Annual Report • Oct 26, 2023
Annual Report
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Binder1.pdf 50387 U CQS Annual Rpt 2023_002_Strategic Report Section_Ev27 50387 U CQS Annual Rpt 2023_003_Governance Report Section_Ev25 50387 U CQS Annual Rpt 2023_004_Independent Auditors Report Section_Ev22 50387 U CQS Annual Rpt 2023_005_Financials_Ev22 50387 U CQS Annual Rpt 2023_006_General Information Section_Ev24 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Focused on the future, delivering value today Annual Report 2023 1488328134 CQS Natural Resouces Growth and Income PLC Annual Report 2023 1485640078 IFC Our Objective Strategic Report 1 Key Metrics 2 Why Invest? 4 Performance Record 6 Chair’s Statement 8 Investment Manager’s Review 12 Top Ten Largest Holdings 15 Portfolio at a Glance 16 Investment Portfolio 19 Principal Risks, Uncertainties and Mitigation 23 Strategic Review 27 Environmental, Social and Governance (“ESG”) Statement 28 Stakeholder Interests (s. 172 statement) Directors’ Report and Governance Reports 30 Board of Directors and Investment Manager 33 Directors’ Report 37 Statement of Directors’ Responsibilities 38 Statement of Corporate Governance 41 Report of the Audit Committee 44 Directors’ Remuneration Report Auditor’s Report 46 Independent Auditor’s Report to the Members of CQS Natural Resources Growth and Income PLC Financial Statements 54 Statement of Comprehensive Income 55 Balance Sheet 56 Statement of Changes in Equity 57 Cash Flow Statement 58 Notes to the Financial Statements General Information and Annual General Meeting 75 Glossary of Terms and Definitions 76 Notice of Annual General Meeting 79 Report of the UK Investment Adviser Relating to Matters under the Alternative Investment Fund Managers’ Directive 82 Corporate Information 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. Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC 1 -3.1% +6.3% +53.6% (percentages shown are comparative to 2022) Share price capital return Net asset value capital returnNet asset value total return Composite benchmark total return Share price total return Dividend per share (including a special interim dividend of 3.00p per share) +3.5% +1.1% -0.2% Key Metrics For full results see page 4 > Financial statementsGovernanceStrategic report 2 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Why invest? • Exposure to value focused, under-researched global resources equities, aided by the investment trust closed end structure • Unconstrained flexibility to invest in energy, mining or related service industries • After years of producer under-investment, supply is now constrained, potentially leading to higher prices and higher profits for natural resources companies • Global growth and energy to drive long term demand • Fund dividends are supported by strong income dynamics of the sector 2 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 3Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Investment approach The Company actively invests in global energy and mining companies, with a focus on total return. It also pays a regular quarterly dividend. The flexible mandate allows the Company to shift its portfolio weighting between energy and mining, with the aim of maximising returns depending on the point in the cycle, whilst providing relative value opportunities. The closed end structure is well suited to allowing the investment management team to focus on the best returns profile, rather than liquidity as is the case with Exchange Traded Funds (“ETFs”). The nature of this focus results in the Company holding a large proportion in names that fall just below major index or ETF inclusion, adding additional upside potential should they become included. The portfolio is invested mostly in producers, with strong earnings profiles and market caps around £300m to £2bn, although also below and above this range. North America, Australia or the UK. The majority of holdings are listed in North America, Australia or the UK. Investment management team Keith Watson, having studied applied physics, has focused on resources since 1992. Robert Crayfourd, a geologist, has managed natural resources funds since 2004. Ian (Franco) Francis has many years of experience in investing in the high-yield fixed interest sector. The investment process The investment process involves leveraging the macro understanding from being at CQS, a $16.1bn asset manager, supporting commodity allocation decisions with hundreds of meetings a year with prospective companies, as well as extensive historical knowledge of assets globally, steering the bottom up stock picking. This allows the investment manager to focus on the key themes they believe will generate the best chances at any particular point in the cycle. Comparative Indices The Company has previously measured itself against a composite Index comprising of 80 per cent of the EMIX Global Mining Index (sterling adjusted) and 20 per cent of the Credit Suisse High Yield Index (sterling adjusted). The EMIX Global Mining Index ceased publication in July 2023. The Board have reviewed replacing the benchmark index but after investigation with the Company’s broker and investment manager have not found a comparable index that can be used as a key performance indicator. In future the Company will therefore not utilise a formal benchmark but rather publish its net asset value performance alongside two comparative indices; the MSCI World Metals & Mining Index (sterling adjusted) and the MSCI World Energy Sector Index (sterling adjusted) as these best reflect the potential returns from the Company. Gearing We selectively employ gearing with the aim of enhancing returns. The Company currently utilises a gearing facility with £14 million drawn down from a £25 million facility from Scotiabank. Dividend The Board considers that the dividend policy is very attractive to shareholders and therefore provides an element of share price stability. The mix of fixed interest securities and growth stocks enables us to meet our commitment to pay regular quarterly dividends in addition to capital growth. The Company currently pays quarterly dividends which this year have totalled 5.60p per share, equalling the previous year. In addition, for the financial year to 30 June 2023 the Company paid a special dividend of 3.00p per share on 16 October 2023. Financial statementsGovernanceStrategic report A member of the Association of Investment Companies. 3Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 4 Year to 30 June 2023 Year to 30 June 2022 Period 1 July 2018 to 30 June 2023 Total Return Net asset value 3.5% 20.6% 74.8% Ordinary share price (0.2)% 14.7% 86.6% Composite index 6.3% 1.0% 63.6% EMIX Global Mining Index (sterling adjusted) 6.6% 1.2% 73.0% Credit Suisse High Yield Index (sterling adjusted) 4.5% 0.0% 21.5% 30 June 2023 30 June 2022 % change period Capital Values Net asset value per share (pence) 204.16p 201.94p 1.1% Ordinary share price (mid market) (pence) 169.50p 175.00p (3.1)% 30 June 2023 30 June 2022 % change period Revenue and Dividends Revenue earnings per ordinary share 10.03p 5.16p 94.4% Dividends per ordinary share (2023 figure inclusive of special interim dividend of 3.00p per share) 8.60p 5.60p 53.6% Dividend Yield (excluding special interim dividend) 3.3% 3.2% Discount (difference between share price and fully diluted net asset value) 16.98% 13.3% Gearing Gearing provided by bank loan 8.9% 8.1% Ongoing charges (as a percentage of average shareholders’ funds) 1.8% 1.7% Performance Record Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 5 Year to 30 June 2023 High Year to 30 June 2023 Low Period’s Highs/Lows Net asset value per share (pence) 248.79 188.08 Ordinary share price (mid market) (pence) 215.00 149.00 Discount 20.77% 13.58% Rate xd date Record date Payment date Dividend History Special interim 2023 3.00p 21 September 2023 22 September 2023 16 October 2023 Fourth interim 2023 1.82p 27 July 2023 28 July 2023 31 August 2023 Third interim 2023 1.26p 27 April 2023 28 April 2023 26 May 2023 Second interim 2023 1.26p 26 January 2023 27 January 2023 28 February 2023 First interim 2023 1.26p 26 October 2022 27 October 2022 25 November 2022 Total for year ended 2023 8.60p Fourth interim 2022 1.82p 28 July 2022 29 July 2022 26 August 2022 Third interim 2022 1.26p 28 April 2022 29 April 2022 27 May 2022 Second interim 2022 1.26p 27 January 2022 28 January 2022 25 February 2022 First interim 2022 1.26p 28 October 2021 29 October 2021 30 November 2021 Total for year ended 2022 5.60p * A glossary of the terms, including alternative performance measures, used can be found on page 74. ** Including a special interim dividend of 3.00p which was paid on 16 October 2023. An alternative performance measure is 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. Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 20236 Your Board believes that the ongoing energy transition is an investment theme that will deliver rewards to investors over the long term. Overview The old adage that “this has been a year of two halves” has proved to be very true for the Company’s financial year to 30 June 2023. When I wrote the interim statement at the start of 2023, the NAV was up 17.2% and the Company was successfully navigating the tricky global economic and political environment. The Company had also just received The Investment Trust of the Year Award in the natural resources sector from Investment Week. Six months later, the background is more difficult; assets have fallen back so that the overall net asset value return for the year, whilst still positive at +3.5%, is much reduced from earlier in the year. Delivering a positive return for the year is to be commended though, as high inflation and interest rates have weighed upon global growth prospects and depressed many equity benchmarks. Your Board believes that the ongoing energy transition is an investment theme that will deliver rewards to investors over the long term. We encourage our Investment Manager to invest in sectors and stocks that will help to deliver the clean energy the world needs in the future and by way of example, we have expressed this in the past with large weightings in the copper sector, which is a key component of electrification and renewable power. However, nearer-term valuations and returns to shareholders are also key, so you will see that when there are concerns over global growth the portfolio has increased its weighting in oil and gas. This ability to switch between sectors is, we believe, a key advantage for the Company and the Investment Chair’s Statement Well placed in challenging markets Helen Green 1485638332 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 7 Manager’s Review on pages 8 to 15 provides a good summary of the factors influencing their decisions and both the investing team and the Board believe there is a good prospect of further growth in natural resources markets. Investment, share performance and discount The NAV total return to 30 June 2023 was a positive return of 3.5% which compares with an increase in the composite benchmark of 6.3%. The Company’s shares fell over the year, with the share price falling from 175.0p as at 30 June 2022 to 169.5p at the end of June this year. With dividends reinvested, this results in a total return of -0.2%. The discount between NAV and the share price widened during the year. As at 30 June 2023, the Company’s shares were trading at a discount of 17.5%. Your Board has noted that the discount has been volatile and ranged between 13.58% and 20.77% over the last year. We have increased our efforts to promote the Company effectively and continue to monitor the rating very closely. The discount to the net asset value at the time of writing is 16.98%. Dividends and income Income and dividends have always been a focus of the Company. Unlike in previous years where the revenue earned from the portfolio has not been enough to cover the dividends paid, the year to 30 June 2023 has seen revenue earnings increase by 94.4%. This remarkable increase is primarily due to a small number of the holdings in the portfolio paying much increased dividends from their operations. In particular, I would mention BW LPG and Goodbulk in the shipping sector and Thungela, a South African coal company as paying substantial dividends. This has resulted in earnings per share increasing from 5.16p in the year to 30 June 2022 to a figure of 10.03p in the current year. The Board considers that the dividend policy is very attractive to shareholders and therefore provides an element of share price stability. Therefore, for the year to 30 June 2023, we decided to continue to pay quarterly dividends totalling 5.60p per share, equalling the previous year. We have noted the exceptional increase in earnings but would caution that returns from the resources sector can be very cyclical and may not be repeated in the forthcoming year. We have therefore decided to pay a special dividend of 3.00p per share in addition to the four quarterly dividends. This will result in a total dividend for the year of 8.60p per share with 1.43p per share being credited to the Company’s revenue reserves. Gearing As at 30 June 2023 the gearing was 8.9% (2022: 8.1%) and the amount drawdown under the Scotiabank facility was £14 million (2022: £17 million). The facility amount is £25 million and was renewed for a further 12 months in September 2023. Annual General Meeting The business of the Annual General Meeting (“AGM”) is summarised in the Directors’ Report on pages 35 and 36. The AGM will be held at One Fleet Street Place, London, EC4M 7WS at 11.00am on Friday, 15 December 2023. 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 background of challenging global equity and bond markets your Board believes the Company is well placed to benefit from demand for resources. The Investment Management team have a significant weighting to the energy sector which they believe is supported by ongoing demand and the portfolio remains well diversified across a range of sectors and geographical areas. We have maintained the weighting in the precious metals sector for additional protection. Your Board and I look forward to seeing shareholders at the forthcoming Annual General Meeting. The Board and I would also like to thank shareholders for their continuing support of the Company. Helen Green Chair 20 October 2023 +3.5% -0.2% +53.6% Net asset value total return Ordinary share price total return Increase in total dividends (including a special dividend of 3.0p) Key Metrics 1184163675 The ability to switch between sectors is, we believe a key advantage for the Company. CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 8 Summary While a positive supply-led outlook extends to both energy and base metals in the medium term, our preference currently remains weighted towards energy, with increased exposure to precious metals due to global economic uncertainty. Longer term, the underlying supply dynamics remain consistent, notably the absence of substantial investment in supply across a number of commodities as well as shipping capacity. The crucial dis- tinction between our shorter and longer-term views emerges when considering the potential of a more extensive global economic deceleration; in such a scenario, energy demonstrates comparatively less discretionary demand compared with copper and other base metals. This is exemplified by the fact that during the financial crisis of 2008/9, the demand for energy only experienced a marginal decline of a few percentage points. Performance Over the 12 months to 30 June 2023, the Company gained 3.5% in the net asset value. Whilst not seeing the same outperformance as our last financial year, we remain pleased to have consolidated the prior years’ gains and not relinquished these, particularly given large rotations within the sub sectors of our overall investment universe. Sterling gained 4.3% over the period which acted as a drag on returns as most assets are non-sterling denominated, a key feature of the fund. The Company’s holding in Sigma Lithium, which owns a significant lithium mine in Brazil, was the most notable contributor, seeing sterling gains of 148% over the year, rising 28- fold over 3 years. Whilst we have retained a position in the stock, the equity holding has been largely reduced, with profits rotated into other stocks. Review of the year China’s reopening of post covid-19 restrictions disappointed over the year. Where the market had hoped for a bounce back in demand, the reality has been a slower grind. The backdrop of the Chinese property crisis and poor manufacturing trends have notably weighed. Having said that, expectations are that Chinese oil demand should continue to increase through 2023. The oil price fell 17% over the period, yet US oil stocks gained 9.8%. Much of this was due to the discounted valuations of energy equity. Russian oil supply proved much more resilient than we and the market had expected, as did output from several other regions such as Iran, Venezuela and Libya. OPEC has been clear it will defend pricing by cutting supply to ensure a floor, whilst the US rig count is now in decline, suggesting that expectations for continued US supply growth may prove unfounded. Investment Manager’s Review Keith Watson Robert CrayfourdIan (Franco) Francis Delivering value through the energy transition Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 9 We continue to believe oil demand will grow and do not agree with claims of having seen peak oil prices. The share of electric vehicles (“EVs”) is growing proportionately but remains a small component of the overall market, especially in emerging markets which we see as key demand growth drivers. Environmental policy from governments and large investors continues to constrain supply of crude oil, whilst Russia is likely to struggle to hold existing production levels as access to international oil and gas services become more challenging. Justifying our caution on base metals, benchmark copper prices gained only 0.7% over the 12 months to 30 June 2023, whilst the miners maintained their high price to NAV multiples. Clearly the key variable here is the copper price, whilst we note equity valuations offer less downside protection when compared with out of favour energy stocks. The shipping names in the portfolio delivered strong returns for the fund. Similar to the commodity producers, investment in new supply remains constrained with the order books for new vessels in crude and bulk shippers at record lows despite strong day rates. This reflects uncertainty on vessel environmental requirements going forward. A number of global shipping regulations, limiting sulphur emissions and reducing CO 2 emissions, have restricted investment. Given vessels are amortised over their 25-30 year lives, the uncertainty on requirements beyond 10 years has made the financing of vessels difficult. Instead, most corporates have opted to pay dividends and make share buybacks, keeping utilisation and day rates and therefore returns high. As previously mentioned, lithium stocks performed well, seeing a strong tail wind from both lithium prices and retail investment flows. Strong gains were registered by Sigma Resources in Brazil while developer Leo Lithium, whose high-grade project is located in Mali, gained 78% in sterling terms, as it received funding from Chinese battery manufacturer, Gangfeng. Energy transition The primary focus of the fund remains on maximising returns via exposure to key long-term thematics, while maintaining a keen focus on valuations. Currently the energy transition is one of the biggest prevailing investment themes both at consumer and government level, and an obvious source of incremental future demand growth for certain commodities. The nature of this transition in terms of both its magnitude and pace, provides numerous investment opportunities and the re-industrialisation effect may prove historically profound. There are the obvious direct plays on this, such as the use of lithium-based energy storage, as reflected by strong returns of Sigma Resources and Leo Lithium. In addition, however, the ESG theme is influencing investment styles inhibiting supply of traditional energy sources, which are expected to remain the dominant form of energy consumption for years to come as the energy transition is impossible to achieve overnight. -60 -30 0 30 60 90 120 150 Net asset value total return NAV 2018 2019 2020 2021 2022 2023 CQS Natural Resources NAV MSCI World Metals and Mining Index MSCI World Energy Sector Index 10 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Investment Manager’s Review continued Government policy and pressure from large financial institutions remains heavily focused on promoting the addition of incremental renewable capacity and providing tax breaks on electric vehicles, whilst restricting the supply of traditional forms of power, such as fossil fuels. This is restricting traditional energy supply while demand for these sources is not declining at the same rate in the near term. As a result, the prices of traditional fuels remain supported, while the producers of these have been shunned by large financial institutions and thus trade at historically extreme valuation discounts. Despite the intuitive need for cleaner energy, we assess the manner in which this can be responsibly and realistically achieved. In addition to an increase in supply of commodities used in clean power, implementing energy transition also requires an understanding that traditional energy will nevertheless be required to enable a smooth transition. In this context fossil fuel producers can still play a role and some producers in this black- listed sector should perhaps not be ignored. The energy transition is happening but will take longer than many politicians claim. The main reason for this is that there are no near-term solutions capable of rapidly replacing many of our energy sources. This may be no bad thing. With the carbon breakeven on many new Electric Vehicles estimated by some manufacturers to be 8 years, too fast a transition could prove counterproductive in reducing greenhouse gases. Renewables such as wind and solar are intermittent sources and thus require more battery storage to increase their utility, meaning a sustainable increase in supply will take time to achieve. Nuclear, 6.5% of the fund through Uranium Holdings, is the only source of zero carbon base load power, but even that would take decades to reach a level that meaningfully displaces traditional sources. As a result, we believe oil demand has not yet peaked and will likely continue to grow. While natural gas has the ability to enable greater renewable additions, as turbine generators can be quickly turned on-and-off helping to smooth the intermittency of renewables, government policy continues to restrict exploration and development. The fund holds 8.4% exposure to gas to benefit from any shift in energy policy to become more inclusive of this fuel. It is important to note coal-to-gas switching has been the single greatest driver of reduced carbon emissions in human history, primarily driven by the West. Allowing greater gas production would help contain gas prices and thus enable emerging markets to wean themselves off coal. Even coal, which represents 5.5% of the fund, will be required for years to come. The fund owns high quality producers, whose product is used for electricity generation or metallurgical coal used in steel production. We actively vote against the expansion of production growth and support the payment of earnings as dividends or buybacks. Coal producers are hugely out of favour given the poor ESG optics, and thus trade at a huge discount to earnings and free cashflow multiples, thereby contributing disproportionately to income for the fund. Macro Macro uncertainty remains high. Against the backdrop of already soft demand growth the synchronised tightening of central bank interest rates, to try to quell inflation, has introduced more pressure on economies. Notwithstanding lag effects, the broader demand outlook and particularly investor sentiment remains sensitive to the success of interest rate policies in taming inflation. Inflation is now showing signs of easing, most notably in those regions which experienced higher prior year rates. Though implied rates indicate a peak in the next year, central banks remain highly cautious on easing too soon. Unless there is a correction in general economic activity, interest rates may plateau at an elevated level. We believe market consensus of a sharp retracement may not come to fruition. The ongoing property crisis in China, with large developers such as Evergrande and more recently Country Garden in effective bankruptcy, represents another pocket of risk which is dampening a major source of commodity demand. It is likely China will continue to seek stimulus to support its general economy, but we still believe the effects will be felt selectively in demand for certain commodities. This is especially so for iron ore in which the fund has no investments and also contributed to the material reduction in our copper exposure, which stood at 6.4% as at the end of June 2023. Over the medium to longer term we do expect a structural shortage of copper for deployment in the energy transition given the lack of investment into large new supply projects. However, we believe some measure of this view is already implied in the premium valuations of many copper producers which contrast starkly with the discounted valuations ascribed to out of favour energy peers. 