us equities us growth opportunities outside...

US Equities

US GROWTH OPPORTUNITIES

OUTSIDE FANG*

*FACEBOOK, AMAZON, NETFLIX, GOOGLE

Helen Ford, Portfolio Specialist

T. Rowe Price

Trends & Morningstar Roularta event

March 9th 2016

For investment professionals only. Not for further distribution.

2 2

0

0.5

1

1.5

2

2.5

3

Energy Materials Consumer

Discretionary

Industrials Information

Technology

Financials Consumer

Staples

Health Care Telecom. Utilities

Current Relative P/E Ratio

Average P/E Ratio

Past performance is not a reliable indicator of future results.

Sources: FactSet

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of

Russell Investment Group.

0

10

20

30

40

50

60

S&P 500 Russell 1000 Value Russell 1000 Grow th Russell Mid Cap Russell 2000

Current P/E Ratio

Average P/E Ratio

Equity Valuations:

Key Market Indices and Sectors

MARKET INDICES: FORWARD P/E RATIOS

Past 20 years, as of 31 January 2016

SECTORS: FORWARD P/E RATIOS RELATIVE TO THE S&P 500 INDEX

Past 20 years, as of 31 January 2016

P/E Ratio Range over

past 20 years

P/E Ratio Range over

past 15 years

3 3

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

S&

P 5

00 D

iv. Y

ield

Min

us

T

en

Year

Tre

asu

ry Y

ield

S&P 500 DIVIDEND YIELD VS.

10 YEAR TREASURY YIELD

June 1997–January 2016

-5%

-3%

-1%

1%

3%

5%

0

5

10

15

20

25

30

1997 2000 2003 2006 2009 2012 2015

S&P 500: TRAILING PE VS.

RELATIVE EARNINGS YIELD

December 1997– December 2015, quarterly

S&P 500 Trailing PE (LHS)

Average PE

Relative Earnings Yield* (RHS)

Average EY Spread

As of 31 January 2016


* Relative earnings yield is calculated as the S&P 500 Forward Earnings Yield minus the BBB U.S. Corporate Bond Yield

Source: Factset, The Luethold Group

Equity Valuations: Cheap or Expensive?

Average:

-2.29%

Current

0.52%

50%

70%

90%

110%

130%

1983 1987 1991 1995 1999 2003 2007 2011 2015

SMALL-CAP TO LARGE-CAP

HISTORICAL P/E RATIO

Based on Normalized Earnings, January 1983–January 2016

Median:

104%

30

40

50

60

70

80

90

100

110

120

130

700

1,000

1,300

1,600

1,900

2,200

2000 2003 2006 2009 2012 2015

Earn

ing

s P

er

Sh

are

(U

SD

$)

Ind

ex L

evel

S&P 500 INDEX VS EARNINGS PER SHARE

January 2000– January 2016

Price (L) Earnings Per Share (R)

4 4

0%

25%

50%

75%

100%

125%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

VALUATION PREMIUM: GROWTH VS. VALUE

(NTM)

Russell 1000 Growth/Value

Russell 1000 Growth/Value Median

Russell 2000 Growth/Value

Russell 2000 Growth/Value Median

-20%

-10%

0%

10%

20%

30%

40%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

FOLLOWING GLOBAL FINANCIAL CRISIS GROWTH STOCKS HAVE MOSTLY OUTPERFORMED

Value - Growth



Source: Factset, Strategas

Growth Commanding A Smaller-Than-

Average Premium

Value Outperforms

Growth

Outperforms

5 5

0

50

100

150

200

250

300

350

400

Reb

ased

In

de

x L

evel

FACEBOOK AND GOOGLE PRICE vs. S&P 500

December 2010 – January 2016 Facebook

Google

S&P 500

0

100

200

300

400

500

600

Reb

ased

In

de

x L

evel

AMAZON AND NETFLIX PRICE vs. S&P 500

December 2010 – January 2016

Amazon

Netflix

S&P 500



Source: Factset

FANG - Performance

2014 2015 2016E 2017E

Facebook 58.4% 43.8% 42.0% 32.9%

Amazon 19.5% 20.2% 21.3% 19.4%

Netflix 25.8% 23.2% 29.2% 26.3%

Google 10.2% 13.9% 17.7% 16.4%

S&P 500 3.7% -3.5% 2.0% 6.2%

REVENUE GROWTH ACROSS FANG

6

As of 31 December 2015

Source & Copyright: Citywire. The Fund manager is rated by Citywire based on the manager’s 3 year risk adjusted performance as at 31 December 2015.

Morningstar rating based on A Class performance and Silver Morningstar Analyst Rating of the Fund as at 31 December 2015.

© 2015 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (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.

About The Manager

26 years of investment experience

25 years with T. Rowe Price

1993-Present: PM Blue Chip Growth Strategy

2003-Present: PM US Blue Chip Equity SICAV

Past performance is not a reliable indicator of future performance.

