Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 30 June 2017 and unaudited.

Performance at month end with net income reinvested.
 

	One  month	Three months	One  year	Three  years	Five  years	Since  Launch*
Sterling:
Share price	0.4	2.4	32.2	40.2	141.9	83.8
Net asset value	0.9	2.0	24.9	35.5	125.3	82.7
MSCI Frontiers Index (NR)	0.0	2.2	22.7	18.7	82.4	47.5
MSCI Emerging Markets Index (NR)	0.4	2.3	27.4	35.9	46.6	28.0
US Dollars:
Share price	1.0	6.4	28.4	6.6	100.7	53.6
Net asset value	1.5	6.0	21.3	2.9	86.8	52.4
MSCI Frontiers Index (NR)	0.6	6.1	19.2	-9.8	51.1	22.8
MSCI Emerging Markets Index (NR)	1.0	6.3	23.7	3.3	21.4	6.7

Sources: BlackRock and Standard & Poor’s Micropal
* 17 December 2010.

At month end Ordinary Shares
US Dollar
Net asset value - capital only:	185.34c
Net asset value - cum income:	188.36c
Sterling:
Net asset value - capital only:	142.69p
Net asset value - cum income:	145.02p
Share price:	148.50p
Total assets (including income):	£255.0m
Premium to cum-income NAV:	2.4%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	3.5%
Ordinary shares in issue:	175,843,108
Ongoing charges**:	1.4%
Ongoing charges plus taxation and performance fee:	2.4%

*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.5% and includes the 2016 final dividend of 4.00 cents per share declared on 22 November 2016 and paid to shareholders on 17 February 2017 and the 2017 interim dividend of 2.70 cents per share announced on 25 May 2017 and paid to shareholders on 30 June 2017.

**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2016.
 

Sector Analysis	Gross assets(%)*		Country Analysis	Gross assets(%)*
Financials	32.1		Argentina	15.1
Consumer Staples	16.3		Romania	9.5
Energy	10.6		Kuwait	9.1
Health Care	8.7		Vietnam	8.5
Telecommunication Services	8.6		Kazakhstan	8.1
Materials	7.5		Morocco	6.8
Utilities	5.6		Egypt	5.9
Real Estate	4.7		Ukraine	5.7
Industrials	4.2		Sri Lanka	5.4
Information Technology	4.0		Bangladesh	5.0
Consumer Discretionary	1.6		Nigeria	3.9
	-----		Kenya	3.8
Total	103.9		Pakistan	3.3
	-----		Eurasia	2.9
Short positions	0.0		Philippines	2.2
	=====		Colombia	2.0
			Estonia	1.8
			Saudi Arabia	1.8
			Slovenia	1.7
			Tanzania	1.2
			United Arab Emirates	0.2
				-----
			Total	103.9
				-----
			Short positions	0.0
				=====

*reflects gross market exposure from contracts for difference (CFDs).

Market Exposure
 

	31.07  2016     %	31.08  2016     %	30.09  2016     %	31.10  2016     %	30.11  2016     %	31.12  2016     %	31.01  2017     %	28.02  2017     %	31.03  2017     %	30.04  2017     %	31.05  2017     %	30.06  2017     %
Long	103.4	105.7	104.0	106.4	102.3	108.4	115.0	115.8	112.1	108.9	105.0	103.9
Short	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Gross	103.4	105.7	104.0	106.4	102.3	108.4	115.0	115.8	112.1	108.9	105.0	103.9
Net	103.4	105.7	104.0	106.4	102.3	108.4	115.0	115.8	112.1	108.9	105.0	103.9

Ten Largest Equity Investments

Company	Country of Risk	% of gross assets
Halyk Savings Bank	Kazakhstan	3.6
Equity Group	Kenya	3.1
Banco Marco	Argentina	3.1
Mobile Telecommunications	Kuwait	2.7
Pampa Energia	Argentina	2.6
Integrated Diagnostics	Egypt	2.6
S.N.G.N. Romgaz	Romania	2.5
Square Pharmaceuticals	Bangladesh	2.5
MHP	Ukraine	2.5
Maroc Telecom	Morocco	2.4

Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:

In June, the Company’s NAV rose by 1.5%, outperforming its benchmark (the MSCI Frontiers Index) which rose by 0.6% (on a US Dollar basis with net income reinvested and net of ongoing charges). The MSCI Emerging Markets Index rose by 1.0% over the same period.

Stock selection in Kazakhstan was a significant contributor to performance this month. Halyk Bank rallied 18% as it announced the agreement of the much anticipated merger with KKB to create a dominant banking franchise in the domestic market.  We believe the merger will differentiate Halyk given the growth in deposit market share which will give them a sustainable competitive advantage in cost of funding versus peers.  Earnings will benefit from the deployment of capital by Halyk through the merger and hence we continue to have high conviction that valuation remains attractive and this position continues to be a large weighting within the portfolio.

Our position in Egyptian diagnostic testing company, Integrated Diagnostics Holding, contributed to performance as the stock increased 14% following a positive trading statement the previous month and benefiting from investors increased appetite for Egyptian assets. We believe the stock has an advantageous competitive position in a sector which should see structural growth. We also like exposure to Egypt, we believe domestic rates are now sufficiently high to attract international investors (corroborated by inflows of greater than $9bn into the domestic Treasury bill market), and that these flows will support the Egyptian pound at these levels and allow recovery of the domestic economy. 

Turkish-listed Coca Cola Icecek, the Eurasian Coca-Cola bottler, rallied close to 10% through the month on continued good volumes and consumption trends in the region. We like the company for its unique regional footprint and attractive valuations.

Performance this month also came from actively avoiding having any exposure to the Oman stock market. The index corrected 7% through the period. It is a market that we have avoided for some time as we believe that the currency is unsustainable at current levels with the oil price around $50 per barrel.

The Romanian market was volatile this month as incoming ministers talked of dismantling the existing pension system.  Although the news was quickly denied, it is a good reminder of the potential uncertainty some of these frontier markets carry.

Pakistan had a volatile month as well with the index finishing down 8% as the hype around the MSCI’s reclassification to ‘emerging market’ faded away and the currency faced new selling pressures on continued deterioration of the country’s current account balances. We have significantly reduced our exposure to the Pakistani market from 9% at the end of May to just over 3% at the end of June, believing that it is very difficult for frontier stock markets to perform in environment where the FX is under pressure. 

We have significantly reduced exposure to Bangladesh over the past few months, with exposure around 5% at month end having fallen from 9% at the start of the year. We have taken profits from positions in Bangladesh, including a position in Grameenphone, which has risen 27% since purchase in September 2016 where we believe that valuations are no longer attractive. As anticipated the fall in allocation to South Asian markets has correlated with an increase in allocation to African markets where exposure has risen over the last three months from 17% to 22% now.

Broadly, Frontier Markets continue to exhibit strong GDP growth and low government debt levels, and represent an opportunity to invest in companies with strong cash flow and high dividend yields, on some of the lowest valuations in the world.

26 July 2017

ENDS

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 BlackRock’s website (or any other website) is incorporated into, or forms part of, this announcement