BlackRock Frontiers Investment Trust shines with strong performance and diverse investment strategy

BlackRock Frontiers Investment Trust plc (LON:BRFI) has announced its half yearly financial report for the six months ended 31 March 2023.

PERFORMANCE RECORD

The Company’s financial statements are presented in US Dollars. The Company’s shares are listed on the London Stock Exchange and quoted in British Pound Sterling. The British Pound Sterling amounts for performance returns shown below are presented for convenience. The difference in performance returns measured in US Dollars and in British Pound Sterling reflects the change in the value of British Pound Sterling versus the US Dollar over the period.

	As at  31 March  2023	As at  30 September  2022
US Dollar
Net assets (US$’000)1	338,161	302,656
Net asset value per ordinary share (cents)	178.61	159.86
Ordinary share price (mid market)2 (cents)	166.30	142.61
	—————-	—————-
British Pound Sterling
Net assets (£’000)1,2	273,493	271,124
Net asset value per ordinary share2 (pence)	144.45	143.21
Ordinary share price (mid market) (pence)	134.50	127.75
Discount3	6.9%	10.8%
	==========	==========

Performance	For the six  months ended  31 March  2023  %	For the  year ended  30 September  2022  %	Since  inception4  %
US Dollar
Net asset value per share (with dividends reinvested)3	+14.5	-10.9	+83.0
Benchmark Index (NR)5,6	+4.5	-7.3	+41.4
MSCI Frontier Markets Index (NR)6	+2.2	-25.2	+27.5
MSCI Emerging Markets Index (NR)6	+14.0	-28.1	+19.8
Ordinary share price (with dividends reinvested)3	+19.8	-10.0	+68.5
	—————-	—————-	—————-
British Pound Sterling
Net asset value per share (with dividends reinvested)3	+3.3	+7.7	+129.9
Benchmark Index (NR)5,6	-5.7	+12.0	+76.9
MSCI Frontier Markets Index (NR)6	-7.7	-9.6	+60.7
MSCI Emerging Markets Index (NR)6	+3.0	-13.2	+51.1
Ordinary share price (with dividends reinvested)3	+8.0	+8.7	+111.4
	==========	==========	==========

¹     The change in net assets reflects dividends paid and portfolio movements during the period.

²     Based on an exchange rate of US$1.2365 to £1 at 31 March 2023 and US$1.1163 to £1 at 30 September 2022.

³     Alternative Performance Measure, see Glossary in the half yearly report and financial statements.

⁴     The Company was incorporated on 15 October 2010 and its shares were admitted to trading on the London Stock Exchange on 17 December 2010.

⁵     With effect from 1 April 2018, the Benchmark Index changed to the MSCI Emerging Markets Index ex Selected Countries + MSCI Frontier Markets Index + MSCI Saudi Arabia Index. Prior to 1 April 2018, the Benchmark Index was the MSCI Frontier Markets Index. The performance returns of the Benchmark Index since inception have been blended to reflect this change.

⁶     Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes.

Sources: BlackRock and Datastream.

CHAIRMAN’S STATEMENT

Dear shareholder,
I am pleased to present the Company’s Half Yearly Financial Report for the six months to 31 March 2023.

Period highlights

·        NAV total return of +14.5%, well ahead of the benchmark return of +4.5% (in US Dollar terms with dividends reinvested);

·        Share price total return of +19.8% (in US Dollar terms with dividends reinvested);

·        Share price total return of +8.0% (in British Pound Sterling terms with dividends reinvested);

·        Declared interim dividend of 3.10 cents per share; and

·        Yield of 4.3% (based on share price at 1 June 2023, interim dividend for 2023 and final dividend for 2022).

Performance and overview
Our portfolio managers’ strategy and investment process has seen the Company perform strongly during the period, outperforming our benchmark. Their ability to identify and expose the portfolio to different and diverse themes is, we believe, our competitive advantage.

During the six months to 31 March 2023, the Company achieved a NAV total return in US Dollars of +14.5%, outperforming its Benchmark Index which returned +4.5%. The Company’s share price total return was +19.8%. To provide further context, the MSCI Frontier Markets Index returned +2.2% and the MSCI Emerging Markets Index returned +14.0%.

As you will read in the Investment Manager’s Report which follows, global markets have been dominated by fears of a US-led recession, uncertainty over the trajectory of interest rates and speculation over when the Federal Reserve (Fed) will reverse its monetary policy tightening cycle; which many believe will be the catalyst for a return of confidence.

However, there are tailwinds for frontier markets, in particular a weakening US Dollar and the re-opening of China, both of which have been beneficial of late for many of the markets that we invest in. Our portfolio managers also note the relatively benign fiscal position and accommodative monetary policy applied by many of the governments of the countries in which we invest. This is in stark contrast to the current position in developed markets. This lack of correlation with developed market economies has always been and remains one of the Company’s key attractions for investors seeking portfolio diversification.

