BLACKROCK FRONTIERS INVESTMENT TRUST PLC All information is at 30 June 2014 and unaudited. Performance at month end with net income reinvested One Three Six One Three Since month months months year years launch* Sterling: Share price -0.5% 2.1% 5.2% 16.4% 43.1% 31.1% Net asset value -0.8% 7.9% 9.3% 18.6% 44.2% 34.8% MSCI Frontiers Index (NR) -2.0% 9.1% 16.5% 20.8% 33.4% 24.2% MSCI EM Markets (NR) 0.7% 3.9% 2.8% 1.4% -7.2% -5.8% US Dollars: Share Price 1.5% 4.7% 8.6% 31.2% 52.5% 44.1% Net asset value 1.2% 10.6% 13.0% 33.7% 53.7% 48.0% MSCI Frontiers Index (NR) -0.1% 11.9% 20.2% 36.2% 42.1% 36.2% MSCI EM Markets (NR) 2.7% 6.6% 6.1% 14.3% -1.2% 3.3% Sources: BlackRock and Standard & Poor's Micropal * 17 December 2010. At month end US Dollar: Net asset value - capital only: 202.02c Net asset value - cum income: 205.80c Sterling: Net asset value - capital only: 118.14p Net asset value - cum income: 120.35p Share price: 119.13p Total assets (including income): £181.3m Discount to cum-income NAV: 1.0% Gearing: nil Gearing range (as a % of gross assets): 0-20% Net yield: 1.1% Ordinary shares in issue: 150,621,621 *The Company's yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 1.1% and includes the 2014 interim dividend of 2.25 cents per share announced on 20 May 2014 and payable to shareholders on 4 July 2014. However, as previously announced, a special dividend of 3.40c per share (representing the Company's earnings for the period from 1 April 2013 to 30 September 2013) was paid early in 2013 to avoid revenue dilution as a result of the Company's C-Share issue which was completed on 29 September 2013. If this dividend had been paid as a final dividend for 2013, the Company's yield would be 2.8%. Benchmark Sector Analysis Gross assets(%)* Country Analysis Gross assets(%)* Financials 31.2 Nigeria 12.2 Energy 18.2 Kuwait 11.8 Telecommunications 14.5 Pakistan 8.4 Consumer Staples 12.6 Bangladesh 7.7 Consumer Discretionary 7.8 Saudi Arabia 7.0 Industrials 7.2 Iraq 6.1 Health Care 6.9 Romania 6.1 Materials 3.6 Kazakhstan 6.0 Utilities 2.4 Sri Lanka 5.7 Information Technology 2.2 Oman 5.5 ----- Argentina 7.3 Total 106.6 Ukraine 4.8 ----- Vietnam 3.7 Short positions -1.7 Turkmenistan 3.1 ===== Morocco 2.5 Slovenia 2.4 Other 6.3 ----- 106.6 ===== Short positions -1.7 ===== *reflects gross market exposure from contracts for difference (CFDs) Market Exposure 31.07 31.08 30.09 31.10 30.11 31.12 31.01 28.02 31.03 30.04 31.05 30.06 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 % % % % % % % % % % % % Long 103.2 98.9 98.8 100.4 100.5 103.3 96.6 101.8 101.6 101.6 98.0 106.6 Short 3.0 3.3 1.4 1.6 1.6 1.5 1.7 1.8 1.7 2.0 1.7 1.7 Gross 106.2 102.2 100.2 102.0 102.1 104.8 98.3 103.6 103.3 103.6 99.7 108.3 Net 100.2 95.6 97.4 98.8 98.9 101.8 94.9 100.0 99.9 99.6 96.3 104.9 Ten Largest Equity Investments Company Country of Risk % of Gross Assets Kuwait Food Kuwait 5.1% Zenith Bank Nigeria 4.8% Mobile Telecommunications Kuwait 4.7% Halyk Bank Kazakhstan 3.9% BRD Romania 3.7% MHP Ukraine 3.6% Genel Energy Iraq 3.4% Banco Macro Argentina 3.2% Dragon Oil Turkmenistan 3.1% Bank Muscat Oman 3.0% Commenting on the markets, Sam Vecht, representing the Investment Manager noted: Markets In June, the MSCI Frontier Market Index fell 0.1%. The benchmark return obscures a wide dispersion of return between individual constituent countries. (All calculations in US dollars with net income reinvested.) The Buenos Aires bourse was the strongest performer during the month, rallying by 10%. President Christina Fernandez announced that the government were willing to negotiate with a bond holder who refused to participate in the debt restructuring following the country's default in 2001. A resolution to the long-running dispute has the potential to allow Argentina access to international capital markets and facilitate much needed investment in the country. Kazakhstan was also a strong performer during June as the market rose by 8%. In response to a deteriorating economic environment, the government