Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 31 August 2019 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	-7.8	2.0	-2.6	19.4	30.0	78.1
Net asset value	-7.3	0.9	1.3	21.0	34.7	84.6
Benchmark (NR)**	-4.9	2.3	7.0	41.9	35.2	73.1
MSCI Frontiers Index (NR)	-1.1	6.8	15.2	37.9	31.3	69.3
MSCI Emerging Markets Index (NR)	-4.4	3.3	2.1	27.2	39.0	40.5
US Dollars:
Share price	-8.3	-1.4	-8.7	11.1	-4.4	39.7
Net asset value	-7.8	-2.5	-5.0	12.6	-1.1	44.6
Benchmark (NR)**	-5.4	-1.2	0.3	32.0	-0.9	36.2
MSCI Frontiers Index (NR)	-1.6	3.2	7.9	28.2	-3.7	32.2
MSCI Emerging Markets Index (NR)	-4.9	-0.2	-4.4	18.3	1.9	9.8

Sources: BlackRock and Standard & Poor’s Micropal

* 17 December 2010.

** The Company’s benchmark changed from MSCI Frontier Markets Index to MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (net total return, USD) effective 1/4/2018.
 

At month end
US Dollar
Net asset value - capital only:	159.27c
Net asset value - cum income:	164.37c
Sterling:
Net asset value - capital only:	130.77p
Net asset value - cum income:	134.96p
Share price:	132.75p
Total assets (including income):	£324.8m
Discount to cum-income NAV:	1.6%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	5.0%
Ordinary shares in issue:	240,672,801
Ongoing charges**:	1.4%
Ongoing charges plus taxation and performance fee:	1.4%

*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 5.0% and includes the 2018 final dividend of 4.40 cents per share and special dividend of 1.0 cents per share, both of which were declared on 11 December 2018 and were paid to shareholders on 7 February 2019. Also included is the 2019 interim dividend of 3.00 cents per share announced on 30 May 2019 and paid to shareholders on 28 June 2019.

**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2018.

Sector Analysis	Gross market value as a % of net assets		Country Analysis	Gross market value as a % of net assets
Financials	24.1		Indonesia	13.6
Consumer Staples	15.0		Egypt	10.3
Real Estate	14.6		United Arab Emirates	10.0
Industrials	13.7		Thailand	9.9
Consumer Discretionary	13.5		Vietnam	9.8
Energy	8.5		Malaysia	6.5
Materials	8.3		Kazakhstan	5.7
Health Care	5.9		Philippines	5.5
Communication Services	4.5		Saudi Arabia	4.2
Utilities	1.8		Turkey	4.1
Information Technology	1.6		Romania	4.0
	-----		Pakistan	3.7
	111.5		Nigeria	3.5
Short positions	-----		Greece	2.9
	-4.2		Qatar	2.6
	=====		Chile	2.5
			Ukraine	2.4
			PAN-Africa	2.2
			Argentina	2.1
			Poland	2.1
			Colombia	2.0
			Kenya	1.1
			PAN-Asian	0.6
			Morocco	0.2
				-----
			Total	111.5
				-----
			Short positions	-4.2
				=====

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

Market Exposure
 

	30.09  2018     %	31.10  2018     %	30.11  2018     %	31.12  2018     %	31.01  2019     %	28.02  2019     %	31.03  2019     %	30.04  2019     %	31.05  2019     %	30.06  2019     %	31.07  2019     %	31.08  2019     %
Long	107.7	107.8	108.1	109.3	115.1	112.9	113.1	116.0	111.0	114.1	117.0	111.5
Short	7.7	6.8	8.6	8.6	7.3	6.7	6.6	6.6	8.8	8.1	5.1	4.2
Gross	115.4	114.6	116.7	117.9	122.4	119.6	119.7	122.6	119.8	122.2	122.1	115.7
Net	100.0	101.0	99.5	100.7	107.8	106.2	106.5	109.4	102.2	106.0	111.9	107.3

Ten Largest Investments

Company	Country of Risk	Gross market value as a % of net assets
Charoen Pokphand Food	Thailand	3.7
Vincom Retail	Vietnam	3.2
Astra International	Indonesia	3.1
LT Group	Philippines	3.1
Koza Altin	Turkey	2.7
Eastern Tobacco	Egypt	2.7
Emaar Development	United Arab Emirates	2.7
Emaar Properties	United Arab Emirates	2.6
Ooredoo	Qatar	2.6
Air Arabia	United Arab Emirates	2.6

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

The Company’s NAV was down 7.8%¹ versus its benchmark, the MSCI Emerging ex Selected Countries + Frontiers Markets + Saudi Arabia Index (“Benchmark Index”), which was down 5.4% in August². For reference, the MSCI Frontiers Index was down 1.6%², and the MSCI Emerging Markets Index was down 4.9%² on a US Dollar basis, over the same period (all performance figures are on a US Dollar basis with net income reinvested).

Our allocation to Egypt (one of our largest country positions at 10.3% of the portfolio) was the top contributor to returns in August. Holdings in real estate development company Medinet Nasr (+13.0%), and financial EFG Hermes (+21.2%) performed strongly as inflation fell faster than the market was expecting and the Central Bank cut interest rates. We continue to expect further interest rate cuts over the next 6 months which should lead to an acceleration of economic activity. Our holding in Turkish gold miner Koza Anadoulu (+14.1%) rose with gold prices and is now up more than 60% from the lows in March. 

Stock selection was strong in Thailand. Thai protein company CP Foods (+7.8%) rose after reporting better than expected results, benefiting from the knock-on impact on local chicken and pork prices from Asian swine flu. Thai Beverage (+6.3%) also contributed to returns, touching 1 year highs as the company reported another quarter showing a return to growth of volumes in Thailand.

Our allocation to Argentina was the largest detractor in August, responsible for 260bps underperformance after the market rout post the surprise outcome in Argentina’s primary vote. While we had trimmed some of our positions on the back of market strength in May and June, we went into the primaries running a long position and were wrong footed by the election results. Our holdings in Energy company YPF (-47.9%), Energy Utility Pampa Energia (-60.1%) and financial Banco Macro (-66.0%) were the top three stock detractors.

Our holdings in British American Tobacco Malaysia (-13.6%) and Indonesian coal company ITMG (-23.5%) were additional detractors. BAT Malaysia underperformed following disappointing earnings results which saw higher costs and a larger than expected decline in the legal tobacco market. As yet, the company is not seeing the benefits from an increased government crackdown on the black market.

We substantially cut our holdings in Argentina post the primary elections, given our view that the extent of gross dollar debt issuance required over the next few years would prove difficult for the government to raise. We are concerned that the path of debt default and implementation of capital controls may not be as smooth as the market is expecting. Elsewhere in the portfolio, we have trimmed positions to take profits across a number of markets including Indonesia, United Arab Emirates, Thailand and Turkey.

We see significant value in the smaller emerging and frontier markets and see the markets well supported by the lower rate environment. We note that a lot of stocks in our universe are trading at extreme valuations, in many cases at less than 4x price to earnings. We view such deep value as an opportunity to invest in a wide subset of countries which exhibit good growth, have low government debt levels, and are home to companies with strong cash flow and high dividend yields, trading on some of the lowest valuations in the world.

Sources:

¹BlackRock as at 31 August 2019

²MSCI as at 31 August 2019

26 September 2019

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.