BlackRock Frontiers Investment Trust Plc – Half-year Report

BLACKROCK FRONTIERS INVESTMENT TRUST PLC
LEI:  5493003K5E043LHLO706 - Article 5 Transparency Directive, DTR 4.2
 

Half Yearly Financial Report for the six months ended 31 March 2018

Investment Objective (up to and including 31 March 2018)
The Company’s investment objective was to achieve long term capital growth from investment in companies operating in Frontier Markets or whose stocks are listed on the stock markets of such countries.

Revised Investment Objective and Policy (with effect from 1 April 2018)
With effect from the 1 April 2018, and following shareholder approval, the Company adopted a new investment objective and investment policy which is set out below:

Investment Objective
The Company’s investment objective is to achieve long term capital growth by investing in companies domiciled or listed in, or exercising the predominant part of their economic activity in, less developed countries. These countries (the “Frontiers Universe”) are any country which is neither part of the MSCI World Index of developed markets nor one of the eight largest countries by market capitalisation in the MSCI Emerging Markets Index as at 1 April 2018: being Brazil, China, India, Korea, Mexico, Russia, South Africa, and Taiwan (the “Selected Countries”).

Investment Policy
The Company will seek to maximise total return and will invest in companies domiciled or listed in, or exercising the predominant part of their economic activity in, the Frontiers Universe. Performance is measured against the Company’s reference index (“Reference Index”), which is a composite of the MSCI Emerging Markets Index ex Selected Countries + MSCI Frontier Markets Index + MSCI Saudi Arabia Index (net total return, USD). The Investment Manager is not constrained by the geographical weightings of the Reference Index and the Company’s portfolio may frequently be overweight or underweight relative to the Reference Index. The Company will exit any investment as soon as reasonably practicable following the relevant company ceasing to be domiciled or listed in, or exercising the predominant part of their economic activity in, the Frontiers Universe.

In order to achieve the Company’s investment objective, the Investment Manager selects investments through a process of fundamental and geopolitical analysis, seeking long-term appreciation from mispriced value or growth. The Investment Manager employs both a top-down and bottom-up approach to investing. It is expected that the Company’s portfolio will have exposure to between 35 to 65 holdings.

Where possible, investments will generally be made directly in the stock markets of the Frontiers Universe. Where the Investment Manager determines it appropriate, investments may be made through collective investment schemes, although such investments are not likely to be significant. Investments in other closed-ended investment funds admitted to the Official List will not exceed more than 10 per cent., in aggregate, of the value of the Gross Assets (calculated at the time of any relevant investment). It is intended that the Company will generally be invested in equity securities; however, the Investment Manager may invest in equity-related securities, such as derivatives or convertibles, and, to a lesser extent, in bonds or other fixed-income securities, including high risk debt securities. These securities may be below investment grade.

Due to national and/or international regulation, excessive operational risk, prohibitive costs and/or the time period involved in establishing trading and custody accounts in certain countries in the Frontiers Universe, the Company may be unable to invest (whether directly or through nominees) in companies in certain countries in the Frontiers Universe or, in the opinion of the Company and/or the Investment Manager, it may not be advisable to do so. In such circumstances, or in countries where acceptable custodial and other arrangements are not in place to safeguard the Company’s investments, the Company intends to gain economic exposure to companies in such countries by investing indirectly through derivatives. Derivatives are financial instruments linked to the performance of another asset or security, such as promissory notes, contracts for difference, futures or traded options. Save as provided below, there is no restriction on the Company investing in derivatives in such circumstances or for efficient portfolio management purposes.

The Company may be geared through borrowings and/or by entering into derivative transactions (taking both long and short positions) that have the effect of gearing the Company’s portfolio to enhance performance. The Company may also use borrowings for the settlement of transactions, to facilitate share repurchases (where applicable) and to meet on-going expenses.

The respective limits on gearing (whether through the use of derivatives, borrowings or a combination of both) are set out below:

Maximum gearing through the use of derivatives or borrowings to gain exposure to long positions in securities	140 per cent. of net assets
Maximum exposure to short positions (for shorting purposes the Company may use indices or individual stocks)	10 per cent. of net assets
Maximum gross exposure (total long exposure plus total short exposure)	150 per cent. of net assets
Maximum net exposure (total long exposure minus total short exposure)	130 per cent. of net assets

In normal circumstances, the Company will typically have net exposure of between 95 per cent, and 120 per cent. of net assets.

When investing via derivatives, the Company will seek to mitigate and/or spread its counterparty risk exposure by collateralisation and/or contracting with a potential range of counterparty banks, as appropriate, each of which shall, at the time of entering into such derivatives, have a Standard & Poor’s credit rating of at least A- on its long-term senior unsecured debt.

The Company may invest up to 5 per cent. of its Gross Assets (at the time of such investment) in unquoted securities. The Company will invest so as not to hold more than 15 per cent. of its Gross Assets in any one stock or derivative position at the time of investment (excluding cash management activities).

No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.

PERFORMANCE RECORD

FINANCIAL HIGHLIGHTS

Attributable to ordinary shareholders	31 March 2018	30 September 2017
US Dollar
Net assets (US$’000)	425,742	350,247
Net asset value per ordinary share (cents)	220.03	196.91
Ordinary share price (mid market)1 (cents)	228.66	199.91
	--------	--------
Sterling
Net assets (£’000)1	303,494	261,047
Net asset value per ordinary share1 (cents)	156.85	146.76
Ordinary share price (mid market) (cents)	163.00	149.00
	--------	--------
Premium	3.9%	1.5%
	======	=====

   

Performance – total return basis	Six months ended   31 March 2018   %	Year ended  30 September 2017  %	Since  inception3  %
US Dollar
Net asset value per share (with dividends reinvested)	+13.9	+21.5	+81.5
MSCI Frontier Markets Index (NR)2	+11.0	+25.5	+47.3
MSCI Emerging Markets Index (NR)2	+9.0	+22.5	+25.4
Ordinary share price (with dividends reinvested)	+16.6	+23.6	+85.6
Sterling
Net asset value per share (with dividends reinvested)	+8.8	+17.7	+101.2
MSCI Frontier Markets Index (NR)2	+6.2	+21.5	+63.7
MSCI Emerging Markets Index (NR)2	+4.2	+18.6	+39.4
Ordinary share price (with dividends reinvested)	+11.4	+19.8	+105.5

1.    Based on an exchange rate of US$1.4028 to £1 at 31 March 2018 and US$1.3417 to £1 at 30 September 2017.
2.    Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors.
3.    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 TO 31 MARCH 2018

Dear Shareholder

I am pleased to present the Company’s half-yearly financial report for the six months to 31 March 2018.

PERIOD HIGHLIGHTS

• Interim dividend of 3.00 cents per share;

• Yield of 3.3% (based on share price at 15 May 2018, interim dividend for 2018 and final dividend for 2017);

• NAV total return of +13.9% (in US Dollar terms);

• Reversal of a provision for Argentine Capital Gains Tax;

• Share price total return of +16.6% (in US Dollar terms);

• 15.6 million new Ordinary shares issued at a premium to NAV; and

• Shareholder authority obtained for expanded investment universe.

PERFORMANCE AND OVERVIEW
During the six months to 31 March 2018 the Company generated a NAV total return in US Dollars of +13.9%, outperforming its benchmark, the MSCI Frontier Markets Index, which returned +11.0%. The Company’s share price total return was 16.6%. Over the same period, the Emerging Markets Index rose by 9.0%. The Company’s investment objective is to achieve long-term capital growth and therefore it remains important to consider the Company’s performance over the longer term. Since launch in December 2010, the Company’s NAV total return was 81.5%, comparing very favourably to the benchmark index total return of 47.3% (all calculations are in US Dollar terms with dividends reinvested). For sterling based investors, the NAV total return has been 101.2% since launch, versus the benchmark total return of 63.7%.

