Final Results

BlackRock Frontiers Investment Trust plc BlackRock Frontiers Investment Trust plc Investment Objective The Company's investment objective is to achieve long term capital growth from investment in companies listed or operating in Frontier Markets (defined as any country which is not in either the MSCI Emerging Markets Index or the MSCI Developed Markets Index). Summary Investment Policy The Company will seek to maximise total return by investing in the securities of companies domiciled or listed in, or exercising the predominant part of their economic activity in, Frontier Markets. Performance Record 30 September 30 September 2012 2011 US Dollar Net assets ( US$'000) 128,262 115,629 Net asset value per share (cum income) (US cents) 135.35c 122.01c Share price (US cents)* 130.40c 116.84c Sterling Net assets (£'000)* 79,429 74,226 Net asset value per share (cum income) (pence)* 83.82p 78.32p Share price (pence) 80.75p 75.00p Discount 3.7% 4.2% Period from 17 December 2010 Year ended to 30 September 30 September Since 2012 2011*** inception*** Performance - total return basis % % % US dollar Net asset value per share (with income reinvested) 14.7 (19.5) (7.7) MSCI Frontiers Index (NR**) 3.6 (15.6) (12.6) MSCI Emerging Markets Index (NR**) 16.9 (19.3) (5.7) Ordinary share price (with income reinvested) 15.6 (24.5) (12.7) Sterling Net asset value per share (with 10.7 (20.1) (11.7) income reinvested) MSCI Frontiers Index (NR**) (0.1) (16.2) (16.2) MSCI Emerging Markets Index (NR* *) 12.8 (19.9) (9.6) Ordinary share price (with income reinvested) 11.5 (25.0) (16.4) * Based on an exchange rate of 1.6148 at 30 September 2012 and 1.5578 at 30 September 2011. ** Net return indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors. *** The Company was incorporated on 15 October 2010 and its shares were admitted to trading on the London Stock Exchange on 17 December 2010. Chairman's Statement I am pleased to present the annual report to shareholders of the BlackRock Frontiers Investment Trust plc for the year ended 30 September 2012. Overview Global equity markets have been volatile throughout the year under review as concerns surrounding the Eurozone, the strength of the US economy and the prospects of slower growth in China have all weighed on markets. Against this backdrop, I am pleased to report that the Company's net asset value ("NAV") increased over the year by 14.7% compared with an increase of 3.6% in the MSCI Frontier Markets Index . The Company's share price rose by 15.6%. ( All calculations on a US dollar basis with net income reinvested). The largest contribution to performance over the year came from the Company's exposure to the oil sector in Iraq. Stocks in this region performed well following news that inter-governmental disputes over licensing arrangements in the area had been resolved, allowing payments to be made to energy companies operating and exporting from Northern Iraq. Financial stocks in Nigeria also made a strong contribution. Not holding companies in the Kuwaiti financial sector also contributed positively to relative performance, given weaker than expected earnings. Since the period end, the Company's NAV has increased by 1.6% and the share price has risen by 0.2% (both on a US dollar basis with net income reinvested). Revenue return and dividends The Company's revenue return per share for the year amounted to 4.14 cents (period ended 30 September 2011: 3.51 cents). The Directors are recommending the payment of a final dividend of 2.60 cents per Ordinary Share in respect of the year ended 30 September 2012 (2011: 3.00 cents), which together with the interim dividend of 1.2 cents per share (2011: nil), makes a total of 3.80 cents per share (2011: 3.00 cents). The dividend will be paid on 8 March 2013 to Shareholders on the register of members at close of business on 1 February 2013. The cost of the dividend amounts to US$ 2,464,000. Share capital At 30 September 2012 the Company had in issue 94,766,267 shares with a nominal value of 1 cent per ordinary share. There were no share allotments or share buybacks in the year. Share rating and share buy backs The Directors recognise the importance to investors that the Company's share price should not trade at a significant discount to NAV. Accordingly, the Directors monitor the share rating closely and will consider share repurchases in the market if the discount widens significantly. In addition, before the Company's fifth Annual General Meeting ("AGM") in 2016 the Board will provide Shareholders with an opportunity to realise the value of their Ordinary Shares at NAV per Share less costs. For the year under review the Company's shares have traded at an average discount to NAV of 4.4%, and were trading at a discount of 4.9% on a cum-income basis at the date of this report. The Directors have the authority to buy back up to 14.99% of the Company's issued share capital. This authority, which has not so far been utilised, expires on the conclusion of the 2013 AGM, when a resolution will be put to shareholders to renew it. Annual General Meeting The AGM of the Company will be held at BlackRock's offices at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 5 March 2013 at 12.00 noon. Details of the business of the meeting are set out in the Notice of Meeting on pages 60 to 63 of the Annual Report and the Investment Manager will be making a presentation to shareholders on the Company's progress and the outlook for Frontier Markets. Outlook Sentiment in global equity markets continues to be impacted by recurring concerns over the future of the Eurozone, doubts about the underlying strength of the US recovery and fears of a slowdown in China. However, recent policy action by both the European Central Bank and subsequently by the Federal Reserve in September has prompted a return of confidence, and a rally in `risk' assets. Against this background it is also worth noting that many of the companies listed in Frontier Markets are amongst the higher yielding equities in the world, making the Company's portfolio well placed to benefit from increasing investor appetite for income. In general, Frontier Markets are better positioned than many developed markets, having lower levels of overall indebtedness and enjoying the prospect of stronger underlying growth. We continue to believe that the sector represents an attractive opportunity for investors within the broader emerging markets universe. Audley Twiston-Davies 30 November 2012 Principal risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below: Performance risk - The Board is responsible for deciding the investment policy to fulfil the Company's objectives and for monitoring the performance of the Company's investment manager ("Investment Manager") and the strategy adopted. An inappropriate policy or strategy may lead to poor performance, dissatisfied Shareholders and a widening discount. The Company's investment policy permits the use of both exchange-traded and over-the-counter derivatives (including contracts for difference). To manage these risks the Board regularly reviews the Company's investment mandate and long term strategy, and has put in place appropriate limits over levels of gearing and the use of derivatives. Levels of portfolio exposure through derivatives, including the extent to which the portfolio is geared in this manner and the value of any short positions, are reported regularly to the Board and monitored. The Board also reviews the controls put in place by the Investment Manager to monitor and to minimise counterparty exposure, which include intra-day monitoring of exposures to ensure these are within set limits. The Investment Manager provides an explanation of significant stock selection decisions, the rationale for the composition of the investment portfolio and movements in the level of gearing. The Board monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the Company's investment policy. Income/dividend risk - The amount of dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. Regulatory risk - The Company operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of proposed dividends, if any, to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board at each meeting. The Board and the Investment Manager also monitor changes in government policy and legislation which may have an impact on the Company. Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's other service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These have been regularly tested and monitored and an internal controls report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit Committee at least twice a year. The Investment Manager and the custodian Bank of New York Mellon (International) Limited ("BNYM") also produce a regular Service Organisation Control report (SOC 1) which is reviewed by their reporting accountants and gives assurance regarding the effective operation of controls. The Board also considers succession arrangements for key employees of the Investment Manager and the business continuity arrangements for the Company's key service providers. Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through realising investments in the face of negative market movements. Frontier and Emerging markets companies tend to be more volatile than the more established markets and therefore present a higher degree of risk. In addition the securities markets of Frontier Markets are not as large as the more established securities markets and have substantially less trading volume, which may result in a lack of liquidity and higher price volatility. There are a limited number of attractive investment opportunities in Frontier Markets and this may lead to delay in investment and may increase the price at which such investments may be made and reduce potential investment returns for the Company. As a consequence of this and other market factors the Company may invest in a concentrated portfolio of shares and this focus may result in higher risk when compared to a portfolio that has spread or diversified investments more broadly. Corruption also remains a significant issue across Frontier Markets and the effects of corruption could have a material adverse effect on the Company's performance. Accounting, auditing and financial reporting standards and practices and disclosure requirements applicable to many companies in developing countries are less rigorous. As a result there may be less information available publicly to investors in such securities. Such information which is available is often less reliable. The Company also gains exposure to Frontier Markets by investing indirectly through Promissory Notes ("P-Notes") which presents additional risk to the Company as the use of P-Notes is uncollateralised resulting in the Company being subject to full counterparty risk via the P-Note issuer. P-Notes also present liquidity issues as the Company, being a captive client of a P-Note issuer, may only be able to realise its investment through the P-Note issuer and this may have a negative impact on the liquidity of the P-Notes which does not correlate to the liquidity of the underlying security. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. Financial risks - The Company's investment activities expose it to a variety of financial risks which include foreign currency risk and interest rate risk. Further details are disclosed in note 16 of the Annual Report, together with a summary of the policies for managing these risks. Related party transactions BlackRock Investment Management (UK) Limited, the manager, is considered to be a related party of the Company in terms of the IFRS definitions. Transactions and relationship details are set out in the Director's Report on page 16 of the Annual Report. The Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £28,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £ 23,000 and each other Director receives an annual fee of £20,000. All five members of the Board hold ordinary shares in the Company. Audley Twiston-Davies holds 85,000 ordinary shares, John Murray holds 100,000 ordinary shares, Nick Pitts-Tucker holds 75,000 ordinary shares, Lynn Ruddick holds 26,000 ordinary shares and Sarmad Zok holds 30,000 ordinary shares. Statement of Directors' responsibilities In accordance with Disclosure and Transparency Rule 4.1.12, the Directors also confirm to the best of their knowledge and belief that: - the financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and net return of the Company; and - the annual report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board of Directors Audley Twiston-Davies 30 November 2012 Investment Manager's Report Market Commentary In the year to 30 September 2012, global markets have continued to move in line with `risk-on/risk-off' sentiment, reflecting the concerns surrounding the outlook for global growth and the hope that policymakers would find the right tools to stimulate economic growth. Towards the end of the period, global markets rallied strongly as policy action by both the European Central Bank ("ECB") and Federal Reserve, spurred a rally in risk assets. Governments in the Eurozone demonstrated their strong political will to curtail sovereign debt risks and address systemic risks. The president of the European Central Bank, Mario Draghi, stated that he would do `whatever it takes to save the Euro'. Furthermore, the German high court ruled that the European Stability Mechanism did not contravene the German constitution, thus paving the way for credible ECB intervention. The US Federal Reserve governor, Ben Bernanke, also contributed to improved market sentiment by announcing a third programme of quantitative easing. Despite this turmoil, Frontier Markets have demonstrated far lower volatility than the better known Emerging and Developed markets. Frontier Markets also demonstrated low levels of correlation, not only with more Developed markets but also with each other. These low correlations highlighted the lack of `hot' institutional money in Frontier Markets. The majority of market participants are local investors who are not chasing `risk-on/risk off' trades mentioned above. Given that correlations across Frontier Markets are exceptionally low and in many cases these countries are not fully integrated into the world economic system, local issues can be more significant than global economic challenges. This is especially true in countries which have become more stable politically and have embarked on ambitious programmes of reform. Frontier Markets