Emerging Markets Growth Fund - Quarterly Review September 2021 Portfolio Managers
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Emerging Markets Growth Fund
Quarterly Review
September 2021
Todd M. McClone, CFA, Partner
Casey K. Preyss, CFA, Partner
Vivian Lin Thurston, CFA, Partner
Portfolio Managers
13693909William Blair Emerging Markets Growth Fund Important Disclosures September 2021
Risks:
The views expressed in this report and the information about the holdings are as of the date of this material, unless otherwise noted, and
are subject to change. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the
Fund will continue to hold any one particular security or stay invested in any one particular sector. Holdings are subject to change at any
time.
The Fund involves a high level of risk and may not be appropriate for everyone. You should only consider it for the aggressive
portion of your portfolio. The Fund’s returns will vary, and you could lose money by investing in the Fund. The Fund holds equities which
may decline in value due to both real and perceived general market, economic, and industry conditions. Investing in foreign denominated
and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be
enhanced in emerging markets. The securities of emerging market companies may be subject to greater volatility and less liquidity than
companies in more developed markets. Individual securities may not perform as expected or a strategy used by the Adviser may fail to
produce its intended result. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a
portfolio. Convertible securities may be called before intended, which may have an adverse effect on investment objectives. The Fund is
expected to incur operating expenses that are higher than those of mutual funds investing exclusively in U.S. equity securities due to the
higher custodial fees associated with foreign securities investments.
Performance cited represents past performance. Past performance does not guarantee future results and current performance
may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of
dividends and capital gains. Investment returns and principal will fluctuate with market and economic conditions and you may
have a gain or loss when you sell shares. For the most current month end performance information, please call 1‐877‐962‐5247,
or visit our Web site at www.williamblairfunds.com. Class N shares are available to the general public without a sales load. Class
I and Class R6 shares are available only to investors who meet certain eligibility requirements.
This content is for informational and educational purposes only and is not intended as investment advice or a recommendation to buy or
sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives,
guidelines and restrictions.
Please carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. This and other
information is contained in the Fund’s prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272.
Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.
Copyright © 2021 William Blair & Company, L.L.C. “William Blair” is a registered trademark of William Blair & Company, L.L.C.
Distributed by William Blair & Company, L.L.C., member FINRA/SIPC
2 13693909William Blair Emerging Markets Growth Fund Summary & Outlook September 2021
Market Review Chinese government announced new regulatory moves
which negatively impacted companies in the technology
Global equities declined (-1.11%) in the third quarter as and private education sectors. Hampered investor
volatility picked up in September, erasing gains in July and sentiment was further compounded in late September on
August. Developed Markets were flat (-0.19%) but concerns over the collapse of Evergrande, one of China’s
outperformed Emerging Markets (-7.39%) primarily due to largest real estate developers, and the potential impact on
weakness within China. From a global sector perspective, China’s financial system. Conversely, India continued to
Consumer Discretionary (-5.13%) and Materials (-4.45%) advance (+12.64%) amid a slowdown in the country’s new
lagged. Conversely, Energy continued to outperform COVID-19 cases and a significant liquidity boost from the
(+2.87% for the quarter and +34.26% year-to-date) as country’s central bank and foreign inflows.
rising demand and supply constraints drove stronger crude
oil prices.
Performance
US equities were flat (-0.06%) for the quarter as economic
data remained healthy, albeit past the peak rate of growth, Outperformance of the Emerging Markets Growth Fund
and solid corporate earnings helped offset volatility (Class N) versus the MSCI Emerging Markets IMI (net) was
induced by the rise of new Delta variant cases. At the much- primarily driven by positive stock selection across most
anticipated Jackson Hole symposium, Federal Reserve sectors. The consumer discretionary, materials, and
Chairman Jerome Powell noted that the economy has made information technology sectors were the largest sources of
“substantial further progress” on inflation, while the labor relative return. In consumer discretionary, Alibaba Group
market has also made “clear progress”. The Fed also Holding underweighting helped relative performance as
announced that the tapering of quantitative easing could the stock underperformed amid intense regulatory
start this year and finish in mid-2022. crackdown. The reduced position reflects the increased
probability of lower operating profit as a result of
Japanese equities were flat in July and August but advanced government intervention. MercadoLibre also contributed to
strongly in September to close out a solid third quarter the sector outperformance as the strong operating
(+4.35%). Strength within Japan was primarily due to the momentum and acquisition of the logistics operator Kangu
announcement that Prime Minister Suga would not be over the quarter continued to support its best-in-class
running for re-election in November. Despite a very short ecosystem of marketplace, payments, and logistics and
time in office (less than a year), Suga’s approval ratings allows the company to introduce additional services. SRF
were very low following the administration’s handling of Ltd, a leader in specialty chemicals, technical textiles, and
the coronavirus pandemic. packaging films in India, within materials was an additional
source of outperformance. The company is benefiting from
Emerging Markets sharply declined (-7.39%) primarily due an improved global agrochemical cycle and growing import
to weakness within China (-17.99%). In late July, the substitution as a result of disruptions in China. In
3 13693909William Blair Emerging Markets Growth Fund Summary & Outlook September 2021
information technology, Silergy Corp propelled relative early-stage digital disruptor with significant competitive
returns. The Chinese leading analog semiconductor advantages and market share opportunity stemming from
company delivered strong results, driven by robust sales its brand, innovation, low-cost deposits, technology, and
growth and margin expansion as it continues to benefit cost efficiency.
