Half-yearly Report

BlackRock Frontiers Investment Trust plc Half Yearly Financial Report - Six months ending 31 March 2012 Investment Objective The Company's investment objective is to achieve long term capital growth from investment in companies 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. Financial Highlights 31 March 30 September 2012 2011 US Dollar Net assets ($'000) 129,890 115,629 Net asset value per share (cum income) 137.06c 122.01c Ordinary share price* 134.21c 116.84c Sterling Net assets (£'000)* 81,298 74,226 Net asset value per share (cum income)* 85.79p 78.32p Ordinary share price 84.00p 75.00p Discount 2.1% 4.2% Period from launch*** Six (17 December) months 2010 ended to 30 31 March September 2012 2011 Performance - Total Return Basis US dollar Net asset value per share (net income reinvested) 15.0% -19.5% MSCI Frontiers Index (net return)** 3.5% -15.6% MSCI Emerging Markets Index (net return)** 19.1% -19.3% MSCI World Developed Markets Index (net return)** 20.0% -10.6% Ordinary share price* 17.8% -24.5% Sterling Net asset value per share (net income reinvested) 12.1% -20.1% MSCI Frontiers Index (net return)** 0.9% -16.2% MSCI Emerging Markets Index (net return)** 16.2% -19.9% MSCI World Developed Markets Index (net return)** 17.5% -11.2% Ordinary share price 14.8% -25.0% * Based on exchange rate of 1.5977 at 31 March 2012 and 1.5578 at 30 September 2011. **Net return indices calculate the reinvestment of dividends net of withholding taxes using tax rates applicable to non-resident institutional investors. ***The Company was incorporated on 15 October 2010 and its shares were admitted to trading on the London Stock Exchange on 17 December 2010. Chairman's Statement For the six months ended 31 March 2012 I am pleased to present the interim report to shareholders of the BlackRock Frontiers Investment Trust plc for the six months ended 31 March 2012. Overview Against a background of continuing global volatility, the Company's net asset value ("NAV") performed well over the period, increasing by 12.1% and outperforming the MSCI Frontier Markets Index by 11.2%. The Company's share price increased by 14.8% over the same period (all performance calculations are in sterling with net income reinvested). The Investment Manager's focus on quality companies considered to be underpriced relative to emerging and developed market peers proved successful in the period. In particular, stocks with exposure to Iraq increased significantly in value following the decision by Exxon to invest in the Kurdistan region of Iraq. The Investment Manager will continue to focus on careful stock selection in companies with attractive valuations and good growth prospects. Since the period end, the Company's NAV has fallen by 2.9% and the share price has fallen by 2.4% (both on a sterling basis with net income reinvested). Revenue return and dividends The Company's revenue return per share for the six month period amounted to 2.20 cents (period from incorporation on 15 October 2010 to 31 March 2011: 1.69 cents). Dividend receipts from portfolio investments have been strong in the first part of the year and in recognition of this the Directors are recommending an interim dividend of 1.2 cents per share payable on 22 June 2012 to shareholders on the Company's register on 25 May 2012. The Board believes that the promising start to the year provides a sound basis for the level of the final dividend, which will be announced at the time of the publication of the Company's annual results for the year ended 30 September 2012. Share capital At 31 March 2012 the Company had in issue 94,766,267 shares with a nominal value of £1 per ordinary share. There were no share issues or share buybacks in the period. Share rating and share buy backs The Directors recognise the importance to investors of ensuring that the Company's share price does not trade at a significant discount to the underlying NAV. Accordingly, the Directors monitor the share rating closely and will consider share repurchases in the market if the discount to NAV widens significantly. In addition, the Board will provide shareholders with the opportunity to realise the value of their ordinary shares at NAV per share less costs in advance of the Company's fifth Annual General Meeting in 2016. For the six month period ended 31 March 2012 the Company's shares have traded at an average discount to NAV of 3.2%, and were trading at a discount of 1.6% on a cum income basis at the date of this report. The Directors have the authority to buy back up to 14.99% of the Company's issued share capital. This authority, which has not so far been utilised, expires on the conclusion of the 2013 AGM, when a resolution will be put to shareholders to renew it. Outlook The implementation of positive structural