Final Results

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 30 September September 2013 2012 US Dollar Net assets^^ (US$'000) 255,233 128,262 Net asset value per share (cum income) (US cents) 169.45c 135.35c Share price (US cents)* 178.13c 130.40c ------- ------- Sterling Net assets^^ (£'000)* 157,610 79,429 Net asset value per share (cum income) (pence)* 104.64p 83.82p Share price (pence) 110.00p 80.75p ------- ------- Premium/(discount) 5.1% (3.7%) ------- ------- Performance Year Year ended ended 30 30 September September Since 2013 % 2012 % inception%^ US dollar Net asset value per share (with income reinvested) +31.6 +14.7 +20.6 MSCI Frontiers Index (NR**) +21.8 +3.6 +6.3 MSCI Emerging Markets Index (NR**) +1.0 +16.9 (4.4) Ordinary share price (with income reinvested) +43.6 +15.6 +24.6 Sterling Net asset value per share (with income reinvested) +31.2 +10.7 +16.0 MSCI Frontiers Index (NR**) +21.4 (0.1) +2.4 MSCI Emerging Markets Index (NR**) +0.7 +12.8 (8.0) Ordinary share price (with income reinvested) +43.2 +11.5 +19.7 * Based on an exchange rate of 1.6194 at 30 September 2013 and 1.6148 at 30 September 2012. ** 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. ^^ The change in net assets reflects market movements during the year and the issue of C shares. Sources: BlackRock and Datastream. 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 2013. Overview Frontier Markets performed strongly throughout the year to 30 September 2013, with the MSCI Frontier Markets Index increasing by 21.8%, in contrast to the MSCI Emerging Markets Index, which rose by just 1%. Against this backdrop, I am pleased to report that the Company's net asset value ("NAV") per share increased over the year by 31.6% and its share price rose by 43.6%. (All calculations are on a US dollar basis, with net income reinvested.) The largest contribution to performance came from the Middle East, where the decision by MSCI to upgrade United Arab Emirates and Qatar from Frontier Market to Emerging Market status buoyed returns. These markets also saw significant growth in their local economies and flourishing real estate sectors. As a Frontier Markets investment trust, the Company will have sold substantially all of its positions in UAE and Qatar prior to changes in the indices taking effect in the second quarter of 2014. We expect that anticipated inflows into these markets will provide a favourable background against which to sell our holdings. The Company's holdings in Argentina also performed well, mainly as a result of increased soya prices and growing investor confidence that a change in macroeconomic policy would occur after the poor government performance in the August primaries. Within Africa, Kenya was the best performer, with relatively peaceful presidential and parliamentary elections and the introduction of the first government bond index. Since the period end, the Company's NAV per share has increased by 4.5% and the share price has risen by 3.3% (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 6.13 US cents (30 September 2012: 4.14 US cents). 5.40 US cents per share have been distributed to shareholders in the year by way of an ordinary interim dividend of 2.00 cents per share (2012: 1.20 cents per share) and a special interim dividend of 3.40 US cents per share. This represents an increase of 42.1% over the total dividends of 3.80 US cents paid in relation to the year ended 30 September 2012. This reflects the increased level of dividends generated from the Company's portfolio over the year. The Directors do not recommend the payment of a final dividend. As explained in the Company's Interim Report, the Directors declared an additional special interim dividend of 3.40 US cents on 30 May 2013, payable to shareholders on 5 July 2013, in place of a final dividend. This dividend was paid early in anticipation of the Company's C Share issue, and represented the additional revenue expected to be generated between 1 April 2013 and the C Share conversion date on 25 September 2013. For the year ended 30 September 2012, a final dividend of 2.60 US cents was paid. C Share issue It was encouraging that the placing and offer for subscription for C Shares made by the Company met with strong demand, and 63,566,000 C Shares of 100 pence each were issued on 31 July 2013. These C Shares were subsequently converted into 55,855,354 new ordinary shares on 25 September 2013. The issue was well supported both by existing shareholders and new investors. At 30 September 2013, the Company had 150,621,621 shares in issue. There were no other 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. Periodic opportunities for return of capital At the Company's fifth annual general meeting in 2016, the Board will provide Shareholders with an opportunity to elect to realise the value of their Ordinary Shares at the applicable Net Asset Value per Ordinary Share less applicable costs. The route which will be used to provide Shareholders with an exit will depend on the level of uptake anticipated at the time and will be established following Shareholder consultation. This is likely to be achieved through a tender offer or a reorganisation of the Company. In all circumstances, the Board will seek to safeguard the interests of both continuing Shareholders and those electing to realise their investment. If this initial return of capital is not undertaken in conjunction with a liquidation of the Company, the Directors intend to offer Shareholders further opportunities to realise the value of their Ordinary Shares, at the applicable Net Asset Value per Ordinary Share less costs, at five yearly intervals. For the year under review the Company's ordinary shares have traded at an average discount to NAV of 0.8%, and were trading at a premium of 3.9% 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 (excluding any shares held in treasury). This authority, which has not so far been utilised, expires on the conclusion of the 2014 AGM, when a resolution will be put to shareholders to renew it. New reporting requirements There have been a number of revisions to reporting requirements for companies with accounting periods beginning on or after 1 October 2012. These include the addition of a new Strategic Report which is intended to replace the Business Review section of the Director’s Report, providing insight into the Company’s objectives, strategy and principal risks, and enabling shareholders to assess how effective Directors have been in promoting the success of the Company during the course of the year under review. Other changes comprise additional Audit Committee reporting requirements on the external audit process, as set out on pages 31 to 33 of the annual report, and changes to the structure and voting requirements in respect of the Directors’ Remuneration Report which are explained in more detail on pages 23 to 25 of the Annual Report. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive ("the Directive") is a European directive which seeks to reduce systemic risk by regulating alternative investment fund managers ("AIFMs"). AIFMs are responsible for managing investment products that fall within the category of Alternative Investment Funds ("AIFs") and investment trusts are included in this. The Directive was implemented on 22 July 2013 although the Financial Conduct Authority ("FCA") permits a transitional period of one year after that, during which UK AIFMs must seek authorisation. The Board has taken, and will continue to take, independent advice on the consequences for the Company of the implementation of the Directive. It has decided in principle that BlackRock Fund Managers Limited will be appointed as its AIFM before the end of the transitional period on 22 July 2014. New Articles of Association At the forthcoming Annual General Meeting, shareholders will be asked to approve new Articles of Association in substitution for the current Articles. The Board is proposing to make these amendments to the Articles in response to AIFMD Regulations coming into force; details of the principal changes are given on pages 21 and 22 of the Annual Report. Annual General Meeting The AGM of the Company will be held at BlackRock's offices at 12 Throgmorton Avenue, London EC2N 2DL on Monday, 3 February 2014 at 12.00 noon. Details of the business of the meeting are set out in the Notice of Meeting on pages 65 to 68 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 Frontier Markets have seen strong returns in 2013, outperforming Emerging Markets by a wide margin over the year to 30 September 2013, as well as demonstrating lower volatility. Our managers remain confident that valuations continue to be attractive, both in absolute terms and relative to mainstream Emerging Markets. Frontier Markets in the main continue to provide compelling investment opportunities, given their strong GDP growth, dynamic demographic profiles and low debt burdens. The low correlation of Frontier Markets with both Developed and Emerging Markets provides considerable diversification benefits making the asset class an attractive option for long-term investors. Audley Twiston-Davies 26 November 2013 Investment Manager's Report Market overview Over the twelve months to 30 September 2013, Frontier markets performed strongly, returning +21.8%. This is in contrast to mainstream Emerging Markets, which have endured another volatile period, ending the year up by just 1%. Strong returns were generated by a wide range of Frontier Markets, with various Middle Eastern, European, Latin American and African markets rising in excess of 25% over the year. The United Arab Emirates was the strongest performer over the twelve months, rising by 62%. The decision by the MSCI to upgrade United Arab Emirates, as well as Qatar, from Frontier Markets to Emerging Markets, with effect from the second quarter of 2014, reflects a growing realisation of how far these economies and financial markets have developed in recent years. The performance of the equity market also reflects a significant resurgence in the local economy and an improving real estate market. Argentina was also amongst the best performing Frontier Markets in the twelve months to September, rising by 61%, despite the currency depreciating by nearly 20% versus the US dollar over the same period. Investors have become increasingly hopeful of a change in macroeconomic policy occurring after the government had a poor result in the August primaries. The increase in soya prices also provided relief to the beleaguered economy. Of the large African markets, Kenya was the best performer. Financial developments over the year include the introduction of Kenya's first government bond index, with the aim of deepening capital markets. Presidential and parliamentary elections passed off relatively peacefully, in contrast to the 2007 poll which saw widespread violence, and Uhurru Kenyatta was declared President having secured 50.07% of the vote, in what international observers declared free and fair elections. In addition, Eastern European Frontier markets were buoyed by the easing of systemic financial risk in mainstream Europe. The exception to this was Ukraine where poor performance was driven by concerns over the level of sovereign debt, which placed additional pressure on the currency and equity markets. The sell-off in mainstream Emerging Markets was largely 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 programme. 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. Portfolio overview The Company was well positioned over geographies and individual stocks, returning 31.6% (USD terms), outperforming the MSCI Frontier Markets Index by 9.8%. Positions in the Middle East were notable relative performers with the strongest being United Arab Emirates hospital operator NMC Health. The company was a large relative contributor to performance, reporting a 17% rise in net profit for the first half of 2013, driven by higher occupancy levels. The company stated that the inflow of patients crossed the one million mark in the first six months and expects that number to exceed 2 million by the end of 2013. Outside the Middle East, contributors to performance included Pan African contracting company, Shikun and Binui, which rose by 50%. Investors were cheered by the news that the company had secured a three year, US$500 million project with the Nigerian government for the paving and widening of a road in the