TIDMBERI
BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC (LEI:54930040ALEAVPMMDC31)
INVESTMENT OBJECTIVE
The Company's objectives are to achieve an annual dividend target and, over the
long term, capital growth by investing primarily in securities of companies
operating in the mining and energy sectors.
PERFORMANCE RECORD
31 May 30
2020 November Change
(unaudited) 2019 %
(audited)
Net asset value per ordinary share (pence) 65.71 75.28 -12.7
- with dividends reinvested1 -10.0
Net assets (GBP'000)2 74,558 85,945 -13.2
Ordinary share price (mid-market) (pence) 55.20 66.00 -16.4
- with dividends reinvested1 -13.3
Discount to net asset value1 16.0% 12.3%
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For the six For the six
months months
ended ended
31 May 31 May
2020 2019 Change
(unaudited) (unaudited) %
Revenue
Net profit on ordinary activities after taxation (GBP'000) 2,113 2,282 -7.4
Revenue earnings per ordinary share (pence) 1.86 1.97 -5.6
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Interim dividends (pence)
1st interim 1.00 1.00 -
2nd interim3 1.00 1.00 -
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1 Alternative Performance Measures, see Glossary included within the
interim report (which can be found on the Company's website at
www.blackrock.com/uk/beri).
2 The change in net assets reflects market movements, the buyback of shares
and dividends paid during the period.
3 Paid on 17 July 2020.
PERFORMANCE TO 31 MAY 2020
Six months One year Three years Five years
Net Asset Value (with dividends reinvested)1 -10.0% -9.3% 4.0% 4.8%
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Share price (with dividends reinvested)1 -13.3% -16.0% -10.0% -13.9%
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1 Alternative Performance Measure. Further details of the calculation of
performance with dividends reinvested are given in the Glossary included within
the interim report (which can be found on the Company's website at
www.blackrock.com/uk/beri).
Source: BlackRock.
CHAIRMAN'S STATEMENT FOR THE SIX MONTHS TO 31 MAY 2020
MARKET OVERVIEW
The past six months have been challenging for investors across the globe, with
the COVID-19 pandemic creating deep uncertainty about the prospects for
economies and triggering extreme volatility in markets. The early weeks of the
period under review began promisingly for the mining and energy sectors but
this was swept away in mid-February when the extent of the global health crisis
became apparent and markets slumped. Shares in oil companies were particularly
badly affected as the crisis emerged at the same time as heightened political
tensions between the major oil producing nations, which conspired to drive
crude oil prices sharply lower. Stock markets have subsequently rallied and oil
prices have partially recovered, aided by the eventual implementation of OPEC1
production cuts. Mined commodity prices have also risen as positive economic
data from China indicated some recovery in industrial activity. However,
despite these recent promising indications, significant market volatility is
expected to remain until there is greater clarity on the likely duration of the
COVID-19 outbreak and its effects on the global economy.
PERFORMANCE
During the six months ended 31 May 2020 the Company's net asset value ('NAV')
per share fell by 10.0% and its share price fell by 13.3% (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 6.3% and the MSCI World Energy Index fell by 28.3%
over the same period (both percentages in sterling terms with dividends
reinvested). Further information on investment performance is given in the
Investment Manager's Report.
Since the period end and up until close of business on 28 July 2020 the
Company's NAV has increased by 11.8% and the share price has risen by 17.4%
(with dividends reinvested).
FOCUS ON ENERGY TRANSITION
The Board announced on 17 March that, within the parameters of the Company's
existing investment policy, it intended to increase exposure to stocks
benefitting from the transition in the energy sector, away from carbon-based
energy supplies towards alternative and renewable sources. The Board views the
global transition to a low-carbon economy as a secular trend and an investment
opportunity that demands inclusion in the portfolio in a significant way. The
Company has adopted a balanced approach, and will continue to incorporate
traditional energy and mining equity investments in the portfolio, as these
continue to have a key role to play in the energy transition theme alongside
those in the vanguard of sustainable energy production. As at 28 July 2020,
27.4% of the portfolio is now invested in these transitional energy stocks,
with 18.6% invested in traditional energy holdings and 54.0% invested in the
mining sector.
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 but also because no index that appropriately
reflects the Company's blended exposure to the energy and mining sectors. For
internal purposes, however, the Board compares the performance of the portfolio
against a bespoke internal mining and energy composite index and this will
evolve in line with the portfolio changes described above. The neutral sector
weightings of 50% mining and 50% traditional energy in this current bespoke
index will evolve to 40% mining, 30% traditional energy and 30% energy
transition sector weightings.
REVENUE RETURN AND DIVIDS
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 relatively robust. Revenue return per share for the
six-month period was 1.86 pence (six months to 31 May 2019: 1.97 pence). The
Board's current target is to declare quarterly dividends of at least 1.00 pence
per share in the year to 30 November 2020, making a total of at least 4.00
pence for the year as a whole. This target represents a yield of 7.2% based on
the share price of 55.20 pence per share as at 31 May 2020.
The first quarterly dividend of 1.00 pence per share was paid on 18 April 2020
and the second quarterly dividend of 1.00 pence per share was paid on 17 July
2020 (four quarterly interim dividends each of 1.00 pence per share were paid
in the twelve months ended 30 November 2019).
We do not expect the shift in focus away from carbon-based energy supplies
towards alternative and renewable sources described above to impair the
Company's ability to meet its target dividend, which will be delivered
primarily from a mix of dividend income from the portfolio and dividend
reserves, supported by the payment of income out of capital if required. 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.
FRANKED INVESTMENT INCOME (FII) GROUP LITIGATION ORDER (GLO) V HMRC
In 2003 The Prudential Assurance Company Limited filed a case against HM
Revenue & Customs (HMRC) on the treatment of foreign sourced dividends. The
litigation concerned the tax treatment of UK-resident companies (including
investment funds) that received dividends from portfolio shareholdings in
non-UK companies. It had previously been settled that the UK dividend tax
regime that applied to portfolio dividends prior to 2009 was contrary to EU
law, as UK dividends were not subject to tax whereas non-UK dividends were
taxable.
On 25 July 2018 the UK Supreme Court handed down its judgement in the
Prudential case, ruling (inter alia) that non-UK dividends remained taxable but
that credit should be given for the underlying foreign tax at the foreign
nominal corporate income tax rate of the source country. In June 2020, the
Company received correspondence from HMRC accepting the entitlement of the
Company to claim for double tax relief in the relevant accounting periods in
relation to underlying tax suffered on dividends from non-UK companies. While
the amount of the repayment has not been formally agreed with HMRC, and as such
a degree of uncertainty remains, the Board has been advised that the receipt of
a repayment in respect of these amounts had become sufficiently probable to
merit recognition in the Company's NAV, and it announced on 26 June 2020 that
an asset of GBP945,614 had been reflected in the NAV in respect of these claims.
As the original tax expense was debited to the revenue column of the income
statement, the benefit of this recovery has been credited to the revenue column
of the income statement and will result in an uplift of 0.83 pence per share to
the Company's revenue earnings per share for the year to 30 November 2020. More
information is given in note 15.
CHANGES TO PORTFOLIO MANAGEMENT AND FEES
Given the Company's increased focus on energy transition stocks, we announced
on 17 March 2020 that BlackRock's energy specialist Mark Hume would be
replacing Olivia Markham as portfolio manager to work alongside Tom Holl. Mark
has 10 years of experience directly managing energy stocks and is co-manager of
BlackRock's all-cap Energy strategy. The Board would like to take the
opportunity to thank Olivia for her contribution in managing the Company's
portfolio over the last six years.
The Board is very mindful of the need to ensure that shareholders receive good
value from the operations of the Company and regularly review all of its costs.
