BLACKROCK FRONTIERS INVESTMENT TRUST PLC
All information is at 31 December 2012 and unaudited.
Performance at month end with net income reinvested
One Three Six One Since
month months months year launch*
Share price 1.4% 2.2% 12.4% 15.8% -14.6%
Net asset value 2.2% 4.7% 14.2% 15.3% -7.4%
MSCI Frontiers Index (NR) 0.6% 2.4% 6.8% 4.1% -13.7%
MSCI EM Markets (NR) 3.4% 4.9% 9.8% 13.0% -4.1%
Net asset value 3.7% 5.4% 18.4% 20.6% -3.4%
MSCI Frontiers Index (NR) 2.1% 3.1% 10.7% 8.9% -10.0%
MSCI EM Markets (NR) 4.9% 5.6% 13.8% 18.2% -0.1%
Sources: BlackRock and Standard & Poor's Micropal
* 17 December 2010.
At month end
Net asset value - capital only: 139.84c
Net asset value - cum income: 142.69c
Net asset value - capital only: 86.03p
Net asset value - cum income: 87.78p
Share price: 82.50p
Total assets (including income): £83.2m
Discount to cum income NAV: 6.0%
Net yield: 3.2%
Ordinary shares in issue: 94,766,267
Sector Analysis Gross assets(%)* Country Analysis Gross assets(%)*
Financials 29.6 Nigeria 15.7
Consumer Staples 16.4 United Arab Emirates 11.1
Industrials 13.9 Qatar 10.5
Telecommunication 12.4 Saudi Arabia 9.7
Energy 10.4 Kazakhstan 9.0
Consumer Discretionary 6.4 Vietnam 5.4
Healthcare 5.8 Ukraine 5.4
Materials 5.1 Panama 4.6
Utilities 2.8 Bangladesh 4.3
Technology 0.6 Argentina 3.9
----- Iraq 3.7
Total 103.4 Croatia 2.7
----- Pan Africa 2.5
Short positions -5.2 Algeria 2.5
===== Kuwait 2.4
Sri Lanka 1.0
Short positions -5.2
*reflects gross market exposure from contracts for difference (CFDs)
29.02 31.03 30.04 31.05 30.06 31.07 31.08 30.09 31.10 30.11 31.12
2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012
% % % % % % % % % % %
Long 103.9 98.3 100.8 99.2 97.2 101.9 96.5 99.1 101.0 102.0 103.4
Short 5.2 3.0 2.1 0.0 2.6 2.6 2.5 2.6 4.2 4.9 5.2
Gross 109.1 101.3 102.9 99.2 99.8 104.5 99.0 101.7 105.2 106.9 108.6
Net 98.7 95.3 98.7 99.2 94.6 99.3 94.0 96.5 96.8 97.1 98.2
Ten Largest Equity Investments (in alphabetical order)
Company Country of Risk
Air Arabia United Arab Emirates
FBN Holdings Nigeria
First Gulf Bank United Arab Emirates
Halyk Savings Bank Kazakhstan
Hrvatski Telekomunikacije Croatia
Kazmunaigas Exploration Kazakhstan
NMC Health United Arab Emirates
Qatar Electricity & Water Qatar
Zenith Bank Nigeria
Commenting on the markets, Sam Vecht, representing the Investment Manager
The MSCI Frontier Markets Index continued its rally into the year end, rising
2.1% and bringing returns for 2012 to 8.9% (on a US dollar basis with net
income reinvested). The rally in Frontier Markets echoed the movements seen
across Global Equity markets. Performance was driven by strong inflows into
equities as the valuation differential between equities and bonds reached a
Argentina was the best performing market in December, rising by 19%. Following
an earlier US court decision which required the government to pay "holdout"
creditors, Argentina was able to win a stay on the ruling and so avert
immediate default. The stock market rallied from very low levels as panic
amongst investors subsided somewhat. State-controlled energy company, YPF, was
the best performing large cap stock, up by 28% as it announced partnerships
with Bridas and Chevron to develop its shale assets.
Vietnam was a strong performer over the month, rising by 12%. During 2012 the
Vietnamese trade account swung to a surplus for the first time since 1992, as
weak domestic demand curtailed imports and the ramp up of foreign owned
production within Vietnam drove a robust increase in exports. Whilst
significant economic problems remain, especially within the banking system, the
government has taken credible steps to address the issues and the rally in the
equity market, from a very low level, reflected this.