Your portfolio managers provide a detailed description of the key contributors to and detractors from performance during the period, portfolio activity and their views on the outlook for the second half of the financial year in their report which follows.

Revenue return and dividends
BlackRock Frontiers Investment Trust’s revenue return per share for the six months ended 31 March 2023 amounted to 2.74 cents (six months ended 31 March 2022: 2.31 cents). Further, as at 31 May 2023 the Company had accrued a total of 5.95 cents in revenue return per share for the period from 1 October 2022 to 31 May 2023. Accordingly, the Board is pleased to declare an interim dividend of 3.10 cents per share (2022: 2.75 cents per share). This interim dividend is payable on 7 July 2023 to shareholders on the Company’s register on 16 June 2023. The shares will go ex-dividend on 15 June 2023. During the period the final dividend of 4.25 cents per share for the year ended 30 September 2022, which was declared on 7 December 2022, was paid to shareholders on 14 February 2023.

This higher interim dividend than usual is reflective of an increase in the amount of revenue generated, which our portfolio managers’ believe is sustainable given that it is broadly representative of the underlying earnings growth in the companies held within our portfolio.  There can of course be no guarantee of the level of future revenue derived from our portfolio and I should be clear that this should not be considered to be a dividend forecast.

Portfolio management team
As announced on 24 February 2023, Sudaif Niaz was appointed alongside Sam Vecht and Emily Fletcher as a named portfolio manager of the Company. Sudaif joined BlackRock in 2015 and is a portfolio manager and research analyst in the Global Emerging Markets Equities Team. Sudaif is also a member of the EMEA and Frontier Markets research team, where he covers South East Asia and parts of the Middle East. He has worked closely with Sam and Emily for many years providing support in managing the Company’s portfolio and his addition as a named manager reflects his significant contribution. There are no changes anticipated in the way the portfolio is managed on a day-to-day basis as a result of this change.

Gearing
One of the advantages of the investment trust structure is that the Company can use gearing with the objective of increasing portfolio returns over the longer term. The Company utilised its ability to gear the portfolio through its CFD exposure during the year. As at 31 March 2023, net gearing stood at 2.4%.

Board composition
On 1 February 2023 the Board announced that, as part of its ongoing succession plans, and having each served for a tenure of in excess of 12 years, Mr Zok and I would step down from the Board prior to next year’s AGM to be held in February 2024. The Board has undertaken a process to identify my successor as Chairman and to identify a replacement for Mr Zok whose in-depth knowledge and on the ground insights into the culture, customs and business practices in the Middle East have been invaluable.

I am pleased to announce that it has been agreed that Katrina Hart, our current Senior Independent Director, will succeed me as Chairman upon my retirement from the Board at the AGM in 2024. Katrina possesses a great deal of investment trust specific expertise and asset management experience, having spent her executive career in investment banking and equities research. It has also been agreed that Elisabeth Airey, also a serving Director, will succeed Katrina as our Senior Independent Director. Further information on their respective backgrounds and experience can be found in the half yearly report and financial statements.

Share capital
For the period under review, the Company’s ordinary shares traded at an average discount to NAV of 8.3%, but had narrowed to 6.9% on a cum-income basis at 31 March 2023. By comparison, the weighted average discount of the AIC Global Emerging Markets peer group during the period under review was 10.8%.

As at 1 June 2023, the discount stood at 8.6% (compared to an average discount for the peer group of 9.6%). The Directors are keen to ensure that the Company’s share price does not trade at a significant discount or premium to the underlying NAV. Accordingly, the Directors, in conjunction with the Company’s broker, monitor the level of discount closely and will consider the issue of ordinary shares at a premium or repurchase at a discount to help balance demand and supply in the market if they believe it is in shareholders’ interests to do so. In determining whether to proceed, Directors review a range of factors, including the ongoing attractiveness of the investment offering, the prevailing market conditions and the discount level in absolute terms and relative to that of the peer group companies.

The Board continues to monitor the market in our shares and, in conjunction with the Company’s broker, gives consideration to the possibility of buying back shares.

The Directors currently have the authority to buy back shares in the market equivalent to 14.99% of the Company’s issued share capital and also to issue new shares equivalent to 10% of the Company’s issued share capital (excluding any shares held in treasury). The Board will seek a renewal of these authorities from shareholders at the AGM.

No new shares were issued or sold from treasury during the period or up to the date of this report.

Shareholder communication
We appreciate how important access to regular information is to our shareholders. To supplement our Company website, we now offer shareholders the ability to sign up to the BlackRock Trust Matters newsletter which includes information on the Company as well as news, views and insights.

