Half-year Report
01/08/2023 12:53
BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC (LEI:54930040ALEAVPMMDC31)
HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 MAY 2023
PERFORMANCE RECORD
As at As at
31 May 2023 30 November 2022
Net assets (£’000) 1 166,490 194,708
Net asset value per ordinary share (pence) 122.79 144.92
Ordinary share price (mid-market) (pence) 111.60 135.00
Discount to net asset value 2 9.1% 6.8%
========== ==========
For the For the
six months ended year ended
31 May 2023 30 November 2022
Performance (with dividends reinvested)
Net asset value per share 2 -13.8% 44.5%
Ordinary share price 2 -15.9% 44.8%
========== ==========
For the For the Change
six months six months %
ended ended
31 May 2023 31 May 2022
Revenue
Net profit on ordinary activities after taxation (£’000) 3,209 2,965 8.2
Revenue earnings per ordinary share (pence) 3 2.37 2.42 -2.1
---------------- ---------------- ----------------
Interim dividends (pence)
1st interim 1.10 1.10 –
2nd interim 4 1.10 1.10 –
---------------- ---------------- ----------------
Total dividends paid/payable 2.20 2.20 –
========== ========== ==========
1 The change in net assets reflects portfolio movements, the issue and
reissue of shares and dividends paid during the period.
2 Alternative Performance Measures, see Glossary contained within the Half
Yearly Financial Report.
3 Further details are given in the Glossary contained within the Half Yearly
Financial Report.
4 Paid on 14 July 2023.
Chairman’s Statement
While investors have continued to face some macro-economic uncertainties over
the past 6 months, my fellow Board members and I believe that the Company
remains well-positioned flexibly to take advantage of the transition to a more
sustainable energy economy.
MARKET OVERVIEW
At the start of the Company’s financial year on 1 December 2022 and through
into the first half of 2023, markets as a whole were buoyed up by the
Technology sector. However, the Traditional Energy sector fell during the six
months to 31 May 2023, due primarily to a mild European winter, reducing
European power prices. The MSCI World Energy Index was down by 12.9% over the
six-month period to 31 May 2023 and the Metals and Mining sector also pulled
back from previous gains with the MSCI ACWI Metals and Mining Index falling by
9.2% (all calculations in US Dollar terms with dividends reinvested). Your
Company’s portfolio is well positioned to weather these trends, as the
portfolio managers decreased Traditional Energy exposure through 2022 and into
2023 to stand at 32.6% at the end of the period, and moved to a higher
weighting in the Energy Transition sector (27.8% at 31 May 2023). While the
Energy Transition sector has also suffered from supply chain concerns and a
rotation from growth to value, the sector now offers opportunities on more
reasonable valuations.
The energy and supply chain shock that resulted following the invasion of
Ukraine has driven a surge in inflation in most developed economies, with the
UK experiencing the highest levels of inflation amongst advanced economies
this year, and rates reaching a 40 year high of 11.1% in October 2022. With
central governments continuing to raise interest rates to control inflation,
the outlook for equities remains volatile.
PERFORMANCE
During the six months ended 31 May 2023, the Company’s net asset value (NAV)
per share fell by 13.8% and its share price fell by 15.9% (both percentages in
Sterling terms with dividends reinvested). Although the Company does not have
a formal benchmark, to set this in the context of the market backdrop, the
EMIX Global Mining (ex-Gold and Energy) Index fell by 14.9% and the MSCI World
Energy Index fell by 16.3% over the same period (both percentages in Sterling
terms with dividends reinvested). The Company had 27.8% of its portfolio
invested in stocks with exposure to the Energy Transition sector and the
decarbonisation of the energy supply chain as at 31 May 2023. There is no
reference index that currently reflects the composition of the investment
universe for this sector, but for illustrative purposes, the S&P Global Clean
Energy Index decreased by 16.3% and the Wilderhill Clean Energy Index
decreased by 24.9% over the same period (both in Sterling terms with dividends
reinvested).
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 internal
Mining and Energy composite index. The neutral sector weightings of this
bespoke index are 40% Mining, 30% Traditional Energy and 30% Energy
Transition.
Further information on investment performance is given in the Investment
Managers’ Report.
REVENUE RETURN AND DIVIDENDS
The Company’s revenue return per share for the six-month period was 2.37
pence per share, a decrease of 2.1% over the same period last year (the
revenue return for the six months to 31 May 2022 was 2.42 pence per share).
The Board’s current target is to declare quarterly dividends of at least
1.10 pence per share in the year to 30 November 2023, making a total of at
least 4.40 pence per share for the year as a whole. This target represents a
yield of 3.9% based on the share price of 111.60 pence per share as at 31 May
2023, and 3.7% based on the share price of 119.80 pence per share at the close
of business on 28 July 2023.
The first quarterly interim dividend of 1.10 pence per share was paid on 19
April 2023 and the second quarterly interim dividend of 1.10 pence per share
was paid on 14 July 2023 (four quarterly interim dividends each of 1.10 pence
per share were paid in the twelve months ended 30 November 2022).
The Company may also 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
from option writing. Consequently, they will only enter into option
transactions with the intention that the overall contribution is beneficial to
total return.
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
13.7%, and the level of gearing at 31 May 2023 was 5.5%. For calculations, see
the Glossary contained within the Half Yearly Financial Report.
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 the Company’s share buyback,
sale of shares from treasury and share issuance powers to ensure that the
share price is broadly in line with the underlying NAV.
The Company’s shares started the period under review trading at a discount
of 6.8%; this fell to 3.4% in December 2022 and subsequently the shares moved
to trade fairly consistently at a premium from January 2023 to mid-February
2023. To manage the premium, the Company issued new shares into market demand
in January and February 2023. Over the period under review, the Company issued
1,230,000 shares for net proceeds of £1,789,000. At the Company’s annual
general meeting held on 13 March 2023, the Company was granted authority to
allot up to 26,981,238 shares and/or sell the same amount of shares held in
treasury on a non-pre-emptive basis (being equivalent to 20 per cent of share
capital in issue at that time).
Since mid-February 2023 the Company’s shares have been trading at a
discount, which widened in line with many investment trusts. Since 31 May 2023
the discount has widened out again, and as at the date of this report, the
Company has bought back 540,000 shares for costs of £621,000 and at an
average discount of 9.9%. As at 28 July 2023 the Company’s shares are
trading at a discount of 8.7%.
MARKET OUTLOOK & PORTFOLIO POSITIONING
A higher interest rate environment to combat inflation has led to market
concerns about the prospect of a global recession. In addition, with the
continuation of the war in Ukraine and sanctions on Russia, commodity prices
remain elevated putting pressure on inflation at the same time as tight labour
markets are driving higher wages higher. Although more recently inflation
appears to be slowing, all these factors are likely to result in central banks
maintaining rates at higher levels relative to the last few years with risks
of a global economic slowdown remaining.
Despite the current uncertainty, the ongoing drive by governments to address
climate change and decarbonize the energy supply chain remains an important
backdrop for the Company’s three pillars, of Traditional Energy, Mining and
Metals and Energy Transition. The Board considers that all three sectors have
an important role to play as the energy system transitions to a lower carbon
economy. Traditional energy is needed to support base load energy to continue
to power economies during the transition. The Metals and Mining sector
provides the material supply chain for low carbon technologies from steel for
wind turbines to lithium for electric cars. The path to a lower carbon economy
is also expected to disrupt many industries and business models with scope for
the Company to invest directly in opportunities in the Energy Transition
space. Against this backdrop, the flexibility of the Company’s investment
mandate with the ability to shift exposure between Traditional Energy, Energy
Transition and Mining sectors, means that it is uniquely positioned to serve
investors as these sectors evolve.
The Board is confident that the Company remains well-placed to benefit from
these key investment trends over the long term.
Adrian Brown
Chairman
1 August 2023
INVESTMENT MANAGERS’ REPORT
MARKET OVERVIEW
The first half of 2023 provided welcome relief for investors in terms of broad
equity index returns following a torrid year in 2022. Whilst the Company’s
return so far this year has lagged that of broader markets such as the S&P
500, it has performed well against the comparator sector indices, and it is
important to remember just how significant the outperformance of the Company
was against equities in general over the past 12 months.
One of the notable features of equity markets in the first half has been how
concentrated the returns have been in a small number of stocks. The chart on
page 8 of the Half Yearly Financial Report (Figure 1) neatly illustrates this
in the context of the US equity market suggesting that there is little
evidence of exuberance in the majority of the market.
