Half-yearly Report

BlackRock Frontiers Investment Trust plc Half Yearly Financial Report for the six months ended 31 March 2013 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 Financial Highlights 31 March 2013 30 September 2012 US Dollar Net assets (US$'000's) 145,180 128,262 Net asset value per share (cum income) 153.20c 135.35c Share price* 158.68c 130.40c ------- ------- Sterling Net assets (£'000's)* 95,607 79,429 Net asset value per share (cum income)* 100.89p 83.82p Share price 104.50p 80.75p ------- ------ Premium/(discount) 3.6% (3.7%) ------- ------ Performance - total return basis Six months ended Year ended 31 March 30 September 2013 2012 % % US Dollar Net asset value per share (with income reinvested) 15.1 14.7 MSCI Frontiers Index (net return**) 11.5 3.6 MSCI Emerging Markets Index (net return**) 3.9 16.9 Ordinary share price (with income reinvested) 23.8 15.6 Sterling Net asset value per share (with income reinvested) 22.4 10.7 MSCI Frontiers Index (net return**) 18.6 (0.1) MSCI Emerging Markets Index (net return**) 10.5 12.8 Ordinary share price (with income reinvested) 31.7 11.5 * Based on an exchange rate of 1.5185 at 31 March 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. Chairman's Statement for the six months ended 31 March 2013 A note of cautious optimism returned to global equity markets in the first quarter of 2013, with investor confidence bolstered by the positive action taken by policy makers in Europe, China and the US to address long running debt and budgetary issues. This improvement in market sentiment has been tempered by recent events in Cyprus which have highlighted that Europe's debt issues remain unresolved. These events had a detrimental impact on Global and Emerging Markets as the Cypriot solution of a banking 'bail-in' using unsecured deposits set a precedent which negatively impacted sentiment surrounding risk assets. In comparison Frontier Markets have produced superior returns, driven by strong earnings growth reported by underlying companies and a lack of the prolific share issuance which is currently absorbing liquidity in Emerging Markets. Higher dividend yields relative to Emerging and Developed Markets have also led to investor demand against a backdrop of bond yields at record lows. Against this background, the Company's net asset value ("NAV") increased by 15.1% (22.4% in sterling terms) over the six months, outperforming the MSCI Frontier Markets Index by 3.6% (3.8% in sterling terms). By comparison, the Company's share price increased by 23.8% (31.7% in sterling terms) over the same period, reflecting an improvement in the share rating such that the Company's shares were trading at a premium at the year end (all performance calculations are with income reinvested). The Company's outperformance against the benchmark was due principally to the strong performance of holdings in the Nigerian banking sector, positions in the UAE and the portfolio's underweight position in Kuwait. Further details of the factors contributing to performance are given in the Investment Manager's Report. Since the period end, the Company's NAV has increased by 8.6% and the share price has increased by 2.9% (both on a sterling basis with net income reinvested. C-Share issue As announced on 30 April 2013, the Board is considering increasing the Company's capital base through an issue of 'C' shares to meet demand from new and existing investors whilst avoiding any dilution for existing shareholders. The Board is currently in the process of identifying the extent of investor demand and it is expected that a further announcement will be made in the next few weeks. Revenue return and dividends The Company’s revenue return per share for the six month period to 31 March 2013 amounted to 2.41 US cents (31 March 2012: 2.20 US cents). The Directors are pleased to declare an interim dividend of 2.00 US cents per share payable on 5 July 2013 to shareholders on the Company’s register on 7 June 2013 (an increase of 67% in relation to the interim dividend of 1.20 US cents for the period to 31 March 2012). As noted above, the Board are currently considering potential demand for a C Share issue. If this proceeds, the increased number of ordinary shares in issue after completion will result in any revenue earned but not distributed prior to the conversion date being spread over a larger pool of shareholders. Consequently, to avoid dilution of revenue return to existing shareholders, the Board are also declaring a special interim dividend of 3.40 US cents, representing the additional revenue expected to be generated between 1 April 2013 and the anticipated C Share Conversion date. In total this will equal dividends of 5.40 US cents per share for the year to 30 September 2013, an increase of 42.1% over total dividends of 3.80 US cents paid in relation to the year ended 30 September 2012. This reflects the increased level of dividends expected to be generated from the Company’s current portfolio. This additional special dividend will be in place of the final dividend, normally paid in March. The Board do not therefore currently anticipate any further distributions in respect of the financial year ending 30 September 2013. Share rating and share buy backs The Directors recognise the importance to investors of ensuring that the Company's share price is as close to its underlying NAV as possible and will consider share repurchases in the market if the discount to NAV widens significantly. In addition, before 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 NAV per share less 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 and is likely to be achieved through a tender offer or a reorganisation of the Company. To the extent shareholders elect for cash we expect that they will receive their proceeds within approximately six weeks of the relevant AGM. In all circumstances the Board will seek to safeguard the interests of both continuing shareholders and those electing to realise their investment. For the six month period ended 31 March 2013, the Company's shares have traded at an average discount to NAV of 4.4%, and were trading at a discount of 1.8%, 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 2014 AGM, when a resolution will be put to shareholders to renew it. The Company has not bought back any shares in the period. