CQS Natural Resources Growth and Income PLC (the "Company")
Annual Financial Report for the year ended 30 June 2024
This announcement contains regulated information
The statements below are extracted from the Company's Annual Report for the year ended 30 June 2024 (the "Annual Report"). The Annual Report, which includes the notice of the Company's forthcoming annual general meeting, will be posted to shareholders at the end of October 2024. Members of the public may obtain copies from Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL or from the Company's website at https://ncim.co.uk/cqs-natural-resources-growth-and-income-plc/ where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.
The Annual Report will be submitted to the Financial Conduct Authority and will shortly be available in full, unedited text for inspection on the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Our Objective
To provide shareholders with capital growth and income predominantly from a portfolio of mining and resource equities and of mining, resource and industrial fixed interest securities.
Strategic Report
Key Metrics
for the year ended 30 June:
| Share price capital return1 | Share price total return1 | Dividend yield1,2 |
| Net asset value capital return1 | Net asset value total return1 |
|
| MSCI World Energy Index total return (sterling adjusted)3 | MSCI World Metals and Mining Index total return (sterling adjusted)3 |
|
1 Alternative Performance Measure ("APM").
2 Based on an annualised dividend of 6.60 pence per share (2023: annualised dividend of 8.60 pence per share).
3 Used by the Company as a comparator, not a benchmark.
Performance Record
| | Year ended 30 June 2024 | Year ended 30 June 2023 | Five years ended 30 June 2024 |
| Total Return | | | |
| Net asset value per share1 | 7.2% | 3.5% | 118.7% |
| Ordinary share price (mid market)1 | 17.1% | (0.2)% | 167.0% |
| MSCI World Energy Index (sterling adjusted)2 | 17.4% | 9.6% | 64.0% |
| MSCI World Metals and Mining Index (sterling adjusted)2 | 7.3% | 12.7% | 73.0% |
| | As at 30 June 2024 | As at 30 June 2023 | % change |
| Capital Values | | | |
| Net asset value per share1 | 209.44p | 204.16p | 2.6% |
| Ordinary share price (mid market) | 189.00p | 169.50p | 11.5% |
| Share price discount to NAV per share1 | 9.8% | 16.98% | |
| Gearing1 | 10.1% | 8.9% | |
| | Year ended 30 June 2024 | Year ended 30 June 2023 | % change |
| Revenue Earnings and Dividends | | | |
| Earnings per ordinary share | 6.39p | 10.03p | (36.3)% |
| Dividends per ordinary share3 | 6.60p | 8.60p | (23.3)% |
| Dividend yield1 | 3.0% | 3.3% | |
| Ongoing charges ratio1 | 1.9% | 1.8% | |
| 1 Alternative Performance Measure ("APM"). A glossary of the terms used, including alternative performance measures, can be found on pages 86 to 88 of the Annual Report. 2 The EMIX Global Mining Index (sterling adjusted), which formed part of the Company's composite benchmark index in periods prior to 30 June 2023 ceased publication. From 1 July 2023, the Company has used the MSCI World Energy Index (sterling adjusted) and MSCI World Metals and Mining Index (sterling adjusted) as comparator indices, not formal benchmarks, for its performance. 3 Including a special interim dividend of 1 penny which was paid on 2 September 2024 (2023: including a special interim dividend of 3.00 pence which was paid on 16 October 2023). | |||
| | Highest | Lowest |
| Highs and Lows during the year ended 30 June 2024 | | |
| Net asset value per share | 229.91p | 183.53p |
| Ordinary share price (mid market) | 202.50p | 152.25p |
| Discount | 19.4% | 6.3% |
| | Dividend per share | Ex-dividend date | Record date | Payment date |
| Dividend History | | | | |
| Special interim dividend 2024 | 1.00p | 1 August 2024 | 2 August 2024 | 2 September 2024 |
| Fourth interim dividend 2024 | 1.82p | 1 August 2024 | 2 August 2024 | 2 September 2024 |
| Third interim dividend 2024 | 1.26p | 25 April 2024 | 26 April 2024 | 28 May 2024 |
| Second interim dividend 2024 | 1.26p | 25 January 2024 | 26 January 2024 | 23 February 2024 |
| First interim dividend 2024 | 1.26p | 26 October 2023 | 27 October 2023 | 27 November 2023 |
| Total for year ended 30 June 2024 | 6.60p | | | |
| Special interim dividend 2023 | 3.00p | 21 September 2023 | 22 September 2023 | 16 October 2023 |
| Fourth interim dividend 2023 | 1.82p | 27 July 2023 | 28 July 2023 | 31 August 2023 |
| Third interim dividend 2023 | 1.26p | 27 April 2023 | 28 April 2023 | 26 May 2023 |
| Second interim dividend 2023 | 1.26p | 26 January 2023 | 27 January 2023 | 28 February 2023 |
| First interim dividend 2023 | 1.26p | 26 October 2022 | 27 October 2022 | 25 November 2022 |
| Total for year ended 30 June 2023 | 8.60p | | | |
Chair's Statement
In my last year as Chair of your Company, I am pleased that it continues to be well positioned and has the investment flexibility needed to deliver robust returns for shareholders, despite the challenging macro environment.
OVERVIEW
The year to 30 June 2024 has seen your Company navigate a challenging market backdrop. Geopolitical conflicts provided an impetus for energy prices and energy companies, with shipping companies being beneficiaries, as the threat to shipping in and around the Straits of Hormuz resulted in lengthy alternative routes for much of the world's crude oil.
Elsewhere, growth, and in particular industrial growth, which is a key driver for much commodity demand, has been muted in developed markets. The emerging market powerhouses of India and China are both expected to see their recent growth rates subside. This has provided a headwind for industrial metal prices that shows little immediate chance of abating.
Precious metals prices, and as a result, producer share prices, performed well particularly in the latter part of the financial year as their 'safe harbour' status proved attractive in the face of a potential loosening of monetary policies around the world and the growing influence of nationalistic inward-looking politics across the world.
Finally, we are pleased that our exposure to uranium has again proved of benefit to your Company. There is growing consensus about the key role nuclear power will play in the move to a low-carbon future. This evolution of opinion has provided support for uranium prices, particularly as nations play catch-up following a period of sustained under-investment in this essential provider of low emissions baseload power, which will be needed to support the down time associated with wind, solar and hydro energies.
The flexibility to invest in these key growth sectors is a material advantage and a crucial aspect of our overall investment case. The Investment Manager's Review provides greater detail on the overarching themes driving the markets, and factors influencing their investment decisions over the course of the last year.
PERFORMANCE AND DISCOUNT
During the year to 30 June 2024, the Company's total net asset value ("NAV") increased from £136.6 million to £138.6 million and the share price increased from 169.50 pence to 189.00 pence per share. The Company's NAV per share delivered a total return in the year under review of 7.2%. This is similar to the return of 7.3% produced by the MSCI World Metals and Mining Index (sterling adjusted) but lagged the 17.4% return from the MSCI World Energy Index (sterling adjusted). Although the Company's short-term returns have been volatile, over the longer term, the Company's NAV per share returned 118.7% for the five years to 30 June 2024, compared with NAV returns of 73% for the MSCI World Metals and Mining Index and 64% for the MSCI World Energy Index.
I am pleased to report, however, that shareholders have experienced a share price return over the year of 17.1%. This reflected the effect of a material reduction in the discount to net assets at which the Company's shares trade, which tightened from 16.98% at the end of the previous financial year to 9.8% at the year end. This discount tightening comes against a background which has seen discounts across the investment trust sector widen materially.
SHARE BUYBACKS
A key contributor to this discount narrowing has been the Board's decision for the Company to begin buying back its own shares. During the year under review the Company bought back a total of 728,557 shares (1.1% of the shares in issue) into treasury at a cost of approximately £1.4 million and at an average discount of 13.5%. Over the course of the year the Company's discount averaged 15%.
While the Board had previously expressed concerns that the relatively small size of the Company stood in the way of buying back shares, it became apparent, as the discount widened, that the benefit to existing shareholders in terms of NAV enhancement and the improvement in liquidity offered by buying back shares outweighed this concern.
Discounts across the investment trust sector have widened in recent years leading many investment trusts to buyback shares in an effort to improve shareholder value. Investment trust buybacks have reached record levels with £3.7 billion of shares bought back in the first half of 2024 alone, close to the £4.0 billion for the whole of 2023.
As at the close of the UK market on 21 October 2024, the discount was 12.8%. Since the year end, a further 1,823,322 shares were bought back into treasury at a cost of £3.3 million. As at 21 October 2024, the Company had 64,336,630 shares in issue (excluding 2,551,879 shares held in treasury).
DIVIDENDS AND INCOME
Your Company has continued to maintain its dividend and has paid three interim dividends of 1.26 pence per share and a fourth interim dividend of 1.82 pence per share in respect of the year. Further to this, given strong revenue income from the Company's portfolio, the Board was pleased to announce an additional special interim dividend of 1 penny per share. This has resulted in total dividends for the year of 6.60 pence per share. This compares with 8.60 pence per share paid in respect of the year ended 30 June 2023.
GEARING
As at 30 June 2024 gearing was 10.1% (2023: 8.9%) and the amount drawn down under the £25 million Scotiabank revolving credit facility was £17 million (2023: £16 million).
The facility with Scotiabank expired after a one-year term on 13 September 2024. Following the Board's review of alternative credit facility providers, the Company has now entered into a two-year agreement with BNP Paribas for the provision of a £25 million secured revolving credit facility. Further details can be found within Note 12 to the Financial Statements.
BOARD CHANGES
During the year the Board undertook a detailed review of its Succession Plan and announced planned changes to the Board's composition in July. This plan comprises two key components:
● Firstly, we were delighted to announce the appointment of Louise Hall and Seema Paterson as non-executive directors with effect from 1 August 2024. Louise and Seema have also been appointed to the Audit Committee, Management Engagement Committee and Nomination Committee. They will offer themselves for election by shareholders at the Annual General Meeting ("AGM") to be held in December 2024.
● Secondly, Alun Evans and I will be retiring as non-executive directors at the conclusion of the forthcoming AGM and will therefore not seek re-election. Following my retirement, Chris Casey will succeed me as Chair of the Board and Seema will succeed Chris as Chair of the Audit Committee. Additionally, following Alun's retirement, Carole Cable will succeed him as Chair of the Management Engagement Committee.
It has been an honour being Chair of your Company since April 2022 and a director for nine years. I have thoroughly enjoyed my time serving on the Board and have huge respect for the experience and expertise of the Investment Managers and Board of Directors with whom I have worked over this period. I am very happy to be handing over to Chris who has chaired the Audit Committee so well and wish him and the Board all the best for the future.
In anticipation of Alun's retirement, I would also like to extend our gratitude for his dedicated service to the Company. Throughout his 10-year tenure, his expertise, wealth of knowledge and insightful guidance have been invaluable to the Board, and we wish him all the best for the future.
INVESTMENT MANAGEMENT COMPANY
In October 2023, CQS (UK) LLP, the Company's Investment Manager, advised that it was being acquired by Manulife Investment Management, a major asset manager and insurer headquartered in Canada. This transaction completed in April 2024. The Investment Manager is now trading as Manulife | CQS Investment Management but at present the name of the Company is not expected to change.
HALF YEAR REPORT AND ACCOUNTS
In common with many other companies, the Company aims to do what it can to reduce its carbon footprint. As part of this strategy, and also to produce cost savings for shareholders, the Company will no longer be preparing printed copies of its half year report and accounts. This document will, however, continue to be published on the Company's website. The Company's annual report will continue to be available in print.
ANNUAL GENERAL MEETING
The business of the AGM is summarised in the Directors' Report on pages 40 and 41 and the Notice of Meeting beginning on page 89 of the Annual Report. The AGM will be held at One Fleet Street Place, London, EC4M 7WS at 11.00 am on Tuesday, 10 December 2024.
As well as the formal proceedings, this will be an opportunity to meet the Board and to receive a presentation from our portfolio managers and we hope as many shareholders as possible will attend. Shareholders can submit questions in advance by writing to the Company Secretary, Frostrow Capital LLP ("Frostrow"), at cosec@frostrow.com.
The Board encourages all shareholders to exercise their right to vote at the AGM and, where possible, to do so in respect of the meeting online in advance. Registering your vote in advance will not restrict you from attending and voting at the meeting in person should you wish to do so, but as the past few years have shown, unforeseen extraordinary events can make attendance difficult or impossible.
The Board recommends that shareholders vote in favour of all resolutions as each of the Directors intends to do in respect of their own shares.
OUTLOOK
Against a backdrop of global tensions, the Company has continued to perform well since the Company's year end and remains strongly positioned to benefit from demand in resources, energy, and shipping. The Investment Managers have maintained a significant weighting in precious metals and energy, supported by ongoing demand, as well as diversification across a broad range of sectors and geographies, remaining nimble enough to capitalise on evolving macro drivers.
The Board and I would like to thank shareholders for their continuing support of the Company, and we look forward to seeing you at the forthcoming AGM.
HELEN GREEN
Chair
23 October 2024
Investment Manager's Review
SUMMARY
The financial year ended 30 June 2024 has been one of strategic positioning and measured performance for the Company. Despite navigating a complex global landscape marked by geopolitical tensions, trade frictions, and subdued industrial growth, the Company delivered a NAV per share total return of 7.2%, bolstered by a dividend payout totalling 6.60 pence per share (of which 1 penny was a special interim dividend). The portfolio's focus on energy markets, where demand is more resilient, coupled with a strategic exposure to precious metals, proved advantageous in an otherwise challenging commodity environment. The Company remains well-positioned for long-term growth, supported by disciplined portfolio management and a cautious approach to industrial metals.
The Company's total return was in-line with the sterling return registered by the MSCI World Metals and Mining Index (7.3%) but behind the 17.4% MSCI World Energy Index return. The primary contributions to performance for the year came from the portfolio's energy allocation with an additional contribution coming from the performance of precious metal equities in the latter part of the financial year. Over the longer term, the Company's NAV per share returned 118.7% for the five years to 30 June 2024, compared with NAV returns of 73% for the MSCI World Metals and Mining Index and 64% for the MSCI World Energy Sector Index.
REVIEW
Expectations of only limited supply growth across broader commodity markets remained little changed over the year and, against this backdrop, the outlook for demand has become a more important driver of commodity markets. Unfortunately, and despite significant government spending, aggregate global growth remains challenging, particularly in industrial sectors with significant regional variations evident.
We prefer that the portfolio has exposure to energy markets, where demand is less discretionary, rather than industrial metals for which the outlook for incremental demand, and therefore prices, is more subdued, impacting pricing, given slower than expected growth in key markets, India and China. Both exploration & production ("E&P") and energy shippers have performed well with the latter having delivered useful dividends alongside share price performance. E&P, crude shipping and coal stocks represent a combined 30% of the Company's assets versus nearly 9% for industrial metals.