from structural growth in demand from automobile, cloud,
and 5G end-markets as well as localization trend. Information technology exposure was boosted through
purchases of Wuxi Lead Intelligent Equi-A and Zhejiang
Partly offsetting these effects were underweight allocations Jingsheng Mechanical & Electrical-A. Wuxi Lead is the
to the financials and energy sectors, coupled with below- Chinese designer and manufacturer of equipment for large-
average stock selection in the consumer staples sector. In format batteries used in electric vehicles and grid-level
consumer staples, Wuliangye Yibin Co Ltd and Kweichow power storage. Through a consistent focus on R&D and
Moutai Co Ltd weighed on relative results. The two Baijiu process learnings, the company has developed a leading
stocks performance was hampered by concerns about position in production equipment for the battery industry
regulatory tightening affecting luxury premium liquor with a 30%-40% market share in China, with share as high
brands as the government shifted focus to “Common as 60% in certain critical segments of the equipment
Prosperity.” Stock selection within Korea also detracted market. Zhejiang Jingsheng Mechanical & Electrical is a
from relative performance as Kakao was a drag. The stock leading solar wafer equipment manufacturer. Our
pulled back because of increased regulatory scrutiny on investment thesis is predicated on the company’s dominant
platform companies in Korea. Lg Household & Health Care market share of 40%, manufacturing expertise, best-in-
Ltd also weighed on relative performance as the company class crystal furnaces providing high product yields, and
delivered weaker-than-expected second-quarter results ability to penetrate adjacent markets both within and
and a cautious second half of the year outlook because of outside solar.
continued margin pressure from increased promotional
costs in China. Communication services exposure was reduced during the
period through liquidation of NCSoft, a South Korean video
Positioning games developer, amid a disappointing launch of latest
game Blade & Soul II. Exposure to consumer discretionary
During the period, financials exposure was increased also declined as a result of the sale of Naspers Ltd, China
through the purchases of OTP Bank Nyrt and KakaoBank Education Group Holdings, and MakeMyTrip Ltd. We sold
Corp. OTP is a Hungary-based bank with operations across Naspers to reduce exposure to Tencent amid the Chinese
CEE. The bank is well positioned to benefit from the government regulatory crackdown on digital platforms. We
macroeconomic recovery and rate hikes in the region. Its exited China Education Group Holdings, a leading private
exposure to structural growth market and significant higher education company, because of policy headwinds in
excess capital should continue to drive robust growth and the education sector as the Chinese leadership shifted its
returns. KakaoBank is the largest mobile-only bank in focus to “Common Prosperity” and looks to alleviate the
South Korea, with 16 million customers. The company is an dual burden on parents and children. MakeMyTrip, the
4 13693909William Blair Emerging Markets Growth Fund Summary & Outlook September 2021
Indian online travel company, was eliminated in favor of capital markets to compete on a global stage. At the same
better growth opportunities as operating performance time, the nature of the autocratic regime and state-planned
continued to be impacted by the COVID-19 pandemic and economy has facilitated the execution of the China
resulting travel demand. Communist Party’s (CCP) objectives through policies and
regulations directing resources into innovative sectors and
From a geographic perspective, a notable adjustment was facilitating the emergence of new industries and global
increases to India, offset by decreases to China. champions.
Outlook The absolute power of the state to enact and enforce policy
and regulation is another constant characteristic of China.
Corporate performance has been strong as the global The current regulatory crackdown on industries that have
economies continue to resume normalized activity. We benefited from policy support (or at least the government’s
have seen strength in the cyclical areas of the economy, laissez-faire approach), while seemingly unexpected, is,
while at the same time companies with leading business when analyzed closely, consistent with the government’s
models and practices have continued to press their priorities and past attitudes and actions toward other
structural competitive advantage. This has driven positive industries.
momentum for the market this year, and companies with
strong returns and differentiated positioning like those we Chinese leadership’s reprioritization of its objectives to
seek to invest in have generally enjoyed even stronger rebalance growth versus social issues is one example. Given
corporate and stock market performance on balance. China’s current stage of development, its focus is on
While we do not expect the backdrop to change materially, Common Prosperity and more balanced growth as opposed
we do point out two primary areas of intermediate-term to its prior target of fast growth.
focus for global equity investors: China policy and
regulation risk, and the inflation outlook. Under the surface, China’s economic achievements have
seemingly caused growing tensions between the country’s
China socialist political and ideological goals and growing
capitalist (profit-led) economy.
We view the China investment opportunities and risks
within the framework of what has, and what hasn’t Increased inequality, changes in demographics, and the
changed. In turn we reference our investability model to emergence of new sectors and dominant private
determine exploitability and accessibility for returns in corporations have become a significant part of the
Chinese equities. economy, posing new and critical challenges to the Chinese
authorities.
Favorable elements of what hasn’t changed include China’s
commitment to economic growth, accelerated corporate In particular, the digital economy industries and companies
innovation across many industries, and liberalization of have reaped the benefits of an extremely supportive
5 13693909William Blair Emerging Markets Growth Fund Summary & Outlook September 2021
regulatory backdrop, favorable taxation, and access to sending ambiguous messages to investors. We believe this is
foreign capital. While many of these companies have likely to continue.
benefited society at large by providing availability of goods,
cheaper prices, life-enhancing digital services (ecommerce, Also playing a role in the regulatory crackdown is a
payments, access to capital, etc.), Chinese leadership is now deepening rivalry between the United States and China, in
concerned about the potentially negative impact on our view. While China’s transformative growth trajectory
inequality and social values that some of these industries has posed domestic challenges, it has also raised concerns
have had. It also appears Chinese leadership is concerned for the rest of the world and particularly the United States.
about the threat that has arisen from the amount of power As China became a strategic competitor to the United
accumulated by some platform companies, the influence States, tensions arose on trade and economic issues, then
that foreign investors exert on them, and the potential expanded to technological, geopolitical, ideological, and
systemic risks that exist with these new data-heavy financial fronts. As a result, China’s regulatory crackdown
business models. has focused on industries with stronger foreign
connections, especially those in highly sensitive sectors.