Although this might be reassuring for all the stocks/sectors away from this
handful of big winners, the multi-asset context should also be considered. The
second chart shows how non-equity investments such as corporate bonds and even
cash are now competing with equities in terms of near-term yield. This broader
environment has tempered our enthusiasm to add more aggressively to the energy
transition holdings in the near-term despite the strong policy tailwinds.
However, we are patient investors and believe when the higher rate environment
is better reflected in lower equity valuations we may have a plethora of
exciting investment opportunities.
PORTFOLIO ACTIVITY & INVESTMENT PERFORMANCE
Despite a strong first few months of the year that saw the NAV per share reach
a ten year high of over 145 pence per share, a weaker end to the period saw
the Company’s NAV decline 13.8% from 144.92 pence per share to 122.79 pence
per share (percentage in Sterling terms with dividends reinvested).
There were no significant top-down portfolio changes made at a single point in
time during the first half, but a number of more incremental changes were made
as our views on certain sub-sectors and individual companies evolved during
the period.
We ended the period with less of the Company’s portfolio invested in mining
companies than we had at the start of the year, with a reduction from almost
50% of the portfolio to circa 45% (see Figure 2 on page 9 of the Half Yearly
Financial Report). This was driven by a less optimistic view on China’s
commodity demand post the COVID-19 reopening and the ongoing cost inflation
pressuring mining company margins. However in the medium term we remain
excited by the demand growth driven by the energy transition for metals such
as lithium and copper, so whilst we reduced the position size in a number of
holdings given the near-term headwinds, we didn’t make dramatic changes.
On the traditional energy side, the biggest changes were the reintroduction of
ExxonMobil into the portfolio driven by attractive relative valuation, which
was funded by selling the service company Patterson UTI and trimming some of
the oil price sensitive exploration and production companies.
Gearing was also reduced during the first half of the year as we took a more
cautious near-term view on the mining and traditional energy sectors, whilst
wanting to keep some dry powder for any further valuation pullbacks on
selected energy transition companies. We are also cognisant that the cost of
borrowing for the Company has risen substantially over the last 12 months, and
this certainly factors into our considerations of what level of gearing is
appropriate for the Company.
In the energy transition space, valuation multiples have continued to come
down from their highs of 12-18 months ago. This has brought a number of
companies we view as long-term winners in this space to an attractive entry
point, so we initiated a number of new positions in energy transition
companies, and we increased the percentage of the Company’s portfolio in the
energy transition investments over the first half of the year. Although we
added a couple of new companies, we think there will be more opportunities in
the coming 6-12 months as higher interest rates do not appear to be fully
reflected into most equity valuations yet. When this does happen – or if the
nominal rate environment begins to ease again – then we have a long list of
structural winners from the energy transition that we would be keen to build
positions in for the portfolio.
Commodity 31 May 30 November % change 2023 on 2022
2023 2022 Average Price %
Change 1
Base Metals (US$/tonne)
Aluminium 2,287 2,448 -6.6 -23.2
Copper 8,070 8,227 -1.9 -11.7
Lead 2,012 2,182 -7.8 -6.7
Nickel 20,433 26,892 -24.0 -7.5
Tin 25,700 23,045 11.5 -37.9
Zinc 2,230 3,050 -26.9 -21.8
----------------- ----------------- ----------------- -----------------
Precious Metals (US$/ounce)
Gold 1,971 1,752 12.5 2.2
Silver 23.5 21.7 8.7 -0.6
Platinum 1,003 1,025 -2.1 2.5
Palladium 1,390 1,908 -27.1 -27.5
----------------- ----------------- ----------------- -----------------
Energy
Oil (West Texas Intermediate (WTI)) (US$/barrel) 68.1 80.5 -15.4 -19.4
Oil (Brent) (US$/barrel) 73.4 85.6 -14.3 -18.2
Natural Gas (US$/Metric Million British Thermal Unit (MMBTU)) 2.1 7.0 -70.0 -44.1
----------------- ----------------- ----------------- -----------------
Bulk Commodities (US$/tonne)
Iron ore 100.0 103.0 -2.9 -11.4
Coking coal 191.0 265.0 -27.9 -35.3
Thermal coal 135.0 398.5 -66.1 -7.2
----------------- ----------------- ----------------- -----------------
Equity Indices
MSCI ACWI Metals & Mining Index (US$) 335.6 369.8 -9.2 n/a
MSCI ACWI Metals & Mining Index (£) 270.8 319.7 -15.3 n/a
MSCI 3 World Energy Index (US$) 404.6 464.4 -12.9 n/a
MSCI 3 World Energy Index (£) 326.5 389.9 -16.3 n/a
============ ============ ============ ============
Source: Datastream, June 2023.
1 Average of 30/11/21-31/05/22 to 30/11/22-31/05/23.
INCOME
Despite lower commodity prices for many companies (for example iron ore
averaged over 10% lower for H1 2023 vs. H1 2022), the conservative balance
sheet management across the sectors allowed for attractive dividend pay-outs
to continue.
We have continued to reduce the fixed income holdings as a proportion of the
Company’s portfolio over the last 12 to 18 months. Given the strength of the
balance sheets across the mining and traditional energy sectors, there has
been a dearth of new issuance and when it has come, the yields / spreads have
not been attractive relative to dividend yields in the respective equity or
the Company’s cost of gearing.
Whilst equity market volatility trended lower during the period (the CBOE
Volatility Index started at 21 in the beginning of May and closed May 2023
under 16), there were some company specific events that offered some
attractive call and put writing opportunities. There was a greater balance
between calls and puts in the first half of this financial year than there was
last year, when there was a skew towards put writing, and this reflected our
cautious outlook on the market. Looking forward to the second half of the
year, if we see continued strength in Sterling versus the US Dollar, this will
be a headwind to Company earnings as the majority of dividend income received
is in US Dollars.
ENERGY
In the six-month period to end May 2023, the energy sector fell, lagging
global equities. A mild European winter was a key factor in reducing the
pressure on natural gas and oil prices and European power prices moved lower.
Expectations of an energy crisis in Europe over winter did not materialise and
the bloc exited the winter months with natural gas storage of circa 60%, well
above the typical 30-40% storage levels of recent years, after continuing to
purchase liquified natural gas (LNG) from the US and Middle East. This
relatively benign outcome had the effect of removing a headwind to European
equities. The removal of this risk was therefore positive for non-energy
sectors. The US Henry Hub natural gas price fell -70.0% during the period to
$2.1/MMBTU (see Figure 3 on page 11 of the Half Yearly Financial Report).
Brent and West Texas Intermediate (WTI) oil prices fell -14.3% and -15.4%,
ending the month at $73.4/barrel and $68.1/barrel respectively.
On the supply side, we continue to observe tightness in energy markets, driven
by a lack of investment in new oil production outside of US shale oil, but
changing expectations for oil demand impacted on the oil price. China relaxed
its zero COVID-19 policy towards the end of 2022 leading initially to
expectations that China’s economic growth and oil demand would rebound in
2023. Low apparent spare production capacity coupled with the prospect of a
recovery in oil demand from China supported a constructive outlook for oil
prices in 2023. Figure 4 on page 12 of the Half Yearly Financial Report shows
the upward trend in China’s oil demand since 2019 and the impact of
China’s zero COVID-19 related lockdown restrictions in depressing oil demand
through 2022. Within the refining sector, oil products are typically viewed as
a leading indicator to demand for crude oil but developments on refining
capacity have clouded the energy outlook in 2023. 2023 is set to be a year of
refining capacity additions following significant mothballing of capacity
during COVID-19. China has been retaining refined oil products, restricting
their export, in order to ensure sufficient domestic supplies, which has
contributed to volatile spread prices for oil products. Analysts therefore had
to look more closely behind any moves in gasoline and diesel prices and
refining spreads.
Investor sentiment towards energy has changed during the period following the
collapse of Silicon Valley Bank (SVB) in the US and then the concerns around
First Republic Bank and the potential for tighter financial conditions. The
failure of SVB in the US in March 2023 had a notable impact on the oil price
and large cap energy share price as this contributed to investor concerns
around the potential for tighter lending conditions and lower economic growth,
and expectations for lower demand for oil. In the days that followed this
event, investors appeared to de-risk energy positions, which contributed to a
fall in the oil price and in energy equities. The moves did not appear to be
driven by fundamentals, but from changes in short-dated investor positioning
in futures markets. Whilst there had been an increase in energy derivative
positions through January and February 2023, there was a sharp reduction in
the number of contracts following the collapse of SVB in March 2023 (see
Figure 5 on page 12 of the Half Yearly Financial Report).
