BLACKROCK FRONTIERS INVESTMENT TRUST PLC: Portfolio Update
BLACKROCK FRONTIERS INVESTMENT TRUST PLC
All information is at 30 September 2013 and unaudited.
Performance of ordinary share portfolio at month end with net income reinvested
One Three Six One Since
month months months year launch* Sterling: Share price 0.9% 6.3% 8.7% 43.2% 19.7% Net asset value -1.4% 2.0% 7.3% 31.2% 16.0% MSCI Frontiers Index (NR) -1.2% -0.4% 2.4% 21.4% 2.4% MSCI EM Markets (NR) 1.7% -0.9% -8.8% 0.7% -8.0% US Dollars: Net asset value 3.2% 8.9% 14.5% 31.6% 20.6% MSCI Frontiers Index (NR) 3.4% 6.3% 9.2% 21.8% 6.3% MSCI EM Markets (NR) 6.5% 5.8% -2.8% 1.0% -4.4%
Sources: BlackRock and Standard & Poor's Micropal * 17 December 2010.
At month end Ordinary Shares US Dollar: Net asset value - capital only: 169.00c Net asset value - cum income: 169.52c Sterling: Net asset value - capital only: 104.36p Net asset value - cum income: 104.68p Share price: 110.00p Total assets (including income): £157.7m Premium to cum-income NAV: 5.1% Gearing: nil Gearing range (as a % of gross assets): 0-20% Net yield*: 4.6% Ordinary shares in issue**: 150,621,621
*Yield calculations are based on dividends announced in the last 12 months as at the date of the release of this announcement, including the 2012 final dividend per share of 2.60 cents per share (1.64557 pence per share) announced on 30 November 2012, the 2013 interim dividend of 2.00 cents per share and the special interim dividend of 3.40 cents per share announced on 30 May 2013, payable to shareholders on 5 July 2013. The interim and special dividends announced on 30 May 2013 that total 5.40 cents per share (3.45003 pence per share) are the total dividends for the financial year ending 30 September 2013. The special dividend represents the final dividend which is normally paid in March each year. Therefore, a more accurate indication of the projected yield for the financial year to 30 September 2013 would be 3.1% (based on the latest available share price as at the date of this announcement of 110.00 pence per share). The Board does not currently anticipate any further distributions for the current financial year. **Includes 55,855,354 shares arising from the conversion of C shares into ordinary shares on 25 September 2013.
Benchmark Sector Analysis Gross assets(%)* Country Analysis Gross assets(%)*
Financials 32.4 Saudi Arabia 12.0 Consumer Staples 14.8 Nigeria 11.4 Energy 13.1 United Arab Emirates 11.3 Telecommunication 11.8 Qatar 11.2 Healthcare 9.4 Bangladesh 6.5 Industrials 7.8 Kazakhstan 5.8 Materials 5.8 Kuwait 5.0 Consumer Discretionary 2.2 Iraq 4.6 Utilities 1.5 Ukraine 3.6
---- Oman 3.5 Total 98.8 Vietnam 3.5
---- Pakistan 3.4 Short positions -1.4 Sri Lanka 3.1
==== Turkmenistan 3.0 Slovenia 2.2 Panama 2.2 Pan Africa 2.1 Kyrgyzstan 1.4 Croatia 1.4 Other 1.6 ----- 98.8 ===== Short positions -1.4
*reflects gross market exposure from contracts for difference (CFDs)
31.10 30.11 31.12 31.01 28.02 31.03 30.04 31.05 30.06 31.07 31.08 30.9
2012 2012 2012 2013 2013 2013 2013 2013 2013 2013 2013 2013
% % % % % % % % % % % %
Long 101.0 102.0 103.4 105.1 104.1 99.5 99.2 99.8 95.9 103.2 98.9 98.8 Short 4.2 4.9 5.2 3.5 1.2 1.2 1.2 1.1 2.5 3.0 3.3 1.4 Gross 105.2 106.9 108.6 108.6 105.3 100.7 100.4 100.9 98.4 106.2 102.2 100.2 Net 96.8 97.1 98.2 101.6 102.9 98.3 98.0 98.7 93.4 100.2 95.6 97.4
Ten Largest Equity Investments
Company Country of Risk % of gross assets
Zenith Bank Nigeria 4.7% Emaar Properties United Arab Emirates 4.0% Doha Bank Qatar 3.9% Halyk Savings Bank Kazakhstan 3.3% Dragon Oil Turkmenistan 3.1% Abdullah Al Othaim Saudi Arabia 3.0% Square Pharmaceutical Bangladesh 3.0% Qatar National Bank Qatar 3.0% Qatar Gas Transportation Qatar 3.0% Mobile Telecommunication Kuwait 2.8%
Commenting on the markets, Sam Vecht, representing the Investment Manager noted:
The MSCI Frontier Market Index returned 3.4% in September. Frontier Markets underperformed mainstream Emerging Markets which rose strongly, 6.5%, on the decision of the US Federal Reserve to postpone the tapering of its Quantitative Easing ("QE") Program. Despite the initial optimism, we would contend that QE does little to address Emerging Markets economic imbalance and that Frontier Countries generally remain better positioned. (All calculations on a US Dollar basis with net income reinvested.)
