Blackrock Engy Regulatory News (BERI)

BLACKROCK ENERGY AND RESOURCES INCOME TRUST PLC (LEI:54930040ALEAVPMMDC31)

HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 MAY 2023

PERFORMANCE RECORD

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

2 Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report.

3 Further details are given in the Glossary contained within the Half Yearly Financial Report.

4 Paid on 14 July 2023.

Chairman’s Statement

While investors have continued to face some macro-economic uncertainties over the past 6 months, my fellow Board members and I believe that the Company remains well-positioned flexibly to take advantage of the transition to a more sustainable energy economy.

MARKET OVERVIEW At the start of the Company’s financial year on 1 December 2022 and through into the first half of 2023, markets as a whole were buoyed up by the Technology sector. However, the Traditional Energy sector fell during the six months to 31 May 2023, due primarily to a mild European winter, reducing European power prices. The MSCI World Energy Index was down by 12.9% over the six-month period to 31 May 2023 and the Metals and Mining sector also pulled back from previous gains with the MSCI ACWI Metals and Mining Index falling by 9.2% (all calculations in US Dollar terms with dividends reinvested). Your Company’s portfolio is well positioned to weather these trends, as the portfolio managers decreased Traditional Energy exposure through 2022 and into 2023 to stand at 32.6% at the end of the period, and moved to a higher weighting in the Energy Transition sector (27.8% at 31 May 2023). While the Energy Transition sector has also suffered from supply chain concerns and a rotation from growth to value, the sector now offers opportunities on more reasonable valuations.

The energy and supply chain shock that resulted following the invasion of Ukraine has driven a surge in inflation in most developed economies, with the UK experiencing the highest levels of inflation amongst advanced economies this year, and rates reaching a 40 year high of 11.1% in October 2022. With central governments continuing to raise interest rates to control inflation, the outlook for equities remains volatile.

PERFORMANCEDuring the six months ended 31 May 2023, the Company’s net asset value (NAV) per share fell by 13.8% and its share price fell by 15.9% (both percentages in Sterling terms with dividends reinvested). Although the Company does not have a formal benchmark, to set this in the context of the market backdrop, the EMIX Global Mining (ex-Gold and Energy) Index fell by 14.9% and the MSCI World Energy Index fell by 16.3% over the same period (both percentages in Sterling terms with dividends reinvested). The Company had 27.8% of its portfolio invested in stocks with exposure to the Energy Transition sector and the decarbonisation of the energy supply chain as at 31 May 2023. There is no reference index that currently reflects the composition of the investment universe for this sector, but for illustrative purposes, the S&P Global Clean Energy Index decreased by 16.3% and the Wilderhill Clean Energy Index decreased by 24.9% over the same period (both in Sterling terms with dividends reinvested).

The Board does not formally benchmark the Company’s performance against Mining and Energy sector indices because meeting a specific dividend target is not within the scope of these indices and also because no index appropriately reflects the Company’s blended exposure to the Energy (including the Energy Transition) and Mining sectors. For internal monitoring purposes, however, the Board compares the performance of the portfolio against a bespoke internal Mining and Energy composite index. The neutral sector weightings of this bespoke index are 40% Mining, 30% Traditional Energy and 30% Energy Transition.

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

REVENUE RETURN AND DIVIDENDS The Company’s revenue return per share for the six-month period was 2.37 pence per share, a decrease of 2.1% over the same period last year (the revenue return for the six months to 31 May 2022 was 2.42 pence per share). The Board’s current target is to declare quarterly dividends of at least 1.10 pence per share in the year to 30 November 2023, making a total of at least 4.40 pence per share for the year as a whole. This target represents a yield of 3.9% based on the share price of 111.60 pence per share as at 31 May 2023, and 3.7% based on the share price of 119.80 pence per share at the close of business on 28 July 2023.

