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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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SICAV

Middle East & Africa Equity Fund

Unconstrained, growth-orientated investing in the under explored markets of the Middle East and Africa.

ISIN LU0310188205 WKN A0M1XR

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

4.20%
$6.2m

1YR Return
(View Total Returns)

Manager Tenure

53.21%
<1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.05
5.30%

Inception Date 04-Sep-2007

Performance figures calculated in USD

31-May-2021 - Seun Oyegunle, CFA, Portfolio Manager ,
We believe overall, the long-term outlook for the Africa and Middle East region remains robust, despite the current global slowdown. Looking beyond the current crisis, growth in this region is likely to be driven by some of the world’s most attractive demographics, rising urbanisation and levels of infrastructure investment, and a strong asset base in natural resources. There is much scope for economic improvement, boosted by the implementation of reforms and growing structural domestic demand.
Seun Oyegunle, CFA
Seun Oyegunle, CFA, Portfolio Manager

Seun Oyegunle is the portfolio manager of the Africa & Middle East Fund in the Equity Division. 

Click for Manager Outlook
 

Strategy

Manager's Outlook

Amid a challenging backdrop, we continue to focus on the long-term fundamentals, and look to hold high conviction ideas, in quality companies that are well-positioned to withstand the current environment and emerge stronger on the other side. Over the longer-term, this region is likely to be bolstered by a recovery in regional growth and meaningful country-specific improvements, including economic reform. Over recent years, we have been encouraged by policymakers' attempts to cut subsidies to fuel, electricity and gas as part of fiscal consolidation plans.

In South Africa, we had existing concerns regarding the disappointingly slow path to reform and the economy entered the current crisis already in a recession. The macroeconomic outlook in South Africa is increasingly tough, not only as a result of stringent lockdowns due to the coronavirus pandemic, but also because South Africa is a small, open economy, which is highly exposed to global growth trends. We focus on our highest conviction ideas, in well-run, quality companies.

Elsewhere in Africa, the removal of an interest rate cap in Kenya in 2019 was a positive catalyst for the market. We are able to find opportunities in the market, particularly given the recent market dislocation. Egypt completed an IMF-backed reform agenda and loan program in 2019. If the political situation remains stable, this should drive a material improvement to the country's economic backdrop. While challenges still exist, including those to the tourism sector during the current crisis, we are starting to see signs of easing inflation, an improving budget deficit and currency stability. We are also increasingly cautious on the outlook in Morocco. The country has had a very difficult COVID crisis, stimulus measures have been underwhelming, and the economy is also tourist dependent. We maintain selective high conviction ideas here.

In the Middle East, oil exporting nations have been challenged by oil price volatility amid the pandemic and associated lockdowns measures around the globe. We are increasingly constructive on the Saudi Arabian market given an improving oil price coupled with the recovery from the pandemic. We are selective on bottom up ideas here but look for opportunities to add to attractively valued names. In Qatar, recent weeks have seen moves towards a normalization in relations with the nation's gulf neighbors. The economy is also likely to be boosted by the World Cup 2022 and significant investments in natural gas projects. We are able to find some attractively valued names in the market.

Overall, the long-term outlook for the Africa and Middle East region remains robust, despite the current global slowdown. Looking beyond the current crisis, growth in this region is likely to be driven by some of the world's most attractive demographics, rising urbanization and levels of infrastructure investment, and a strong asset base in natural resources. There is much scope for economic improvement, boosted by reform implementation and growing structural domestic demand. This will translate into strong corporate earnings growth that we believe can be sustained by various businesses in the years ahead. We believe the fundamentals generally remain intact and that strong growth will resume on the other side of the crisis.

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of companies in the developing countries of the Middle East and Africa.

Investment Approach

  • The fund is growth oriented, unconstrained and designed to deliver strong absolute performance.
  • Stock selection is driven by fundamental analysis seeking to identify the best companies with attractive valuations and earnings that are growing faster than their local, regional or global peers.
  • In investment frontiers such as the Middle East and Africa market, inefficiencies are likely to be significant. One of the core tenets of our investment strategy is that stocks are frequently mispriced.
  • Focus on finding companies with above-average revenue growth, strong management and good corporate governance.
  • The bottom-up, stock specific approach is supported by a top-down perspective focusing on macro and micro-factors mainly at the country level.
  • Manager with a proven track record of investing in emerging markets supported by a dedicated analyst team.
  • Dedicated Portfolio Manager supported by a well-resourced analyst team.