reforms, improving domestic liquidity and declining inflation in many Frontier Market countries should increase investor confidence and widen their appeal. Many institutional investors have little or no exposure to the asset class. Given these factors, combined with their global isolation from capital flows and rising dividend, Frontier Markets are likely to continue to demonstrate a low correlation with other global markets where conditions remain challenging. We continue to believe that Frontier Markets represent a compelling opportunity for investors, with attractive valuations and growth prospects relative to developed and emerging market peers. Audley Twiston-Davies 11 May 2012 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 Accounts for the period ended 30 September 2011. A detailed explanation can be found in the Directors' Report on pages 15 to 16 and in note 16 on pages 44 to 50 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. Related party disclosure The Investment Manager is regarded as a related party and details of the management fees payable are set out in note 4 and note 9. 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, include a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules. The half yearly financial report was approved by the Board on 11 May 2012 and the above responsibility statement was signed on its behalf by the Chairman. Audley Twiston-Davies By order of the Board 11 May 2012 Investment Manager's Report Markets In the 6 months to 31 March 2012, the NAV of the Company rose by 12.1%, outperforming the benchmark, the MSCI Frontier Markets Index, by 11.2%. Since inception, the NAV of the Company has returned -10.4%, outperforming the benchmark by 4.5%. (All performance figures are calculated on a Sterling basis with net income reinvested). Global markets remained highly volatile, climbing a wall of worry in the fourth quarter of 2011, on fears over a disorderly unwinding of the Eurozone's debt problems. Equity markets also reacted adversely to renewed fears of a hard landing in China. Oil prices over this period remained stubbornly high as Iranian energy exports declined significantly as economic sanctions started to bite. Markets recovered strongly in 2012 as the European Central Bank finally unleashed the much-needed liquidity in response to an escalating banking and sovereign debt crisis. The rally was also fuelled by better than expected global economic momentum. Markets turned optimistic on the prospects of a full-fledged US recovery, as the US housing and labour markets demonstrated signs of stabilization. Nevertheless, this optimism proved to be short-lived due to persistent worries over the solvency of peripheral Europe. Long-term conviction in equities remains absent despite record low bond yields and accommodative monetary policy in many developed economies. Notably, trading activity across major equity markets is subdued. Volumes in the New York Stock Exchange, for instance, are at decade lows. Frontier Markets ended the period in positive territory in a volatile period for global markets. There was a remarkable divergence in market performance across Frontier Markets, with domestic and company specific factors trumping global factors as drivers of returns. Kazakhstan, Kenya and Saudi Arabia delivered the best performance over the period. Argentina, Bangladesh and Ukraine were among the weakest performing markets. Kazakhstan delivered strong returns over the period. The country is well positioned as an emerging energy power. The banking system is returning to growth after a prolonged period of repair and restructuring. The Saudi market also performed well, with daily trading volumes of US$4 billion a day, surpassing the combined total of the Turkish and Russian domestic markets. The Saudi Stock Exchange has been driven up by an increasing participation of retail investors, buoyant government and consumer spending as well as acceleration in bank lending. Sri Lanka and Bangladesh lost 20% over the period. Both markets struggled to shake off concerns over a deteriorating macroeconomic environment. We have started to build positions in these markets, with a view that valuations have now rebased to attractive levels amidst indications of macroeconomic stabilisation. The IMF has committed to a US$1 billion credit facility to Bangladesh. This development will help stabilise the finances of the country and is supportive of a robust growth outlook. Portfolio review Positions in Iraq have been particularly profitable and were the largest contributors to performance. The entry of Exxon into the Kurdistan region of Iraq has proved to be extremely positive for the company's long term holdings in the region including Gulf Keystone and DNO, which rose nearly 140% and 90% over the period