1477089062 Strategic report Governance Financial statements 11Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 In response to elevated risks arising from tightening OECD interest rate policy and risks around China’s financing of expected economic stimulus, we increased the fund’s precious metals exposure, which stood at 19.5% at 30 June 2023, as a direct hedge against this general uncertainty. Additionally, we believe precious metal producers have fallen further out of favour and thus trade at a discount versus historic multiples and also versus other mining peers. Though cost inflation has been a major headwind for precious metal producers, which have less ability to pass costs through to consumers, cost pressures are now easing, notably for energy and steel, while importantly labour tightness is now also showing signs of abating. It is never easy to reduce wages, so this aspect remains stickier than other inputs. We believe this can support both earnings growth and multiple expansion, while providing a useful macroeconomic hedge to the overall portfolio. Outlook The outlook for the sector is positive, as commodity supply remains constrained by disciplined management teams, ESG constraints and tough global government policies and whilst the energy transition provides incremental sources of demand, is perhaps more impactful in its restriction of supply of the old economy fossil fuels. The producers themselves are generally attractively valued, especially in energy, where many funds remain cautious on ownership due to ESG restrictions, whilst constrained supply supports pricing, underpinning dividends and buybacks. Some near-term concerns are evident, as a higher rate environment and Chinese economic slowdown weigh on demand expectations. We believe energy is less discretionary, so less affected by these aspects, whilst any investment in new supply is muted. Longer term base metals such as copper look attractive given the long lead time in bringing on new mines, as well as being required in enabling the energy transition. Ian (Franco) Francis, Keith Watson, Rob Crayfourd New City Investment Managers 20 October 2023 1511038924 The outlook for the sector is positive, as commodity supply remains constrained by disciplined management teams, ESG constraints and tough global government permitting policies. Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Investment Manager’s Review continued Top ten largest holdings Leo Lithium Funded developer of the high grade, low cost Goulamina hard rock Lithium Project in Mali. With a strong management, with Galaxy’s ex CEO Simon Haye, who has a track record in lithium mine development. The mine is a JV with Chinese battery producer Gangfeng and targets first production in 2024. £’000 Sales £(2,011) Purchases £4,816 £3,367 Appreciation 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. Sales £(2,990) Purchases £3,468 £4,419 Appreciation £’000 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. Sales – Purchases – £1,505 Appreciation £’000 12 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Precision Drilling Precision Drilling owns a fleet of land rigs for oil and gas shale, in the US, Canada and Middle East. They are well placed to benefit from tightening fundamentals in the rig market, as producer activity picks up due to stronger energy pricing. Despite a cautious stance from oil and gas re adding production in North America, the rig market is already tight, seeing strong day rates for Precision. Sales £(1,385) Purchases £660 £(3,102) Depreciation £’000 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. Napha switching at refiners and displacing wood for propane as fuel in the likes of India are major drivers of demand growth. The company has a strong capital returns policy, primarily through dividends. Sales £(1,525) Purchases – £1,671 Appreciation £’000 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/bbl. is materially below current spot markets. Sales £(1,554) Purchases – £342 Appreciation £’000 Financial statementsGovernanceStrategic report 13Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Diversified Oil & Gas An independent energy company focused on acquiring and enhancing primarily natural gas producing assets with current operations in the US. The business model focuses on buying attractively priced late life US onshore gas assets. Sales £(338) Purchases £2,885 £(1,330) Depreciation £’000 14 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 To see a full breakdown of our investments see page 16 > 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. Sales £(882) Purchases £123 £2,667 Appreciation £’000 Vermilion Energy A Canadian listed European and Canadian oil and gas producer. Two-thirds of their production is North American, but also with sizeable European gas exposure at a higher margin, the company is well placed to benefit from current tight gas market in Europe due to the loss of Russian gas, as windfall taxes have discouraged new investment into supply. With strong free cash flow and significant scope for growth, the company has focused on share buybacks so far and will increase this as they reduce debt levels further. Sales – Purchases £1,886 £(2,836) Depreciation £’000 REA Holding 1 REA is a leading contributor to responsible palm oil production globally. REA has a commitment to produce sustainably and has also received RSPO certification. Following substantial cost cutting measures the group is well placed to benefit from the recent recovery in the crude palm oil price. Sales – Purchases – £(1,123) Depreciation £’000 Note 1 – Includes REA Holdings 9% preference shares valued at £4,064,000, REA Finance 8.75% 31/08/2025 ** valued at £481,000, REA Holdings valued at £134,000 and REA Holdings warrants valued at £4,000 value of REA holding updated above. ** Denotes a Level 2 security. *** Denotes a Level 3 security Investment Manager’s Review continued Top ten largest holdings Strategic report Governance Financial statements 15Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Job No: 50387 Proof Event: 10 Black Line Level: 1 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Portfolio at a glance 0 5 10 15 20 25 30 Diversified Minerals Palm Oil Iron Platinum Fixed Interest Securities Zinc Silver Nickel Base metals Rare Earths Preference Shares Uranium Coal Lithium Copper Shipping Gold Oil & Gas 2023 % of total investments 2022 % of total investments 0 5 10 15 20 25 30 35 40 Unquoted Europe Australia US UK Canada 2023 % of total investments 2022 % of total investments By commodity By location of listing 16 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Company Sector Valuation £’000 Total Investments % Leo Lithium Lithium 7,779 5.2 Transocean Oil & Gas 7,461 5.0 NexGen Energy Uranium 7,281 4.9 Precision Drilling Oil & Gas 6,874 4.6 BW LPG Shipping 6,487 4.3 Diamondback Energy Oil & Gas 5,435 3.6 Diversified Gas & Oil Oil & Gas 5,300 3.5 Emerald Resources Gold 5,160 3.4 REA Holding (note 1) Palm Oil 4,683 3.1 Vermilion Energy Oil & Gas 4,506 3.0 Top ten investments 60,966 40.6 Euronav Shipping 4,383 2.9 EOG Resources Oil & Gas 4,150 2.8 West African Resources Gold 3,683 2.5 Talon Metals Nickel 3,534 2.4 Sigma Lithium Resources Lithium 3,252 2.2 Galena Mining Base metals 3,084 2.1 Tamboran Resources Oil & Gas 2,799 1.9 First Quantum Minerals Copper 2,781 1.9 Foran Mining Base metals 2,764 1.8 Lynas Corporation Rare earth 2,683 1.8 Top twenty investments 94,079 62.9 Osisko Gold 2,525 1.7 Thungela Resources Coal 2,456 1.6 Peabody Energy Coal 2,215 1.5 Karora Resources Base metals 2,193 1.5 Calibre Mining Gold 2,094 1.4 Ascendant Resources Base metals 2,002 1.3 Calidus Gold 1,966 1.3 New Hope Coal 1,830 1.2 Coronado Global Resources Coal 1,734 1.2 Wheaton Precious Metals Gold 1,700 1.1 Top thirty investments 114,794 76.7 Investment Portfolio As at 30 June 2023 Strategic report Governance Financial statements 17Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Company Sector Valuation £’000 Total Investments % Ero Copper Copper 1,667 1.1 Pioneer Natural Resources Oil & Gas 1,629 1.1 B2Gold Corp Gold 1,566 1.0 Peyto Exploration & Development Oil & Gas 1,562 1.0 NorAm Drilling Oil & Gas 1,441 1.0 MAG Silver Silver 1,438 1.0 Firefinch Lithium 1,416 0.9 2020 Bulkers Shipping 1,406 0.9 Ur-Energy Uranium 1,374 0.9 Adventus Mining Corporation Copper 1,355 0.9 Top forty investments 129,648 86.5 Ora Banda Mining Gold 1,262 0.8 PetroTal Corp Oil & Gas 1,136 0.8 Central Asia Metals Copper 1,132 0.8 Richmond Vanadium Diversified mineral 1,047 0.7 Fortuna Silver Mines Silver 994 0.7 Shelf Drilling Oil & Gas 994 0.7 Metals X Base metals 887 0.6 Winsome Resources Lithium 846 0.6 Fission Uranium Uranium 793 0.5 Rupert Resources Gold 748 0.5 Top fifty investments 139,487 93.2 Sierra Rutile Diversified mineral 723 0.5 Palladium One Mining Platinum 705 0.5 Integra Resources Gold 611 0.4 Westgold Resources Gold 603 0.4 Trident Royalties Zinc 562 0.4 Vizsla Silver Silver 532 0.4 Platinum Group Metals Platinum 484 0.3 Vintage Energy Oil & Gas 442 0.3 Goodbulk Shipping 427 0.3 Newcore Gold Gold 406 0.3 Top sixty investments 144,982 97.0 18 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Company Sector Valuation £’000 Total Investments % Odyssey Energy Oil & Gas 391 0.3 New World Resources Gold 389 0.3 Cosa Resources Base metals 354 0.2 Collective Mining Copper 348 0.2 Silver Mountain Resources Silver 334 0.2 Denison Mines Uranium 306 0.2 Castile Resources Property Gold 305 0.2 Americas Gold and Silver Silver 302 0.2 Rockhopper Exploration Oil & Gas 276 0.2 Tharisa Platinum 250 0.2 Top seventy investments 148,237 99.2 Other investments 1,228 0.8 Total 149,465 100.0 Notes to the Investment Portfolio are on page 12. Investment Portfolio continued As at 30 June 2023 Strategic report Governance Financial statements 19Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Risk Description Controls Investment and Strategy Risk Trend: 2023: > The Board is responsible for deciding the investment strategy to fulfil the Company’s objectives and monitoring the performance of the Investment Manager. Inappropriate strategy, including country and sector allocation, stock selection and the use of gearing could lead to poor returns for shareholders. To manage this risk the Board requires the Investment Manager to provide an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio at each Board meeting, when gearing levels are also reviewed. The Board monitors the spread of investments to ensure that it is adequate to minimise the risk associated with particular countries or factors specific to particular sectors. The Investment Manager also provides the Board and shareholders with monthly factsheets which include an investment commentary. Market risk Trend: 2023: > The Company’s assets consist principally of listed equities and fixed interest securities. Its greatest risks are consequently market related, with exposure to movements in the prices of the Company’s investments and the loss that the Company might suffer through holding investments in the face of negative market movements. Liquidity in the investment company sector has fallen over the last year and the Board is monitoring this closely with the Broker. The Board relies upon the research capabilities of the Investment Manager to build a portfolio, utilising diversification, to mitigate market risk. The Board monitors the implementation of the investment strategy and reviews the performance of the portfolio on an ongoing basis. The Investment Manager provides a detailed presentation on a quarterly basis which records both realised and unrealised gains and losses. The Company’s share price discount to NAV is discussed with the Investment Manager and Broker on a regular basis with a view to taking action if considered appropriate. The Investment Manager and Broker hold regular shareholder meetings through which investor sentiment can be assessed. Sector Risk Trend: 2023: > The majority of the Company’s assets are equity-related investments in companies, usually mid and small cap , with a wide range of commodity exposures. The prices of the underlying commodities are often volatile and the companies can be located in countries at risk of political instability. The liquidity in the shares of the investee companies is often restricted, meaning that it can be difficult to buy or sell volumes of shares at the quoted price. The Board seeks to mitigate this risk through the processes described in the paragraph above on Investment and Strategy Risk. In addition, the closed-ended 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. Risks are inherent in the investment process, but it is important that their nature and magnitude are understood so that risks can be identified and controlled to the extent possible. The Board 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. Principal risks and mitigations are discussed regularly at Board meetings and the summarised conclusions of such a meeting held on 12 October 2023 are set out below. Principal Risks, Uncertainties and Mitigation Risk trend and level Increasing Stable Decreasing 20 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Risk Description Controls Political risk Trend: 2023: > Political developments could affect the environment in which the Company operates and negatively impact the value of the Company’s investments and/ or demand for its shares. The conflict in Ukraine is having a major impact on the global economy and has increased volatility in the natural resources sector. Political developments are closely monitored and considered by the Board. 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 that emerge. Financial and currency risk Trend: 2023: > The Company’s investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, interest rate risk, liquidity risk and credit risk. Further details of these risks and the ways in which they are managed are disclosed in notes to the financial statements. Market Demand Trend: 2023: > Demand for shares in the Company declines due to failure to meet investors’ objectives. The risk level has increased as the volatility of the discount has widened this year. The Investment Manager regularly meets with investors to discuss their objectives and some of those meetings are attended by the Chair of the Board. The Board also receives frequent feedback from the Company’s Broker on their interactions with investors. The Board monitors the share price and any signs of demand reduction are discussed so that appropriate action can be taken. Periodically the Board holds a strategy meeting at which the investment objectives and strategy are discussed. Key person risk Trend: 2023: > 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. 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 Management Engagement Committee of the Company formally reviews the performance of the Investment Manager annually. Principal Risks, Uncertainties and Mitigation continued Strategic report Governance Financial statements 21Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Risk Description Controls Dividend and earnings risk Trend: 2023: > The earnings that underpin the amount of dividends declared and future dividend growth are generated by the Company’s underlying portfolio. One or more of the following factors could adversely affect the Company’s earnings and, thereby, its ability to declare a dividend: l A contraction of available investment opportunities suitable for the Company, given its investment objective and its policy. l The persistence of adverse market conditions or government intervention during a macro-economic crisis resulting in cuts to dividend income. l Adverse changes to the tax treatments applicable to the Company’s stream of investment and dividend income. l We believe the risk level has reduced this year as we have seen the level of dividends across the portfolio increase. The Board has engaged with CQS, the Investment Manager, to manage the Company’s portfolio and therefore depends upon the Investment Manager to construct an appropriate portfolio that will produce income allowing the Company to meet its dividend target. The Board monitors the implementation of the investment strategy, reviewing the performance of the Investment Manager on an ongoing basis and receiving a formal presentation from the Investment Manager on a quarterly basis. The Board receives and reviews detailed income forecasts prepared by the Investment Manager and Administrator at each Board meeting and when the quarterly dividends are declared. Gearing risk Trend: 2023: > The impact of a fall in the value of the underlying investments on the NAV of the Company’s shares could be exacerbated by the Company’s level of gearing. It could also result in a breach of loan covenants. Gearing levels and compliance with loan covenants are monitored by the Administrator and the Investment Manager on a monthly basis. The Board reviews compliance with the gearing levels and loan covenant compliance at regular Board meetings. The Board sets the gearing limits. Gearing will not exceed 25% of shareholders’ funds at the time of borrowing. Regulatory risk Trend: 2023: > A breach of regulatory rules could lead to a suspension of the Company’s stock exchange listing or financial penalties. The Company Secretary monitors the Company’s compliance with the Listing Rules of the UK Listing Authority. Compliance with the Listing Rules is reviewed by the Directors at each Board meeting and the Board receives a quarterly report from the Investment Manager’s Compliance Officer. 22 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Risk Description Controls Operational risk Trend: 2023: > 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 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 ISAE 3402 reports on the description of controls placed in operation, their design and operating effectiveness on BNP’s Fund Administration and Global and Local Custody services. 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. Cyber risk Trend: 2023: > Cyber risk has previously been monitored as an element of operational risk, but, given the heightened risk to information security as cyber criminals become more sophisticated, and increasing reliance on electronic communication and storage of data, the Board now consider cyber risk and data security as a principal risk in its own right. The recent emergence of AI could jeopardize IT control. Due to the structure of our business model, all cyber risk rests with our service providers. Our service providers are highly regulated entities, nevertheless we have increased monitoring and request annual confirmations that cyber risk is appropriately controlled, and no significant incidents impacting the Company have occurred. 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 continued rise of inflation and ongoing geopolitical conflicts. The Board regularly discusses these matters with the Investment Manager, and receives feedback based on the Investment Manager’s research, and discussions with shareholders and the Broker. The Board discussions include longer-term impacts of climate change on the Company’s portfolio and returns. The Board will continue to assess emerging risks on a regular basis. Principal Risks, Uncertainties and Mitigation continued Strategic report Governance Financial statements 23Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Strategic Review Introduction The Company operates under the guidelines for UK-listed Companies’ Annual Reports in accordance with The Companies Act 2006. This Strategic Review is designed to provide information primarily about the Company’s business and results for the year ended 30 June 2023. It should be read in conjunction with the Chair’s Statement on pages 6 to 7, and the Investment Manager’s Review on pages 8 to 11, which give a detailed review of the investment activities for the year and look to the future. This year, we discuss our approach to our stakeholder responsibilities and the Board’s review of the Company’s purpose, culture and values during the year and in more detail, on pages 28 and 29. We also discuss our approach to people, social and governance matters and the environment in the Directors’ Report on page 33. 