To that end, as also announced on 17 March, we agreed a reduction in the
management fee payable by the Company to BlackRock Fund Managers Ltd (the
"Manager") to 0.80% on gross assets per annum (previously 0.95% per annum on
the first GBP250 million of gross assets and 0.90% per annum thereafter). In
addition, it was agreed that the Company's Ongoing Charges, as set out and
defined in its annual report (and for avoidance of doubt including the
management fee), would be capped at 1.25% per annum of average daily net
assets. More information is set out in note 4.
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 8.5%, and
the level of gearing at 31 May 2020 was 3.0%. For calculations, see the
Glossary included within the interim 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.
Over the six months to 31 May 2020, the Company's shares have traded at an
average discount of 13.5%, and within a range of a 3.6% discount to a 24.6%
discount. The Company bought back a total of 700,000 ordinary shares between 1
December 2019 and 20 February 2020 at an average price of 66.06 pence per
share, for a total consideration of GBP462,000 and at an average discount of
12.3%. These shares were placed in treasury for potential reissue, thereby
saving the associated costs of an issue of new shares if demand arises.
However, as the COVID-19 pandemic took hold and global markets plummeted in
March and April 2020, the extreme market volatility created challenges for many
investment companies in determining appropriate intraday pricing levels for buy
back transactions. Consequently the Board has been less active in buying back
shares over the second half of the period under review and into June 2020, but
continues to monitor the market and, in conjunction with the Company's broker,
gives consideration to the possibility of buying back shares on a daily basis.
MARKET OUTLOOK AND PORTFOLIO POSITIONING
Recent signs of economic recovery in many of the world's major nations have
boosted oil and mined commodity prices and in turn share prices in our sectors.
Deferred infrastructure spending and continued recovery in demand as lockdowns
ease create the prospect of a structural upcycle for oil and commodity prices.
However, the investment environment remains extremely uncertain. Significant
market volatility is expected to remain until there is greater clarity on how
long it will take for more accustomed levels of economic activity to resume,
which in turn will depend on the extent to which the spread of COVID-19 can be
contained.
The Company's portfolio is focussed on larger market capitalisation,
established companies. In addition, the Manager is seeking to enhance the
growth element of the portfolio through selective investments in companies that
are exposed to energy transition and the decarbonisation of the energy supply
chain, where the Manager believes that the long term prospects are compelling.
ED WARNER
30 July 2020
1 Organization of the Petroleum Exporting Countries.
INVESTMENT MANAGER'S REPORT
MARKET OVERVIEW
The first half of 2020 will be viewed as one of the most extraordinary six
months for financial markets and for many aspects of life for all of us. The
year started out with economic activity buoyant, and growing modestly in most
major economies, and most market debate focused on what might trigger a
recession and/or the end of the decade long bull market for equities. The
mining companies were generating strong cashflow with a bias to returning it to
shareholders. We saw the lack of recent investment in conventional oil projects
as being likely to tighten markets towards the end of 2020 and the energy
transition accelerating and creating exciting new investment opportunities.
The emergence of COVID-19 and subsequent rapid spread across the world of the
virus caused an unprecedented impact on economic activity. This sent shockwaves
through the commodity markets as demand collapsed across almost every sector.
The hardest hit areas were those where the demand has been "lost" - such as
oil; the cancelled flights and missed car journeys will not be caught up,
however fast the recovery is. Other commodities that are more exposed to
capital expenditure, such as iron ore and steel, fared better as lost time on
construction projects can be made up.
Although China was the first country to suffer the effects of the virus, it has
also been the first to emerge out the other side. The Chinese Government
unleashed economic stimulus that quickly led to a rebound in underlying
activity. This can be seen in many data points and the chart on page 8 of the
half yearly annual report shows inventories across the metals space in China
and shows the effects of lockdown (rising inventories) followed by the swift
recovery through April and May.
Although the financial markets in Europe and North America have followed a
similar trajectory of sharp decline and rapid rebound, it remains to be seen
whether underlying economic activity will follow the same V-shaped recovery.
The ability of China to stimulate commodity-intensive activity is significantly
higher than that of governments in the West and this is one of the key reasons
we have maintained a larger weight in mining (versus energy) during the first
half as China accounts for a significantly greater proportion of mined
commodity demand than oil (or gas) demand.
The sections on mining, energy and the energy transition describe the first
half impacts in greater detail, the response of the companies to the dramatic
changes and how we have positioned the portfolio going into the second half of
the year.
2020 on 2019
Average Price
%
Change
(Average of
30 November 31 May % 31/05/18-31/05/
Commodity 2019 2020 Change 19
to 31/05/19-
31/05/20)
Base Metals (US$/tonne)
Aluminium 1,792 1,526 -14.8 -13.5
Copper 5,843 5,352 -8.4 -8.9
Lead 1,923 1,655 -13.9 -6.3
Nickel 13,618 12,260 -10.0 10.6
Tin 16,504 15,503 -6.1 -16.4
Zinc 2,300 1,993 -13.3 -16.4
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Precious Metals (US$/oz)
Gold 1,461.5 1,731.6 18.5 21.8
Silver 17.0 17.8 4.7 10.2
Platinum 894.0 825.0 -7.7 4.5
Palladium 1,832.0 1,920.0 4.8 55.4
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Energy
Oil (WTI) (US$/Bbl) 55.2 33.7 -38.9 -22.1
Oil (Brent) (US$/Bbl) 64.5 34.2 -47.0 -23.2
Natural Gas (US$/MMBTU) 2.5 1.7 -32.0 -30.1
Uranium (US$/lb) 26.0 34.0 30.8 -2.0
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Bulk Commodities (US$/tonne)
Iron ore 87.0 101.5 16.7 21.0
Coking coal* 141.3 133.3 -5.7 -23.2
Thermal coal 69.4 52.0 -25.1 -35.6
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Equity Indices
EMIX Global Mining Index (US$) 787.9 800.4 1.6 n/a
EMIX Global Mining Index (GBP) 609.2 647.4 6.3 n/a
MSCI World Energy Index (US$) 303.6 208.0 -31.5 n/a
MSCI World Energy Index (GBP) 234.7 168.2 -28.3 n/a
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* Source: Bloomberg.
Source: Datastream.
PORTFOLIO ACTIVITY AND INVESTMENT PERFORMANCE
The chart on page 10 of the half-yearly report sets out in detail the monthly
changes in the Company's portfolio composition between February 2017 and May
2020.
Throughout the first half of 2020 the portfolio had a greater weighting in
mining stocks than energy ones given our views on relative commodity price
outlook and, importantly, what commodity prices were being priced into the
market valuation of the companies. In our view, the market has consistently
underestimated the iron price and therefore the major mining companies have
appeared relatively attractive.
Gearing in the Company has been used quite sparingly in the first half of the
year compared to much of 2018 and 2019. In March we reduced gearing to just
over 5% due to the market volatility, but we will look to increase this back to
at least match the portfolio's fixed interest holdings as and when we think
appropriate. The energy transition companies that are being integrated into the
portfolio typically have lower volatility than the commodity-driven mining and
energy companies and this could allow gearing to be used to a modestly higher
degree in time too.
Within mining the biggest change in commodity positioning has been in the gold
sector where we started the period at around 14.5% and ended at 16.1%. There
are two main reasons why we increased the gold exposure. First was the speed
and magnitude of the response of Central Banks, most notably the US Federal
Reserve (the Fed), to the COVID-19 driven economic shock. The asset purchase
programme announced by the Fed and the guidance they have given on interest
rates remaining exceptionally low is, we believe, very supportive for gold.
Secondly the gold companies have shown a new willingness to act with more
capital discipline. Many of the larger, and even mid-size, gold companies have
announced dividend increases in the last six months. The gold companies still
have lower yields than the diversified mining companies, but it is an important
signal to investors that the misallocation of capital that occurred in the last
gold cycle is less likely to occur this time around.