Outlook
Our portfolio managers believe our Company is well placed to continue to generate good performance as we move through the second half of our financial year. Since the period end and up to 1 June 2023, the net asset value per share of the Company has increased by 3.7% from 178.61 cents per share to 185.23 cents per share. The Company’s Benchmark Index has decreased by 0.2%.

Our portfolio is exposed to a range of fast-growing countries with significant natural resources, such as Chile and Indonesia. Our holdings in South East Asia are also benefiting as Western countries seek to recalibrate their supply chains away from China in response to rising geo-political tensions. In Europe, the portfolio managers have selectively added to Greece and Hungary to take advantage of attractive investment opportunities. They have also initiated a position in Argentina, a region that has at times delivered strong returns for BlackRock Frontiers Investment Trust.

Success in these markets requires extensive resources, painstaking research and local knowledge. Our portfolio managers’ unwavering commitment to meeting the management teams of the companies we invest in, wherever they may be in the world, is invaluable and sets us apart.

As we move through the second half of the financial year the Board shares our portfolio managers’ excitement around the breadth of opportunities offered by the Frontier Markets in what is a dynamic and ever-changing investment universe.

AUDLEY TWISTON-DAVIES
Chairman
5 June 2023

INVESTMENT MANAGER’S REPORT

Market Review
In many ways, the six months to end March 2023 have been less eventful for our universe than the first nine months of 2022, despite us operating in a markedly different world. US interest rates are at 16 year highs, the world appears more divided along geopolitical lines, and although inflation appears to be retreating somewhat, it remains front of mind for investors alongside the looming possibility of a US-led global recession. Against this backdrop, the Company has delivered a strong result, with the net asset value (NAV) increasing by 14.5% in US Dollar terms and by 3.3% in British Pound Sterling terms over the six month period (all percentages with dividends reinvested).

Much of 2022 was dominated by concerns about a crippling European energy crisis. A warmer than usual winter, coupled with a quick ramp up of storage efforts, and sizeable increases in liquefied natural gas imports, have helped avert a full-scale crisis. Gas prices have in fact experienced an 86% decline from the record highs we saw in August last year and gas reserves are now at a comfortable level. Over the six month period, this has benefited countries in Eastern Europe, in particular Greece (+49%), Poland (+47%) and Hungary (+40%).

The other notable global event was the quicker than anticipated reopening of the Chinese economy post-COVID-19. This development supported several countries in our investment universe, particularly in South East Asia as tourism numbers started to recover, notably in Thailand.

Geopolitical tensions remain front of mind for investors. While we saw an easing of China/Taiwan tensions following the meeting between US President Biden and Chinese Communist Party General Secretary Xi Jinping at the G-20 in November last year, the relationship between the two countries soured again in 2023 after the US decision to inhibit sales of advanced technology to China. These geopolitical tensions have accelerated a duplication of supply chains which continues to benefit countries in our investment universe such as Vietnam and Malaysia.

From the Road
One of the highlights of the last six months was the acceleration of travel to our investment universe to conduct on-the-ground due diligence. The team visited more than 15 countries over the period. In Europe, some of the countries we visited were Georgia, Greece and Hungary. We also travelled to countries such as Kuwait, Qatar and Saudi Arabia in the Middle East. Among the many countries we visited in Asia, examples are Indonesia, Malaysia and Vietnam. Our travels also took us to several destinations in Latin America, including Argentina, Chile and Uruguay. We met with representatives from companies, governments and civil society to stress test our investment views.

Our visit confirmed Greece as one of the bright spots in our investment universe. Digitalisation there should continue to drive better than expected government revenue collection and thus investments on top of very significant inflows from the European Union under the Recovery and Resilience Facility program. The country has seen a significant increase in exports to Gross Domestic Product (GDP) from 20% in 2006 to nearly 50% in 2023, and we continue to see attractive opportunities in the country. In Indonesia, we expect the domestic consumption environment and current account to see sustained improvements. The country has the biggest stock of nickel in the world, a crucial input in the electric vehicle (EV) battery supply chain, and we see the country’s transformation from a primarily upstream extractive economy into a more value additive one as positive for the economy overall.

In contrast, our trip to Vietnam highlighted near-term concerns from the developments in the real estate sector. While we expect the country to benefit from the relocation of supply chains from China and an uptick in tourism, we have adopted a more cautious stance following our recent trip as we try to side-step the fallout from the problems in the real estate sector. Our position in Vietnam is somewhat separated from these concerns.

Portfolio Review
In the six months to 31 March 2023, the Company’s NAV returned 14.5% (on a US Dollar basis with dividends reinvested) significantly outperforming its Benchmark Index (the MSCI Emerging Markets Index ex Selected Countries + MSCI Frontier Markets + MSCI Saudi Arabia Index) which returned 4.5%. Over the same period the MSCI Emerging Markets Index rose by 14.0% and MSCI Frontier Markets Index rose by 2.2%. Since inception, the Company’s NAV has returned 83.0%, compared with 41.4% for its Benchmark Index. For reference, the MSCI Frontier Markets Index and the MSCI Emerging Markets Index returned 27.5% and 19.8% respectively (all percentages in US Dollar terms with dividends reinvested).