In response to lower oil prices, in April, OPEC announced a cut to production
targets of 1 million barrels per day, which was a surprise to markets, but was
in line with prior proactive action in October 2022 where OPEC cut target
output to defend the oil price. We believe that OPEC no longer views US shale
oil producers as likely to ramp up oil production in response to a cut,
undermining their control. In past reports we have commented on the capital
discipline displayed by the energy companies, which has continued through this
reporting period. For US shale oil producers, this has been evident with
capital expenditure budgets fully funded by cash flow generation, whilst
weakness in oil prices has seen companies cut the number of drilling rigs in
operation (see Figure 6 on page 13 of the Half Yearly Financial Report).
Energy companies have focused on reducing costs since the oil price fall in
2015 and have strengthened balance sheets as oil prices recovered through 2021
and 2022. This has enabled them to generate higher earnings for a given oil
price. On the other hand, energy companies are not immune from the
inflationary pressures in labour markets or in raw materials markets and many
have therefore had to increase capital expenditure budgets as a result, even
as they may have reduced production growth. Many energy companies are
therefore strongly cash flow generative at the $70-$80 oil prices seen through
this reporting period and the largest companies have reported strong earnings
in their quarterly and annual results.
ENERGY TRANSITION
Last year’s Ukraine invasion caused, at least temporarily a sharp elevation
in energy prices globally as Russian volumes sought to find new markets to
combat developed market sanctions. Not surprisingly this led to a greater
focus on security of supply and set the tone for a more balanced debate around
how to effect an orderly transition. Despite the pragmatism amongst policy
makers, high energy prices did little to crystallise progress at COP27 late
last year. The impasse on how to help low-income nations execute an effective
and just transition remains a case of funding. For now, at least, commitments
to limit warming to a global goal of 1.5 degrees Celsius continue to face
challenges.
Compounded by the geopolitical rifts created by Russia’s invasion of
Ukraine, fragmentation is undoing much of the globalisation that took place
over the last two decades. This underpins an important dynamic at play in the
race to decarbonise with different countries adopting different policies and
plotting different paths towards net zero. There is even some evidence that
competition for ‘green dollars’ is rising with the EU announcing in
February 2023 the European “Green Deal Net Zero Industry Act” aimed at
incentivising local sustainable energy-related manufacturing. Specifically,
the Act aims to:
1. Drive accelerated renewables permitting, to increase planning and
investment certainty, with a view to stepping up the share of energy directly
sourced from clean energy – by 2030, Europe is planning to achieve c. 70% of
electricity from renewables;
2. Develop a supply chain to domestically source at least 40% of the clean
tech equipment in solar, wind, electrolysis, batteries and heat pumps; and
3. Introduce incentives to stimulate investments.
Whilst the policy is welcome, it comes hot on the heels of the United
States’ Inflation Reduction Act announced in August last year and the lack
of granularity on how industry can access these incentives was reflected in a
limited response from stock prices in the clean power space (see Figure 7 on
page 14 of the Half Yearly Financial Report).
In stark contrast, on 12 May 2023 the US Department of Treasury published
guidance on domestic content bonus credits (renewable energy tax credits)
under the Inflation Reduction Act. Based on the guideline, 40% or more of
total direct materials and direct labour costs needs to be produced/incurred
in the United States. The threshold is set to increase to 55% for projects
commencing construction after 2026. In effect, this established a 10%
additional tax credit for domestic content on top of the 30% investment tax
credit for renewables projects. This benefitted companies with already strong
domestic supply chains such as US-based First Solar (an increase of +26% on 12
May 2023), one of the solar companies held in the portfolio.
Through the course of the six month period ended 31 May 2023, we have
continued to maintain our exposure to Energy Transition companies at around
25% of the Company’s NAV as many of the Energy Transition stocks have
underperformed in the last 6 months (see Figure 8 on page 15 of the Half
Yearly Financial Report).
Whilst valuations remain elevated across much of the space (see Figure 9 on
page 15 of the Half Yearly Financial Report), they have markedly compressed
from where they were this time last year, albeit they remain relatively more
keenly priced than our other focus areas (e.g. Energy, Mining and Utilities).
Nevertheless, as supply chain pressures ease and subsidies are clarified, it
should start to pave the way for margin and earnings improvements across the
Energy Transition space.
MINING
There was a strong positive sentiment at the start of the year in the mining
sector as China’s sharp reversal of zero-COVID-19 policies led to optimism
about the strength of commodity demand from the economy reopening after
several years of lockdowns and false dawns. This initially translated into
strong commodity demand with mined metals prices performing well in the first
quarter of the year. However we quite quickly saw the positive momentum stall
in a number of leading indicators, so we pared back our mining equity holdings
as we took the view that the best case near-term scenario was being priced
into share prices but downside risks were rising. As the second quarter
progressed, economic data from China disappointed with new loan growth coming
in below consensus expectations and new property building projects also
struggling to recover. This demand weakness more than offset the supply
challenges – which are discussed in detail below – and so the half year
ended with most mined commodity prices below where they had started the year.
With little or no relief yet on the cost side, this pressured producer margins
and as a result, the mining sector struggled in the second quarter and also
ended the half below where it has started.
We have written a number of times about the supply-side constraints in mining
and the risk of supply disruptions, and the latter came to the fore in the
first half of 2023, especially in the copper market. There were widespread
protests that affected the industry in Peru with blockades preventing access
to mines, ports and roads that impacted production. Also, in Chile the
underperformance of the State-owned producer Codelco continued, which was the
main driver of a poor start to the year for copper output from the world’s
largest producer (see Figure 10 on page 16 of the Half Yearly Financial
Report).
Although the issues above can be seen as temporary in nature, they appear to
be occurring on a more frequent basis and if inventories of metals are low
(like copper inventories were in H1 2023) then these disruptions risk pushing
prices higher. However it is also important to look at the longer-term issues
facing the supply of metals. The chart on page 17 (see Figure 11) of the Half
Yearly Financial Report shows just how long it now takes to bring a new mine
into production – not only are assets becoming harder to discover in the
first place but the permitting challenges, engineering complexity, financing
hurdles and construction itself all significantly constrain the ability of
supply-side companies to respond to any environment of higher prices.
One of the consequences of these supply challenges is that existing production
is becoming more valuable – both from a financial standpoint but also
strategically. Several automotive companies have recently signed offtake
agreements1 with miners (or soon to be miners) of nickel and lithium as they
look to secure supply of raw materials. Mining companies have also recognised
the value of de-risked producing assets compared to the risks of developing
new assets – BHP recently completed the takeover of Australian copper miner
Oz Minerals and there is an on-going acquisition saga between Glencore and
Teck Resources, where the latter has just finished the $8bn construction of a
new copper mine in Chile.
With the scarcity of both high-quality exploration discoveries and producing
copper assets in the listed market, we have taken a barbell approach in the
portfolio. We have continued to build our basket of earlier stage companies,
such as Filo Mining, alongside large-scale producers such as First Quantum,
who have successfully renegotiated their fiscal terms in Panama (a move that
was positively received by the market, driving an increase in share price and
removing selling pressure on the company’s shares).
MARKET OUTLOOK AND PORTFOLIO POSITIONING
Concerns over a global economic slowdown have percolated financial markets for
much of this year as the US Federal Reserve continues to drive a hard line on
Quantitative Tightening (QT) to help stave off rampant inflation. Yet, if one
were to simply look at the S&P 500, which year-to-date is up 8.6% through to
31 May 2023, you might be forgiven for thinking that everything was back to
normal. However, the dispersion in returns is notable as six US mega-cap
stocks account for all of this years’ gains. Amazon, Apple, Google,
Microsoft, Nvidia and Tesla are up by 46% in aggregate since the start of the
year. The remaining 494 stocks i.e. Everything Else is, on average, down (see
Figure 12 on page 18 of the Half Yearly Financial Report). This reflects a
quite extreme crowding effect and one which more often than not portends
trickier times ahead. Coupled with sticky inflation and a Chinese economy that
thus far has underwhelmed our expectations in terms of the pace and breadth of
its post-COVID-19 recovery, this leaves us somewhat cautious as we look ahead
for the next six months.