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive (the Directive) is a European directive which seeks to reduce potential systemic risk by regulating alternative investment fund managers (AIFMs). AIFMs are responsible for investment products that fall within the category of Alternative Investment Funds ("AIFs") and investment companies are included in this. We expect the implementation of the Directive to be effective from 22 July 2013 although it is currently anticipated that the Financial Conduct Authority ("FCA") will permit a transitional period of one year within which UK AIFMs must seek authorisation. The Board is currently taking independent advice from Dickson Minto W.S. on the consequences for the Company and will inform shareholders once the most appropriate course of action has been decided. Outlook There remain many unresolved problems facing financial markets and the global economy generally. However, we remain optimistic about the prospects for Frontier Market equities. Corporate results across Frontier Markets have exceeded expectations, and limited issuances together with the limited access to these markets, have helped your Company's shares to trade at a premium to NAV in April 2013. In contrast, Emerging Market returns have been muted so far this year, with many companies reporting earnings downgrades and increased issuance absorbing significant levels of liquidity. Frontier Markets continue to stand out for their low valuations and high dividend yields. Several Frontier economies are well placed in the current global environment due to positive structural reforms, high growth and well-capitalised, liquid banking systems. Frontier stocks, particularly in the domestic or consumer sectors, are valued at a fraction of their emerging peers despite higher growth rates and higher margins. Audley Twiston-Davies Chairman 30 May 2013 Interim Management Report and Responsibility Statement The Chairman's Statement and the Investment Manager's Report give details of the important events which have occurred during the period and their impact on the financial statements. Principal risks and uncertainties A detailed explanation of the risks relating to the Company can be divided into various areas as follows: - Performance; - Income/dividend risk - Market; - Regulatory; - Operational; and - Financial The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 September 2012. A detailed explanation can be found in the Directors' Report on pages 14 and 15 and in note 16 on pages 44 to 53 of the Annual Report and Accounts which is available on the website maintained by the Investment Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/ brfi. In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties, as summarised, are equally applicable to the remaining six months of the financial year as they were to the six months under review. Going concern The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Related party disclosure The Investment Manager is regarded as a related party under the Listing Rules and details of the management fees payable are set out in note 4 and note 9. The related party disclosure with the Directors is set out in note 9. Directors' responsibility statement The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements. The Directors confirm to the best of their knowledge that: - the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting"; and - the interim management report, together with the Chairman's Statement and Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's ("FCA") Disclosure and Transparency Rules. This half yearly financial report has been reviewed by the Company's Auditor. The half yearly financial report was approved by the Board on 30 May 2013 and the above responsibility statement was signed on its behalf by the Chairman. Audley Twiston-Davies For and on behalf of the Board 30 May 2013 Investment Manager's Report Market overview In the six months to 31 March 2013, global markets appeared to believe that the Eurozone crisis had cleared the worst of its problems. The prospects of a significant global economic slowdown were reduced as investor confidence in the tools deployed by policy makers grew. Once again, the period generated a new lexicon of issues which captured investors' imaginations only to fall from headlines just as quickly as they appeared. At the beginning of 2013, the focus was on Greek politics and developments within the Eurozone. Investor attention was briefly distracted from the Eurozone by the once-a-decade transition of power in China before the prospect of the US economy going over a 'fiscal cliff' captured the imagination of commentators and investors alike. After a last minute deal was brokered to avoid the 'fiscal cliff', uncertainty over the outcome of Italian elections placed the Eurozone back at the forefront, exacerbated