rose 3.6% in the year to 30 September 2012 on a US dollar basis, with a wide dispersion of returns across markets. The strongest performing markets over the period were Nigeria and Kenya. Kenya was the strongest performer, surging 77%. The Kenyan market rebounded from a 50% fall in 2011 as inflation fell from 20% to single digits. Foreign buyers of the stock market were tempted back on significant improvement in the macroeconomic environment, oil discoveries and innovations in the microfinance sector. Nigeria rose 53% during the year, as investors bought into what was one of the cheapest markets in the world. Post the significant restructuring of the banking sector, where the action taken was as aggressive as seen anywhere else in the world, including the jailing of CEOs at some of the worst offending banks, Nigerian banks have emerged with restructured balance sheets and a renewed ability to lend. At their nadir, banks were trading at fractions of their book values, an opportunity seldom presented to investors globally. Today, like many Frontier banking systems, Nigerian banks have a cheap and growing deposit base, high capital adequacy ratios and minimal exposure to European debt. Elsewhere, Kazakhstan also enjoyed a strong year, rising 30%. Kazakhstan is another example of a Frontier Market where patient investing has been rewarded. As a commodity exporter, Kazakhstan was rocked by the global crisis, which exposed weaknesses within the banking system. The start of 2012 saw the country experience protests against incumbent President Nursultan Nazarbayev. Whilst we hope that Kazakhstan can transition to a more democratic government, we believe that the current political situation will be broadly stable in the medium term and believe that the country's banking system is now on a much stronger footing. The market has outperformed as investors have come to recognise this reality. The weakest markets during the year were Ukraine and Argentina. Argentina fell by nearly 50%, mainly due to the nationalization of energy company YPF. The decision has already negatively impacted the investment climate with companies including Repsol, Vale and Enel announcing reviews or moratoriums of future activity in Argentina. This comes on top of increasing scepticism regarding the integrity of economic data reported by Argentine authorities, which has also drawn criticism from the International Monetary Fund ("IMF"). Ukraine also fell significantly during the period as investors worried about the twin concerns of increasing pressure on the currency and the prospect of a breakdown in an IMF agreement. We consider stocks in Ukraine have been unfairly penalised by the negative sentiment pervading Europe. A good example is MHP, Ukraine's largest poultry company, which has a solid record of capacity expansion and is completely self-sufficient in feed, thus benefitting from rising corn prices. However, the stock is valued at less than 5x 2012 price to earnings. Portfolio Commentary The Company's NAV returned 14.7% over the twelve months to 30th September, outperforming the MSCI Frontiers Markets Index by 11.1% (all calculations performed on a US dollar basis with net income reinvested). The Company was well positioned with both stock selection and asset allocation contributing to performance over the year. The Company's positions in Iraq were the largest contributors to performance over the period. We have long been of the view that Iraq's vast but underdeveloped oil industry was not fully appreciated by the market. The news that oil majors such as Total, Chevron and Gazprom took up acreage in Kurdistan is evidence that the industry also now shares this view. Most recently, stocks exposed to this highly prospective energy region have performed well on the news that the dispute between the administration of the Kurdistan region of Iraq and the Federal government in Baghdad had been resolved. This will allow payments to be made to energy companies operating and exporting from Northern Iraq, including Norwegian-listed DNO and London-listed Gulf Keystone. Strong contributors to performance included financials in Nigeria. Nigerian bank, UBA, continued its strong run after announcing that second quarter profits in June had more than doubled. The stock has risen 175% from its January 2012 lows. The Company's underweight position in Kuwaiti stocks, including National Bank of Kuwait ("NBK"), also contributed to relative performance. In July, the shares of NBK suffered a 6% fall, the largest single day decline in two years, following the announcement of weak earnings which surprised many investors. The Kuwaiti banking system has to yet to fully recognize losses from the aftermath of lending to unregulated investment companies. The Company has no exposure to Kuwaiti financials and remains materially underweight Kuwait. The Company's largest holding in Kuwait, NMTC, was the subject of a bid by its parent, Qatar Telecom. The shares were suspended as at 30 September although that was lifted as of 8 October following the acceptance by NMTC shareholders of the deal. Detracting from performance was Slovenian financial, Nova Kreditna Banka Maribor, which suffered a credit downgrade in light of deteriorating asset quality. Portfolio Activity The Company added to positions in Vietnam at attractive valuations, given the team's belief that the market had overreacted to recent high-profile arrests of local businessmen. Vietnam is undertaking firm measures to reform overleveraged state enterprises, which are crowding out private sector investment and cramping the banking system. The country has taken steps to tackle excessive monetary growth and inflation. Recent efforts to tighten monetary supply have paid off, with the Vietnamese dong appreciating thus far this year due to rising foreign currency reserves, despite recent concerns over the banking system. The Company also increased holdings in Bangladesh. The Bangladesh economy is sustaining resilient growth levels in spite of numerous challenges, including a twin deficit, double digit inflation, and slowing textiles exports. Remittance growth has picked up sharply in 2012, supporting the currency and foreign exchange reserves. The Company increased exposure to Grameenphone, the pioneer of the Bangladesh mobile telephony market. The company has innovated solutions to combat the issues of lack of rural power and road access to achieve 97% population coverage. The Company initiated a new position in Cable and Wireless Communications, a leading telecommunications operator in several Frontier Markets, including Panama, Macau and the Caribbean Islands. We believe that the operator is engineering a successful turnaround in Jamaica as a consequence of favourable regulatory environments, and has significant asset value that could be crystallized through disposals over the medium term. The Company fully exited its position in Pakistan due to a combination of macroeconomic concerns and stock specific issues. In July 2012, a confrontation between the judiciary and the government led to the removal of Prime Minister Yousaf Raza Gilani and the sacking of the Cabinet. The Company sold the position in Pakistan industrial, Lucky Cement, which had performed well, prompted by uncertainty over the