Half-yearly Report

BlackRock Frontiers Investment Trust plc Half Yearly Financial Report for the six months ended 31 March 2015 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 2015 30 September 2014 US Dollar Net assets (US$'000) 262,584 306,132 Net asset value per share (cum income) 174.33c 203.25c Share price (1) 167.38c 211.58c ------- ------- Sterling Net assets (£'000) (1) 176,883 188,819 Net asset value per share (cum income) (1) 117.43p 125.36p Share price 112.75p 130.50p ------- ------- (Discount)/premium -4.0% 4.1% ======= ======= Six months ended Year ended Since Performance - total return basis 31 March 2015 30 September 2014 inception % % % US Dollar Net asset value per share (with income reinvested) -12.3 +21.2 +28.3 MSCI Frontier Markets Index (net return(2)) -15.2 +30.0 +17.3 MSCI Emerging Markets Index (net return(2)) -2.4 +4.3 -2.7 Ordinary share price (with income reinvested) -19.0 +20.1 +21.3 ------ ------ ------ Sterling Net asset value per share (with income reinvested) -4.2 +21.1 +34.5 MSCI Frontier Markets Index (net return(2)) -7.4 +29.9 +23.2 MSCI Emerging Markets Index (net return(2)) +6.6 +4.2 +2.2 Ordinary share price (with income reinvested) -11.5 +20.0 +27.0 ===== ===== ===== 1. Based on an exchange rate of 1.4845 at 31 March 2015 and 1.6213 at 30 September 2014. 2. 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 to 31 March 2015 For the six months to 31 March 2015, the MSCI Frontier Markets Index fell by 15.2%, significantly underperforming the MSCI Emerging Markets Index which fell by 2.4%. Against this backdrop your Company's NAV per share fell by 12.3%, outperforming the index by 2.9% and the share price fell by 19.0% (all calculations are in US dollar terms with income reinvested). Overview Although our NAV return was better than that of the benchmark index, it was a disappointing six months in absolute terms. It is worth reflecting, however, that since your Company was launched in December 2010, Frontier Markets have performed well, returning 17.3%. This represents a significant outperformance over mainstream Emerging Markets which have been volatile and have fallen by 2.7% over the same period. Encouragingly, your Company has also outperformed the MSCI Frontier Markets Index by some margin over that time, returning 28.3%, compared with a benchmark return of 17.3% (all calculations are in US dollars, with income reinvested). It is also pleasing to note that in April 2015 the Company was awarded the accolade of being Money Observer's Best Diversified Emerging Markets Trust. For the period under review, the dramatic fall in the oil price was the major preoccupation for investors in Frontier Markets and the Manager's decision to decrease exposure to oil exporting countries in favour of those countries benefitting from lower energy costs, including Sri Lanka, Pakistan and Bangladesh, helped to cushion some of the fall. Individual holdings such as the Company's holding in the software development company EPAM Systems, which has operations in Ukraine and Belarus, also contributed strongly to relative performance following good results. The portfolio's exposure to Iraqi oil stocks was the most significant negative contributor over the period. Since the period end and up to 15 May 2015, the Company's NAV per share has risen by 6.3% and the share price has risen by 8.0% (both on a US dollar basis with income reinvested). Revenue Return and Dividends The Company's revenue return per share for the six months to 31 March 2015 amounted to 2.54 US cents (31 March 2014: 3.02 US cents). The decrease was mainly due to the exit last year of Qatar and UAE from the Company's investment universe. These countries were reclassified as Emerging, as opposed to Frontier, Markets which prompted the sale of holdings in these countries from the portfolio. Typically companies in both of these countries pay dividends early in the calendar year and the absence of this income accounts for 1.3 cents per share of the decrease. Although this change has impacted the timing of portfolio dividend flows, we do not expect it to impact the Company's earnings per share significantly for the full year to 30 September 2015. The Board hs declared an interim dividend of 2.40 cents per share payable on 3 July 2015 to shareholders on the Company's register on 5 June 2015. Share Capital The Directors recognise the importance to investors that the Company's share price should not trade at a significant discount or premium to NAV. Accordingly, the Directors monitor the share rating closely and will consider share repurchases or share issues in the market if the discount or premium widens significantly. For the period under review, the Company's shares traded at an average discount of 2.1%, and as at 15 May 2015 stood at a discount of 2.4%. 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 AGM in 2016, when a resolution will be put to shareholders to renew it. At 31 March 2015, the Company had 150,621,621 shares in issue. There were no share allotments or share buybacks in the period. 