The first quarterly interim dividend of 1.10 pence per share was paid on 19 April 2023 and the second quarterly interim dividend of 1.10 pence per share was paid on 14 July 2023 (four quarterly interim dividends each of 1.10 pence per share were paid in the twelve months ended 30 November 2022).

The Company may also write options to generate revenue return, although the portfolio managers’ focus is on investing the portfolio to generate an optimal level of total return without striving to meet an annual income target from option writing. Consequently, they will only enter into option transactions with the intention that the overall contribution is beneficial to total return.

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 31 May 2023 was 5.5%. For calculations, see the Glossary contained within the Half Yearly Financial Report.

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

The Company’s shares started the period under review trading at a discount of 6.8%; this fell to 3.4% in December 2022 and subsequently the shares moved to trade fairly consistently at a premium from January 2023 to mid-February 2023. To manage the premium, the Company issued new shares into market demand in January and February 2023. Over the period under review, the Company issued 1,230,000 shares for net proceeds of £1,789,000. At the Company’s annual general meeting held on 13 March 2023, the Company was granted authority to allot up to 26,981,238 shares and/or sell the same amount of shares held in treasury on a non-pre-emptive basis (being equivalent to 20 per cent of share capital in issue at that time).

Since mid-February 2023 the Company’s shares have been trading at a discount, which widened in line with many investment trusts. Since 31 May 2023 the discount has widened out again, and as at the date of this report, the Company has bought back 540,000 shares for costs of £621,000 and at an average discount of 9.9%. As at 28 July 2023 the Company’s shares are trading at a discount of 8.7%.

MARKET OUTLOOK & PORTFOLIO POSITIONING A higher interest rate environment to combat inflation has led to market concerns about the prospect of a global recession. In addition, with the continuation of the war in Ukraine and sanctions on Russia, commodity prices remain elevated putting pressure on inflation at the same time as tight labour markets are driving higher wages higher. Although more recently inflation appears to be slowing, all these factors are likely to result in central banks maintaining rates at higher levels relative to the last few years with risks of a global economic slowdown remaining.

Despite the current uncertainty, the ongoing drive by governments to address climate change and decarbonize the energy supply chain remains an important backdrop for the Company’s three pillars, of Traditional Energy, Mining and Metals and Energy Transition. The Board considers that all three sectors have an important role to play as the energy system transitions to a lower carbon economy. Traditional energy is needed to support base load energy to continue to power economies during the transition. The Metals and Mining sector provides the material supply chain for low carbon technologies from steel for wind turbines to lithium for electric cars. The path to a lower carbon economy is also expected to disrupt many industries and business models with scope for the Company to invest directly in opportunities in the Energy Transition space. Against this backdrop, the flexibility of the Company’s investment mandate with the ability to shift exposure between Traditional Energy, Energy Transition and Mining sectors, means that it is uniquely positioned to serve investors as these sectors evolve.

The Board is confident that the Company remains well-placed to benefit from these key investment trends over the long term.

Adrian BrownChairman 1 August 2023

INVESTMENT MANAGERS’ REPORT

MARKET OVERVIEW The first half of 2023 provided welcome relief for investors in terms of broad equity index returns following a torrid year in 2022. Whilst the Company’s return so far this year has lagged that of broader markets such as the S&P 500, it has performed well against the comparator sector indices, and it is important to remember just how significant the outperformance of the Company was against equities in general over the past 12 months.

One of the notable features of equity markets in the first half has been how concentrated the returns have been in a small number of stocks. The chart on page 8 of the Half Yearly Financial Report (Figure 1) neatly illustrates this in the context of the US equity market suggesting that there is little evidence of exuberance in the majority of the market.

Although this might be reassuring for all the stocks/sectors away from this handful of big winners, the multi-asset context should also be considered. The second chart shows how non-equity investments such as corporate bonds and even cash are now competing with equities in terms of near-term yield. This broader environment has tempered our enthusiasm to add more aggressively to the energy transition holdings in the near-term despite the strong policy tailwinds. However, we are patient investors and believe when the higher rate environment is better reflected in lower equity valuations we may have a plethora of exciting investment opportunities.

