Portfolio Update

THE BLACKROCK FRONTIERS INVESTMENT TRUST PLC

All information is at 31 October 2011 and unaudited.

Performance at month end with net income reinvested

 

                                  One      Three     Year    Since
                                month     months  to date   launch*
Sterling:
Share price                      2.0%     -12.2%   -28.7%   -23.5%
Net asset value                  0.0%     -10.0%   -19.7%   -20.0%
MSCI Frontiers Index (NR)       -1.4%      -6.3%   -17.8%   -16.8%
MSCI EM Markets (NR)             9.3%     -10.4%   -14.2%   -11.4%

US Dollars:
Net asset value                  3.6%     -11.5%   -17.2%   -17.2%
MSCI Frontiers Index (NR)        2.2%      -7.8%   -15.3%   -13.8%
MSCI EM Markets (NR)            13.2%     -11.9%   -11.5%    -8.3%

Sources: BlackRock and Standard & Poor's Micropal
* 17 December 2010.

At month end
US Dollar:
Net asset value - capital only:               123.08c
Net asset value - cum income:                 126.55c
Sterling:
Net asset value - capital only:                76.25p
Net asset value - cum income:                  78.40p
Share price:                                   76.50p
Total assets (including income):               £74.3m
Discount to cum income NAV:                      2.4%
Gearing:                                          nil
Net yield:                                        n/a
Ordinary shares in issue:                  94,766,267

Benchmark

Sector Analysis   Gross assets(%)*         Country Analysis  Gross assets(%)*
Financials              25.4               Qatar                      16.0
Industrials             20.1               Kazakhstan                 11.2
Consumer Staples        11.9               Nigeria                    10.5
Energy                  11.8               Saudi Arabia               10.5
Telecommunications      10.5               Ukraine                     8.1
Materials                7.8               United Arab Emirates        7.6
Utilities                5.2               Kuwait                      6.1
Consumer Discretionary   5.2               Croatia                     5.2
Healthcare               3.2               Iraq                        4.5
                                           Panama                      3.7      
                        ----               Jordan                      3.5
                       101.1               Oman                        2.8
                        ----               Romania                     2.3
Short positions         -6.2               Pan Africa                  2.0
                        ====               Pakistan                    1.7
                                           Slovenia                    1.5
                                           Other                       3.9
                                                                      ----
                                                                     101.1
                                                                      ====
                                           Short positions            -6.2
                                                                      ====

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

Market Exposure

          31.12    31.1  28.2    31.3    30.4    31.5    30.6    31.7    31.8    30.9   31.10 
           2010    2011  2011    2011    2011    2011    2011    2011    2011    2011    2011    
            %       %     %       %       %       %       %       %       %       %       % 
Long       76.3    92.3  96.5    98.0    99.9   103.2   103.3   103.6   105.2   100.7   101.1
Short         -       -     -       -     2.0     2.9     2.7     2.8     7.8     7.4     6.2
Gross      76.3    92.3  96.5    98.0   101.9   106.1   106.0   106.4   113.0   108.1   107.3
Net        76.3    92.3  96.5    98.0    97.9   100.3   100.6   100.8    97.4    93.3    94.9

Ten Largest Equity Investments (in alphabetical order)

Company                         Country of Risk
Al Mouwasat                     Saudi Arabia
Al Othaim                       Saudi Arabia
Commercial Bank of Qatar        Qatar
Copa                            Panama
Hrvatski Telekomunikacije       Croatia
Kazmunaigas Exploration         Kazakhstan
National Mobile                 Kuwait
Qatar Electricity & Water       Qatar
Qatar Navigation                Qatar
Zenith Bank                     Nigeria

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

Markets
The MSCI Frontiers Index (NR) increased by 2.2% in October on a US$ Basis.  
Global equity markets rallied in the wake of optimism over progress on new proposals 
to address the European sovereign debt crisis. US economic data was also better than expected
amid growing confidence that China would avert a hard landing. This combination
of positive economic data and bearish investor positioning led to a sharp rise
in risk assets as investors rushed to catch the rally.

As we noted last month, correlations between assets have risen to extreme
levels. Correlations remained extremely high in October with the only change
being the reversal of the direction of asset price moves. In the global equity
market, leadership of sector and country performance rotated 180 degrees in
many cases, highlighting the challenges of investing in markets driven by
political events rather than fundamental value.

