Final Results

BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC

(LEI: 54930040ALEAVPMMDC31)

Annual Results announcement for the year ended 30 November 2019

Performance record

	30 November 2019	30 November 2018	Change
Net asset value (NAV) per ordinary share (pence)	75.28	75.87	(0.8)
– with dividends reinvested1			4.4
Net assets (£’000)2	85,945	88,109	(2.5)
Ordinary share (mid-market) (pence)	66.00	70.60	(6.5)
– with dividends reinvested1			(1.3)
Discount to net asset value1	12.3%	6.9%

	Year ended 30 November 2019	Year ended 30 November 2018	Change
Revenue
Net profit on ordinary activities after taxation (£’000)	4,578	5,145	(11.0)
Revenue earnings per ordinary share (pence)	3.97	4.37	(9.2)
Dividends (pence)
1st interim	1.00p	1.00p	–
2nd interim	1.00p	1.00p	–
3rd interim	1.00p	1.00p	–
4th interim	1.00p	1.00p	–
	_____	_____
Total dividends paid and payable	4.00p	4.00p	–
	=====	=====

1    Alternative Performance Measures, see Glossary in the Company’s Annual Report for the year ended 30 November 2019 which can be found on the Company’s website at www.blackrock.co.uk/beri.
2    The change in net assets reflects market movements, the buyback of shares and dividends paid during the year.

Chairman’s statement

Dear Shareholder

I am pleased to present the annual report to shareholders of BlackRock Energy and Resources Income Trust plc for the year ended 30 November 2019.

OVERVIEW AND PERFORMANCE

The year under review has been another volatile one for markets, which ended with leading indices at or around record highs. Resources have remained out of favour with investors, however, against a backdrop of low inflation and an increasing focus on climate change. The energy and mining sectors performed in stark contrast to each other with energy companies lagging badly, reflecting greater concern among investors about the impact of carbon based fuels on the environment. The MSCI World Energy Index fell by 5.7% over the year. In contrast the EMIX Global Mining Index increased by 18.3% (all data in sterling terms with dividends reinvested). A 50:50 composite of the two indices posted an increase of 10.5% for the year to 30 November 2019. Against this backdrop, the Company’s NAV per share rose by 4.4%¹ for the year to 30 November 2019.

It should be noted that these comparisons are given for illustrative purposes only. The Company’s objectives are to achieve both an annual dividend target and, over the long term, capital growth. Consequently the Board does not formally benchmark performance against mining and energy sector indices as meeting a specific dividend target is not within the scope of these indices.

Additional information on commodity markets and key contributors and detractors to portfolio performance are set out in the Investment Manager’s report below. Further detail on the performance of the Company is set out in the table below and in the performance record and chart on page 3 of the Company’s Annual Report for the year ended 30 November 2019.

Since the year end and up to the close of business on 3 February 2020, the Company’s NAV has returned -2.5% and the share price has returned +0.4% (all calculations in Sterling terms with dividends reinvested).

BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC: NAV AND SHARE PRICE PERFORMANCE

	One year %	Three years %	Five years %	Since inception %
Net Asset Value (with dividends reinvested)1	4.4	4.7	12.4	59.9
Share price (with dividends reinvested)1	-1.3	-6.5	-7.8	38.5

¹     Alternative Performance Measures. Further details of the calculation of performance with dividends reinvested are given in the Glossary in the Company’s Annual Report for the year ended 30 November 2019.

REVENUE RETURN AND DIVIDENDS

The Company’s revenue return per share for the year amounted to 3.97 pence (2018: 4.37 pence). This was only marginally below our payment of four quarterly dividends of 1.00 pence, making a total of 4.00 pence for the year. Full details of the dividends paid for the 2018 and 2019 financial years are set out in note 7 below.

The Board’s current target is to declare quarterly dividends of at least 1.00 pence 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 6.1%¹ based on the share price as at the close of business on 30 November 2019.

In previous years, the Company employed an option writing strategy to generate revenue returns and to ensure that the Company’s dividend was covered by current year income. However, in January 2019, the Board announced a more flexible approach, recognising that it was possible to generate similar, or possibly improved returns for the Company with a lower level of option writing, particularly in rising markets where the returns might be curtailed by writing call options. Consequently, the portfolio managers focused on investing the portfolio to generate an optimal level of total return without striving to meet an annual income target, with revenue reserves, capital and special reserves being utilised to meet the Board’s dividend target if current year portfolio income alone was insufficient. In 2019, option premium income represented 22.9% of total income (2018: 36.3%).

Dividends paid and declared by the Company in respect of the year ended 30 November 2019 totalled £4,596,000 compared to current year earnings of £4,578,000. In addition to revenue reserves of £1,525,000 as at 30 November 2019, the Company has the ability to make dividend distributions out of special reserves and capital reserves which totalled £36,253,000 at 30 November 2019.

SHARE CAPITAL AND DISCOUNT CONTROL

The Board is conscious that the Company’s shares have traded at a discount to the underlying NAV for most of the year under review. Recognising the importance to shareholders that the market price of the Company’s shares should not trade at either a significant discount or premium to the NAV, the Board monitors the Company’s share rating closely, and is committed to making share purchases where appropriate. The Company currently has authority to buy back up to 14.99% of the Company’s issued share capital (excluding treasury shares) and will be seeking shareholder authority at the forthcoming AGM to renew this authority.

Equally, on occasions where the shares are trading at a premium, the Board is committed to the regular issue of ordinary shares as a way of ensuring that any premium to NAV is maintained within a sensible range, to provide ongoing market liquidity and to do so in a manner that is accretive to shareholders. At the forthcoming AGM the Company will be seeking the authority to allot new shares or sell from treasury ordinary shares representing up to 10% of the Company’s issued ordinary share capital.

During the financial year ended 30 November 2019, the Company bought back 1,956,166 ordinary shares at an average price of 70.92 pence per share and at an average discount of 10.8% representing total consideration (excluding costs) of £1,390,000. As at the date of this report, the Company has bought back an additional 300,000 shares since the year end for total consideration of £198,350.

The Company did not issue any shares during the year ended 30 November 2019.

GEARING

The Company operates a flexible gearing policy which depends on prevailing market conditions. The maximum gearing used during the year was as at 30 November 2019 when net gearing was 14.7%. Net gearing has been calculated in accordance with AIC guidelines. Further details are included in the Glossary in the Annual Report.

CHANGE OF NAME

As announced on 13 May 2019, the Company changed its name to BlackRock Energy and Resources Income Trust plc. The Board believes that the new name better reflects the fact that the Company predominantly invests in energy and mining equities as opposed to commodities. The name change also reflects the portfolio having exposure to companies expected to benefit from the move towards a lower carbon global economy. There has been no change to the investment philosophy, investment process or management of the Company. More details can be found on the Company’s website at www.blackrock.com/uk/beri.

BOARD COMPOSITION

The Board is mindful of the increasing focus on independence, tenure and succession planning set out in the updated Financial Reporting Council’s review of the UK Corporate Governance Code, which applies for periods commencing on or after 1 January 2019. With this in mind, the Board commenced a search during the year to identify a new Director to join the Board, assisted by a third-party recruitment firm. Following a detailed evaluation of each of the candidates, the Board selected Mr Adrian Brown who was subsequently appointed with effect from 10 December 2019. Mr Brown brings a wealth of financial sector experience and expertise, both complementing and enhancing the skills and experience of the existing Board. Mr Brown will stand for election at the forthcoming Annual General Meeting (AGM).

Further information on Mr Brown and all of the Directors can be found in their biographies in the Annual Report. Information on the recruitment and selection process undertaken and details of the Board’s policy on director tenure and succession planning can be found in the Directors’ Report in the Annual Report.

After many years of excellent service to the Company, Jonathan Ruck Keene is standing down from the Board at this AGM. Jonathan oversaw the launch of the Company in 2005 and acted as an alternative Non-Executive Director from 2007 to 2009 when he became a full member of the Board. On behalf of all shareholders, and my fellow Directors, I would like to thank Jonathan for all his hard work and wise counsel over the years.

FINANCIAL AND CORPORATE REPORTING

The Board takes its governance responsibilities very seriously and follows best practice requirements as closely as possible. Consequently, key aspects of the revised UK Code of Corporate Governance (the UK Code) published in 2018 are being early-adopted in the Company’s Annual Report this year. As part of the enhanced disclosure recommended under the UK Code, a separate statement has been included for the first time within the Strategic Report setting out how we, as Directors, have fulfilled our duties in taking into account the wider interests of stakeholders in promoting the success of the Company. As part of this reporting, and given the environmental impact of the extractive industries that many portfolio companies within the Company’s investment universe engage in, we have provided more information on our approach towards environmental, social and governance (ESG). We have also provided more information on our Manager’s approach to shareholder engagement and voting activities. Further details are set out in the Strategic Report below.

Earlier this year, the Association of Investment Companies (AIC) also published updates to its Code of Corporate Governance (the AIC Code) which were endorsed by the Financial Reporting Council (FRC) as being appropriate for investment companies. The 2019 AIC Code applies to accounting periods beginning on or after 1 January 2019. With effect from the Company’s new financial year, the Board has adopted the recommendations of the 2019 AIC Code.

ANNUAL GENERAL MEETING

The Company’s AGM will be held on Tuesday, 17 March 2020 at 10.30 a.m. at the offices of BlackRock, 12 Throgmorton Avenue, London EC2N 2DL. Details of the business of the meeting are set out in the Notice of Meeting in the Annual Report. The portfolio managers will make a presentation to shareholders on the Company’s progress and the outlook for the year.

OUTLOOK

In the mining sector, future prospects depend to a large extent on the outlook for global trade and economic growth in China; the ongoing trade tensions between the US and China are likely to drive continuing volatility. This uncertainty has contributed to steel, iron ore and copper inventories running at lower than historical averages, which leaves these commodities well positioned to benefit from any upturn in economic activity; the Company’s manager believes that the outlook is positive for such commodities and the portfolio has substantial holdings in the major diversified mining companies.

In the energy sector, structural shifts away from carbon-based energy supplies towards alternative and renewable energy sources continue to gain momentum, and are likely to cause permanent change in demand for these fuels. If the move away from carbon based fuels presents challenges for some entities in the Company’s investment universe, it creates opportunities elsewhere, and although there is still a strong rationale for investment in the traditional sectors of the industry, the Board is increasingly mindful of the growing use of renewable sources of power in electricity generation and the rapid development of energy technology. BlackRock has a dedicated Sustainable Energy team, who form a key part of the wider natural resources team and are well placed to identify investment opportunities in this space.

ED WARNER

Chairman

5 February 2020

Investment Manager’s report

MARKET OVERVIEW

This has been another year where markets have been buffeted by trade wars, changes in direction from various central banks around the world and, of course, tweets from the US President. Despite a very volatile start to the Company’s financial year 2019 as markets sold off sharply in December 2018, the rapid pivot by the Federal Reserve (the Fed) from tightening to loosening of monetary policy provided the supportive backdrop for many equity indices to make new highs through 2019. Lack of inflation meant that there was little general investor interest in the commodities themselves, which are seen by many as a hedge in a portfolio against rising inflation. In the short to medium term we expect many of the deflationary pressures, such as the impact of technology and ageing populations in the western world to persist so commodities are more likely to be driven by specific supply and demand characteristics as opposed to any uplift from inflation-driven financial inflows.

Whilst the mining sector just failed to keep pace with broader markets, energy companies again underperformed and delivered a negative return for the year. This was a result of Exploration & Production (E&P) companies underperforming again as investors fled riskier oil companies and sought their exposure via the Integrated Oil Majors, which actually fell less than the price of oil over the twelve months. The investment portfolio continues to focus the majority of its energy holdings in the Integrated Oil Companies (IOC) because many of these offer attractive yields and evolving business models, and because we cannot see a clear catalyst for E&P companies to deliver a sufficiently large inflection in returns to compensate for their higher risk business models.

Commodity	30 November 2019	30 November 2018	change	2019 on 2018 Average Price % Change (Average of 30/11/17- 30/11/18 to 30/11/18- 30/11/19)
Base Metals (US$/tonne)
Aluminium	1,792	1,957	-8.4	-14.8
Copper	5,843	6,227	-6.2	-8.9
Lead	1,923	1,961	-1.9	-12.3
Nickel	13,618	11,136	22.3	3.8
Tin	16,504	18,398	-10.3	-6.6
Zinc	2,300	2,655	-13.4	-13.2
	_____	_____	_____	_____
Precious (US$/oz)
Gold	1,461.5	1,219.2	19.9	8.1
Silver	17.0	14.2	19.7	1.1
Platinum	894.0	805.0	11.1	-4.1
Palladium	1,832.0	1,205.0	52.0	46.5
	_____	_____	_____	_____
Energy
Oil (WTI) (US$/Bbl)	55.2	50.8	8.7	-14.6
Oil (Brent) (US$/Bbl)	64.5	57.5	12.2	-11.5
Natural Gas (US$/MMBTU)	2.6	4.6	-43.5	1.7
Uranium (US$/lb)	26.0	29.1	-10.7	8.0
Bulk Commodities (US$/tonne)
Iron ore	87.0	65.0	33.8	30.5
Coking coal*	260.0	314.0	-17.2	-15.1
Thermal coal	69.4	102.9	-32.6	-24.2
	_____	_____	_____	_____
Equity Indices
EMIX Global Mining Index (US$)	787.9	657.0	19.9	n/a
EMIX Global Mining Index (£)	609.2	515.0	18.3	n/a
MSCI World Energy Index (US$)	303.6	317.7	-4.4	n/a
MSCI World Energy Index (£)	234.7	249.0	-5.7	n/a
	_____	_____	_____	_____
Source: Datastream unless otherwise indicated. *     Source: Macquarie.