by the problems besetting Cyprus. While risks are likely to continue to surface, it does highlight the dangers of relying on the 24 hour news cycle to discover what is important for investors as many of these issues faded from view. Frontier Markets outperformed both developed and emerging market peers over the performance period and demonstrated lower volatility. In sterling terms, the MSCI Frontier Markets Index returned 18.6% over the six month period to 31 March 2013 in comparison with the MSCI Emerging Markets Index which rose by 10.5%. (Both indices rose by 11.5% and 3.9% respectively in US dollar terms.) Some of the smaller Eastern European Frontier markets were buoyed by the easing of systemic financial risk in mainstream Europe. However, the larger constituents of the benchmark performed well for reasons unconnected to 'hot' global capital flows. Kenya performed strongly over the period, returning over 40% and continuing its resurgence from the problems of 2011. Inflation has fallen over the last 12 consecutive months and now stands at 4.5%. Recent developments include the introduction of Kenya's first government bond index, with the aim of deepening capital markets. Recent presidential and parliamentary elections passed off relatively peacefully in contrast to the 2007 poll which saw widespread violence. Uhurru Kenyatta was declared President having secured 50.1% of the vote, just above the 50% requirement to avoid a runoff election, in what international observers declared to be free and fair elections. The United Arab Emirates ("UAE") was also up by 40% as the equity market finally caught up with the buoyant economy and improving real estate market. In addition, Dubai successfully issued US$1.25 billion of bonds, with the 30 year tranche priced at just 5.4%. Nigeria also continued to perform well over the period, up by 35%. Although the Nigerian equity market rallied strongly in 2012, valuations continue to look attractive within the context of emerging markets. The inclusion of Nigerian sovereign debt within the JP Morgan Emerging Market Bond Index has brought the country to the attention of a wider investor base. Since then, bond yields have fallen by around 4% and had a knock on effect on the cost of equity, hence driving up theoretical stock market valuations. Kuwait underperformed as the country's political stasis showed no sign of abating, with opposition parties boycotting elections to the National Assembly. The low turnout undermines the legitimacy of the recently elected parliament and there is little sign that new legislation and reforms to improve infrastructure can be enacted soon. Portfolio overview The Company returned 15.1%, outperforming the MSCI Frontier Markets Index by 3.6%. (All calculations in US dollar terms with net income reinvested.) The strongest individual contributor to relative performance was United Arab Emirates hospital operator, NMC Health. The company saw its share price rise by almost 90% after the company announced increased profits for 2012 and plans to expand capacity. The company's development projects including Mussafah Day Patient Centre, Brightpoint Womens Hospital, Khalifa City Specialty Hospital and the DIP General Hospital are progressing on schedule and on budget. Following the price appreciation, NMC has now returned to the FTSE 250 Index. Also contributing to relative performance was casino operator, Nagacorp, which owns the largest integrated gaming and hotel complex in Cambodia. The shares performed well on account of Cambodia's strong tourism flows and in anticipation of strong 2012 earnings. In Ukraine, poultry producer, MHP rose strongly, up by over 25%. The company announced a trading update which exceeded market expectations at the sales, margin and net income level. Investors were further cheered by the announcement that the company would pay its first dividend. The largest individual detractor from relative performance was Iraq-focused oil company Gulf Keystone. Sentiment surrounding the shares was negatively impacted by legal action surrounding a 30% interest in oil fields in Northern Iraq. This has overshadowed positive news of the company's exploration program and the prospect of a deal to export energy to neighbouring Turkey. Outlook Although flows into risky assets slowed towards the end of the period, despite developed market Central Banks continuing to provide liquidity aggressively, we expect these flows to continue. Emerging market returns have been muted so far this year due to weaker than expected corporate results across some of the major markets and increased issuance, especially in Asia, which has absorbed much of this liquidity. In contrast to emerging markets, corporate results across Frontier Markets have surprised more positively and there has been minimal stock issuance. Record low bond yields are forcing investors to widen their search for yield. In this context, Frontier Markets, stand out for their high dividend yields, often in secure US pegged currencies, amidst low sovereign bond yields and healthy growth prospects. Allocation into the Middle East by global emerging market funds are at their lowest since 2005, and this is likely to improve as these markets are unlikely to be isolated from the global search for yield. The Company is positive about the outlook for the UAE, which continues to see strong earnings, with companies beating expectations. Frontier Markets are not without risk. However, the key question is `which of those risks is already priced in by the market?' Both Nigeria and Vietnam are notable examples