Your Company has generated a strong absolute return during the past six months, once again demonstrating the advantages of investing in Frontier Markets which have provided a degree of insulation from the geo-political tensions and significant market volatility we have witnessed across the developed markets globally during the period. Against this backdrop the relative performance delivered by your investment managers is all the more impressive. The Board believe that the Company’s sustained strong investment performance, relatively low portfolio volatility and low correlation with the developed markets present an attractive proposition for investors seeking a viable alternative to developed market investing.

At the portfolio level, performance was derived from good country and sector allocation and stock selection, aided by active adjustment of the portfolio’s market exposure. Kazakhstan, Vietnam, Argentina and Romania were the stand out performers by country. The portfolio’s exposure to Africa was also beneficial, with a number of financials in Nigeria and Kenya delivering strong share price growth. The largest contributors at the stock level were Kazakh financial, Halyk Savings Bank, which rose by 51%, and Colombian oil producer, EcoPetrol, which rose by 90% since it was purchased in February of last year, demonstrating the opportunities available in Frontier Markets. The main detractors at the country level were Kuwait and Morocco where political tensions in the region and some stock specific disappointments were detrimental to overall portfolio performance. The portfolio’s overall underweight exposure relative to the benchmark index in Vietnam, which performed well, also detracted.

Overall performance was aided by the reversal of an accumulated provision for a potential Argentine capital gains tax liability in the sum of US$5,939,000. Following the enactment of Argentine tax reform legislation taking American Depositary Receipts over Argentine equity out of scope for capital gains tax, and after consultation with its advisers, a decision was taken by the Board to reverse the provision with effect from 3 January 2018. You can read more about performance, portfolio activity and the investment managers’ views on the outlook for the second half of the year in their report which follows.

REVENUE RETURN AND DIVIDENDS
The Company’s revenue return per share for the six months ended 31 March 2018 amounted to 2.27 cents (2017: 2.74 cents). The Board is pleased to declare an interim dividend of 3.00 cents per share (2017: 2.70 cents per share) payable on 29 June 2018 to shareholders on the Company’s register on 1 June 2018. The shares will go ex-dividend on 31 May 2018. The final dividend of 4.20 cents per share for the year ended 30 September 2017 was declared on 1 December 2017 and paid to shareholders on 9 February 2018.

The Company has historically paid out approximately one third of its revenue via the interim dividend and the balance in the form of a final dividend. However, the Board has decided that, where deemed to be appropriate, the Company may distribute a greater proportion of its revenue at the interim dividend stage to better reflect the timing of the underlying income earned by the Company during the financial year.

SHARE CAPITAL
The Directors recognise the importance to investors of ensuring that the Company’s share price remains as close to its underlying NAV as possible. Accordingly, the Directors monitor the share price closely and will consider the issue at a premium or repurchase at a discount of ordinary shares to balance demand and supply in the market. For the period under review the Company’s ordinary shares have traded at an average premium to NAV of 3.6%, and were trading at a premium of 3.1% on a cum-income basis at 15 May 2018. The Directors currently have the authority to buy back up to 14.99% of the Company’s issued share capital and also to issue up to 10% of the Company’s issued share capital (excluding any shares held in treasury).

In response to sustained demand for its shares during the period, the Company has issued 15,623,000 new ordinary shares during the period at an average price of 161.50 pence per share and for a total consideration of £25,238,000 (US$34,484,000). The new shares were issued at a premium to the prevailing NAV and were therefore accretive to NAV. The Board believes that the issue of new shares by the Company – where demand cannot be met in the market – helps to regulate the share price premium/discount to NAV and the resultant economies of scale achieved through the enlargement of the Company are beneficial to shareholders. Since the period end and up to the date of this report, the Company has issued a further 1,500,000 new ordinary shares at an average price of 159.17 pence per share and for a total consideration of £2,387,500 (US$3,219,000). No shares were bought back in the period under review or up to the date of this report.

REVISED INVESTMENT OBJECTIVE AND POLICY
As set out in the Circular sent to shareholders on 7 March 2018, the Board, having consulted with the Manager and the Company’s advisers, proposed that shareholders consider the adoption of a revised investment policy which would permit a broadened investment universe to include any country which is neither part of the MSCI World Index of developed markets nor one of the eight largest countries by market capitalisation in the MSCI Emerging Markets Index as at 1 April 2018: being Brazil, China, India, Korea, Mexico, Russia, South Africa, and Taiwan. As part of this change it was proposed that the Company also adopt a new benchmark Index: the MSCI Emerging Markets ex Selected Countries + Frontier Markets + Saudi Arabia Index (net total return, USD). At a General Meeting of the Company held on 27 March 2018 an ordinary resolution of the Company was duly passed by shareholders adopting the revised investment objective and policy (including the new benchmark index) with effect from 1 April 2018. The Company’s new investment objective and policy is set out in full within the Half Yearly Financial Report.

OUTLOOK
Frontier Market investing continues to present an attractive proposition for the medium to long-term investor. The Board believes that the Company’s broadened investable universe provides the investment managers with the flexibility to adjust the portfolio’s geographic exposure to take advantage of specific opportunities or in response to the natural evolution of Frontier Markets. The Board is confident that the investment managers are well positioned to take full advantage of the new opportunities this may create in what remains a dynamic and exciting asset class. We look forward to a new chapter for the Company and believe that it is now well placed to deliver continued success in the years to come.

Audley Twiston-Davies
Chairman
17 May 2018

INVESTMENT MANAGER’S REPORT

PORTFOLIO AND MARKET COMMENTARY
In the six months to 31 March 2018, the Company outperformed the benchmark by 2.9%. The Company returned 13.9% while the benchmark returned 11.0%. Over this time period, the MSCI Emerging Markets Index rose by 9.0%. Since inception the Company has returned 81.5% compared to the return of 47.3% for the MSCI Frontier Markets Index (all calculations are in US Dollar terms with dividends reinvested).

Frontier Markets continued to perform well over the period following on from a notably strong performance in 2017, which marked the best calendar year in a decade and the first year since 2010 in which Frontier Markets outperformed Developed Markets. Robust performance continued in 2018 with Frontier Markets rising nearly by 6% in January, marking one of the best-ever starts to the year. February and March 2018 saw increased volatility in the markets, as more developed markets saw a sustained sell-off and general risk-off sentiment gathering momentum fuelled by US/China trade war concerns and the first Federal Reserve rate hike in 2018. Frontier Markets were down very slightly, falling by 0.6%, over those months compared to a decline in both Emerging and Developed Markets of 6.4% and 6.2% respectively, once again showing their lower correlation to global markets and demonstrating the benefits of investing in a wide, diverse asset class.

Most countries in Frontier Markets delivered positive returns over the six months to 31 March 2018 driven by favourable domestic, economic and political developments.

The Kazakhstan market rose substantially over the period (up by 49%) and the Company benefited from its significant country allocation. The position in Halyk Savings Bank was the top stock contributor to overall returns as it continued to rally (up by 51% post the take-over of competitor, Kazkommertsbank), and to deliver good results on the back of its strong market position and competitive advantage in its cost of funding versus peers.

Colombian oil producer, EcoPetrol, came a close second on return contribution. Whilst the increase in the crude price was no doubt helpful for returns, the company was also able to stabilise production and achieve better than expected cost discipline. The Company fully exited the position in November 2017 after a more than 90% price rise since initiation of the position in February 2017.

Our African stocks performed well in this interim period. Kenyan financial, Equity Group, contributed well to returns after rising by 42% on expectations of a removal of the rate cap following the political stabilisation. Nigerian banks United Bank of Africa and Zenith Bank rose by 35% and 25% respectively as the Naira stabilised. Nigerian currency reserves rose by 42% to reach over US$42bn at the end of March 2018. Eastern Tobacco in Egypt was another notable performer, rising by 57% following both a significant increase in earnings expectations and also a re-rating of the company, having been one of the cheapest tobacco stocks in the world, on speculation that the government are considering selling their stake in the company.