Our allocation to Hungary did very well, with low-cost airline Wizz Air Holdings (+108%) being the single biggest contributor over the period. The company has benefitted from a rebound in travel demand in a post-COVID-19 environment while managing to maintain cost discipline, hence preserving margins. Our overweight allocation to Hungarian bank OTP Bank (+55%) was another significant contributor where a high interest rate environment bolstered net interest income. National Bank of Greece (+64%) and Polish bank PKO Bank Polski (+50%) benefitted from similar fundamentals. The majority of the banks we own are national champions and are less susceptible to the much talked about asset-liability mismatches in the regional US banks. Given their dominant domestic positioning, our bank holdings should benefit from a deposit flight to safety.

Elsewhere, our exposure to Argentina through Vista Oil & Gas (Vista) (+61%) also performed strongly. Vista owns assets in the famous Vaca Muerta shale formation in Argentina. The company benefitted from higher hydrocarbon prices and an increase in export volumes. Our Kazakh exposure also did well, primarily through our holding in fintech super-app JSC Kaspi (+33%). Our positioning in the country is driven by bottom-up fundamentals. Another notable contributor to the performance of the Company over this period was our overall underweight allocation to Saudi Arabia. Significantly higher risk-free rates and lower energy prices weighed on the Saudi market overall.

While we had no exposure to Turkey (+48%), it is worth highlighting that it was the second best performing market in our universe over this period. The Turkish elections concluded on 28 May 2023, where current president Recep Tayyip Erdogan was re-elected for a historic third term. We continue to have no exposure to the country.

From a stock specific perspective, the biggest detractor over the period was Saudi National Bank (-33%). The company was the largest shareholder in Credit Suisse. While the investment in Credit Suisse relative to the scale of Saudi National Bank was immaterial, the market questioned the bank’s capital allocation framework. It was little surprise when the bank saw its chairman resign after the collapse of the Swiss bank. Elsewhere in the Kingdom, Saudi Telecom also detracted (-9%). Our allocation to Qatar Gas Transport Company (-12%) was also a detractor but has since recovered. In Vietnam, Vietnam Technological & Commercial (Techcombank) (-20%) negatively impacted returns and post our trip we have taken a more cautious view on the country given tightening liquidity conditions and the concerns around the viability of some parts of the property sector.

In terms of positioning, we added to Indonesia as we like the macro setup in the country. We increased our exposure to companies such as auto conglomerate Astra International on the back of a supportive outlook for automotive sales. We also initiated a position in food manufacturing company Indofoods as well as in commercial bank, Bank Central Asia. Hungary is another market where we have conviction and we added to OTP Bank and Wizz Air Holdings. We exited Genting Malaysia, a Malaysian hotel and resort operator, where despite an uptick in tourist numbers, the company has disappointed on the cost side.

Outlook
We still believe global markets are in the process of adjusting to a world of higher inflation and higher interest rates. The banking sector fragility we saw over the course of March is one indicator that this level of interest rates is starting to bite. Equally, we believe we are near a peak in the US Dollar and that provides a favourable setup for frontier markets that posit supportive economic fundamentals and policy making.

We retain an overweight exposure in Indonesia and Chile as both fit our macro-economic framework. In particular, the Indonesian economy is positioned to sustain high single digits nominal GDP growth given policy-making remains favourable to attract foreign direct investment and continue to grow its exports base. We have an optimistic view on Indonesia’s ability to grow its value-added nickel exports that the global EV battery supply chain will increasingly rely on. Indonesia holds one of the largest nickel reserves in the world and is quickly developing these into higher density battery grade nickel for NCM batteries. This will support Indonesian balance of payments and allow for more sustainable economic growth given Indonesia remains under invested in most sectors by relative emerging market standards. Our favourable view on Chile is predicated on the country implementing an orthodox monetary and fiscal policy which has enabled inflation to roll over and we believe there is value in stocks there as the interest rate cycle normalises.

GEOPOLITICAL FACTORS

From a geopolitical standpoint, the world looks increasingly split into three blocks: the ‘Western’ block such as Europe, US, South Korea, Japan, Australasia, the ‘Eastern’ block such as China, Russia, North Korea, and some Chinese aligned African nations, and then the ‘Neutrals’ such as India, Brazil, Saudi Arabia and much of the rest of South America and the Middle East. Most of the countries within our Frontier Markets universe are considered ‘neutrals’, and should benefit as the global geopolitical alliances recalibrate.

