Final Results
BlackRock Commodities Income Investment Trust plc
Annual Results Announcement for the year ended 30 November 2016
PERFORMANCE RECORD
Financial Highlights
| Attributable to ordinary shareholders | As at 30 November 2016 |
As at 30 November 2015 |
Change % |
| Assets | |||
| Net assets (£’000)* | 98,833 | 69,430 | 42.3 |
| Net asset value per ordinary share | 83.57p | 60.08p | 39.1 |
| – with income reinvested | 51.9 | ||
| -------- | -------- | -------- | |
| Ordinary share price (mid-market) | 82.75p | 59.75p | 38.5 |
| – with income reinvested | 51.4 | ||
| ======== | ======== | ======== |
| Year ended 30 November 2016 |
Year ended 30 November 2015 |
Change % |
|
| Revenue | |||
| Net revenue after taxation (£’000) | 5,197 | 6,940 | (25.1) |
| Revenue return per ordinary share | 4.43p | 6.32p | (30.0) |
| -------- | -------- | -------- | |
| Interim dividends | |||
| 1st interim | 1.50p | 1.50p | – |
| 2nd interim | 1.50p | 1.50p | – |
| 3rd interim | 1.00p | 1.50p | (33.3) |
| 4th interim | 1.00p | 1.50p | (33.3) |
| -------- | -------- | -------- | |
| Total dividends paid and payable | 5.00p | 6.00p | (16.7) |
| ======== | ======== | ======== |
* The change in net assets reflects market movements and the issue of 2,700,000 ordinary shares in the year.
CHAIRMAN’S STATEMENT
OVERVIEW
The commodities sector has enjoyed a resurgence this year, buoyed by economic stimulus measures in China and in spite of continued volatility in global markets. Oil has recovered through 2016, culminating in the OPEC deal which appears to have stabilised the price of crude oil. Against this improved backdrop, commodity producers have taken the opportunity to strengthen their balance sheets and reduce debt.
The unexpected outcomes of both the EU referendum in the UK and the US presidential election have increased expectations that protectionist economic policies will be adopted in Europe and the US. In turn, these would be likely to drive up commodity prices. In addition, the market is anticipating significant infrastructure spending in the US under President Trump. Consequently, reflation is emerging as a key economic theme, although concerns remain over the sustainability of the recent improvement in global growth.
Additional information on commodity markets and key contributors and detractors to portfolio performance are set out in the Investment Managers’ report.
PERFORMANCE
| One year |
Three years |
Five years % |
Since inception |
|
| Net Asset Value (with income reinvested | 51.9 | -1.4 | -12.0 | 52.7 |
| Share price (with income reinvested) | 51.4 | -5.8 | -10.6 | 48.8 |
During the year, the Company’s net asset value per share (NAV) has risen by 51.9%, including reinvestment of dividends. The share price produced a total return of 51.4%. The Company’s objectives are to achieve both an annual dividend target and, over the long term, capital growth. The Board does not benchmark performance against mining and energy sector indices as income generation is not within their scope. For illustrative purposes, over the same period, the Euromoney Global Mining Index rose by 85.5% and the MSCI World Energy Index by 28.8% in sterling terms. A 50:50 composite of the two indices represented an increase of 66.0% for the year to 30 November 2016. Additional information on the performance of the Company is set out in the performance record and the chart on page 31 of the Directors Remuneration Report contained within the Annual Report.
Since the year end and up to the close of business on 30 January 2017, the Company's NAV has returned 5.1% and the share price has returned 9.4% (all calculations with dividends reinvested).
REVENUE RETURN AND DIVIDENDS
The Company’s revenue return per share for the year amounted to 4.43p (2015: 6.32p). It remains the Company’s intention to pay four quarterly dividends. Details of the dividends paid for the 2015 and 2016 financial years are set out in note 7.
The Board announced on 14 March 2016 that, as falling commodity prices had forced many companies to reduce or cancel their dividend payments, it had decided to revise its 2016 dividend target, paying a first and second quarterly interim dividend of 1.50 pence, followed by third and fourth quarterly interim dividend payments of 1.00 pence, making a total of 5.00 pence per ordinary share for the year as a whole (2015: target of 6.00 pence). The Board’s current target is to declare quarterly dividends of at least 1.00 pence in the year to November 2017, making a total of at least 4.00 pence for the year as a whole. This target represents a yield of 4.8% based on the share price as at the close of business on 30 November 2016. The Board is prepared to use revenue reserves to meet this target if portfolio income alone is insufficient.1
TENDER OFFERS
The Directors of the Company have discretion to make semi-annual tender offers at the prevailing NAV, less 2%, for up to 20% of the issued share capital in August and February of each year.
The Board announced on 14 June 2016 that it had decided not to proceed with a tender offer in August 2016 and on 16 December 2016 that the tender offer in February 2017 would not be implemented. During the year ended 30 November 2016, the Company’s shares traded at an average discount to NAV of 1.3% compared to a discount of 2.0% to NAV, the price at which any tender offer would be made, therefore it was not in the interests of shareholders for any tender to be implemented.
Resolutions for the renewal of the Company’s semi-annual tender authorities will be put to shareholders at the forthcoming Annual General Meeting (AGM).
SHARE CAPITAL
The Company is committed to the regular issue of ordinary shares at a premium to NAV as a way of ensuring that any premium to NAV is maintained within a sensible range, to provide ongoing market liquidity and to do so in a manner that is accretive to shareholders.
During the financial year ended 30 November 2016, the Company issued 2,700,000 ordinary shares at an average price of 58.74p per share for a total consideration of £1,586,000, before the deduction of issue costs. The ordinary shares were issued at an average premium of 3.3% to the cum income NAV at the close of business on the business day prior to each issue and at a premium to the estimated cum income NAV at the time of each transaction. It should be noted that the issue of new ordinary shares during the year has provided a gross capital uplift of £54,000, including income of £13,000.
Since 30 November 2016, and up to the close of business on 31 January 2017, a further 500,000 ordinary shares have been issued for consideration of £438,000, before the deduction of issue costs. The ordinary shares were issued at an average premium of 2.0% to the cum income NAV at the close of business on the previous business day and at a premium to the estimated cum income NAV at the time of the transaction. At the forthcoming AGM the Company will be seeking the authority to allot new ordinary shares or sell from treasury ordinary shares representing up to 10% of the Company’s issued ordinary share capital.
GEARING
The Company operates a flexible gearing policy which depends on prevailing market conditions. The maximum gearing used during the year was 5.9% and at 30 November 2016 net gearing was 3.7%. Gearing has been calculated in accordance with AIC guidelines and on a net basis.
ANNUAL GENERAL MEETING
The Company’s AGM will be held on Tuesday, 14 March 2017 at 10.30 a.m. at the offices of BlackRock, 12 Throgmorton Avenue, London EC2N 2DL. Details of the business of the meeting are set out in the Notice of Meeting on pages 77 to 80 of the Annual Report. The portfolio managers will make a presentation to shareholders on the Company’s progress and the outlook for the year.
OUTLOOK
The outlook for the natural resources sector has improved significantly over the year under review, with improving global economic growth driving up demand. This, coupled with the fact that companies have significantly cut capital expenditure to reduce costs in leaner times, has pushed prices higher and driven a resurgence across the sector. Oil prices also gained strength as year-on-year declines in non-OPEC production emerged; the recent OPEC deal appears to have removed much of the downside risk in oil-related equities, as long as it is adhered to.
Looking ahead for 2017, the Managers are optimistic. Although commodity prices could still be derailed by an economic recession in China, or a collapse of the OPEC deal, on balance there is a reasonable expectation that neither is likely to transpire. Overall, companies in the natural resources sector have stronger financial fundamentals than a year ago, and the sector seems well positioned to deliver for investors.
ED WARNER
Chairman
1 February 2017
-
This is a target and should not be interpreted as a profit or dividend forecast.
STRATEGIC REPORT
The Directors present the Strategic Report of the Company for the year ended 30 November 2016. The aim of the Strategic Report is to provide shareholders with the information required to enable them to assess how the Directors have performed in their duty to promote the success of the Company during the year under review.
BUSINESS AND MANAGEMENT OF THE COMPANY
BlackRock Commodities Income Investment Trust plc (the Company) is an investment trust company that has a premium listing on the London Stock Exchange. Its principal activity is portfolio investment. The Company’s wholly owned subsidiary is BlackRock Commodities Securities Income Company Limited. Its principal activities are option writing and investment dealing.
Investment trusts, like unit trusts and OEICs, are pooled investment vehicles which allow exposure to a diversified range of assets through a single investment thus spreading, although not eliminating, investment risk.
In accordance with the Alternative Investment Fund Managers Directive (AIFMD) the Company is an Alternative Investment Fund (AIF). BlackRock Fund Managers Limited (the Manager) is the Company’s Alternative Investment Fund Manager. The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager. The Manager, operating under guidelines determined by the Board, has direct responsibility for decisions relating to the running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.
The Company delegates fund accounting services to BlackRock Investment Management (UK) Limited (BIM (UK) or the Investment Manager), which in turn sub-delegates these services to Bank of New York Mellon (International) Limited and also sub-delegates registration services to the Registrar, Computershare Investor Services PLC. Other service providers include the Depositary, BNY Mellon Trust & Depositary (UK) Limited. Details of the contractual terms with these service providers are set out in the Directors’ Report contained within the Annual Report.
