Final Results
31/01/2025 11:12
BlackRock Energy and Resources Income Trust plc
LEI: 54930040ALEAVPMMDC31
Annual Report and Financial Statements 30 November 2024
Performance record
As at As at
30 November 30 November
2024 2023
Net assets (£’000) 1 167,327 162,362
Net asset value per ordinary share (pence) 137.66 123.58
Ordinary share price (mid-market) (pence) 121.00 110.40
Discount to net asset value 2 12.1% 10.7%
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For the year For the year
ended ended
30 November 30 November
2024 2023
Performance (with dividends reinvested)
Net asset value per share 2 15.3% -11.8%
Ordinary share price 2 14.0% -15.2%
Reference index # 0.5% -17.0%
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Since inception Since inception
to 30 November to 30 November
2024 2023
Performance since inception (with dividends reinvested)
Net asset value per share 2 259.9% 212.2%
Ordinary share price 2 218.4% 179.4%
========= =========
For the year For the year Change
ended ended %
30 November 30 November
2024 2023
Revenue
Net profit on ordinary activities after taxation (£’000) 4,541 5,774 -21.4
Revenue earnings per ordinary share (pence) 4 3.63 4.39 -17.3
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Dividends (pence)
1st interim 1.125 1.100 2.3
2nd interim 1.125 1.100 2.3
3rd interim 1.125 1.100 2.3
4th interim 1.125 1.125 –
--------------- --------------- ---------------
Total dividends paid 4.500 4.425 1.7
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1 The change in net assets reflects portfolio movements, the repurchase of
shares and dividends paid during the year.
2 Alternative Performance Measures, see Glossary contained within the Annual
Report and Financial Statements.
3 The Company was launched on 13 December 2005.
4 Further details are given in the Glossary contained within the Annual
Report and Financial Statements.
# Reference index is the blended comparator index comprised of three indices
– the MSCI ACWI Select Metals & Mining Producers Ex Gold and Silver IM
(Mining), the MSCI World Energy Index (Traditional Energy) and S&P Global
Clean Energy Index (Energy Transition) with a 40:30:30 mix of the 3 indices.
Chairman’s statement
Dear Shareholder
Overview
From the start of the Company’s financial year on 1 December 2023 and
through to the first half of 2024, markets as a whole showed resilience driven
initially by signs of easing inflation and expectations of interest rate cuts
in the US and UK. However, as the year progressed, continued weak economic
data from China was a significant headwind for commodity prices and the mining
sector in particular. In response, our portfolio managers reduced Mining
sector exposure (down from 44.5% at the start of the year to 40.2% at 30
November 2024) and increased the weighting of Energy Transition stocks within
the portfolio (up to 29.2% at the year end from 24.9% at the start of the
year) on the back of compelling valuations.
Given the mix of opportunity and risks, the Board remains confident in your
Company’s 3-pronged investment strategy (Mining, Traditional Energy and
Energy Transition). Since implementing this strategy, we have seen each of the
3 sectors move in or out of investors’ favour, and this strategy gives the
portfolio managers the flexibility to manoeuvre the portfolio around volatile
markets, to take advantage of where they think the best investment
opportunities can be found.
Performance
During the year ended 30 November 2024, the Company’s net asset value (NAV)
per share returned 15.3% and the share price returned 14.0% (both percentages
in British Pound Sterling terms with dividends reinvested). This was
significantly ahead of the internal benchmark that the fund manager and the
board use to evaluate performance. Performance has been measured against a
blended comparator index which comprised three indices – the MSCI ACWI
Select Metals & Mining Producers Ex Gold and Silver IM (Mining), the MSCI
World Energy Index (Traditional Energy) and S&P Global Clean Energy Index
(Energy Transition) with a 40:30:30 mix of the 3 indices. Over the period the
comparator index showed a return of 0.5% with the representative indices
returning for Mining 0.6%, Traditional Energy 10.7% and Energy Transition
-11.7% (all percentages in British Pound Sterling terms with dividends
reinvested).
Within the Mining portfolio, mergers and acquisitions activity was a driver of
performance, with the acquisition of Filo Corp (by BHP and Lundin Mining), and
of the Canadian steel company, Stelco (by its peer, Cleveland-Cliffs) both
contributing significantly to returns. In the Energy Transition portfolio, the
most significant contributions to performance came from industrial holdings,
manufacturing energy efficiency products and electricity grid infrastructure
equipment suppliers (key to support the growing demand for electricity
generation).
Cumulative performance as at 30 November 2024
Performance to 30 November 2024 1 Year 2 Years 3 Years 5 Years Since
change change change change inception 2
% % % % %
Net Asset Value (with dividends reinvested) 1 15.3 1.7 47.0 125.0 259.9
Share price (with dividends reinvested) 1 14.0 -3.4 39.9 129.9 218.4
Reference index 3,4 0.5 -14.9 13.9 N/A N/A
========= ========= ========= ========= =========
1 Alternative Performance Measures. Further details of the calculation of
performance with dividends reinvested are given in the Glossary contained
within the Annual Report and Financial Statements.
2 The Company was launched on 13 December 2005.
3 Reference index is the blended comparator index comprised of three indices
– the MSCI ACWI Select Metals & Mining Producers Ex Gold and Silver IM
(Mining), the MSCI World Energy Index (Traditional Energy) and S&P Global
Clean Energy Index (Energy Transition) with a 40:30:30 mix of the 3 indices.
4 Please note though, that the Company’s objectives are to achieve both an
annual dividend target and, over the long term, capital growth (see table
above). Consequently, the Board does not formally benchmark performance
against mining and energy sector indices as meeting a specific dividend target
is not within the scope of these indices. In addition, the S&P Global Clean
Energy Index following recent changes is the best available proxy.
Source: BlackRock. Data as at 30 November 2024.
Our portfolio managers provide a detailed description of the main contributors
and detractors to performance during the period, insight into the positioning
of the portfolio and their views on the outlook for the forthcoming year in
their report below.
The Board is very pleased with the Manager’s performance over all periods
shown. The Company’s NAV returned 125.0% over 5 years to 30 November 2024
compared to 81.5% net total return in MSCI ACWI Select Metals & Mining
Producers Ex Gold and Silver IMI Index and 71.4% net total return in the MSCI
World Energy Index (all percentages in British Pound Sterling terms with
dividends reinvested).
Further information on investment performance is given in the Investment
Managers’ Report below.
Revenue return and dividends
The Company’s revenue earnings per share for the year to 30 November 2024
was 3.63 pence per share, a 17.3% decrease compared to the prior year revenue
earnings per share of 4.39 pence. The decrease was driven by lower dividend
payments from a number of key mining companies, combined with an increased
portfolio exposure to Energy Transition companies, which tend to have a lower
yield. The Board’s dividend target for 2024 was to declare quarterly
dividends of at least 1.125 pence per share in the year to 30 November 2024,
making a total of at least 4.50 pence per share for the year as a whole. The
shortfall of 0.87 pence between earnings per share and the annual dividend
target will be funded out of the Company’s available revenue reserves (c£5
million (4.29 pence per share) at 30 November 2024). This target represents a
yield of 3.7% based on the share price of 121.00 pence at 30 November 2024,
and 3.8% based on the share price at the close of business on 28 January 2025.
The Board has decided to maintain the annual dividend target of at least 4.50
pence per share for the year to 30 November 2025. The Company is committed to
meet its target dividend next year and to review it annually. The dividend
will be met through a mix of dividend income from the portfolio and revenue
reserves, although this may be supported by the distribution of other
distributable reserves if required.
The Company may also continue to write options to generate revenue return,
although the portfolio managers’ focus is on investing the portfolio to
generate an optimal level of total return without striving to meet an annual
income target and will only undertake option transactions to the extent that
the overall contribution is beneficial to total return.
This dividend target should not be interpreted as a profit forecast.
Gearing
The Company operates a flexible gearing policy which depends on prevailing
market conditions. It is not intended that gearing will exceed 20% of the
gross assets of the Company. The maximum gearing used during the period was
14.8%, and the level of gearing at 30 November 2024 was 13.4%. Average gearing
over the year to 30 November 2024 was 9.5%. For calculations, see the Glossary
contained within the Annual Report and Financial Statements.
Management of share rating
The Directors recognise the importance to investors that the Company’s share
price should not trade at a significant premium or discount to NAV, and
therefore, in normal market conditions, may use share repurchases, sales of
shares from treasury and share issues to ensure that the share price is
broadly in line with the underlying NAV.
Discounts across the closed end funds sector remained wide over the period
under review, driven by ongoing uncertainty around interest rates, cost
inflation and global economic growth, and heightened by an accelerated stream
of retail selling in the run-up to the UK Budget (and expectations of higher
capital gains taxes). Against this challenging backdrop, the Company’s
shares started the year under review trading at a discount of 10.7% and ended
the year at 12.1%, which compared to a closed end fund sector average
(excluding 3i) of 15.5% and an average for the AIC Commodities and Natural
resources peer group of 13.1% at 30 November 2024. The Board stepped in to
actively manage the discount, buying back 9,833,697 shares in the year under
review at a cost of £11,288,000 and at an average discount of 10.8%. This
discount management activity has continued since the year end, and up to 28
January 2025, the Company repurchased 1,708,000 ordinary shares for a net
consideration of £2,046,000 at an average discount of 10.3%. As at 28 January
2025 the Company’s shares were trading at a discount of 8.3%. The Board’s
objectives in exercising the buy back are to seek to minimise share price
volatility and encourage the Company’s share price to trade within as tight
a range as possible, taking into account the various factors described above.
However, despite consistent and targeted action in support of the share
rating, it was disappointing to see the discount remain wide during the
period. The Board recognises that shareholders experience the share price
performance of the Company and, in conjunction with our Broker and the
Manager, keep the share rating under continuous review seeking to understand
and address the drivers of the discount.
There are of course several factors which influence the level of
premium/discount at which a Company’s shares trade in the market, many of
which are outside of the Board’s direct scope of control or influence. It is
important to view the Company’s share rating in the wider market context,
noting that the Investment Trust sector average discount at 30 November 2024
had widened to 15.5% compared to 12.8% at the end of 2023 and 10.7% at the end
of 2022, remaining correlated with Gilt yields. Buy back activity was
significantly elevated across the sector as a whole as boards grappled with
selling pressure, with calendar year 2024 setting a new record for buy backs
at £7.6 billion, nearly double the previous calendar year. Buybacks across
the sector hit a monthly-high of £952m in October with a record-breaking 125
funds buying back shares, and this trend continued into November, with 124
companies buying back shares. Overall, we believe the share buy back activity
undertaken has been beneficial in reducing the volatility of our share rating
and delivering NAV accretion. Your Board will continue to monitor the
Company’s share rating and may deploy its powers to support it by issuing or
buying back the Company’s shares where it believes that it is in
shareholders’ long-term best interests to do so.
Consumer Duty Value Assessment
The Manager has conducted an annual value assessment on the Company in line
with FCA rules set out in the Consumer Duty regulation. The assessment focuses
on the nature of the product, including benefits received and its quality,
limitations that are part of the product, expected total costs to clients and
target market considerations. Within this, the assessment considers quality of
services, performance of the Company (against both relevant reference indices
and peers), total costs associated with the product (including management fees
and other operating costs), and also considers whether all consumers,
including vulnerable consumers, are able to receive fair value from the
product. The Manager has concluded that the Company is providing value based
on the above assessment.
Ongoing charges
The Directors want to ensure that shareholders receive good value with an
ongoing process of reviewing operating costs. To that end, as also announced
on 1 December 2024, we agreed a reduced level of cap on the Company’s
Ongoing Charges (as set out and defined in the Glossary contained within the
Annual Report and Financial Statements and for avoidance of doubt including
the management fee). Previously, Ongoing Charges had been capped at 1.25% per
annum of average daily net assets; with effect from 1 December 2024 this
reduced to 1.15% per annum of average daily net assets.
Changes in cost disclosure requirements
Following the FCA’s statement on 19 September 2024 that Investment Trusts
were no longer required to comply with the cost disclosure requirements under
the UK PRIIPs Regulation, the Company has amended its KID Document in line
with guidance from the Association of Investment Companies (“AIC”), making
it clear in the KID that there were no additional costs paid by investors to
acquire shares, and disclosing that the Company had an OCF of 1.19% (reducing
to 1.15% from 1 December 2024). In addition, the Manager has amended the cost
data included in the EMT files provided to distributors to reflect the most up
to date OCF for the Company of 1.15% as this is felt to be the most accurate
reflect of the costs associated with operating the Company. The Board
considered that this change ensures that the Company is reporting its cost
data in line with the wider industry approach and is on a level playing field
with other products in terms of how the product is viewed by investors when
they are assessing cost information to make investment decisions.
Agreement with Saba Capital Management L.P.
On 22 January the Company announced that it had entered into an agreement with
Saba Capital Management L.P. (‘Saba’) pursuant to which Saba has given a
number of undertakings to the Company, including commitments not to put
forward any proposals to shareholders nor to requisition any resolution or
general meeting of the Company nor to seek to control or influence the Board
or the Company or the policies or management of the Company. More detail can
be found in the stock exchange announcement which is available at the
following link
https://www.londonstockexchange.com/news-article/BERI/agreement-with-saba/16863476.
The agreement covers the period up to the Company’s 2027 AGM (expected to be
held in March 2027). The Board is committed at all times to exercising the
best standards of corporate governance, promoting the success of the Company
and putting first the interests of shareholders as a whole, and the agreement
in no way restricts the Board’s or the Company’s independence.
Board composition
The Board supports the increasing focus on independence, tenure and succession
planning set out in the updated Financial Reporting Council’s review of the
UK Corporate Governance Code. As previously announced, Anne Marie Cannon
joined the Board on 16 January 2024, and Carol Bell, having served nine years
on the board, retired at the Company’s AGM held on 15 March 2024. As at the
date of this report the Board consists of four independent Non-executive
Directors. In accordance with best practice and good corporate governance, the
Directors continue to submit themselves for annual re-election.
Further information on all of the Directors can be found in their biographies
contained within the Annual Report and Accounts. Information on the
recruitment and selection process undertaken and details of the Board’s
policy on director tenure and succession planning can be found in the
Directors’ Report contained within the Annual Report and Accounts.
Annual general meeting arrangements
The AGM will be held in person at 12:00 p.m. on Thursday, 20 March 2025 at the
offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL.
The Board very much looks forward to meeting shareholders and we encourage you
to attend this year’s AGM. A buffet lunch and refreshments will be available
to all shareholders joining us on the day, and the Board look forward to
meeting shareholders over lunch to discuss your views and to answer any
questions you may have. In the meantime, if shareholders would like to contact
me, please write to BlackRock Energy and Resources Income Trust plc, 12
Throgmorton Avenue, London EC2N 2DL, marked for the attention of the Chairman.
Even if you cannot attend, we urge you to vote. For those of you who hold
shares via platforms, information on how to vote can be found here:
https://www.theaic.co.uk/availability-on-platforms.
Market outlook and portfolio positioning
The Energy Transition remains one of the key megatrends, likely to affect the
world economy over the next 2-3 decades, and a priority for both governments
and companies. On one hand, governments in the developed world are facing
rising spending commitments due to ageing populations, higher interest burdens
and a focus on defence spending: This may mean that expenditure on the
low-carbon transition is more subdued through the course of 2025 as
governments and businesses juggle priorities. On the other hand, increased
focus on energy security and increased power demand from artificial
intelligence (AI) applications, are likely to spur increased demand on
electricity grids and the materials and fuels that power them. Against this
backdrop, the flexibility of the Company’s investment mandate with the
ability to shift exposure between Mining, Traditional Energy and Energy
Transition sectors, means that it is uniquely positioned to serve investors as
these sectors evolve. The Board considers that all three sectors have an
important role to play as the energy system continues its transition to a
lower carbon economy; the Mining sector provides the material supply chain for
low carbon technologies from steel for wind turbines to lithium for electric
cars; traditional energy is needed to support base load energy to continue to
power economies during the transition; and the path to a lower carbon economy
is expected to disrupt many industries and business models with scope for the
Company to invest directly in opportunities in the Energy Transition space.
The Board is confident that the Company offers investors exposures which would
be hard to replicate through passive indices and remains well-placed to
benefit from these key investment trends over the long term.
ADRIAN BROWN
31 January 2025
Investment Manager’s report
Market overview
After a tough year in 2023, it was pleasing that the Company delivered a
positive year in 2024, delivering a NAV total return well ahead of the passive
sector indices and ahead of our blended comparator, and continuing the strong
growth delivered over the last 5 years (NAV total return of 125.0%). This was
achieved in a volatile environment across the three main sectors of focus with
a strong dispersion of performance between commodities as well as within the
different industries within the energy transition space. This kind of
environment plays well to our active management style, investing flexibly
across the mining, energy and energy transition.
The US markets continued to dominate global market performance, delivering
more than double the total return of the UK indices. The US market now
accounts for around seventy percent of the MSCI World Index and whilst there
are good reasons for robust US performance to continue, it is worth
remembering that markets go through cycles and phases - for example in the
1980s Japan represented more than 40% of the MSCI World Index and now only
stands at around 6%.
There was a lot of focus on elections in 2024 with approximately half of the
world’s population and countries going through polls. Whilst the issues that
were debated ranged hugely in each election contest, what was notable was the
absence in references to austerity or balanced budgets. With Governments in
the developed world facing rising spending commitments due to ageing
populations, higher interest burdens and greater defence spending, the risk of
renewed inflation remains and the outlook for returns from real or hard assets
like commodities is potentially exciting.
Despite all of the geo-political turmoil, and the challenging backdrop, energy
markets were largely untroubled, with oil prices trading within a relatively
tight range. Although the sentiment towards energy transition may have come
down from its very high levels of the last few years, the transformation is
still very much happening but perhaps with a greater focus on economic
rationality. This is reassuring for our preferred areas of investment and
supports the approach taken in this Company of being technology and commodity
agnostic – remaining focused on risk-adjusted investment returns rather than
committing to championing one possible technology or solution.
