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BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC (LEI:54930040ALEAVPMMDC31)
HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 MAY 2021
PERFORMANCE RECORD
| As at 31 May 2021 (unaudited) |
As at 30 November 2020 (audited) |
Change % |
|
| Net assets (£’000)1 | 116,887 | 91,642 | 27.5 |
| Net asset value per ordinary share (pence) | 100.53 | 80.76 | 24.5 |
| Ordinary share price (mid-market) (pence) | 102.50 | 71.40 | 43.6 |
| Premium/(discount) to net asset value2 | 2.0% | (11.6%) | |
| --------------- | --------------- | ||
| Performance (with dividends reinvested) | |||
| Net asset value per share2 | 27.3% | 13.9% | |
| Ordinary share price2 | 46.9% | 16.0% | |
| ======== | ======== |
| For the six months ended 31 May 2021 (unaudited) |
For the six months ended 31 May 2020 (unaudited) |
Change % |
|
| Revenue | |||
| Net profit on ordinary activities after taxation (£’000) | 2,356 | 2,113 | 11.5 |
| Revenue earnings per ordinary share (pence)2 | 2.07 | 1.86 | 11.3 |
| --------------- | --------------- | --------------- | |
| Interim dividends (pence) | |||
| 1st interim | 1.00 | 1.00 | – |
| 2nd interim3 | 1.00 | 1.00 | – |
| ======== | ======== | ======== |
1 The change in net assets reflects market movements, shares issued and dividends paid during the period.
2 Alternative Performance Measures, see Glossary included within the Half Yearly Financial Report (which can be found on the Company’s website at www.blackrock.com/uk/beri).
3 Paid on 16 July 2021.
CHAIRMAN’S STATEMENT
MARKET OVERVIEW
The COVID-19 pandemic continues to overshadow financial markets across the globe, generating ongoing economic upheaval as concerns over new variants of the disease contribute to uncertainty about the pace of economic recovery. It is becoming clear that no country is safe in isolation and the pandemic won’t be beaten until an effective vaccination programme has been implemented globally, which will take time. Markets were boosted in November by the election of President Biden in the United States of America (US) and the prospect of new ‘green deal’ spending in the US and Europe; the Company’s heightened exposure to Energy Transition stocks benefitted from this in the first quarter of the year, although valuations have since cooled as fears over inflation and rising commodity prices led investors to seek more exposure to conventional mining and commodities stocks. Valuations in the Mining sector were buoyed by a genuine tightness between supply and demand and continuing issues with global supply chains (driven mainly by COVID-19) and rising investor concerns about inflation. The Traditional Energy sector also performed well in the first few months of the year with oil prices remaining high as the vaccine roll-out programme gained momentum and economic activity gathered pace.
PERFORMANCE
During the six months ended 31 May 2021, the Company’s net asset value (NAV) per share rose by 27.3% and its share price rose by 46.9% (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 Index rose by 27.6% and the MSCI World Energy Index rose by 16.7% over the same period (both percentages in sterling terms with dividends reinvested). The Company had approximately 30% 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 2021. 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 8.6% and the Wilderhill Index decreased by 15.1% over the same period. The gains in the Company’s NAV over the six months under review were driven predominantly by the Mining allocation in the portfolio.
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 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 below.
Since the period end and up until close of business on 26 July 2021 the Company’s NAV remained unchanged and the share price has fallen by 11.3% (with dividends reinvested) as the Company's discount widened out in recent weeks.
REVENUE RETURN AND DIVIDENDS
While dividends have come under pressure in the wider equity markets as a result of the COVID-19 crisis, the income from the investments held by your Company has remained robust. Revenue return per share for the six-month period was 2.07 pence per share, an increase of 11.3% over the same period last year (the revenue return for the six months to 31 May 2020 was 1.86 pence per share). The Board’s current target is to declare quarterly dividends of at least 1.00 pence per share in the year to 30 November 2021, making a total of at least 4.00 pence per share for the year as a whole. This target represents a yield of 3.9% based on the share price of 102.50 pence per share as at 31 May 2021.
The first quarterly interim dividend of 1.00 pence per share was paid on 22 April 2021 and the second quarterly interim dividend of 1.00 pence per share was paid on 16 July 2021 (four quarterly interim dividends each of 1.00 pence per share were paid in the twelve months ended 30 November 2020).
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 and they will only enter into option transactions to the extent 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 9.7%, and the level of gearing at 31 May 2021 was 5.2%. For calculations, see the Glossary included within the Half Yearly Financial Report (which can be found on the Company’s website at www.blackrock.com/uk/beri).
SHARE CAPITAL AND DISCOUNT CONTROL
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 issue powers to ensure that the share price is broadly in line with the underlying NAV. The Company currently has authority to buy back up to 14.99% of the Company’s issued share capital (excluding treasury shares) and to allot ordinary shares representing up to 10% of the Company’s issued ordinary share capital (excluding treasury shares).
The Company’s shares started the period under review trading at a discount of 11.6%; this widened out to 13.2% by the end of calendar year 2020 as markets remained volatile. This volatility continued to create challenges for many investment companies in determining appropriate intraday pricing levels for buyback transactions. Consequently the Board was not active in buying back shares over the first three months of the period under review (when the average discount was 7.3%); however the Board continued to monitor the market throughout and, in conjunction with the Company’s broker, gave consideration to the possibility of buying back shares on a daily basis. In early May 2021 the Company’s shares moved to trade consistently at a premium (reaching a high of a 5.8% premium in the month) and between 12 May and 31 May the Company issued 2,800,000 shares for proceeds of £2,880,000 (before the deduction of issue costs). The shares were issued out of treasury at an average premium of 1.5% to the cum income NAV at the close of business on the business day prior to each issue and at a premium to the estimated cum income NAV at the time of each transaction. The average discount for the entire six months to 31 May 2021 was 4.0%.
As at 26 July 2021 the Company’s shares were trading at a discount to NAV of 9.6%.
MARKET OUTLOOK & PORTFOLIO POSITIONING
The world continues to reel from the impact of COVID-19 and its ever-evolving challenges. There is reason to be cautious on the global economic outlook for the remainder of the year as recent Chinese economic data has shown a slow-down in activity, and US fiscal support may be easing. Traditional energy demand has picked up as economies begin to reopen, benefitting some energy producers but driving up costs and inflation.
Against this challenging backdrop, one trend is clear. Government support across the globe for the decarbonisation of the energy supply chain and a greener energy infrastructure is here to stay. Over the long-term, capital investment in the relevant infrastructure and technological advances will create compelling investment opportunities both in the Energy Transition sector and for the companies that service the associated supply chains. The Board is confident that the Company is currently well placed to benefit from these key investment trends.
ED WARNER
Chairman
28 July 2021
INVESTMENT MANAGER’S REPORT
MARKET OVERVIEW
The last six months have seen great returns to the areas that the Company invests in and potentially cemented the foundations of the next cycle in energy and resources. Following the election of President Biden in the United States of America (US) and the deployment of vaccination programmes, market conditions have been very favourable for Mining and Traditional Energy companies. Although global policies around decarbonisation are key drivers for the Energy Transition companies, share prices already reflected considerable expectation at the beginning of the period and consequently, returns were relatively lacklustre.
The recovery in economic activity across the world – in particular in the US and China – has been strong, driven by the potent combination of pent-up demand and government stimulus. For context, the fiscal stimulus response in the US since the start of the COVID-19 pandemic has, according to some calculations, been around four times that seen during the 2008 global financial crisis to counter a negative impact to the economy that was only one quarter of the magnitude (Source: BlackRock Investment Institute). This has created a surplus of demand relative to supply across the majority of commodities and squeezed prices higher. The disruption to logistics and supply chains from the various COVID-19 impacts has exacerbated these deficits and further supported markets.