It is clear to us that these geopolitical concerns have already prompted a supply chain recalibration away from China and countries such as Vietnam and Malaysia will continue to see the benefit of re-shoring of supply chains.

Finally, we observe a marked contrast in the monetary and fiscal policy decisions taken in the small emerging and frontier markets versus developed markets in the post-pandemic years, and we find significant value in currencies and equity markets across our investment opportunity set. We are optimistic over the long-term in our under-frontiers investment universe which should enable compelling investment opportunities.

Sam Vecht, Emily Fletcher and Sudaif Niaz
BlackRock Investment Management (UK) Limited

5 June 2023

Ten largest investments¹ as at 31 March 2023

1 + Bank Central Asia (2022: n/a)
Financials (Indonesia)
Portfolio value: $16,905,000
Percentage of net assets: 5.0% (2022: nil%)

Bank Central Asia is an Indonesian commercial bank headquartered in Jakarta. It is the largest private bank in the country, offering commercial banking and other financial services.

2 + Abdullah Al Othaim Markets² (2022: 5th)
Consumer Staples (Saudi Arabia)
Portfolio value: $12,099,000
Percentage of net assets: 3.6% (2022: 3.2%)

Abdullah Al Othaim Markets is a large retailer in Saudi Arabia, operating supermarkets, hypermarkets, convenience stores and wholesale outlets. They also have a small presence in Egypt. The company is looking to disrupt the current landscape which is largely dominated by mom-and-pop stores.

3 + Astra International (2022: 12th)
Consumer Discretionary (Indonesia)
Portfolio value: $11,845,000
Percentage of net assets: 3.5% (2022: 2.6%)

Astra International is an Indonesian auto conglomerate and the largest independent automotive group in South East Asia.

4 + Saudi Basic Industries Corporation² (2022: n/a)
Materials (Saudi Arabia)
Portfolio value: $11,054,000
Percentage of net assets: 3.3% (2022: nil%)

Saudi Basic Industries Corporation (SABIC), headquartered in Riyadh, is a steel and chemicals manufacturer. The company is a subsidiary of Saudi Arabian Oil Co, and engages in the production of petrochemicals, chemicals, industrial polymers, fertilizers and metals.

5 + PKO Bank Polski (2022: 7th)
Financials (Poland)
Portfolio value: $10,651,000
Percentage of net assets: 3.1% (2022: 3.1%)

PKO Bank Polski is Poland’s largest bank founded in 1919. It is primarily focused on retail banking, operating over 1100 branches in Poland and abroad.

6 + Bank Mandiri (2022: 23rd)
Financials (Indonesia)
Portfolio value: $10,064,000
Percentage of net assets: 3.0% (2022: 2.0%)

Bank Mandiri is one of the largest banks in Indonesia. The bank offers a range of banking products and services from corporate to retail banking.

7 – JSC Kaspi (2022: 4th)
Financials (Kazakhstan)
Portfolio value: $9,870,000
Percentage of net assets: 2.9% (2022: 3.4%)

JSC Kaspi is the largest payments and fintech ecosystem in Kazakhstan. The company began as a bank but expanded into peer-to-peer payments and online marketplaces, proving vital for businesses during the lockdowns of 2020. The company is working on expanding into other markets in Central Asia.

8 + Wizz Air Holdings (2022: 46th)
Industrials (Hungary)
Portfolio value: $9,838,000
Percentage of net assets: 2.9% (2022: 1.2%)

Wizz Air Holdings, legally incorporated as Wizz Air Hungary Ltd, is a Hungarian ultra-low-cost carrier with its head office in Budapest, Hungary. The airline serves many cities across Europe, as well as some destinations in North Africa, the Middle East and South Asia.

9 + OTP Bank (2022: 42nd)
Financials (Hungary)
Portfolio value: $9,770,000
Percentage of net assets: 2.9% (2022: 1.3%)

OTP Bank, headquartered in Budapest, Hungary, is one of the leading banking groups in Central and Eastern Europe. The bank has operations in 11 countries across the region and serves nearly 16 million customers.

10 + FPT² (2022: 11th)
Information Technology (Vietnam)
Portfolio value: $9,638,000
Percentage of net assets: 2.9% (2022: 2.6%)

FPT is Vietnam’s largest information technology services company, with a focus on information and communications technologies. The core business focuses on consulting, providing and deploying technology and telecommunications services and solutions.

¹        Gross market exposure as a % of net assets.

²        Exposure gained via long contracts for difference (CFDs) only.

BlackRock Frontiers Investment Trust’s ten largest investments represented 33.1% of the Company’s portfolio as at 31 March 2023 (30 September 2022: 35.2%).

Percentages in brackets represent the portfolio holding at 30 September 2022.

Symbols indicate the change in the relative ranking of the position in the portfolio compared to its ranking as at 30 September 2022.