Commodity 30 November 30 November % change 2024 on 2023
2024 2023 Average Price %
Change 1
Base Metals (US$/tonne)
Aluminium 2,577 2,156 19.5% 5.3%
Copper 8,892 8,388 6.0% 7.4%
Lead 2,048 2,092 -2.1% -3.7%
Nickel 15,671 16,438 -4.7% -25.0%
Tin 28,695 22,984 24.8% 15.0%
Zinc 3,109 2,467 26.0% 1.3%
--------------- --------------- --------------- ---------------
Precious Metals (US$/ounce)
Gold 2,659.5 2,037.8 30.5% 21.6%
Silver 30.1 25.3 19.0% 18.7%
Platinum 940.0 937.0 0.3% -1.6%
Palladium 983.0 1,025.0 -4.1% -28.9%
--------------- --------------- --------------- ---------------
Energy
Oil (West Texas Intermediate) (US$/barrel) 68.3 75.6 -9.7% -1.4%
Oil (Brent) (US$/barrel) 74.2 81.7 -9.3% -2.3%
Natural Gas (US$/Metric Million British Thermal Unit) 3.4 2.8 23.3% -21.6%
--------------- --------------- --------------- ---------------
Bulk Commodities (US$/tonne)
Iron ore 106.0 132.5 -20.0% -3.6%
Coking coal 205.0 285.0 -28.1% -5.4%
Thermal coal 141.5 129.0 9.7% -30.4%
--------------- --------------- --------------- ---------------
Equity Indices
MSCI ACWI 2 Select Metals & Mining Producers Ex Gold and Silver IMI Net Index (US$) 1,300.6 1,287.5 1.0% n/a
MSCI ACWI 2 Select Metals & Mining Producers Ex Gold and Silver IMI Net Index (£) 1,666.1 1,656.0 0.6% n/a
MSCI 3 World Energy Index (US$) 511.3 459.9 11.2% n/a
MSCI World Energy Index (£) 669.3 604.4 10.7% n/a
S&P Global Clean Energy Index (US$) 1,132.2 1,276.5 -11.3% n/a
S&P Global Clean Energy Index (£) 890.8 1,008.3 -11.7% n/a
========= ========= ========= =========
Source: LSEG Datastream and Bloomberg.
1 Average Price % Change (Average of 30/11/22-30/11/23 to 30/11/23-30/11/24).
2 Morgan Stanley Capital International All Country Weighted Index.
3 Morgan Stanley Capital International.
Portfolio performance and investment activity
While the Company produced a positive NAV Total Return (with dividends
reinvested) over the year, the second half of the Company’s year started in
a challenging way as continued weak economic data from China was a headwind to
the commodity complex and this was eventually reflected in lower share prices
across the Mining sector. As the charts contained within the Annual Report and
Financial Statements show, we reduced our exposure to mining companies early
in the second half of the year compared to the first half, which cushioned the
impact and we shifted the mix of exposure within the Mining sector, reducing
industrial metals exposure, including copper, and adding to uranium and
precious metals in the second half of the year.
The biggest change in the portfolio over the course of 2024 though was the
increased weight to the Energy Transition sector. A confluence of factors,
including the anticipation of Trump winning the US election and his subsequent
victory, caused some high-quality companies in this sector to become oversold
and, in our view, attractively valued for the first time in several years.
Also, the tough stance on China taken by both Parties in the US gave us
conviction that the surge in US manufacturing investment spending was likely
to continue and with that backdrop, we found a number of interesting Energy
Transition investments related to greater electricity grid spend and data
centre build outs.
The Company’s NAV total return was 15.3% for the year to 30 November 2024,
which was a strong outcome compared to the performance of the three main
sectors that the Company invests in as shown in the chart contained within the
Annual Report and Financial Statements.
The key driver of the portfolio’s performance was stock selection, notably
in the Mining and Energy Transition parts of the portfolio. On the Mining
side, some of that positive stock selection came from two companies that were
acquired for very different reasons, Filo Corp and Stelco. Filo Corp was
acquired by BHP and Lundin Mining who wanted to secure exposure to the world
class copper discovery that had been made in the Vicuña district of
Argentina. Stelco was a Canadian steel company that for a number of years
traded at a substantial discount to peers despite paying consistently strong
and high dividends – whilst the market might not have recognised the value
in the company, their peer Cleveland-Cliffs did recognise this when they
acquired it in an all-cash deal at a substantial premium.
On the Energy Transition side, it was our industrial holdings with exciting
energy efficiency products that were strong contributors to returns along with
companies such as Schneider Electric that produce the transformers that will
be critical in building out the electricity grid infrastructure required to
enable the growing capacity of electrical generation.
Reflecting on some of the investment decisions that were detractors to
performance during the year, a couple of items stood out. The first was a
tough year for European utilities, with positions in RWE and EDP Renováveis
both seeing meaningful declines in their share prices. The second challenging
area was exposure to battery and battery materials companies. Whilst we have
very limited exposure to electric vehicle (EV) manufacturers, the modest
holdings we had in battery manufacturer Samsung SDI and lithium producer,
Albemarle, both detracted from performance during the year.
Income
This year was a tougher year for income for the Company, primarily driven by
lower dividend payments from a number of key Mining companies and the
decisions during the year to increase the exposure to Energy Transition
companies, which are usually lower dividend payers as they are often using a
greater proportion of their earnings to reinvest back into growth projects.
The Traditional Energy companies in the UK, such as Shell, continued to have a
more fixed dividend policy, although the increase they announced this year was
more modest than in the previous two years. However, with valuations where
they are, we would expect a greater emphasis on capital allocation to buybacks
from Conventional Energy and Mining companies in the year ahead.
Option income remained at under 20% of total income generated by the Company
during the year and at levels comparable to that in 2023. Also similar to
2023, there was a balance of call and put options written given the lack of
overall market direction in our sectors and our preference to focus on stock
specific opportunities. We reduced option writing in the last month or so of
the year going into the US elections given it was a potentially binary event
where investment outcomes were harder to predict.
Mining
This year followed a similar pattern to 2023 with the mined commodities
experiencing a wide variety of returns with gold on one hand up over 30% and
coking coal on the other down a little less than 30%.
The commodity prices that came under the most pressure were the steel inputs
of iron ore and coking coal as weaker Chinese demand and a lack of supply
disruptions, that had been a feature of recent years, caused these markets to
be soft. Looking forward in these markets, the outlook is improving. For iron
ore, when the price touched around US$90 per tonne in August 2024, we started
to see some higher cost supply curtailed, suggesting that this could be a
reasonable longer-term price for the industry. On the coking coal side, the
recent sale of some key producing assets led to a more consolidated industry
which will, hopefully, bring supply discipline and a more robust pricing
environment.
Although the future growth in demand for many mined commodities is likely to
be driven by energy transition across developed and developing countries, we
cannot forget that the Chinese economy probably still remains the key driver
for the Mining sector. The concerns around the health of China’s economy
surged again during the summer with the China Purchasing Managers’ Index
falling below 50% in May and staying below 50% through the summer. Towards the
end of the third quarter there was a series of stimulus announcements from the
Chinese authorities that initially caused a remarkable risk-on rally with the
Chinese stock market (Shanghai Composite Index) rising almost 30% during the
three weeks from the middle of September. Despite the policy support and stock
market reaction, the real economy has been slower to respond, and this can be
seen in the continued growth of steel exports from China with higher exports
implying weaker domestic demand for steel.
One of the brighter spots in the industrial commodities was aluminium, where
the price rose almost 20% over the course of the year. The demand story for
aluminium for many years has been an attractive one – it is widely used in
high voltage cables and thanks to better research and development, has been
able to be substituted for more expensive copper in air conditioning units and
even some wiring applications. Its lightweight properties have also driven
demand growth from the automobile industry where it has been substituted for
steel. However historically there has been more than adequate supply of
aluminium to meet demand as China grew production in an almost unconstrained
manner, placing new refineries and smelters close to coal fields to benefit
from cheap energy. With China’s growing focus on the environment and a
desire to keep the energy onshore (aluminium exports can be seen as energy
exports given how energy intensive the production process is), the authorities
have placed a capacity ceiling of 45 million tonnes per year on the industry.
This has slowed the production growth as seen on the chart contained within
the Annual Report and Financial Statements and we expect this restraint to
continue. In addition to improving margins for producers in China, the
restraint should limit aluminium export growth and tighten the supply-demand
balance in the ex-China market, which would benefit the aluminium holdings in
the portfolio such as Hydro.
The mergers and acquisition (M&A) environment continued to remain active for
the Mining sector during 2024 with the headline-grabbing attempt by BHP to
acquire Anglo American, which ultimately ended in no deal being consummated.
This was another example of companies recognising the benefits of “buying
versus building” as both the capital intensity of building new assets
continue to rise and the rising risk associated with getting assets permitted
and built also grinds higher. We would expect this desire by companies to
consolidate the industry to continue into 2025, but it will require boards and
management teams to take a long-term view. At current commodity prices and
cost structures, the prices being demanded by sellers of assets look
expensive, so a belief in tighter markets to come and ultimately higher
commodity prices is necessary to justify most potential M&A transactions or
greenfield investments.
Energy Transition
Over the past twelve months, the Energy Transition sector has continued to
power ahead, with global solar panel installations expected to increase to
600GW, a rise of 35% on 2024, according to Bloomberg New Energy Finance. This
compares to solar installations of 252GW in 2022, which was in itself a record
year. In recent years, factors impacting on the energy transition have shifted
from a focus on decarbonisation to prioritisation of energy security,
reshoring of critical supply chains and we are now seeing an additional driver
in the form of increasing electricity demand expectations.
The US policy in the form of the US CHIPS Act and the Inflation Reduction Act
(IRA) has supported a rapid increase in corporate investment in US
manufacturing of key technologies including EV battery production,
leading-edge semiconductor fabrication plants, solar panel and wind turbine
manufacturing. Companies supplying the necessary equipment for these
facilities have benefited from increased demand and Trane Technologies,
(energy efficient commercial heating, ventilation and air conditioning) and
Ingersoll-Rand (energy efficient pumps and compressors) were among the top
contributors to performance.
Large scale investment in the hardware required for generative artificial
intelligence (AI) model training and subsequent querying has created increased
demand for a number of related industries. In addition to microchips, AI data
centres require specialist design and power management. Data centre and
critical infrastructure design group, Vertiv Holdings and power management
specialists, Schneider Electric, saw strong share price performance over the
year. Supplies to electricity grid connections and power transformers
including GE Vernova reported quarterly results consistently ahead of market
expectations with increased orderbooks and performed strongly during the year.
Within Energy Transition, elevated interest rates, overcapacity in the solar
and EV supply chains and uncertainty around the direction of US policy caused
market sentiment to remain negative for parts of the renewable power sector,
particularly for non-US companies, given a wide valuation differential between
US and European stock markets. At a company level, given these market moves,
wind turbine group, Vestas significantly underperformed during the year and
detracted from returns, with the group experiencing higher costs, which
prevented an awaited recovery in profit margins. European renewable utilities
were sensitive to changes in interest rate expectations and underperformed
following the US elections with RWE and EDP Renováveis detracting from
returns. EV battery manufacturer Samsung SDI and EV semiconductor group ST
Microelectronics fell during the year with EV demand growth in Europe lower
than expected. EV sales globally are expected to rise c.20% in 2025, however
this is skewed towards China with weaker automobile sales in Europe masking
the continued increase in EV market share.
Following the US elections, there was a pullback in valuations of renewables
companies. In 2016, we saw similar initial negative share price reaction to
renewables, yet the sector went on to outperform over the remaining
presidential term and we see stronger demand drivers for these companies
today.
Whilst some policies or parts of the IRA may be changed, such as EV subsidies,
lesser support at the federal level for offshore wind, or lower duration of
tax credits for renewables, we do not see the core aim of reshoring of
manufacturing to be reversed and we see opportunity in some of the market
moves.
Traditional Energy
Oil prices traded within a US$70-US$90/barrel range for most of the year,
ending towards the lower band, but a level that enables the oil & gas industry
to generate significant profits. Despite the significant ongoing investment
into low-carbon alternatives, the world has yet to break the link between
economic growth and oil demand and the 12-month period set a new record for
oil demand at 102.6 million barrels per day (source: US Energy Information
Administration December 2024). In contrast, North American natural gas markets
saw a distinctly looser market throughout most of 2023 and 2024 as supply
growth continued well ahead of the anticipated inflection in US LNG export
(thereby driving up demand). Henry Hub prices spent most of the prior two
years in contango with gas production companies having to curtail significant
volumes to help rebalance the market.
Oil prices were driven by several notable factors during the year. On the
supply side, large new oil producing projects in Guyana and Norway, which have
been under construction for several years, ramped production in 2024 and US
shale oil producers led US production higher to 13.5 million barrels per day.
On the demand side, global consumption has continued to increase. However, the
main source of oil demand growth in recent years has been China, which saw
significantly slower-than-expected growth due to lower levels of construction
activity and continued substitution away from diesel and into natural gas
within the heavy-duty truck sector. The International Energy Agency (IEA)
revised downwards its estimate of 2024e oil demand growth expectations from
China from 700,000 barrels per day to less than 200,000 barrels per day. With
oil demand growth barely sufficient to absorb the new oil supply, global oil
markets were well-supplied throughout the year, leading the Organisation of
Petroleum Exporting Countries to delay adding back previously curtailed
production to support oil prices. Despite the marked slowdown in Chinese
growth the agency has been revising its expectations for 2025e demand upwards,
notably in Asia ex-China.
Commodities, including oil, have long been used by investors as a hedge
against increased geo-political risk and this was again evident in 2024.
Houthi militant attacks on international shipping in the Red Sea during the
first quarter of the year resulted in disruption to global trade routes. A
majority of ships therefore diverted to taking the longer route between East
and West around the Cape of Good Hope, rather than the Suez Canal route. Oil
prices rose during this period, and later moved higher with escalation of
events in the Middle East between Iran and Israel in October, on the risk of
disruption to energy infrastructure. As risk of further escalation subsided,
the Brent oil price tracked lower towards US$70 into the year end.
Energy holdings delivered a positive return in the period, modestly ahead of
the benchmark. Midstream pipeline companies, including Targa Resources, which
was the top contributor to returns over the year, having seen valuations
increase. In our view, selected pipeline companies may benefit from the
increased power demand in the US with reshoring of manufacturing trends and
the build out of AI data centres. Increased demand for power in the US from
hyperscalers, the large technology cloud service providers investing in AI
data centres, has driven a resurgence in demand for nuclear power and a higher
uranium price, which underpinned a positive contribution from Cameco. On the
other hand, oil exploration and production company, Kosmos saw its shares fall
on the range-bound oil price and lower than expected production from its
Jubilee asset offshore Ghana.
Outlook
The economic growth outlook for China remains important for the mining sector
with the country accounting for the largest part of demand for many mined
materials including iron ore and copper. The incoming US administration has
announced an intention to add further tariffs on goods imported from China and
in order to maintain economic growth, we expect China to stimulate its
domestic economy. In the past, such stimulus measures have included
infrastructure and the property sectors, which may drive increased demand for
certain metals. The supply of many metals remains constrained after a period
of relative underinvestment in new production capacity, providing the
potential for a supportive pricing outlook for mining companies.
The energy transition involves shifting from a predominantly oil & gas-based
economy to lower carbon sources of energy, which are more materials intensive.
The scale of the renewables industry, which continues to expand rapidly, is at
a level that is already a material source of demand growth for certain metals,
including copper and silver and the expected increase in power demand, from
reshoring manufacturing and AI data centres will likely add to this trend.
Companies within the mining sector have much stronger balance sheets today,
with relatively low debt, enabling increased pricing to feed through to
profits and shareholder distribution, whilst we find companies trading at
attractive valuations.
The outlook for the oil and gas industry appears uncertain, with a much
wider-than-usual range of potential outcomes, both positive and negative. Our
base case is that new oil production meets or exceeds oil demand growth in
2025. However, the potential for a supply shock is higher-than-normal given
elevated geopolitical tensions. In one of its final acts, the previous US
administration introduced tighter oil-related sanctions on Russia, targeting
the tankers transporting the country’s crude production and the insurers
backing this so called ‘shadow fleet’. However, it remains unclear what
the new US administration’s policy on Russia will be. Meanwhile, there is
also the potential for the Trump administration to retighten the enforcement
of sanctions against Iranian oil supply, which have been relaxed over the past
4 years (see chart contained within the Annual Report and Financial
Statements). Ultimately, however, OPEC+ spare capacity at record levels means
this could be used to help balance the market and effectively cap upside.
On the demand side, importantly, we are no longer seeing downgrades to
estimates around demand from China (the key factor that held oil back through
2024) and in some instances, we are starting to see upgrades. Company
valuations generally remain inexpensive in our view, offering investment
opportunities but this uncertainty increases the need to be selective. Beyond
2025, we see demand exceeding supply, with fewer sizeable new oil production
projects. Looking ahead, we believe that the duration of oil demand growth
remains underappreciated and not reflected in energy company valuations today.
Many energy companies are able to deliver attractive levels of cash flow
generation at the expected oil price range of US$60-US$80/barrel and have
strong balance sheets. The energy intensity of global economic growth is
expected to increase over the coming years because of electrification, power
demands of artificial intelligence, emerging market economy growth and the
reshoring of supply chains, which may be supportive for natural gas and
nuclear assets.
Reform of US planning regulations may further support midstream companies,
whilst energy typically offers a hedge against geo-political risk and
inflation.
The outlook for energy transition related companies appears exceptionally
strong, however US policy uncertainty may continue to impact on market
sentiment towards renewables in the near term. There is a fundamental and
pressing need for increased electricity generation in the US and Europe and
renewables will have to be part of that solution, due to speed to roll out and
low cost, even without considering corporate decarbonisation targets. Whilst
we see increased demand for combined cycle gas turbines (CCGTs) and for
nuclear power, supply bottlenecks and time to build will likely drive
increased demand for readily available renewable generation.
The energy transition will not follow a straight line, and we have seen
challenges to market sentiment over the past year. This market caution has led
to some companies trading on attractive valuations, in our view. We see
several potential catalysts in Europe and in the US. The headwind of high
interest rates is steadily reversing and industry destocking within the EV
supply chain, which has impacted on underlying demand for semiconductors,
appears to have largely finished. The new US administration may drive an
acceleration of investment into all forms of energy for national security
reasons (energy security, re-shoring of manufacturing of key technologies, AI
data centres), whilst in Europe, tighter vehicle emission regulations may lead
to an increased demand for EVs. It is possible that reform to planning may
facilitate project permitting which could be a significant positive in
enabling faster build out of renewable projects.