With this, the Chinese authorities have indicated their
intention to address perceived excesses and shortcomings In particular, Beijing’s desire to bring home some of its
that have arisen from the previous policy period, while largest and most attractive companies that are listed
doubling the size of China’s economy by 2035. Beijing’s overseas coincided with increased scrutiny from the United
priories are focused on three core issues: social stability, States on Chinese American depositary receipts (ADRs).
national security, and sustainable domestic growth. This occurred with the passing of the Holding Foreign
Companies Accountable (HFCA) Act, which sets a timeline
The fact that these objectives may at first sight seem for the forced delisting of these companies. This has called
difficult to reconcile, coupled with the ample room for into question the legality and enforcement of the important
interpretation of the government’s intentions and apparent variable interest entity (VIE) structure, as well foreign
lack of rules (given the principle-based nature of Chinese governments’ willingness to allow investment in Chinese
regulations), has created much angst and many hurdles for companies.
companies as they operate their businesses.
Where from here?
The drastic enforcement of this new wave of regulations in
the new economy is, as expected, painful, messy, and a One thing is clear: Not all industries and companies are
source of angst for companies and investors alike. It has led equal on these fronts, and a thorough evaluation of their
to irreparable damage and loss in certain industries, such alignment with Beijing’s key objectives and priorities
as after-school tutoring (AST). The lack of coordination should help determine the extent of the impact and viability
among different regulators and institutions, conflicting of entire industries.
priorities, battles for power, and personal attitudes (a la
Jack Ma) have driven regulatory scrutiny in fits and starts,
6 13693909William Blair Emerging Markets Growth Fund Summary & Outlook September 2021
For foreign investors, the new paradigm also calls into The assumption that the Chinese government intends to
question the investability of China. To assess this, we have a ban foreign capital is radically opposed to the consistent
framework that seeks to identify the exploitability and efforts from Beijing to open its capital markets, giving
accessibility of future corporate growth and returns. access to foreign investors and developing the
internationalization of the renminbi. Still, selective strategic
“Exploitability” moves beyond the typical definition of a industries may be affected by bans amid increased
company’s ability to innovate, create products and services, protectionism in the name of higher public interest. This
and grow profitably; in this case it also assesses the degree was the case with the AST (after school tutoring) industry.
of alignment between the corporation’s activities and the
government’s objectives. Here, we assess the potential Needless to say, while we continue to find China’s long-
outcome and variability in a conventional financial model. term growth and corporate performance opportunities
Industries that we believe may have elevated risk include attractive, our investability framework has identified
media, online retailing, education, gaming, and healthcare, greater uncertainty and thus risk. In many of our
specifically pharmaceuticals. We are actively researching investment strategies, we have cut our China weightings
the variability and distribution of future outcomes of materially, by many cases in half from prior high levels. We
revenues and profits for our portfolio holdings in these feel this is the prudent response to many of the industries
industries and adjusting our estimates accordingly. and companies that may remain at risk of being in the
crosshairs of more government regulatory scrutiny. At the
“Accessibility” refers to foreign investors’ ability to access same time we have rotated our Chinese investments into
economic value creation. Here, we assess the Chinese those companies whose growth opportunities are aligned
government’s intention of allowing foreign capital into with government objectives.
certain industries, including threats to the VIE structure as
well as the risk to ADR listings. We do recognize that the real and perceived interpretation
of these risks could change, in particular with more
Assuming foreign investors are not banned, but the degree transparency of intention from the government. We have
of accessibility is in question, we discount the potential spent a great deal of collective research time on these
future earnings in the form of an increased equity risk important issues, and that will likely be the case well into
premium (ERP), and ultimately weighted average cost of and beyond 2022.
capital (WACC) or discount rate.
Inflation
We believe the market may have become too sanguine
regarding China’s country risk, with the ERP as low as that As our economies gradually reopen and people are allowed
of many developed markets late last year. With the recent to move more freely, the 2020 experience should reverse.
market correction, it has risen back to its long-term We believe the challenges with goods production and
average. longer delivery times will get resolved within months, not
years, and goods price inflation will likely return to the pre-
7 13693909William Blair Emerging Markets Growth Fund Summary & Outlook September 2021
COVID muted annual rate of sub-2%. Services prices will to come on-line. While complicated, we believe the political
likely move sharply higher as restaurants, theatres, and incentives are largely aligned, and this will be resolved in
travel reopen. We may even see pockets of quite large price the coming months providing important relief to energy
increases, as supply will not be able to adjust instantly to all prices.
the pent-up demand, in leisure travel for example.
In the medium term, stronger economic growth of around
These pockets of much stronger price gains generate 3% can translate into a sustainable annual inflation rate of
headlines, but we believe the argument that such isolated, 2%-3%. Every policymaker and consumer would be
temporary pockets of price pressures will translate into pleased with that outcome. The central banks would
sustained, higher annual inflation in the medium term is welcome this with open arms instead of worrying about
weak because it does not consider supply adjustment. inflation being too low as a result of weak growth. We
believe this is the most likely probability for the next
We expect the supply responses to play out in the coming several years.
quarters to meet demand levels. First, in our view there is
no reason to believe the current logistical bottlenecks will Recently the risk of stagflation has received a great deal of
prove to be structural, rather they are recovering from the attention. The bottom line is that the calamitous
complexity of a shutdown that we haven’t experienced in experience of the 1970s had much to do with egregious
decades. On the other hand, the two biggest risks of macroeconomic meddling, and inflation did not appear
persistent inflation arise from labor and energy prices. In suddenly out of nowhere. Misguided price controls and
the US alone, we have seen an employment gap of close to wage freezes disincentivized supply adjustment and
10 million workers. The vast majority of those workers in destroyed demand growth. The 1970s bear no resemblance
our estimation are only temporarily sidelined due to to what we are talking about today: stronger demand
COVID-related issues, ranging from childcare and safety growth, employment, and supply adjustment and more
concerns, to paycheck relief benefits outweighing wages. stable, mild inflation consistent with price stability, broadly
We are already beginning to see the gradual resumption of defined.
those workers back into the workforce and expect that to
play out through next year.