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 ("NAV") 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. Options include 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 NAV per ordinary share less costs, at five yearly intervals. Outlook Against a backdrop of continuing concerns over global growth, tensions in the Middle East and Ukraine and falling oil prices, valuations look increasingly attractive across many of the Frontier Market countries. In Nigeria, the results of the recent Presidential elections create a positive environment for change and the country has tremendous long term potential. Countries as diverse as Pakistan and Morocco are reaping the benefits of improved fiscal discipline and we are hopeful that the framework agreement between the international community and Iran will be a step towards greater stability in the Middle East. Overall, we believe that Frontier Markets continue to represent a compelling investment opportunity for long term investors. An ability to access investments in countries which in many cases exhibit fast growing economies, strong demographic profiles, low government debt and substantial commodity endowments provide a range of exciting investment opportunities. In addition, the low correlation of Frontier Markets with both Emerging and Developed Markets in our view also offer compelling portfolio diversification benefits. Audley Twiston-Davies Chairman 18 May 2015 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; - Regulatory; - Operational; - Market; - Political; 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 2014. A detailed explanation can be found in the Strategic Report on pages 14 to 16 and in note 17 on pages 50 to 62 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at 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, having considered the nature and liquidity of the portfolio, the Company's investment objective and the Company's projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. For this reason, they continue to adopt the going concern basis in preparing the financial statements. 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. Ongoing charges (including any performance fees but excluding interest costs and taxation) are approximately 1.5% of net assets. Related Party Disclosure and Transactions with the AIFM and Investment Manager BlackRock Fund Managers Limited ("BFM") was appointed as the Company's AIFM with effect from 2 July 2014. BFM has (with the Company's consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited ("BIM (UK)"). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management and performance fees payable are set out in note 4 and note 10. The related party transactions with the Directors are 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, includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority ("FCA") Disclosure and Transparency Rules. The half yearly financial report has been reviewed by the Company's Auditor. The half yearly financial report was approved by the Board on 18 May 2015 and the above responsibility statement was signed on its behalf by the Chairman. Audley Twiston-Davies For and on behalf of the Board 18 May 2015 Investment Manager's Report Market Commentary The six months to 31 March 2015 were a difficult time for Frontier Markets. The MSCI Frontier Markets Index fell by 15.2% over this period (calculated in US dollar terms with income reinvested). Since the reclassification of Qatar and United Arab Emirates, the Frontier Markets Index has a much lower weighting in the Middle East and is less exposed to movements in the oil price. That said, the significance of the recent move in oil prices for energy exporters such as Nigeria, Kazakhstan and Kuwait was sufficient to weigh on index returns and markest in the three countries fell by 33%, 31% and 18% respectively. The oil importing nations fared somewhat better. Pakistan has been one of the strongest markets, and although over the six month period under review it fell by 6%, this is not the full story. In the five months to the end of February, the market was up by nearly 7%; it then fell by 12% in March as investors were concerned about the impact of the imminent government placement of their stake in the largest bank, Habib Bank. Following the placement, the market has rallied by 12% in the month to 27 April 2015, taking the overall performance of the index from 30 September 2014 to 27 April 2015 to nearly 5%. This strong performance has been driven by a virtuous circle of a lower import bill, lower inflation, a strengthening currency and a greater than expected cut in interest rates. The Pakistani rupee is one of only a handful of currencies which has appreciated versus the US dollar over the reporting period which has been a tailwind for foreign investor returns. Another notable strong performer has been Argentina which has risen by 15% over the half year. The current presidential incumbent, Cristina Fernandez de Kirchner, has served two terms already and so cannot be re-elected in the October elections. Investors are becoming increasingly excited about the country's prospects in the event of a shift towards a more orthodox economic policy. If Argentina were to reach agreement with its hold-out creditors, this could pave the way for a reopening of foreign capital markets and a lifting of some of the foreign exchange restrictions currently in place which are hampering growth. The Kenyan market was up by 5% over the period. Index returns were driven by Telecommunications company, Safaricom, the global leader in mobile money transfer, which has continued to extend its dominance following its recent acquisition of YuMobile's frequency spectrum. Portfolio Commentary The Company's net asset value ("NAV") per share fell by 12.3% (in US dollar terms) during the six months ended 31 March 2015. Pakistani industrial, Hub Power Company, outperformed substantially during the period, rising by 39%. The company reported results that beat expectations and its US dollar linked return looked increasingly attractive to investors as interest rates fell. The company is currently