The Energy Transition is one of the key megatrends which will play out over
the next 2-3 decades, although these trends will not be linear. Your
Company’s portfolio, with its mandate flexibly to invest across all 3
sectors and actively to select beneficiary companies, is well positioned to
take advantage of the growth this trend will deliver.
Tom Holl and Mark Hume
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
31 January 2025
Distribution of investments as at 30 November 2024
Asset allocation – Geography
Global 1 49.1%
United States 26.2%
Canada 11.2%
United Kingdom 3.1%
Brazil 2.8%
Australia 2.1%
Italy 1.9%
Africa 1.8%
Latin America 2 0.7%
Germany 0.6%
Ireland 0.5%
1 Global relates to companies having businesses and operations in
multiple countries and territories.
2 Latin America represents Argentina.
Source: BlackRock.
Asset allocation – Commodity/sub-sectors
Mining 40.2%
Traditional Energy 30.6%
Energy Transition 29.2%
Energy Transition 29.2%
Energy Efficiency 12.8%
Electrification 8.0%
Renewables 5.6%
Storage 1.9%
Transport 0.9%
Traditional Energy 30.6%
Exploration & Production 15.9%
Integrated 6.4%
Distribution 3.5%
Oil Services 3.4%
Oil, Gas & Consumable Fuels 1.4%
Mining 40.2%
Diversified 19.9%
Copper 5.8%
Gold 3.7%
Aluminium 2.9%
Industrial Minerals 2.3%
Uranium 2.2%
Nickel 1.3%
Steel 1.2%
Metals & Mining 0.9%
Source: BlackRock.
Ten largest investments
Together, the Company’s ten largest investments represented 32.5% of the
Company’s portfolio as at 30 November 2024 (2023: 36.3%)
1 ▲ Anglo American (2023: 65th)
Diversified mining group
Market value: £8,687,000
Share of investments: 4.6%1 (2023: 0.4%)
A global mining group. The group’s mining portfolio includes bulk
commodities including iron ore, manganese, metallurgical coal, base metals
including copper and nickel and precious metals and minerals such as platinum
and diamonds. Anglo American has mining operations globally, with significant
assets in Africa and South America.
2 ▲ Rio Tinto (2023: 4th)
Diversified mining group
Market value: £8,453,000
Share of investments: 4.5% (2023: 4.4%)
One of the world’s leading mining companies. The group’s primary product
is iron ore, but it also produces aluminium, copper, diamonds, gold,
industrial minerals and energy products.
3 ▲ Targa Resources (2023: n/a)
Traditional energy distribution
Market value: £6,722,000
Share of investments: 3.5% (2023: n/a)
Targa Resources is a leading provider of midstream services and is one of the
largest independent midstream infrastructure companies in North America.
4 ▲ Shell (2023: 5th)
Integrated oil group
Market value: £5,533,000
Share of investments: 2.9% (2023: 3.8%)
Shell is one of the largest integrated energy companies globally with five
main operating segments: Integrated Gas, Upstream, Marketing, Chemicals and
Products, and Renewables and Energy Solutions. The company has a high quality,
gas/liquified natural gas (LNG)-weighted portfolio.
5 ▲ Vertiv Holdings (2023: n/a)
Energy efficiency
Market value: £5,474,000
Share of investments: 2.9% (2023: n/a)
Vertiv Holdings is a multinational provider of critical infrastructure and
services for data centres, communication networks, and commercial and
industrial environments.
6 ▲ Hydro (2023: 24th)
Aluminium mining
Market value: £5,457,000
Share of investments: 2.9% (2023: 1.6%)
Hydro is a Norwegian aluminium and renewable energy company that has 33,000
employees in more than 140 locations and 40 countries.
7 ▲ Permian Resources (2023: n/a)
Exploration & Production
Market value: £5,440,000
Share of investments: 2.9% (2023: n/a)
Permian Resources is a leading independent oil and natural gas company
headquartered in Texas, USA. The group is the second largest pure-play
exploration and production company in the Permian Basin.
8 ▼ Vale (2023: 3rd)
Diversified mining group
Market value: £5,316,000
Share of investments: 2.8%2 (2023: 4.6%)
One of the largest mining groups in the world, with operations in 30
countries. Vale is the world’s largest producer of iron ore and iron ore
pellets, and the world’s largest producer of nickel. The group also produces
manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum
group metals, gold, silver, cobalt, potash, phosphates and other fertiliser
nutrients.
9 ▲ EOG Resources (2023: 25th)
Exploration & Production
Market value: £5,265,000
Share of investments: 2.8% (2023: 1.6%)
EOG Resources is one of the largest crude oil and natural gas exploration and
production companies in the USA with proven reserves in the USA and Trinidad.
10 ▼ Glencore (2023: 1st)
Diversified mining group
Market value: £5,110,000
Share of investments: 2.7% (2023: 4.8%)
One of the world’s largest globally diversified natural resources groups.
The group’s operations include approximately 150 mining and metallurgical
sites and oil production assets. Glencore’s mined commodity exposure
includes copper, cobalt, nickel, zinc, lead, ferroalloys, aluminium, iron ore,
gold and silver.
1 (0.0)% relates to an equity option in Anglo American.
2 1.0% relates to interest in Vale shareholder debentures.
All percentages reflect the value of the holding as a percentage of total
investments.
Arrows indicate the change in relative ranking of the position in the
portfolio compared to its ranking as at 30 November 2023.
Percentages in brackets represent the value of the holding as at 30 November
2023.
Investments as at 30 November 2024
Main Market % of
geographic value investments
exposure £’000
Mining
Diversified
Anglo American Global 8,738 } 4.6
Anglo American Put Option 20/12/24 Global (51)
Rio Tinto Global 8,453 4.5
Vale Brazil 3,410 } 2.8
Vale Debentures* Brazil 1,906
Glencore Global 5,110 2.7
Teck Resources Global 4,265 2.2
BHP Global 3,470 1.8
Abaxx Technologies Global 2,387 1.3
--------------- ---------------
37,688 19.9
========= =========
Copper
First Quantum Minerals 6.875% 15/10/27 Global 1,646 } 1.5
First Quantum Minerals Global 1,284
Freeport-McMoRan United States 2,277 1.2
Foran Mining Canada 1,732 0.9
Metals Acquisition Australia 1,444 0.8
Ngex Minerals Latin America 1,389 0.7
Ivanhoe Electric United States 1,026 0.5
Develop Global Australia 348 0.2
--------------- ---------------
11,146 5.8
========= =========
Gold
Barrick Gold Global 2,050 1.1
Allied Gold Corporation 8.75% 07/09/2028 Africa 1,614 0.9
Wheaton Precious Metals Global 1,581 0.8
Kinross Gold Global 1,207 0.6
Newmont Global 577 0.3
--------------- ---------------
7,029 3.7
========= =========
Aluminium
Hydro Global 5,457 2.9
--------------- ---------------
5,457 2.9
========= =========
Industrial Minerals
Albemarle Global 1,637 0.9
Lynas Corporation Australia 933 0.5
CF Industries United States 924 0.5
Nutrien United States 788 0.4
--------------- ---------------
4,282 2.3
========= =========
Uranium
Cameco Canada 4,210 2.2
--------------- ---------------
4,210 2.2
========= =========
Nickel
Lifezone Metals Global 1,257 0.7
Nickel Mines Australia 1,051 0.6
--------------- ---------------
2,308 1.3
========= =========
Steel
ArcelorMittal Global 2,203 1.2
Steel Dynamics United States 7 –
--------------- ---------------
2,210 1.2
========= =========
Metals & Mining
Ivanhoe Mines Africa 1,777 0.9
--------------- ---------------
1,777 0.9
========= =========
Total Mining 76,107 40.2
========= =========
Traditional Energy
Exploration & Production
Permian Resources United States 5,440 2.9
EOG Resources United States 5,265 2.8
ConocoPhillips Global 4,789 2.5
Arc Resources Canada 3,601 1.9
Tourmaline Oil Canada 3,584 1.9
Canadian Natural Resources Canada 3,452 1.8
Diamondback Energy United States 1,991 1.0
Hess Global 1,533 0.8
Kosmos Energy United States 637 0.3
--------------- ---------------
30,292 15.9
========= =========
Integrated
Shell Global 5,533 2.9
ExxonMobil Global 4,788 2.5
Eni Global 1,883 1.0
Gazprom** Russian Federation – –
--------------- ---------------
12,204 6.4
========= =========
Distribution
Targa Resources United States 6,722 3.5
--------------- ---------------
6,722 3.5
========= =========
Oil Services
Gaztransport & Technigaz Global 2,756 1.5
TechnipFMC Global 1,812 1.0
Saipem Global 1,686 0.9
--------------- ---------------
6,254 3.4
========= =========
Oil, Gas & Consumable Fuels
Pembina Pipeline Canada 2,703 1.4
--------------- ---------------
2,703 1.4
========= =========
Total Traditional Energy 58,175 30.6
========= =========
Energy Transition
Energy Efficiency
Vertiv Holdings Global 5,474 2.9
Schneider Electric Global 4,321 2.3
Ingersoll-Rand United States 4,052 2.1
Trane Technologies United States 3,779 2.0
Analog Devices Global 3,186 1.7
Regal Rexnord United States 1,950 1.0
Kingspan Group Ireland 857 0.5
Nidec Corp Global 597 0.3
--------------- ---------------
24,216 12.8
========= =========
Electrification
National Grid United Kingdom 4,244 2.2
Vistra United States 2,635 1.4
Talen Energy United States 2,264 1.2
Constellation Energy United States 2,210 1.2
NextEra Energy United States 1,901 1.0
Sempra United States 1,863 1.0
EDP Renováveis Global 31 –
--------------- ---------------
15,148 8.0
========= =========
Renewables
GE Vernova United States 4,204 2.2
Innergex Renewable Energy Canada 2,025 1.1
SSE United Kingdom 1,679 0.9
First Solar Global 1,573 0.8
Siemens Energy Global 1,214 0.6
--------------- ---------------
10,695 5.6
========= =========
Storage
Prysmian Spa Italy 3,618 1.9
--------------- ---------------
3,618 1.9
========= =========
Transport
Infineon Technologies Germany 1,089 0.6
Samsung SDI Global 653 0.3
--------------- ---------------
1,742 0.9
========= =========
Total Energy Transition 55,419 29.2
========= =========
Total Portfolio 189,701 100.0
========= =========
Comprising:
Equity and debt investments 189,752 100.0
Derivative financial instruments – written options (51) –
--------------- ---------------
189,701 100.0
========= =========
* The investment in the Vale debenture is illiquid and has been valued using
secondary market pricing information provided by the Brazilian Financial and
Capital Markets Association (ANBIMA).
** The investment in Gazprom has been valued at a nominal value of RUB0.01 as
secondary listings of the depositary receipts on Russian companies have been
suspended from trading.
All investments are ordinary shares unless otherwise stated. The total number
of holdings (including options) at 30 November 2024 was 74 (2023: 78).
There was one open option and no open futures as at 30 November 2024 (2023:
one option and one future).
The equity and fixed income investment total of £189,752,000 (2023:
£175,540,000) above before the deduction of the negative option valuation of
£51,000 (2023: negative option valuation of £110,000 and negative futures
contract valuation of £780,000) represents the Group’s total investments
held at fair value as reflected in the Consolidated and Parent Company
Statements of Financial Position below. The table above excludes cash and
gearing; the level of the Group’s gearing may be determined with reference
to the bank overdraft of £25,944,000 (2023: £17,862,000) and cash and cash
equivalents of £3,714,000 (2023: £5,276,000) that are also disclosed in the
Consolidated and Parent Company Statements of Financial Position. Details of
the AIC methodology for calculating gearing are given in the Glossary
contained within the Annual Report and Financial Statements.
As at 30 November 2024, the Company did not hold any equity interests
comprising more than 3% of any company’s share capital.
Strategic report
The Directors present the Strategic Report of the Company for the year ended
30 November 2024. The aim of the Strategic Report is to provide shareholders
with the information required to enable them to assess how the Directors have
performed in their duty to promote the success of the Company for the
collective benefit of shareholders.
The Chairman’s Statement together with the Investment Manager’s Report and
the Section 172 Statement set out how the Directors promote the success of the
Company form part of the Strategic Report. The Strategic Report was approved
by the Board at its meeting on 31 January 2025.
Business and management of the Company
BlackRock Energy and Resources Income Trust plc (the Company) is an investment
trust company that has a premium listing on the London Stock Exchange. Its
principal activity is portfolio investment and option writing. The Company’s
wholly owned subsidiary is BlackRock Energy and Resources Securities Income
Company Limited (together ‘the Group’). Its principal activity is
investment dealing.
Investment trusts, like unit trusts and open-ended investment companies
(OEICs), are pooled investment vehicles which allow exposure to a diversified
range of assets through a single investment thus spreading, although not
eliminating, investment risk. In accordance with the Alternative Investment
Fund Managers’ Directive (AIFMD) the Company is an Alternative Investment
Fund (AIF). BlackRock Fund Managers Limited (the Manager) is the Company’s
Alternative Investment Fund Manager (AIFM). The management of the investment
portfolio and the administration of the Company have been contractually
delegated to the Manager. The Manager, operating under guidelines determined
by the Board, has direct responsibility for decisions relating to the running
of the Company and is accountable to the Board for the investment, financial
and operating performance of the Company.
The Company delegates fund accounting services to the Manager, which in turn
subdelegates these services to the Fund Accountant, The Bank of New York
Mellon (International) Limited. The Company sub-delegates registration
services to the Registrar, Computershare Investor Services PLC. Other service
providers include the Depositary, also performed by The Bank of New York
Mellon (International) Limited. Details of the contractual terms with these
service providers are set out in the Directors’ Report contained within the
Annual Report and Financial Statements.
Business model
The Company invests in accordance with the investment objective. The Board is
collectively responsible to shareholders for the long-term success of the
Company. There is a clear division of responsibility between the Board and the
Manager. Matters reserved for the Board include setting the Company’s
strategy, including its investment objective and policy, setting limits on
gearing, capital structure, governance, and appointing and monitoring of the
performance of service providers, including the Manager. As the Company’s
business model follows that of an externally managed investment trust, it does
not have any employees and outsources its activities to third party service
providers including the Manager who is the principal service provider.
Investment objective
The Company’s objectives are to achieve an annual dividend target and, over
the long term, capital growth by investing primarily in securities of
companies operating in the mining and energy sectors.
Investment policy and strategy
The Company seeks to achieve its objectives through a focused portfolio,
consisting of approximately 30 to 150 securities.
Although the Company has the flexibility to invest within this range, at 30
November 2024 the portfolio consisted of 74 investments (including one open
option contract), and the detailed portfolio listing is provided above.
There are no restrictions on investment in terms of geography or sub-sector
and, in addition to equities, other types of securities, such as convertible
bonds and debt issued primarily by mining or energy companies, may be
acquired. Although most securities will be quoted, listed or traded on an
investment exchange, up to 10% of the gross assets of the Group, at the time
of investment, may be invested in unquoted securities. Investment in
securities may be either direct or through other funds, including other funds
managed by BlackRock or its associates, with up to 15% of the portfolio being
invested in other listed investment companies, including listed investment
trusts. In order to comply with the current Listing Rules, the Company will
not invest more than 10% of its gross asset value in other listed closed-ended
investment funds which themselves may invest more than 15% of their gross
assets in other listed closed-ended investment funds. This restriction does
not form part of the Company’s investment policy. Up to 10% of the gross
assets of the Group, at the time of investment, may be invested in physical
assets, such as gold and in securities of companies that operate in the
commodities sector other than the mining and energy sectors.
No more than 15% of the gross assets of the Group will be invested in any one
company as at the date any such investment is made and the portfolio will not
own more than 15% of the issued shares of any one company, other than the
Company’s subsidiary. The Group may deal in derivatives, including options
and futures, up to a maximum of 30% of the Group’s assets for the purposes
of efficient portfolio management and to enhance portfolio returns. In
addition, the Group is also permitted to enter into stock lending arrangements
up to a maximum of 33.3% of the total asset value of the portfolio.
The Group may, from time to time, use borrowings to gear its investment policy
or in order to fund the market purchase of its own ordinary shares. This
gearing typically is in the form of an overdraft or short-term facility, which
can be repaid at any time. Under the Company’s Articles of Association, the
Board is obliged to restrict the borrowings of the Company to an aggregate
amount equal to 40% of the value of the gross assets of the Group. However,
borrowings are not anticipated to exceed 20% of gross assets at the time of
drawdown of the relevant borrowings.
The Group’s financial statements are maintained in British Pound Sterling.
Although many investments are denominated and quoted in currencies other than
British Pound Sterling, the Company does not intend to employ a hedging policy
against fluctuations in exchange rates but may do so in the future if
circumstances warrant implementing such a policy.
No material change will be made to the investment policy without shareholder
approval.
Environmental, social and governance (ESG) impact
The Board’s ESG approach is set out in the Annual Report and Financial
Statements. The direct impact of the Company’s activities is minimal as it
has no employees, premises, physical assets or operations either as a producer
or a provider of goods or services. Neither does it have customers. Its
indirect impact occurs through the investments that it makes, and this is
managed through BlackRock’s approach to ESG integration.
Performance
Details of the Company’s performance for the year are given in the
Chairman’s Statement above. The Investment Manager’s Report above includes
a review of the main developments during the year, together with information
on investment activity within the Company’s portfolio.
Results and dividends
The Company’s revenue earnings for the year amounted to 3.63p per share
(2023: 4.39p). Details of dividends paid and declared in respect of the year,
together with the Company’s dividend policy, are set out in the Chairman’s
Statement above.
Future prospects
The Board’s main focus is the achievement of an annual dividend target and,
over the long term, capital growth. The future of the Company is dependent
upon the success of the investment strategy. The outlook for the Company is
discussed in both the Chairman’s Statement above and in the Investment
Manager’s Report above.
Employees, social, community and human rights issues
The Company has no employees, and all the Directors are non-executive,
therefore, there are no disclosures to be made in respect of employees. The
Company believes that it is in shareholders’ interests to consider
environmental, social and governance factors and human rights issues when
selecting and retaining investments. Details of the Company’s policy on
socially responsible investment are set out in the Annual Report and Financial
Statements.
Modern slavery act
As an investment vehicle the Company does not provide goods or services in the
normal course of business and does not have customers. Accordingly, the
Directors consider that the Company is not required to make any slavery or
human trafficking statement under the Modern Slavery Act 2015. The Board
considers the Company’s supply chain, dealing predominantly with
professional advisers and service providers in the financial services
industry, to be low risk in relation to this matter.
