Global Natural Resources 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

A massive productivity wave in U.S. shale, which collapsed cost curves, began in 2011 and prompted a secular bear market in oil that has since extended to other commodities. History has shown that commodity cycles tend to last 15 to 20 years on average, and we continue to believe that there is more room for productivity to improve and for the bear market to persist. The secular dynamic of productivity-driven oil price deflation was exacerbated in early 2020 by dual demand and supply shocks hitting the market, creating unprecedented pressure on market balance and ultimately driving West Texas Intermediate (WTI) prices briefly negative in a clear signal that oil production needed to be swiftly and meaningfully curtailed.

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The global spread of the coronavirus effectively shut down many large economies around the world and drove a negative demand shock which far exceeded any weakness previously seen in oil. Historic data shows that, oil prices overshoot to the downside after demand shocks, as supply curtailments initially lag falling demand; conversely, supply lags in response to demand recovery, allowing oil prices to overshoot to the upside before eventually normalizing. We continue to expect the normalization of prices to reflect the underlying cost curves more closely over time but predicting the magnitude and duration of this process has now been complicated by multiple exogenous factors such as weather, geopolitics, and broader economic supply chain and inflation challenges. The ongoing conflict in Ukraine, in particular, has amplified near-term uncertainty and volatility in the commodity markets. While we continue to expect a normalization of prices as some of these exogenous factors reverse and productivity continues to improve, we recognize that we cannot know exactly how the Ukraine crisis will unfold going forward, exacerbating the high level of uncertainty around the timing and path of normalization.

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Nevertheless, we are likely to see some changes based on what has already occurred thus far that would make the normalization process for some commodities take longer than others. For instance, we think that global gas/LNG prices are likely to remain elevated for longer as there is no quick or easy way for Europe to structurally reposition away from its Russian gas dependence since gas cannot be as easily re-routed as oil given the long lead times of infrastructure. This then creates second-order effects on other commodities, such as fertilizers and other agricultural products, that rely on gas in the production process. What further complicates the landscape is the fact that some commodities are now pricing up to demand destruction levels in order to rebalance inventories. This is therefore increasing the odds of an economic recession which, in turn, has dampened the demand outlook for basic metals, resulting in a significant pull back across the industry.

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We have maintained our disciplined approach and remain committed to our data-driven, bottom-up stock selection process and our philosophy of buying and holding a diverse selection of fundamentally sound natural resources companies with solid balance sheets and trusted management. Our expansive global research platform continues to assist in identifying those companies that we think can provide long-term capital appreciation for our shareholders, and we believe that the market will reward our disciplined and consistent approach to investing over the long term.

Strategy

Fund Summary

Our approach involves assessing resource/commodity cycles, industry valuations, and company fundamentals. The focus is on identifying well-managed companies with attractive long-term supply and demand fundamentals. We broadly diversify holdings for more consistent returns potential and lower volatility than highly concentrated energy or gold strategies. 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.

31-May-2024 - Shinwoo Kim, Co-Portfolio Manager,

Natural resources equities advanced in May. Oil prices fell as the US Federal Reserve held interest rates steady and noted that high inflation readings could delay rate cuts. Investors were concerned that the cuts may begin later than originally expected, given that higher rates typically weigh on the economy and can reduce oil demand. Within the portfolio, stock selection in electrical equipment and components added value as the significant demand potential from artificial intelligence, which requires a lot of electricity for computing power in data centres, benefitted companies that provide power and components to those producers. Stock choices in diversified metals and mining also added value. Base metals moved broadly higher during the month, as copper prices hit another record high on increased demand and supply constraints. Conversely, an overweight exposure and stock selection in US oil exploration and production detracted due to falling oil prices. Our positions in the industry are focused on companies with a diverse asset base, disciplined capital allocation, strong balance sheet and quality management team. Stock selection also detracted in industrial gases. Within the segment, we focus on companies that we believe will benefit from multiple themes, such as deglobalisation and decarbonisation, and that have superior business models.

31-Jan-2024 - Shinwoo Kim, Portfolio Manager,

After spending a decade underweight energy, the portfolio is now overweight versus the benchmark. In 2023, we saw incremental evidence that we are in the ending stages of the productivity wave in oil and natural gas and are approaching a more structurally positive environment for commodities. We have found that the market transition as productivity rolls over is often bumpy, so we are modestly overweight energy and metals, with a focus on companies that are high quality, high conviction and/or with idiosyncratic drivers.

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.

Hedged share classes (denoted by 'h') utilise investment techniques to mitigate currency risk between the underlying investment currency(ies) of the fund and the currency of the hedged share class. The costs of doing so will be borne by the share class and there is no guarantee that such hedging will be effective.

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.

©2024 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Citywire Data Source: Citywire – where the fund manager is rated by Citywire, the rating is based on the manager’s 3-year risk adjusted performance. For further information on ratings methodology, please visit www.aboutcitywire.com.

Risks

Typical Investor