The Company benefited from stock selection in Argentina during the period, with our holdings in financials, Grupo Financiero Galicia and Grupo Supervielle rising 28% and 23% respectively. Since the end of the period, MSCI Argentina has fallen significantly.  US interest rates have risen throughout 2018 and this has caused debt investors to question whether they are earning sufficient yield on their Emerging Market holdings.  With its significant twin deficits, meaning the country is very reliant on external financing, and inflation coming in above expectations, Argentina has been at the forefront of these concerns.  We have been reducing our holdings in Argentina throughout 2018, with the weight falling from 22% at the end of December 2017 to around 12% mid-April, but taking the opportunity of the significant market volatility to increase positions through the end of April and start of May.

Positions in Romania were also among the top contributors to returns as both BRD Groupe Société Générale, a leading bank in the country, and S.N.G.N. Romgaz, an oil and gas producer, reported strong earnings backed by robust cash flow generation supported by the strong domestic macro-economic environment.

Vietnam was the best performing Frontier Market over the six months, rising by 60%. The market was supported by strong net foreign inflows, increased trading volumes and improved macro-economic data with accelerating GDP growth and export growth. Our position in a listed brokerage firm, Saigon Securities, rose by 61% as it benefited from increasing trading volumes and rising market valuations. The Company also benefited from participation in the IPO of Vietnam Prosperity Bank. This is a notable exception to what is generally an uninteresting Vietnamese banking sector as it owns the leading consumer finance business in the country. However, our positions in leading soy milk producer Quang Ngai Sugar, and distribution business, Mobile World Group, detracted from performance falling by 18% and 8% respectively over the period. As a result, our holdings in Vietnam rose on average by 19% underperforming the market there and therefore detracting from relative returns.

Conversely, the performance of the Kuwaiti market weighed on returns as this small market suffered as investors withdrew money from the region as a result of increased political tensions. Our holding in Burgan Bank, which fell by 20% over the period, was the largest detractor. We continue to expect that the bank will see growth in earnings above market expectations as excess provisioning levels fall, however, to date we have been incorrect in this assessment.

Moroccan performance also detracted from returns. A fall in the share price of Douja Promotion Groupe Addoha, the largest real estate company in Morocco, following the release of disappointing results and a lower than expected dividend more than offset positive contributions from holdings in both Maroc Telecom and Attijariwafa Bank which rose by 12% and 10% respectively over the period after both released better than expected results.

PORTFOLIO ACTIVITY
At the beginning of the period, we increased exposure by using our ability to gear the Company and take advantage of attractive valuations in the markets. Following a period of strong performance, we subsequently reduced gearing levels, taking profits and reducing gross exposure across the book. We have most recently decreased exposure to Argentina, Vietnam and Romania by locking in the profits in the names that performed well. We closed out positions in Argentinian natural gas name, TGS and reduced Romanian power distributor, Societatea Energetica Electrica. We also exited our long-standing position in Kazakh energy name, Kazmunaigas, participation in the long awaited tender offer from its parent company increased.

We have built up a long position in Saudi Arabia on the view that the stock market has broadly lagged the oil price and that government spending is expected to increase. We have continued to increase portfolio exposure to Egypt on the back of an improved macro-environment with lower expected inflation and lower trade deficit. We also increased exposure in Nigeria where we believe the exchange rate has reached a sustainable level and the stock market was overly pessimistic on the outlook.

CONTRIBUTION TO NAV RETURN BY COUNTRY
for the 6 month period ended 31 March 2018

Country	%
Kuwait	-0.9
Tanzania	-0.3
Morocco	-0.2
Pan-Frontier Markets	-0.1
Sri Lanka	0.1
Slovenia	0.1
Philippines	0.2
Estonia	0.2
Saudi Arabia	0.3
Bangladesh	0.4
Ukraine	0.6
Kenya	1.3
Colombia	1.3
Egypt	1.5
Romania	1.5
Nigeria	1.5
Argentina	1.6
Vietnam	1.8
Kazakhstan	2.2

All performance figures calculated on a US dollar basis.

Source: BlackRock.

OUTLOOK
We continue to be positive on Frontier Markets, especially where those markets are experiencing improved macro-economic conditions, better political governance, cash flow growth, and cheap valuations.

As we are seeing more countries being reclassified from Frontier to Emerging Market status, there is the risk that the MSCI Frontier Markets Index loses the best performing countries and that concentration increases within the remaining countries in the index. Hence, we discussed with the Board a way to create a sustainable, consistent universe which allowed us to access the markets which are fast growing, show low correlations to more developed markets and are inefficient, offering opportunity for outperformance. At the end of March 2018, we announced a vote for the expansion of the investment universe to include the ‘forgotten’ countries of the Emerging and Frontier Markets indices. As a result of a positive vote by over 99% of shareholders, the Company will now be benchmarked against a bespoke index, the MSCI Emerging Markets ex Selected Countries + Frontier Markets + Saudi Arabia Index (net total return, USD). The index excludes the largest 8 countries (Brazil, China, India, Korea, Mexico, Russia, South Africa and Taiwan) with a combined weight of 85% on a market weighted basis of the MSCI Emerging Markets Index and includes the other 16 countries of the index, which tend to be less followed by investors in Emerging Markets. These ‘forgotten’ Emerging Market countries share many characteristics with our historically defined Frontier Markets. We are now considering opportunities throughout the expanded frontiers universe and therefore, following shareholder approval, have commenced the allocation of a portion of the portfolio into some of the newer countries in late March 2018.

Frontier Markets continue to exhibit the characteristics that we believe 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 where it is possible to invest in companies on some of the lowest valuations in the world, provides an unrivalled investment opportunity. The lower correlations between Frontier Markets and Developed and Emerging Markets means 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
17 May 2018

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:

• Investment Performance Risk;

• Income/Dividend Risk;

• Legal & Regulatory Risk;

• Operational Risk;

• Counterparty Risk;

• Market Risk;

• Political Risk; and

• Financial Risk.

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 2017. A detailed explanation can be found in the Strategic Report on pages 19 to 22 and in note 17 on pages 65 to 77 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at www.blackrock.co.uk/brfi.

In the view of the Board, there have not been any material 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 (excluding any performance fees, interest costs and taxation) were approximately 1.4% of average net assets for the year ended 30 September 2017.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE AIFM AND INVESTMENT MANAGER
BlackRock Fund Managers Limited (‘BFM’) is the Company’s AIFM. 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 13. The related party transactions with the Directors are set out in note 12.

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 Auditors.

The half yearly financial report was approved by the Board on 17 May 2018 and the above responsibility statement was signed on its behalf by the Chairman.

Audley Twiston-Davies
For and on behalf of the Board
17 May 2018

TEN LARGEST INVESTMENTS¹ 31 MARCH 2018

The National Bank of Kuwait (Kuwait, Financials, 4.3% (2017: 2.2%)) is the largest financial institution and is the market leader in the commercial banking market with over 65 branches in Kuwait.

YPF (Argentina, Energy, 3.7% (2017: 2.5%)) is a vertically integrated Argentine energy company, engaged in oil and gas exploration and production, and the transportation, refining, and marketing of gas and petroleum products. The company is a prominent investor and employer in the country and its second largest exporter.

Equity Group² (Kenya, Financials, 3.5% (2017: 3.4%)) is a large East African financial services company headquartered in Nairobi. The bank differentiates itself from its peers through its large retail customer base with nearly half of all bank accounts in Kenya.

Halyk Savings Bank (Kazakhstan, Financials, 3.5% (2017: 3.6%)) 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.