Portfolio Construction

  • Typically 50-80 stocks
  • Individual positions typically range from 2.0%-8.0%
  • Country and sector weights unconstrained
  • Cash reserves typically 0%-5%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Fund % 53.21% 4.20% 8.91% 5.81% 21.91%
Indicative Benchmark % 54.26% 6.44% 9.16% 3.97% 20.98%
Excess Return % -1.05% -2.24% -0.25% 1.84% 0.93%

Inception Date 04-Sep-2007

Manager Inception Date 01-Jan-2021

Indicative Benchmark: Linked Benchmark Net

Data as of 31-May-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 54.95% -0.10% 7.00% 5.24%
Indicative Benchmark % 59.52% 2.51% 7.19% 3.34%
Excess Return % -4.57% -2.61% -0.19% 1.90%

Inception Date 04-Sep-2007

Indicative Benchmark: Linked Benchmark Net

Data as of 31-Mar-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 11-Jun-2021 Quarter to DateData as of 11-Jun-2021 Year to DateData as of 11-Jun-2021 1 MonthData as of 31-May-2021 3 MonthsData as of 31-May-2021
Fund % 1.49% 10.28% 23.72% 4.08% 13.15%
Indicative Benchmark % 0.73% 8.72% 21.87% 4.21% 15.01%
Excess Return % 0.76% 1.56% 1.85% -0.13% -1.86%

Inception Date 04-Sep-2007

Indicative Benchmark: Linked Benchmark Net

Indicative Benchmark: Linked Benchmark Net

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 30 September 2010, the benchmark for the sub-fund was changed to S&P Emerging Market/Frontier Middle East & Africa Broad Market Index ex Israel. Prior to 30 September 2010, the benchmark for the sub-fund was MSCI Arabian Markets and Africa Index. Prior to 1 July 2009, the benchmark for the sub-fund was S&P IFCG Africa and Middle East ex-Saudi Arabia and ex-Israel. Prior to 1 September 2008, this benchmark also excluded Kuwait. The benchmark changes were made because the portfolio manager viewed the new benchmark composition to be a better representation of the investment strategy of the sub-fund. Historical benchmark representations have not been restated.

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

31-May-2021 - Seun Oyegunle, CFA, Portfolio Manager ,
Middle Eastern and African equities again delivered strong returns in May, rising alongside both their developed and emerging markets peers. The South African market was particularly buoyant; bank stocks there were supported by higher global economic recovery expectations. Coronavirus restrictions continued, with the nightly curfew extended. On the political front, the African National Congress suspended its secretary-general, Ace Magashule, news that was welcomed by the market. Saudi Arabia, by contrast, underperformed its regional peers but still eked out a positive gain over the month. Within the portfolio, performance benefitted from our positions in a number of South African names, including several banks and Telkom, a large wireline and wireless telecommunications provider. The latter’s shares rose sharply after the company delivered earnings that were at the top of end of expectations and pleased investors with the announcement of a new dividend policy. Our bank holdings in the United Arab Emirates (UAE) also made a positive contribution to relative returns.

Holdings

Total
Holdings
46
Largest Holding Al Rajhi Bank 9.41% Was (31-Dec-2020) 8.94%
Other View Full Holdings Quarterly data as of  31-Mar-2021
Top 10 Holdings 50.52% View Top 10 Holdings Monthly data as of  31-May-2021

