BLACKROCK FRONTIERS INVESTMENT TRUST PLC All information is at 31 May 2013 and unaudited. Performance at month end with net income reinvested One Three Six One Since month months months year launch* Sterling: Share price 2.8% 10.0% 36.3% 43.3% 14.8% Net asset value 8.2% 8.6% 29.5% 38.2% 17.3% MSCI Frontiers Index (NR) 7.8% 9.7% 27.0% 31.6% 8.9% MSCI EM Markets (NR) 0.0% -3.4% 7.1% 15.8% -0.7% US Dollars: Net asset value 5.4% 8.5% 22.5% 36.2% 14.1% MSCI Frontiers Index (NR) 5.0% 9.5% 20.1% 29.6% 5.9% MSCI EM Markets (NR) -2.6% -3.5% 1.3% 14.1% -3.5% Sources: BlackRock and Standard & Poor's Micropal * 17 December 2010. At month end US Dollar: Net asset value - capital only: 160.66c Net asset value - cum income: 165.78c Sterling: Net asset value - capital only: 105.97p Net asset value - cum income: 109.35p Share price: 109.00p Total assets (including income): £103.6m Discount to cum-income NAV: 0.3% Gearing: nil Gearing range (as a % of gross assets): 0-20% Net yield*: 4.8% Ordinary shares in issue: 94,766,267 *Yield calculations are based on dividends announced in the last 12 months as at the date of the release of this announcement, including the 2012 final dividend per share of 2.60 cents per share announced on 30 November 2012,the 2013 interim dividend of 2.00 cents per share and the special interim dividend of 3.40 cents per share announced on 30 May 2013,payable to shareholders on 5 July 2013. The interim and special dividends announced on 30 May 2013 that total 5.40 cents per share are the total dividends for the financial year ending 30 September 2013. The special dividend represents the final dividend which is normally paid in March each year. Therefore, a more accurate indication of the projected yield for the financial year to 30 September 2013 would be 3.3% (based on the current ex-dividend share price as at the date of release of this announcement of 105.50 pence). The Board does not currently anticipate any further distributions for the current financial year. Benchmark Sector Analysis Gross assets(%)* Country Analysis Gross assets(%)* Financials 32.1 Nigeria 12.5 Consumer Staples 15.0 United Arab Emirates 12.4 Energy 13.6 Qatar 12.1 Telecommunication 13.2 Saudi Arabia 11.1 Industrials 10.0 Kazakhstan 6.9 Healthcare 6.0 Iraq 6.2 Consumer Discretionary 4.7 Vietnam 5.8 Materials 2.9 Bangladesh 4.6 Utilities 1.5 Ukraine 4.2 Technology 0.8 Sri Lanka 2.7 ----- Pan Africa 2.4 Total 99.8 Croatia 2.4 ----- Panama 2.3 Short positions -1.1 Kuwait 2.2 ===== Kenya 2.2 Cambodia 1.9 Argentina 1.6 Pakistan 1.4 Turkmenistan 1.4 Algeria 1.4 Other 2.1 ----- 99.8 ===== Short positions -1.1 ===== *reflects gross market exposure from contracts for difference (CFDs) Market Exposure 30.06 31.07 31.08 30.09 31.10 30.11 31.12 31.01 28.02 31.03 30.04 31.05 2012 2012 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 % % % % % % % % % % % % Long 97.2 101.9 96.5 99.1 101.0 102.0 103.4 105.1 104.1 99.5 99.2 99.8 Short 2.6 2.6 2.5 2.6 4.2 4.9 5.2 3.5 1.2 1.2 1.2 1.1 Gross 99.8 104.5 99.0 101.7 105.2 106.9 108.6 108.6 105.3 100.7 100.4 100.9 Net 94.6 99.3 94.0 96.5 96.8 97.1 98.2 101.6 102.9 98.3 98.0 98.7 Ten Largest Equity Investments Company Country of Risk % of gross assets Zenith Bank Nigeria 3.7% Halyk Savings Bank Kazakhstan 2.9% Etihad Etisalat Saudi Arabia 2.9% Qatar National Bank Qatar 2.7% Doha Bank Qatar 2.7% MHP Ukraine 2.4% Kazmunaigas Exploration Kazakhstan 2.3% Air Arabia UAE 2.2% Qatar Gas Transportation Qatar 2.2% Hatton National Bank Sri Lanka 2.1% Commenting on the markets, Sam Vecht, representing the Investment Manager noted: Market overview In May, Frontier Markets returned 5.0% (in US dollar terms with income reinvested), outperforming mainstream Emerging Markets which returned -2.6%. Calendar year to date, Frontier Markets have risen by 17%, outperforming Emerging Markets by 20%. The sell-off in mainstream Emerging Markets has been driven by falls in bond prices on the back of rhetoric from the US Federal Reserve suggesting that improvements in the US economy could eventually lead to a tapering of the current quantitative easing program. Emerging Markets, especially those which have been beneficiaries of the 'carry-trade', were impacted, with many bonds, currencies and equities across the developing world posting losses. To date, Frontier Markets have been less affected by the speculation over QE, showing again their lower volatility and lower correlation to Developed Markets. Due to the lack of western institutional fund managers following this asset class, Frontier investors have instead focused on local issues. For example, investors in the best performing Frontier Market in May, Pakistan, were cheered by the return to power of Nawaz Sharif, in a decisive election victory. The strong mandate gives Sharif the opportunity to tackle structural economic and political problems, beginning with a likely call for IMF