Morningstar rating

T. Rowe Price Funds SICAV- US Blue Chip Equity Fund A Class.

As of 31 December 2015. © Morningstar, Inc. All rights reserved.

*Performance is annualised for periods greater than 1 year.

Period 1 Year 3 Years 5 Years

Performance* 10.87% 19.59% 14.78%

Ranking

Percentile

Ranking

3/64 2/60 2/56

3rd 4th

T. Rowe Price Funds SICAV –

US Blue Chip Equity A Share Class, USD

PERCENTILE RANKING IN MORNINGSTAR

US LARGE-CAP CORE GROWTH EQUITY

LARRY PUGLIA

US Large-Cap Core Growth Equity Portfolio Manager

5th

7 7

Our US Equity Expertise

US Equity AUM: USD490.1B

US Equity Research Analysts: 1021

Combined US Large Cap Growth Assets: USD158.9B2


1 Includes 12 sector PM’s, 48 research analysts, 30 associate research analysts, 6 quantitative analysts, and 6 specialty analysts. 2 The combined U.S. Large-Cap Growth assets of the T. Rowe Price group of companies. The T. Rowe Price group of companies includes T. Rowe Price Associates, Inc.,

T. Rowe Price International Ltd, T. Rowe Price Hong Kong Limited, T. Rowe Price Singapore Private Ltd., and T. Rowe Price (Canada), Inc.

Large-Cap Growth investing is a significant

business for T. Rowe Price

8 8

Investing in growth stocks since 1950 – total large-cap growth

equity assets under management exceed USD158 billion1


1 The combined U.S. Large-Cap Growth assets of the T. Rowe Price group of companies. The T. Rowe Price group of companies includes T. Rowe Price Associates,

Inc., T. Rowe Price International Ltd, T. Rowe Price Hong Kong Limited, T. Rowe Price Singapore Private Ltd., and T. Rowe Price (Canada), Inc.

The T. Rowe Price Growth

Investing Advantage

The energy and focus of a boutique endowed with the

resources of a global organization

Extensive US small-/mid-cap and non-US research and portfolio

management resources complement our large-cap growth

investing activities

The T. Rowe Price Funds SICAV – US Blue Chip Equity Fund has

had the same portfolio manager since the Fund’s inception

– Larry Puglia

9


Investment Team

10


Equity Research Team

11

Objective –

Sustainable Competitive Advantage

Focus on leading business franchises that can successfully

weather economic cycles.

Attractive business model

in growth industry

Seasoned, shareholder-

oriented management

Significant free cash flow

generation

Above-average, durable

revenue and earnings growth

Competitive

Advantage

12 12

Our Blue Chip Growth Philosophy

Companies operating in fertile growth fields can best grow sales and earnings

Durable and sustainable earning and free cash flow growth drive investment

returns over time

Strong management teams who skillfully reinvest cash flow can significantly

enhance company performance

Fundamental research is essential to the identification of long-term growth

opportunities

Valuation matters – investors must be careful to avoid overpaying for growth

Diversified portfolios help to manage portfolio risk profile

13 13

Investment Process

USD

14 14

Portfolio Snapshot

As of 31 December 2015, Figures Shown in US Dollars

T. ROWE PRICE FUNDS SICAV—US BLUE CHIP EQUITY FUND


15 15

Total Return Performance – Class A

As of 31 December 2015 Figures Shown in US Dollars



Annualized

Three

Months

One

Year

Three

Years

Five

Years

Seven

Years

Ten

Years

Since Inception 5

Feb 2003

US Blue Chip Equity Fund Class A 11.09 10.87 19.59 14.78 18.47 8.23 9.73

S&P 500 Index 7.04 1.38 15.13 12.57 14.81 7.31 9.32

Value Added¹ 4.05 9.49 4.46 2.21 3.66 0.92 0.41

Russell 1000 Growth Index 7.32 5.67 16.83 13.53 17.11 8.53 10.02

Value Added² 3.77 5.2 2.76 1.25 1.36 -0.3 -0.29

16 16

Three Year Rolling Returns –

TRP Funds SICAV – US Blue Chip Equity Fund Class A (Annualized Net of Fees)

vs. S&P 500 Index and Russell 1000 Growth Index

-40

-20

0

20

40

-40 -20 0 20 40

vs. S&P 500 Index

vs. Russell 1000 Growth Index

Fund Underperformance

US

Blu

e C

hip

Eq

uity F

un

d C

lass A

Percent


Each point represents the performance of the fund and its benchmark for a three-year annualized period. Points above the diagonal represent outperformance

relative to the benchmark. Points below the diagonal represent relative underperformance. Figures shown net of fees.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of

Russell Investment Group.

Calculated Quarterly from 31 December 2005 through 31 December 2015

Fund Outperformance

17 17

Positioning: Structural Themes

UBIQUITOUS & EXPERIENCE RICH INTERNET

(convergence of communications & computing) As of 31 January 2016


* Sources: Factset, Standard & Poor's, RBC Capital Markets

The specific securities identified and described above do not necessarily represent securities purchased or sold by T. Rowe Price. This information is not intended to

be a recommendation to take any particular investment action and is subject to change. No assumptions should be made that the securities identified and discussed

above were or will be profitable. The views and opinions above are as of 31 January 2016.