Directors and gender representation
The Directors of the Company are set out in the Governance structure and
Directors’ biographies contained within the Annual Report and Financial
Statements. All the Directors held office throughout the year with the
exception of Mrs Anne Marie Cannon (who was appointed to the Board on 16
January 2024). The Board consists of two male Directors and two female
Directors.
Key performance indicators
A number of performance indicators (KPIs) are used to monitor and assess the
Company’s success in achieving its objectives and to measure its progress
and performance. The principal KPIs are described below:
Performance
At each meeting the Board reviews the performance of the portfolio as well as
the net asset value and share price for the Company and compares this to the
performance of other companies in the peer group. The Company does not have a
benchmark; however, the Board also reviews performance in the context of the
blended performance of the MSCI ACWI Metals and Mining Index, MSCI World
Energy Index and the S&P Global Clean Energy Index and a 40:30:30 composite of
the three indices. The Board also monitors performance relative to a peer
group of commodities and natural resources focused funds and also regularly
reviews the Company’s performance attribution analysis to understand how
performance was achieved. This provides an understanding of how components
such as sector exposure, stock selection and asset allocation impacted
performance. Information on the Company’s performance is given in the
performance record contained within the Annual Report and Financial Statements
and the Chairman’s Statement and Investment Manager’s Report above.
Share rating
The Board monitors the level of the Company’s premium or discount to NAV on
an ongoing basis and considers strategies for managing any premium or
discount. In the year to 30 November 2024, the Company’s share price to NAV
traded in the range of a discount of 8.0% and 14.2% on a cum income basis. The
average discount for the year was 10.8%. 9,833,697 shares were repurchased
into treasury during the year at a total cost of £11,288,000 and an average
discount of 10.8%. Details of shares issued or repurchased since the year end
date are given in note 9 below.
Further details setting out how the discount or premium at which the
Company’s shares trade is calculated are included in the Glossary contained
within the Annual Report and Financial Statements.
Ongoing charges
The ongoing charges represent the Company’s management fee and all other
recurring operating expenses, excluding finance costs, direct transaction
costs, custody transaction charges, VAT recovered, taxation, prior year
expenses written back and certain non-recurring items, expressed as a
percentage of average daily net assets. The ongoing charges are based on
actual costs incurred in the year as being the best estimate of future costs.
The Company’s Manager has also agreed to reduce the existing cap on ongoing
charges from 1.25% to 1.15% with effect from 1 December 2024. To the extent
that the Company’s ongoing charges exceed 1.15% of average net assets, the
Manager will rebate a portion of the management fee to ensure they remain
below 1.15%. The Board reviews the ongoing charges and monitors the expenses
incurred by the Company on an ongoing basis. A definition setting out in
detail how the ongoing charges ratio is calculated is included in the Glossary
contained within the Annual Report and Financial Statements. The Company’s
ongoing charges amounted to 1.20% for the year ended 30 November 2024 (there
was no management fee rebate due for the year).
Dividend target and income generation
The level of income is considered at each meeting and the Board receives
detailed income forecasts. The Board also monitors the risks and returns from
option writing, and regularly reviews the Company’s levels of distributable
reserves.
The table below sets out the key KPIs for the Company. These KPIs fall within
the definition of ‘Alternative Performance Measures’ (APMs) under guidance
issued by the European Securities and Markets Authority (ESMA) and additional
information explaining how these are calculated is set out in the Glossary
contained within the Annual Report and Financial Statements.
Key Performance Indicators Year ended Year ended
30 November 30 November
2024 2023
Net asset value total return 1,2 15.3% -11.8%
Share price total return 1,2 14.0% -15.2%
Discount at year end 2,3 12.1% 10.7%
Revenue return per share 3.63p 4.39p
Dividends per share 4.500p 4.425p
Ongoing charges 2, 4 1.20% 1.19%
========= =========
1 This measures the Company’s NAV and share price total returns, which
assumes dividends paid by the Company have been reinvested.
2 Alternative Performance Measures, see Glossary contained within the Annual
Report and Financial Statements.
3 This is the difference between the share price and the cum-income NAV per
share.
4 Ongoing charges represent the management fee and all other recurring
operating expenses excluding finance costs, direct transaction costs, custody
transaction charges, VAT recovered, taxation, prior year expenses written back
and certain non-recurring items, expressed as a percentage of average daily
net assets. The cap on ongoing charges reduced from 1.25% to 1.15% with effect
from 1 December 2024.
Principal risks
The Company is exposed to a variety of risks and uncertainties. The Board has
in place a robust process to identify, assess and monitor the principal risks
of the Company. A core element of this process is the Company’s risk
register which identifies the risks facing the Company and assesses the
likelihood and potential impact of each risk and the controls established for
mitigation. A residual risk rating is then calculated for each risk.
The risk register is regularly reviewed, and the risks reassessed. The risk
environment in which the Company operates is also monitored and regularly
appraised. New risks are also added to the register as they are identified
which ensures that the document continues to be an effective risk management
tool.
The risk register, its method of preparation and the operation of key controls
in the Manager’s and third-party service providers’ systems of internal
control are reviewed on a regular basis by the Audit and Management Engagement
Committee. In order to gain a more comprehensive understanding of the
Manager’s and other third-party service providers’ risk management
processes, and how these apply to the Company’s business, BlackRock’s
internal audit department provides an annual presentation to the Audit and
Management Engagement Committee Chairman setting out the results of testing
performed in relation to BlackRock’s internal control processes. The Audit
and Management Engagement Committee also periodically receives presentations
from BlackRock’s Risk & Quantitative Analysis teams, and reviews Service
Organisation Control (SOC 1) reports from BlackRock and other key service
providers. The Custodian is appointed by the Company’s Depositary and does
not have a direct contractual relationship with the Company.
The Board has undertaken a robust assessment of both the principal and
emerging risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. The risk that
unforeseen or unprecedented events including (but not limited to) heightened
geo-political tensions such as the war in Ukraine, high inflation and the
current cost of living crisis has had a significant impact on global markets.
The Board has taken into consideration the risks posed to the Company by these
events and incorporated them into the Company’s risk register. Emerging
risks are considered by the Board as they come into view and are incorporated
into the existing review of the Company’s risk register.
Additionally, the Manager considers emerging risks in numerous forums and the
Risk and Quantitative Analysis team produces an annual risk survey. Any
material risks of relevance to the Company identified through the annual risk
survey will be communicated to the Board.
Emerging risks that have been considered by the Board over the year include
the impact of climate change, escalating geo-political conflict and
technological advances.
The key emerging risks identified are as follows:
Climate change: Investors can no longer ignore the impact that the world’s
changing climate will have on their portfolios, with the impact of climate
change on returns, including climate-related natural disasters, now
potentially significant and with the potential to escalate more swiftly than
one is able to predict. The Board receives ESG reports from the Manager on the
portfolio and the way ESG considerations are integrated into the investment
decision-making, so as to mitigate risk at the level of stock selection and
portfolio construction.
Artificial Intelligence (‘AI’): Advances in computing power means that AI
has become a powerful tool that will impact a huge range of areas and with a
wide range of applications that have the potential to dislocate established
business models and disrupt labour markets, creating uncertainty in corporate
valuations. The significant energy required to power this technological
revolution will create further pressure on environmental resources and carbon
emissions.
Geo-political risk: Escalating geo-political tensions (including, but not
limited to tensions in the Middle East and the ongoing war in Ukraine, or
deteriorating relations between China and the US/other countries) have a
significant negative impact on global markets, with an increasing use of
tariffs and domestic regulations making global trade more complex and driving
economic fragmentation.
The Board will continue to assess these risks on an ongoing basis. In relation
to the UK Code, the Board is confident that the procedures that the Company
has put in place are sufficient to ensure that the necessary monitoring of
risks and controls has been carried out throughout the reporting period.
The principal risks and uncertainties faced by the Company during the
financial year, together with the potential effects, controls and mitigating
factors are set out in the following table.
Investment performance
Principal risk
The returns achieved are reliant primarily upon the performance of the
portfolio.
The Board is responsible for:
· setting the investment strategy to fulfil the Company’s objective; and
· monitoring the performance of the Investment Manager and the
implementation of the investment strategy.
An inappropriate investment strategy may lead to:
· poor performance;
· widening discount;
· a reduction or permanent loss of capital; and
· dissatisfied shareholders and reputational damage.
The Board is also cognisant of the long-term risk to performance from
inadequate attention to ESG issues, and in particular the impact of climate
change. More detail in respect of these risks can be found in the AIFMD Fund
Disclosures document available on the Company’s website at
www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-energy-and-resources-income-trust-plc.pd
(http://www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-energy-and-resources-income-trust-plc.pdf)f.
Mitigation/Control
To manage this risk the Board:
· regularly reviews the Company’s investment mandate and long-term
strategy;
· where necessary, the Board seeks shareholder approval to both repurchase
and issue shares to help control the level of discount/premium at which the
shares trade. The Board also keep under review other mechanisms for reducing
the discount, including the option of offering occasional cash exits at close
to NAV;
· has set investment restrictions and guidelines which the Investment
Manager monitors and regularly reports on;
· receives from the Investment Manager a regular explanation of stock
selection decisions, portfolio exposure, gearing and any changes in gearing
and the rationale for the composition of the investment portfolio; and
· monitors the maintenance of an adequate spread of investments in order to
minimise the risks associated with factors specific to particular sectors,
based on the diversification requirements inherent in the investment policy.
ESG analysis is integrated in the Manager’s investment process, as set out
in the Annual Report and Financial Statements. This is monitored by the Board.
Income/dividend
Principal risk
The ability to pay dividends, and future dividend growth, is dependent on a
number of factors including the level of dividends earned from the portfolio
and income generated from the option writing strategy. Income returns from the
portfolio are dependent, among other things, upon the Company successfully
pursuing its investment policy.
Any change in the tax treatment of dividends or interest received by the
Company including as a result of withholding taxes or exchange controls
imposed by jurisdictions in which the Company invests may reduce the level of
dividends received by shareholders.
Mitigation/Control
The Board monitors this risk through the receipt of detailed income forecasts
and considers the level of income at each meeting.
The Company has the ability to make dividend distributions out of special
reserves and capital reserves as well as revenue reserves to support any
dividend target. These reserves totalled £96.0 million at 30 November 2024.
In setting the dividend target each year, the Board is mindful of the balance
of shareholder returns between income and capital.
Gearing
Principal risk
The Company’s investment strategy may involve the use of gearing, including
borrowings.
Gearing may be generated through borrowing money or increasing levels of
market exposure through the use of derivatives. The Company currently has an
overdraft facility with The Bank of New York Mellon (International) Limited.
The use of gearing exposes the Company to the risk associated with borrowing.
Gearing provides an opportunity for greater returns where the return on the
Company’s underlying assets exceeds the cost of borrowing. It is likely to
have the opposite effect where the return on the underlying assets is below
the cost of borrowings. Consequently, the use of borrowings by the Company may
increase the volatility of the NAV.
Mitigation/Control
The Company’s Articles of Association limit borrowings to an aggregate
amount equal to 40% of the value of the gross assets of the Company. However,
to further manage this risk the Board does not anticipate borrowings will
exceed 20% of gross assets at the time of drawdown.
The use of derivatives, including options and futures has been limited to a
maximum of 30% of the Group’s assets.
The Investment Manager will only use gearing when confident that market
conditions and opportunities exist to enhance investment returns.
The Investment Manager reports to the Board on a regular basis the levels of
gearing in place as compared to limits set by the Board under the investment
policy and by the Manager as Alternative Investment Fund Manager (AIFM) under
the Alternative Investment Fund Managers’ Directive, as retained and
onshored in the UK (AIFMD).
The Board monitors gearing levels and will raise any queries or concerns in
respect of changes in the gearing level with the Investment Manager.
Legal and regulatory compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an investment trust,
subject to continuing to meet the relevant eligibility conditions and operates
as an investment trust in accordance with Chapter 4 of Part 24 of the
Corporation Tax Act 2010. As such, the Company is exempt from capital gains
tax on the profits realised from the sale of its investments.
Any breach of the relevant eligibility conditions could lead to the Company
losing investment trust status and being subject to corporation tax on capital
gains realised within the Company’s portfolio.
Any serious breach could result in the Company and/or the Directors being
fined or the subject of criminal proceedings or the suspension of the
Company’s shares which would in turn lead to a breach of the Corporation Tax
Act 2010.
Amongst other relevant laws and regulations, the Company is required to comply
with the provisions of the Companies Act 2006, the Alternative Investment Fund
Managers’ Directive, the Market Abuse Regulation, the UK Listing Rules,
international sanctions and the FCA’s Disclosure Guidance and Transparency
Rules.
Mitigation/Control
The Investment Manager monitors investment movements, the level and type of
forecast income and expenditure and the amount of proposed dividends to ensure
that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010
are not breached. The results are reported to the Board at each meeting.
Compliance with the accounting rules affecting investment trusts are also
carefully and regularly monitored.
The Company Secretary, Manager and the Company’s professional advisers
provide regular reports to the Board in respect of compliance with all
applicable rules and regulations. The Board and the Manager also monitor
changes in government policy and legislation which may have an impact on the
Company.
The Company’s Investment Manager, BlackRock, at all times complies with the
sanctions administered by the UK Office of Financial Sanctions Implementation,
the United States Treasury’s Office of Foreign Assets Control, the United
Nations, European Union member states and any other applicable regimes.
The Market Abuse Regulation came into force on 3 July 2016. The Board has
taken steps to ensure that individual Directors (and their Persons Closely
Associated) are aware of their obligations under the regulation and has
updated internal processes, where necessary, to ensure the risk of
non-compliance is effectively mitigated.
Operational
Principal risk
The Company relies on the services provided by third parties.
Accordingly, it is dependent on the control systems of the Manager and The
Bank of New York Mellon (International) Limited (who act as both Depositary,
Custodian and Fund Accountant and who maintain the Company’s assets,
settlement and accounting records). The Company’s share register is
maintained by the Registrar, Computershare Investor Services PLC. The security
of the Company’s assets, dealing procedures, accounting records and
adherence to regulatory and legal requirements depend on the effective
operation of the systems of the third-party service providers.
Failure by any service provider to carry out its obligations to the Company
could have a material adverse effect on the Company’s performance.
Disruption through a Global IT outage, a cyber-attack or by way of any other
event leading to the disruption of the accounting, payment systems, custody
records and other IT systems which prevent the accurate reporting and
monitoring of the Company’s financial position and operational activities.
Inadequate succession arrangements, particularly of the Manager, could disrupt
the level of service provided.
Any significant reduction in the market value of the Company, including
through falls in its share price and increased buybacks may result in the
Company’s size becoming unviable.
Mitigation/Control
The Fund Accountant’s and the Manager’s internal control processes are
regularly tested and monitored throughout the year and are evidenced through
their SOC 1 reports, which are subject to review by an Independent Service
Assurance Auditor. The SOC 1 reports provide assurance in respect of the
effective operation of internal controls. These reports are provided to the
Audit and Management Engagement Committee.
The Company’s financial assets are subject to a strict liability regime and
in the event of a loss of assets, the Depositary must return assets of an
identical type or the corresponding amount, unless able to demonstrate the
loss was a result of an event beyond its reasonable control.
The Board reviews the overall performance of the Manager, Investment Manager
and all other third-party service providers on a regular basis.
The Board also considers the business continuity arrangements of the
Company’s key service providers on an ongoing basis and reviews these as
part of its review of the Company’s risk register.
The Board considers the Manager’s succession plans in so far as they affect
the services provided to the Company.
The Board considers opportunities to enhance the size of the Company, monitors
any buy-backs, and has in place an ongoing charges cap.
Market
Principal risk
Market risk arises from volatility in the prices of the Company’s
investments. The price of shares of companies in the mining, traditional
energy and energy transition sectors can be volatile and this may be reflected
in the NAV and market price of the Company’s shares.
The Company invests in the mining, traditional energy and energy transition
sectors in many countries globally and will also be subject to
country-specific risk. A lack of growth in world or country-specific
industrial production may adversely affect metal and energy prices.
Companies operating within the sectors in which the Company invests will be
impacted by climate change and by new legislation governing climate change and
environmental issues, which may have a negative impact on their valuation and
share price. Market risk includes the potential impact of events which are
outside the Company’s control, including (but not limited to) heightened
geo-political tensions and military conflict, a global pandemic and high
inflation.
There is the potential for the Company to suffer loss through holding
investments in the face of negative market movements.
Mitigation/Control
The Board considers the diversification of the portfolio, asset allocation,
stock selection, and levels of gearing on a regular basis and has set
investment restrictions and guidelines which are monitored and reported on by
the Investment Manager. The Board monitors the implementation and results of
the investment process with the Investment Manager.
Under the Company’s investment policy, the Investment Manager has the
ability to invest in energy transition stocks and is mindful of the impact of
any shift in energy consumption towards less carbon intensive energy supply.
This is taken into account by the Investment Manager in building a well
diversified portfolio.
The Board also recognises the benefits of a closed-end fund structure in
extremely volatile markets such as those experienced during the Russia-Ukraine
and Middle East conflicts. Unlike open-ended counterparts, closed-end funds
are not obliged to sell-down portfolio holdings at low valuations to meet
liquidity requirements for redemptions. During times of elevated volatility,
restrictions and impacts on securities and markets following the Russian
invasion of the Ukraine and market stress, the ability of a closed-end fund
structure to remain invested for the long term enables the Portfolio Managers
to adhere to disciplined fundamental analysis from a bottom-up perspective and
be ready to respond to dislocations in the market as opportunities present
themselves.
The Board monitors its share register, consults regularly with shareholders
and seeks to improve engagement with retail shareholders.
Financial
Principal risk
The Company’s investment activities expose it to a variety of financial
risks that include interest rate risk and foreign currency risk.
The Company invests in both British Pound Sterling and non-British Pound
Sterling denominated securities. Consequently, the value of investments in the
portfolio made in non-British Pound Sterling currencies will be affected by
currency movements.
Mitigation/Control
Details of these risks are disclosed in note 17 to the Financial Statements,
together with a summary of the policies for managing these risks.