Portfolio analysis as at 31 March 2023

Country allocation: Absolute weights (Gross market exposure as a % of net assets)¹

	%
Saudi Arabia	17.8
Indonesia	17.2
Thailand	8.8
Vietnam	8.6
United Arab Emirates	8.0
Kazakhstan	7.8
Hungary	7.3
Chile	6.0
Greece	4.3
Poland	3.1
Argentina	2.7
Qatar	2.4
Egypt	2.4
Panama	2.0
Philippines	2.0
Peru	1.7
Georgia	1.6
Malaysia	1.6
Colombia	1.5
Kuwait	1.3
Romania	1.0
Kenya	0.7
Ukraine	0.4

Country allocation relative to the Benchmark Index (%)¹

	%
Kazakhstan	7.2
Vietnam	6.9
Hungary	6.2
Indonesia	6.2
Chile	2.8
Argentina	2.7
Greece	2.1
Panama	2.0
Egypt	1.9
Georgia	1.6
Colombia	1.0
United Arab Emirates	0.9
Romania	0.5
Kenya	0.4
Ukraine	0.4
Peru	0.1
Lithuania	-0.1
Tunisia	-0.1
Estonia	-0.1
Croatia	-0.1
Bahrain	-0.1
Jordan	-0.1
Mauritius	-0.1
Oman	-0.3
Bangladesh	-0.3
Slovenia	-0.3
Nigeria	-0.4
Morocco	-0.6
Other	-0.8
Poland	-0.9
Czech Republic	-1.0
Philippines	-2.1
Qatar	-2.8
Turkey	-3.5
Thailand	-3.6
Kuwait	-3.7
Saudi Arabia	-4.9
Malaysia	-6.8

Sector allocation: Absolute weights (Gross market exposure as a % of net assets)¹

	%
Financials	36.6
Materials	15.8
Energy	14.1
Industrials	10.9
Consumer Staples	10.7
Consumer Discretionary	6.3
Information Technology	5.7
Communication Services	3.8
Real Estate	2.6
Utilities	2.0
Health Care	1.7

Sector allocation relative to the Benchmark Index (%)¹

	%
Energy	6.9
Industrials	4.9
Consumer Staples	4.3
Information Technology	4.2
Materials	4.2
Consumer Discretionary	2.0
Real Estate	-1.3
Health Care	-1.7
Utilities	-2.7
Communication Services	-5.3
Financials	-5.3

¹     Includes exposure gained through equity positions and long and short CFD positions.

Sources: BlackRock and Datastream.

Investments as at 31 March 2023

Equity portfolio by country of exposure

Company	Principal  country of  operation	Sector	Fair value1  US$’000	Gross market  exposure  as a % of  net assets3
Bank Central Asia	Indonesia	Financials	16,905	5.0
Astra International	Indonesia	Consumer Discretionary	11,845	3.5
Bank Mandiri	Indonesia	Financials	10,064	3.0
Indocement Tunggal Prakarsa	Indonesia	Materials	7,569	2.3
Mitra Adiperkasa	Indonesia	Consumer Discretionary	6,570	1.9
Indofood CBP Sukses Makmur	Indonesia	Consumer Staples	5,047	1.5
			—————-	—————-
			58,000	17.2
			==========	==========
JSC Kaspi	Kazakhstan	Financials	9,870	2.9
Halyk Savings Bank	Kazakhstan	Financials	8,446	2.5
Kazatomprom	Kazakhstan	Energy	7,985	2.4
			—————-	—————-
			26,301	7.8
			==========	==========
Advanced Info Service	Thailand	Communication Services	8,483	2.5
Bangkok Bank	Thailand	Financials	6,706	2.0
Bangkok Dusit Medical Services	Thailand	Health Care	5,651	1.7
Airports of Thailand	Thailand	Industrials	5,006	1.5
			—————-	—————-
			25,846	7.7
			==========	==========
OTP Bank	Hungary	Financials	9,770	2.9
Wizz Air Holdings	Hungary	Industrials	8,735	2.6
MOL Group	Hungary	Energy	4,995	1.5
			—————-	—————-
			23,500	7.0
			==========	==========
Cervecerias Unidas	Chile	Consumer Staples	8,744	2.6
Banco Santander Chile	Chile	Financials	6,309	1.9
Empresas CMPC	Chile	Materials	5,184	1.5
			—————-	—————-
			20,237	6.0
			==========	==========
Emaar Properties	United Arab Emirates	Real Estate	8,701	2.6
Air Arabia	United Arab Emirates	Industrials	6,224	1.8
			—————-	—————-
			14,925	4.4
			==========	==========
National Bank of Greece	Greece	Financials	7,682	2.3
Titan Cement International	Greece	Materials	3,916	1.2
			—————-	—————-
			11,598	3.5
			==========	==========
PKO Bank Polski	Poland	Financials	10,651	3.1
			—————-	—————-
			10,651	3.1
			==========	==========
Vista Oil & Gas	Argentina	Energy	9,265	2.7
			—————-	—————-
			9,265	2.7
			==========	==========
Qatar Gas Transport Company	Qatar	Energy	8,167	2.4
			—————-	—————-
			8,167	2.4
			==========	==========
LT Group	Philippines	Industrials	3,800	1.1
Jollibee Foods	Philippines	Consumer Discretionary	3,108	0.9
			—————-	—————-
			6,908	2.0
			==========	==========
Copa Airlines	Panama	Industrials	6,868	2.0
			—————-	—————-
			6,868	2.0
			==========	==========
Credicorp	Peru	Financials	5,890	1.7
			—————-	—————-
			5,890	1.7
			==========	==========
Frontken Corp	Malaysia	Industrials	5,454	1.6
			—————-	—————-
			5,454	1.6
			==========	==========
Bank Of Georgia	Georgia	Financials	5,447	1.6
			—————-	—————-
			5,447	1.6
			==========	==========
Ecopetrol	Colombia	Energy	4,954	1.5
			—————-	—————-
			4,954	1.5
			==========	==========
Eastern Company	Egypt	Consumer Staples	4,759	1.4
			—————-	—————-
			4,759	1.4
			==========	==========
Mobile Telecommunications	Kuwait	Communication Services	4,341	1.3
			—————-	—————-
			4,341	1.3
			==========	==========
BRD–Groupe Société Générale	Romania	Financials	3,444	1.0
			—————-	—————-
			3,444	1.0
			==========	==========
Equity Group	Kenya	Financials	2,411	0.7
			—————-	—————-
			2,411	0.7
			==========	==========
Ferrexpo	Ukraine	Materials	909	0.3
			—————-	—————-
			909	0.3
			==========	==========
Equity investments			259,875	76.9
			==========	==========
BlackRock’s Institutional Cash Series plc – US Dollar Liquid Environmentally Aware Fund (Cash Fund)			75,824	22.4
			—————-	—————-
Total investments (including Cash Fund)			335,699	99.3
			==========	==========