respectively. The Company's holding in UAE Financial First Gulf Bank also reaped significant rewards. The stock appreciated 43% over the period, as the bank announced higher than expected dividends and record profits. We expect the UAE market to continue its path to recovery in 2012. The UAE economy continues to be a strong beneficiary of pan-regional capital and tourism flows, while Dubai's property market is showing signs of stabilisation after a four year slump. Other positive contributors to performance include Saudi Arabian healthcare company, Mouwasat, which delivered strong earnings growth following the implementation of price increases and higher capacity utilisation. The Company also benefited from holding the energy company, Kazmunaigas whose share price rose strongly from a very low valuation following a significant increase in its dividend. The Company had no exposure to Kuwaiti telecoms firm, Zain, the largest constituent of the index. Our preference for Zain's, competitor, NMTC proved correct, as the latter rose by 18% over the period, compared to a decline of 8% for Zain. The portfolio remains materially underweight in Kuwait. Broadly, our patience in holding stocks which were materially undervalued relative to their emerging or developed peers, given their underlying growth prospects, proved to be rewarding. The biggest single stock detractors from performance were the holdings in Argentinian financial Banco Macro and Slovenian financial Novo Kreditna. Our purchase of Banco Macro proved to be premature. Despite its low valuation at just four times its earnings and delivering some of the highest returns on equity amongst Latin American financials, the stock sold off further on concerns over Argentina's macroeconomic stability. Positioning and Outlook As at 31 March 2012, the Company held 44 long positions and 3 short positions in stocks across 23 markets. Over the period, the investment team undertook research trips to Bangladesh, Ghana, Iraq, Jordan, Kazakhstan, Myanmar, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Ukraine and Vietnam. In Nigeria, where we have a significant overweight position, we are encouraged by the government's efforts to address endemic power and infrastructure shortages, and improve the efficacy of government spending. Nigeria signed a landmark deal with General Electric which will build and operate power plants, which is a key step forward in raising power capacity. This follows a reduction in fuel subsidies implemented in January which will free up the government's spending for productive investment purposes. The portfolio is also overweight Saudi Arabia. Saudi Arabia's economy is in an enviable position, with oil production and FX reserves at historic highs, public debt at historic lows, and credit growth accelerating. The country is increasingly a focus of interest for international investors and is likely to see an inflow of capital should the Saudi market open to foreign investment in the future. The Manager has extensive connections in the region and is well positioned to benefit from these developments.Whilst we expect the market to be volatile given the vagaries of a retail driven market, we expect strong corporate earnings to remain an anchor for good performance. Kazakhstan and Ukraine are both substantially overweight in the portfolio. The banking system in Kazakhstan has plentiful liquidity with interbank rates at only 1%, and its largest energy company Kazmunaigas trades on a cheap price to earnings ratio ("PE") of just 5x, with a dividend yield of 7%. While there are risks in Ukraine, we believe these are largely discounted considering the likelihood of an IMF deal if external pressures escalate. Our largest holding in Ukraine, poultry producer MHP, is growing earnings by 20% per annum given its competitive strengths and trades on just six times price to earnings. We remain bullish on the Frontier Markets, and we continue to see a wealth of investment opportunities, with valuations and growth prospects superior to developed and emerging market peers. We think the implementation of positive structural reforms, improving domestic liquidity and declining inflation will prove to be powerful drivers for rising confidence in Frontier Equity Markets. With so much concern over banking leverage globally, frontier financial systems stand out for their high capital ratios, high levels of liquidity and low exposure to European sovereign debt, having emerged from their own respective domestic crises of previous years. Low levels of sovereign debt in Frontier Markets also leave them well placed to support domestic investment programmes despite global economic volatility. Near-term, we are cognisant that the global macroeconomic backdrop for equities could deteriorate in the coming months