BUSINESS MODEL
The Company invests in accordance with the investment objective. The Board is collectively responsible to shareholders for the long term success of the Company and is its governing body. There is a clear division of responsibility between the Board and the Manager. Matters reserved for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing, capital structure, governance, and appointing and monitoring of the performance of service providers, including the Manager.
As the Company’s business model follows that of an externally managed investment trust, it does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider.
INVESTMENT OBJECTIVE
The Company’s objectives are to achieve an annual dividend target and, over the long term, capital growth by investing primarily in securities of companies operating in the mining and energy sectors.
INVESTMENT POLICY AND STRATEGY
The Company seeks to achieve its objectives through a focused portfolio, consisting of approximately thirty to one hundred and fiffty securities.
Although the Company has the flexibility to invest within this wide range, at 30 November 2016 the portfolio consisted of 70 investments, and the detailed portfolio listing is provided on pages 19 to 21 of the Annual Report.
There are no restrictions on investment in terms of geography or sub-sector and, in addition to equities, other types of securities, such as convertible bonds and debt issued primarily by mining or energy companies, may be acquired. Although most securities will be quoted, listed or traded on an investment exchange, up to 10% of the gross assets of the Company and its subsidiary (the Group), at the time of investment, may be invested in unquoted securities.
Investment in securities may be either direct or through other funds, including other funds managed by BlackRock or its associates, with up to 15% of the portfolio being invested in other listed investment companies, including listed investment trusts.
Up to 10% of the gross assets of the Group, at the time of investment, may be invested in physical assets, such as gold and in securities of companies that operate in the commodities sector other than the mining and energy sectors.
No more than 15% of the gross assets of the Group will be invested in any one company as at the date any such investment is made and the portfolio will not own more than 15% of the issued shares of any one company, other than the Company’s subsidiary.
The Group may deal in derivatives, including options and futures, up to a maximum of 30% of the Group’s assets for the purposes of efficient portfolio management and to enhance portfolio returns. In addition, the Company is also permitted to enter into stock lending arrangements up to a maximum of 331/3% of the total asset value of the portfolio.
The Group may from time to time, use borrowings to gear its investment policy or in order to fund the market purchase of its own ordinary shares. This gearing typically is in the form of an overdraft or short term facility, which can be repaid at any time. Under the Company’s Articles of Association, the Board is obliged to restrict the borrowings of the Company to an aggregate amount equal to 40% of the value of the gross assets of the Group. However, borrowings are not anticipated to exceed 20% of the Company’s gross assets at the time of drawdown of the relevant borrowings.
The Group’s financial statements are maintained in sterling. Although many investments are denominated and quoted in currencies other than sterling, the Company does not intend to employ a hedging policy against fluctuations in exchange rates, but may do so in the future if circumstances warrant implementing such a policy.
No material change will be made to the investment policy without shareholder approval.
PERFORMANCE
Details of the Company’s performance for the year are given in the Chairman’s Statement. The Investment Manager’s Report includes a review of the main developments during the year, together with information on investment activity within the Company’s portfolio.
RESULTS AND DIVIDENDS
The Company’s revenue earnings for the year amounted to 4.43p per share (2015: 6.32p).
Details of dividends paid and declared in respect of the year, together with the Company’s dividend policy, are set out in the Chairman’s Statement.
KEY PERFORMANCE INDICATORS
A number of performance indicators (KPIs) are used to monitor and assess the Company’s success in achieving its objectives and to measure its progress and performance.
The principal KPIs are described below:
Performance
The performance of the portfolio together with the performance of the Company’s net asset value and share price are reviewed at each Board meeting.
Information on the Company’s performance is given in the performance record and the Chairman’s Statement and Investment Managers’ Report.
Premium/discount to NAV
At each meeting the Board monitors the level of the Company’s premium or discount to NAV and considers strategies for managing any premium or discount.
In the year to 30 November 2016, the Company’s share price to NAV traded in the range of a premium of 7.3% to a discount of 12.5% on a cum income basis. The Company issued a total of 2,700,000 shares during the year and further details are given in the Chairman’s Statement. No shares were bought back during the year.
Ongoing charges
The ongoing charges represent the Company’s management fee and all other recurring operating and investment management expenses, excluding finance costs, expressed as a percentage of average net assets.
The Board reviews the ongoing charges and monitors the expenses incurred by the Company at each meeting.
The Board also monitors performance relative to a peer group of commodities and natural resources focused open and closed-end funds and also regularly reviews the Company’s performance attribution analysis to understand how performance was achieved. This provides an understanding of how components such as sector exposure, stock selection and asset allocation impacted performance. Further details are provided in the Investment Manager’s Report.
| Year ended 30 November 2016 |
Year ended 30 November 2015 |
|
| Net asset value movement1 | 51.9% | -29.4% |
| Share price movement2 | 51.4% | -34.8% |
| Discount to net asset value (at year end) | 1.0% | 0.5% |
| Revenue return per share | 4.43p | 6.32p |
| Ongoing charges3 | 1.4% | 1.4% |
| ======== | ======== |
1. Calculated in accordance with AIC guidelines.
2. Calculated on a mid to mid basis with income reinvested.
3. Ongoing charges represent the management fee and all other recurring operating and investment management expenses excluding finance costs expressed as a percentage of average net assets.
PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties. The Board has in place a robust process to identify, assess and monitor the principal risks of the Company. A core element of this process is the Company’s risk register which identifies the risks facing the Company and assesses the likelihood and potential impact of each risk and the controls established for mitigation. A residual risk rating is then calculated for each risk.
The risk register is regularly reviewed and the risks re-assessed. The risk environment in which the Company operates is also monitored and regularly appraised. New risks are also added to the register as they are identified which ensures that the document continues to be an effective risk management tool.
The risk register, its method of preparation and the operation of key controls in the Manager’s and third party service providers systems of internal control are reviewed on a regular basis by the Audit and Management Engagement Committee. In order to gain a more comprehensive understanding of the Manager’s and other third party service providers’ risk management processes, and how these apply to the Company’s business, BlackRock’s internal audit department provides an annual presentation to the Audit and Management Engagement Committee Chairman setting out the results of testing performed in relation to BlackRock’s internal control processes. The Audit and Management Engagement Committee also periodically receives presentations from BlackRock’s Risk & Quantitative Analysis teams, and reviews Service Organisation Control (SOC 1) reports from BlackRock and from the Company’s custodian (Bank of New York Mellon (International) Limited). The custodian is appointed by the Company’s Depositary and does not have a direct contractual relationship with the Company.
The Board has undertaken a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Those principal risks have been described in the table below, together with an explanation of how they are managed and mitigated. The Board will continue to assess these risks on an ongoing basis. In relation to the 2016 update to the UK Corporate Governance Code, the Board is comfortable that the procedures that the Company has in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the year under review.
The Company’s principal risks may be categorised under the following headings:
-
investment performance;
-
income/dividend;
-
gearing;
-
legal and regulatory compliance;
-
operational;
-
market; and
-
financial.
The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out in the following table.
| Principal Risk | Mitigation/Control |
| Investment performance | |
| The returns achieved are reliant primarily upon the performance of the portfolio. The Board is responsible for:
An inappropriate investment strategy may lead to:
|
To manage this risk the Board:
|
| Income/dividend | |
| The ability to pay dividends, and future dividend growth, is dependent on a number of factors including the level of dividends earned from the portfolio and income generated from the option writing strategy. Income returns from the portfolio are dependent, among other things, upon the Company successfully pursuing its investment policy. Any change in the tax treatment of dividends or interest received by the Company including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests may reduce the level of dividends received by shareholders. |
The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. The Company also has a revenue reserve which could potentially be used to support the Company’s dividend if required. |
| Gearing | |
| The Company’s investment strategy may involve the use of gearing, including borrowings. Gearing may be generated through borrowing money or increasing levels of market exposure through the use of derivatives. The Company currently has an uncommitted overdraft facility with Bank of New York Mellon (International) Limited. The use of gearing exposes the Company to the risk associated with borrowing. Gearing provides an opportunity for greater returns where the return on the Company’s underlying assets exceeds the cost of borrowing. It is likely to have the opposite effect where the return on the underlying assets is below the cost of borrowings. Consequently, the use of borrowings by the Company may increase the volatility of the NAV. |
The Company’s Articles of Association limit borrowings to an aggregate amount equal to 40% of the value of the gross assets of the Group. However, to further manage this risk the Board does not anticipate borrowings will exceed 20% of the Company’s gross assets at the time of drawdown. The use of derivatives, including options and futures has been limited to a maximum of 30% of the Group’s assets. The Investment Manager will only use gearing when confident that market conditions and opportunities exist to enhance investment returns. |
| Legal and regulatory compliance | |
| The Company has been accepted by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. Any serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010. The Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers Directive, the Market Abuse regulations, the UK Listing Rules and the FCA’s Disclosure & Transparency Rules. |
The Investment Manager monitors investment movements and the amount of proposed dividends, if any, to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting. Compliance with the accounting rules affecting investment trusts is carefully and regularly monitored. The Company Secretary and the Company’s professional advisers provide regular reports to the Board in respect of compliance with all applicable rules and regulation. Following authorisation under the Alternative Investment Fund Managers’ Directive (AIFMD), the Company and its appointed Alternative Investment Fund Manager (AIFM) are subject to the risks that the requirements of this Directive are not correctly complied with. The Board and the AIFM also monitor changes in government policy and legislation which may have an impact on the Company. The Market Abuse Regulation came into force across the EU on 3 July 2016. The Board has taken steps to ensure that individual Directors (and their Persons Closely Associated) are aware of their obligations under the regulation and has updated internal processes, where necessary, to ensure the risk of non-compliance is effectively mitigated. |
| Operational | |
| The Company relies on the services provided by third parties. Accordingly, it is dependent on the control systems of the Manager, BNY Mellon Trust & Depositary (UK) Limited (the Depositary) and the Bank of New York Mellon (International) Limited (the Fund Accountant), who maintain the Company’s assets, settlement and accounting records. The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of the third party service providers. Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company’s financial position. |
Due diligence is undertaken before contracts are entered into with third party service providers. Thereafter, the performance of the provider is subject to regular review and reported to the Board. The Fund Accountant’s and the Manager’s internal control processes are regularly tested and monitored throughout the year and are evidenced through their Service Organisation Control (SOC 1) reports, which are subject to review by an Independent Service Assurance Auditor. The SOC 1 reports provide assurance in respect of the effective operation of internal controls. These reports are provided to the Audit and Management Engagement Committee. The Company’s financial assets are subject to a strict liability regime and in the event of a loss of assets, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control. The Board reviews the overall performance of the Manager, Investment Manager and all other third party service providers on a regular basis. The Board also considers the business continuity arrangements of the Company’s key service providers. |
| Market | |
| Market risk arises from volatility in the prices of the Company's investments. The price of shares of companies in the mining and energy sectors can be volatile and this may be reflected in the NAV and market price of the Company's shares. The Company invests in the mining and energy sectors in many countries globally and will also be subject to country-specific risk. A lack of growth in world or country-specific industrial production may adversely affect metal and energy prices. Companies operating within the sectors in which the Company invests may be impacted by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price. There is the potential for the Company to suffer loss through holding investments in the face of negative market movements. |
The Board considers the diversification of the portfolio, asset allocation, stock selection, and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. |
| Financial | |
| The Company’s investment activities expose it to a variety of financial risks that include interest rate risk and foreign currency risk. The Company invests in both sterling and non-sterling denominated securities. Consequently, the value of investments in the portfolio made in non-sterling currencies will be affected by currency movements. |
Details of these risks are disclosed in note 17 to the financial statements, together with a summary of the policies for managing these risks. |
VIABILITY STATEMENT
In accordance with provision C.2.2 of the 2014 UK Corporate Governance Code, the Directors have assessed the prospects of the Company for a period of three years. The Board considers three years to be an appropriate time horizon, being the period generally used to assess potential investments.