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 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 24 and 25. Viability statement In accordance with the provisions of the AIC Code, the Directors have assessed the viability of the Company over a period longer than the 12 months required by the ‘Going Concern’ provision. The Board conducted this viability review for a period of three years, such 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. We have considered the appropriate viability period to be three years and is made on the assumption that the loan facility is rolled over annually rather than repaid. As discussed throughout the Strategic Review and this Annual Report as a whole, the Directors monitor and discuss any effects of any risks such as the conflict in Ukraine, inflation rises and any longstanding implications of the Covid-19 pandemic on the Company’s investment strategy, outlook and financial position. This monitoring has considerably informed the Directors’ viability assessment and statement this year. However, the Directors do not 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. 24 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 This is based on 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 Board also considers the annual continuation vote should not be a factor to affect the three year period given the ongoing support of major shareholders. In making this statement the Board: (i) considered the continuation vote to be proposed at the Annual General Meeting which the Board considers will be voted in favour of by shareholders; and (ii) carried out a robust assessment of the principal risks facing the Company. These risks and their mitigations are set out on pages 19 to 22. 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. When considering the risk of underperformance, the Board carried out 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. The Company has a loan facility in place to provide gearing until September 2024. The Board considered the Company’s portfolio and concluded 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 Board also considered the impact of potential regulatory change and the controls in place surrounding significant third party providers, including the fund 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 98%. The Scotiabank loan expired on 17 September 2023. Terms have been agreed to renew the facility on similar commercial terms until September 2024. The Board intend to renew the loan facility upon its expiry. Based on 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 for a period of three years from the date of approval of this Report. Performance Measurement and Key Performance Indicators (“KPI’s”) 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 show how the Company has performed against those KPI’s, and a glossary of terms and alternative performance measures is included on page 74. The KPI’s 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 net asset value (“NAV”) performance of the ordinary shares relative to that of its benchmark index. 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. After investigation the Board has concluded that there are no indices truly representative of the Company’s diversified commodities equity focus. It has to date therefore chosen an approximate composite proxy, 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). Given that only a very small proportion of the Company’s portfolio overlaps with the composite benchmark, shareholders should expect a significant degree of convergence away from the benchmark return. The EMIX Global Mining Index ceased publication in July 2023. The Board have reviewed replacing the benchmark index but after investigation with the Company’s broker and Investment Manager have not found a comparable index that can be used as a key performance indicator. The Company will therefore not utilise a formal benchmark but rather publish its net asset value performance alongside two comparative indices in the future; The MSCI World Metals & Mining Index (sterling adjusted) and the MSCI World Energy Sector Index (sterling adjusted). The performance of the NAV and composite benchmark are shown in the graphs on page 1 with statistics also shown on page 7 and page 25. Strategic Review continued Strategic report Governance Financial statements 25Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 NAV and Share Price Performance Net Asset Value Total Return and Share Price Total Return v Composite Index Source: BNP Paribas S.A., Jersey Branch l Dividends per share The Board currently intends to at least 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. During the year under review dividends per share totalling 5.60 pence per share were declared (2022: 5.60 pence). The Company declared a special dividend on 13 September 2023 in order to remain compliant with the Income and Taxes Act. l Ongoing charges The ongoing charges are 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 Company expenses. For the year under review ongoing charges were 1.8% (2022: 1.7%). These KPI’s 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 on page 74. 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 on page 6 and the Investment Manager’s Review on pages 8 to 14 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. Social, Community, Employee Responsibilities and Environmental Policy 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, 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. As an investment trust with its current structure the Company has no direct social, community, employee or environmental responsibilities of its own. Modern Slavery Act 2015 As an investment vehicle the Company does not provide goods or services in the normal course of business and does not have customers. Accordingly, the Directors consider that the Company does not fall within the scope of the Modern Slavery Act 2015 and is not, therefore, obliged to make a slavery and human trafficking statement. Board diversity Details of the Directors of the Company on 30 June 2023, all of whom held office throughout the year are set out on pages 30 and 31. 26 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Number of Board members Percentage of the Board Senior positions on the Board Men: 3 60% 1 Women: 2 40% 1 Number of Board members Percentage of the Board Senior positions on the Board White British or other White (including minority-white groups) 5 100% 2 Mixed/Multiple Ethnic Groups Nil N/A N/A Asian/Asian British Nil N/A N/A Black/African/ Caribbean/ Black British Nil N/A N/A Other ethnic group, including Arab Nil N/A N/A Not specified/ prefer not to say Nil N/A N/A The Board consists of three male Directors and two female Directors, chaired by a woman, and this represents a gender diversity ratio of 40% and means composition of the Board is within the expectations of the new FCA diversity and inclusion rules. The Board acknowledges that diversity in the Boardroom and the workplace is also an increasingly important area of focus today for UK business, and also a key theme of the latest update of the Code. Whilst the current composition of the Board, which is stable, is very diverse in terms of experience and background, it is not ethnically diverse. The Board is investigating setting up a board apprenticeship scheme to provide personal development opportunities for ethnically diverse candidates, probably having full time roles in the natural resources sector. By order of the Board Helen Green Chair 20 October 2023 Strategic Review continued Strategic report Governance Financial statements 27Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Introduction CQS Natural Resources Growth and Income PLC (“the Company”) is a UK listed investment company whose objective is to provide shareholders with capital growth and income from a portfolio of mining and resource equities and mining, resource, industrial and other fixed interest securities. The Company has appointed CQS (UK) LLP (“CQS”) as its Investment Manager. The Board fully supports the growing importance placed on ESG factors when asking the Company’s Investment Manager to deliver against the Company’s objectives. The Board has requested that the Investment Manager take into account the broader social, ethical and environmental issues of 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. CQS Responsible Investment Policy incorporating our ESG Statement CQS view ESG factors as significant drivers influencing financing costs, risk assessment valuations and performance. The assessment, integration and engagement of ESG factors is a crucial part of the Investment Manager’s responsible investment commitment. By embedding responsible investment into its investment process, the Investment Manager seeks to enhance its ability to identify value, investment opportunity, risk and, critically, to generate the best possible returns and outcomes for its clients. The Investment Manager is a signatory to the United Nations Principles for Responsible Investment (“PRI”), the UK Stewardship Code, the Net Zero Asset Managers’ initiative and the Institutional Investors Group on Climate Change. The Task Force on Climate-related Financial Disclosures (“TCFD”) is a global initiative to promote consistent and transparent reporting of climate-related risks and opportunities by companies and financial institutions. Starting in 2024 we will publish annual product-level TCFD reporting for CQS Natural Resources Growth and Income PLC which will enable investors to make informed choices based on consistent and comparable information about the climate impact of the Fund. The Investment Manager has a three-pronged approach to engagement – Targeted Engagement Programmes which maps key objectives for priority companies to the UN Sustainable Development Goals, day-to-day engagement as part of the research process, and collaborative engagements. Key engagements are monitored and discussed at quarterly Engagement Group meetings and cover environmental, social and governance topics. An example of this engagement for the Fund over the reporting period was the Investment Manager’s participation in the 2022 CDP Non-Disclosure Campaign. The campaign was a collaboration of 263 financial institutions directly engaging with 1,468 of the highest impact companies not currently disclosing environmental data through CDP. The Investment Manager co-signed letters to 63 companies and led on the engagements with 18 of these companies, including a holding within the Company, to encourage better environmental disclosures. As a result of the campaign, 390 companies (27%) in the campaign made disclosures on at least one of the key environmental issues including climate, water and forests. CQS has published its Responsible Investment Policy and a link to that policy can be found here: https://www.cqs.com/documents/cqs-responsible- investment-policy-february-2023.pdf Environmental, Social and Governance (“ESG”) Statement 28 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 25 Black Line Level:3 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Stakeholder Interests (s. 172 statement) Stakeholder Activity or mitigation in year Shareholders l the Board operates an investment strategy designed to deliver outperformance over the medium to longer term, based on exposure to valuable commodity markets; l 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; and l shareholders are given opportunities to attend meetings with the Board and also to attend, ask questions and vote at the Annual General Meeting of the Company. Suppliers The Board regularly evaluates the performance of its key panel of third party professional service providers. Community & Environment 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. These areas are further discussed on page 27. Other Stakeholders l the Board seeks to maintain the highest levels of corporate governance through compliance with the principles and provisions of both the AIC Code and, to the maximum extent practicable, the UK Code; and l the Board is committed to responding promptly and transparently to any reputational or regulatory matter that might arise affecting the Company, its future prospects or its investment activities. 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. As a listed investment trust, the Directors consider the following as supporting its approach to those key areas of these statutory responsibilities: Principal decisions Set out below is the principal decision taken during the year which the Board considers have had the greatest impact on the Company’s long-term success. 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. Decision Stakeholder interests Review of Dividend policy 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. It was agreed it was in the best interests of the Company and Shareholders to maintain the dividend in the year under review. Strategic report Governance Financial statements 29Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 25 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 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 33. The Notice of the Annual General Meeting (“AGM”) 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. Purpose, values and culture The Board and the Investment Manager have taken time during the year to consider the expectations of the Code in the areas of corporate purpose, values and culture. Whilst of the opinion that the Code’s requirements in these areas apply more stringently to premium listed companies with their own operations, rather than investment companies with limited operations, 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 to create an environment conducive to effect 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. 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. 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 33 to 35 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 20 October 2023 30 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Board of Directors and Investment Manager All of the Directors are non-executive and all are considered by the Board to be independent of the Investment Manager. The Board fulfils the function of the Audit, Nomination and Management Engagement Committees. Helen Green Director and Chair of the Board Length of service: 8 years – appointed a Director on 1 September 2015 and appointed Chair of the Board on 1 April 2022. Experience: Helen is a Chartered Accountant and a director of Saffery Trust in Guernsey. She joined Saffery Champness in London in 1984, relocating to Guernsey in 2000. Committee membership: Management Engagement Committee, Nomination Committee Remuneration: £33,000 per annum All other public company directorships: l abrdn China Investment Company Limited (chair) l JPMorgan Global Core Real Assets Limited l Landore Resources Limited Shared Directorships with any other Trust Directors: None Shareholding in Company: 5,500 ordinary shares Paul Cahill Director Length of service: 1 year – appointed a Director on 23 June 2022. Experience: Paul is chairman of the Advisory Board of Bacchus Capital Advisers (an independent investment and merchant banking platform focused on metals and mining); a non-executive director of ASX-listed Ironbark Zinc Limited; and a Senior Adviser, Mineral Resources for Mitsubishi Corporation. Paul has over 30 years of experience in the natural resources sector, most of which with the Anglo American Group in various senior roles including Group Head of Business Development. Committee membership: Audit Committee, Management Engagement Committee, Nomination Committee Remuneration: £25,000 per annum All other public company directorships: l Ironbark Zinc Limited Shared Directorships with any other Trust Directors: None Shareholding in Company: None Carole Cable Director Length of service: 6 years – appointed a Director on 1 October 2017. Experience: Carole is a partner and co-head of the Energy and Resources division at Brunswick Group LLP, where she advises clients in the mining and oil/ gas sector. Carole has had a 25 year career connected to the mining and commodities sector, initially on the sell side at JP Morgan and Credit Suisse. Carole is also a non-executive director of Nystar NV the former holding entity of a global mining and multi metals business, and the chair of Women in Mining UK. Committee membership: Audit Committee, Management Engagement Committee, Nomination Committee Remuneration: £25,000 per annum All other public company directorships: l Nyrstar N.V. Shared Directorships with any other Trust Directors: None Shareholding in Company: None Strategic report Governance Financial statements 31Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Christopher Casey Director and Chair of the Audit Committee Length of service: 6 years – appointed a Director on 1 October 2017; appointed Chair of the Audit Committee on 1 April 2022. Experience: Christopher is currently chairman of European Smaller Companies Trust PLC, Mobius Investment Trust plc, and Life Settlement Assets PLC. Christopher was a KPMG partner until 2010. Since then he has carried out a number of non-executive board roles including chairman of China Polymetallic Mining Ltd. Committee membership: Audit Committee – Chair, Management Engagement Committee, Nomination Committee Remuneration: £28,000 per annum All other public company directorships: l European Smaller Companies Trust plc l Mobius Investment Trust plc l Life Settlement Assets PLC Shared Directorships with any other Trust Directors: None Shareholding in Company: 6,500 ordinary shares Alun Evans Director Length of service: 9 years – appointed a Director on 26 September 2014. Experience: Alun has worked in the investment management industry for nearly 40 years. He began his career at Capel- Cure Myers moving to Carr Sheppards Crosthwaite in 1990, where he became an executive director in 1998. He joined Cheviot in 2009 as Business Development Director, from which he retired in August 2017. Committee membership: Audit Committee; Management Engagement Committee; Nomination Committee Remuneration: £25,000 per annum All other public company directorships: None Shared Directorships with any other Trust Directors: None Shareholding in Company: 10,540 ordinary shares 32 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Investment Manager CQS Cayman Limited Partnership (“CQS”) was appointed as the Company’s Investment Manager in 2007 and, with the agreement of the Board, since then the function has been delegated to CQS (UK) LLP, trading as NCIM. NCIM is part of the CQS Group, a global diversified asset manager, running multiple strategies with, as at 30 June 2023, assets of US$16.1 billion under management. With effect from 19 May 2019, the Company entered into a new investment management agreement to appoint CQS (UK) LLP as its Investment Manager. The previous investment management agreement with CQS was terminated. Ian Francis, Keith Watson and Rob Crayfourd have day-to-day responsibility for managing the Company’s portfolio. Ian Francis joined the NCIM team in 2007. He has over 40 years’ investment experience, primarily in the fixed interest and convertible spheres, and his career has included Collins Stewart, West LB Panmure, James Capel and Hoare Govett. Keith Watson joined the NCIM team in 2013 from Mirabaud Securities where he was a Senior Natural Resource Analyst. Prior to Mirabaud, Keith was Director of Mining Research at Evolution Securities. Previous to this, he was a top-ranked business services analyst at Dresdner Kleinwort Wasserstein, Commerzbank and Credit Suisse/ BZW. Keith began his career in 1992 as a portfolio manager and research analyst at Scottish Amicable Investment Managers. Keith has a BSc (Hons) in Applied Physics from Durham University. Robert Crayfourd joined the NCIM team in 2011. He holds a BSc in Geological Sciences from the University of Leeds and is a CFA holder with over 14 years’ experience, having previously worked for the Universities Superannuation Scheme and HSBC Global Asset Management where he focused on the resource sector. Alternative Investment Fund Managers Directive (“AIFMD”) The Company has appointed CQS (UK) LLP, a subsidiary of CQS, as the Company’s alternative investment fund manager (“AIFM”). The AIFM has received its approval from the FCA to act as AIFM of the Company. A requirement of the UK AIFMD is for the Company to appoint a depositary, which will oversee the custody and cash arrangements and other UK AIFMD required depositary responsibilities. The Board appointed BNP Paribas on 15 September 2020 to act as the Company’s depositary. As part of the process the investment management agreement was updated and builds in the regulatory requirements arising as a result of the appointment of the AIFM. Further UK AIFMD disclosures are shown on pages 79 and 80. The Directors present their Annual Report and the audited Financial Statements for the year ended 30 June 2023. The Financial Statements have been prepared in accordance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, and the relevant provisions of the Companies Act, 2006. Corporate Governance The Statement of Corporate Governance is set out on pages 38 to 40 and forms part of this Report. Principal Activity and Status The company is registered as a public limited company in terms of the Companies Act 2006 (company number: 02978531). It is an investment company as defined by Section 833 of the Companies Act 2006. It carries on the business of an investment trust and has been approved under Sections 1158 and 1159 of the Corporation Tax Act 2010 by HM Revenue and Customs as such, subject to continuing to meet eligibility requirements. The Directors are of the opinion that the Company has conducted its affairs in a manner compliant with the conditions for continued approval and intends to continue to do so. The Company has a premium listing on the London Stock Exchange, within the Financial Services sector, and is identified by the TIDM or ticker symbol ‘CYN’. The Company’s ISIN is GB0000353929 and SEDOL is 0035392. As an investment company that is managed and marketed in the United Kingdom, the Company is an Alternative Investment Fund (“AIF”) falling within the scope of, and subject to, the requirements of the Alternative