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than
the twelve months referred to by the ‘Going Concern’ guidelines. The Board
is cognisant of the uncertainty surrounding the potential duration of the
conflicts in Russia-Ukraine and Middle East, its impact on the global economy
and the prospects for many of the Company’s portfolio holdings.
Notwithstanding these crises, and given the factors stated below, the Board
expects the Company to continue for the foreseeable future and has therefore
conducted this review for a period of five years. This is generally the
investment holding period investors consider while investing in the sector.
The Board conducted this review for the period up to the AGM in 2030.
The Board has also considered a number of other factors in its assessment,
including:
· portfolio liquidity;
· setting the investment strategy to fulfill the Company’s objective; and
monitoring the performance of the Investment Manager and the implementation of
the investment strategy. The Board regularly reviews the Company’s
investment mandate and long-term strategy; it has set investment restrictions
and guidelines which the Investment Manager monitors and regularly reports to
the Board;
· the Company’s revenue and expense forecasts. The Board is confident that
the Company’s business model remains viable and that there are sufficient
resources to meet all liabilities as they fall due for the period under
review;
· the Company’s borrowing facility and the fact that the Company continues
to meet its financial covenants in respect of this facility;
· the long-term risk to performance from inadequate attention to ESG issues,
and in particular the impact of climate change. ESG analysis is integrated in
the Manager’s investment process. This is monitored by the Board;
· the principal risks and uncertainties as set out above and the fact that
the Company has appropriate controls and processes in place to manage these
and to maintain its operating model;
· the operational resilience of the Company and its key service providers
and their ability to continue to provide a good level of service for the
foreseeable future;
· the effectiveness of business continuity plans in place for the Company
and key service providers; and
· the level of income generated by the Company and future income forecasts.
In its assessment of the viability of the Company the Directors have noted
that:
· the Company predominantly invests in highly liquid, large listed companies
so its assets are readily realisable;
· the Company has gearing facilities in place and no concerns around
facilities, headroom or covenants;
· the Company’s forecasts for revenues, expenses and liabilities are
relatively stable, it has largely fixed overheads which comprise a small
percentage of net assets and ongoing charges are capped at 1.25% of average
net asset value; and
· the business model should remain attractive for longer than five years
unless there is significant economic or regulatory change.
The Directors have also reviewed:
· the impact of a significant fall in global commodity equity markets on the
value of the Company’s investment portfolio;
· the ability of portfolio companies to pay dividends, and the Company’s
portfolio yield and ability to meet its dividend target over the longer term;
· the ongoing relevance of the Company’s investment objective, business
model and investment policy in the current environment; and
· the level of demand for the Company’s shares.
Based on the results of their analysis, the Directors have concluded that
there is a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period of their
assessment.
Section 172 Statement: promoting the success of BlackRock Energy and Resources
Income Trust plc
The Companies (Miscellaneous Reporting) Regulations 2018 require Directors to
explain in detail how they have discharged their duties under Section 172(1)
of the Companies Act 2006 in promoting the success of their companies for the
benefit of members as a whole. This enhanced disclosure covers how the Board
has engaged with and understands the views of stakeholders and how
stakeholders’ needs have been taken into account, the outcome of this
engagement and the impact that it has had on the Board’s decisions.
As the Company is an externally managed investment company and does not have
any employees or customers, the Board considers the main stakeholders in the
Company to be the shareholders, key service providers (being the Manager and
Investment Manager, the Custodian, Depositary, Registrar and Broker) and
investee companies. The reasons for this determination, and the Board’s
overarching approach to engagement, are set out in the table below.
Stakeholders
Shareholders
Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term
strategy. The Board is focused on fostering good working relationships with
shareholders and on understanding the views of shareholders in order to
incorporate them into the Board’s strategy and objectives in delivering
long-term growth and income. The Chairman met with a number of significant
shareholders during the year.
Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is
responsible for the Company’s portfolio management (including asset
allocation, stock and sector selection) and risk management, as well as
ancillary functions such as administration, secretarial, accounting and
marketing services. The Manager has sub-delegated portfolio management to the
Investment Manager. Successful management of shareholders’ assets by the
Investment Manager is critical for the Company to successfully deliver its
investment strategy and meet its objective. The Company is also reliant on the
Manager as AIFM to provide support in meeting relevant regulatory obligations
under the AIFMD and other relevant legislation.
Other key service providers
In order for the Company to function as an investment trust with a listing on
the premium segment of the official list of the Financial Conduct Authority
(FCA) and trade on the London Stock Exchange’s (LSE) main market for listed
securities, the Board relies on a diverse range of advisors for support in
meeting relevant obligations and safeguarding the Company’s assets. For this
reason, the Board considers the Company’s Custodian, Depositary, Registrar
and Broker to be stakeholders. The Board maintains regular contact with its
key external service providers and receives regular reporting from them
through the Board and committee meetings, as well as outside of the regular
meeting cycle.
Investee companies
Portfolio holdings are ultimately shareholders’ assets, and the Board
recognises the importance of good stewardship and communication with investee
companies in meeting the Company’s investment objective and strategy. The
Board monitors the Manager’s stewardship activities and receives regular
feedback from the Manager in respect of meetings with the management of
portfolio companies.
A summary of the key areas of engagement undertaken by the Board with its key
stakeholders in the year under review and how Directors have acted upon this
to promote the long-term success of the Company are set out in the table
below.
Area of Engagement
Investment Mandate and Objective
Issue
The Board is committed to promoting the role and success of the Company in
delivering on its investment mandate to shareholders over the long term.
However, the Board recognises that the sectors in which the Company invests
are undergoing structural changes, with a shift in the energy sector away from
carbon-based energy supplies towards alternative and renewable energy sources.
The extractive industries in which the companies in the Company’s investment
universe operate are facing ethical and sustainability issues that cannot be
ignored by asset managers and investment companies alike. More than ever,
consideration of material ESG information and sustainability risks is an
important element of the investment process. The Board also has responsibility
to shareholders to ensure that the Company’s portfolio of assets is invested
in line with the stated investment objective and in a way that ensures an
appropriate balance between spread of risk and portfolio returns.
Engagement
The Board believes that responsible investment and sustainability are integral
to the longer-term delivery of growth in capital and income and has worked
very closely with the Manager throughout the year to regularly review the
Company’s performance, investment strategy and underlying policies to ensure
that the Company’s investment objective continues to be met in an effective,
responsible way that is transparent to current and future investors.
In addition to six scheduled Board meetings a year, the Board holds a Strategy
Day which is dedicated to an in depth review of the Company’s strategy in
conjunction with key advisors including the Company’s broker, public
relations and marketing teams and members of BlackRock’s portfolio
management and risk analytics teams.
The Manager’s approach to the consideration of ESG factors in respect of the
Company’s portfolio, as well as its engagement with investee companies to
encourage the adoption of sustainable business practices which support
long-term value creation, are kept under review by the Board.
The Manager reports to the Board in respect of its consideration of ESG
factors and how these are integrated into the investment process; a summary of
BlackRock’s approach to ESG integration is set out in the Annual Report and
Financial Statements.
Impact
The portfolio activities undertaken by the Investment Manager can be found in
the Investment Manager’s Report above.
The Board does not formally benchmark the Company’s performance against
mining and energy sector indices because meeting a specific dividend target is
not within the scope of these indices and also because no index appropriately
reflects the Company’s blended exposure to the Energy (including the energy
transition) and mining sectors. For internal monitoring purposes, however, the
Board compares the performance of the portfolio against a bespoke composite
index. The neutral sector weightings of this bespoke index are 40% Mining, 30%
Traditional Energy and 30% Energy Transition, as measured (respectively) by
the MSCI ACWI Select Metals & Mining Producers Ex Gold and Silver IMI Index,
the MSCI World Energy Index and the S&P Global Clean Energy Index.
Details regarding the Company’s Key Performance Indicators can be found in
this Strategic Report.
Management of Share Rating
Issue
The Board recognises the importance to shareholders that the market price of
the Company’s shares should not trade at either a significant discount or
premium to the NAV. One of the Board’s long-term strategic aspirations is
that the Company’s shares should trade consistently at a price close to the
NAV per share.
Engagement
The Board monitors the Company’s discount on an ongoing basis and meets with
the Manager and the Company’s Broker on a regular basis to discuss methods
to try to ensure that the shares trade neither at an excessive discount or
premium to NAV, but as close to par as possible. A range of discount control
mechanisms have been considered and the benefits and disadvantages of these
have been discussed at length. The Chairman also had discussions with major
shareholders during the year.
For the year under review, the Board authorised the buy back of 9,833,697
shares at a cost of £11,288,000 and at an average discount of 10.8%. Since
the year end and up to 28 January 2025, the Company repurchased 1,708,000
ordinary shares for a net consideration of £2,046,000 at an average discount
of 10.3%.
In addition, the Board has worked closely with the Manager to develop the
Company’s marketing strategy, with the aim of ensuring effective
communication with existing shareholders and to attract new shareholders to
the Company in order to improve liquidity in the Company’s shares and to
sustain the share rating of the Company.
Impact
The Company’s average discount for the year to 30 November 2024 was 10.8%
(year to 30 November 2023: 6.4%) and as at 28 January 2025 the discount stood
at 8.3%. This compares to an average discount for the AIC Commodities and
Natural resources sector of 13.1% at 30 November 2024 and 12.2% at 28 January
2025.
The Company contributed during the year to a focused investment trust sales
and marketing initiative operated by BIM (UK) on behalf of the investment
trusts under its management. For the year ended 30 November 2024, the
Group’s contribution to the consortium element of the initiative, which
enables the trusts to achieve efficiencies by combining certain sales and
marketing activities, represented 0.025% per annum of its net assets (£167.4
million) as at 31 December 2024, and this contribution was matched by BIM
(UK). This marketing activity was one factor contributing to increased demand
for the Company’s shares, enabling it to grow in size and resulting in a
lower operating charges ratio and greater liquidity.
Dividend target
Issue
A key element of the Company’s investment objective is to achieve an annual
dividend target. The Board is cognisant that portfolio investments with a high
yield may have lower capital growth, and that seeking to ensure that any
dividend target is covered by current year dividend revenue may result in a
lower total return. Conversely, a move to invest a higher proportion of the
portfolio in higher growth investments (including certain energy transition
stocks) may result in a lower yielding portfolio.
Engagement
The Board reviews income forecasts and option writing activity in conjunction
with the Manager to determine the most effective approach for meeting the
dividend target whilst generating the optimal level of total return for
shareholders.
The Board aims to meet the annual target dividend primarily from a mix of
dividend income from the portfolio and revenue reserves, although this will be
supported by the distribution of the Company’s other substantial
distributable reserves (£96.0 million at 30 November 2024) if required.
Impact
The Board’s dividend target for 2024 was to declare quarterly dividends of
at least 1.125 pence per share in the year to 30 November 2024, making a total
of at least 4.50 pence per share for the year as a whole. The shortfall of
0.87 pence between earnings per share and the annual dividend target will be
funded out of the Company’s revenue reserves and distributable reserves
(£96.0 million at 30 November 2024).
The Board has decided to maintain the annual dividend target of at least 4.50
pence per share for the year to 30 November 2025.
The Company has sufficient distributable reserves to meet its current target
dividend for a period of 17 years.
Service levels of third party providers
Issue
The Board acknowledges the importance of ensuring that the Company’s
principal suppliers are providing a suitable level of service: this includes
the Manager in respect of investment performance and delivering on the
Company’s investment mandate; the Custodian and Depositary in respect of
their duties towards safeguarding the Company’s assets; the Registrar in its
maintenance of the Company’s share register and dealing with investor
queries and the Company’s Broker in respect of the provision of advice and
acting as a market maker for the Company’s shares.
Engagement
The Manager reports to the Board on the Company’s performance on a regular
basis. The Board carries out a robust annual evaluation of the Manager’s
performance, its commitment and available resources.
The Board performs an annual review of the service levels of all third-party
service providers and concludes on their suitability to continue in their
role.
The Board receives regular updates from the AIFM, Depositary, Registrar and
Broker on an ongoing basis.
Impact
All performance evaluations were performed on a timely basis and the Board
concluded that all key third-party service providers, including the Manager
were operating effectively and providing a good level of service.
Board composition
Issue
The Board is committed to ensuring that its own composition brings an
appropriate balance of knowledge, experience and skills, and that it is
compliant with best corporate governance practice under the UK Code, including
guidance on tenure and the composition of the Board’s committees.
Engagement
The Board reviews succession planning on an ongoing basis. A new Director, Mrs
Anne Marie Cannon, was appointed in January 2024. As part of her selection
process, the Nomination Committee agreed the selection criteria and the method
of selection, recruitment and appointment. Board diversity, including gender,
was taken into account when establishing the criteria. The services of an
external search consultant, Cornforth Consulting Limited, was used to identify
potential candidates.
The Board remain focused on best Corporate Governance Practice, and in
particular the recommendation under the UK Code that Directors’ tenure is
limited to nine years. While the Board does not have a formal limit on tenure,
Carol Bell retired as a Director at the Annual General Meeting held on 15
March 2024, as her tenure exceeded nine years with effect from December 2023.
Impact
The Board appointed Mrs Anne Marie Cannon as a Director of the Company with
effect from 16 January 2024. Mrs Cannon’s biography is set out in the Annual
Report and Financial Statements. Details of each Director’s contribution to
the success and promotion of the Company are set out in the Directors’
Report contained within the Annual Report and Financial Statements.
All Directors currently serving on the Board have tenure below the nine years
maximum limit recommended under the UK Code.
The Board’s composition currently meets all targets recommended under the
Parker Review and enshrined in recent changes to the FCA’s Listing Rules
(which set new diversity targets and associated disclosure requirements for UK
companies listed on the London Stock Exchange).
BlackRock Investment Stewardship Engagement with portfolio companies in the
year ended 30 November 2024
Given the Board’s belief in the importance of engagement and communication
with portfolio companies, they receive regular updates from the Manager in
respect of activity undertaken for the year under review. The Board notes that
over the year to 30 November 2024, 102 total company engagements were held
with the management teams of 41 portfolio companies representing 68% of the
portfolio by value at 30 November 2024. To put this into context, there were
74 companies in the BlackRock Energy and Resources Income Trust plc portfolio
at 30 November 2024. Additional information is set out in the table below as
well as the key engagement themes for the meetings held in respect of the
Company’s portfolio holdings.
BlackRock Energy and Resources Income Trust plc -
year ended 30 November 2024
Number of engagements held 102
Number of companies met 41
% of equity investments covered 55
Shareholder meetings voted at 75
Number of proposals voted on 1,010
Number of votes against management 13
% of total votes represented by votes against management 1.25
=========
BlackRock Investment Stewardship’s benchmark policies are the foundation for
the team’s voting and engagement activities. The policies – which are
comprised of published BlackRock Investment Stewardship Global Principles,
regional voting guidelines, and engagement priorities – take a financial
materiality-based approach and are focused solely on advancing clients’
financial interests. The policies provide clients, companies, and other
external stakeholders, visibility and clarity into the core elements of
corporate governance that guide BlackRock Investment Stewardship’s program
globally and within each regional market every year.
BlackRock Investment Stewardship’s benchmark policies are reviewed annually
by BlackRock Investment Stewardship and the BlackRock Investment Stewardship
oversight and advisory committees, which are comprised of BlackRock senior
executives with relevant experience and oversight. The policies are updated as
necessary to reflect changes in market standards, evolving governance
practices, and insights gained from multiyear engagements.
BlackRock Investment Stewardship does not act collectively with other
shareholders or organizations in voting shares. Instead, it makes decisions on
how to engage companies and how to vote proxies independently, based solely on
its professional assessment of what is in the long-term financial interests of
BlackRock’s clients.
The BlackRock Investment Stewardship Global Principles, regional voting
guidelines, and engagement priorities are all available
here: https://www.blackrock.com/corporate/insights/investment-stewardship/blackrock-investment-stewardship.
BlackRock Investment Stewardship’s five engagement priorities are: board
quality and effectiveness; strategy, purpose, and financial resilience;
incentives aligned with financial value creation; climate and natural capital;
and company impacts on people. The BlackRock Investment Stewardship engagement
priorities reflect the themes on which the team most frequently engages
companies, where they are relevant, as these can be a source of material
business risk or opportunity.
A detailed approach to the team’s engagement priorities is available here:
https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pd
(https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf)f.
BlackRock Investment Stewardship#
BlackRock Investment Stewardship (BIS) is responsible for engagement and
voting in relation to clients’ assets managed by certain index equity
portfolio managers. The BlackRock Investment Stewardship team takes a
long-term approach in its stewardship efforts, reflecting the investment
horizons of the majority of BlackRock’s clients. BlackRock Investment
Stewardship’s activities include engaging with companies, proxy voting on
clients’ behalf, contributing to industry dialogue on stewardship, and
reporting on its activities. These activities are the main components of the
stewardship toolkit and are performed all year long. BlackRock Investment
Stewardship aims to take a globally consistent approach, while recognizing the
unique markets and sectors in which companies operate.
# As of 1 January 2025, BlackRock’s stewardship policies are developed and
implemented by two independent, specialist teams, BlackRock Investment
Stewardship (BIS) and BlackRock Active Investment Stewardship (BAIS). While
the two teams operate independently, their general approach is grounded in
widely recognized norms of corporate governance and shareholder rights and
responsibilities. BIS is responsible for engagement and voting in relation to
clients’ assets managed by certain index equity portfolio managers.
Approximately 90% of BlackRock clients’ public equity assets under
management are held in index strategies, as of 30 September 2024. BAIS
partners with BlackRock’s active investment teams on company engagement and
voting in relation to their holdings.
Environmental, Social and Governance Approach
The Board’s approach
Environmental, social and governance (ESG) issues can present both
opportunities and risks to long-term investment performance. The Company’s
investment universe comprises sectors that are undergoing significant
structural change and are likely to be highly impacted by increasing
regulation as a result of climate change and other social and governance
factors. Your Board is committed to ensuring that we have appointed a manager
that integrates ESG considerations into its investment process and has the
skill and vision to navigate the structural transition that the Company’s
investment universe is undergoing.
The Board believes multi-year engagement with management is, in most cases,
the most constructive way of building our understanding of a company’s
approach to addressing material business risks and opportunities. Engagement
can lead to stronger relationships with companies and more constructive
outcomes for shareholders and businesses alike.