In its assessment of the viability of the Company the Directors have noted that:
-
the Company predominantly invests in highly liquid, large listed companies so its assets are readily realisable;
-
the Company has limited gearing and no concerns around facilities, headroom or covenants; and
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the business model should remain attractive for longer than three years, unless there is significant economic or regulatory change.
The Directors have also reviewed:
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the Company’s principal risks and uncertainties, as previously set out;
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the potential impact of the continuation of the fall in commodity equity markets on the value of the Company’s investment portfolio and underlying dividend income;
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the ongoing relevance of the Company’s investment objective, business model and investment policy in the current environment; and
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the level of demand for the Company’s shares.
The Board has also considered a number of financial metrics in its assessment, including:
-
the level of ongoing charges, both current and historic;
-
the level at which the shares trade relative to NAV;
-
the level of income generated;
-
future income forecasts; and
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99% of the portfolio was capable of being liquidated in less than 20 days.
The Board has concluded that the Company would be able to meet its ongoing operating costs as they fall due as a consequence of:
-
a liquid portfolio; and
-
expenses which comprise a small percentage of net assets.
Based on the results of their analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.
FUTURE PROSPECTS
The Board’s main focus is the achievement of an annual dividend target and, over the long term, capital growth. The future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in both the Chairman’s Statement and in the Investment Manager’s Report.
EMPLOYEES, SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES
The Company has no employees and all the Directors are non-executive, therefore, there are no disclosures to be made in respect of employees.
The Company believes that it is in shareholders’ interests to consider environmental, social and governance factors and human rights issues when selecting and retaining investments. Details of the Company’s policy on socially responsible investment are set out in the Corporate Governance Statement contained within Annual Report.
MODERN SLAVERY ACT
As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. The Board considers the Company’s supply chain, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.
DIRECTORS, GENDER REPRESENTATION AND EMPLOYEES
The Directors of the Company on 30 November 2016, all of whom held office throughout the year, are set out in the Governance Structure and Directors’ biographies on page 22 of the Annual Report.
The Board consists of three male Directors and one female Director. The Company does not have any employees.
By order of the Board
BlackRock Investment Management (UK) Limited
Company Secretary
1 February 2017
RELATED PARTY TRANSACTIONS
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. The management contract is terminable by either party on six months’ notice.
BlackRock Investment Management (UK) Limited (BIM (UK)) acts as the Company’s Investment Manager under a delegation agreement with BFM. BIM (UK) also acted as the Secretary of the Company throughout the year. For the year ended 30 November 2015, BFM received a management fee of 1.1% of gross assets. With effect from 1 December 2015, the management fee was reduced to 0.95% on the first £250 million of gross assets and 0.90% thereafter. Further details in relation to the management fee are given in note 4. The Board believes that the current fee structure is appropriate for an investment company in this sector.
The Group contributes to a focused investment trust sales and marketing initiative operated by BIM (UK) on behalf of the investment trusts under its management. For the year ended 30 November 2016, the Group’s contribution to the consortium element of the initiative, which enables the trusts to achieve efficiencies by combining certain sales and marketing activities, represented 0.025% per annum of its net assets (£63.0 million) as at 31 December 2015, and this contribution is matched by BIM (UK). For the year ended 30 November 2016, £10,000 (excluding VAT) has been invoiced and paid in respect of this initiative. The purpose of the programme is to ensure effective communication with existing shareholders and to attract new shareholders to the Company. This has the benefit of improving liquidity in the Company’s shares and helps sustain the stock market rating of the Company.
BFM and BIM (UK) are subsidiaries of BlackRock, Inc. which is a publicly traded corporation on the New York Stock Exchange operating as an independent firm. The PNC Financial Services Group, Inc. has a significant economic interest in BlackRock, Inc. PNC Financial Services Group, Inc. is a US public company.
The Board consists of four non-executive Directors, all of whom, with the exception of Mr Ruck Keene, who is an employee of the Manager, are considered to be independent of the Manager by the Board. None of the Directors has a service contract with the Company. For the year ended 30 November 2016, the Chairman received an annual fee of £33,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of £27,000 and the other Director received an annual fee of £22,000. Mr Ruck Keene waived his fee.
As at 30 November 2016 and 2015, the Directors’ interests in the Company’s Ordinary Shares were as follows:
| 30 November 2016 |
30 November 2015 |
|
| Ordinary shares |
Ordinary shares |
|
| Ed Warner (Chairman) | 94,000 | 32,000 |
| Carol Bell | 33,500 | 33,500 |
| Michael Merton | 17,000 | 17,000 |
| Jonathan Ruck Keene | 14,000 | 14,000 |
| ======== | ======== |
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements under IFRS as adopted by the European Union.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group as at the end of each financial year and of the profit or loss of the Group for that year.
In preparing these Group financial statements, the Directors are required to:
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present fairly the financial position, financial performance and cash flows of the Group;
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select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
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present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
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make judgements and estimates that are reasonable and prudent;
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state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;
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provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; and
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prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance Statement and the Report of the Audit and Management Engagement Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules. The Directors have delegated responsibility to the Manager for the maintenance and integrity of the Group’s corporate and financial information included on the BlackRock website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors confirm to the best of their knowledge that:
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the financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
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the annual report and financial statements include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
The 2014 UK Corporate Governance Code also requires Directors to ensure that the annual report and financial statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit and Management Engagement Committee advise on whether it considers that the annual report and financial statements fulfils these requirements. The process by which the Committee has reached these conclusions is set out in the Audit and Management Engagement Committee’s report. As a result, the Board has concluded that the annual report and financial statements for the year ended 30 November 2016, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy.
For and on behalf of the Board
ED WARNER
Chairman
1 February 2017
INVESTMENT MANAGER’S REPORT
Introduction
The year saw a welcome change for the Natural Resources sector, characterised by strong returns as global economic growth accelerated and reflation emerged as a key theme for the global economy. We started the period under review at a point of extreme pessimism, with both energy and mining share prices under significant pressure, many shares trading below levels seen even during the Global Financial Crisis (GFC) and the Bloomberg Commodity Index at the lowest level since the late 1990’s. The key concern was the strength of the Chinese economy, and its impact on commodity demand, against a backdrop of high debt burdens, particularly within the mining sector. Commodity price weakness had forced companies to slash capital spending and focus on reducing costs and improving balance sheets. Confidence in the sector was at a low point, with credit default swap spreads above GFC levels and generalist investors positioned underweight.
However, early 2016 appeared to mark a turning point as it became apparent that Chinese demand stimulus was beginning to take effect. March data saw a large positive pick up in economic data points such as trade, industrial production, credit, property and fixed asset investment. The market did however remain concerned about the sustainability of this growth given it appeared to be fuelled by rising debt levels resulting from credit easing. Nonetheless, economic data continued to exceed expectations as the period progressed, notably in the Chinese property sector, and commodity prices responded positively. Commodities, gold in particular, also benefitted from a tailwind of the US dollar wavering as expectations around the path for US interest rates changed markedly over the year. For reference, at the beginning of 2016, the market was pricing in four interest rate rises this year, which, at the time of writing, is now set to be a maximum of one. Oil prices also saw strength as it became more evident that the rebalancing of the oil market was under way as year-on-year declines in non-OPEC production emerged. Commodity producers were able to use improved commodity prices to bolster balance sheets as a result of which concerns around debt eased and share prices responded positively.