Against a backdrop of extreme fiscal deficit spending which has yet to stimulate meaningful economic growth and in an environment of increasingly inward looking, nationalistic political behaviour, the attractively valued precious metals sector remains the most significant exposure, representing over 30% of the Company's portfolio. Despite a recent pullback in share prices, exposure to energy transition remains an important investment theme and represents approximately 17% of the Company's portfolio, principally focused on uranium, used in nuclear power generation, which has received huge international endorsement, and lithium.
Such positioning has delivered meaningful total returns over the last six months of the financial year allowing distribution of an additional 1 penny per share special dividend to shareholders post year end.
A FOCUS ON ENERGY, GOLD, SHIPPING AND URANIUM HAS DELIVERED IMPROVED TOTAL RETURN
The energy sector was lifted by a rise in crude price premium resulting from Middle East tensions, particularly after the Hamas-Israel conflict began in October 2023 and in which Iran has a significant hand. While this helped drive performance of E&P investments, even more notable was the performance of energy shippers which have seen a marked improvement in day rates as they undertake lengthier routes to avoid hot spots such as the Strait of Hormuz that in the first 10 months of 2023 accounted for around 30% of seaborne crude oil traffic.
Against a backdrop of still sluggish GDP growth and rising international trade friction, exposure to less discretionary energy remains preferred over industrial metals which we feel will stay subdued. The energy sector appears to have absorbed the prospect of rising OPEC+ output, as production quota restrictions unwind, while the potential for more meaningful replenishment of the US Strategic Petroleum Reserve may offer support for incremental demand in future.
In a broader context, alternative energy, including nuclear power which has seen a wholesale shift in government and public opinion, also offers significant recovery potential. Its low carbon credentials have seen it brought back into the fold and embraced as a core part of global energy transition ambitions, as illustrated by the widespread international backing at COP28 at which a tripling of nuclear power generating capacity was targeted. After a decade of underinvestment in new developments, this sector continues to offer huge leverage to a sustainable increase in uranium prices. Representing only a small proportion of electricity generating costs, utility demand is largely insensitive to price moves. Despite the recent jump in prices, the outlook remains very positive for related mining equities, with Tier 1 development asset NexGen Energy remaining a top portfolio holding.
Exposure to precious metal mining stocks has risen as a result of recent performance and also incremental investment. The attractively valued equities remain a preferred sector for investment allocations as a beneficiary of ongoing geopolitical friction, together with unproductive and irresponsible fiscal spending. In an environment of inward looking, nationalistic government, policy geopolitical risks are, if anything, rising. Against a backdrop of limited aggregate demand, disinflation trends have also been evident to varying degrees and a synchronised cycle of monetary easing appears to be approaching. This factor may encourage investment by physically-backed funds which have typically been an important indicator of metal prices as they transition from seller to buyer.
This contrasts with industrial metals which will have to contend with moderate growth prospects, especially as China continues to struggle with a weak property sector. In addition, industrial metal mining equities, to an extent, already discount an improved metal pricing environment arising from fiscal spending.
The Company's gearing has also been somewhat pared and, as at 21 October 2024, stands at 9.8%, providing flexibility to take advantage of any potential opportunities that arise. For example, despite a cautious view on near-term copper prices, copper development projects have increasingly moved into focus, appearing hugely discounted in comparison to the high ratings currently ascribed to copper producers.
Reflecting the above, the largest individual performance contributors were LPG shipper, BW LPG, followed by gold producer, Emerald Resources, and uranium mine developer, NextGen, in joint second place. The most significant detractors to performance were developer, Leo Lithium, followed by lead producer, Galena Mining, both of which have been suspended from trading: the former following a Mali coup which has subsequently seen control of the asset pass to the Chinese joint venture partner, Gangfeng, and the latter which is attempting to arrange a financial restructuring.
DEMAND GROWTH HAS BECOME MORE CHALLENGING
The engine of global growth remains the large emerging markets of China and India which have recently clocked annual GDP growth of over 6% and 10% respectively. Perhaps unsurprisingly, these are also economies that have access to sources of discounted energy, notably from Russia which has been sanctioned by most western governments. Nevertheless, the outlook for both regions is for a deceleration in growth. Indian growth is expected to remain relatively resilient at over 8% over the next couple of years, though in the case of China, GDP is anticipated to ease back below 4.5% in real terms over the same timeframe. Furthermore, beneath China's headline GDP growth and despite its advantageous access to cheap sources of energy, the region's industrial sector has largely contracted over the last two years, as measured by official manufacturing Purchasing Managers' Index ("PMI") data. In this context ebbing industrial demand is increasingly concerning.
Outside these economies, growth in other major economic blocs is tepid with Organisation for Economic Co-operation and Development ("OECD") GDP growth estimated to have slipped below 1% in 2023. Stripping out the contribution from the 2.5% growth registered by the US, which represents a near 40% share of this figure, growth elsewhere is clearly anaemic. As in China, despite the advantage of relatively low domestic energy prices and a boost from the Inflation Reduction Act, manufacturing in the US remains challenged with PMIs also remaining in contraction.
Despite the lack of new supply, it is increasingly difficult to ignore slowing demand for metals which is becoming increasingly dependent on India's ability to sustain both internal demand and its role as an entrepôt for the re-export of Chinese and Russian products. This latter point too is receiving greater scrutiny from western markets where governments, keen to ensure tariff income is captured (perhaps a better motivational mechanism to control trade than blanket sanctions which do not generate government income), are consequently focused on ensuring "proof of origin" in an effort to prevent circumvention.
TRADE FRICTION A DRAG
Chinese authorities' attempts to transition their economy's growth dependence from infrastructure/construction towards the consumer has thus far had very limited success. As a result of declining domestic demand, particularly from its property sector (a significant consumer of metals not just during construction but in subsequent fit out which requires wiring, aircon and white goods), China is increasingly reliant on export markets. Recent headlines also indicate another push on Belt and Road infrastructure initiatives such as its recent trilateral agreement to construct a 500km rail link with Kyrgyzstan and Uzbekistan (providing an alternate trade route with important Middle East markets).
China's export 'release valve' has been most obviously used by its steel industry. Monthly steel exports for March 2024 totalled nearly 10 million tonnes (an increase of 30% year on year), rising almost to prior peak levels of a decade ago prior to Trump's 2016 election. With Chinese steel products estimated to have a near $100 per tonne cost advantage over the US, this has only served to reignite Western-Sino frictions with developed economies looking to reimpose tariffs on cheaper Chinese imports as they seek to protect domestic production. Latterly, tariffs have extended beyond steel to include 'strategic' industries central to policies such as energy transition. While barriers may act to hold prices up in protectionist western economies, potentially resulting in more gentle disinflationary trends, China, which is finding it more difficult to export, is now having to contend with deflationary pressures and the prospect of a self-reinforcing downward deflation spiral which, in real terms, increases debt service costs, crimps consumer spending/demand and accentuates regional price differences of trade goods.
Importantly, alongside the decline in Chinese property prices, recent official data (for May 2024) showed floor space completions (important for base metals consumption) 18.4% lower year on year, while floor space of new starts (important for iron ore) fell by 22.6% year on year. Against the backdrop of retreating new starts and lagging effect on property completions, the demand outlook for metals such as iron ore remains subdued while the effect will also detract from copper consumption.
Indeed, as illustrated by the retreat in iron ore prices back below $100 per tonne over the last six months, a recent surge in speculative copper buying in the first quarter of 2024 (which followed a short squeeze) is also unwinding, alongside which the Chinese copper premium has similarly disappeared in the second quarter of 2024. Both appear indicative of easing regional demand.
Overall, this relatively more challenging near-term industrial demand backdrop continues to be reflected by the Company's lower exposure to related metals: as previously stated, the Company has no direct iron ore investments and exposure to copper miners and other base metals is historically low. Longer term, however, there remains a lack of investment in new greenfield projects (a function of ESG compliance requirements and latterly higher capex costs) and the increasingly deep value evident in such assets is becoming difficult to ignore. Indeed, within the relatively limited exposure to base metals the Company has more recently established positions in equities such as Solaris and Solgold that both own assets located in Ecuador.
Discounts appear to have prompted some modest consolidation with M&A occurring. Strategic metals such as copper and uranium have seen relatively more activity and the Company has benefited as copper-gold developer, Adventus, and uranium developer, Fission Energy, have been the subject of takeovers. Furthermore, gold producer, Korora Resources, was taken over by Westgold Resources.
OUTLOOK
The Company's 2024 performance highlights the strength of the energy-focused strategy, which yielded strong returns in a year marked by sluggish global growth and geopolitical uncertainties. Energy equities, particularly E&P companies and energy shippers, alongside precious metals, were the key contributors to performance, with limited exposure to industrial metals reflecting a cautious outlook for near-term demand. At the time of writing and since the year end, your portfolio managers have increased the portfolio weighting to precious metal miners due to attractive fundamentals, reducing the energy and shipping exposure, whilst remaining cautious on base metal miners as we see broader global economic risks. This active rotation between commodities looks to maximise returns and minimise risks through the cycle. Strategic adjustments, including a special dividend distribution and careful gearing, position the Company to capitalise on emerging opportunities in the evolving market landscape.
IAN (FRANCO) FRANCIS, KEITH WATSON AND ROBERT CRAYFOURD
Manulife | CQS Investment Management
23 October 2024
Top ten largest holdings
NEXGEN ENERGY
A tier 1 uranium development asset in the established Athabasca Basin uranium mining district in Saskatchewan, Canada, has the potential to be the lowest cost uranium mine globally. As a zero-carbon source of energy, civil nuclear power generation and hence uranium, may gain further traction in global energy mix.
£'000
p
3,593
Appreciation
Sales
-
Purchases
-
2023 7,281
2024 10,874
EMERALD RESOURCES
An Australian listed gold producer, with a producing mine in Cambodia and development asset in Australia. The company has successfully commissioned its low cost Okvau gold mine in Cambodia on time and budget. This strong management team has a long history of delivering mines on time and budget and are self-funded for the future growth profile.
£'000
p
1,437
Appreciation
Sales
-
Purchases
1,153
2023 5,160
2024 7,750
BW LPG
The world's largest independent LPG shipper, predominantly sending propane from the US and Middle East to Asia. Propane is a by-product of shale production, so benefits from increased activity in the US. Naphtha switching at refiners and displacing wood for propane as fuel in the countries such as India are major drivers of demand growth. The company has a strong capital returns policy, primarily through dividends.
£'000
p
4,754
Appreciation
Sales
(4,912)
Purchases
547
2023 6,487
2024 6,876
WEST AFRICAN RESOURCES
An Australian listed emerging mid-tier gold producer based in the West African region. The company acquires, explores and develops resource projects, and serves customers in West Africa and Australia.
£'000
p
2,731
Appreciation
Sales
(473)
Purchases
-
2023 3,683
2024 5,941
FRONTLINE
A leading listed seaborne transporter of crude oil and refined products. The company owns and operates one of the largest and most modern fleets in the industry, consisting of VLCCs, Suezmax tankers and LR2 / Aframax tankers. Due to Frontline's brand, financial flexibility and significant scale, it holds a unique position among its peers.
£'000
p
2,117
Appreciation
Sales
(641)
Purchases
4,426
2023
2024 5,902
DIAMONDBACK ENERGY
A large US oil shale producer, in the Permian basin, in Texas. They have high quality acreage and management, so are well placed to benefit from current stronger energy pricing. The implied oil price of $60 per barrel is materially below current spot markets.
£'000
p
2,375
Appreciation
Sales
(2,156)
Purchases
-
2023 5,435
2024 5,654
TRANSOCEAN
A leading international provider of offshore contract drilling services for oil and gas wells. The group is well placed to benefit from an improvement in offshore rig day rates. The offshore rig market looks attractive as spending from global oil and gas increases, whilst the availability of rigs remains constrained given the large capital requirement and long lead times for new builds.
£'000
q
(1,600)
Depreciation
Sales
(390)
Purchases
-
2023 7,461
2024 5,471
TAMBORAN RESOURCES
A US listed natural gas exploration and production company, which specialises in the transition to cleaner energy and supports the energy transition by developing commercial production of natural gas with net zero equity scope 1 and 2 emissions. Tamboran Resources conducts its business in Australia.
£'000
q
(209)
Depreciation
Sales
-
Purchases
2,581
2023 2,799
2024 5,171
KARORA RESOURCES
A US listed multi-asset mineral resource company, focused primarily on the acquisition, exploration, evaluation, and development of precious metal properties. The company's vision is to become the next sustainable high-quality mid-tier producer and serves customers worldwide. Karora Resources was acquired by Westgold Resources on 1 August 2024.
£'000
p
1,374
Appreciation
Sales
-
Purchases
1,299
2023 2,193
2024 4,866
REA HOLDINGS
A leading contributor to responsible palm oil production globally. REA has a commitment to produce sustainably and has also received Roundtable on Sustainable Palm Oil certification. Following substantial cost cutting measures the group is well placed to benefit from the recent recovery in the crude palm oil price.
