Blackrock Engy Regulatory News (BERI)

BlackRock Energy and Resources Income Trust plc

LEI: 54930040ALEAVPMMDC31 

Annual Report and Financial Statements 30 November 2023

Performance Record

1 The change in net assets reflects portfolio movements, the issue and repurchase of shares and dividends paid during the year.

2 Alternative Performance Measures, see Glossary contained within the Annual Report and Accounts.

3 Further details are given in the Glossary contained within the Annual Report and Accounts.

CHAIRMAN’S STATEMENT

Dear Shareholder

OVERVIEWAt the start of the year and through into the first half of 2023, markets as a whole were buoyed up by the technology sector, and optimism that interest rates might be close to their peak. The global economy performed well at the start of the year, supported by factors such as falling energy prices, strong consumer balance sheets and the reopening of the Chinese economy. However, relatively quickly, positive momentum stalled as global manufacturing activity receded and China’s economy, usually a major demand engine, delivered a disappointing rebound. By the end of the first half of the year, many investors were concerned about recession risk, and most mined commodity prices had fallen below the level where they started.

All nations attending the 28th United Nations Conference of the Parties (COP28) climate summit in Dubai formally agreed to transition away from fossil fuels and rapidly ramp up production of renewable energy. However, it is clear that traditional commodities and the companies which produce them, whether in energy or mining, will have a role to play in the transition towards net zero carbon emissions over the coming decades.

The Energy Transition portion of the portfolio suffered due to the impact of cost inflation, the challenges faced by companies in this sector and the pressure from a higher cost of capital arising from interest rate rises, which caused some dramatic share price falls. These declines have started to present some opportunities to invest in companies that have strong long-term fundamentals but were overvalued until recently. Your Company’s portfolio is well-positioned to take advantage of these trends, as the portfolio managers increased Traditional Energy exposure slightly through 2023 to 30.6% at the end of the year, and moved to a higher weighting in the Energy Transition sector to 24.9% at 30 November 2023.

Our portfolio managers provide a detailed description of the main contributors and detractors to performance during the period, insight into the positioning of the portfolio and their views on the outlook for the forthcoming year in their report which follows and is contained in the Annual Report and Accounts.

I am also pleased to be able to tell you that the Company won the Investment Week Investment Company of the Year Award 2023 – Commodities and Resources category. The Company also won the CityWire Investment Trust Award 2023 - Special Equities Trust. I am sure shareholders will join me in congratulating the investment team on these achievements.

PERFORMANCEDuring the year ended 30 November 2023, the Company’s net asset value (NAV) per share returned -11.8% and the share price returned -15.2% (both percentages in Pound Sterling terms with dividends reinvested). The Company’s objectives are to achieve both an annual dividend target and, over the long term (see table below), 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. However, to set the performance above in the context of the market backdrop, the MSCI ACWI Select Metals & Mining Producers Ex Gold and Silver IMI Net Index returned -5.5%, the S&P Global Clean Energy Index returned -36.4% and the MSCI World Energy Index returned -6.8% during the year ended 30 November 2023 (all percentages in Pound Sterling terms with dividends reinvested).

CUMULATIVE PERFORMANCE AS AT 30 NOVEMBER 2023

1 Alternative Performance Measures. Further details of the calculation of performance with dividends reinvested are given in the Glossary contained within the Annual Report and Accounts.

2 The Company was launched on 13 December 2005.

As noted above, the Board does not formally benchmark the Company’s performance against Mining and Energy sector indices; however, for internal monitoring purposes, the Board compares the performance of the portfolio against a bespoke internal Mining and Energy composite index. The neutral sector weightings of this bespoke index are 40% Mining, 30% Traditional Energy and 30% Energy Transition.

Further information on investment performance is given in the Investment Managers’ Report.

REVENUE RETURN AND DIVIDENDS The Company’s revenue earnings per share for the year to 30 November 2023 was 4.39 pence per share, a 12.0% decrease compared to the prior year revenue earnings per share of 4.99 pence. The weakening US Dollar contributed to the reduction in earnings, as many resource company dividends are paid in US Dollars. The Board’s dividend target for 2023 was to declare quarterly dividends of at least 1.10 pence per share in the year to 30 November 2023, making a total of at least 4.40 pence per share for the year as a whole. However, the Board is cognisant of the importance of dividends to its shareholders and the need to balance growth in dividend with its sustainability. Consequently it announced in December 2023 that it would pay a fourth quarterly dividend for the year to 30 November 2023 of 1.125 pence per share (making total dividend payment for the year of 4.425 pence per share) and also increased the annual dividend target for the year to 30 November 2024 to 4.50 pence per share (an increase of 2.3% compared to the previous target). This target represents a yield of 4.1% based on the share price of 110.40 pence per share as at 30 November 2023, and 4.1% based on the share price at the close of business on 26 January 2024. This dividend target should not be interpreted as a profit forecast.

The Company may also write options to generate revenue earnings, although the portfolio managers’ focus is on investing the portfolio to generate an optimal level of total return without striving to meet an annual income target and they will only undertake option transactions to the extent that the overall expected contribution is beneficial to total return.

GEARINGThe Company operates a flexible gearing policy which depends on prevailing market conditions. It is not intended that gearing will exceed 20% of the gross assets of the Company. The maximum gearing used during the period was 13.7%, and the level of gearing at 30 November 2023 was 8.1%. Average gearing over the year to 30 November 2023 was 8.4%. For calculations, see the Glossary contained within the Annual Report and Accounts.

MANAGEMENT OF SHARE RATING The Directors recognise the importance to investors that the Company’s share price should not trade at a significant premium or discount to NAV, and therefore, in normal market conditions, may use share buybacks, sales of shares from treasury and share issues to ensure that the share price is broadly in line with the underlying NAV.

The Company’s shares started the year under review trading at a discount of 6.8%; this narrowed to 3.4% in December 2022 and subsequently the shares moved to trade fairly consistently at a premium from January 2023 to mid-February 2023. To manage the premium, the Company issued new shares into market demand in January and February 2023. During the year ended 30 November 2023, the Company issued 1,230,000 shares for net proceeds of £1,789,000 at an average premium of 1.6%. At the Company’s Annual General Meeting held on 13 March 2023, the Company was granted authority to allot up to 26,981,238 shares and/or sell the same amount of shares held in treasury on a non-pre-emptive basis (being equivalent to 20 per cent of share capital in issue at that time). Since mid-February 2023 the Company’s shares have been trading at a discount, which widened in line with many investment trusts. Since 31 May 2023 the discount has widened out again, and during the year, the Company has bought back 4,200,000 shares for costs of £4,837,000 and at an average discount of 10.0%. Since the year end and up to 26 January 2024, the Company bought back 1,800,000 ordinary shares for a net consideration of £2,014,000 at an average discount of 10.6%. As at 26 January 2024 the Company’s shares were trading at a discount of 11.2%.

BOARD COMPOSITION The Board supports the increasing focus on independence, tenure and succession planning set out in the updated Financial Reporting Council’s review of the UK Corporate Governance Code. Carol Bell, having served nine years on the board, has advised the Board that she will step down from the Board at the conclusion of this year’s AGM. I would like to take this opportunity to thank Carol for the benefit of her expertise and experience and her contribution to the Board during her tenure. We wish her well for the future. With this in mind, the Board commenced a search in 2023 to identify a new director to join the Board, assisted by a third-party recruitment firm, Cornforth Consulting Limited. Following a detailed evaluation of each of the candidates, the Board selected Anne Marie Cannon who was subsequently appointed with effect from 16 January 2024. As at the date of this report the Board consists of five independent Non-executive Directors. In accordance with best practice and good corporate governance, the Directors continue to submit themselves for annual re-election, Anne Marie Cannon will submit herself for election at this year’s AGM.

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

ANNUAL GENERAL MEETING ARRANGEMENTS The AGM will be held in person at 12:00 p.m. on Friday, 15 March 2024 at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL.

The Board very much looks forward to meeting shareholders and answering any questions you may have on the day. We hope you can attend this year’s AGM, light refreshments will be made available to shareholders who have attended the AGM.

MARKET OUTLOOK AND PORTFOLIO POSITIONING The continued commitment by governments to address climate change and decarbonise the energy supply chain remains an important backdrop for the Company’s three pillars of Traditional Energy, Mining and Energy Transition. The Board considers that all three sectors have an important role to play as the energy system transitions to a lower carbon economy. Traditional Energy is needed to support base load energy to continue to power economies during the transition. The Mining sector provides the material supply chain for low carbon technologies from steel for wind turbines to lithium for electric cars. The path to a lower carbon economy is also expected to disrupt many industries and business models with scope for the Company to invest directly in opportunities in the Energy Transition space. Against this backdrop, the flexibility of the Company’s investment mandate with the ability to shift exposure between Traditional Energy, Mining and Energy Transition sectors, means that it is uniquely positioned to serve investors as these sectors evolve. The Board is confident that the Company remains well-placed to benefit from these key investment trends over the long term.