with renewed concerns about European peripheral risks. US economic data could soften as the recent spate of positive surprises abates. Nevertheless, we think Frontier Markets will continue to demonstrate lower correlations with global markets, given their isolation from global pools of capital, the importance of domestic developments and their high and rising dividends. Sam Vecht BlackRock Investment Management (UK) Limited 11 May 2012 Ten Largest Investments* Kazmunaigas Exploration Production (Kazakhstan; Energy; 5.7% (2011: 5.1%); www.kmgep.kz) is the second largest Kazakh oil producing company with a proven oil reserve of 1,707m barrels which gives the company an estimated reserve life of 26 years. Zenith Bank (Nigeria; Financials; 4.5% (2011: 4.9%); www.zenithbank.com) is Nigeria's second largest bank with 350 branches in Nigeria accounting for over 10% of the country's banking assets. Zenith offers a full range of retail and corporate banking services and has subsidiaries in Ghana, The Gambia and Sierra Leone. Qatar Electricity & Water (Qatar; Utilities; 4.3% (2011: 5.3%); www.qewc.com) manages power generation and water desalination plants across Qatar. It started production in 1999 from a single plant and has grown to operate 10 plants. The company continues to expand capacity which reached 5,249MW in 2011, an increase of 18% from 2010 levels. Halyk Savings Bank (Kazakhstan; Financial; 4.0% (2011: 3.3%); www.halykbank.kz) is one of Kazakhstan's leading financial services groups and a leading retail bank with the largest customer base and distribution network among Kazakhstan banks. Hrvatski Telekomunikacije (Croatia; Telecommunications; 4.1% (2011: 4.9%); www.t.ht.hr) is the leading telecommunications operator in Croatia providing voice and data services through a range of wireless, fixed and broadband technologies. Commercial Bank of Qatar (Qatar; Financials; 3.6% (2011: 4.2%); www.cbq.com.qa) offers a full range of corporate, retail, Islamic, and investment banking services as well as owning and operating exclusive Diners Club franchises in Qatar and Oman. The Bank's countrywide network includes 34 full service branches and 148 ATMs. MHP (Ukraine; Consumer Staples; 3.5% (2011: 3.4%); www.mhp.com.ua) is Ukraine's largest poultry producer accounting for more than 40% of chicken commercially produced in the country. MHP is vertically integrated producing its own grain. Qatar Navigation (Qatar; Industrials; 3.3% (2011: 4.0%); www.qatarnav.com) operates in Qatar's transport, shipping and logistics sectors. The company's key businesses include offshore oil and gas support services, port services, marine transport and industrial equipment. Qatar Navigation also owns 25% of Qatar Gas Transport, the largest LNG vessel owner in the world. National Mobile Telecommunications (Kuwait; Telecom; 3.2% (2011: 3.1%); www.wataniya.com) known locally as Wataniya, The company is the second largest telecom operator in Kuwait and has witnessed remarkable expansion in the Middle East. Wataniya's subsidiaries are the largest and second largest telecoms operators in Tunisia and Algeria respectively. Air Arabia (UAE, Industrial; 3.1% (2011: 3.0%); www.airarabia.com) is the largest Middle East low-cost carrier based at Sharjah International Airport, in the UAE. Air Arabia has grown significantly and also operates carriers based out of Casablanca, Morocco and Alexandria, Egypt. Air Arabia currently operates a total fleet of 27 (leased and owned) Airbus A320 aircraft and flies to more than 65 destinations within the Middle East, North Africa, Asia and Europe. * As a percentage of gross market exposure. Percentages in brackets represent the value of the holding as at 30 September 2011. Country and Sector Allocation 31 March 2012 Country allocation relative to MSCI Frontier Markets Index(%)* Saudi Arabia 8.9 Kazakhstan 7.9 Ukraine 7.1 Nigeria 4.2 Pan Africa 2.4 Panama 2.2 Iraq 2.0 Croatia 1.8 Argentina 1.0 Vietnam 0.5 Qatar 0.1 Bangladesh 0.1 Romania 0.0 Bulgaria -0.1 Serbia, Republic of -0.3 Lithuania -0.3 Estonia -0.4 Kenya -0.6 Bahrain -0.6 Slovenia -0.8 Tunisia -0.9 Jordan -0.9 Mauritius -1.1 Mali -1.2 Oman -1.7 Lebanon -1.9 Sri Lanka -2.0 Other -2.1 Pakistan -2.3 UAE -2.5 Kuwait -23.2 Net liabilities -1.3 Cash 6.0 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 (%)* Qatar 13.6 Nigeria 13.2 Kazakhstan 11.7 Saudi Arabia 8.9 Ukraine 7.5 UAE 6.9 Argentina 6.4 Kuwait 5.7 Croatia 4.1 Bangladesh 3.7 Vietnam 2.6 Pan Africa 2.4 Pakistan 2.2 Panama 2.2 Iraq 2.0 Kenya 1.8 Romania 1.2 Slovenia 1.1 Oman 1.1 Mali -1.2 Other -1.8 Net liabilities -1.3 Cash 6.0 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* Industrials 8.5 Consumer Staples 6.6 Energy 3.4 Consumer Discretionary 3.4 Utilities 2.8 Materials 0.8 Technology 0.6 Health Care 0.3 Oil & Gas -1.0 