Notwithstanding the enormous volatility experienced in global markets in
general and energy markets in particular, many of the structural trends in
traditional energy markets remain in place. We continue to believe that demand
for oil will peak some time in the next ten to fifteen years as society
continues to drive towards a lower carbon world. Combined with almost unchecked
growth from US shale for the last decade, this has led to increasingly volatile
oil prices. This has placed greater value on strong balance sheets, diversified
portfolios and stable sources of cash flow - a characteristic more often than
not of the larger Integrated Oil Companies (IOCs) and Midstream (Pipelines)
businesses. With the outlook for interest rates now looking 'lower-for-longer',
this should bode well for high quality dividend streams such as those within
the Midstream space. This has resulted in a deliberate shift in energy
sub-sector allocation over the period with, for instance, Midstream companies
making up 8% of the Company's NAV from less than 3% at the start of the period.
Other key changes include reducing the exposure to Exploration and Production
companies from almost 14% of NAV to just under 10% by the end of the period.
Whilst some of this shift has been driven by underlying market movements a
large proportion of the reduction reflects increasing risks around a Democratic
Presidential victory in November this year, which may result in less favourable
treatment of domestic producers. Finally, the Company has increased its
exposure to selected Oilfield Services stocks from zero to just under 2% in the
period. Whilst a smaller component of the Company's NAV, it marks the first
foray into the sector since September 2018.
The Company delivered a NAV total return of -10.0% over the six month period to
31 May 2020. This compares to a return of -11.0% over the same time period for
the reference index (used for internal monitoring purposes), which is a 50/50
split of the EMIX Global Mining Index and the MSCI World Energy Index. Although
the Company performed moderately better than UK equity markets (the FTSE All
Share returning -16.0% for the six month period), it lagged global equity
markets with the MSCI World Index (in GBP) down just 0.5%.
INCOME
During the first half of 2020, the Company generated GBP2.6 million in gross
income. This funded a dividend payment of 1.00p per share for the first and
second quarters, for a total of 2.00p per share for the first half of the year.
Although the high level of market volatility was attractive for option writing,
we were selective in our option writing, to target the best total return,
rather than overwrite the same proportion of the portfolio and generate excess
income from options.
The mining companies continued their now-established track record of returning
surplus cash to shareholders with companies such as Rio Tinto declaring final
year dividends at the upper end of targeted pay out ranges. The gold companies
have also shown a notable change in attitude towards dividends - for example
Newmont hiked its dividend by almost 80% and guided that it would return around
half of its free cashflow to shareholders through time.
The energy companies provided a less positive dividend story during the first
half of the year. Whilst some companies opted to use their balance sheet
strength to maintain payments despite the very challenging oil price
environment, many others took the chance to reset dividends lower. This
happened in areas of structural challenge, such as the oil services sector
where Schlumberger cut its dividend by 75%. Elsewhere, Royal Dutch Shell cut
its dividend by two-thirds, which was the first time it has cut its dividend
since World War II.
The energy transition companies under consideration for the portfolio did not
experience anything like the financial squeeze the oil companies faced from the
collapse in the oil price. Their dividends therefore look more likely to be
maintained over the medium term. However some, especially in Europe, may be
under political pressure to limit dividend payments in favour of reinvesting as
Governments are keen to see a green bias to any economic recovery. Overall for
the energy transition companies, their dividend yields are often lower than
those in mining and conventional energy as they typically have greater growth
opportunities. Thus, the flexibility to pay dividends from capital should allow
the portfolio to have an appropriate exposure to Energy Transition stocks
without diluting the importance of income within the Company's Objectives.
ENERGY
The International Energy Agency (IEA) estimates that average oil demand in 2020
will fall by over 8 million barrels per day, equivalent to 8% of total
consumption - making it the largest annual contraction in history (the chart on
page 13 of the Company's interim report shows the growth in global demand year
on year from the first quarter of 2019 and projected forward to the end of
2021).
The timing of this unprecedented collapse in demand came just as the world's
major oil producers (OPEC and Russia) had failed to reach an agreement on
supply at the group's meeting on 6 March 2020. This mismatch between supply and
demand caused crude inventories to rise at record rates, in turn, driving Brent
oil prices from an early January high of $69/barrel to a low of $19/barrel in
late-April. Prompt action by OPEC and Russia (OPEC+) saw the group agree a
reduction of almost 10 million barrels per day effective from the start of May.
Elsewhere, US shale producers implemented one of the sharpest reductions in
activity in history with the horizontal rig count falling from 701 to 271 over
the period. This has translated into budget cuts from producers in the order of
50% on an annualised basis through the balance of the year. As a result, US
shale output is forecast to contract by as much as 2 million barrels per day
through the second half of 2020 (a chart showing the supply and growth activity
for US Natural Gas Liquids and the horizontal rig count since January 2015 is
included on page 14 of the half-yearly financial report).
Taken together, these actions helped to drive crude prices back towards $35/
barrel by the end of the period and assuming OPEC+ remains focused on managing
supply we would expect inventories, and therefore prices, to normalise in the
first half of next year.
Turning to equities, the global energy sector fell 30% in the period with the
larger companies faring better (-27%) than smaller companies (-50%). From a
sub-sector perspective the Midstream (Pipelines) and Downstream (Refining &
Marketing) companies held up relatively better - falling by less than 20%. In
contrast, Oilfield Services stocks fell by more than one-third over the period.
Energy equities touched their lows in mid-March and have since rallied more
than 50%. As at the end of May, the sector is still trading at more than 30%
below where we started the period with global oil markets continuing to
rebalance.
ENERGY TRANSITION
Mitigating climate change is unquestionably the greatest challenge currently
facing humanity. In the decades ahead, the entire global energy system needs to
decarbonise if we are to limit emissions to tolerable levels. The
decarbonisation of the energy system not only covers the power sector, it also
touches transportation, buildings materials and petrochemicals all of which
have, up until now, been great enablers of a better quality of life. Continuing
to deliver affordable, clean and safe energy, whilst reducing carbon emissions
presents an immense challenge. A shift away from hydrocarbons is already
underway with coal's share of primary energy consumption, for instance, now at
its lowest level in 16 years. Closer to home, policy makers are also stepping
up their efforts. For example, in December 2019, the European Commission rolled
out its "roadmap for making the EU's economy sustainable by turning climate
change and environmental challenges into opportunities across all policy
areas". The EU plans to hit "Net Zero" emissions by 2050 with the aid of a EUR7
trillion investment plan. Within this plan as much as 45% could be allocated
towards the Utilities sector and will see a massive renovation wave of our
buildings and infrastructure, the roll-out of renewable energy projects and
cleaner transport. More detail is given in the chart on page 15 of the
half-yearly report.
Although the direction of travel is clear for decarbonisation, the pace is not.
Nevertheless, in recognition of the momentum building in the Energy Transition,
the board announced at the 2020 AGM in March, that the Company would be
shifting its investments to reflect this transition. This shift was undertaken
more formally on 1 June 2020 with a target neutral portfolio weighting for
Energy Transition stocks of 30%.
MINING
The mining sector mirrored similar trends as with the broader equity market,
largely recovering its losses following a sharp selloff in March; by the end of
the period it had recovered its losses. Within this though there was a wide
differential between the performance of the mined commodities, with the safe
haven metal gold once again showing its value as a hedge against volatility and
iron ore again benefitting from a favourable market structure.
Looking at the industrial mined commodities first, most of the base metals saw
price declines in the first half and this contrasted against iron ore, which
saw a price rise of over 15%. The chart on page 16 of the Company's interim
report for the six months ended 31 May 2020 shows China's demand (as a share of
total global demand) for a sample of mined commodities and the price change
from the start of 2020 to early June. China, whilst clearly impacted earlier by
the virus, has looked to reverse some of the negative economic impacts by
injecting stimulus. Whilst not of the scale seen at the start of 2016 and not
entirely focused in resource-intensive areas, it has provided a material boost
to steel demand (and hence iron ore demand).