PORTFOLIO ACTIVITY & INVESTMENT PERFORMANCE Despite a strong first few months of the year that saw the NAV per share reach a ten year high of over 145 pence per share, a weaker end to the period saw the Company’s NAV decline 13.8% from 144.92 pence per share to 122.79 pence per share (percentage in Sterling terms with dividends reinvested).

There were no significant top-down portfolio changes made at a single point in time during the first half, but a number of more incremental changes were made as our views on certain sub-sectors and individual companies evolved during the period.

We ended the period with less of the Company’s portfolio invested in mining companies than we had at the start of the year, with a reduction from almost 50% of the portfolio to circa 45% (see Figure 2 on page 9 of the Half Yearly Financial Report). This was driven by a less optimistic view on China’s commodity demand post the COVID-19 reopening and the ongoing cost inflation pressuring mining company margins. However in the medium term we remain excited by the demand growth driven by the energy transition for metals such as lithium and copper, so whilst we reduced the position size in a number of holdings given the near-term headwinds, we didn’t make dramatic changes.

On the traditional energy side, the biggest changes were the reintroduction of ExxonMobil into the portfolio driven by attractive relative valuation, which was funded by selling the service company Patterson UTI and trimming some of the oil price sensitive exploration and production companies.

Gearing was also reduced during the first half of the year as we took a more cautious near-term view on the mining and traditional energy sectors, whilst wanting to keep some dry powder for any further valuation pullbacks on selected energy transition companies. We are also cognisant that the cost of borrowing for the Company has risen substantially over the last 12 months, and this certainly factors into our considerations of what level of gearing is appropriate for the Company.

In the energy transition space, valuation multiples have continued to come down from their highs of 12-18 months ago. This has brought a number of companies we view as long-term winners in this space to an attractive entry point, so we initiated a number of new positions in energy transition companies, and we increased the percentage of the Company’s portfolio in the energy transition investments over the first half of the year. Although we added a couple of new companies, we think there will be more opportunities in the coming 6-12 months as higher interest rates do not appear to be fully reflected into most equity valuations yet. When this does happen – or if the nominal rate environment begins to ease again – then we have a long list of structural winners from the energy transition that we would be keen to build positions in for the portfolio.

Source: Datastream, June 2023.

1 Average of 30/11/21-31/05/22 to 30/11/22-31/05/23.

INCOMEDespite lower commodity prices for many companies (for example iron ore averaged over 10% lower for H1 2023 vs. H1 2022), the conservative balance sheet management across the sectors allowed for attractive dividend pay-outs to continue.

We have continued to reduce the fixed income holdings as a proportion of the Company’s portfolio over the last 12 to 18 months. Given the strength of the balance sheets across the mining and traditional energy sectors, there has been a dearth of new issuance and when it has come, the yields / spreads have not been attractive relative to dividend yields in the respective equity or the Company’s cost of gearing.

Whilst equity market volatility trended lower during the period (the CBOE Volatility Index started at 21 in the beginning of May and closed May 2023 under 16), there were some company specific events that offered some attractive call and put writing opportunities. There was a greater balance between calls and puts in the first half of this financial year than there was last year, when there was a skew towards put writing, and this reflected our cautious outlook on the market. Looking forward to the second half of the year, if we see continued strength in Sterling versus the US Dollar, this will be a headwind to Company earnings as the majority of dividend income received is in US Dollars.