Mining -2.0 Telecommunications -4.7 Financials -23.4 Net liabilities -1.3 Cash 6.0 * 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 Financials 28.1 Industrials 15.5 Energy 13.9 Consumer Staples 13.4 Telecommunications 12.1 Utilities 4.3 Materials 4.2 Consumer Discretionary 3.7 Healthcare 2.5 Technology 0.6 Oil & Gas -1.0 Mining -2.0 Net liabilities -1.3 Cash 6.0 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 2012 Fair value and Gross gross market Principal market exposure country of as a % of exposure(2) net Company operation Sector US$'000 assets(3) Equity portfolio Banco Macro Argentina Financials 1,819 1.4 Bank Muscat Oman Financials 1,388 1.1 Central European Consumer Media Romania Discretionary 1,499 1.2 Commercial Bank of Qatar Qatar Financials 4,691 3.6 Copa Holdings Panama Industrials 2,832 2.2 DNO International Iraq Energy 1,746 1.3 Doha Bank Qatar Financials 1,217 0.9 Eurasian Natural Resources Kazakhstan Materials 2,609 2.0 Grupo Financiero Galicia Argentina Financials 981 0.8 Halyk Savings Bank Kazakhstan Financials 5,187 4.0 Heritage Oil Iraq Energy 821 0.6 Hrvatski Telekomunikacije Croatia Telecommunications 5,291 4.1 Industries Of Qatar Qatar Industrials 2,286 1.8 JKX Oil & Gas Ukraine Energy 2,602 2.0 Kazmunaigas Exploration Production Kazakhstan Energy 7,382 5.7 Kernel Holdings Ukraine Consumer Staples 2,636 2.0 Kuwait Foods Consumer (Americana) Kuwait Discretionary 3,310 2.5 MHP Ukraine Consumer Staples 4,539 3.5 National Mobile Telecommunications Kuwait Telecommunications 4,158 3.2 Qatar Electricity & Water Qatar Utilities 5,556 4.3 Qatar Navigation Qatar Industrials 4,236 3.3 Shikun & Binui Pan Africa Industrials 3,050 2.3 Tenaris Argentina Energy 1,910 1.5 YPF Sociedad Anonima Argentina Energy 3,541 2.7 Equity investments 75,287 58.0 Investment in BlackRock's Institutional Cash Fund 14,470 11.1 Total Equity Investments 89,757 69.1 P-Notes Abdullah Al Othaim Mrkts Saudi P-Note 13/08/14 Arabia Health Care 2,659 2.0 Abdullah Al Othaim Mrkts Saudi P-Note 30/08/13 Arabia Health Care 629 0.5 Al Mouwasat Medical Serv Saudi P-Note 09/10/12 Arabia Industrials 3,679 2.8 Al Rajhi Bank Saudi P-Note 13/08/14 Arabia Financials 1,361 1.1 Saudi Arabian Amiantit Saudi P-Note 03/09/12 Arabia Consumer Staples 3,192 2.5 Total P-Notes 11,520 8.9 Total investments excluding CFDs 101,277 78.0 Gross market Principal Gross exposure country Fair market as a % of value (1) exposure(2) of net Company operation Sector US$'000 US$'000 assets(3) CFD portfolio Long positions: United Air Arabia Arab Emirates Industrials 3,991 3.1 Ecobank Transnational Nigeria Financials 2,652 2.1 United Emirates Arab Emirates Financials 1,259 1.0 First Bank of Nigeria Nigeria Financials 2,890 2.2 First Gulf United Bank Arab Emirates Financials 3,690 2.8 FPT Corp Vietnam Technology 783 0.6 Grameenphone Bangladesh Telecommunications 3,908 3.0 Guinness Nigeria Nigeria Consumer Staples 1,962 1.5 Kinh Do Corporation Vietnam Consumer Staples 2,581 2.0 Lucky Cement Pakistan Materials 2,850 2.2 Marico Bangladesh Bangladesh Consumer Staples 845 0.7 Nova Kreditna Banka Maribor Slovenia Financials 1,478 1.1 Safaricom Kenya Telecommunications 2,322 1.8 Unilever Nigeria Nigeria Consumer Staples 1,660 1.3 United Bank For Africa Nigeria Financials 2,002 1.5 Zenith Bank Nigeria Financials 5,884 4.5 Total long CFD positions (2,835) 40,757 31.4 Total short CFD positions 414 (3,887) (3.0) Total CFD portfolio (2,421) 36,870 28.4 Equity investments and P-Notes (excluding BlackRock Cash Fund) 86,807 86,807 66.9 BlackRock's Institutional Cash Fund (4) 14,470 7,826 6.0 Total investments 98,856 131,503 101.3 Cash and cash equivalents (4) 32,647 Net current liabilities (1,613) (1,613) (1.3) Net assets 129,890 129,890 100.0 1. 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 negative US$2,421,000 represents the fair valuation of all the CFD contracts, which is determined based on the difference between the purchase price and the 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$43,592,000 at the time of purchase, and subsequent market falls in prices have resulted in unrealised losses on the CFD contracts of US$2,835,000, resulting in the value of the total market exposure to the underlying securities falling to US$40,757,000 as at 31 March 2012. The cost of acquiring the securities to which exposure was gained via the short CFD positions would have been US$4,301,000 at the time of entering into the contract, and subsequent price falls have resulted in unrealised profits on the short CFD positions of US$414,000 and the value of the market exposure of these investments decreasing to US$3,887,000 at 31 March 2012. If the short positions had been closed on 31 March 2012 this would have resulted in a profit of US$414,000 for the Company. - P-Notes are valued based on the quoted bid price of the underlying equity 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 gross market exposure. 