I look forward to seeing shareholders at the forthcoming Annual General Meeting.

ADRIAN BROWN30 January 2024

INVESTMENT MANAGER’S REPORT

MARKET OVERVIEW After a very strong performance in 2022, the last twelve months to 30 November 2023 have been tougher in the extractive mining and traditional energy industries and even harder for many of the companies in the energy transition sector. Commodity prices pulled back from their prior year highs, especially in the energy commodities such as natural gas and thermal coal. Whilst some of this reflected market conditions normalising following the dislocations as a result of the Russia – Ukraine conflict, as we progressed through the year greater concerns emerged about the demand outlook both in major Western economies and in China.

The impact of inflation and higher interest rates was most acutely felt in some of the industries related to the energy transition sector. The offshore wind industry saw several high-profile project cancellations or deferrals as spiralling costs rendered projects uneconomic in the face of higher funding costs. The explosive growth in electric vehicle sales also slowed, albeit from exceptional rates of growth to “just” a high rate but consumers in the key market of the United States of America (US) appear yet to be convinced with several US manufacturers recently reducing near-term sales targets.

Despite some of these challenges, it was encouraging to see that policy support and regulation focused on the energy transition did not take backward steps during the year. Although the methods of implementation are yet to be announced by individual countries, the agreement at the COP28 meeting in December 2023 to triple renewable energy capacity globally by 2030 reaffirms the strong tailwind for growth that companies in this sector would experience over the coming years.

Whilst it would appear on the surface that broader equity markets did substantially better over the year than the Company’s areas of focus, it should be noted that equity market performance has been narrow relative to historic averages. That is to say that the positive performance was concentrated in a small number of shares, mainly the “Magnificent 7” in the technology sector..

Source: Datastream.

1 Average of 1/12/2021-30/11/2022 to 1/12/2022-30/11/2023.

2 Morgan Stanley Capital International All Country Weighted Index.

3 Morgan Stanley Capital International.

PORTFOLIO PERFORMANCE AND INVESTMENT ACTIVITY It was a more challenging year in 2023 and the Company’s NAV total return was -11.8% and share price total return was -15.2%.

Although the mining sector had an encouraging start to 2023 as optimism surrounding the re-opening of the Chinese economy following the COVID-19 policy reversals late in 2022, this optimism faded as we went through the year and activity levels failed to reach the expectations set earlier in the year. Whilst we had positioned the Company’s portfolio for the re-opening with c50% of the net assets in mining companies at the end of February 2023, we took the view that a strong re-opening was priced in but not assured, so we reduced the exposure to c44% by the end of April 2023 and to c40% by the end of May 2023. However, as we entered the final part of the year, although iron ore and coking coal prices were remarkably strong, the share prices of some of the larger producers of these commodities did not keep pace with the commodity prices themselves and free cashflow yields were over 10% in some instances. This was attractive enough to add back to our mining exposure and we closed the year with c48% of the net assets exposed to the sector.

The portfolio started the year with 21.9% of the net assets invested in energy transition companies but by the end of the year this had risen to 24.9%. The challenges faced by companies in this sector and the pressure from higher cost of capital caused some dramatic share price falls with the S&P Clean Energy Index falling 36.4% in the year in Pound Sterling terms. These declines started to present some opportunities to invest in companies that had strong long-term fundamentals but where the valuation had been too high until recently. We started to build some new positions and if interest rates continue to edge lower then we would expect exposure to energy transition companies to grow as a proportion of the net assets of the Company.

In the traditional energy sector, the exposure remained fairly steady between c29% and c35% of net assets as seen in the annual report and accounts. However, within this, the composition of exposure to this sector was varied over the year. One of the notable areas we invested into after an absence for many years was the oil services sector. There is now greater discipline in this industry and some companies that were previously deemed to be too risky have fixed their balance sheets and offer an exciting risk-reward trade-off going forward.

INCOME2023 was another robust year for income for the Company. Despite a lack of strength in commodity prices, the capital discipline of most companies favouring shareholder distributions over increasing capital expenditure, meant that it was still a good year for dividends. However as many of the larger mining companies have moved towards pay-out ratios over the last few years, the income received did fall from this group of companies. Fortunately, this was offset to a degree by a number of our larger energy holdings, such as Shell and Total, once again increasing their dividends. Overall, total income fell by 10%, which was a creditable result in a challenging year.

The Company’s option writing was more balanced between call option and put option writing this year as compared to 2022, where it was skewed towards put option writing. We also wrote slightly fewer options this year compared to the previous year.

Fixed interest income fell year on year as some of the bonds we held were bought back by the issuers and there were fewer compelling opportunities for new fixed income investments as the interest rate spreads for many issuers in the mining and energy sectors remained low or tightened during the year.

MININGThe mined commodities saw remarkable dispersion in their prices during 2023 and this was reflected in a wide outcome of share price returns from the mining companies in the portfolio. At the extreme, iron ore was up almost 30% during the year, but lithium was down 80% (lithium carbonate price in China). In the 2022 Annual Report we wrote about lithium prices needing to stay elevated for a sustained period of time to incentivise investment in new lithium supplies, so why have prices tumbled?

Whilst some commodities have experienced supply disruptions in 2023, lithium production saw few notable challenges. At the same time, demand conditions deteriorated as we progressed through the year. Demand growth cooled in lithium’s main market of China and in the US a number of the key manufacturers scaled back the extent of their growth aspirations. This quickly pushed the lithium market into a surplus situation, which caused the prices to correct. We still think the longer-term outlook for lithium demand is strong after a period of consolidation now where inventories will build and then have to be consumed before a better price environment might reappear.

Iron ore, which is a key ingredient in the steel making process, had a far better year than most commodities in 2023 even though China’s property sector – historically the most important driver of the steel market (and therefore the iron ore market) – continued to struggle. The chart in in the annual report shows the hit to steel demand/production in China over the last two years from the declining property market, which has clearly been a significant headwind. However, what has surprised to the upside has been the strength in steel demand from the infrastructure sector. This is typically thought of as traditional infrastructure such as bridges, subway systems etc. but the demand growth in the last few years has been driven more by investment in renewable energy and energy transition infrastructure. This once again reaffirms how commodity intensive the Energy Transition is and also that some of the commodities (and their producers) that will benefit are not just the “future facing metals” such as copper but also the traditional building blocks of the economy like iron ore and steel.

For some of the base metals the combination of the recent price weakness and the stickiness of operating and capital costs means that prices are now below the cost of production. This can be seen in the annual report where aluminium especially has a number of producers in a loss-making position.

Whilst the price falling below the cost of production does not create an immediate floor in the price of a given commodity, over time supply is forced out of the market (or demand recovers) and prices stabilise. Looking into 2024 we believe that much of the downside case is already priced into some of the base metals (such as aluminium) and into the share prices of the companies producing the base metal.

During the year, some large merger and acquisition transactions that shone a spotlight on the desirability of energy transition commodities but also reminded us that less fashionable, but highly cashflow generative assets, are still sought after. In terms of the former, Vale sold a minority stake in their base metals business, which includes copper and nickel mines, to a group of investors including Saudi Arabia’s Public Investment Fund. The price paid in terms of EV/EBITDA multiple was higher than the multiple at which Vale shares trade at in the public market, which was a significant positive for the Company’s holding in Vale. In terms of less fashionable assets, Glencore emerged as the eventual buyer of Teck Resources’ coking coal assets following a protracted period of negotiation. The deal also included an announcement that Glencore intends to split its coal and metals businesses in a couple of years’ time as it looks to capture the premium valuation for its transition metals portfolio that other pure play companies in that space currently enjoy.

ENERGY TRANSITION After more than a decade of easy monetary policy, the pivot towards more ‘normal’ interest rates in an effort to tame inflation and stave off a sharp recession saw real US interest rates climb back to levels last seen in 2003-2006. Although policy continued to provide positive tailwinds for the longer-term outlook for energy transition companies, the rising cost of capital framed much of this years’ stock price performance. Our colleagues in the BlackRock Investment Institute have written extensively about a ‘New Regime’. Given our tenure in markets we would frame this as a ‘return to normal’.

Despite the rising cost of capital disproportionately impacting a broad swathe of ‘growth’ stocks particularly in the Energy Transition space, 2023 was marked by the confirmation of Artificial Intelligence (AI) as a significant driver of future earnings in the Technology sector – not surprisingly the NASDAQ Index was amongst the best-performing market segments during the period.