considering building a large coal fired power plant which would substantially increase production capacity at attractive returns for investors. Eastern European IT outsourcer, EPAM Systems, was another notable performer rising by 32% over the period also after reporting results that exceeded analyst expectations. Companies are increasingly focusing on location when choosing to outsource business, preferring their supplier to be geographically closer, and this is benefiting EPAM who are taking market share. The Company benefited from positions in Sri Lanka where stock selection was especially strong, with our largest holding, Hatton National Bank, rising by 20% vs the MSCI Sri Lanka Index which fell by 14%. There had been concerns that in the event of an opposition victory, supporters of incumbent Mr Mahinda Rajapaksa would impede a smooth transition of power. Sri Lanka announced election results in January 2015, declaring victory for the opposition and this was followed by the relatively smooth handover of power to Mr Maithripala Sirisena and his party, marking Sri Lanka as a Frontier Market with a bright and vibrant democracy. Strong relative performance has been driven by our underweight position in Nigeria. Positions in Nigeria were reduced substantially at the start of the financial year on the back of our view that the substantial fall in oil prices would likely weigh on domestic growth and force the central bank to devalue the currency. The macro-economic situation in Bangladesh remains healthy. We have continued to see strong GDP growth supported by an improving external balance on the back of rising exports and a lower oil price reducing imports. We continue to believe that the Bangladesh market looks attractive in this environment, especially given the relative multiples between comparable companies in Bangladesh and India. The most significant detractors from performance were the Iraqi oil stocks. Although Kurdistan has started exporting oil through it's pipeline to Turkey, the International Oil Companies ("IOCs") are still not receiving payment for these exports which is putting pressure on their balance sheets, exacerbated by the fall in the oil price. Positions in Kazakhstan also had a negative impact on performance as the market started to price in a Kazakh Tenge devaluation, again related to the fall in oil price. Portfolio Activity Over the last year, a substantial portion of the portfolio has been moved from oil producing to oil importing countries such that the percentage of the portfolio with direct exposure to oil exporting countries has fallen by over 25%. We would highlight the significant reduction in positions in Nigeria, Saudi Arabia and Oman. That said, the Company continued to hold positions in companies based in energy exporting countries which have strong underlying fundamentals that we believe are significantly underpriced. The Company has initiated positions in a number of new companies including: Eastern European IT outsourcer, EPAM Systems, where we believe that the stock is underpriced relative to its growth profile; and Tunisian brewer, SFBT, which is the dominant producer of beer, soft drinks and water in Tunisia. Outlook The six months to 31 March 2015 was a period of poor performance for Frontier Markets both on an absolute and relative basis. Although the Company has outperformed its benchmark, this has been insufficient to prevent a fall in absolute terms. Performance of Frontier Markets has been strong over the previous three years, and importantly has been accompanied by strong corporate earnings growth across the universe, such that valuations are attractive, especially given the recent sell off. We note the current trend for political normalisation within Frontier Markets. Following Pakistan and Sri Lanka, Nigeria is the most recent Frontier Market country to have surprised investors with a peaceful, democratic transition of power to the opposition in recent elections. While many challenges remain, not least the war in the north east of the country, a currency that appears overvalued and ongoing corruption concerns, the opportunity for positive change with genuinely new leadership is considerable. We note that the entire market capitalisation of the Nigerian Stock Exchange is circa US$45 billion (£30 billion), a mere fraction of the country's official GDP and a sum roughly equal to one mid-tier UK FTSE 100/S&P 500 corporate. Within Nigeria we believe that the banking sector has tremendous long term potential and trades at inexpensive relative and absolute valuations. Elsewhere, the framework agreement between the international community and Iran is positive, despite many complicated technical details which still need to be dealt with before June 2015. The Iranian stock market has thus far been un-investable because of sanctions. This surprisingly large and liquid market could well feature in portfolios if sanctions were lifted. The Vietnamese regulator is considering measures to lift foreign ownership restrictions in the equity market which will allow greater foreign participation. Regulation changes in Saudi Arabia which intends to open its markets to foreign investors in 2015 are also of note, as it will likely mean that MSCI will consider the country for index inclusion. Overall, we believe that Frontier Markets continue to represent a compelling opportunity for long term investors. The combination of the countries with the fastest growing GDP, the best demographic profiles, the lowest government debt and a substantial commodity endowment where it is possible to invest in companies