Our current outlook calls for growth continuing to slow on
As for energy prices, we do not believe there is a structural a sequential basis, supply chains resuming their historic
lack of supply owing to the energy transition from fossil efficiencies, and peaking corporate profit margins
fuels to renewables. Instead, we believe much of the move moderating. Coming from historically high valuations, we
in oil and gas prices is attributable to the geopolitical would expect only modest outcomes for equities over the
complications from the Nord Stream 2 pipeline that has yet coming quarters.
8 13693909Market Performance September 2021
QTD YTD 2020 2019
AC World (DM+EM) -1.1 11.4 16.3 26.4
Developed Markets (DM) -0.2 13.1 15.9 27.5
Japan 4.4 5.9 13.1 19.6
Europe ex UK -1.7 9.8 12.1 25.0
UK -0.2 12.2 -9.0 23.2
USA -0.1 15.0 20.5 30.4
Emerging Markets (EM) -7.4 0.7 18.4 17.6
Asia -8.6 -1.8 28.5 17.8
Regions
China -18.0 -16.1 29.4 22.7
India 12.6 30.1 16.1 5.3
Korea -12.0 -4.9 46.0 9.6
Taiwan -2.4 17.0 39.1 35.2
EMEA 3.8 20.8 -5.6 15.8
Russia 9.1 31.4 -11.6 50.1
South Africa -4.8 7.1 -4.9 11.2
Latin America -13.5 -5.1 -14.1 19.4
Brazil -20.0 -10.4 -19.1 29.3
Mexico 0.8 14.4 -1.6 12.9
Frontier Markets (FM) 4.5 21.4 2.1 13.8
Large Cap -8.7 -2.8 19.6 19.3
Size
Small Cap -2.2 17.2 19.3 11.5
Communication Svcs -14.7 -8.0 27.1 10.9
Discretionary -21.7 -20.2 33.1 31.6
Staples -4.3 -1.6 10.8 9.6
Energy 9.0 25.4 -14.9 19.4
Sectors
Financials 0.9 9.4 -7.9 12.0
Healthcare -12.8 -5.2 55.5 2.9
Industrials -4.6 15.0 7.7 6.3
IT -5.4 3.7 58.5 40.8
Materials -3.4 15.9 26.2 7.7
Real Estate -10.6 -9.8 -15.6 22.2
Utilities 6.8 14.5 -4.9 9.7
Quality -0.8 -3.2 -6.8 13.7
Valuation -3.7 5.6 -12.4 4.5
Style
Etrend 3.9 20.2 14.5 12.5
Momentum 8.0 22.1 9.7 16.1
Growth -0.5 -4.1 12.9 6.1
Composite 0.8 11.9 -5.3 16.8
Past performance is not a reliable indicator of future results. Regional performance is based on IMI region/country indexes. Sector and style values are based
on the MSCI EM IMI Index. Size values are based on the MSCI EM IMI Index. Style values reflect the Quintile 1 minus Quintile 5 spread of William Blair’s proprietary
quantitative models. Sectors are based on Global Industry Classification (GICS) sectors. Large Cap and Small Cap based on MSCI Global Investable Market Index
Methodology. Data in blue reflects the top 20% (highest) values by region, country, sector, and style. Data in red reflects the bottom 20% (lowest) values by region,
country, sector, and style. All index returns are net of dividends. A direct investment in an unmanaged index is not possible. Name change from Telecommunication
Services to Communication Services effective after close of business on 9/28/18; industry and subindustry reclassifications effective 10/1/18.
9 13693909William Blair Emerging Markets Growth Fund Performance September 2021
Periods ended 9/30/2021 September Quarter YTD 1 Year 3 Year 5 Year 10 Year
William Blair Emerging Markets Growth -4.71% -6.39% 3.31% 21.75% 19.41% 14.40% 9.41%
Fund (WBENX) – Class N
William Blair Emerging Markets Growth -4.69% -6.30% 3.54% 22.03% 19.73% 14.71% 9.70%
Fund (WBEIX) – Class I
William Blair Emerging Markets Growth -4.64% -6.29% 3.61% 22.23% 19.82% 14.81% 9.83%
Fund (BIEMX) – Institutional Class R6
MSCI Emerging Markets IMI (net) -3.73% -7.39% 0.71% 20.80% 9.10% 9.28% 6.21%
Inception 6/6/2005
Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or
higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment
returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. For the most
current month end performance information, please call 1‐877‐962‐5247, or visit our Web site at www.williamblairfunds.com. Class N shares
are available to the general public without a sales load. Class I and Class R6 shares are available only to investors who meet certain eligibility
requirements.
Emerging Markets Growth Fund Expense Ratios:
Gross
Class N Shares 1.55%
Class I Shares 1.30%
Class R6 Shares 1.20%
Expenses shown are as of the most recent prospectus.
A direct investment in an index is not possible. The MSCI Emerging Markets IMI Index is a free float-adjusted market capitalization index that is designed to
measure equity market performance in the global emerging markets.
10 13693909William Blair Emerging Markets Growth Fund Performance Analysis (by sector) September 2021
The table below shows the calculated sector attribution of the Emerging Markets Growth Fund vs. its benchmark.