£'000
q
(203)
Depreciation
Sales
-
Purchases
201
2023 4,683
2024 4,681
To see a full breakdown of our investments see Investment Portfolio as at 30 June 2024
Portfolio at a glance
BY COMMODITY
| | 2023 % of total investments | 2024 % of total investments |
| Zinc | 0.4 | - |
| Diversified Minerals | 1.2 | 0.7 |
| Nickel | 2.4 | 0.9 |
| Platinum | 1.0 | 1.5 |
| Rare Earth | 1.8 | 1.5 |
| Royalty | | 1.8 |
| Base metals | 5.5 | 2.0 |
| Silver | 2.4 | 2.3 |
| Palm Oil | 0.1 | 3.1 |
| Coal | 5.5 | 4.0 |
| Copper | 6.4 | 5.0 |
| Lithium | 8.9 | 5.7 |
| Shipping | 8.2 | 9.4 |
| Uranium | 6.5 | 10.1 |
| Oil & Gas | 30.0 | 24.4 |
| Gold | 16.1 | 27.5 |
| * Comprises polymetallic investee companies. | ||
BY LOCATION OF LISTING
| As at 30 June | 2023 % of total investments | 2024 % of total investments |
| Canada | 35.4 | 33.7 |
| Australia | 10.1 | 22.1 |
| US | 14.0 | 22.1 |
| UK | 26.5 | 10.9 |
| Europe | 10.1 | 6.8 |
| Unquoted | 3.9 | 4.4 |
| Total Investments | 100.0 | 100.0 |
Investment Portfolio as at 30 June 2024
| Company | Sector | Valuation | % of total investments |
| | | £'000 | |
| NexGen Energy | Uranium | 10,874 | 7.1 |
| Emerald Resources | Gold | 7,750 | 5.1 |
| BW LPG | Shipping | 6,876 | 4.5 |
| West African Resources | Gold | 5,941 | 3.9 |
| Frontline | Shipping | 5,902 | 3.9 |
| Diamondback Energy | Oil & Gas | 5,654 | 3.7 |
| Transocean | Oil & Gas | 5,471 | 3.6 |
| Tamboran Resources | Oil & Gas | 5,171 | 3.4 |
| Karora Resources | Gold | 4,866 | 3.2 |
| REA Holdings1 | Palm Oil | 4,681 | 3.1 |
| Top ten investments | | 63,186 | 41.5 |
| EOG Resources | Oil & Gas | 4,243 | 2.8 |
| Vermilion Energy | Oil & Gas | 3,994 | 2.6 |
| Diversified Energy | Oil & Gas | 3,961 | 2.6 |
| Ora Banda Mining | Gold | 3,948 | 2.6 |
| Leo Lithium | Lithium | 3,297 | 2.2 |
| Calibre Mining | Gold | 3,004 | 2.0 |
| Sigma Lithium Resources | Lithium | 3,001 | 2.0 |
| Foran Mining | Copper | 2,824 | 1.9 |
| Thungela Resources | Coal | 2,543 | 1.7 |
| Lynas Corporation | Rare Earth | 2,347 | 1.5 |
| Top twenty investments | | 96,348 | 63.4 |
| Peabody Energy | Coal | 2,276 | 1.5 |
| Precision Drilling | Oil & Gas | 2,219 | 1.5 |
| Wheaton Precious Metals | Royalty | 2,073 | 1.3 |
| Peyto Exploration & Development | Oil & Gas | 2,015 | 1.3 |
| Ur-Energy | Uranium | 1,997 | 1.3 |
| Equinox | Gold | 1,994 | 1.3 |
| Robex Resources | Gold | 1,934 | 1.3 |
| Fission Uranium | Uranium | 1,529 | 1.0 |
| Solaris Resources | Gold | 1,528 | 1.0 |
| Coppernico Metals | Copper | 1,445 | 0.9 |
| Top thirty investments | | 115,358 | 75.8 |
| Reunion Gold | Gold | 1,394 | 0.9 |
| Metals X | Base metals | 1,368 | 0.9 |
| Patriot Battery Metals | Lithium | 1,355 | 0.9 |
| Coronado Global Resources | Coal | 1,343 | 0.9 |
| Talon Metals | Nickel | 1,326 | 0.9 |
| Osisko | Gold | 1,317 | 0.9 |
| Mawson Gold | Gold | 1,262 | 0.8 |
| Fortuna Silver Mines | Silver | 1,241 | 0.8 |
| Afentra | Oil & Gas | 1,191 | 0.8 |
| Shelf Drilling | Oil & Gas | 1,162 | 0.8 |
| Top forty investments | | 128,317 | 84.4 |
| NorAm Drilling | Oil & Gas | 1,140 | 0.7 |
| Sylvania Platinum | Platinum | 1,129 | 0.7 |
| 2020 Bulkers | Shipping | 1,128 | 0.7 |
| Newcore Gold | Gold | 1,031 | 0.7 |
| Rex Minerals | Gold | 962 | 0.6 |
| Solgold | Copper | 957 | 0.6 |
| Ero Copper | Copper | 895 | 0.5 |
| Calidus | Gold | 883 | 0.5 |
| Vizsla Silver | Silver | 801 | 0.5 |
| Central Asia Metals | Copper | 763 | 0.5 |
| Top fifty investments | | 138,006 | 90.4 |
| Rupert Resources | Gold | 748 | 0.5 |
| Trident Royalties | Royalty | 713 | 0.5 |
| Galena Mining | Base metals | 707 | 0.5 |
| Spartan Delta | Oil & Gas | 695 | 0.5 |
| Richmond Vanadium | Diversified Minerals | 634 | 0.4 |
| Galiano Gold | Gold | 630 | 0.4 |
| Platinum Group Metals | Platinum | 573 | 0.4 |
| Winsome Resources | Lithium | 571 | 0.4 |
| Polymetals Resources | Gold | 555 | 0.4 |
| Ascendant Resources | Base metals | 550 | 0.4 |
| Top sixty investments | | 144,382 | 94.8 |
| Integra Resources | Gold | 532 | 0.3 |
| MAG Silver | Silver | 516 | 0.3 |
| Denison Mines | Uranium | 497 | 0.3 |
| Firefinch | Lithium | 468 | 0.3 |
| Cosa Resources | Uranium | 463 | 0.3 |
| Euronav | Shipping | 456 | 0.3 |
| Westgold Resources | Gold | 438 | 0.3 |
| ISOEnergy | Base metals | 428 | 0.3 |
| TDG Gold | Gold | 414 | 0.2 |
| Silver Mountain Resources | Silver | 413 | 0.2 |
| Top seventy investments | | 149,007 | 97.6 |
| Other investments | | 3,620 | 2.4 |
| Total | | 152,627 | 100.0 |
| 1 Includes REA Holdings 9% preference shares valued at £4,063,000 (2023: £4,064,000), REA Finance 8.75% 31/08/2025 valued at £460,000 (2023: £481,000), REA Holdings valued at £153,000 (2023: £134,000) and REA Holdings warrants valued at £4,000 (2023: £4,000). | |||
Principal Risks, Uncertainties and Mitigations
Risks are inherent in the investment process and it is important that their nature and magnitude are understood so that they can be identified and can be controlled to the extent possible. The Board is responsible for managing risks faced by the Company and, through delegation to the Audit Committee, has established a detailed framework to manage the key risks to which the business is exposed with associated policies and processes devised to mitigate those risks.
A risk management process has been established to identify and assess risks, their likelihood and the possible severity of impact. For each risk identified, during the year the Audit Committee considers both the likelihood and impact of the risk and then assigns an inherent risk score. The scoring of the risk is then reconsidered once the respective key mitigations are applied, and a residual risk score is assigned.
Principal risks and mitigations are discussed regularly at Audit Committee meetings and the summarised conclusions of such meetings held during the year are set out below.
RISK TREND AND LEVELS
Change in inherent risk assessment over the last financial year:
↑ Increasing → Stable ↓ Decreasing
| Risk and trend | Principal Risks and Uncertainties | Controls and mitigations |
| Market, Sector and Geopolitical Risk Trend: 2024: → | By the nature of its investing activities, the Company's portfolio is exposed to fluctuations in market prices (both individual security prices and foreign exchange) and also to risks associated with the specific sectors in which its portfolio companies operate, such as inflation, interest rates, commodity and energy prices. Geopolitical developments and regional conflicts could affect the environment in which the Company operates, resulting in volatilities in prices, foreign exchange rates and interest rates, which can negatively impact the value of the Company's investments and/or demand for its shares. Geopolitical developments could also provide opportunity in the Company's investment strategy. | The Board reviews the Company's performance against comparator indices on an ongoing basis and receives a formal report from the Investment Manager at quarterly meetings. The closed-end structure of the Company is an essential part of the Board's management of this risk, ensuring that parts of the portfolio do not have to be sold to raise liquidity to fund redemptions at short notice, as would be the case with alternative structures. The Board considers asset allocation and concentration of the portfolio to minimise the risk associated with particular sector and/or geopolitical exposures. Geopolitical risk forms part of the Investment Manager's investment process and decisions. The Board has a regular dialogue with the Investment Manager to assess the impact of geopolitical events and to evaluate both the risks and opportunities. The Investment Manager reports sector risks arising from the general market and/or specific geopolitical environments to the Board at each quarterly meeting. Limits and restrictions set out in the Company's Investment Policy are intended to mitigate the Company's specific risk exposures. The Company's Administrator produces a monthly compliance report, confirming the Company's compliance with its published Investment Policy and restrictions, or reporting any breaches or issues. The Company does not hedge against any foreign currency movements, but income received from foreign investee companies is converted into Pounds Sterling. Reports and updates on the Company's investment portfolio, including currency exposures and recent transactions are prepared by the Company's Administrator for the Board's review regularly and at each quarterly meeting. Further details of these risks and related sensitivity analysis are disclosed in Notes to the Financial Statements. |
| Demand for the Company's shares Trend: 2024: ↑ | Demand for shares in the Company could decline due to failure to promote the Company, meet investors' objectives, and/ or poor communication with shareholders, resulting in falling share prices and widening of discount, and/or reputational damages. Arbitrageurs may acquire large stakes in the Company which could threaten the viability of the Company. | A range of marketing activities is carried out by the Investment Manager, the broker, the Company Secretary and Administrator's Investor Relations team and a specialist PR company, and the Board receives regular feedback on their interactions with investors. Shareholder registers and key shareholder activities are provided by the broker for review by the Board at quarterly meetings. The Board monitors the share price and any signs of demand reduction are discussed so that appropriate action can be taken, including buying back of the Company's shares. Periodically the Board holds a strategy meeting at which the investment objectives and strategy are discussed. The Company offers shareholders a continuation vote every year. |
| Key person risk Trend: 2024: → | Performance of the Company may be negatively affected by a change in the fund management team. | There are three fund managers who are responsible for day-to-day portfolio management which reduces the risk of any one fund manager's departure. The Investment Manager reports to the Board regularly on developments in their team and succession planning, where appropriate, and any key personnel changes are immediately reported to the Board. Furthermore, an Investment Committee at the Investment Manager oversees key stock selection and could support the Company in the event of a period of change. The Board meets with senior management at the investment manager to assess the stability of the management team and to reaffirm their commitment to and support of the fund management team and the Company. |
| Regulatory risk Trend: 2024: → | A breach of regulatory rules could lead to a suspension of the Company's stock exchange listing, loss of its investment trust status and/or financial penalties. | The Company Secretary and Administrator performs ongoing monitoring activities for the Company's compliance with the Listing Rules of the UK Listing Authority, the Companies Act, Market Abuse Regulations and other relevant and applicable legal and tax regulations. The Board reviews regulatory compliance regularly and at each Board meeting through reports from the Investment Manager's Compliance Officer and the Company Secretary and Administrator. |
| Operational risk: 2024: → | The Company relies upon the services provided by third parties and is reliant on the internal control systems of the Investment Manager and the Company's other service providers. Failures at these third parties, including cyber security, could adversely impact the security and maintenance of, inter alia, the Company's assets, dealing and settlement procedures, and accounting records. | The operating effectiveness of third party service providers is regularly tested and monitored and reported on at each Board meeting. The Audit Committee receives assurance reports such as IASE3402 and AAF01/20 from all key service providers. These reports detail key controls in operation at service providers and the effectiveness of their design and implementation and are independently reviewed by third party professional services firms. The Investment Manager delivers a risk based internal audit plan which covers different areas of its operations that are subject to internal audit, including front, middle and infrastructure audits. Any areas of concern relevant to the Company are discussed with the Audit Committee. |
EMERGING RISKS
During Board discussions on principal risks and uncertainties, the Board considered any risks that were not an immediate threat but could arise in the longer term and have significant impact on the ability of the Company to continue to meet its objectives.
Focus areas have been the further escalation of emerging geopolitical tensions in the Middle East and elsewhere, and the wide share price discount to NAV per share across the board in the investment trust sector. The Board will continue to assess newly emerging risks on a regular basis to ensure that the implications for the Company are properly assessed and mitigating controls introduced where necessary.
Strategic Review
INTRODUCTION
This Strategic Review is designed to provide information primarily about the Company's business and results for the year ended 30 June 2024. It should be read in conjunction with the Chair's Statement and the Investment Manager's Review, which give a detailed review of the investment activities for the year and look to the future.
Within the Strategic Review we discuss our approach to our stakeholder responsibilities within our S. 172 Statement and the Board's review of the Company's purpose, culture and values during the year. We also discuss our approach to people, social and governance matters and the environment .
BUSINESS MODEL
The business model of the Company is described in more detail below.
INVESTMENT OBJECTIVE
The Company seeks to provide shareholders with capital growth and income predominantly from a portfolio of mining and resource equities and of mining, resource and industrial fixed interest securities.
INVESTMENT POLICY
The Company invests predominantly in mining and resource equities and mining, resource and industrial fixed interest securities (including, but not limited to, preference shares, loan stocks and corporate bonds, which may be convertible and/or redeemable). The Company may invest in companies regardless of country, sector or size and the Company's portfolio is constructed without reference to the composition of any stock market index or benchmark. Exposure to higher yielding securities may also be obtained by investing in other sectors, including closed-end investment companies and open-ended collective investment schemes.
The Company may, but is not obliged to, invest in derivatives, financial instruments, money market instruments and currencies for the purpose of efficient portfolio management.
The Company may acquire securities that are unquoted at the time of investment but which are about to be, or are immediately convertible at the option of the Company into securities which are, listed or traded on a stock exchange, and may continue to hold securities that cease to be quoted or listed if the Investment Manager considers this appropriate. In addition, the Company may invest up to 10 per cent of its gross assets in other securities that are unlisted or unquoted at the time of investment.
The Company will not invest more than 15 per cent in aggregate of the value of its total assets (measured at the time of investment) in other investment trusts or investment companies which are listed on the Official List except that this restriction does not apply to investments in other investment trusts or investment companies which themselves have published investment policies to invest no more than 15 per cent of their total assets in other investment trusts or investment companies which are listed on the Official List.
The Company may borrow an amount up to 25 per cent of shareholders' funds (measured at the time of drawdown).
The Investment Manager expects that the Company will normally be fully invested. However, during periods in which changes in economic circumstances, market conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its position in cash, money market instruments and derivative instruments in order to seek protection from stock market falls.
The Company's performance in meeting its objectives is measured against key performance indicators ("KPIs") as set out on pages 25 and 26 of the Annual Report.
PURPOSE, VALUES AND CULTURE
The Board and the Investment Manager have taken time during the year to consider the expectations of the AIC Code of Corporate Governance (the "AIC Code") in the areas of corporate purpose, values and culture. The Board has identified the following for each on behalf of the Company:
Purpose - The Company's purpose is defined as the Board working collaboratively with the Investment Manager to deliver its agreed investment approach within its chosen natural resource and mining sectors of the global economy to generate capital growth and income for investors, whilst cognisant of its regulatory, stakeholder and societal responsibilities.
Values - Given the Company's status as a listed investment trust, and lack of direct employees, the Company's values are essentially those of the Board and its interactions with its key third party advisers, which are defined by trust, rigorous review, and foresight amongst others.
Culture - The Board emphasises open collaboration between directors and the Company's third-party advisers, including the Investment Manager, to create an environment conducive to effective decision-making. This also facilitates prompt and appropriate response to material issues by the Board. Where necessary, the Board challenges to ensure that performance is maintained on behalf of investors and stakeholders.
INVESTMENT MANAGER AND MANAGEMENT FEES
The Company's investments are managed by CQS (UK) LLP, which was acquired by Manulife Investment Management in April 2024 and now trades as Manulife | CQS Investment Management. Ian Francis, Keith Watson and Robert Crayfourd are the responsible portfolio managers. Further detail on the managers can be found on page 3 of the Annual Report.
CQS (UK) LLP is a global diversified asset manager, running multiple strategies with, as at 30 June 2024, assets of US$14.6 billion under management.
The Board keeps under review the appropriateness of the Investment Manager's appointment. In doing so the Management Engagement Committee considers the investment performance of the Company and the capability and resources of the Investment Manager to deliver satisfactory investment performance. It also considers the length of the notice period of the investment management contract and the fees payable to the Investment Manager, together with the standard of the other services provided. The Directors are satisfied with the Investment Manager's ability to deliver satisfactory investment performance, and the quality of other services provided. It is therefore their opinion that the continuing appointment of the Investment Manager on the terms agreed is in the interests of shareholders as a whole.