On the positive side, there is scope for China to lean on stimulus measures to
support its real estate sector, which would bode well for mined commodity and
materials demand. This would be additive to mobility trends which continue to
grind upwards as more people choose to travel post-COVID-19 restriction
easing. On the negative side, higher-for-longer interest rates may well be
required to properly blunt western economies that continue to ‘run hot’.
The effect on aggregate demand has yet to be fully felt, but the risks that
rapid QT carries have already been evident in the US banking system with the
collapse of Silicon Valley Bank and First Republic Bank. So, whilst we see an
increasingly supportive policy backdrop for the energy transition over the
next two decades, we consider that near-term caution is warranted, and the
Company is positioned accordingly.
Tom Holl and Mark Hume
BlackRock Investment Management (UK) Limited
1 August 2023
1 An offtake agreement is an arrangement between a producer and a buyer to
purchase or sell portions of the producer's upcoming goods. It is normally
negotiated before the construction of a factory or facility to secure a market
and revenue stream for its future output.
DISTRIBUTION OF INVESTMENTS AS AT 31 May 2023
Asset allocation – Geography
Global 57.4%
United States 15.4%
Canada 8.6%
Brazil 5.0%
Germany 4.6%
Latin America 1 3.1%
France 2.5%
Australia 1.8%
Ireland 0.6%
China 0.5%
Denmark 0.5%
1 Latin America represents Argentina and Ecuador.
Source: BlackRock.
Asset allocation – Commodity
Energy Transition (27.8%)
Electrification 10.7%
Energy Efficiency 7.5%
Transport 5.2%
Renewables 4.4%
Mining 39.6%
Traditional Energy 32.6%
Energy Transition 27.8%
Traditional Energy (32.6%)
Integrated 15.5%
Exploration & Production 14.0%
Distribution 1.6%
Energy Efficiency 0.5%
Refining & Marketing 0.5%
Storage 0.5%
Mining (39.6%)
Diversified 19.3%
Copper 7.9%
Industrial Minerals 4.4%
Aluminium 2.5%
Steel 2.4%
Gold 1.1%
Uranium 1.0%
Nickel 0.9%
Platinum Group Metals 0.4%
Tin -0.3%
Source: BlackRock.
TEN LARGEST INVESTMENTS
1 + ExxonMobil (2022: n/a)
Integrated oil group
Market value: £8,767,000
Share of net assets: 5.0% (2022: n/a)
An American multinational oil and gas corporation. They continue to evolve to
meet growing global demand for oil, natural gas and refined products and plan
to play a leading role in the energy transition. The corporation has announced
emission-reduction plans for 2030 with an aim to reduce greenhouse gas and
methane intensity and around 40% of its investments will be directed towards
reducing greenhouse gas emissions with an emphasis on carbon capture and
storage, biofuels, and hydrogen.
2 = Vale (2022: 2nd)
Diversified mining group
Market value: £8,115,000
Share of net assets: 4.6%1 (2022: 4.4%)
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.
3 - Glencore (2022: 1st)
Diversified mining group
Market value: £7,725,000
Share of net assets: 4.4% (2022: 7.3%)
One of the world’s largest globally diversified natural resource 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.
4 - BHP (2022: 3rd)
Diversified mining group
Market value: £7,428,000
Share of net assets: 4.2% (2022: 4.2%)
The world’s largest diversified mining group by market capitalisation. The
group is an important global player in a number of commodities including iron
ore, copper, thermal and metallurgical coal, manganese, nickel, silver and
diamonds. BHP also has significant interests in oil, gas and liquefied natural
gas.
5 - Teck Resources (2022: 4th)
Diversified mining group
Market value: £7,287,000
Share of net assets: 4.2% (2022: 3.6%)
A diversified mining group headquartered in Canada. Teck Resources is engaged
in mining and mineral development with operations and projects in Canada, the
US, Chile and Peru. The group has exposure to copper, zinc, steelmaking coal
and energy.
6 = Shell (2022: 6th)
Integrated oil group
Market value: £6,093,000
Share of net assets: 3.5% (2022: 3.2%)
A British publicly traded multinational oil and gas group headquartered in
London. Shell is one of the world’s largest independent energy companies,
operating in more than 70 countries. Shell explores and produces energy
products - fuels, oil, natural gas, lubricants, LPG, chemicals; including 100%
renewable electricity by Shell Energy.
7 = BP (2022: 7th)
Integrated oil group
Market value: £5,874,000
Share of net assets: 3.4% (2022: 2.9%)
A British multinational oil and gas company headquartered in London. BP is one
of the oil and gas “supermajors” and one of the world’s largest
companies measured by revenues and profits. It is a vertically integrated
company operating in all areas of the oil and gas industry, including
exploration and extraction, refining, distribution and marketing, power
generation, and trading; including low carbon businesses.
8 + NextEra Energy (2022: 9th)
Electrification
Market value: £5,696,000
Share of net assets: 3.3% (2022: 2.5%)
NextEra Energy is America’s premier clean energy leader and the world’s
largest producer of wind and solar energy. The company has a dominant market
share in a structurally growing renewables market.
9 + Canadian Natural Resources (2022: 10th)
Exploration & Production
Market value: £5,181,000
Share of net assets: 3.0% (2022: 2.5%)
A senior Canadian oil and natural gas company. The company has a diversified
portfolio of assets in North America, the UK North Sea and Offshore Africa.
10 - First Quantum Minerals (2022: 5th)
Copper producer
Market value: £4,841,000
Share of net assets: 2.7%2 (2022: 3.5%)
A Canadian-based mining and metals company whose principal activities include
mineral exploration, development and mining. Its main product is copper.
1 1.1% relates to interest in Vale shareholder debentures.
2 1.5% relates to fixed interest holdings in First Quantum Minerals.
All percentages reflect the value of the holding as a percentage of total
investments. For this purpose, where more than one class of securities is
held, these have been aggregated. The percentages in brackets represent the
value of the holding as at 30 November 2022.
Together, the ten largest investments represent 38.3% of total investments
(ten largest investments as at 30 November 2022: 36.8%).