PORTFOLIO ACTIVITY AND INVESTMENT PERFORMANCE

A chart showing the portfolio’s allocation to the Energy and Mining sectors on a monthly basis for the six years ended 30 November 2019 is included within the Investment Manager’s Report on page 10 of the Company’s Annual Report for the year ended 30 November 2019.

The portfolio’s sector positioning between mining and energy remained around the same level for much of the year from an equity standpoint, with the higher mining sector exposure (shown in the chart included on page 10 of the Company’s Annual Report) being a result of the mining fixed income securities held. Within this stable sector allocation though there were some notable changes in the sub-sector allocation within energy and commodity allocation within mining.

In mining, we increased the exposure to gold in the first half of the year, driven by a view that expectations for real interest rates in the US would decline, the Fed would adopt a looser stance on monetary policy and this would be a positive for gold. This thesis played out with the Fed cutting interest rates several times in 2019, compared to expectations at the start of the year that they would raise the Fed Fund Rates further. We have kept a higher percentage of the portfolio in gold than in 2018 because monetary policy is loose in most major economies and in the US, the Fed began to expand its balance sheet at the start of September, following almost a year of tightening. A chart showing the total assets on the balance sheet of the Federal Reserve, noting the recent re-start of asset purchases, is included on page 11 of the Company’s Annual Report for the year ended 30 November 2019 which can be found on the website at www.blackrock.co.uk/beri.

In energy, as mentioned in the introduction, we have continued to reduce E&P holdings in favour of Integrated Oil Companies as well as selected refiners and, to date, one National Oil Company (CNOOC). The dividend yields, which are covered by underlying operational cashflow at our current oil price expectations, are sufficiently attractive for investors not to have to take on E&P risk. Because of this, we think that the larger Integrated Oil Companies offer a better risk-adjusted return proposition.

Subsequent to the end of the financial year, we reduced gearing by decreasing our holding in a number of oil sensitive stocks because we became increasingly cautious on the shorter-term outlook for the oil markets – we go into greater detail on this in the energy section of the report.

INCOME

The Company generated £5.6 million in gross income during 2019. This supported a dividend payment of 4.00 pence per share for the year as a whole.

Most companies announce capital return plans with their annual results unless there are significant changes at the mid-point of the year that compel an out of cycle change. Given the second half of 2019 saw a relatively benign market, there were very few surprises on the capital return side either on the up or downside. With the larger companies on both the mining and energy sides having strong balance sheets and maintaining capital discipline with very few new projects being approved, the dividend outlook remains robust going into 2020.

Mining and Energy sectors have low levels of debt, which should reduce commodity-price related volatility and support dividend payments.  More information is set out in the table on page 12 of the Company’s Annual Report for the year ended 30 November 2019.

ENERGY

Following a strong first half of 2019 for oil markets, the second half of the year lacked a clear trend for oil prices as weaker economic data and geopolitical events pressured oil markets down and up respectively. The headline event for the oil sector was the attack on the Saudi Arabian oil facilities in September when the world’s largest oil processing facility, Abqaiq, was hit by drone strikes, which affected an apparent 5.4 million barrels per day of productive capacity (around 6% of the world’s oil supply). This caused the oil price to jump to over $70 per barrel but these gains were quickly given back as the faster than expected operational recovery by the operator, Saudi Aramco, was compounded by worse than expected economic data towards the end of September.

The Organisation of Petroleum Exporting Countries (OPEC) meeting in July offered little excitement compared to the December 2018 meeting where the production cuts were announced that sparked the oil price rally in the first part of 2019. The July meeting saw the existing production cuts rolled for a further 9 months as the members looked to support the oil market and resulted in little drama in the oil markets. As we moved into the final part of 2019, attention turned to the early December OPEC meeting, which was assigned greater importance given the poor economic backdrop experienced in the autumn. OPEC and Russia agreed to further cuts of 500,000 barrels per day (roughly half a percent of global supply). The oil price reacted positively but in a very modest way, ending the day of the announcement up only 1%.

No discussion on the oil market is complete without an analysis of the US shale industry. 2019 has been a pivotal year for US shale – prior to this year, there was a consensus in the market that shale oil production would continue to grow in the medium term (the next 3-5 years) driven by technology enabled productivity gains and plentiful capital to fund drilling. Both of these assumptions have been challenged this year. Whilst technology does continue to improve recoveries and lower some costs, the pace of improvement appears to have slowed and some companies are having to move from the best (cheapest) geology to more challenging (expensive) rocks. On the funding side, many of the shale operators have been pressured by investors to pivot away from volume growth and towards free cash flow generation. This reduces the outlook for future supply growth. Also, investors are becoming more cautious on the longer-term business model for shale companies, especially those that are smaller in scale – this can be seen in the higher cost of debt faced by shale companies, in general, now relative to the start of the year.

As we look to 2020, oil markets look balanced to modestly over supplied without further OPEC production cuts, at least for the first half of the year. We would therefore expect oil to trade closer to the bottom end of its recent price range. However, as we look towards the end of 2020 and beyond, the combined impact of US shale production growth slowing significantly and non-OPEC, non-US production starting to suffer from the lower investment levels seen in the last few years, is supportive of a stronger oil price.

A table showing the declining capital expenditure by oil companies, which supports our view of lower supply growth in the medium term, is shown on page 13 of the Company’s Annual Report for the year ended 30 November 2019.

A table showing the median Decline Rates (fall in supply each year from existing producing assets) by major basin is set out on page 13 of the Company’s Annual Report for the year ended 30 November 2019.

MINING

In our interim report, we discussed the characteristics of a strong first half of 2019 for the mining sector, which was driven by better than expected iron ore prices. The second half of the year started well with iron ore continuing to move higher due to the continued supply disruption from Brazil. However, towards the end of the summer, not even commodities supported by supply disruption could overcome the downturn in global economic activity. This downturn was seen in purchasing managers index readings across many of the main economies going below 50 – indicating contraction in the manufacturing side. This synchronous slowdown in global demand caused many of the mined commodities to trade at or around twelve-month lows at the start of September.

However, sentiment began to turn in the last two months of the year and economic data began to improve, albeit from a low base. This was particularly notable in China where towards the end of the period steel margins increased significantly and property data showed some positive signals too. Given the uncertainty for manufacturers and other businesses caused by the Trade War, there had been de-stocking across the industrial supply chain in China. For example, steel, iron ore and copper inventories were lower than historical averages. In our view, this means that any pickup in economic activity as we go through the first half of 2020 is likely to be positive for such commodities.

One area of material weakness in the mining sector during 2019 was thermal coal (which is used in coal-fired power stations). During the year there was an increase in supply of coal within China as a number of new mines continued to ramp up and transport bottlenecks eased with some new and expanded rail infrastructure brought online. Whilst thermal coal will be a significant part of the energy mix (especially in Asia) over the next couple of decades, it faces multiple headwinds. Regulation is of course becoming increasingly anti-coal, the alternatives continue to become more cost competitive and consumers of power (both industrial and retail) are increasingly demanding lower carbon energy from power generators. The speed of change in the investment community’s attitude towards coal has seen a step-change this year and the cost of capital faced by coal companies has risen – reflected in coal companies trading at substantial discounts to other mining and energy companies. We are not convinced that these valuations are sufficiently attractive given the risks the companies face and did not hold any pure thermal coal companies in the portfolio at the end of the year.

MARKET OUTLOOK AND PORTFOLIO POSITIONING

Mining and energy are both classic cyclical sectors, highly exposed to global trade and overall levels of economic activity so we expect the on-going trade tussles between the US and other countries, notably China, to have a significant short-term influence on the direction of these markets. Stepping away from this unpredictable (but important) factor, we remain positive on the medium-term outlook for the energy sector as the investment boom in shale matures and the contraction in conventional oil capital are both set to tighten the supply of oil in the early part of the decade. However, as noted in the energy section of this report, we are cautious on the shorter-term outlook so have positioned the portfolio to reflect this, with a view to increase exposure on any meaningful share price falls.

The shorter-term outlook for mining is slightly more positive and we have substantial holdings in the major diversified mining companies such as BHP as well as a number of copper companies. Given the strong free cash flow generation of the largest companies in the mining sector and their bias to return cash to shareholders, we do not see many small or mid cap opportunities that are attractive relative to their larger peers.

Last year we wrote about introducing some new holdings into the investment portfolio that are beneficiaries from a transition to a lower carbon economy. At the end of this year, the portfolio had holdings in the renewables focused electricity generator Enel, the lithium producer Albemarle and the industry-leading battery cathode manufacturer Umicore. The pace of change in the energy transition has continued to accelerate and is creating a broad set of investment opportunities that have structural growth rates that are likely to be persistently higher than those for traditional energy and some parts of mining. The Natural Resources Team at BlackRock has been investing in sustainable energy companies since the early 2000s so we believe we are very well  positioned to view this energy transition objectively and increase our exposure to this theme in the near future.

Whilst we are excited by the investment opportunities presented by the acceleration of the energy transition, it is also important to highlight the extensive Environmental, Social and Governance (ESG) work we do as investors in natural resources companies and that the transition is going to take time. On ESG, we consider the risks (and opportunities) presented by the full spectrum of ESG factors. These factors vary by commodity, geography and of course company but integrating ESG considerations at every step of the investment process is as important as the evaluation of the financial metrics and risks of a company.

More information about BlackRock’s ESG process can be found below.

On the time frame for transition, the charts on page 15 of the Company’s Annual Report for the year ended 30 November 2019 show the breakdown of oil demand, including a split out of the transport demand, and BP Group’s outlook for global oil demand under a series of different transition scenarios. Even if the transition is quicker than their fastest transition scenario, substantial investment is still required in future oil supply. This investment, we believe, is likely to lag the market’s medium-term requirements and create investment opportunities in the traditional energy space even as we move through this transition.

OLIVIA MARKHAM AND TOM HOLL

BlackRock Investment Management (UK) Limited

5 February 2020

Ten largest investments

1             =  (2018: 1^st)
BHP
Diversified mining company
Ordinary shares      £7,684,000
Share of investments      7.8% (2018: 9.1%)
An important global player in a number of commodities including 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)

2             =  (2018: 2^nd)
First Quantum Minerals
Copper producer
Ordinary shares      £1,969,000
Corporate bonds      £5,257,000
Share of investments      7.4% (2018: 7.2%)
An established and rapidly growing mining company operating seven mines and developing five projects worldwide. A significant producer of copper, as well as nickel, gold, zinc and platinum group elements.
(MSCI ESG Rating: BB)

3             =  (2018: 3^rd)
Royal Dutch Shell ‘B’

Integrated oil company

Ordinary shares      £5,892,000
Share of investments      6.0% (2018: 6.8%)
The Anglo-Dutch company is one of the world’s leading energy companies. The company is active in every area of the oil and gas industry including exploration and production, refining and marketing, power generation and energy trading. The company also has renewable energy interests in biofuels.
(MSCI ESG Rating: A)

4             + (2018: 37^th)
Barrick Gold

Gold mining company

Ordinary shares      £4,972,000

Share of investments     5.0% (2018: 0.9%)

Following the merger with Randgold Resources in 2018, Barrick Gold is the second largest gold company by market capitalisation and 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)

5             + (2018: 7^th)

BP Group

Integrated oil company

Ordinary shares      £4,769,000

Share of investments     4.8% (2018: 4.5%)

An international leader in exploration and production of oil and natural gas, the company refines, markets and supplies petroleum products, generates solar energy and manufactures chemicals.

(MSCI ESG Rating: BBB)

6             = (2018: 6^th)

Chevron

Integrated oil company

Ordinary shares      £4,600,000

Share of investments     4.7% (2018: 4.9%)

An integrated oil and gas producer engaged in all aspects of the industry. The company has both upstream and downstream operations, as well as alternative energy including solar, wind and biofuels.