Largest Top Contributor^

Al Rajhi Bank
By 0.08%
% of fund 9.31%

Largest Top Detractor^

Capitec Bank Holdings
By -1.35%
% of fund 3.56%

^Absolute

Quarterly Data as of 31-Mar-2021

Top Purchase

Al Rajhi Bank
9.33%
Was (31-Dec-2020) 8.94%

Top Sale

Al Rajhi Bank
9.33%
Was (31-Dec-2020) 8.94%

Quarterly Data as of 31-Mar-2021

31-Mar-2021 - Seun Oyegunle, CFA, Portfolio Manager ,

Overall, the portfolio remains quite defensively positioned. On a sector basis, we have overweight exposures to the consumer discretionary, health care, consumer staples, and IT sectors. The most significant underweight is in materials. Country-wise, the portfolio is overweight Egypt, the UAE, and Morocco, while key country underweights include Kuwait, Saudi Arabia, and Qatar. In terms of portfolio activity over the quarter, we raised our weighting to Saudi Arabia (but remain underweight), further reduced the portfolio's holdings in Kuwaiti financials, and reduced our position in Morocco.� On a sector basis, we modestly lowered our exposure to financial names and increased our health care position through a South Africa-based hospital group.

Saudi Arabia

Although we retained a significant underweight position in Saudi Arabia, we continued to increase our exposure to this market over the course of the first quarter by adding to our bank holdings, identifying an opportunity within the consumer discretionary space, and making a couple of switches within the petrochemical industry.

  • We continued to build a position in Saudi British Bank, the corporate and retail bank. The bank is well-managed, and we view it as one of the strongest in Saudi Arabia. We see a path to an improved return on tangible equity profile, following a reset due to the impacts of the pandemic, along with the bank's merger with Alawwal. Looking ahead, we believe that the bank is well placed to benefit from forthcoming corporate growth over the medium-term. We believe the recent merger provides upside potential due to cost and funding synergies.
  • We added to our holding in Leejam Sports, which operates the largest network of sports and fitness centers in the Middle East and North Africa, providing high quality health, fitness and personal training services. In recent months, the company launched a low-cost gym chain. This is a relatively new phenomenon in Saudi Arabia and will provide conveniently located and affordable fitness centers. This is in line with the government's Vision 2030, which includes a pledge to promote healthy lifestyles in the population.
  • We initiated a holding in Saudi Kayan Petrochemical, a manufacturer of chemicals, polymers and specialty products. The stock has been performing well due to improving margins given increasing average selling prices of certain products produced by the company, including low-density polyethylene (LDPE), high-density polyethylene (HDPE), polycarbonate and polypropylene. The company has also recently received approval from the Ministry of Energy for an increase in its ethane allocation, which should set it on the path to improved production cost economics.
  • We sold out of our position in Yanbu National Petrochemical, the Saudi Arabian single-site petrochemical plant, which manufactures basic chemicals, intermediates, and polymers. The company reported strong fourth-quarter results, with a consensus-beating rebound in earnings driven by improved product prices and lower costs. We are more cautious on the sustainability of the cost level from here and find higher conviction ideas elsewhere in the sector.
  • We took some profit from our position in Al Rajhi Bank, a large Islamic bank. The bank is well-placed to benefit from increased loan growth and a rising mortgage penetration ratio in Saudi Arabia. After posting positive fourth-quarter results, the company's share price rallied and offered us with an opportunity to trim. We continue to view the company as a high-quality franchise, although the valuation is looking more reasonable from here.

Kuwait

Over the course of the first quarter, we continued to reduce our overall exposure to Kuwait as we believe that the country is more likely to be adversely affected by the impact of the pandemic than other Gulf Cooperation Council markets due to lower stimulus measures. We are concerned that the government has been unable to pass needed reforms and, as investors,� do not find the economy attractive.

  • We eliminated our holding in National Bank of Kuwait, the country's first local bank. The bank remains a strong franchise with a defensively positioned balance sheet, however we are likely to see return on equity (ROE) contraction in the short term. We are also more cautious on the outlook for the company given macro headwinds which include an expat exodus and ongoing delays in passing the debt law. Valuations began to look stretched and we prefer to focus on higher conviction banking names in the region.

Morocco

Over the course of the review period, we reduced our exposure to Morocco, trimming the size of our positions in a number of names. Morocco has undergone a difficult coronavirus crisis and we believe that the country will be a laggard in the normalization of economic activities post-pandemic compared with some of its emerging market peers.

  • We reduced our holding in Attijariwafa Bank, the country's largest bank. The company reported 2020 earnings that were negatively affected by the pandemic but included stable margins and an improvement in cost efficiency. We believe that the share price is approaching its fair value and we are also increasingly cautious on the macroeconomic outlook in Morocco. The tourism dependent economy continues to be challenged by the pandemic. We trimmed our holding and redeployed proceeds to higher conviction ideas.