Banco Macro (Argentina, Financials, 3.3% (2017: 2.4%)) is the sixth largest bank in Argentina with around a 6% share of total assets in the banking system. Around 80% of the bank’s branches are located outside of the City and Province of Buenos Aires. Banco Macro is the leading bank in personal lending with around a 14% market share.

MHP (Ukraine, Consumer Staples, 3.2% (2017: 3.2%)) a food processor, 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 the company to distribute products directly to customers.

Zenith Bank (Nigeria, Financials, 3.0% (2017: 2.3%)) 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.

Mobile Telecommunications (Kuwait, Telecommunication Services, 3.0% (2017: 3.8%)) 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.

United Bank for Africa (Nigeria, Financials, 2.8% (2017: 1.7%)) is a bank based in Nigeria and recognised as the country’s third largest bank, UBA has a footprint covering 19 African markets, serving 9 million customers.

Orascom Construction (Egypt, Industrials, 2.7% (2017: 1.6%)) is an engineering, procurement and construction contractor based in Egypt. The company was Egypt's first multinational corporation and is now one of the region’s largest corporations focused on infrastructure, industrial and high-end commercial projects in the Middle East, North Africa, the United States, and the Pacific Rim for public and private clients.

1.     Gross market exposure as a % of net assets. Percentages in brackets represent the value of the holding as at 30 September 2017. Together the ten largest investments represent 33.0% of net assets (30 September 2017: 33.6%).
2.     Includes exposure gained via any contracts for difference and equity holdings.

COUNTRY AND SECTOR ALLOCATION 31 MARCH 2018

COUNTRY ALLOCATION
Relative to the MSCI Frontier Markets Index (%)
 

Saudi Arabia	7.5
Egypt	6.3
Ukraine	3.5
Kazakhstan	3.2
Romania	2.7
Pan-Middle East	2.6
Philippines	2.1
Colombia	1.8
Thailand	1.7
Pan-Asia	1.5
Other Africa	1.3
Bangladesh	1.1
Sri Lanka	0.6
Estonia	0.6
Turkey	0.6
Slovenia	0.4
Malaysia	0.4
Nigeria	-0.2
Lithuania	-0.2
Serbia	-0.2
Cote d’Ivoire	-0.2
Tunisia	-0.5
Senegal	-0.8
Jordan	-1.3
Croatia	-1.6
Kenya	-1.9
Mauritius	-2.0
Oman	-2.1
Lebanon	-2.4
Short Positions	-3.0
Bahrain	-3.4
Kuwait	-4.5
Morocco	-4.9
Vietnam	-6.0
Argentina	-6.2

Sources: BlackRock and Datastream.

Absolute weights (% of Gross Market Exposure)
 

Argentina	15.9
Kuwait	12.1
Vietnam	9.5
Saudi Arabia	7.5
Nigeria	7.1
Romania	6.8
Egypt	6.3
Kazakhstan	3.9
Bangladesh	3.7
Kenya	3.5
Ukraine	3.5
Morocco	3.0
Pan-Middle East	2.6
Philippines	2.1
Slovenia	1.9
Sri Lanka	1.8
Colombia	1.8
Thailand	1.7
Pan-Asia	1.5
Other Africa	1.3
Estonia	1.0
Turkey	0.6
Malaysia	0.4
Short Positions	-3.0

Sources: BlackRock and Datastream.

SECTOR ALLOCATION
Relative to the MSCI Frontier Markets Index (%)
 

Health Care	6.3
Consumer Discretionary	5.1
Materials	4.3
Industrials	1.7
Consumer Staples	1.5
Information Technology	0.6
Energy	-0.1
Real Estate	-1.6
Utilities	-2.9
Short Positions	-3.0
Telecommunication Services	-7.4
Financials	-8.0

Absolute weights (% of Gross Market Exposure)
 

Financials	37.9
Consumer Staples	12.6
Health Care	9.1
Materials	8.7
Energy	6.1
Telecommunication Services	6.0
Industrials	5.8
Real Estate	5.6
Consumer Discretionary	5.5
Information Technology	1.7
Utilities	0.5
Short Positions	-3.0

Sources: BlackRock and Datastream.

INVESTMENTS AS AT 31 MARCH 2018

Company	Principal  country of  operation	Sector	Fair value and market exposure1  US$’000	Gross  market  exposure  as a % of  net assets3
Equity portfolio
YPF	Argentina	Energy	15,876	3.7
Banco Macro	Argentina	Financials	14,247	3.3
Grupo Financiero Galicia	Argentina	Financials	9,801	2.4
Grupo Supervielle	Argentina	Financials	9,050	2.1
IRSA Inversiones	Argentina	Real Estate	9,047	2.1
Loma Negra Compania Industrial Argentina	Argentina	Materials	3,786	0.9
			--------	--------
			61,807	14.5
			--------	--------
The National Bank of Kuwait	Kuwait	Financials	18,487	4.3
Mobile Telecommunications	Kuwait	Telecommunication Services	12,662	3.0
Burgan Bank	Kuwait	Financials	10,802	2.6
Mezzan Holdings	Kuwait	Consumer Staples	5,889	1.4
Kuwait Investment Projects	Kuwait	Financials	3,528	0.8
			--------	--------
			51,368	12.1
			--------	--------
Zenith Bank	Nigeria	Financials	12,852	3.0
United Bank for Africa	Nigeria	Financials	11,869	2.8
Nigerian Breweries	Nigeria	Consumer Staples	5,550	1.3
			--------	--------
			30,271	7.1
			--------	--------
BRD Groupe Societe Generale	Romania	Financials	9,664	2.3
S.N.G.N. Romgaz	Romania	Energy	8,647	2.0
Banca Transilvania	Romania	Financials	8,450	2.0
Societatea Energetica Electrica	Romania	Utilities	2,087	0.5
			--------	--------
			28,848	6.8
			--------	--------
Orascom Construction	Egypt	Industrials	11,473	2.7
Integrated Diagnostics	Egypt	Health Care	6,078	1.4
Eastern Tobacco	Egypt	Consumer Staples	5,801	1.4
Centamin	Egypt	Materials	545	0.1
Cleopatra Hospital	Egypt	Health Care	53	–
			--------	--------
			23,950	5.6
			--------	--------
Halyk Savings Bank	Kazakhstan	Financials	14,697	3.5
Kcell Joint Stock Company	Kazakhstan	Telecommunication Services	1,818	0.4
			--------	--------
			16,515	3.9
			--------	--------
MHP	Ukraine	Consumer Staples	13,791	3.2
Luxoft	Ukraine	Information Technology	1,145	0.3
			--------	--------
			14,936	3.5
			--------	--------
Equity Group	Kenya	Financials	14,584	3.4
			--------	--------
			14,584	3.4
			--------	--------
Attijariwafa Bank	Morocco	Financials	6,302	1.5
Douja Promotion Groupe Addoha	Morocco	Real Estate	6,210	1.4
			--------	--------
			12,512	2.9
			--------	--------
LT Group	Philippines	Industrials	8,761	2.1
			--------	--------
			8,761	2.1
			--------	--------
KRKA	Slovenia	Health Care	7,678	1.8
			--------	--------
			7,678	1.8
			--------	--------
Crystal International	Pan - Asia	Consumer Discretionary	6,356	1.5
			--------	--------
			6,356	1.5
			--------	--------
Chevron Lubricants	Sri Lanka	Materials	2,982	0.7
Melstacorp	Sri Lanka	Consumer Staples	2,851	0.7
Distilleries Company of Sri Lanka	Sri Lanka	Consumer Staples	480	0.1
			--------	--------
			6,313	1.5
			--------	--------
Tallink	Estonia	Industrials	3,997	0.9
			--------	--------
			3,997	0.9
			--------	--------
Square Pharmaceuticals	Bangladesh	Health Care	2,929	0.7
			--------	--------
			2,929	0.7
			--------	--------
Equity Investments			290,825	68.3
			--------	--------
BlackRock’s Institutional Cash Series plc – US Dollar Liquidity Fund			123,289	29.0
			--------	--------
Total equity investments (including BlackRock’s Institutional Cash Series plc)			414,114	97.3
			--------	--------
P-Notes
Al Rajhi Bank P-Note 19/01/2021	Saudi Arabia	Financials	9,428	2.2
			--------	--------
Total P-Notes			9,428	2.2
			--------	--------
Total investments excluding CFDs			423,542	99.5
			=======	=====