Nigeria continued to perform well in December, up by 9%. Although the Nigerian
equity market has rallied strongly in 2012, valuations continue to look
attractive within the context of Emerging Markets. The inclusion of Nigerian
sovereign debt within the JP Morgan Emerging Market Bond Index has brought the
country to the attention of a wider investor base. Since then, bond yields
have fallen by around 4% and had a knock on effect on the cost of equity and
hence driving up theoretical stock market valuations.
Kuwait underperformed as the country's political stasis showed no sign of
abating, with opposition parties boycotting elections to the National Assembly.
The low turnout undermines the legitimacy of the recently elected parliament
and there is little sign that new legislation and reforms to improve
infrastructure can be enacted soon.
In December, the BlackRock Frontiers Investment Trust's NAV returned 3.7%,
outperforming the index by 1.6%. This brought the curtain down on a year in
which the Company returned 20.6% and outperformed the index by 11.7% (all
percentages in US dollar terms with net income reinvested).
Performance over the month was driven by stock selection. The largest
individual contributor to performance was Romanian Media company, Central
European Media, which rose over 30% in December as risk appetite increased and
investors began to countenance a potential economic improvement across Europe
UAE Healthcare provider, NMC Health performed strongly in December, rising by
12%, after the company announced that construction work had begun on a new
facility in the Khalifa district of Abu Dhabi. The hospital is due to be opened
The Company also benefitted from holdings in Argentina, including energy
company YPF and financial Grupo Galicia.
Detracting from performance over the month was the position in the Iraqi Energy
name, Gulf Keystone, as tensions increased between the Kurdistan Regional
Government and Baghdad and put into doubt the continuation of oil exports from
the north of the country. Despite this, exports have continued, paving the way
for much larger quantities to be exported over the coming months.
Over the course of 2012, the Company generated significant performance across
all regions with Nigeria, Iraq, Panama and Bangladesh being standout markets.
Individual stock contributions were driven by Nigerian financials, which
rallied from oversold positions as balance sheet stability was restored to the
sector. Panamanian airline Copa Holdings was up by 78% over the year as the
company continued to report impressive results from its expanding South
American network and Kazakhstan financial, Halyk Bank, rose by 69% as trends in
non-performing loans reached an inflection point and the bank started to report
At the end of December, the Company held 55 long positions and 4 short
positions across 25 countries. We would aim to reduce the number of positions
held over the next few months.
The Company opened new positions in Bangladesh health care company, Square
Pharmaceuticals, the leading manufacturer of generic drugs in Bangladesh.
Against this, the Team sold the position in the Bangladeshi Telecom Company,
Grameenphone. At an operating level, the company remains in good health.
However, increased competition means that earnings are likely to come under
pressure as it is forced to invest in price to maintain market share.
2012 was a year of contrasts as investors swung from extremes of optimism and
pessimism about the state of world economic health. Whilst the global economy
continues to oscillate around zero growth, the swing factor between data points
which are either slightly positive or negative is vastly larger than the data
points themselves, hence creating the culture of extreme mood swings that we
have seen. In the second half of 2012, we did see a note-worthy recovery in
European financials, which have risen nearly 50% in US dollar terms from their
lows suggests a further normalization in European financial risk. The last few
months of the year saw the start of a shift from bonds to equities as the
extreme low levels of returns offered in the bond market compelled investors to
overcome their fears and increase exposure to the equity markets.
We would expect this reversal of trend to continue in 2013 as investors search
for better returns on their savings. We continue to highlight frontier
markets, one of the few remaining asset classes which offer investors
diversification. With dedicated Frontier market funds totaling just $10bn
currently, we expect strong performance in 2013 as funds flow into these
Given the fast growth, dynamic demographic profile, improving corporate
governance, low levels of indebtedness, cheap valuations and high dividend
yields, we believe that Frontier Markets represent a compelling opportunity for
long-term investors. History shows that buying inexpensive equities in fast
growing countries, with undervalued currencies, is a sensible strategy for
16 January 2013
Latest information is available by typing www.blackrock.co.uk/brfi on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV
terminal). Neither the contents of the Manager's website nor the contents of
any website accessible from hyperlinks on the Manager's website (or any other
website) is incorporated into, or forms part of, this announcement.
-0- Jan/16/2013 16:07 GMT
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