Under the investment management agreement with the Company, CQS (UK) LLP receives a management fee of 1.2 per cent on net assets up to £150 million; 1.1 per cent on net assets above £150 million and up to £200 million; 1.0 per cent on net assets above £200 million and up to £250 million; and, 0.9 per cent on net assets above £250 million.
The administration of the Company was delegated to BNP Paribas S.A., Jersey Branch until 21 November 2023. Frostrow Capital LLP was appointed as Company Secretary and Administrator on 22 November 2023. Equiniti Limited is appointed as the Company's share registrar.
UK ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE ("UK AIFMD")
The Company has appointed CQS (UK) LLP, trading as Manulife | CQS Investment Management, as the Company's alternative investment fund manager ("AIFM"). The AIFM has been approved by the FCA to act as AIFM of the Company. A requirement of the UK AIFMD is for the Company to appoint a depositary to oversee the custody and cash arrangements and undertake other UK AIFMD required depositary responsibilities. The Board appointed BNP Paribas as the Company's depositary.
Further UK AIFMD disclosures are shown on pages 95 and 96 of the Annual Report.
LONG-TERM VIABILITY STATEMENT
In accordance with the provisions of the AIC Code, the Directors have assessed the viability of the Company over a period of three years, which reflects the long-term nature of its investment objective, and the longer-term view adopted by the Investment Manager when making investment decisions and delivering total returns to shareholders.
The Board has reviewed the Company's financial position and its ability to liquidate its portfolio and meet its expenses as they fall due and, in doing so, noted the following:
● the assumption that the loan facility is rolled over annually rather than repaid. The Company had an unsecured loan facility with Scotiabank Europe Plc ("Scotiabank") which expired on 13 September 2024, however, a new secured facility was agreed with BNP Paribas on 13 September 2024 for a two-year period. In order to assess the impact of underperformance of the portfolio on the loan, the Board reviewed a series of stress tests and detailed financial modelling including in particular the effects of any substantial future falls in investment value on the ability to repay and re-negotiate borrowings, potential breaches of loan covenants and the maintenance of dividend payments. All tests concluded that there was no uncertainty over the Company's financial viability over the assessment period;
● Directors monitor and discuss the effects of any risks such as geopolitical events, inflation levels and adverse market conditions on the Company's investment strategy, outlook and financial position. The global pandemic now has a reduced impact on the Company's portfolio of investee companies, many of which have now restarted production after previous restrictions. Underlying core revenue income from the Company's portfolio continues to be strong and the Board believes that the Company is well placed to withstand the wider economic effects of the ongoing geopolitical events. The Board was therefore comfortable to declare a fourth quarterly interim dividend and special interim dividend payment, to be drawn from the Company's strong reserves, and also firmly consider it is appropriate to adopt the going concern basis as at 30 June 2024;
● that the annual continuation vote should not be a factor to affect the three-year period given the ongoing support of major shareholders. Since 2004, shareholders have been given the opportunity to vote on an Ordinary Resolution to continue the Company as an investment trust at each annual general meeting of the Company and the Company's significant shareholders have supported the continuation vote in previous years. If the resolution is not passed, the Board will put forward proposals to liquidate, open-end or otherwise reconstruct the Company;
● that the diverse nature of investments held gives stability and liquidity along with flexibility to be able to react positively to market and political forces outside of the Board's control;
● the assumption that there are no significant changes in market conditions or the tax and regulatory environment that could not reasonably have been foreseen;
● the impact of potential regulatory change and the controls in place surrounding significant third-party providers, including the Investment Manager. The Board also noted the liquidity risk in the portfolio where the percentage of Level 1 listed investments held at the year end was 95% (2023: 98%);
● the Company's processes for monitoring investment revenue and costs, with the use of frequent revenue forecasts, and the Investment Manager's compliance with the investment objective and policies. 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;
● Directors do not currently expect there to be any significant change to the current principal risks facing the Company. Furthermore, the Directors do not envisage any change in strategy which would prevent the Company from operating over the three-year period; and
● Directors have carried out a robust assessment of the principal risks facing the Company. These risks and their mitigations are set out on pages 20 to 22 of the Annual Report. The principal risks identified as most relevant to the assessment of the viability of the Company were those relating to a future macro-event likely to have a material impact on the financial position of the Company and the potential under-performance of the portfolio and its effect on the ability to pay dividends. When assessing these risks, the Directors have considered the risks and uncertainties facing the Company in severe but plausible scenarios, taking into account the controls in place and mitigating actions that could be taken.
After making enquiries of the Company's Investment Manager, and having considered the Company's investment objective, nature of the investment portfolio and expenditure projections, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. The Board has considered a detailed assessment of the Company's ability to meet its liabilities as they fall due, in the context of the Company's investment objective, nature of the investment portfolio and expenditure projections, and is satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, and in light of the Company's long-term investment record, the Directors are satisfied that it is appropriate to adopt the going concern basis in preparing the accounts, notwithstanding the fact that the Company is subject to an annual continuation vote as described above.
Based on the results of its review and taking into account the long-term nature of the Company and its financing, the Board has a reasonable expectation that the Company will be able to continue its operations and meet its expenses and liabilities as they fall due for the foreseeable future, taken to mean at least the next three years. The Board has chosen this period as the timeframe being deemed most appropriate to the cycles within which the Company's investee companies operate and the sectors of the economy in which the portfolio is concentrated. The Board continues to consider that this period also reflects the long-term objectives of the Company, being a Company with no fixed life, whilst considering the impact of uncertainties in the markets.
PERFORMANCE MEASUREMENT AND KEY PERFORMANCE INDICATORS ("KPIS")
The Board uses a number of performance measures to assess the Company's success in meeting its objectives. The tables and data on page 4 of the Annual Report show how the Company has performed against those KPIs, and a glossary of terms and alternative performance measures is included on pages 86 to 88 of the Annual Report.
The KPIs, which are used to measure progress and performance over time and which are comparable with those reported by other investment trusts are as follows:
● Investment Performance
To assess investment performance, the Board monitors the NAV per share performance relative to that of two comparator indices: the MSCI World Metals and Mining Index (sterling adjusted) and the MSCI World Energy Index (sterling adjusted).
The Company invests principally in equity-related investments in companies, usually mid and small cap companies, with a wide range of commodity exposures as well as a number of fixed interest securities. Until July 2023, the Company had chosen an approximate composite proxy index, being 80 per cent of the EMIX Global Mining Index (sterling adjusted) and 20 per cent of the Credit Suisse High Yield Index (sterling adjusted). However, following the cessation of publication of the EMIX Global Mining Index (sterling adjusted), the Board considered replacing the benchmark index but, after investigation with the Company's broker and Investment Manager, did not find a suitable comparable index to be used as a key performance indicator. The Company therefore does not utilise a formal benchmark but has published its NAV per share performance alongside the two comparative indices as these best reflect the potential returns.
The performance of the NAV and comparative indices are shown in the graphs on page 1 with statistics also shown on page 4 of the Annual Report. Over a five year period, the Company's share price and NAV total returns have both outperformed its comparator indices, as shown by the graph on page 26 of the Annual Report.
Refer to the Chair's Statement for the Chair's commentary on the Company's development and performance during the year as well as position of the Company's business as at the year end.
● Dividend per share
The Board currently intends at least to maintain the level of dividend paid by the Company in recent years in future years. The continuing ability of the Company to do so is monitored on a quarterly basis. In respect of the year under review, four interim dividends per share totalling 5.60 pence per share were declared (2023: 5.60 pence per share). The Company has also declared a 1 penny per share special interim dividend due to strong underlying core revenue income from the Company's portfolio (2023: 3.00 pence per share).
● Ongoing charges ratio
The ongoing charges ratio is a measure of the total expenses incurred by the Company expressed as a percentage of the average shareholders' funds over the year. The Board regularly reviews the ongoing charges and monitors all expenses. For the year under review the ongoing charges ratio is 1.9% (2023: 1.8%).
Dividend per share and ongoing charges ratio fall within the definition of "Alternative Performance Measures" ("APMs") under guidance issued by the European Securities and Markets Authority ("ESMA"). Additional information explaining how these are calculated is set out in the Glossary.
The Directors have carefully selected these KPIs as in their view these combine to provide the most appropriate measures of performance, both in terms of managing the business and presentation to shareholders and stakeholders. The Board is satisfied that performance against each measure has been satisfactory in the context of the events in the financial year. Further information regarding forward looking assessments for the KPIs can be found in the Chair's Statement and Investment Manager's Review.
FUTURE PROSPECTS
The Chair's Statement and the Investment Manager's Review include a review of developments during the year as well as information on investment activity within the Company's portfolio and the factors likely to affect the future performance of the Company.
EMPLOYEES, SOCIAL, HUMAN RIGHTS AND ENVIRONMENTAL MATTERS
As a UK listed investment trust, the Company has no direct employees and accordingly it has no direct social or community impact and very limited environmental impact from its operations. Nevertheless, the Board determines that, given the profile of the natural resource sectors on which the investment strategy focuses, it is important that the Investment Manager monitors performance across these areas, specifically including human rights and health and safety performance, in finalising investment decisions. The investment portfolio is also increasingly focusing on low greenhouse gas businesses, commodities and solutions.
The Directors recognise that their first duty is to act in the best financial interests of the Company's shareholders and to achieve good financial returns against acceptable levels of risk, in accordance with the objectives of the Company.
In asking the Company's Investment Manager to deliver against these objectives, the Directors have also requested that the Investment Manager take into account the broader social, ethical and environmental issues of all companies within the Company's portfolio, acknowledging that companies failing to manage these issues adequately run a long-term risk to the sustainability of their businesses.
More specifically, to access capital they now expect companies to demonstrate ethical conduct, effective management of their stakeholder relationships, responsible management and mitigation of social and environmental impacts, as well as due regard for wider societal issues. The Investment Manager is increasingly expected to engage with investee companies around these themes, in line with the expectations of the UK Stewardship Code.
The Company's Investment Manager, CQS (UK) LLP (trading as Manulife | CQS Investment Management), has in turn stated that they view ESG factors as a key driver of financing costs, valuations and performance, while also being capable of acting as a lever to shape and influence the world for generations to come. The integration and assessment of ESG factors is a crucial part of this commitment, and a key factor in their decision-making. Through embedding ESG into the investment process, the Investment Manager seeks to enhance their ability to identify value, investment opportunities and, critically, to generate the best possible returns for their clients. CQS (UK) LLP is a signatory to the internationally recognised Principles for Responsible Investment ("PRI"), fully supporting all the PRIs.
Stakeholder Interests (S. 172 statement)
The following 'Section 172' disclosure, which is required by the Companies Act 2006 and the AIC Code, , describes how the directors have had regard to the views of the Company's stakeholders in their decision -making. The Board regularly reviews its responsibilities vis-à-vis Section 172 of the Companies Act 2006, in conjunction with the Company Secretary. The key areas, being only those relevant to the Company as a listed investment trust, are applied to all relevant board decision-making:
(a) the likely consequences of any decision in the longer term;
(b) the need to foster the Company's business relationships with suppliers, customers and others;
(c) the impact of the Company's operations on the community and the environment;
(d) the desirability of the Company maintaining a reputation for high standards of business conduct; and
(e) the need to act fairly between members of the Company.
The Board considers the factors outlined under Section 172 and the wider interests of stakeholders as a whole in all decisions it takes on behalf of the Company.