   

Company	Principal  country of  operation	Sector	Fair value1  US$’000	Gross  market  exposure2  US$’000	Gross  market  exposure  as a % of  net assets3
CFD portfolio
Long positions
Mobile World	Vietnam	Consumer Discretionary		8,161	1.9
Petrovietnam Fertilizer & Chemicals	Vietnam	Materials		7,459	1.7
Vincom Retail	Vietnam	Real Estate		6,624	1.6
Saigon Securities	Vietnam	Financials		6,363	1.5
FPT	Vietnam	Information Technology		5,800	1.4
Quang Ngai Sugar	Vietnam	Consumer Staples		4,576	1.1
Hatien 1 Cement	Vietnam	Materials		1,422	0.3
				--------	--------
				40,405	9.5
				--------	--------
Herfy Food Services	Saudi Arabia	Consumer Discretionary		9,116	2.1
Yanbu National Petrochemical	Saudi Arabia	Materials		8,078	1.9
National Medical Care	Saudi Arabia	Health Care		5,260	1.3
				--------	--------
				22,454	5.3
				--------	--------
Square Pharmaceuticals	Bangladesh	Health Care		7,025	1.7
British American Tobacco	Bangladesh	Consumer Staples		5,642	1.3
				--------	--------
				12,667	3.0
				--------	--------
Ooredoo	Pan - Middle East	Telecommunication Services		11,095	2.6
				--------	--------
				11,095	2.6
				--------	--------
Almacenes Exito	Colombia	Consumer Staples		7,462	1.8
				--------	--------
				7,462	1.8
				--------	--------
Indorma Ventures	Thailand	Materials		5,291	1.2
Land and Houses Public Company Limited	Thailand	Real Estate		2,086	0.5
				--------	--------
				7,377	1.7
				--------	--------
Biotoscana Investments	Argentina	Health Care		6,129	1.4
				--------	--------
				6,129	1.4
				--------	--------
Acacia Mining	Other Africa	Materials		5,554	1.3
				--------	--------
				5,554	1.3
				--------	--------
Cleopatra Hospital	Egypt	Health Care		3,192	0.7
				--------	--------
				3,192	0.7
				--------	--------
Koza Altin Isletmele	Turkey	Materials		2,343	0.6
				--------	--------
				2,343	0.6
				--------	--------
Sapura Energy	Malaysia	Energy		1,404	0.4
UMW Holdings	Malaysia	Consumer Discretionary		160	–
				--------	--------
				1,564	0.4
				--------	--------
Melstacorp	Sri Lanka	Consumer Staples		1,077	0.3
Distilleries Company of Sri Lanka	Sri Lanka	Consumer Staples		131	–
Chevron Lubricants	Sri Lanka	Materials		123	–
				--------	--------
				1,331	0.3
				--------	--------
Attijariwafa Bank	Morocco	Financials		539	0.1
				--------	--------
				539	0.1
				--------	--------
Equity Group	Kenya	Financials		446	0.1
				--------	--------
				446	0.1
				--------	--------
Tallink	Estonia	Industrials		317	0.1
				--------	--------
				317	0.1
				--------	--------
KRKA	Slovenia	Health Care		242	0.1
				--------	--------
				242	0.1
				--------	--------
Kuwait Food (Americana)4	Kuwait	Consumer Discretionary		3	–
				--------	--------
				3	–
			--------	--------	--------
Total long CFD positions			(2,244)	123,120	29.0
			--------	--------	--------
Total short CFD positions			231	(12,276)	(3.0)
			--------	--------	--------
Total CFD portfolio			(2,013)	110,844	26.0
			=====	======	====

FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS
as at 31 March 2018

Portfolio	Fair value1  US$’000	Gross  market  exposure2  US$’000	Gross  market  exposure  as a % of  net assets
Equity investments and P-Notes	300,253	300,253	70.5
	--------	--------	--------
Total long CFD positions	(2,244)	123,120	29.0
	--------	--------	--------
Total short CFD positions	231	(12,276)	(3.0)
	--------	--------	--------
Total gross exposure	298,240	411,097	96.5
	--------	--------	--------
BlackRock’s Institutional Cash Series plc – US Dollar Liquidity Fund3	123,289	123,289	29.0
	--------	--------	--------
Total Investments	421,529	534,386	125.5
	--------	--------	--------
Cash and cash equivalents3	4,079	(108,778)	(25.5)
	--------	--------	--------
Net current assets	153	153	0.0
	--------	--------	--------
Non-current liabilities	(19)	(19)	0.0
	--------	--------	--------
Net assets	425,742	425,742	100.0
	--------	--------	--------

1.   Fair value is determined as follows:
        –      Listed investments are valued at bid prices where available, otherwise at latest market traded quoted prices.

• The sum of the fair value column for the CFD contracts totalling US$2,013,000 represents the fair valuation of all the CFD contracts, which is determined based on the difference between the purchase price and value of the underlying shares in the contract (in effect the unrealised gains/(losses) on the exposed positions). The cost of purchasing the securities held through long CFD positions directly in the market would have amounted to US$125,364,000 at the time of purchase, and subsequent market falls in prices have resulted in unrealised losses on the CFD contracts of US$2,244,000, resulting in the value of the total market exposure to the underlying securities falling to US$123,120,000 as at 31 March 2018. The cost of acquiring the securities to which exposure was gained via the short CFD positions would have been US$12,507,000 at the time of entering into the contract, and subsequent price falls have resulted in unrealised gains on the short CFD positions of US$231,000 and the value of the market exposure of these investments decreasing to US$12,276,000 at 31 March 2018. If the short position had been closed on 31 March 2018 this would have resulted in a gain of US$231,000 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 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.   The gross market exposure column for cash and cash equivalents has been adjusted to assume the Company purchased direct holdings rather than exposure being gained through CFDs.
4.  Unquoted investment.

INDEPENDENT REVIEW REPORT TO BLACKROCK FRONTIERS INVESTMENT TRUST PLC

INTRODUCTION
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 which comprises the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Financial Position, the Cash Flow Statement and the Notes to the Financial Statements. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

DIRECTORS’ RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP
London
17 May 2018

STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MARCH 2018

		Revenue US$’000			Capital US$’000			Total US$’000
		Six months ended		Year  ended  30.09.17  (audited)	Six months ended		Year  ended  30.09.17  (audited)	Six months ended		Year  ended  30.09.17  (audited)
	Notes	31.03.18  (unaudited)	31.03.17  (unaudited)		31.03.18  (unaudited)	31.03.17  (unaudited)		31.03.18  (unaudited)	31.03.17  (unaudited)
Income from investments held at fair value through profit or loss	3	4,004	4,770	13,195	–	–	–	4,004	4,770	13,195
Net income from contracts for difference	3	1,457	1,054	2,731	–	–	–	1,457	1,054	2,731
Other income	3	34	5	42	–	–	–	34	5	42
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total revenue		5,495	5,829	15,968	–	–	–	5,495	5,829	15,968
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit on investments held at fair value through profit or loss		–	–	–	39,910	29,412	54,896	39,910	29,412	54,896
Net loss on foreign exchange		–	–	–	(98)	(212)	(835)	(98)	(212)	(835)
Net profit/(loss) from contracts for difference		–	–	–	3,037	(434)	3,367	3,037	(434)	3,367
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total		5,495	5,829	15,968	42,849	28,766	57,428	48,344	34,595	73,396
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Expenses
Investment management and performance fees	4	(427)	(308)	(672)	(4,217)	(2,244)	(3,285)	(4,644)	(2,552)	(3,957)
Other operating expenses	5	(596)	(481)	(1,062)	(31)	(59)	(130)	(627)	(540)	(1,192)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total operating expenses		(1,023)	(789)	(1,734)	(4,248)	(2,303)	(3,415)	(5,271)	(3,092)	(5,149)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before finance costs and taxation		4,472	5,040	14,234	38,601	26,463	54,013	43,073	31,503	68,247
Finance costs	6	(2)	–	(2)	(9)	–	(7)	(11)	–	(9)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before taxation		4,470	5,040	14,232	38,592	26,463	54,006	43,062	31,503	68,238
Taxation	7	(286)	(504)	(1,125)	5,843	(4,316)	(6,909)	5,557	(4,820)	(8,034)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Profit for the period		4,184	4,536	13,107	44,435	22,147	47,097	48,619	26,683	60,204
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Earnings per ordinary share (US cents)	9	2.27	2.74	7.70	24.13	13.40	27.67	26.40	16.14	35.37
		=====	=====	=====	=====	=====	=====	=====	=====	=====