company's plans to acquire a 75% stake in ICI Pakistan. Outlook Global markets post the 2008 global financial crisis, have moved in tandem with policy action by global central banks and in anticipation of cyclical economic recovery . The noteworthy recovery in European financials, which have risen by nearly 50% in US dollar terms from their July lows suggests a further normalization in European financial risk. Moreover, US equities have begun to outperform US Treasuries, suggesting that investors are gradually shifting their asset allocation away from low yielding sovereign bonds. This unwinding of bearish positioning and normalizing European financial risk is likely to drive global equity markets higher. The Company is well positioned in this environment, given its substantial overweight positions in Kazakhstan and Ukraine, where stocks, despite delivering solid operating performance, have been unfairly penalized by the negative sentiment pervading Europe. We remain optimistic about the outlook for Frontier Markets, which stand out for their low valuations and high dividend yields. Positive structural reforms, high growth and well-capitalised, liquid banking systems leave several Frontier economies well placed in the current global environment. Sam Vecht BlackRock Investment Management (UK) Limited 30 November 2012 Ten Largest Investments* 30 September 2012 Zenith Bank† (Nigeria; Financials; 4.9% (2011: 4.9%); www.zenithbank.com) is Nigeria's second largest bank with 350 branches in Nigeria accounting for over 10% of the country's banking assets. Zenith offers a full range of retail and corporate banking services and has subsidiaries in Ghana, The Gambia and Sierra Leone. Kazmunaigas Exploration Production (Kazakhstan; Energy; 4.7% (2011: 5.1%); www.kmgep.kz) is the second largest Kazakh oil producing company with proven oil reserves of 1,707 million barrels which gives the company an estimated reserve life of 26 years. First Bank of Nigeria† (Nigeria; Financials; 4.1% (2011: 3.3%); www.firstbanknigeria.com) is Nigeria's third largest bank. With a presence in 12 sub-Saharan African countries the company offers a full range of retail and corporate banking services and operates over 1,500 ATMs. Qatar Electricity and Water (Qatar; Utilities; 4.0% (2011: 5.3%); www.qewc.com) manages power generation and water desalination plants across Qatar. It started production in 1999 from a single plant and has grown to operate 10 plants. The company continues to expand capacity which will reach 5,249MW this year, an increase of 18% from 2010 levels. MHP (Ukraine; Consumer Staples; 3.9% (2011: 3.4%); www.mhp.com.ua) is Ukraine's largest poultry producer accounting for more than 40% of chicken commercially produced in the country. MHP is vertically integrated producing its own grain. Hrvatski Telekomunikacije (Croatia; Telecommunications; 3.8% (2011: 4.9%); www.t.ht.hr) is the leading telecommunication operator in Croatia providing voice and data services through a range of wireless, fixed and broadband technologies. Commercial Bank of Qatar (Qatar; Financials; 3.5% (2011: 4.2%); www.cbq.com.qa) offers a full range of corporate, retail, Islamic, and investment banking services as well as owning and operating exclusive Diners Club franchises in Qatar and Oman. The bank's countrywide network includes 34 full service branches and 148 ATMs. Al Mouwasat‡ (Saudi Arabia; Health Care: 3.3% (2011: 3.0%); www.mouwasat.com) is a hospital operator with facilities across Saudi Arabia. The company's hospitals are located in Dammam, Jubail, Madina, Qatif and Riyadh, with dispensaries in Hofuf and Dammam. The company plans to open another hospital in Riyadh in 2013. Air Arabia† (United Arab Emirates; Industrials; 3.2% (2011: 3.0%); www.airarabia.com) was established as the first, and remains the largest, low cost airline in the Middle East. Based in the UAE, Air Arabia operates scheduled services to 46 destinations across the Middle East, North Africa, India, Central Asia and Europe. Halyk Savings Bank (Kazakhstan; Financials; 3.2% (2011: 3.3%) ; www.halykbank. kz) is one of Kazakhstan's leading financial services groups and a leading retail bank with the largest customer base and distribution network in Kazakhstan. Halyk's branch network consists of 566 outlets across the country, with 1,913 ATMs. * As a % of total market exposure. Percentages in brackets represent the portfolio holding as at 30 September 2011. † Denotes exposure gained via a contract for difference. ‡ Denotes exposure gained via P-Notes. Portfolio Analysis Country Allocation: Absolute Weights (%)* Long Short positions positions % % Nigeria 15.9 Qatar 12.9 UAE 10.0 Kazakhstan 9.3 Saudi 8.4 Arabia Vietnam 5.5 Iraq 5.0 Ukraine 4.7 Panama 4.1 Croatia 3.8 Argentina 3.7 Bangladesh 3.4 Kuwait 2.7 Pan Africa 2.2 Romania 1.9 Algeria 1.8 Kenya 1.8 Cambodia 1.0 Cameroon 0.5 Slovenia 0.4 Pan Middle -2.6 East Net -4.6 Liabilities Cash 8.2 Source: BlackRock. Country Allocation Relative to MSCI Frontiers Index (%)* % Saudi Arabia 8.4 Kazakhstan 5.8 Iraq 5.0 Ukraine 4.4 Panama 4.1 Vietnam 3.0 Nigeria 2.8 Pan Africa 2.2 Algeria 1.8 Croatia 1.6 Argentina 1.0 Cambodia 1.0 Bangladesh 0.7 Romania 0.7 Cameroon 0.5 UAE - 0.6 Kenya -1.3 Qatar -1.3 Slovenia -1.5 Pan Middle East -2.6 Other -15.5 Kuwait -23.8 Net Liabilities -4.6 Cash 8.2 Source: BlackRock. *Based on portfolio gross market exposure as a % of net assets, compared to the MSCI Frontier Markets Index - Net Return. Net return indicies calculate the reinvestment of dividends net of withholding taxes using the rates applicable to non-resident institutional investors. Sector Allocation: Absolute Weights (%)* Long Short positions positions % % Financials 27.4 Industrials 14.4 Consumer Staples 13.5 Energy 12.5 -2.6 Telecom 11.0 Healthcare 5.7 Consumer Discretionary 5.6 Materials 4.4 Utilities 4.0 Technology 0.5 Net liabilities -4.6 Cash 8.2 Source: BlackRock. Sector Allocation Relative to the MSCI Frontiers Index (%)* % Industrials 6.6 Consumer Discretionary 5.7 Consumer Staples 5.1 Healthcare 3.7 Utilities 2.5 Energy 1.4 Materials 0.9 Technology 0.5 Telecom -3.5 Financials -26.5 Net liabilities -4.6 Cash 8.2 Source: BlackRock. *Based on portfolio gross market exposure as a % of net assets, compared to the MSCI Frontier Markets Index - Net Return. Net return indicies calculate the reinvestment of dividends net of withholding taxes using the rates applicable to non-resident institutional investors. Investments as at 30 September 2012 Fair value and Gross market market as a % of exposure exposure* net Company Principal country Sector US$'000 assets*** of operation Equity portfolio Banco Macro Argentina Financials 1,317 1.0 Cable & Wireless Panama Telecommunications 2,339 1.8 Central European Media Romania Consumer 2,428 1.9 Discretionary Commercial Bank of Qatar Financials 4,532 3.5 Qatar Copa Holdings Panama Industrials 2,905 2.3 DNO InternationaI Iraq Energy 3,844 3.0 Doha Bank Qatar Financials 1,756 1.4 Eurasian Natural Kazakhstan Materials 1,773 1.4 Resources Grupo Financiero Argentina Financials 872 0.7 Galicia Gulf Keystone Petroleum Iraq Energy 2,608 2.0 Halyk Savings Bank Kazakhstan Financials 4,066 3.2 Hrvatski Croatia Telecommunications 4,867 3.8 Telekomunikacije Industries of Qatar Qatar Industrials 2,281 1.8 