WHO? - STAKEHOLDER GROUP: SHAREHOLDERS
| Why? | How? | What? | Outcomes and Actions |
| Clear communication of the Company's strategy and the performance against the Company's objective can help the share price trade closer to its NAV per share which benefits shareholders. New shares may be issued to meet demand without net asset value per share dilution to existing shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs. The Board operates an investment strategy designed to deliver strong performance over the medium to longer term, based on exposure to valuable commodity markets. | The AIFM and the Investment Manager, on behalf of the Board, complete a programme of investor relations throughout the year. An analysis of the Company's shareholder register is provided to the Directors at each Board meeting along with investor relations and marketing reports from the Company Secretary and Administrator. The Board reviews and considers the marketing plans on a regular basis. Reports from the Company's broker are submitted to the Board on investor sentiment and industry issues. | Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio. Key mechanisms of engagement include: ● The Annual General Meeting, whereby shareholders are invited to attend, ask questions and vote ● The Chair and non-executive directors make themselves available to engage with shareholders ● The Company's website hosts reports, video interviews with the Investment Manager and monthly factsheets ● One-on-one investor meetings facilitated by the Company Secretary and Administrator who actively engage with professional investors, typically discretionary wealth managers, some institutions and a range of execution-only platforms. Regular engagement helps to attract new investors and retain existing shareholders, and over time results in a stable share register made up of diverse, long-term holders | Shareholders are provided with performance updates via the Company's website as well as the annual and half-year financial reports and monthly factsheets. The Investment Manager and the Company Secretary and Administrator meet regularly with shareholders and potential investors to discuss the Company's strategy, performance and portfolio. Both the Investment Manager and the Company Secretary and Administrator also engage with the Press on the Company's behalf. Information on how to vote your Company shares on a selection of major platforms can be found by following the link within the Notice of Meeting on page 94 of the Annual Report. |
| Why? | How? | What? | Outcomes and Actions |
| While share buybacks will not necessarily prevent the discount from widening further, particularly in times of market volatility, they may, to a limited extent, mitigate a widening trend. In addition, buybacks enhance the net asset value per share for remaining shareholders, provide some additional liquidity and help to dampen discount volatility which can damage shareholder returns. The Board recognises the importance shareholders place on the Company's dividend policy and is cognisant of the need to ensure the viability of the dividend. | At each meeting the Board reviews movements in the Company's shareholder register. There are regular interactions and engagement with shareholders (including at the AGM). Regular feedback from shareholders is received from the Company's broker. Shareholders' rights are protected under the Company's Articles of Association which require any proposal that may materially change those rights to be subject to prior approval by a majority of shareholders in general meeting. | In the event of any significant (defined as 20% or more of those voting) vote against any of the resolutions put to shareholders at the AGM, the Board will explain in its announcement of the results of the AGM the actions it intends to take to consult shareholders in order to understand the reasons behind any significant votes against resolutions. Following the consultation, an update will be published no later than six months after the AGM and the annual report will detail the impact the shareholder feedback has had on any decisions the Board has taken and any actions or resolutions proposed. The Company's Dividend Policy. | The Board reviews the Company's share price discount/ premium on a daily basis and in April 2024, following discussion with advisers, the Board agreed a limited programme of purchases of its own shares. The Company's discount tightened from 16.98% at the end of the previous financial year to 9.8% as at 30 June 2024. Further detail is set out in the Chair's Statement. It was agreed it was in the best interests of the Company and shareholders to maintain the interim dividend in the year under review, as well as declare an additional special interim dividend due to continued strong underlying core revenue income. |
WHO? - STAKEHOLDER GROUP: AIFM AND INVESTMENT MANAGER
| Why? The benefit of engagement with the Company's stakeholders | How? How the Board and the Company's service providers have engaged with the Company's stakeholders | What? The key areas of engagement | Outcomes and Actions The actions, principal decisions and outcomes |
| Engagement with the Company's Investment Manager is necessary to: ● evaluate their performance against the Company's stated strategy and to understand any risks or opportunities this may present; and ● better understand the internal controls in place at CQS. The Board ensures that the Investment Manager's ESG approach meets standards set by the Board. | Representatives of the AIFM attend each quarterly Board meeting and present a report on investment performance and other related matters. Between meetings the Board maintains regular contact with the Investment Manager. The Audit Committee annually review reports from the AIFM's Money Laundering Reporting Officer and Compliance Officer to assess the adequacy and effectiveness of both functions. | Portfolio composition, performance, ESG matters, outlook, and business updates. The integration of ESG into the Investment Manager's investment processes. | The Board's appointed Investment Manager is committed to integrating environmental, social and governance themes into both its research engagement and investment activities. CQS is also a signatory to the Principles for Responsible Investment, amongst other initiatives. Further details of the Investment Manager's ESG related activities and reports can be found on page 35 of the Annual Report. |
WHO? - STAKEHOLDER GROUP: SERVICE PROVIDERS
| Why? | How? | What? | Outcomes and Actions |
| As an externally managed investment company, the Company does not have employees. Its main stakeholders therefore comprise its shareholders and a small number of service providers. The Board has delegated a wide range of activities to external agents, in addition to the Investment Manager. The Company contracts with third parties for other services including: depositary, investment accounting & administration as well as company secretarial and registrars. The Company ensures that the third parties to whom the services have been outsourced complete their roles in line with their service level agreements and are able to continue to provide these services, thereby supporting the Company in its success and ensuring compliance with its obligations. | Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of the services offered, including the control systems in operation in so far as they relate to the affairs of the Company. The Directors have frequent engagement with the Company's other service providers through the annual cycle of reporting and due diligence meetings or site visits by the Company Secretary and Administrator. This engagement is completed with the aim of maintaining an effective working relationship and oversight of the services provided. The Board regularly evaluates the performance of its third-party service providers. | The Board met regularly with representatives of the Company Secretary and Administrator which attend every Board meeting to provide updates on risk management, accounting, administration and corporate governance matters. In August 2024, representatives of the Company Secretary and Administrator conducted an oversight visit to the Company's registrar, Equiniti, on the Board's behalf. An industry update, presentations on cyber security, dividend payment processes, the shareholder register and online shareholder engagement were received. | All service providers engaged and supplied requested information for the due diligence exercise to be completed. Reviews of the Company's service providers in June 2024 were positive, and the Directors believe their continued appointment is in the best interests of the Company. Following the review undertaken in June 2023, the Board undertook to assess alternative administration and company secretarial providers, which resulted in the appointment of Frostrow in November 2023. The Audit Committee met with BDO LLP to review the audit plan for the year, agree their remuneration, review the outcome of the annual audit and to assess the quality and effectiveness of the audit process. Please refer to the Audit Committee Report beginning on page 52 of the Annual Report for further information. |
WHO? - STAKEHOLDER GROUP: THE COMPANY'S LENDER
| Why? | How? | What? | Outcomes and Actions |
| Investment companies have the ability to borrow with a view to enhancing long-term returns to shareholders. Engagement with the Company's lender ensures that it fully understands the nature of the Company's business, the strategy adopted by the Investment Manager and the extent to which the Company complies with its loan covenants. | Regular reporting to the lender with respect to adherence with loan covenants and ad hoc meetings with the AIFM. The AIFM engaged with the provider of the Company's previous loan facility in advance of expiry in September 2024. | Continued compliance with covenants set out within the loan agreement between the Company and the lender. The AIFM sought quotations from the previous and alternative lenders. | The Board ensures compliance with loan covenants throughout the year. As detailed on page 7 of the Annual Report, the Company entered into a two-year agreement with BNP Paribas with improved commercial terms on 13 September 2024. |
RELATIONS WITH SHAREHOLDERS
The Directors place a great deal of importance on communication with shareholders. The annual report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the Investment Manager's website. The Company responds to letters from shareholders on a wide range of issues.
A regular dialogue is maintained with the Company's institutional shareholders and with private client asset managers. Reference to significant holdings in the Company's ordinary shares can be found under "Substantial Interests in the Company's Shares" on page 39 of the Annual Report. The Notice of the annual general meeting included within the annual report and financial statements is sent out at least 20 working days in advance of the AGM. All shareholders have the opportunity to put questions to the Board or Investment Manager, either formally at the Company's AGM or subsequent to the meeting when light refreshments will be offered to shareholders.
DISCLOSURE AND TRANSPARENCY RULES
Other information required to be disclosed pursuant to the Disclosure Guidance and Transparency Rules has been placed in the Directors' Report on pages 38 to 41 of the Annual Report because it is information which refers to events that have taken place during the course of the year.
By order of the Board
HELEN GREEN
Chair
23 October 2024
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company Law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law).
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 Company and of the profit or loss of the Company for that year. In preparing the financial statements, the Directors are required to:
● select suitable accounting policies and then apply them consistently;
● state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;
● make judgements and accounting estimates that are reasonable and prudent; and
● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are also responsible for:
● safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities;
● keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006;
● preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with relevant laws and regulations; and
● the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT
The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the 'Board of Directors' section on pages 36 and 37 of the Annual Report confirms that, to the best of their knowledge:
● the Company's Financial Statements, which have been prepared in accordance with United Kingdom Accounting Standards give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
● the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
HELEN GREEN
Chair
23 October 2024
Note to those who access this document by electronic means:
The Annual Report for the year ended 30 June 2024 has been approved by the Board of CQS Natural Resources Growth and Income PLC. Copies of the Company's annual report and half year report are circulated to shareholders and, where possible to potential investors. It is also made available in electronic format for the convenience of readers. Printed copies are available from the Company Secretary's office in London.
Financial Statements
Income Statement
| | | Year ended 30 June 2024 | Year ended 30 June 2023 | ||||
| | Notes | Revenue | Capital | Total | Revenue | Capital | Total |
| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Gains/(losses) on investments held at fair value through profit or loss | 9 | - | 6,095 | 6,095 | - | (423) | (423) |
| Exchange gains on foreign currencies | | - | 14 | 14 | - | - | - |
| Income | 2 | 6,426 | 768 | 7,194 | 8,542 | 878 | 9,420 |
| Investment management fee | 3 | (416) | (1,248) | (1,664) | (445) | (1,336) | (1,781) |
| Other expenses | 4 | (976) | - | (976) | (698) | (8) | (706) |
| Net return before finance costs and tax | | 5,034 | 5,629 | 10,663 | 7,399 | (889) | 6,510 |
| Finance costs | 5,11 | (311) | (734) | (1,045) | (197) | (585) | (782) |
| Net return before tax | | 4,723 | 4,895 | 9,618 | 7,202 | (1,474) | 5,728 |
| Taxation | 6,11 | (454) | (38) | (492) | (494) | - | (494) |
| Net return for the year | | 4,269 | 4,857 | 9,126 | 6,708 | (1,474) | 5,234 |
| Basic and diluted return per ordinary share (pence) | | 6.39p | 7.27p | 13.66p | 10.03p | (2.20)p | 7.83p |
The "total" column of this statement is the Income Statement of the Company, prepared in accordance with Financial Reporting Standard 102 ("FRS 102"). The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the AIC ("AIC SORP").
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
There is no other comprehensive income, and therefore the net return for the period is also the total comprehensive income.
The Notes form part of these Financial Statements.
Balance Sheet
| | Notes | As at 30 June 2024 | As at 30 June 2023 |
| | | £'000 | £'000 |
| Fixed assets | | | |
| Investments at fair value through profit or loss | 9 | 152,627 | 149,465 |
| Current assets | | | |
| Debtors | 10 | 645 | 257 |
| Cash | | 2,952 | 3,857 |
| | | 3,597 | 4,114 |
| Current liabilities | | | |
| Creditors: amounts falling due within one year | 11 | (658) | (1,019) |
| Bank loan | 12 | (17,000) | (16,000) |
| Net current liabilities | | (14,061) | (12,905) |
| Net assets | | 138,566 | 136,560 |
| Capital and reserves | | | |
| Called-up share capital | 13 | 16,722 | 16,722 |
| Treasury shares | 13 | (182) | - |
| Special distributable reserve | | 27,127 | 28,571 |
| Share premium | | 4,851 | 4,851 |
| Capital reserve | | 88,307 | 83,454 |
| Revenue reserve | | 1,741 | 2,962 |
| Equity shareholders' funds | | 138,566 | 136,560 |
| Net asset value per ordinary share | 14 | 209.44p | 204.16p |
Company number: 02978531
These Financial Statements were approved by the Board of Directors and authorised for issue on 23 October 2024 and were signed on its behalf by:
HELEN GREEN
Chair
The Notes form part of these Financial Statements.
Statement of Changes in Equity
| | Notes | Share capital | Treasury shares | Share premium | Special distributable reserve | Capital reserve | Revenue reserve | Total |
| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| For the year ended 30 June 2024 | | | | | | | | |
| Balance at 30 June 2023 | | 16,722 | - | 4,851 | 28,571 | 83,454 | 2,962 | 136,560 |
| Net return for the year | | - | - | - | - | 4,857 | 4,269 | 9,126 |
| Shares bought back into treasury | | - | (182) | - | (1,182) | (4) | - | (1,368) |
| Dividends paid | 7 | - | - | - | (262) | - | (5,490) | (5,752) |
| Balance at 30 June 2024 | | 16,722 | (182) | 4,851 | 27,127 | 88,307 | 1,741 | 138,566 |
| For the year ended 30 June 2023 | | | | | | | | |
| Balance at 30 June 2022 | | 16,722 | - | 4,851 | 28,571 | 84,928 | - | 135,072 |
| Net return for the year | | - | - | - | - | (1,474) | 6,708 | 5,234 |
| Dividends paid | 7 | - | - | - | | - | (3,746) | (3,746) |
| Balance at 30 June 2023 | | 16,722 | - | 4,851 | 28,571 | 83,454 | 2,962 | 136,560 |
The special distributable reserve, capital reserve (excluding the unrealised gains on Level 2 and Level 3 investments detailed in Note 9) and the revenue reserve are distributable by way of dividend.
The Notes form part of these Financial Statements.
Cash Flow Statement
| | Notes | Year ended 30 June 2024 | Restated Year ended 30 June 2023 |
| | | £'000 | £'000 |
| Operating activities | | | |
| Investment income received1 | | 6,366 | 7,814 |
| Deposit interest received | | 112 | 95 |
| Investment management fees paid | | (1,662) | (1,939) |
| Other expenses | | (911) | (642) |
| Net cash inflow from operating activities | | 3,905 | 5,328 |
| Investing activities | | | |
| Purchases of investments | | (35,310) | (49,058)2 |
| Disposals of investments | | 37,587 | 46,9802 |
| Net cash inflow/(outflow) from investing activities | | 2,277 | (2,078) |
| Financing activities | | | |
| Equity dividends paid | | (5,752) | (3,746) |
| Shares bought back into treasury | | (1,368) | - |
| Drawdown from/(repayment of) credit facility | 12 | 1,000 | (1,000) |
| Loan interest paid | | (981) | (758) |
| Net cash outflow from financing activities | | (7,101) | (5,504) |
| Decrease in net cash | | (919) | (2,254) |
| Reconciliation of net cash flow movement to movement in net cash | | | |
| Decrease in net cash during the year | | (919) | (2,254) |
| Foreign exchange gains on cash | | 14 | - |
| Movement in net cash during the year | | (905) | (2,254) |
| Opening cash balance at 1 July | | 3,857 | 6,111 |
| Closing cash balance at 30 June | | 2,952 | 3,857 |
| 1 Net of withholding tax. 2 Cash flows on purchases and disposals of investments for the year ended 30 June 2023 have been restated to correct the gross up impact of £13,871,000 due to non-cash movements. There was no impact on the net cash outflow from investing activities balance in the Cash Flow Statement or on any other primary statements reported in 2023. | |||
The Notes form part of these Financial Statements.
Notes to the Financial Statements for the year ended 30 June 2024
1 ACCOUNTING POLICIES
CQS Natural Resources Growth and Income PLC is a public company limited by shares, incorporated in accordance with the Laws of England and Wales. Details of the registered office are included on page 97 of the Annual Report.
A summary of the principal accounting policies adopted is set out below.
(a) Basis of accounting
The financial statements are prepared on a going concern basis, in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Principles ("UK GAAP") including FRS102 'The Financial Reporting Standard applicable in the UK and Ireland' and the Statement of Recommended Practice regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the Association of Investment Companies in July 2022.
The Company's financial statements are presented in sterling, being the functional and presentational currency of the Company. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.
Having considered the Company's investment objective, nature of the investment portfolio, loan facility, expenditure projections, suitable stress testing and the impact of the current geopolitical and market uncertainty, the Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the Financial Statements, notwithstanding that the Company is subject to an annual continuation vote.
(b) Financial assets
All financial assets are initially recognised at fair value, recorded at the date on which the Company became party to the contractual requirements of the financial asset, with the related transaction costs expensed under the capital column of the Income Statement. Subsequently, they are measured at fair value through profit or loss.
Cash
Cash comprises cash at bank and demand deposits and carried at amortised cost.
(c) Financial liabilities
All financial liabilities are initially recognised at fair value net of transaction costs incurred, recorded on the date on which the Company becomes party to the contractual requirements of the financial liability, and subsequently carried at amortised cost with the exception of bank loans, which are measured at cost, being the fair value of the consideration received.
(d) Fixed asset investments
Financial assets which comprise equity shares, preference shares, fixed income securities and warrants, are classified as held at fair value through profit or loss as the financial assets are managed and their performance is evaluated on a fair value basis in accordance with the Company's investment strategy and this is also the basis on which information about investments is provided internally to the Board.
Purchases or sales of financial assets are recognised/derecognised on the date the Company trades the investments. On initial recognition investments are classified as fair value through profit or loss with any resultant gain or loss, including any gain or loss arising from a change in exchange rates, recognised in the Income Statement. For listed securities this is either the bid price or last traded price, depending on the convention of the exchange on which the investment is listed.
Financial assets which are not listed or where trading in the securities of an investee company is suspended are valued at the Board's estimate of fair value in accordance with International Private Equity and Venture Capital Valuation ("IPEV") guidance. Unquoted financial assets are valued on the basis of all the information available to them at the time of valuation. This includes a review of the financial and trading information of the Company, covenant compliance, ability to pay the interest due and cash held. Valuation methodologies for the Company's unquoted investments include:
● the last published net asset value or traded share price of the security, after adjustment for factors that the AIFM and Board believe would affect the amount of cash that the Company would receive if the security were realised as at the reporting date; or
● the estimated, discounted cash distribution based on information provided by the management or liquidators of the security. The discount applied will take account of various factors, including expected timings of the cash flow and the level of certainty on the estimate; or
● in the case of warrants, a widely accepted valuation model, such as the Black-Scholes model.