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 (EU). 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 the Company.

The Company does not have any other comprehensive income. 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 2018

	Notes	Called up  share  capital  US$’000	Share  premium  account  US$’000	Capital  redemption  reserve  US$’000	Special  reserve  US$’000	Capital  reserves  US$’000	Revenue  reserve  US$’000	Total  US$’000
For the six months ended 31 March 2018 (unaudited)
At 30 September 2017		1,778	46,275	5,798	230,776	55,901	9,719	350,247
Total Comprehensive Income:
Net profit for the period		–	–	–	–	44,435	4,184	48,619
Transactions with owners, recorded directly to equity:
C share issue costs – write back		–	–	–	23	–	–	23
Share issues	10	156	34,328	–	–	–	–	34,484
Dividend paid(a)	8	–	–	–	–	–	(7,631)	(7,631)
		--------	--------	--------	--------	--------	--------	--------
At 31 March 2018		1,934	80,603	5,798	230,799	100,336	6,272	425,742
		--------	--------	--------	--------	--------	--------	--------
For the six months ended 31 March 2017 (unaudited)
At 30 September 2016		1,643	21,456	5,798	230,794	8,804	7,902	276,397
Total Comprehensive Income:
Net profit for the period		–	–	–	–	22,147	4,536	26,683
Transactions with owners, recorded directly to equity:
Share issues		61	10,757	–	–	–	–	10,818
Share issue costs		–	–	–	–	(54)	–	(54)
Cash exit tender offer costs		–	–	–	(43)	–	–	(43)
Dividend paid(b)	8	–	–	–	–	–	(6,573)	(6,573)
		--------	--------	--------	--------	--------	--------	--------
At 31 March 2017		1,704	32,213	5,798	230,751	30,897	5,865	307,228
		--------	--------	--------	--------	--------	--------	--------
For the year ended 30 September 2017 (audited)
At 30 September 2016		1,643	21,456	5,798	230,794	8,804	7,902	276,397
Total Comprehensive Income:
Net profit for the year		–	–	–	–	47,097	13,107	60,204
Transactions with owners, recorded directly to equity:
Share issues		135	24,967	–	–	–	–	25,102
Share issue costs		–	(148)	–	–	–	–	(148)
C share issue costs		–	–	–	(18)	–	–	(18)
Dividends paid(c)	8	–	–	–	–	–	(11,290)	(11,290)
		--------	--------	--------	--------	--------	--------	--------
At 30 September 2017		1,778	46,275	5,798	230,776	55,901	9,719	350,247
		--------	--------	--------	--------	--------	--------	--------

(a)    Final dividend of 4.20 cents per share for the year ended 30 September 2017, declared on 1 December 2017 and paid on 9 February 2018.
(b)    Final dividend of 4.00 cents per share for the year ended 30 September 2016, declared on 22 November 2016 and paid on 17 February 2017.
(c)    Final dividend of 4.00 cents per share for the year ended 30 September 2016, declared on 22 November 2016 and paid on 17 February 2017 and interim dividend paid in respect of the year ended 30 September 2017 of 2.70 cents per share, declared on 25 May 2017 and paid on 30 June 2017.

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018

	Notes	31 March  2018   US$’000  (unaudited)	31 March  2017  US$’000  (unaudited)	30 September  2017  US$’000  (audited)
Non current assets
Investments held at fair value through profit or loss		423,542	301,590	354,384
		--------	--------	--------
Current assets
Other receivables		5,746	3,617	5,416
Derivative financial assets held at fair value through profit or loss		1,080	1,153	882
Cash collateral held with brokers		3,389	–	1,431
Cash and cash equivalents		4,079	10,799	5,947
		--------	--------	--------
		14,294	15,569	13,676
		--------	--------	--------
Total assets		437,836	317,159	368,060
		--------	--------	--------
Current liabilities
Other payables		(8,462)	(3,475)	(7,644)
Derivative financial liabilities held at fair value through profit or loss		(3,093)	(847)	(2,281)
Cash collateral received in respect of contracts for difference		(520)	(1,190)	(1,930)
		--------	--------	--------
		(12,075)	(5,512)	(11,855)
		--------	--------	--------
Total assets less current liabilities		425,761	311,647	356,205
		--------	--------	--------
Non current liabilities
Non current tax liability	7	–	(1,734)	(3,286)
Deferred taxation liability	7	–	(2,666)	(2,653)
Management shares of £1.00 each (one quarter paid)		(19)	(19)	(19)
		--------	--------	--------
Net assets		425,742	307,228	350,247
		--------	--------	--------
Equity attributable to equity holders
Called up share capital	10	1,934	1,704	1,778
Share premium account		80,603	32,213	46,275
Capital redemption reserve		5,798	5,798	5,798
Special reserve		230,799	230,751	230,776
Capital reserves		100,336	30,897	55,901
Revenue reserve		6,272	5,865	9,719
		--------	--------	--------
Total equity		425,742	307,228	350,247
		--------	--------	--------
Net asset value per ordinary share (US cents)	9	220.03	180.32	196.91
		--------	--------	--------

CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MARCH 2018

	Six months ended  31 March 2018  US$’000  (unaudited)	Six months ended  31 March 2017  US$’000  (unaudited)	Year ended  30 September 2017  US$’000  (audited)
Operating activities
Net profit before taxation	43,062	31,503	68,238
Add back finance costs	11	–	9
Net profit on investments and contracts for difference held at fair value through profit or loss (including transaction costs)	(44,007)	(29,348)	(59,209)
Net loss on foreign exchange	98	212	835
Sales of investments held at fair value through profit or loss	119,647	66,441	164,419
Purchases of investments held at fair value through profit or loss	(91,743)	(92,191)	(172,655)
Purchases of Liquidity Fund	(122,265)	(18,556)	(89,213)
Sales of Liquidity Fund	65,169	39,812	65,645
Realised losses on closure of contracts for difference	(29,581)	(13,223)	(24,567)
Realised gains on closure of contracts for difference	34,236	13,159	30,586
Increase in other receivables	(1,393)	(1,393)	(592)
Increase/(decrease) in other payables	2,485	(1,111)	(568)
Decrease in amounts due from brokers	1,063	2,894	294
Net movement in cash collateral held with brokers	(1,958)	450	(981)
(Decrease)/increase in amounts due to brokers	(1,667)	(1,118)	2,507
Cash collateral (pledged)/received in respect of contracts for difference	(1,410)	1,023	1,763
Taxation paid	(382)	(420)	(2,095)
	--------	--------	--------
Net cash outflow from operating activities	(28,635)	(1,866)	(15,584)
	--------	--------	--------
Financing activities
Interest paid	(11)	–	(9)
Tender costs paid	–	(43)	–
Proceeds from share issues	34,484	10,764	25,102
C Share issue costs write back	23	–	–
Share issue costs paid	–	–	(166)
Dividends paid	(7,631)	(6,573)	(11,290)
	--------	--------	--------
Net cash inflow from financing activities	26,865	4,148	13,637
	--------	--------	--------
(Decrease)/increase in cash and cash equivalents	(1,770)	2,282	(1,947)
Effect of foreign exchange rate changes	(98)	(212)	(835)
	--------	--------	--------
Change in cash and cash equivalents	(1,868)	2,070	(2,782)
Cash and cash equivalents at the start of the period	5,947	8,729	8,729
	--------	--------	--------
Cash and cash equivalents at the end of the period	4,079	10,799	5,947
	--------	--------	--------
Comprised of:
Cash at bank	4,079	10,799	5,947
	======	======	======