Shgamu-Benin area of the country. Like many Frontier market companies, the company also paid a healthy dividend, implying a yield in excess of 5%. In Bangladesh, holdings in tobacco company, BAT Bangladesh, a subsidiary of the UK listed multinational, added significantly to performance as the stock price rose by substantially more than 100% over the year and also paid a dividend yielding more than 5%. This undervalued stock remains a core holding in the portfolio. In Vietnam, Consumer Staples company, Kinh Do Corp, the leading domestic producer of moon cakes was another strong performer, rising 85% over the year, as the company continued to prove its dominance in distribution in the local market as it rebranded and relaunched a number of its brands driving increased volumes. The largest detractor from performance was Sundance Resources, owners of an iron ore asset in Cameroon. The company share price suffered after a proposed takeover failed to complete. Portfolio activity Over the year we reduced the Company's exposure to African markets, predominantly Nigeria and Kenya and increased exposure to South East Asian markets such as Bangladesh and Vietnam. Nigeria was one of our most favoured countries. Having successfully addressed a banking crisis, Nigeria is tackling challenges associated with its lack of power capacity, high fuel subsidies and energy sector investment. The market has been buoyant, rising 30% over the period, which has tempered our bullish view, although we remain excited by the immense long-term potential for Nigeria. We also took profits in holdings in Kenya, a market which we now view as excessively valued, trading on an index valuation of four times price to book. We increased exposure to Bangladesh through health care company, Square Pharmaceutical. The positive view on the Bangladeshi market is driven by a combination of increased political stability and international flows into an undervalued market. The prospect of reforms to deepen the equity market in Dhaka also improved sentiment. Despite being the leading health care company in the country, Square Pharmaceutical is trading on a ratio of less than 10x price to earnings. We also added to the position in Sri Lankan financial, Hatton Bank. The bank operates one of the strongest deposit franchises in the country due to its historic dominance in rural areas. Despite some current pressure on results from the current weak economic environment in Sri Lanka, the bank is well placed to benefit as the economic environment turns. Trading on an earnings multiple of less than 8x with a dividend yield above 5%, we believe that this is currently one of the most attractive banks in the Frontier universe. We sold a position in Cambodian casino operator, Nagacorp. The stock performed well over the period but we decided to take profits following the announcement of a new casino project, which will require at least US$350 million of investment. Precise details of the project have yet to be announced but the casino-resort venture on the outskirts of the Russian port city of Vladivostock, a country in which the company has no prior experience, will take several years to bear fruit. Outlook 2013 has been a break out year for Frontier Markets. During this twelve month period, Frontier Markets have strongly outperformed Emerging Markets whilst at the same time showing lower volatility than both Emerging and Developed Markets. Frontier Market valuations remain attractive both in absolute and relative terms to mainstream Emerging Markets. Companies operating very profitably in Sub-Saharan Africa, Asia and the Middle East offer exposure to some of the fastest growing markets globally yet are trading on valuations of under 10x price to earnings supported by high dividend yields. More than 2 billion people live in Frontier Markets but until now they have attracted little investor attention. With their strong GDP growth, positive demographic profile, low debt burden and relatively low correlation to developed and emerging markets, we think that Frontier Markets, although not without risk, are a great place to invest for those who have both a long-term horizon and wish to see capital and income growth. In a changing world, we believe that opportunities abound for unconventional investors. Sam Vecht and Emily Fletcher BlackRock Investment Management (UK) Limited 26 November 2013 Ten Largest Investments* 30 September 2013 Zenith Bank** (Nigeria, Financials, 4.6% (2012: 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. Emaar Properties (United Arab Emirates, Financials, 4.0% (2012: nil) www.emaar.com) is currently the Persian Gulf region's largest land and real estate developer. Emaar's activities include property investment and development, property management services, education, health care, retail and hospitality sectors, as well as investing in financial service providers. Doha Bank (Qatar, Financials, 3.9% (2012: 1.4%) www.dohabank.com.qa) Doha Bank is the largest private commercial bank in Qatar. Doha Bank provides banking services to individuals and commercial, corporate and institutional clients through an extensive banking network and multiple access channels. Halyk Savings Bank (Kazakhstan, Financials, 3.3% (2012: 3.2%) 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. Abdullah Al Othaim^ (Saudi Arabia, Consumer Staples, 3.1% (2012: 2.0%) www.othaimmarkets.com) operates supermarkets across Saudi Arabia. The company has opened 108 branches across hypermarket, supermarket and express formats. In 2012, 40 million customers visited Al Othaim stores. Dragon Oil (Turkmenistan, Energy, 3.0% (2012: nil) www.dragonoil.com) is a leading independent international oil and gas exploration, development and production company. Its principal asset is the Cheleken Contract Area, in the eastern section of the Caspian Sea, offshore Turkmenistan. Dragon Oil had oil and gas reserves and resources as at 31 December 2012 of 677 million barrels of 2P oil and condensate reserves, 1.5 trillion cubic feet of gas reserves, 59 million barrels of oil and condensate contingent resources and 1.4 trillion cubic feet of gas resources. Qatar Gas Transportation (Qatar, Energy, 3.0% (2012: nil) www.qatargas.com) is a