LEGACY TECHNOLOGY

COMPANIES

Intel, Cisco, Hewlett-

Packard, Oracle

ENTERPRISE ADOPTION

OF CLOUD COMPUTING

Red Hat , Salesforce.com,

Amazon.com, Workday,

ServiceNow, NetSuite,

Microsoft

BUSINESS MODELS

ENABLED BY ACCESS

TO RICH INTERNET

CONTENT

Google, Amazon, Baidu,

Priceline, LinkedIn, Netflix,

Facebook, Ctrip.com

International

INFRASTRUCTURE

PROVIDERS

Juniper Networks, Akamai,

Crown Castle, VMware

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

Dec-14 Mar-15 Jun-15 Sep-15 Dec-15

Cu

mu

lati

ve P

erf

orm

an

ce (

%)

TECHNOLOGY

S&P 500 New Tech*

S&P 500 Transitional Tech*

S&P 500 Old Tech*

18


Sources: World Bank, Centers for Medicare & Medicaid Services, Factset

The specific securities identified and described above do not represent all of the securities purchased, sold, or recommended for the SICAV sub-fund and no

assumptions should be made that the securities identified and discussed were or will be profitable.

Positioning: Structural Themes

COST EFFECTIVE & INNOVATIVE SOLUTION

DRIVEN HEALTHCARE

Addressing unmet clinical needs – Gilead, Celgene, Biogen, Regeneron, Alexion, Vertex

Cost-effective therapy – McKesson, UnitedHealth, Cardinal Health, Humana

0

4

8

12

16

20

1960 1966 1972 1978 1984 1990 1996 2002 2008 2014

%

INCREASING HEALTHCARE SPEND

DRIVEN BY AGEING POPULATION

December 1960 – December 2014

National health expenditure (% of GDP)

Population ages 65 and above (% of total)

-20

-15

-10

-5

0

5

10

15

20

25

Dec-14 Mar-15 Jun-15 Sep-15 Dec-15

Cu

mu

lati

ve P

erf

orm

an

ce (

%)

HEALTH CARE S&P 1500 Biotech

S&P 1500 Health Care Technology

APPENDIX

20

1 The combined U.S. Large-Cap Growth assets of the T. Rowe Price group of companies. The T. Rowe Price group of companies includes T. Rowe Price Associates,

Inc., T. Rowe Price International Ltd, T. Rowe Price Hong Kong Limited, T. Rowe Price Singapore Private Ltd., and T. Rowe Price (Canada), Inc. 2 The total US Large-Cap Core Growth Equity Strategy assets of the T. Rowe Price group of companies. 3 Corporate, Public, Non-Profit, Taft-Hartley, Endowments/Foundations, and Sub-Advisory clients.

US Large-Cap Growth Assets

Under Management

21 21

Portfolio Construction and

Risk Management

Individual position sizes are typically +/-3% relative to S&P 500 Index and +/-4%

versus the Russell 1000 Growth Index weightings

Typical position sizes range from 0.25% to 5.00%

Sector weights typically range from 0.5X to 2.0X for primary S&P 500 Index

sectors1 and 0.5X to 3.0X for primary Russell 1000 Growth Index sectors2

Portfolio turnover typically ranges from 30%-45% annually

Monthly attribution analysis employed to confirm and evaluate source of

investment returns

Management oversight throughout the process, including Equity Steering

Committee and Risk Management Working Group

1 Sectors representing 10%+ of the S&P Index. 2 Sectors representing 10%+ of the Russell 1000 Growth Index.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyright related to the Russell indexes. Russell® is a trademark of Russell

Investment Group.

22

The specific securities identified and described above do not represent all of the securities purchased, sold, or recommended for the SICAV sub-fund and no

assumptions should be made that the securities identified and discussed were or will be profitable.

The information shown does not reflect any exchange-traded funds that may be held in the portfolio. Numbers may not total due to rounding. Listed holdings are a

portion of the fund’s total and may change at any time. They are not recommendations to buy or sell any security. Data is expressed as a percentage of net assets

and excludes cash and cash equivalents.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyright related to the Russell indexes. Russell® is a trademark of Russell

Investment Group.