INVESTMENTS AS AT 31 May 2023
Main Market % of
geographic value investments
exposure £’000
Mining
Diversified
Vale Brazil 6,098 } 4.6
Vale Debentures* Brazil 2,017
Glencore Global 7,725 4.4
BHP Global 7,428 4.2
Teck Resources Global 7,287 4.2
Trident Global 1,987 1.1
Rio Tinto Global 704 0.4
Anglo American Global 690 0.4
---------------- ----------------
33,936 19.3
========== ==========
Copper
First Quantum Minerals Global 2,127 } 2.7
First Quantum Minerals 6.875% 15/10/27 Global 1,607
First Quantum Minerals 6.875% 01/03/26 Global 897
First Quantum Minerals 7.5% 01/04/25 Global 210
Filo Mining Latin America 3,899 2.2
Ivanhoe Electric United States 2,046 1.2
Solaris Resources Latin America 1,505 0.9
Freeport-McMoRan United States 1,084 0.6
Develop Global Australia 578 0.3
---------------- ----------------
13,953 7.9
========== ==========
Industrial Minerals
Albemarle Global 4,422 2.5
Nutrien United States 1,378 0.8
Lynas Corporation Australia 1,036 0.6
Bunge Global 939 0.5
CF Industries United States 38 –
---------------- ----------------
7,813 4.4
========== ==========
Aluminium
Norsk Hydro Global 3,033 1.7
Alcoa Corp Global 1,478 0.8
------------------ ------------------
4,511 2.5
========== ==========
Steel
ArcelorMittal Global 2,403 1.4
Steel Dynamics United States 1,710 1.0
------------------ ------------------
4,113 2.4
========== ==========
Gold
Wheaton Precious Metals Global 1,897 1.1
------------------ ------------------
1,897 1.1
========== ==========
Uranium
Cameco Canada 1,795 1.0
------------------ ------------------
1,795 1.0
========== ==========
Nickel
Nickel Mines Australia 1,558 0.9
Lifezone Commitment Global – –
------------------ ------------------
1,558 0.9
========== ==========
Platinum Group Metals
Bravo Mining Brazil 659 0.4
------------------ ------------------
659 0.4
========== ==========
Tin
LME Tin Future Dec 23 Global (559) (0.3)
------------------ ------------------
(559) (0.3)
========== ==========
Total Mining 69,676 39.6
========== ==========
Traditional Energy
Integrated
ExxonMobil Global 8,767 5.0
Shell Global 6,093 3.5
BP Global 5,874 3.4
TotalEnergies Global 4,228 2.4
Cenovus Energy Canada 2,129 1.2
Gazprom** Russian Federation – –
------------------ ------------------
27,091 15.5
========== ==========
Exploration & Production
Canadian Natural Resources Canada 5,181 3.0
Hess Global 4,701 2.7
ConocoPhillips Global 4,140 2.4
Tourmaline Oil Canada 3,188 1.8
Arc Resources Canada 2,811 1.6
EOG Resources United States 2,659 1.5
Orron Energy Global 1,068 0.6
Kosmos Energy United States 641 0.4
------------------ ------------------
24,389 14.0
========== ==========
Distribution
Cheniere Energy United States 2,741 1.6
------------------ ------------------
2,741 1.6
========== ==========
Energy Efficiency
Nidec Corp Global 830 0.5
------------------ ------------------
830 0.5
========== ==========
Refining & Marketing
Valero Energy United States 807 0.5
------------------ ------------------
807 0.5
========== ==========
Storage
Contemporary Amperex Technology China 806 0.5
------------------ ------------------
806 0.5
========== ==========
Total Traditional Energy 56,664 32.6
========== ==========
Energy Transition
Electrification
NextEra Energy United States 5,696 3.3
RWE Germany 4,322 2.5
EDP Renováveis Global 3,348 1.9
Sempra Energy United States 2,566 1.5
Iberdrola Global 1,819 1.0
EDP – Energias De Portugal Global 818 0.5
------------------ ------------------
18,569 10.7
========== ==========
Energy Efficiency
Schneider Electric Global 3,408 1.9
Analog Devices Global 2,664 1.5
Ingersoll-Rand United States 2,624 1.5
Trane Technologies United States 1,520 0.9
Kingspan Group Ireland 1,067 0.6
Texas Instruments Global 979 0.6
Soitec France 863 0.5
------------------ ------------------
13,125 7.5
========== ==========
Transport
Infineon Technologies Germany 3,729 2.1
STMicroelectronics France 3,544 2.0
Samsung SDI Global 1,983 1.1
------------------ ------------------
9,256 5.2
========== ==========
Renewables
Vestas Wind Global 3,020 1.7
First Solar Global 2,854 1.6
Sunnova Energy International United States 1,024 0.6
Orsted Denmark 880 0.5
------------------ ------------------
7,778 4.4
========== ==========
Total Energy Transition 48,728 27.8
========== ==========
Total Portfolio 175,068 100.0
========== ==========
Comprising
Equity and debt investments 175,627 100.3
Derivative financial instruments – futures (559) (0.3)
------------------ ------------------
175,068 100.0
========== ==========
* 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 £0.01 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 31 May 2023 was 70 (30 November 2022: 68).
There were no open options as at 31 May 2023 (30 November 2022: one).
The equity and fixed income investment total of £175,627,000 (30 November
2022: £206,394,000) above before the deduction of the negative valuation of
commodity futures contracts of £559,000 (30 November 2022: negative option
valuation of £55,000) represents the Group’s total investments held at fair
value as reflected in the Consolidated Statement of Financial Position. The
table above excludes cash and gearing; the level of the Group’s gearing may
be determined with reference to the bank overdraft of £9,364,000 (30 November
2022: £14,345,000) and cash and cash equivalents of £194,000 (30 November
2022: £6,214,000) that are also disclosed in the Consolidated Statement of
Financial Position. Details of the AIC methodology for calculating gearing are
given in the Glossary contained within the Half Yearly Financial Report.
As at 31 May 2023, the Company did not hold any equity interests comprising
more than 3% of any company’s share capital.
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
The Chairman’s Statement and the Investment Managers’ Report give details
of the important events which have occurred during the period and their impact
on the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks faced by the Company can be divided into various areas as
follows:
* Investment performance;
* Income/dividend;
* Gearing;
* Legal and regulatory compliance;
* Operational;
* Market; and
* Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year ended 30
November 2022. A detailed explanation can be found in the Strategic Report on
pages 39 to 43 and in note 16 on pages 107 to 118 of the Annual Report and
Financial Statements which are available on the Company’s website at
www.blackrock.com/uk/beri.
The Board and the Investment Manager continue to monitor investment
performance in line with the Company’s investment objectives, and the
operations of the Company and the publication of net asset values are
continuing.
In the view of the Board, there have not been any changes to the fundamental
nature of the principal risks and uncertainties since the previous report and
these are equally applicable to the remaining six months of the financial year
as they were to the six months under review.
GOING CONCERN
The Board is mindful of the risk that unforeseen or unprecedented events
including (but not limited to) heightened geopolitical tensions such as the
war in Ukraine, high inflation and the current cost of living crisis has had a
significant impact on global markets. Notwithstanding this significant degree
of uncertainty, the Directors, having considered the nature and liquidity of
the portfolio, the Company’s investment objective, the Company’s projected
income and expenditure and the Company’s substantial distributable reserves,
are satisfied that the Company has adequate resources to continue in
operational existence for the foreseeable period to 31 May 2025, being a
period of at least twelve months from the date of approval of the financial
statements and is financially sound.
The Company has a portfolio of investments which are considered to be readily
realisable and is able to meet all of its liabilities from its assets and
income generated from these assets. Borrowings under the overdraft facility
shall be lower of £40.0 million or 20% of the Company’s net assets
(calculated at the time of draw down) and this covenant was complied with
during the period. Ongoing charges (excluding finance costs, direct
transaction costs, custody transaction charges, VAT recovered, taxation, prior
year expenses written back and certain non-recurring charges) have been capped
by the Manager at 1.25% of average daily net assets with effect from 17 March
2020 and were 1.13% of net assets for the year ended 30 November 2022. Based
on the above, the Board is satisfied that it is appropriate to continue to
adopt the going concern basis in preparing the financial statements.
RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) is the Company’s Alternative
Investment Fund Manager (AIFM) and has, with the Company’s consent,
delegated certain portfolio and risk management services, and other ancillary
services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM
and BIM (UK) are regarded as related parties under the Listing Rules. Details
of the management fee payable are set out in note 4 and note 13 below. The
related party transactions with the Directors are set out in note 12 below.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing
Authority require the Directors to confirm their responsibilities in relation
to the preparation and publication of the Interim Management Report and
Financial Statements.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within the Half Yearly
Financial Report has been prepared in accordance with International Accounting
Standard 34 Interim Financial Reporting; and
· the Interim Management Report together with the Chairman’s Statement and
Investment Managers’ Report include a fair review of the information
required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and
Transparency Rules.
This Half Yearly Financial Report has not been audited or reviewed by the
Company’s Auditor.
The Half Yearly Financial Report was approved by the Board on 1 August 2023
and the above responsibility statement was signed on its behalf by the
Chairman.