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2018

1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

2. BASIS OF PREPARATION
The half yearly financial statements have been prepared using the same accounting policies as set out in the Company’s Annual Report and Financial Statements for the year ended 30 September 2017 which were prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union and applied in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’. Insofar as the Statement of Recommended Practice (‘SORP’) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (‘AIC’), revised in November 2014 is compatible with IFRS, the Financial Statements have been prepared in accordance with guidance set out in the SORP.

3. INCOME

	Six months ended  31 March 2018  US$’000  (unaudited)	Six months ended  31 March 2017  US$’000   (unaudited)	Year ended  30 September 2017  US$’000  (audited)
Investment income:
Overseas listed dividends	2,410	4,664	11,200
Overseas listed special dividends	564	13	488
Overseas listed stock dividends	1,030	93	1,507
Income from contracts for difference	1,457	1,054	2,731
	--------	--------	--------
	5,461	5,824	15,926
Other income:
Deposit interest	34	5	42
	--------	--------	--------
Total income	5,495	5,829	15,968
	--------	--------	--------

Dividends and interest received in the six months ended 31 March 2018 amounted to US$3,626,000 and US$34,000 (six months ended 31 March 2017: US$5,008,000 and US$5,000; year ended 30 September 2017: US$15,701,000 and US$42,000) respectively.

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

	Six months ended 31 March 2018 (unaudited)			Six months ended 31 March 2017 (unaudited)			Year ended 30 September 2017 (audited)
	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000
Investment management fee	427	1,707	2,134	308	1,232	1,540	672	2,689	3,361
Performance fee	–	2,510	2,510	–	1,012	1,012	–	596	596
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Total	427	4,217	4,644	308	2,244	2,552	672	3,285	3,957
	--------	--------	--------	--------	--------	--------	--------	--------	--------

An investment management fee equivalent to 1.10% per annum of the Company’s gross assets (defined as the aggregate net assets of the long equity and CFD portfolios of the Company) 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 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. The management and performance fees are payable to BFM.

For the six months ended 31 March 2018, the Company’s NAV had outperformed the MSCI Frontiers Markets Index on a US dollar basis and a performance fee of US$2,510,000 has been accrued (six months ended 31 March 2017: US$1,012,000; year ended 30 September 2017: US$596,000).

5. OTHER OPERATING EXPENSES

	Six months  ended   31 March  2018   US$’000   (unaudited)	Six months  ended   31 March  2017   US$’000   (unaudited)	Year ended  30 September 2017  US$’000  (audited)
Allocated to revenue:
Custody fee	244	187	429
Auditor’s remuneration:
– audit services	18	12	36
– other assurance services	7	7	9
Registrar’s fee	22	12	37
Directors’ emoluments	102	89	179
Broker fees	22	18	38
Depositary fees1	22	16	35
Marketing fees	55	28	73
Other administrative costs	104	112	226
	--------	--------	--------
	596	481	1,062
	--------	--------	--------
Allocated to capital:
Transaction charges	31	59	130
	--------	--------	--------
	627	540	1,192
	--------	--------	--------

1.     All expenses other than depositary fees are paid in sterling and are therefore subject to exchange rate fluctuations.

6. FINANCE COSTS

	Six months ended 31 March 2018 (unaudited)			Six months ended 31 March 2017 (unaudited)			Year ended 30 September 2017 (audited)
	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000
Interest on bank overdraft	2	9	11	–	–	–	2	7	9
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Total	2	9	11	–	–	–	2	7	9
	--------	--------	--------	--------	--------	--------	--------	--------	--------

7. TAXATION

	Six months ended 31 March 2018 (unaudited)			Six months ended 31 March 2017 (unaudited)			Year ended 30 September 2017 (audited)
	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000	Revenue  US$’000	Capital  US$’000	Total  US$’000
Analysis of tax charge/(credit) for the period:
Current taxation:
Corporation taxation	199	(199)	–	84	(84)	–	296	(296)	–
Overseas taxation	87	–	87	420	–	420	830	–	830
Overseas tax on capital gains tax	–	295	295	–	1,734	1,734	–	4,552	4,552
Capital gains tax provision reversed	–	(3,286)	(3,286)	–	–	–	–	–	–
Prior year adjustment	–	–	–	–	–	–	(1)	–	(1)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Total current tax charge	286	(3,190)	(2,904)	504	1,650	2,154	1,125	4,256	5,381
Deferred tax – capital gains tax provision reversed	–	(2,653)	(2,653)	–	–	–	–	–	–
Total deferred taxation	–	–	–	–	2,666	2,666	–	2,653	2,653
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Total taxation	286	(5,843)	(5,557)	504	4,316	4,820	1,125	6,909	8,034
	--------	--------	--------	--------	--------	--------	--------	--------	--------

Following the enactment of Argentine tax reform (Law No. 27,430), effective 1 January 2018, and discussions with the Company’s advisers, capital gains on American Depositary Receipts over Argentine equity held by the Company will not give rise to an Argentine Capital Gains Tax liability and accordingly the provision for capital gains tax of US$5,939,000 previously accrued by the Company has been reversed.

8. DIVIDENDS
The Board has declared an interim dividend of 3.00 cents per share payable on 29 June 2018 to shareholders on the register at 1 June 2018 (six months ended 31 March 2017, interim dividend of 2.70 cents per share paid on 30 June 2017 to shareholders on the register at 9 June 2017). This dividend has not been accrued in the financial statements for the six months ended 31 March 2018, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.

9. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE

	Six months ended  31 March 2018  (unaudited)	Six months  ended   31 March  2017   (unaudited)	Year ended  30 September 2017  (audited)
Net revenue profit attributable to ordinary shareholders (US$’000)	4,184	4,536	13,107
Net capital profit attributable to ordinary shareholders (US$’000)	44,435	22,147	47,097
Total profit attributable to ordinary shareholders (US$’000)	48,619	26,683	60,204
	--------	--------	--------
Equity shareholders’ funds (US$’000)	425,742	307,228	350,247
	---------------	----------------	--------
The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was:	184,192,578	165,363,328	170,192,369
	----------------	----------------	----------------
The actual number of ordinary shares in issue at the end of each period on which the net asset value per ordinary share was calculated was:	193,491,108	170,383,108	177,868,108
	----------------	---------------	---------------
Return per share
Revenue earnings per share – (US cents)	2.27	2.74	7.70
Capital earnings per share – (US cents)	24.13	13.40	27.67
	--------	--------	--------
Total earnings per share – (US cents)	26.40	16.14	35.37
	--------	--------	--------
Net asset value per ordinary share – (US cents)	220.03	180.32	196.91
Ordinary share price* – (US cents)	228.66	183.82	199.91
Net asset value per ordinary share** – (pence)	156.85	144.20	146.76
Ordinary share price – (pence)	163.00	147.00	149.00
	--------	--------	--------

*       The Company’s share price is quoted in sterling and the above represents the US dollar equivalent based on exchange rates of 1.4028 at 31 March 2018, 1.2505 at 31 March 2017 and 1.3417 at 30 September 2017.