on some of the lowest valuations in the world provides an unrivalled investment opportunity. The low correlation between Frontier Markets and all Developed and Emerging Markets mean that the inclusion of a Frontier Markets fund within a portfolio can bring significant diversification benefits. Sam Vecht and Emily Fletcher BlackRock Investment Management (UK) Limited 18 May 2015 Ten largest investments(1) 31 March 2015 MHP (Ukraine, Consumer Staples, 4.8% (2014: 5.2%)) is a food processing business, specialising in poultry exports. From hatching through to finished poultry products, the production process is 100% owned. MHP also owns 11 distribution centres and a refrigerated delivery vehicle fleet which enables them to distribute their products, chilled as well as frozen, directly to their customers. Mobile Telecommunications(2) (Kuwait, Telecommunications, 4.8% (2014: 5.1%)) 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. Kuwait Foods (Americana) (Kuwait, Consumer Discretionary, 4.4% (2014: 5.4%)) also known as `Americana', operates fast food franchises across North Africa, Central Asia and the Middle East. Square Pharmaceuticals(2) (Bangladesh, Health Care, 4.2% (2014: 2.9%)) is the largest pharmaceutical company in Bangladesh. Pharmaceutical spending in Bangladesh is low as a % GDP but growing. This is reflected in annualised revenue growth of approximately 15%. Hub Power(2) (Pakistan, Utilities, 3.8% (2014: 2.5%)) owns an oil-fired power station with an installed net capacity of 1,200 MW at Mouza Kund, Hub, in Balochistan and a 214 MW net capacity oil-fired power station at Mouza Poong, Narowal in Punjab. The Hub power station was one of the first and largest Independent Power Producers (IPP) in Pakistan to be financed by the private sector in Southern Asia and one of the largest private power projects in the newly industrialised world. Banco Macro (Argentina, Financials, 3.5% (2014: 2.9%)) is the second largest domestically-owned private bank in Argentina. The bank focuses on low and middle income individuals as well as SMEs. Telecom Argentina (Argentina, Telecommunications, 3.4% (2014: 1.6%)) is primarily engaged in the provision of national fixed-line telecommunication services, international long-distance services, data transmission and Internet services, as well as mobile telephony. BRD Société Générale (Romania, Financials, 3.4% (2014: 3.2%)) is the second largest Romanian bank, with over 2 million clients and 900 branches. The normalisation of credit conditions in Romania will result in positive earnings momentum and potential for the stock to re-rate. United Bank(2) (Pakistan, Financials, 3.4% (2014: 2.3%)) is one of the largest commercial banks in Pakistan having more than 1,320 branches within the country. After a sustained period of collecting low-cost deposits, Pakistani banks are well placed to grow loans meaningfully going forward with improvements in the power sector hopefully spurring credit demand. United Bank has an attractive valuation and a solid fee franchise. Halyk Savings Bank (Kazakhstan, Financials, 3.3% (2014: 4.2%)) 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. 1. Gross market exposure as a % of portfolio assets (excluding the investment in BlackRock's Institutional Cash Fund). Percentages in brackets represent the portfolio holding at 30 September 2014. 2. Includes exposure gained via both contracts for difference and equity holdings. Country and sector allocation 31 March 2015 Country Allocation (%)* Relative to MSCI Frontier Markets Index Bangladesh 8.7 Sri Lanka 6.9 Ukraine 4.5 Saudi Arabia 3.5 Kazakhstan 2.9 Turkmenistan 2.8 Romania 2.7 Iraq 2.7 Belarus 2.4 Panama 1.8 Pakistan 1.7 Algeria 1.6 Estonia 1.2 Other 0.7 Tunisia 0.3 Lithuania -0.1 Serbia -0.2 Bulgaria -0.2 Vietnam -0.3 Slovenia -0.6 Jordan -0.7 Mauritius -1.1 Bahrain -1.1 Short -1.6 positions Morocco -1.6 Croatia -1.7 Oman -2.3 Lebanon -2.6 Argentina -3.9 Kenya -5.6 Nigeria -8.9 Kuwait -11.9 Absolute weights Bangladesh 11.3 Kuwait 11.0 Pakistan 9.2 Sri Lanka 8.9 Argentina 6.6 Kazakhstan 6.2 Nigeria 5.9 Romania 5.4 Morocco 5.0 Ukraine 4.6 Vietnam 3.9 Saudi Arabia 3.5 Turkmenistan 2.8 Iraq 2.7 Oman 2.5 Belarus 2.4 Slovenia 1.9 Panama 1.8 Estonia 1.6 Algeria 1.6 Kenya 1.1 Tunisia 1.0 Other 0.7 Short -1.6 positions Source: BlackRock. * Based on portfolio gross market exposure as a % of portfolio assets (excluding the investment in BlackRock's Institutional Cash Fund), compared to the MSCI Frontier Market Index. Sector Allocation (%)* Relative to MSCI Frontier Markets Index Consumer 6.3 Discretionary Energy 5.2 Consumer Staples 3.5 Health Care 3.0 Utilities 2.9 Information 2.4 Technology Industrials 1.8 Telecommunications 0.1 Short positions -1.6 Materials -4.7 Financials -18.9 Absolute weights Financials 32.1 Telecommunications 15.8 Energy 15.5 Consumer Staples 12.6 Consumer 6.8 Discretionary Health Care 5.9 Industrials 5.3 Utilities 3.7 Information 2.4 Technology Materials 1.5 Short positions -1.6 Source: BlackRock. * Based on portfolio gross market exposure as a % of portfolio assets (excluding the investment in BlackRock's Institutional Cash Fund), compared to the MSCI Frontier Market Index. Investments as at 31 March 2015 Fair value (1) and market Gross market Principal country exposure exposure as a % Company of operation Sector US$'000 of net assets(3) Equity portfolio Agility Kuwait Industrials 6,123 2.3 Attijariwafa Bank Morocco Financials 5,917 2.2 Banco Macro Argentina Financials 9,073 3.5 Bank Muscat Oman Financials 6,545 2.5 BRD Société Générale Romania Financials 8,871 3.4 Cable & Wireless Panama