(MSCI ESG Rating: BBB)

7             - (2018: 5^th)

Exxon Mobil

Integrated oil company

Ordinary shares      £4,154,000

Share of investments     4.2% (2018: 5.2%)

The world’s largest publicly traded international oil and gas company and the largest refiner and marketer of petroleum products.

(MSCI ESG Rating: BBB)

8             + (2018: 11^th)

ConocoPhillips

Integrated oil company

Ordinary shares      £3,574,000

Share of investments     3.6% (2018: 3.5%)

The company is the world’s largest independent exploration and production (E&P) company based on proved reserves and production. The company operates around the world in 17 different countries.

(MSCI ESG Rating: AA)

9             (2018: n/a)

Total

Integrated oil company

Ordinary shares      £3,542,000

Share of investments     3.6% (2018: n/a)

The French multinational 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)

10           - (2018: 4^th)

Rio Tinto

Diversified mining company

Ordinary shares      £3,438,000

Share of investments     3.5% (2018: 6.5%)

One of the world’s leading mining operations. Although its primary product is iron ore, the company also produces aluminium, copper, diamonds, gold, industrial minerals and energy products.

(MSCI ESG Rating: A)

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.

Together, the ten largest investments represented 50.6% of total investments of the holding as at 30 November 2019 (ten largest investments as at 30 November 2018: 56.0%).

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 30 November 2019

ASSET ALLOCATION – GEOGRAPHY

Global	65.1%
USA	12.4%
Canada	11.0%
Australia	5.0%
Latin America	4.1%
Asia	2.0%
Africa	0.4%

ASSET ALLOCATION – COMMODITY

	Energy
Integrated Oil, Gas and Energy Transition	38.7%
Exploration & Production	7.9%
Distribution	2.2%
	Mining
Diversified Mining	20.2%
Gold	14.5%
Copper	11.0%
Silver	3.1%
Diamonds	2.0%
Steel	0.4%

Source: BlackRock.

Investments as at 30 November 2019

	Main geographic exposure	Market value £’000	% of investments
Integrated Oil, Gas and Energy Transition
Royal Dutch Shell ‘B’	Global	5,892	6.0
BP Group	Global	4,769	4.8
Chevron	Global	4,600	4.7
Exxon Mobil	Global	4,154	4.2
ConocoPhillips	USA	3,574	3.6
Total	Global	3,542	3.6
Suncor Energy	Canada	2,953	3.0
Marathon Petroleum	USA	2,242	2.3
Enel	Global	1,850	1.9
Albemarle	Global	1,733	1.7
Pilgangoora 12% 21/06/22	Australia	1,647	1.7
Umicore	Global	1,157	1.2
		38,113	38.7
Diversified Mining
BHP	Global	7,684	7.8
Rio Tinto	Global	3,438	3.5
Vale	Latin America	2,913	3.0
Teck Resources	Canada	2,414	2.4
Anglo American	Global	1,419	1.4
KAZ Minerals	Asia	1,178	1.2
Glencore	Global	874	0.9
Glencore Call Option 20/12/19 £2.4	Global	(28)	–
		19,892	20.2
Gold
Barrick Gold	Global	4,972	5.0
Newmont Mining	Global	2,504	2.5
Agnico Eagle Mines	Canada	2,136	2.2
Franco-Nevada	Global	1,854	1.9
AngloGold Ashanti	Global	1,472	1.5
Newcrest Mining	Australia	965	1.0
Osisko Gold Royalties Convertible Bond 4% 31/12/22	Canada	412	0.4
		14,315	14.5
Copper
First Quantum Minerals 7.25% 15/05/22	Global	3,703	3.7
First Quantum Minerals	Global	1,969	2.0
First Quantum Minerals 6.875% 01/03/26	Global	857	0.9
First Quantum Minerals 7.5% 01/04/25	Global	350	0.4
First Quantum Minerals 7.25% 01/04/23	Global	347	0.4
OZ Minerals	Australia	1,843	1.9
Lundin Mining	Global	1,717	1.7
Freeport-McMoRan Copper & Gold Put Option 20/12/19 $9.0	Global	(2)	–
		10,784	11.0
Exploration & Production
EOG Resources	USA	2,027	2.1
Kosmos Energy	USA	1,760	1.8
Concho Resources	USA	1,561	1.6
Marathon Oil	Global	901	0.9
CNOOC	Asia	801	0.8
Noble Energy	Global	513	0.5
Occidental Petroleum	USA	246	0.2
		7,809	7.9
Silver
Wheaton Precious Metals	Global	1,970	2.0
Fresnillo	Latin America	1,046	1.1
		3,016	3.1
Distribution
TC Energy Corporation	Canada	1,409	1.4
Williams Companies	USA	759	0.8
		2,168	2.2
Diamonds
Mountain Province Diamonds 8% 15/12/22	Canada	1,624	1.6
Petra Diamonds 7.25% 01/05/22	Africa	391	0.4
		2,015	2.0
Steel
Coronado Global Resources	Australia	412	0.4
		412	0.4
Portfolio		98,524	100.0
Comprising:
Equity and fixed income investments		98,554	100.0
Derivative financial instruments – written options		(30)	–
		98,524	100.0

All investments are ordinary shares unless otherwise stated. The total number of holdings (including options) at 30 November 2019 was 49 (30 November 2018: 56). The total number of open options as at 30 November 2019 was 2 (30 November 2018: 10). The negative valuations of £30,000 (30 November 2018: £682,000) in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 30 November 2019.

The equity and fixed income investment total of £98,554,000 (2018: £94,815,000) above before the deduction of the negative option valuations of £30,000 (2018: £682,000) represents the Company’s total investments held at fair value as reflected in the Consolidated and Parent Company Statements of Financial Position below. The table above excludes cash and gearing; the level of the Company’s gearing may be determined with reference to the bank overdraft of £12,589,000 and cash and cash equivalents of £nil that are also disclosed in the Consolidated and Parent Company Statements of Financial Position. Details of the AIC methodology for calculating gearing are given in the Glossary in the Annual Report.

As at 30 November 2019, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 30 November 2019. The aim of the Strategic Report is to provide shareholders with the information required to enable them to assess how the Directors have performed in their duty to promote the success of the Company during the year under review.

The Board’s summary of their activities in the year in this regard is set out in more detail below.

BUSINESS AND MANAGEMENT OF THE COMPANY

BlackRock Energy and Resources Income Trust plc (the Company) is an investment trust company that has a premium listing on the London Stock Exchange. Its principal activity is portfolio investment. The Company’s wholly owned subsidiary is BlackRock Energy and Resources Securities Income Company Limited (together ‘the Group’). Its principal activities are option writing and investment dealing.

Investment trusts, like unit trusts and Open Ended Investment Companies (OEICs), are pooled investment vehicles which allow exposure to a diversified range of assets through a single investment thus spreading, although not eliminating, investment risk.

In accordance with the Alternative Investment Fund Managers’ Directive (AIFMD) the Company is an Alternative Investment Fund (AIF). BlackRock Fund Managers Limited (the Manager) is the Company’s Alternative Investment Fund Manager (AIFM). The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager. The Manager, operating under guidelines determined by the Board, has direct responsibility for decisions relating to the running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

The Company delegates fund accounting services to BlackRock Investment Management (UK) Limited (BIM (UK) or the Investment Manager), which in turn sub-delegates these services to The Bank of New York Mellon (International) Limited and also sub-delegates registration services to the Registrar, Computershare Investor Services PLC. Other service providers include the Depositary, The Bank of New York Mellon (International) Limited. Details of the contractual terms with these service providers are set out on page 41 of the Directors’ Report included within the Company’s Annual Report for the year ended 30 November 2019.

BUSINESS MODEL

The Company invests in accordance with the investment objective. The Board is collectively responsible to shareholders for the long term success of the Company and is its governing body. There is a clear division of responsibility between the Board and the Manager. Matters reserved for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing, capital structure, governance, and appointing and monitoring of the performance of service providers, including the Manager.

As the Company’s business model follows that of an externally managed investment trust, it does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider.

INVESTMENT OBJECTIVE

The Company’s objectives are to achieve an annual dividend target and, over the long term, capital growth by investing primarily in securities of companies operating in the mining and energy sectors.

INVESTMENT POLICY AND STRATEGY

The Company seeks to achieve its objectives through a focused portfolio, consisting of approximately thirty to one hundred and fifty securities.

Although the Company has the flexibility to invest within this range, at 30 November 2019 the portfolio consisted of forty-nine investments, and the detailed portfolio listing is provided above.

There are no restrictions on investment in terms of geography or sub-sector and, in addition to equities, other types of securities, such as convertible bonds and debt issued primarily by mining or energy companies, may be acquired. Although most securities will be quoted, listed or traded on an investment exchange, up to 10% of the gross assets of the Group, at the time of investment, may be invested in unquoted securities.

Investment in securities may be either direct or through other funds, including other funds managed by BlackRock or its associates, with up to 15% of the portfolio being invested in other listed investment companies, including listed investment trusts.

Up to 10% of the gross assets of the Group, at the time of investment, may be invested in physical assets, such as gold and in securities of companies that operate in the commodities sector other than the mining and energy sectors.

No more than 15% of the gross assets of the Group will be invested in any one company as at the date any such investment is made and the portfolio will not own more than 15% of the issued shares of any one company, other than the Company’s subsidiary.

The Group may deal in derivatives, including options and futures, up to a maximum of 30% of the Group’s assets for the purposes of efficient portfolio management and to enhance portfolio returns. In addition, the Group is also permitted to enter into stock lending arrangements up to a maximum of 33¹/₃% of the total asset value of the portfolio.

The Group may, from time to time, use borrowings to gear its investment policy or in order to fund the market purchase of its own ordinary shares. This gearing typically is in the form of an overdraft or short term facility, which can be repaid at any time. Under the Company’s Articles of Association, the Board is obliged to restrict the borrowings of the Company to an aggregate amount equal to 40% of the value of the gross assets of the Group. However, borrowings are not anticipated to exceed 20% of gross assets at the time of drawdown of the relevant borrowings.

The Group’s financial statements are maintained in sterling. Although many investments are denominated and quoted in currencies other than sterling, the Company does not intend to employ a hedging policy against fluctuations in exchange rates, but may do so in the future if circumstances warrant implementing such a policy.

No material change will be made to the investment policy without shareholder approval.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) IMPACT

The Board’s ESG policies are set out below. The direct impact of the Company’s activities is minimal as it has no employees, premises, physical assets or operations either as a producer or a provider of goods or services. Neither does it have customers. Its indirect impact occurs through the investments that it makes and this is mitigated through BlackRock’s ESG policies which are set out below.

PERFORMANCE

Details of the Company’s performance for the year are given in the Chairman’s Statement above. The Investment Manager’s Report above includes a review of the main developments during the year, together with information on investment activity within the Company’s portfolio.

RESULTS AND DIVIDENDS

The Company’s revenue earnings for the year amounted to 3.97p per share (2018: 4.37p).

Details of dividends paid and declared in respect of the year, together with the Company’s dividend policy, are set out in the Chairman’s Statement above.

FUTURE PROSPECTS

The Board’s main focus is the achievement of an annual dividend target and, over the long term, capital growth. The future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in both the Chairman’s Statement and the Investment Manager’s Report above.

EMPLOYEES, SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES

The Company has no employees and all the Directors are non-executive, therefore, there are no disclosures to be made in respect of employees.

The Company believes that it is in shareholders’ interests to consider environmental, social and governance factors and human rights issues when selecting and retaining investments. Details of the Company’s policy on socially responsible investment are set out on page 55 of the Company’s Annual Report for the year ended 30 November 2019.

MODERN SLAVERY ACT

As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. The Board considers the Company’s supply chain, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

DIRECTORS AND GENDER REPRESENTATION

The Directors of the Company are set out in the Governance Structure and Directors’ biographies in the Annual Report. All the Directors held office throughout the year with the exception of Mr Adrian Brown who was appointed to the Board on 10 December 2019.

The Board consists of four male Directors and one female Director.

PROMOTING THE SUCCESS OF BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC

New regulations (The Companies (Miscellaneous Reporting) Regulations 2018) require Directors to explain more fully how they have discharged their duties under section 172(1) of the Companies Act 2006 in promoting the success of their companies for the benefit of members as a whole. This enhanced disclosure covers how the Board has engaged with and understands the views of stakeholders and how stakeholders’ needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board’s decisions.

The Board consider the main stakeholders in the Company to be the Manager and the shareholders. The Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, secretarial, accounting and marketing services. The Board is also focused on fostering good working relationships with shareholders so they understand the Board’s strategy and objectives in delivering long term growth and income. In addition to this the Board consider investee companies and key service providers to the Company to be stakeholders; the latter comprise the Company’s Custodian, Depositary, Registrar and Broker.

A summary of the key areas of engagement undertaken by the Board with its key stakeholders in the year under review and how Directors have acted upon this to promote the long term success of the Company are set out in the table below.

