BlackRock Frontiers Investment Trust PLC · LSE:BRFI
BlackRock Frontiers Investment Trust — MLIIF Global Enhanced Equity Yield Fund — Investor Presentation (October 2006)
20 slides from BlackRock Frontiers Investment Trust's investor presentation, Oct 13, 2006
Slide 1: MLIIF Global Enhanced Equity Yield Fund: A New Option for Enhanced Income
MLIIF Global Enhanced Equity Yield Fund “A New Option for Enhanced Income” Intermediary Use Only. Not Approved for Clients or the General Public 13th October 2006
Slide 2: Where do you go for yield when the bond market continues to be at risk?
Where do you go for yield when the bond market continues to be at risk? (%) US Treasury Benchmark bond redemption yields in % 7 6 5 4 3 2 1 0 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 2 yr 10 yr • Fixed income products may not be enough… • Why not diversify your yield portfolio and utilize eq
Slide 3: Market Environment
Market Environment Given overall expectations for modest stock market returns in the near term, investors may be looking for a diversified investment that seeks to provide the opportunity for current income and the potential for capital appreciation. “…equity markets appear to be stuck for now. Valu
Slide 4: Equity Dividends Trending Higher
Equity Dividends Trending Higher Rise in dividend payments of companies across Annual Dividend Yield 90% the global equity universe 80% 2.5 70% 2 60% 50% 1.5 40% 1 30% 20% 0.5 10% 0% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 % dividend inc reases of all d
Slide 5: Introducing the Fund
Introducing the Global Enhanced Equity Yield Fund A New Option for Enhanced Income • Target 9% Annual Yield (USD)* • Diversified portfolio of dividend paying equities & covered call options overlay • Benchmark: MSCI World Index • 100% NAV invested in global equities, targeting those with higher divi
Slide 6: How does a Covered Call strategy work?
How does a Covered Call strategy work? What is a call option? • A call option gives the buyer the right, but not the obligation, to buy an asset at an agreed price (strike) What is a covered call? • A covered call is an options strategy whereby an investor holds a long position in an asset and write
Slide 7: Quantitative Portfolio Construction Generates Additional 1.5% Yield
Quantitative Portfolio Construction Portfolio Optimisation Quantitative Model Equity Portfolio Maximise divided yield Maintains characteristics within parameters: MSCI World Index of MSCI World Index 23 Countries +/- 1% 2,000 Securities Ex-Ante Tracking Error 13 Currencies +/- 1% <2% 38 Industries +
Slide 8: Proprietary Investment Model
Proprietary Investment Model Universe: Global Equities in the MSCI World Index approx. 2,000 Securities Optimization: Highest Dividend Yielding Equities Maintain Regional / Industry Weightings and Risk Characteristics of the Index Sell Covered Call Options 1 Month European Calls, At to slightly Out
Slide 9: GEEY Offers Income & Capital Appreciation Potential
GEEY Offers Income & Capital Appreciation Potential Anticipated Annual Yield Capital Appreciation Potential Cov ered 9 Calls 8 50% 7 Premium Income 6 5.5% 5 (%) 4 3 Optimised Portfolio Equity Additional Dividends Exposure 1.5% 2 50% 1 MSCI Dividend Yield 2.0% • 50% of the portfolio will not be cover
Slide 10: Writing Index Calls
Writing Index Calls The premium received from writing covered calls is a “moving target” because the premium amount changes with the volatility of the market, which changes constantly. EXAMPLES OF RECENT MONTHLY PREMIUMS: S&P 500 Index, 1 Month At-the-Money Call 1.50% FTSE 100 Index, 1 Month At-the-
Slide 11: Call Premium in a Portfolio Context
Call Premium in a Portfolio Context EXAMPLE OF MSCI WORLD PORTFOLIO WITH 50% OVERWRITE: 1 Month At-the-Money Index Overwrite % Regional Weight Monthly Income Premium S&P 500 1.50% 50% 49.3% 0.37% FTSE 100 1.65% 50% 12.3% 0.10% EUROSTOXX 50 1.85% 50% 15.1% 0.14% Nikkei 225 2.00% 50% 9.9% 0.10% Other
Slide 12: Total Return with Income Reinvested
Total Return with Income Reinvested In a market environment where expectations are single digit returns: Equity Equity + 50% Covered Call* 100% Covered Call (%) Return MSCI World Index Relative to a long-only global equity portfolio, Global Enhanced Equity Yield Fund normally offers: • Lower volatil
Slide 13: Portfolio Characteristics
Portfolio Characteristics Top 10 Holdings Investment Allocation by Country (%) % US (49.3) Japan Exxon Mobil Corp 1.81% Franc e (3.7) 9.9% Italy (2.7) General Electric Co 1.78% Germany (2.5) Netherlands (1.9) UK Spain (1.6) Citigroup Inc 1.50% Finland (1.3) 12.3% Portugal (0.7) Pfizer Inc 1.21% Belg
Slide 14: Strategy Backtest – December 1996 to September 2006
Strategy Backtest – 31 December 1996 to 30 September 2006 300% NAV Appreciation 250% 200% 150% 100% 50% 0% 12/3 1/1996 3/3 1/1997 6/3 0/1997 9/3 0/1997 12/3 1/1997 3/3 1/1998 6/3 0/1998 9/3 0/1998 12/3 1/1998 3/3 1/1999 6/3 0/1999 9/3 0/1999 12/3 1/1999 3/3 1/2000 6/3 0/2000 9/2 9/2000 12/2 9/2000 3
Slide 15: Annual Returns
Annual Returns As at 30 September 2006, inception 31 December 1996 GROSS NET, 1.85% TER MSCI World Index MSCI World Index (Net Total 9% Annual 9% Annual (Price Return) Accumulation Accumulation Return) Distribution Distribution 1997 Return 14.61% 4.52% 12.52% 2.68% 15.75% 14.17% Standard Deviation 1
Slide 16: Quantitative Investments Team
Quantitative Investments Team Quantitative Investments Total Assets: $ 60.2 billion Index Structured Products Enhanced Index $48.8 b $1.2 b $10.2 b Jonathan Clark, Fund Manager – Structured Products • Jon is responsible for managing derivative strategies for the Quantitative Investments team, and is
Slide 17: MLIIF Global Enhanced Equity Yield: Investment Objective and Fund Terms
MLIIF Global Enhanced Equity Yield Investment Objective and Policy: • The Global Enhanced Equity Yield Fund seeks to generate a high level of income. The Fund invests globally, with no prescribed country or regional limits, at least 70% of its total net assets in equity securities. The Fund makes us
Slide 18: MLIIF – Share Classes
MLIIF Global Enhanced Equity Yield – Share Classes The Management Fee and Fund Expenses will be accrued against the NAV on a daily basis. Distribution Fees (if applicable) will be deducted from quarterly distributions. Annual Distribution Share Class Initial Charge Management Fee Distribution Fee CD
Slide 19: Summary - MLIIF Global Enhanced Equity Yield
Summary - MLIIF Global Enhanced Equity Yield Superior returns in downward, sideways or slowly upward moving markets 9% Annual Yield (USD)* distribution Additional capital appreciation potential Low risk vs. MSCI World Index Highly experienced fund manager *Target yield based on USD returns of class
Slide 20: The following notes should be read in conjunction with the attached document
The following notes should be read in conjunction with the attached document: • Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Services Authority). Registered office: 33 King William Street, London, EC4R 9AS. Registered in England No. 2020394. Tel:
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