The only Energy Transition theme to outpace the Traditional Energy and Mining Sectors was Electric Vehicles (EVs). Yet, this was obfuscated by the inclusion of Nvidia in the iShares EV & Driving Technology ETF. Stock dispersion within the EV space was stark. EV charging companies such as ChargePoint (-85%) and Blink Charging (-77%) faced the prospect of sharply lower demand for charging networks as many of the US automakers revised down their ambitious EV growth targets partly on reduced subsidies, but also reflect slower demand growth. Despite these headwinds, the gap between the leading EV original equipment manufacturers continued to widen with Stellantis (+39%) and Tesla (+23%) far outpacing Fisker (-80%), Lucid (-58%) and Rivian (-48%) during the period. Whilst EV demand growth has slowed from 65% in 2022 to c25% in 2023, it remains robust and helped drive strong performance from Schneider Electric (+28%) and ST Microelectronics (+27%), two Energy Transition investments held by the Company.

In general, stock prices were negatively impacted by rising cost of capital and sticky cost inflation throughout several of the Energy Transition supply chains. That said, some challenges were project specific. In the case of offshore wind, there were several high-profile project cancellations and material impairment charges taken as historical power price contracts were insufficient to offset cost overruns and delays. Investor reactions were swift and negative for wind energy equipment manufacturers and developers alike. Yet, this overlooks the fact that offshore wind capacity accounts for less than 10% of the global wind capacity and just 3% of the renewables capacity overall.

Dispersion was also evident in solar energy stocks. Despite the positive tailwinds from the Inflation Reduction Act 2022 this was not enough to counteract the effect of a rising cost of capital and the lagged impact on consumer affordability. This led to a strong bifurcation between residential and utility scale solar energy companies. Inverter manufacturers Enphase (-69%) and SolarEdge (-73%) were down sharply as softening demand in both the US and Europe created a huge glut of channel inventory that will require several quarters to work down. Neither were held by the Company during the period. Elsewhere in the solar space, FirstSolar (held by the Company) held up better, albeit posting a negative return of -9% as it benefited disproportionately from US tax credits aimed at boosting domestic content across solar equipment manufacturing.

The financial year ended on a somewhat brighter note as policy makers pushed ever harder for faster deployment of clean energy technology at COP28 in Dubai. Ambitions were confirmed of a tripling of renewable energy capacity by 2030 which should see unconstrained demand for solar and wind continue apace – the limiting factor will be the regulatory permitting process and supply chain bottlenecks. With stock prices falling sharply this year and the longer-term demand outlook for energy transition metals continuing to strengthen valuations in the Energy Transition space are beginning to show much better support than in recent years. For example, the iShares Global Clean Energy ETF 12-month forward price/sales ratio has contracted by 25% in the last twelve months whilst still offering the prospect of mid-teens year on year sales growth based on consensus forecasts.

Although oil prices averaged $83/barrel for 2023, this masked a run-up to $97/barrel from June to August 2023 as ‘OPEC-plus’ enacted the first of two surprise supply cuts as it sought to manage the market. Both announcements came as the crude futures structure shifted from backwardation to contango in June 2023 and again in late November 2023 – a signal of a weakening physical market Interestingly, cutting production has the effect of increasing spare capacity in the system – a useful insurance policy should any politically-driven curtailment surprise the market. Yet, this ignores the effect of a US Strategic Petroleum Reserve that stands at a 40-year low just as its military presence is being drawn to both the Middle East and the South China Sea. It’s worth bearing in mind that had the Biden Administration not released a record amount of oil (close to 600,000 barrels per day on average for 2022), the energy price shock could have been far worse. This insurance policy is no longer available in our view.

Whilst the industry is within sight of a peak in demand, we continue to believe that the entrenched inertia in the global system, particularly in the Emerging Markets, means that we may be some years off terminal decline. So, as much as the market might wish to read into the need for Organisation of Petroleum Exporting Countries (OPEC) to cut supply to manage the market as a sign of waning demand – it has been the supply side that has surprised the markets.

Reflecting back on 2023, demand was the one area that did not surprise in the aggregate. Per the International Energy Agency’s (IEA) Oil Monthly Market Report, expectations for demand were marginally up from their initial forecast in December 2022. China, India and Russian demand expanded by almost 1 million barrels per day more than the IEA expected at the end of 2022.

Turning to supply, the key surprise was not an unexpected surge in US shale output (although it too remained more resilient than initial market expectations), but the sheer resilience of Russian output which delivered 1.3 million barrels per day more than the IEA initially estimated. Iran was the next largest contributor with an incremental output of 0.5 million barrels per day – partly reflecting a softening in US sanctions towards the second half of the year. Although other aging hydrocarbon basins continued to disappoint against initial expectations (e.g. the North Sea), this was not enough to offset the upside surprise from Russia and Iran. Eventually, Saudi Arabia had to step in with near 1 million barrels per day production cuts to rebalance global markets.

Following a very strong year in 2022, the Traditional Energy outlook for the new financial year was always going to be more challenging – not least against a backdrop of the underperformance in growth stocks (inflation fears, rising interest rates). As the year progressed and the US Federal Reserve (FED) continued to signal that further tightening was unnecessary, investors returned en masse to those sectors which had previously underperformed. Just one US shale production company made it into the top 20 performing Traditional Energy stocks (Gulfport Resources, +90%), vindicating our decision to lower exposure significantly to this sub-sector at the tail end of 2022. Amongst the larger cap Integrated Oil Companies (IOCs), key holding Shell handily outpaced the broader sector, up 17% during the period.

OUTLOOKWhilst the medium term outlook remains incredibly strong for investment opportunities in the Energy Transition, the year ahead will not be easy. We envisage an abnormally high level of uncertainty – driven on the one hand by the potential lagged effects on the real economy of higher interest rates as well as a challenging geopolitical backdrop, the likes of which has not been seen for several decades. Geopolitical tensions remain high relative to history (sadly) with no end in sight for conflicts in both Eastern Europe and the Middle East. The latter remains a key source of supply (and thoroughfare) for global energy trade. This is to say nothing of persistent tensions between the US and China, where tariffs continue to be the tool of choice in tackling the competitive threat of cheaper manufactured goods in the Energy Transition value chain, as well as the continued threat to Taiwanese independence.

The market will inevitably remain focused on the path of bond yields in the months ahead, particularly as the FED attempts to engineer an economically soft landing. The challenges to such a scenario are somewhat similar to this past year particularly as the lagged effects of quantitative tightening play out through the real economy. Typically, falling bond yields are supportive overall for equities, but when the market is adjusting from one regime to the next, it can be highly volatile. Flexibility will be key to the Company’s performance in the year ahead.

US election campaigning has already commenced ahead of the November 2024 elections. Ahead of that, elections will also take place for the European Parliament in early June 2024. In both cases, there is a growing political divide between energy security, affordability and decarbonisation. There are several key regulations expected in the year ahead that have the potential to impact energy and mining markets alike (see Table 1) – all of which we will be closely monitoring looking for opportunities for the Company.

Whilst the outlook for the year is replete with risk, we also see the potential opportunities – a direct outcome of the flexibility embedded in the Company. Policy continues to drive strong demand for investment into the Energy Transition sector - a tripling in renewables capacity by 2030 agreed at COP28 will need to be matched with equally ambitious investments into electricity grids. The harder we attempt to accelerate these investments, the more capital will be required into the materials required to deliver this rewiring of the world’s energy system – a positive tailwind for selected parts of the Mining sector.

Table 1: Key Energy Transition Regulations 

Source: Wolfe Equities Research, December 2023. European Commission.

1 To be Confirmed.

There is significant upside skew to traditional energy markets as reinvestment into new supply remains below where we see demand in the coming years. Spare capacity has improved, but politically-enforced curtailments may be hard to manage as evidenced by Russian production since sanctions were imposed. This situation could be compounded by a dwindling US Strategic Petroleum Reserve. Rapid consolidation in the Traditional Energy sector continues to underpin disciplined reinvestment into incrementally lower carbon intensity barrels paving the way for attractive cash returns and modest, profitable growth.

TOM HOLL AND MARK HUMEBLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED30 January 2024

Distribution of investments as at 30 November 2023

Asset allocation – Geography

1 Global relates to companies having businesses and operations in multiple countries and territories.

2 Latin America represents Argentina and Ecuador.

Source: BlackRock.

Asset allocation – Commodity/sub-sectors

Source: BlackRock.

TEN LARGEST INVESTMENTS

Together, the ten largest investments represent 36.3% of the Company’s portfolio as at 30 November 2023 (2022: 36.8%).