Adrian Brown
For and on behalf of the Board
1 August 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY
2023
Six months ended Six months ended Year ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Income from investments held at fair value through profit or loss 3 3,411 101 3,512 3,267 – 3,267 6,969 – 6,969
Other income 3 652 – 652 398 – 398 1,343 – 1,343
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total revenue 4,063 101 4,164 3,665 – 3,665 8,312 – 8,312
========= ========= ========= ========= ========= ========= ========= ========= =========
Net profit/(loss) on investments and options held at fair value through profit or loss – (29,497) (29,497) – 42,548 42,548 – 51,394 51,394
Net (loss)/profit on foreign exchange – (35) (35) – 9 9 – 4 4
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total 4,063 (29,431) (25,368) 3,665 42,557 46,222 8,312 51,398 59,710
========= ========= ========= ========= ========= ========= ========= ========= =========
Expenses
Investment management fee 4 (202) (606) (808) (159) (475) (634) (339) (1,019) (1,358)
Other operating expense 5 (232) (13) (245) (235) (5) (240) (886) (11) (897)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total operating expenses (434) (619) (1,053) (394) (480) (874) (1,225) (1,030) (2,255)
========== ========= ========= ========= ========= ========= ========= ========= =========
Net profit/(loss) on ordinary activities before finance costs and taxation 3,629 (30,050) (26,421) 3,271 42,077 45,348 7,087 50,368 57,455
Finance costs 6 (93) (279) (372) (20) (59) (79) (49) (147) (196)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Net profit/(loss) on ordinary activities before taxation 3,536 (30,329) (26,793) 3,251 42,018 45,269 7,038 50,221 57,259
========== ========== ========= ========= ========= ========= ========= ========= =========
Taxation (expense)/credit (327) 54 (273) (286) 60 (226) (644) 162 (482)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Net profit/(loss) on ordinary activities after taxation 8 3,209 (30,275) (27,066) 2,965 42,078 45,043 6,394 50,383 56,777
========= ========= ========= ========= ========= ========= ========= ========= =========
Earnings/(loss) per ordinary share (pence) 8 2.37 (22.40) (20.03) 2.42 34.35 36.77 4.99 39.28 44.27
========= ========= ========= ========= ========= ========= ========= ========= =========
The total columns of this statement represent the Group’s Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards (IASs). 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 period. All
income is attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss) (31 May 2022:
£nil; 30 November 2022: £nil). The net profit/(loss) for the period
disclosed above represents the Group’s total comprehensive income/(loss).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MAY
2023
Notes Called Share Special Capital Revenue Total
up share premium reserve reserves reserve £’000
capital account £’000 £’000 £’000
£’000 £’000
For the six months ended 31 May 2022 (unaudited)
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 period – – – (30,275) 3,209 (27,066)
Transactions with owners, recorded directly to equity:
Ordinary share issues 9 12 1,781 – – – 1,793
Share issue costs – (4) – – – (4)
Share reissue costs written back – – – 28 – 28
Dividends paid 1 7 – – – – (2,969) (2,969)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
At 31 May 2023 1,356 69,980 70,937 17,556 6,661 166,490
========== ========== ========== ========== ========== ==========
For the six months ended 31 May 2022 (unaudited)
At 30 November 2021 1,190 47,727 68,852 (2,548) 5,607 120,828
Total comprehensive income:
Net profit for the period – – – 42,078 2,965 45,043
Transactions with owners, recorded directly to equity:
Ordinary share issues 105 13,171 – – – 13,276
Ordinary shares reissued from treasury – 1,023 2,091 – – 3,114
Share issue costs – (59) (6) – – (65)
Dividends paid 2 7 – – – – (2,654) (2,654)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
At 31 May 2022 1,295 61,862 70,937 39,530 5,918 179,542
========== ========== ========== ========== ========== ==========
For the year ended 30 November 2022 (audited)
At 30 November 2021 1,190 47,727 68,852 (2,548) 5,607 120,828
Total comprehensive income:
Net profit for the year – – – 50,383 6,394 56,777
Transactions with owners, recorded directly to equity:
Ordinary share issues 154 19,563 – – – 19,717
Share issue costs – (110) – – – (110)
Ordinary shares reissued from treasury – 1,023 2,091 – – 3,114
Share reissue costs – – (6) (32) – (38)
Dividends paid 3 7 – – – – (5,580) (5,580)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
At 30 November 2022 1,344 68,203 70,937 47,803 6,421 194,708
========== ========== ========== ========== ========== ==========
1 4th interim dividend of 1.10p per share for the year ended 30 November
2022, declared on 7 December 2022 and paid on 13 January 2023 and 1st interim
dividend of 1.10p per share for the year ending 30 November 2023, declared on
13 March 2023 and paid on 19 April 2023.
2 4th interim dividend of 1.10p per share for the year ended 30 November
2021, declared on 8 December 2021 and paid on 14 January 2022 and 1st interim
dividend of 1.10p per share for the year ended 30 November 2022, declared on
15 March 2022 and paid on 21 April 2022.
3 4th interim dividend of 1.10p per share for the year ended 30 November
2021, declared on 8 December 2021 and paid on 14 January 2022; 1st interim
dividend of 1.10p per share for the year ended 30 November 2022, declared on
15 March 2022 and paid on 21 April 2022; 2nd interim dividend of 1.10p per
share for the year ended 30 November 2022, declared on 7 June 2022 and paid on
15 July 2022 and 3rd interim dividend of 1.10p per share for the year ended 30
November 2022, declared on 12 September 2022 and paid on 20 October 2022.
For information on the Company’s distributable reserves, please refer to
note 10 below.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2023
Notes 31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
£’000 £’000 £’000
Non current assets
Investments held at fair value through profit or loss 11 175,627 194,755 206,394
---------------- ---------------- ----------------
Current assets
Other receivables 835 639 1,980
Current tax asset 134 74 103
Cash collateral held with brokers 1,086 – 285
Cash and cash equivalents 194 6,567 6,214
---------------- ---------------- ----------------
Total current assets 2,249 7,280 8,582
========== ========== ==========
Total assets 177,876 202,035 214,976
========== ========== ==========
Current liabilities
Other payables (1,463) (1,113) (5,868)
Derivative financial liabilities held at fair value through profit or loss 11 (559) (18) (55)
Bank overdraft (9,364) (21,362) (14,345)
---------------- ---------------- ----------------
Total current liabilities (11,386) (22,493) (20,268)
========== ========== ==========
Net assets 166,490 179,542 194,708
========== ========== ==========
Equity attributable to equity holders
Called up share capital 9 1,356 1,295 1,344
Share premium account 69,980 61,862 68,203
Special reserve 70,937 70,937 70,937
Capital reserves 17,556 39,530 47,803
Revenue reserve 6,661 5,918 6,421
---------------- ---------------- ----------------
Total equity 166,490 179,542 194,708
========== ========== ==========
Net asset value per ordinary share (pence) 8 122.79 138.60 144.92
========== ========== ==========
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MAY 2023
Six months Six months Year
ended ended ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
£’000 £’000 £’000
Operating activities:
Net (loss)/profit on ordinary activities before taxation (26,793) 45,269 57,259
Add back finance costs 372 79 196
Net loss/(profit) on investments and options held at fair value through profit or loss (including transaction costs) 29,497 (42,548) (51,394)
Net amount for capital special dividends received (86) – –
Net loss/(profit) on foreign exchange 35 (9) (4)
Sales of investments held at fair value through profit or loss 53,133 58,162 126,788
Purchases of investments held at fair value through profit or loss (51,272) (82,567) (153,949)
Decrease/(increase) in other receivables 44 (124) (18)
Increase in other payables 515 363 230
Decrease in amounts due from brokers 1,100 4,363 2,916
(Decrease)/increase in amounts due to brokers (4,838) (4,798) 40
Net movement in cash collateral held with brokers (801) – (285)
---------------- ---------------- ----------------
Net cash inflow/(outflow) from operating activities before taxation 906 (21,810) (18,221)
========== ========== ==========
Taxation on investment income included within gross income (304) (243) (528)
---------------- ---------------- ----------------
Net cash inflow/(outflow) from operating activities 602 (22,053) (18,749)
========== ========== ==========
Financing activities
Interest paid (372) (79) (196)
Receipts from share issues 1,793 13,276 19,717
Share issue costs paid (58) (33) (60)
Proceeds from shares reissued from treasury – 3,114 3,108
Dividends paid (2,969) (2,654) (5,580)
---------------- ----------------
Net cash (outflow)/inflow from financing activities (1,606) 13,624 16,989
========== ==========
Decrease in cash and cash equivalents (1,004) (8,429) (1,760)
Effect of foreign exchange rate changes (35) 9 4
---------------- ----------------
Change in cash and cash equivalents (1,039) (8,420) (1,756)
Cash and cash equivalents at start of period (8,131) (6,375) (6,375)
---------------- ----------------
Cash and cash equivalents at end of period (9,170) (14,795) (8,131)
========== ==========
Comprised of:
Cash at bank 194 6,567 6,214
Bank overdraft (9,364) (21,362) (14,345)
---------------- ---------------- ----------------
(9,170) (14,795) (8,131)
========== ========== ==========
NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MAY 2023
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 principal activity of the subsidiary, BlackRock Energy and Resources
Securities Income Company Limited, is investment dealing and options writing.
2. Basis of preparation
The Half Yearly Financial Statements for the period ended 31 May 2023 have
been prepared in accordance with the Disclosure Guidance and Transparency
Rules sourcebook of the Financial Conduct Authority and with the UK-adopted
International Accounting Standard 34 (IAS 34) Interim Financial Reporting. The
Half Yearly Financial Statements should be read in conjunction with the
Group’s Annual Report and Financial Statements for the year ended 30
November 2022, which have been prepared in accordance with UK-adopted
International Accounting Standards (IASs) in conformity with the requirements
of the Companies Act 2006.
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 IASs, the financial statements have been prepared in accordance
with guidance set out in the SORP.