Changes in fair value and gains or losses on disposal are included in the Income Statement as a capital item.
(e) Income
Dividends receivable on equity shares are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company's right to receive payment is established. Dividend income is recognised through the revenue or capital column of the Income Statement based on the nature of the distributions.
Fixed interest returns on non-equity shares are recognised on a time apportioned basis so as, if material, to reflect the effective interest rate on those instruments. Any difference between acquisition cost and maturity value is recognised as revenue over the life of the security using the effective yield basis of calculating amortisation. Other returns on non-equity shares are recognised when the right to the return is established. The fixed return on a debt security is recognised on a time apportioned basis so as to reflect the effective interest rate on each such security. Income from deposit interest and underwriting commission is recognised on an accruals basis.
(f) Taxation
The charge for taxation is based on net revenue for the year. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except:
- the recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
- any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences.
Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Because the Company intends each year to qualify as an investment trust under Chapter 4 of Part 24 of the Corporation Tax Act 2010 (previously S842 of the Income and Corporation Taxes Act 1988), no provision is made for deferred taxation in respect of the capital gains that have been realised, or are expected in the future to be realised, on the sale of fixed asset investments.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as a revenue item except the following which are charged to capital:
- expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment; and
- the Company charges 75 per cent of investment management fees to capital, in line with the Board's expected long-term return in the form of capital gains and income respectively from the investment portfolio of the Company. This split has been reassessed annually and remains appropriate. For further details refer to Note 3.
(h) Dividend payments
Dividends paid by the Company on its shares are recognised in the financial statements in the period in which they are paid and are shown in the Statement of Changes in Equity. Shares held in treasury carry no entitlement to dividends.
(i) Foreign currency
Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates at the date of the transaction. Overseas assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Instruments held at fair value are translated at the rate prevailing at the time the fair value is determined.
Any gain or loss arising from a change in exchange rates subsequent to the date of a transaction and before the settlement date is included as an exchange gain or loss. The functional currency of the Company, being its statutory reporting currency, is Pounds Sterling.
(j) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs of debt, insofar as they relate to the financing of the Company's investments or to financing activities aimed at maintaining or enhancing the value of the Company's investments, are allocated between revenue and capital in accordance with the Board's expected long-term split of returns, in the form of income and capital gains respectively, from the Company's investment portfolio. For further details refer to Note 5.
(k) Capital and reserves
(a) Share capital - represents the nominal value of authorised and allocated, called-up and fully paid shares issued. The reserve is non-distributable.
(b) Share premium - the surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are deducted from this account. The reserve is non-distributable.
(c) Capital reserve - The following are accounted for in this reserve:
- gains and losses on the realisation of investments;
- realised and unrealised exchange differences on transactions of a capital nature;
- capitalised expenses and finance costs, together with the related taxation effect; and
- increases and decreases in the valuation of investments held.
This reserve, excluding the unrealised gains on Level 2 and Level 3 investments detailed in Note 9, is distributable by way of dividends.
(d) Special distributable reserve - created from the Court cancellation of the share premium account which had arisen from premiums paid at launch. This reserve is distributable by way of dividends.
(e) Revenue reserve - the net profit/(loss) arising in the revenue column of the Income Statement is added to or deducted from this reserve. This reserve is distributable by way of dividends.
(f) Treasury shares - shares that have been repurchased by the Company but not cancelled. These shares are held in a treasury account and remain part of the Company's share capital but do not carry any rights to receive dividends or vote at general meetings. This reserve is non-distributable.
(l) Single segmental reporting
The Company is engaged in a single segment of business, being an investment business, consequently no segmental analysis is provided.
(m) Critical accounting estimates and judgements
The only significant accounting estimate and judgement is the valuation of the unquoted investments which is described in Note 1(d) above.
The Company does not intend to acquire securities that are unquoted or unlisted at the time of investment with the exception of securities which, at the time of acquisition, are intending to list on a stock exchange or securities which are convertible into quoted securities.
The Board delegates to a formal Valuation Committee, which sits within the Company's AIFM and meets on a monthly basis to review developments in relation to unquoted investments in the portfolio and assess whether adjustments are required to reflect the latest fair value of those investments.
The valuation methodologies for unquoted investments are dependent on the type of instruments in the portfolio. For securities that have been delisted, fair value may be determined based on the expected future cash flow or the last price traded immediately prior to delisting, with appropriate illiquidity or similar discounts applied. Derivative instruments are fair valued using well established and commonly accepted techniques and models with inputs and assumptions determined by the VC. The Company uses the Black Scholes model for the valuation of warrants.
As illustrated above, the Company's valuation process for unquoted equities involved significant judgements and estimates, which could have a material impact on the reported balances at the year end.
As at 30 June 2024, the Company held £7,525,000 or 4.9% of the portfolio, in Level 3 investments, of which £6,830,000 or 4.5% of the portfolio relate to unquoted equity investments and the remaining £694,000 or 0.4% relate to unquoted warrants. Further details on valuation methodologies and sensitivity analysis can be found in Note 9.
2 INCOME
| | 2024 Revenue | 2024 Capital | 2024 Total | 2023 Revenue | 2023 Capital | 2023 Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Income from investments | | | | | | |
| UK dividend income | 450 | - | 450 | 128 | - | 128 |
| Preference share dividend income | 799 | - | 799 | 985 | - | 985 |
| Overseas dividend income | 4,874 | 768 | 5,642 | 7,146 | 878 | 8,024 |
| Overseas fixed interest | 191 | - | 191 | 188 | - | 188 |
| | 6,314 | 768 | 7,082 | 8,447 | 878 | 9,325 |
| Other income | | | | | | |
| Bank interest | 112 | - | 112 | 95 | - | 95 |
| | 112 | - | 112 | 95 | - | 95 |
| Total income | 6,426 | 768 | 7,194 | 8,542 | 878 | 9,420 |
3 INVESTMENT MANAGEMENT FEES
| | 2024 Revenue | 2024 Capital | 2024 Total | 2023 Revenue | 2023 Capital | 2023 Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Investment management fee | 416 | 1,248 | 1,664 | 445 | 1,336 | 1,781 |
The Company's Investment Manager is CQS (UK) LLP (trading as Manulife | CQS Investment Management). The contract between the Company and CQS may be terminated by either party giving not less than six months' notice of termination.
The Company's annual management fee is 1.2 per cent on net assets up to £150m; 1.1 per cent on net assets above £150m and up to £200m; 1.0 per cent on net assets above £200m and up to £250m; and 0.9 per cent on net assets above £250m.
The balance due to CQS for management fees at the year end was £140,000 (2023: £138,000).
Investment management fees have been allocated 75% to capital and 25% to revenue (2023: 75% capital and 25% revenue) in the Income Statement. This capital and revenue split is reviewed by the Board annually.
4 OTHER EXPENSES
| | 2024 Revenue | 2024 Capital | 2024 Total | 2023 Revenue | 2023 Capital | 2023 Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Secretarial and administration fees | 201 | - | 201* | 154 | - | 154 |
| Directors' fees | 157 | - | 157 | 137 | - | 137 |
| Employer's National Insurance contributions | 6 | - | 6 | 4 | - | 4 |
| Auditor's remuneration for the audit of the Company's financial statements | 73 | - | 73 | 60 | - | 60 |
| Tax advisor remuneration for tax services | 31 | - | 31 | 15 | - | 15 |
| Directors' and Officers' liability insurance | 15 | - | 15 | 13 | - | 13 |
| Registrar fees | 23 | - | 23 | 21 | - | 21 |
| Custody and depositary fees | 79 | - | 79 | 84 | - | 84 |
| Public relations | 84 | - | 84 | 50 | - | 50 |
| Broker fees | 50 | - | 50 | 45 | - | 45 |
| Stock exchange fees | 22 | - | 22 | 20 | - | 20 |
| Legal and professional fees | 178 | - | 178** | 35 | - | 35 |
| Other | 57 | - | 57 | 60 | 8 | 68 |
| | 976 | - | 976 | 698 | 8 | 706 |
| * Frostrow Capital LLP was appointed on 22 November 2023 to provide the Company with administration and Company Secretary services, as well as serve as the Company's investor relations and marketing adviser. All service provisions from Frostrow are included in a single fee figure. The total balance for the current year includes £90,000 charge from the previous administration and company secretarial firm, BNP Paribas. ** Includes £78,000 in relation to the renewal of the Company's loan facility (2023: £nil, as the facility was renewed during 2022), £33,000 in relation to the appointment of two non-executive directors and £15,000 in relation to the transition of the Company's Administrator and Company Secretary. | ||||||
The Company does not have any employees and no pension contributions were payable in respect of any of the Directors.
5 FINANCE COSTS
| | 2024 Revenue | 2024 Capital | 2024 Total | 2023 Revenue | 2023 Capital | 2023 Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Interest on bank loan | 245 | 734 | 979 | 197 | 585 | 782 |
| Other interest (Note 11) | 66 | - | 66 | - | - | - |
| | 311 | 734 | 1,045 | 197 | 585 | 782 |
Interest on the bank loan has been allocated 75% to capital and 25% to revenue (2023: 75% capital and 25% revenue) in the Income Statement. This capital and revenue split is reviewed by the Board annually.
6 TAXATION
| | 2024 Revenue | 2024 Capital | 2024 Total | 2023 Revenue | 2023 Capital | 2023 Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Corporation tax (Note 11) | 122 | - | 122 | - | - | - |
| Overseas withholding tax | 332 | 38 | 370 | 494 | - | 494 |
| | 454 | 38 | 492 | 494 | - | 494 |
Reconciliation of Tax Charge
The tax in the Income Statement for the year is lower than the current standard rate of corporation tax in the UK of 25% (2023: 25%). A reconciliation of the total tax charge is set out below:
| | 2024 Total | 2023 Total |
| | £'000 | £'000 |
| Return on ordinary activities before taxation | 9,618 | 5,728 |
| Corporation tax at 25% (2023: 20.5%*) | 2,405 | 1,174 |
| Effects of: | | |
| Non-taxable income | (1,594) | (1,693) |
| Non-taxable gains | (1,652) | (93) |
| Overseas withholding tax | 370 | 494 |
| Excess management expenses (deferred tax not recognised) | 845 | 610 |
| Non-taxable exchange gains | (4) | 2 |
| Corporation tax - prior year adjustment (Note 11) | 122 | - |
| Current year tax charge | 492 | 494 |
| * The Corporation tax rate increased from 19% to 25% with effect from 1 April 2023, therefore the theoretical tax rate in the year to 30 June 2023 was 20.5%. | ||
The Company has not provided for deferred tax on capital gains or losses arising on the revaluation and disposal of investments as it is exempt from tax due to its investment trust status. The Company can offset excess management expenses (management fees, other administrative expenses, and interest costs) against taxable income to eliminate any tax charge on such income, but it is unlikely to generate future taxable profits to utilise these amounts. The unrecognised deferred tax assets as at 30 June 2024 totalled £4,449,000 (2023: £3,604,000) arising as a result of having excess management expenses of £17,798,000 (2023: £14,417,000) and based on a prospective tax rate of 25% (2023: 25%).
7 DIVIDENDS
| | 2024 Revenue | 2023 Revenue |
| | £'000 | £'000 |
| Amounts recognised as distributions to equity holders in the year: | | |
| Fourth interim dividend for the year ended 30 June 2023 of 1.82p (2022: 1.82p) per share | 1,217 | 1,217 |
| Special interim dividend for the year ended 30 June 2023 of 3.00p (2022: nil) per share | 2,007 | - |
| First interim dividend for the year ended 30 June 2024 of 1.26p (2023: 1.26p) per share | 843 | 843 |
| Second interim dividend for the year ended 30 June 2024 of 1.26p (2023: 1.26p) per share | 843 | 843 |
| Third interim dividend for the year ended 30 June 2024 of 1.26p (2023: 1.26p) per share | 842 | 843 |
| | 5,752 | 3,746 |
| Amounts relating to the year but not paid at the year end: | | |
| Fourth interim dividend for the year ended 30 June 2024 of 1.82p (2023: 1.82p) per share | 1,198* | 1,217 |
| Special interim dividend for the year ended 30 June 2024 of 1.00p (2023: 3.00p) per share. | 658* | 2,007 |
| Total | 1,856 | 3,224 |
| * Calculated using the number of voting shares (excluding shares held in treasury) in issuance of 65,809,800 as at the record date of 2 August 2024. | ||
In accordance with FRS 102, the fourth and special interim dividends have not been included as a liability in these accounts and will be recognised in the period in which they are paid.
8 RETURN PER ORDINARY SHARE
Return per ordinary share attributable to shareholders reflects the overall performance of the Company in the year.
| | Year ended 30 June 2024 | Year ended 30 June 2023 |
| | £'000 | £'000 |
| Revenue return | 4,269 | 6,708 |
| Capital return | 4,857 | (1,474) |
| Total Return | 9,126 | 5,234 |
| Weighted average number of ordinary shares in issue | 66,817,536 | 66,888,509 |
| Revenue return per share (pence) | 6.39 | 10.03 |
| Capital return per share (pence) | 7.27 | (2.20) |
| Total return per share (pence) | 13.66 | 7.83 |
There were no dilutive instruments issued by the Company for the years ended 30 June 2024 and 30 June 2023.
9 INVESTMENTS
| | 2024 | 2023 |
| | £'000 | £'000 |
| Equity shares | 146,952 | 143,740 |
| Preference shares | 4,063 | 4,064 |
| Fixed income securities | 929 | 1,416 |
| Warrants | 683 | 246 |
| | 152,627 | 149,466 |
All investments are designated at fair value through profit or loss at initial recognition, therefore all gains and losses arising on investments are designated at fair value through profit or loss.
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:
● Level 1 - investments quoted in an active market;
● Level 2 - investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices; and
● Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or based on observable market data.
| | Level 1 | Level 2 | Level 3 | Total |
| As at 30 June 2024 | £'000 | £'000 | £'000 | £'000 |
| Investments at fair value through profit or loss | | | | |
| Quoted equities | 140,121 | - | - | 140,121 |
| Unquoted equities | - | - | 6,831 | 6,831 |
| Quoted preference shares | 4,063 | - | - | 4,063 |
| Fixed income securities | - | 918 | 11 | 929 |
| Unquoted warrants | - | - | 683 | 683 |
| Total | 144,184 | 918 | 7,525 | 152,627 |
| | Level 1 | Level 2 | Level 3 | Total |
| As at 30 June 2023 | £'000 | £'000 | £'000 | £'000 |
| Investments at fair value through profit or loss | | | | |
| Quoted equities | 141,858 | - | - | 141,858 |
| Unquoted equities | - | - | 1,882 | 1,882 |
| Quoted preference shares | 4,064 | - | - | 4,064 |
| Fixed income securities | - | 1,406 | 10 | 1,416 |
| Quoted warrants | - | 21 | 68 | 89 |
| Unquoted warrants | - | - | 157 | 157 |
| Total | 145,922 | 1,427 | 2,117 | 149,466 |
Level 2 investments are priced using evaluated prices from a third-party vendor, together with a price comparison made with secondary and tertiary evaluated third party sources. Evaluated prices are in turn based on a variety of sources, including broker quotes and benchmarks. As a result, these investments are disclosed as Level 2 as the fair values of these investments are not as visible as quoted equity investments and their higher inherent pricing risk. However, this does not mean that the fair values shown in the portfolio valuation are not achievable at point of sale.