CFD portfolio

Company	Principal  country of  operation	Sector	Fair value1  US$’000	Gross market  exposure3  US$’000	Gross market  exposure as a  % of net assets3
Long positions
Abdullah Al Othaim Markets	Saudi Arabia	Consumer Staples		12,099	3.6
Saudi Basic Industries Corporation	Saudi Arabia	Materials		11,054	3.3
Elm Company	Saudi Arabia	Information Technology		9,622	2.8
Yanbu National Petrochemical	Saudi Arabia	Materials		8,216	2.4
Arabian Drilling	Saudi Arabia	Energy		6,362	1.9
Saudi British Bank	Saudi Arabia	Financials		3,254	1.0
				—————-	—————-
				50,607	15.0
				==========	==========
FPT	Vietnam	Information Technology		9,638	2.9
Vietnam Technological & Commercial	Vietnam	Financials		8,225	2.4
Petrovietnam Drilling & Well Services	Vietnam	Energy		5,772	1.7
Vietnam Dairy Products	Vietnam	Consumer Staples		5,564	1.6
				—————-	—————-
				29,199	8.6
				==========	==========
Borouge	United Arab Emirates	Materials		6,914	2.0
Abu Dhabi Commercial Bank	United Arab Emirates	Financials		5,411	1.6
				—————-	—————-
				12,325	3.6
				==========	==========
Commercial International Bank	Egypt	Financials		3,432	1.0
				—————-	—————-
				3,432	1.0
				==========	==========
Titan Cement International	Greece	Materials		2,575	0.8
				—————-	—————-
				2,575	0.8
				==========	==========
Wizz Air Holdings	Hungary	Industrials		1,103	0.3
				—————-	—————-
				1,103	0.3
				==========	==========
Ferrexpo	Ukraine	Materials		286	0.1
				—————-	—————-
				286	0.1
			==========	==========	==========
Total long CFD positions			3,339	99,527	29.4
			==========	==========	==========
Total short CFD positions			(490)	(13,228)	(3.9)
			==========	==========	==========
Total CFD portfolio			2,849	86,299	25.5
			==========	==========	==========