Area of Engagement	Issue	Engagement	Impact
Discount management	One of the Board’s long-term strategic aspirations is that the Company’s shares should trade consistently at a price close to the NAV per share.	The Board monitors the Company’s discount on an ongoing basis and has met with the Manager and the Company’s Broker on a regular basis to discuss methods to manage the discount. A range of discount control mechanisms have been considered and the benefits and disadvantages of these have been discussed at length. As a result of these discussions the Board announced in January 2019 that it would no longer seek to implement half yearly tenders but would instead adopt an active buy-back policy. In addition, the Board has worked closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with existing shareholders and to attract new shareholders to the Company in order to improve liquidity in the Company’s shares and to sustain the share rating of the Company.	For much of the second half of the year, the shares traded consistently at a discount. Between 1 December 2018 and 30 November 2019 the Company bought back 1,956,166 shares at a cost of £1,390,000. Since the year end and up to the date of this report, the Company has bought back a further 300,000 shares at a cost of £198,350. The Company contributed during the year to a focused investment trust sales and marketing initiative operated by BIM (UK) on behalf of the investment trusts under its management. For the year ended 30 November 2019, the Group’s contribution to the consortium element of the initiative, which enables the trusts to achieve efficiencies by combining certain sales and marketing activities, represented 0.025% per annum of its net assets (£84.4 million) as at 31 December 2018, and this contribution was matched by BIM (UK). The Company’s average discount for the year to 30 November 2019 was 8.3% and as at the date of this report the discount stands at 9.9%
Investment mandate and objective	The Board is committed to promoting the role and success of the Company in delivering on its investment mandate to shareholders over the long term. However, the Board recognises that the sectors in which the Company invests are undergoing structural changes, with a shift in the energy sector away from carbon based energy supplies towards alternative and renewable energy sources. The extractive industries in which the companies in the Company’s investment universe operate are facing ethical and sustainability issues that cannot be ignored by asset managers and investment companies alike. More than ever, consideration of sustainable investment is a key factor in making investment decisions. The Board also has responsibility to shareholders to ensure that the Company’s portfolio of assets is invested in line with the stated investment objective and in a way that ensures an appropriate balance between spread of risk and portfolio returns.	The Board believes that responsible investment and sustainability are integral to the longer term delivery of growth in capital and income and has worked very closely with the Manager throughout the year to regularly review the Company’s performance, investment strategy and underlying policies to ensure that the Company’s investment objective continues to be met in an effective, responsible and sustainable way that is transparent to current and future investors. The Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as its engagement with investee companies to encourage the adoption of sustainable business practices which support long term value creation, are kept under review by the Board. The Manager reports to the Board in respect of its consideration of ESG factors and how these are integrated into the investment process; a summary of BlackRock’s approach to ESG and sustainability is set out below. The Board has also worked closely during the year with the Manager and the Company’s broker to review the Company’s name and whether this is the most appropriate title given the structural changes to the Company’s investment universe.	Within the parameters of the Company’s existing       investment policy, the Manager is continuing to expand its investment in Energy Transition stocks. This enables shareholders to benefit from investment opportunities in well-established, high quality dividend paying renewable energy companies as well as companies set to benefit from changing energy consumption and structural changes in the energy sector. BlackRock has stated that, as part of its commitment to sustainability, it will divest any investment in companies that derive more than 25% of revenues from thermal coal production from all discretionary active investment portfolios. The Company did not hold securities within its portfolio that fell within this category during the year under review or since the year end. The portfolio activities undertaken by the Manager,  including the specific strategic decisions concerning a reallocation away from traditional energy stocks towards transitional energy companies can be found in the Investment Manager’s Report above. As part of this recognition of shifting trends in the energy sector, the Board changed the Company’s name to BlackRock Energy and Resources Income Trust plc in May 2019; the name change reflects the portfolio having exposure to companies expected to benefit from the move towards a lower carbon global economy and the fact that the Company predominantly invests in energy and mining equities as opposed to commodities.
Dividend target	A key element of the Company’s investment objective is to achieve an annual dividend target. The Board is cognisant that portfolio investments with a high yield may have lower capital growth, and that seeking to ensure that any dividend target is covered by current year dividend revenue may result in a lower total return. Conversely, a move to invest a higher proportion of the portfolio in higher growth investments (including certain Energy Transition stocks) may result in a lower yielding portfolio. In previous years the Manager has written options to generate premium income to ensure that the dividend is covered.	The Board undertook a review of option writing activity in conjunction with the Manager to determine the most effective approach for meeting the dividend target whilst generating the optimal level of total return for shareholders.	In January 2019 the Board announced that it was adopting a more flexible approach, recognising that it was possible to generate similar or improved returns for the Company with a lower level of option writing (particularly in rising markets where returns might be curtailed by writing call options). The Board has committed to the use of revenue reserves and capital reserves as necessary to meet the current dividend  target of 4.00 pence per share (a yield of 6.1% based on the share price at 30 November 2019) to the extent that current year revenue is not sufficient. For the year to 30 November 2019, 0.03p of the total dividends of 4.00p per share paid were distributed from brought forward special reserves.
Service levels of third party providers	The Board acknowledges the importance of ensuring that the Company’s principal suppliers are providing a suitable level of service: this includes the Manager in respect of investment performance and delivering on the Company’s investment mandate; the Custodian and Depositary in respect of their duties towards safeguarding the Company’s assets; the Registrar in its maintenance of the Company’s share register and dealing with investor queries and the Company’s Brokers in respect of the provision of advice and acting as a market maker for the Company’s shares.	The Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual evaluation of the Manager’s performance, its commitment and available resources. The Board performs an annual review of the service levels of all third party service providers and concludes on their suitability to continue in their role. The Board receives regular updates from the AIFM, Depositary, Registrar and Brokers on an ongoing basis.	All performance evaluations were performed on a timely basis and the Board concluded that all third party service providers, including the Manager were operating effectively and providing a good level of service. The level of fee paid to the Depositary was reviewed and was reduced from 0.00115% per annum of net assets to a rate of 0.00095% per annum with effect from 1 January 2019.
Board composition	The Board is committed to ensuring that its own composition brings an appropriate balance of knowledge, experience and skills, and that it is compliant with best corporate governance practice under the UK Code, including guidance on tenure and the composition of the Board’s committees.	The Board undertook a review of succession planning arrangements in the year and identified the need for a new Director. The Nomination Committee agreed the selection criteria and the method of selection, recruitment and appointment. Board diversity, including gender, was taken into account when establishing the criteria. The services of an external search consultant, Cornforth Consulting Limited, was used to identify potential candidates.	The Board appointed Mr Adrian Brown as a Director of the Company with effect from 10 December 2019. Mr Brown’s biography is set out in the Annual Report. Details of each Directors’ contribution to the success and promotion of the Company are set out in the Directors’ report in the Annual Report.

SUSTAINABILITY AND OUR ESG POLICIES

THE BOARD’S APPROACH

Environmental, social and governance (ESG) issues can present both opportunities and threats to long term investment performance. The Company’s investment universe comprises sectors that are undergoing significant structural change and are likely to be highly impacted by increasing regulation as a result of climate change and other social and governance factors. Your Board is committed to ensuring that we have appointed a manager that applies the highest standards of ESG practice, and also one that has the skill and vision to navigate the structural transition that the Company’s investment universe is undergoing. The Board believes effective engagement with management is, in most cases, the most effective way of driving meaningful change in the behaviour of investee company management.  This is particularly true for the Company’s Manager given the extent of BlackRock’s shareholder engagement (BlackRock held 2,050 engagements with 1,458 companies based in 42 markets for the 12 months ended 30 June 2019).  As well as the influence afforded by its sheer scale, the Board believes that BlackRock is well placed as Manager to fulfil these requirements due to the integration of ESG into its investment processes, the emphasis it places on sustainability, its collaborative approach in its investment stewardship activities and its position in the industry as one of the largest suppliers of sustainable investment products in the global market. More information on BlackRock’s approach to sustainability is set out below.

RESPONSIBLE OWNERSHIP – BLACKROCK’S APPROACH

As a fiduciary to its clients, BlackRock has built its business to protect and grow the value of clients’ assets. From BlackRock’s perspective, business-relevant sustainability issues can contribute to a company’s long term financial performance, and thus further incorporating these considerations into the investment research, portfolio construction, and stewardship process can enhance long-term risk adjusted returns. By expanding access to data, insights and learning on material ESG risks and opportunities in investment processes across BlackRock’s diverse platform, BlackRock believes that the investment process is greatly enhanced. ESG factors have been a key consideration of the BlackRock Natural Resources Team’s investment process since the team was formed in 1991 and the Company’s portfolio managers work closely with BlackRock’s Investment Stewardship team to assess the governance quality of companies and investigate any potential issues, risks or opportunities. The portfolio managers use ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio.

The importance of considering ESG when investing in the Natural Resources Sector
Environmental	Social	Corporate Governance
Digging mines and drilling for oil will inevitably have an impact on the local environment. Key is how companies manage this process ensuring the benefits are appropriately shared amongst all stakeholders. The value wiped off the market cap of companies like BP, after the Macondo oil spill, and BHP and Vale, after the Samarco tailings dam failure, highlights the key role that ESG has on share price performance. As set out in more detail below, BlackRock will be aligning its engagement and stewardship priorities to UN Sustainable Development Goals and is committed to voting against management to the extent that they have not demonstrated sufficient progress in how they manage these environmental impacts and operating events.	BlackRock believes it is vital that natural resources companies maintain their social licence to operate. By this, BlackRock means that companies maintain broad acceptance from their employees, stakeholders, local communities and the national government. The portfolio management team’s site visits to companies’ assets provide them with valuable insight into these issues which often cannot be properly understood from company reports.	As with all companies, good corporate governance is critical for natural resources companies. In conjunction with the BlackRock Investment Stewardship team, the portfolio management team actively engage with companies on a wide range of governance issues including board independence, executive compensation, shareholder protection and timely disclosure.

WHAT DOES THE TRANSITION TO A LOWER CARBON WORLD MEAN FOR COMMODITIES?

The world is moving towards lower carbon solutions to tackle climate change. This will have a major impact on global commodity demand and we recognise that we will need to be adept at positioning the Company for such changes. The proportion of global electricity generation accounted for by solar and wind is set to rise sharply over the next 20 years. Meanwhile, the rise of electric vehicles will eventually be a headwind for global oil demand. However, while we see electric vehicles as a longer-term problem for oil we do not expect peak oil demand until the 2030’s. We believe this allows oil and traditional energy equities room for at least one more growth cycle. This trend will be negative for some commodities, but it also creates opportunities elsewhere. For example, the electric vehicle theme will drive demand for certain commodities used in the batteries, such as lithium, cobalt and nickel.

BLACKROCK’S APPROACH TO SUSTAINABLE INVESTING

Considerations about sustainability have been at the centre of BlackRock’s investment approach for many years and the firm offers more than 100 sustainable products and solutions. BlackRock believes that climate change is now a defining factor in companies’ long term prospects, and that it will have a significant and lasting impact on economic growth and prosperity. BlackRock believes that climate risk now equates to investment risk, and this will drive a profound reassessment of risk and asset values as investors seek to react to the impact of climate policy changes. This in turn is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade.

In January 2020, with this transition in mind, BlackRock announced that it would accelerate its sustainable investing efforts and make a number of enhancements to its investment management and risk processes, including the following:

•     Heightening scrutiny on sectors and issuers with a high ESG risk, such as thermal coal producers, due to the investment risk they present to client portfolios;

•     Putting ESG analysis at the heart of Aladdin (BlackRock’s proprietary trading platform) and using proprietary tools to help analyse ESG risk; and

•     Placing oversight of ESG risk with BlackRock’s Risk and Quantitative Analysis group (RQA), to ensure that ESG risk is given increased weighting as a risk factor and is analysed with the same weight given to traditional measures such as credit or liquidity risk.

INVESTMENT STEWARDSHIP

BlackRock also places a strong emphasis on sustainability in its stewardship activities. BlackRock have engaged with companies on sustainability-related questions for a number of years, urging management teams to make progress while also deliberately giving companies time to enhance disclosure consistent with the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD). This includes each company’s plan for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized, as expressed by the TCFD guidelines. To this end, BlackRock is now a member of Climate Action 100+, a group of investors that engages with companies to improve climate disclosure and align business strategy with the goals of the Paris Agreement. BlackRock will be aligning its engagement and stewardship priorities to UN Sustainable Development Goals (including Gender Equality and Affordable and Clean Energy). BlackRock is committed to voting against management to the extent that they have not demonstrated sufficient progress on sustainability issues.

BlackRock is committed to transparency in terms of disclosure on its engagement with companies and voting rationales. Last year BlackRock voted against or withheld votes from 4,800 directors at 2,700 different companies.  More details about BlackRock’s investment stewardship process can be found on BlackRock’s website at https://www.blackrock.com/uk/individual/about-us/investment-stewardship.