Emerging Markets Growth Fund vs. MSCI Emerging Markets IMI (net)
07/01/2021 to 09/30/2021
Emerging Markets Growth Fund MSCI Emerging Markets IMI (net) Attribution Analysis
Issue
Average Total Contrib to Average Total Contrib to Allocation Selection Total
GICS Sector Weight Return Return Weight Return Return Effect Effect Effect
Communication Services 13.5% -13.3% -1.9% 9.8% -14.7% -1.5% -0.3% 0.2% -0.1%
Consumer Discretionary 14.0% -13.5% -2.0% 15.4% -21.7% -3.7% 0.2% 1.4% 1.6%
Consumer Staples 5.5% -8.5% -0.5% 5.8% -4.3% -0.2% 0.0% -0.2% -0.2%
Energy 1.9% 19.6% 0.4% 4.8% 9.0% 0.4% -0.4% 0.2% -0.3%
Financials 11.6% 6.8% 0.7% 17.7% 0.9% 0.2% -0.5% 0.6% 0.1%
Health Care 6.4% -11.5% -0.9% 5.4% -12.8% -0.7% -0.1% 0.0% -0.1%
Industrials 7.5% -5.8% -0.5% 6.2% -4.6% -0.3% 0.0% -0.1% -0.1%
Information Technology 31.3% -3.0% -0.9% 20.8% -5.4% -1.1% 0.2% 0.7% 0.9%
Materials 6.1% 9.3% 0.5% 9.3% -3.4% -0.3% -0.1% 0.7% 0.6%
Real Estate 0.2% -5.1% 0.0% 2.5% -10.6% -0.3% 0.1% 0.0% 0.1%
Utilities 0.4% -9.9% 0.0% 2.3% 6.8% 0.1% -0.3% -0.1% -0.3%
Cash 1.5% - -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% -5.2% -5.2% 100.0% -7.4% -7.4% -1.2% 3.4% 2.2%
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period,
including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent
simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary
attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. Sectors are
based on Global Industry Classification (GICS) Sectors. International investing involves special risk considerations, including currency fluctuations, lower liquidity,
economic and political risk.
11 13693909William Blair Emerging Markets Growth Fund Performance Analysis (by region) September 2021
The table below shows the calculated regional attribution of the Emerging Markets Growth Fund vs. its benchmark.
Emerging Markets Growth Fund vs. MSCI Emerging Markets IMI (net)
07/01/2021 to 09/30/2021
Emerging Markets Growth Fund MSCI Emerging Markets IMI (net) Attribution Analysis
Issue
Average Total Contrib to Average Total Contrib to Allocation Selection Total
Region Weight Return Return Weight Return Return Effect Effect Effect
EM Asia 84.0% -5.4% -4.5% 78.2% -8.6% -6.8% -0.1% 2.8% 2.7%
EMEA 7.1% 1.0% 0.0% 13.7% 3.8% 0.5% -0.7% -0.2% -0.9%
Latin America 7.4% -8.0% -0.6% 8.1% -13.5% -1.1% 0.0% 0.4% 0.4%
Cash 1.5% - -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% -5.2% -5.2% 100.0% -7.4% -7.4% -0.8% 2.9% 2.2%
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period,
including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent
simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary
attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. International
investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.
12 13693909William Blair Emerging Markets Growth Fund Top Contributors/Detractors September 2021
The tables below show the top contributors and detractors for the Emerging Markets Growth Fund vs. its benchmark.
Top Five Contributors (%) for the Period: 07/01/2021 to 09/30/2021
Issuer Sector Country Contribution To
Relative Return
Alibaba Group Holding Ltd Consumer Discretionary China 0.68
SRF Ltd Materials India 0.31
Sea Ltd Communication Services Thailand 0.29
Reliance Industries Ltd Energy India 0.26
Silergy Corp Information Technology China 0.25
Top Five Detractors (%) for the Period: 07/01/2021 to 09/30/2021
Issuer Sector Country Contribution To
Relative Return
Kakao Corp Communication Services South Korea -0.57
Country Garden Services Holdin Real Estate China -0.24
NetEase Inc Communication Services China -0.17
Taiwan Semiconductor Manufactu Information Technology Taiwan -0.16
Wuliangye Yibin Co Ltd Consumer Staples China -0.14
Index: MSCI Emerging Markets IMI (net)
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Performance results will be reduced by the fees incurred. Attribution by is based on estimated returns of all equities held during a measurement
period, including purchases and sales. We calculate attribution using our proprietary attribution system. Our proprietary attribution system runs transactions-
based attribution, taking into account all trading activity. Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report
are for informational purposes only. Holdings are subject to change at any time. This information does not constitute, and should not be construed as, investment
advice or recommendations with respect to the securities listed. Specific securities identified and described do not represent all of the securities purchased, sold, or
recommended and you should not assume that investments in the securities identified were or will be profitable.
13 13693909William Blair Emerging Markets Growth Fund Positioning September 2021
Regional Exposure Sectoral Exposure
83.6 -2.1 12.1 -2.8
EM Asia Total Communication Services -2.8
78.2 -0.7 9.5
12.7 -2.4
21.5 -8.0 Consumer Discretionary -8.0
China 14.3
30.9 -16.9 4.6 -1.6
Consumer Staples -3.9
25.0 6.9 5.9
India
13.2 13.2 Energy 2.8 1.1
5.4 0.2
12.1 -2.4
South Korea 14.1 3.8
13.2 -0.7 Financials 8.2
18.4
19.9 -0.3 5.3 -2.3
Taiwan Health Care
15.4 1.3 5.4 -1.2
7.8 0.8 7.5 -0.3
EMEA Total Industrials 0.0
14.2 1.9 6.2
32.0 1.9
3.6 0.4 Information Technology 2.7
Russia 20.6
3.4 1.6 0.9
Materials 6.6
1.4 -0.9 9.2 4.0
South Africa
3.2 -0.4 0.7 0.7
Real Estate 0.7
2.6
7.4 0.5
Latin America Total 0.5 0.2
7.5 -0.8 Utilities
2.5 0.5
3.5 -0.9 -- 0.0
Brazil Other
4.6 -1.4 -- 0.0
0.7 0.2 1.2 0.8
Mexico Cash & Equivalents -0.4
1.9 0.4 --
1.2 0.8
Cash & Equivalents William Blair Emerging Markets Growth Fund Portfolio Diff Previous QTR
-- -0.4
MSCI Emerging Markets IMI (net) Portfolio Diff YTD
William Blair Emerging Markets Growth Fund Portfolio Diff Previous QTR
MSCI Emerging Markets IMI (net) Portfolio Diff YTD
Source: William Blair.