The demand side is just one half of the story - it is important to look at the
role of supply in the various mined commodities too. On the supply side, the
highly concentrated nature of iron ore supply (both in terms of country of
supply and number of companies responsible for it) has caused supply to be more
vulnerable to disruption. The biggest source of supply shortfall relative to
expectations has come from Brazil where the struggles of Vale (the country's
biggest iron ore producer) to recover from the tailings dam disaster last year
have been compounded by the country's slow response to bring the virus under
control. These supply disruptions have coincided with China's strong
stimulus-driven demand and have resulted in a tight iron ore market, hence the
robust pricing. Also the supply disruptions from Brazil (relative to
expectations at the start of the year) are expected to continue through 2020,
maintaining a relatively tight balance between supply and demand in the global
iron ore market.
There has also been supply disruption in other commodities, but it has either
not been as impactful on overall supply as seen for iron ore, and/or the fall
in apparent demand has been even greater than the supply declines. In copper,
there were quite a few temporary mine closures in countries such as Peru and
Chile but following a number of weeks of suspension, production appears to have
ramped back up.
The strong performance of iron ore is a material positive for the major mining
companies, which are the core of the mining part of the portfolio. Unlike many
other sectors in the market, cashflows for the major miners have remained
strong in the first half of 2020 and look set to remain robust for the balance
of the year. When combined with the strong balance sheets that the sector had
at the start of the year, the stage is set for dividend payments to continue.
This is reassuring for the portfolio and there is a possibility that as other
sectors see dividend cuts or cancellations, the mining sector re-rates as the
dividend yield attracts new investors.
MARKET OUTLOOK & PORTFOLIO POSITIONING
From a conventional energy perspective the recent collapse in oil prices has
finally forced a dramatic downturn in US shale growth. The energy industry was
already driving towards much needed capital discipline and this downturn has
merely accelerated and reinforced this fiscal constraint. We believe that 2020
will mark the end of what has been a multi-year non-OPEC supply-driven bear
market. As a result, OPEC's role will change from needing to cut output to
balance the market, to adding barrels back - this will completely change the
financial market's perception that the world is awash with oil. Put another
way, despite the near-term challenges for oil markets, we are actually becoming
more bullish on the sector on a 2+ year time frame and reaffirm our view that
normalised oil prices will return to the $60-70/bbl range - a view we have held
since 2017. Our constructive outlook on the sector remains focused on higher
quality, globally diversified energy companies that can not only benefit from
rising commodity prices but can do so within the framework of the Energy
Transition.
Following the formal introduction of Energy Transition stocks into the
portfolio on 1 June 2020, these stocks now comprise more than a quarter of the
total NAV with Utility companies (e.g. Enel, RWE, NextEra Energy and EDP
Renovaveis) and Wind Manufacturers (e.g. Vestas) complementing our more
traditional energy holdings.
On the mining side, the key determinants of second half performance will be the
duration of the steel / commodity intensive stimulus in China and the pace of
recovery in economic activity in the rest of the world. The mining holdings
remain tilted towards iron ore, through a combination of the majors such as BHP
and specialists such as Fortescue, given the ongoing risks to iron ore supply.
The outlook for gold remains attractive given the vast quantitative easing and
the likely investor demand for risk hedges given how quickly equity markets
have rebounded following the March lows and the ongoing risks to the real
economy.
MARK HUME AND THOMAS HOLL
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
30 July 2020
TEN LARGEST INVESTMENTS AS AT 31 MAY 2020
BHP: 8.4% (2019: 7.8%) is the world's largest diversified natural resources
company. The company is a major producer of aluminium, iron ore, copper,
thermal and metallurgical coal, manganese, uranium, nickel, silver, titanium
minerals and diamonds. The company also has significant interests in oil, gas
and liquefied natural gas. (MSCI ESG Rating: BBB)
First Quantum Minerals: 6.5%1 (2019: 7.4%) is an established and rapidly
growing mining company operating seven mines and developing five projects
worldwide. The company is a significant copper producer and also produces
nickel, gold, zinc and platinum group elements. (MSCI ESG Rating: BB)
Barrick Gold: 5.7% (2019: 5.0%) is the world's second largest gold company by
market capitalisation following the merger with Randgold Resources in 2018.
Barrick Gold has operations and projects in 15 countries across the world. In
2019 the company successfully established a joint venture with Newmont Mining
across both companies' Nevada assets to maximize the synergies across both sets
of assets. (MSCI ESG Rating: BBB)
Chevron: 4.9% (2019: 4.7%) is an integrated oil and gas producer engaged in all
aspects of the oil and gas industry. The company has both upstream and
downstream operations, as well as alternative energy operations including
solar, wind and biofuels. (MSCI ESG Rating: BBB)
Total: 4.6% (2019: 3.6%) is a French multinational and is one of the largest
oil companies in the world. This integrated oil and gas company covers the
entire oil and gas chain from exploration and production to power generation,
transportation, refining and marketing and energy trading. (MSCI ESG Rating: A)
Rio Tinto: 4.5% (2019: 3.5%) is one of the world's leading mining companies.
The company's primary production is iron ore, but it also produces aluminium,
copper, diamonds, gold, industrial minerals and energy products. (MSCI ESG
Rating: A)
Newmont Mining: 4.3% (2019: 2.5%) is the only gold producer listed in the S&P
500 Index. The company has operations in Australia, Canada, Ghana, Peru,
Suriname, Mexico, Argentina, Dominican Republic and the United States. The
company has a commitment to sustainable and responsible mining and has been
named the mining industry leader in overall sustainability by the Dow Jones
Sustainability World Index in 2015, 2016, 2017 and 2018. (MSCI ESG Rating: A)
Royal Dutch Shell: 4.1% (2019: 6.0%) is one of the world's leading energy
companies. The Anglo-Dutch company is active in every area of the oil and gas
industry within exploration and production, refining and marketing, power
generation and energy trading. The company also has renewable energy interests
in biofuels. (MSCI ESG Rating: A)
Vale: 3.7%2 (2019: 3.0%) is one of the largest mining companies 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
company also produces manganese ore, ferroalloys, metallurgical and thermal
coal, copper, platinum group metals, gold, silver, cobalt, potash, phosphates
and other fertiliser nutrients. (MSCI ESG Rating: CCC)
Williams Companies: 3.5% (2019: 0.8%) is an American energy company based in
Tulsa, Oklahoma. Its core business is natural gas processing and
transportation, with additional petroleum and electricity generation assets.
(MSCI ESG Rating: BB)
1 5.2% relates to fixed interest holdings in First Quantum Minerals.
2 0.1% 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 2019. Together, the ten largest investments
represent 50.2% of total investments (ten largest investments as at 30 November
2019: 50.6%).
MSCI ESG ratings look to identify environmental, social and governance risks
and opportunities for individual stocks. Companies are rated on a scale from
AAA to CCC according to their exposure to certain risks and their ability to
manage them relative to the industry peers. A stock rated as AAA signifies a
company which is leading in terms of ESG factors relative to its industry. On
the other hand, a stock with a CCC score is considered a laggard, due to the
presence of one or more ESG risks that MSCI perceives to be material. The
rating scale is as follows: AAA, AA, A, BBB, BB, B, CCC. From AAA to AA a
company is considered to be an ESG leader in its respective industry, A to BB
is deemed to be an average score, whilst B and CCC represents a below average
score.
DISTRIBUTION OF INVESTMENTS AS AT 31 MAY 2020
ASSET ALLOCATION - GEOGRAPHY
Global 62.4%
USA 15.0%
Canada 7.7%
Australia 6.6%
Latin America 4.8%
Asia 2.4%
South Africa 0.8%
Africa 0.3%
Source: BlackRock.
ASSET ALLOCATION - COMMODITY
Mining 53.9%
Energy 46.1%
Integrated Oil, Gas and Energy 37.0%
Transition
Distribution 5.2%
Exploration & Production 3.9%
Diversified Mining 20.6%
Gold 16.1%
Copper 8.6%
Silver 3.0%
Diamonds 1.5%
Iron Ore 1.5%
Steel 1.3%
Platinum Group Metals 0.8%
Nickel 0.5%
Source: BlackRock.