4. The gross market exposure column for Cash and Cash Fund investments has been adjusted to assume the Company purchased direct holdings in investments rather than exposure being gained through CFDs. Statement of Comprehensive Income for the six months ended 31 March 2012 Revenue $'000 Capital $'000 Total $'000 For the For the For the For the For the For the Six period period Six period period Six period period months 15.10.10 15.10.10 months 15.10.10 15.10.10 months 15.10.10 15.10.10 ended to to ended to to ended to to 31.03.12 31.03.11 30.09.11 31.03.12 31.03.11 30.09.11 31.03.12 31.03.11 30.09.11 Notes(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) Gains/ (losses) on investments held at fair value through profit or loss - - - 10,514 867 (20,389) 10,514 867 (20,389) Net capital gains/ (losses) from contracts for difference - - - 5,613 (3,160) (10,381) 5,613 (3,160) (10,381) (Loss)/ profit on credit default swap - - - (4) - 128 (4) - 128 Income from investments held at fair value through profit or loss 3 1,937 778 2,066 - - - 1,937 778 2,066 Net income from contracts for difference 3 783 1,635 2,791 - - - 783 1,635 2,791 Other income 3 11 2 9 - - - 11 2 9 ----- ----- ----- ------ ----- ------ ------ ------ ------ Total revenue 2,731 2,415 4,866 16,123 (2,293) (30,642) 18,854 122 (25,776) ----- ----- ----- ------ ----- ------ ------ ------ ------ Expenses Investment management and performance fees 4 (135) (90) (231) (1,265) (710) (924) (1,400) (800) (1,155) Other expenses 5 (208) (152) (505) (71) - (19) (279) (152) (524) ----- ----- ----- ------ ----- ------ ------ ------ ------ Total operating expenses (343) (242) (736) (1,336) (710) (943) (1,679) (952) (1,679) ----- ----- ----- ------ ----- ------ ------ ------ ------ Net profit/ (loss) on ordinary activities before taxation 2,388 2,173 4,130 14,787 (3,003) (31,585) 17,175 (830) (27,455) Taxation (305) (572) (807) 234 191 239 (71) (381) (568) ----- ----- ----- ------ ----- ------ ------ ------ ------ Net profit/ (loss) on ordinary activities after taxation 2,083 1,601 3,323 15,021 (2,812) (31,346) 17,104 (1,211) (28,023) ----- ----- ----- ------ ----- ------ ------ ------ ------ Earnings per ordinary share (US cents) 8 2.20 1.69 3.51 15.85 (2.97) (33.08) 18.05 (1.28) (29.57) ----- ----- ----- ------ ----- ------ ------ ------ ------ The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All income is attributable to the equity holders of BlackRock Frontiers Investment Trust plc. There were no minority interests. Statement of Changes in Equity for the six months ended 31 March 2012 Ordinary Share Share premium Special Capital Revenue capital account reserve reserve reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 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* - - - - (2,843) (2,843) ------ ------ ------- ------ ----- ------- At 31 March 2012 948 - 142,704 (16,325) 2,563 129,890 ------ ------ ------- ------ ----- ------- For the period 15 October 2010 (date of incorporation) to 31 March 2011 (unaudited) Opening balance - - - - - - Total Comprehensive Income: Net (loss)/ profit for the period - - - (2,812) 1,601 (1,211) Transactions with owners, recorded directly to equity: Shares issued 948 145,636 - - - 146,584 Share issue costs - (2,932) - - - (2,932) ------ ------- ------- ------ ----- ------- At 31 March 2011 948 142,704 - (2,812) 1,601 142,441 ------ ------- ------- ------ ----- ------- For the period 15 October 2010 (date of incorporation) to 30 September 2011 (audited) Opening balance - - - - - - Total Comprehensive Income: Net (loss)/ profit for the period - - - (31,346) 3,323 (28,023) Transactions with owners, recorded directly to equity: Shares issued 948 145,636 - - - 146,584 Share issue costs - (2,932) - - - (2,932) Cancellation of share premium account - (142,704) 142,704 - - - ------ ------ ------- ------ ----- ------- At 30 September 2011 948 - 142,704 (31,346) 3,323 115,629 ------ ------ ------- ------ ----- ------- * Final dividend 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. During the period the Company incurred purchase transaction costs of US$65,000 (for the period from 15 October 2010 to 31 March 2011: US$172,000; for the period 15 October 2010 to 30 September 2011: US$287,000), and sales transaction costs of US$52,000 (for the period from 15 October 2010 to 31 March 2011: US$11,000; for the period 15 October 2010 to 30 September 2011: US$49,000). All transaction costs have been included within the capital reserve. Statement of Financial Position as at 31 March 2012 31 March 31 March 30 September 2012 2011 2011 US$'000 US$'000 US$'000 Notes (unaudited) (unaudited) (audited) Non current assets Investments designated