One interesting aspect of the pandemic has been a strong move from governments, investors and consumers alike to think and act in a more sustainable fashion. This has led to a greater focus on ESG and, in particular, climate change. To this end, the pressure on the Traditional Energy companies to elucidate a clear alignment to Net Zero has accelerated. The result has been some high-profile votes for climate proposals both in Europe and the US. In turn, hydrocarbon companies are rapidly shifting towards ‘managed decline’ in their legacy oil production businesses. Since consumer behaviours are not changing at the same pace, this has the potential to cause a widening gap between supply and demand over the medium term. This, together with government stimulus, may lead to inflationary conditions - an environment in which resources companies tend to flourish.
PORTFOLIO ACTIVITY AND INVESTMENT PERFORMANCE
The Company performed well during the first half of 2021. The net asset value (NAV) of the Company returned 27.3% per share driven primarily by strong returns in Mining and Traditional Energy holdings in the portfolio. Share price returns of 46.9% during the period (both percentages in sterling terms with dividends reinvested) also had a strong tailwind from the improvement in trading conditions for the Company’s shares as they ended the period at a modest premium to NAV, having started at a discount of over 10%.
Having increased our Traditional Energy holdings in November 2020 following the first vaccine rollout announcements, we maintained positioning in the region of 30% in this sector throughout the first half of 2021. In fact, we made only modest changes to the sector allocation between the three main areas, but we did make some changes at the sub-sector and individual company level over the last six months.
During the period, we added a number of new holdings in the North American Exploration and Production (E&P) sector. These additions were focused on management teams that had clearly articulated a commitment to capital discipline whilst offering enhanced cash returns to shareholders. The vast majority of the North American energy sector has committed to living well within cash flow – a stark shift from the past decade or so when the shale oil industry consistently outspent cashflow by 120%. This combination of supply discipline and a faster reopening of the global economy than anticipated is leading to rapidly tightening physical balances and oil prices in excess of $70 per barrel. With budgets anchored on oil prices in the low $50s, this bodes very well for outsized returns of capital from a sector with a poor track record of returns. This pivot back to North America was predominantly funded by exiting some of our international oil company holdings.
Whilst Traditional Energy stocks have performed strongly during the period (MSCI ACWI Energy +28% versus FTSE 100 +19%) this came at the expense of some of the Energy Transition stocks. Following an incredibly strong year in 2020, the solar and wind stocks fell by between 10% and 40%. Structurally, we continue to see the Energy Transition accelerating, and this pullback offered a good opportunity to add to some of our existing higher quality wind and solar companies in the period – with one new stock added from the solar sector Scatec ASA.
Within the Mining sector, the largest position change was adding to a holding in the Vale perpetual shareholder debentures. These securities have a share in a revenue royalty over a substantial portion of the areas where Vale mines iron ore. The proportion of Vale’s production being mined from these areas is increasing over the next few years, so these instruments offer the dual benefit of an income yield and growth. We also established a position in Labrador Iron Ore, which has exposure to iron ore production in Canada where Rio Tinto is the operator. The iron ore product here is of particularly high quality and with the increasing environmental pressure on steel production, we think that premia for high quality products will remain high into the future. We funded these positions by exiting Fortescue, which was trading at a more expensive valuation and produces a lower grade product than the other iron ore companies held in the portfolio.
Although inflation began to accelerate early in 2021 – and we think this will continue throughout the year – we trimmed our gold exposure as we saw greater upside in the cyclical/industrial areas of the portfolio. We also reduced our Platinum Group Metals (PGM) producer holdings, taking the profits from companies that had performed very strongly as a result of higher palladium and rhodium prices.
INCOME
The Mining and Traditional Energy sectors have continued their trend of returning capital to shareholders. They are becoming so consistent in doing so that we believe it will begin to be reflected in higher valuation multiples, especially in an environment of historically low bond yields across the sovereign and corporate markets.
The percentage of the portfolio held in bonds has steadily reduced over the last year or so. The primary reason for this is that companies have refinanced higher yield securities that we have held, with lower yield paper. They have been able to do this because of the improved financial health and outlook of the issuers as well as the ongoing loose monetary policies from central banks around the world. We have generally not participated in these refinancings as the post-tax yield on the new issues has not been attractive relative to the equity holdings of the portfolio.
Option income was lower in the first half of 2021 than in many of the recent half year periods. This is a reflection of our overall positive market view and volatilities in our sectors broadly coming down relative to the overall market when compared to the last few years. It is also a result of the Board offering the flexibility to pay the dividend from capital.
ENERGY
Continued shareholder pressure to reduce hydrocarbon output is constraining supply at a time when demand is recovering at pace. The recent ‘Net Zero Emissions’ report from the International Energy Agency (IEA) highlighted the scale of the problem of trying to decarbonise at pace. The report was specifically designed to outline a possible pathway to Net Zero by 2050. One conclusion from the report was to suggest that global oil supply would need to fall by 75% – a headline which grabbed a lot of attention. Whilst the direction of travel towards decarbonisation remains clear, the agency also provided their latest medium-term oil demand outlook which showed consumption rising to 104 million barrels per day by 2026, above the 100 million barrels per day reached in 2019.
The chart on page 9 of the Half Yearly Financial Report shows a linear interpolation of the agency’s Net Zero Emissions path to 2050 which would suggest a supply shortfall of more than 30 million barrels per day by 2026. We do not believe that consumption patterns will change anywhere near as rapidly as supply can be reduced which paves the way for an extended period of high oil prices. Since our last update, oil prices have risen from $46 per barrel to over $70 per barrel. This bodes well for those higher quality producers that have pledged to return capital to shareholders.
ENERGY TRANSITION
Government regulations continue to evolve rapidly in the Energy Transition space. Some of the highlights from the period include both regulatory and market news.
Regulatory:
- President Biden announced plans for a $2.2 trillion American Jobs Plan to target spending on roads, clean energy generation and grid, water and waste infrastructure and support for a domestic electric vehicle supply chain, including Electric Vehicle (EV) charging points;
- As part of Earth Day, President Biden held a Leader’s Summit, subsequently announcing that the US will target reducing carbon emissions by more than 50% by 2030 compared with 2005 levels; and
- In May, the UK government, as part of its broader Net Zero by 2050 ambitions has suggested that homeowners may have to replace gas heating with efficient pumps whenever a property is sold.
Industry:
- Within clean transportation, there was further evidence of the accelerating shift toward EVs as Volvo announced that it plans to go all electric by 2030, whilst Jaguar announced that it plans to become an electric-only brand from 2025 onwards;
- Volkswagen held their Power Day in March and announced they would build six battery ‘gigafactories’ in Europe by 2030, each with 40 GWh of capacity with the first to be constructed in Sweden with Northvolt; and
- In May, Ford announced that it expects 40% of global sales to be fully electric by 2030 with plans to increase investment in EVs by $8bn to $30bn through 2025.
MINING
Whilst the green metal narrative and longer-term demand outlook was certainly helpful for metals like copper in the first half of the year, strong returns were seen across the majority of mined commodities. One of the most notable features of the last six months has been the strength in the iron ore price, with stronger than expected Chinese steel demand combining with continued supply disappointments from Brazil and Australia to result in a tight physical market and high prices. The major London-listed diversified miners have benefitted from this and it has been the key driver of their higher forecast cash flow for the first half of 2021. Within the iron ore market, high quality/low impurity product has attracted a higher premium as steel makers have looked to maximise productivity from blast furnaces and minimise their environmental emissions. We believe China’s environmental commitments here to be genuine and if anything will get more stringent in the future. Therefore, we think this quality differential will persist not just in iron ore but across the commodities suite and have this consideration built into all of our investment analysis.
To illustrate the scale of potential demand for certain commodities from the decarbonisation of the economy, the chart on page 10 of the Half Yearly Financial Report shows the forecast copper demand growth from a number of key areas. Interestingly, when we look back at historic forecasts of solar build out and EV demand, these forecasts have consistently underestimated the speed/scale of these areas, so we think there is upside risk to the forecasts here.
The constraint in capital spending on new mines is a key characteristic of the Mining sector that we’ve written about before and it is reassuring to see this continuing during 2021. Despite the very strong commodity price environment and robust financial health of the producing companies, capital expenditure intentions are also remaining restrained, as shown in the chart on page 11 the Half Yearly Financial Report.
