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

While the current market environment continues to present near-term headwinds to the portfolio, 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 overall, the undemanding valuations of Chinese equities compared to their global counterparts, creates an attractive entry point for active long-term investors. We believe that China will continue its policy easing path as inflation remains subdued, while other major economies may need to tighten their monetary policies. 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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In the property sector alone, 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 going forward 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 key risks to the portfolio and remain vigilant in monitoring them including a prolonged Russia-Ukraine conflict that could keep energy and commodity prices higher for longer and an unrelenting surge of coronavirus cases that could trigger widespread lockdowns that disrupt production and spending.

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Despite the challenging market events, we believe that the government has enough levers to pull to achieve a soft landing, supported by the government shifting its focus back to keeping growth stable. 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.

31-Jul-2021 - Wenli Zheng, Portfolio Manager,

We reduced our position in the consumer discretionary sector to underweight, although it remains the portfolio’s second-largest absolute weighting. Notably, we scaled back our exposure to education companies, selling our positions in TAL Education and New Oriental Education & Technology. We have always kept the size of our positions in the education space in check, so the overall impact to the portfolio of the government’s regulatory crackdown has been well contained compared to many of our peers.

Past performance is not a reliable indicator of future performance.

The Funds are sub-funds of the T. Rowe Price Funds OEIC, an investment company with variable capital incorporated in England and Wales which is registered with the UK Financial Conduct Authority 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 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 and via www.troweprice.com.

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.

IA Sector: Many UK funds are grouped into sectors by the Investment Association (the “IA”) (the trade body that represents UK investment managers), to help investors to compare funds with broadly similar characteristics. Investors may compare the fund against the performance of the Europe Excluding UK sector. This sector represents the average performance of certain funds that invest at least 80% of their assets in European shares and exclude UK securities. It can therefore serve as a method of comparing the fund’s performance with other funds that have broadly similar characteristics. The fund is not constrained to or managed in line with this sector. Source for IA Sector Data: © Morningstar. All Rights Reserved.

Disclosures on Vendor Indices can be found here.

Risks

Typical Investor

Commentary for