Towards the end of the period, reflation emerged as the prominent theme for markets. The surprise results in both the Brexit referendum and the US presidential election increased expectations of protectionist policies in Europe and the US. Protectionism is broadly reflationary, at least in the short term, as it leads to increased import / export prices. President Trump’s borrowing plans and comments around infrastructure spend added to reflation expectations and the US 10-year yield rose rapidly to 2.4%. This led to a rotation into value and sectors which typically benefit from rising inflation such as financials and commodities.
Although the sustainability of the recent acceleration in global growth is still under debate, this is the first time since the GFC that growth is synchronised in all the main economic regions. Key risks remain: a return to tighter credit controls in China and aggressive tightening of US interest rates, perhaps on the back of a significant pick-up in inflation. However, neither of these events appear to be imminent at this stage and the starting point for the sector remains one in which the consensus is being underweight resources. The outperformance of Natural Resources has caused pain to the relative performance of many portfolios and looking ahead to 2017, it may be that generalist investors will be forced to reassess these underweight positions.
Performance
During the year ended 30 November 2016, the Company’s net asset value (“NAVâ€) increased by 51.9%, with the share price increasing by 51.4%. Over the same period, the Euromoney Global Mining and MSCI World Energy indices increased by 85.5% and 28.8% respectively (all data in sterling terms with income reinvested). Additional information on performance is given in the Chairman's Statement and the Directror's Remuneration Report on page 31 of the Annual Report. To benefit from the positive moves in the market gearing was increased in the Company: the maximum net gearing over the period was 5.9%; at the end of November the portfolio had gearing of 3.7%.
The table below shows the annual performance of key commodity prices during the year.
| Commodity | 30 November 2015 |
30 November 2016 |
% change |
| Base Metals (US$/tonne) | |||
| Aluminium | 1,446 | 1,732 | 19.8 |
| Copper | 4,586 | 5,825 | 27.0 |
| Lead | 1,647 | 2,365 | 43.6 |
| Nickel | 8,900 | 11,250 | 26.4 |
| Tin | 14,900 | 21,050 | 41.3 |
| Zinc | 1,563 | 2,702 | 72.9 |
| Precious Metals (US$/oz) | |||
| Gold | 1,065.0 | 1,173.2 | 10.2 |
| Silver | 14.1 | 16.5 | 17.0 |
| Platinum | 831.0 | 912.5 | 9.8 |
| Palladium | 544.4 | 770.4 | 41.5 |
| -------- | -------- | -------- | |
| Energy | |||
| Oil (WTI) (US$/Bbl) | 41.7 | 49.4 | 18.5 |
| Oil (Brent) (US$/Bbl) | 44.6 | 50.5 | 13.2 |
| Natural Gas (US$/MMBTU) | 2.23 | 3.35 | 50.2 |
| Uranium (US$/lb) | 36.1 | 17.8 | -50.7 |
| -------- | -------- | -------- | |
| Bulk Commodities (US$/tonne) | |||
| Iron ore | 43.0 | 79.1 | 84.0 |
| Coking coal | 75.4 | 308.8 | 309.5 |
| Thermal coal | 53.6 | 93.9 | 75.2 |
| Potash (US$/st) | 290 | 240 | -17.2 |
| -------- | -------- | -------- | |
| Equity Indices | |||
| Euromoney Global Mining Index (US$) | 193.6 | 298.4 | 54.1 |
| Euromoney Global Mining Index (£) | 128.7 | 238.7 | 85.5 |
| MSCI World Energy Index (US$) | 197.5 | 211.6 | 7.1 |
| MSCI World Energy Index (£) | 131.4 | 169.3 | 28.8 |
| ======== | ======== | ======== |
Source: Bloomberg.
Income
During the year the Company generated £6,530,000 in gross income. This enabled the payment of 1.00 pence per share for the final interim payment, bringing the total dividend for 2016 to 5.00 pence per share, a decrease of 16.7% compared to the prior year.
In the interim report we highlighted the significant dividend cuts made by the likes of ConocoPhillips, Rio Tinto and BHP Billiton as they abandoned their progressive dividend policies and the latter two moved to a payout ratio approach. Other more indebted companies, such as Anglo American and Glencore had suspended their dividends completely. This gloomy picture for the mining sector has changed significantly in the last six months, however, as the material increase in commodity prices has reduced the debt burden and opened the door to dividend re-initiations / increases as we head into 2017.
The energy sector has not seen the free cash flow windfall that the mining sector has experienced and so the prospect for dividend increases is more muted. However, the actions of OPEC, which, as discussed in the energy section, materially reduce the downside risk in oil, should give confidence to the management teams and boards in the sector to at least maintain the current dividend levels.
Since the end of June, sterling has traded on average 11% below the H1 2016 average. The majority of companies in the portfolio (and investment universe more broadly) pay their dividends in US dollars so as we look into 2017, sterling based investors such as this Company are likely to receive a relative income uplift even before any increases in payouts are announced by the underlying companies.
The market environment for option writing has remained attractive during 2016 and this is reflected in the consistently high income the Company generated from option selling with this income accounting for c.60% of the gross income received for the year. During the second half of the year, approximately two thirds of the options sold were calls with a disproportionate focus on the gold holdings as the outlook for this sector became less positive on the back of a stronger outlook for US interest rates.
Portfolio Positioning
The rapid and large moves across the commodity sector during the year necessitated a more nimble approach to changing portfolio positioning between the energy and mining sectors than in the previous few years. Having started 2016 with a portfolio tilted towards the energy sector, once the economic stimulus in China in the first quarter was clearly beginning to have an effect and was visible in the economic data, we moved the portfolio back to being split evenly between energy and mining. As we went into the fourth quarter, oil had retreated back to $45/bbl as the market showed great scepticism towards a possible OPEC deal – this gave an opportunity to once again tilt the portfolio towards the energy sector with a focus on adding to the US E&P exposure. When markets are pricing in outcome of a binary event being either close to zero or one hundred percent, the risk / reward from taking the opposite position is asymmetrically skewed to the upside. Had OPEC not reached an agreement, this was already being priced in entirely in our view by the market so positioning for a positive outcome from the meeting had an attractive risk-reward trade-off.
During the second half of the year the Company was run with modestly more gearing than in 2015 and the first half of 2016 as we had a greater confidence in the outlook for the underlying commodities and the attractive valuation of the sector, both relative to its own history and the broader equity market.
In terms of stock specifics, we maintained large core holdings in the major mining companies given their improved free cash flow and strong potential for dividend increases next year. One notable change in the second half of the year was rebuilding our position in the Brazilian mining company Vale. Whilst this company’s balance sheet is not as strong as the London majors, its total return potential and relative valuation were sufficiently compelling to compensate for the additional risk. The key reduction in the second half of the year was precious metals exposure. Following the Brexit referendum these companies had performed very well and there appeared to be more attractive returns on offer elsewhere in the natural resources space so we wrote calls over a number of positions and reduced some holdings through outright selling.
In the energy sector we added materially to a number of US E&P companies in the last three months of the year, notably those with assets in the Permian and Eagle Ford shale basins. We also added to our oil services exposure but again were selective in doing so, focusing on those companies most exposed to the US onshore sector. The increase in E&P positions was partly funded by a reduction in gold exposure but also from a modest decrease in positions in the US integrated companies that have an inherently lower sensitivity to changes in the oil price given their refining and downstream businesses.
| Portfolio Composition | |||
| Energy | Mining | Cash | |
| Dec-15 | 57.3 | 46.9 | -4.2 |
| Jan-16 | 56.7 | 46.1 | -2.8 |
| Feb-16 | 47 | 54.8 | -1.8 |
| Mar-16 | 47.1 | 52.4 | 0.5 |
| Apr-16 | 48.1 | 56.3 | -4.4 |
| May-16 | 55.9 | 48.4 | -4.3 |
| Jun-16 | 50.6 | 52.2 | -2.8 |
| Jul-16 | 45.5 | 60.9 | -6.4 |
| Aug-16 | 50.5 | 56.8 | -7.3 |
| Sep-16 | 50.0 | 54.1 | -4.1 |
| Oct-16 | 51.2 | 56.2 | -7.4 |
| Nov-16 | 55.4 | 47.8 | -3.2 |
Energy
The second half of the year was a relatively disappointing one for the energy sector until the last day of the Company’s financial year. From May to October the oil price (WTI, U$) fell by 7% and continued to weaken in November to the $45/bbl level as the market focused on supply restarts in a number of countries such as Libya leading to expectations of a balanced market being pushed into late 2017 and a great scepticism on OPEC reaching a deal to cut output. The energy companies traded modestly better than the commodity itself during this period, reflecting the continued trend of cost cutting and incremental improvements in the outlook for returns on invested capital as a result.
Since 2014, OPEC policy has changed from limiting output to support prices to maximising its output to compete for market share. This led to a lower and more volatile price environment for oil with the market in over supply and inventories rising. Earlier in the year we saw prices test multi-year lows close to $35 per barrel as the market tried to balance itself by forcing higher cost supply to shut down; subsequent to this we saw US production retreat from its highs and the oil price recover back into the forties.