Argentina was amongst the best performing Frontier Markets in September. Investors became increasingly hopeful of a change in macroeconomic policy occurring after the government incurred a poor result in the August primaries. The increase in soya prices also provided relief to the beleaguered economy.
The United Arab Emirates continued to perform well ahead of the upgrade to Emerging Markets status in June 2014. Economic data continues to show improvement as Dubai's export-orientated service sector recovers in tandem with infrastructure spending in Abu Dhabi.
Ukraine was one of the weaker performers over the month. This was driven by concerns over the level of sovereign debt, which placed additional pressure on the currency and equity markets.
Bangladesh also underperformed as protestors calling for increases in the minimum wage clashed with police, weighing on sentiment.
The Company's NAV per share returned 3.2% in September, slightly underperforming the MSCI Frontier Market Index. Over the previous 12 months the Company has returned 31.6%, outperforming the benchmark by 9.8% (all calculations on a US Dollar Basis with net income reinvested).
The strongest performers over the month included the positions in Saudi Arabia. The strongest individual performer was car hire firm, United International Transport (also known as Budget Saudi Arabia). The team recently met with the impressive senior management of the company who communicated a strong business plan.
Iraqi focused oil E&P company, Gulf Keystone also performed well over the month. The stock rose 15% on the news that the company's dispute with its former advisers and been resolved in its favour. We remain convinced that the Kurdistan Region of Iraq is one of the most prospective oil regions in the world.
Kazakh energy company, Kazmunaigas was the largest individual detractor from relative performance in September. Production at Kazakhstan's giant Kashagan offshore oilfield was halted two weeks after its launch. However, the company does not expect that the start of commercial output to be significantly delayed.
We initiated a new position in Baltic ferry and cruise ship operator, Tallink. The region is emerging from the effects of the European debt crisis and with a free cash flow yield of 18%, the company has the ability to pay down debt and fund healthy dividend payouts over time.
We sold the position in Cambodian casino operator, Nagacorp. The decision to take profits in the position was driven by the announcement of a new casino project, which will require at least $350m of investment. Precise details of the project have yet to be announced but the casino-resort venture on the outskirts of the Russian port city of Vladivostock, a country in which the company has no prior experience, will take several years to bear fruit.
Frontier Market valuations remain attractive both in absolute terms and relative to mainstream Emerging Markets. Companies operating very profitably in Sub-Saharan Africa, Asia and the Middle East offer exposure to some of the fastest growing markets globally yet are trading on valuations of under 10 times the price to earnings ratio supported by high dividend yields.
More than 2 billion people live in Frontier Market countries but until now they have attracted little investor attention. With their strong GDP growth, positive demographic profile, low debt burden and relatively low correlation to developed and emerging markets, we think frontier markets are a great place to invest for those who have both a long term horizon and wish to see capital and income growth. In a changing world, we believe that opportunities abound for unconventional investors.
15 October 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.
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