Relevant International Accounting Standards that have yet to be adopted:
IFRS 17 – Insurance contracts (effective 1 January 2023). This standard
replaces IFRS 4 which currently permits a wide range of accounting practices
in accounting for insurance contracts. IFRS 17 will fundamentally change the
accounting by all entities that issue insurance contracts and investment
contracts with discretionary participation features.
This standard is unlikely to have any impact on the Group as it does not issue
insurance contracts.
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.
The amendment of this standard is unlikely to have any significant impact on
the Group.
None of the standards that have been issued but are not yet effective are
expected to have a material impact on the Group.
3. Income
Six months Six months Year
ended ended ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
£’000 £’000 £’000
Investment income:
UK dividends 329 320 613
UK special dividends – 67 67
Overseas dividends 2,055 2,204 4,604
Overseas special dividends 800 309 1,060
Fixed income 227 367 625
---------------- ---------------- ----------------
Total investment income 3,411 3,267 6,969
========== ========== ==========
Other income:
Option premium income 652 398 1,342
Bank interest – – 1
---------------- ---------------- ----------------
652 398 1,343
========== ========== ==========
Total income 4,063 3,665 8,312
========== ========== ==========
During the period, the Group received option premium income in cash totalling
£652,000 (six months ended 31 May 2022: £432,000; year ended 30 November
2022: £1,342,000) 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 period, option premiums of £652,000 (six months
ended 31 May 2022: £398,000; year ended 30 November 2022: £1,342,000) were
amortised to revenue.
At 31 May 2023, there was no open positions (31 May 2022: one; 30 November
2022: one) with an associated liability of £nil (31 May 2022: £18,000; 30
November 2022: £55,000).
Dividends and interest received in cash during the period amounted to
£2,837,000 and £178,000 (six months ended 31 May 2022: £2,799,000 and
£153,000; year ended 30 November 2022: £5,609,000 and £437,000).
Special dividends of £101,000 have been recognised in capital for the six
months ended 31 May 2023 (six months ended 31 May 2022: £nil; year ended 30
November 2022: £nil).
4. Investment management fee
Six months ended Six months ended Year ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 202 606 808 159 475 634 339 1,019 1,358
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total 202 606 808 159 475 634 339 1,019 1,358
========== ========== ========== ========== ========== ========== ========== ========== ==========
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. The amount of rebate accrued for
the six months ended 31 May 2023 amounted to £nil (six months ended 31 May
2022: £nil; year ended 30 November 2022: £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 on pages 136 and 137 of the
Annual Report and Financial Statements) allocated between revenue and capital
during the period.
5. Other operating expenses
Six months Six months Year
ended ended ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
£’000 £’000 £’000
Allocated to revenue:
Custody fee 5 3 8
Auditor’s remuneration – audit services 1 24 22 46
Registrar’s fee 18 15 31
Directors’ emoluments 66 72 139
Broker fees 12 13 25
Depositary fees 9 7 15
Marketing fees 21 12 45
Printing and postage fees 19 19 42
Legal and professional fees 13 8 20
Directors search fees 6 9 18
Bank charges 7 4 12
Stock exchange listings fees 2 9 24 53
Other administration costs 42 27 52
Provision for doubtful debts 3 – – 380
Write back of prior year expenses 4 (19) – –
---------------- ---------------- ----------------
232 235 886
========== ========== ==========
Allocated to capital:
Custody transaction charges 5 13 5 11
---------------- ---------------- ----------------
245 240 897
========== ========== ==========
1 No non-audit services are provided by the Company’s auditors in the six
months ended 31 May 2023 (six months ended 31 May 2022: none; year ended 30
November 2022: none).
2 For the year ended 30 November 2022, this included one-off block listing
fees of £49,000.
3 Provision for doubtful debts relate to dividend income from Gazprom ADR
which has not been received due to measures imposed by the Russian authorities
in response to the sanctions that have been imposed on Russia as a result of
the invasion of Ukraine.
4 Relates to miscellaneous fees, directors search fees, legal and
professional fees written back during the period (six months ended 31 May
2022: none; year ended 30 November 2022: none).
5 For the six months ended 31 May 2023, expenses of £13,000 (six months
ended 31 May 2022: £5,000; year ended 30 November 2022: £11,000) were
charged to the capital account of the Statement of Comprehensive Income.
The transaction costs incurred on the acquisition of investments amounted to
£32,000 for the six months ended 31 May 2023 (six months ended 31 May 2022:
£92,000; year ended 30 November 2022: £155,000). Costs relating to the
disposal of investments amounted to £19,000 for the six months ended 31 May
2023 (six months ended 31 May 2022: £14,000; year ended 30 November 2022:
£33,000). All transaction costs have been included within the capital
reserves.
6. Finance costs
Six months ended Six months ended Year ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Interest payable – bank overdraft 93 279 372 20 59 79 49 147 196
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total 93 279 372 20 59 79 49 147 196
========== ========== ========== ========== ========== ========== ========== ========== ==========
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.
At 31 May 2023, the Group had an overdraft facility of the lower of £40
million (six months ended 31 May 2022: £35 million; year ended 30 November
2022: £35 million) or 20% of the Group’s net assets.
7. Dividends
The Board’s current dividend target is to declare quarterly dividends of
1.10 pence per share in the year to 30 November 2023, making a total of at
least 4.40 pence per share for the year as a whole.
A first interim dividend for the year ending 30 November 2023 of £1,491,000
(1.10 pence per share) was paid on 19 April 2023 to shareholders on the
register on 24 March 2023.
The Directors have declared a second interim dividend for the year ending 30
November 2023 of 1.10 pence per share. The total cost of the dividend was
£1,491,000 and was paid on 14 July 2023 to shareholders on the Company’s
register on 15 June 2023. This dividend has not been accrued in the financial
statements for the six months ended 31 May 2023, as under IAS, interim
dividends are not recognised until paid. Dividends are debited directly to
reserves.
The third and fourth interim dividends will be declared in September 2023 and
December 2023 respectively.
Dividends on equity shares paid during the period were:
Six months Six months Year
ended ended ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
Second interim dividend for the year ended 30 November 2022 of 1.10p (2021: 1.00p) – – 1,448
Third interim dividend for the year ended 30 November 2022 of 1.10p (2021: 1.00p) – – 1,478
Fourth interim dividend for the year ended 30 November 2022 of 1.10p (2021: 1.10p) 1,478 1,278 1,278
First interim dividend for the year ending 30 November 2023 of 1.10p (2022: 1.10p) 1,491 1,376 1,376
---------------- ---------------- ----------------
2,969 2,654 5,580
========== ========== ==========
8. Consolidated earnings and net asset value per ordinary share
Total revenue, capital (loss)/earnings and net asset value per ordinary share
are shown below and have been calculated using the following:
Six months Six months Year
ended ended ended
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
Net revenue profit attributable to ordinary shareholders (£’000) 3,209 2,965 6,394
Net capital (loss)/profit attributable to ordinary shareholders (£’000) (30,275) 42,078 50,383
---------------- ---------------- ----------------
Total (loss)/profit attributable to ordinary shareholders (£’000) (27,066) 45,043 56,777
========== ========== ==========
Equity shareholders’ funds (£’000) 166,490 179,542 194,708
========== ========== ==========
The weighted average number of ordinary shares in issue during each period on which the earnings per ordinary share was calculated was: 135,151,964 122,487,667 128,248,137
The actual number of ordinary shares in issue at the period end on which the net asset value per ordinary share was calculated was: 135,586,194 129,540,391 134,356,194
---------------- ---------------- ----------------
Earnings per share
Revenue earnings per share (pence) - basic and diluted 2.37 2.42 4.99
Capital (loss)/earnings per share (pence) - basic and diluted (22.40) 34.35 39.28
---------------- ---------------- ----------------
Total (loss)/earnings per share (pence) - basic and diluted (20.03) 36.77 44.27
========== ========== ==========
As at As at As at
31 May 2023 31 May 2022 30 November 2022
(unaudited) (unaudited) (audited)
Net asset value per ordinary share (pence) 122.79 138.60 144.92
Ordinary share price (pence) 111.60 142.00 135.00
========== ========== ==========
There were no dilutive securities at the period end (six months ended 31 May
2022: nil; year ended 30 November 2022: nil).