10 Largest Over/Underweights

T. Rowe Price Funds SICAV – US Blue Chip Equity Fund Relative to the Russell 1000 Growth Index


T. Rowe Price Funds SICAV – US Blue Chip Equity Fund Relative to the S&P 500 Index


10 Largest Overweights % of

Fund

% of

Index Difference

Amazon.com 7.3 1.3 6.0

Alphabet 7.7 2.6 5.1

Facebook 4.6 1.5 3.1

Danaher 3.1 0.3 2.8

Priceline 3.0 0.3 2.7

Visa 3.1 0.9 2.2

Mastercard 2.6 0.5 2.1

Alexion Pharmaceuticals 2.2 0.2 2.0

Allergan 2.6 0.7 1.9

McKesson 1.9 0.2 1.6

10 Largest Underweight % of

Fund

% of

Index Difference

Exxon Mobil Corporation 0.0 1.9 -1.9

Apple 1.4 3.2 -1.8

Johnson & Johnson 0.0 1.7 -1.7

GE 0.0 1.6 -1.6

Berkshire Hathaway 0.0 1.4 -1.4

Wells Fargo 0.0 1.4 -1.4

Procter & Gamble 0.0 1.3 -1.3

AT&T 0.0 1.3 -1.3

J.P. Morgan Chase & Co. 0.0 1.3 -1.3

Verizon 0.0 1.2 -1.2

10 Largest Overweights % of

Fund

% of

Index Difference

Amazon.com 7.3 2.2 5.0

Alphabet 7.7 4.4 3.3

Danaher 3.1 0.1 3.0

Priceline 3.0 0.6 2.5

Facebook 4.6 2.4 2.1

Allergan 2.6 0.5 2.1

Alexion Pharmaceuticals 2.2 0.3 1.9

MasterCard 2.6 0.9 1.7

Visa 3.1 1.5 1.6

McKesson 1.9 0.4 1.5

10 Largest Underweights % of

Fund

% of

Index Difference

Apple 1.4 5.6 -4.2

Verizon Communications 0.0 1.9 -1.9

Coca-Cola 0.0 1.7 -1.7

PepsiCo 0.0 1.5 -1.5

Comcast 0.0 1.3 -1.3

McDonald’s 0.0 1.2 -1.2

Altria Group 0.0 1.1 -1.1

Amgen 0.0 1.2 -1.1

3M 0.0 1.0 -1.0

AbbVie 0.1 0.9 -0.9

23 23

Portfolio Turnover

Investors, not traders

Sources: T. Rowe Price, Morningstar as of 31/12/15

2009 2010 2011 2012 2013 2014 2015

T. Rowe Price Funds SICAV –

US Blue Chip Equity Fund 71% 43% 48% 28% 68% 36% 36%

Morningstar US Large Growth

Category Average 109% 91% 88% 78% 79% 75% 69%

Our low-turnover approach can help

allow earnings to compound and reduces

trading costs.

24 24

Market Capitalization

Figures may not add to 100% due to rounding.

As of 31 January 2016 Market Capitalization shown in US Dollars


$0-$10 Billion

1%

$10-$25 Billion

10%

$25-$50 Billion

18%

$50+ Billion

70%

Alaska Air Group Ameriprise Financial Northern Trust Aetna Intercontinental Exchange AbbVie Kraft Heinz

Ashland Amerisource Bergen Norwegian Cruise Line Holdings Alexion Pharmaceutical Kroger Allergan Lockheed Martin

Borg-Warner AutoZone Perrigo American Airlines Las Vegas Sands Alphabet Lowes

Carmax Canadian Pacific Railway Pioneer Natural Resources American Tower Marsh & McLennan Amazon.com MasterCard

Cimarex Energy Chipotle Mexican Grill Red Hat Anthem McKesson Amgen McDonalds

Flowserve Concho Resources Rockwell Collins Avago Technologies Monster Beverage Apple Medtronic

Hologic Delphi Automotive Roper Technologies Bank Of New York Mellon Morgan Stanley Biogen Microsoft

Hunt J B Trans Services Electronic Arts Ross Stores Baxalta Netflix Boeing Nike

IHS First Data Royal Caribbean Cruises Becton Dickinson & Company Northrop Grumman Bristol-Myers Squibb Priceline

MGM Resorts International Fiserv Sherwin-Williams Cardinal Health O Reilly Automotive Celgene Starbucks

PVH Hanesbrands State Street Carnival PayPal Holdings Chubb Thermo Fisher Scientific

ServiceNow Henry Schein Synchrony Financial Cigna PPG Industries Citigroup Time Warner

Wabtec Hilton Worldwide Holdings TD Ameritrade Holding Cognizant Technology Solutions Regeneron Pharmaceutical Costco Wholesale Union Pacific

Incyte Tesla Motors Constellation Brands Salesforce CVS Health UnitedHealth Group

Intuitive Surgical Tractor Supply Delta Air Lines Shire Danaher Visa

L Brands United Continental Holdings Elab Stryker Eli Lilly Walgreens Boots Alliance

Linkedin Vertex Pharmaceuticals Estee Lauder T-Mobile Facebook Walt Disney

Marriott Willis Towers Watson FedEx V. F. Gilead Sciences

Molson Coors Brewing Zoetis Humana Valeant Pharmaceuticals Home Depot

25 25

Risk/Return Characteristics

Five Years Ended 31 January 2016


This information demonstrates, in part, the firm’s Risk/Return analysis. This material is provided for informational purposes only and is not intended to be investment

advice or a recommendation to take any particular investment action. Statistics are based on monthly net returns. Russell Investment Group is the source and owner

of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group.