In terms of its own reporting, BlackRock believes that the SASB provides a clear set of standards for reporting sustainability information across a wide range of issues, from labour practices to data privacy to business ethics. For evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them, the TCFD provides a valuable framework. BlackRock recognize that reporting to these standards requires significant time, analysis, and effort. BlackRock’s own SASB-aligned disclosure is available on its website at https://www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/blackrock2018sasbdisclosure.pdf, and BlackRock is working towards a TCFD-aligned disclosure by the end of 2020.

BlackRock is also a founding member of the TCFD and a signatory to the UN’s Principles for Responsible Investment. BlackRock also signed the Vatican’s 2019 statement advocating carbon pricing regimes, which it believes are essential to combating climate change. BlackRock has also joined with France, Germany, and global foundations to establish the Climate Finance Partnership, which is one of several public-private efforts to improve financing mechanisms for infrastructure investment. More information on BlackRock’s policies on Corporate Sustainability can be found on BlackRock’s website at https://www.blackrock.com/uk/individual/about-us/corporate-sustainability.

KEY PERFORMANCE INDICATORS

A number of performance indicators (KPIs) are used to monitor and assess the Company’s success in achieving its objectives and to measure its progress and performance.

The principal KPIs are described below:

Performance

At each meeting the Board reviews the performance of the portfolio as well as the net asset value and share price for the Company and compares this to the performance of other companies in the peer group. The Company does not have a benchmark; however the Board also reviews performance in the context of the performance of the EMIX Global Mining Index and the MSCI World Energy Index and a 50:50 composite of both indices.

Information on the Company’s performance is given in the performance record, the Chairman’s Statement and Investment Manager’s Report above.

Share rating

The Board monitors the level of the Company’s premium or discount to NAV on an ongoing basis and considers strategies for managing any premium or discount.

In the year to 30 November 2019, the Company’s share price to NAV traded in the range of a premium of 1.5% to a discount of 14.5% on a cum income basis. The average discount for the year was 8.3%. No shares were issued during the year. The Company bought back a total of 1,956,166 shares during the year and further details are given in the Chairman’s Statement above. Details of shares bought back since the year end date are given in note 14 in the Company’s Annual Report for the year ended 30 November 2019.

Further details setting out how the discount or premium at which the Company’s shares trade is calculated are included in the Glossary in the Company’s Annual Report for the year ended 30 November 2019.

Ongoing charges

The ongoing charges represent the Company’s management fee and all other recurring operating expenses excluding finance costs, direct transaction costs, custody transaction charges and taxation, expressed as a percentage of average net assets.

The ongoing charges are based on actual costs incurred in the year as being the best estimate of future costs. The Board reviews the ongoing charges and monitors the expenses incurred by the Company on an ongoing basis. A definition setting out in detail how the ongoing charges ratio is calculated is included in the Glossary in the Company’s Annual Report for the year ended 30 November 2019.

Dividend target and income generation

The level of income is considered at each meeting and the Board receives detailed income forecasts. The Board also monitors performance relative to a peer group of commodities and natural resources focused open and closed-end funds and also regularly reviews the Company’s performance attribution analysis to understand how performance was achieved. This provides an understanding of how components such as sector exposure, stock selection and asset allocation impacted performance. Further details are provided in the Investment Manager’s Report above.

The table below sets out the key KPIs for the Company. These KPIs fall within the definition of ‘Alternative Performance Measures’ (APMs) under guidance issued by the European Securities and Markets Authority (ESMA) and additional information explaining how these are calculated is set out in the Glossary in the Company’s Annual Report for the year ended 30 November 2019.

Key Performance Indicators	Year ended 30 November 2019	Year ended 30 November 2018
Net asset value total return1,2	4.4%	3.6%
Share price total return1,2	(1.3%)	(0.9%)
Discount to net asset value (at year end)2,4	12.3%	6.9%
Revenue return per share	3.97p	4.37p
Ongoing charges2,3	1.48%	1.39%

1    This measures the Company’s NAV and share price total returns, which assumes dividends paid by the Company have been reinvested.
2    Alternative Performance Measures, see Glossary in the Company's Annual Report for the year ended 30 November 2019.
3    Ongoing charges represent the management fee and all other recurring operating expenses excluding finance costs, direct transaction costs, custody transaction charges and taxation, expressed as a percentage of average shareholders’ funds.
4    This is the difference between the share price and the cum-income NAV per share.

PRINCIPAL RISKS

The Company is exposed to a variety of risks and uncertainties. The Board has in place a robust process to identify, assess and monitor the principal risks of the Company. A core element of this process is the Company’s risk register which identifies the risks facing the Company and assesses the likelihood and potential impact of each risk and the controls established for mitigation. A residual risk rating is then calculated for each risk.

The risk register is regularly reviewed and the risks re-assessed. The risk environment in which the Company operates is also monitored and regularly appraised. New risks are also added to the register as they are identified which ensures that the document continues to be an effective risk management tool.

The risk register, its method of preparation and the operation of key controls in the Manager’s and third party service providers’ systems of internal control are reviewed on a regular basis by the Audit and Management Engagement Committee. In order to gain a more comprehensive understanding of the Manager’s and other third party service providers’ risk management processes, and how these apply to the Company’s business, BlackRock’s internal audit department provides an annual presentation to the Audit and Management Engagement Committee Chairman setting out the results of testing performed in relation to BlackRock’s internal control processes. The Audit and Management Engagement Committee also periodically receives presentations from BlackRock’s Risk & Quantitative Analysis teams, and reviews Service Organisation Control (SOC 1) reports from BlackRock and from the Company’s custodian (The Bank of New York Mellon (International) Limited). The custodian is appointed by the Company’s Depositary and does not have a direct contractual relationship with the Company.

The Board has undertaken a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Those principal risks have been described in the table below together with an explanation of how they are managed and mitigated. The Board will continue to assess these risks on an ongoing basis. In relation to the 2016 update to the UK Corporate Governance Code, the Board is comfortable that the procedures that the Company has in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the year under review.

The Company’s principal risks may be categorised under the following headings:

•     investment performance;

•     income/dividend;

•     gearing;

•     legal and regulatory compliance;

•     operational;

•     market; and

•     financial.

The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out in the following table.

Principal Risk	Mitigation/Control
Investment performance The returns achieved are reliant primarily upon the performance of the portfolio. The Board is responsible for: •     setting the investment strategy to fulfil the Company’s objective; and •     monitoring the performance of the Investment Manager and the implementation of the investment strategy. An inappropriate investment strategy may lead to: •     poor relative performance; •     a reduction or permanent loss of capital; and •     dissatisfied shareholders and reputational damage.	To manage this risk the Board: •     regularly reviews the Company’s investment mandate and long term strategy; •     has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports on; •     receives from the Investment Manager a regular explanation of stock selection decisions, portfolio exposure, gearing and any changes in gearing and the rationale for the composition of the investment portfolio; •     monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with factors specific to particular sectors, based on the diversification requirements inherent in the investment policy.
Income/dividend The ability to pay dividends, and future dividend growth, is dependent on a number of factors including the level of dividends earned from the portfolio and income generated from the option writing strategy. Income returns from the portfolio are dependent, among other things, upon the Company successfully pursuing its investment policy. Any change in the tax treatment of dividends or interest received by the Company including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests may reduce the level of dividends received by shareholders.	The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. The Company has the ability to make dividend distributions out of special reserves and capital reserves as well as revenue reserves to support any dividend target. These reserves totalled £37.8 million at 30 November 2019. In setting the dividend target each year, the Board is mindful of the balance of shareholder returns between income and capital.
Gearing The Company’s investment strategy may involve the use of gearing, including borrowings. Gearing may be generated through borrowing money or increasing levels of market exposure through the use of derivatives. The Company currently has an uncommitted overdraft facility with The Bank of New York Mellon (International) Limited. The use of gearing exposes the Company to the risk associated with borrowing. Gearing provides an opportunity for greater returns where the return on the Company’s underlying assets exceeds the cost of borrowing. It is likely to have the opposite effect where the return on the underlying assets is below the cost of borrowings. Consequently, the use of borrowings by the Company may increase the volatility of the NAV.	The Company’s Articles of Association limit borrowings to an aggregate amount equal to 40% of the value of the gross assets of the Group. However, to further manage this risk the Board does not anticipate borrowings will exceed 20% of gross assets at the time of drawdown. The use of derivatives, including options and futures has been limited to a maximum of 30% of the Group’s assets. The Investment Manager will only use gearing when confident that market conditions and opportunities exist to enhance investment returns. The Investment Manager reports to the Board on a regular basis the levels of gearing in place as compared to limits set by the Board under the investment policy and by the Manager as Alternative Investment Fund Manager (AIFM) under the Alternative Investment Fund Managers’ Directive (AIFMD). The Board monitor gearing levels and will raise any queries or concerns in respect of changes in the gearing level with the Investment Manager.
Legal and regulatory compliance The Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. Any serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010. Amongst other relevant laws and regulations the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive, the Market Abuse Regulation, the UK Listing Rules and the FCA’s Disclosure Guidance and Transparency Rules.	The Investment Manager monitors investment movements and the amount of proposed dividends, if any, to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting. Compliance with the accounting rules affecting investment trusts is carefully and regularly monitored. The Company Secretary and the Company’s professional advisers provide regular reports to the Board for their review in respect of compliance with all applicable rules and regulations. Following authorisation under the AIFMD, the Company and its appointed AIFM are subject to the risks that the requirements of this Directive are not correctly complied with. The Board and the AIFM also monitor changes in government policy and legislation which may have an impact on the Company. The Market Abuse Regulation came into force across the EU on 3 July 2016. The Board has taken steps to ensure that individual Directors (and their Persons Closely Associated) are aware of their obligations under the regulation and has updated internal processes, where necessary, to ensure the risk of non-compliance is effectively mitigated.
Operational The Company relies on the services provided by third parties. Accordingly, it is dependent on the control systems of the Manager and The Bank of New York Mellon (International) Limited (who act as both Depositary and Fund Accountant and who maintain the Company’s assets, settlement and accounting records). The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of the third party service providers. Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company’s financial position.	Due diligence is undertaken before contracts are entered into with third party service providers. Thereafter, the performance of the provider is subject to regular review and reported to the Board. The Fund Accountant’s and the Manager’s internal control processes are regularly tested and monitored throughout the year and are evidenced through their SOC 1 reports, which are subject to review by an Independent Service Assurance Auditor. The SOC 1 reports provide assurance in respect of the effective operation of internal controls. These reports are provided to the Audit and Management Engagement Committee. The Company’s financial assets are subject to a strict liability regime and in the event of a loss of assets, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control. The Board reviews the overall performance of the Manager, Investment Manager and all other third party service providers on a regular basis. The Board also considers the business continuity arrangements of the Company’s key service providers.
Market Market risk arises from volatility in the prices of the Company’s investments. The price of shares of companies in the mining and energy sectors can be volatile and this may be reflected in the NAV and market price of the Company’s shares. The Company invests in the mining and energy sectors in many countries globally and will also be subject to country-specific risk. A lack of growth in world or country-specific industrial production may adversely affect metal and energy prices. Companies operating within the sectors in which the Company invests may be impacted by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price. There is the potential for the Company to suffer loss through holding investments in the face of negative market movements.	The Board considers the diversification of the portfolio, asset allocation, stock selection, and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. Under the Company’s investment policy, the Investment Manager has the ability to invest in energy transition stocks and is mindful of the impact of any shift in energy consumption towards less carbon intensive energy supply. This is taken into account by the Investment Manager in building a well diversified portfolio.
Financial The Company’s investment activities expose it to a variety of financial risks that include interest rate risk and foreign currency risk. The Company invests in both sterling and non-sterling denominated securities. Consequently, the value of investments in the portfolio made in non-sterling currencies will be affected by currency movements.	Details of these risks are disclosed in note 16 to the financial statements in the Annual Report, together with a summary of the policies for managing these risks.

VIABILITY STATEMENT

In accordance with provision C.2.2 of the 2016 UK Corporate Governance Code, the Directors have assessed the prospects of the Company for a period of three years. The Board considers three years to be an appropriate time horizon, being the period generally used to assess potential investments.

In its assessment of the viability of the Company the Directors have noted that:

•     the Company predominantly invests in highly liquid, large listed companies so its assets are readily realisable;

•     the Company has gearing and no concerns around facilities, headroom or covenants; and

•     the business model should remain attractive for longer than three years, unless there is significant economic or regulatory change.

The Directors have also reviewed:

•     the Company’s principal risks and uncertainties, as previously set out;

•     the potential impact of a fall in commodity equity markets on the value of the Company’s investment portfolio and underlying dividend income;

•     the ongoing relevance of the Company’s investment objective, business model and investment policy in the current environment; and

•     the level of demand for the Company’s shares.