Investment Fund Managers Directive (“UK AIFMD”). Further details are provided in the UK AIFMD Disclosures on page 79. The Company’s shares are eligible for inclusion in an Individual Savings Account (“ISA”). The Company is a member of the Association of Investment Companies (“AIC”). Board of Directors and Investment Manager continued Strategic report Governance Financial statements 33Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Directors’ Report Results and Dividends Details of the Company’s results and dividends paid are shown on page 5 of this Report. Dividend Policy Subject to market conditions and the Company’s performance, financial position and financial outlook, it is the Directors’ intention to pay an attractive level of dividend income to Shareholders on a quarterly basis. The Company intends to continue to pay all dividends as interim dividends. A resolution to approve this dividend policy will be proposed at the Annual General Meeting (“AGM”). Directors Biographical details of the Directors, all of whom are non- executive, can be found on pages 30 to 31. As explained in more detail under Corporate Governance on pages 38 to 40, the Board has agreed that all Directors will retire annually. Helen, Carole, Paul, Christopher, and Alun, will retire at the Annual General Meeting and, being eligible, offer themselves for re-election for a further year. The Directors believe that each of the Directors brings a significant range of business, financial and management skills and experience to the Company and enables the Board to provide effective strategic leadership and proper guidance of the Company. The Board confirms that, following the annual evaluation process set out in the Corporate Governance Statement on page 38, the performance of each of these Directors continues to be effective and demonstrates commitment to the role. The Board therefore believes that it is in the interests of shareholders that these Directors are re-elected. The Board notes that Alun Evans has served the suggested maximum tenure of 9 years but feel that Mr Evans continues to provide invaluable experience and feels that it is in the best interests of the Company that he should continue in his role at this time. None of the Directors is entitled to compensation for loss of office on the takeover of the Company. None of the Directors has a service contract with the Company. The Directors exercise the powers conferred by the Company’s Articles of Association and UK Company Law to manage the Company’s interest for the benefit of shareholders and stakeholders. Further information regarding the proposed changes to those authorities this year can be found on page 35. Directors and Officers Insurance The Company has a Directors’ and Officers’ insurance policy in respect of liabilities that may attach to them in their capacity as Directors of the Company. This covers any liabilities that may arise to a third party for negligence, default or breach of trust or duty. This policy has been in force throughout the year under review and remains in place as at the date of this report. For more information see note 4. Conflicts of Interest The Board has a procedure for identifying, reporting and addressing conflicts of interest, or potential conflicts. It considers that the procedure has worked effectively during the year under review and intends to continue to review all notified situations on an annual basis. Directors’ Remuneration Policy and Report The Directors’ Remuneration Report is set out on pages 44 and 45. An advisory ordinary resolution to approve the report will be put to shareholders at the Company’s AGM. The Company is also required to put the Directors’ Remuneration Policy to a binding shareholder vote on a triennial basis. The Remuneration Policy was approved by shareholders at the AGM held in 2021 and will continue to apply for the next financial year to 30 June 2024. Directors’ Responsibilities The Directors’ responsibilities in preparing these Financial Statements are stated on page 37. Capital Structure As at 30 June 2023 there were 66,888,509 ordinary shares of 25 pence each in issue. The ordinary shares give shareholders the entitlement to all of the capital growth in the Company’s net assets and to all the Company’s income that is resolved to be distributed. Substantial Interests in the Company’s Shares As at 30 June 2023, the Company had been notified of the following substantial interests in the Company’s voting rights. Person subject to the notification obligation % of voting rights First Equity Limited 5.31 Charles Stanley Group plc 5.28 Premier Miton Group plc 4.89 Philip J Milton & Company plc 4.45 Following the year end, and to the date of this report, the Company received the following new notifications: Person subject to the notification obligation % of voting rights Saba Capital Management L.P. 5.00 First Equity Limited 4.93 As at 30 June 2023 the Company had 66,888,509 shares in issue. Management and Management Fees As part of its strategy for achieving its objectives, the Board has delegated the management of the investment portfolio to CQS (UK) LLP, trading as New City Investment Managers (“NCIM”), with Ian Francis, Keith Watson and Rob Crayfourd as the portfolio managers. 34 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 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. Since 3 April 2018 the Company’s annual management fee has been 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 has been delegated to BNP Paribas S.A., Jersey Branch. Equiniti act as the Company’s share registrar. Change of Control There are no agreements to which the Company is party that might be affected by a change of control of the Company. Exercise of Voting Powers The Investment Manager, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company’s voting rights in respect of investee companies. The underlying aim of exercising such voting rights is to protect the return from an investment. Principal Risks The key risks faced by the Company are set out in the Strategic Review on pages 19 to 22. The Board and Audit Committee regularly review the Company’s emerging and principal risks and consider related changes in the Company’s risk profile. 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. Such a resolution has been proposed as Resolution 11 within the Notice of Annual General Meeting on pages 75 to 78. The Directors recommend that shareholders vote in favour of continuation, as they intend to do so in respect of their own beneficial shareholdings. Discussions with the Company’s significant shareholders also suggest their support for the continuation vote, as in previous years. If the resolution is not passed, the Board will put forward proposals to liquidate, open- end or otherwise reconstruct the Company. 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 that the Company is subject to an annual continuation vote as described above. In forming this opinion, the Directors spent considerable time during the financial year, together with the Investment Manager, reviewing the implications of the conflict in Ukraine and continued inflation rises for the Company’s financial position, liquidity, investment strategy and dividend policy. These regular reviews established that 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. The Company’s dividend income streams have improved over the last 12 months and the Board believes that the Company is well placed to withstand the wider economic effects of the Ukraine conflict and any ongoing effects of the pandemic. The Board were therefore comfortable to declare the fourth quarterly 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 2023. The Company has an unsecured loan facility with Scotiabank Europe Plc (“Scotiabank”) which expired on 17 September 2023, however, similar commercial terms were agreed with Scotiabank on 13 September 2023 for a further twelve months. Financial Statements The Directors’ responsibilities regarding the Financial Statements and safeguarding of assets are set out on page 37. Streamlined Energy and Carbon Reporting The Company is categorised as a lower energy user under the HMRC Environmental Reporting Guidelines March 2019 and is therefore not required to make the detailed disclosures of energy and carbon information set out within the guidelines. The Company’s energy and carbon information is therefore not disclosed in this report. Global Greenhouse Gas Emissions The Company has no greenhouse gas emissions to report from its operations for the year ended 30 June 2023 (as per the prior year), nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 (including those within the underlying investment portfolio). The Company’s approach Directors’ Report continued Strategic report Governance Financial statements 35Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 with regard to the environmental standards and performance of investee companies is discussed in more detail in the section headed Stewardship Code on page 39. Listing Rule 9.8.4 Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross-reference table indicating where the information is set out. The Directors confirm that there were no disclosures to be made in this regard. Annual General Meeting The Notice of the Annual General Meeting is contained on pages 75 to 78. Continuation Vote The Directors are required to propose an Ordinary Resolution at the forthcoming Annual General Meeting that the Company shall continue in being an investment trust. Accordingly, the Directors are proposing Resolution 10, as an Ordinary Resolution. Resolutions relating to the following items of special business will also be proposed at the forthcoming AGM. Increase of Directors Remuneration Resolution 11, which is proposed as a Special Resolution will if passed, amend Article 80 of the Company Articles of Association to increase the remuneration to no more than £200,000 per annum. Directors’ Authority to Allot Shares The Directors are seeking authority to allot shares. Resolution 12 will, if passed, authorise the Directors to allot new shares up to an aggregate nominal amount of £1,672,000 per annum being 10 per cent of the total issued shares as at the date of the Notice of the Annual General Meeting. In response to the shareholder vote at the 2022 AGM, the Board clarifies and reconfirms that it would not, under any ordinary circumstance, seek to issue shares at a discount to net asset value per share. In the unlikely circumstance that the Directors consider such an action to be in the interests of shareholders, it would seek a specific enabling, or ratifying, authority to do so from shareholders. Authority to Disapply Pre-Emption Rights Resolution 13, which is a Special Resolution, will, if passed, renew the Directors’ existing authority to make allotments of shares or sell shares from treasury for cash without first offering them to existing holders in proportion to their existing holdings. Resolution 13 authorises the Directors to allot new ordinary shares for cash or to sell shares held by the Company in treasury, otherwise than to existing shareholders on a pro rata basis up to an aggregate nominal amount of £836,100 which is equivalent to 3,344,405 ordinary shares and represents 5% of the Company’s ordinary share capital as at the date of the Notice of Annual General Meeting. These authorities will continue in effect until the conclusion of the Annual General Meeting in 2024. The Directors do not have any immediate plans to issue further ordinary shares in the Company. Directors’ Authority to Buy Back shares The Company did not purchase any shares for cancellation during the year. Resolution 14, as set out in the Notice of the Annual General Meeting, seeks renewal of the Company’s authority to purchase its own shares. The renewed authority to make market purchases will be in respect of 10,026,525 ordinary shares being approximately 14.99 per cent of the issued ordinary shares of the Company in issue as at the date of the Annual General Meeting. The price paid for the shares will not be less than the nominal value of 25p per share nor more than the higher of (i) 105 per cent of the average middle market quotations taken from and calculated by reference to the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Ordinary Share is contracted to be purchased or (ii) the higher of the price of the last independent trade and the highest current independent bid. This power will only be exercised if, in the opinion of the Directors, a purchase would result in an increase in net asset value per share and be in the interests of the shareholders as a whole. Any shares purchased under this authority will be cancelled immediately on completion of the purchase or held in treasury. The Directors have no current intention of utilising this authority. This authority will expire at the conclusion of the Annual General Meeting of the Company in 2024. Notice of Meeting Recommendation Your Board considers the passing of the resolutions to be proposed at the Annual General Meeting is likely to promote the success of the Company for the benefit of its members as a whole and are in the best interests of the Company and its shareholders as a whole. Accordingly, the Directors unanimously recommend that shareholders should vote in favour of the resolutions, as they intend to do in respect of their own beneficial shareholdings. Disclosure of Information to the Auditor As required by Section 418 of the Companies Act 2006 each of the Directors who held office at the date of approval of this Directors’ Report confirm that, so far as each of the Directors is aware, there is no relevant information of which the Company’s Auditor is unaware and the Directors have taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information. 36 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Directors’ Report continued Independent Auditors The Auditor, BDO LLP, is willing to continue in office as the Auditor and a resolution to reappoint BDO LLP and authorise the Directors to determine the Auditor’s remuneration for the ensuing year, will be proposed at the Annual General Meeting. By Order of the Board Helen Green Chair 20 October 2023 Strategic report Governance Financial statements 37Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulation. 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: l select suitable accounting policies and then apply them consistently; l 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; l make judgements and accounting estimates that are reasonable and prudent; l prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and l prepare a directors’ report, a strategic report and a directors’ remuneration report which comply with the requirements of the Companies Act 2006. The Directors are responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for 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. The Directors are responsible for 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. Website publication The directors are responsible for ensuring the annual report and the Financial Statements are made available on a website. Financial Statements are published on the Company’s website in accordance with legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the directors. The Directors’ responsibility also extends to the ongoing integrity of the Financial Statements contained therein. Directors’ confirmations The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face. The Directors consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. In the case of each Director in office at the date the Directors’ Report is approved: l so far as the Director is aware, there is no relevant audit information of which the Company’s Auditor is unaware; and l they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information. On behalf of the Board Helen Green Chair 20 October 2023 Statement of Directors’ Responsibilities 38 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Statement of Corporate Governance Introduction The UK Listing Authority requires all listed companies to describe how they have complied with the principles of the UK Corporate Governance Code published in 2018 (“the UK Code”), which is available on the Financial Reporting Council’s website: www.frc.org.uk. The UK Code covers in particular the annual reappointment of Directors, Board diversity, external evaluation, the Board’s responsibilities in relation to risk, and a clear explanation of business model and strategy. The Association of Investment Companies also published a Code of Corporate Governance (“AIC Code”), in February 2019, and a Corporate Governance Guide for Investment Companies (“AIC Guide”) which are available on the AIC’s website: www.theaic. co.uk. The AIC Code, as explained by the AIC Guide, addresses all of the principles set out in Section 1 of the UK Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies. The Company has reported performance against the 2018 version of the Code and the 2019 version of the AIC Code, which considerably focus board’s governance considerations on their company’s purpose, culture, values, people where applicable, diversity and the integration of each of these thematic principles. Statement of Compliance The Board has considered the principles and recommendations of both the UK Code and the AIC Code and believes that the Company has complied with the applicable provisions throughout the year under review and up to the date of this report except as below. The UK Code includes provisions relating to: l The role of the chief executive; l Executive directors’ remuneration, including formation of a separate board committee and appointment of a remuneration consultant; l The need for an internal audit function, including controls framework; and l The appointment of a Senior Independent Director. As the AIC Code acknowledges in setting out additional provisions relevant to the industry, the above exceptions are not believed to be automatically relevant to externally managed investment companies. The directors, having regularly reviewed the Company’s compliance, are therefore comfortable that the Company complies in full with both the UK Code and the AIC Code. This report further describes how this compliance is achieved. The Board The Chair is responsible for the leadership of the Board and ensuring its effectiveness on all aspects of its role. Given the size and composition of the Board it is not considered necessary to appoint a Senior Independent Director. All Directors are considered by the Board to be independent of the Investment Manager. Each of the Directors are independent in character and judgement and, there are no relationships, or circumstances which the Board considers likely to affect the judgement of the independent Directors. The Board takes the view that independence is not compromised by length of tenure and that experience and continuity can add significantly to the Board’s strength. New Directors receive an induction from the Company Secretary in good time after joining the Board, and all Directors receive other relevant training as necessary on an ongoing basis. During the year ended 30 June 2023 the Board met seven times. In addition, there were three Audit Committee meetings, one Management Engagement Committee meeting, and one Nomination Committee meeting. Between meetings the Board maintains regular contact with the Investment Manager. Two additional meetings were held where a committee was formed for the signing of loan documents and signing of the accounts. Directors have attended Board and Committee meetings during the year ended 30 June 2023 as follows (with their eligibility to attend the meeting in brackets). Audit Committee Management Engagement Committee Nomination Committee Board Meeting Helen Green 3 (3) 1 (1) 1 (1) 7 (7) Carole Cable 3 (3) 1 (1) 1 (1) 5 (7) Paul Cahill 3 (3) 1 (1) 1 (1) 6 (7) Christopher Casey 3 (3) 1 (1) 1 (1) 7 (7) Alun Evans 3 (3) 1 (1) 1 (1) 6 (7) Strategic report Governance Financial statements 39Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 The Board has a schedule of matters reserved to it for decision and the requirement for Board approval on these matters is communicated directly to the senior staff of the Investment Manager. Such matters include strategy, borrowings, treasury and dividend policy. Full and timely information is provided to the Board to enable the Directors to function effectively and to discharge their responsibilities. The Board also reviews the financial statements, performance and revenue budgets. The Board has put in place necessary procedures to conduct, on an annual basis, an independent appraisal of the Chair of the Board as well as a performance evaluation of the Board as a whole, the individual Directors and the Board Committees. The Board has engaged with Fletcher Jones to conduct an evaluation of the Board. The Chair regularly reviews and agrees with each Director their training and development needs. The annual evaluation of the Board and the Directors has been completed and the Directors have concluded that the Board continues to function effectively and individually. The Board has reviewed the Chair’s and Directors’ other commitments and is satisfied that the Chair and other Directors are capable of devoting sufficient time to the Company. There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company’s expense. This is in addition to the access which every Director has to the advice and services of the Company Secretary, BNP Paribas S.A., Jersey Branch, which is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board has reviewed the Company’s internal controls and principal risks and uncertainties. These are described in the Strategic Report on pages 19 to 22. Committees of the Board The Board has three principal committees: the Audit Committee, the Management Engagement Committee and the Nomination Committee. The terms of reference for these committees are available via the Company Secretary and via the Company website. A separate remuneration committee has not been established as the Board consists of only five non-executive directors. The whole Board is responsible for setting directors’ fees in accordance with the Remuneration Policy set out on page 44, which is subject to periodic shareholder approval. Audit Committee The Audit Committee comprises all directors, with the exception of the chair of the Board, and is Chaired by Christopher Casey. Further details are provided in the Report of the Audit Committee on pages 41 to 43. Management Engagement Committee A separate Management Engagement Committee, which is chaired by Helen Green and comprises the full Board, has been established. The Management Engagement Committee annually reviews matters concerning the management contract which exists between the Company and the Investment Manager. Details of the Management Agreement are shown in note 3 to the financial statements. Nomination Committee The Nomination Committee is chaired by Helen Green and comprises the full Board. Possible new Directors are identified against the requirements of the Company’s business and the need to have a balanced Board. The Terms of Reference of the Nomination Committee are available on request. External search consultants may be used to assist in the appointment of new Directors. Every Director is entitled to receive appropriate training as deemed necessary. A Director appointed during the year is required, under the provisions of the Company’s Articles of Association, to retire and seek election by shareholders at the next Annual General Meeting. In 2011, the Board decided that all Directors would retire annually and, if appropriate, seek re-election. Stewardship Code The Financial Reporting Council (“FRC”) published “The UK Stewardship Code” (“Code”) for institutional shareholders in September 2012. The purpose of the Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. The FRC is encouraging institutional investors to make a statement of their commitment to the Code. The Board has delegated responsibility for actively monitoring the activities of investee companies to the Investment Manager. The Investment Manager is responsible for reviewing, on a regular basis, the annual reports, circulars and other publications produced by the investee companies, and for attending company meetings. This includes environmental, social and governance matters, as further discussed on page 27. The Investment Manager, in the absence of explicit instruction from the Board, is empowered to use discretion in the exercise of the Company’s voting rights. The Investment Manager’s policy is to assess each voting opportunity individually and to vote only in cases where it is believed that the Company’s best interests need to be protected. The Board has reviewed, and endorses, the Investment Manager’s Statement of Compliance with the Code, which appears on the Investment Manager’s website, at www.ncim.co.uk. The Board receives reports from the Investment Manager on the exercise by the Investment Manager of the Company’s voting rights. 