has brought forward reforms which aim to increase investment, particularly into the energy sector. The weakest market during July was Bulgaria, falling by 10%, which suffered a run on its fourth largest bank, KTB. The run appeared to be politically motivated. The Trust does not have any direct exposure to Bulgaria. Portfolio In June, the Company's NAV increased by 1.2%, outperforming the index by 1.3% (on a US dollar basis with net income reinvested). The strongest individual contribution to performance was Iraqi E&P energy company, Gulf Keystone, which rallied by 20%. Investors were cheered by the news that CEO and chairman, Todd Kozel, had stepped down, raising the prospects that boardroom unrest would be nearing a resolution. Kyrgyzstan gold miner Centerra was also a strong performer in June, returning 46%. After a period of uncertainty, the Canadian listed company received the appropriate licences for its Kumtor mines. The stock rallied on this news and the team took profits, selling the holding before the end of the month Detracting from relative performance over the month was Pakistani holding company, Engro, which also owns fertilizer assets. The stock fell by 15% on the back of an increase in regulated gas price announced as part of 2014-2015 government budget. Activity The Company re-initiated a position in internet company, Mercadolibre which is headquartered in Argentina and is eBay's equivalent in Latin America. We had previously held the stock and profited from a 50% rise in the stock price before selling the position. Following recent price weakness, we bought the stock which enjoys considerable leverage to rising internet penetration and online retail. We also invested in Nigerian Financial UBA. We had previously held UBA till early 2013, and sold out after the stock had risen nearly threefold from its initial purchase cost. Subsequently the stock has underperformed the Nigerian market and is valued at an attractive discount to Nigerian peers, despite considerable efforts to improve underwriting standards and asset quality. UBA is valued at just 5 times forward price to earnings. The Company initiated a position in Pakistan financial, United Bank Ltd, by participating in the current government's privatization of its remaining 19% stake, which was valued at an attractive discount. The bank is well positioned to benefit from accelerating loan growth in Pakistan and has a strong fee franchise as the domestic leader in inward remittances. Outlook The S&P500 is now entering its sixth consecutive year of positive returns - a rare phenomenon over the past century. Financial markets appear to be entrenched in the belief that interest rates will remain low, anchored by dovish central banks in the US and EU and benign inflation trends. Bond yields globally remain near or at record low levels, and consequently some of the best performing Emerging Markets this year have been those characterised as the 'fragile five' given the dependence of their bond markets on foreign investment flows. This growing belief in the perpetuity of low interest rates may lead to renewed financial imbalances, as capital flows continue to seek high yield, at the expense of liquidity or quality. This may cause a sharp reversal of certain asset prices at some stage. Frontier Markets are relatively well positioned in this environment, as they are somewhat insulated from global capital flows given their underdeveloped financial markets and are driven more by indigenous economic and political developments. However, the surge of many relatively illiquid stocks, especially in the consumer sector, is a growing cause for concern. We much prefer the opportunities in markets such as Bangladesh, Romania, Saudi Arabia and Sri Lanka, where valuations remain attractive and economic prospects are robust or improving. 16 July 2014 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. END
BLACKROCK FRONTIERS INVESTMENT TRUST PLC: Portfolio Update
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