Telecommunications 4,991 1.9 Chevron Lubricants Sri Lanka Energy 6,825 2.6 Commercial Bank of Sri Lanka Financials 1,432 0.6 Ceylon Distilleries Co of Sri Sri Lanka Consumer Staples 4,122 1.6 Lanka DNO ASA Iraq Energy 4,120 1.6 Dragon Oil Turkmenistan Energy 7,744 2.9 Engro Foods Pakistan Consumer Staples 3,499 1.3 EPAM Systems Belarus Information 6,613 2.5 Technology Genel Energy Iraq Energy 3,263 1.2 Global Telecom Algeria Telecommunications 4,271 1.6 Guaranty Trust Bank Nigeria Financials 2,552 1.0 Halyk Savings Bank Kazakhstan Financials 8,778 3.3 Hatton National Bank Sri Lanka Financials 3,437 1.3 Hub Power Pakistan Utilities 5,647 2.1 Kazmunaigas Exploration Kazakhstan Energy 8,229 3.1 Production KRKA Slovenia Health Care 5,122 2.0 Kuwait Foods Kuwait Consumer 11,475 4.4 (Americana) Discretionary MHP Ukraine Consumer Staples 12,675 4.8 Millat Tractors Pakistan Industrials 2,874 1.1 Mobile Kuwait Telecommunications 10,027 3.8 Telecommunications Olympic Industries Bangladesh Consumer Staples 3,128 1.2 S.N.G.N. Romgaz Romania Energy 5,918 2.3 Safaricom Kenya Telecommunications 3,137 1.2 Square Pharmaceuticals Bangladesh Health Care 1,997 0.8 Tallink Estonia Industrials 4,368 1.7 Telecom Argentina Argentina Telecommunications 9,024 3.4 United Bank Pakistan Financials 3,013 1.2 United Bank for Africa Nigeria Financials 6,035 2.3 Zenith Bank Nigeria Financials 3,855 1.5 ------- ----- Equity Investments 194,700 74.2 ------- ----- BlackRock's Institutional Cash Fund 57,285 21.8 ------- ----- Total Equity Investments 251,985 96.0 ======= ===== Fixed Interest Bank Muscat 0% 31/12/2049 Oman Financials 177 0.1 ------- ----- Total Fixed Interest 177 0.1 ------- ----- P-Notes Herfy Food Services Saudi Arabia Consumer 2,930 1.1 08/10/15 Discretionary Jarir Marketing 22/01/18 Saudi Arabia Consumer 2,214 0.8 Discretionary United International Saudi Arabia Industrials 1,283 0.5 Transportation 31/07/17 Yanbu National Saudi Arabia Energy 3,026 1.2 Petrochemical 31/07/17 ------- ----- Total P-Notes 9,453 3.6 ------- ----- Total investments excluding CFDs 261,615 99.7 ======= ===== Gross Gross market Principal Fair market exposure country value(1) exposure(2) as a % of Company of operation Sector US$'000 US$'000 net assets(3) CFD portfolio Long positions: British American Bangladesh Consumer Staples 6,802 2.6 Tobacco Commercial Bank of Sri Lanka Financials 2,369 0.9 Ceylon Distilleries Co of Sri Lanka Consumer Staples 1,519 0.6 Sri Lanka Hatton National Sri Lanka Financials 4,794 1.8 Bank Hub Power Pakistan Utilities 4,380 1.7 Maroc Telecom Morocco Telecommunications 7,623 2.9 Masan Vietnam Financials 5,073 1.9 Mobile Kuwait Telecommunications 2,608 1.0 Telecommunications Mobile World Vietnam Telecommunications 1,693 0.6 Petrovietnam Vietnam Materials 4,215 1.6 Fertilizer & Chemicals Société Tunisia Consumer Staples 2,779 1.1 Frigorifique et Brasserie de Tunis Square Bangladesh Health Care 9,005 3.4 Pharmaceuticals Titas Gas Bangladesh Energy 3,363 1.3 Transmission & Distribution United Bank Pakistan Financials 5,732 2.2 United Commercial Bangladesh Financials 6,787 2.6 Bank Youngone Other Consumer 1,930 0.7 Discretionary Zenith Bank Nigeria Financials 3,924 1.5 ------- ------- ----- Total long CFD positions (70) 74,596 28.4 ------- ------- ----- Total short CFD positions (176) (4,418) (1.7) ------- ------- ----- Total CFD portfolio (246) 70,178 26.7 ------- ------- ----- Equity investments (excluding BlackRock's Institutional Cash Fund), fixed interest and P-Notes 204,330 204,330 77.9 ------- ------- ----- BlackRock's Institutional Cash Fund (4) 57,285 57,285 21.8 ------- ------- ----- Total investments 261,369 331,793 126.4 ------- ------- ----- Cash and cash equivalents (4) 4,126 (66,298) (25.3) ------- ------- ----- Net current liabilities (3,013) (3,013) (1.1) ------- ------- ----- Net assets 262,482 262,482 100.0 ======= ======= ===== 1. Fair value is determined as follows: - Listed/fixed interest 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$246,000) represents the fair valuation of all the CFD contracts, which is determined based on the difference between 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$74,666,000 at the time of purchase, and subsequent market falls in prices have resulted in unrealised losses on the CFD contracts of US$70,000, resulting in the value of the total market exposure to the underlying securities falling to US$74,596,000 as at 31 March 2015. The cost of acquiring the securities to which exposure was gained via the short CFD positions would have been US$4,242,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised losses on the short CFD positions of US$176,000 and the value of the market exposure of these investments increasing to US$4,418,000 at 31 March 2015. If the short position had been closed on 31 March 2015 this would have resulted in a loss of US$176,000 for the Company. - P-Notes are valued based on the quoted bid price of the underlying security to which they relate. 2. Market exposure in the case of equity and P-Note investments is the same as fair value. In the case of CFDs it is the market value of the underlying shares to which the portfolio is exposed via the contract. 3. % based on the total market exposure. 