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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.

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.

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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 LU1244138852 Bloomberg TREMVEQ:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

6.18%
$195.0m

1YR Return
(View Total Returns)

Manager Tenure

67.99%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.05
6.05%

Inception Date 14-Sep-2015

Performance figures calculated in USD

28-Feb-2021 - Ernest Yeung, Portfolio Manager,
We expect the economic recovery in emerging markets (EM) to broaden, supported by the shift in governments’ stimulus efforts away from traditional monetary easing towards a focus on fiscal measures that directly target consumers. This structural change should result in a more visible multiplier effect that could hasten gross domestic product (GDP) growth. An acceleration in GDP expansion bodes well for value-oriented, cyclical, and old-economy 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.

 

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 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.

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 Q)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 67.99% 6.18% 12.37% 11.82% 11.82%
Indicative Benchmark % 58.39% 6.48% 12.07% 11.69% 11.69%
Excess Return % 9.60% -0.30% 0.30% 0.13% 0.13%

Inception Date 14-Sep-2015

Manager Inception Date 14-Sep-2015

Indicative Benchmark: MSCI Emerging Markets Index Net

Data as of 31-Mar-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 67.99% 6.18% 12.37% 11.82%
Indicative Benchmark % 58.39% 6.48% 12.07% 11.69%
Excess Return % 9.60% -0.30% 0.30% 0.13%

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 16-Apr-2021 Quarter to DateData as of 16-Apr-2021 Year to DateData as of 16-Apr-2021 1 MonthData as of 31-Mar-2021 3 MonthsData as of 31-Mar-2021
Fund % 0.59% 0.59% 9.17% 1.47% 8.53%
Indicative Benchmark % 2.52% 2.52% 4.86% -1.51% 2.29%
Excess Return % -1.93% -1.93% 4.31% 2.98% 6.24%

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. 

28-Feb-2021 - Ernest Yeung, Portfolio Manager,
Most EM equities rose in U.S. dollar terms in February but underperformed their developed world counterparts. Optimism over the coronavirus vaccine rollout and the U.S. fiscal stimulus were capped by concerns about inflationary pressures and the potential response of global central banks. Within the portfolio, stock selection drove the outperformance, with stock choices in China contributing the most. Our position in JOYY, a large video live streaming platform, was a key source of strength. Its shares surged as investors continued to focus on the sale of the company’s domestic video live streaming business YY Live to Baidu. The transaction is awaiting regulatory approval and if it pushes through, USD 3.6 billion in cash will be injected into the company’s coffers that can be used to pay dividends. Stock selection in India also worked well as Hindalco Industries benefitted on the back of the aluminium and copper producer’s strong earnings. In contrast, our underweight position in Taiwan, which outperformed, weakened returns. Our overweight in Brazil, a key underperformer, and stock selection in the market, also dragged. Petroleo Brasileiro hurt returns after Brazil President Bolsonaro ousted the state-run oil producer’s chief executive officer following a string of fuel price increases.

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 26.19% View Top 10 Holdings Monthly data as of  31-Mar-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
5.17%
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-Dec-2020 - Ernest Yeung, Portfolio Manager,

In the final quarter of 2020, we increased our exposure to cyclical stocks that stand to benefit from the post-pandemic economic recovery. The performance divergence shifted to businesses that benefited from the pandemic, or "COVID-on" stocks, and those which stand to gain from the end of the outbreak and a return to normality, or "COVID-off" stocks. This market disconnection provided us with opportunities to identify high-quality "forgotten" stocks that had been sold off by the end of the third quarter, but whose businesses are well positioned to thrive in a post-coronavirus world.

The K-shaped recovery that took hold in EM, with some economies recovering quickly while others focused on continuing to contain the pandemic, resulted in one other positive development. It prompted management teams to become more proactive in their restructuring efforts - cutting costs, selling assets, shifting capacity and changing product mix. We found opportunities within these companies that have undertaken "self-help" measures.

Despite the rally 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.