1 ► Glencore (2022: 1st)Diversified mining groupMarket value: £8,301,000Share of investments: 4.8% (2022: 7.3%)

One of the world’s largest globally diversified natural resources groups. The group’s operations include approximately 150 mining and metallurgical sites and oil production assets. Glencore’s mined commodity exposure includes copper, cobalt, nickel, zinc, lead, ferroalloys, aluminium, iron ore gold and silver.

2 ▲ BHP (2022: 3rd)Diversified mining groupMarket value: £8,210,000Share of investments: 4.7% (2022: 4.2%)

The world’s largest diversified mining group by market capitalisation. The group is an important global player in a number of commodities including iron ore, copper, thermal and metallurgical coal, manganese, nickel, silver and diamonds. BHP also has significant interests in oil, gas and liquefied natural gas.

3 ▼ Vale (2022: 2nd)Diversified mining groupMarket value: £8,032,000Share of investments: 4.6%1 (2022: 4.4%)

One of the largest mining groups in the world, with operations in 30 countries. Vale is the world’s largest producer of iron ore and iron ore pellets, and the world’s largest producer of nickel. The group also produces manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals, gold, silver, cobalt, potash, phosphates and other fertiliser nutrients.

4 ▲ Rio Tinto (2022: 59th)Diversified mining groupMarket value: £7,729,000Share of investments: 4.4%2 (2022: 0.4%)

One of the world’s leading mining companies. The group’s primary product is iron ore, but it also produces aluminium, copper, diamonds, gold, industrial minerals and energy products.

5 ▲ Shell (2022: 6th)Integrated oil groupMarket value: £6,581,000Share of investments: 3.8% (2022: 3.2%)

Shell is one of the largest integrated energy companies globally with five main operating segments: Integrated Gas, Upstream, Marketing, Chemicals and Products, and Renewables and Energy Solutions. The company has a high-quality, gas/liquified natural gas (LNG)-weighted portfolio. Shell owns the largest portfolio of global LNG supplies, which is a critical long-term bridge to help the world abate from highly polluting coal power generation. Under its ‘Powering Progress’ strategy, Shell is committing a third or more of its capital expenditure into renewables and energy solutions. These include electrical charging platforms, wind power generation and nature-based carbon offsetting.

6 ▲ ExxonMobil (2022: n/a)Integrated oil groupMarket value: £6,537,000Share of investments: 3.7% (2022: n/a)

An American multinational oil and gas corporation. They continue to evolve to meet growing global demand for oil, natural gas and refined products and plan to play a role in the energy transition.

7 ▲ NextEra Energy (2022: 9th)ElectrificationMarket value: £4,769,000Share of investments: 2.7% (2022: 2.5%)

NextEra Energy is America’s premier clean energy leader and the world’s largest producer of wind and solar energy. The company has a dominant market share in a structurally growing renewables market.

8 ▲ Canadian Natural Resources (2022: 10th)Exploration & ProductionMarket value: £4,758,000Share of investments: 2.7% (2022: 2.5%)

A senior Canadian oil and natural gas company. The company has a diversified portfolio of assets in North America, the UK North Sea and Offshore Africa.

9 ▲ RWE (2022: 20th)ElectrificationMarket value: £4,356,000Share of investments: 2.5% (2022: 1.9%)

A multinational energy company that generates and trades electricity in the Asia-Pacific region, Europe and the United States. The company is Germany’s leading clean energy utility company, with a massive pivot to renewables. The company is purchasing renewable power assets and selling its legacy fossil fuel business. RWE has a clear strategy to continue to increase exposure to renewable energy.

10 ▲ Hess (2022: 15th)Exploration & ProductionMarket value: £4,161,000Share of investments: 2.4% (2022: 2.0%)

An American global independent energy company, involved in the exploration and production of crude oil and natural gas.

1 1.3% relates to interest in Vale shareholder debentures.

2 (0.1)% relates to an equity option in Rio Tinto.

All percentages reflect the value of the holding as a percentage of total investments.

Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at 30 November 2022.

Percentages in brackets represent the value of the holding as at 30 November 2022.

INVESTMENTS AS AT 30 NOVEMBER 2023

* The investment in the Vale debenture is illiquid and has been valued using secondary market pricing information provided by the Brazilian Financial and Capital Markets Association (ANBIMA).

** The investment in Gazprom has been valued at a nominal value of £0.01 as secondary listings of the depositary receipts on Russian companies have been suspended from trading.

All investments are ordinary shares unless otherwise stated. The total number of holdings (including options and commodity futures) at 30 November 2023 was 78 (2022: 68).

There was one open option (2022: one) and one open future (2022: none) as at 30 November 2023.

The equity and fixed income investment total of £175,540,000 (2022: £206,394,000) above before the deduction of the negative option valuation of £110,000 (2022: £55,000) and the negative futures contract valuation of £780,000 (2022: £nil) represents the Group’s total investments held at fair value as reflected in the Consolidated and Parent Company Statements of Financial Position below. The table above excludes cash and gearing; the level of the Group’s gearing may be determined with reference to the bank overdraft of £17,862,000 (2022: £14,345,000) and cash and cash equivalents of £5,276,000 (2022: £6,214,000) that are also disclosed in the Consolidated and Parent Company Statements of Financial Position. Details of the AIC methodology for calculating gearing are given in the Glossary contained within the Annual Report and Accounts.

As at 30 November 2023, 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 2023. The aim of the Strategic Report is to provide shareholders with the information required to enable them to assess how the Directors have performed in their duty to promote the success of the Company for the collective benefit of shareholders.

The Chairman’s Statement together with the Investment Manager’s Report and the Section 172 Statement set out how the Directors promote the success of the Company below form part of the Strategic Report. The Strategic Report was approved by the Board at its meeting on 30 January 2024.

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

Investment trusts, like unit trusts and open-ended investment companies (OEICs), are pooled investment vehicles which allow exposure to a diversified range of assets through a single investment thus spreading, although not eliminating, investment risk. In accordance with the Alternative Investment Fund Managers’ Directive (AIFMD) the Company is an Alternative Investment Fund (AIF). BlackRock Fund Managers Limited (the Manager) is the Company’s Alternative Investment Fund Manager (AIFM). The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager. The Manager, operating under guidelines determined by the Board, has direct responsibility for decisions relating to the running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

The Company delegates fund accounting services to the Manager, which in turn subdelegates these services to the Fund Accountant, The Bank of New York Mellon (International) Limited. The Company sub-delegates registration services to the Registrar, Computershare Investor Services PLC. Other service providers include the Depositary, also performed by The Bank of New York Mellon (International) Limited. Details of the contractual terms with these service providers are set out in the Directors’ Report contained within the Annual Report and Accounts.

BUSINESS MODEL The Company invests in accordance with the investment objective. The Board is collectively responsible to shareholders for the long-term success of the Company. There is a clear division of responsibility between the Board and the Manager. Matters reserved for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing, capital structure, governance, and appointing and monitoring of the performance of service providers, including the Manager. As the Company’s business model follows that of an externally managed investment trust, it does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider.

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

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

Although the Company has the flexibility to invest within this range, at 30 November 2023 the portfolio consisted of 72 investments (including one open option contract and one open future contract), and the detailed portfolio listing is provided above.

There are no restrictions on investment in terms of geography or sub-sector and, in addition to equities, other types of securities, such as convertible bonds and debt issued primarily by mining or energy companies, may be acquired. Although most securities will be quoted, listed or traded on an investment exchange, up to 10% of the gross assets of the Group, at the time of investment, may be invested in unquoted securities. Investment in securities may be either direct or through other funds, including other funds managed by BlackRock or its associates, with up to 15% of the portfolio being invested in other listed investment companies, including listed investment trusts. In order to comply with the current Listing Rules, the Company will not invest more than 10% of its gross asset value in other listed closed-ended investment funds which themselves may invest more than 15% of their gross assets in other listed closed-ended investment funds. This restriction does not form part of the Company’s investment policy. Up to 10% of the gross assets of the Group, at the time of investment, may be invested in physical assets, such as gold and in securities of companies that operate in the commodities sector other than the mining and energy sectors.

No more than 15% of the gross assets of the Group will be invested in any one company as at the date any such investment is made and the portfolio will not own more than 15% of the issued shares of any one company, other than the Company’s subsidiary. The Group may deal in derivatives, including options and futures, up to a maximum of 30% of the Group’s assets for the purposes of efficient portfolio management and to enhance portfolio returns. In addition, the Group is also permitted to enter into stock lending arrangements up to a maximum of 33.3% of the total asset value of the portfolio.