Health Care

As the quarter began, the portfolio had an overweight position in the health care sector and over the course of the review period, we raised this further, identifying what we believe is a compelling opportunity in South Africa.

  • We initiated a position in South African hospital group Netcare. The stock price corrected given the suspension of non-urgent elective surgeries and general hesitance in visiting hospitals during the pandemic, which resulted in lower volumes and occupancy rates. Our expectation is that the insured customer base will be more resilient than the market is expecting. We believe that the share price reached an attractive valuation and see strong upside potential from here.

Sectors

Total
Sectors
9
Largest Sector Financials 42.31% Was (30-Apr-2021) 43.49%
Other View complete Sector Diversification

Monthly Data as of 31-May-2021

Indicative Benchmark: MSCI Arabian Markets & Africa 10/40 IMI Index

Top Contributor^

Financials
Net Contribution 1.26%
Sector
-0.06%
Selection 1.31%

Top Detractor^

Materials
Net Contribution -0.79%
Sector
-0.54%
Selection
-0.25%

^Relative

Quarterly Data as of 31-Mar-2021

Largest Overweight

Consumer Discretionary
By5.87%
Fund 18.16%
Indicative Benchmark 12.28%

Largest Underweight

Materials
By-11.47%
Fund 7.97%
Indicative Benchmark 19.44%

Monthly Data as of 31-May-2021

31-May-2021 - Seun Oyegunle, CFA, Portfolio Manager ,
The portfolio’s main sector overweight positions are in consumer discretionary, health care, information technology, and consumer staples. Our largest underweight position is in materials, followed by energy. We reduced the portfolio’s financials exposure over the month. Global bank stocks in general have risen sharply in recent months as expectations for global economic growth have grown. We took the opportunity to book profits in a number of our holdings in the sector, including banks based in South Africa, the UAE, and Saudi Arabia.

Countries

Total
Countries
13
Largest Country South Africa 35.75% Was (30-Apr-2021) 33.65%
Other View complete Country Diversification

Monthly Data as of 31-May-2021

Indicative Benchmark: MSCI Arabian Markets & Africa 10/40 IMI Index

Top Contributor^

Saudi Arabia
Net Contribution 0.84%
Country
-0.22%
Selection 1.06%

Top Detractor^

South Africa
Net Contribution -0.63%
Country
0.02%
Selection
-0.65%

^Relative

Quarterly Data as of 31-Mar-2021

Largest Overweight

United Kingdom
By6.90%
Fund 6.90%
Indicative Benchmark 0.00%

Largest Underweight

Kuwait
By-5.08%
Fund 0.49%
Indicative Benchmark 5.56%

Monthly Data as of 31-May-2021

31-May-2021 - Seun Oyegunle, CFA, Portfolio Manager ,
The portfolio has a modest overweight with respect to the UAE. Over the course of the month we made a number of adjustments to our holdings in this market. In addition to reducing the size of our position in a domestic bank, we also built on our existing holding in the largest property developer in the Middle East. In our view the company is well-placed to benefit from the recovery in Dubai’s property market following the coronavirus pandemic. Its latest quarterly earnings were strong, comfortably beating expectations.

Team (As of 10-Jun-2021)

Seun Oyegunle, CFA

Seun Oyegunle is the portfolio manager of the Africa & Middle East Fund in the Equity Division. 

Seun’s investment experience began in 2009, and he has been with T. Rowe Price since 2013, beginning as a research analyst, covering retail and other sectors across a number of emerging markets, in the Emerging Markets department of the Equity Division. Prior to this, Seun was employed by Asset and Research Management Ltd. as an analyst covering the consumer goods sector. He also was employed by Vetiva Capital Management Ltd.

Seun earned an M.B.A. in finance from the University of Pennsylvania, The Wharton School, and a B.Sc. in chemical engineering from the University of Lagos. Seun also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2020
  • Years at
    T. Rowe Price
    7
  • Years investment
    experience
    11

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 190 basis points 2.07%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10%
N/A

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.