of Frontier Markets addressing long term structural problems. For example, Nigeria is tackling challenges associated with its chronic lack of power capacity, high fuel subsidies and energy sector investment. Given these features, we believe that Frontier Markets represent a compelling opportunity for long term investors. Historically buying inexpensive equities in fast growing countries, with undervalued currencies, is a sensible strategy for capital appreciation. We believe that 2013 will be the breakout year for Frontier Markets. With dedicated Frontier Markets funds totalling just US$17 billion, flows searching for the diversification benefits (which are declining in emerging markets) could allow assets under management in Frontier Markets to double. Sam Vecht & Emily Fletcher BlackRock Investment Management (UK) Limited 30 May 2013 Ten largest investments(1) Zenith Bank(2) (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. Kazmunaigas Exploration Production (Kazakhstan; Energy; 4.1% (2012: 4.7%); www.kmgep.kz) is the second largest Kazakh oil producing company with a proven oil reserve of 1,707 million barrels which gives the company an estimated reserve life of 26 years. Halyk Savings Bank (Kazakhstan; Financials; 4.0% (2012: 3.2%); www.halykbank.kz) is the largest bank in Kazakhstan offering a full range of retail and corporate banking services. Etihad Etisalat (3) (Saudi Arabia; Telecom; 3.7% (2012: nil); www.mobily.com.sa) is the largest mobile telecom provider by users of HPSA technology ('3.5G') and trades under the brand name 'Mobily'. MHP (Ukraine; Consumer Staples; 3.3% (2012: 3.9%); 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. First Bank of Nigeria(2) (Nigeria; Financials; 3.3% (2012: 4.1%); www.firstbanknigeria.com), with a history that goes back to 1894, was the first bank to be incorporated in Nigeria. Currently with over 570 branches, the FirstBank Group has one of the largest branch networks in Nigeria. Qatar Telecom (Qatar; Telecommunications; 3.3% (2012: nil); www.ooredoo.qa) was recently rebranded as Ooredoo and is a leading fixed line and mobile telecom operator. With 92 million customers, the company's footprint covers Qatar, Indonesia, Kuwait, Iraq, Algeria, Tunisia and Oman. Hatton National Bank(2) (Sri Lanka; Financials; 3.0% (2012: nil); www.hnb.lk) is a leading private bank in Sri Lanka. HNB provides universal financial services to companies, institutional investors and individuals. Petrovietnam Fertilizers & Chemicals(2) (Vietnam; Materials; 2.7% (2012: 2.5%); www.dpm.vn) is one of the biggest fertilizer producers in Vietnam. The company manages and operates the Phu My Fertilizer Plant (capacity 740,000 tons per year) and constructing Ca Mau Fertilizer Plant (capacity 800,000 tons per year). Qatar Electricity & Water (Qatar; Utilities; 2.7% (2012: 4.0%); 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. (1) As a percentage of gross market exposure. Percentages in brackets represent the value of the holding as at 30 September 2012. Together the ten largest investments represent 34.8% of the Company's gross exposure (ten largest investments at 30 September 2012: 38.6% of the Company's gross exposure). (2) Denotes exposure gained via a contract for difference. (3) Denotes exposure gained via P-Notes. Country and Sector Allocation 31 March 2013 Country allocation relative to MSCI Frontier Markets Index (%)* Saudi Arabia 9.3 Kazakhstan 5.1 Iraq 4.6 Ukraine 3.9 Bangladesh 2.7 Vietnam 2.6 Panama 2.4 Algeria 2.3 Cambodia 2.1 Sri Lanka 1.3 Pan Africa 0.9 Cameroon 0.8 Croatia 0.7 UAE 0.2 Romania -0.1 Argentina -0.2 Nigeria -0.9 Other -1.1 Slovenia -1.4 Kenya -1.7 Qatar -4.1 Pan Middle East -10.1 Kuwait -22.1 Net liabilities -7.8 Cash 10.6 Source: BlackRock and Datastream. *Based on portfolio gross market exposure as a % of net assets, compared to the MSCI Frontier Markets Index - net return. Net return indices calculate the reinvestment of dividend net of withholding taxes using tax rates applicable to non-resident institutional investors. Absolute weights Country allocation absolute weights (%)* Nigeria 14.1 Qatar 11.0 UAE 11.0 Saudi Arabia 9.3 Kazakhstan 9.1 Vietnam 4.8 Iraq 4.6 Bangladesh 4.6 Ukraine 4.1 Sri Lanka 3.0 Argentina 2.8 Croatia 2.7 Pan Africa 2.5 Panama 2.4 Algeria 2.3 Kenya 2.1 Cambodia 2.1 Kuwait 1.8 Romania 1.1 Cameroon 0.8 Pan Middle East 0.8 Slovenia 0.2 Other 0.0 Net liabilities -7.8 Cash 10.6 Source: BlackRock and Datastream. * Based on portfolio gross market exposure as a % of net assets, compared to the MSCI Frontier Markets Index - net return. Net return indices calculate the reinvestment of dividend net of withholding taxes using tax rates applicable to non-resident institutional investors. Sector allocation (%) relative to MSCI Frontier Markets Index* Consumer Staples 6.7 Health Care 5.1 Consumer Discretionary 4.9 Energy 2.4 Technology 1.9 Utilities 1.6 Telecommunications 0.9 Materials 0.7 Industrials -3.9 Financials -23.1 Net liabilities -7.8 Cash 10.6 Source: BlackRock and Datastream. * Based on portfolio gross market exposure as a % of net assets, compared to the MSCI Frontier Markets Index - net return. Net return indices calculate the reinvestment of dividend net of withholding taxes using tax rates applicable to non-resident institutional investors. Sector allocation absolute weights (%) Financials 27.9 Consumer Staples 16.1 Telecommunications 15.5 Energy 10.4 Healthcare 6.8 Industrials 6.5 Consumer Discretionary 5.0 Materials 4.4 Utilities 2.7 Technology 1.9 Net liabilities -7.8 Cash 10.6 Source: BlackRock and Datastream. * Based on portfolio