This trend is going to see commodity supply growth be muted compared to the growth seen during/after the 2000s super cycle, creating the potential for a stronger for longer price environment as markets remain consistently undersupplied. Another constraint on project development is the vastly improved remuneration policies at the major mining companies now compared to previous cycles. This has aligned management more closely with shareholders and, given the focus on returns and per share metrics rather than volume growth, is leading to a bias against projects being approved by senior executives. The final subtle difference compared to the 2000s cycle is that mining companies are having to commit a greater proportion of their capital spend to ESG related projects – for example, they might upgrade their mining fleet from diesel to electric trolley assisted trucks. Whilst these investments can come with modest efficiency gains, their main impact is a reduction in emissions or other environmental improvements. This is positive for the sustainability of the industry, but this capital doesn’t lead to a material increase in production, whereas in previous cycles nearly all of the capital would be committed to increasing production/supply. This is another supportive factor for a more durable price cycle for mined commodities looking forward from here.
MARKET OUTLOOK AND PORTFOLIO POSITIONING
At the end of 2020 we wrote about the challenges that still lay ahead for the global economy. Many of these challenges still remain as we face uncertainty about the relaxing of COVID-19-related restrictions and the withdrawal of the economic support measures. However, what has become clearer is that the commitment to reopen economies with greater focus on delivering environmentally friendly outcomes is incredibly strong. This should be supportive of a broad range of investment opportunities in the Energy Transition space as well as a key driver on growth for certain mined commodities. We are optimistic on these infrastructure programmes being rolled out but remain healthily sceptical of the potential for disappointment – the previous US president promised major infrastructure spend which never came through as some forecast at the start of 2017. With that in mind, we are focused perhaps more on the opportunities where economics and consumer demand are creating the change, notably in the electric vehicle space and the associated supply chains.
As we think about differentiated investment opportunities over the next few years, one thing that stands out is the dispersion in market views across many areas of our portfolio and investment universe. The chart on page 12 of the Half Yearly Financial Report shows the dispersion in copper price forecasts as an example of this.
We believe that this provides an array of opportunities for active managers and in the portfolio, we will look to have positions that are sized appropriately to balance conviction and risk management.
As we enter the second half of the year, we are excited about the outlook across all the main areas of the portfolio. However, we are cognisant that the most recent Chinese economic data has shown a slowing in activity and we may have already seen the peak in US fiscal support. With this in mind, after the end of the first half of the year we modestly reduced the Mining sector exposure in the portfolio until we have greater visibility on the timing of the increased demand that will come through from decarbonisation spend over the next few years.
The physical energy markets have continued to tighten as economies reopen so we allocated this capital to a number of companies where we believe management to be most disciplined and the free cashflow most likely to be returned to shareholders.
ENERGY TRANSITION
The determination to build back more sustainably, particularly from developed countries, has been palpable of late and we think this will lead to a more rapid deployment of capital and labour than is currently embedded into long-term consensus expectations. Record fiscal stimulus targeting green industries and initiatives have been announced from the European Union Green Deal, China and more recently the US. Whilst details are still being confirmed, the long-term direction of travel is clear. Regulatory support for the Energy Transition sector is getting stronger with capital following at pace. Indeed, we expect more announcements from governments as part of the 26th UN Climate Change Conference of the Parties (COP26) meeting planned for November this year.
And it’s not just regulation that is helping the acceleration of the Energy Transition sector, economics continue to improve too. For instance, renewable energy costs for onshore wind and solar photovoltaic, are now at grid parity in certain markets and such power generation now represents the most economic technology choice, which is driving rapid adoption. We see similar cost competitiveness trends in other areas such as energy efficient lighting and energy storage solutions in automotive electrification. Combined, regulation and economics are incredibly supportive for a rapid and substantive capital deployment in the years ahead.
However, we are cognisant that this rapid deployment of capital can cause dislocations in asset prices. As noted earlier, equity valuations across parts of the Energy Transition sub-sectors have pulled back materially from the highs experienced in the third quarter of 2021. At the same time, generationally low asset prices in the Traditional Energy sector opened up an attractive risk-adjusted opportunity at a time when many of the Traditional Energy companies are embracing their own path towards Net Zero.
We think this builds on an important point around risk-adjusted returns as we navigate the Energy Transition and one which will continue to open up new opportunities for the Company in the coming years. We are reminded of a quote from the former Chairman and CEO of Citicorp, Walter Wriston:
“Capital will always go where it’s welcome and stay where it’s well treated. Capital is not just money. It’s also talent and ideas.”
TOM HOLL AND MARK HUME
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
28 July 2021
DISTRIBUTION OF INVESTMENTS AS AT 31 MAY 2021
Asset allocation – Geographic
| Global | 55.4% |
| USA | 16.6% |
| Latin America | 10.0% |
| Canada | 9.7% |
| Australia | 2.2% |
| South Africa | 2.0% |
| Germany | 1.9% |
| France | 0.8% |
| Ireland | 0.7% |
| United Kingdom | 0.5% |
| Africa | 0.2% |
Asset allocation – Commodity
| Mining | 49.0% |
| Traditional Energy | 28.7% |
| Energy Transition | 22.3% |
| Energy Transition (22.3%) | |
| Electrification | 8.7% |
| Energy Efficiency | 6.9% |
| Renewables | 5.0% |
| Transport | 1.0% |
| Storage | 0.7% |
| Traditional Energy (28.7%) | |
| E&P | 13.7% |
| Integrated | 10.5% |
| Refining & Marketing | 3.0% |
| Distribution | 1.1% |
| Oil Services | 0.4% |
| Mining (49.0%) | |
| Diversified | 25.4% |
| Copper | 7.6% |
| Industrial Minerals | 4.6% |
| Gold | 4.3% |
| Steel | 2.6% |
| Diamonds | 1.3% |
| Iron | 1.3% |
| Platinum | 1.2% |
| Nickel | 0.7% |
TEN LARGEST INVESTMENTS
1 + Vale (2020: 2nd)
Diversified mining group
Market value: £12,357,000
Share of investments: 10.0%1 (2020: 6.0%)
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.
2 + Rio Tinto (2020: 3rd)
Diversified mining group
Market value: £5,218,000
Share of investments: 4.2% (2020: 5.6%)
One of the world’s leading mining groups. The group’s primary production is iron ore, but it also produces aluminium, copper, diamonds, gold, industrial minerals and energy products.
3 - BHP (2020: 1st)
Diversified mining group
Market value: £4,852,000
Share of investments: 3.9% (2020: 6.3%)
The world’s largest diversified natural resources group. The group is a major producer of aluminium, iron ore, copper, thermal and metallurgical coal, manganese, uranium, nickel, silver, titanium minerals and diamonds. The group also has significant interests in oil, gas and liquefied natural gas.
4 = Chevron (2020: 4th)
Integrated oil group
Market value: £4,729,000
Share of investments: 3.8% (2020: 5.2%)
An integrated oil and gas producer engaged in all aspects of the oil and gas industry. The group has both upstream and downstream operations, as well as alternative energy operations including solar, wind and biofuels.
5 + Freeport-McMoRan (2020: 6th)
Copper producer
Market value: £4,718,000
Share of investments: 3.8% (2020: 3.7%)
A global mining group which operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum.
6 + Anglo American (2020: 7th)
Diversified mining group
Market value: £4,711,000
Share of investments: 3.8% (2020: 3.4%)
A global mining group. The group’s mining portfolio includes bulk commodities including iron ore, manganese, and metallurgical coal, base metals including copper and nickel and precious metals and minerals including platinum and diamonds. Anglo American has mining operations globally, with significant assets in Africa and South America.
7 + Glencore (2020: n/a)
Diversified mining group
Market value: £4,294,000
Share of investments: 3.5% (2020: n/a)
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.
8 + Enel (2020: 10th)
Electrification
Market value: £3,758,000
Share of investments: 3.1% (2020: 2.9%)
An electric utility and network operator and a leading owner of renewable energy assets. The group operates in more than 30 countries, bringing energy to people through the adoption of new sustainability-oriented technologies.