There has been no transfer of financial assets between Levels 1 and 2 during the year (2023: none).
The Level 3 investments at the year end, along with the respective valuation methods utilised, are as follows:
The fair value of Level 3 financial assets has been determined by reference to valuation techniques described in Note 1(d) of these Financial Statements. Judgement has been exercised in each of these valuations in determining the most appropriate valuation methodology and inputs into the valuation models used.
Unquoted equity investments:
The majority (82.4%) of the unquoted equity valuation relates to three investments, respectively Leo Lithium, whose share trading on the Australian Securities Exchange (ASX) has been suspended since September 2023; an equity placement, in mid May 2024, into Coppernico Metals, whose shares commenced trading on the Toronto Stock Exchange in August 2024; and Calidus Resources, whose share trading on the ASX was suspended on 1 July 2024.
The valuation of Leo Lithium (£3,297,000) is based on its last traded share price immediately prior to the trading suspension with an illiquidity discount of 10% applied. A 10% increase on the discount rate applied to arrive at the fair value of Leo Lithium would result in a £330,000 negative impact on the Company's net return for the year and NAV as at the year end, and a 10% decrease on the discount rate applied would result in an equal but opposite effect on the Company's net return for the year and NAV as at year end.
As the Company's holding in Coppernico Metals was acquired shortly before the year end, the investment is valued at the cost of equity placement of £1,445,000. A 10% increase on the discount rate applied to arrive at the fair value of Coppernico Metals would result in a £145,000 negative impact on the Company's net return for the year and NAV as at the year end, and a 10% decrease on the discount rate applied would result in an equal but opposite effect on the Company's net return for the year and NAV as at year end.
Calidus shares had been listed and actively traded on the Australian Stock Exchange ("ASX"), but close to the Company's year end, unexpectedly announced that voluntary administrators were appointed and the company was placed in receivership with its shares suspended from trading with immediate effect. The value of the Company's equity holding in Calidus was £1,766,000 based on the market price quoted on the ASX. However, in light of the unexpected announcement and absence of detailed reasoning, a 50% discount was applied, therefore valuing Calidus at £883,000 as at 30 June 2024. If the fair value decreased by a further 30%, the impact on the Company's net return for the year and NAV as at the year end would be a reduction of £265,000 and if fair value recovered by 30%, the impact would be the equal opposite.
10% sensitivity thresholds for Leo Lithium and Coppernico and 30% for Calidus are considered to be reasonable based on observations of current market conditions.
Unquoted warrants:
The Company's investments in unquoted warrants are valued using the Black Scholes Model and the inputs into the model require judgements and estimates, which are detailed as follows:
● Volatility and time to maturity: for any warrants with a maturity greater than 1 year, the 90-day volatility is used and for any securities with a maturity less than 1 year, the 60-day volatility is used. These have been deemed appropriate periods to use, as often using the time to expiry has captured market or firm events that have artificially inflated the volatility which has in turn inflated the valuation. If the period used still yields an unreflective level of volatility, then the volatility period used is overridden. When appropriate to extend the period the time to maturity is used, up to a maximum of 400 days, which is in line with Bloomberg's option and warrant valuation model assumptions; and
● Risk free rate: in determining the risk free rate, the swap price discount curve is used for the relevant currencies. The swap curve in the warrant currency is deemed an appropriate method for approximating the yield curve for the following reasons:
- there is sufficient liquidity and depth of pricing to provide reliable valuations for the Swap curves for the points and currencies that the Company currently requires;
- using Swaps allows for the same discount rate methodology to be used across the range of maturities of the Warrant portfolio, whereas using other instruments to construct a yield curve would typically be more limited across different tenors. This is relevant to the current portfolio as there is a wide range of time-to-maturities; and
- using Swaps allows for the same discount rate methodology to be used across different currencies, which is applicable to the Company's current portfolio which contains warrants listed and traded in a range of currencies.
If the market value of the warrants were to fall by 10 per cent, the impact on the net return and the net asset value of the Company would be a reduction of £68,000 (2023: a reduction of £23,000). If the value of the Level 3 warrants were to rise by the same percentage, the effect would be equal and opposite.
All other Level 3 securities have been priced at nil, in the absence of any indicators of higher value. There are normal voting rights attached to all Level 3 equity holdings which are directly proportionate to the percentage holding in the company.
In line with the revised AIC SORP issued in July 2022, the presentations of gains and losses arising from disposals of investments and gains and losses on revaluation of investments have now been combined. Please see Accounting Policies Note 1(a). The gains and losses included in the table below have all been recognised within gains on investments held at fair value in the Income Statement.
| | 2024 | 2023 |
| Gains/(losses) on investments | £'000 | £'000 |
| Realised gains on sales of investments | 8,397 | 21,767 |
| Unrealised losses on investments | (2,302) | (22,190) |
| Gains/(losses) on investments | 6,095 | (423) |
During the year the Company purchased £35,310,000 (2023 restated: £49,058,000) of investments and incurred a total transaction cost of £33,000 (2023: £43,000). Disposals of investments amounted to £37,621,000 (2023 restated: £46,980,000) with a total transaction cost of £34,000 (2023: £42,000). As at 30 June 2024, £34,000 of the disposal proceeds were receivable (2023: £nil). Cash flows on purchases and disposals of investments for the year ended 30 June 2023 have been restated to correct the gross up impact of £13,871,000 due to non-cash movements. There was no impact on the net cash outflow from investing activities balance in the Cash Flow Statement or on any other primary statements reported in 2023.
10 DEBTORS
| | 2024 | 2023 |
| | £'000 | £'000 |
| Prepayments and accrued income | 331 | 64 |
| Overseas withholding tax recoverable | 254 | 175 |
| Other debtors | 34 | 10 |
| VAT recoverable | 26 | 8 |
| | 645 | 257 |
11 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
| | 2024 | 2023 |
| | £'000 | £'000 |
| Amounts due to brokers | 116 | 620 |
| Other creditors | 420 | 399 |
| Corporation tax | 122 | - |
| | 658 | 1,019 |
Included within other creditors is £140,000 (2023: £138,000) due to the Investment Manager in respect of management fees.
Corporation tax liability relates to certain overseas dividend income recognised during the year ended 30 June 2009, which was treated as exempt for corporation tax following the ruling of the HMRC's First Tier Tribunal in December 2021. The ruling was reversed by the Upper Tribunal in January 2024 and consequently the Company has recognised a tax liability of £122,000. An interest charge of £66,000 has been provided in respect of this tax liability. The actual amount is subject to HMRC confirmation, however, the Company believes that the interest exposure provided for is a conservative estimate and may not materialise.
12 BANK LOAN
| | 2024 | 2023 |
| | £'000 | £'000 |
| Bank loan | 17,000 | 16,000 |
The Company had an unsecured loan facility with Scotiabank Europe Plc ("Scotiabank"), on which drawdowns attract an interest rate of Sterling Overnight Index Average ("SONIA") plus 1.10%. As at 30 June 2024, £17 million was drawn down at an indicative rate of 6.3% fixed until 13 September 2024 (2023: £16 million was drawn down at an indicative rate of 5.878% fixed until 15 September 2023).
During the year and since the year end to 13 September 2024, the covenants of the loan facility have been met. The following are the covenants for the facility:
● borrower shall not permit the adjusted asset coverage to be less than 3.5 to 1;
● the borrower shall not permit the net asset value to be less than £45 million;
● maximum loan to value ratio of 30%; and
● minimum coverage ratio (total adjusted total assets value over debt) of 1.
The loan facility is rolled over every three months and can be cancelled at any time.
The facility with Scotiabank expired on 13 September 2024 and a new secured facility with a two-year tenure has been agreed with BNP Paribas until September 2026. Drawdowns from the new facility attracts an interest rate of SONIA plus 1.35% and a commitment fee of 0.45%. The credit facility with Scotiabank had a floating charge covering all the property or undertaking of the Company. The floating charge was satisfied upon repayment and expiration of the facility with Scotiabank, and replaced by a floating charge, with the same coverage of assets, under the new facility agreement with BNP Paribas.
As at the date this Report was approved, £17 million was drawn down under this facility at an indicative rate of 6.3% fixed until 12 December 2024.
13 SHARE CAPITAL
| | 2024 | 2023 |
| | £'000 | £'000 |
| Allotted, called up and fully-paid: | | |
| 66,159,952 (2023: 66,888,509) ordinary shares of 25p each | 16,540 | 16,722 |
| 728,557 (2023: nil) ordinary shares held in treasury | 182 | - |
| 66,888,509 (2023: 66,888,509) total ordinary shares of 25p each | 16,722 | 16,722 |
No shares were issued by the Company during the year (2023: nil).
During the year, the Company bought back 728,557 shares to be held in treasury at a cost of £1,368,000 (2023: nil). Between 1 July 2024 and 21 October 2024, the Company bought back a further 1,823,322 shares into treasury at a cost of £3,287,000.
Capital management policies and procedures
The Company's capital management objectives are:
● to ensure that the Company will be able to continue as a going concern; and
● to maximise the capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board normally seeks to limit gearing to 25% of net assets. The maximum gearing during the course of the year was 12.6% and it was 10.1% at 30 June 2024.
The capital of the Company is managed in accordance with its investment policy detailed in the Strategic Review on page 23 of the Annual Report.
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Investment Manager's views on the market, and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company has no externally imposed capital requirements.
14 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share is based on net assets of £138,565,000 (2023: £136,560,000) and on 66,159,952 (2023: 66,888,509) ordinary shares, being the number of ordinary shares in issue, excluding shares held in treasury, at the year end.
There were no dilutive instruments issued by the Company for the years ended 30 June 2024 and 30 June 2023.
15 FINANCIAL INSTRUMENTS
The Company's financial instruments comprise its investment portfolio, cash balances, bank facilities and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. The Company can make use of flexible borrowings for short-term purposes to achieve improved performance in rising markets and to seek to enhance the returns to shareholders, when considered appropriate by the Investment Manager. The downside risk of borrowings may be reduced by raising the level of cash balances held.
Financial assets designated at fair value through profit or loss (see Note 9) are held at fair value. For listed securities trading actively, fair value is considered to be equivalent to the most available recent bid price. Where listed securities are not trading actively, multiple broker quotes are referencing to estimate fair value. For unlisted securities, this is determined by the Board using valuation techniques based on unobservable inputs. The fair value of other receivables, cash, and other payables is represented by their carrying value in the Balance Sheet shown. These are short-term financial assets and liabilities whose carrying value approximate fair value.
The main risks that the Company faces arising from its financial instruments are:
(i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;
(ii) interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;
(iii) foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency rates;
(iv) credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and
(v) liquidity risk, being the risk that the bank may demand repayment of a loan or that the Company may not be able to quickly liquidate its investments.
Financial assets and liabilities
The financial assets and liabilities of the Company are as follows:
| | 2024 | 2023 |
| | £'000 | £'000 |
| Financial assets | | |
| Investments | 152,627 | 149,465 |
| Cash | 2,952 | 3,857 |
| Accrued income | 308 | 38 |
| Other debtors | 337 | 219 |
| Financial liabilities | | |
| Bank loan | 17,000 | 16,000 |
| Amounts due to brokers | 116 | 620 |
| Other creditors | 543 | 399 |
Market price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long-term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy.
Investment and portfolio performance are discussed in more detail in the Investment Manager's Review and further information on the investment portfolio is set out on pages 17 to 19 of the Annual Report.
If the investment portfolio valuation were to fall by 5% at 30 June 2024 (2023: 5%), the impact on the profit or loss and the net asset value would be a reduction of £7,631,000 (2023: a reduction of £7,473,000). If the investment portfolio valuation were to rise by 5% the impact would be equal and opposite. The calculations are based on the portfolio valuation as at the respective balance sheet dates and are not representative of the year as a whole and may not be reflective of future market conditions. A 5% sensitivity has been selected as this level of change is considered to be reasonable based on observations of post year end performance of the portfolio investments.
Interest rate risk
Financial assets
Fixed, floating rate and preference share yields and their prices are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.
Interest rates on fixed income instruments are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. Consequentially, if a fixed income instrument is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a fixed income instrument the market price at any given time will depend on the market environment at that time. Therefore, a fixed income instrument sold before its redemption date is likely to have a different price from its purchase level and a profit or loss may be incurred.
Interest rates on floating rate instruments vary throughout the life of the instrument based on movements in the applicable underlying base rate. Consequentially, the total return achieved on these positions changes throughout the life of position. In addition, over the life of the financial instrument, the market price of such instruments will depend on the market environment at that time. Therefore, a floating rate instrument sold before its redemption date is likely to have a different price from its purchase level and a profit or loss may be incurred.
Interest rates on floating rate instruments vary throughout the life of the instrument based on movements in the applicable underlying base rate. Consequentially, the total return achieved on these positions changes throughout the life of position. In addition, over the life of the financial instrument, the market price of such instruments will depend on the market environment at that time. Therefore, a floating rate instrument sold before its redemption date is likely to have a different price from its purchase level and a profit or loss may be incurred. Bond yields, and their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.
Returns from bonds are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds.
Consequentially, if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price from its purchase level and a profit or loss may be incurred.
The Company's exposure to floating interest rates gives rise to cash flow interest rate risk and its exposure to fixed interest rates gives rise to fair value interest rate risk. Interest rate risk on fixed rate interest instruments is considered to be part of market price risk as disclosed above.
If the bank base rate were to increase by 1%, the impact on the Company's net return would be a reduction of £140,000 (2023: a reduction of £122,000). If the bank base rate were to decrease by 1%, the impact on the profit or loss would be equal and opposite. The calculations are based on borrowings as at the respective balance sheet dates and are not representative of the year as a whole.
Floating rate
When the Company retains cash balances they are held in floating rate deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency for each deposit.
Financial liabilities
The Company may utilise drawdowns from the credit facility, which provides borrowings in Pounds Sterling at a variable rate based on the SONIA rate. The Board sets borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis.