More information on BlackRock’s global approach to ESG integration, as well
as activity specific to the BlackRock Energy and Resources Income Trust plc
portfolio, is set out below. BlackRock has defined ESG integration as the
practice of incorporating financially material ESG information and
consideration of sustainability risks into investment decisions in order to
enhance risk-adjusted returns. ESG integration does not change the Company’s
investment objective or constrain the Investment Manager’s investable
universe and does not mean that an ESG or impact focused investment strategy
or any exclusionary screens have been or will be adopted by the Company.
Similarly, ESG integration does not determine the extent to which the Company
may be impacted by sustainability risks. More information on sustainability
risks may be found in the AIFMD Fund Disclosures document of the Company
available on the Company’s website
at www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-energy-and-resources-income-trust-plc.pd
(http://www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-energy-and-resources-income-trust-plc.pdf)f.
The Company does not meet the criteria for Article 8 or 9 products under the
EU Sustainable Finance Disclosure Regulation (“SFDR”) and the investments
underlying this financial product do not take into account the EU criteria for
environmentally sustainable economic activities.
BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the Sustainability
Accounting Standards Board provides a clear set of standards for reporting
sustainability information across a wide range of issues, from labour
practices to data privacy to business ethics. For evaluating and reporting
climate-related risks, as well as the related governance issues that are
essential to managing them, the Task Force on Climate-related Financial
Disclosures (TCFD) provides a valuable framework. BlackRock recognises that
reporting to these standards requires significant time, analysis, and effort.
BlackRock’s 2023 TCFD report can be found
at www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2023-blkinc.pd
(http://www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2023-blkinc.pdf)f.
BlackRock’s approach to ESG integration
BlackRock believes that sustainability risks including climate risk are
investment risks. As a fiduciary, we manage material risks and opportunities
that could impact portfolios. Sustainability can be a driver of investment
risks and opportunities, and we incorporate them in our firm wide processes
when they are material. This in turn (in BlackRock’s view) is likely to
drive a significant reallocation of capital away from traditional carbon
intensive industries over the next decade. BlackRock believes that
carbon-intensive companies will play an integral role in unlocking the full
potential of the energy transition, and to do this, they must be prepared to
adapt, innovate and pivot their strategies towards a low carbon economy.
BlackRock incorporates into its firmwide processes relevant, financially
material information, including financially material data and information
related to ESG. BlackRock’s investment view is that doing so can provide
better risk-adjusted returns for its clients over the long term.
BlackRock’s clients have a wide range of perspectives on a variety of issues
and investment themes, including sustainable and low-carbon transition
investing. Given the wide range of unique and varied investment objectives
sought by its clients, BlackRock’s investment teams have a range of
approaches to considering financially material E, S, and/or G factors. As with
other investment risks and opportunities, the financial materiality of E, S
and/or G considerations may vary by issuer, sector, product, mandate, and time
horizon. Depending on the investment approach, this financially material E, S
and/or G data or information may help inform due diligence, portfolio or index
construction, and/or monitoring processes of client portfolios, as well as
BlackRock’s approach to risk management.
BlackRock’s ESG integration framework is built upon its history as a firm
founded on the principle of thorough and thoughtful risk management. Aladdin,
BlackRock’s core risk management and investment technology platform, allows
investors to leverage financially material E, S and/or G data or information
as well as the combined experience of BlackRock’s investment teams to
effectively identify investment opportunities and investment risks.
BlackRock’s heritage in risk management combined with the strength of the
Aladdin platform enables BlackRock’s approach to ESG integration.
BlackRock structures its approach around three main pillars: investment
processes, material insights and transparency. These pillars underpin ESG
integration at BlackRock and they are supported by equipping BlackRock
employees with investment relevant E, S and/or G data, tools, and education.
More information in respect of BlackRock’s approach to ESG integration can
be found
at https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pd
(https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pdf)f.
BIS benchmark policies
BlackRock Investment Stewardship’s benchmark policies, and the vote
decisions made consistent with these policies, take a financial
materiality-based approach and are focused solely on advancing clients’
financial interests. BlackRock Investment Stewardship’s benchmark policies
– comprised of the BlackRock Investment Stewardship Global Principles,
regional voting guidelines, and engagement priorities – apply to clients’
assets invested through index equity strategies and provide guidance on
BlackRock Investment Stewardship’s position on common corporate governance
matters. BlackRock Investment Stewardship takes a globally consistent
approach, while recognizing the unique markets and sectors in which companies
operate.
More detail in respect of BIS reporting can be found at:
https://www.blackrock.com/corporate/insights/investment-stewardship/blackrock-investment-stewardship.
Global principles
The BIS Global Principles reflect BIS’ views on certain globally applicable
fundamental elements of governance that contribute to a company’s ability to
create long-term financial value, anchored in transparency and accountability.
The Global Principles are available on BIS’
website: https://www.blackrock.com/corporate/literature/fact-sheet/blkresponsible-investment-engprinciples-global.pd
(https://www.blackrock.com/corporate/literature/fact-sheet/blkresponsible-%20investment-engprinciples-global.pdf)f.
Regional voting guidelines
The BIS regional voting guidelines provide context on how the Principles
inform BIS’ voting decisions in relation to common ballot items for
shareholder meetings in those markets.
BIS’ regional voting guidelines are available on its website at:
https://www.blackrock.com/corporate/insights/investment-stewardship/blackrock-investment-stewardship#stewardship-policie
(https://www.blackrock.com/corporate/insights/investment-stewardship/blackrock-investment-stewardship#stewardship-policies)s.
Engagement priorities
The BIS engagement priorities are the five themes on which BIS most frequently
engages with companies, where they are relevant and a source of material
business risk or opportunity. The engagement priorities are available on
BIS’ website:
https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf.
The above forms part of the Strategic Report.
By order of the Board
GRAHAM VENABLES
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
31 January 2025
Related Party Transactions and Transactions with the AIFM and the Investment
Manager
BlackRock Fund Managers Limited (BFM) provides management and administrative
services to the Group under a contract which is terminable on six months’
notice. BFM has (with the Group’s consent) delegated certain portfolio and
risk services, and other ancillary services to BlackRock Investment Management
(UK) Limited (BIM (UK)). Further details of the investment management contract
are disclosed in the Directors’ Report contained within the Annual Report
and Financial Statements.
The investment management fee due for the year ended 30 November 2024 amounted
to £1,425,000 (2023: £1,549,000). At the year end, £1,072,000 was
outstanding in respect of the management fee (2023: £742,000).
The Company is entitled to a rebate from the investment management fee charged
by the Manager in the event the Company’s ongoing charges exceeds the cap of
1.25% per annum of average daily net assets. The amount of rebate accrued to
30 November 2024 amounted to £nil (2023: £nil).
Further details in respect of the management fee and rebate are given in note
4 below.
In addition to the above services, BIM (UK) has provided the Group with
marketing services. The total fees paid or payable for these services for the
year ended 30 November 2024 amounted to £80,000 excluding VAT (2023:
£84,000). Marketing fees of £28,000 excluding VAT (2023: £106,000) were
outstanding as at the year end.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware USA.
At the date of this report, the Board consists of four non-executive
Directors, all of whom are considered to be independent of the Manager by the
Board.
Disclosures of the Directors’ interests in the ordinary shares of the
Company and fees and expenses payable to the Directors are set out in the
Directors’ Remuneration Report contained within the Annual Report and
Financial Statements for the year ended 30 November 2024. At 30 November 2024,
£12,000 (2023: £11,000) was outstanding in respect of Directors’ fees.
Statement of Directors’ responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable United Kingdom law and
regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
Group and Parent Company financial statements in accordance with UK-adopted
International Accounting Standards (IFRSs). Under company law the Directors
must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and the Company
and of the profit or loss of the Group and the Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors and then apply them
consistently;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· make judgements and estimates that are reasonable and prudent;
· in respect of the Group financial statements, state whether UK-adopted
International Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
· provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group and
Company financial position and financial performance;
· in respect of the Parent Company financial statements, state whether
UK-adopted International Accounting Standards, have been followed, subject to
any material departures disclosed and explained in the financial statements;
and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and/or the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group’s and the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of
the Group and the Company and enable them to ensure that the Group and Company
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and Parent
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report, Corporate Governance Statement and the Report of the Audit and
Management Engagement Committee that comply with that law and those
regulations. The Directors have delegated responsibility to the Manager for
the maintenance and integrity of the Group’s corporate and financial
information included on the BlackRock website. Legislation in the United
Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors confirm, to the best of their knowledge:
· that the consolidated financial statements prepared in accordance with
UK-adopted International Accounting Standards, give a true and fair view of
the assets, liabilities, financial position and profit of the Parent Company
and undertakings included in the consolidation taken as a whole;
· that the annual report, including the strategic report, includes a fair
review of the development and performance of the business and the position of
the Company and undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face; and
· that they consider the annual report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to
assess the company’s position, performance, business model and strategy.
In order to reach a conclusion on this matter, the Board has requested that
the Audit and Management Engagement Committee advise on whether it considers
that the Annual Report and Financial Statements fulfils these requirements.
The process by which the Committee has reached these conclusions is set out in
the Audit and Management Engagement Committee’s Report contained within the
Annual Report and Financial Statements. As a result, the Board has concluded
that the Annual Report for the year ended 30 November 2024, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group’s and the Company’s position,
performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
ADRIAN BROWN
Chairman
31 January 2025
Consolidated statement of comprehensive income for the year ended 30 November
2024
2024 2023
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Income from investments held at fair value through profit or loss 3 4,951 – 4,951 6,258 79 6,337
Other income 3 1,200 – 1,200 1,218 – 1,218
--------------- --------------- --------------- --------------- --------------- ---------------
Total income 6,151 – 6,151 7,476 79 7,555
========= ========= ========= ========= ========= =========
Net profit/(loss) on investments and derivatives held at fair value through profit or loss – 18,986 18,986 – (27,606) (27,606)
Net profit on foreign exchange – 25 25 – 6 6
--------------- --------------- --------------- --------------- --------------- ---------------
Total 6,151 19,011 25,162 7,476 (27,521) (20,045)
========= ========= ========= ========= ========= =========
Expenses
Investment management fees 4 (356) (1,069) (1,425) (387) (1,162) (1,549)
Other operating expenses 5 (511) (9) (520) (535) (16) (551)
--------------- --------------- --------------- --------------- --------------- ---------------
Total operating expenses (867) (1,078) (1,945) (922) (1,178) (2,100)
========= ========= ========= ========= ========= =========
Net profit/(loss) on ordinary activities before finance costs and taxation 5,284 17,933 23,217 6,554 (28,699) (22,145)
Finance costs 6 (230) (690) (920) (196) (588) (784)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on ordinary activities before taxation 5,054 17,243 22,297 6,358 (29,287) (22,929)
Taxation (charge)/credit (513) 128 (385) (584) 117 (467)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on ordinary activities after taxation 4,541 17,371 21,912 5,774 (29,170) (23,396)
========= ========= ========= ========= ========= =========
Earnings/(loss) per ordinary share (pence) 3.63 13.87 17.50 4.39 (22.17) (17.78)
========= ========= ========= ========= ========= =========
The total columns of this statement represent the Group’s Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards (IAS). The supplementary revenue and capital accounts 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 year. All
income is attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss) (2023: £nil).
The net profit/(loss) for the year disclosed above represents the Group’s
total comprehensive income.
Consolidated statement of changes in equity for the year ended 30 November
2024
Group Notes Called Share Special Capital Revenue Total
up share premium reserve reserves reserve £’000
capital account £’000 £’000 £’000
£’000 £’000
For the year ended 30 November 2024
At 30 November 2023 1,356 69,980 66,100 18,660 6,266 162,362
Total comprehensive income:
Net profit for the year – – – 17,371 4,541 21,912
Transaction with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 9, 10 – – (11,208) – – (11,208)
Share repurchase costs 9, 10 – – (80) – – (80)
Dividends paid 1 7 – – – – (5,659) (5,659)
--------------- --------------- --------------- --------------- --------------- ---------------
At 30 November 2024 1,356 69,980 54,812 36,031 5,148 167,327
========= ========= ========= ========= ========= =========
For the year ended 30 November 2023
At 30 November 2022 1,344 68,203 70,937 47,803 6,421 194,708
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – (29,170) 5,774 (23,396)
Transaction with owners, recorded directly to equity:
Ordinary share issues 9, 10 12 1,781 – – – 1,793
Share issue costs 9, 10 – (4) – – – (4)
Ordinary shares repurchased into treasury 9, 10 – – (4,802) – – (4,802)
Share repurchase costs 9, 10 – – (35) – – (35)
Share reissue costs written back 10 – – – 27 – 27
Dividends paid 2 7 – – – – (5,929) (5,929)
--------------- --------------- --------------- --------------- --------------- ---------------
At 30 November 2023 1,356 69,980 66,100 18,660 6,266 162,362
========= ========= ========= ========= ========= =========
1 4th interim dividend of 1.125p per share for the year ended 30 November
2023, declared on 7 December 2023 and paid on 12 January 2024; 1st interim
dividend of 1.125p per share for the year ended 30 November 2024, declared on
15 March 2024 and paid on 26 April 2024; 2nd interim dividend of 1.125p per
share for the year ended 30 November 2024, declared on 4 June 2024 and paid on
15 July 2024 and 3rd interim dividend of 1.125p per share for the year ended
30 November 2024, declared on 18 September 2024 and paid on 28 October 2024.
2 4th interim dividend of 1.100p per share for the year ended 30 November
2022, declared on 7 December 2022 and paid on 13 January 2023; 1st interim
dividend of 1.100p per share for the year ended 30 November 2023, declared on
13 March 2023 and paid on 19 April 2023; 2nd interim dividend of 1.100p per
share for the year ended 30 November 2023, declared on 7 June 2023 and paid on
14 July 2023 and 3rd interim dividend of 1.100p per share for the year ended
30 November 2023, declared on 20 September 2023 and paid on 27 October 2023.
Parent company statement of changes in equity
Company Notes Called Share Special Capital Revenue Total
up share premium reserve reserves reserve £’000
capital account £’000 £’000 £’000
£’000 £’000
For the year ended 30 November 2024
At 30 November 2023 1,356 69,980 66,100 20,294 4,632 162,362
Total comprehensive income:
Net profit for the year – – – 16,692 5,220 21,912
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 9, 10 – – (11,208) – – (11,208)
Share repurchase costs 9, 10 – – (80) – – (80)
Dividends paid 1 7 – – – – (5,659) (5,659)
--------------- --------------- --------------- --------------- --------------- ---------------
At 30 November 2024 1,356 69,980 54,812 36,986 4,193 167,327
========= ========= ========= ========= ========= =========
For the year ended 30 November 2023
At 30 November 2022 1,344 68,203 70,937 50,437 3,787 194,708
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – (30,170) 6,774 (23,396)
Transactions with owners, recorded directly to equity:
Ordinary share issues 9, 10 12 1,781 – – – 1,793
Share issue costs 9, 10 – (4) – – – (4)
Ordinary shares repurchased into treasury 9, 10 – – (4,802) – – (4,802)
Share repurchase costs 9, 10 – – (35) – – (35)
Share reissue costs written back 10 – – – 27 – 27
Dividends paid 2 7 – – – – (5,929) (5,929)
--------------- --------------- --------------- --------------- --------------- ---------------
At 30 November 2023 1,356 69,980 66,100 20,294 4,632 162,362
========= ========= ========= ========= ========= =========
1 4th interim dividend of 1.125p per share for the year ended 30 November
2023, declared on 7 December 2023 and paid on 12 January 2024; 1st interim
dividend of 1.125p per share for the year ended 30 November 2024, declared on
15 March 2024 and paid on 26 April 2024; 2nd interim dividend of 1.125p per
share for the year ended 30 November 2024, declared on 4 June 2024 and paid on
15 July 2024 and 3rd interim dividend of 1.125p per share for the year ended
30 November 2024, declared on 18 September 2024 and paid on 28 October 2024.
2 4th interim dividend of 1.100p per share for the year ended 30 November
2022, declared on 7 December 2022 and paid on 13 January 2023; 1st interim
dividend of 1.100p per share for the year ended 30 November 2023, declared on
13 March 2023 and paid on 19 April 2023; 2nd interim dividend of 1.100p per
share for the year ended 30 November 2023, declared on 7 June 2023 and paid on
14 July 2023 and 3rd interim dividend of 1.100p per share for the year ended
30 November 2023, declared on 20 September 2023 and paid on 27 October 2023.
For information on the Company’s distributable reserves please refer to note
10 below.