9 + ConocoPhillips (2020: 13th)
E&P
Market value: £3,439,000
Share of investments: 2.8% (2020: 2.7%)
An American multinational corporation engaged in hydrocarbon exploration. ConocoPhillips is one of the world’s largest independent E&P groups based on production and proved reserves. They have operations in 15 countries and are committed to the efficient and effective exploration and production of oil and natural gas.
10 + Vestas (2020: 11th)
Renewables
Market value: £3,428,000
Share of investments: 2.8% (2020: 2.9%)
A Danish manufacturer, seller, installer and servicer of wind turbines. The group is the energy industry’s global partner on sustainable energy solutions, providing wind power across the globe.
1 2.9% relates to fixed interest holdings in Vale.
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 2020.
Together, the ten largest investments represent 41.7% of total investments (ten largest investments as at 30 November 2020: 43.1%).
INVESTMENTS AS AT 31 MAY 2021
| Main geographic exposure |
Market value £’000 |
|
% of investments |
|
| Mining | ||||
| Diversified | ||||
| Vale | Latin America | 8,784 | } | 10.0 |
| Vale Debentures * | Latin America | 3,573 | ||
| Rio Tinto | Global | 5,218 | 4.2 | |
| BHP | Global | 4,852 | 3.9 | |
| Anglo American | Global | 4,711 | 3.8 | |
| Glencore | Global | 4,294 | 3.5 | |
| --------------- | --------------- | |||
| 31,432 | 25.4 | |||
| ========= | ========= | |||
| Copper | ||||
| Freeport-McMoran | United States | 4,718 | 3.8 | |
| First Quantum Minerals | Global | 1,674 | } | 2.7 |
| First Quantum Minerals 6.875% 01/03/26 | Global | 844 | ||
| First Quantum Minerals 7.5% 01/04/25 | Global | 336 | ||
| First Quantum Minerals 7.25% 01/04/23 | Global | 320 | ||
| Lundin Mining | Global | 1,313 | 1.1 | |
| --------------- | --------------- | |||
| 9,205 | 7.6 | |||
| ========= | ========= | |||
| Industrial Minerals | ||||
| CF Industries | United States | 1,703 | 1.4 | |
| Trane Technologies | United States | 1,474 | 1.2 | |
| Bunge | Global | 1,440 | 1.2 | |
| Lynas Corporation | Australia | 1,006 | 0.8 | |
| --------------- | --------------- | |||
| 5,623 | 4.6 | |||
| ========= | ========= | |||
| Gold | ||||
| Kinross Gold | Global | 1,611 | 1.3 | |
| Wheaton Precious Metals | Global | 1,540 | 1.3 | |
| Newmont Mining | Global | 1,104 | 0.9 | |
| Sibanye Stillwater | South Africa | 985 | 0.8 | |
| --------------- | --------------- | |||
| 5,240 | 4.3 | |||
| ========= | ========= | |||
| Steel | ||||
| ArcelorMittal | Global | 1,129 | } | 1.6 |
| ArcelorMittal 5.5% 18/05/23 | Global | 860 | ||
| Steel Dynamics | United States | 1,253 | 1.0 | |
| --------------- | --------------- | |||
| 3,242 | 2.6 | |||
| ========= | ========= | |||
| Diamonds | ||||
| Mountain Province Diamonds 8% 15/12/22 | Canada | 1,397 | 1.1 | |
| Petra Diamonds 7.25% 01/05/22 | Africa | 251 | 0.2 | |
| --------------- | --------------- | |||
| 1,648 | 1.3 | |||
| ========= | ========= | |||
| Iron | ||||
| Labrador Iron Ore | Canada | 1,570 | 1.3 | |
| --------------- | --------------- | |||
| 1,570 | 1.3 | |||
| ========= | ========= | |||
| Platinum | ||||
| Impala Platinum | South Africa | 1,522 | 1.2 | |
| --------------- | --------------- | |||
| 1,522 | 1.2 | |||
| ========= | ========= | |||
| Nickel | ||||
| Nickel Mines | Australia | 813 | 0.7 | |
| --------------- | --------------- | |||
| 813 | 0.7 | |||
| ========= | ========= | |||
| Total Mining | 60,295 | 49.0 | ||
| ========= | ========= | |||
| Traditional Energy | ||||
| E&P | ||||
| ConocoPhillips | Global | 3,439 | 2.8 | |
| Canadian Natural Resources | Canada | 2,903 | 2.4 | |
| Hess | Global | 2,370 | 1.9 | |
| Pioneer Natural Resources | United States | 2,224 | 1.8 | |
| Devon Energy | United States | 1,741 | 1.4 | |
| Arc Resources | Canada | 1,420 | 1.2 | |
| Tourmaline Oil | Canada | 1,406 | 1.1 | |
| Santos | Australia | 905 | 0.7 | |
| Kosmos Energy | United States | 455 | 0.4 | |
| --------------- | --------------- | |||
| 16,863 | 13.7 | |||
| ========= | ========= | |||
| Integrated | ||||
| Chevron | Global | 4,729 | 3.8 | |
| Total | Global | 2,576 | 2.1 | |
| Exxon Mobil | Global | 2,175 | 1.8 | |
| Suncor Energy | Canada | 1,844 | 1.5 | |
| Equinor | Global | 1,558 | 1.3 | |
| --------------- | --------------- | |||
| 12,882 | 10.5 | |||
| ========= | ========= | |||
| Refining & Marketing | ||||
| Marathon Petroleum | United States | 1,923 | 1.6 | |
| Valero Energy | United States | 1,776 | 1.4 | |
| --------------- | --------------- | |||
| 3,699 | 3.0 | |||
| ========= | ========= | |||
| Distribution | ||||
| TC Energy Corporation | Canada | 1,400 | 1.1 | |
| --------------- | --------------- | |||
| 1,400 | 1.1 | |||
| ========= | ========= | |||
| Oil Services | ||||
| Baker Hughes | Global | 550 | 0.4 | |
| --------------- | --------------- | |||
| 550 | 0.4 | |||
| ========= | ========= | |||
| Total Traditional Energy | 35,394 | 28.7 | ||
| ========= | ========= | |||
| Energy Transition | ||||
| Electrification | ||||
| Enel | Global | 3,758 | 3.1 | |
| EDP Renovaveis | Global | 2,364 | 1.9 | |
| RWE | Germany | 2,311 | 1.9 | |
| NextEra Energy | United States | 853 | 0.7 | |
| Iberdrola | Global | 794 | 0.6 | |
| National Grid | United Kingdom | 564 | 0.5 | |
| --------------- | --------------- | |||
| 10,644 | 8.7 | |||
| ========= | ========= | |||
| Energy Efficiency | ||||
| Schneider Electric | Global | 1,904 | 1.5 | |
| Maxim Integrated | Global | 1,803 | 1.5 | |
| Smith (A.O.) Corp | United States | 1,054 | 0.9 | |
| ON Semiconductor | Global | 1,051 | 0.9 | |
| Soitec | France | 935 | 0.8 | |
| Kingspan Group | Ireland | 809 | 0.7 | |
| Texas Instruments | Global | 792 | 0.6 | |
| --------------- | --------------- | |||
| 8,348 | 6.9 | |||
| ========= | ========= | |||
| Renewables | ||||
| Vestas | Global | 3,428 | 2.8 | |
| Scatec ASA | Global | 1,137 | 0.9 | |
| Sunnova Energy International | United States | 763 | 0.6 | |
| Shoals Technologies | United States | 433 | 0.4 | |
| First Solar | Global | 336 | 0.3 | |
| --------------- | --------------- | |||
| 6,097 | 5.0 | |||
| ========= | ========= | |||
| Transport | ||||
| Volkswagen | Global | 1,281 | 1.0 | |
| --------------- | --------------- | |||
| 1,281 | 1.0 | |||
| ========= | ========= | |||
| Storage | ||||
| Umicore | Global | 913 | 0.7 | |
| --------------- | --------------- | |||
| 913 | 0.7 | |||
| ========= | ========= | |||
| Total Energy Transition | 27,283 | 22.3 | ||
| ========= | ========= | |||
| Total Portfolio | 122,972 | 100.0 | ||
| ========= | ========= | |||
| Comprising: | ||||
| Equity and debt investments | 122,972 | 100.0 | ||
| Derivative financial instruments – written options | – | – | ||
| --------------- | --------------- | |||
| 122,972 | 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).