as held at fair value through profit or loss 101,277 68,649 91,787 ------- ------ ------ Current assets Other receivables 1,043 1,588 887 Derivative financial assets held at fair value through profit or loss 4,179 1,947 1,770 Cash held on margin deposit with brokers 4,469 2,281 11,846 Cash and cash equivalents 28,178 78,636 23,331 ------- ------ ------ 37,869 84,452 37,834 Current liabilities Other payables (2,637) (6,027) (4,166) Derivative financial liabilities held at fair value through profit or loss (6,600) (4,614) (9,807) ------- ------- ------ (9,237) (10,641) (13,973) ------- ------- ------ Net current assets 28,632 73,811 23,861 ------- ------- ------- Total assets less current liabilities 129,909 142,460 115,648 Creditors: amounts falling due after more than one year Preference shares of £1.00 each (one quarter paid) (19) (19) (19) ------- ------- ------- Net assets 129,890 142,441 115,629 ------- ------- ------- Capital and reserves Ordinary share capital 7 948 948 948 Share premium account - 142,704 - Special reserve 142,704 - 142,704 Capital reserves (16,325) (2,812) (31,346) Revenue reserve 2,563 1,601 3,323 ------- ------- ------- Total equity 129,890 142,441 115,629 ------- ------- ------- Net asset value per share (US cents) 8 137.06 150.31 122.01 ------- ------- ------- Cash Flow Statement for the six months ended 31 March 2012 For the For the period period Six months 15 October 15 October ended 2010 to 2010 to 31 March 31 March 30 September 2012 2011 2011 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Net cash inflow/(outflow) from operating activities before financial activities 1,660 (64,237) (109,854) ------ ------ ------ Financing activities Proceeds from the issue of preference shares - 19 19 Proceeds from the issue of ordinary shares - 146,584 146,584 Share issue costs paid (1,289) (1,257) (1,316) Dividend paid (2,843) - - ------ ------ ------ Net cash (outflow)/inflow from financing activities (4,132) 145,346 145,287 ------ ------ ------ (Decrease)/increase in cash and cash equivalents (2,472) 81,109 35,433 Effect of foreign exchange rate changes (58) (192) (256) ------ ------ ------ Change in cash and cash equivalents (2,530) 80,917 35,177 Cash and cash equivalents at start of period 35,177 - - ------ ------ ------ Cash and cash equivalents at end of period 32,647 80,917 35,177 ------ ------ ------ Comprised of: Cash at bank and money market deposits 32,647 80,917 35,177 ------ ------ ------ 32,647 80,917 35,177 ------ ------ ------ Reconciliation of Net income before Taxation to Net Cash Flow from Operating Activities For the For the period period Six months 15 October 15 October ended 2010 to 2010 to 31 March 31 March 30 September 2012 2011 2011 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Profit/(loss) before taxation 17,175 (830) (27,455) (Gains)/losses on investments and CFDs held at fair value through profit or loss (including transaction costs) (16,372) 2,293 29,974 Realised losses on closure of CFD contracts (3,129) (426) (4,570) Gains on realisation of CFDs 2,725 89 3,277 Proceeds/(cost) of Credit Default Swap 646 - (522) Increase in other receivables (677) (1,588) (366) Increase in other payables 174 1,008 1,701 Decrease/(increase) in amounts due from brokers 521 - (521) (Decrease)/increase in amounts due to brokers (355) 3,036 355 Net sales/(purchases) of investments held at fair value through profit or loss 1,023 (67,746) (111,642) Taxation on investment income included within gross income (71) (73) (85) ----- ------ ------- Net cash inflow/(outflow) from operating activities 1,660 (64,237) (109,854) ----- ------ ------- Notes to the Financial Statements 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. 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 2011 (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 For the period For the period Six months 15 October 15 October ended 2010 to 2010 to 31 March 31 March 30 September 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Investment income: UK listed dividends - - 106 Overseas listed dividends 1,937 778 1,960 Income from contracts for difference 783 1,635 2,791 ----- ----- ----- 2,720 2,413 4,857 Other income: Deposit interest 11 2 9 ----- ----- ----- Total income 2,731 2,415 4,866 ===== ===== ===== 4. Investment management and performance fees For the period For the period Six months ended 15 October 2010 to 15 October 2010 31 March 2012 31 March 2011 to 30 September 2011 (unaudited) (unaudited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investment management fee 135 541 676 90 362 452 231 924 1,155 Performance fee - 724 724 - 348 348 - - - --- ----- ----- ---- --- --- --- --- ----- Total 135 1,265 1,400 90 710 800 231 924 1,155 === ===== ===== ==== === === === === ===== An investment management fee