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

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

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

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) IMPACTThe Board’s ESG approach is set out in the Annual Report and Accounts. The direct impact of the Company’s activities is minimal as it has no employees, premises, physical assets or operations either as a producer or a provider of goods or services. Neither does it have customers. Its indirect impact occurs through the investments that it makes, and this is managed through BlackRock’s approach to ESG integration.

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

RESULTS AND DIVIDENDS The Company’s revenue earnings for the year amounted to 4.39p per share (2022: 4.99p). 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.

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 on above and in the Investment Manager’s Report above.

EMPLOYEES, SOCIAL, COMMMUNITY AND HUMAN RIGHTS ISSUES The Company has no employees, and all the Directors are non-executive, therefore, there are no disclosures to be made in respect of employees. The Company believes that it is in shareholders’ interests to consider environmental, social and governance factors and human rights issues when selecting and retaining investments. Details of the Company’s policy on socially responsible investment are set out in the Annual Report and Accounts.

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 REPRESENTATIONThe Directors of the Company are set out in the Governance structure and Directors’ biographies contained within the Annual Report and Accounts. All the Directors held office throughout the year with the exception of Mrs Anne Marie Cannon (who was appointed to the Board on 16 January 2024). The Board consists of two male Directors and three female Directors.

KEY PERFORMANCE INDICATORS A number of performance indicators (KPIs) are used to monitor and assess the Company’s success in achieving its objectives and to measure its progress and performance. The principal KPIs are described below:

PERFORMANCE At each meeting the Board reviews the performance of the portfolio as well as the net asset value and share price for the Company and compares this to the performance of other companies in the peer group. The Company does not have a benchmark; however, the Board also reviews performance in the context of the blended performance of the MSCI ACWI Metals and Mining Index, MSCI World Energy Index and the S&P Global Clean Energy Index and a 40:30:30 composite of the three indices effective from 1 August 2023. The Board also monitors performance relative to a peer group of commodities and natural resources focused funds and also regularly reviews the Company’s performance attribution analysis to understand how performance was achieved. This provides an understanding of how components such as sector exposure, stock selection and asset allocation impacted performance. Information on the Company’s performance is given in the performance record contained within the Annual Report and Accounts and the Chairman’s Statement and Investment Manager’s Report above.

SHARE RATING The Board monitors the level of the Company’s premium or discount to NAV on an ongoing basis and considers strategies for managing any premium or discount. In the year to 30 November 2023, the Company’s share price to NAV traded in the range of a discount of 13.0% to a premium of 3.6% on a cum income basis. The average discount for the year was 6.4%. A total of 1,230,000 new shares were issued during the year and further details are given in the Chairman’s Statement. 4,200,000 shares were bought back into treasury during the year. Details of shares issued or bought back since the year end date are given in note 16 contained within the Annual Report and Accounts.

Further details setting out how the discount or premium at which the Company’s shares trade is calculated are included in the Glossary contained within the Annual Report and Accounts.

ONGOING CHARGES The ongoing charges represent the Company’s management fee and all other recurring operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items, expressed as a percentage of average daily net assets. The ongoing charges are based on actual costs incurred in the year as being the best estimate of future costs. The Company’s Manager has also agreed to cap ongoing charges by rebating a portion of the management fee to the extent that the Company’s ongoing charges exceed 1.25% of average net assets. The Board reviews the ongoing charges and monitors the expenses incurred by the Company on an ongoing basis. A definition setting out in detail how the ongoing charges ratio is calculated is included in the Glossary contained within the Annual Report and Accounts. The Company’s ongoing charges was 1.19% for the year ended 30 November 2023 (there was no management fee rebate due for the year).

DIVIDEND TARGET AND INCOME GENERATION The level of income is considered at each meeting and the Board receives detailed income forecasts. The Board also monitors the risks and returns from option writing, and regularly reviews the Company’s levels of distributable reserves.

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

1 This measures the Company’s NAV and share price total returns, which assumes dividends paid by the Company have been reinvested.

2 Alternative Performance Measures, see Glossary contained within the Annual Report and Accounts.

3 This is the difference between the share price and the cum-income NAV per share.

4 Ongoing charges represent the management fee and all other recurring operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items, expressed as a percentage of average daily net assets.

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

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

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

The Board has undertaken a robust assessment of both the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risk that unforeseen or unprecedented events including (but not limited to) heightened geo-political tensions such as the war in Ukraine, high inflation and the current cost of living crisis has had a significant impact on global markets. The Board has taken into consideration the risks posed to the Company by these events and incorporated them into the Company’s risk register. The risks identified by the Board have been described in the table that follows, together with an explanation of how they are managed and mitigated. Emerging risks are considered by the Board as they come into view and are incorporated into the existing review of the Company’s risk register. Additionally, the Manager considers emerging risks in numerous forums and the Risk and Quantitative Analysis team produces an annual risk survey. Any material risks of relevance to the Company identified through the annual risk survey will be communicated to the Board. The Board will continue to assess these risks on an ongoing basis. In relation to the UK Code, the Board is confident that the procedures that the Company has put in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the reporting period.

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

INVESTMENT PERFORMANCE

Principal riskThe returns achieved are reliant primarily upon the performance of the portfolio.

The Board is responsible for:

· setting the investment strategy to fulfil the Company’s objective; and

· monitoring the performance of the Investment Manager and the implementation of the investment strategy.

An inappropriate investment strategy may lead to:

· poor performance;

· widening discount;

· a reduction or permanent loss of capital; and

· dissatisfied shareholders and reputational damage.

The Board is also cognisant of the long-term risk to performance from inadequate attention to ESG issues, and in particular the impact of climate change. More detail in respect of these risks can be found in the AIFMD Fund Disclosures document available on the Company’s website at www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-energy-and-resources-income-trust-plc.pdf.

Mitigation/ControlTo manage this risk the Board:

· regularly reviews the Company’s investment mandate and long-term strategy;

· where necessary, the Board seeks shareholder approval to both buyback and issue shares to help control the level of discount/premium at which the shares trade;

· has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports on;

· receives from the Investment Manager a regular explanation of stock selection decisions, portfolio exposure, gearing and any changes in gearing and the rationale for the composition of the investment portfolio; and

· monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with factors specific to particular sectors, based on the diversification requirements inherent in the investment policy.

ESG analysis is integrated in the Manager’s investment process, as set out in the Annual Report and Accounts. This is monitored by the Board.

INCOME/DIVIDEND

Principal riskThe ability to pay dividends, and future dividend growth, is dependent on a number of factors including the level of dividends earned from the portfolio and income generated from the option writing strategy. Income returns from the portfolio are dependent, among other things, upon the Company successfully pursuing its investment policy.

Any change in the tax treatment of dividends or interest received by the Company including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests may reduce the level of dividends received by shareholders.

Mitigation/ControlThe 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 £91.0 million at 30 November 2023.

In setting the dividend target each year, the Board is mindful of the balance of shareholder returns between income and capital.

GEARING

Principal riskThe Company’s investment strategy may involve the use of gearing, including borrowings.

Gearing may be generated through borrowing money or increasing levels of market exposure through the use of derivatives. The Company currently has an overdraft facility with The Bank of New York Mellon (International) Limited. The use of gearing exposes the Company to the risk associated with borrowing.

Gearing provides an opportunity for greater returns where the return on the Company’s underlying assets exceeds the cost of borrowing. It is likely to have the opposite effect where the return on the underlying assets is below the cost of borrowings. Consequently, the use of borrowings by the Company may increase the volatility of the NAV.

Mitigation/ControlThe Company’s Articles of Association limit borrowings to an aggregate amount equal to 40% of the value of the gross assets of the Company. However, to further manage this risk the Board does not anticipate borrowings will exceed 20% of gross assets at the time of drawdown.

The use of derivatives, including options and futures has been limited to a maximum of 30% of the Group’s assets.

The Investment Manager will only use gearing when confident that market conditions and opportunities exist to enhance investment returns.

The Investment Manager reports to the Board on a regular basis the levels of gearing in place as compared to limits set by the Board under the investment policy and by the Manager as Alternative Investment Fund Manager (AIFM) under the Alternative Investment Fund Managers’ Directive, as retained and onshored in the UK (AIFMD).

The Board monitors gearing levels and will raise any queries or concerns in respect of changes in the gearing level with the Investment Manager.

LEGAL AND REGULATORY COMPLIANCE

Principal riskThe Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio.

Any serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010.

Amongst other relevant laws and regulations, the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive, the Market Abuse Regulation, the UK Listing Rules, international sanctions and the FCA’s Disclosure Guidance and Transparency Rules.

Mitigation/ControlThe 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 on 3 July 2016. The Board has taken steps to ensure that individual Directors (and their Persons Closely Associated) are aware of their obligations under the regulation and has updated internal processes, where necessary, to ensure the risk of non-compliance is effectively mitigated.