At the country level, while we have a high exposure to China in absolute terms, we have sizeable positions in Mexico, Russia and Brazil, viewed as value markets with good exposure to commodities. We found new investment opportunities within financials, where we have a substantial exposure, as well as in industrials and business services. We started to scale back our energy allocation as our investment thesis of an oil price recovery started to materialize.

Financials

We have a significant exposure to financials in absolute terms. The sector has been through a tough year given the sharp falls in economic growth due to the coronavirus pandemic and the significant reduction in interest rates. However, we sought emerging market banks that have better franchises and stronger balance sheets while still fitting our investment framework.� In the quarter, we bought several EM banks whose valuations fell even as third-quarter results for a number of them were positive. Within China's financial sector, we switched to a better franchise that is more leveraged to retail and mortgages with a less demanding valuation.

  • We sold Postal Savings Bank of China and took advantage of share price weakness to buy the H-shares of China Construction Bank, a large state-owned bank. It has a relatively low-risk balance sheet given the high share of loans and mortgages from state-owned enterprises. In addition, the bank has one of the best digital platforms among China's biggest lenders.
  • We invested in National Commercial Bank (NCB), Saudi Arabia's largest bank by assets, that has a robust balance sheet with healthy capital and liquidity ratios. It reported a strong third-quarter profit due to improved loan growth, driven by accelerating mortgage momentum. We think that its merger agreement with Samba Financial Group offers operating expense and funding synergies. Overall, we believe NCB is a resilient banking franchise with accelerating growth towards mortgages.

Industrials and Business Services

The portfolio has a relatively high exposure to industrials and business services. Within the sector, we own 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 also favor machinery stocks with resilient free cash flow which may benefit from the pick-up in demand for container ships, infrastructure and mining projects.

  • We bought NARI Technology, which makes electrical equipment, and counts China's major state-owned grid companies as key customers. We believe it stands to gain from China's plans to accelerate renewable energy projects, resulting in increased power grid capital expenditure. We view NARI as a good quality company which will likely benefit from the digitalization of China's power grid, a structural tailwind. Its management has implemented cost controls and sales system reforms, improving the efficiency of its sales force. NARI has a cash generative and recurring business and we believe its position is well entrenched as many of its equipment items are vital and related to safety. Its non-grid business grew faster-than-expected in 2020, suggesting that management is executing its business plan well
  • We bought shares of Beijing Capital International Airport (BCIA), China's largest airport, on a travel recovery thesis. The company has significantly cut costs after its earnings troughed this year. However, we see earnings recovery beyond 2020, with the return of international passenger volumes and duty-free spending.

Energy

We have a sizable position in the energy sector, owning oil- and gas-related companies that have a strong execution track record, solid balance sheet, or improving operations. In the quarter, we started to reduce our allocation as our investment thesis of an oil price recovery in the near term is playing out and may reach a level that could trigger a capital expenditure increase across the industry.� That said, we remain bearish on oil prices in the long term.

  • We closed our position in CNOOC, a pure oil and gas exploration and production company in China, as our oil price investment thesis panned out and amid concerns over its parent company's inclusion in the U.S. government blacklist of companies with links to the Chinese military.

Materials

The portfolio has a sizable exposure in materials. We think the sector has been less affected by the coronavirus pandemic as we saw the prompt resumption of construction activity within the region. Moreover, the fundamentals of the industry are improving with better supply discipline.

  • We own Fresnillo, a precious metals miner, which has navigated the pandemic well with its free cash flow set to accelerate; Orbia Advance, a chemical company that makes products leveraged to building activity; and Grupo Mexico, a conglomerate with a strong free cash flow and interests in mining, railroad transportation and infrastructure - all based in Mexico.
  • We are also invested in South Korea-based POSCO, one of the world's largest steel producers, with recovering fundamentals and a beneficiary of the recovery in auto steel demand and pick-up in shipbuilding orders.�
  • We bought shares of Zhejiang Runtu, one of the world's largest and lowest-cost textile dye producers. We believe the stock price does not reflect the likely post-coronavirus recovery of dye prices in a consolidating and relatively uncompetitive industry. The China-based company's latest quarterly results showed gross profit recovering albeit still only 75% of normal levels.