All investments are ordinary shares unless otherwise stated. The total number of holdings (including options) at 31 May 2021 was 66 (30 November 2020: 63).
There were no open options as at 31 May 2021 (30 November 2020: 2).
The equity and fixed income investment total of £122,972,000 (2020: £97,580,000) above before the deduction of the negative option valuations of £nil (2020: £11,000) 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 £12,193,000 and cash and cash equivalents of £6,859,000 that are also disclosed in the Consolidated Statement of Financial Position. Details of the AIC methodology for calculating gearing are given in the Glossary included within the Half Yearly Financial Report (which can be found on the Company’s website at www.blackrock.com/uk/beri).
As at 31 May 2021, 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 2020. A detailed explanation can be found in the Strategic Report on pages 40 to 44 and in note 16 on pages 106 to 117 of the Annual Report and Financial Statements which are available on the website at www.blackrock.com/uk/beri.
COVID-19 continues to have an impact on the global economy, supply chains and capital markets, and could continue to adversely affect the global economy, individual issuers and capital markets, and could continue with a degree of severity and duration which cannot be predicted. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally.
GOING CONCERN
The Board is mindful of the continuing uncertainty surrounding the potential duration of the COVID-19 pandemic and its impact on the global economy, the Company’s assets and the level of revenue derived from the portfolio. 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 future and is financially sound. The Board believes that the Company and its key third party service providers have in place appropriate business continuity plans and will be able to continue to maintain service levels through the COVID-19 pandemic.
The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Ongoing charges (excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation 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 1.25% of net assets for the year ended 30 November 2020. 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 of the financial statements. The related party transactions with the Directors are set out in note 12 of the financial statements.
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 28 July 2021 and the above responsibility statement was signed on its behalf by the Chairman.
ED WARNER
FOR AND ON BEHALF OF THE BOARD
28 July 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY 2021
| |
Six months ended 31 May 2021 (unaudited) |
Six months ended 31 May 2020 (unaudited) |
Year ended 30 November 2020 (audited) |
|||||||
| Notes |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
|
| Income from investments held at fair value through profit or loss | 3 | 2,515 | – | 2,515 | 1,975 | – | 1,975 | 3,618 | – | 3,618 |
| Other income | 3 | 342 | – | 342 | 620 | – | 620 | 1,325 | – | 1,325 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total income | 2,857 | – | 2,857 | 2,595 | – | 2,595 | 4,943 | – | 4,943 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Net profit/(loss) on investments and options held at fair value through profit or loss | – | 22,617 | 22,617 | – | (10,475) | (10,475) | – | 6,307 | 6,307 | |
| Net loss on foreign exchange | – | (5) | (5) | – | (98) | (98) | – | (49) | (49) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total | 2,857 | 22,612 | 25,469 | 2,595 | (10,573) | (7,978) | 4,943 | 6,258 | 11,201 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Expenses | ||||||||||
| Investment management fee | 4 | (110) | (333) | (443) | (74) | (209) | (283) | (133) | (469) | (602) |
| Other operating expenses | 5 | (213) | (4) | (217) | (173) | (1) | (174) | (388) | (6) | (394) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total operating expenses | (323) | (337) | (660) | (247) | (210) | (457) | (521) | (475) | (996) | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Net profit/(loss) on ordinary activities before finance costs and taxation | 2,534 | 22,275 | 24,809 | 2,348 | (10,783) | (8,435) | 4,422 | 5,783 | 10,205 | |
| Finance costs refund/(expense) | 6 | 3 | 9 | 12 | (5) | (15) | (20) | (9) | (26) | (35) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit/(loss) on ordinary activities before taxation | 2,537 | 22,284 | 24,821 | 2,343 | (10,798) | (8,455) | 4,413 | 5,757 | 10,170 | |
| Taxation (expense)/credit | (181) | – | (181) | (230) | 38 | (192) | 487 | 50 | 537 | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit/(loss) on ordinary activities after taxation | 8 | 2,356 | 22,284 | 24,640 | 2,113 | (10,760) | (8,647) | 4,900 | 5,807 | 10,707 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Earnings/(loss) per ordinary share (pence) | 8 | 2.07 | 19.60 | 21.67 | 1.86 | (9.47) | (7.61) | 4.31 | 5.12 | 9.43 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All income is attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss). 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 2021
| Notes |
Called up share capital £’000 |
Share premium account £’000 |
Special reserve £’000 |
Capital reserve £’000 |
Revenue reserve £’000 |
Total £’000 |
|
| For the six months ended 31 May 2021 (unaudited) | |||||||
| At 30 November 2020 | 1,190 | 46,977 | 66,775 | (27,797) | 4,497 | 91,642 | |
| Total comprehensive income: | |||||||
| Net profit for the period | – | – | – | 22,284 | 2,356 | 24,640 | |
| Transactions with owners, recorded directly to equity: | |||||||
| Ordinary shares reissued from treasury | 9 | – | 749 | 2,131 | – | – | 2,880 |
| Share issue costs | – | – | (6) | – | – | (6) | |
| Dividends paid1 | 7 | – | – | – | – | (2,269) | (2,269) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 31 May 2021 | 1,190 | 47,726 | 68,900 | (5,513) | 4,584 | 116,887 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the six months ended 31 May 2020 (unaudited) | |||||||
| At 30 November 2019 | 1,190 | 46,977 | 67,241 | (33,604) | 4,141 | 85,945 | |
| Total comprehensive income/(loss): | |||||||
| Net (loss)/profit for the period | – | – | – | (10,760) | 2,113 | (8,647) | |
| Transactions with owners, recorded directly to equity: | |||||||
| Ordinary shares purchased into treasury | – | – | (462) | – | – | (462) | |
| Share purchase costs | – | – | (4) | – | – | (4) | |
| Dividends paid2 | 7 | – | – | – | – | (2,274) | (2,274) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 31 May 2020 | 1,190 | 46,977 | 66,775 | (44,364) | 3,980 | 74,558 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the year ended 30 November 2020 (audited) | |||||||
| At 30 November 2019 | 1,190 | 46,977 | 67,241 | (33,604) | 4,141 | 85,945 | |
| Total comprehensive income: | |||||||
| Net profit for the year | – | – | – | 5,807 | 4,900 | 10,707 | |
| Transactions with owners, recorded directly to equity: | |||||||
| Ordinary shares purchased into treasury | – | – | (462) | – | – | (462) | |
| Share purchase costs | – | – | (4) | – | – | (4) | |
| Dividends paid3 | 7 | – | – | – | – | (4,544) | (4,544) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 30 November 2020 | 1,190 | 46,977 | 66,775 | (27,797) | 4,497 | 91,642 | |
| ========= | ========= | ========= | ========= | ========= | ========= |
1 4th interim dividend of 1.00p per share for the year ended 30 November 2020, declared on 8 December 2020 and paid on 15 January 2021 and 1st interim dividend of 1.00p per share for the year ended 30 November 2021, declared on 16 March 2021 and paid on 22 April 2021.
2 4th interim dividend of 1.00p per share for the year ended 30 November 2019, declared on 10 December 2019 and paid on 20 January 2020 and 1st interim dividend of 1.00p per share for the year ended 30 November 2020, declared on 17 March 2020 and paid on 23 April 2020.
3 4th interim dividend of 1.00p per share for the year ended 30 November 2019, declared on 10 December 2019 and paid on 20 January 2020; 1st interim dividend of 1.00p per share for the year ended 30 November 2020, declared on 17 March 2020 and paid on 23 April 2020; 2nd interim dividend of 1.00p per share for the year ended 30 November 2020, declared on 9 June 2020 and paid on 17 July 2020 and 3rd interim dividend of 1.00p per share for the year ended 30 November 2020, declared on 15 September 2020 and paid on 20 October 2020.