OPERATIONAL

Principal riskThe Company relies on the services provided by third parties.

Accordingly, it is dependent on the control systems of the Manager and The Bank of New York Mellon (International) Limited (who act as both Depositary, Custodian and Fund Accountant and who maintain the Company’s assets, settlement and accounting records). The Company’s share register is maintained by the Registrar, Computershare Investor Services PLC. The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of the third-party service providers.

Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company’s financial position.

Inadequate succession arrangements, particularly of the Manager, could disrupt the level of service provided.

Mitigation/ControlThe Fund Accountant’s and the Manager’s internal control processes are regularly tested and monitored throughout the year and are evidenced through their SOC 1 reports, which are subject to review by an Independent Service Assurance Auditor. The SOC 1 reports provide assurance in respect of the effective operation of internal controls. These reports are provided to the Audit and Management Engagement Committee.

The Company’s financial assets are subject to a strict liability regime and in the event of a loss of assets, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control.

The Board reviews the overall performance of the Manager, Investment Manager and all other third-party service providers on a regular basis.

The Board also considers the business continuity arrangements of the Company’s key service providers on an ongoing basis and reviews these as part of its review of the Company’s risk register.

The Board considers the Manager’s succession plans in so far as they affect the services provided to the Company.

MARKET

Principal riskMarket risk arises from volatility in the prices of the Company’s investments. The price of shares of companies in the mining, traditional energy and energy transition sectors can be volatile and this may be reflected in the NAV and market price of the Company’s shares.

The Company invests in the mining, traditional energy and energy transition sectors in many countries globally and will also be subject to country-specific risk. A lack of growth in world or country-specific industrial production may adversely affect metal and energy prices.

Companies operating within the sectors in which the Company invests will be impacted by climate change and by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price. Market risk includes the potential impact of events which are outside the Company’s control, including (but not limited to) heightened geo-political tensions and military conflict, a global pandemic and high inflation.

There is the potential for the Company to suffer loss through holding investments in the face of negative market movements.

Mitigation/ControlThe Board considers the diversification of the portfolio, asset allocation, stock selection, and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager.

Under the Company’s investment policy, the Investment Manager has the ability to invest in energy transition stocks and is mindful of the impact of any shift in energy consumption towards less carbon intensive energy supply. This is taken into account by the Investment Manager in building a well diversified portfolio.

The Board also recognises the benefits of a closed-end fund structure in extremely volatile markets such as those experienced with the Russia- Ukraine conflict, and more recently, the conflict in the Middle East. Unlike open-ended counterparts, closed- end funds are not obliged to sell-down portfolio holdings at low valuations to meet liquidity requirements for redemptions. During times of elevated volatility, restrictions and impacts on securities and markets following the Russian invasion of the Ukraine and market stress, the ability of a closed-end fund structure to remain invested for the long term enables the Portfolio Managers to adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves.

FINANCIAL

Principal riskThe Company’s investment activities expose it to a variety of financial risks that include interest rate risk and foreign currency risk.

The Company invests in both British Pound Sterling and non-British Pound Sterling denominated securities. Consequently, the value of investments in the portfolio made in non-British Pound Sterling currencies will be affected by currency movements.

Mitigation/ControlDetails of these risks are disclosed in note 18 to the Financial Statements, together with a summary of the policies for managing these risks.

Viability statementIn accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve months referred to by the ‘Going Concern’ guidelines. The Board is cognisant of the uncertainty surrounding the potential duration of the conflicts in Russia-Ukraine and Middle East, its impact on the global economy and the prospects for many of the Company’s portfolio holdings. Notwithstanding these crises, and given the factors stated below, the Board expects the Company to continue for the foreseeable future and has therefore conducted this review for a period of five years. This is generally the investment holding period investors consider while investing in the sector. The Board conducted this review for the period up to the AGM in 2029.

The Board has also considered a number of other factors in its assessment, including:

· portfolio liquidity;

· setting the investment strategy to fulfill the Company’s objective; and monitoring the performance of the Investment Manager and the implementation of the investment strategy. The Board regularly reviews the Company’s investment mandate and long-term strategy; it has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports to the Board;

· the Company’s revenue and expense forecasts. The Board is confident that the Company’s business model remains viable and that there are sufficient resources to meet all liabilities as they fall due for the period under review;

· the Company’s borrowing facility and the fact that the Company continues to meet its financial covenants in respect of this facility;

· the long-term risk to performance from inadequate attention to ESG issues, and in particular the impact of climate change. ESG analysis is integrated in the Manager’s investment process. This is monitored by the Board;

· the principal risks and uncertainties as set out above and the fact that the Company has appropriate controls and processes in place to manage these and to maintain its operating model;

· the operational resilience of the Company and its key service providers and their ability to continue to provide a good level of service for the foreseeable future;

· the effectiveness of business continuity plans in place for the Company and key service providers; and

· the level of income generated by the Company and future income forecasts.

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

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

· the Company has gearing facilities in place and no concerns around facilities, headroom or covenants;

· the Company’s forecasts for revenues, expenses and liabilities are relatively stable, it has largely fixed overheads which comprise a small percentage of net assets and ongoing charges are capped at 1.25% of average net asset value; and

· the business model should remain attractive for longer than five years unless there is significant economic or regulatory change.

The Directors have also reviewed:

· the impact of a significant fall in global commodity equity markets on the value of the Company’s investment portfolio;

· the ability of portfolio companies to pay dividends, and the Company’s portfolio yield and ability to meet its dividend target over the longer term;

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

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

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

SECTION 172 STATEMENT: PROMOTING THE SUCCESS OF BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLCThe Companies (Miscellaneous Reporting) Regulations 2018 require Directors to explain in detail how they have discharged their duties under Section 172(1) of the Companies Act 2006 in promoting the success of their companies for the benefit of members as a whole. This enhanced disclosure covers how the Board has engaged with and understands the views of stakeholders and how stakeholders’ needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board’s decisions.

As the Company is an externally managed investment company and does not have any employees or customers, the Board considers the main stakeholders in the Company to be the shareholders, key service providers (being the Manager and Investment Manager, the Custodian, Depositary, Registrar and Broker) and investee companies. The reasons for this determination, and the Board’s overarching approach to engagement, are set out in the table below.

Stakeholders

ShareholdersContinued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy. The Board is focused on fostering good working relationships with shareholders and on understanding the views of shareholders in order to incorporate them into the Board’s strategy and objectives in delivering long-term growth and income.

Manager and Investment ManagerThe Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, secretarial, accounting and marketing services. The Manager has sub-delegated portfolio management to the Investment Manager. Successful management of shareholders’ assets by the Investment Manager is critical for the Company to successfully deliver its investment strategy and meet its objective. The Company is also reliant on the Manager as AIFM to provide support in meeting relevant regulatory obligations under the AIFMD and other relevant legislation.

Other key service providersIn order for the Company to function as an investment trust with a listing on the premium segment of the official list of the Financial Conduct Authority (FCA) and trade on the London Stock Exchange’s (LSE) main market for listed securities, the Board relies on a diverse range of advisors for support in meeting relevant obligations and safeguarding the Company’s assets. For this reason, the Board considers the Company’s Custodian, Depositary, Registrar and Broker to be stakeholders. The Board maintains regular contact with its key external service providers and receives regular reporting from them through the Board and committee meetings, as well as outside of the regular meeting cycle.

Investee companiesPortfolio holdings are ultimately shareholders’ assets, and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship activities and receives regular feedback from the Manager in respect of meetings with the management of portfolio companies.

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

Area of Engagement

Investment Mandate and Objective

IssueThe Board is committed to promoting the role and success of the Company in delivering on its investment mandate to shareholders over the long term. However, the Board recognises that the sectors in which the Company invests are undergoing structural changes, with a shift in the energy sector away from carbon-based energy supplies towards alternative and renewable energy sources. The extractive industries in which the companies in the Company’s investment universe operate are facing ethical and sustainability issues that cannot be ignored by asset managers and investment companies alike. More than ever, consideration of material ESG information and sustainability risks is an important element of the investment process. The Board also has responsibility to shareholders to ensure that the Company’s portfolio of assets is invested in line with the stated investment objective and in a way that ensures an appropriate balance between spread of risk and portfolio returns.

EngagementThe Board believes that responsible investment and sustainability are integral to the longer-term delivery of growth in capital and income and has worked very closely with the Manager throughout the year to regularly review the Company’s performance, investment strategy and underlying policies to ensure that the Company’s investment objective continues to be met in an effective, responsible way that is transparent to current and future investors.