The Board has also considered a number of financial metrics in its assessment, including:

•     the level of ongoing charges, both current and historic;

•     the level at which the shares trade relative to NAV;

•     the level of income generated;

•     future income forecasts; and

•     99% of the portfolio was capable of being liquidated in less than 20 days.

The Board has concluded that the Company would be able to meet its ongoing operating costs as they fall due as a consequence of:

•     a liquid portfolio; and

•     expenses which comprise a small percentage of net assets.

Based on the results of their analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

BY ORDER OF THE BOARD

SARAH BEYNSBERGER

FOR AND ON BEHALF OF

BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED

Company Secretary

5 February 2020

RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER

BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. The management contract is terminable by either party on six months’ notice.

BlackRock Investment Management (UK) Limited (BIM (UK)) acts as the Company’s Investment Manager under a delegation agreement with BFM. BIM (UK) also acted as the Secretary of the Company throughout the year. BFM receives a management fee of 0.95% on the first £250 million of gross assets and 0.90% thereafter. The investment management fee due for the year ended 30 November 2019 amounted to £948,000 (2018: £1,000,000).  At the year end, £389,000 was outstanding in respect of the management fee (2018: £412,000).

Further details in relation to the management fee are given in note 4. The Board believes that the current fee structure is appropriate for an investment company in this sector. Further details of the investment management contract are disclosed in the Directors’ Report contained within the Company’s Annual Report for the year ended 30 November 2019.

The Group contributes to a focused investment trust sales and marketing initiative operated by BIM (UK) on behalf of the investment trusts under its management. For the year ended 30 November 2019, the Group’s contribution to the consortium element of the initiative, which enables the trusts to achieve efficiencies by combining certain sales and marketing activities, represented 0.025% per annum of its net assets (£84.4 million) as at 31 December 2018, and this contribution is matched by BIM (UK). For the year ended 30 November 2019, £29,000 (excluding VAT) has been invoiced and paid in respect of this initiative. The purpose of the programme is to ensure effective communication with existing shareholders and to attract new shareholders to the Company. This has the benefit of improving liquidity in the Company’s shares and helps sustain the stock market rating of the Company.

The total fees paid or payable for these services for the year ended 30 November 2019 amounted to £29,000 excluding VAT (2018: £21,000).

BFM and BIM (UK) are subsidiaries of BlackRock, Inc. which is a publicly traded corporation on the New York Stock Exchange operating as an independent firm. PNC Financial Services Group, Inc. has a significant economic interest in BlackRock, Inc. PNC Financial Services Group, Inc. is a US public company.

The Board consists of five non-executive Directors, all of whom, with the exception of Mr Ruck Keene (who was previously an employee of the Manager) are considered to be independent of the Manager by the Board. Mr Ruck Keene retired from his position at BlackRock on 7 April 2017 and will continue to be deemed to be non-independent of the Manager for a period of five years following his retirement under current guidance set out in the UK Corporate Governance Code. None of the Directors has a service contract with the Company. For the year ended 30 November 2019, the Chairman received an annual fee of £38,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of £32,000 and the other Directors received an annual fee of £27,000.

The related party transactions with Directors are set out in the Directors’ Remuneration Report contained within the Company’s Annual Report for the year to 30 November 2019. At 30 November 2019, £10,000 (2018: £10,000) was outstanding in respect of Directors’ fees.

As at 30 November 2019 and 2018, the Directors’ interests in the Company’s Ordinary Shares were as follows:

	30 November 2019	30 November 2018
	Ordinary shares	Ordinary shares
Ed Warner (Chairman)	94,000	94,000
Carol Bell	33,500	33,500
Michael Merton	17,000	17,000
Jonathan Ruck Keene	14,000	14,000

All the holdings of the Directors are beneficial. No other changes to these holdings have been notified up to the date of this report. Since 30 November 2019, Adrian Brown was appointed to the Board, and acquired 14,603 shares in the Company on 16 December 2019 for total consideration of £9,938.

Statement of Directors’ responsibilities in respect of the annual report and financial statements

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements under IFRS as adopted by the European Union.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group as at the end of each financial year and of the profit or loss of the Group for that year.

In preparing these Group financial statements, the Directors are required to:

•     present fairly the financial position, financial performance and cash flows of the Group;

•     select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

•     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

•     make judgements and estimates that are reasonable and prudent;

•     state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

•     provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; and

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance Statement and the Report of the Audit and Management Engagement Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules. The Directors have delegated responsibility to the Manager for the maintenance and integrity of the Group’s corporate and financial information included on the BlackRock website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names are listed in the Annual Report, confirm to the best of their knowledge that:

•     the financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

•     the annual report and financial statements include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The 2016 UK Corporate Governance Code also requires Directors to ensure that the annual report and financial statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit and Management Engagement Committee advise on whether it considers that the annual report and financial statements fulfil these requirements. The process by which the Committee has reached these conclusions is set out in the Audit and Management Engagement Committee’s report in the Annual Report. As a result, the Board has concluded that the annual report and financial statements for the year ended 30 November 2019, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s position, performance, business model and strategy.

FOR AND ON BEHALF OF THE BOARD

ED WARNER

Chairman

5 February 2020

Consolidated statement of comprehensive income for the year ended 30 November 2019

	Notes	Revenue 2019	Revenue 2018	Capital 2019	Capital 2018	Total 2019	Total 2018
		£’000	£’000	£’000	£’000	£’000	£’000
Income from investments held at fair value through profit or loss	3	4,336	4,038	658	–	4,994	4,038
Other income	3	1,308	2,323	–	–	1,308	2,323
		_____	_____	_____	_____	_____	_____
Total income		5,644	6,361	658	–	6,302	6,361
		_____	_____	_____	_____	_____	_____
Net profit/(loss) on investments and options held at fair value through profit or loss		–	–	(585)	(717)	(585)	(717)
Net profit on foreign exchange		–	–	25	30	25	30
		_____	_____	_____	_____	_____	_____
Total		5,644	6,361	98	(687)	5,742	5,674
Expenses		_____	_____	_____	_____	_____	_____
Investment management fee	4	(237)	(250)	(711)	(750)	(948)	(1,000)
Other operating expenses	5	(404)	(343)	(5)	(3)	(409)	(346)
		_____	_____	_____	_____	_____	_____
Total operating expenses		(641)	(593)	(716)	(753)	(1,357)	(1,346)
		_____	_____	_____	_____	_____	_____
Net profit/(loss) on ordinary activities before finance costs and taxation		5,003	5,768	(618)	(1,440)	4,385	4,328
Finance costs	6	(49)	(37)	(148)	(109)	(197)	(146)
		_____	_____	_____	_____	_____	_____
Net profit/(loss) on ordinary activities before taxation		4,954	5,731	(766)	(1,549)	4,188	4,182
		_____	_____	_____	_____	_____	_____
Taxation		(376)	(586)	42	63	(334)	(523)
		_____	_____	_____	_____	_____	_____
Net profit/(loss) on ordinary activities after taxation		4,578	5,145	(724)	(1,486)	3,854	3,659
		_____	_____	_____	_____	_____	_____
Earnings/(loss) per ordinary share (pence)	8	3.97	4.37	(0.63)	(1.26)	3.34	3.11
		_____	_____	_____	_____	_____	_____

The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by 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 year. 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 year disclosed above represents the Group’s total comprehensive income/(loss).

Consolidated statement of changes in equity for the year ended 30 November 2019

Group	Notes	Called up share capital	Share premium account	Special reserve	Capital reserve	Revenue reserve	Total
		£’000	£’000	£’000	£’000	£’000	£’000
For the year ended 30 November 2019
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	9,10	–	–	(1,390)	–	–	(1,390)
Share purchase costs	9,10	–	–	(10)	–	–	(10)
Dividends paid1	7	–	–	(232)	–	(4,386)	(4,618)
		_____	_____	_____	_____	_____	_____
At 30 November 2019		1,190	46,977	67,241	(33,604)	4,141	85,945
		_____	_____	_____	_____	_____	_____
For the year ended 30 November 2018
At 30 November 2017		1,188	46,827	71,223	(31,394)	3,513	91,357
Total comprehensive income/(loss):
Net (loss)/profit for the year		–	–	–	(1,486)	5,145	3,659
Transactions with owners, recorded directly to equity:
Share issues		2	150	–	–	–	152
Ordinary shares purchased into treasury		–	–	(2,373)	–	–	(2,373)
Ordinary shares reissued from treasury		–	–	40	–	–	40
Share purchase costs		–	–	(17)	–	–	(17)
Dividends paid2	7	–	–	–	–	(4,709)	(4,709)
		_____	_____	_____	_____	_____	_____
At 30 November 2018		1,190	46,977	68,873	(32,880)	3,949	88,109
		_____	_____	_____	_____	_____	_____
1    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. 2    4th interim dividend of 1.00p per share for the year ended 30 November 2017, declared on 11 December 2017 and paid on 19 January 2018; 1st interim dividend of 1.00p per share for the year ended 30 November 2018, declared on 13 March 2018 and paid on 20 April 2018, 2nd interim dividend of 1.00p per share for the year ending 30 November 2018, declared on 13 June 2018 and paid on 20 July 2018 and 3rd interim dividend of 1.00p per share for the year ended 30 November 2018, declared on 18 September 2018 and paid on 23 October 2018.

Parent company statement of changes in equity for the year ended 30 November 2019

Company	Notes	Called up share capital	Share premium account	Special reserve	Capital reserve	Revenue reserve	Total
		£’000	£’000	£’000	£’000	£’000	£’000
For the year ended 30 November 2019
At 30 November 2018		1,190	46,977	68,873	(31,444)	2,513	88,109
Total comprehensive income:
Net profit for the year		–	–	–	456	3,398	3,854
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury	9,10	–	–	(1,390)	–	–	(1,390)
Share purchase costs	10	–	–	(10)	–	–	(10)
Dividends paid1	7	–	–	(232)	–	(4,386)	(4,618)
		_____	_____	_____	_____	_____	_____
At 30 November 2019		1,190	46,977	67,241	(30,988)	1,525	85,945
		_____	_____	_____	_____	_____	_____
For the year ended 30 November 2018
At 30 November 2017		1,188	46,827	71,223	(30,099)	2,218	91,357
Total comprehensive income/(loss):
Net (loss)/profit for the year		–	–	–	(1,345)	5,004	3,659
Transactions with owners, recorded directly to equity:
Share issues		2	150	–	–	–	152
Ordinary shares purchased into treasury		–	–	(2,373)	–	–	(2,373)
Ordinary shares reissued from treasury		–	–	40	–	–	40
Share purchase costs		–	–	(17)	–	–	(17)
Dividends paid2	7	–	–	–	–	(4,709)	(4,709)
		_____	_____	_____	_____	_____	_____
At 30 November 2018		1,190	46,977	68,873	(31,444)	2,513	88,109
		_____	_____	_____	_____	_____	_____
1    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. 2    4th interim dividend of 1.00p per share for the year ended 30 November 2017, declared on 11 December 2017 and paid on 19 January 2018; 1st interim dividend of 1.00p per share for the year ended 30 November 2018, declared on 13 March 2018 and paid on 20 April 2018, 2nd interim dividend of 1.00p per share for the year ending 30 November 2018, declared on 13 June 2018 and paid on 20 July 2018 and 3rd interim dividend of 1.00p per share for the year ended 30 November 2018, declared on 18 September 2018 and paid on 23 October 2018.