At the end of November, OPEC made a major announcement that has materially changed the range of outcomes we would expect to see for the oil price in the coming years. OPEC agreed to reduce production by 1.2 million barrels per day to a targeted output of 32.5 million barrels per day and non-OPEC countries, including Russia, indicated they would cut by close to 600,000 barrels per day. The scale of the cuts and the inclusion of Russia in the deal was ahead of even the most optimistic expectations going into the meeting and the oil price responded very strongly, rising 8% on the day. If the agreement is successfully implemented, it brings forward the anticipated re-balancing of supply and demand in the oil market to early 2017 and should drive inventory draws through the year. This should be supportive for oil prices and we would see the oil price moving higher from the $50/bbl level as the market gains confidence and sees these inventory declines happening.
The actions of OPEC do not entirely remove the downside risk to oil (for example there could be a negative demand shock if global economic growth disappoints that causes the oil price to fall) but it does significantly lower the probability of a lower oil price. This improves the risk-adjusted return outlook for energy companies and is of particular benefit to the US oil producers. The longer that the agreement holds true, the more confidence the equity market will have in this reduced downside risk and the sector should begin to trade at a higher valuation multiple to reflect the lower risks than it has faced in the last three years.
| IEA Oil Market Supply and Demand Forecasts (in millions of barrels per day 'MBPD') | ||||||
| Supply and demand forecast pre-OPEC announcement | 70% OPEC compliance | OPEC 1.2mbpd cut | OPEC 1.2 mbpd cut and non-OPEC 0.6mbpd cut |
|||
| 1Q14 | 0.4 | |||||
| 2Q14 | 1.1 | |||||
| 3Q14 | 0.9 | |||||
| 4Q14 | 1.6 | |||||
| 1Q15 | 1.3 | |||||
| 2Q15 | 2 | |||||
| 3Q15 | 1.1 | |||||
| 4Q15 | 1.7 | |||||
| 1Q16 | 1.1 | |||||
| 2Q16 | 0.3 | |||||
| 3Q16 | 0.2 | |||||
| 4Q16 | 0.7 | |||||
| 1Q17E | 0.8 | -0.04 | -0.4 | -1 | ||
| 2Q17E | 0.9 | 0.06 | -0.3 | -0.9 | ||
| 3Q17E | 0.2 | -0.64 | -1 | -1.6 | ||
| 4Q17E | -0.1 | -0.94 | -1.3 | -1.9 | ||
Mining
This year saw some very strong returns in the mining sector, with both mined commodity demand increasing and supply contracting. Mined commodity prices were up across the board with zinc, iron ore and coking coal up 73%, 84% and 310% respectively (US dollar terms).
On the supply side, China was instrumental in leading the supply rationalisation which defined one of the key characteristics of the year, the outperformance of bulks over base metals. After a series of safety incidents, as well as unsustainable levels of debt, the Chinese coal miners were restricted to 270 operating days from 330. This dramatically tightened the world’s coal markets, particularly in coking coal which returned 310% over the year. Steel sector rationalisation also began, the success of which remains unproven, but prices were driven higher nonetheless by increases in demand from property and infrastructure. With a lag to property starts, appliance production and sales started to pick up from June and July, with a notable pick up in air conditioners which are important for copper. Throughout this period liquidity concerns that may undermine the recovery were always on the radar. China saw large US dollar outflows due to expectations for the renminbi to weaken, however the impact on the market has been muted.
The impact of the mining sector slashing capital expenditure and underinvesting over the past few years is beginning to be felt by global production. As you can see in the chart below, we saw production declines across all major commodities except copper. Zinc at last saw the impact of the closure and draw down of stock piles from the Century mine which closed in 2015. Historically, Chinese production has increased in response to higher zinc prices, but that has not occurred and the zinc price returned 73% over the period.
In the precious metals space, we really saw a year of two halves. The “lower for longer†extension of the rate cycle, and resulting reduction in real rates was very supportive for gold in the first half. Brexit and European political uncertainty also highlighted gold’s hedge properties. However, the resurgence of global growth meant investors sold their gold en masse in the second half, with speculative positioning and ETF holdings declining markedly. Whilst gold remains a useful hedge, the relative attractiveness of other investments is a headwind.
In terms of company behaviour, we are seeing the first signs that deflation in cost of production has ceased, particularly with commodity related currencies broadly stable and the increase we have seen in the oil price. Capital expenditures in 2016 also likely hit a cyclical low. However, we remain optimistic that mining boards and management teams learnt important lessons about the use of debt given the cyclicality of the sector, and the propensity to destroy shareholder value using M&A. Thus it appears unlikely we will return to the capital expenditure excesses of the last cycle, and we have already seen a return to dividend payments from some players.
Finally, on valuation, whilst the sector has risen this year, it has only returned to July 2015 levels and many of the miners are trading at attractive free cash flow yields. Company earnings are likely to be upgraded as the high spot prices persist and generalist fund managers appear underweight.
| Mined Commodities Change in Supply H1'16 vs H1'15 | ||||
| Change in supply |
Change in price |
|||
| Chinese Thermal Coal | -13.4% | 26.7% | ||
| Mined Zinc | -7.7% | 43.8% | ||
| Chinese Iron Ore | -5.7% | 35.5% | ||
| Alumina | -2.6% | 19.8% | ||
| Palladium | -2.5% | 26.9% | ||
| Gold | -2.2% | 27.5% | ||
| Seaborne Thermal Coal | -2.0% | 38.9% | ||
| Mined Nickel | -2.0% | 17.4% | ||
| Platinum | -1.8% | 26.6% | ||
| Aluminium | -1.3% | 11.4% | ||
| Seaborne Met Coal | 0.7% | 53.4% | ||
| Mined Copper | 4.8% | 2.2% | ||
| Seaborne Iron Ore | 5.7% | 35.5% | ||
Outlook
For the first time in a number of years, we are optimistic as we look to the year ahead. The OPEC deal has tightened the oil market and put a floor underneath the oil price, which removes much of the downside risk in oil-related equities. Enough scepticism remains in the market about whether the deal will be honoured to result in the energy equities still offering attractive returns even after the initial share price rises seen in November. Clearly the key risk to our more positive outlook for the oil market is that one or more of the parties in the deal reneges on their committed output, the deal falls apart and the members turn on the taps and compete for market share. We view the risk of this happening as lower than the market views it because the responsibility for production cuts sits with members that have a reasonable track record of adhering to quotas in the past and not with those who have lacked discipline.
On the mining side, most of the commodities are seeing an improvement in the balance between supply and demand next year with some, such as zinc, forecast to move into meaningful deficit. This should be supportive for prices and the lack of capital investment in new projects means that the supply side should remain tight, at least in the next year or two. Some of the bulk commodities have performed exceptionally well in 2016 and could fall from their highs if speculative activity in China does reverse strongly but we think they would still settle at prices above those forecast at the start of 2016 as the underlying fundamentals have improved. There is the risk that an economic shock in China could derail the mining recovery but, as we have seen early in 2016, the authorities in China have levers which they are not afraid to pull to avoid a hard-landing scenario.
The companies themselves are in a stronger financial position than a year ago, particularly on the mining side, and are still valued at a discount to the wider equity market. If management teams remain disciplined in their capital allocation and do not make the same mistakes they made in the post financial crisis upcycle then the sector is well positioned to deliver for investors.
Olivia Markham and Tom Holl
BlackRock Investment Management (UK) Limited
1 February 2017
DISTRIBUTION OF INVESTMENTS as at 30 November 2016
ASSET ALLOCATION – GEOGRAPHY
| Global | 51.2% |
| USA | 24.0% |
| Canada | 8.9% |
| Latin America | 5.2% |
| Africa | 3.9% |
| Europe | 3.6% |
| Australia | 2.8% |
| Asia | 0.4% |
ASSET ALLOCATION – COMMODITY
| Energy | 51.1% |
| Mining | 48.9% |
| Mining | |
| Diversified Mining | 21.4% |
| Gold | 11.9% |
| Copper | 8.1% |
| Silver | 2.5% |
| Fertilisers | 1.9% |
| Diamonds | 1.8% |
| Steel | 1.3% |
| Energy | |
| Integrated Oil | 24.1% |
| Exploration & Production | 19.3% |
| Distribution | 3.7% |
| Oil Services | 2.7% |
| Agricultural Science | 1.3% |
Source: BlackRock
TEN LARGEST INVESTMENTS as at 30 November 2016
First Quantum Minerals: 7.3% (2015:5.6%) is an established and rapidly growing mining company operating seven mines and developing five projects worldwide. The company is a significant copper producer and also produces nickel, gold, zinc and platinum group elements.
Royal Dutch Shell: 6.5% (2015: 5.0%) is one of the world’s leading energy companies. The Anglo-Dutch company is active in every area of the oil and gas industry within exploration and production, refining and marketing, power generation and energy trading. The company also has renewable energy interests in biofuels.
ExxonMobil: 6.4% (2015: 6.3%) is the world’s largest publicly traded international oil and gas company and the largest refiner and marketer of petroleum products.
Rio Tinto: 5.1% (2015: 5.4%) is one of the world’s leading mining companies. The company’s primary production is iron ore, but it also produces aluminium, copper, diamonds, gold, industrial minerals and energy products.
BHP Billiton: 4.7% (2015: 5.5%) is the world’s largest diversified natural resources company. The company is a major producer of aluminium, iron ore, copper, thermal and metallurgical coal, manganese, uranium, nickel, silver, titanium minerals and diamonds. The company also has significant interests in oil, gas and liquefied natural gas.