In addition to six scheduled Board meetings a year, the Board holds a Strategy Day which is dedicated to an in depth review of the Company’s strategy in conjunction with key advisors including the Company’s broker, public relations and marketing teams and members of BlackRock’s portfolio management and risk analytics teams.

The Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as its engagement with investee companies to encourage the adoption of sustainable business practices which support long-term value creation, are kept under review by the Board.

The Manager reports to the Board in respect of its consideration of ESG factors and how these are integrated into the investment process; a summary of BlackRock’s approach to ESG integration is set out in the Annual Report and Accounts.

ImpactThe portfolio activities undertaken by the Investment Manager can be found in the Investment Manager’s Report above.

The Board does not formally benchmark the Company’s performance against mining and energy sector indices because meeting a specific dividend target is not within the scope of these indices and also because no index appropriately reflects the Company’s blended exposure to the Energy (including the energy transition) and mining sectors. For internal monitoring purposes, however, the Board compares the performance of the portfolio against a bespoke internal mining and energy composite index.

Details regarding the Company’s Key Performance Indicators can be found in this Strategic Report.

Management of Share Rating

IssueThe Board recognises the importance to shareholders that the market price of the Company’s shares should not trade at either a significant discount or premium to the NAV. One of the Board’s long-term strategic aspirations is that the Company’s shares should trade consistently at a price close to the NAV per share.

EngagementThe Board monitors the Company’s discount on an ongoing basis and meets with the Manager and the Company’s Broker on a regular basis to discuss methods to manage the discount. A range of discount control mechanisms have been considered and the benefits and disadvantages of these have been discussed at length.

The Board is also prepared to issue shares into the market to meet demand as required and avoid shares moving to trade at an excessive premium. The Company’s shares moved to trade at a sustained premium in the first half of 2023, and the Company issued new shares into market demand to manage this following consultation with the manager and the broker. Where necessary, the Board sought shareholder approval to both buy-backs and issuance. Resolutions were proposed, and passed, at the Annual General Meeting on 13 March 2023 and a General Meeting on 3 March 2023.

The Board notes that all share issues have been and will continue to be made at premiums to the prevailing NAV per share, such that all such transactions are accretive to the NAV and NAV per share so that existing shareholders are protected from any value/economic dilution.

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.

ImpactThe Company’s average discount for the year to 30 November 2023 was 6.4% (year to 30 November 2022: 2.9%) and as at 26 January 2024 the discount stood at 11.2%. This compares to an average discount for the AIC Commodities and Natural resources sector of 13.7% at 30 November 2023 and 12.7% at 31 December 2023.

The share issuance transactions in the year under review resulted in an increase of £1.8 million (2022: an increase of £22.6 million) in the Company’s assets under management.

However, the Company has bought back 4,200,000 shares to be held in treasury for a total consideration of £4,837,000 at an average discount of 10.0%. Collectively, this share buyback activity undertaken in 2023 contributed 0.3% to the NAV per share return over the year. The share buyback transactions in the year resulted in a decrease of £4.8 million in the Company’s assets under management.

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 2023, 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 (£184.9 million) as at 31 December 2022, and this contribution was matched by BIM (UK). This marketing activity was one factor contributing to increased demand for the Company’s shares, enabling it to grow in size and resulting in a lower operating charges ratio and greater liquidity.

Dividend target

IssueA 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.

EngagementThe Board reviews income forecasts and option writing activity in conjunction with the Manager to determine the most effective approach for meeting the dividend target whilst generating the optimal level of total return for shareholders.

The Board aims to meet the annual target dividend primarily from a mix of dividend income from the portfolio and revenue reserves, although this will be supported by the distribution of the Company’s other substantial distributable reserves (£86.4 million at 30 November 2023) if required.

ImpactSince the year end, the Board has announced that the annual dividend target will increase to 4.500 pence per share for the year to 30 November 2024.

Service levels of third party providers

IssueThe Board acknowledges the importance of ensuring that the Company’s principal suppliers are providing a suitable level of service: this includes the Manager in respect of investment performance and delivering on the Company’s investment mandate; the Custodian and Depositary in respect of their duties towards safeguarding the Company’s assets; the Registrar in its maintenance of the Company’s share register and dealing with investor queries and the Company’s Broker in respect of the provision of advice and acting as a market maker for the Company’s shares.

EngagementThe Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual evaluation of the Manager’s performance, its commitment and available resources.

The Board performs an annual review of the service levels of all third-party service providers and concludes on their suitability to continue in their role.

The Board receives regular updates from the AIFM, Depositary, Registrar and Broker on an ongoing basis.

ImpactAll performance evaluations were performed on a timely basis and the Board concluded that all key third-party service providers, including the Manager were operating effectively and providing a good level of service.

Board composition

IssueThe 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.

EngagementThe Board reviews succession planning on an ongoing basis. A new Director, Anne Marie Cannon, was appointed after the year end as part of a recruitment process that was initiated in 2023. As part of this process, the Nomination Committee agreed the selection criteria and the method of selection, recruitment and appointment. Board diversity, including gender, was taken into account when establishing the criteria. The services of an external search consultant, Cornforth Consulting Limited, was used to identify potential candidates.

The Board remain focused on best Corporate Governance Practice, and in particular the recommendation under the UK Code that Directors’ tenure is limited to nine years. While the Board does not have a formal limit on tenure, Dr Bell will not be standing for re-election at the Annual General Meeting to be held on 20 March 2024, noting that her tenure would exceed nine years with effect from December 2023.

ImpactThe Board appointed Mrs Anne Marie Cannon as a Director of the Company with effect from 16 January 2024. Mrs Cannon’s biography is set out in the Annual Report and Accounts. Details of each Director’s contribution to the success and promotion of the Company are set out in the Directors’ Report contained within the Annual Report and Accounts.

All Directors currently serving on the Board have tenure below the nine years maximum limit recommended under the UK Code (with the exception of Dr Bell who will be standing down as a director of the Company at the conclusion of the AGM which is to be held on 15 March 2024).

The Board’s composition currently meets all targets recommended under the Parker Review and enshrined in recent changes to the FCA’s Listing Rules (which set new diversity targets and associated disclosure requirements for UK companies listed on the London Stock Exchange).

Environmental, Social And Governance Approach

The Board’s approachEnvironmental, social and governance (ESG) issues can present both opportunities and risks to long-term investment performance. The Company’s investment universe comprises sectors that are undergoing significant structural change and are likely to be highly impacted by increasing regulation as a result of climate change and other social and governance factors. Your Board is committed to ensuring that we have appointed a manager that integrates ESG considerations into its investment process and has the skill and vision to navigate the structural transition that the Company’s investment universe is undergoing.

The Board believes multi-year engagement with management is, in most cases, the most constructive way of building our understanding of a company’s approach to addressing material business risks and opportunities. Engagement can lead to stronger relationships with companies and more constructive outcomes for shareholders and businesses alike.

More information on BlackRock’s global approach to ESG integration, as well as activity specific to the BlackRock Energy and Resources Income Trust plc portfolio, is set out below. BlackRock has defined ESG integration as the practice of incorporating financially material ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns. ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe and does not mean that an ESG or impact focused investment strategy or any exclusionary screens have been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks. More information on sustainability risks may be found in the AIFMD Fund Disclosures document of the Company available on the Company’s website at www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-energy-andresources-income-trust-plc.pdf.

The Company does not meet the criteria for Article 8 or 9 products under the EU Sustainable Finance Disclosure Regulation (“SFDR”) and the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

1 Source: BlackRock Investment Stewardship 2023 Global Voting Spotlight report (https://www.blackrock.com/corporate/literature/publication/2023-investment-stewardship-voting-spotlight.pdf) and BlackRock Investment Stewardship website www.blackrock.com/corporate/about-us/investment-stewardship#engagement-and-voting-history

BlackRock Investment Stewardship Engagement with portfolio companies in the year ended 30 November 2023Given the Board’s belief in the importance of engagement and communication with portfolio companies, they receive regular updates from the Manager in respect of activity undertaken for the year under review. The Board notes that over the year to 30 November 2023, 97 total company engagements were held with the management teams of 36 portfolio companies representing 50% of the portfolio by % of holdings at 30 November 2023. To put this into context, there were 72 companies in the BlackRock Energy and Resources Income Trust plc portfolio at 30 November 2023. Additional information is set out in the table below as well as the key engagement themes for the meetings held in respect of the Company’s portfolio holdings.

The importance and challenges of considering ESG when engaging with investee companies in the Natural Resources Sector and BlackRock’s global approach to ESG integration

EnvironmentalBlackRock’s approach to climate risk and opportunities and the global energy transition is based on our role as a fiduciary to our clients. As the world works toward a transition to a low-carbon economy, BlackRock are interested in hearing from companies about their strategies and plans for responding to the challenges and capturing the opportunities that this transition creates. When companies consider climate-related risks, it is likely that they will also assess their impact and dependence on natural capital.