Consolidated and parent company statements of financial position as at 30 November 2019

	Notes	30 November 2019		30 November 2018
		Group	Company	Group	Company (restated)
		£’000	£’000	£’000	£’000
Non current assets
Investments held at fair value through profit or loss	11	98,554	101,990	94,815	97,071
		_____	_____	_____	_____
Current assets
Other receivables		519	3,008	474	2,856
Cash collateral held with brokers		218	–	2,013	–
Cash and cash equivalents		–	–	29	–
		_____	_____	_____	_____
		737	3,008	2,516	2,856
		_____	_____	_____	_____
Total assets		99,291	104,998	97,331	99,927
		_____	_____	_____	_____
Current liabilities
Other payables		(727)	(654)	(822)	(631)
Derivative financial liabilities held at fair value through profit or loss	11	(30)	(30)	(682)	(682)
Bank overdraft		(12,589)	(18,369)	(7,718)	(10,505)
		_____	_____	_____	_____
		(13,346)	(19,053)	(9,222)	(11,818)
		_____	_____	_____	_____
Net assets		85,945	85,945	88,109	88,109
		=====	=====	=====	=====
Equity attributable to equity holders
Called up share capital	9	1,190	1,190	1,190	1,190
Share premium account	10	46,977	46,977	46,977	46,977
Special reserve	10	67,241	67,241	68,873	68,873
Capital reserves
At 1 December		(32,880)	(31,444)	(31,394)	(30,099)
Net (loss)/profit for the year		(724)	456	(1,486)	(1,345)
		_____	_____	_____	_____
At 30 November	10	(33,604)	(30,988)	(32,880)	(31,444)
		=====	=====	=====	=====
Revenue reserve
At 1 December		3,949	2,513	3,513	2,218
Net profit for the year		4,578	3,398	5,145	5,004
Dividends paid		(4,386)	(4,386)	(4,709)	(4,709)
		_____	_____	_____	_____
At 30 November	10	4,141	1,525	3,949	2,513
		_____	_____	_____	_____
Total equity		85,945	85,945	88,109	88,109
		=====	=====	=====	=====
Net asset value per ordinary share (pence)	8	75.28	75.28	75.87	75.87

Consolidated and parent company cash flow statements for the year ended 30 November 2019

	30 November 2019		30 November 2018
	Group	Company	Group	Company (restated)
	£’000	£’000	£’000	£’000
Operating activities
Net profit on ordinary activities before taxation	4,188	4,061	4,182	3,823
Add back finance costs	197	197	146	145
Net loss/(profit) on investments and options held at fair value through profit or loss (including transaction costs)	585	(595)	717	576
Net profit on foreign exchange	(25)	(24)	(30)	(31)
Sales of investments held at fair value through profit or loss	34,855	34,855	34,333	34,333
Purchases of investments held at fair value through profit or loss	(39,831)	(39,831)	(34,678)	(34,678)
Increase in other receivables	(43)	(150)	(83)	(544)
Increase in other payables	23	23	74	74
Decrease in amounts due from brokers	–	–	1,568	1,568
Net movement in cash collateral held with brokers	1,795	–	(1,064)	–
	_____	_____	_____	_____
Net cash inflow/(outflow) from operating activities before taxation	1,744	(1,464)	5,165	5,266
	_____	_____	_____	_____
Taxation paid	(245)	–	(397)	–
Taxation on investment income included within gross income	(209)	(209)	(66)	(66)
	_____	_____	_____	_____
Net cash inflow/(outflow) from operating activities	1,290	(1,673)	4,702	5,200
Financing activities
Interest paid	(197)	(197)	(146)	(145)
Proceeds from share issues	–	–	192	192
Payments for share purchases	(1,390)	(1,390)	(2,373)	(2,373)
Share purchase costs paid	(10)	(10)	(17)	(17)
Dividends paid	(4,618)	(4,618)	(4,709)	(4,709)
	_____	_____	_____	_____
Net cash outflow from financing activities	(6,215)	(6,215)	(7,053)	(7,052)
Decrease in cash and cash equivalents	(4,925)	(7,888)	(2,351)	(1,852)
Effect of foreign exchange rate changes	25	24	30	31
Change in cash and cash equivalents	(4,900)	(7,864)	(2,321)	(1,821)
Cash and cash equivalents at start of year	(7,689)	(10,505)	(5,368)	(8,684)
	_____	_____	_____	_____
Cash and cash equivalents at end of year	(12,589)	(18,369)	(7,689)	(10,505)
	_____	_____	_____	_____
Comprised of:
Cash at bank	–	–	29	–
Bank overdraft	(12,589)	(18,369)	(7,718)	(10,505)
	_____	_____	_____	_____
	(12,589)	(18,369)	(7,689)	(10,505)
	_____	_____	_____	_____

Notes to the financial statements for the year ended 30 November 2019

1. PRINCIPAL ACTIVITY

The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. The Company was incorporated on 4 November 2005 and this is the fourteenth Annual Report.

2. ACCOUNTING POLICIES

The principal accounting policies adopted by the Group and Company are set out below.

(a) Basis of preparation

The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Statement of Comprehensive Income and related notes. All of the Group’s operations are of a continuing nature.

Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014 and updated in February 2018, is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.

Substantially, all of the assets of the Group consist of securities that are readily realisable and, accordingly, the Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Consequently, the Directors have determined that it is appropriate for the financial statements to be prepared on a going concern basis.

The Group’s financial statements are presented in sterling, which is the functional currency of the Group and the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.

IFRS standards that are yet to be adopted:

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning on or after 1 January 2019 and have not been applied in preparing these financial statements (major changes and new standards issued are detailed below) as these are not expected to have any effect on the measurement of the amounts recognised in the financial statements of the Group.

IFRS 16 – Leases (effective 1 January 2019) 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.

Adoption of new and amended standards and interpretations:

IFRS 9 Financial Instruments

The classification and measurement requirements of IFRS 9 have been adopted retrospectively as of the date of initial application on 1 December 2018, however, the Group has chosen to take advantage of the option not to restate comparatives. Therefore, the 2018 comparative figures are presented and measured under IAS 39. All financial assets previously held at fair value continue to be measured at fair value and accordingly there has been no impact as a result of the adoption of IFRS 9. All financial assets that were classified as loans and receivables and measured at amortised cost continue to be so and there was no material impact of expected credit losses on financial assets measured at amortised cost.

IFRS 15 Revenue from contracts with customers

The Group adopted IFRS 15 as of the date of initial application of 1 December 2018. IFRS 15 replaces IAS 18 Revenue and establishes a five-step model to account for revenue arising from contracts with customers. In addition, guidance on interest and dividend income have been moved from IAS 18 to IFRS 9 without significant changes to the requirements. Therefore, there was no impact of adopting IFRS 15 for the Group.

IFRIC 23 – Uncertainty over Income Tax Treatments

This standard is mandatory with effect from 1 January 2019 but the Group early adopted it on 1 December 2018. IFRIC 23 provides guidance on how to account for uncertainty related to income taxes. There is no impact on the measurement of taxes, therefore the Group was able to implement the interpretation retrospectively. The interpretation provides additional clarity regarding the presentation and disclosures of uncertain tax assets and liabilities.

(b) Basis of consolidation

The Group’s financial statements are made up to 30 November each year and consolidate the financial statements of the Company and its wholly owned subsidiary, which is registered and operates in England and Wales, BlackRock Energy and Resources Securities Income Company Limited (together ‘the Group’).

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intra-group balances and transactions, including unrealised profits arising therefrom, are eliminated. The subsidiary is not considered to be an investment entity. 

(c) Presentation of the Consolidated Statement of Comprehensive Income

In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Consolidated Statement of Comprehensive Income.

(d) Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business being investment business.

(e) Income

Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. Special dividends, if any, are treated as a capital or a revenue receipt depending on the facts or circumstances of each dividend. The return on a fixed income security is recognised on a time apportionment basis so as to reflect the effective yield on the fixed income security. Interest income and deposit interest is accounted for on an accruals basis.

Options may be purchased or written over securities held in the portfolio for generating or protecting capital returns, or for generating or maintaining revenue returns. Where the purpose of the option is the generation of income, the premium is treated as a revenue item. Where the purpose of the option is the maintenance of capital, the premium is treated as a capital item.

Option premium income is recognised as revenue evenly over the life of the option contract and included in the revenue column of the Consolidated Statement of Comprehensive Income unless the option has been written for the maintenance and enhancement of the Group’s investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column of the Consolidated Statement of Comprehensive Income.

Where the Group has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.

(f) Expenses

All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Consolidated Statement of Comprehensive Income, except as follows:

•     expenses which are incidental to the acquisition or sale of an investment are charged to the capital column of the Consolidated Statement of Comprehensive Income. Details of transaction costs on the purchases and sales of investments are disclosed within note 10 to the financial statements in the Annual Report.

•     expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated;

•     the investment management fee and finance costs have been allocated 75% to the capital column and 25% to the revenue column of the Consolidated Statement of Comprehensive Income in line with the Board’s expectations of the long term split of returns, in the form of capital gains and income, respectively, from the investment portfolio.

Finance costs incurred by the Subsidiary are charged 100% to revenue.

(g) Taxation

The Group accounts do not reflect any adjustment for group relief between the Company and the Subsidiary.

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date.

Where expenses are allocated between capital and revenue, any tax relief in respect of expenses is allocated between capital and revenue returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period.

Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.

(h) Investments held at fair value through profit or loss

In accordance with IFRS 9, the Group classifies its investments at initial recognition as held at fair value through profit or loss and are managed and evaluated on a fair value basis in accordance with its investment strategy and business model.

All investments are measured initially and subsequently at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales of investments are recognised at the trade date of the disposal.

The fair value of the Financial investments is based on their quoted bid price at the financial reporting date, without deduction for the estimated selling costs. This policy applies to all current and non current asset investments held by the Group.

Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Consolidated Statement of Comprehensive Income as ‘Net profits or losses on investments held at fair value through profit of loss’. Also included within the heading are transaction costs in relation to the purchase or sale of investments.

For all financial instruments not traded in an active market, the fair value is determined by using various valuation techniques. Valuation techniques include market approach (i.e., using recent arm’s length market transactions adjusted as necessary and reference to the current market value of another instrument that is substantially the same) and the income approach (e.g., discounted cash flow analysis and option pricing models making use of available and supportable market data as possible).

(i) Options

Options are held at fair value based on the bid/offer prices of the options written to which the Group is exposed. The value of the option is subsequently marked-to-market to reflect the fair value of the option based on traded prices. Where the premium is taken to revenue, an appropriate amount is shown as capital return such that the total return reflects the overall change in the fair value of the option. When an option is exercised, the gain or loss is accounted for as a capital gain or loss. Any cost on closing out an option is transferred to revenue along with any remaining unamortised premium.

(j) Other receivables and other payables

Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value.

(k) Dividends payable

Under IFRS, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the financial reporting date. Interim dividends should not be accrued in the financial statements unless they have been paid.

Dividends payable to equity shareholders are recognised in the Consolidated Statement of Changes in Equity.

(l) Foreign currency translation

Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities and non monetary assets held at fair value are translated into sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate. For investment transactions and investments held at the year end, denominated in a foreign currency, the resulting gains or losses are included in the profit/(loss) on investments held at fair value through profit or loss in the Consolidated Statement of Comprehensive Income.

(m) Cash and cash equivalents

Cash comprises cash in hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

(n) Bank borrowings

Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Consolidated Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise.

 (o) Share repurchases

Shares repurchased and subsequently cancelled – share capital is reduced by the nominal value of the shares repurchased, and the capital redemption reserve is correspondingly increased in accordance with section 733 of the Companies Act 2006. The full cost of the repurchase is charged to the special reserve.

Shares repurchased and held in treasury – the full cost of the repurchase is charged to the special reserve.

Where treasury shares are subsequently reissued –

•     amounts received to the extent of the repurchase price are credited to the special reserve; and

•     any surplus received in excess of the repurchase price is taken to the share premium account.

(p) Restatement of 2018 comparatives

Amounts receivable by the parent company from the subsidiary of £2,489,000 (2018: £2,382,000) have been presented separately in the Parent Company’s Statement of Financial Position with comparatives restated. This receivable was previously netted against the bank overdraft. This change in presentation has no impact on the net assets, the Group’s Statement of Financial Position or the Group’s Statement of Comprehensive Income. Other receivables of 2018 have been restated from £474,000 to £2,856,000 and the bank overdraft has been restated from £(8,123,000) to £(10,505,000) on the Parent Company’s Statement of Financial Position.  The Parent Company’s Cash Flow statement for 2018 has been adjusted accordingly with the increase in other receivables restated from £(83,000) to £(544,000) and the bank overdraft restated from £(8,123,000) to £(10,505,000).

(q) Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors do not believe that any accounting judgements or estimates have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

3. INCOME

	2019 £’000	2018 £’000
Investment income:
UK dividends	1,485	1,599
UK special dividends	57	–
Overseas dividends	1,707	1,478
Overseas special dividends	178	49
Fixed Income	909	912
	_____	_____
	4,336	4,038
	_____	_____
Other income:
Deposit interest	14	16
Option premium income	1,294	2,307
	1,308	2,323
	_____	_____
Total income	5,644	6,361
	_____	_____

During the year, the Group received option premium income totalling £1,156,000 (2018: £2,370,000) for writing covered call and put options for the purposes of revenue generation. Option premiums of £1,294,000 (2018: £2,307,000) were amortised to revenue. At 30 November 2019, there were 2 (2018: 10) open positions with an associated liability of £30,000 (2018: £682,000).

Dividends and interest received in cash during the year amounted to £3,167,000 and £836,000 (2018: £3,134,000 and £740,000).

Special dividends amounting to £658,000 have been recognised in capital during the year (2018: £nil).

4. INVESTMENT MANAGEMENT FEE

	2019			2018
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Investment management fee	237	711	948	250	750	1,000
	_____	_____	_____	_____	_____	_____
	237	711	948	250	750	1,000
	_____	_____	_____	_____	_____	_____

The investment management fee is levied at 0.95% of gross assets per annum on the first £250 million of the Company’s gross assets reducing to 0.90% thereafter. 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.