BP: 3.6% (2015: 4.1%) also referred to by its former name British Petroleum, is one of the world’s leading international oil and gas companies. The company explores for and produces oil and natural gas and refines, markets and supplies petroleum products. It also generates solar energy and manufactures chemicals.
Vale: 3.5% (2015: Nil) is one of the largest mining companies in the world, with operations in 30 countries. Vale is the world’s largest producer of iron ore and iron ore pellets, and the world’s largest producer of nickel. The company also produce manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals, gold, silver, cobalt, potash, phosphates and other fertiliser nutrients.
ConocoPhillips: 3.0% (2015: 4.9%) is the world’s largest independent exploration and production company (based on proved reserves and production of liquids and natural gas). It has producing assets in North America, Europe, Asia and Australia in conventional oil and gas and a growing portfolio of North American shale and oil sands businesses.
Anadarko Petroleum: 3.0% (2015: 2.6%) is one of the world’s largest independent oil and natural gas exploration and production companies. Anadarko currently has production assets in the gulf of Mexico, US onshore, West and North Africa. The exploration portfolio includes assets in the production regions as well as East Africa and Columbia.
Enbridge Income Fund Trust: 2.8% (2015: 4.7%) is a Canadian listed company that is focused on energy infrastructure assets in North America. It has a strong commitment to paying cashflow out to shareholders, with a long term target of paying out approximately 80% of cash generated and available for distribution on a monthly basis.
All percentages reflect the value of the holding as a percentage of total investments. For this purpose, where more than one class of securities is held, these have been aggregated. The percentages in brackets represent the value of the holding as at 30 November 2016. Together, the ten largest investments represent 45.9% of total investments (ten largest investments as at 30 November 2015: 51.2%).
Investments as at 30 November 2016
| Main geographic exposure |
Market value |
% of investments |
|
| £’000 | % | ||
| Integrated Oil | |||
| Royal Dutch Shell ‘B’ | Global | 6,697 | 6.5 |
| ExxonMobil | Global | 6,541 | 6.4 |
| BP | Global | 3,673 | 3.6 |
| BP Call Option 16/12/16 | Global | (31) | – |
| ConocoPhillips | USA | 3,107 | 3.0 |
| Occidental Petroleum | USA | 2,714 | 2.6 |
| Statoil | Europe | 1,125 | 1.1 |
| Chevron | Global | 893 | 0.9 |
| -------- | -------- | -------- | |
| 24,719 | 24.1 | ||
| -------- | -------- | -------- | |
| Diversified Mining | |||
| Rio Tinto | Global | 5,291 | 5.1 |
| Rio Tinto Call Option 16/12/16 | Global | (16) | – |
| BHP Billiton | Global | 4,860 | 4.7 |
| Vale | Latin America | 3,665 | 3.6 |
| Vale Call Option 16/12/16 | Latin America | (52) | (0.1) |
| Pioneer Natural Resources | USA | 2,600 | 2.6 |
| Pioneer Natural Resources Call Option 16/12/16 | USA | (61) | (0.1) |
| Glencore | Global | 2,517 | 2.4 |
| Lundin Mining | Europe | 1,530 | 1.5 |
| Lundin Petroleum | Europe | 978 | 1.0 |
| Teck Resources | Canada | 689 | 0.7 |
| -------- | -------- | -------- | |
| 22,001 | 21.4 | ||
| -------- | -------- | -------- | |
| Exploration & Production | |||
| Anadarko Petroleum | USA | 3,071 | 3.0 |
| EOG Resources | USA | 2,191 | 2.1 |
| EOG Resources Put Option 16/12/16 | USA | (7) | – |
| Devon Energy | USA | 2,143 | 2.1 |
| Encana | Canada | 2,112 | 2.0 |
| Noble Energy | Global | 1,921 | 1.9 |
| Marathon Oil | Global | 1,881 | 1.8 |
| Cimarex Energy | USA | 1,843 | 1.8 |
| Hess | Global | 1,619 | 1.6 |
| Laredo Petroleum | USA | 1,127 | 1.1 |
| Crescent Point Energy | Canada | 891 | 0.9 |
| Cabot Oil & Gas | USA | 691 | 0.7 |
| Southwestern Energy | USA | 363 | 0.3 |
| -------- | -------- | -------- | |
| 19,846 | 19.3 | ||
| -------- | -------- | -------- | |
| Gold | |||
| Newcrest Mining | Australia | 2,444 | 2.4 |
| Newmont Mining | Global | 2,059 | 2.0 |
| Newmont Mining Call Option 16/12/16 | Global | (25) | – |
| Nevsun Resources | Africa | 1,971 | 1.9 |
| Barrick Gold | Global | 1,654 | 1.6 |
| Barrick Gold Put Option 16/12/16 | Global | (51) | (0.1) |
| AngloGold Ashanti | Global | 1,272 | 1.2 |
| AngloGold Ashanti Call Option 16/12/16 | Global | (17) | – |
| Agnico Eagle Mines | Canada | 984 | 1.0 |
| Franco-Nevada | Global | 690 | 0.7 |
| Detour Gold | Canada | 601 | 0.6 |
| Eldorado Gold | Asia | 394 | 0.4 |
| Gold Fields | Africa | 253 | 0.2 |
| -------- | -------- | -------- | |
| 12,229 | 11.9 | ||
| -------- | -------- | -------- | |
| Copper | |||
| First Quantum Minerals 7.25% 15/05/22 | Global | 4,658 | 4.5 |
| First Quantum Minerals | Global | 2,945 | 2.9 |
| First Quantum Minerals Call Option 20/01/17 | Global | (68) | (0.1) |
| Avanco Resources | Latin America | 813 | 0.8 |
| -------- | -------- | -------- | |
| 8,348 | 8.1 | ||
| -------- | -------- | -------- | |
| Distribution | |||
| Enbridge Income Fund Trust | Canada | 2,916 | 2.8 |
| TransCanada | Canada | 932 | 0.9 |
| -------- | -------- | -------- | |
| 3,848 | 3.7 | ||
| -------- | -------- | -------- | |
| Oil Services | |||
| Baker Hughes | USA | 1,540 | 1.5 |
| Baker Hughes Put Option 16/12/16 | USA | (7) | – |
| Schlumberger | USA | 1,234 | 1.2 |
| Schlumberger Put Option 16/12/16 | USA | (6) | – |
| -------- | -------- | -------- | |
| 2,761 | 2.7 | ||
| -------- | -------- | -------- | |
| Silver | |||
| Silver Wheaton | Global | 1,131 | 1.1 |
| Silver Wheaton Put Option 16/12/16 | Global | (57) | (0.1) |
| Fresnillo | Latin America | 910 | 0.9 |
| Fresnillo Call Option 16/12/16 | Latin America | (7) | – |
| Tahoe Resources | USA | 573 | 0.6 |
| Tahoe Resources Call Option 20/01/17 | USA | (35) | – |
| -------- | -------- | -------- | |
| 2,515 | 2.5 | ||
| -------- | -------- | -------- | |
| Fertilisers | |||
| CF Industries Holdings | USA | 1,560 | 1.5 |
| CF Industries Holdings Call Option 16/12/16 | USA | (10) | – |
| Iluka Resources | Australia | 362 | 0.4 |
| -------- | -------- | -------- | |
| 1,912 | 1.9 | ||
| -------- | -------- | -------- | |
| Diamonds | |||
| Petra Diamonds 8.25% 31/05/20 | Africa | 1,383 | 1.3 |
| Petra Diamonds | Africa | 466 | 0.5 |
| -------- | -------- | -------- | |
| 1,849 | 1.8 | ||
| -------- | -------- | -------- | |
| Agriculture Science | |||
| Monsanto | Global | 1,316 | 1.3 |
| -------- | -------- | -------- | |
| 1,316 | 1.3 | ||
| -------- | -------- | -------- | |
| Steel | |||
| ArcelorMittal | Global | 1,313 | 1.3 |
| -------- | -------- | -------- | |
| 1,313 | 1.3 | ||
| -------- | -------- | -------- | |
| Zinc | |||
| Boliden | Sweden | 20 | – |
| -------- | -------- | -------- | |
| 20 | – | ||
| -------- | -------- | -------- | |
| Nickel | |||
| Norilsk Nickel Put Option 16/12/16 | USA | (32) | – |
| -------- | -------- | -------- | |
| (32) | – | ||
| -------- | -------- | -------- | |
| Total Investments | 102,645 | 100.0 | |
| ======== | ======== | ======== |
All investments are ordinary shares unless otherwise stated.
The total number of holdings (including options) at 30 November 2016 was 70 (30 November 2015: 62).
The total number of open options as at 30 November 2016 was 16 (30 November 2015: 12).
The negative valuations of £482,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 30 November 2016.