Cash & Equivalents includes: cash and dividend accruals.
14 13693909William Blair Emerging Markets Growth Fund Top Holdings by Market Cap September 2021
The table below shows the Emerging Markets Growth Fund’s largest holdings as of 9/30/2021 by market cap as well as the sub-totals by
market cap for the portfolio and index. The stocks are listed by country and by the sector that defines each one’s role in the portfolio.
% of Total % of Total
Net Assets in Net Assets in
Country Sector Portfolio Index*
Large Cap(>$20b) 49.8% 42.5%
Taiwan Semiconductor Taiwan Information Technology 7.9% 5.7%
Manufactu
Samsung Electronics Co Ltd South Korea Information Technology 4.6% 3.9%
Tencent Holdings Ltd China Communication Services 3.2% 3.8%
MediaTek Inc Taiwan Information Technology 3.1% 0.5%
Reliance Industries Ltd India Energy 2.8% 1.1%
Mid Cap($5-20b) 23.0% 26.7%
Silergy Corp China Information Technology 1.9% 0.1%
TCS Group Holding PLC Russia Financials 1.6% 0.1%
Chailease Holding Co Ltd Taiwan Financials 1.2% 0.1%
OTP Bank Nyrt Hungary Financials 1.0% 0.1%
Capitec Bank Holdings Ltd South Africa Financials 1.0% 0.1%
Small Cap(William Blair Emerging Markets Growth Fund Top Portfolio Changes September 2021
Top Portfolio Changes During the Period: 07/01/2021 to 09/30/2021
Security Name Country Sector
Otp Bank Plc Hungary Financials
Purchases
Kakaobank Corp South Korea Financials
New
Zhejiang Jingsheng Mechani-A China Information Technology
Bank Jago Tbk Pt Indonesia Financials
Wuxi Lead Intelligent Equi-A China Information Technology
Naspers Ltd-N Shs South Africa Consumer Discretionary
Liquidations
Kweichow Moutai Co Ltd-A China Consumer Staples
Shenzhen Mindray Bio-Medic-A China Health Care
Hangzhou Tigermed Consulti-A China Health Care
Stoneco Ltd-A Brazil Information Technology
Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report are for informational purposes only. Holdings are subject
to change at any time. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities
listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and you should not assume that investments
in the securities identified were or will be profitable.
16 13693909William Blair Emerging Markets Growth Fund Characteristics September 2021
MSCI Emerging Markets IMI
Emerging Markets Growth Fund (net) Difference
Quality
Return on Equity (%) 22.3 16.9 32%
Cash Flow ROIC (%) 23.9 19.4 23%
Debt/Equity (%) 42.2 72.8 -42%
Growth
Long-Term Growth (%) 26.7 20.7 29%
5-Year Historic EPS Growth (%) 16.5 10.5 57%
Reinvestment Rate (%) 17.6 12.8 38%
Earnings Trend
EPS Revision Breadth (%) 2.3 -0.3 2.6
Valuation
P/E (next 12 months) 25.5 12.7 100%
Other
Float Adjusted Weighted Average Market Cap ($m) 87,412 75,769 15%
Number of Holdings 145 3,235
Active Share (%) 71 --
Characteristics have been calculated by William Blair.
Please refer to the ‘Important Disclosures’ section of this document for further information on investment risks and returns.
17 13693909William Blair Emerging Markets Growth Fund Holdings September 2021
Portfolio Portfolio Portfolio
Weight Weight Weight
EM Asia 83.56 EM Asia (continued) EM Asia (continued)
China 21.46 India 24.95 India (continued)
Tencent Holdings Ltd 3.16 Reliance Industries Ltd 2.64 Varun Beverages Ltd 0.32
Silergy Corp 1.90 Tata Consultancy Svcs Ltd 1.83 Indian Energy Exchange Ltd 0.31
Wuxi Biologics Cayman Inc 1.49 Hdfc Bank Limited 1.63 Kajaria Ceramics Ltd 0.31
Alibaba Group Holding Ltd 1.43 Housing Development Finance 1.32 Nestle India Ltd 0.31
China Merchants Bank-H 1.42 Bajaj Finance Ltd 0.87 Aarti Industries Limited 0.30
Li Ning Co Ltd 1.27 Srf Ltd 0.85 Voltas Ltd 0.30
Contemporary Amperex Techn-A 1.01 Apollo Hospitals Enterprise 0.78 Computer Age Management Serv 0.27
Wuxi Apptec Co Ltd-H 0.92 Divi's Laboratories Ltd 0.76 Navin Fluorine International 0.27
Jd.Com Inc - Cl A 0.79 Asian Paints Ltd 0.72 Indiamart Intermesh Ltd 0.27
Meituan-Class B 0.69 Info Edge India Ltd 0.61 Atul Ltd 0.26
Anta Sports Products Ltd 0.68 Pidilite Industries Ltd 0.58 Amber Enterprises India Ltd 0.26
Zhongsheng Group Holdings 0.67 Havells India Ltd 0.56 Escorts Ltd 0.25
Shenzhen Inovance Technolo-A 0.64 Tata Elxsi Ltd 0.55 Polycab India Ltd 0.25
Netease Inc 0.63 Pi Industries Ltd 0.48 Jk Cement Ltd 0.25
Shenzhou International Group 0.63 Dixon Technologies India Ltd 0.46 Indraprastha Gas Ltd 0.24
China Meidong Auto Holdings 0.45 Larsen & Toubro Infotech Ltd 0.43 Metropolis Healthcare Ltd 0.24