4. The gross market exposure column for Cash and Cash Fund investments has been adjusted to assume the Company purchased direct holdings rather than exposure being gained through CFDs. Statement of Comprehensive Income for the six months ended 31 March 2015 Revenue US$'000 Capital US$'000 Total US$'000 Six Six Six Six Six Six months months Year months months Year months months Year ended ended ended ended ended ended ended ended ended 31.03.15 31.03.14 30.09.14 31.03.15 31.03.14 30.09.14 31.03.15 31.03.14 30.09.14 Notes (unaudited)(unaudited)(audited)(unaudited)(unaudited) (audited)(unaudited)(unaudited)(audited) (Loss)/profit on investments held at fair value through profit or loss - - - (34,062) 21,095 37,157 (34,062) 21,095 37,157 Profit/(loss) on foreign exchange - - - 266 (53) (199) 266 (53) (199) Net profit/ (loss) from contracts for difference 3 1,315 1,438 2,540 (6,463) 3,516 9,732 (5,148) 4,954 12,272 Income from investments held at fair value through profit or loss 3 3,639 4,176 10,112 - - - 3,639 4,176 10,112 Other income 3 59 24 64 - - - 59 24 64 ----- ----- ----- ------ ------ ------ ------ ------ ------ Total revenue 5,013 5,638 12,716 (40,259) 24,558 46,690 (35,246) 30,196 59,406 ----- ----- ----- ------ ------ ------ ------ ------ ------ Expenses Investment management and performance fees 4 (305) (300) (633) (1,221) (1,199) (2,523) (1,526) (1,499) (3,156) Other expenses 5 (466) (470) (1,019) (13) (81) (202) (479) (551) (1,221) ----- ----- ----- ------ ------ ------ ------ ------ ------ Total operating expenses (771) (770) (1,652) (1,234) (1,280) (2,725) (2,005) (2,050) (4,377) ----- ----- ----- ------ ------ ------ ------ ------ ------ Net profit/ (loss) on ordinary activities before finance costs and taxation 4,242 4,868 11,064 (41,493) 23,278 43,965 (37,251) 28,146 55,029 Finance costs (1) - - (5) - (1) (6) - (1) ----- ----- ----- ------ ------ ------ ------ ------ ------ Net profit/ (loss) on ordinary activities before taxation 4,241 4,868 11,064 (41,498) 23,278 43,964 (37,257) 28,146 55,028 Taxation (410) (317) (1,142) 144 154 402 (266) (163) (740) ----- ----- ----- ------ ------ ------ ------ ------ ------ Net profit/ (loss) for the period 3,831 4,551 9,922 (41,354) 23,432 44,366 (37,523) 27,983 54,288 ----- ----- ----- ------ ------ ------ ------ ------ ------ Earnings per ordinary share (US cents) 8 2.54 3.02 6.59 (27.45) 15.56 29.45 (24.91) 18.58 36.04 ===== ===== ===== ===== ===== ===== ===== ===== ===== 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. The Company does not have any other recognised gains or losses. The net profit for the period disclosed above represents the Company's total comprehensive income. Statement of Changes in Equity for the six months ended 31 March 2015 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 six months ended 31 March 2015 (unaudited) At 30 September 2014 1,506 - 5,798 231,030 59,716 8,082 306,132 Total comprehensive income: Net (loss)/profit for the period - - - - (41,354) 3,831 (37,523) Dividend paid(a) 6 - - - - - (6,025) (6,025) ----- ------ ----- ------- ------ ----- ------- At 31 March 2015 1,506 - 5,798 231,030 18,362 5,888 262,584 ----- ------ ----- ------- ------ ----- ------- For the six months ended 31 March 2014 (unaudited) At 30 September 2013 1,506 88,326 5,798 142,704 15,350 1,549 255,233 Total comprehensive income: Net profit for the period - - - - 23,432 4,551 27,983 Transactions with owners, recorded directly to equity: Cancellation of balance on share premium account - (88,326) - 88,326 - - - Dividend paid 6 - - - - - - - ----- ------ ----- ------- ------ ----- ------- At 31 March 2014 1,506 - 5,798 231,030 38,782 6,100 283,216 ----- ------ ----- ------- ------ ----- ------- For the year ended 30 September 2014 (audited) At 30 September 2013 1,506 88,326 5,798 142,704 15,350 1,549 255,233 Total comprehensive income: Net profit for the year - - - - 44,366 9,922 54,288 Transactions with owners, recorded directly to equity: Cancellation of balance on share premium account - (88,326) - 88,326 - - - Dividend paid (b) 6 - - - - - (3,389) (3,389) ----- ------ ----- ------- ------ ----- ------- At 30 September 2014 1,506 - 5,798 231,030 59,716 8,082 306,132 ----- ------ ----- ------- ------ ----- ------- (a) Final dividend of 4.0 US cents per share for the year ended 30 September 2014, declared on 11 February 2015 and paid on 20 February 2015. (b) Interim dividend paid in respect of the year ended 30 September 2014 of 2.25 US cents per share, declared on 20 May 2014 and paid on 4 July 2014. During the period the Company incurred purchase transaction costs of US$292,000 (for the six months ended 31 March 2014: US$383,000; for the year ended 30 September 2014: US$782,000), and sales transaction costs of US$226,000 (for the six months ended 31 March 2014: US$187,000; for the year ended 30 September 2014: US$493,000). All transaction costs have been included within capital reserves. Statement of Financial Position as at 31 March 2015 31 March 2015 31 March 2014 30 September 2014 US$'000 US$'000 US$'000 Notes (unaudited) (unaudited) (audited) Non current assets Investments designated as held at fair value through profit or loss 261,615 249,760 292,318 ------- ------- ------- Current assets Other receivables 3,822 4,804 2,142 Derivative financial assets held at fair value through profit or loss 2,244 11,689 18,493 Cash held on margin deposit with brokers 3,170 1,085 90 Cash and cash equivalents 956 42,644 14,770 ------- ------- ------- 10,192 60,222 35,495 Current liabilities Other payables (6,714) (13,301) (2,841) Net collateral held in respect of contracts for difference - (5,679) (11,924) Derivative financial liabilities held at fair value through profit or loss (2,490) (7,767) (6,897) ------- ------- ------- (9,204) (26,747) (21,662) ------- ------- ------- Net current assets 988 33,475 13,833 ======= ======= ======= Total assets less current liabilities 262,603 283,235 306,151 Creditors: amounts falling due after