As at 30 November 2016, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 November 2016
| Notes | Revenue 2016 |
Revenue 2015 |
Capital 2016 |
Capital 2015 |
Total 2016 |
Total 2015 |
|
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| Income from investments | 3 | 2,836 | 4,027 | – | – | 2,836 | 4,027 |
| Other income | 3 | 3,694 | 4,541 | – | – | 3,694 | 4,541 |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Total income | 6,530 | 8,568 | – | – | 6,530 | 8,568 | |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Profit/(losses) on investments held at fair value through profit or loss | – | – | 29,133 | (34,873) | 29,133 | (34,873) | |
| Profit on foreign exchange | – | – | 723 | 6 | 723 | 6 | |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Total | 6,530 | 8,568 | 29,856 | (34,867) | 36,386 | (26,299) | |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Expenses | |||||||
| Investment management fees | 4 | (201) | (220) | (602) | (661) | (803) | (881) |
| Other operating expenses | 5 | (279) | (333) | (6) | (3) | (285) | (336) |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Total operating expenses | (480) | (553) | (608) | (664) | (1,088) | (1,217) | |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Net profit/(loss) before finance costs and taxation | 6,050 | 8,015 | 29,248 | (35,531) | 35,298 | (27,516) | |
| Finance costs | 6 | (64) | (24) | (36) | (33) | (100) | (57) |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Net profit/(loss) on ordinary activities before taxation | 5,986 | 7,991 | 29,212 | (35,564) | 35,198 | (27,573) | |
| Taxation | (789) | (1,051) | (146) | – | (935) | (1,051) | |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Profit/(loss) for the year | 5,197 | 6,940 | 29,066 | (35,564) | 34,263 | (28,624) | |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| Earnings/(loss) per ordinary share | 8 | 4.43p | 6.32p | 24.75p | (32.37p) | 29.18p | (26.05p) |
| ======== | ======== | ======== | ======== | ======== | ======== |
The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of BlackRock Commodities Income Investment Trust plc. There were no minority interests.
The Group does not have any other comprehensive income. The net profit/(loss) disclosed above represents the Group’s total comprehensive income/(loss).
The total net profit of the Company and the Group for the year was £34,263,000 (2015: loss of £28,624,000).
STATEMENTS OF CHANGES IN EQUITY for the year ended 30 November 2016
| Group | Notes | Ordinary share capital |
Share premium account |
Special reserve |
Capital reserves |
Revenue reserve |
Total |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| For the year ended 30 November 2016 | |||||||
| At 30 November 2015 | 1,156 | 44,837 | 71,223 | (51,545) | 3,759 | 69,430 | |
| Total comprehensive income: | |||||||
| Net profit for the year | – | – | – | 29,066 | 5,197 | 34,263 | |
| Transaction with owners, recorded directly to equity: | |||||||
| Shares issued | 9&10 | 27 | 1,559 | – | – | – | 1,586 |
| Share issue costs | 10 | – | (8) | – | – | – | (8) |
| Tender issue costs rebated | 10 | – | 7 | – | – | – | 7 |
| Dividends paid | 7 | – | – | – | – | (6,445) | (6,445) |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 30 November 2016 | 1,183 | 46,395 | 71,223 | (22,479) | 2,511 | 98,833 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| For the year ended 30 November 2015 | |||||||
| At 30 November 2014 | 1,052 | 37,003 | 71,223 | (15,981) | 3,399 | 96,696 | |
| Total comprehensive income: | |||||||
| Net (loss)/profit for the year | – | – | – | (35,564) | 6,940 | (28,624) | |
| Transaction with owners, recorded directly to equity: | |||||||
| Shares issued | 9&10 | 104 | 7,982 | – | – | – | 8,086 |
| Share issue costs | 10 | – | (148) | – | – | – | (148) |
| Dividends paid | 7 | – | – | – | – | (6,580) | (6,580) |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 30 November 2015 | 1,156 | 44,837 | 71,223 | (51,545) | 3,759 | 69,430 | |
| ======== | ======== | ======== | ======== | ======== | ======== |
| Company | Notes | Ordinary share capital |
Share premium account |
Special reserve |
Capital reserves |
Revenue reserve |
Total |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| For the year ended 30 November 2016 | |||||||
| At 30 November 2015 | 1,156 | 44,837 | 71,223 | (50,001) | 2,215 | 69,430 | |
| Total comprehensive income: | |||||||
| Net profit for the year | – | – | – | 28,026 | 6,237 | 34,263 | |
| Transaction with owners, recorded directly to equity: | |||||||
| Shares issued | 9&10 | 27 | 1,559 | – | – | – | 1,586 |
| Share issue costs | 10 | – | (8) | – | – | – | (8) |
| Tender issue costs rebated | 10 | – | 7 | – | – | – | 7 |
| Dividends paid | 7 | – | – | – | – | (6,445) | (6,445) |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 30 November 2016 | 1,183 | 46,395 | 71,223 | (21,975) | 2,007 | 98,833 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| For the year ended 30 November 2015 | |||||||
| At 30 November 2014 | 1,052 | 37,003 | 71,223 | (14,675) | 2,093 | 96,696 | |
| Total comprehensive income: | |||||||
| Net (loss)/profit for the year | – | – | – | (35,326) | 6,702 | (28,624) | |
| Transaction with owners, recorded directly to equity: | |||||||
| Shares issued | 9&10 | 104 | 7,982 | – | – | – | 8,086 |
| Share issue costs | 10 | – | (148) | – | – | – | (148) |
| Dividends paid | 7 | – | – | – | – | (6,580) | (6,580) |
| -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 30 November 2015 | 1,156 | 44,837 | 71,223 | (50,001) | 2,215 | 69,430 | |
| ======== | ======== | ======== | ======== | ======== | ======== |
STATEMENTS OF FINANCIAL POSITION as at 30 November 2016
| Notes | 2016 Group |
2016 Company |
2015 Group |
2015 Company |
|
| £’000 | £’000 | £’000 | £’000 | ||
| Non current assets | |||||
| Investments held at fair value through profit or loss | 103,127 | 104,449 | 69,610 | 71,154 | |
| -------- | -------- | -------- | -------- | ||
| Current assets | |||||
| Other receivables | 916 | 916 | 455 | 455 | |
| Collateral held on margin deposit with brokers | 2,990 | – | 1,312 | – | |
| Cash and cash equivalents | 7,208 | 74 | 2,935 | – | |
| -------- | -------- | -------- | -------- | ||
| 11,114 | 990 | 4,702 | 455 | ||
| -------- | -------- | -------- | -------- | ||
| Total assets | 114,241 | 105,439 | 74,312 | 71,609 | |
| -------- | -------- | -------- | -------- | ||
| Current liabilities | |||||
| Other payables | (3,239) | (2,886) | (1,170) | (754) | |
| Derivative financial liabilities held at fair value through profit or loss | (482) | (482) | (623) | (623) | |
| Bank overdraft | (11,687) | (3,238) | (3,089) | (802) | |
| -------- | -------- | -------- | -------- | ||
| (15,408) | (6,606) | (4,882) | (2,179) | ||
| -------- | -------- | -------- | -------- | ||
| Net assets | 98,833 | 98,833 | 69,430 | 69,430 | |
| -------- | -------- | -------- | -------- | ||
| Equity attributable to equity holders | |||||
| Ordinary share capital | 9 | 1,183 | 1,183 | 1,156 | 1,156 |
| Share premium account | 10 | 46,395 | 46,395 | 44,837 | 44,837 |
| Special reserve | 71,223 | 71,223 | 71,223 | 71,223 | |
| Capital reserves | (22,479) | (21,975) | (51,545) | (50,001) | |
| Revenue reserve | 2,511 | 2,007 | 3,759 | 2,215 | |
| -------- | -------- | -------- | -------- | ||
| Total equity | 98,833 | 98,833 | 69,430 | 69,430 | |
| -------- | -------- | -------- | -------- | ||
| Net asset value per ordinary share | 8 | 83.57p | 83.57p | 60.08p | 60.08p |
| ======== | ======== | ======== | ======== |
CASH FLOW STATEMENTS for the year ended 30 November 2016
| 2016 Group |
2016 Company |
2015 Group |
2015 Company |
|
| £’000 | £’000 | £’000 | £’000 | |
| Operating activities | ||||
| Profit/(loss) before taxation* | 35,198 | 34,416 | (27,573) | (28,312) |
| Add back finance costs | 100 | 48 | 57 | 44 |
| (Gains)/losses on investments held at fair value through profit or loss including transaction costs | (29,133) | (28,911) | 34,873 | 34,635 |
| Net movement on foreign exchange | (723) | 95 | (6) | (6) |
| Sales of investments held at fair value through profit or loss | 73,535 | 73,535 | 48,292 | 48,292 |
| Purchases of investments held at fair value through profit or loss | (78,060) | (78,060) | (53,579) | (53,579) |
| Increase in other receivables | (13) | (13) | (69) | (69) |
| Decrease in other payables | (203) | (203) | (3) | (3) |
| (Increase)/decrease in amounts due from brokers | (448) | (448) | 741 | 741 |
| Increase/(decrease) in amounts due to brokers | 2,335 | 2,335 | (806) | (806) |
| Net movement in collateral pledged in respect of derivatives | (1,678) | – | 492 | – |
| -------- | -------- | -------- | -------- | |
| Net cash inflow from operating activities before interest and taxation | 910 | 2,794 | 2,419 | 937 |
| -------- | -------- | -------- | -------- | |
| Interest paid | (100) | (48) | (57) | (44) |
| Taxation paid | (845) | – | (701) | – |
| Taxation on investment income included within gross income | (153) | (153) | (312) | (312) |
| -------- | -------- | -------- | -------- | |
| Net cash (outflow)/inflow from operating activities | (188) | 2,593 | 1,349 | 581 |
| -------- | -------- | -------- | -------- | |
| Financing activities | ||||
| Dividends paid | (6,445) | (6,445) | (6,580) | (6,580) |
| Share issue costs paid | (8) | (8) | (116) | (116) |
| Tender issue costs rebated | 7 | 7 | – | – |
| Proceeds from shares issued | 1,586 | 1,586 | 8,086 | 8,086 |
| -------- | -------- | -------- | -------- | |
| Net cash (outflow)/inflow from financing activities | (4,860) | (4,860) | 1,390 | 1,390 |
| -------- | -------- | -------- | -------- | |
| (Decrease)/increase in cash and cash equivalents | (5,048) | (2,267) | 2,739 | 1,971 |
| -------- | -------- | -------- | -------- | |
| Cash and cash equivalents at start of the year | (154) | (802) | (2,900) | (2,780) |
| Effect of foreign exchange rate changes | 723 | (95) | 7 | 7 |
| -------- | -------- | -------- | -------- | |
| Cash and cash equivalents at end of year | (4,479) | (3,164) | (154) | (802) |
| -------- | -------- | -------- | -------- | |
| Comprised of: | ||||
| Cash and cash equivalents | 7,208 | 74 | 2,935 | – |
| Bank overdraft | (11,687) | (3,238) | (3,089) | (802) |
| -------- | -------- | -------- | -------- | |
| (4,479) | (3,164) | (154) | (802) | |
| ======== | ======== | ======== | ======== |
* Includes dividends and interest received in the year of £2,226,000 and £525,000 (2015: £3,618,000 and £353,000) respectively.