ENERGY In the six-month period to end May 2023, the energy sector fell, lagging global equities. A mild European winter was a key factor in reducing the pressure on natural gas and oil prices and European power prices moved lower. Expectations of an energy crisis in Europe over winter did not materialise and the bloc exited the winter months with natural gas storage of circa 60%, well above the typical 30-40% storage levels of recent years, after continuing to purchase liquified natural gas (LNG) from the US and Middle East. This relatively benign outcome had the effect of removing a headwind to European equities. The removal of this risk was therefore positive for non-energy sectors. The US Henry Hub natural gas price fell -70.0% during the period to $2.1/MMBTU (see Figure 3 on page 11 of the Half Yearly Financial Report). Brent and West Texas Intermediate (WTI) oil prices fell -14.3% and -15.4%, ending the month at $73.4/barrel and $68.1/barrel respectively.

On the supply side, we continue to observe tightness in energy markets, driven by a lack of investment in new oil production outside of US shale oil, but changing expectations for oil demand impacted on the oil price. China relaxed its zero COVID-19 policy towards the end of 2022 leading initially to expectations that China’s economic growth and oil demand would rebound in 2023. Low apparent spare production capacity coupled with the prospect of a recovery in oil demand from China supported a constructive outlook for oil prices in 2023. Figure 4 on page 12 of the Half Yearly Financial Report shows the upward trend in China’s oil demand since 2019 and the impact of China’s zero COVID-19 related lockdown restrictions in depressing oil demand through 2022. Within the refining sector, oil products are typically viewed as a leading indicator to demand for crude oil but developments on refining capacity have clouded the energy outlook in 2023. 2023 is set to be a year of refining capacity additions following significant mothballing of capacity during COVID-19. China has been retaining refined oil products, restricting their export, in order to ensure sufficient domestic supplies, which has contributed to volatile spread prices for oil products. Analysts therefore had to look more closely behind any moves in gasoline and diesel prices and refining spreads.

Investor sentiment towards energy has changed during the period following the collapse of Silicon Valley Bank (SVB) in the US and then the concerns around First Republic Bank and the potential for tighter financial conditions. The failure of SVB in the US in March 2023 had a notable impact on the oil price and large cap energy share price as this contributed to investor concerns around the potential for tighter lending conditions and lower economic growth, and expectations for lower demand for oil. In the days that followed this event, investors appeared to de-risk energy positions, which contributed to a fall in the oil price and in energy equities. The moves did not appear to be driven by fundamentals, but from changes in short-dated investor positioning in futures markets. Whilst there had been an increase in energy derivative positions through January and February 2023, there was a sharp reduction in the number of contracts following the collapse of SVB in March 2023 (see Figure 5 on page 12 of the Half Yearly Financial Report).

In response to lower oil prices, in April, OPEC announced a cut to production targets of 1 million barrels per day, which was a surprise to markets, but was in line with prior proactive action in October 2022 where OPEC cut target output to defend the oil price. We believe that OPEC no longer views US shale oil producers as likely to ramp up oil production in response to a cut, undermining their control. In past reports we have commented on the capital discipline displayed by the energy companies, which has continued through this reporting period. For US shale oil producers, this has been evident with capital expenditure budgets fully funded by cash flow generation, whilst weakness in oil prices has seen companies cut the number of drilling rigs in operation (see Figure 6 on page 13 of the Half Yearly Financial Report).

Energy companies have focused on reducing costs since the oil price fall in 2015 and have strengthened balance sheets as oil prices recovered through 2021 and 2022. This has enabled them to generate higher earnings for a given oil price. On the other hand, energy companies are not immune from the inflationary pressures in labour markets or in raw materials markets and many have therefore had to increase capital expenditure budgets as a result, even as they may have reduced production growth. Many energy companies are therefore strongly cash flow generative at the $70-$80 oil prices seen through this reporting period and the largest companies have reported strong earnings in their quarterly and annual results.

ENERGY TRANSITION Last year’s Ukraine invasion caused, at least temporarily a sharp elevation in energy prices globally as Russian volumes sought to find new markets to combat developed market sanctions. Not surprisingly this led to a greater focus on security of supply and set the tone for a more balanced debate around how to effect an orderly transition. Despite the pragmatism amongst policy makers, high energy prices did little to crystallise progress at COP27 late last year. The impasse on how to help low-income nations execute an effective and just transition remains a case of funding. For now, at least, commitments to limit warming to a global goal of 1.5 degrees Celsius continue to face challenges.