For information on the Company’s distributable reserves, please refer to note 10 below.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2021
| Notes |
31 May 2021 (unaudited) £’000 |
31 May 2020 (unaudited) (restated)1 £’000 |
30 November 2020 (audited) (restated)1 £’000 |
|
| Non current assets | ||||
| Investments held at fair value through profit or loss | 11 | 122,972 | 76,812 | 97,580 |
| Current assets | ||||
| Other receivables | 1,053 | 757 | 338 | |
| Current tax asset | 47 | 6 | 17 | |
| Cash collateral held with brokers | – | 249 | 163 | |
| Cash and cash equivalents | 6,859 | 5,731 | 6,380 | |
| --------------- | --------------- | --------------- | ||
| Total current assets | 7,959 | 6,743 | 6,898 | |
| ========= | ========= | ========= | ||
| Total assets | 130,931 | 83,555 | 104,478 | |
| ========= | ========= | ========= | ||
| Current liabilities | ||||
| Other payables | (1,630) | (914) | (487) | |
| Current tax liability | (221) | (138) | (221) | |
| Derivative financial liabilities held at fair value through profit or loss | 11 | – | (26) | (11) |
| Bank overdraft | (12,193) | (7,919) | (12,117) | |
| --------------- | --------------- | --------------- | ||
| Total current liabilities | (14,044) | (8,997) | (12,836) | |
| ========= | ========= | ========= | ||
| Net assets | 116,887 | 74,558 | 91,642 | |
| ========= | ========= | ========= | ||
| Equity attributable to equity holders | ||||
| Called up share capital | 9 | 1,190 | 1,190 | 1,190 |
| Share premium account | 47,726 | 46,977 | 46,977 | |
| Special reserve | 68,900 | 66,775 | 66,775 | |
| Capital reserve | (5,513) | (44,364) | (27,797) | |
| Revenue reserve | 4,584 | 3,980 | 4,497 | |
| --------------- | --------------- | --------------- | ||
| Total equity | 116,887 | 74,558 | 91,642 | |
| ========= | ========= | ========= | ||
| Net asset value per ordinary share (pence) | 8 | 100.53 | 65.71 | 80.76 |
| ========= | ========= | ========= |
1 Please refer to note 2 “Restatement of 2020 comparatives” below for further details.
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MAY 2021
| Six months ended 31 May 2021 (unaudited) £’000 |
Six months ended 31 May 2020 (unaudited) (restated)1 £’000 |
Year ended 30 November 2020 (audited) (restated)1 £’000 |
|
| Operating activities: | |||
| Net profit/(loss) on ordinary activities before taxation | 24,821 | (8,455) | 10,170 |
| (Subtract)/add back finance costs (refund)/expense | (12) | 20 | 35 |
| Net (profit)/loss on investments and options held at fair value through profit or loss (including transaction costs) | (22,617) | 10,475 | (6,307) |
| Net loss on foreign exchange | 5 | 98 | 49 |
| Sales of investments held at fair value through profit or loss | 40,765 | 37,875 | 94,723 |
| Purchases of investments held at fair value through profit or loss | (43,551) | (26,613) | (87,461) |
| (Increase)/decrease in other receivables | (125) | 10 | 171 |
| Increase/(decrease) in other payables | 520 | (242) | (167) |
| Increase in amounts due from brokers | (590) | (258) | – |
| Increase in amounts due to brokers | 623 | 502 | – |
| Net movement in cash collateral held with brokers | 163 | (31) | 55 |
| --------------- | --------------- | --------------- | |
| Net cash inflow from operating activities before taxation | 2 | 13,381 | 11,268 |
| --------------- | --------------- | --------------- | |
| Taxation paid | – | (45) | (73) |
| Refund of UK corporation tax | – | – | 946 |
| Taxation on investment income included within gross income | (211) | (77) | (195) |
| --------------- | --------------- | --------------- | |
| Net cash (outflow)/inflow from operating activities | (209) | 13,259 | 11,946 |
| ========= | ========= | ========= | |
| Financing activities | |||
| Interest received/(paid) | 12 | (20) | (35) |
| Net cash proceeds from ordinary shares reissued from treasury | 2,874 | – | – |
| Payments for share purchases | – | (462) | (462) |
| Share purchase costs paid | – | (4) | (4) |
| Dividends paid | (2,269) | (2,274) | (4,544) |
| --------------- | --------------- | --------------- | |
| Net cash inflow/(outflow) from financing activities | 617 | (2,760) | (5,045) |
| ========= | ========= | ========= | |
| Increase in cash and cash equivalents | 408 | 10,499 | 6,901 |
| Effect of foreign exchange rate changes | (5) | (98) | (49) |
| --------------- | --------------- | --------------- | |
| Change in cash and cash equivalents | 403 | 10,401 | 6,852 |
| Cash and cash equivalents at start of period | (5,737) | (12,589) | (12,589) |
| --------------- | --------------- | --------------- | |
| Cash and cash equivalents at end of period | (5,334) | (2,188) | (5,737) |
| ========= | ========= | ========= | |
| Comprised of: | |||
| Cash at bank | 6,859 | 5,731 | 6,380 |
| Bank overdraft | (12,193) | (7,919) | (12,117) |
| --------------- | --------------- | --------------- | |
| (5,334) | (2,188) | (5,737) | |
| ========= | ========= | ========= |
1 Please refer to note 2 “Restatement of 2020 comparatives” below for further details.
The notes below form part of these financial statements.
Notes to the financial statements for the six months ended 31 May 2021
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 six month period ended 31 May 2021 have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with International Accounting Standard 34 (IAS 34), ‘Interim Financial Reporting’, as adopted by the European Union (EU). 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 2020, which have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union and as applied in accordance with the provisions 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, is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.
Adoption of new and amended standards and interpretations:
Amendments to IFRS 3 – Definition of a business (effective 1 January 2020). This amendment revised the definition of a business.
This standard did not have any impact on the Group.
Amendments to IAS 1 and IAS 8 – Definition of material (effective 1 January 2020). The amendments to IAS 1, ‘Presentation of Financial Statements’, and IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, and consequential amendments to other IFRSs require companies to:
(i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting;
(ii) clarify the explanation of the definition of material; and
(iii) incorporate some of the guidance of IAS 1 about immaterial information.
This standard did not have any impact on the Group.
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (effective 1 January 2020). These amendments provide certain reliefs in connection with the interest rate benchmark reform. The reliefs relate to hedge accounting and have the effect that the Inter Bank Offer Rate (IBOR) reform should not cause hedge accounting to terminate.
This standard did not have any significant impact on the Group.
IFRS standards that have yet to be adopted:
IFRS 17 – Insurance contracts (effective 1 January 2021). This standard replaces IFRS 4, which currently permits a wide range of 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. The standard has not been endorsed by the EU.
This standard is unlikely to have any impact on the Group as it has no insurance contracts.
Restatement of 2020 comparatives
In order to better reflect the requirements of IAS 32: Financial Instruments: Presentation, the parent company’s bank overdraft has been presented separately from the subsidiary’s cash balance in the Consolidated Statement of Financial Position and the Consolidated Cash Flow Statement with comparatives restated. These balances were previously shown on a net basis for the Group. This change in presentation has no impact on the Group’s net assets or the Group’s Statement of Comprehensive Income. The Group cash and cash equivalents balance as at 31 May 2020 has been restated from £104,000 to £5,731,000 and the Group overdraft balance has been restated from £2,292,000 to £7,919,000. The Group’s cash and cash equivalents balance as at 30 November 2020 has been restated from £8,000 to £6,380,000 and the Group overdraft balance has been restated from £5,745,000 to £12,117,000.
Also, the Group has restated the presentation of the Current tax asset and the Current tax liability on the face of the Consolidated Statement of Financial Position separately from Other receivables and Other payables. The Current tax asset and Current tax liability were previously included within Other receivables and Other payables respectively in the Consolidated Statement of Financial Position.
