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.

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

Chinese equities ended flat in August but off their lows due to optimism late in the month on the likelihood of further property stimulus which eased market concerns about China’s growth prospects. Within the portfolio, stock selection in communication services hurt. Owning a music streaming services provider dented relative returns the most as investors took profits following sharp share price gains in the first seven months of 2024. We continue to like the company’s business transformation. Financials detracted due to our lack of exposure in mega-cap insurers which delivered favourable results. Turning to contributors, our stock choices in real estate helped. Owning a property management company aided returns following strong first-half results, driven by its shopping mall operation. Consumer discretionary was another source of strength. Not owning an e-commerce company was beneficial following its warning of slower sales in the face of increased competition. Among stocks we own, shares in an electric two-wheeler company helped as the market cheered its new product amid expectations of a strong product cycle. Industrials and business services also lifted relative returns due to stock selection. A logistics provider added value as it reported a solid set of results.

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.

Past performance is not a reliable indicator of future performance.

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.

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.

Before deciding to invest in the fund, you should read the offering document/prospectus (including its investment objectives, policies and any risk warnings) which are available and may be obtained from any appointed distributors.

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.

Benchmark: Investors may use the benchmark to compare the fund’s performance. The benchmark has been selected because it is similar to the investment universe used by the investment manager and therefore acts as an appropriate comparator. The investment manager is not constrained by any country, sector and/or individual security weightings relative to the benchmark and has complete freedom to invest in securities that do not form part of the benchmark.

Disclosure on Vendor Indices can be found here.

Risks

Typical Investor