more than one year Management shares of £1.00 each (one quarter paid) (19) (19) (19) ------- ------- ------- Net assets 262,584 283,216 306,132 ======= ======= ======= Capital and reserves Called up share capital 7 1,506 1,506 1,506 Share premium account - - - Capital redemption reserve 5,798 5,798 5,798 Special reserve 231,030 231,030 231,030 Capital reserves 18,362 38,782 59,716 Revenue reserve 5,888 6,100 8,082 ------- ------- ------- Total equity 262,584 283,216 306,132 ======= ======= ======= Net asset value per share (US cents) 8 174.33 188.03 203.25 ======= ======= ======= Cash Flow Statement for the six months ended 31 March 2015 Six Six months months Year ended ended ended 31 March 2015 31 March 2014 30 September 2014 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Net cash outflow from operating activities before financing activities (8,055) (47,223) (71,562) ------ ------ ------ Financing activities Equity dividend paid (6,025) - (3,389) ------ ------ ------ Net cash outflow from financing activities (6,025) - (3,389) ------ ------ ------ Increase/(decrease) in cash and cash equivalents (14,080) (47,223) (74,951) Effect of foreign exchange rate changes 266 (53) (199) ------ ------ ------ Change in cash and cash equivalents (13,814) (47,276) (75,150) Cash and cash equivalents at start of period 14,770 89,920 89,920 ------ ------ ------ Cash and cash equivalents at end of period 956 42,644 14,770 ------ ------ ------ Comprised of: Cash and cash equivalents 956 42,644 14,770 ------ ------ ------ 956 42,644 14,770 ====== ====== ====== Reconciliation of Net Income Before Taxation to Net Cash Flow From Operating Activities Six Six months months Year ended ended ended 31 March 2015 31 March 2014 30 September 2014 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) (Loss)/profit before taxation (37,257) 28,146 55,028 Losses/(profits) on investments and CFDs held at fair value through profit or loss (including transaction costs) 34,540 (23,416) (47,591) Net movement on foreign exchange (266) 53 199 Realised losses on closure of CFD contracts (12,865) (2,532) (3,571) Gains on realisation of CFDs 18,547 2,106 4,009 Increase in other receivables (2,365) (3,761) (404) Increase/(decrease) in other payables 4,377 3,118 (1,347) (Increase)/decrease in amounts due from brokers (2,395) 257 584 Decrease in amounts due to brokers (504) (4,843) (10,866) Collateral received in respect of contracts for differences (11,924) 2,959 9,204 Sales of investments held at fair value through profit or loss 99,636 100,583 264,935 Purchases of investments held at fair value through profit or loss (97,313) (149,730) (341,002) Taxation on investment income included within gross income (266) (163) (740) ------ ------ ------ Net cash outflow from operating activities (8,055) (47,223) (71,562) ====== ====== ====== Notes to the Financial Statements for the six months ended 31 March 2015 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 period ended 30 September 2014 (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 months ended Six months ended Year ended 31 March 2015 31 March 2014 30 September 2014 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Investment income: UK listed dividends 59 117 314 Overseas listed dividends 3,580 4,059 9,796 Fixed interest income - - 2 Income from contracts for difference 1,315 1,438 2,540 ----- ----- ------ 4,954 5,614 12,652 Interest receivable and other income: Deposit interest 59 24 64 ----- ----- ------ Total income 5,013 5,638 12,716 ===== ===== ====== 4. Investment Management and Performance Fees Six months Six months Six months Six months Six months Six months Year Year Year ended ended ended ended ended ended ended ended ended 31 March 31 March 31 March 31 March 31 March 31 March 30 September 30 September 30 September 2015 2015 2015 2014 2014 2014 2014 2014 2014 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 305 1,221 1,526 300 1,199 1,499 633 2,523 3,156 An investment management fee equivalent to 1.10% per annum of the Company's gross assets is payable to the Manager. In addition, the 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 Frontier 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 2015, the Company's NAV has outperformed the Reference Index, however since the cumulative relative NAV outperformance was below the high watermark on which a performance fee was last paid, no performance fee had been accrued (six months ended 31 March 2014: nil; year ended 30 September 2014: nil). 5. Operating Expenses Six months ended Six months ended Year ended 31 March 2015 31 March 2014 30 September 2014 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Custody fee 144 112 359 Directors' fees 84 105 215 Marketing fees 31 33 45 Other administration costs 207 220 400 ---- ---- ----- 466 470 1,019 ==== ==== ===== For the six months ended 31 March 2015, expenses of US$13,000 (six months ended 31 March 2014: US$81,000; year ended 30 September 2014: US$202,000) were charged to the capital column of the Statement of Comprehensive Income relating to transaction costs. 