SocialBlackRock Investment Stewardship’s Global Principles underscore the belief that companies are best placed to deliver value for long-term shareholders like BlackRock’s clients when they also consider the interests of their other key stakeholders, which generally will include workers, business partners (such as suppliers and distributors), clients and consumers, government, and the communities in which they operate.

In BlackRock’s experience, companies that build strong relationships with their stakeholders are more likely to meet their own strategic objectives, while poor relationships may create adverse impacts that expose a company to legal, regulatory, operational, and reputational risks and jeopardize their ability to deliver sustainable, long-term financial performance.

Corporate GovernanceAs with all companies, good corporate governance is especially critical for natural resources companies. In BlackRock’s experience, the sound governance, in terms of both process and practice, is critical to the success of a company, the protection of shareholders’ interests, and long-term shareholder value creation.

Governance issues, including the management of material sustainability issues that have a significant impact for natural resource companies, all require effective leadership and oversight from a company’s board.

BlackRock believes that companies with experienced, engaged and diverse directors, who are effective in actively advising and overseeing management as a board, are well-positioned to deliver long-term value creation.

BlackRock’s approach to ESG integrationBlackRock believes that sustainability risks including climate risk are investment risks. As a fiduciary, we manage material risks and opportunities that could impact portfolios. Sustainability can be a driver of investment risks and opportunities, and we incorporate them in our firm wide processes when they are material. This in turn (in BlackRock’s view) is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade. BlackRock believes that carbon-intensive companies will play an integral role in unlocking the full potential of the energy transition, and to do this, they must be prepared to adapt, innovate and pivot their strategies towards a low carbon economy.

As part of BlackRock’s structured investment process, ESG risks and opportunities (including sustainability/climate risk) are considered within the portfolio management team’s fundamental analysis of companies and industries. ESG factors have been a key consideration of the BlackRock Natural Resources Team’s investment process since inception and the Company’s portfolio managers work closely with BIS to assess the governance quality of companies and understand any potential issues, risks or opportunities.

As part of their approach to ESG integration, the portfolio managers use ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio. In particular, portfolio managers now have access to 1,200 key ESG performance indicators in Aladdin (BlackRock’s proprietary trading system) from third-party data providers. BlackRock’s internal sustainability research framework scoring is also available alongside third-party ESG scores in core portfolio management tools. BlackRock’s analyst’s sector expertise and local market knowledge allows it to engage with companies through direct interaction with management teams and conducting site visits. In conjunction with the portfolio management team, BlackRock Investment Stewardship’s (BIS) meets with boards of companies frequently to evaluate how they are strategically managing their longer-term issues, including those surrounding ESG and the potential impact these may have on company financials. BIS’s and the portfolio management team’s understanding of ESG issues is further supported by BlackRock’s Sustainable and Transition Solutions (STS). STS look to advance ESG research and integration, active engagement and the development of sustainable investment solutions across the firm.

Investment StewardshipConsistent with BlackRock’s fiduciary duty as an asset manager, BIS seeks to support investee companies in their efforts to deliver long-term financial performance on behalf of our clients. These clients include public and private pension plans, governments, insurance companies, endowments, universities, charities and, ultimately, individual investors, among others. BIS serves as a link between BlackRock’s clients and the companies they invest in. Clients depend on BlackRock to help them meet their investment goals; the business and governance decisions that companies make will have a direct impact on BlackRock’s clients’ long-term investment outcomes and financial well-being.

Global PrinciplesThe BIS Global Principles, regional voting guidelines, and engagement priorities (collectively, the ‘BIS policies’) set out the core elements of corporate governance that guide BIS’ efforts globally and within each regional market, including when engaging with companies and voting at shareholder meetings when authorised to do so on behalf of clients. Each year, BIS reviews its policies and updates them as necessary to reflect changes in market standards and regulations, insights gained over the year through third-party and its own research, and feedback from clients and companies. BIS’ Global Principles are available on its website at https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf.

Regional voting guidelinesBIS’ voting guidelines are intended to help clients and companies understand its thinking on key governance matters. They are the benchmark against which it assesses a company’s approach to corporate governance and the items on the agenda to be voted on at the shareholder meeting. BIS applies its guidelines pragmatically, taking into account a company’s unique circumstances where relevant. BlackRock informs voting decisions through research and engages as necessary. BIS reviews its voting guidelines annually and updates them as necessary to reflect changes in market standards, evolving governance practice and insights gained from engagement over the prior year. BIS’ regional voting guidelines are available on its website at www.blackrock.com/corporate/insights/investment-stewardship#stewardship-policies.

BlackRock is committed to transparency in terms of disclosure of its stewardship activities on behalf of clients. BIS publishes its stewardship policies – such as the BIS Global Principles, regional voting guidelines and engagement priorities – to help BlackRock’s clients understand its work to advance their interests as long-term investors in public companies. Additionally, BIS publishes both annual and quarterly reports detailing its stewardship activities, as well as vote bulletins that describe its rationale for certain votes at high profile shareholder meetings. More detail in respect of BIS reporting can be found at www.blackrock.com/corporate/insights/investment-stewardship.

BlackRock’s reporting and disclosuresIn terms of its own reporting, BlackRock believes that the Sustainability Accounting Standards Board provides a clear set of standards for reporting sustainability information across a wide range of issues, from labour practices to data privacy to business ethics. For evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them, the Task Force on Climate-related Financial Disclosures (TCFD) provides a valuable framework. BlackRock recognises that reporting to these standards requires significant time, analysis and effort. BlackRock’s 2022 TCFD report can be found at www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2022-blkinc.pdf.

The above forms part of the Strategic Report.

By order of the Board

GRAHAM VENABLES

FOR AND ON BEHALF OF

BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED

30 January 2024

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

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

The investment management fee due for the year ended 30 November 2023 amounted to £1,549,000 (2022: £1,358,000). At the year end, £742,000 was outstanding in respect of the management fee (2022: £728,000).

The Company is entitled to a rebate from the investment management fee charged by the Manager in the event the Company’s ongoing charges exceeds the cap of 1.25% per annum of average daily net assets. The amount of rebate accrued to 30 November 2023 amounted to £nil (2022: £nil).

Further details in respect of the management fee and rebate are given in note 4 below.

In addition to the above services, BIM (UK) has provided the Group with marketing services. The total fees paid or payable for these services for the year ended 30 November 2023 amounted to £84,000 excluding VAT (2022: £45,000). Marketing fees of £106,000 excluding VAT (2022: £22,000) were outstanding as at the year end.

The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware USA.

At the date of this report, the Board consists of five non-executive Directors, all of whom are considered to be independent of the Manager by the Board.

Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report contained in the Annual Report for the year ended 30 November 2023. At 30 November 2023, £11,000 (2022: £11,000) was outstanding in respect of Directors’ fees.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the Group and Parent Company financial statements in accordance with UK-adopted International Accounting Standards (IFRSs). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period.

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

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

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

· make judgements and estimates that are reasonable and prudent;

· in respect of the Group financial statements, state whether UK-adopted International Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

· provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company financial position and financial performance;

· in respect of the Parent Company financial statements, state whether UK-adopted International Accounting Standards, have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and/or the Company will continue in business.

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

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

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report, Corporate Governance Statement and the Report of the Audit and Management Engagement Committee that comply with that law and those regulations. The Directors have delegated responsibility to the Manager for the maintenance and integrity of the Group’s corporate and financial information included on the BlackRock website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm, to the best of their knowledge:

· that the consolidated financial statements prepared in accordance with UK-adopted International Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit of the Parent Company and undertakings included in the consolidation taken as a whole;

· that the annual report, including the strategic report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· that they consider the annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s position, performance, business model and strategy.

In order to reach a conclusion on this matter, the Board has requested that the Audit and Management Engagement Committee advise on whether it considers that the Annual Report and Financial Statements fulfils these requirements. The process by which the Committee has reached these conclusions is set out in the Audit and Management Engagement Committee’s Report contained within the Annual Report and Accounts. As a result, the Board has concluded that the Annual Report for the year ended 30 November 2023, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s and the Company’s position, performance, business model and strategy.

FOR AND ON BEHALF OF THE BOARDADRIAN BROWNChairman30 January 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 NOVEMBER 2023

The total columns of this statement represent the Group’s Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards (IAS). The supplementary revenue and capital accounts are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Group.

The Group does not have any other comprehensive income/(loss) (2022: £nil). The net profit/(loss) for the year disclosed above represents the Group’s total comprehensive income.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 NOVEMBER 2023