Five Years

T. Rowe Price Funds

SICAV – US Blue Chip

Equity Fund Class A

S&P 500 Index

Annualised Total Return 12.07 10.91

Annualised Standard Deviation 15.31 11.88

Historical Tracking Error 6.95

Beta 1.16 1

R-Squared 0.81 1

Alpha -0.27

Sharpe Ratio 0.78 0.91

Information Ratio 0.17

Five Years

T. Rowe Price Funds

SICAV – US Blue Chip

Equity Fund Class A

Russell 1000

Growth Index

Annualised Total Return 12.07 11.67

Annualised Standard Deviation 15.31 12.27

Historical Tracking Error 5.79

Beta 1.17 1

R-Squared 0.88 1

Alpha -1.21

Sharpe Ratio 0.78 0.94

Information Ratio 0.07

26

US Blue Chip Equity Fund Class A

S&P 500 Index

Russell 1000 Growth Index

8

12

16

8 12 16

Five Years Ended 31 January 2016


This information demonstrates, in part, the firm’s Risk/Return analysis. This material is provided for informational purposes only and is not intended to be investment

advice or a recommendation to take any particular investment action. Statistics are based on monthly net returns.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell

Investment Group.

Risk/Return Characteristics

Avera

ge

An

nu

al

Retu

rn (

%)

Average Annual Standard Deviation (%)

27

0

200

400

600

800

1,000

1,200

00 02 04 06 08 10 12 14 16

0

50

100

150

200

250

300

Nu

mb

er

of

Deals

$ B

illi

on

s (

US

D)

US M&A DEAL VALUE

January 2000 - January 2016

Value of Deals (L) Number of Deals (R)

$0 $100000 $200000 $300000 $400000 $500000

Discretionary

Industrials

Technology

Staples

Materials

Utilities

Healthcare

Financials

Energy

Telecom

Total Transaction Value ($MM USD)

COMPLETED GLOBAL M&A BY INDUSTRY

January 2015 – December 2015

Sources: T. Rowe Price, Factset, Standard & Poor‘s

Continuation of Deals Following Period

of Increased Capital Return

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013

NEW ISSUES, US CORPORATE BONDS

(TRAILING TWELVE MONTHS, $B USD) As of 31 October 2015

50

100

150

200

250

1995 1999 2003 2007 2011 2015

TOTAL DEBT AS % OF TOTAL EQUITY

December 1994 - January 2016

S&P 500 Large Cap

28 28

All currency in US Dollars

Sources: Deutsche Bank, World Federation of Exchanges, Strategas, Factset

The Impact of Share Buybacks

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Co

ntr

ibu

tio

n o

f tt

m e

ps

gro

wth

SHARE BUYBACKS HAVE HAD A LIMITED

IMPACT ON EPS GROWTH

As of 31 December 2014 Buybacks Net Margin Sales

2,000

4,000

6,000

8,000

10,000

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

MEANINGFUL SHRINKAGE IN THE

NUMBER OF US LISTED COMPANIES


8,823

5,250

0

100

200

300

400

500

600

700

800

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

$b

ns U

SD

Quarterly

ANNOUNCED BUYBACK CURRENTLY

AHEAD OF ACTUAL BUYBACKS

As of 30 June 2015

Buyback Announcements

Gross Buybacks

-9.7 -50

0

50

100

150

200

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

5-y

r ch

g in

S&

P 5

00 S

ha

res

O

uts

tan

din

g $

bn

s U

SD

SHARES OUTSTANDING IN THE S&P HAS

DECREASED FROM 2011-2014


29 29

-22.4

-1.5

32.2

26.1

18.7

12.4 7.5

-20.5

-39.7

78.1

17.7

5.0 4.1 6.9

-1.5

7.8

12.5 10.1

-60.00

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

100.00

%

S&P 500 INDEX EARNINGS

PER SHARE GROWTH

2001 – 2018E*

9.8

-1.2

4.4

10.6

13.0

11.2

7.1

8.9

-12.9

7.8

9.9

3.1 2.1

3.7

-3.6

1.8

6.3 5.7

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

%

S&P 500 INDEX REVENUE

GROWTH

2001 – 2018E*

As of 30 September 2015


Chart is shown for illustrative purposes only and does not represent the performance of any specific security.

* Institutional Brokers’ Estimate System (IBES) estimate.

Sources: FactSet, Standard & Poor’s.