In contrast, investors in Frontier Markets attached less significance to the
travails of the Eurozone, instead focusing on the issues directly impacting
local stock valuations.

Kazakhstan was the strongest performer in October where the country's political
and economic stability have resulted in current account and budget surpluses
with oil output forecast to double in the next ten years. These characteristics
prompted S&P to raise the country's credit rating to BBB+ at the beginning of
November, ranking Kazakhstan higher than, amongst others, Russia and Brazil.

In Nigeria, the market rose over 7% as the country continues to push ahead with
policy changes to combat inflation and currency weakness. To that end, the
central bank has tightened monetary policy and the government is expected to
scrap the costly fuel subsidy. Nigeria's profile of strong economic growth and
low levels of debt represents one of the most attractive places in which to
invest across Frontiers Markets.

The weakest performer over the month was Bangladesh. The market rallied
moderately in the middle of October with the spurious news that local banks
would begin buying equities as part of a stabilisation programme to halt the
stock market declines. However, this failed to materialise and in the last week
of October, the market fell a further 11%.

Portfolio performance

The BlackRock Frontiers Investment Trust returned 3.6% and outperformed the
MSCI Frontiers index (NR)by 1.4% (all calculations on a US$ basis with net
income reinvested). 

The underweight position in Bangladesh, where the Company had limited exposure
in October, was the largest contributor to performance. Overweight positions in
Kazakhstan were also a positive contributor to returns.

At a stock level, the strongest performer was Romanian media company, CETV,
which announced an extremely positive trading statement ahead of expectations
for the third quarter of 2011, driven by strong execution.

Iraqi exposed oil E&P name, DNO, also performed strongly over the month due to
a combination of stock buybacks and a positive reaction from investors to the
recent merger with RAK Petroleum.

The Panama based airline, Copa also performed well after reporting robust
annual traffic growth of 22% for the third quarter of 2011. Copa remains one of
the few airlines globally that is able to maintain margins given its resilient
'hub and spoke' business model.

Detracting from performance was the underweight in National Bank of Kuwait. The
stock rose on optimism  that the bank was underwriting credit for a major power
project in the otherwise moribund Kuwaiti economy,  We believe this will be
short-lived given the stock rich valuations and ongoing political challenges in
Kuwait.

Portfolio Activity
The Company is currently holding 41 long positions and 7 short positions in
stocks across 23 markets. 

During the month, the Company opened positions in two telecom companies:
Kenya's Safaricom and Grameenphone of Bangladesh

Grameenphone is the pioneer of the Bangladesh mobile telephony market.  They
have innovated solutions to get around the issues of lack of rural power and
road access to achieve 97% population coverage.  The company's superior network
and distribution give them strong cost and brand advantages and places them
favourably to exploit this underpenetrated market.

Safaricom has a similar strategy with its M-Pesa (M for mobile, pesa is Swahili
for money) service which enables mobile-phone based money transfers. The
company is attractively valued and offers a 6% dividend yield.

The Company sold the position in Romanian financial, SIF2 into share price
strength.

Outlook
The outlook for the global economy remains challenged with Eurozone contagion
fears as witnessed by the sharp rise in Italian bond yields and the prospects
of a slow-down in China. While we do not necessarily expect a 'hard-landing', a
decrease in economic activity will have implications for world markets, not
least in the materials sector.

While Frontier Markets will not be immune to any slowdown, the extent is
likely to be less than in developed markets. Sovereign debt levels are lower
than in developed markets while the banking sector has strong capital ratios
with little or no exposure to peripheral European debt.

Frontier Markets offer strong relative attractions compared to other equity
markets. The companies we invest in are less dependent on developed markets,
faster growing and are on lower valuations. Frontier Markets also offer
diversification benefits given their significantly lower correlations with
developed equity markets which have become highly correlated with each other.

In Kazakhstan, we remain overweight the state-owned energy company,
Kazmunaigas, which has a market capitalisation of $7bn, a net cash position of
$3.5bn, a dividend yield of 5% and is currently undertaking a buy-back of 25%
of shares in issue.

The Company remains overweight in Nigeria where bank stocks are trading at
distressed multiples despite a 20% return on equity and a 8%-9% dividend yield
with ample capital and liquidity.  However, we are mindful of risks and to that
end, we are conducting a research trip to Nigeria in November to corroborate
our positive view; we believe that on-the-ground-research is crucial to gaining
insight into the economic environment of Frontier Markets.


16 November 2011

 
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.