China Evolution Equity Fund

Capital at risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

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Overview

Manager's Outlook

We believe that China remains a fertile hunting ground for investors seeking to identify sustainable businesses that could emerge as future winners and market leaders.

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We think that China is poised for a gradual economic recovery as the broad package of policy support provides a significant tailwind. Benign inflation in contrast to the decades-high readings seen in other economies gives China the leeway to loosen policy. Moreover, the relaxation of lockdowns and easing of restrictions rapidly normalised the supply chains. The relaxation of rules to allow increased mobility are meant to ease the burden and cushion the impact of China's zero-COVID approach, in our view.

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We think that the undemanding valuations of Chinese equities compared to their global counterparts creates an attractive entry point for active long-term investors. China's decision to make economic stability paramount following structural reforms augurs well for a steady economic recovery that will provide a conducive backdrop for quality businesses to thrive in China, in our view.

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Our portfolio maintains overweight positions in the industrial and business services, consumer discretionary, and real estate sectors as we believe that select businesses in these industries have strong competitive advantages and that the favorable slew of policy support will be a tailwind for these companies to grow their market share.

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In the real estate sector, we think that the policy-induced slowdown will likely stabilize following government support and easing measures particularly at local government levels.

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We believe policy clarity will improve, limiting the unpredictability that had roiled markets and allowing investors to focus more on company fundamentals. Some policies can lead to short-term volatility, but they may also create opportunities and accelerate innovation. We believe that long-term outcomes can be improved if the government can balance better equity with preserving entrepreneurship.

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We recognize there are key risks to the portfolio and remain vigilant in monitoring them. This includes a prolonged Russia-Ukraine conflict, which could keep energy and commodity prices higher for longer, and an unrelenting surge of coronavirus cases, which could trigger sporadic lockdowns that disrupt production and spending.

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We remain rooted in our fundamental research, and we believe that our edge when it comes to understanding companies and identifying future leaders will eventually prevail over current market fears. ��

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Strategy

Fund Summary

Our approach focuses on uncovering stocks where change and growth are underappreciated or undiscovered. Leveraging our long history of investing in China, we seek to identify innovative companies beyond the widely owned mega cap stocks that offer the long-term potential for durable or accelerating growth or a fundamental rerating. The manager is not constrained by the fund's benchmark, which is used for performance comparison purposes only.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Jun-2024 - Wenli Zheng, Portfolio Manager,

Chinese equities retreated in June after recent gains amid mixed economic data and a resurgence of trade tensions with the West. Low expectations of more aggressive policy measures to steady the slowing economy at July’s Third Plenum, a conclave of China’s top leaders, weighed on sentiment. Within the portfolio, stock selection in communication services hurt. Our position in an online recruitment app, detracted as its shares paused for breath after year-to-date gains brought about by solid first-quarter results. Our lack of exposure to a mega-cap internet company was another significant drag; it reported above-consensus profits, which lifted its share price, as did investors’ enthusiasm for its application of artificial intelligence. Not owning financials, particularly state-owned banks, also dented performance as recent property measures boosted sentiment for these names. On a positive note, our stock picks in industrials and business services added value. Owning a supplier of converter valves, a critical component for ultra-high-voltage (UHV) transmission, benefitted as China is ramping up investments in UHV to support the transmission of renewable power. Our position in a rail equipment provider helped further on the back of the central government’s commitment to upgrade infrastructure following years of underinvestment.

31-Jan-2024 - Wenli Zheng, Portfolio Manager,

In January we increased our allocation to the consumer discretionary sector, where we have a significant absolute position. In this space we own businesses that gain from structural trends such as electrification. We hold shares of an electric vehicle startup and auto parts companies. We invested in a home appliance producer that we think can grow its earnings, driven by its market share gains in the global appliance industry. We also own shares of market share gainers in the sportswear and hotel industry. Recently, we initiated a position in a leading hotel operator and franchisor within China’s upper midscale segment.

Benchmark Data Source: MSCI. MSCI index returns are shown with reinvestment of dividends after the deduction of withholding taxes. MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Past performance is not a reliable indicator of future performance.

Source for 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.

Daily performance data is based on the latest available NAV.

The Funds are sub-funds of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents and/or key information document (KID) in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the articles of incorporation and the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors. They can also be found along with a summary of investor rights in English at www.troweprice.com. The Management Company reserves the right to terminate marketing arrangements.

Please note that the Fund typically has a risk of high volatility.

The specific securities identified and described in this website do not represent all of the securities purchased, sold, or recommended for the sub-fund and no assumptions should be made that the securities identified and discussed were or will be profitable.

A full list of the currently issued Share Classes including Distributing, Hedged, and Accumulating Categories may be obtained, free of charge and upon request, from the registered office of the Company.

Risks

Typical Investor