Fair value and gross market exposure of investments as at 31 March 2023

Portfolio	Fair value1	Gross market  exposure3	Gross market exposure as  a % of net assets3
	US$’000	US$’000	31 March 2023	31 March 2022	30 September 2022
Equity investments (see footnote 1(a)below)	259,875	259,875	76.9	75.8	74.8
Total long CFD positions (see footnote 1(b) below)	3,339	99,527	29.4	35.3	31.3
Total short CFD positions (see footnote 1(b) below)	(490)	(13,228)	(3.9)	(2.3)	(5.2)
	—————-	—————-	—————-	—————-	—————-
Total gross market exposure	262,724	346,174	102.4	108.8	100.9
	==========	==========	==========	==========	==========
Cash Fund	75,824	75,824	22.4	23.3	23.6
	—————-	—————-	—————-	—————-	—————-
Total investment and derivatives	338,548	421,998	124.8	132.1	124.5
	==========	==========	==========	==========	==========
Cash and cash equivalents1,2	6,032	(77,418)	(22.9)	(30.1)	(25.7)
Other net current (liabilities)/assets	(6,400)	(6,400)	(1.9)	(2.0)	1.2
Non-current liabilities	(19)	(19)	0.0	0.0	0.0
	—————-	—————-	—————-	—————-	—————-
Net assets	338,161	338,161	100.0	100.0	100.0
	==========	==========	==========	==========	==========

The nature of the Company’s portfolio and the fact the Company gains significant exposure to a number of markets through long and short CFDs means that to the extent the Investment Manager has elected not to be geared, the Company will always hold a level of cash in a money market fund on its balance sheet representative of the difference between the notional cost of purchasing or selling the investments directly and the lower initial cost of making a margin payment on a long or short CFD contract. The Company was geared through the use of long and short CFD positions and gross and net gearing as at 31 March 2023 was 10.2% and 2.4% respectively (31 March 2022: 13.5% and 8.8%; 30 September 2022: 11.3% and 1.0%). Gross and net gearing are Alternative Performance Measures, see Glossary in the half yearly report and financial statements.

¹        Fair value is determined as follows:

(a) Listed investments are valued at bid prices where available, otherwise at latest market traded quoted prices.

(b) The sum of the fair value column for the CFD contracts totaling US$2,849,000 represents the net fair valuation of all the CFD contracts, which is determined based on the difference between the notional transaction price and market value of the underlying shares in the contract (in effect the unrealised gains/(losses) on the exposed long and short CFD positions). The exposure to securities held through long CFD positions directly in the market would have amounted to US$96,188,000 at the time of purchase, and subsequent movement in market prices have resulted in unrealised gains on the long CFD positions of US$3,339,000 resulting in the value of the total long CFD market exposure to the underlying securities increasing to US$99,527,000 as at 31 March 2023. If the long positions had been closed on 31 March 2023, this would have resulted in a gain of US$3,339,000 for the Company. The notional exposure of selling the securities gained via the short CFD positions would have been US$12,738,000 at the time of entering into the contract, and subsequent movement in market prices have resulted in unrealised losses on the short CFD positions of US$490,000 resulting in the value of the total short CFD market exposure of these investments increasing to US$13,228,000 at 31 March 2023. If the short positions had been closed on 31 March 2023 this would have resulted in a loss of US$490,000 for the Company.

²        The gross market exposure column for cash and cash equivalents has been adjusted to assume the Company purchased/sold direct holdings rather than exposure being gained through long and short CFDs and forward currency positions.

³        Gross market exposure in the case of equity investments is the same as fair value. In the case of long and short CFDs it is the market value of the underlying shares to which the portfolio is exposed via the contract.

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 and Regulatory Risk;

·        Counterparty Risk;

·        Operational Risk;

·        Political Risk;

·        Financial Risk; and

·        Market 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 2022. A detailed explanation can be found in the Strategic Report and in note 17 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at: www.blackrock.com/uk/brfi.

Certain financial markets have been volatile during the financial period due primarily to continuing geo-political tensions arising from Russia’s invasion of Ukraine. The Company has no exposure to Russia and a small exposure of 0.4% of net assets to Ukraine. The Board and the Investment Manager continue to monitor investment performance in line with the Company’s investment objectives.

In the view of the Board, other than those noted above, 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 Board remains mindful of the ongoing uncertainty surrounding the potential duration of the Russia-Ukraine conflict and its longer term effects on the global economy and the current heightened geo-political risk. Nevertheless, 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.

Based on the above, the Board is satisfied that it is appropriate to 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 them. Ongoing charges (excluding performance fees, finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items) were approximately 1.36% of average daily net assets for the year ended 30 September 2022.

Related party disclosures and transactions with the AIFM and Investment Manager
BlackRock Fund Managers Limited (BFM) is the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management and performance fees payable are set out in note 4 and note 14. The related party transactions with the Directors are set out in note 13.

Directors’ Responsibility Statement
The Disclosure Guidance 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 UK-adopted 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 Guidance and Transparency Rules.

The Half Yearly Financial Report has been reviewed by BlackRock Frontiers Investment Trust’s Auditors.

The Half Yearly Financial Report was approved by the Board on 5 June 2023 and the above Responsibility Statement was signed on its behalf by the Chairman.

Audley Twiston-Davies
For and on behalf of the Board
5 June 2023