INVESTMENTS AS AT 31 MAY 2020
Main Market
geographic value % of
exposure GBP'000 investments
Integrated Oil and Energy Transition
Chevron Global 3,795 4.9
Total Global 3,498 4.6
Royal Dutch Shell 'B' Global 3,140 4.1
BP Group Global 2,642 3.4
ConocoPhillips USA 2,433 3.2
Enel Global 1,965 2.6
Suncor Energy Canada 1,813 2.4
Pilgangoora 12% 21/06/22 Australia 1,654 2.2
Pioneer Natural Resources USA 1,514 2.0
Albemarle Global 1,371 1.8
Marathon Petroleum USA 1,359 1.8
Schlumberger USA 1,177 1.5
Petrobras Latin 850 1.1
America
Umicore Global 631 0.8
Santos Australia 478 0.6
-------------- --------------
28,320 37.0
-------------- --------------
Diversified Mining
BHP Global 6,437 8.4
Rio Tinto Global 3,493 4.5
Vale Latin 2,735 3.6
America
Vale Debentures* Latin 105 0.1
America
Anglo American Global 1,785 2.3
KAZ Minerals Asia 1,140 1.5
Teck Resources Canada 150 0.2
-------------- --------------
15,845 20.6
-------------- --------------
Gold
Barrick Gold Global 4,346 5.7
Barrick Gold Call Option 19/06/20 $27 Global (12) -
Newmont Mining Global 3,317 4.3
Agnico Eagle Mines Canada 1,328 1.7
Franco-Nevada Global 1,269 1.7
Newcrest Mining Australia 985 1.3
AngloGold Ashanti Global 722 0.9
Osisko Gold Royalties Convertible Bond 4% 31/12/22 Canada 414 0.5
Kirkland Lake Gold Put Option 19/06/20 $35 Canada (14) -
-------------- --------------
12,355 16.1
-------------- --------------
Copper
First Quantum Minerals 7.25% 15/05/22 Global 2,535 3.3
First Quantum Minerals Global 990 1.3
First Quantum Minerals 6.875% 01/03/26 Global 833 1.1
First Quantum Minerals 7.5% 01/04/25 Global 338 0.4
First Quantum Minerals 7.25% 01/04/23 Global 332 0.4
Freeport-McMoRan Copper & Gold Global 1,100 1.4
OZ Minerals Australia 361 0.5
Lundin Mining Global 185 0.2
-------------- --------------
6,674 8.6
-------------- --------------
Distribution
Williams Companies USA 2,707 3.5
TC Energy Corporation Canada 1,305 1.7
-------------- --------------
4,012 5.2
-------------- --------------
Exploration & Production
Hess USA 1,151 1.5
EOG Resources USA 717 0.9
CNOOC Asia 660 0.9
Kosmos Energy USA 438 0.6
-------------- --------------
2,966 3.9
-------------- --------------
Silver
Wheaton Precious Metals Global 2,308 3.0
Fresnillo Latin 36 -
America
-------------- --------------
2,344 3.0
-------------- --------------
Diamonds
Mountain Province Diamonds 8% 15/12/22 Canada 898 1.2
Petra Diamonds 7.25% 01/05/22 Africa 231 0.3
-------------- --------------
1,129 1.5
-------------- --------------
Iron Ore
Fortescue Metals Australia 1,119 1.5
-------------- --------------
1,119 1.5
-------------- --------------
Steel
ArcelorMittal Global 1,014 1.3
-------------- --------------
1,014 1.3
-------------- --------------
Platinum Group Metals
Impala Platinum South 617 0.8
Africa
-------------- --------------
617 0.8
-------------- --------------
Nickel
Nickel Mines Australia 391 0.5
-------------- --------------
391 0.5
-------------- --------------
Portfolio 76,786 100.0
-------------- --------------
Comprising
Equity and fixed income investments 76,812 100.0
Derivative financial instruments - written options (26) -
-------------- --------------
76,786 100.0
======== ========
* Includes investments held at Directors' valuation.
All investments are ordinary shares unless otherwise stated. The total number
of holdings (including options) at 31 May 2020 was 53 (30 November 2019: 49).
The total number of open options as at 31 May 2020 was 2 (30 November 2019: 2).
The negative valuations of GBP26,000 (30 November 2019: GBP30,000) in respect of
options held represent the notional cost of repurchasing the contracts at
market prices as at 31 May 2020.
As at 31 May 2020, 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 Manager's Report give details of
the important events which have occurred during the period and their impact on
the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
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 2019. A detailed explanation can be found in the Strategic Report on
pages 36 to 39 and in note 16 on pages 88 to 99 of the Annual Report and
Financial Statements which are available on the website at blackrock.com/uk/
beri.
In the view of the Board, the outbreak of the COVID-19 pandemic has
fundamentally altered the nature of the risks reported in the Annual Report and
Financial Statements. COVID-19 has resulted in travel restrictions, closed
international borders, enhanced health screenings at ports of entry and
elsewhere, disruption of and delays in healthcare service preparation and
delivery, prolonged quarantines, cancellations, supply chain disruptions and
lower consumer demand, as well as general concern and uncertainty. The impact
of COVID-19 has adversely affected 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 uncertainty surrounding the potential duration of
the COVID-19 pandemic and its impact on the global economy, the Company's
assets and the potential for the level of revenue derived from the portfolio to
reduce versus the prior year. 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 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, nonrecurring charges and
taxation) have been capped by the Manager at 1.25% of net asset value with
effect from 17 March 2020, and were approximately 1.48% of net assets for the
year ended 30 November 2019. 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. The related party
transactions with the Directors are set out in note 12.
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 Manager's 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 report has not been audited or reviewed by the Company's
Auditor. The half yearly financial report was approved by the Board on 30 July
2020 and the above responsibility statement was signed on its behalf by the
Chairman.