JKX Oil & Gas Ukraine Energy 960 0.7 Kazmunaigas Exploration Kazakhstan Energy 6,050 4.7 Production Kuwait Foods Kuwait Consumer 3,542 2.8 (Americana) Discretionary Lonrho Pan Africa Industrials 149 0.1 MHP Ukraine Consumer Staples 5,029 3.9 Nagacorp Cambodia Consumer 1,288 1.0 Discretionary NMC Health United Arab Health Care 3,101 2.4 Emirates Nova Kreditna Banka Slovenia Financials 487 0.4 Maribor Orascom Telecom Algeria Telecommunications 2,326 1.8 Holdings Qatar Electricity & Qatar Utilities 5,090 4.0 Water Qatar Navigation Qatar Industrials 2,915 2.3 Shikun & Binui Pan Africa Industrials 2,715 2.1 Sundance Resources Cameroon Materials 642 0.5 YPF Argentina Energy 2,569 2.0 ------ ---- Equity investments 72,451 56.5 ------ ---- BlackRock Institutional Cash Fund 14,590 11.4 ------ ---- Total equity investments 87,041 67.9 ------ ---- P-Notes Abdullah Al Othaim Saudi Arabia Consumer Staples 1,997 1.5 Markets P-Note 13/08/14 Abdullah Al Othaim Saudi Arabia Consumer Staples 613 0.5 Markets P-Note 30/08/13 Al Mouwasat Medical Saudi Arabia Health Care 4,250 3.3 P-Note 13/04/15 Al Rajhi Bank P-Note 13 Saudi Arabia Financials 1,787 1.4 /08/14 Saudi Arabian Amiantit Saudi Arabia Industrials 2,079 1.6 P-Note 11/05/15 ------ ---- Total P-Notes 10,726 8.3 ------ ---- Total investments excluding CFDs 97,767 76.2 ------ ---- Gross market Gross exposure Principal Fair market as a % country of value*exposure** of net Company operation Sector US$'000 US$'000 assets*** CFD Portfolio Long positions: Air Arabia United Arab Industrials 4,168 3.2 Emirates Aldar Properties United Arab Financials 1,940 1.5 Emirates British American Bangladesh Consumer Staples 845 0.7 Tobacco Ecobank Transnational Nigeria Financials 2,674 2.1 Emirates United Arab Industrials 1,230 1.0 Emirates First Bank of Nigeria Nigeria Financials 5,296 4.1 First Gulf Bank United Arab Financials 2,452 1.9 Emirates FPT Vietnam Technology 639 0.5 Grameenphone Bangladesh Telecommunications 2,317 1.8 Guinness Nigeria Nigeria Consumer Staples 2,233 1.7 Kenolkobil Kenya Energy 69 0.1 Kinh Do Vietnam Consumer Staples 3,093 2.4 Marico Bangladesh Bangladesh Consumer Staples 1,235 1.0 Petrovietnam Fertilizer & Chemicals Vietnam Materials 3,261 2.5 Safaricom Kenya Telecommunications 2,223 1.7 Unilever Nigeria Nigeria Consumer Staples 2,342 1.8 United Bank for Nigeria Financials 1,609 1.3 Africa Zenith Bank Nigeria Financials 6,265 4.9 ------- ------- ----- Total long CFD positions 3,105 43,891 34.2 ------- ------- ----- Total short CFD positions (286) (3,342) (2.6) ------- ------- ----- Total CFD portfolio 2,819 40,549 31.6 ------- ------- ----- Equity investments (excluding BlackRock cash fund) and P-Notes 83,177 83,177 64.8 ------- ------- ----- BlackRock Institutional Cash Fund**** 14,590 10,567 8.2 ------- ------- ----- Total investments 100,586 134,293 104.6 ------- ------- ----- Cash and cash equivalents**** 33,707 ------- ------- ----- Net current liabilities (6,031) (6,031) (4.6) ------- ------- ----- Net assets 128,262 128,262 100.0 ------- ------- ----- * Fair value is determined as follows: - Listed and AIM quoted investments are valued at bid prices where available, otherwise at published price quotations. - The sum of the fair value column for the CFD contracts totalling US$2,819,000 represents the fair valuation of all the CFD contracts, which is determined based on the difference between the purchase price and value of the underlying shares in the contract (in effect the unrealised gains/(losses) on the exposed positions). The cost of purchasing the securities held through long CFD positions directly in the market would have amounted to US$40,786,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the CFD contracts of US$3,105,000, resulting in the value of the total market exposure to the underlying securities rising to US$43,891,000 as at 30 September 2012. The cost of acquiring the securities to which exposure was gained via the short CFD positions would have been US$3,056,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised losses on the short CFD positions of US$286,000 and the value of the market exposure of these investments increasing to US$3,342,000 at 30 September 2012. If the short position had been closed on 30 September 2012 this would have resulted in a loss of US$286,000 for the Company. - P-Notes are valued based on the quoted bid price of the underlying equity security to which they relate. ** Market exposure in the case of equity and P-Note investments is the same as Fair Value. In the case of CFDs it is the market value of the underlying shares to which the portfolio is exposed via the contract. *** % based on the total market exposure. **** The gross market exposure column for cash and cash fund investments has been adjusted to assume the Company purchased direct holdings in investments rather than exposure being gained through CFDs. Statement of Comprehensive Income for the year ended 30 September 2012 Revenue Revenue Capital Capital Total Total 2012 2011 2012 2011 2012 2011 Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Profits/(losses) on investments held at fair value through profit or loss - - 3,973 (20,122) 3,973 (20,122) Losses on foreign exchange - - (76) (267) (76) (267) Net profits/(losses) from contracts for difference 3 2,109 2,791 10,203 (10,381) 12,312 (7,590) (Loss)/profit on credit - - (4) 128 (4) 128 default swap Income from investments held at fair value through profit or loss 3 3,306 2,066 - - 3,306 2,066 Other income 3 28 9 - - 28 9 ------ ------ ------ ------ ------ ------ Total revenue 5,443 4,866 14,096 (30,642) 19,539 (25,776) ------ ------ ------ ------ ------ ------ Expenses Investment management and performance fees 4 (269) (231) (1,767) (924) (2,036) (1,155) Other expenses 5 (556) (505) (86) (19) (642) (524) ------ ------ ------ ------ ------ ------ Total operating expenses (825) (736) (1,853) (943) (2,678) (1,679) ------ ------ ------ ------ ------ ------ Net profit/(loss) on ordinary activities before finance costs and taxation 4,618 4,130 12,243 (31,585) 16,861 (27,455) Finance costs (1) - (3) - (4) - ------ ------ ------ ------ ------ ------ Net profit/(loss) on ordinary activities before taxation 4,617 4,130 12,240 (31,585) 16,857 (27,455) Taxation (698) (807) 454 239 (244) (568) ------ ------ ------ ------ ------ ------ Net profit/(loss) on ordinary activities after taxation 3,919 3,323 12,694 (31,346) 16,613 (28,023) ====== ====== ====== ====== ====== ====== Earnings/(loss) per ordinary share (cents) 7 4.14 3.51 13.39 (33.08) 17.53 (29.57) ====== ====== ====== ====== ====== ====== The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. The net return of the Company for the year was a profit of US$16,613,000 (2011: a loss of US$28,023,000). The Company does not have any other recognised gains or losses. The net profit/ (loss) for the period disclosed above represents the Company's total comprehensive income. Statement of Changes in Equity Ordinary Share Share premium Special Capital Revenue capital account reserve reserve reserve Total Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 For the year ended 30 September 2012 At 30 September 2011 948 - 142,704 (31,346) 3,323 115,629 Total Comprehensive Income: Net profit for the period - - - 12,694 3,919 16,613 