BlackRock Frontiers Investment Trust Plc - Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 31 January 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	4.7	8.2	19.4	71.6	110.7	109.3
Net asset value	5.7	8.7	21.0	55.0	100.3	104.9
MSCI Frontiers Index (NR)	0.6	3.0	15.6	34.8	70.8	62.5
MSCI Emerging Markets Index (NR)	3.1	5.0	24.8	47.7	47.4	46.9
US Dollars:
Share price	10.1	16.0	35.0	62.7	89.5	91.6
Net asset value	11.2	16.5	36.9	46.9	80.0	87.3
MSCI Frontiers Index (NR)	5.7	10.3	30.7	27.6	53.2	48.2
MSCI Emerging Markets Index (NR)	8.3	12.4	41.0	40.3	32.2	33.9

Sources: BlackRock and Standard & Poor’s Micropal

* 17 December 2010.
 

At month end Ordinary Shares
US Dollar
Net asset value - capital only:	226.41c
Net asset value - cum income:	227.11c
Sterling:
Net asset value - capital only:	159.21p
Net asset value - cum income:	159.71p
Share price:	166.00p
Total assets (including income):	£297.6m
Premium to cum-income NAV:	3.9%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	3.1%
Ordinary shares in issue:	186,316,108
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 3.1% and includes the 2017 final dividend of 4.20 cents per share declared on 4 December 2017 and payable to shareholders on 9 February 2018 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 2017.
 

Sector Analysis	Gross market value as a % of net assets		Country Analysis	Gross market value as a % of net assets
Financials	40.5		Argentina	19.0
Consumer Staples	12.8		Kuwait	12.2
Energy	9.9		Vietnam	9.7
Health Care	9.6		Egypt	8.4
Materials	9.4		Nigeria	7.8
Telecommunication Services	8.6		Romania	7.2
Industrials	6.2		Kazakhstan	7.1
Real Estate	5.9		Morocco	5.4
Consumer Discretionary	4.2		Saudi Arabia	4.7
Information Technology	2.1		Ukraine	4.0
Utilities	1.0		Sri Lanka	4.0
	-----		Bangladesh	3.9
Total	110.2		Kenya	3.3
	-----		PAN-Middle East	2.7
Short positions	-3.0		Philippines	2.7
	=====		Columbia	2.0
			Slovenia	1.9
			PAN-Asian	1.6
			Estonia	1.4
			Tanzania	1.2
				-----
			Total	110.2
				-----
			Short positions	-3.0
				=====

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

Market Exposure
 

	28.02  2017     %	31.03  2017     %	30.04  2017     %	31.05  2017     %	30.06  2017     %	31.07  2017     %	31.08 2017     %	30.09  2017     %	31.10  2017     %	30.11  2017     %	31.12  2017     %	31.01  2018     %
Long	115.8	112.1	108.9	105.0	103.9	106.6	107.9	107.7	113.4	111.0	113.3	110.2
Short	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	2.5	3.8	3.8	3.0
Gross	115.8	112.1	108.9	105.0	103.9	106.6	107.9	107.7	115.9	114.8	117.1	113.2
Net	115.8	112.1	108.9	105.0	103.9	106.6	107.9	107.7	110.9	107.2	109.5	107.2

Ten Largest Investments

Company	Country of Risk	Gross market value as a % of net assets
Grupo Financiero Galicia	Argentina	4.2
YPF	Argentina	4.2
The National Bank of Kuwait	Kuwait	4.1
Halyk Savings Bank	Kazakhstan	3.3
MHP	Ukraine	3.3
Equity Group	Kenya	3.3
Zenith Bank	Nigeria	3.2
United Bank for Africa	Nigeria	3.1
Mobile Telecommunications	Kuwait	2.9
Burgan Bank	Kuwait	2.9

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

In January, the Company’s NAV rose by 11.2%* on a US Dollar basis with net income reinvested, marking its best month since launch in 2010. Performance included the reversal of a provision accrued for a potential Capital Gains Tax liability in Argentina.  Following the enactment of Argentine tax reform (Law No. 27,430), effective 1 January 2018, it was noted that ADRs over Argentine equity held by a non-resident purchaser will not give rise to an Argentine Capital Gains Tax liability.  In addition, the law removed any liability for unpaid capital gains tax arising from transactions prior to 1 January 2018.  The Board therefore decided to reverse the accrual with effect from 3 January 2018, which amounted to 2.10% of NAV.  For reference, the MSCI Frontier benchmark gained 5.7%*, while the MSCI Emerging Markets Index added 8.3%* on a US Dollar basis, over the same period.

Performance for the month was well spread out, as the majority of frontier markets ended the month in positive territory and almost half of them up double digits. Broad Nigerian exposure was the top contributor to performance, with the market gaining 13% in January as near-term outlook improved amid functioning FX (foreign exchange) and stronger oil prices, both factors which have led trade volumes to have tripled over the past six months. Lenders, Zenith Bank (+21%) and United Bank for Africa (+23%), were both among the strongest performers. An off-benchmark allocation to Ukrainian food producer, MHP (+22%), benefitted the Company after reporting a very strong fourth quarter 2017, after achieving significant poultry price increases over the year. Management’s shift from domestic sales to exports, which has resulted in positive pricing trends, supports MHP being one of the fund’s largest positions on both an absolute and relative basis. Our long standing overweight to Kazakhstan’s Haylk Bank (+31%) also continued its streak of strong performance, ending the month as the Company’s top contributor to returns.

Our two holdings in the Philippines, one a long position and one a short position, both contributed positively to returns.  Our long position in LT Group rose 17% as the company significantly increased cigarette prices with the magnitude of the move above analyst estimates.   The Company also benefited from two holdings in Colombia, Ecopetrol (+23%) and Exito (+14%).  Having bought Ecopetrol at around $9/ADR (American Depositary Receipts) in February, we decided to take profits and fully exit our position in January at around $18/ADR. 

Our position in Vietnamese broker, Saigon Securities, rose 19% following the strong performance of the Vietnamese market.  Whilst we have around 10% of the portfolio in Vietnam, this is an underweight relative to the index and therefore led to negative relative returns in Vietnam.  Holdings in Sri Lanka also detracted from relative returns as the market was flat in January.  

We continued to decrease gearing in January, taking profits and reducing gross exposure across the book following very strong performance. At the same time, we have built up a long position in Saudi Arabia, on the view that the stock market has broadly lagged oil and that in the near-term, government spending is expected to increase materially. On the other hand we exited our long-standing position in Kakzakh energy name, Kazmunaigas, into the long awaited tender offer from its parent company.

Frontier Markets continue to exhibit strong GDP (Gross Domestic Product) 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.

23 February 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.

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