3. INCOME
| Six months ended 31 May 2021 (unaudited) £’000 |
Six months ended 31 May 2020 (unaudited) £’000 |
Year ended 30 November 2020 (audited) £’000 |
|
| Investment income: | |||
| UK dividends | 495 | 709 | 1,034 |
| UK special dividends | 75 | – | – |
| Overseas dividends | 1,799 | 827 | 1,848 |
| Overseas special dividends | 10 | – | – |
| Overseas scrip dividends | – | – | 17 |
| Fixed income | 136 | 439 | 722 |
| Less provision for doubtful debts | – | – | (3) |
| -------------- | -------------- | -------------- | |
| 2,515 | 1,975 | 3,618 | |
| ======== | ======== | ======== | |
| Other income: | |||
| Deposit interest | – | 10 | – |
| Option premium income | 342 | 610 | 1,241 |
| Interest on corporation tax refund | – | – | 84 |
| -------------- | -------------- | -------------- | |
| 342 | 620 | 1,325 | |
| ======== | ======== | ======== | |
| Total income | 2,857 | 2,595 | 4,943 |
| ======== | ======== | ======== |
During the period, the Group received option premium income in cash totalling £311,000 (six months ended 31 May 2020: £644,000; year ended 30 November 2020: £1,238,000) for writing put and covered call 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 £342,000 (six months ended 31 May 2020: £610,000; year ended 30 November 2020: £1,241,000) were amortised to revenue.
At 31 May 2021, there were no open positions (31 May 2020: 2; 30 November 2020: 2) with an associated liability of £nil (31 May 2020: £26,000; 30 November 2020: £11,000).
Dividends and interest received in cash during the period amounted to £2,019,000 and £137,000 (six months ended 31 May 2020: £1,473,000 and £380,000; year ended 30 November 2020: £2,867,000 and £680,000) respectively.
No special dividends have been recognised in capital during the period (six months ended 31 May 2020: £nil; year ended 30 November 2020: £nil).
4. INVESTMENT MANAGEMENT FEE
| Six months ended 31 May 2021 (unaudited) |
Six months ended 31 May 2020 (unaudited) |
Year ended 30 November 2020 (audited) |
|||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Investment management fee | 112 | 335 | 447 | 78 | 234 | 312 | 167 | 501 | 668 |
| Expense rebate due from Manager | (2) | (2) | (4) | (4) | (25) | (29) | (34) | (32) | (66) |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
| Total | 110 | 333 | 443 | 74 | 209 | 283 | 133 | 469 | 602 |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | |
Up to 16 March 2020, the investment management fee was levied at the rate of 0.95% of gross assets per annum on the first £250 million of the Company’s gross assets reducing to 0.90% thereafter. With effect from 17 March 2020, the investment management fee is levied at 0.80% of gross assets per annum.
Gross assets are calculated based on net assets before the deduction of the bank overdraft.
The fee is allocated 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income. There is no additional fee for company secretarial and administration services.
In addition, effective from 17 March 2020, 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 2021 amounted to £4,000 (six months ended 31 May 2020: £29,000; year ended 30 November 2020: £66,000) and has been adjusted in the investment management fee charged by the Manager. The rebate is offset against management fees and is allocated between revenue and capital in the ratio of total Ongoing Charges (as defined on pages 133 and 134 of the Annual Report and Financial Statements) allocated between revenue and capital during the period.
5. OTHER OPERATING EXPENSES
| Six months ended 31 May 2021 (unaudited) £’000 |
Six months ended 31 May 2020 (unaudited) £’000 |
Year ended 30 November 2020 (audited) £’000 |
|
| Allocated to revenue: | |||
| Custody fee | 3 | 2 | 4 |
| Auditor's remuneration – audit services1 | 22 | 13 | 37 |
| Registrar’s fee | 15 | 16 | 30 |
| Directors’ emoluments | 70 | 69 | 131 |
| Broker fees | 12 | 11 | 23 |
| Depositary fees | 5 | 4 | 7 |
| Marketing fees | 11 | 11 | 32 |
| Printing and postage fees | 18 | 13 | 29 |
| Legal and professional fees | 12 | 1 | 16 |
| Directors search fees | 11 | – | 20 |
| Bank charges | 3 | 3 | 7 |
| Stock exchange listings fees | 4 | 4 | 7 |
| Other administration costs | 27 | 26 | 45 |
| -------------- | -------------- | -------------- | |
| 213 | 173 | 388 | |
| ======== | ======== | ======== | |
| Allocated to capital: | |||
| Custody transaction charges2 | 4 | 1 | 6 |
| -------------- | -------------- | -------------- | |
| 217 | 174 | 394 | |
| ======== | ======== | ======== |
1 No non-audit services are provided by the Company’s auditors.
2 For the six month period ended 31 May 2021, expenses of £4,000 (six months ended 31 May 2020: £1,000; year ended 30 November 2020: £6,000) were charged to the capital column of the Statement of Comprehensive Income. These relate to transaction costs charged by the custodian on sale and purchase trades.
The transaction costs incurred on the acquisition of investments amounted to £24,000 for the six months ended 31 May 2021 (six months ended 31 May 2020: £57,000; year ended 30 November 2020: £140,000). Costs relating to the disposal of investments amounted to £15,000 for the six months ended 31 May 2021 (six months ended 31 May 2020: £15,000; year ended 30 November 2020: £31,000). All transaction costs have been included within the capital reserve.
Effective 17 March 2020, the Company’s Ongoing Charges, as defined in the Glossary included within the Half Yearly Financial Report (including the investment management fee), will be 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 rebate will apply to Ongoing Charges incurred by the Company from 17 March 2020. No cap was in place for Ongoing Charges incurred up to 16 March 2020.
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.
6. FINANCE COSTS
| Six months ended 31 May 2021 (unaudited) |
Six months ended 31 May 2020 (unaudited) |
Year ended 30 November 2020 (audited) |
|||||||
| Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
|
| Interest payable – bank overdraft | 7 | 21 | 28 | 5 | 15 | 20 | 9 | 26 | 35 |
| Refund of prior period excess overdraft interest | (10) | (30) | (40) | – | – | – | – | – | – |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
| Total | (3) | (9) | (12) | 5 | 15 | 20 | 9 | 26 | 35 |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | |
Finance costs for the Company are charged 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income. Subsidiary finance costs are charged 100% to the revenue column of the Consolidated Statement of Comprehensive Income.
At 31 May 2021, 31 May 2020 and 30 November 2020, the Group had an overdraft facility of the lower of £17.5 million or 20% of the Group’s net assets.
7. DIVIDENDS
The Board’s current dividend target is to declare quarterly dividends of 1.00 pence per share in the year to 30 November 2021, making a total of at least 4.00 pence per share for the year as a whole.
A first interim dividend for the period ending 28 February 2021 of £1,134,000 (1.00 pence per share) was paid on 22 April 2021 to shareholders on the register on 26 March 2021.
The Directors have declared a second interim dividend for the year ended 30 November 2021 of 1.00 pence per share. The total cost of the dividend was £1,163,000 and was paid on 16 July 2021 to shareholders on the Company’s register on 18 June 2021. This dividend has not been accrued in the financial statements for the six months ended 31 May 2021, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.
The third and fourth interim dividends will be declared in September 2021 and December 2021 respectively.