Compounded by the geopolitical rifts created by Russia’s invasion of Ukraine, fragmentation is undoing much of the globalisation that took place over the last two decades. This underpins an important dynamic at play in the race to decarbonise with different countries adopting different policies and plotting different paths towards net zero. There is even some evidence that competition for ‘green dollars’ is rising with the EU announcing in February 2023 the European “Green Deal Net Zero Industry Act” aimed at incentivising local sustainable energy-related manufacturing. Specifically, the Act aims to:

1. Drive accelerated renewables permitting, to increase planning and investment certainty, with a view to stepping up the share of energy directly sourced from clean energy – by 2030, Europe is planning to achieve c. 70% of electricity from renewables;

2. Develop a supply chain to domestically source at least 40% of the clean tech equipment in solar, wind, electrolysis, batteries and heat pumps; and

3. Introduce incentives to stimulate investments.

Whilst the policy is welcome, it comes hot on the heels of the United States’ Inflation Reduction Act announced in August last year and the lack of granularity on how industry can access these incentives was reflected in a limited response from stock prices in the clean power space (see Figure 7 on page 14 of the Half Yearly Financial Report).

In stark contrast, on 12 May 2023 the US Department of Treasury published guidance on domestic content bonus credits (renewable energy tax credits) under the Inflation Reduction Act. Based on the guideline, 40% or more of total direct materials and direct labour costs needs to be produced/incurred in the United States. The threshold is set to increase to 55% for projects commencing construction after 2026. In effect, this established a 10% additional tax credit for domestic content on top of the 30% investment tax credit for renewables projects. This benefitted companies with already strong domestic supply chains such as US-based First Solar (an increase of +26% on 12 May 2023), one of the solar companies held in the portfolio.

Through the course of the six month period ended 31 May 2023, we have continued to maintain our exposure to Energy Transition companies at around 25% of the Company’s NAV as many of the Energy Transition stocks have underperformed in the last 6 months (see Figure 8 on page 15 of the Half Yearly Financial Report).

Whilst valuations remain elevated across much of the space (see Figure 9 on page 15 of the Half Yearly Financial Report), they have markedly compressed from where they were this time last year, albeit they remain relatively more keenly priced than our other focus areas (e.g. Energy, Mining and Utilities). Nevertheless, as supply chain pressures ease and subsidies are clarified, it should start to pave the way for margin and earnings improvements across the Energy Transition space.

MININGThere was a strong positive sentiment at the start of the year in the mining sector as China’s sharp reversal of zero-COVID-19 policies led to optimism about the strength of commodity demand from the economy reopening after several years of lockdowns and false dawns. This initially translated into strong commodity demand with mined metals prices performing well in the first quarter of the year. However we quite quickly saw the positive momentum stall in a number of leading indicators, so we pared back our mining equity holdings as we took the view that the best case near-term scenario was being priced into share prices but downside risks were rising. As the second quarter progressed, economic data from China disappointed with new loan growth coming in below consensus expectations and new property building projects also struggling to recover. This demand weakness more than offset the supply challenges – which are discussed in detail below – and so the half year ended with most mined commodity prices below where they had started the year. With little or no relief yet on the cost side, this pressured producer margins and as a result, the mining sector struggled in the second quarter and also ended the half below where it has started.

We have written a number of times about the supply-side constraints in mining and the risk of supply disruptions, and the latter came to the fore in the first half of 2023, especially in the copper market. There were widespread protests that affected the industry in Peru with blockades preventing access to mines, ports and roads that impacted production. Also, in Chile the underperformance of the State-owned producer Codelco continued, which was the main driver of a poor start to the year for copper output from the world’s largest producer (see Figure 10 on page 16 of the Half Yearly Financial Report).