ED WARNER
For and on behalf of the Board
30 July 2020
FINANCIAL STATEMENTS
Consolidated statement of comprehensive income for the six months ended 31 May
2020
Revenue GBP'000 Capital GBP'000 Total GBP'000
Notes
Six months ended Six months ended Six months ended
Year ended Year ended Year ended
31.05.20 31.05.19 30.11.19 31.05.20 31.05.19 30.11.19 31.05.20 31.05.19 30.11.19
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Income from investments 3 1,975 2,154 4,336 - - 658 1,975 2,154 4,994
held at fair value through
profit or loss
Other income 3 620 671 1,308 - - - 620 671 1,308
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total income 2,595 2,825 5,644 - - 658 2,595 2,825 6,302
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net (loss)/profit on - - - (10,475) 1,215 (585) (10,475) 1,215 (585)
investments and options
held at fair value through
profit or loss
Net (loss)/profit on - - - (98) 36 25 (98) 36 25
foreign exchange
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total 2,595 2,825 5,644 (10,573) 1,251 98 (7,978) 4,076 5,742
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Expenses
Investment management fee 4 (74) (116) (237) (209) (348) (711) (283) (464) (948)
Other operating expenses 5 (173) (199) (404) (1) (1) (5) (174) (200) (409)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total operating expenses (247) (315) (641) (210) (349) (716) (457) (664) (1,357)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net profit/(loss) on 2,348 2,510 5,003 (10,783) 902 (618) (8,435) 3,412 4,385
ordinary activities before
finance costs and taxation
Finance costs 6 (5) (23) (49) (15) (67) (148) (20) (90) (197)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net profit/(loss) on 2,343 2,487 4,954 (10,798) 835 (766) (8,455) 3,322 4,188
ordinary activities before
taxation
Taxation (230) (205) (376) 38 27 42 (192) (178) (334)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net profit/(loss) on 8 2,113 2,282 4,578 (10,760) 862 (724) (8,647) 3,144 3,854
ordinary activities after
taxation
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings/(loss) per 8 1.86 1.97 3.97 (9.47) 0.74 (0.63) (7.61) 2.71 3.34
ordinary share (pence)
========= ========= ========= ========= ========= ========= ========= ========= =========
The total column of this statement represents the Group's Consolidated
Statement of Comprehensive Income, prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The
supplementary revenue and capital columns are both prepared under guidance
published by the Association of Investment Companies (AIC). All items in the
above statement derive from continuing operations. No operations were acquired
or discontinued during the period. All income is attributable to the equity
holders of the 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
2020
Share
Called up premium Special Capital Revenue
share capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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 9 - - (462) - - (462)
Share purchase costs - - (4) - - (4)
Dividends paid1 7 - - - - (2,274) (2,274)
------------ ------------ ------------ ------------ ------------ ------------
At 31 May 2020 1,190 46,977 66,775 (44,364) 3,980 74,558
------------ ------------ ------------ ------------ ------------ ------------
For the six months ended 31 May 2019
(unaudited)
At 30 November 2018 1,190 46,977 68,873 (32,880) 3,949 88,109
Total comprehensive income:
Net profit for the period - - - 862 2,282 3,144
Transactions with owners, recorded directly
to equity:
Ordinary shares purchased into treasury 9 - - (389) - - (389)
Share purchase costs - - (3) - - (3)
Dividends paid2 7 - - (232) - (2,090) (2,322)
------------ ------------ ------------ ------------ ------------ ------------
At 31 May 2019 1,190 46,977 68,249 (32,018) 4,141 88,539
------------ ------------ ------------ ------------ ------------ ------------
For the year ended 30 November 2019
(audited)
At 30 November 2018 1,190 46,977 68,873 (32,880) 3,949 88,109
Total comprehensive income/(loss):
Net (loss)/profit for the year - - - (724) 4,578 3,854
Transactions with owners, recorded directly
to equity:
Ordinary shares purchased into treasury 9 - - (1,390) - - (1,390)
Share purchase costs - - (10) - - (10)
Dividends paid3 7 - - (232) - (4,386) (4,618)
------------ ------------ ------------ ------------ ------------ ------------
At 30 November 2019 1,190 46,977 67,241 (33,604) 4,141 85,945
========= ========= ========= ========= ========= =========
1 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.
2 4th interim dividend of 1.00p per share for the year ended 30 November
2018, declared on 11 December 2018 and paid on 18 January 2019 and 1st interim
dividend of 1.00p per share for the year ended 30 November 2019, declared on 12
March 2019 and paid on 18 April 2019.
3 4th interim dividend of 1.00p per share for the year ended 30 November
2018, declared on 11 December 2018 and paid on 18 January 2019; 1st interim
dividend of 1.00p per share for the year ended 30 November 2019, declared on 12
March 2019 and paid on 18 April 2019, 2nd interim dividend of 1.00p per share
for the year ending 30 November 2019, declared on 11 June 2019 and paid on 19
July 2019 and 3rd interim dividend of 1.00p per share for the year ended 30
November 2019, declared on 17 September 2019 and paid on 22 October 2019.
The transaction costs relating to the acquisition and disposal of investments
amounted to GBP57,000 and GBP15,000 respectively for the six months ended 31 May
2020 (six months ended 31 May 2019: GBP23,000 and GBP8,000; year ended 30 November
2019: GBP67,000 and GBP9,000). All transaction costs have been included within the
capital reserve.
The share premium account is not distributable profit under the Companies Act
2006. The special reserve may be used as distributable profits for all purposes
and, in particular, for the repurchase by the Company of its ordinary shares
and for payment as dividends. In accordance with the Company's articles, net
capital reserves may be distributed by way of the repurchase by the Company of
its ordinary shares and for payment as dividends.
Consolidated statement of financial position as at 31 May 2020
31 May 31 May 30 November
2020 2019 2019
GBP'000 GBP'000 GBP'000
Notes (unaudited) (unaudited) (audited)
Non current assets
Investments held at fair value through profit or 10 76,812 94,423 98,554
loss
------------ ------------ ------------
Current assets
Other receivables 763 5,017 519
Cash collateral held with brokers 249 634 218
Cash and cash equivalents 104 - -
------------ ------------ ------------
1,116 5,651 737
------------ ------------ ------------
Total assets 77,928 100,074 99,291
------------ ------------ ------------
Current liabilities
Other payables (1,052) (742) (727)
Derivative financial liabilities held at fair value 10 (26) (203) (30)
through profit or loss
Bank overdraft (2,292) (10,590) (12,589)
------------ ------------ ------------
(3,370) (11,535) (13,346)
------------ ------------ ------------
Net assets 74,558 88,539 85,945
========= ========= =========
Equity attributable to equity holders
Called up share capital 9 1,190 1,190 1,190
Share premium account 46,977 46,977 46,977
Special reserve 66,775 68,249 67,241
Capital reserve (44,364) (32,018) (33,604)
Revenue reserve 3,980 4,141 4,141
------------ ------------ ------------
Total equity 74,558 88,539 85,945
========= ========= =========
Net asset value per ordinary share (pence) 8 65.71 76.60 75.28
========= ========= =========
Consolidated cash flow statement for the six months ended 31 May 2020
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2020 2019 2019
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Operating activities:
Net (loss)/profit on ordinary activities before taxation (8,455) 3,322 4,188
Add back finance costs 20 90 197
Net loss/(profit) on investments and options held at fair 10,475 (1,215) 585
value through profit or loss (including transaction costs)
Net loss/(profit) on foreign exchange 98 (36) (25)
Sales of investments held at fair value through profit or 37,875 25,933 34,855
loss
Purchases of investments held at fair value through profit or (26,613) (24,804) (39,831)
loss
Decrease/(increase) in other receivables 10 (36) (43)
(Decrease)/increase in other payables (242) 35 23
Increase in amounts due from brokers (258) (4,507) -
Increase in amounts due to brokers 502 - -
Net movement in cash collateral held with brokers (31) 1,379 1,795
------------ ------------ ------------
Net cash inflow from operating activities before taxation 13,381 161 1,744
------------ ------------ ------------
Taxation paid (45) (191) (245)
Taxation on investment income included within gross income (77) (103) (209)
------------ ------------ ------------
Net cash inflow/(outflow) from operating activities 13,259 (133) 1,290
------------ ------------ ------------
Financing activities
Interest paid (20) (90) (197)
Payments for share purchases (462) (389) (1,390)
Share purchase costs paid (4) (3) (10)
Dividends paid (2,274) (2,322) (4,618)
------------ ------------ ------------
Net cash outflow from financing activities (2,760) (2,804) (6,215)
------------ ------------ ------------
Increase/(decrease) in cash and cash equivalents 10,499 (2,937) (4,925)
Effect of foreign exchange rate changes (98) 36 25
------------ ------------ ------------
Change in cash and cash equivalents 10,401 (2,901) (4,900)
Cash and cash equivalents at start of period (12,589) (7,689) (7,689)
------------ ------------ ------------
Cash and cash equivalents at end of period (2,188) (10,590) (12,589)
------------ ------------ ------------
Comprised of:
Cash at bank 104 - -
Bank overdraft (2,292) (10,590) (12,589)
------------ ------------ ------------
(2,188) (10,590) (12,589)
========= ========= =========
NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHSED 31 MAY 2020
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 2020 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 Company's Annual Report and Financial Statements for the year ended 30
November 2019, which have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006 and in accordance with
IAS 34 Interim Financial Reporting.
Insofar as the Statement of Recommended Practice (SORP) for investment trust
companies and venture capital trusts issued by the Association of Investment
Companies (AIC) in October 2019 is compatible with IFRS, the financial
statements have been prepared in accordance with guidance set out in the SORP.