Consolidated and parent company statements of financial position as at 30
November 2024
30 November 2024 30 November 2023
Notes Group Company Group Company
£’000 £’000 £’000 £’000
Non current assets
Investments held at fair value through profit or loss 189,752 190,707 175,540 177,995
--------------- --------------- --------------- ---------------
Current assets
Other receivables 436 3,176 618 3,359
Current tax asset 193 193 130 130
Cash collateral pledged with brokers 11 591 591 1,538 1,538
Cash and cash equivalents – cash at bank 11 3,714 19 5,276 80
--------------- --------------- --------------- ---------------
Total current assets 4,934 3,979 7,562 5,107
========= ========= ========= =========
Total assets 194,686 194,686 183,102 183,102
========= ========= ========= =========
Current liabilities
Other payables (1,364) (1,364) (1,988) (1,988)
Derivative financial liabilities held at fair value through profit or loss (51) (51) (890) (890)
Cash and cash equivalents - bank overdraft 11 (25,944) (25,944) (17,862) (17,862)
--------------- --------------- --------------- ---------------
Total current liabilities (27,359) (27,359) (20,740) (20,740)
========= ========= ========= =========
Net assets 167,327 167,327 162,362 162,362
========= ========= ========= =========
Equity attributable to equity holders
Called up share capital 9 1,356 1,356 1,356 1,356
Share premium account 10 69,980 69,980 69,980 69,980
Special reserve 10 54,812 54,812 66,100 66,100
Capital reserves 10
At 1 December 18,660 20,294 47,803 50,437
Net profit for the year 17,371 16,692 (29,170) (30,170)
Transactions with owners, recorded directly to equity - - 27 27
At 30 November 36,031 36,986 18,660 20,294
Revenue reserve 10
At 1 December 6,266 4,632 6,421 3,787
Net profit for the year 4,541 5,220 5,774 6,774
Dividends paid (5,659) (5,659) (5,929) (5,929)
At 30 November 5,148 4,193 6,266 4,632
--------------- --------------- --------------- ---------------
Total equity 167,327 167,327 162,362 162,362
========= ========= ========= =========
Net asset value per ordinary share (pence) 8 137.66 137.66 123.58 123.58
========= ========= ========= =========
Consolidated and parent company cash flow statements for the year ended 30
November 2024
30 November 2024 30 November 2023
Group Company Group Company
£’000 £’000 £’000 £’000
Operating activities
Net profit on ordinary activities before taxation 1 22,297 22,297 (22,929) (22,929)
Add back finance costs 920 920 784 784
Net profit on investments and derivatives held at fair value through profit or loss (including transaction costs) (18,986) (17,486) 27,606 28,606
Net profit on foreign exchange (25) – (6) –
Sales of investments held at fair value through profit or loss 123,914 123,914 97,330 97,330
Purchases of investments held at fair value through profit or loss (119,979) (119,979) (93,247) (93,247)
Decrease in other receivables 182 183 (134) (134)
Decrease in other payables (55) (55) 471 471
Decrease in amounts due to brokers (569) (569) 1,496 1,496
Net movement in cash collateral held with brokers 947 947 (1,253) (1,253)
--------------- --------------- --------------- ---------------
Net cash inflow from operating activities before taxation 8,646 10,172 5,849 6,855
========= ========= ========= =========
Taxation on investment income included within gross income (448) (448) (494) (494)
--------------- --------------- --------------- ---------------
Net cash (outflow)/inflow from operating activities 8,198 9,724 5,355 6,361
========= ========= ========= =========
Financing activities
Interest paid (920) (920) (784) (784)
Shares repurchased into treasury (11,208) (11,208) (4,802) (4,802)
Share repurchase costs (80) (80) (35) (35)
Dividends paid (5,659) (5,659) (5,929) (5,929)
--------------- --------------- --------------- ---------------
Net cash inflow/(outflow) from financing activities (17,867) (17,867) (9,816) (9,816)
========= ========= ========= =========
Decrease in cash and cash equivalents (9,669) (8,143) (4,461) (3,455)
Effect of foreign exchange rate changes 25 – 6 –
--------------- --------------- --------------- ---------------
Change in cash and cash equivalents (9,644) (8,143) (4,455) (3,455)
Cash and cash equivalents at start of year (12,586) (17,782) (8,131) (14,327)
--------------- --------------- --------------- ---------------
Cash and cash equivalents at end of year (22,230) (25,925) (12,586) (17,782)
========= ========= ========= =========
Comprised of:
Cash at bank 3,714 19 5,276 80
Bank overdraft (25,944) (25,944) (17,862) (17,862)
--------------- --------------- --------------- ---------------
(22,230) (25,925) (12,586) (17,782)
========= ========= ========= =========
1 Dividends and interest received in cash during the year amounted to
£4,080,000 and £436,000 (2023: £5,107,000 and £482,000).
Notes to the financial statements for the year ended 30 November 2024
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. The
Company was incorporated on 4 November 2005 and this is the seventeenth Annual
Report.
2. Accounting policies
The principal accounting policies adopted by the Group and Company are set out
below.
(a) Basis of preparation
The Group and Company financial statements have been prepared under the
historic cost convention modified by the revaluation of certain financial
assets and financial liabilities held at fair value through profit or loss and
in accordance with UK-adopted International Accounting Standards (IAS), with
future changes being subject to endorsement by the UK Endorsement Board and
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. All of the Group’s operations are of a
continuing nature. The Company has taken advantage of the exemption provided
under Section 408 of the Companies Act 2006 not to publish its individual
Statement of Comprehensive Income and related notes.
Insofar as the Statement of Recommended Practice (SORP) for investment trust
companies and venture capital trusts, issued by the Association of Investment
Companies (AIC) in October 2019 and updated in July 2022, is compatible with
UK-adopted IAS, the financial statements have been prepared in accordance with
guidance set out in the SORP.
Substantially, all of the assets of the Group consist of securities that are
readily realisable and, accordingly, the Directors are satisfied that the
Group has adequate resources to continue in operational existence for the
foreseeable future for the period to 31 January 2026, being a period of at
least twelve months from the date of approval of the financial statements and
therefore consider the going concern assumption to be appropriate. The
Directors have reviewed compliance with the covenants associated with the bank
overdraft facility, income and expense projections and the liquidity of the
investment portfolio in making their assessment.
The Directors have considered the impact of climate change on the value of the
investments included in the Financial Statements and have concluded that there
was no further impact of climate change to be considered as the investments
are valued based on market pricing as required by IFRS 13.
None of the Group’s other assets and liabilities were considered to be
potentially impacted by climate change.
The Group’s financial statements are presented in British Pound Sterling,
which is the functional currency of the Group and the currency of the primary
economic environment in which the Group operates. All values are rounded to
the nearest thousand pounds (£’000) except when otherwise indicated.
Adoption of new and amended International Accounting Standards and
interpretations:
IFRS 17 – Insurance contracts (effective 1 January 2023). This standard
replaced IFRS 4 and applies to all types of insurance contracts. IFRS 17
provides a consistent and comprehensive model for insurance contracts covering
all relevant accounting aspects.
IAS 12 - Deferred tax related to assets and liabilities arising from a single
transaction (effective 1 January 2023). The International Accounting Standards
Board (IASB) has amended IAS 12 Income Taxes to require companies to recognise
deferred tax on particular transactions that, on initial recognition, give
rise to equal amounts of taxable and deductible temporary differences.
According to the amended guidance, a temporary difference that arises on
initial recognition of an asset or liability is not subject to the initial
recognition exemption if that transaction gave rise to equal amounts of
taxable and deductible temporary differences. These amendments might have a
significant impact on the preparation of financial statements by companies
that have substantial balances of right-of-use assets, lease liabilities,
decommissioning, restoration and similar liabilities. The impact for those
affected would be the recognition of additional deferred tax assets and
liabilities.
IAS 8 – Definition of accounting estimates (effective 1 January 2023). The
IASB has amended IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors to help distinguish between accounting policies and accounting
estimates, replacing the definition of accounting estimates.
IAS 1 and IFRS Practice Statement 2 - Disclosure of accounting policies
(effective 1 January 2023). The IASB has amended IAS 1 Presentation of
Financial Statements to help preparers in deciding which accounting policies
to disclose in their financial statements by stating that an entity is now
required to disclose material accounting policies instead of significant
accounting policies.
IAS 12 – International Tax Reform Pillar Two Model Rules (effective 1
January 2023). The IASB has published amendments to IAS 12 Income Taxes to
respond to stakeholders’ concerns about the potential implications of the
imminent implementation of the OECD pillar two rules on the accounting for
income taxes. The amendment is an exception to the requirements in IAS 12 that
an entity does not recognise and does not disclose information about deferred
tax assets as liabilities related to the OECD pillar two income taxes and a
requirement that current tax expenses must be disclosed separately to pillar
two income taxes.
The amendment of these standards did not have any significant impact on the
Group.
Relevant International Accounting Standards that have yet to be adopted:
IAS 1 – Classification of liabilities as current or non current (effective 1
January 2024). The IASB has amended IAS 1 Presentation of Financial Statements
to clarify its requirement for the presentation of liabilities depending on
the rights that exist at the end of the reporting period. The amendment
requires liabilities to be classified as non current if the entity has a
substantive right to defer settlement for at least 12 months at the end of the
reporting period. The amendment no longer refers to unconditional rights.
IAS 1 – Non current liabilities with covenants (effective 1 January 2024).
The IASB has amended IAS 1 Presentation of Financial Statements to introduce
additional disclosures for liabilities with covenants within 12 months of the
reporting period. The additional disclosures include the nature of covenants,
when the entity is required to comply with covenants, the carrying amount of
related liabilities and circumstances that may indicate that the entity will
have difficulty complying with the covenants.
IAS 21 – Lack of exchangeability (effective 1 January 2025). The IASB issued
amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates to
specify how an entity should assess whether a currency is exchangeable and how
it should determine a spot exchange rate when exchangeability is lacking. The
amendments also require disclosure of information that enables users of its
financial statements to understand how the currency not being exchangeable
into the other currency affects, or is expected to affect, the entity’s
financial performance, financial position and cash flows.
IFRS 18 – Presentation and disclosure in financial statements (effective 1
January 2027). The IASB issued IFRS 18, which replaces IAS 1 Presentation of
Financial Statements. IFRS 18 introduces new requirements for presentation
within the statement of profit or loss, including specified totals and
subtotals. Furthermore, entities are required to classify all income and
expenses within the statement of profit or loss into one of five categories:
operating, investing, financing, income taxes and discontinued operations,
whereof the first three are new. It also requires disclosure of newly defined
management performance measures, subtotals of income and expenses, and
includes new requirements for aggregation and disaggregation of financial
information based on the identified ‘roles’ of the primary financial
statements and the notes.
None of the standards that have been issued, but are not yet effective, are
expected to have a material impact on the Group.
(b) Basis of consolidation
The Group’s financial statements are made up to 30 November each year and
consolidate the financial statements of the Company and its wholly owned
subsidiary, which is registered and operates in England and Wales, BlackRock
Energy and Resources Securities Income Company Limited (together ‘the
Group’).
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Company obtains control, and continue to be consolidated
until the date that such control ceases. The financial statements of
subsidiaries used in the preparation of the consolidated financial statements
are based on consistent accounting policies. All intra-group balances and
transactions, including unrealised profits arising therefrom, are eliminated.
(c) Presentation of the Consolidated Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Consolidated Statement of Comprehensive Income between items of a
revenue and a capital nature has been presented alongside the Consolidated
Statement of Comprehensive Income.
(d) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business being investment business.
(e) Income
Dividends receivable on equity shares are recognised as revenue for the year
on an ex-dividend basis. Where no ex-dividend date is available, dividends
receivable on or before the year end are treated as revenue for the year.
Provision is made for any dividends not expected to be received. Special
dividends, if any, are treated as a capital or a revenue receipt depending on
the facts or circumstances of each particular case. The return on a debt
security is recognised on a time apportionment basis so as to reflect the
effective yield on the debt security.
Options may be purchased or written over securities held in the portfolio for
generating or protecting capital returns, or for generating or maintaining
revenue returns. Where the purpose of the option is the generation of income,
the premium is treated as a revenue item. Where the purpose of the option is
the maintenance of capital, the premium is treated as a capital item.
Option premium income is recognised as revenue evenly over the life of the
option contract and included in the revenue account of the Consolidated
Statement of Comprehensive Income unless the option has been written for the
maintenance and enhancement of the Group’s investment portfolio and
represents an incidental part of a larger capital transaction, in which case
any premia arising are allocated to the capital account of the Consolidated
Statement of Comprehensive Income.
Deposit interest receivable is accounted for on an accruals basis.
Where the Group has elected to receive its dividends in the form of additional
shares rather than in cash, the cash equivalent of the dividend is recognised
as revenue. Any excess in the value of the shares received over the amount of
the cash dividend is recognised in capital.
(f) Expenses
All expenses, including finance costs, are accounted for on an accruals basis.
Expenses have been charged wholly to the revenue account of the Consolidated
Statement of Comprehensive Income, except as follows:
· expenses which are incidental to the acquisition or sale of an investment
are charged to the capital account of the Consolidated Statement of
Comprehensive Income. Details of transaction costs on the purchases and sales
of investments are disclosed within note 10 to the financial statements
contained within the Annual Report and Financial Statements;
· expenses are treated as capital where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated; and
· the investment management fee and finance costs have been allocated 25% to
the revenue account and 75% to the capital account of the Consolidated
Statement of Comprehensive Income in line with the Board’s expectations of
the long term split of returns, in the form of capital gains and income,
respectively, from the investment portfolio. The investment management fee
rebate accrued as a result of the application of the cap on ongoing charges of
1.25% per annum of average daily net assets is offset against management fees
and is allocated between revenue and capital in the ratio of total ongoing
charges allocated between revenue and capital during the year.
Finance costs incurred by the Subsidiary are charged 100% to revenue.
(g) Taxation
The Group accounts do not reflect any adjustment for group relief between the
Company and the Subsidiary.
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the Consolidated
Statement of Comprehensive Income because it excludes items of income or
expenses that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that were applicable at the balance
sheet date.
Where expenses are allocated between capital and revenue accounts, any tax
relief in respect of expenses is allocated between capital and revenue returns
on the marginal basis using the Company’s effective rate of corporation tax
for the accounting period.
Deferred taxation is recognised in respect of all temporary differences that
have originated but not reversed at the financial reporting date, where
transactions or events that result in an obligation to pay more taxation in
the future or right to pay less tax in the future have occurred at the
financial reporting date. This is subject to deferred taxation assets only
being recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of the temporary differences
can be deducted. Deferred taxation assets and liabilities are measured at the
rates applicable to the legal jurisdictions in which they arise.
(h) Investments held at fair value through profit or loss
In accordance with IFRS 9, the Group classifies its investments at initial
recognition as held at fair value through profit or loss and are managed and
evaluated on a fair value basis in accordance with its investment strategy and
business model.
All investments are measured initially and subsequently at fair value through
profit or loss. Purchases of investments are recognised on a trade date basis.
Sales of investments are recognised at the trade date of the disposal.
The fair value of the financial investments is based on their quoted bid price
at the financial reporting date, without deduction for the estimated selling
costs. This policy applies to all current and non-current asset investments
held by the Group.
The fair value of the investment in the subsidiary is calculated based on the
net asset value of the underlying balances within the subsidiary.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Consolidated Statement
of Comprehensive Income as ‘Net profit/(loss) on investments and options
held at fair value through profit or loss’. Also included within the heading
are transaction costs in relation to the purchase or sale of investments.
For all financial instruments not traded in an active market, the fair value
is determined by using various valuation techniques. Valuation techniques
include market approach (i.e., using recent arm’s length market transactions
adjusted as necessary and reference to the current market value of another
instrument that is substantially the same) and the income approach (i.e.,
discounted cash flow analysis and option pricing models making use of
available and supportable market data as possible). See note 2(p) below.
(i) Options
Options are held at fair value through profit or loss based on the bid/offer
prices of the options written to which the Group is exposed. The value of the
option is subsequently marked-to-market to reflect the fair value through
profit or loss of the option based on traded prices. Where the premium is
taken to revenue, an appropriate amount is shown as capital return such that
the total return reflects the overall change in the fair value of the option.
When an option is exercised, the gain or loss is accounted for as a capital
gain or loss. Any cost on closing out an option is transferred to revenue
along with any remaining unamortised premium.
(j) Other receivables and other payables
Other receivables and other payables do not carry any interest and are
short-term in nature and are accordingly stated on an amortised cost basis.
(k) Dividends payable
Under IAS, final dividends should not be accrued in the financial statements
unless they have been approved by shareholders before the financial reporting
date. Interim dividends should not be recognised in the financial statements
unless they have been paid.
Dividends payable to equity shareholders are recognised in the Consolidated
Statement of Changes in Equity.
(l) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at
the date of the transaction. Foreign currency monetary assets and liabilities
and non-monetary assets held at fair value are translated into British Pound
Sterling at the rate ruling on the financial reporting date. Foreign exchange
differences arising on translation are recognised in the Consolidated
Statement of Comprehensive Income as a revenue or capital item depending on
the income or expense to which they relate. For investment transactions and
investments held at the year end, denominated in a foreign currency, the
resulting gains or losses are included in the net profit/(loss) on investments
and options held at fair value through profit or loss in the Consolidated
Statement of Comprehensive Income.
(m) Cash and cash equivalents
Cash comprises cash in hand, bank overdrafts and on demand deposits. Cash
equivalents are short term, highly liquid investments that are readily
convertible to known amounts of cash and that are subject to an insignificant
risk of changes in value.
(n) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges are
accounted for on an accruals basis in the Consolidated Statement of
Comprehensive Income using the effective interest rate method and are added to
the carrying amount of the instruments to the extent that they are not settled
in the period in which they arise.
(o) Share repurchases and share reissues
Shares repurchased and subsequently cancelled – share capital is reduced by
the nominal value of the shares repurchased, and the capital redemption
reserve is correspondingly increased in accordance with Section 733 of the
Companies Act 2006. The full cost of the repurchase is charged to the special
reserve.
Shares repurchased and held in treasury – the full cost of the repurchase is
charged to the special reserve.
Where treasury shares are subsequently reissued:
· amounts received to the extent of the repurchase price are credited to the
special reserve and capital reserves based on a weighted average basis of
amounts utilised from these reserves on repurchases; and
· any surplus received in excess of the repurchase price is taken to the
share premium account.
Where new shares are issued, the par value is taken to called up share capital
and amounts received to the extent of any surplus received in excess of the
par value are taken to the share premium account.
Share issue costs are charged to the share premium account. Costs on share
reissues are charged to the special reserve and capital reserves.
(p) Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates and assumptions will, by definition, seldom equal the
related actual results. Estimates and judgements are regularly evaluated and
are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
The Directors do not believe that any accounting judgements or estimates have
a significant risk of causing a material adjustment to the carrying amount of
assets and liabilities within the next financial year.
3. Income
2024 2023
£’000 £’000
Investment income:
UK dividends 1,184 608
UK stock dividends 128 –
Fixed income 505 453
Overseas dividends 2,835 4,578
Overseas special dividends 299 619
--------------- ---------------
Total investment income 4,951 6,258
========= =========
Other income:
Bank interest 4 2
Interest on collateral received 32 7
Option premium income 1,164 1,209
--------------- ---------------
Total other income 1,200 1,218
========= =========
Total 6,151 7,476
========= =========
During the year, the Group received option premium income in cash totalling
£1,164,000 (2023: £1,209,000) for writing covered call and put options for
the purposes of revenue generation.
Option premium income is amortised evenly over the life of the option contract
and accordingly, during the year, option premiums of £1,164,000 (2023:
£1,209,000) were amortised to revenue.
At 30 November 2024, there was one open option position (2023: one) with an
associated liability of £51,000 (2023: £110,000).
No special dividends have been recognised in capital during the year (2023:
£79,000).
4. Investment management fee
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 356 1,069 1,425 387 1,162 1,549
--------------- --------------- --------------- --------------- --------------- ---------------
Total 356 1,069 1,425 387 1,162 1,549
========= ========= ========= ========= ========= =========
The investment management fee is levied at 0.80% of gross assets per annum.
Gross assets for the purposes of calculating the management fee equate to the
value of the portfolio’s gross assets held on the relevant date as valued on
the basis of applicable accounting policies, less the value of any investments
in in-house funds.