Zhangzhou Pientzehuang Pha-A 0.35 Coforge Limited 0.43 Affle India Ltd 0.24
Centre Testing Intl Group-A 0.34 Upl Ltd 0.43 Gujarat Gas Ltd 0.23
Zhejiang Jingsheng Mechani-A 0.34 Crompton Greaves Consumer El 0.42 Hdfc Life Insurance Co Ltd 0.22
Jiumaojiu International Hold 0.33 Tata Consumer Products Ltd 0.42 Reliance Industries-Partly P 0.14
Country Garden Services Hold 0.33 Balkrishna Industries Ltd 0.40 Indonesia 1.69
Beijing Oriental Yuhong-A 0.33 Hindustan Unilever Ltd 0.39 Bank Central Asia Tbk Pt 0.86
Wuxi Lead Intelligent Equi-A 0.33 Dabur India Ltd 0.38 Bank Rakyat Indonesia Perser 0.49
China Tourism Group Duty F-A 0.29 Godrej Properties Ltd 0.37 Bank Jago Tbk Pt 0.34
Suzhou Maxwell Technologie-A 0.28 Dr Lal Pathlabs Ltd 0.37 Philippines 0.26
Sungrow Power Supply Co Lt-A 0.28 Astral Ltd 0.35 Intl Container Term Svcs Inc 0.26
Wuliangye Yibin Co Ltd-A 0.27 Laurus Labs Ltd 0.35 South Korea 12.13
Kingdee International Sftwr 0.20 Apl Apollo Tubes Ltd 0.33 Samsung Electronics Co Ltd 4.57
As of 9/30/2021. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
18 13693909William Blair Emerging Markets Growth Fund Holdings September 2021
Portfolio Portfolio Portfolio
Weight Weight Weight
EM Asia (continued) EM Asia (continued) EMEA (continued)
South Korea (continued) Taiwan (continued) Russia (continued)
Kakao Corp 1.73 Globalwafers Co Ltd 0.33 Ozon Holdings Plc - Adr 0.31
Naver Corp 1.56 Lotes Co Ltd 0.32 South Africa 1.36
Samsung Sdi Co Ltd 1.12 Elite Material Co Ltd 0.32 Capitec Bank Holdings Ltd 1.00
Kakaobank Corp 0.59 Sinbon Electronics Co Ltd 0.31 Clicks Group Ltd 0.36
Hansol Chemical Co Ltd 0.58 Asmedia Technology Inc 0.30 Latin America 7.40
Leeno Industrial Inc 0.39 Accton Technology Corp 0.29 Argentina 2.51
Pi Advanced Materials Co Ltd 0.29 Feng Tay Enterprise Co Ltd 0.28 Mercadolibre Inc 1.62
Sk Hynix Inc 0.28 Chroma Ate Inc 0.27 Globant SA 0.89
Wonik Ips Co Ltd 0.23 Poya International Co Ltd 0.01 Brazil 3.53
Lg Household & Health Care 0.23 Thailand 2.21 Weg SA 0.61
Nice Information Service Co 0.19 Sea Ltd-Adr 1.95 Totvs SA 0.51
Jyp Entertainment Corp 0.19 Com7 Pcl-F 0.26 Raia Drogasil SA 0.41
Koh Young Technology Inc 0.17 Vietnam 0.95 Localiza Rent A Car 0.37
Taiwan 19.91 Hoa Phat Group Jsc 0.95 Magazine Luiza SA 0.36
Taiwan Semiconductor-Sp Adr 5.93 EMEA 7.82 Locaweb Servicos De Internet 0.30
Mediatek Inc 3.04 Hungary 1.02 Patria Investments Ltd-A 0.28
Taiwan Semiconductor Manufac 1.84 Otp Bank PLC 1.02 Vinci Partners Investments-A 0.25
Chailease Holding Co Ltd 1.18 Kazakhstan 0.15 B3 Sa-Brasil Bolsa Balcao 0.22
Aspeed Technology Inc 0.84 Jsc Kaspi.Kz Gdr-Reg S 0.15 Pet Center Comercio E Partic 0.21
Parade Technologies Ltd 0.74 Kenya 0.28 Mexico 0.72
Realtek Semiconductor Corp 0.72 Safaricom PLC 0.28 Walmart De Mexico Sab De Cv 0.72
Ememory Technology Inc 0.68 Poland 1.45 Uruguay 0.64
Voltronic Power Technology 0.62 Dino Polska SA 0.76 Dlocal Ltd 0.64
Momo.Com Inc 0.47 Allegro.Eu SA 0.42 Cash 1.22
Advantech Co Ltd 0.37 Inpost SA 0.27 Total 100.00
E.Sun Financial Holding Co 0.36 Russia 3.56
Airtac International Group 0.35 Yandex Nv-A 1.72
Wiwynn Corp 0.34 Tcs Group Holding-Gdr Reg S 1.54
As of 9/30/2021. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
19 13693909Glossary - Terms
1 Month EPS Revision Breadth: 1-month factor representing the trend in the direction of estimate changes. Range from -100% to +100%, it is calculated as
the number of positive revisions minus the number of negative revisions divided by the total number of estimates.
Active Share: A measure of the percentage of equity holdings in a portfolio that differ from the benchmark index. It is calculated by taking the sum of the
absolute value of the differences of the weight of each holding in a portfolio versus the weight of each holding in the index and dividing by two.
Alpha: A measure of a portfolio’s return in excess of the market return, after both have been adjusted for risk. It is a mathematical estimate of the amount of
return expected from a portfolio above and beyond the market return at any point in time. For example, an alpha of 1.25 indicates that a stock is projected to
rise 1.25% in price in a year over the return of the market, or the return when the market return is zero. When an investment price is low relative to its alpha, it
is undervalued, and considered a good selection.