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
Share issues 1,230,000 – 1,230,000 12
Shares reissued from treasury – – – –
---------------- ---------------- ---------------- ----------------
At 31 May 2023 135,586,194 – 135,586,194 1,356
=========== ========== ========== ==========
During the period ended 31 May 2023, no shares were reissued (six months ended
31 May 2022: 2,747,643; year ended 30 November 2022: 2,747,643 shares were
reissued from treasury) for a net consideration after costs of £nil (six
months ended 31 May 2022: £3,108,000; year ended 30 November 2022:
£3,108,000).
During the period ended 31 May 2023, the Company issued 1,230,000 (six months
ended 31 May 2022: 10,574,391; year ended 30 November 2022: 15,390,194) shares
for a net consideration after costs of £1,789,000 (six months ended 31 May
2022: £13,249,000; year ended 30 November 2022: £19,677,000).
Since 31 May 2023, no shares have been issued.
Since 31 May 2023 and as at the date of this report, the Company has bought
back 540,000 shares for costs of £621,000.
10. Reserves
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 reserve 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 reserve and revenue reserve may be
distributed by way of dividend. The Parent Company’s gain/loss on the
capital reserve arising on the revaluation of investments of £13,039,000 (31
May 2022: gain of £51,306,000; year ended 30 November 2022: gain of
£49,150,000) is subject to fair value movements and may not be readily
realisable at short notice, as such it may not be entirely distributable. The
reserves of the subsidiary company are not distributable until distributed as
a dividend to the Parent Company. 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.
11. Financial risks and valuation of financial instruments
The Company’s investment activities expose it to the various types of risk
which are associated with the financial instruments and markets in which it
invests. The risks are substantially consistent with those disclosed in the
previous annual financial statements with the exception of those outlined
below.
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than
those arising from interest rate risk or currency risk), whether those changes
are caused by factors specific to the individual financial instrument or its
issuer, or factors affecting similar financial instruments traded in the
market. Local, regional or global events such as war, acts of terrorism, the
spread of infectious illness or other public health issues, recessions,
climate change or other events could have a significant impact on the Group
and its investments.
The current environment of heightened geopolitical risk given the war in
Ukraine has undermined investor confidence and market direction. In addition
to the tragic and devastating events in Ukraine, the war has constricted
supplies of key commodities, pushing prices up and creating a level of market
uncertainty and volatility which is likely to persist for some time.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in the
Consolidated Statement of Financial Position at their fair value (investments
and derivatives) or at an amount which is a reasonable approximation of fair
value (due from brokers, dividends and interest receivable, due to brokers,
accruals, cash at bank and bank overdrafts). IFRS 13 requires the 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) as set out on page 97 of the Group’s Annual Report and Financial
Statements for the year ended 30 November 2022.
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 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 Level
3 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.
Fair values of financial assets and financial liabilities
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 for any business
related risks, including climate risk, in accordance with the fair value
related requirements of the Company’s financial reporting framework.
The table below sets out fair value measurements using the IFRS 13 fair value
hierarchy.
Financial assets/(liabilities) at fair value through profit or loss at 31 May 2023 (unaudited) Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 170,896 – – 170,896
Fixed income investments 2,714 2,017 – 4,731
Liabilities:
Derivative financial instruments – commodity futures (559) – – (559)
---------------- ---------------- ---------------- ----------------
173,051 2,017 – 175,068
========== ========== ========== ==========
Financial assets/(liabilities) at fair value through profit or loss at 31 May 2022 (unaudited) Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 187,630 – – 187,630
Fixed income investments 4,133 2,992 – 7,125
Liabilities:
Derivative financial instruments – written options – (18) – (18)
---------------- ---------------- ---------------- ----------------
191,763 2,974 – 194,737
========== ========== ========== ==========
Financial assets/(liabilities) at fair value through profit or loss at 30 November 2022 (audited) Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Assets:
Equity investments 198,500 – – 198,500
Fixed income investments 5,629 2,265 – 7,894
Liabilities:
Derivative financial instruments – written options (55) – – (55)
---------------- ---------------- ---------------- ----------------
204,074 2,265 – 206,339
========== ========== ========== ==========
As at 31 May 2023, 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 previous year end, the ADRs in Gazprom were converted
into equity shares of Gazprom. As at the period-end, this investment is
considered a Level 3 financial asset.
As at 31 May 2023, the Company has one commodity future position. This has
been treated as a Level 1 investment.
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 for any business
risks, including climate change risk, in accordance with the fair value
related requirements of the Company’s financial reporting framework.
12. Related party disclosure
Directors’ emoluments
The Board consists of four non-executive Directors, all of whom are considered
to be independent of the Manager by the Board. None of the Directors has a
service contract with the Company. The Chairman receives an annual fee of
£40,000, the Chairman of the Audit and Management Engagement Committee
receives an annual fee of £34,000, the Senior Independent Director receives
an annual fee of £30,000 and each of the other Directors receives an annual
fee of £29,000.
As at 31 May 2023, an amount of £11,000 (31 May 2022: £11,000; 30 November
2022: £11,000) was outstanding in respect of Directors’ fees.
At the period end, interests of the Directors in the ordinary shares of the
Company are as set out below:
31 May 2023 31 May 2022 30 November 2022
Mr Adrian Brown (Chairman) 35,000 25,000 35,000
Mrs Carole Ferguson 1 10,000 – –
Dr Carol Bell 44,000 44,000 44,000
Mr Andrew Robson 35,000 24,000 35,000
1 Mrs Ferguson joined the Board with effect from 22 December 2021 and held no
shares as at that date.
Since the period end and up to the date of this report there have been no
changes in Directors’ holdings.
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).
As at 31 May 2023
Total % of shares held by Related BlackRock Funds Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc.
0.95 n/a n/a
As at 31 May 2022
Total % of shares held by Related BlackRock Funds Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc.
Nil n/a n/a
13. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration
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 management services, and other ancillary services, to BlackRock
Investment Management (UK) Limited (BIM (UK)). Further details of the
investment management contract are disclosed on page 57 of the Directors’
Report in the Company’s Annual Report and Financial Statements for the year
ended 30 November 2022.
The investment management fee due for the six months ended 31 May 2023
amounted to £808,000 (six months ended 31 May 2022: £634,000; year ended 30
November 2022: £1,358,000). At the period end £1,187,000 was outstanding in
respect of these fees (six months ended 31 May 2022: £882,000; year ended 30
November 2022: £728,000).
The Company is entitled to a rebate from the investment management fee charged
by the Manager in the event the Company’s ongoing charges exceed the cap of
1.25% per annum of average daily net assets. The amount of rebate accrued to
31 May 2023 amounted to £nil (six months ended 31 May 2022: £nil; year
ended 30 November 2022: £nil). Any final rebate for the full year ending 30
November 2023 will not crystallise and fall due until the calculation date of
30 November 2023.
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
period ended 31 May 2023 amounted to £21,000 excluding VAT (six months ended
31 May 2022: £12,000; year ended 30 November 2022: £45,000). Marketing fees
of £43,000 (31 May 2022: £34,000; 30 November 2022: £22,000) were
outstanding at 31 May 2023.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
14. Capital commitments and contingent liabilities
The Group had one capital commitment at 31 May 2023 (31 May 2022: none; year
ended 30 November 2022: none) in relation to the SPAC PIPE commitment for
investment in Lifezone SPAC. There were no contingent liabilities at 31 May
2023 (31 May 2022: none; 30 November 2022: none).
15. Publication of non-statutory accounts
The financial information contained in this Half Yearly Financial Report does
not constitute statutory accounts as defined in Section 435 of the Companies
Act 2006. The financial information for the six months ended 31 May 2023 and
31 May 2022 has not been reviewed or audited by the auditor.
The information for the year ended 30 November 2022 has been extracted from
the latest published audited financial statements, which have been filed with
the Registrar of Companies unless otherwise stated. The report of the Auditors
on those accounts contained no qualification or statement under Sections
498(2) or 498(3) of the Companies Act 2006.
16. Annual results
The Board expects to announce the annual results for the year ending 30
November 2023 in January 2024.
Copies of the annual results announcement can be obtained from the Secretary
on 020 7743 3000 or at cosec@blackrock.com. The Annual Report and Financial
Statements should be available at the beginning of February 2024, with the
Annual General Meeting being held in March 2024.
For further information please contact:
Melissa Gallagher, Managing Director Investment Trusts - 020 7743 3000
Tom Holl/Mark Hume, Fund Managers - 020 7743 3000
Press enquires:
Lansons Communications – Tel: 020 7294 3689
E-mail: BlackRockInvestmentTrusts@lansons.com
1 August 2023
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London EC2N 2DL
END
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