The fee is allocated 25% to the revenue account and 75% to the capital account
of the Consolidated Statement of Comprehensive Income. There is no additional
fee for company secretarial and administration services.
The Company is entitled to a rebate from the investment management fee charged
by the Manager in the event the Company’s ongoing charges exceed the cap of
1.25% per annum of average daily net assets. No rebate was payable for the
year ended 30 November 2024 (2023: £nil). The rebate, if any, is offset
against management fees and is allocated between revenue and capital in the
ratio of total ongoing charges (as defined in the Annual Report and Financial
Statements) allocated between revenue and capital during the year.
5. Other operating expenses
2024 2023
£’000 £’000
Allocated to revenue:
Custody fee 7 9
Auditor’s remuneration – audit services 1 51 48
Registrars’ fee 32 35
Directors’ emoluments 2 143 133
Broker fees 25 24
Depositary fees 16 17
Marketing fees 80 84
Printing and postage fees 40 39
Legal and professional fees 24 26
Directors search fees – 38
Bank charges 14 14
Stock exchange listing fees 11 14
Other administration costs 68 75
Write back of prior year expenses 3 – (21)
--------------- ---------------
Total revenue expenses 511 535
========= =========
Allocated to capital:
Custody transaction charges 4 9 16
--------------- ---------------
Total 520 551
========= =========
The Company’s ongoing charges 5 , calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items were: 1.20% 1.19%
========= =========
1 No non-audit services are provided by the Company’s auditors (2023:
none).
2 Further information on Directors’ emoluments can be found in the
Directors’ Remuneration Report contained within the Annual Report and
Financial Statements. The Company has no employees.
3 For the year ended 30 November 2024, no prior year expenses were written
back (2023: miscellaneous fees, external Director evaluation fees, legal fees
and legal and professional fees).
4 For the year ended 30 November 2024, expenses of £9,000 (2023: £16,000)
were charged to the capital account of the Statement of Comprehensive Income.
These relate to transaction costs charged by the custodian on sale and
purchase trades.
5 Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
The Company’s ongoing charges, as defined in the Annual Report and Financial
Statements (including the investment management fee), are capped at 1.25% per
annum of average daily net assets. The Company is entitled to a rebate from
the investment management fee charged by the Manager in the event the
Company’s ongoing charges exceed the cap.
The overall cap on ongoing charges and any applicable rebate is calculated and
accrued on a daily basis and will be adjusted in the investment management
fees charged up to 30 November every year. See note 4 above.
6. Finance costs
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest paid on bank overdraft 230 690 920 196 588 784
--------------- --------------- --------------- --------------- --------------- ---------------
Total 230 690 920 196 588 784
========= ========= ========= ========= ========= =========
Finance costs for the Company are charged 25% to the revenue account and 75%
to the capital account of the Consolidated Statement of Comprehensive Income.
Subsidiary finance costs are charged 100% to the revenue account of the
Consolidated Statement of Comprehensive Income.
7. Dividends
Dividends paid on equity shares Record date Payment date 2024 2023
£’000 £’000
4th interim dividend of 1.125p per share for the year ended 30 November 2023 (2023: 1.100p) 14 December 2023 12 January 2024 1,468 1,478
1st interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.100p) 28 March 2024 26 April 2024 1,422 1,491
2nd interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.100p) 13 June 2024 15 July 2024 1,396 1,491
3rd interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.100p) 26 September 2024 28 October 2024 1,373 1,469
--------------- ---------------
Accounted for in the financial statements 5,659 5,929
========= =========
The total dividends payable in respect of the year ended 30 November 2024
which form the basis of Section 1158 of the Corporation Tax Act 2010 and
Section 833 of the Companies Act 2006, and the amounts declared, meet the
relevant requirements as set out in this legislation.
2024 2023
Dividends paid (for Section 1158 compliance) on equity shares for the year ended 30 November £’000 £’000
1st interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.100p) 1,422 1,491
2nd interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.100p) 1,396 1,491
3rd interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.100p) 1,373 1,469
4th interim dividend of 1.125p per share for the year ended 30 November 2024 (2023: 1.125p) 1,365 1,464
--------------- ---------------
Total 5,556 5,915
========= =========
8. Earnings/(loss) and net asset value per ordinary share
Total revenue, capital earnings/(loss) and net asset value per ordinary share
are shown below and have been calculated using the following:
2024 2023
Net revenue profit attributable to ordinary shareholders (£’000) 4,541 5,774
Net capital profit/(loss) attributable to ordinary shareholders (£’000) 17,371 (29,170)
--------------- ---------------
Total profit/(loss) attributable to ordinary shareholders (£’000) 21,912 (23,396)
========= =========
Total shareholders’ funds (£’000) 167,327 162,362
========= =========
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was: 125,204,148 131,610,148
The actual number of ordinary shares in issue at the end of the year on which the net asset value per ordinary share was calculated was: 121,552,497 131,386,194
Calculated on weighted average number of ordinary shares
Revenue earnings per share (pence) - basic and diluted 3.63 4.39
Capital earnings/(loss) per share (pence) - basic and diluted 13.87 (22.17)
--------------- ---------------
Total earnings/(loss) per share (pence) - basic and diluted 17.50 (17.78)
========= =========
As at As at
30 November 30 November
2024 2023
Net asset value per share (pence) 137.66 123.58
Ordinary share price (pence) 121.00 110.40
========= =========
There were no securities in issue at the year end that have any dilutive
effect on earnings per share.
9. Called up share capital
Ordinary Treasury Total Nominal
shares shares shares value
number number number £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 1 pence each:
At 30 November 2022 134,356,194 – 134,356,194 1,344
Ordinary share issues 1,230,000 – 1,230,000 12
Ordinary shares repurchased into treasury (4,200,000) 4,200,000 – –
At 30 November 2023 131,386,194 4,200,000 135,586,194 1,356
Ordinary shares repurchased into treasury (9,833,697) 9,833,697 – –
------------------ ------------------ ------------------ ------------------
At 30 November 2024 121,552,497 14,033,697 135,586,194 1,356
=========== =========== =========== ===========
During the year ended 30 November 2024, 9,833,697 shares were repurchased into
treasury (2023: 4,200,000) for a net consideration after costs of £11,288,000
(2023: £4,837,000).
During the year ended 30 November 2024, the Company issued no shares (2023:
1,230,000) for a net consideration after costs of £nil (2023: £1,789,000).
Since the year end, and as at 28 January 2025 a further 1,708,000 ordinary
shares have been repurchased into treasury for a total consideration of
£2,046,000.
10. Reserves
Group Share Special Capital Capital Revenue
premium reserve reserve reserve reserve
account £’000 arising on arising on £’000
£’000 investments revaluation
sold of
£’000 investments
held
£’000
At 30 November 2023 69,980 66,100 3,210 15,450 6,266
Movement during the year:
Total comprehensive income:
Net profit for the year – – 6,727 10,644 4,541
Transactions with owners recorded directly to equity:
Ordinary shares repurchased into treasury – (11,208) – – –
Share repurchase costs – (80) – – –
Dividends paid – – – – (5,659)
--------------- --------------- --------------- --------------- ---------------
At 30 November 2024 69,980 54,812 9,937 26,094 5,148
========= ========= ========= ========= =========
Distributable reserves
Company Share Special Capital Capital Revenue
premium reserve reserve reserve reserve
account £’000 arising on arising on £’000
£’000 investments revaluation
sold of
£’000 investments
held
£’000
At 30 November 2023 69,980 66,100 2,392 17,902 4,632
Movement during the year:
Total comprehensive income:
Net profit for the year – – 7,548 9,144 5,220
Transactions with owners recorded directly to equity:
Ordinary shares repurchased into treasury – (11,208) – – –
Share repurchase costs – (80) – – –
Dividends paid – – – – (5,659)
--------------- --------------- --------------- --------------- ---------------
At 30 November 2024 69,980 54,812 9,940 27,046 4,193
========= ========= ========= ========= =========
Exchange gains of £821,000 arising in the subsidiary company in the year
ended 30 November 2016 were incorrectly treated in the parent company
accounts. This has been corrected in the net revenue and net capital profit of
the parent company in the current year. The revenue reserves of the parent
company had been overstated by £821,000 and the capital reserves of the
parent company understated by the same amount. The adjustment has no impact on
the net assets, net revenue and capital profit and revenue, capital and
distributable reserves of the Group.
Group Share Special Capital Capital Revenue
premium reserve reserve reserve reserve
account £’000 arising on arising on £’000
£’000 investments revaluation
sold of
£’000 investments
held
£’000
At 30 November 2022 68,203 70,937 (1,350) 49,153 6,421
Movement during the year:
Total comprehensive income/(loss):
Net profit/(loss) for the year – – 4,533 (33,703) 5,774
Transactions with owners recorded directly to equity:
Ordinary share issues 1,781 – – – –
Share issue costs (4) – – – –
Ordinary shares repurchased into treasury – (4,802) – – –
Share repurchase costs – (35) – – –
Share reissue costs written back – – 27 – –
Dividends paid – – – – (5,929)
--------------- --------------- --------------- --------------- ---------------
At 30 November 2023 69,980 66,100 3,210 15,450 6,266
========= ========= ========= ========= =========
Distributable reserves
Company Share Special Capital Capital Revenue
premium reserve reserve reserve reserve
account £’000 arising on arising on £’000
£’000 investments revaluation
sold of
£’000 investments
held
£’000
At 30 November 2022 68,203 70,937 (2,168) 52,605 3,787
Movement during the year:
Total comprehensive income/(loss):
Net profit/(loss) for the year – – 4,533 (34,703) 6,774
Transactions with owners recorded directly to equity:
Ordinary share issues 1,781 – – – –
Share issue costs (4) – – – –
Ordinary shares repurchased into treasury – (4,802) – – –
Share repurchase costs – (35) – – –
Share reissue costs written back – – 27 – –
Dividends paid – – – – (5,929)
--------------- --------------- --------------- --------------- ---------------
At 30 November 2023 69,980 66,100 2,392 17,902 4,632
========= ========= ========= ========= =========
The share premium account and capital redemption reserve are not distributable
reserves under the Companies Act 2006. In accordance with ICAEW Technical
Release 02/17BL on Guidance on Realised and Distributable Profits under the
Companies Act 2006, the special reserve and capital reserves of the Parent
Company may be used as distributable reserves for all purposes and, in
particular, the repurchase by the Parent Company of its ordinary shares and
for payments such as dividends. In accordance with the Company’s Articles of
Association, the special reserve, capital reserves and the revenue reserve may
be distributed by way of dividend. The Parent Company’s capital gains of
£36,986,000 (2023: £20,294,000) comprise a gain on capital reserve arising
on investments sold of £9,940,000 (2023: £2,392,000), a gain on capital
reserve arising on revaluation of listed investments of £26,091,000 (2023:
£15,447,000) and a revaluation gain on the investment in the subsidiary of
£955,000 (2023: £2,455,000). The gain on capital reserve arising on the
revaluation of investments of £26,091,000 (2023: £15,447,000) is subject to
fair value movements and may not be readily realisable at short notice, as
such it may not be entirely distributable. The investments are subject to
financial risks, as such capital reserves (arising on investments sold) and
the revenue reserve may not be entirely distributable if a loss occurred
during the realisation of these investments. The reserves of the subsidiary
company are not distributable until distributed as a dividend to the Parent
Company.
11. Valuation of financial instruments
Financial assets and financial liabilities are either carried in the
Consolidated and Parent Company Statements 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 Group 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 Group are explained in the
accounting policies note 2(h) to the Financial Statements contained within the
Annual Report and Financial Statements.
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 for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted
prices are readily 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 Group
does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using 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-standardised financial 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.
Over-the-counter derivative option contracts have been classified as Level 2
investments as their valuation has been based on market observable inputs
represented by the underlying quoted securities to which these contracts
expose the Group.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes
inputs not based on market 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 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.
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. 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 including an assessment of the relevant risks including but not
limited to credit risk, market risk, liquidity risk, business risk and
sustainability risk. The determination of what constitutes ‘observable’
inputs requires significant judgement by the Investment Manager and these
risks are adequately captured in the assumptions and inputs used in
measurement of Level 3 assets or liabilities.
The investment in the subsidiary is classified within Level 3 since the
subsidiary is not a listed entity. The fair value of the investment in the
subsidiary is calculated based on the net asset value of the underlying
balances within the subsidiary. Therefore, no sensitivity analysis has been
presented.
Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value
hierarchy.
Financial assets at fair value through profit or loss at 30 November 2024 – Group Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 184,586 – – 184,586
Fixed income investments - 5,166 – 5,166
Liabilities:
Derivative financial instruments – written options (51) – – (51)
--------------- --------------- --------------- ---------------
Total 184,535 5,166 – 189,701
========= ========= ========= =========
Financial assets at fair value through profit or loss at 30 November 2024 – Company Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 184,586 – 955 185,541
Fixed income investments - 5,166 – 5,166
Liabilities:
Derivative financial instruments – written options (51) – – (51)
--------------- --------------- --------------- ---------------
Total 184,535 5,166 955 190,656
========= ========= ========= =========
Financial assets at fair value through profit or loss at 30 November 2023 – Group Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 169,171 – – 169,171
Fixed income investments 4,022 2,347 – 6,369
Liabilities:
Derivative financial instruments – written options (110) – – (110)
Derivative financial instruments – commodity futures (780) – – (780)
--------------- --------------- --------------- ---------------
Total 172,303 2,347 – 174,650
========= ========= ========= =========
Financial assets at fair value through profit or loss at 30 November 2023 – Company Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 169,171 – 2,455 171,626
Fixed income investments 4,022 2,347 – 6,369
Liabilities:
Derivative financial instruments – written options (110) – – (110)
Derivative financial instruments – commodity futures (780) – – (780)
--------------- --------------- --------------- ---------------
Total 172,303 2,347 2,455 177,105
========= ========= ========= =========
In addition to the investment in the subsidiary, the Company held one other
Level 3 security as at 30 November 2024 (2023: one).
A reconciliation of fair value measurement in Level 3 is set out below.
Level 3 Financial assets fair value through profit or loss at 30 November – Company 2024 2023
£’000 £’000
Opening fair value 2,455 3,455
Total gains or losses included in profit/(loss) on investments in the Consolidated Statement of Comprehensive Income:
– assets held at the end of the year (1,500) (1,000)
--------------- ---------------
Closing balance 955 2,455
========= =========
As at 30 November 2024, the investment in Gazprom has been valued at a nominal
value of RUB0.01 due to lack of access to the Moscow Stock Exchange as a
result of sanctions against Russia following the invasion of Ukraine.
Following the suspension of the secondary listings of depositary receipts of
Russian companies, the investment in Gazprom ADRs was transferred from Level 1
to Level 3. Towards the end of the year ended 30 November 2023, the ADRs in
Gazprom were converted into equity shares of Gazprom. As at the year-end, this
investment is considered a Level 3 financial asset.
For exchange listed equity investments, the quoted price is the bid price.
Substantially, all investments are valued based on unadjusted quoted market
prices. Where such quoted prices are readily available in an active market,
such prices are not required to be assessed or adjusted any price related
risks, including climate risk, in accordance with the fair value related
requirements of the Company’s financial reporting framework.
12. Related party disclosure
Directors’ emoluments
At the date of this report, the Board consists of four non-executive
Directors, all of whom are considered to be independent of the Manager by the
Board.
Disclosures of the Directors’ interests in the ordinary shares of the
Company and fees and expenses payable to the Directors are set out in the
Directors’ Remuneration Report contained within the Annual Report and
Financial Statements. At 30 November 2024, £12,000 (2023: £11,000) was
outstanding in respect of Directors’ fees.
Significant holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock Inc.
(“Related BlackRock Funds”); or
b. investors (other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are as a result, considered to
be related parties to the Company (“Significant Investors”).
Total % of shares held by Total % of shares held by Number of Significant
Related BlackRock Funds Significant Investors who are Investors who are not affiliates
not affiliates of BlackRock of BlackRock Group or
Group or BlackRock, Inc. BlackRock, Inc.
As at 30 November 2024 0.7 n/a n/a
As at 30 November 2023 0.7 n/a n/a
========= ========= =========
13. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administrative
services to the Group under a contract which is terminable on six months’
notice. BFM has (with the Group’s consent) delegated certain portfolio and
risk services, and other ancillary services to BlackRock Investment Management
(UK) Limited (BIM (UK)). Further details of the investment management contract
are disclosed in the Directors’ Report contained within the Annual Report
and Financial Statements.
The investment management fee due for the year ended 30 November 2024 amounted
to £1,425,000 (2023: £1,549,000). At the year end, £1,072,000 was
outstanding in respect of the management fee (2023: £742,000).
The Company is entitled to a rebate from the investment management fee charged
by the Manager in the event the Company’s ongoing charges exceeds the cap of
1.25% per annum of average daily net assets. The amount of rebate accrued to
30 November 2024 amounted to £nil (2023: £nil).
Further details in respect of the management fee and rebate are given in note
4 above.
In addition to the above services, BIM (UK) has provided the Group with
marketing services. The total fees paid or payable for these services for the
year ended 30 November 2024 amounted to £80,000 excluding VAT (2023:
£84,000). Marketing fees of £28,000 excluding VAT (2023: £106,000) were
outstanding as at the year end.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware USA.
14. Contingent liabilities
There were no contingent liabilities at 30 November 2024 (2023: nil).
15. Publication of Non-Statutory Accounts
The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The 2024 Annual
Report and Financial Statements will be filed with the Registrar of Companies
shortly.
The report of the auditor for the year ended 30 November 2024 contains no
qualification or statement under Section 498(2) or (3) of the Companies Act
2006.
This announcement was approved by the Board of Directors on 31 January 2025.
16. Annual Report
Copies of the Annual Report will be sent to members shortly and will be
available from the registered office c/o The Company Secretary, BlackRock
Energy and Resources Income Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
17. Annual General Meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on Thursday, 20 March 2025 at 12.00 pm.
For further information, please contact:
Sarah Beynsberger, Director, Investment Companies, BlackRock Investment
Management (UK) Limited
Tel: 020 7743 3000
Press enquiries:
Lansons Communications
Email: BlackRockInvestmentTrusts@lansons.com
Tel: 020 7490 8828
31 January 2025
12 Throgmorton Avenue
London EC2N 2DL
END
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