Although the issues above can be seen as temporary in nature, they appear to be occurring on a more frequent basis and if inventories of metals are low (like copper inventories were in H1 2023) then these disruptions risk pushing prices higher. However it is also important to look at the longer-term issues facing the supply of metals. The chart on page 17 (see Figure 11) of the Half Yearly Financial Report shows just how long it now takes to bring a new mine into production – not only are assets becoming harder to discover in the first place but the permitting challenges, engineering complexity, financing hurdles and construction itself all significantly constrain the ability of supply-side companies to respond to any environment of higher prices.

One of the consequences of these supply challenges is that existing production is becoming more valuable – both from a financial standpoint but also strategically. Several automotive companies have recently signed offtake agreements1 with miners (or soon to be miners) of nickel and lithium as they look to secure supply of raw materials. Mining companies have also recognised the value of de-risked producing assets compared to the risks of developing new assets – BHP recently completed the takeover of Australian copper miner Oz Minerals and there is an on-going acquisition saga between Glencore and Teck Resources, where the latter has just finished the $8bn construction of a new copper mine in Chile.

With the scarcity of both high-quality exploration discoveries and producing copper assets in the listed market, we have taken a barbell approach in the portfolio. We have continued to build our basket of earlier stage companies, such as Filo Mining, alongside large-scale producers such as First Quantum, who have successfully renegotiated their fiscal terms in Panama (a move that was positively received by the market, driving an increase in share price and removing selling pressure on the company’s shares).

MARKET OUTLOOK AND PORTFOLIO POSITIONING Concerns over a global economic slowdown have percolated financial markets for much of this year as the US Federal Reserve continues to drive a hard line on Quantitative Tightening (QT) to help stave off rampant inflation. Yet, if one were to simply look at the S&P 500, which year-to-date is up 8.6% through to 31 May 2023, you might be forgiven for thinking that everything was back to normal. However, the dispersion in returns is notable as six US mega-cap stocks account for all of this years’ gains. Amazon, Apple, Google, Microsoft, Nvidia and Tesla are up by 46% in aggregate since the start of the year. The remaining 494 stocks i.e. Everything Else is, on average, down (see Figure 12 on page 18 of the Half Yearly Financial Report). This reflects a quite extreme crowding effect and one which more often than not portends trickier times ahead. Coupled with sticky inflation and a Chinese economy that thus far has underwhelmed our expectations in terms of the pace and breadth of its post-COVID-19 recovery, this leaves us somewhat cautious as we look ahead for the next six months.

On the positive side, there is scope for China to lean on stimulus measures to support its real estate sector, which would bode well for mined commodity and materials demand. This would be additive to mobility trends which continue to grind upwards as more people choose to travel post-COVID-19 restriction easing. On the negative side, higher-for-longer interest rates may well be required to properly blunt western economies that continue to ‘run hot’. The effect on aggregate demand has yet to be fully felt, but the risks that rapid QT carries have already been evident in the US banking system with the collapse of Silicon Valley Bank and First Republic Bank. So, whilst we see an increasingly supportive policy backdrop for the energy transition over the next two decades, we consider that near-term caution is warranted, and the Company is positioned accordingly.

Tom Holl and Mark HumeBlackRock Investment Management (UK) Limited1 August 2023

1 An offtake agreement is an arrangement between a producer and a buyer to purchase or sell portions of the producer's upcoming goods. It is normally negotiated before the construction of a factory or facility to secure a market and revenue stream for its future output.  

DISTRIBUTION OF INVESTMENTS AS AT 31 May 2023

Asset allocation – Geography

1 Latin America represents Argentina and Ecuador.

Source: BlackRock.

Asset allocation – Commodity

Energy Transition (27.8%)

Traditional Energy (32.6%)

Mining (39.6%)

Source: BlackRock.