Dividends on equity shares paid during the period were:
| Six months ended 31 May 2021 (unaudited) |
Six months ended 31 May 2020 (unaudited) |
Year ended 30 November 2020 (audited) |
|
| Second interim dividend for the year ended 30 November 2020 of 1.00p (2019: 1.00p) | – | – | 1,135 |
| Third interim dividend for the year ended 30 November 2020 of 1.00p (2019: 1.00p) | – | – | 1,135 |
| Fourth interim dividend for the year ended 30 November 2020 of 1.00p (2019: 1.00p) | 1,135 | 1,139 | 1,139 |
| First interim dividend for the year ending 30 November 2021 of 1.00p (2020: 1.00p) | 1,134 | 1,135 | 1,135 |
| -------------- | -------------- | -------------- | |
| 2,269 | 2,274 | 4,544 | |
| ======== | ======== | ======== |
8. CONSOLIDATED EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue, capital returns per share and net asset value per share are shown below and have been calculated using the following:
| Six months ended 31 May 2021 (unaudited) |
Six months ended 31 May 2020 (unaudited) |
Year ended 30 November 2020 (audited) |
|
| Net revenue profit attributable to ordinary shareholders (£’000) | 2,356 | 2,113 | 4,900 |
| Net capital profit/(loss) attributable to ordinary shareholders (£’000) | 22,284 | (10,760) | 5,807 |
| ----------------- | ----------------- | ----------------- | |
| Total profit/(loss) attributable to ordinary shareholders (£’000) | 24,640 | (8,647) | 10,707 |
| ========== | ========== | ========== | |
| Equity shareholders’ funds (£'000) | 116,887 | 74,558 | 91,642 |
| ========== | ========== | ========== | |
| The weighted average number of ordinary shares in issue during each period on which the earnings per ordinary share was calculated was: | 113,712,381 | 113,656,537 | 113,562,426 |
| The actual number of ordinary shares in issue at the period end on which the net asset value per ordinary share was calculated was: | 116,270,349 | 113,470,349 | 113,470,349 |
| Earnings per share | |||
| Revenue earnings per share (pence) | 2.07 | 1.86 | 4.31 |
| Capital earnings/(loss) per share (pence) | 19.60 | (9.47) | 5.12 |
| ----------------- | ----------------- | ----------------- | |
| Total earnings/(loss) per share (pence) | 21.67 | (7.61) | 9.43 |
| ========== | ========== | ========== |
There were no dilutive securities at the period end (six months ended 31 May 2020: nil; year ended 30 November 2020: nil).
| As at 31 May 2021 (unaudited) |
As at 31 May 2020 (unaudited) |
As at 30 November 2020 (audited) |
|
| Net asset value per ordinary share (pence) | 100.53 | 65.71 | 80.76 |
| Ordinary share price (pence) | 102.50 | 55.20 | 71.40 |
| ======== | ======== | ======== |
9. CALLED UP SHARE CAPITAL
| Ordinary shares in issue number |
Treasury shares number |
Total shares number |
Nominal value £’000 |
|
| Allotted, called up and fully paid share capital comprised: | ||||
| Ordinary shares of 1 pence each: | ||||
| At 30 November 2020 | 113,470,349 | 5,495,651 | 118,966,000 | 1,190 |
| Shares reissued from treasury | 2,800,000 | (2,800,000) | – | – |
| ----------------- | ----------------- | ----------------- | ----------------- | |
| At 31 May 2021 | 116,270,349 | 2,695,651 | 118,966,000 | 1,190 |
| ========== | ========== | ========== | ========== |
During the period, no shares were bought back and transferred to treasury (six months ended 31 May 2020: 700,000; year ended 30 November 2020: 700,000) for a total consideration of £nil (six months ended 31 May 2020: £466,000; year ended 30 November 2020: £466,000).
During the period, 2,800,000 shares were issued from treasury (six months ended 31 May 2020: nil; year ended 30 November 2020: nil) for a total consideration of £2,874,000 (six months ended 31 May 2020: £nil; year ended 30 November 2020: £nil). Since 31 May 2021, no additional shares have been issued.
10. RESERVES
The share premium and capital redemption reserve are not distributable profits 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 profits for all purposes and, in particular, the repurchase by the Parent Company of its ordinary shares and for payments as dividends. In accordance with the Company’s Articles of Association, net capital returns may be distributed by way of dividend. The Parent Company’s capital losses of £(5,513,000) comprise a loss on capital reserve arising on investments sold of £(34,681,000), a gain on capital reserve arising on revaluation of listed investments of £28,858,000 and revaluation gains on the investment in the subsidiary of £310,000. The capital reserve arising on the revaluation of listed investments of £28,858,000 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.
11. VALUATION OF FINANCIAL INSTRUMENTS
Market risk arising from price risk
COVID-19 continues to have an impact on the global economy, supply chains and capital markets, and could continue to adversely affect the economies of many nations across the entire global economy, individual issuers and capital markets, and could continue to an extent that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established health care systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.
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 2020.
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.
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.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager.
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.
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/(liabilities) at fair value through profit or loss at 31 May 2021 (unaudited) |
Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity investments | 116,251 | – | – | 116,251 |
| Fixed income investments | 3,148 | 3,573 | – | 6,721 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | – | – | – |
| -------------- | -------------- | -------------- | -------------- | |
| 119,399 | 3,573 | – | 122,972 | |
| ======== | ======== | ======== | ======== |
Financial assets/(liabilities) at fair value through profit or loss at 31 May 2020 (unaudited) |
Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity investments | 69,472 | – | – | 69,472 |
| Fixed income investments | 7,235 | 105 | – | 7,340 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (26) | – | (26) |
| -------------- | --------------- | -------------- | -------------- | |
| 76,707 | 79 | – | 76,786 | |
| ======== | ======== | ======== | ======== |
Financial assets/(liabilities) at fair value through profit or loss at 30 November 2020 (audited) |
Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity investments | 94,217 | – | – | 94,217 |
| Fixed income investments | 3,216 | 147 | – | 3,363 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (11) | – | (11) |
| -------------- | -------------- | -------------- | -------------- | |
| 97,433 | 136 | – | 97,569 | |
| ======== | ======== | ======== | ======== |
There were no transfers between levels for financial assets and financial liabilities during the period recorded at fair value as at 31 May 2021, 31 May 2020 and 30 November 2020. The Group did not hold any Level 3 securities throughout the financial period under review or as at 31 May 2020 and 30 November 2020.
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 £38,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £32,000 and each of the other Directors receives an annual fee of £27,000.
As at 31 May 2021, an amount of £10,000 (31 May 2020: £10,000; 30 November 2020: £10,000) 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:
| Ordinary shares 31 May 2021 |
Ordinary shares 31 May 2020 |
Ordinary shares 30 November 2020 |
|
| Ed Warner (Chairman) | 94,000 | 94,000 | 94,000 |
| Dr Carol Bell | 44,000 | 44,000 | 44,000 |
| Adrian Brown | 14,603 | 14,603 | 14,603 |
| Michael Merton1 | N/A | 17,000 | 17,000 |
| Andrew Robson2 | 14,000 | N/A | N/A |
1 Michael Merton retired as a Non-Executive Director of the Board on 16 March 2021.
2 Andrew Robson was appointed a Non-Executive Director on 8 December 2020 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.
13. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed on pages 54 and 55 of the Directors’ Report in the Company’s Annual Report and Financial Statements for the year ended 30 November 2020.
The investment management fee due for the six months ended 31 May 2021 amounted to £443,000 (six months ended 31 May 2020: £283,000; year ended 30 November 2020: £602,000). At the period end £672,000 was outstanding in respect of these fees (six months ended 31 May 2020: £210,000; year ended 30 November 2020: £296,000). 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 rebate for the six months period ended 31 May 2021 amounted to £4,000 (six months ended 31 May 2020: £29,000; year ended 30 November 2020: £66,000) and has been adjusted in the investment management fee charged by the Manager. Any final rebate for the full year ending 30 November 2021 will not crystallise and fall due until the calculation date of 30 November 2021.
In addition to the above services, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the period ended 31 May 2021 amounted to £11,000 excluding VAT (six months ended 31 May 2020: £11,000; year ended 30 November 2020: £32,000). Marketing fees of £31,000 (31 May 2020: £30,000; 30 November 2020: £20,000) were outstanding at 31 May 2021.
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 capital commitments on investments of £1,890,000 at period end (31 May 2020: £nil; 30 November 2020: £nil). There were no contingent liabilities at 31 May 2021 (31 May 2020: £nil; 30 November 2020: £nil).
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 2021 and 31 May 2020 has not been reviewed or audited by the auditor.
The information for the year ended 30 November 2020 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 2021 in January 2022.
Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000 or at [email protected]. The Annual Report and Financial Statements should be available at the beginning of February 2022, with the Annual General Meeting being held in March 2022.
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: [email protected]
28 July 2021
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London EC2N 2DL
END