Transaction with owners, recorded directly to equity: Dividend paid* 6 - - - - (3,980) (3,980) --- ------- ------- ------ ----- ------- At 30 September 2012 948 - 142,704 (18,652) 3,262 128,262 === ======= ======= ====== ===== ======= For the period from 15 October 2010 (date of incorporation) to 30 September 2011 Opening balance - - - - - - Total Comprehensive Income: Net (loss)/profit for the period - - - (31,346) 3,323 (28,023) Transaction with owners, recorded directly to equity: Shares issued 948 145,636 - - - 146,584 Share issue costs - (2,932) - - - (2,932) Cancellation of share premium account - (142,704) 142,704 - - - --- ------- ------- ------ ----- ------- At 30 September 2011 948 - 142,704 (31,346) 3,323 115,629 === ======= ======= ====== ===== ======= * Final dividend paid in respect of the year ended 30 September 2011 of 3.00 cents per share, declared 2 December 2011 and paid on 24 February 2012, interim dividend paid in respect of the year ended 30 September 2012 of 1.20 cents per share, declared 11 May 2012 and paid on 22 June 2012. Statement of Financial Position as at 30 September 2012 30 September 30 September 2012 2011 Note US$'000 US$'000 Non current assets Investments designated as held at fair value through profit or loss 97,767 91,787 ------- ------- Current assets Other receivables 499 887 Derivative financial assets held at fair value through profit or loss 5,547 1,770 Cash held on margin deposit with brokers 231 11,846 Cash and cash equivalents 33,707 23,331 ------- ------- 39,984 37,834 Current liabilities Other payables (2,794) (4,166) Net collateral received in respect of contracts for difference (3,948) - Derivative financial liabilities held at fair value through profit or loss (2,728) (9,807) ------- ------- (9,470) (13,973) ------- ------- Net current assets 30,514 23,861 ------- ------- Total assets less current liabilities 128,281 115,648 Creditors: amounts falling due after more than one year Management shares of £1.00 each (one quarter paid) (19) (19) ------- ------- Net assets 128,262 115,629 ======= ======= Capital and reserves Ordinary share capital 8 948 948 Special reserve 9 142,704 142,704 Capital reserves 9 (18,652) (31,346) Revenue reserve 9 3,262 3,323 ------- ------- Total equity 128,262 115,629 ======= ======= Net asset value per share (cents) 7 135.35 122.01 ======= ======= Cash Flow Statement for the year ended 30 September 2012 30 September 30 September 2012 2011 US$'000 US$'000 Operating activities Profit/(loss) before taxation 16,857 (27,455) (Profits)/losses on investments and CFDs held at fair value through profit or loss (including transaction costs) (14,638) 29,974 Net movement on foreign exchange 76 267 Sale of investments held at fair value through profit or loss 66,508 69,433 Purchases of investments held at fair value through profit or loss (68,515) (181,342) Realised losses on closure of CFD contracts (7,280) (4,570) Gains on realisation of CFDs 6,443 3,277 Proceeds/(cost) of Credit Default Swap 646 (522) Decrease/(increase) in other receivables 27 (366) Increase in other payables 179 1,701 Decrease/(increase) in amounts due from brokers 361 (521) Increase in amounts due to brokers 265 355 Taxation paid (693) (85) ------ ------- Net cash inflow/(outflow) from operating activities before financial activities 236 (109,854) ------ ------- Financing activities Equity dividends paid (3,980) - Proceeds from the issue of management shares - 19 Proceeds from issue of ordinary shares - 146,584 Share issue costs paid (1,381) (1,316) ------ ------- Net cash (outflow)/inflow from financing activities (5,361) 145,287 ------ ------- (Decrease)/increase in cash and cash equivalents (5,125) 35,433 Effect of foreign exchange rate changes (62) (256) ------ ------- Change in cash and cash equivalents (5,187) 35,177 Cash and cash equivalents at start of period 35,177 - ------ ------- Cash and cash equivalents at end of period 29,990 35,177 ------ ------- Comprised of: Cash and cash equivalents 33,707 23,331 Cash held on margin deposit with brokers 231 11,846 Less: Collateral received in respect of contracts for difference (3,948) - ------ ------- 29,990 35,177 ------ ------- Notes to the Financial Statements 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. The Company was incorporated on 15 October 2010, and this is the second annual report. The Company shares were listed on the London Stock Exchange on 17 December 2010. The Comparative period is from inception to 30 September 2011 (the first year end of the Company). 2. Accounting policies The principal accounting policies adopted by the Company are set out below. (a) Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. All of the Company's operations are of a continuing nature. The Company's financial statements are presented in US Dollars, which is the currency of the primary economic environment in which the Company operates. All values are rounded to the nearest thousand dollars (US$'000) except where otherwise indicated. Insofar as the Statement of Recommended Practice ("SORP") for investment trust companies and venture capital trusts issued by the AIC, revised in January 2009, is compatible with IFRS, the financial statements have been prepared in accordance with the guidance set out in the SORP. A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company. However, IFRS 9 "Financial Instruments" issued in November 2009 will change the classification of financial assets, but is not expected to have an impact on the measurement basis of the financial assets since the majority of the Company's financial assets are measured at fair value through profit or loss. IFRS 9 (2009) deals with classification and measurement of financial assets and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: at amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset's contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of "held to maturity", "available for sale" and "loans and receivables". IFRS 10 Consolidated Financial Statements (effective 1 January 2013) establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore are required to be consolidated by a parent. The Company does not prepare consolidated financial statements hence the provisions of this statement are not applicable. IFRS 11 Joint Arrangements (effective 1 January 2013) removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. This is not applicable to the Company as it holds no interests in joint arrangements. IFRS 12 Disclosure of Involvement with Other Entities (effective 1 January 2013) now requires additional disclosures that relate to an entity`s interests in subsidiaries, joint arrangements, associates and structured entities. This is not applicable to the Company as it does not prepare consolidated financial statements. IFRS 13 Fair Value measurement (effective 1 January 2013)establishes a single source of guidance under IFRS for all fair value measurements. It does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Company is currently assessing the impact that this standard will have on the financial position and performance. The standard is effective for annual periods beginning on or after 1 January 2015 but is not yet approved by the EU. Earlier application is permitted. The company does not plan to early adopt