gross market exposure as a % of net assets, compared to the MSCI Frontier Markets Index - net return. Net return indices calculate the reinvestment of dividend net of withholding taxes using tax rates applicable to non-resident institutional investors. Investments as at 31 March 2013 Fair value* Principal and Gross market country market exposure as a of exposure % of net assets Company operation Sector US$'000 *** Equity portfolio Air Arabia United Arab Industrials 3,466 2.4 Emirates Avangardco Ukraine Consumer Staples 1,205 0.8 Banco Macro Argentina Financials 1,363 0.9 Cable & Wireless Panama Telecommunications 3,434 2.4 Central European Romania Consumer 1,574 1.1 Media Discretionary Commercial Bank of Qatar Financials 2,331 1.6 Qatar DNO International Iraq Energy 2,274 1.6 Doha Bank Qatar Financials 2,365 1.6 Dubai Islamic Bank United Arab Financials 2,750 1.9 Emirates Eurasian Natural Kazakhstan Materials 1,379 0.9 Resources Grupo Financiero Argentina Financials 846 0.6 Galicia Gulf Keystone Iraq Energy 3,314 2.3 Petroleum Halyk Savings Bank Kazakhstan Financials 5,882 4.0 Hrvatski Croatia Telecommunications 3,900 2.7 Telekomunikacije Industries of Qatar Qatar Industrials 273 0.2 Kazmunaigas Kazakhstan Energy 5,930 4.1 Exploration Production Kenya Airways Kenya Industrials 1,393 1.0 Kuwait Foods Kuwait Consumer 2,666 1.8 (Americana) Discretionary Mercadolibre Argentina Technology 1,832 1.3 MHP Ukraine Consumer Staples 4,750 3.3 Nagacorp Cambodia Consumer 2,979 2.0 Discretionary NMC Health United Arab Health Care 3,167 2.2 Emirates Nova Kreditna Banka Slovenia Financials 290 0.2 Maribor Orascom Telecom Algeria Telecommunications 3,347 2.3 Holdings Qatar Electricity & Qatar Utilities 3,960 2.7 Water Qatar Gas Qatar Energy 2,528 1.7 Transportation Qatar Telecom Qatar Telecommunications 4,719 3.3 Safaricom Kenya Telecommunications 836 0.6 Shikun & Binui Pan Africa Industrials 3,685 2.5 Soldiere Lebanon Financials 1,205 0.8 Sundance Resources Cameroon Materials 1,140 0.8 Westernzagros Iraq Energy 977 0.7 ------- ---- Equity Investments 81,760 56.3 ------- ---- BlackRock Institutional Cash Fund 12,913 8.9 ------- ---- Total Equity Investments 94,673 65.2 ======= ==== P-Notes Abdullah Al Othaim Saudi Arabia Consumer Staples 1,166 0.8 Markets P-Note 13/08/ 14 Abdullah Al Othaim Saudi Arabia Consumer Staples 579 0.4 Markets P-Note 30/08/ 13 Al Mouwasat Medical Saudi Arabia Health Care 3,721 2.6 P-Note 13/04/15 Etihad Etisalat Bank Saudi Arabia Telecommunications 5,381 3.7 P-Note 05/12/14 Saudi Arabian Saudi Arabia Industrials 1,837 1.3 Amiantit P-Note 11/05 /15 United International Saudi Arabia Industrials 778 0.5 Transportation P-Note 23/02/15 ------- ---- Total P-Notes 13,462 9.3 ------- ---- Total investments excluding CFDs 108,135 74.5 ======= ==== Gross market Principal Gross exposure country market as a % of of exposure net assets Company operation Sector US$'000** *** CFD portfolio Long positions: British American Bangladesh Consumer Staples 3,070 2.1 Tobacco Dangote Flour Mills Nigeria Consumer Staples 1,830 1.3 Ecobank Transnational Nigeria Financials 2,988 2.0 First Bank of Nigeria Nigeria Financials 4,739 3.3 First Gulf Bank United Arab Financials 3,352 2.3 Emirates FPT Vietnam Technology 906 0.6 Guinness Nigeria Nigeria Consumer Staples 2,312 1.6 Hatton National Bank Sri Lanka Financials 4,313 3.0 Kinh Do Vietnam Consumer Staples 3,909 2.7 Marico Bangladesh Consumer Staples 1,294 0.9 Petrovietnam Vietnam Materials 3,980 2.7 Fertilizers & Chemicals Safaricom Kenya Telecommunications 860 0.6 Sorouh Real Estate United Arab Financials 3,259 2.2 Emirates Square Pharmaceuticals Bangladesh Health Care 2,340 1.6 Unilever Nigeria Nigeria Consumer Staples 1,837 1.3 Zenith Bank Nigeria Financials 6,607 4.6 ------ ---- Total long CFD positions 47,596 32.8 ------ ---- Fair Gross market Gross Investment value exposure** market exposure as Summary US$'000 US$'000 a % of net assets*** Total long CFD positions 9,481 47,596 32.8 ------- ------- ----- Total short CFD positions (175) (1,686) (1.2) ------- ------- ----- Total CFD portfolio 9,306 45,910 31.6 ------- ------- ----- Equity investments (excluding BlackRock Cash Fund) and P-Notes 95,222 95,222 65.6 ------- ------- ----- BlackRock's Institutional Cash Fund **** 12,913 15,355 10.6 ------- ------- ----- Total Investments 117,441 156,487 107.8 ------- ------- ----- Cash and cash equivalents **** 39,046 ------- ------- ----- Net current liabilities (11,307) (11,307) (7.8) ------- ------- ----- Net assets 145,180 145,180 100.0 ======= ======= ===== * 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$9,306,000 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$38,115,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the CFD contracts of US$9,481,000, resulting in the value of the total market exposure to the underlying securities rising to US$47,596,000 as at 31 March 2013. The cost of acquiring the securities to which exposure was gained via the short CFD positions would have been US$1,511,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised losses on the short CFD positions of US$175,000 and the value of the market exposure of these investments increasing to US$1,686,000 at 31 March 2013. If the short position had been closed on 31 March 2013 this would have resulted in a loss of US$175,000 for the Company. - P-Notes are valued based on the quoted bid price of the underlying equity security to which they relate. ** Market exposure in the case of equity and P-Note investments is the same as Fair Value. In the case of CFDs it is the market value of the underlying