6. Dividend The Board has declared an interim dividend of 2.40 US cents per share payable on 3 July 2015 to shareholders on the register at 5 June 2015 (six months ended 31 March 2014, interim dividend of 2.25 US cents per share paid on 4 July 2014 to shareholders on the register at 6 June 2014). This dividend has not been accrued in the financial statements for the six months ended 31 March 2015, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves. 7. Called Up Share Capital Number Total Nominal of shares shares value in issue in issue US$'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 1 cent each: At 30 September 2014 150,621,621 150,621,621 1,506 ----------- ----------- ----- At 31 March 2015 150,621,621 150,621,621 1,506 =========== =========== ===== 8. Earnings and Net Asset Value Per Ordinary Share Six months ended Six months ended Year ended 31 March 2015 31 March 2014 30 September 2014 (unaudited) (unaudited) (audited) Net revenue profit attributable to ordinary shareholders (US$'000) 3,831 4,551 9,922 Net capital (loss)/profit attributable to ordinary shareholders (US$'000) (41,354) 23,432 44,366 ------ ------ ------ Total (loss)/profit attributable to ordinary shareholders (US$'000) (37,523) 27,983 54,288 ------ ------ ------ Revenue earnings per share - (US cents) 2.54 3.02 6.59 Capital (losses)/earnings per share - (US cents) (27.45) 15.56 29.45 ------ ------ ------ Total (losses)/earnings per share - (US cents) (24.91) 18.58 36.04 ====== ====== ====== Six months ended Six months ended Year ended 31 March 2015 31 March 2014 30 September 2014 (unaudited) (unaudited) (audited) Total equity attributable to ordinary shareholders (US$'000) 262,584 283,216 306,132 ------- ------- ------ Net asset value per share basic and diluted - (US cents) 174.33 188.03 203.25 ------- ------- ------- Share price* (US cents) 167.38 196.72 211.58 ------- ------- ------- The weighted average number of ordinary shares in issue during the period on which the return per ordinary share was calculated was: 150,621,621 150,621,621 150,621,621 ----------- ----------- ----------- The actual number of ordinary shares in issue at the end of each period on which the net asset value was calculated was: 150,621,621 150,621,621 150,621,621 ----------- ----------- ----------- * The Company's share price is quoted in sterling and the above represents the US dollar equivalent based on exchange rates of 1.4845 at 31 March 2015, 1.6672 at 31 March 2014 and 1.6213 at 30 September 2014. 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 except for Ms Ruddick, are considered to be independent by the Board. With effect from 27 February 2015 Ms Ruddick is also a director of another investment trust managed by BlackRock and is now therefore deemed to be non-independent. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £34,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £28,000 and each other Director receives an annual fee of £24,000. As at 31 March 2015, an amount of £11,000 (31 March 2014: £10,700; 30 September 2014: £10,750) was outstanding in respect of directors' fees. All five members of the Board hold ordinary shares in the Company. Audley Twiston-Davies holds 128,935 ordinary shares, Lynn Ruddick holds 47,456 ordinary shares, John Murray holds 121,967 ordinary shares, Nick Pitts-Tucker holds 110,148 ordinary shares and Sarmad Zok holds 38,987 ordinary shares. 10. Transactions with the AIFM and Investment Manager BlackRock Fund Managers Limited ("BFM") was appointed as the Company's AIFM with effect from 2 July 2014. BFM provides management and administration services to the Company under a contract which is terminable on six months' notice. BFM has (with the Company's consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited. The details of the annual fee in relation to these services are disclosed in note 4. As at 31 March 2015 an amount of US$725,000 (31 March 2014: US$1,377,000; 30 September 2014: US$834,000) was outstanding in respect of management fees. There was no performance fee outstanding for the six months ended 31 March 2015, six months ended 31 March 2014 or year ended 30 September 2014. The final performance fee for the full year to 30 September 2015 will not crystallise and fall due until the calculation date of 30 September 2015. In addition to the above services, with effect from 1 November 2013 BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the period ended 31 March 2015 amounted to US$31,000 excluding VAT (six months ended 31 March 2014: US$33,000; 30 September 2014: US$72,000). Marketing fees of US$101,000 were outstanding at 31 March 2015 (31 March 2014: US$33,000; 30 September 2014: US$72,000). The Company has an investment in BlackRock's Institutional Cash Fund of US$57,285,000 at the period end (31 March 2014: US$27,981,000; 30 September 2014: US$69,384,000). 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 2015 has not been audited. The information for the year ended 30 September 2014 has been extracted from the latest published audited financial statements, which has been filed with the Registrar of Companies. The report of the Auditor on those accounts contained no qualifications or statement under section 498(2) or 498(3) of the Companies Act 2006. 12. Contingent Liabilities There were no contingent liabilities at 31 March 2015 (31 March 2014 and 30 September 2014: nil). 13. Annual Results The Board expects to announce the annual results for the year ended 30 September 2015 in early December 2015. Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000. The Annual Report and Financial Statements should be available by late December with the Annual General Meeting being held in February 2016. 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 18 May 2015 12 Throgmorton Avenue, London EC2N 2DL END The Half Yearly Financial Report will also be available on the BlackRock website at http://www.blackrock.co.uk/brfi. 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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Blackrock Frontiers Investment Trust (BRFI)
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