this standard. (b) Presentation of the Statement of Comprehensive Income In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's status as an investment company under the previous provisions of section 1158 of the Corporation Tax Act 2010, net capital returns may not be distributed by way of dividend. (c) Segmental reporting The Directors are of the opinion that the Company is engaged in a single segment of business being investment business. (d) Income Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the period end are treated as revenue for the period. Provision is made for any dividends not expected to be received. Special dividends, if any, are treated as a capital or a revenue receipt depending on the facts or circumstances of each particular case. The return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Interest income and expenses are accounted for on an accruals basis. (e) Expenses All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Statement of Comprehensive Income, except as follows: - expenses which are incidental to the acquisition of an investment are included within the cost of the investment; - expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; - the investment management fees and finance costs of borrowing borne by the Company have been allocated 80% to the capital column and 20% to the revenue column of the Statement of Comprehensive Income in line with the Board's expectations of the long term split of returns, in the form of capital gains and income, respectively, from the investment portfolio; - performance fees are allocated 100% to the capital column of the Statement of Comprehensive Income as fees are generated in connection with enhancing the value of the investment portfolio. (f) Taxation Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise. (g) Investments held at fair value through profit or loss The Company's investments are classified as held at fair value through profit or loss in accordance with IAS 39 - "Financial Instruments: Recognition and Measurement" and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are initially recognised as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. The sale of investments are recognised at the trade date of the disposal. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs. The fair value of the financial investments is based on their quoted bid price, or as otherwise stated at the financial reporting date, without deduction for the estimated selling costs. This policy applies to all current and non current asset investments held by the Company. The fair value of the Promissory Note is based on the quoted bid price of the underlying equity to which it relates. Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as "Gains or losses on investments held at fair value through profit or loss". Also included within the heading are transaction costs in relation to the purchase or sale of investments. Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques. These may include recent arm's length market transactions or the current fair value of another instrument which is substantially the same. Where no reliable fair value can be estimated for such instruments, they are carried at cost subject to any provision for impairment. The Company held no unquoted investments at 30 September 2012. (h) Derivatives Derivatives are held at fair value based on the bid prices of the underlying securities the Company is exposed to through the CFD contracts. Credit Default Swaps are valued based on broker price quotes received daily. Gains and losses on derivative transactions are recognised in the Statement of Comprehensive Income. They are recognised as capital and are shown in the capital column of the Statement of Comprehensive Income if they are of a capital nature and are recognised as revenue and shown in the revenue column of the Statement of Comprehensive Income if they are of a revenue nature. To the extent that any gains or losses are of a mixed revenue and capital nature, they are apportioned between revenue and capital accordingly. (i) Other receivables and other payables Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value. (j) Dividends payable Under IFRS interim dividends are recognised when paid to shareholders. Final dividends, if any, are only recognised after they have been approved by shareholders. (k) Foreign currency translation Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated into US dollars at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate. (l) Cash and cash equivalents Cash comprises cash in hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (m) Bank borrowings Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise. 3. Income 2012 2011 US$'000 US$'000 Investment Income: UK listed dividends 56 106 verseas listed dividends 3,250 1,960 Income from contracts for difference 2,109 2,791 ----- ----- 5,415 4,857 Interest receivable and other income: Deposit interest 28 9 ----- ----- Total income 5,443 4,866 ===== ===== 4. Investment management and performance fees 2012 2011 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 269 1,078 1,347 231 924 1,155 Performance fees - 689 689 - - - --- ----- ----- --- --- ----- Total 269 1,767 2,036 231 924 1,155 === ===== ===== === === ===== An investment management fee equivalent to 1.10% per annum of the Company's gross assets is payable to the Investment Manager. In addition, the Investment Manager is also entitled to receive a performance fee at a rate of 10% of any increase in the NAV at the end of a performance period over and above what would have been achieved had the cumulative NAV since launch increased in line with the MSCI Frontiers Markets Index ("the Reference Index"). The performance fee payable in any year is capped at an amount equal to 2.5% or 1% of the gross assets if there is any increase or decrease in the NAV per share at the end of the relevant performance period respectively. Any capped excess outperformance for a period may be carried forward to the next two performance periods, subject to the then applicable annual cap. For the period from launch to 30 September 2012, the Company's NAV had outperformed the MSCI Frontiers Markets Index by 11.1% on a US dollar basis and a performance fee of US$689,000 (2011: US$ nil) has been accrued at 30 September 2012. 