40 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Bribery Prevention The Board confirms it has zero tolerance to bribery and corruption in its business activities and takes its responsibility to prevent bribery very seriously. Criminal Finances Act 2017 In line with the requirements of The Criminal Finances Act 2017, the Directors confirm that the Company has a commitment to zero tolerance towards the criminal facilitation of tax evasion. Principal Decisions The principal decisions set out on page 28 outlines decisions taken during the year which the Board considers have the greatest impact on the Company’s long-term success. 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. Review of Dividend Policy 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. It was agreed it was in the best interests of the Company and Shareholders to maintain the dividend in the year under review. A special dividend was declared on 13 September 2023 to ensure compliance with the Income and Taxes Act. Relations with Shareholders The Directors place a great deal of importance on communication with shareholders. The Annual Report and Financial Statements are 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 33. The Notice of the Annual General Meeting (“AGM”) included within the Annual Report and Financial Statements is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board or Investment Manager, either formally at the Company’s AGM. The Company Secretary is available to answer general shareholder queries at any time throughout the year. Purpose, Values and Culture The Board and the Investment Manager have taken time during the year to consider the expectations of the Code in the new areas of corporate purpose, values and culture. Whilst of the opinion that the Code’s requirements in these areas apply more stringently to premium listed companies with their own operations, rather than investment companies with limited operations, the Board have 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 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 to create an environment conducive to effect 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. 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 that the investment strategy focuses on, 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. 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 33 to 35 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 20 October 2023 Statement of Corporate Governance continued Strategic report Governance Financial statements 41Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Report of the Audit Committee Composition of the Audit Committee An Audit Committee has been established with written terms of reference and comprises four non-executive Directors, Christopher Casey, Carole Cable, Paul Cahill and Alun Evans. The Audit Committee members have recent and relevant financial experience, and the Audit Committee as a whole has competence relevant to the sector in which the Company operates. The terms of reference of the Audit Committee are reviewed and reassessed for their adequacy on an annual basis and are disclosed on the Company’s website. Further copies are available on request. Role of the Audit Committee A summary of the Committee’s main audit review functions is shown below: l to review and monitor the internal control systems and risk management systems on which the Company is reliant; l to consider annually whether there is a need for the Company to have its own internal audit function; l to monitor the integrity of the Half Year Report and Annual Report of the Company by reviewing, and challenging where necessary, the actions and judgements of the Investment Manager and Administrators; l to meet with the external Auditor, BDO LLP (“BDO”) to review their proposed audit programme of work and their findings. The Board shall also use this as an opportunity to assess the effectiveness of the audit process; l to develop and implement the policy on the engagement of the external Auditor to supply non-audit services; l to review an annual statement from the Investment Manager and Administrator detailing the arrangements in place whereby the staff of the Investment Manager and of the Administrator may, in confidence, escalate concerns about possible improprieties in matters of financial reporting or other matters; l to make recommendations in relation to the appointment of the external Auditor and to approve the remuneration and terms of engagement of the external Auditor; and l to monitor and review annually the external Auditor’s independence, objectivity, effectiveness, resources and qualification. Half Year Report and Annual Report The Board of Directors are responsible for preparing the Half Year Report and Annual Report. The Audit Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues which may arise and any specific areas which require judgement. Auditor As part of its review of the scope and results of the audit, during the year the Audit Committee considered and approved BDO’s plan for the audit of the Financial Statements for the year ended 30 June 2023. At the conclusion of the audit BDO did not highlight any issues to the Audit Committee which would cause it to qualify its audit report. BDO issued an unqualified audit report which is included on pages 46 to 53. It has been agreed that all non-audit work to be carried out by BDO must be approved in advance by the Audit Committee and any special projects must also be approved in advance. As part of the review of auditor independence and effectiveness, BDO has confirmed that it is independent of the Company and has complied with relevant auditing standards. In evaluating BDO, the Audit Committee has taken into consideration the standing, skills and experience of the firm and the audit team. The Audit Committee, from direct observation and enquiry of the Investment Manager and Administrator, is satisfied that BDO provides effective independent challenge in carrying out its responsibilities. Following professional guidelines, the audit partner rotates after five years. The audit partner is in his second year of appointment. Significant matters considered regarding the Annual Report and Financial Statements During the year, the Audit Committee considered a number of significant matters and areas of key audit risk in respect of the Annual Report and Financial Statements. The Audit Committee reviewed the external audit plan and concluded that the appropriate areas of audit risk relevant to the Company had been identified by the Auditor. The Committee also discussed the audit procedures and plan with the Auditor and that suitable control procedures had been put in place to obtain reasonable assurance that the Financial Statements as a whole would be free of material misstatements. The table below sets out the key areas of risk identified and also explains how these were addressed. 42 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Report of the Audit Committee continued Significant issue How the issue was addressed The accuracy of the valuation of the investment portfolio Listed investments are valued using stock exchange prices provided by third party pricing vendors. Unquoted or illiquid investments, if any, are valued by the Directors based on recommendations from the CQS Valuation Committee. The Board reviews detailed portfolio valuations at each of its Board meetings and receives confirmation from the Administrator that the pricing basis is appropriate, in line with relevant accounting standards as adopted by the Company and that the carrying values are materially correct. The Board also relies on the Administrator’s controls which are documented in an annual internal controls report which is reviewed by the Audit Committee. The risk of misappropriation of assets and unsecured ownership of investments The Depositary is responsible for the financial instruments held in its custody. The Depositary reports to the Committee twice a year. The Committee reviews reports from its service providers on key controls over the assets of the Company and will take action to address any significant issues that are identified in these reports, which may include direct discussions with representatives of the relevant service providers to obtain more detailed information surrounding any matters of concern and gaining assurance that appropriate remediation action has been taken. Any significant issues are reported by the Manager to the Committee. The Manager has put in place procedures to ensure that investments can only be made to the extent that the appropriate contractual and legal arrangements are in place to protect the Company’s assets. The Depositary is responsible for financial restitution for the loss of financial instruments held in custody. The risk that income is overstated, incomplete or inaccurate through failure to recognise proper income entitlements or to apply the appropriate accounting treatment for recognition of income The Board reviews income forecasts, including special dividends, and receives explanations from the Manager for any variations or significant movements from previous forecasts and prior year figures. The Committee also reviews the facts and circumstances of all special dividends to determine the revenue/ capital treatment. The Committee also reviews an ISAE 3402 Report from the Company’s Administrator and Custodian, BNP Paribas SA. These reports include information on the control processes in place to ensure the accurate recording of income, and any exceptions are highlighted to the Committee and will be investigated further to ensure that appropriate remediation action has been taken where relevant. The risk that the Company’s continuation vote is not passed at the AGM in December 2023. The Company’s Broker and Investment Manager meet with institutional holders on a regular basis and have received no indication that these investors will vote against continuation. Approximately 51% of the Company’s shares are held through execution only platforms; the Board and the Broker have received no indication that these investors will vote against continuation. Strategic report Governance Financial statements 43Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Internal Controls The Board is ultimately responsible for the Company’s system of internal control and for reviewing its effectiveness. Following publication of the Financial Reporting Council’s “Internal Control: Revised Guidance for Directors on the Combined Code” (the “FRC guidance”) the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and is regularly reviewed by the Board and accords with the FRC Guidance. The key components designed to provide effective internal control are outlined below: l BNP Paribas S.A., Jersey Branch as Company Secretary and Administrator together with the Investment Manager prepares forecasts and management accounts which allow the Board to assess the Company’s activities and review its performance; l the Board and Investment Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the Investment Manager as appropriate; l as a matter of course the Investment Manager’s compliance department continually reviews the Investment Manager’s operations and reports to the Board on a quarterly basis; l written agreements are in place which specifically define the roles and responsibilities of the Investment Manager, Administrator and other third party service providers; and l the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place at the Investment Manager and the Administrator, has decided to place reliance on the Investment Manager’s and the Administrator’s systems and their internal audit procedures. The Audit Committee has established a set of ongoing processes designed to meet the particular needs of the Company in managing the risks to which it is exposed. The process is one whereby the Investment Manager has identified the key risks to which the Company is exposed, and recorded them on a risk matrix together with the controls employed to mitigate these risks. A residual risk rating has been applied to each risk. The Audit Committee is responsible for reviewing the risk matrix and associated controls before recommending to the Board for consideration and approval, challenging the Investment Manager’s assumptions to ensure a robust internal risk management process. The Audit Committee formally reviewed the updated risk matrix during the year and will continue to do so on an annual basis. Regular reports will be provided to the Audit Committee highlighting material changes to risk ratings. During the year, the Audit Committee also discussed and reviewed the internal controls frameworks in place at the Investment Manager and the Administrator. Discussions focused on three lines of defence: assurances at operational level; internal oversight; and independent objective assurance. The Audit Committee concluded that these frameworks were appropriate for the identification, assessment, management and monitoring of financial and regulatory risks, with particular regard to the protection of the interests of the Company’s shareholders. Internal control systems are designed to meet the Company’s particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss. Christopher Casey Chair of the Audit Committee 20 October 2023 44 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 The Board presents the Directors’ Remuneration Report for the year ended 30 June 2023 which has been prepared in accordance with sections 420-422 of the Companies Act 2006. Statement by the Chair The remuneration of the Directors has been set in order to attract individuals of a calibre appropriate to the future development of the Company. The Company’s policy on Directors’ remuneration, together with details of the remuneration of each Director, is shown below. An ordinary resolution for the approval of this Report will be put to the members at the forthcoming Annual General Meeting. Remuneration Committee The full Board acts as the Remuneration Committee whose Chair is the Chair of the Company. The determination of the Directors’ fees is a matter dealt with by the whole Board. Directors’ Remuneration Policy The Board’s policy is that the remuneration of Directors should reflect the experience of the Board as a whole, be fair and comparable to that of other relevant investment trusts that are similar in size and have similar investment objectives and structures. Furthermore, the level of remuneration should be sufficient to attract and retain the Directors needed to oversee the Company property and to reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company’s affairs. The fees for the non-executive Directors are determined within the limits set out in the Company’s Articles of Association. The present limit is £175,000 per annum in aggregate and the approval of shareholders in a general meeting would be required to increase this limit. At the prevailing level of Directors’ fees the aggregate amount paid to the Company’s Directors during the year to 30 June 2023 was £136,000. It is the Directors’ intention to seek approval from shareholders at the 2023 AGM to approve an increase in the remuneration limit to £200,000 per annum. Non-executive Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. It is the Board’s policy that Directors do not have service contracts, but new Directors are provided with a letter of appointment which is kept by the Company Secretary. The terms of Directors’ appointments and the Company’s Articles of Association provide that Directors should retire and be subject to election at the first Annual General Meeting after their appointment. Directors are obliged to retire by rotation, and to offer themselves for re-election by shareholders at least every three years after that. Any Director who has served on the Board for more than nine years will offer themselves for re-election annually. However, the Board has agreed that all Directors will retire annually and, if appropriate, seek re-election. There is no notice period and no provision for compensation upon early termination of appointment. Director Date of Initial Appointment Carole Cable 1 October 2017 Paul Cahill 23 June 2022 Christopher Casey 1 October 2017 Alun Evans 26 September 2014 Helen Green 1 September 2015 Annual Report on Directors’ Remuneration Directors’ Emoluments (audited) The Directors who served in the year received the following fees: Director 2023 £’000 2022 £’000 2021 £’000 2020 £’000 2019 £’000 Helen Green 1 33 30 27 26 22 Carole Cable 25 25 24 23 20 Paul Cahill 25 1 n/a n/a n/a Christopher Casey 2 28 26 24 23 20 Alun Evans 25 25 24 23 20 Richard Prickett 3 n/a 24 32 30 27 Totals 136 131 131 125 109 The amounts paid by the Company to the Directors were for services as non-executive Directors excluding expenses. 1 £24,750 of Director fees paid to Saffery Champness Management International Limited. 2 Chair of the Audit Committee. 3 Mr Prickett retired 31 March 2022. For the year ended 30 June 2023, the annual remuneration payable was as follows: £ Chair 33,000 Chair of the Audit Committee 28,500 Director 25,000 Directors’ remuneration 2023 000’s % 2022 000’s % 2021 000’s % 2020 000’s % 2019 000’s % 136 3.8 131 0 131 4.8 125 14.7 109 Directors’ Remuneration Report Strategic report Governance Financial statements 45Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 The Committee agreed to the following changes made to the Board’s remuneration with effect from 1 July 2023. £ Chair 38,000 Chair of the Audit Committee 33,500 Director 28,500 Relative importance of spend on pay The table below sets out, in respect of the financial year ended 30 June 2023 and the preceding financial year: a) the remuneration paid to the Directors; and b) the distribution made to shareholders by way of dividend. Year ended 30 June 2023 Year ended 30 June 2022 % Change Total remuneration 136,000 131,000 3.8 Dividend 5,753,000 3,746,000 53.6 Directors’ Interests (audited) Biographies of the Directors are shown on pages 30 and 31. The interests (all of which were beneficial) of the Directors who held office at the year end in the shares of the Company were as below: All of the Directors’ holdings are beneficial. No changes to these holdings have been reported up to the date of this report. Ordinary shares 2023 Ordinary shares 2022 Carole Cable – – Paul Cahill – n/a Christopher Casey 6,500 6,500 Alun Evans 10,540 10,540 Helen Green 5,500 5,500 Company Performance The Board is responsible for the Company’s investment strategy and performance, although the management of the Company’s investment portfolio is delegated to the Investment Manager through the investment management agreement, as referred to in the Directors’ Report on page 33. The following graph compares for the five years to 30 June 2023 the share price total return (assuming all dividends are reinvested) to ordinary shareholders with the total shareholder return on a notional investment made up of shares of the same kinds and number as those by reference to which a composite index, weighted as to 80 percent EMIX Global Mining Index (sterling adjusted) and 20 percent Credit Suisse High Yield Index (sterling adjusted), is calculated. This composite index was chosen as it represents a comparable mix of mining and resource equities and fixed interest securities. Voting at Annual General Meeting In accordance with the Companies Act 2006, the Company is required to seek shareholder approval of its remuneration policy on a triennial basis. An ordinary resolution for the approval of the remuneration policy was approved by shareholders at the AGM held in December 2021, with 99.71% of votes cast (including votes cast at the Chair’s discretion) in favour and 0.39% votes cast against. The Directors’ Remuneration Report was last approved by shareholders at the AGM held on 15 December 2022 with 99.92% of the votes cast (including votes cast at the Chair’s discretion) in favour and 0.08% votes cast against. An ordinary resolution for the approval of the Annual Report on Directors’ Remuneration will be put to an advisory shareholder vote at the forthcoming AGM. Pursuant to Article 80 of the Company’s artcicles a resolution for the approval of the remuneration limit to be increased to £200,000 will be put to a shareholder vote at the forthcoming AGM. Approval The Directors’ Remuneration Report on pages 44 to 45 was approved by the Board of Directors and signed on its behalf on 20 October 2023. Helen Green Chair 46 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Opinion on the financial statements In our opinion the financial statements: l give a true and fair view of the state of the Company’s affairs as at 30 June 2023 and of its profit for the year then ended; l have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and l have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of CQS Natural Resources Growth and Income PLC (the ‘Company’) for the year ended 30 June 2023 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. Independence Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 23 May 2017 to audit the financial statements for the year ended 30 June 2017 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is seven years, covering the years ended 30 June 2017 to 30 June 2023. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: l Assessment of the Directors’ cash flow forecasts, which covered a period of at least 12 months from the date of approval of these financial statements by corroborating key input data such as cash flows based on agreements to supporting documentation taking into account historical actuals and reviewing the current period and post year end results against forecasts. We challenged the forecasts, including performing additional sensitivity and scenario analysis as well as reverse stress testing; l Challenging the Directors’ assumptions and judgements made by performing an independent liquidity analysis of the investment portfolio as well as considering the availability of cash and the loan re-arranged post year end; l Challenging the Directors’ assessment of the likelihood of the continuation vote passing by considering, specifically: – Historic record on the annual vote and the percentage by which it passed recently as well as relative stability of the shareholder register; – Continued performance of the company relative to benchmark and previous years in which the vote had passed; and – Correspondence with the Company’s broker which references their discussions with major shareholders that the vote is likely to pass; and l Reviewing the loan agreements to identify the covenants and assessing the likelihood of them being breached based on the Directors’ forecasts and our sensitivity analyses. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Independent Auditor’s Report to the Members of CQS Natural Resources Growth and Income PLC Strategic report Governance Financial statements 47Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Overview 2023 2022 Key audit matters Valuation and ownership of investments ✓ ✓ Revenue recognition x ✓ * Based on the nature of the revenue generated and the lack of incentive to manipulate revenue recognised given the growth objective of the Company, revenue recognition is no longer considered to be a key audit matter. Materiality Company financial statements as a whole £1,365m (2022:£1,350m) based on 1% (2022: 1%) of Net assets An overview of the scope of our audit Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 48 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Key audit matter How the scope of our audit addressed the key audit matter Valuation and ownership of investments Note 1(d) and Note 9 We consider the valuation and ownership of investments to be the most significant audit areas as investments represent the most significant balance in the financial statements and underpin the principal activity of the entity. Whilst we do not consider the valuation of the quoted equity investments to be subject to a significant degree of estimation or judgement, there is a risk that the prices used by the Company are not reflective of the fair value of those investments as at the year end. The unquoted investments may have significant judgement involved in selecting a valuation methodology and a high level of estimation uncertainty involved in determining their valuations. There is also a risk that errors made in the recording of investment holdings result in the incorrect reflection of investments owned by the Company. For these reasons and the materiality of the balance in relation to the financial statements as a whole, we considered this to be a key audit matter. We responded to this matter by testing the valuation and ownership of the whole portfolio of investments. We performed the following procedures: In respect of each of the level 1 quoted equity investment valuations, we have: l Checked the year end valuation to externally quoted prices from independent sources. l Considered contra indicators of value which suggest that the year-end price is not the most appropriate indication of fair value such as potential liquidity issues; l Confirmed the investment holdings to independently received third party confirmation from the custodian; and l Recalculated the expected investment value as at the year end by multiplying the independently confirmed holdings with external bid prices. In respect of each of the quoted bond valuations we have: l Checked the year end valuation to externally quoted prices from independent sources; l Considered contra indicators of value which suggest that the year end price is not the most appropriate indication of fair value such as potential liquidity issues; l Considered the impact on the valuation of any non-performance of the investment and/or defaults on interest payments; and l Confirmed the investment holdings to independently received third party confirmation from the custodian. In respect of the level 3 quoted equity and bond instruments we have: l Assessed judgmental inputs into the valuation for reasonability against publicly available market data. l Verified the status of the equity instrument through independent research on the stock exchange for announcement of delisting or suspension of trade. Independent Auditor’s Report continued Strategic report Governance Financial statements 49Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Key audit matter How the scope of our audit addressed the key audit matter Valuation and ownership of investments Note 1(d) and Note 9 continued l Assessed the reasonability of management’s valuation methodology applied in line with IPEV guidelines. l Confirmed the investment holdings to independently received third party confirmation from the custodian. We have also assessed whether for investments written down to nil in the year, whether the unrealized losses on these investments should be recognized as realized losses in the financial statements. Key observations: Based on our procedures performed we did not identify any matters to suggest the valuation or ownership of the investments was not appropriate. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Company financial statements 2023 2022 Materiality £1,365,000 £1,350,000 Basis for determining materiality 1% of Net Assets Rationale for the benchmark applied As an investment trust, the net asset value is the key measure of performance for users of the financial statements. Performance materiality £1,024,000 £1,012,500 Basis for determining performance materiality 75% of materiality Rationale for the percentage applied for performance materiality l Number of unadjusted audit differences in prior year. l Nature, complexity and volume of transactions. l Number of accounts subject to estimation. 50 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £68,000 (2022: £67,500). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Corporate governance statement The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. Going concern and longer-term viability l The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 34 and l The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate set out on page 34. Other Code provisions l Directors’ statement on fair, balanced and understandable set out on page 37; l Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 43; l The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 43; and l The section describing the work of the audit committee set out on page 43. Independent Auditor’s Report continued Strategic report Governance Financial statements 51Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: l the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and l the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: l adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or l the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or l certain disclosures of Directors’ remuneration specified by law are not made; or l we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: 52 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Non-compliance with laws and regulations Based on: l Our understanding of the Company and the industry in which it operates; l Discussion with management and those charged with governance; and l Obtaining and understanding of the Company’s policies and procedures regarding compliance with laws and regulations, we considered the significant laws and regulations to be Companies Act 2006, the FCA listing and DTR rules, the principles of the AIC Code of Corporate Governance, industry practice represented by the AIC SORP, the applicable accounting framework, and the Company’s qualification as an Investment Trust under UK tax legislation as any non-compliance of this would lead to the Company losing various deductions and exemptions from corporation tax. Our procedures in respect of the above included: l Agreement of the financial statement disclosures to underlying supporting documentation; l Enquiries of management and those charged with governance relating to the existence of any non-compliance with laws and regulations; l Reviewing minutes of meeting of those charged with governance throughout the period for instances of non- compliance with laws and regulations; and l Reviewing the calculation in relation to Investment Trust compliance to check that the Company was meeting its requirements to retain its Investment Trust Status. Fraud We assessed the susceptibility of the financial statement to material misstatement including fraud. Our risk assessment procedures included: l Enquiry with management and those charged with governance regarding any known or suspected instances of fraud; l Obtaining an understanding of the Company’s policies and procedures relating to: – Detecting and responding to the risks of fraud; and – Internal controls established to mitigate risks related to fraud. l Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud; l Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and l Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these. Based on our risk assessment, we considered the areas most susceptible to be management override of controls including the risk of bias in the judgements and assumptions made in the valuation of investments. Our procedures in respect of the above included: l In addressing the risk of valuation of investments, the procedures set out in the Key Audit Matters section of our report; l In addressing the risk of management override of controls: – Reviewing estimates and judgements, including those applied in relation to the recoverability of long outstanding debtors and in relation to the valuation of unquoted investments to assess their appropriateness and the existence of any systemic bias; – Reviewing the unadjusted audit differences for indications of bias or deliberate misstatement; – Agreement of the financial statement disclosures to underlying supporting documentation; – Enquiry of the Administrator, Alternative Investment Fund Manager (AIFM) and those charged with governance regarding any known or suspected non-compliance with applicable laws and regulations; – Review of Board and Committee meeting minutes throughout the period for known or suspected insatnces of fraud; and – Obtaining an understanding of the control environment in monitoring compliance with laws and regulations. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non- compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. Independent Auditor’s Report continued Strategic report Governance Financial statements 53Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Chris Meyrick (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, United Kingdom 20 October 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Statement of Comprehensive Income Year ended 30 June 2023 Year ended 30 June 2022 Notes Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 (Losses)/gains on investments held at fair value through profit or loss 9 – (423) (423) – 21,435 21,435 Exchange gains – – – – 70 70 Income 2 8,542 878 9,420 4,765 – 4,765 Investment management fee 3 (445) (1,336) (1,781) (405) (1,214) (1,619) Other expenses 4 (698) (8) (706) (626) – (626) Net return before finance costs and taxation 7,399 (889) 6,510 3,734 20,291 24,025 Interest payable and similar charges 5 (197) (585) (782) (83) (241) (324) Net return on ordinary activities before taxation 7,202 (1,474) 5,728 3,651 20,050 23,701 Tax on ordinary activities 6 (494) – (494) (202) – (202) Net return attributable to equity shareholders 6,708 (1,474) 5,234 3,449 20,050 23,499 Return per ordinary share (pence) 8 10.03p (2.20p) 7.83p 5.16p 29.98p 35.14p The ‘total’ column of this statement represents the Company’s profit and loss account, prepared in accordance with UK GAAP. All revenue and capital items in this statement derive from continuing operations. A statement of other comprehensive income is not presented as all gains and losses of the Company have been reflected in the above Statement of Comprehensive Income. The accompanying notes are an integral part of the financial statements. 54 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Balance Sheet Notes As at 30 June 2023 £’000 As at 30 June 2022 £’000 Fixed assets Investments at fair value through profit or loss 9 149,465 146,373 Current assets Debtors 10 257 103 Cash at bank 3,857 6,111 4,114 6,214 Current liabilities Creditors: amounts falling due within one year 11 (1,019) (515) Loan: amount falling due within one year 12 (16,000) (17,000) (17,019) (17,515) Net assets 136,560 135,072 Capital and reserves Called-up share capital 13 16,722 16,722 Special distributable reserve 28,571 28,571 Share premium 4,851 4,851 Capital reserve 83,454 84,928 Revenue reserve 2,962 – Equity shareholders’ funds 136,560 135,072 Net asset value per share 14 204.16p 201.94p Company number: 02978531 These financial statements on pages 58 to 73 were approved by the Board of Directors and authorised for issue on 20 October 2023 and were signed on its behalf by: Helen Green Chair The accompanying notes are an integral part of the financial statements. 55 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Statement of Changes in Equity Notes Share Capital £’000 Share premium account £’000 Share distributable reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total £’000 For the year ended 30 June 2023 Balance at 30 June 2022 16,722 4,851 28,571 84,928 – 135,072 Net return/(loss) on ordinary activities after taxation – – – (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 For the year ended 30 June 2022 Balance at 30 June 2021 16,722 4,851 28,868 64,878 – 115,319 Net return/(loss) on ordinary activities after taxation – – – 20,050 3,449 23,499 Dividends paid 7 – – (297) – (3,449) (3,746) Balance at 30 June 2022 16,722 4,851 28,571 84,928 – 135,072 The special distributable reserve and the revenue reserve represents the amount of the Company’s reserves distributable by way of dividend. The accompanying notes are an integral part of the financial statements. 56 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Notes Year ended 30 June 2023 £’000 Year ended 30 June 2022 £’000 Operating activities Investment income received 7,814 4,559 Deposit interest received 95 4 Investment management fees paid (1,939) (1,438) Other expenses (642) (695) Net cash inflow from operating activities 5,328 2,430 Investing activities Purchases of investments (62,929) (64,641) Disposals of investments 60,851 68,425 Net cash (outflow)/inflow from operating activities (2,078) 3,784 Financing activities Equity dividends paid (3,746) (3,746) Loan facility (repayment)/drawdown 12 (1,000) 1,000 Loan interest (758) (314) Net cash outflow from financing activities (5,504) (3,060) (Decrease)/increase in net cash (2,254) 3,154 Reconciliation of net cash flow movement to movement in net cash Increase in cash in the year (2,254) 3,154 Exchange gains – 70 Movement in net cash in the year (2,254) 3,224 Opening cash at 1 July 6,111 2,887 Closing cash at 30 June 3,857 6,111 * Denoting the investment income received is net of Withholdings Tax. The accompanying notes are an integral part of the financial statements. Cash Flow Statement 57 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Notes to the Financial Statements for the year ended 30 June 2023 1 Accounting policies CQS Natural Resources Growth and Income PLC is a public company limited by shares, it was incorporated in accordance with the Laws of England and Wales, details of the registered office are included on page 81. A summary of the principal accounting policies adopted is set out below. (a) Basis of accounting The financial statements have been prepared in accordance with Financial Reporting Standard 102 and the Statement of Recommended Practice (“SORP”) for “Financial Statements of Investment Trust Companies and Venture Capital Trusts” issued by the Association of Investment Companies dated July 2022. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted. At each AGM of the Company, Shareholders are given the opportunity to vote on an ordinary resolution to continue the Company as an investment company. If any such resolution is not passed, the Board will put forward proposals at an extraordinary general meeting to liquidate or otherwise reconstruct or reorganise the Company. Given the performance of the Company, input from the Company’s major Shareholders and its Broker and considering that 98% of the Shareholder’s votes at the last AGM held in December 2022, were in favour of the continuation of the Company, the Board considers it likely that Shareholders will vote in favour of continuation at the forthcoming AGM. The Company’s existing loan facility with Scotiabank expired in September 2023 and the Company entered into a new facility with Scotiabank on 15 September, 2023 on comparable terms. After making enquiries of the Investment Manager and 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 geo-political and market uncertainty on the Company, the Directors consider 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 as described above. (b) Financial assets All investment assets are initially recognised at fair value net of transactions costs incurred. All financial assets are recorded at the date on which the Company became party to the contractual requirements of the financial asset. Subsequently, they are measured at fair value through profit or loss. All financial assets are recorded at the date on which the Company became party to the contractual requirements of the financial asset. Cash and cash equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risk of change in value. (c) Financial liabilities All financial liabilities are initially recognised at fair value net of transaction costs incurred. All financial liabilities are recorded on the date on which the Company becomes party to the contractual requirements of the financial liability. Non-derivative financial liabilities such as loan equivalents, trade and other payables with fixed and determinable payments and not quoted in an active market, are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition and are subsequently carried at amortised cost. Bank loans are recognised at cost, being the fair value of the consideration received. Any issue costs will be charged in the year in which they are incurred. The amounts falling due for repayment within one year are included under “Loan: amount falling due within one year” in the Balance Sheet and amounts falling due after one year are included under “Loan: amount falling due after more than one year” in the Balance Sheet. (d) Fixed asset investments Financial assets which comprise equity shares, preference shares, convertible bonds, 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 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 58 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 arising from a change in exchange rates, recognised in the Statement of Comprehensive Income. 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 (IPEV) valuation guidance. Unquoted financial assets are valued by the Directors 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. For convertible bonds this also includes consideration of their discounted cash flows and underlying equity value based on information provided by the Investment Manager. (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. 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 Statement of Comprehensive Income 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. (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. 59 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 1 Accounting policies continued 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 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) 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. The reserve is non-distributable. (d) Special distributable reserve – created from the Court cancellation of the share premium account which had arisen from premiums paid at launch. Available as distributable profits. (e) Revenue reserve – the net profit/(loss) arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve. Available for paying dividends. (l) Single segmental reporting The Company is engaged in a Single Segment of business, being investment business, consequently no business segmental analysis is provided. (m) Critical accounting estimates and judgements The only significant accounting estimate and judgement is the valuation of the unquoted and level 2 investments which is described in note 1(d) above. The main judgements and estimates used in calculating the price of the warrants are: Firstly, the derivative valuation model used to value the warrants. The Investment Manager has selected the Black Scholes Model to value the unlisted warrants as this is a widely accepted warrant valuation model to use. Secondly, the inputs into the Black-Scholes model as outlined below. For any unlisted securities the time to maturity to estimate the historic volatility required in the calculations underpinning the Black Scholes Pricing Model is used. The volatility of the underlying equity is obtained, and if this is not available or is not reflective, due to a lack of liquidity etc., then the Company will look to use the volatility of the parent company or an appropriate proxy. For any securities 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 Notes to the Financial Statements continued for the year ended 30 June 2023 60 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 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. In determining the risk free rate, the swap price discount curve is used for the relevant currency which is derived from data retrieved from Bloomberg. 