**     The Company’s NAV is quoted in US dollars (and also published in sterling) and the above represents the sterling equivalent based on exchange rates of 1.4028 at 31 March 2018, 1.2505 at 31 March 2017 and 1.3417 at 30 September 2017.

10. CALLED UP SHARE CAPITAL

	Number of  ordinary  shares	Nominal  value  US$’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 1 cent each:
At 30 September 2017	177,868,108	1,778
Shares issued	15,623,000	156
	----------------	--------
At 31 March 2018	193,491,108	1,934
	----------------	--------

The Company also has in issue 50,000 management shares which carry the right to a fixed cumulative preferred dividend.

During the period the Company issued 15,623,000 shares (six months ended 31 March 2017: 6,050,000; year ended 30 September 2017: 13,535,000) for a total gross consideration of US$34,484,000 (six months ended 31 March 2017: US$10,818,000; year ended 30 September 2017: US$25,102,000). A further 1,500,000 shares have been issued since the period end and up to and including the date of this report.

11. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 2(g) as set out on pages 55 and 56 in the Company’s Annual Report and Financial Statements for the year ended 30 September 2017.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

The fair value hierarchy has the following levels:

Level 1 – Quoted market price in an active market for an identical instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.

Level 2 – Valuation techniques used to price securities based on observable inputs. This category includes instruments valued using quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Valuation techniques used for non-standard instruments such as options, currency swaps and other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

As at the period end the P-Notes and CFDs are valued using the underlying equity bid price and the inputs to the valuation were the exchange rates used to convert the P-Notes and CFD valuation from the relevant local currency to US dollars at the period end date. There have been no changes to the valuation technique during the period under review or as at the date of this report.

Level 3 – Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and these inputs could have a significant impact on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the investment manager. The investment manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

Contracts for difference and P-Notes have all been classified as level 2 investments as their valuation has been based on market observable inputs represented by the market prices of the underlying quoted securities to which these contracts expose the Company.

The table below sets out fair value measurements using IFRS 13 fair value hierarchy.

Financial assets/(liabilities) at fair value through profit or loss at 31 March 2018	Level 1  US$’000	Level 2  US$’000	Level 3  US$’000	Total  US$’000
Assets:
Equity investments	290,825	–	–	290,825
P-Notes	–	9,428	–	9,428
BlackRock’s Institutional Cash Series plc – US Dollar Liquidity Fund	123,289	–	–	123,289
Contracts for difference (gross exposure on long positions)	–	123,117	3	123,120
Liabilities:
Contracts for difference (gross exposure on short positions)	–	(12,276)	–	(12,276)
	--------	--------	--------	--------
	414,114	120,269	3	534,386
	--------	--------	--------	--------

   

Financial assets at fair value through profit or loss at 31 March 2017	Level 1  US$’000	Level 2  US$’000	Level 3  US$’000	Total  US$’000
Assets:
Equity investments	261,304	9,516	208	271,028
P–Notes	–	9,192	–	9,192
BlackRock’s Institutional Cash Series plc – US Dollar Liquidity Fund	21,370	–	–	21,370
Contracts for difference (gross exposure on long positions)	–	64,317	2	64,319
	--------	--------	--------	--------
	282,674	83,025	210	365,909
	--------	--------	--------	--------

   

Financial assets at fair value through profit or loss at 30 September 2017	Level 1  US$’000	Level 2  US$’000	Level 3  US$’000	Total  US$’000
Assets:
Equity investments	287,979	–	211	288,190
BlackRock’s Institutional Cash Series plc – US Dollar Liquidity Fund	66,194	–	–	66,194
Contracts for difference (gross exposure on long positions)	–	88,513	2	88,515
	--------	--------	--------	--------
	354,173	88,513	213	442,899
	--------	--------	--------	--------

There were no transfers between levels of financial assets and financial liabilities during the period recorded at fair value as at 31 March 2018 or 31 March 2017. For the year ended 30 September 2017, transfers of financial assets from fair value hierarchy Level 2 to Level 1 amounted to US$14,146,000. These arose primarily in relation to the Nigerian equity securities held in the investment portfolio where observable spot exchange rates as quoted on the FMDQ OTC Securities Exchange have been applied for valuing the Nigerian equity securities following the introduction of a special window for investors by the Central Bank of Nigeria effective 28 April 2017. The Company held one Level 3 security throughout the period under review and as at 30 September 2017.

A reconciliation of fair value measurement in Level 3 is set out below.

Level 3 Financial assets at fair value through profit or loss	31 March 2018  US$’000	31 March 2017  US$’000	30 September 2017  US$’000
Opening fair value	213	213	213
Total gains or losses included in gains/(losses) on investments in the Statement of Comprehensive Income
– assets disposed during the period	(211)	–	–
– assets held at the end of the period	1	(3)	–
	--------	--------	--------
Closing balance	3	210	213
	--------	--------	--------

12. RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS
The Board consists of five non-executive Directors, all of whom are considered to be wholly independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £36,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £30,000 and each other Director receives an annual fee of £26,000.

As at 31 March 2018 an amount of US$17,000 (£12,000) (31 March 2017: US$15,000 (£12,000): 30 September 2017: US$16,000 (£12,000)) was outstanding in respect of Directors’ fees.

At the period end, the interests of the Directors in the ordinary shares of the Company are as set out below:

	Ordinary shares
Audley Twiston-Davies	128,935
John Murray	121,967
Nick Pitts-Tucker	110,148
Sarmad Zok	Nil
Stephen White	30,000

13. TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six month’s 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 (BIM (UK)).

The investment management fee due for the six months ended 31 March 2018 amounted to US$2,134,000 (six months ended 31 March 2017: US$1,540,000; year ended 30 September 2017: US$3,361,000). In addition a performance fee of US$2,510,000 (six months ended 31 March 2017: US$1,012,000, year ended 30 September 2017: US$596,000) was accrued for the six months ended 31 March 2018.

At the period end US$3,076,000 was outstanding in respect of management fees (31 March 2017: US$1,855,000; 30 September 2017: US$2,606,000). Any final performance fee for the full year to 30 September 2018 will not crystallise and fall due until the calculation date of 30 September 2018.

In addition to the above services, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services to 31 March 2018 amounted to US$55,000 excluding VAT (six months ended 31 March 2017: US$28,000; year ended 30 September 2017: US$73,000). Marketing fees of US$109,000 excluding VAT (31 March 2017: US$68,000; 30 September 2017: US$55,000) was outstanding at 31 March 2018.

The Company has an investment in BlackRock’s Institutional Cash Series plc - US Dollar Liquidity Fund of US$123,289,000 at 31 March 2018 (31 March 2017: US$21,370,000; 30 September 2017: US$66,194,000).

14. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 March 2018 (31 March 2017 and 30 September 2017: nil).

15. SUBSEQUENT EVENTS
With effect from 1 April 2018, the Company’s benchmark index was changed to MSCI Emerging Markets ex Selected Countries + Frontier Markets + Saudi Arabia Index (net total return, USD).

16. 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 2018 has not been audited.

The information for the year ended 30 September 2017 has been extracted from the latest published audited financial statements, which has been filed with the Registrar of Companies, unless otherwise stated. The report of the auditors on those accounts contained no qualifications or statement under section 498(2) or 498(3) of the Companies Act 2006.

17. ANNUAL RESULTS
The Board expects to announce the annual results for the year ended 30 September 2018 in early December 2018.

Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000 or at cosec@blackrock.com. The Annual Report should be available by late December with the Annual General Meeting being held in February 2019.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited
Tel: 020 7743 3000

Press enquiries:

Lucy Horne, Lansons Communications – Tel:  020 7294 3689
E-mail:  lucyh@lansons.com

17 May 2018

12 Throgmorton Avenue
London EC2N 2DL

END