The revised SORP issued in October 2019 is applicable for accounting periods
beginning on or after 1 January 2019, therefore the Company has adopted the new
SORP for the accounting year beginning 1 December 2019. As a result, there will
be an amended presentation of movements in investments held at fair value
through profit or loss in the notes to the financial statements, which will be
included as part of the 2020 Annual Report and Financial Statements. As this
note is not included as part of the Interim Report and Financial Statements,
there is no impact on the Interim Report and Financial Statements as a result
of the adoption of the revised SORP.
The taxation charge has been calculated by applying an estimate of the annual
effective tax rate to any profit for the period.
Adoption of new and amended standards and interpretations
IFRS 16 Leases
The Group adopted IFRS 16 as of the date of initial application of 1 December
2019. IFRS 16 specifies accounting for leases and removes the distinction
between operating and finance leases. This standard is not applicable to the
Group as it has no leases.
IFRS standards that have yet to be adopted
Amendments to IFRS 3 - Definition of a business (effective 1 January 2020).
This amendment revises the definition of a business. According to feedback
received by the International Accounting Standards Board, application of the
current guidance is commonly thought to be too complex and it results in too
many transactions qualifying as business combinations. The standard has been
endorsed by the EU. This standard is unlikely to 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 has been endorsed by the EU. This standard is unlikely to 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 generally cause hedge accounting to terminate. However, any hedge
ineffectiveness should continue to be recorded in the income statement. Given
the pervasive nature of hedges involving IBOR based contracts, the reliefs will
affect companies in all industries.
This standard has been endorsed by the EU. This standard is unlikely to have
any significant impact on the Group.
IFRS 17 - Insurance contracts (effective 1 January 2021). This standard
replaces IFRS 4, which currently permits a wide variety 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.
3. INCOME
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2020 2019 2019
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Investment income:
UK dividends 709 716 1,485
UK special dividends - - 57
Overseas dividends 827 778 1,707
Overseas special dividends - 179 178
Fixed interest 439 481 909
-------------- -------------- --------------
1,975 2,154 4,336
-------------- -------------- --------------
Other income:
Deposit interest 10 1 14
Option premium income 610 670 1,294
-------------- -------------- --------------
620 671 1,308
-------------- -------------- --------------
Total income 2,595 2,825 5,644
======== ======== ========
During the period, the Group received option premium income in cash totalling GBP
644,000 (six months ended 31 May 2019: GBP604,000; year ended 30 November 2019: GBP
1,156,000) 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 GBP610,000 (six months
ended 31 May 2019: GBP670,000; year ended 30 November 2019: GBP1,294,000) were
amortised to revenue.
At 31 May 2020, there were 2 (31 May 2019: 3; 30 November 2019: 2) open
positions with an associated liability of GBP26,000 (31 May 2019: GBP203,000; 30
November 2019: GBP30,000).
Dividends and interest received in cash in the period amounted to GBP1,473,000
and GBP380,000 (six months ended 31 May 2019: GBP1,533,000 and GBP427,000; year ended
30 November 2019: GBP3,167,000 and GBP836,000) respectively.
No special dividends have been recognised in capital during the period (six
months ended 31 May 2019: GBP658,000; year ended 30 November 2019 GBP658,000).
4. INVESTMENT MANAGEMENT FEE
Six months ended Six months ended Year ended
31 May 2020 31 May 2019 30 November 2019
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 78 234 312 116 348 464 237 711 948
Expense rebate due from Manager (4) (25) (29) - - - - - -
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total 74 209 283 116 348 464 237 711 948
======== ======== ======== ======== ======== ======== ======== ======== ========
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 GBP250 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.
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 exceeds the cap of 1.25% per annum of average daily
net assets. The amount of rebate accrued as at 31 May 2020 amounted to GBP29,000
and has been adjusted in the investment management fee charged by the Manager.
5. OTHER OPERATING EXPENSES
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2020 2019 2019
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Allocated to revenue:
Custody fee 2 2 4
Auditor's remuneration - audit services 13 13 27
Registrar's fee 16 13 30
Directors' emoluments 69 62 124
Broker fees 11 12 23
Depositary fees 4 5 9
Marketing fees 11 12 29
Printing and postage fees 13 17 31
Legal and professional fees 1 13 21
Directors search fees - - 26
Bank charges 3 11 15
Stock exchange listings fees 4 4 7
Other administration costs 26 35 58
-------------- -------------- --------------
173 199 404
-------------- -------------- --------------
Allocated to capital:
Custody transaction charges 1 1 5
-------------- -------------- --------------
174 200 409
======== ======== ========
Effective 17 March 2020 the Company's Ongoing Charges, as defined in the
Glossary included within the interim report (which can be found on the
Company's website at www.blackrock.com/uk/beri) (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 exceeds 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 Six months ended Year ended
31 May 2020 31 May 2019 30 November 2019
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest payable - bank 5 15 20 23 67 90 49 148 197
overdraft
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total 5 15 20 23 67 90 49 148 197
======== ======== ======== ======== ======== ======== ======== ======== ========
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 2020, 31 May 2019 and 30 November 2019, the Group had an overdraft
facility of the lower of GBP17.5 million or 20% of the Group's net assets.
7. DIVIDS
The Board's current dividend target is to declare quarterly dividends of 1.00
pence per share in the year to 30 November 2020, making a total of at least
4.00 pence for the year as a whole.
A first interim dividend for the period ending 29 February 2020 of GBP1,139,000
(1.00p per share) was paid on 23 April 2020 to shareholders on the register on
27 March 2020.
The Directors have declared a second interim dividend for the year ended 30
November 2020 of 1.00p per ordinary share. The total cost of the dividend was GBP
1,350,000 and was paid on 17 July 2020 to shareholders on the Company's
register on 19 June 2020. This dividend has not been accrued in the financial
statements for the six months ended 31 May 2020, 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 2020 and
December 2020 respectively.
Dividends on equity shares paid during the period were:
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2020 2019 2019
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Second interim dividend for the year ended 30 November 2019 - - 1,151
of 1.00p (2018: 1.00p)
Third interim dividend for the year ended 30 November 2019 of - - 1,145
1.00p (2018: 1.00p)
Fourth interim dividend for the year ended 30 November 2019 1,139 1,161 1,161
of 1.00p (2018: 1.00p)
First interim dividend for the year ending 30 November 2020
of 1.00p (2019: 1.00p);
- Distributed from Revenue 1,135 929 929
- Distributed from Special Reserve - 232 232
-------------- -------------- --------------
2,274 2,322 4,618
======== ======== ========
8. CONSOLIDATED EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue and capital returns per share and net asset value per share are
shown below and have been calculated using the following:
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2020 2019 2019
(unaudited) (unaudited) (audited)
Net revenue profit attributable to ordinary shareholders (GBP 2,113 2,282 4,578
'000)
Net capital (loss)/profit attributable to ordinary (10,760) 862 (724)
shareholders (GBP'000)
---------------- ---------------- ----------------
Total (loss)/profit attributable to ordinary shareholders (GBP (8,647) 3,144 3,854
'000)
---------------- ---------------- ----------------
Equity shareholders' funds (GBP'000) 74,558 88,539 85,945
---------------- ---------------- ----------------
The weighted average number of ordinary shares in issue 113,656,537 116,096,755 115,379,743
during each period on which the return per ordinary share was
calculated was:
---------------- ---------------- ----------------
The actual number of ordinary shares in issue (excluding 113,470,349 115,580,243 114,170,349
treasury shares) at the period end on which the net asset
value was calculated was:
---------------- ---------------- ----------------
Earnings per share
Revenue earnings per share (pence) 1.86 1.97 3.97
Capital (loss)/earnings per share (pence) (9.47) 0.74 (0.63)
---------------- ---------------- ----------------
Total (loss)/earnings per share (pence) (7.61) 2.71 3.34
========= ========= =========
There were no dilutive securities at the period end (six month ended 31 May
2019: nil; year ended 30 November 2019: nil).