equivalent to 1.10 per cent 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 per cent 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 2012, the Company's NAV had outperformed the MSCI Frontiers Markets Index by 11.2% in US$ terms and a performance fee of US$724,000 had been accrued. As the outperformance had been generated predominantly through capital returns, the performance fee has been charged 100% to capital. The fee does not crystallise until 30 September 2012 but is accrued daily in the Company's NAV based on daily performance data, in line with best practice under the SORP. 5. Operating expenses For the period For the period Six months 15 October 15 October ended 2010 to 2010 to 31 March 31 March 30 September 2012 2011 2011 (unaudited) (unaudited) (audited) US$'000 US$'000 US$'000 Custody fee 70 23 76 Directors' fees 85 33 107 Other administration costs 53 96 322 --- --- --- 208 152 505 === === === For the six months ended 31 March 2012, expenses of US$71,000 charged to the capital column of the Statement of Comprehensive Income relate to US$14,000 of transaction costs and US$57,000 of fees in relation to investing in new markets. For the period 15 October 2010 to 30 September 2011 expenses of US$19,000 were charged to the capital column of the Statement of Comprehensive Income. These related to transaction costs (US$6,000) and interest charges relating to the Credit Default Swap (US$13,000). 6. Dividend The Board has declared an interim dividend of 1.20 cents per share payable on 22 June 2012 to shareholders on the register at 25 May 2012. No interim dividend has previously been paid. This dividend has not been accrued in the financial statements for the six months ended 31 March 2012, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves. 7. Share capital Number of Total Nominal shares in shares value issue in issue US$'000 Authorised share capital comprised: Ordinary shares of 1 cent each: ---------- ---------- --- Allotted, issued and fully paid: At 30 September 2011 94,766,267 94,766,267 948 ---------- ---------- --- At 31 March 2012 94,766,267 94,766,267 948 ========== ========== === 8. Earnings and net asset value per ordinary share Six months For the period 15 For the period 15 ended October 2010 to October 2010 to 31 March 31 March 30 September 2012 2011 2011 (unaudited) (unaudited) (audited) Net revenue profit attributable to ordinary shareholders (US$'000) 2,083 1,601 3,323 Net capital profit/ (loss) attributable to ordinary shareholders (US$'000) 15,021 (2,812) (31,346) ------- ------- ------- Total earnings attributable to ordinary shareholders (US$'000) 17,104 (1,211) (28,023) ------- ------- ------- Revenue earnings per share - (US cents) 2.20 1.69 3.51 Capital earnings/ (loss) per share - (US cents) 15.85 (2.97) (33.08) ------ ------ ------ Total earnings/ (loss) per share - (US cents) 18.05 (1.28) (29.57) ------ ------ ------ 31 March 31 March 30 September 2012 2011 2011 (unaudited) (unaudited) (audited) Total equity attributable to shareholders (US$'000) 129,890 142,441 115,629 ------- ------- ------- Net asset value per share basic and diluted - (US cents) 137.06 150.31 122.01 Share price* 134.21 145.08 116.84 ====== ====== ====== 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 does not have any dilutive securities outstanding. 9. Related party transactions The Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £28,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £23,000 and each other Director receives an annual fee of £20,000. 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. The Investment Manager, BlackRock Investment Management (UK) Limited, is also a related party. The investment management and performance fees accrued and payable for the period ended 31 March 2012 are set out in note 4. As at 31 March 2012 an amount of US$676,000 was outstanding in respect of management fees. A further US$724,000 had been accrued in respect of the performance for the six months ended 31 March 2012. The final perfomance fee for the full year to 30 September 2012 will not crystallise and fall due until the calculation date of 30 September 2012. The Company has an investment in BlackRock's Institutional Cash Fund of US$14,470,000 at the period end. 10. 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 2012 has not been audited. 11. Annual results The Board expects to announce the annual results for the year ended 30 September 2012 in mid December 2012. 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 2013, with the Annual General Meeting being held in March 2013. 11 May 2012 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 11 May 2012 12 Throgmorton Avenue, London EC2N 2DL ers-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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