TEN LARGEST INVESTMENTS

1 + ExxonMobil (2022: n/a)Integrated oil groupMarket value: £8,767,000Share of net assets: 5.0% (2022: n/a)

An American multinational oil and gas corporation. They continue to evolve to meet growing global demand for oil, natural gas and refined products and plan to play a leading role in the energy transition. The corporation has announced emission-reduction plans for 2030 with an aim to reduce greenhouse gas and methane intensity and around 40% of its investments will be directed towards reducing greenhouse gas emissions with an emphasis on carbon capture and storage, biofuels, and hydrogen.

2 = Vale (2022: 2nd)Diversified mining groupMarket value: £8,115,000Share of net assets: 4.6%1 (2022: 4.4%)

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

3 - Glencore (2022: 1st)Diversified mining groupMarket value: £7,725,000Share of net assets: 4.4% (2022: 7.3%)

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

4 - BHP (2022: 3rd)Diversified mining groupMarket value: £7,428,000Share of net assets: 4.2% (2022: 4.2%)

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

5 - Teck Resources (2022: 4th)Diversified mining groupMarket value: £7,287,000Share of net assets: 4.2% (2022: 3.6%)

A diversified mining group headquartered in Canada. Teck Resources is engaged in mining and mineral development with operations and projects in Canada, the US, Chile and Peru. The group has exposure to copper, zinc, steelmaking coal and energy.

6 = Shell (2022: 6th)Integrated oil groupMarket value: £6,093,000Share of net assets: 3.5% (2022: 3.2%)

A British publicly traded multinational oil and gas group headquartered in London. Shell is one of the world’s largest independent energy companies, operating in more than 70 countries. Shell explores and produces energy products - fuels, oil, natural gas, lubricants, LPG, chemicals; including 100% renewable electricity by Shell Energy.

7 = BP (2022: 7th)Integrated oil groupMarket value: £5,874,000Share of net assets: 3.4% (2022: 2.9%)

A British multinational oil and gas company headquartered in London. BP is one of the oil and gas “supermajors” and one of the world’s largest companies measured by revenues and profits. It is a vertically integrated company operating in all areas of the oil and gas industry, including exploration and extraction, refining, distribution and marketing, power generation, and trading; including low carbon businesses.

8 + NextEra Energy (2022: 9th)ElectrificationMarket value: £5,696,000Share of net assets: 3.3% (2022: 2.5%)

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

9 + Canadian Natural Resources (2022: 10th)Exploration & ProductionMarket value: £5,181,000Share of net assets: 3.0% (2022: 2.5%)

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

10 - First Quantum Minerals (2022: 5th)Copper producerMarket value: £4,841,000Share of net assets: 2.7%2 (2022: 3.5%)

A Canadian-based mining and metals company whose principal activities include mineral exploration, development and mining. Its main product is copper.

1 1.1% relates to interest in Vale shareholder debentures.

2 1.5% relates to fixed interest holdings in First Quantum Minerals.

All percentages reflect the value of the holding as a percentage of total investments. For this purpose, where more than one class of securities is held, these have been aggregated. The percentages in brackets represent the value of the holding as at 30 November 2022.

Together, the ten largest investments represent 38.3% of total investments (ten largest investments as at 30 November 2022: 36.8%).

INVESTMENTS AS AT 31 May 2023

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

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

All investments are ordinary shares unless otherwise stated. The total number of holdings (including options) at 31 May 2023 was 70 (30 November 2022: 68).

There were no open options as at 31 May 2023 (30 November 2022: one).

The equity and fixed income investment total of £175,627,000 (30 November 2022: £206,394,000) above before the deduction of the negative valuation of commodity futures contracts of £559,000 (30 November 2022: negative option valuation of £55,000) represents the Group’s total investments held at fair value as reflected in the Consolidated Statement of Financial Position. The table above excludes cash and gearing; the level of the Group’s gearing may be determined with reference to the bank overdraft of £9,364,000 (30 November 2022: £14,345,000) and cash and cash equivalents of £194,000 (30 November 2022: £6,214,000) that are also disclosed in the Consolidated Statement of Financial Position. Details of the AIC methodology for calculating gearing are given in the Glossary contained within the Half Yearly Financial Report.