shipping company which owns, operates and manages LNG vessels and provides shipping and marine-related services to a range of participants within the Qatari hydrocarbon sector. The company is an integral component of the supply chain of some of the largest, most advanced energy projects in the world. Qatar National Bank (Qatar, Financials, 3.0% (2012: nil) www.qnb.com.qa) has steadily grown to be among the largest banks in the Middle East and North Africa Region with US$104.4 billion of assets. The bank is the leading financial institution in Qatar with a market share approaching 45% of banking sector assets. Square Pharmaceuticals^^ (Bangladesh, Health Care, 3.0% (2012: nil) www.squarepharma.com.bd) is the largest pharmaceutical company in Bangladesh. The company generates revenue of US$163 million with a market share of 16%. Mobile Telecommunications (Kuwait, Telecommunication Services 2.8% (2012: Nil) also known as Zain, Mobile Telecommunications Kuwait has a commercial presence in 8 countries across the Middle East and North Africa with over 44 million subscribers. The Company enjoys a 40% market share in its home market, Kuwait. * Gross market exposure as a % of net assets. Percentages in brackets represent the portfolio holding at 30 September 2012. ** Includes exposure gained via both contracts for difference and equity holdings. ^ Includes exposure gained via P-Notes. ^^ Denotes exposure gained via a contract for difference. Portfolio Analysis Country Allocation: Absolute Weights (% of Gross Assets) Saudi Arabia 12.0 Nigeria 11.4 United Arab Emirates 11.3 Qatar 11.2 Bangladesh 6.5 Kazakhstan 5.8 Kuwait 5.0 Iraq 4.6 Ukraine 3.6 Oman 3.5 Vietnam 3.5 Pakistan 3.4 Sri Lanka 3.1 Turkmenistan 3.0 Slovenia 2.2 Panama 2.2 Pan Africa 2.1 Kyrgyzstan 1.4 Croatia 1.4 Other 1.6 ---- 98.8 ==== Short positions -1.4 Source: BlackRock. Country Allocation Relative to the MSCI Frontiers Index (%)* Saudi Arabia 12.0 Bangladesh 5.1 Iraq 4.6 Ukraine 3.5 Turkmenistan 3.0 Kazakhstan 2.8 Panama 2.2 Pan Africa 2.1 Vietnam 1.8 Sri Lanka 1.8 Kyrgyzstan 1.4 Slovenia 0.4 Oman 0.2 Bulgaria -0.1 Lithuania -0.1 Estonia -0.1 Serbia -0.2 Croatia -0.2 Pakistan -0.6 Tunisia -0.6 Jordan -0.6 Bahrain -0.7 Romania -1.0 Mauritius -1.0 Short positions -1.4 Lebanon -1.9 Nigeria -2.9 United Arab Emirates -2.9 Argentina -3.0 Kenya -3.4 Qatar -4.5 Kuwait -18.1 Source: BlackRock. * Based on portfolio gross market exposure as a percentage of gross assets, compared to the MSCI Frontier Markets Index - Net Return. Net return indices calculate the reinvestment of dividends net of withholding taxes using the rates applicable to non-resident institutional investors. Sector Allocation: Absolute Weights (% of Gross Assets) Financials 32.4 Consumer Staples 14.8 Energy 13.1 Telecommunications 11.8 Health Care 9.4 Industrials 7.8 Materials 5.8 Consumer Discretionary 2.2 Utilities 1.5 ---- 98.8 ==== Short positions -1.4 Source: BlackRock. Sector Allocation Relative to the MSCI Frontiers Index (%)* Health Care 7.4 Energy 5.9 Consumer Staples 5.9 Materials 2.4 Consumer Discretionary 2.1 Utilities 0.2 Short positions -1.4 Telecommunications -2.0 Industrials -2.2 Financials -20.9 Source: BlackRock. * Based on portfolio gross market exposure as a percentage of gross assets, compared to the MSCI Frontier Markets Index - Net Return. Net return indices calculate the reinvestment of dividends net of withholding taxes using the rates applicable to non-resident institutional investors. Investments as at 30 September 2013 Fair Gross value market Principal and exposure country market as a % of exposure* of net Company operation Sector US$'000 assets*** Equity portfolio Air Arabia United Arab Industrials 5,170 2.0 Emirates Avangardco Ukraine Consumer Staples 3,314 1.3 Banco Macro Argentina Financials 2,203 0.9 BankMuscat Oman Financials 3,924 1.5 Cable & Wireless Panama Telecommunications 5,635 2.2 Centerra Gold Kyrgyzstan Materials 3,541 1.4 Distilleries Co of Sri Lanka Consumer Staples 911 0.4 Sri Lanka DNO International Iraq Energy 4,822 1.9 Doha Bank Qatar Financials 10,066 3.9 Dragon Oil Turkmenistan Energy 7,782 3.0 Emaar Properties United Arab Financials 10,316 4.0 Emirates First Gulf Bank United Arab Financials 3,854 1.5 Emirates Gulf Keystone Iraq Energy 2,565 1.0 Petroleum Halyk Savings Bank Kazakhstan Financials 8,433 3.3 Hatton National Bank Sri Lanka Financials 1,704 0.7 Hrvatski Croatia Telecommunications 3,510 1.4 Telekomunikacije Kazmunaigas Exploration Kazakhstan Energy 6,257 2.4 Production Kenya Airways Kenya Industrials 974 0.4 KRKA Slovenia Health Care 5,591 2.2 Kuwait Foods Kuwait Consumer 5,575 2.2 (Americana) Discretionary MHP Ukraine Consumer Staples 5,755 2.3 Mobile Kuwait Telecommunications 3,097 1.2 Telecommunications NMC Health United Arab Health Care 6,300 2.5 Emirates Nova Kreditna Banka Slovenia Financials 133 0.1 Maribor Omantel Oman Telecommunications 5,083 2.0 Ooredoo Qatar Telecommunications 3,364 1.3 Qatar Gas Transportation Qatar Energy 7,628 3.0 Qatar National Bank Qatar Financials 7,661 3.0 Shikun & Binui Pan Africa Industrials 5,484 2.1 Tallink Estonia Industrials 708 0.3 Zenith Bank Nigeria Financials 4,437 1.7 ------- ----- Equity Investments 145,797 57.1 ------- ----- BlackRock's Institutional Cash Fund 2,642 1.0 ------- ----- Total Equity Investments 148,439 58.1 ------- ----- P-Notes Abdullah Al Othaim Saudi Arabia Consumer Staples 6,845 2.7 Markets P-Note 13/08/14 Abdullah Al Othaim Saudi Arabia Consumer Staples 914 0.4 Markets P-Note 03/09/15 Al Mouwasat Medical Saudi Arabia Health Care 4,391 1.7 P-Note 13/04/15 Etihad Etisalat P-Note 05 Saudi Arabia Telecommunications 5,400 2.1 /12/14 Saudi Arabian Amiantit Saudi Arabia Industrials 2,903 1.1 P-Note 11/05/15 Saudi Basic Industries Saudi Arabia Materials 5,646 2.2 P-Note 23/02/15 United International Saudi Arabia Industrials 4,556 1.8 Transportation P-Note 23/02/15 ------- ----- Total P-Notes 30,655 12.0 ------- ----- Total investments excluding CFDs 179,094 70.1 ======= ===== Gross market Principal Gross exposure country Fair market as a % of value* exposure** of net Company operation Sector US$'000 US$'000 assets*** CFD Portfolio Long positions: Access Bank Nigeria Financials 5,296 2.1 British American