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 the current portfolio as there is a wide range of time-to-maturities. – 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 contain Warrants listed and traded in a range of currencies. The entity has elected to show the cashflows relating to capital loan repayment/drawdowns on a net basis, given that the facility’s agreement dictates that the loan is a 3 month rolling credit facility, with the option to roll the principle drawdown after every 3 months and therefore any cash drawdown and payments are in relation to an instrument with a short term maturity. 2 Income 2023 £’000 2022 £’000 Income from investments UK dividend income 128 160 Preference share dividend income 985 492 Overseas dividend income 7,146 3,751 Overseas fixed interest 188 358 8,447 4,761 Other income † Deposit interest 95 4 95 4 Total income 8,542 4,765 Total income comprises: Dividends 8,259 4,403 Fixed interest securities 188 358 Deposit interest 95 4 8,542 4,765 * All investment income arises on investments valued at fair value through profit or loss. † Other income on financial assets not valued at fair value through profit or loss. 61 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 3 Investment Management Fees 2023 Revenue £’000 2023 Capital £’000 2023 Total £’000 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 Investment management fee 445 1,336 1,781 405 1,214 1,619 The Company’s Investment Manager is CQS which in turn has delegated this function to NCIM. 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 £138,000 (2022: £296,000) as per the Investment Management Agreement. Investment management fees have been allocated 75% to capital and 25% to revenue (2022: 75% capital and 25% revenue) in the Statement of Comprehensive Income. 4 Other Expenses 2023 Revenue £’000 2023 Capital £’000 2023 Total £’000 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 Secretarial and administration fees 154 – 154 141 – 141 Directors’ fees 137 – 137 131 – 131 Employer's National Insurance contributions 4 – 4 3 – 3 Auditor remuneration: – fees payable for the audit of the annual accounts 60 – 60 65 – 65 Tax advisor remuneration for tax services 15 – 15 10 – 10 Directors’ and Officers’ liability insurance 13 – 13 11 – 11 Registrar fees 21 – 21 19 – 19 Custody fees 34 – 34 32 – 32 Depositary fees 50 – 50 50 – 50 Promotional activities 50 – 50 40 – 40 Stock exchange fees 20 – 20 22 – 22 Advisory and legal fees 80 – 80 76 – 76 Other 60 8 68 26 – 26 698 8 706 626 – 626 No pension contributions were payable in respect of any of the Directors. The Company does not have any employees. Notes to the Financial Statements continued for the year ended 30 June 2023 62 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 5 Interest Payable 2023 Revenue £’000 2023 Capital £’000 2023 Total £’000 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 Interest on bank loan 197 585 782 83 241 324 Interest payable on the bank loan has been allocated 75% to capital and 25% to revenue (2022: 75% capital and 25% revenue) in the Statement of Comprehensive Income. 6 Tax on Ordinary Activities 2023 Revenue £’000 2023 Capital £’000 2023 Total £’000 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 Corporation tax – – – (163) – (163) Overseas taxation 494 – 494 365 – 365 494 – 494 202 – 202 Reconciliation of Tax Charge The tax in the Statement of Comprehensive Income for the year is lower than current standard rate of corporation tax in the UK of 25% (2022: 19%). A reconciliation of the total tax charge is set out below: 2023 Total £’000 2022 Total £’000 Return on ordinary activities before taxation 5.728 23,701 19% for 1 July 2022 to 31 March 2023 (2022: 19%) 25% for 1 April 2023 to 30 June 2023 (2022: 19%) 1,174 4,503 Effects of: Non-taxable income (1,693) (837) Non-taxable gains (93) (4,073) Overseas withholding tax 494 365 Excess management expenses (deferred tax not recognised) 610 420 Non-taxable exchange gains 2 (13) Corporation tax – (163) Current year tax charge 494 202 No provision for deferred taxation has been made in the current or prior accounting year. 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 on these items because of its investment trust status. The Company can offset management fees, other administrative expenses, and interest costs against taxable income to eliminate any tax charge on such income. The tax legislation refers to these as management expenses (management fees and other administrative expenses) and these are captured together under the heading ‘Excess management expenses’. Where there are not fully utilised, they can be carried forward to future years. As the Company is unlikely to generate future taxable profits to utilise these amounts, the Company cannot recognise an asset to reflect them, but must still disclose the deferred tax amount carries forward arising from any unutilised amounts. Consequently, the Company has not recognised a deferred tax assets totalling £3,604,000 (2022: £2,860,000) arising as a result of having excess management expenses of £14,417,000 (2022: £11,440,000) and based on a prospective tax rate of 25% (2022: 25%). 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 was 20.5%. 63 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 7 Dividends 2023 Revenue £’000 2022 Revenue £’000 Amounts recognised as distributions to equity holders in the year: Fourth interim dividend for the year ended 30 June 2022 of 1.82p (2021: 1.82p) per ordinary share 1,217 1,217 First interim dividend for the year ended 30 June 2023 of 1.26p (2022: 1.26p) per ordinary share 843 843 Second interim dividend for the year ended 30 June 2023 of 1.26p (2022: 1.26p) per ordinary share 843 843 Third interim dividend for the year ended 30 June 2023 of 1.26p (2022: 1.26p) per ordinary share 843 843 3,746 3,746 Amounts relating to the year but not paid at the year end: Fourth interim dividend for the year ended 30 June 2023 of 1.82p (2022: 1.82p) per ordinary share 1,217 1,217 Special interim dividend for the year ended 30 June 2023 of 3.00p (2022 - nil) per ordinary share. 2,007 – Total 3,224 1,217 In accordance with FRS 102 the fourth interim dividend has not been included as a liability in these accounts and will be recognised in the period in which it is 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 2023 £’000 Year ended 30 June 2022 £’000 Revenue return 6,708 3,449 Capital (loss)/return (1,474) 20,050 Total Return 5,234 23,499 Weighted average number of ordinary shares in issue 66,888,509 66,888,509 Revenue return per ordinary share (pence) 10.03 5.16 Capital (loss)/return per ordinary share (pence) (2.20) 29.98 Total return per ordinary share (pence) 7.83 35.14 For the years ended 30 June 2023 and 30 June 2022 there was no dilution to the revenue return per ordinary share. Additionally, for the years ended 30 June 2023 and 30 June 2022 there was no dilution to the capital return per ordinary share. Notes to the Financial Statements continued for the year ended 30 June 2023 64 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 9 Investments 2023 £’000 2022 £’000 Equity shares 143,740 139,005 Fixed income securities 1,416 1,875 Preference shares 4,064 5,024 Warrants 246 469 149,466 146,373 Included above are unquoted investments of value £157,000 (2022: £482,000). 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. However, the Company may continue to hold securities that cease to be quoted or listed if the Investment Manager considers this to be appropriate. All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses arise on investments 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: l Level 1 – investments quoted in an active market; l Level 2 – investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices; and l 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. If the market value of the Level 3 investments fell by 5 per cent, the impact on the profit or loss and the net asset value would have been negative £0.11 million (2022: negative £0.12 million). If the value of the Level 3 investments rose by the same amount, the effect would have been equal and opposite. 5% has been selected as this level of change is considered to be reasonable based on observations of current market conditions. As at 30 June 2023 Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 Financial assets at fair value through profit or loss Quoted equities 141,858 – 1,882 143,740 Quoted preference shares 4,064 – – 4,064 Quoted bonds – 1,406 10 1,416 Quoted warrants – 21 68 89 Unquoted warrants – – 157 157 Total 145,922 1,427 2,117 149,466 65 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 9 Investments continued As at 30 June 2022 Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 Financial assets at fair value through profit or loss Quoted equities 135,599 1,455 1,891 138,945 Quoted preference shares 5,024 – – 5,024 Quoted bonds – 1,763 112 1,875 Quoted warrants 47 – – 47 Unquoted equities – – 60 60 Unquoted warrants – – 422 422 Total 140,670 3,218 2,485 146,373 In line with the revised 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) on page 58. The Company received £60,851,000 (2022: £68,289,000) from investments sold in the year. Level 2 investments are priced using evaluated prices from a third-party vendor, together with a price comparison made to 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 – recognising that 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. 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. 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 % holding in the company. The respective interests in these holdings are detailed above. The gains and losses included in the above table have all been recognised within Gains on investments held at fair value in the Statement of Comprehensive Income on page 54. The Directors believe that the use of reasonable possible alternative assumptions for its Level 3 holdings would not result in a valuation significantly different from the valuation included in these financial statements. Gains/Losses on investments 2023 £’000 2022 £’000 Realised gains on sale 21,767 31,722 Unrealised losses on investments (22,190) (10,287) Gains on investments (423) 21,435 During the year the Company incurred transaction costs on the purchases of £43,000 (2022: £65,000) and transaction costs on sales of £42,000 (2022: £58,000). Notes to the Financial Statements continued for the year ended 30 June 2023 66 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 10 Debtors 2023 £’000 2022 £’000 Prepayments and accrued income 64 69 Other debtors 10 – Overseas tax recoverable 175 22 VAT recoverable 8 12 257 103 11 Creditors: Amounts Falling Due Within One Year 2023 £’000 2022 £’000 Amounts due to brokers 620 52 Other creditors 399 463 1,019 515 Included within other creditors is £138,000 (2022: £296,000) due to CQS in respect of management fees. 12 Bank Loan Facility 2023 £’000 2022 £’000 Bank loan facility 16,000 17,000 £16 million was drawn down at an indicative SONIA rate of 5.878% fixed until 15 September 2023. As at the date this Report was approved, £14 million was drawn down under this facility at an indicative SONIA rate of 5.186% fixed until 15 December 2023. The Company has an unsecured loan facility with Scotiabank Europe Plc (“Scotiabank”). The previous facility expired on 17 September 2023 and has been renewed for a further year expiring on 15 September 2024. During the year the covenants of the loan facility have been met. The following are the covenants for the facility: l the borrower shall not permit the adjusted asset coverage to be less than 3.5 to 1; l the borrower shall not permit the net asset value to be less than £45 million; and l the loan facility is rolled over every three months and can be cancelled at any time. 67 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 13 Share Capital 2023 Shares 2023 £’000 Allotted, called up and fully-paid Total issued ordinary shares of 25p each as at 1 July 2022 66,888,509 16,722 Total issued ordinary shares of 25p each as at 30 June 2023 66,888,509 16,722 Capital management policies and procedures The Company’s capital management objectives are: l to ensure that the Company will be able to continue as a going concern; and l 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, maximum gearing during the course of the year was 14.3% and was 12.2% at 30 June 2023. 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. The capital of the Company is managed in accordance with its investment policy detailed in the Strategic Review on page 23. 14 Net Asset Value per Ordinary Share The net asset value per ordinary share is based on net assets of £136,560,000 (2022: £135,072,000 ) and on 66,888,509 (2022: 66,888,509) ordinary shares, being the number of ordinary shares in issue at the year end. 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 cash at bank, and other payables is represented by their carrying value in the Balance Sheet shown on page 55. 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 Notes to the Financial Statements continued for the year ended 30 June 2023 68 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 (v) liquidity risk, being the risk that the bank may demand re-payment 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: 2023 £’000 2022 £’000 Financial assets Investment portfolio 149,465 146,373 Cash at bank 3,857 6,111 Accrued income 38 53 Other debtors 219 50 Financial liabilities Loan 16,000 17,000 Amounts due to brokers 620 52 Other creditors 399 463 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 16 to 18. If the investment portfolio valuation fell by 5% at 30 June 2023 (5% 2022), the impact on the profit or loss and the net asset value would have been negative £7.5 million (2022: negative £7.3 million). If the investment portfolio valuation rose by 5% the impact would have been 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. 5% sensitivity has been selected as this level of change is considered to be reasonable based on observations of current market conditions. 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 to 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 to its purchase level and a profit or loss may be incurred. 69 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 15 Financial Instruments continued 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 to 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 had increased by 1%, the impact on the profit or loss would have been a loss of £122,000 (2022: £108,000). If the bank base rate had decreased by 1%, the impact on the profit or loss would have been 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 the bank facility to meet any liabilities due. The Company has borrowed in sterling at a variable rate based on the UK bank base 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 has fixed interest liabilities. The fixed interest liabilities are disclosed in note 9. 2023 £’000 2023 Weighted average interest rate (%) 2023 Weighted average period for which the rate is fixed (years) 2022 £’000 2022 Weighted average interest rate (%) 2022 Weighted average period for which the rate is fixed (years) Assets: Fixed income and convertible securities 1,416 7.6 2.3 1,875 7.5 2.0 * 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 pounds 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. Foreign currency exposure at 30 June 2023 was as follows: Notes to the Financial Statements continued for the year ended 30 June 2023 70 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 30 June 2023 Investments £’000 Cash £’000 Net current assets £’000 Total £’000 Sensitivity Impact 5% £’000 Sensitivity Impact -5% £’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) European 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) 30 June 2022 Investments £’000 Cash £’000 Net current assets £’000 Total £’000 Sensitivity Impact 5% £’000 Sensitivity Impact -5% £’000 Canadian Dollar 60,651 – (28) 60,623 3,031 (3,031) US Dollar 21,767 141 85 21,993 1,100 (1,100) Australian Dollar 35,404 3 – 35,407 1,770 (1,770) Norwegian Krone 10,582 – – 10,582 529 (529) European Euro 3,732 – 111 3,843 192 (192) Brazilian Real – 16 – 16 1 (1) 132,136 160 168 132,464 6,623 (6,623) If the value of the currencies had strengthened against the pound in the portfolio by 5 per cent, the impact on the profit or loss and the net asset value would have been negative £6.8 million (2022: negative £6.6 million). If the value of sterling had strengthened by the same amount the effect would have been equal and opposite. 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. 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. 71 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 15 Financial Instruments continued At the reporting date, the Company’s financial assets exposed to credit risk amounted to the following: 2023 £’000 2022 £’000 Fixed interest investments 1,416 1,875 Cash at bank 3,857 6,111 Interest, dividends and other receivables 257 103 5,530 8,089 As at 30 June 2023 and as at 30 June 2022 there were no debtors that were past due. 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. BNP Paribas is rated A+ by Standard & Poor’s (04/2023), AA- by Fitch (07/2023) and Aa3 rated by Moody’s (07/2022). There were no significant concentrations of credit risk to counterparties as at 30 June 2023 and as at 30 June 2022. No individual investment exceeded 5.2 per cent of total investments as at 30 June 2023 (2022: 7.3 per cent). As at 30 June 2023, for equity investments representing >1% of the total investments, the Company held 3 per cent or more of issued share capital of the following companies: Value per CQS £’000 Percentage held 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% 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. Notes to the Financial Statements continued for the year ended 30 June 2023 72 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 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: 30 June 2023 Three months or less £’000 More than three months but less than one year £’000 More than one year £’000 Total £’000 Current liabilities 1,019 – – 1,019 Loan 16,000 – – 16,000 17,019 – – 17,019 30 June 2022 Three months or less £’000 More than three months but less than one year £’000 More than one year £’000 Total £’000 Current liabilities 515 – – 515 Loan – – 17,000 17,000 515 – 17,000 17,515 16 Net Debt Reconciliation As at 30 June 2022 £’000 Currency differences £’000 Cash flows £’000 As at 30 June 2023 £’000 Cash at bank 6,111 – (2,254) 3,857 Bank loan repayable after one year (17,000) – 1,000 (16,000) (10,889) – (1,254) (12,143) As at 30 June 2021 £’000 Currency differences £’000 Cash flows £’000 As at 30 June 2022 £’000 Cash at bank 2,887 70 3,154 6,111 Bank loan repayable after one year (16,000) – (1,000) (17,000) (13,113) 70 2,154 (10,889) 73 Strategic report Governance Financial statements Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 17 Related Party Transactions The following are considered related parties: the Board of Directors (“the Board”) and CQS/New City Investment Managers (“the Investment Manager”). Details of the fee arrangement with the Investment Manager is 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 44 and 45, 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 45. The balance due to Directors for fees at the year end was £8,000 (2022: £10,000). 18 Post Balance Sheet Events The Board has evaluated subsequent events for the Company through to 20 October 2023, the date the financial statements were available to be issued, and has concluded that the material events listed below do not require adjustment of the financial statements. Dividend declaration The fourth interim dividend of 1.82 pence per share was announced on 19 July 2023 and paid on 31 August 2023 to shareholders on the register on 28 July 2023, having an ex-dividend date of 27 July 2023. The first interim dividend of 1.26 pence per share was announced on 12 October 2023 payable on 27 November 2023 to shareholders on the register on 27 October 2023, having an ex-dividend date of 26 October 2023. Special Dividend The Board announced a special dividend of 3.00 per share on 13 September 2023 and paid on 16 October 2023 to shareholders on the register on 22 September 2023, having an ex-dividend date of 21 September 2023. Change of Administrator and Company Secretary The Board have decided to move its Administrator functions from 1 November 2023 from BNP Paribas S.A to Frostrow Capital. In addition, Frostrow will take on a marketing role on behalf of the Company. Scotiabank Loan Renewal The Board renewed its loan facility with Scotiabank on 15 September 2023 for a further year. Notes to the Financial Statements continued for the year ended 30 June 2023 74 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Strategic report Governance Financial statements 75Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Asset Cover The value of a company’s net assets available to repay a certain security. Asset cover is usually expressed as a multiple and calculated by dividing the net assets available by the amount required to repay the specific security. Discount/Premium 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. Dividend Cover Earnings per share (per the revenue column) divided by dividends per share expressed as a ratio. Dividend Yield The annual dividend expressed as a percentage of the share price. Gearing Total assets (as below) less all cash (including UK Treasury Stock) divided by shareholders’ funds. Net Asset Value or NAV The value of total assets less liabilities. Liabilities for this purpose included current and long-term liabilities. To calculate the net asset value per Ordinary share the net asset value is divided by the number of shares in issue. Ongoing Charges Ratio 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. Prior Charges The name given to all borrowings including debentures, loan and short-term loans and overdrafts that are to be used for investment purposes, reciprocal foreign currency loans, currency facilities to the extent that they are drawn down, index-linked securities, and all types of preference or preferred capital and the income shares of split capital trusts, irrespective of the time until repayment. Price/Earnings Ratio The ratio is calculated by dividing the middle-market price per share by the earnings per share. The calculation assumes no change in earnings but in practice the multiple reflects the stock market’s view of a company’s prospects and profit growth potential. Redemption Yield The measure of the annualised total return on the current price of a security up to the date of its repayment. The calculation is based on aggregated income and capital returns, no account being taken of taxation. Total Assets Total assets less current liabilities (excluding prior charges as defined above). Total Return The share total return involves reinvesting the net dividend in the month that the share price goes ex-dividend. The NAV total return involves investing the same net dividend in the NAV of the trust on the date to which that dividend was earned, e.g. quarter end, half year or year-end date. Glossary of Terms and Definitions 76 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Notice of Annual General Meeting Notice is hereby given that the 28th Annual General Meeting of CQS Natural Resources Growth and Income PLC will be held at One Fleet Place, London EC4M 7WS on Friday, 15 December 2023 at 11.00am to consider the following resolutions. To consider and, if thought fit, pass the following resolutions which will be proposed as Ordinary Resolutions: 1. To receive the Directors’ report and financial statements for the year ended 30 June 2023, together with the Auditor’s report thereon. 