shares to which the portfolio is exposed via the contract. *** % based on the total market exposure. **** The gross market exposure column for Cash and Cash Fund investments has been adjusted to assume the Company purchased direct holdings rather than exposure being gained through CFDs. Statement of Comprehensive Income for the six months ended 31 March 2013 Revenue Capital Total US$'000 US$'000 US$'000 Six months Six months Year Six months Six months Year Six months Six months Year ended ended ended ended ended ended ended ended ended 31.03.13 31.03.12 30.09.12 31.03.13 31.03.12 30.09.12 31.03.13 31.03.12 30.09.12 Notes (unaudited) (unaudited) (audited)(unaudited)(unaudited) (audited)(unaudited) (unaudited) (audited) Profits on investments held at fair value through profit or loss - - - 5,061 10,514 3,973 5,061 10,514 3,973 Losses on foreign exchange - - - (25) - (76) (25) - (76) Net profits from contracts for difference 3 714 783 2,109 13,159 5,613 10,203 13,873 6,396 12,312 Loss on credit default swap - - - - (4) (4) - (4) (4) Income from investments held at fair value through profit or loss 3 2,115 1,937 3,306 - - - 2,115 1,937 3,306 Other income 3 28 11 28 - - - 28 11 28 ----- ----- ----- ------ ------ ------ ------ ------ ------ Total revenue 2,857 2,731 5,443 18,195 16,123 14,096 21,052 18,854 19,539 ----- ----- ----- ------ ------ ------ ------ ------ ------ Expenses Investment management and performance fees 4 (150) (135) (269) (1,224) (1,265) (1,767) (1,374) (1,400) (2,036) Other expenses 5 (220) (208) (556) (23) (71) (86) (243) (279) (642) ----- ----- ----- ------ ------ ------ ------ ------ ------ Total operating expenses (370) (343) (825) (1,247) (1,336) (1,853) (1,617) (1,679) (2,678) ----- ----- ----- ------ ------ ------ ------ ------ ------ Profit on ordinary activities before finance costs and taxation 2,487 2,388 4,618 16,948 14,787 12,243 19,435 17,175 16,861 Finance costs (1) - (1) (3) - (3) (4) - (4) ----- ----- ----- ------ ------ ------ ------ ------ ------ Profit on ordinary activities before taxation 2,486 2,388 4,617 16,945 14,787 12,240 19,431 17,175 16,857 Taxation (203) (305) (698) 154 234 454 (49) (71) (244) ----- ----- ----- ------ ------ ------ ------ ------ ------ Profit for the period 2,283 2,083 3,919 17,099 15,021 12,694 19,382 17,104 16,613 ----- ----- ----- ------ ------ ------ ------ ------ ------ Earnings per ordinary share (US cents) 8 2.41 2.20 4.14 18.04 15.85 13.39 20.45 18.05 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. All income is attributable to the equity holders of BlackRock Frontiers Investment Trust plc. Statement of Changes in Equity for the six months ended 31 March 2013 Called up share Special Capital Revenue capital reserve reserve reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 For the six months ended 31 March 2013 (unaudited) At 30 September 2012 948 142,704 (18,652) 3,262 128,262 Total comprehensive income: Net profit for the period - - 17,099 2,283 19,382 Transactions with owners, recorded directly to equity: Dividend paid(a) - - - (2,464) (2,464) --- ------- ------ ----- ------- At 31 March 2013 948 142,704 (1,553) 3,081 145,180 --- ------- ------ ----- ------- For the six months ended 31 March 2012 (unaudited) At 30 September 2011 948 142,704 (31,346) 3,323 115,629 Total comprehensive income: Net profit for the period - - 15,021 2,083 17,104 Transactions with owners, recorded directly to equity: Dividend paid(b) - - - (2,843) (2,843) --- ------- ------ ----- ------- At 31 March 2012 948 142,704 (16,325) 2,563 129,890 --- ------- ------ ----- ------- For the year ended 30 September 2012 (audited) 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 Transactions with owners, recorded directly to equity: Dividend paid(c) - - - (3,980) (3,980) --- ------- ------ ----- ------- At 30 September 2012 948 142,704 (18,652) 3,262 128,262 === ======= ====== ===== ======= (a) Final dividend of 2.60 US cents per share for the year ended 30 September 2012, declared on 8 February 2013 and paid on 8 March 2013. (b) Final dividend of 3.00 US cents per share for the year ended 30 September 2011, declared on 2 December 2011 and paid on 24 February 2012. (c) Final dividend of 3.00 US cents per share for the year ended 30 September 2011, declared on 2 December 2011 and paid on 24 February 2012 and the interim dividend of 1.20 US cents per share for the six months ended 31 March 2012, declared on 11 May 2012 and paid on 22 June 2012. During the period the Company incurred purchase transaction costs of US$129,000 (for the six months ended 31 March 2012: US$65,000; for the year ended 30 September 2012: US$137,000), and sales transaction costs of US$79,000 (for the six months ended 31 March 2012: US$52,000; for the year ended 30 September 2012: US$91,000). All transaction costs have been included within the capital reserves. Statement of Financial Position as at 31 March 2013 31 31 30 March March September 2013 2012 2012 US$'000 US$'000 US$'000 Notes (unaudited) (unaudited) (audited) Non current assets Investments designated as held at fair value through profit or loss 108,135 101,277 97,767 ======= ======= ======= Current assets Other receivables 3,777 1,043 499 Derivative financial assets held at fair value through profit or loss 10,218 4,179 5,547 Cash held on margin deposit with brokers - 4,469 231 Cash and cash equivalents 39,046 28,178 33,707 ------- ------- ------- 53,041 37,869 39,984 Current liabilities Other payables (3,646) (2,637) (2,794) Net collateral held in respect of (11,419) - (3,948) contracts for difference Derivative financial liabilities