Fixed rate
The Company holds fixed interest investments and the interest rate profiles are as follows:
| | 2024 | 2024 Weighted average interest rate (%)* | 2024 Weighted average period for which the rate is fixed (years) | 2023 | 2023 Weighted average interest rate (%)* | 2023 Weighted average period for which the rate is fixed (years) |
| | £'000 | | | £'000 | | |
| Assets: | | | | | | |
| Fixed income securities | 929 | 7.6 | 1.7 | 1,416 | 7.6 | 2.3 |
| * The "weighted average interest rate" is based on the current yield of each asset, weighted by their market value. | ||||||
Foreign currency risk
The Company invests in overseas securities and may hold foreign currency cash balances which give rise to currency risks. The Company does not hedge its currency exposure and as a result the movement of exchange rates between Pound Sterling and the other currencies in which the Company's investments are denominated may have a material effect, unfavourable or favourable, on the returns otherwise experienced on the investments made by the Company. Although the Investment Manager may seek to manage all or part of the Company's foreign exchange exposure, there is no assurance that this can be performed effectively.
The Company's foreign currency exposure as at 30 June 2024 and 30 June 2023 were as follows:
| | Investments | Cash | Net current assets | Total | Sensitivity Impact Sterling weakens by 5% | Sensitivity Impact Sterling strengthens by 5% |
| 30 June 2024 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Canadian Dollar | 53,683 | 205 | 41 | 53,929 | 2,838 | (2,568) |
| Australian Dollar | 36,464 | 81 | 7 | 36,552 | 1,924 | (1,741) |
| US Dollar | 34,730 | 95 | 147 | 34,972 | 1,841 | (1,665) |
| Norwegian Krone | 11,175 | 423 | - | 11,598 | 610 | (552) |
| Euro | - | 8 | 145 | 153 | 8 | (7) |
| Brazilian Real | - | 26 | - | 26 | 1 | (1) |
| | 136,052 | 838 | 340 | 137,230 | 7,222 | (6,534) |
| | Investments | Cash | Net current assets | Total | Sensitivity Impact Sterling weakens by 5% | Sensitivity Impact Sterling strengthens by 5% |
| 30 June 2023 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Canadian Dollar | 52,937 | 9 | 38 | 52,984 | 2,649 | (2,649) |
| US Dollar | 27,138 | 194 | 8 | 27,340 | 1,367 | (1,367) |
| Australian Dollar | 39,652 | (1) | (620) | 39,031 | 1,952 | (1,952) |
| Norwegian Krone | 10,755 | 29 | - | 10,784 | 539 | (539) |
| Euro | 3,931 | 9 | 35 | 3,975 | 199 | (199) |
| Brazilian Real | - | 23 | | 23 | 1 | (1) |
| | 134,413 | 263 | (539) | 134,137 | 6,707 | (6,707) |
If the value of Pounds Sterling were to strengthen against the foreign currencies the portfolio is exposed to by 5%, the impact on the Company's net return and the net asset value would be a reduction of £6,534,000 (2023: a reduction of £6,707,000). If the value of Pounds Sterling were to weaken by the same amount, the impact on the Company's net return and the net asset value would have been an increase of £7,222,000 (2023: an increase of £6,707,000). The calculations are based on the portfolio valuation, cash balances and net current assets/(liabilities) as at the respective balance sheet dates and are not representative of the year as a whole and may not be reflective of future market conditions.
A 5% sensitivity has been selected as this level of change is considered to be reasonable based on observations of current market conditions.
The Investment Manager does not intend to hedge the Company's foreign currency exposure at the present time.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:
| | 2024 | 2023 |
| | £'000 | £'000 |
| Fixed interest investments | 929 | 1,416 |
| Cash | 2,952 | 3,857 |
| Interest, dividends and other receivables | 645 | 257 |
| | 4,526 | 5,530 |
As at 30 June 2024 and as at 30 June 2023 there were no debtors that were overdue.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.
The cash held by the Company and all the assets of the Company which are traded on a recognised exchange are held by BNP Paribas, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports. Should the credit quality or the financial position of BNP Paribas deteriorate significantly the Investment Manager will move the cash holdings to another bank.
The latest credit ratings for BNP Paribas are: A+ by Standard & Poor's, AA- by Fitch and A2 rated by Moody's.
There were no significant concentrations of credit risk to counterparties as at 30 June 2024 and as at 30 June 2023. The Company's largest single holding represented 7.1% of its total investments as at 30 June 2024 (2023: 5.2%).
Liquidity risk
The Company's liquidity risk is managed on an ongoing basis by the Investment Manager in accordance with policies and procedures in place as described in the Directors' Report. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains sufficient cash and readily realisable securities to pay accounts payable and accrued expenses.
The contractual maturities of the financial liabilities at each Balance Sheet date, based on the earliest date on which payment can be required, were as follows:
| | Three months or less | More than three months but less than one year | More than one year | Total |
| 30 June 2024 | £'000 | £'000 | £'000 | £'000 |
| Current liabilities | 543 | - | - | 543 |
| Bank loan | 17,000 | - | - | 17,000 |
| | 17,543 | - | - | 17,543 |
| | Three months or less | More than three months but less than one year | More than one year | Total |
| 30 June 2023 | £'000 | £'000 | £'000 | £'000 |
| Current liabilities | 1,019 | - | - | 1,019 |
| Bank loan | 16,000 | - | - | 16,000 |
| | 17,019 | - | - | 17,019 |
16 NET DEBT RECONCILIATION
| | As at 30 June 2023 | Currency differences | Cash flows | As at 30 June 2024 |
| | £'000 | £'000 | £'000 | £'000 |
| Cash | 3,857 | 14 | (919) | 2,952 |
| Bank loan | (16,000) | - | (1,000) | (17,000) |
| | (12,143) | 14 | (1,919) | (14,048) |
| | As at 30 June 2022 | Currency differences | Cash flows | As at 30 June 2023 |
| | £'000 | £'000 | £'000 | £'000 |
| Cash | 6,111 | - | (2,254) | 3,857 |
| Bank loan | (17,000) | - | 1,000 | (16,000) |
| | (10,889) | - | (1,254) | (12,143) |
17 SIGNIFICANT INTERESTS
| | Valuation | Ownership |
| Investments as at 30 June 2024 | £'000 | % |
| REA Holdings 9% 31/12/49 | 4,063 | 7.2% |
| Calidus Resources | 1,690 | 3.6% |
| Newcore Gold | 1,031 | 3.2% |
| Galena Mining | 707 | 7.1% |
| Ascendant Resources | 550 | 12.7% |
| TDG Gold | 414 | 5.0% |
| GT Resources | 295 | 3.3% |
| Castile Resources | 288 | 3.1% |
| Odyssey Gold | 263 | 3.5% |
| | Valuation | Ownership |
| Investments as at 30 June 2023 | £'000 | % |
| REA Holdings 9% 31/12/49 | 4,683 | 4.42% |
| Galena Mining | 3,084 | 6.52% |
| Ascendant Resources Inc | 2,002 | 14.97% |
| Calidus Resources | 1,966 | 3.64% |
18 RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE INVESTMENT MANAGER
The following are considered related parties: the Board of Directors ("the Board") and CQS (UK) LLP (trading as Manulife | CQS Investment Management) ("the Investment Manager").
Details of the fee arrangement with the Investment Manager are included in Note 3.
There are no other transactions with the Board other than aggregated remuneration for services as Directors as disclosed in the Directors' Remuneration Report on pages 49 and 50 of the Annual Report, and as set out in the Note 4 to the accounts. The beneficial interests of the Directors in the ordinary shares of the Company are disclosed on page 50 of the Annual Report.
The balance due to Directors for fees at the year end was £nil (2023: £8,000).
19 POST BALANCE SHEET EVENTS
Dividend declaration
The fourth interim dividend of 1.82 pence per share and special interim dividend of 1 penny per share in relation to the year ended 30 June 2024 were announced on 22 July 2024 and paid on 2 September 2024 to shareholders on the register on 2 August 2024, having an ex-dividend date of 1 August 2024.
A first interim dividend of 1.26 pence per share was announced on 15 October 2024 payable on 22 November 2024 to shareholders on the register on 25 October 2024, having an ex-dividend date of 24 October 2024.
Renewal of the Company's credit facility
The Company's one-year unsecured credit facility with Scotiabank expired on 13 September 2024 and a new secured facility with BNP Paribas was agreed on the same date, with a two-year tenure, until September 2026. Refer to Note 12 for further details of the new facility.
There are no other post balance sheet events which would require adjustment of or disclosure in the Financial Statements.
Glossary of Terms and Definitions
| AIC | Association of Investment Companies. The AIC represents a broad range of investment companies, investment trusts, VCTs and other closed-ended funds. | ||||||
| UK Alternative Investment Fund Managers Directive ("UK AIFMD") | Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the AIFMD classifies certain investment vehicles, including investment companies, as Alternative Investment Funds ("AIF"s) and requires them to appoint an Alternative Investment Fund Manager ("AIFM") and depositary to manage and oversee the operations of the investment vehicle. The Board of the Company retains responsibility for strategy, operations and compliance and the Directors retain a fiduciary duty to shareholders. | ||||||
| Alternative Performance Measure ("APM") | A financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. | ||||||
| Dividend Yield (APM) | The annual dividend expressed as a percentage of the share price. | ||||||
|
| | Year ended 30 June 2024 | Year ended 30 June 2023 | ||||
| | Total non-special interim dividends paid and declared (pence) | 5.60 | 5.60 | ||||
| | Closing share price (pence) | 189.00 | 169.50 | ||||
| | Dividend yield | 3.0% | 3.3% | ||||
| Gearing (APM) | Net debt (bank loan net of cash) as a percentage of net asset value. Gearing amplifies the impact of gains or losses on the net asset value of the Company. It can be positive for a company's performance, although it can have negative effects on performance when underlying assets fall in value. It is the Company's policy to determine the adequate level of gearing appropriate to its own risk profile. The Company may borrow an amount up to 25 per cent of shareholders' funds (measured at the time of drawdown). Gearing is calculated in accordance with guidance from the AIC as follows: | ||||||
| | | Year ended 30 June 2024 | Year ended 30 June 2023 | ||||
| | | £'000 | £'000 | ||||
| | Cash | 2,952 | 3,857 | ||||
| | Bank loan | (17,000) | (16,000) | ||||
| | Net debt | (14,048) | (12,143) | ||||
| | Net asset value | 138,566 | 136,560 | ||||
| | Gearing | 10.1% | 8.9% | ||||
| Net Asset Value ("NAV") | The value of total assets less all liabilities of the Company. Liabilities for this purpose include current and long-term liabilities. | ||||||
| NAV per share (APM) | NAV per ordinary share is calculated by dividing total net asset value by the total number of ordinary shares in issue (excluding shares held in treasury). | ||||||
| NAV per share Capital Return (APM) | The movement between opening NAV per share (204.16p) and closing NAV per share (209.44p), which shows the capital return element (without the impact of dividend reinvestment) of the Company's NAV per share during the year. | ||||||
| NAV per share Total Return (APM) | The theoretical total return on an investment over a specified period assuming dividends paid to shareholders are reinvested at net asset value per share at the time the shares were quoted ex-dividend. This is a way of measuring investment management performance of investment companies which is not affected by movements in discounts or premiums. The Directors regard the Company's net asset value total return per share as being the overall measure of value delivered to shareholders over the long term. | ||||||
| | | Year ended 30 June 2024 | Year ended 30 June 2023 | 5 years ended 30 June 2024 | |||
| | Opening NAV per share (pence) | 204.16 | 201.94 | 116.24 | |||
| | Closing NAV per share (pence) | 209.44 | 204.16 | 209.44 | |||
| | Percentage change in NAV per share | 2.6% | 1.1% | 80.2% | |||
| | Impact of dividend reinvestment | 4.6% | 2.4% | 38.5% | |||
| | NAV per share total return | 7.2% | 3.5% | 118.7% | |||
| Ongoing Charges Ratio (APM) | A measure of all operating costs incurred in the reporting period, calculated as a percentage of average net assets in that year. Operating costs exclude costs suffered within underlying investee funds, costs of buying and selling investments, interest costs, taxation and the costs of buying back or issuing ordinary shares. | ||||||
|
| | Year ended 30 June 2024 | Year ended 30 June 2023 | ||||
| | Total expenses (per Note 3 and 4) (£'000) | 2,640 | 2,487 | ||||
| | Average net assets value (£'000) | 136,919 | 138,167 | ||||
| | Ongoing charges ratio | 1.9% | 1.8% | ||||
| Share Price Capital Return | The movement between opening share price (169.50p) and closing share price (189.00p), which shows the capital return element (without the impact of dividend reinvestment) of the Company's share price during the year. | ||||||
| Share Price Total Return (APM) | The change in capital value of a company's shares over a given time period, plus dividends paid to shareholders, expressed as a percentage of the opening value. The assumption is that dividends paid to shareholders are re-invested in the shares at the time the shares are quoted ex-dividend. The Directors regard the Company's share price total return to be a key indicator of performance. This reflects share price growth of the Company which the Board recognises is important to investors. | ||||||
|
| | Year ended 30 June 2024 | Year ended 30 June 2023 | 5 years ended 30 June 2024 | |||
| | Opening share price (pence) | 169.50 | 175.00 | 89.30 | |||
| | Closing share price (pence) | 189.00 | 169.50 | 189.00 | |||
| | Percentage change in share price | 11.5% | (3.1)% | 111.6% | |||
| | Impact of dividend reinvestment | 5.6% | 2.9% | 55.4% | |||
| | Share price total return | 17.1% | (0.2)% | 167.0% | |||
| Share Price Discount or Premium to NAV per share (APM) | The amount by which the market price per share of an investment trust is lower or higher than the net asset value per share. The discount or premium is normally expressed as a percentage of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount. The Board regularly reviews the level of the discount/premium of the Company's share price to the net asset value per share and considers ways in which share price performance may be enhanced, including the effectiveness of share buybacks, where appropriate. | ||||||
| | | Year ended 30 June 2024 | Year ended 30 June 2023 | ||||
| | Closing NAV per share (pence) | 209.44 | 204.16 | ||||
| | Closing share price (pence) | 189.00 | 169.50 | ||||
| | Share price discount to NAV per share | 9.8% | 16.98% | ||||
| TCFD | The Financial Stability Board created the Task Force on Climate-related Financial Disclosures ("TCFD") to improve and increase reporting of climate-related financial information. | ||||||
| Treasury shares | Shares previously issued by a company that have been bought back from shareholders to be held by the company for potential re-issuance or cancellation at a later date. Shares held in treasury do not carry voting rights or rights to dividends. | ||||||
The figures and financial information for 2024 are extracted from the Annual Report and financial statements for the year ended 30 June 2024 and do not constitute the statutory accounts for the year. The Annual Report and financial statements for the year ended 30 June 2024 include the Report of the Independent Auditor which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.
The figures and financial information for 2023 are extracted from the published Annual Report and financial statements for the year ended 30 June 2023 and do not constitute the statutory accounts for that year. The Annual Report and financial statements for the year ended 30 June 2023 have been delivered to the Registrar of Companies and included the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
- ENDS -
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
For further information please contact:
Administrator and Company Secretary
Frostrow Capital LLP
Eleanor Cranmer
Email: cosec@frostrow.com
Tel: 0203 008 4613
Investment Manager
Manulife | CQS Investment Management
Craig Cleland
Email: contactncim@cqsm.com
Tel: 0207 201 5368
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