2. To approve the Company’s Dividend Policy. 3. To approve the Directors’ Remuneration Report for the year ended 30 June 2023. 4. To re-elect Helen Green, who retires annually, as a Director. 5. To re-elect Carole Cable, who retires annually, as a Director. 6. To re-elect Paul Cahill, who retires annually, as a Director. 7. To re-elect Christopher Casey, who retires annually, as a Director. 8. To re-elect Alun Evans, who retires annually, as a Director. 9. To re-appoint BDO LLP as Independent Auditor of the Company. 10. To authorise the Audit Committee to determine the remuneration of the Independent Auditor. 11. That pursuant to Article 80 of the Company’s Articles of Association, with effect from the financial year commencing 1 July 2023, each of the Directors shall be paid a fee for their services at such a rate (if any) as the Board shall from time to time determine provided that Directors’ remuneration shall not exceed in aggregate £200,000 (excluding amounts payable under any other provision of the Articles) per annum. 12. That the Company continues as an investment trust pursuant to the undertaking given by the Board in 2003. 13. That, in substitution for any existing authority, but without prejudice to the exercise of any such authorisation prior to the date of this resolution, the Directors of the Company be and they are hereby generally and unconditionally authorised, in accordance with Section 551 of the Companies Act 2006 (the “Act”), to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company (together being “relevant securities”), up to an aggregate nominal amount of £1,672,000, such authorisation to expire at the conclusion of the annual general meeting of the Company to be held in 2024, unless previously revoked, varied or renewed by the Company in general meeting, save that the Company may, at any time prior to the expiry of such authorisation, make an offer or enter into an agreement which would or might require relevant securities to be allotted or granted after the expiry of such authority and the Directors of the Company may allot or grant relevant securities in pursuance of such an offer or agreement as if such authorisation had not expired. To consider and if thought fit, pass the following resolutions which will be proposed as Special Resolutions: 14. That, subject to the passing of resolution 12 above, and in substitution for any existing power but without prejudice to the exercise of any such power prior to the date of this resolution, the Directors of the Company be and they are hereby empowered, in accordance with Sections 570 and 573 of the Companies Act 2006 (the “Act’), to allot equity securities (as defined in Section 560 of the Act) either pursuant to the authorisation under Section 551 of the Act conferred on the Directors of the Company by such resolution numbered 12, or by way of a sale of treasury shares, in each case for cash, as if Section 561(1) of the Act did not apply to any such allotment: (i) other than pursuant to sub-paragraph (ii) below, up to an aggregate nominal amount of £836,100 (representing approximately 5 per cent of the present issued share capital of the Company); or (ii) in connection with an offer of equity securities open for acceptance for a period fixed by the Directors of the Company to the holders of ordinary shares in the share capital of the Company on a fixed record date in proportion (or as nearly as practicable) to their respective holdings of ordinary shares (but subject to such exclusions or other arrangements as the Directors of the Company may consider necessary or expedient to deal with any legal problems under or resulting from the application or apparent application of the laws of any territory or the requirements of any regulatory body or any stock exchange in any territory or in connection with fractional entitlements or otherwise howsoever); such power to expire at the conclusion of the annual general meeting of the Company to be held in 2024 unless previously revoked, varied or renewed by the Company in general meeting, save that the Company may, at any time prior to the expiry of such power, make an offer or enter into an agreement which would or might require equity securities to be allotted after the expiry of such power and the Directors of the Company may allot equity securities in pursuance of such an offer or agreement as if such power had not expired. Strategic report Governance Financial statements 77Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 15. That, in substitution for any existing authority but without prejudice to the exercise of any such authority prior to the date of this resolution, the Company be and is hereby authorised in accordance with Section 701 of the Companies Act 2006 (the “Act”) to make market purchases (within the meaning of Section 693 of the Act) of ordinary shares of 25p each in the capital of the Company and to cancel or hold in treasury such shares provided that: (i) the maximum number of ordinary shares hereby authorised to be purchased shall be 14.99 per cent of the issued share capital of the Company as at the date of the passing of this resolution; (ii) the minimum price which may be paid for an ordinary share is 25p; (iii) the maximum price (exclusive of expenses) which may be paid for an ordinary share shall not be more than the higher of (i) 5 per cent above the average of the middle market quotations for an ordinary share on the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which any such purchase is made and (ii) the higher of the last independent trade and the highest current bid on the London Stock Exchange; (iv) the authority hereby conferred shall expire on 31 December 2024 or, if earlier, at the conclusion of the Annual General Meeting of the Company to be held in 2024 unless such authority is renewed, varied or revoked by the Company in general meeting prior to such time; and (v) the Company may make a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of ordinary shares pursuant to any such contract. BNP PARIBAS S.A., JERSEY BRANCH Secretary 10 Harewood Avenue London, NW1 6AA 20 October 2023 Notice of Annual General Meeting continued 78 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Notice of Annual General Meeting continued Notes 1. Information about this meeting is available from the Investment Manager’s website www.ncim.co.uk/city-natural-resources-high-yield-trust/ 2. A member entitled to attend and vote at the AGM is entitled to appoint one or more proxies to attend, speak and vote in their stead. Where more than one proxy is appointed, each proxy must be appointed to exercise the rights attached to a different Share or Shares. A proxy need not be a member of the Company. It is recommended that shareholders exercise their votes by means of registering them with the Company’s registrar ahead of the meeting, online or by completing paper proxy forms, and appoint the Chair of the meeting as their proxy. 3. A form of proxy is enclosed for use at the above meeting. Completion and return of the form of proxy will not prevent a member from attending the meeting and voting in person. To be effective, the form of proxy, duly executed, must be lodged at the address shown on the form of proxy not later than 48 hours (excluding non-working days) before the time of the meeting. 4. The right to vote at the meeting is determined by reference to the Company’s register of Members as at 6.30 pm on 13 December 2023. Changes to entries on the register after that time shall be disregarded in determining the rights of any member to attend and vote at the meeting. 5. As at 9.00 am on 20 October 2023, the Company’s issued share capital comprised 66,888,509 ordinary shares of 25 pence each. Each ordinary share carries the right to one vote at a general meeting of the Company, and therefore, the total number of voting rights in the Company as at 9.00 am on 20 October 2023 is 66,888,509. 6. As a member, you have the right to put questions at the meeting relating to the business being dealt with at the meeting. 7. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between them and the member by whom they were nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, they may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights. 8. The statement of the rights of members in relation to the appointment of proxies in notes 2 and 3 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by members of the Company. 9. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the meeting and any adjournment(s) thereof by utilising the procedures described in the CREST Manual which can be viewed at www.euroclear.com. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 10. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID-RA19) by the latest time for the receipt of proxy appointments specified in note 3 above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. 11. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that their CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. Strategic report Governance Financial statements 79Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 12. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended). 13. Institutional investors may be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. Further information regarding Proxymity can be found on www.proxymity.io. Proxies must be lodged by 11 am on Wednesday 13 December 2023 in order to be considered valid. Before appointing a proxy via this process investors will need to have agreed to Proxymity’s associated terms and conditions. It is important to read these carefully as investors will be bound by them and they will govern the electronic appointment of proxies. 14. No Director has a service contract with the Company but copies of Directors’ letters of appointment will, be available inspection for at least 15 minutes prior to the meeting and during the meeting. 15. Under section 338 of the Companies Act 2006, members may require the Company to give, to members of the Company entitled to receive this notice of meeting, notice of a resolution which may properly be moved and is intended to be moved at the meeting. Under Section 338A of that Act, members may request the Company to include in the business to be dealt with at the meeting any matter (other than a proposed resolution) which may properly be included in the business. 16. It is possible that, pursuant to requests made by members of the Company under Section 527 of the Companies Act 2006, the Company may be required to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the meeting or (ii) any circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with Section 437 of the Companies Act 2006. The Company may not require the members requesting any such website publication to pay its expenses in complying with Sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under Section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required under Section 527 of the Companies Act 2006 to publish on a website. 17. In accordance with Section 311A of the Companies Act 2006, the contents of this notice of meeting, details of the total number of shares in respect of which members are entitled to exercise voting rights at the AGM and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the Company after the date of this notice will be available on the Company’s website www. ncim.co.uk. 18. You may not use any electronic address provided either in this Notice of Meeting or any related documents (including the Form of Proxy) to communicate with the Company for any purposes other than those expressly stated. 80 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 CQS Natural Resources Growth and Income PLC For the year ended 30 June 2023 Risk management systems The Company’s Annual Report and Pre-investment Disclosure Document sets out the risks to which the Company is exposed. The UK Investment Manager (CQS (UK) LLP) employs risk management disciplines which monitor the Company’s portfolio and to quantify and manage the associated market and other risks. A permanent independent department has been established by the UK Investment Manager to perform the risk management function. The risk management and performance analysis team (“RMPA”) is led by the Chief Risk Officer and is functionally and hierarchically separate from the operating units of the portfolio managers of the Company. RMPA is a dedicated control function over the operating units of the Investment Manager and is not involved in the performance activities of the Company. RMPA has designed, documented and implemented effective risk management policies, processes and procedures in order to identify, quantify, analyse, monitor, report on and manage all material risks relevant to the Company’s investment strategy. The systems include third party vendor applications such as Tradar, Sungard Front Arena and MSCI Risk Metrics, complemented with a number of proprietary applications. Leverage For the purposes of the AIFM Directive, leverage is any method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a percentage of the Company’s exposure to its net asset value and is calculated on a gross and commitment method. Under the gross method, exposure represents the sum of the Company’s positions after deduction of cash balances, without taking account of any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting positions is offset against each other. The leverage limits are set by the AIFM and approved by the Board. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings. The Company’s maximum limits and actual leverage levels are shown below: Leverage exposure Gross method Commitment method Maximum limit (AIFM) 200% 200% Maximum limit (Board) 200% 200% Actual at 30 June 2023 110% 110% Material changes to information required to be made available to investors of the Company No material changes since since 31 December 2022. Assets of the Company subject to special arrangements arising from their illiquid nature There are no assets of the Company which are subject to special arrangements arising from their illiquid nature. Remuneration The AIFM has adopted a remuneration policy which meets the requirements of the Directive and has been in place for the current financial year of the Company. The variable remuneration period of the AIFM ended on 31 December 2022. The AIFM’s remuneration process is overseen by the AIFM’s remuneration committee (comprised predominately of independent non-executive parties). An internal working group encompassing senior management is responsible for gathering relevant information (both quantitative and qualitative) to evaluate the performance (both short and long term) of individuals, teams and the AIFM as a whole, against external market benchmarks and to utilise this to develop proposals for fixed and variable remuneration for all staff. The remuneration committee receives these proposals and the supporting information and is responsible for independently reviewing and scrutinising the proposals and evidence provided in line with the AIFM’s stated objectives and developing its final recommendations for delivery to the governing body of the AIFM and other entities associated with the AIFM. The variable remuneration of all staff in excess of a threshold, which includes those individuals categorised as remuneration code staff (“code staff”), is subject to the following: l deferred payment of up to 50% of the variable remuneration for a period of 3 years; l deferred remuneration is linked to funds managed by the AIFM; l the breaching of certain covenants may lead to forfeiture of deferred remuneration; and l a claw-back provision of deferred remuneration in certain circumstances including future performance issues by the individuals. Report of the UK Investment Adviser Relating to Matters under the Alternative Investment Fund Managers’ Directive Strategic report Governance Financial statements 81Annual Report 30 June 2023 | CQS NATURAL RESOURCES GROWTH AND INCOME PLC Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 The below information provides the total remuneration paid by the AIFM (and any delegates) for the year 31 December 2022. This has been presented in line with the information available to the Company. There is no allocation made by the AIFM to each AIF and as such the disclosure reflects the remuneration paid to individuals who are partly or fully involved in the AIF, as well as staff of any delegate to which the firm has delegated portfolio management and/or risk management responsibilities in relation to the AIF. Of the total AIFM remuneration paid of $92.9m for the year ended 31 December 2022 to 248 individuals (full time equivalent), $34.5m has been paid as fixed remuneration determined based upon the FCA guidance with the remainder being paid as variable remuneration. The AIFM has assessed the members of staff whom it determines to be code staff in line with UK AIFMD as reflected in SYSC 19b.3.4R. Senior management and staff engaged in the control functions are identified based upon their roles and responsibilities within the AIFM and the delegates. With respect to investment professionals, in determining whether such staff are code staff, due consideration is taken of the allocated capital and trading limits that apply to the funds managed and whether the individuals report into and seek consent for investment decisions from others who are themselves code staff. There are 16.6 individuals (full time equivalent) who meet this definition and these individuals have collectively been compensated $45.1m. Not all individuals are directly remunerated by the AIFM due to the structure of the AIFM entity, however in the interests of meeting the underlying requirement of this disclosure all staff involved have been assessed as if directly remunerated by the AIFM. 82 CQS NATURAL RESOURCES GROWTH AND INCOME PLC | Annual Report 30 June 2023 Job No: 50387 Proof Event: 17 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Corporate Information Registered Number 02978531 Registered in England & Wales Registered Office 10 Harewood Avenue London NW1 6AA Directors Helen Green (Chair) Carole Cable Paul Cahill Christopher Casey (Chair, Audit Committee) Alun Evans Investment Manager CQS (UK) LLP 4th Floor One Strand London WC2N 5HR Secretary and Administrator (until 31 October 2023) BNP Paribas S.A, Jersey Branch IFC 1 The Esplanade St Helier Jersey JE1 5BP Secretary and Administrator (from 1 November 2023) Frostrow Capital 25 Southampton Buildings London WC2A 1AL Solicitors Dentons UK and Middle East LLP One Fleet Place London EC4M 7WS Financial Adviser and Corporate Broker Cavendish Capital Markets 1 Bartholomew Close London EC1A 7BL Bankers BNP Paribas 10 Harewood Avenue London NW1 6AA Scotiabank 201 Bishopsgate London EC2M 3NS Custodian and Depositary BNP Paribas 10 Harewood Avenue London NW1 6AA Auditor BDO LLP 55 Baker Street London W1U 7EU Tax Advisor KPMG LLP 20 Castle Street Edinburgh EH1 2EG AIFM CQS (UK) LLP 4th Floor One Strand London WC2N 5HR Registrars Equiniti Aspect House Spencer Road, Lancing West Sussex BN99 6DA Shareholder helpline UK: 0371 384 2030 Shareholder helpline overseas: +44 121 415 7047 Shareholder Information Net Asset Value/Share Price The net asset value of the Company’s ordinary shares may be obtained by contacting CQS on 0207 201 6900 or by email at [email protected] or alternatively by visiting the Company’s web site at www.ncim.co.uk. Website www.ncim.co.uk * Calls from outside the UK will be charged at international rates. Other telephone provider costs may vary. Lines open 8.30am to 5.30pm, Monday to Friday. Job No: 50387 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: CQS Project Title: Annual Report 2023 T: 0207 055 6500 F: 020 7055 6600 Printed by Park Communications on FSC® certified paper. Park works to the EMAS standard and its Environmental Management System is certified to ISO 14001. This publication has been manufactured using 100% offshore wind electricity sourced from UK wind. 100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remaining 1% used to generate energy. This document is printed on Revive 100 Silk containing 100% recycled fibre. The FSC® label on this product ensures responsible use of the world’s forest resources. This is a certified climate neutral print product for which carbon emissions have been calculated and offset by supporting recognised carbon offset projects. The carbon offset projects are audited and certified according to international standards and demonstrably reduce emissions. The climate neutral label includes a unique ID number specific to this product which can be tracked at www.climatepartner.com, giving details of the carbon offsetting process including information on the emissions volume and the carbon offset project being supported. CQS Natural Resouces Growth and Income PLC Annual Report 2023
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