As at 31 May 2023, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT

The Chairman’s Statement and the Investment Managers’ Report give details of the important events which have occurred during the period and their impact on the financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES The principal risks faced by the Company can be divided into various areas as follows:

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2022. A detailed explanation can be found in the Strategic Report on pages 39 to 43 and in note 16 on pages 107 to 118 of the Annual Report and Financial Statements which are available on the Company’s website at www.blackrock.com/uk/beri.

The Board and the Investment Manager continue to monitor investment performance in line with the Company’s investment objectives, and the operations of the Company and the publication of net asset values are continuing.

In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.

GOING CONCERN The Board is mindful of the risk that unforeseen or unprecedented events including (but not limited to) heightened geopolitical tensions such as the war in Ukraine, high inflation and the current cost of living crisis has had a significant impact on global markets. Notwithstanding this significant degree of uncertainty, the Directors, having considered the nature and liquidity of the portfolio, the Company’s investment objective, the Company’s projected income and expenditure and the Company’s substantial distributable reserves, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable period to 31 May 2025, being a period of at least twelve months from the date of approval of the financial statements and is financially sound.

The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Borrowings under the overdraft facility shall be lower of £40.0 million or 20% of the Company’s net assets (calculated at the time of draw down) and this covenant was complied with during the period. Ongoing charges (excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring charges) have been capped by the Manager at 1.25% of average daily net assets with effect from 17 March 2020 and were 1.13% of net assets for the year ended 30 November 2022. Based on the above, the Board is satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGER BlackRock Fund Managers Limited (BFM) is the Company’s Alternative Investment Fund Manager (AIFM) and has, with the Company’s consent, delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management fee payable are set out in note 4 and note 13 below. The related party transactions with the Directors are set out in note 12 below.

DIRECTORS’ RESPONSIBILITY STATEMENT The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge that:

· the condensed set of financial statements contained within the Half Yearly Financial Report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting; and

· the Interim Management Report together with the Chairman’s Statement and Investment Managers’ Report include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and Transparency Rules.

This Half Yearly Financial Report has not been audited or reviewed by the Company’s Auditor.

The Half Yearly Financial Report was approved by the Board on 1 August 2023 and the above responsibility statement was signed on its behalf by the Chairman.

Adrian BrownFor and on behalf of the Board1 August 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY 2023

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

The Group does not have any other comprehensive income/(loss) (31 May 2022: £nil; 30 November 2022: £nil). The net profit/(loss) for the period disclosed above represents the Group’s total comprehensive income/(loss).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MAY 2023

1 4th interim dividend of 1.10p per share for the year ended 30 November 2022, declared on 7 December 2022 and paid on 13 January 2023 and 1st interim dividend of 1.10p per share for the year ending 30 November 2023, declared on 13 March 2023 and paid on 19 April 2023.

2 4th interim dividend of 1.10p per share for the year ended 30 November 2021, declared on 8 December 2021 and paid on 14 January 2022 and 1st interim dividend of 1.10p per share for the year ended 30 November 2022, declared on 15 March 2022 and paid on 21 April 2022.

3 4th interim dividend of 1.10p per share for the year ended 30 November 2021, declared on 8 December 2021 and paid on 14 January 2022; 1st interim dividend of 1.10p per share for the year ended 30 November 2022, declared on 15 March 2022 and paid on 21 April 2022; 2nd interim dividend of 1.10p per share for the year ended 30 November 2022, declared on 7 June 2022 and paid on 15 July 2022 and 3rd interim dividend of 1.10p per share for the year ended 30 November 2022, declared on 12 September 2022 and paid on 20 October 2022.

For information on the Company’s distributable reserves, please refer to note 10 below.

 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2023