Bangladesh Consumer Staples 4,832 1.9 Tobacco Distilleries Co of Sri Sri Lanka Consumer Staples 1,535 0.6 Lanka Engro Pakistan Materials 2,530 1.0 FBN Holdings Nigeria Financials 4,904 1.9 First Gulf Bank United Arab Financials 3,212 1.3 Emirates Guinness Nigeria Nigeria Consumer Staples 2,707 1.1 Gulf Keystone Iraq Energy 4,376 1.7 Petroleum Hatton National Bank Sri Lanka Financials 3,693 1.4 Hub Power Pakistan Utilities 3,914 1.5 Intercontinental Wapic Nigeria Financials 86 0.0 Insurance Kinh Do Vietnam Consumer Staples 5,773 2.3 Marico Bangladesh Bangladesh Consumer Staples 1,002 0.4 MCB Bank Pakistan Financials 2,286 0.9 Mobile Kuwait Telecommunications 4,145 1.6 Telecommunications Petrovietnam Vietnam Materials 3,178 1.3 Fertilizer & Chemicals Square Pharmaceuticals Bangladesh Health Care 7,694 3.0 Unilever Nigeria Nigeria Consumer Staples 4,231 1.7 United Commercial Bank Bangladesh Financials 3,126 1.2 Zenith Bank Nigeria Financials 7,434 2.9 ------- ------- ----- Total long CFD positions 1,460 75,954 29.8 ------- ------- ----- Total short CFD positions 140 (3,591) (1.4) ------- ------- ----- Total CFD portfolio 1,600 72,363 28.4 ------- ------- ----- Equity investments (excluding BlackRock's Institutional Cash Fund) and P-Notes 176,452 176,452 69.1 ------- ------- ----- BlackRock Institutional Cash Fund**** 2,642 2,642 1.0 ------- ------- ----- Total investments 180,694 251,457 98.5 ------- ------- ----- Cash and cash equivalents**** 89,920 19,157 7.5 ------- ------- ----- Net current liabilities (15,381) (15,381) (6.0) ------- ------- ----- Net assets 255,233 255,233 100.0 ======= ======= ===== * 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$1,600,000 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$74,494,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the CFD contracts of US$1,460,000, resulting in the value of the total market exposure to the underlying securities rising to US$75,954,000 as at 30 September 2013. The cost of acquiring the securities to which exposure was gained via the short CFD positions would have been US$3,731,000 at the time of entering into the contract, and subsequent price falls have resulted in unrealised gains on the short CFD positions of US$140,000 and the value of the market exposure of these investments decreasing to US$3,591,000 at 30 September 2013. If the short position had been closed on 30 September 2013 this would have resulted in a gain of US$140,000 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 rather than exposure being gained through CFDs. Principal risks Extract from Strategic Report: 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. 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 a delay in investment and may increase the price at which such investments may be made and reduce potential investment returns for the Company. There is also exposure to currency risk due to the location of the operation of the businesses in which the Company may invest. 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 than in developed markets. 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. Political Risk - Investments in Frontier Markets may include a higher element of risk compared to more developed markets due to greater political instability. Political and diplomatic events in Frontier Markets where the Company invests (for example, governmental instability, corruption, adverse changes in legislation or other diplomatic developments such as the outbreak of war) could substantially and adversely affect the economies of such countries or the value of the Company's investments in those countries. The Investment Manager recognises this in applying stringent controls over where investments are made and close monitoring of political risks in reaching this assessment. The Investment Manager's approach to filtering the investment universe takes account of the political background to regions, and is backed up by rigorous stock specific research and risk analysis, individually and collectively, in constructing the portfolio. The management team has a wide network of business and political contacts which provides economic insights with public and private bodies, and enables the Investment Manager to assess potential investments in an informed and disciplined way, as well as being able to conduct regular monitoring of investments once made. However, given the nature of political risk, all investments will be exposed to a degree of risk and the Investment Manager will ensure that the portfolio remains diversified across countries to mitigate the risk. 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 to the financial statements, 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. The investment management fee for the year was US$1,780,000 (2012: US$1,347,000), as disclosed in note 4 to the Financial Statements. In addition a performance fee was payable of US$1,624,000 (2012: US$689,000). At the year end, an amount of US$2,240,000 was outstanding in respect of these fees (2012: US$1,360,000). The Board consists of five non-executive Directors, all of whom are considered to be independent of the Manager by the Board. None of the Directors has a service contract with the Company. For the years ended 30 September 2013 and 2012, the Chairman received 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 received an annual fee of £20,000. With effect from 1 October 2013, the remuneration of the Chairman increased to £33,000, the Chairman of the Audit & Management Engagement Committee increased to £27,000, and the other Directors to £23,000. As at 30 September 2013, an amount of £9,250 was payable to Directors in respect of their annual fees (2012: £9,250). All five members of the Board hold ordinary shares in the Company. Audley Twiston-Davies holds 128,935 ordinary shares, John Murray holds 121,967 ordinary shares, Nick Pitts-Tucker holds 110,148 ordinary shares, Lynn Ruddick holds 47,967 ordinary shares (which includes a related party holding of 9,665 shares held through an ISA by her husband, Mr Dewar) and Sarmad Zok holds 38,787 ordinary shares. Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements under IFRS as adopted by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: - present fairly the financial position, financial performance and cash flows of the Company; - select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; - present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; - make judgements and estimates that are reasonable and prudent; - state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; - provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules. The Directors have delegated responsibility to the Investment Manager for the maintenance and integrity of the Company’s corporate and financial information included on the Investment Manager’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the Directors, whose names are listed on page 13 of the Annual Report, confirm to the best of their knowledge that: - the financial statements, which have been prepared in accordance with IFRS 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. The 2012 UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Accounts are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit and Management Engagement Committee advise on whether it considers that the Annual Report and Accounts fulfils these requirements. The process by which the Committee has reached these conclusions is set out in the Audit & Management Engagement Committee’s report on pages 31 to 33 of the Annual Report. As a result, the Board has concluded that the Annual Report for the year ended 30 September 2013, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. For and on behalf of the Board Audley Twiston-Davies Chairman 26 November 2013 Statement of Comprehensive Income for the year ended 30 September 2013 Revenue Revenue Capital Capital Total Total 2013 2012 2013 2012 2013 2012 Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Profits on investments held at fair value through profit or loss 9 - - 18,174 3,973 18,174 3,973 Losses on foreign exchange - - (76) (76) (76) (76) Net profits from contracts for difference 3 2,131 2,109 18,618 10,203 20,749 12,312 Loss on credit default swap - - - (4) - (4) Income from investments held at fair value through profit or loss 3 5,564 3,306 - - 5,564 3,306 Other income 3 55 28 - - 55 28 ----- ----- ------ ------ ------ ------ Total revenue 7,750 5,443 36,716 14,096 44,466 19,539 ----- ----- ------ ------ ------ ------ Expenses Investment management and performance fees 4 (355) (269) (3,049) (1,767) (3,404) (2,036) Other expenses 5 (762) (556) (57) (86) (819) (642) ----- ----- ------ ------ ------ ------ Total operating expenses (1,117) (825) (3,106) (1,853) (4,223) (2,678) ----- ----- ------ ------ ------ ------ Net profit on ordinary activities before finance costs and taxation 6,633 4,618 33,610 12,243 40,243 16,861 Finance costs (2) (1) (8) (3) (10) (4) ----- ----- ------ ------ ------ ------ Net profit on ordinary activities before taxation 6,631 4,617 33,602 12,240 40,233 16,857 Taxation (763) (698) 400 454 (363) (244) ----- ----- ------ ------ ------ ------ Net profit on ordinary activities after taxation 5,868 3,919 34,002 12,694 39,870 16,613 ===== ===== ====== ====== ====== ====== Earnings per ordinary share (cents) 7 6.13 4.14 35.54 13.39 41.67 17.53 ===== ===== ====== ====== ====== ====== 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. The Company does not have any other recognised gains or losses. The net profit for the year disclosed above represents the Company's total comprehensive income. Statement of Changes in Equity Called up Share Capital share premium redemption Special Capital Revenue capital account reserve reserve reserves reserve Total Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 For the year ended 30 September 2013 At 30 September 2012 948 - - 142,704 (18,652) 3,262 128,262 Total Comprehensive Income: Net profit for the year - - - - 34,002 5,868 39,870 Transaction with owners, recorded directly to equity: Share issues - C share 6,356 90,013 - - - - 96,369 Share issue costs - (1,687) - - - - (1,687) Share conversion - C share to ordinary shares (5,798) - 5,798 - - - - Dividend paid* 6 - - - - - (7,581) (7,581) ----- ------ ----- ------- ------ ----- ------- At 30 September 2013 1,506 88,326 5,798 142,704 15,350 1,549 255,233 ----- ------ ----- ------- ------ ----- ------- 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 year - - - - 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 ----- ------ ----- ------- ------ ----- ------- * Final dividend paid in respect of the year ended 30 September 2012 of 2.60 cents per share, declared 30 November 2012 and paid on 8 March 2013, interim dividend of 2.00 cents per share and special dividend of 3.40 cents per share paid in respect of the year ended 30 September 2013, declared 30 May 2013 and paid on 5 July 2013. Statement of Financial Position as at 30 September 2013 30 30 September September 2013 2012 Notes US$'000 US$'000 Non current assets Investments designated as held at fair value through profit or loss 179,094 97,767 ------- ------- Current assets Other receivables 1,207 499 Derivative financial assets held at fair value 4,234 5,547 through profit or loss Cash held on margin deposit with brokers 1,205 231 Cash and cash equivalents 89,920 33,707 ------- ------- 96,566 39,984 Current liabilities Other payables (15,054) (2,794) Net collateral received in respect of contracts for difference (2,720) (3,948) Derivative financial liabilities held at fair value through profit or loss (2,634) (2,728) ------- ------- (20,408) (9,470) ------- ------- Net current assets 76,158 30,514 ------- ------- Total assets less current liabilities 255,252 128,281 Creditors: amounts falling due after more than one year Management shares of £1.00 each (one quarter paid) (19) (19) ------- ------- Net assets 255,233 128,262 ======= ======= Capital and reserves Ordinary share capital 8 1,506 948 Share premium account 9 88,326 - Capital redemption reserve 9 5,798 - Special reserve 9 142,704 142,704 Capital reserves 9 15,350 (18,652) Revenue reserve 1,549 3,262 ------- ------- Total equity 255,233 128,262 ======= ======= Net asset value per share (cents) 7 169.45 135.35 ======= ======= Cash Flow Statement for the year ended 30 September 2013 30 30 September September 2013 2012 US$'000 US$'000 Operating activities