Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 30 June 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	-5.8	-9.7	0.9	49.0	64.7	85.5
Net asset value	-3.6	-7.2	2.2	42.1	64.2	86.7
Benchmark (NR)**	-2.8	-3.6	7.1	35.9	53.6	56.8
MSCI Frontiers Index (NR)	-2.8	-9.9	0.1	27.0	43.5	47.5
MSCI Emerging Markets Index (NR)	-3.4	-2.2	6.5	40.3	46.7	36.3
US Dollars:
Share price	-6.6	-15.1	2.6	25.2	43.6	57.7
Net asset value	-4.3	-12.6	4.0	19.4	43.2	58.5
Benchmark (NR)**	-3.6	-9.2	8.8	14.1	33.7	33.8
MSCI Frontiers Index (NR)	-3.5	-15.2	1.7	6.6	24.9	24.9
MSCI Emerging Markets Index (NR)	-4.2	-8.0	8.2	17.8	27.7	15.4

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:	184.58c
Net asset value - cum income:	189.32c
Sterling:
Net asset value - capital only:	139.80p
Net asset value - cum income:	143.39p
Share price:	145.00p
Total assets (including income):	£284.0m
Premium to cum-income NAV:	1.1%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	3.6%
Ordinary shares in issue:	198,041,108
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 3.6% 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 paid 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	34.4		Argentina	9.2
Real Estate	15.0		Vietnam	8.0
Consumer Discretionary	13.2		Indonesia	7.9
Materials	11.0		Saudi Arabia	7.8
Consumer Staples	10.1		Egypt	7.6
Industrials	9.5		Nigeria	6.8
Health Care	9.3		Kuwait	6.8
Energy	7.2		Qatar	6.4
Telecommunication Services	5.3		Romania	6.3
Information Technology	1.2		Thailand	6.1
	-----		Greece	4.7
Total	116.2		United Arab Emirates	4.5
	-----		Poland	4.0
Short positions	-4.7		Kazakhstan	3.7
	=====		Malaysia	3.5
			Ukraine	3.5
			Hungary	3.0
			Bangladesh	2.7
			Kenya	2.3
			Philippines	2.2
			Turkey	2.1
			PAN-Africa	1.8
			Tanzania	1.2
			PAN-Asian	1.2
			Estonia	1.1
			Morocco	0.9
			Sri Lanka	0.7
			Slovenia	0.2
				-----
			Total	116.2
				-----
			Short positions	-4.7
				=====

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

Market Exposure
 

	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     %	30.06  2018     %
Long	106.6	107.9	107.7	113.4	111.0	113.3	110.2	102.1	97.0	113.2	119.5	116.2
Short	0.0	0.0	0.0	2.5	3.8	3.8	3.0	3.0	2.9	3.8	4.2	4.7
Gross	106.6	107.9	107.7	115.9	114.8	117.1	113.2	105.1	99.9	117.0	123.7	120.9
Net	106.6	107.9	107.7	110.9	107.2	109.5	107.2	99.1	94.1	109.4	115.3	111.5

Ten Largest Investments

Company	Country of Risk	Gross market value as a % of net assets
Astra International	Indonesia	4.1
MHP	Ukraine	3.5
Halyk Savings Bank	Kazakhstan	3.5
Industries of Qatar	Qatar	3.4
Land & Houses Public Company Limited	Thailand	3.4
Chemical Works of Gedeon Richter	Hungary	3.0
Emaar Properties	United Arab Emirates	3.0
Ooredoo	Qatar	3.0
Alpha Bank	Greece	2.9
Zenith Bank	Nigeria	2.9

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

In June the Company’s NAV fell by 4.3%* versus its benchmark the MSCI New Frontier benchmark (MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index, USD net return), which fell by 3.6%**. For reference, its previous benchmark (the MSCI Frontier Markets Index) fell by 3.5%**, and the MSCI Emerging Markets Index fell by 4.2%**, over the same period (all performance figures are on a US Dollar basis with net income reinvested).

June capped a tough first half of 2018 for New Frontier Markets which have suffered as investors have become increasingly worried about rising US interest rates and a strong dollar, coupled with fears about increased disruption to global trade feeding through into lower global growth expectations and a knock on affect to countries in the New Frontier universe. As liquidity has tightened for Emerging Markets, investors are looking for greater yield differentials and higher real rates to justify allocations to these higher risk markets, especially those which are running large fiscal and current account deficits and are more dependent on external funding. 

Just as in May, our overweight to Argentina was the main driver of underperformance with the market down by 22% over the month. Argentina has large twin deficits, a very small domestic savings pool, an illiquid debt market with a convoluted structure and a higher than usual percentage of short term funding.  As such, it has been particularly sensitive to a withdrawal of Emerging Market liquidity.  Earlier this month 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 its previous target, while still looking for inflation to decelerate, which we view as positive steps on the path of economic normalisation.  Portfolio managers Sam Vecht and Emily Fletcher recently returned from Argentina, meeting with leading policymakers and corporates, which served to support the view that the market decline looks overdone.  With the Argentine Peso back to 2015 levels on a real effective exchange rate basis, we think that risk reward for investing in Argentina is attractive and we continue to hold significant positions in the country. 

Outside of Argentina individual holdings in pan-Asian apparel manufacturer, Crystal International (-29%) and Pan-African Energy company Vivo (-16%), also detracted from performance in June. Crystal’s stock price suffered as the company’s profit guidance was revised down due to RMB (Renminbi) depreciation, lower-margin orders and more expensive air freight shipping.  The drawdown in Vivo was driven by anti-government protests in Morocco and uncertainty over fuel pricing.

Contributing to performance in June was our position in Kuwaiti financial Burgan Bank (+8%) which benefited from the surprise announcement from MSCI to consider Kuwait for an upgrade into the MSCI Emerging Markets Index.  Saudi hospital operator National Medical Care (+20%) also helped returns, rallying on deal news-flow that another healthcare company would be acquiring a stake.  Qatari telecom Ooredoo (+8%) was an additional contributor over the month.

This month’s MSCI announced index changes affected Argentina, Saudi Arabia and Kuwait.  Our expanded investment universe encompassing all but the largest eight emerging markets is unaffected by these latest MSCI announcements.  Argentina, Saudi Arabia and Kuwait will remain part of our investible universe and are compelling destinations for long term investors in our view.  Despite the sell-off and increased market concerns in 2018, we think that the expanded New Frontier Markets continue to exhibit strong GDP 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 30 June 2018
**MSCI as at 30 June 2018

24 July 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 Kazakhstan