As at As at As at
31 May 31 May 30 November
2020 2019 2019
(unaudited) (unaudited) (audited)
Net asset value per ordinary share (pence) 65.71 76.60 75.28
-------------- -------------- --------------
Ordinary share price (pence) 55.20 70.00 66.00
======== ======== ========
9. CALLED UP SHARE CAPITAL
Ordinary Treasury Total Nominal
shares shares shares value
number number number GBP'000
Allotted, called up and fully paid share capital
comprised:
Ordinary shares of 1 pence each:
At 30 November 2019 114,170,349 4,795,651 118,966,000 1,190
Shares purchased and held in treasury (700,000) 700,000 - -
---------------- ---------------- ---------------- ----------------
At 31 May 2020 113,470,349 5,495,651 118,966,000 1,190
========= ========= ========= =========
During the period 700,000 shares were bought back and transferred to treasury
(six months ended 31 May 2019: 546,272; year ended 30 November 2019: 1,956,166)
for a total consideration of GBP462,000 (six months ended 31 May 2019: GBP389,000;
year ended 30 November 2019: GBP1,390,000). Since 31 May 2020, no additional
shares have been bought back.
10. 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 in the Group's Annual Report and Financial Statements for the year
ended 30 November 2019.
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 as follows.
The fair value hierarchy has the following levels:
Level 1 - Quoted price for an identical instrument in an active market
A financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm's length
basis. The 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 also includes instruments that are valued based on quoted prices
for similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The Investment Manager
considers observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not proprietary, and
provided by independent sources that are actively involved in the relevant
market.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. If a fair value
measurement uses observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgement, considering factors specific to the asset
or liability. 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.
The table below sets out fair value measurements using the IFRS 13 fair value
hierarchy.
Financial assets/(liabilities) at fair value through Level 1 Level 2 Level 3 Total
profit or loss at 31 May 2020 GBP'000 GBP'000 GBP'000 GBP'000
(unaudited)
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 Level 1 Level 2 Level 3 Total
profit or loss at 31 May 2019 GBP'000 GBP'000 GBP'000 GBP'000
(unaudited)
Assets:
Equity investments 84,660 - - 84,660
Fixed income investments 9,763 - - 9,763
Liabilities:
Derivative financial instruments - written options - (203) - (203)
-------------- -------------- -------------- --------------
94,423 (203) - 94,220
======== ======== ======== ========
Financial assets/(liabilities) at fair value through Level 1 Level 2 Level 3 Total
profit or loss at 30 November 2019 GBP'000 GBP'000 GBP'000 GBP'000
(audited)
Assets:
Equity investments 89,223 - - 89,223
Fixed income investments 9,331 - - 9,331
Liabilities:
Derivative financial instruments - written options - (30) - (30)
-------------- -------------- -------------- --------------
98,554 (30) - 98,524
======== ======== ======== ========
There were no transfers between levels for financial assets and financial
liabilities during the period recorded at fair value as at 31 May 2020, 31 May
2019 and 30 November 2019. The Group did not hold any Level 3 securities
throughout the financial period under review or as at 31 May 2019 and 30
November 2019.
11. FINANCIAL RISKS
The Group'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 of 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, or
other events could have a significant impact on the Group and the market price
of its investments and could result in increased premiums or discounts to the
Group's net asset value. In the view of the Board, the outbreak of the COVID-19
pandemic has fundamentally altered the nature of the risks facing the Group as
reported in the Annual Report and Financial Statements. More detail is set out
in the Interim Management and Responsibility Statement.
A key metric used by the BlackRock Risk and Quantitative Analysis Group to
measure market risk is Value-at-Risk ("VaR") which encompasses currency,
interest rate and price risk. VaR is a statistical risk measure that estimates
the potential portfolio loss from adverse market movements in an ordinary
market environment. VaR analysis reflects the interdependencies between risk
variables, unlike a traditional sensitivity analysis.
The one-day VaR as of 31 May 2020 and 30 November 2019 based on a 99%
confidence level was 9.71% and 2.66%.
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. For the six
months ended 31 May 2020, the Chairman receives an annual fee of GBP38,000, the
Chairman of the Audit and Management Engagement Committee receives an annual
fee of GBP32,000 and each other Director receives an annual fee of GBP27,000.
As at 31 May 2020: GBP10,000 (31 May 2019: GBP10,000; 30 November 2019: GBP10,000)
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 31 May 30
2020 2019 November
2019
Ed Warner (Chairman) 94,000 94,000 94,000
Carol Bell 33,500 33,500 33,500
Michael Merton 17,000 17,000 17,000
Adrian Brown1 14,603 N/A N/A
Jonathan Ruck Keene2 N/A 14,000 14,000
======== ======== ========
1 Adrian Brown was appointed as a Director of the Board on 10 December
2019.
2 Jonathan Ruck Keene retired as a Director of the Board on 17 March 2020.
Since the period end and up to the date of this report there have been no
changes in Directors' holdings.
13. TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six 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 in the Directors' Report in the Company's
Annual Report and Financial Statements for the year ended 30 November 2019.
The investment management fee due to BFM for the six months ended 31 May 2020
amounted to GBP283,000 (six months ended 31 May 2019: GBP464,000; year ended 30
November 2019: GBP948,000). At the period end GBP210,000 was outstanding in respect
of these fees (six months ended 31 May 2019: GBP393,000; year ended 30 November
2019: GBP389,000).
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 exceeds the cap of 1.25% per annum of average daily net assets.
The amount of rebate accrued as at 31 May 2020 amounted to GBP29,000 and has been
adjusted in the investment management fee charged by the Manager.
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 2020 amounted to GBP11,000 excluding VAT (six months ended 31
May 2019: GBP12,000; year ended 30 November 2019: GBP29,000). Marketing fees of GBP
30,000 (31 May 2019: GBP33,000; 30 November 2019: GBP19,000) were outstanding at 31
May 2020.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc. a company incorporated in Delaware USA. During the period, PNC
Financial Services Group, Inc. ("PNC") was a substantial shareholder in
BlackRock, Inc.
PNC did not provide any services to the Company during the financial year ended
30 November 2019 and the period up to 11 May 2020.
On 11 May 2020, PNC announced its intent to sell its investment in BlackRock,
Inc. through a registered offering and related buyback by BlackRock, Inc.
14. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 May 2020 (31 May 2019: nil; 31
November 2019: nil).
15. POST BALANCE SHEET EVENTS
Subsequent to the period end, the Company received correspondence from HMRC
accepting the entitlement of the Company to make a claim for double tax relief
in the relevant accounting periods in relation to underlying tax suffered on
dividends from non-UK companies. This double tax relief will reduce the
corporation tax liability to nil for all periods resulting in a repayment of
the corporation tax suffered in the relevant accounting periods. While the
amount of the repayment has not been formally agreed with HMRC, and as such a
degree of uncertainty remains, the Company now considers receipt of a repayment
is sufficiently probable that it should make an accrual for accounting purposes
to reflect such treatment.
The IFRS accounting rules applicable to the Company determine that an uncertain
tax receivable shall be accrued in the NAV of the Company when, in the view of
the Board, the successful future receipt of such receivable is probable. The
Board's current assessment is that the future receipt of the tax reclaims
described above is probable and so meets this threshold.
The corporation tax refund expected to be received by the Company following
HMRC's acceptance of the claims for the relevant accounting periods amounts to
GBP945,614 and has been recognised in the NAV and has been applied as revenue
through the Company's profit and loss account with effect from 25 June 2020.
16. 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 2020 and 31
May 2019 has not been reviewed or audited by the auditor.
The information for the year ended 30 November 2019 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.
17. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 30
November 2020 in January 2021.
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 2021, with the
Annual General Meeting being held in March 2021.
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
30 July 2020
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London EC2N 2DL
END
END
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