Earnings And Revenues Under Pressure –

Reversal Forecast In 2016

30 30

Headwinds from Energy and Currency

Expected to Subside


Past performance is not a reliable indicator of future results. 1 Source: Standard & Poor’s, RBC Capital Markets 2 Note: Bottom-up consensus expectations; YoY growth of current

constituents

Source: S&P, Thomson Financial, Compustat, FactSet and RBC

Capital Markets

ENERGY AND THE DOLLAR ARE

WEIGHING ON 2015 EARNINGS

EXPECTATIONS2

THESE IMPACTS ARE EXPECTED

TO REVERSE IN 20162

-20

-10

0

10

20

30

40

50

60

70

80

2008Q1

2008Q4

2009Q3

2010Q2

2011Q1

2011Q4

2012Q3

2013Q2

2014Q1

2014Q4

2015Q3

2016Q2(E)

Earn

ing

s P

er

Sh

are

($)

S&P 500 OPERATING EARNINGS

PER SHARE BY SECTOR1

January 2008 – December 2016 (E)

S&P 500 Health Care, Information Technology

S&P 500 Financials and Utilities

S&P 500 Energy, Industrials, Materials

S&P 500 Consumer Discretionary, ConsumerStaples

31


Past performance is not a reliable indicator of future results. 1 EBIT Margins = Earnings Before Interest and Taxes. Where data is not yet reported, IBES estimates are used.

Sources: FactSet, Standard & Poor’s.

Corporate Profit Margins Have Plateaued

S&P 500 INDEX RETURN ON EQUITY

2000 – 2015

S&P 500 INDEX: CUMULATIVE

GROWTH OF EARNINGS COMPONENTS

MARCH 2009 – JAN 2016

SIGNS OF REVENUE GROWTH

IMPROVEMENT

JUNE 2001 – JAN 2016

0

2

4

6

8

10

12

14

16

18

20

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

%

6

7

8

9

10

11

12

13

14

15

16

-40

-30

-20

-10

0

10

20

30

40

50

2001 2003 2005 2007 2009 2011 2013 2015

%

Revenues (Y/Y% Change) (L)

EBIT Margin (Y/Y% Change) (L)

EBIT Margin (%) (R)

0

2

4

6

8

10

12

14

16

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

%

S&P 500 INDEX EBIT MARGINS1

2000 – 2015

72%

68%

12%

-40

-20

0

20

40

60

80

100

2009 2010 2011 2012 2013 2014 2015

Ind

ex L

evel

Earnings Per Share

Net Margin

Revenue Per Share

32 32

-10

-8

-6

-4

-2

0

2

4

6

8

10

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Perc

en

t C

ha

ng

e, A

nn

ua

l R

ate

REAL GDP

MARCH 2001–DECEMBER 2015


Notes: A = Actual; E = U.S Fed; AR = Annual Rate; YA = Year Ago.

* Real GDP and CPI are Q4/Q4; unemployment rate is Q4 average, corporate profits are year./year.

Forecast includes data released through 5 March 2013.

Source: Factset, Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve

US Economy: Modest Growth, Tame

Inflation, and Improved Labour Market

US ECONOMIC PROJECTIONS

ANNUAL PROFILE*

2015(A) 2016(E) 2017(E) 2018(E)

Real GDP (% chg., ar) 2.1 2.3 2.2 2.0

Unemployment Rate (%) 5 4.8 4.8 4.8

Consumer Price Index (% chg., ar) 0.4 1.7 1.9 2.0

-1,000

-800

-600

-400

-200

0

200

400

600

3

4

5

6

7

8

9

10

11

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Ch

an

ge in

No

n-f

arm

Payro

lls

Un

em

plo

ym

en

t (%

)

UNEMPLOYMENT AND

NON-FARM PAYROLLS

MAY 2001–JANUARY 2016

Non-farm Payrolls (R)

Unemployment (L)

33 33

-2

-1

0

1

2

3

4

5

Perc

en

t ch

an

ge,

year

ag

o

INFLATION: PCE PRICE INDEX

JANUARY 2006 – DECEMBER 2015

All Items

Excl. Food & Energy

FED Target

0

2

4

6

8

10

12

1

2

3

4

5

99 01 03 05 07 09 11 13 15

% y

/y

Avg hourly earnings: total pvt industries (L)

Fed funds target rate (R)


Source: Haver Analytics, Bureau of Economic Analysis, Bureau of Labor Statistics

A Closer Look at Inflation

HISTORICALLY THE FED HAS HIKED

WHEN WAGES STARTED RISING

Fed long-term

objective 2%

34 34

0

2

4

6

8

10

12

14

16

18

0

2

4

6

8

10

12

14

16

18

04 05 06 07 08 09 10 11 12 13 14 15

%

%

STRONG JOB CREATION

Full time (LHS)Part time (RHS)