Profit before taxation 40,233 16,857 Profits on investments and CFDs held at fair value (37,319) (14,638) through profit or loss (including transaction costs) Net movement on foreign exchange 76 76 Sale of investments held at fair value through profit or 170,194 66,508 loss Purchases of investments held at fair value through (233,347) (68,515) profit or loss Realised losses on closure of CFD contracts (1,478) (7,280) Gains on realisation of CFDs 21,842 6,443 Proceeds of Credit Default Swap - 646 (Increase)/decrease in other receivables (686) 27 Increase in other payables 1,797 179 Decrease in amounts due from brokers 6 361 Increase in amounts due to brokers 10,757 265 Taxation paid (425) (693) ------ ------ Net cash (outflow)/inflow from operating activities before financial activities (28,350) 236 ------ ------ Financing activities Equity dividends paid (7,581) (3,980) Proceeds from issue of C shares 94,682 - Share issue costs paid (260) (1,381) ------ ------ Net cash inflow/(outflow) from financing activities 86,841 (5,361) ------ ------ Increase/(decrease) in cash and cash equivalents 58,491 (5,125) Effect of foreign exchange rate changes (76) (62) ------ ------ Change in cash and cash equivalents 58,415 (5,187) Cash and cash equivalents at start of the year 29,990 35,177 ------ ------ Cash and cash equivalents at end of the year 88,405 29,990 ------ ------ Comprised of: Cash and cash equivalents 89,920 33,707 Add: Cash held on margin deposit with brokers 1,205 231 Less: Collateral received in respect of contracts for difference (2,720) (3,948) ------ ------ 88,405 29,990 ====== ====== 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 third annual report. 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". The standard has not yet been approved by the EU. Earlier application is permitted. The company does not plan to early adopt this standard. IFRS 10 Consolidated Financial Statements (effective 1 January 2014) 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 2014) 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 2014) 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 has assessed the impact of this standard on the financial position and performance and concluded it is unlikely to result in changes to the fair value measurement techniques currently in place. (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 Articles, 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. Details of transaction costs on the purchases and sales of investments are disclosed within note 9 to the Financial Statements; - 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 a 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 2013. (h) Derivatives Derivatives are held at fair value based on the bid prices of the underlying securities in respect of long positions, and the offer prices of the underlying securities in respect of short positions the Company is exposed to through contracts for difference ("CFDs"). 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 2013 2012 US$'000 US$'000 Investment Income: UK listed dividends 195 56 Overseas listed dividends 5,369 3,250 ----- ----- 5,564 3,306 Income from contracts for difference 2,131 2,109 ----- ----- 7,695 5,415 Interest receivable and other income: Deposit interest 55 28 ----- ----- Total income 7,750 5,443 ===== ===== 4. Investment management and performance fees 2013 2012 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 355 1,425 1,780 269 1,078 1,347 Performance fees - 1,624 1,624 - 689 689 --- ----- ----- --- ----- ----- Total 355 3,049 3,404 269 1,767 2,036 === ===== ===== === ===== ===== 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 year to 30 September 2013, the Company's NAV had outperformed the MSCI Frontiers Markets Index by 9.8% on a US dollar basis and a performance fee of US$1,624,000 (2012: US$689,000) has been accrued at 30 September 2013. 5. Operating expenses 2013 2012 US$'000 US$'000 Custody fee 176 138 Auditors' remuneration: - audit services 44 45 - other non-audit services* 10 10 Registrar's fee 49 29 Directors' emoluments 174 188 Other administration costs 309 146 --- --- 762 556 === === The Company's ongoing charges, calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs were 1.6% (2012: 1.6%). Fees for non audit services of US$9,700 (2012: US$10,000) relate to the review of the interim financial statements In addition the auditors performed work in respect of the Company's C share issue for fees of £15,000 (US$24,300) (all VAT exclusive). The fees in respect C share issue were charged to the C share holders as part of the issuance costs and were not debited to the Company's Income Statement. For the year ended 30 September 2013, expenses of US$57,000 (2012: US$86,000) were charged to the capital column of the Statement of Comprehensive Income, these relate to US$33,000 (2012: US$29,000) of transaction costs and US$24,000 of fees in relation to investing in new markets (2012: US$57,000). 6. Dividends 2013 2012 Record date Payment date US$'000 US$'000 Dividends paid on equity shares: 2012 final of 2.60 cents 01 February 2013 08 March 2013 2,464 2,843 2013 interim of 2.00 cents 07 June 2013 05 July 2013 1,895 1,137 2013 special dividend of 3.40 cents 07 June 2013 05 July 2013 3,222 - ----- ----- 7,581 3,980 ===== ===== The Directors have not proposed a final dividend for the year (2012: 2.60 cents). The total dividends payable in respect of the year ended 30 September 2013 which form the basis of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in this legislation. 2013 2012 US$'000 US$'000 Dividends on equity shares: ----- ----- Interim paid 2.00 cents (2012: 1.20) 1,895 1,137 Special paid 3.40 cents (2012: nil cents) 3,222 - Proposed final ordinary dividend of nil cents (2012: 2.60 cents*) - 2,464 ----- ----- 5,117 3,601 ----- ----- * The dividend payments are based on 94,766,267 ordinary shares. 