Beta: A quantitative measure of the volatility of the portfolio relative to the overall market, represented by a comparable benchmark. A beta above 1 is more
volatile than the overall market, while a beta below 1 is less volatile, and could be expected to rise and fall more slowly than the market.
Cash Flow Return on Invested Capital (ROIC): A measure of how effectively a company generates cash flow based on legacy capital investment.
Developed Markets: Using the Morgan Stanley Capital International (MSCI) geographic definition, this region includes: United Kingdom, Europe (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Spain, Sweden and Switzerland), Japan, Pacific Asia (Australia, Hong
Kong, New Zealand, and Singapore) and the Western Hemisphere (Canada and other Americas).
Debt to Total Capital Ratio: This figure is the percentage of each company’s invested capital that consists of debt. Companies with a high Debt to Total Capital
level may be considered more risky. From a portfolio perspective, the portfolio Debt to Total Capital Ratio is a weighted average of the individual holdings' Debt
to Total Capital Ratio.
Emerging Markets: Using MSCI’s geographic definition, this region includes: Emerging Markets Asia (China, India, Indonesia, Malaysia, S Korea, Taiwan, and
Thailand), Emerging Markets Europe, Mid-East and Africa (Czech Republic, Hungary, Poland, Russia, Turkey, Egypt, Morocco, and S Africa), and Latin America
(Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela).
EPS (Earnings Per Share) Growth Rate (Projected): This measure represents the weighted average of forecasted growth in earnings expected to be
experienced by the stocks within the portfolio over the next 3-5 years. From a portfolio perspective, the portfolio P/E ratio and EPS Growth Rate are weighted
averages of the individual holdings’ P/E ratios and EPS Growth Rates. Data calculated in FactSet.
EPS Growth Rate - 5-Year Historic: The weighted average earnings per share growth for stock within the portfolio over the past 5 years.
EV/EBITDA: (Enterprise Value / Earnings Before Interest, Taxes and Depreciation-Amortization): The EV/EBITDA ratio is useful for global comparisons
because it ignores the distorting effects of individual countries' taxation policies. It's used to find attractive takeover candidates. Enterprise value is a better
measure than market cap for takeovers because it takes into account the debt which the acquirer will have to assume. Therefore, a company with a low
EV/EBITDA ratio can be viewed as a good takeover candidate.
EV/IC: (Enterprise Value / Invested Capital) Ratio: Enterprise Value (EV), which is market capitalization minus cash plus debt divided by Invested Capital
(IC), which is the sum of common stock, preferred stock and long-term debt. This number will get you a simple multiple. If it is below 1.0, then it means that the
company is selling below book value and theoretically below its liquidation value.
20 13693909Glossary - Terms
Information Coefficient: A measure of the correlation between expected and actual returns.
Information Ratio: A measure of risk-adjusted return. The annualized excess return of the portfolio relative to a respective benchmark, divided by the
annualized tracking error relative to that same benchmark. The higher the measure, the higher the risk-adjusted return.
PBV: (Price/Book Value) Ratio: The PBV Ratio measures the value of a company's common stock relative to its shareholder's equity. A price-to-book multiple
above one means that the price of the company's common stock is higher than its common shareholder's equity. A price-to-book multiple below one means that
the price of the company's common stock are less than its break-up value, and the shares may be undervalued.
PCF: (Price/CashFlow): Some analysts favor the price/cash flow over the price-earnings (PE) ratio as a measure of a company’s value. Cash flow is a measure
of a company's financial health. It equals cash receipts minus cash payments over a given period of time.
P/E: (Price/Earnings) Ratio: This is the most common measure of how expensive a stock is. Simply, it is the cost an investor in a given stock must pay per
dollar of current annual earnings. A high P/E generally indicates that the market is paying more to obtain the stock because it has confidence in the company’s
ability to increase its earnings. Conversely, a low P/E often indicates that the market has less confidence that the company’s earnings will increase rapidly or
steadily, and therefore will not pay as much for its stock.
R-squared: A measurement of how closely the portfolio’s performance correlates with the performance of its benchmark, such as the MSC AC World Free ex US
Index. In other words, it is a measurement of what portion of a portfolio’s performance can be explained by the performance of the overall market or index.
Ranges from 0 to 1, where 0 indicates no correlation and 1 indicates perfect correlation.
Risk (Standard Deviation): A measure of the portfolio’s risk. A higher standard deviation represents a greater dispersion of returns, and thus a greater
amount of risk. The annualized standard deviation is calculated using monthly returns.
Sharpe-Ratio: A risk-adjusted measure calculated using standard deviation and excess return (Portfolio return – Risk Free Rate) to determine reward per unit
of risk. The higher the Sharpe ratio, the better the portfolio’s historic risk-adjusted performance.
Tracking Error: Tracking Error measures the extent to which a portfolio tracks its benchmark. The tracking error of an index portfolio should be lower than
that of an active portfolio. The tracking error will always be greater than zero if the portfolio is anything other than a replication of the benchmark.
Trailing 1-Year Turnover: This figure reflects the portfolio’s trading activity by calculating the amount of the portfolio’s holdings bought or sold over the prior
year, expressed as a percentage of the portfolio’s average market value. Turnover figures may be related to the amount of trading costs experienced by the
portfolio.
Weighted Average Market Capitalization: Market capitalization refers to the total market value of each company's outstanding shares. The Weighted
Average Market Capitalization for a portfolio is calculated as the average market capitalization of the stocks within the portfolio, weighted by the amount of each
stock owned.
Weighted Median Market Capitalization: This calculation represents the median market capitalization of the stocks in the portfolio, weighted by the amount
of each stock owned.
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