0

5

10

15

04 05 06 07 08 09 10 11 12 13 14

%

UNEMPLOYMENT RATE BY

QUALIFICATION

College graduates: 25+ yrs

Less than HS diploma: 25+ yrs


Source: Haver Analytics, Bureau of Labor Statistics

A Closer Look at Employment Trends

0

1

2

3

4

5

6

7

8

9

10

93 95 97 99 01 03 05 07 09 11 13

% o

f L

ab

ou

r F

orc

e

UNEMPLOYMENT RATE BY DURATION

Less than 5 weeks 5 to 14 weeks

15-26 weeks 27 weeks and above

0

1

2

3

4

5

6

7

8

9

10

-1200

-1000

-800

-600

-400

-200

0

200

400

600

800

85 90 95 00 05 10 15

m/m

ch

g

THE FED HAS HISTORICALLY

HIKED RATES 2-3 YEARS AFTER

THE TROUGH IN EMPLOYMENT

GROWTH

Change in payroll employment

Fed funds target rate

Pre-crisis Average

UPDATED UPDATED

0

2

4

6

8

10

12

14

16

18

UNEMPLOYMENT RATE VS. PART TIME

January 2000 - January 2016

Official (U3) Unemployment Rate

U6 Unemployment (Marginally attachedand Part Time)

35 35

0

20

40

60

80

100

120

140

160

180

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

93 95 97 99 01 03 05 07 09 11 13 15

Th

ou

san

d B

arr

els

Per

Day

US PRODUCING MORE AND IMPORTING LESS

US Crude Oil Field Production (LHS)

US Petroleum Products Net Imports From All Countries (LHS)

WTI Crude Oil ($/bbl USD) (RHS)

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

05 06 07 08 09 10 11 12 13 14 15

Th

ou

san

d B

arr

els

Per

Day

US CRUDE OIL PRODUCTION VS. RIG COUNT

US Crude Oil Field Production (LHS)

Oil Rigs (RHS)


Sources: Factset, Energy Information Agency, Baker Hughes, Deutsche Bank, Bureau of Economic Analysis, St. Louis Fed

The US Shale Oil Revolution

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

63 67 71 75 79 83 87 91 95 99 03 07 11 15

OIL CONSUMPTION AS A % OF GDP

0

20

40

60

80

100

120

140

160

45

50

55

60

65

70

92 93 95 97 99 01 03 04 06 08 10 12 14 15

$U

SD

OECD INVENTORY DAYS OF DEMAND VS.

OIL PRICE (BRENT CRUDE)

Total OECD Inventory Days of Demand (L)

Oil Price (R)

36 36

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

2010 2011 2012 2013 2014 2015E 2016E

Upstream

Midstream

Downstream

As of 30 November 2015

Sources: Jeffries Capex Survey, FactSet Capex Data, TRP Estimates,

Haver Analytics, Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, Deutsche Bank Research, T. Rowe Price

Economic Impact of Lower Energy Prices

OIL & GAS CAPEX FORECAST

-500

0

500

1000

1500

2000

2500

3000

3500

4000

Jul-14 Nov-14 Mar-15 Jul-15 Nov-15

Th

ou

san

ds

JOB CREATION SINCE THE SUMMER OF 2014

Manufacturing Sector

Mining and Logging Sector

Service Sector

37 37

9

10

11

12

13

70

80

90

100

110

120

130

97 99 01 03 05 07 09 11 13 15

Perc

en

t of D

isp

os

ab

le In

co

me

Perc

en

t o

f D

isp

os

ab

le In

co

me

HOUSEHOLD DEBT AND DEBT SERVICE AS

% OF DISPOSABLE INCOME

DECEMBER 1997–SEPTEMBER 2015

Mortgage Debt & Consumer Credit (L)

Household Debt Service Ratio (R)


Sources: Haver Analytics, Bureau of Economic Analysis, T. Rowe Price

US Consumer: Lower Debt and Improved

Labour Market to Drive Income and Spending

-8

-6

-4

-2

0

2

4

6

8

08 09 10 11 12 13 14 15

Perc

en

t C

ha

ng

e, Y

ear

Ag

o

PAYROLL VS. PERSONAL

CONSUMPTION EXPENDITURES

JANUARY 2008-JANUARY 2016

Payroll Index, Private Industries

Personal Consumption Expenditures

38 38

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

95

115

135

155

175

195

215

04 05 06 07 08 09 10 11 12 13 14 15

Med

ian

In

co

me a

s o

f %

of

Qu

ali

fyin

g I

nc

om

e*

MORTGAGE RATES AND HOUSING

AFFORDABILITY

JULY 2004 – JANUARY 2016

Affordability (LHS)

30 yr rate (RHS)

200

700

1200

1700

2200

04 05 06 07 08 09 11 12 13 14 15

12-q

tr. C

hg

., A

R,

tho

us

an

ds

HOUSING STARTS VS.

HOUSEHOLD FORMATIONS

JULY 2004 – JANUARY 2016

Household Formation

Housing Starts


*Housing Affordability compares the hypothetical mortgage payment on a median priced house to median household income. An index of 100 means this “median”

payment is equal to the amount of income necessary to meet traditional loan quality standards

Source: Haver Analytics, U.S. Census Bureau, National Association of Realtors, Standard & Poor's

How Robust is the Housing Recovery?

