Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 31 May 2018 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	-5.0	-4.1	7.6	50.4	71.5	97.0
Net asset value	-4.6	-6.0	7.0	41.1	65.1	93.7
Benchmark (NR)**	-2.4	-1.6	10.2	35.5	49.2	61.4
MSCI Frontiers Index (NR)	-6.0	-8.1	2.9	26.6	39.3	51.8
MSCI Emerging Markets Index (NR)	-0.2	-2.4	10.6	37.2	42.2	41.1
US Dollars:
Share price	-8.2	-7.4	11.0	31.3	50.9	68.8
Net asset value	-7.8	-9.2	10.3	23.2	45.2	65.7
Benchmark (NR)**	-5.7	-5.0	13.6	18.2	31.0	38.8
MSCI Frontiers Index (NR)	-9.2	-11.3	6.1	10.4	22.3	29.5
MSCI Emerging Markets Index (NR)	-3.5	-5.8	14.0	19.7	24.8	20.4

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 Ordinary Shares
US Dollar
Net asset value - capital only:	193.72c
Net asset value - cum income:	197.91c
Sterling:
Net asset value - capital only:	145.58p
Net asset value - cum income:	148.73p
Share price:	154.00p
Total assets (including income):	£290.0m
Premium to cum-income NAV:	3.5%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	3.4%
Ordinary shares in issue:	194,991,108
Ongoing charges**:	1.4%
Ongoing charges plus taxation and performance fee:	1.6%

*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.4% and includes the 2017 final dividend of 4.20 cents per share declared on 4 December 2017 and paid to shareholders on 9 February 2018 and the 2018 interim dividend of 3.00 cents per share announced on 17 May 2018 and payable to shareholders on 29 June 2018.
**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2017.

Sector Analysis	Gross market value as a % of net assets		Country Analysis	Gross market value as a % of net assets
Financials	36.6		Argentina	10.8
Real Estate	15.4		Egypt	8.1
Consumer Discretionary	14.2		Vietnam	8.0
Materials	11.4		Kuwait	8.0
Consumer Staples	10.3		Indonesia	7.5
Industrials	9.7		Saudi Arabia	7.0
Health Care	9.4		Nigeria	6.7
Energy	6.5		Thailand	6.2
Telecommunication Services	4.7		Romania	5.8
Information Technology	1.3		United Arab Emirates	4.6
	-----		Greece	4.6
Total	119.5		Poland	4.0
	-----		Kazakhstan	3.6
Short positions	-4.2		Ukraine	3.5
	=====		Malaysia	3.4
			Qatar	3.2
			Kenya	2.9
			Bangladesh	2.9
			PAN-Middle East	2.7
			Philippines	2.5
			Turkey	2.3
			Hungary	2.1
			PAN-Africa	2.0
			PAN-Asian	1.6
			Tanzania	1.2
			Morocco	1.1
			Slovenia	1.1
			Estonia	1.1
			Sri Lanka	0.9
			Colombia	0.1
				-----
			Total	119.5
				-----
			Short positions	-4.2
				=====

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

Market Exposure
 

	30.06  2017     %	31.07  2017     %	31.08 2017     %	30.09  2017     %	31.10  2017     %	30.11  2017     %	31.12  2017     %	31.01  2018     %	28.02  2018     %	31.03  2018     %	30.04  2018     %	31.05  2018     %
Long	103.9	106.6	107.9	107.7	113.4	111.0	113.3	110.2	102.1	97.0	113.2	119.5
Short	0.0	0.0	0.0	0.0	2.5	3.8	3.8	3.0	3.0	2.9	3.8	4.2
Gross	103.9	106.6	107.9	107.7	115.9	114.8	117.1	113.2	105.1	99.9	117.0	123.7
Net	103.9	106.6	107.9	107.7	110.9	107.2	109.5	107.2	99.1	94.1	109.4	115.3

Ten Largest Investments

Company	Country of Risk	Gross market value as a % of net assets
Astra International	Indonesia	4.3
MHP	Ukraine	3.5
Land & Houses plc	Thailand	3.4
Halyk Savings Bank	Kazakhstan	3.3
Industries of Qatar	Qatar	3.2
Banco Macro	Argentina	3.2
YPF	Argentina	3.1
Emaar Properties	United Arab Emirates	3.0
Orascom Construction	Egypt	3.0
Equity Group	Kenya	2.9

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

In May, the Company’s NAV fell by 7.8%* versus its benchmark, the MSCI New Frontier benchmark (MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index, USD net return), which fell by 5.7%**. For reference, the Company’s previous benchmark (the MSCI Frontier Markets Index) fell by 9.2%**, and the MSCI Emerging Markets Index fell by 3.5%**, over the same period (all performance figures are on a US Dollar basis with net income reinvested).

New Frontier Markets were weak across the world, with Saudi Arabia the only sizeable market within our universe to deliver a positive return, rising by 3%.  

The end of the US Quantitative Easing program and an increase in US interest rates has resulted in a notable tightening of liquidity for Emerging Markets.  Investors are looking for the greater yield differentials and higher real rates to justify allocations to higher risk markets, especially those which are running large fiscal and current account deficits which cannot fund themselves domestically.  As such, our overweight to Argentina was one of the main drivers of underperformance this month, as the market fell by 22%.  Argentina has large twin deficits, a very small domestic savings pool, an illiquid debt market with a convoluted structure and has a higher than usual percentage of short term funding.  As such, it has been the bell-weather trade for Emerging Market liquidity.  Post month end, Argentina agreed a $50bn package with the IMF (International Monetary Fund) which will cover the majority of the country’s financing needs for the next 2 years.  As part of the agreement, Argentina will reduce its fiscal deficit faster than previous target, while still looking to for inflation to decelerate.  With the Argentine Peso back to 2015 levels on a real effective exchange rate basis, we think that risk reward is attractive here and continue to hold significant positions in Argentina. 

Turkey is the other country which is strongly exposed to a reduction in global liquidity.  However, different to Argentina, the government and Central Bank have shown a less orthodox response to the problems.  We remain cautious on Turkey as it is not only a carry country but both its current account deficit and inflation are high, and central bank has been slow to react with effective monetary policy. 

Our positions in Greek banks performed poorly over the month, falling by 20/25% respectively as investors were concerned about an escalation of the tensions post elections in Italy spilling over into the wider Eurozone. 

Elections were also notable in Malaysia where Dr Mahathir confounded all pollsters to become the world’s oldest elected leader at the age of 92.  In doing so, he ousted the Barisan Nasional (BN) coalition, which has been in power since independence in 1957.  However, Mahathir was prime minister (at the head of the BN coalition) for 22 years, from 1981 to 2003, so perhaps less has changed than it would appear at first glance.  Whilst the market fell by 8% during the month, benefiting our relative performance given the low exposure there, we are not currently looking to add to positions as valuations generally remain high. 

Despite the sell off and increased market concerns in 2018, we think that the expanded New Frontier Markets continue to exhibit strong GDP (Gross Domestic Product) growth, have 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.

Sources:
*BlackRock as at 31 May 2018
**MSCI as at 31 May 2018

20 June 2018

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.