Health Care

Health care, where we have minimal exposure, was an area of opportunity for us in the quarter.

  • At the end of the previous quarter, our sole position in the sector was in Sinopharm Group, the only nationwide pharmaceutical distributor in China which has a highly fragmented drug distribution market. We sold Sinopharm in the quarter as the shift to online pharmacies made its business model less certain after it faced pressure during the pandemic with people avoiding hospital visits.
  • We bought a position in Bangkok Dusit Medical Services, one of Thailand's largest private health care group, as we see it benefiting from a recovery in travel demand following vaccine availability and an eventual lifting of mobility restrictions. Thai hospitals are leveraged to medical tourism. The hospital's management has undertaken cost-cutting measures, which boosted margins during the pandemic period. When demand for medical tourism returns, we believe there will be huge operating leverage benefits.

Sectors

Total
Sectors
11
Largest Sector Financials 21.99% Was (28-Feb-2021) 21.91%
Other View complete Sector Diversification

Monthly Data as of 31-Mar-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

Industrials & Business Services
By3.88%
Fund 8.18%
Indicative Benchmark 4.30%

Largest Underweight

Information Technology
By-6.81%
Fund 14.11%
Indicative Benchmark 20.92%

Monthly Data as of 31-Mar-2021

28-Feb-2021 - Ernest Yeung, Portfolio Manager,
The portfolio has a relatively high exposure to industrials and business services. We own transport infrastructure stocks, such as toll road operators with strong cash generative businesses, which should be well-placed to profit from a recovery in traffic. We also favour machinery stocks with resilient free cash flow, which may benefit from the pick-up in demand for container ships, infrastructure and mining. Here, we are invested in NARI Technology, which makes electrical equipment, and which will likely gain from China’s plans to accelerate renewable energy projects. We also own shares of Beijing Capital International Airport, China’s largest airport, in anticipation of a travel recovery.

Countries

Total
Countries
18
Largest Country China 35.30% Was (28-Feb-2021) 36.43%
Other View complete Country Diversification

Monthly Data as of 31-Mar-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
By2.39%
Fund 4.13%
Indicative Benchmark 1.74%

Largest Underweight

Taiwan
By-9.17%
Fund 4.60%
Indicative Benchmark 13.77%

Monthly Data as of 31-Mar-2021

28-Feb-2021 - Ernest Yeung, Portfolio Manager,
We reduced our underweight in China at the end of last year as we invested in select financials, industrials, consumer discretionary and material companies that fall within our “forgotten” stock framework but have potential upside. Within financials, we switched to a better franchise that is more leveraged to retail and mortgages with a less demanding valuation. In industrials, we bought companies that will benefit from the reopening of the economy. Within consumer discretionary, we continued to own Vipshop Holdings that has completed its cost-cutting efforts and is likely to benefit from strong user growth. China remains our largest country position in absolute terms.

Team (As of 16-Apr-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 UK Tax Reporting Status
Class A $1,000 $100 $100 5.00% 190 basis points 2.07% No
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10% No
Class Q $1,000 $100 $100 0.00% 100 basis points 1.17% No

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

T. Rowe Price Funds SICAV and its sub-funds are domiciled in Luxembourg and therefore considered offshore funds for UK tax purposes. Selected share classes of T. Rowe Price Funds SICAV have been designated “Reporting Funds” by HM Revenue & Customs (HMRC) under the guidelines of the UK Offshore Funds Regulation. These share classes report all relevant tax information to HMRC on an annual basis. Details on the information reported are outlined in the SICAV Shareholder Tax Reporting document that is available in the Fund Range Docs drop-down. Investors in “Reporting Fund” share classes who are considered United Kingdom residents for tax purposes will have any accrued gains treated as a capital gain rather than income upon sale or other disposal of their shares.