held at fair value through profit or loss (912) (6,600) (2,728) ------- ------- ------- (15,977) (9,237) (9,470) ------- ------- ------- Net current assets 37,064 28,632 30,514 ======= ======= ======= Total assets less current liabilities 145,199 129,909 128,281 Creditors: amounts falling due after more than one year Preference shares of £1.00 each (one quarter paid) (19) (19) (19) ------- ------- ------- Net assets 145,180 129,890 128,262 ======= ======= ======= Capital and reserves Called up share capital 7 948 948 948 Special reserve 142,704 142,704 142,704 Capital reserves (1,553) (16,325) (18,652) Revenue reserve 3,081 2,563 3,262 ------- ------- ------- Total equity 145,180 129,890 128,262 ======= ======= ======= Net asset value per share (US cents) 8 153.20 137.06 135.35 ======= ======= ======= Cash Flow Statement for the six months ended 31 March 2013 Six Six months months Year ended ended ended 31 31 30 March March September 2013 2012 2012 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Net cash inflow from operating activities before financing activities 126 1,660 236 ------ ------ ------ Financing activities Share issue costs paid - (1,289) (1,381) Dividend paid (2,464) (2,843) (3,980) ------ ------ ------ Net cash outflow from operating activities after financing activities (2,422) (4,132) (5,361) ------ ------ ------ Decrease in cash and cash equivalents (2,338) (2,472) (5,125) Effect of foreign exchange rate changes (25) (58) (62) ------ ------ ------ Change in cash and cash equivalents (2,363) (2,530) (5,187) Cash and cash equivalents at start of period 29,990 35,177 35,177 ------ ------ ------ Cash and cash equivalents at end of period 27,627 32,647 29,990 ------ ------ ------ Comprised of: Cash and cash equivalents 39,046 28,178 33,707 Add: cash held on margin deposit with brokers - 4,469 231 Less: collateral received in respect of contracts for difference (11,419) - (3,948) ------ ------ ------ 27,627 32,647 29,990 ====== ====== ====== Reconciliation of Net income before Taxation to Net Cash Flow from Operating Activities Six Six months months Year ended ended ended 31 31 30 March March September 2013 2012 2012 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Profit before taxation 19,431 17,175 16,857 Profits on investments and CFDs held at fair value through profit or loss (including transaction costs) (18,476) (16,372) (14,638) Net movement on foreign exchange 25 - 76 Realised losses on closure of CFD contracts (635) (3,129) (7,280) Gains on realisation of CFDs 7,563 2,725 6,443 Proceeds of credit default swap - 646 646 (Increase)/decrease in other receivables (2,538) (677) 27 Increase in other payables 757 174 179 (Increase)/decrease in amounts due from brokers (698) 521 361 Increase/(decrease) in amounts due to brokers 53 (355) 265 Net (purchases)/sales of investments held at fair value through profit or loss (5,307) 1,023 (2,007) Taxation on investment income included within gross income (49) (71) (693) ----- ----- ----- Net cash inflow from operating activities 126 1,660 236 ===== ===== ===== Notes to the Financial Statements for the six months ended 31 March 2013 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. 2. Basis of preparation The half yearly financial statements have been prepared using the same accounting policies as set out in the Company's annual report and financial statements for the year ended 30 September 2012 (which were prepared in accordance with IFRS as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006) and in accordance with International Accounting Standard 34. Insofar as the Statement of Recommended Practice ("SORP") for the investment trust companies and venture capital trusts issued by the Association of Investment Companies ("AIC"), revised in January 2009 is compatible with IFRS, the Financial Statements have been prepared in accordance with guidance set out in the SORP. 3. Income Six Six months months Year ended ended ended 31 31 30 March March September 2013 2012 2012 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Investment income: UK listed dividends - - 56 Overseas listed dividends 2,115 1,937 3,250 Income from contracts for difference 714 783 2,109 ----- ----- ----- 2,829 2,720 5,415 Interest receivable and other income: Deposit interest 28 11 28 ----- ----- ----- Total income 2,857 2,731 5,443 ===== ===== ===== 4. Investment management and performance fees Six months Six months Year ended ended ended 31 March 2013 31 March 2012 30 September 2012 (unaudited) (unaudited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 150 601 751 135 541 676 269 1,078 1,347 Performance fee - 623 623 - 724 724 - 689 689 === ===== ===== === ===== ===== === ===== ===== Total 150 1,224 1,374 135 1,265 1,400 269 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. The performance fee is also subject to a high watermark such that any performance fee is only payable to the extent that the cumulative relative outperformance of the NAV is greater than what would have been achieved had the NAV increased in line with the reference index since the last date in relation to which a performance fee had been paid. For the six months ended 31 March 2013, the Company's NAV had outperformed the MSCI Frontiers Markets Index by 3.6% in US dollar terms and a performance fee of US$623,000 had been accrued. As the outperformance had been generated predominantly through capital returns, the performance fee has been charged 100% to capital. The fee does not crystallise until 30 September 2013 but is accrued daily in the Company's NAV based on daily performance data, in line