assistance. Nigeria continued its strong run, rising by 13% in May. Economic data remains stable, reserves are approaching $50bn, and inflation has been below target for four consecutive months. It is expected that inflation will remain in single digits for the remainder of 2013. Corporate profitability is also improving, especially in the financial sector, prompting domestic investors to return to the market, accounting for over 60% of total equity market transactions. Serbia was the weakest performing market in May. Despite a rate cut which was larger than market expectations, investors are looking for further action to breathe life into a stagnating economy. Portfolio overview The Company returned 5.4% in May, outperforming the MSCI Frontier Market Index by 0.4% (all calculations on a US dollar basis with net income reinvested). The largest individual contributor to relative performance over the month was United Arab Emirates property developer, Sorouh Real Estate. The share price continues to be buoyed by sentiment surrounding a deal to merge with fellow developer, Aldar Properties, which is due to be completed in June. Beyond the synergies of the merger, the shares have also been boosted by increasing liquidity in the Emirati financial sector being invested in the equity market. With the stock having risen more than 100% year to date, the Company has fully exited this position. UAE airline, Air Arabia performed well after strong financial results for the first quarter of 2013. Profits were up 20% as the Sharjah-based budget airline carried a record 1.4 million passengers in the first quarter. Detracting from performance over the month was Croatian Telecom, Hrvatski Tel, which released financial results for the first quarter of 2013 which were below expectations. Portfolio Activity The Company is invested in 55 stocks in across 21 markets, including one short position. We initiated a new position in Pakistan energy company, Hub Power. Post elections, we think that there is an increased likelihood that the government will be able to solve the debt issues in the power sector. We sold a position in MercadoLibre, an Argentinean e-commerce company after the stock rose by more than 50% year to date. Market Outlook Frontier Markets have outperformed significantly in 2013 such that the best performing markets year to date globally are all Frontier Markets. We have been vociferous in our preference for Frontier Markets over mainstream Emerging Markets since the launch of the Company in December 2010 and whilst this has proven to be a correct view to date, we believe that strong performance should always give rise to caution. As a result, mindful of the turbulence in Emerging Markets, we have somewhat reduced the net exposure of the portfolio, especially in the African markets where we have seen most activity from international investors. With around 140 countries in our Frontier Market universe, we see ample opportunity to invest where others are not. The recently announced MSCI decision to upgrade Qatar and United Arab Emirates from Frontier Markets to Emerging Markets, with effect from May 2014, reflects a growing realisation of how far these economies and financial markets have developed in recent years. Whilst we welcome the move, it is unlikely to have any near-term significant impact on how we manage our portfolios. We have been broadly positive on both of these countries for the last two years as the combination of economic restructuring post financial crisis, strong earnings growth, depressed valuations, and high dividend yields offer an attractive combination. Over the next 12 months, we anticipate strong flows into both the UAE and Qatar equity markets. This is likely to extend valuations to levels in excess of target prices and the Company will realise profits in those positions. We will aim to exit our positions in those markets by May 2014, so that the Company remains a pure Frontiers portfolio. Morocco will move from the Emerging Markets Index to the Frontier benchmark in November 2013. We have extensive investment experience in Moroccan equities and believe that the market is looking increasingly attractive having underperformed in recent years. The point at which many others are selling is often a good time to be buying. We continue to believe that Frontier Markets with their strong GDP growth, positive demographic profile, low debt burden and relatively low correlation to developed markets are a great place to invest for those who have both a long term horizon and wish to see capital and income growth. 20 June 2013 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 the Manager's website (or any other website) is incorporated into, or forms part of, this announcement. END -0- Jun/20/2013 15:25 GMT
BLACKROCK FRONTIERS INVESTMENT TRUST PLC: Portfolio Update
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