5. Operating expenses 2012 2011 US$'000 US$'000 Custody fee 138 76 Auditors' remuneration: - audit services 45 40 - other non-audit services 10 9 Registrar's fee 29 22 Directors' emoluments 188 107 Other administration costs 146 251 --- --- 556 505 === === The Company's ongoing charges, calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs was 1.6% (2011: 1.2%). Non audit services of £6,000 (2011: £6,000) relate to the review of the interim financial statements. For the year ended 30 September 2012, expenses of US$86,000 (2011: US$19,000) were charged to the capital column of the Statement of Comprehensive Income, these relate to US$29,000 (2011: US$6,000) of transaction costs and US$57,000 of fees in relation to investing in new markets (2011: US$13,000 of CDS interest charges). For the period 15 October 2010 to 30 September 2011 a fee of £95,000 (net of VAT) was paid to Ernst & Young LLP for services provided in relation to the launch of the Company. This was included within share issue costs of US$2,932,000 debited to the share premium account within the Statement of Changes in Equity. Other administration costs of US$251,000 for the period ended 30 September 2011 included over accruals for printing costs and other sundry expenses of US$70,000 which were subsequently released and credited to operating expenditure in the current financial year. 6. Dividends 2012 2011 Record date Payment date US$'000 US$'000 Dividends paid on equity shares: 2011 final of 3.00 cents 27 January 2012 24 February 2012 2,843 - 2012 interim of 1.20 cents 25 May 2012 22 June 2012 1,137 - ----- ------ 3,980 - ===== ====== The Directors have proposed a final dividend of 2.60 cents per share (2011: 3.00 cents). The dividends will be paid on 8 March 2013, subject to shareholder approval on 5 March 2013, to shareholders on the Company's register on 1 February 2013. Under IFRS the proposed final dividend has not been recognised as a liability in the financial statements as final dividends are only recognised in the financial statements when they have been approved by shareholders, and special and interim dividends are not recognised until they are paid. They are also debited directly to revenue reserves. The total dividends payable in respect of the period ended 30 September 2012 which form the basis of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in this legislation. 2012 2011 US$'000 US$'000 Dividends on equity shares: ----- ----- Interim paid 1.20 cents (2011: nil) 1,137 - Proposed final ordinary dividend of 2.60 cents (2011: 3.00 cent)* 2,464 2,843 ----- ----- 3,601 2,843 ===== ===== * based on 94,766,267 (2011: 94,766,267) ordinary shares. 7. Earnings and net asset value per ordinary share 2012 2011 Net revenue profit attributable to ordinary shareholders (US$'000) 3,919 3,323 Net capital profit/(loss) attributable to ordinary shareholders (US$'000) 12,694 (31,346) ---------- ---------- Total profit/(loss) attributable to ordinary shareholders (US$'000) 16,613 (28,023) ---------- ---------- Total equity attributable to shareholders (US$'000) 128,262 115,629 ---------- ---------- The weighted average number of ordinary shares in issue during the period, on which the earnings per ordinary share was calculated, was: 94,766,267 94,766,267 ---------- ---------- The actual number of ordinary shares in issue at the end of the period, on which the net asset value per ordinary share was calculated, was: 94,766,267 94,766,267 ---------- ---------- Revenue earnings per share - (cents) 4.14 3.51 Capital earnings/(loss) per share - (cents) 13.39 (33.08) ------ ------ Total earnings/(loss) per share - (cents) 17.53 (29.57) ------ ------ Net asset value per share basic and diluted - (cents) 135.35 122.01 ------ ------ Share price* - (cents) 130.40 116.84 ====== ====== Net asset value per share basic and diluted - (pence) 83.82 78.32 ------ ------ Share price (pence) 80.75 75.00 ====== ====== * The Company's share price is quoted in sterling and the above represents the US dollar equivalent. Basic and diluted earnings per share and net asset value per share are the same as the Company does not have any dilutive securities outstanding. 8. Share capital Total number Total number Nominal of shares of shares value in issue in issue US$'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 1 cent each: Allotted, issued and fully paid: ---------- ---------- --- At 30 September 2012 and 30 September 2011 94,766,267 94,766,267 948 ========== ========== === On 17 December 2010 the Company issued 94,766,267 ordinary shares at 100p. The total consideration after deduction of issue costs was £92,871,000 (US$143,652,000) based on a conversion rate of 1.5468 at 17 December 2010. The Company also had in issue 50,000 management shares which carry the right to a fixed cumulative preference dividend. Additional information is given in note 13 of the Annual Report. 9. Reserves Capital Capital reserve reserve arising on arising on revaluation of Special investments investments Revenue reserve sold held reserve US$'000 US$'000 US$'000 US$'000 At 30 September 2011 142,704 (2,604) (28,742) 3,323 Movement during the period: Total Comprehensive Income: Loss on realisation of investments - (2,396) - - Changes in investment holdings gains - - 6,369 - Losses on foreign currency transactions - (76) - - (Losses)/gains on contracts for differences - (1,303) 11,506 - Realised loss on credit default swaps - 124 (128) - Finance costs and investment management fee charged to capital after taxation - (1,402) - - Revenue return for the year - - - 3,919 Dividends paid - - - (3,980) ------- ------- ------- ------- At 30 September 2012 142,704 (7,657) (10,995) 3,262 ======= ======= ======= ======= 10. Related party disclosure BlackRock Investment Management (UK) Limited, the manager, is considered to be a related party of the Company in terms of the IFRS definitions. Transactions and relationship details are set out in the Director's Report on page 16 of the Annual Report. The investment management fee for the period was US$1,347,000 (2011: US$1,155,000), as disclosed in note 4. In addition a performance fee was payable of US$689,000 (2011: US$ nil). At the year end, an amount of US$1,360,000 (2011: US$ was outstanding in respect of these fees (2011: US$1,155,000). The Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. With effect from 1 October 2011, the Chairman receives an annual fee of £28,000, the Chairman of the Audit Committee receives an annual fee of £23,000 and each of the other Directors receives an annual fee of £ 20,000. At 30 September 2012, the Directors' interests in the Company's Ordinary Shares were as follows: 2012 2011 Audley Twiston-Davies (Chairman) 85,000 85,000 John Murray 100,000 - Nick Pitts-Tucker 75,000 75,000 Lynn Ruddick 26,000 26,000 Sarmad Zok 30,000 - The Company has an investment in the BlackRock Institutional Cash Fund of US$14,590,000 (2011: US$ 8,900,000) at the year end. 11. Publication of non statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2012 annual report and financial statements will be filed with the Registrar of Companies shortly. The report of the Auditor for the period ended 30 September 2012 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. This announcement was approved by the Board of Directors on 30 November 2012. 11. Annual Report Copies of the annual report will be sent to members shortly and will be available from the registered office, c/o The Company Secretary, BlackRock Frontiers Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. 12. Annual General Meeting The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 5 March 2013 at 12 noon. ENDS The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/content/groups/uksite/documents/ literature. Neither the contents of the Investment Manager's website nor the contents of any website accessible from hyperlinks on the Investment Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Simon White, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited Tel: 020 7743 5284 Emma Phillips, Media & Communication, BlackRock Investment Management (UK) Limited Tel: 020 7743 2922 30 November 2012 12 Throgmorton Avenue London EC2N 2DL

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