7. Earnings and net asset value per ordinary share 2013 2012 Net revenue profit attributable to ordinary shareholders (US$'000) 5,868 3,919 Net capital profit attributable to ordinary shareholders (US$'000) 34,002 12,694 ------- ------- Total profit attributable to ordinary shareholders (US$'000) 39,870 16,613 ------- ------- Total equity attributable to shareholders (US$'000) 255,233 128,262 ----------- ---------- The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: 95,684,437 94,766,267 ----------- ---------- The actual number of ordinary shares in issue at the end of the period on which the net asset value per ordinary share was calculated was: 150,621,621 94,766,267 ----------- ---------- Revenue earnings per share - (cents) 6.13 4.14 Capital earnings per share - (cents) 35.54 13.39 ------ ------ Total earnings per share - (cents) 41.67 17.53 ------ ------ Net asset value per share basic and diluted - (cents) 169.45 135.35 ------ ------ Share price* - (cents) 178.13 130.40 ====== ====== Net asset value per share basic and diluted - (pence) 104.64 83.82 ------ ------ Share price (pence) 110.00 80.75 ------ ------ * The Company's share price is quoted in sterling and the above represents the US dollar equivalent. Basic and diluted earnings per share and net asset value per share are the same as the Company does not have any dilutive securities outstanding. 8. Called up share capital Number Number of of ordinary C shares shares Nominal in in value issue issue US$'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 1 cent each and C shares of 10 cents each ----------- ---------- ----- At 30 September 2012 94,766,267 - 948 ----------- ---------- ----- C shares issued - 63,566,000 6,356 ----------- ---------- ----- Conversion of C shares into ordinary shares 55,855,354 (63,566,000) (5,798) ----------- ---------- ----- At 30 September 2013 150,621,621 - 1,506 =========== ========== ===== On 31 July 2013 the Company issued 63,566,000 C shares with nominal value of 10 cents each. On 25 September 2013 the C shares were converted into Ordinary shares. The conversion ratio, which has been calculated by reference to the total assets of the Company and the net assets of the Company's attributable to C shareholders as at the close of business on 18 September 2013 was 0.8787. The Company also has in issue 50,000 management shares which carry the right to a fixed cumulative preferred dividend. Additional information is given in note 13 to the Financial Statements. The new ordinary shares arising on conversion rank pari passu with, and have the same rights as, the ordinary shares of the Company already in issue. 9. Share premium and reserves Capital reserve Capital arising reserve on arising revaluation Share Capital on of premium redemption Special investments investments Revenue account reserve reserve sold held reserve US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 30 September 2012 - - 142,704 (7,657) (10,995) 3,262 Movement during the period: Total Comprehensive Income: Issue of C shares 88,326 - - - - - Conversion of C shares - 5,798 - - - - into ordinary shares Loss on realisation of - - - (2,672) - - investments Changes in investment - - - - 20,846 - holding gains Losses on foreign - - - (76) - - currency transactions Gains/(losses) on - - - 19,837 (1,219) - contracts for differences Realised loss on - - - - - - credit default swaps Finance costs and - - - (2,714) - - investment management fee charged to capital after taxation Revenue return for the - - - - - 5,868 year Dividends paid - - - - - (7,581) ------ ----- ------- ------ ------ ------ At 30 September 2013 88,326 5,798 142,704 6,718 8,632 1,549 ====== ===== ======= ====== ====== ====== On 18 October 2013 the Company applied for the share premium account arising on the issue of C Shares to be cancelled and the balance transferred to the special reserve. This was completed on 6 November 2013. 10. Related party disclosure BlackRock Investment Management (UK) Limited, the manager, is considered to be a related party of the Company under the UK Listing Rules definitions. Transactions and relationship details are set out in the Director's Report. The investment management fee for the year was US$1,780,000 (2012: US$1,347,000). In addition a performance fee was payable of US$1,624,000 (2012: US$689,000). At the year end, an amount of US$2,240,000 was outstanding in respect of these fees (2012: US$1,360,000). The Board consists of five non-executive Directors, all of whom are considered to be independent of the Investment Manager by the Board. None of the Directors has a service contract with the Company. For the years ended 30 September 2013 and 2012, the Chairman received an annual fee of £28,000, the Chairman of the Audit & Management Engagement Committee receives an annual fee of £23,000 and each of the other Directors received an annual fee of £20,000. With effect from 1 October 2013, the remuneration of the Chairman increased to £33,000, the Chairman of the Audit & Management Engagement Committee increased to £27,000, and the other Directors to £23,000. As at 30 September 2013, an amount of £ 9,250 was payable to Directors in respect of their annual fees (2012: £9,250). At 30 September 2013, the Directors' interests in the Company's Ordinary Shares, were as follows: 2013 2012 Audley Twiston-Davies (Chairman) 128,935 85,000 Lynn Ruddick* 47,967 26,000 John Murray 121,967 100,000 Nick Pitts-Tucker 110,148 75,000 Sarmad Zok 38,787 30,000 *Chairman of the Audit & Management Engagement Committee. Ms Ruddick's holding includes a related party holding of 9,665 shares held through an ISA by her husband, Mr Dewar. The Company has an investment in the BlackRock Institutional Cash Fund of US$2,642,000 (2012: US$14,590,000) 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 2013 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 2013 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 26 November 2013. 12. 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. 13. Annual General Meeting The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Monday, 3 February 2014 at 12.00 noon. ENDS The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/individual/literature/annual-report/ blackrock-frontiers-investment-trust-plc-annual-report-2013.pdf. 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 Henrietta Guthrie, Lansons Communications Tel: 020 7294 3612 26 November 2013 12 Throgmorton Avenue London EC2N 2DL

Companies

Blackrock Frontiers Investment Trust (BRFI)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today