5. OTHER OPERATING EXPENSES

	2019 £’000	2018 £’000
Allocated to revenue:
Custody fee	4	4
Auditors’ remuneration1 – audit services	27	26
Registrar’s fee	30	30
Directors’ emoluments	124	120
Broker fees	23	20
Depositary fees	9	11
Marketing fees	29	21
Printing and postage fees	31	26
Legal and professional fees	21	29
Directors search fees	26	–
Bank charges	15	11
Stock exchange listings fees	7	7
Other administrative costs	58	38
	_____	_____
	404	343
	_____	_____
Allocated to capital:
Custody transaction charges	5	3
	409	346
The Company’s ongoing charges2, calculated as a percentage of average net assets and using recurring expenses, excluding any finance costs, direct transaction costs, custody transaction charges and taxation were:	1.48%	1.39%
1    No non-audit services are provided by the Company’s auditors. 2    Alternative performance measure, please see Glossary in the Company's Annual Report for the year ended 30 November 2019.

For the year ended 30 November 2019, expenses of £5,000 (2018: £3,000) 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.

Details of the Directors’ emoluments are given in the Directors’ Remuneration Report in the Company's Annual Report for the year ended 30 November 2019.

6. FINANCE COSTS

	2019			2018
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Interest payable – bank overdraft	49	148	197	37	109	146
	_____	_____	_____	_____	_____	_____
	49	148	197	37	109	146
	_____	_____	_____	_____	_____	_____

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.

7. DIVIDENDS

Dividends paid on equity shares:	Record date	Payment date	2019 £’000	2018 £’000
4th interim dividend of 1.00p per share for the year ended 30 November 2018 (2017: 1.00p)	21 December 2018	18 January 2019	1,161	1,188
1st interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)	22 March 2019	18 April 2019	1,161	1,190
2nd interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)	21 June 2019	19 July 2019	1,151	1,169
3rd interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)	27 September 2019	22 October 2019	1,145	1,162
			_____	_____
Accounted for in the financial statements			4,618	4,709
			_____	_____

The total dividends payable in respect of the year ended 30 November 2019 which form the basis of section 1158 of the Corporation Tax act 2010 and section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in this legislation.

	2019			2018
	Revenue	Special Reserve	Total	Revenue	Special Reserve	Total
Dividends paid or declared on equity shares:	£’000	£’000	£’000	£’000	£’000	£’000
1st interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)	929	232	1,161	1,190	–	1,190
2nd interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)	1,151	–	1,151	1,169	–	1,169
3rd interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)	1,145	–	1,145	1,162	–	1,162
4th interim dividend of 1.00p per share for the year ended 30 November 2019 (2018: 1.00p)*	1,139	–	1,139	1,161	–	1,161
	_____	_____	_____	_____	_____	_____
	4,364	232	4,596	4,682	–	4,682
	_____	_____	_____	_____	_____	_____
*     Based on 113,870,349 ordinary shares in issue on 19 December 2019.

8. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE

Total revenue, capital return and net asset value per share are shown below and have been calculated using the following:

	2019	2018
Net revenue profit attributable to ordinary shareholders (£’000)	4,578	5,145
Net capital loss attributable to ordinary shareholders (£’000)	(724)	(1,486)
Total profit attributable to ordinary shareholders (£’000)	3,854	3,659
Total shareholders’ funds (£’000)	85,945	88,109
The weighted average number of ordinary shares in issue during the year, on which the earnings per ordinary share was calculated was:	115,379,743	117,618,034
The actual number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated was:	114,170,349	116,126,515
Earnings per share:
Revenue earnings per share (pence)	3.97	4.37
Capital loss per share (pence)	(0.63)	(1.26)
Total earnings per share (pence)	3.34	3.11

	As at 30 November 2019	As at 30 November 2018
Net asset value per ordinary share (pence)	75.28	75.87
Ordinary share price (pence)	66.00	70.60

There were no dilutive securities at the year end.

9. CALLED UP SHARE CAPITAL

	Ordinary shares 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
Shares in issue at 30 November 2018	116,126,515	2,839,485	118,966,000	1,190
Shares purchased into Treasury	(1,956,166)	1,956,166	–	–
	_____	_____	_____	_____
At 30 November 2019	114,170,349	4,795,651	118,966,000	1,190
	_____	_____	_____	_____

During the year 1,956,166 (2018: 2,891,485) shares were bought back and transferred to treasury for a total consideration of £1,390,000 (2018: £2,373,000). There were no shares issued during the year (2018: 52,000 reissued from treasury and a further 198,000 new shares were issued for a total consideration £192,000 before the deduction of issue costs). Since the year end a further 300,000 ordinary shares have been bought back and held in treasury for a total consideration of £198,350.

10. RESERVES

Group	Share premium account £’000	Distributable reserves
		Special reserve £’000	Capital reserve arising on investments sold £’000	Capital reserve arising on revaluation of investments held £’000	Revenue reserve £’000
At 30 November 2018	46,977	68,873	(35,737)	2,857	3,949
Movement during the year:
Total comprehensive income:
Net capital profit/(loss) for the year	–	–	220	(944)	–
Net revenue profit for the year	–	–	–	–	4,578
Transactions with owners recorded directly to equity:
Ordinary shares purchased into treasury	–	(1,390)	–	–	–
Share purchase costs	–	(10)	–	–	–
Dividends paid	–	(232)	–	–	(4,386)
	_____	_____	_____	_____	_____
At 30 November 2019	46,977	67,241	(35,517)	1,913	4,141
	_____	_____	_____	_____	_____

Company	Share premium account £’000	Distributable reserves
		Special reserve £’000	Capital reserve arising on investments sold £’000	Capital reserve arising on revaluation of investments held £’000	Revenue reserve £’000
At 30 November 2018	46,977	68,873	(36,555)	5,111	2,513
Movement during the year:
Total comprehensive income:
Net capital profit for the year	–	–	220	236	–
Net revenue profit for the year	–	–	–	–	3,398
Transactions with owners recorded directly to equity:
Ordinary shares purchased into treasury	–	(1,390)	–	–	–
Share purchase costs	–	(10)	–	–	–
Dividends paid	–	(232)	–	–	(4,386)
	_____	_____	_____	_____	_____
At 30 November 2019	46,977	67,241	(36,335)	5,347	1,525
	_____	_____	_____	_____	_____

The share premium account is not a distributable reserve under the Companies Act 2006. The special reserve and capital 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 and its status as an investment company under the provisions of section 1158 of the Corporation Tax Act 2010, net capital returns may be distributed by way of dividend.

11. VALUATION OF FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are either carried in the Consolidated and Parent Company Statements of Financial Position at their fair value (investments and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Group are explained in the accounting policies note 2(h) to the Financial Statements in the Annual Report.

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 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.

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 investment in the subsidiary is classified within Level 3 since the subsidiary is not a listed entity. The fair value of the investment in the subsidiary is calculated based on the net asset value of the underlying balances within the subsidiary. Therefore, no sensitivity analysis has been presented.

Fair values of financial assets and financial liabilities

The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.

Financial assets/(liabilities) at fair value through profit or loss at 30 November 2019 – Group	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
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

Financial assets/(liabilities) at fair value through profit or loss at 30 November 2019 – Company	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Assets:
Equity investments	89,223	–	3,436	92,659
Fixed income investments	9,331	–	–	9,331
Liabilities:
Derivative financial instruments – written options	–	(30)	–	(30)
	98,554	(30)	3,436	101,960

Financial assets/(liabilities) at fair value through profit or loss at 30 November 2018 – Group	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Assets:
Equity investments	84,159	–	–	84,159
Fixed income investments	10,656	–	–	10,656
Liabilities:
Derivative financial instruments – written options	–	(682)	–	(682)
	94,815	(682)	–	94,133

Financial assets/(liabilities) at fair value through profit or loss at 30 November 2018 – Company	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Assets:
Equity investments	84,159	–	2,256	86,415
Fixed income investments	10,656	–	–	10,656
Liabilities:
Derivative financial instruments – written options	–	(682)	–	(682)
	94,815	(682)	2,256	96,389

A reconciliation of fair value measurement in Level 3 is set out below:

Level 3 Financial assets fair value through profit or loss at 30 November – Company	2019 £’000	2018 £’000
Opening fair value	2,256	2,115
Total gains or losses included in profit/(loss) on investments in the Consolidated Statement of Comprehensive Income:
– assets held at the end of the year	1,180	141
Closing balance	3,436	2,256

(e) Capital management policies and procedures

The Group’s capital management objectives are:

•     to ensure it will be able to continue as a going concern; and

•     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.

This is to be achieved through an appropriate balance of equity capital and gearing. The Group operates a flexible gearing policy which depends on prevailing conditions.

The Group’s total capital at 30 November 2019 was £98,534,000 (2018: £95,827,000), comprising a bank overdraft of £12,589,000 (2018: £7,718,000) and equity shares, capital and reserves of £85,945,000 (2018: £88,109,000).

Under the terms of the overdraft facility agreement, the Group’s total indebtedness shall at no time exceed £17.5m or 20% of the Group’s net asset value (whichever is the lowest) (2018: £17.5m or 20% of the Group’s net asset value (whichever is the lowest)).

The cash and bank overdraft accounts of the Company and subsidiary are managed under a compensated group arrangement and are therefore presented on a net basis in the Group financial statements.

The Board with the assistance of the Investment Manager monitors and reviews the broad structure of the Group’s capital on an ongoing basis. This review includes:

•     the planned level of gearing, which takes into account the Investment Manager’s view on the market; and

•     the need to buy back equity shares, either for cancellation or to be held in treasury, which takes account of the difference between the NAV per share and the share price (i.e. the level of share price discount or premium).

The Group is subject to externally imposed capital requirements:

•     as a public company, the Company has a minimum share capital of £50,000; and

•     in order to be able to pay dividends out of profits available for distribution, the Company has to be able to meet one of the two capital restrictions tests imposed on investment companies by law.

During the year, the Company complied with the externally imposed capital requirements to which it was subject.

Investments held through Stock Connect

The Company may invest no more than 10% of its net asset value in investments held through Stock Connect. Any China A Shares invested in via Stock Connect will be held by the Depositary/sub-custodian in accounts in the Hong Kong Central Clearing and Settlement System (“CCASS”) maintained by the Hong Kong Securities Clearing Company Limited (“HKSCC”) as central securities depositary in Hong Kong. HKSCC in turn will hold any such China A Shares, as the nominee holder, through an omnibus securities account in its name registered with ChinaClear for the Company.

12. RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS

At the date of this report, the Board consists of five non-executive Directors, all of whom, with the exception of Mr Ruck Keene (who was previously an employee of the Manager) are considered to be independent of the Manager by the Board. Mr Ruck Keene retired from his position at BlackRock on 7 April 2017 and will continue to be deemed to be non-independent of the Manager for a period of five years following his retirement under current guidance set out in the UK Corporate Governance Code.

None of the Directors has a service contract with the Company. For the year ended 30 November 2019, the Chairman received an annual fee of £38,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of £32,000 and the other Directors received an annual fee of £27,000.

The related party transactions with Directors are set out in the Directors’ Remuneration Report in the Company's Annual Report for the year ended 30 November 2019.

At 30 November 2019, £10,000 (2018: £10,000) was outstanding in respect of Directors’ fees.

13. TRANSACTIONS WITH THE INVESTMENT MANAGER AND AIFM

BlackRock Fund Managers Limited (BFM) provides management and administrative services to the Group under a contract which is terminable on six months’ notice. BFM has (with the Group’s consent) delegated certain portfolio and risk services, and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report in the Annual Report.

The investment management fee due for the year ended 30 November 2019 amounted to £948,000 (2018: £1,000,000). At the year end, £389,000 was outstanding in respect of the management fee (2018: £412,000).

In addition to the above services, BlackRock has provided the Group with marketing services. The total fees paid or payable for these services for the year ended 30 November 2019 amounted to £29,000 excluding VAT (2018: £21,000). Marketing fees of £19,000 excluding VAT (2018: £22,000) were outstanding as at the year end.

14. CONTINGENT LIABILITIES

There were no contingent liabilities at 30 November 2019 (2018: nil).

15. PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2019 Annual Report and Financial Statements will be filed with the Registrar of Companies shortly.

The report of the auditor for the year ended 30 November 2019 contains no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.

This announcement was approved by the Board of Directors on 5  February 2020.

16. ANNUAL REPORT

Copies of the Annual Report will be sent to members shortly and will be available from the registered office c/o The Company Secretary, BlackRock Energy and Resources Income Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

17. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 17 March 2020 at 10.30 am.

ENDS

For further information, please contact:

Sarah Beynsberger, Director, Investment Companies, BlackRock Investment Management (UK) Limited
Tel: [phone]

Press enquiries:

Lansons Communications

Email: [e-mail]

Tel:  [phone]

5 February 2020

12 Throgmorton Avenue
London EC2N 2DL

END