with best practice under the SORP. 5. Operating expenses Six Six months months Year ended ended ended 31 31 30 March March September 2013 2012 2012 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Custody fee 45 70 138 Directors' fees 78 85 188 Other administration costs 97 53 230 --- --- --- 220 208 556 === === === For the six months ended 31 March 2013, expenses of US$23,000 charged to the capital column of the Statement of Comprehensive Income relate to US$23,000 of transaction costs. For the six months ended 31 March 2012, expenses of US$71,000 charged to the capital column of the Statement of Comprehensive Income related to US$14,000 of transaction costs and US$57,000 of fees in relation to investing in new markets. For the year ended 30 September 2012, expenses of US$86,000 charged to the capital column of the Statement of Comprehensive Income related to US$29,000 of transaction costs and US$57,000 of fees in relation to investing in new markets. 6. Dividend The Board has declared an interim dividend of 2.00 US cents per share payable on 5 July 2013 to shareholders on the register at 7 June 2013 (six months ended 31 March 2012, interim dividend of 1.20 US cents per share paid on 22 June 2012 to shareholders on the register at 25 May 2012). A special interim dividend of 3.40 US cents has also been declared payable on 5 July 2013 to shareholders on the register at 7 June 2013. Further details relating to this special dividend can be found in the Chairman's Statement. These dividends have not been accrued in the financial statements for the six months ended 31 March 2013, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves. 7. Called up share capital Number of Total Nominal shares in shares in value issue issue US$'000 Authorised share capital comprised: Ordinary shares of 1 cent each: Allotted, issued and fully paid: At 30 September 2012 94,766,267 94,766,267 948 ---------- ---------- --- At 31 March 2013 94,766,267 94,766,267 948 ========== ========== === 8. Earnings and net asset value per ordinary share Six Six months months Year ended ended ended 31 31 30 March March September 2013 2012 2012 (unaudited) (unaudited) (audited) Net revenue profit attributable to ordinary shareholders (US$'000) 2,283 2,083 3,919 Net capital profit attributable to ordinary shareholders (US$'000) 17,099 15,021 12,694 ------ ------ ------ Total profit attributable to ordinary shareholders (US$'000) 19,382 17,104 16,613 ------ ------ ------ Revenue earnings per share - (US cents) 2.41 2.20 4.14 Capital earnings per share - (US cents) 18.04 15.85 13.39 ------ ------ ------ Total earnings per share - (US cents) 20.45 18.05 17.53 ====== ====== ====== 31 31 30 March March September 2013 2012 2012 (unaudited) (unaudited) (audited) Total equity attributable to ordinary shareholders (US$'000) 145,180 129,890 128,262 ------- ------- ------- Net asset value per share basic and diluted - (US cents) 153.20 137.06 135.35 Share price* 158.68 134.21 130.40 ------- ------- ------- The weighted average number of ordinary shares in issue during the period on which the return per ordinary share was calculated was: 94,766,267 94,766,267 94,766,267 ---------- ---------- ---------- The actual number of ordinary shares in issue at the end of each period on which the net asset value was calculated was: 94,766,267 94,766,267 94,766,267 ========== ========== ========== * 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 did not have any dilutive securities at the period end. 9. Related party disclosure 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 of the other Directors 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, Lynn Ruddick holds 26,000 ordinary shares, John Murray holds 100,000 ordinary shares, Nick Pitts-Tucker holds 75,000 ordinary shares and Sarmad Zok holds 30,000 ordinary shares. 10. Transaction with the Investment Manager The Investment Manager, BlackRock Investment Management (UK) Limited, is also considered to be a related party under the Listing Rules. The investment management and performance fees accrued and payable for the period ended 31 March 2013 are set out in note 4. As at 31 March 2013 an amount of US$1,423,000 was outstanding in respect of management fees. A further US$623,000 had been accrued in respect of the performance fee for the six months ended 31 March 2013. The final perfomance fee for the full year to 30 September 2013 will not crystallise and fall due until the calculation date of 30 September 2013. The Company has an investment in BlackRock's Institutional Cash Fund of US$12,913,000 at the period end (31 March 2012: US$14,470,000; 30 September 2012: US$14,590,000). 11. Publication of non statutory accounts The financial information contained in this half yearly report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 31 March 2013 has not been audited. 12. Annual results The Board expects to announce the annual results for the year ended 30 September 2013 in mid December 2013. Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000. The annual report should be available at the beginning of January 2014, with the Annual General Meeting being held in February 2014. 30 May 2013 12 Throgmorton Avenue London EC2N 2DL 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 May 2013 12 Throgmorton Avenue, London EC2N 2DL END The Half Yearly Financial Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/literature/interim-report/blackrock-frontiers-investment-trust-plc-interim-report.pdf. Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement.

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