Average

affordability

154.8

39 39

90

100

110

120

130

140

150

160

170

1 5 9 13 17 21 25 29 33 37

Number of Months after Bull Market Inception

CUMULATIVE GDP GROWTH IN

BULL MARKETS

March 2009 - Sep 2015

Sept 2002 - Oct 2007

Oct 1990 - Jan 2000

Nov 1987 - July 1990

Aug 1982 - Aug 1987

0

50

100

150

200

250

300

350

400

450

500

1 5 9 13 17 21 25 29 33 37

Number of Quarters after Bull Market Inception

S&P 500 EARNINGS IN BULL

MARKETS

March 2009 - Sep 2015Sept 2002 - Oct 2007Oct 1990 - Jan 2000Nov 1987 - July 1990Aug 1982 - Aug 1987




Source: FactSet, Haver Analytics

Muted Growth but Strong Returns

Recent US Bull Market Periods Duration (months) S&P Cumulative Return S&P Annualised Return

Aug 1982 - Aug 1987 61 280% 30%

Nov 1987 - July 1990 33 56% 18%

Oct 1990 - Jan 2000 112 469% 20%

Sept 2002 - Oct 2007 62 86% 13%

March 2009 - December 2015 83 221% 19%

Average 70.2 222% 20%

40 40

How Long Can the US Equity Bull Market

Last?

Bull Market

Start

Bull Market

End

Cumulative

S&P 500 Total

Return

Length in

Months

Recession

Start

Recession

End

Oct-1966 Nov-1968 48% 26 Dec-1969 Dec-1970

May-1970 Jan-1973 74% 32 Nov-1973 Apr-1975

Oct-1974 Feb-1980 90% 65 Jan-1980 Aug-1980

Mar-1980 Nov-1980 43% 8 Jul-1981 Dec-1982

Aug-1982 Aug-1987 229% 61 N/A N/A

Dec-1987 Jul-1990 65% 32 Jul-1990 Apr-1991

Oct-1990 Mar-2000 417% 115 Mar-2001 Dec-2001

Oct-2002 Oct-2007 101% 61 Dec-2007 Jul-2009




Sources: RBC Capital Markets, Standard & Poor’s, Haver Analytics

The passage of time does not typically bring the end to a bull market. Rather they end when an economic

recession sets in. In the last 50 years, the only exception was the bull market of 1982-87, which was followed

by a bear market that lasted only 3 months.

41 41

How Long Can the US Equity Bull Market

Last? Part II

Bear Market Timing S&P 500 Cumulative Price Return

Recession

Period

Start

Date

# of Months

Before Recession

Bear Market

Peak to Trough

1 Year Prior to

Start of Bear

Market

2 Years Prior to

Start of Bear

Market

Dec 69 – Dec 70 Nov-68 11 -36.06% 15.29% 34.70%

Nov 73 – Apr 75 Jan-73 10 -48.20% 16.07% 29.68%

Jan 80 – Aug 80 Feb-80 -1 -17.07% 19.72% 31.81%

Jul 81 – Dec 82 Nov-80 8 -27.11% 31.61% 47.68%

Jul 90 – Apr 91 Jul-90 0 -19.92% 11.18% 35.62%

Mar 01 – Dec 01 Mar-00 12 -49.15% 18.41% 38.15%

Dec 07 – Jul 09 Oct-07 2 -56.78% 15.88% 30.88%

Median n/a 8 -36.06% 16.07% 34.70%

Average n/a 6 -36.33% 18.31% 35.50%




Sources: RBC Capital Markets, Factset, Standard & Poor’s

While a recession does not appear imminent we do appear to be in the mid to late stages of the current

economic expansion. Bear markets typically begin before the recession occurs, but performance typically

remains strong in the latter stages of a bear market.

42

Helen Ford

Portfolio Specialist, US equities

Biographies

Helen Ford is a portfolio specialist in the Equity Division at T. Rowe Price, representing the firm's US equity portfolio

managers to institutional clients, consultants and prospects.

Mrs. Ford has 28 years of investment experience. She joined the firm in 2007 from the Kuwait Investment Office (KIO)

where she was head of US equities for nearly three years. Prior to joining the KIO, she was the financials and health

care manager within Cazenove's global equity team, and before that, she was head of US equities at SLC Asset

Management.

Mrs. Ford holds a B.Sc. (Hons.) degree (1st) from the Open University and is a member of the CFA Institute, having

completed the Institute of Investment Management and Research examinations.

Philippe Goettmann

Head of Distribution Belgium, Luxembourg and France

Tel. +352 274 725 28

[email protected]

Philippe J. Goettmann leads the development of relationships with financial intermediaries and distribution networks

Belgium, France, Luxembourg and Monaco for T. Rowe Price.

He joined T. Rowe Price in 2014 and has 19 years of industry experience. Mr. Goettmann was previously head of

distribution and sales in France and Monaco for Deutsche Asset & Wealth Management (formerly DWS).

Prior to this he spent 10 years responsible for distribution in Belgium and Luxembourg for DWS and ING Investment

Management. Philippe started his career as Legal Officer for Société Générale Bank & Trust in Luxembourg.

mailto:[email protected]

43 43

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