NOTES TO THE FINANCIAL STATEMENTS
1. Principal activity
The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. The Company was incorporated on 4 November 2005 and this is the eleventh annual report.
2. Accounting policies
The principal accounting policies adopted by the Group and Company are set out below.
(a) Basis of preparation
The Group and Parent Company financial statements have been prepared under historical cost convention modified by revaluation of financial assets and financial liabilities held at fair value through profit or loss, in accordance with International Financial Reporting Standards (“IFRSâ€) as adopted by the European Union, International Financial Reporting Interpretations Committee interpretations and as applied in accordance with the provisions of the Companies Act 2006. All of the Group’s operations are of a continuing nature. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Statement of Comprehensive Income and related notes. All of the Group’s operations are of a continuing nature.
The Group’s financial statements are presented in Sterling, which is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.
Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014, is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.
The Group has adopted IFRS 10 – Consolidated Financial Statements Investment Entities amendments (effective 1 January 2014) which establishes a single control model that applies to all entities including special purpose entities. The changes introduced by the Investment Entities amendments require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent. The Directors, having assessed the criteria, believe the parent company meets the criteria to be an investment entity under IFRS 10 and that this accounting treatment reflects the Company’s activities as an investment trust. Therefore any investments in subsidiaries may be carried at fair value through profit and loss in accordance with IAS 39. However, the principal activity of the subsidiary, BlackRock Commodities Securities Income Company Limited (which is controlled by the Company), is investment dealing activities and option writing and therefore this entity is considered to provide investment related services to the Company and is required to be consolidated under the Investment Entities amendment.
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 December 2015 and have not been applied in preparing these financial statements (major changes and new standards issued are detailed below). None of these is expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.
IFRS 9 – Financial Instruments (2014) replaces IAS 39 and deals with a package of improvements including principally a revised model for classification and measurement of financial instruments, a forward looking expected loss impairment model and a revised framework for hedge accounting. In terms of classification and measurement the revised standard is principles based depending on the business model and nature of cash flows. Under this approach instruments are measured at either amortised cost or fair value though the standard retains the fair value option allowing designation of debt instruments at initial recognition to be measured at fair value. Under IFRS 9 equity and derivative investments will be held at fair value because they fail the ‘solely payments of principal and interest’ test and debt investments will be held at fair value because the business model is to manage them on a fair value basis. The scope of the fair value option is reduced within IFRS 9. The standard is effective from 1 January 2018 with earlier application permitted but has not yet been endorsed by the European Commission. The Company does not plan to early adopt this standard.
Amendments to IAS 1 (effective 1 January 2016) require changes to the presentation of financial instruments. The amendments are not expected to have a significant effect on the measurement of amounts recognised in the financial statements of the Company.
Amendments to IAS 7 – Disclosure initiative Statement of Cash Flows (effective 1 January 2017). The amendments are not expected to have a significant effect on the presentation of the Statement of Cash Flows within the financial statements of the Company.
Amendments to IAS 12 – Recognition of deferred tax assets for unrealised losses (effective 1 January 2017). The amendment is not expected to have a significant effect on the measurement of amounts recognised in the financial statements of the Company.
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Company’s revenue streams from financial instruments the provisions of this standard are not expected to be applicable.
(b) Basis of consolidation
The Group’s financial statements are made up to 30 November each year and consolidate the financial statements of the Company and its wholly owned subsidiary, which is registered and operates in England and Wales, BlackRock Commodities Securities Income Company Limited.
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intra-group balances and transactions, including unrealised profits arising therefrom, are eliminated.
(c) Presentation of the Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Consolidated Statement of Comprehensive Income.
(d) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business being investment business.
(e) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. Special dividends are recognised on an ex-dividend basis and are treated as a capital or a revenue receipt depending on the facts or circumstances of each particular case. The return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Interest income is accounted for on an accruals basis.
Option premium income is recognised as revenue evenly over the life of the option contract and included in the revenue column of the Statement of Comprehensive Income unless the option has been written for the maintenance and enhancement of the Company’s investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column of the Statement of Comprehensive Income.
(f) Expenses
All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Consolidated Statement of Comprehensive Income, except as follows:
-
expenses which are incidental to the acquisition of an investment are charged to the capital column of the Statement of Comprehensive Income. Details of transaction costs on the purchases and sales of investments are disclosed in note 10 to the financial statements contained within the annual report.
-
expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and
-
the investment management fees and finance costs of borrowing borne by the Group have been allocated 75% to the capital column and 25% to the revenue column of the Consolidated Statement of Comprehensive Income in line with the Board’s expectations of the long term split of returns, in the form of capital gains and income, respectively, from the investment portfolio.
(g) Taxation
The Group accounts do not reflect any adjustment for group relief between the Company and the Subsidiary.
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date.
Where expenses are allocated between capital and revenue any tax relief in respect of the expenses is allocated between capital and revenue returns on the marginal basis using the Company’s effective rate of corporation taxation for the accounting period.
Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred taxation assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred taxation assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.
(h) Investments held at fair value through profit or loss
The Company’s investments are classified as held at fair value through profit or loss in accordance with IAS 39 – “Financial Instruments: Recognition and Measurement†and are managed and evaluated on a fair value basis in accordance with its investment strategy.
All investments are initially and subsequently measured at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales of investments are recognised at the trade date of the disposal. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs.
The fair value of the financial investments is based on their quoted bid price, or as otherwise stated at the financial reporting date, without deduction for the estimated future selling costs. This policy applies to all current and non current asset investments held by the Group.
Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Consolidated Statement of Comprehensive Income as ‘Gains or losses on investments held at fair value through profit or loss’. Also included within the heading are transaction costs in relation to the purchase or sale of investments.
(i) Options
Options are held at fair value based on the bid/offer prices of the options written to which the Group is exposed. The value of the option is subsequently marked to market to reflect the fair value of the option based on traded prices. Where the premium is taken to revenue, an appropriate amount is shown as capital return such that the total return reflects the overall change in the fair value of the option. When an option is closed out or exercised the gain or loss is accounted for as a capital gain or loss.
(j) Dividends payable
Under IFRS special and interim dividends are recognised when paid to shareholders. Final dividends, if any, are only recognised after they have been approved by shareholders.
(k) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities and non-monetary assets held at fair value through profit or loss are translated into sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate.
(l) Cash and cash equivalents
Cash comprises cash in hand, on demand deposits and bank overdrafts payable on demand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.
(m) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Consolidated Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise.
(n) Other receivables and other payables
Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value.
3. Income
| 2016 £’000 |
2015 £’000 |
|
| Investment Income: | ||
| Overseas listed dividends | 1,222 | 2,422 |
| Fixed interest | 586 | 375 |
| UK listed dividends | 1,028 | 1,230 |
| -------- | -------- | |
| 2,836 | 4,027 | |
| -------- | -------- | |
| Other income: | ||
| Deposit interest | 7 | 3 |
| Option premium income | 3,687 | 4,538 |
| -------- | -------- | |
| 3,694 | 4,541 | |
| -------- | -------- | |
| Total | 6,530 | 8,568 |
| ======== | ======== |
Option premium income is stated after commission expenses incurred on transactions.
During the year, the Group received option premium income totalling £4,103,000 (2015: £4,538,000) for writing put and covered call options for the purposes of revenue generation. Option premiums of £3,687,000 (2015: £4,538,000) were amortised to income. At 30 November 2016, there were 16 open positions (2015: 12) with an associated liability of £482,000 (2015: £623,000).
4. Investment management fees
| 2016 | 2015 | |||||
| Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
|
| Investment management fee | 201 | 602 | 803 | 220 | 661 | 881 |
| ======== | ======== | ======== | ======== | ======== | ======== |
Until 30 November 2015, the investment management fee was levied at a rate of 1.10% of gross assets per annum based on gross assets on the last day of each quarter. In December 2015, the board announced that the Company and the Manager had agreed a reduction of the fees payable to the Manager under the Investment Management Agreement. Effective 1 December 2015 the investment management fee was replaced with a management fee of 0.95% per annum on the first £250 million of the Company’s gross assets reducing to 0.90% thereafter. The fee is allocated 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income.
5. Other expenses
| 2016 £’000 |
2015 £’000 |
|
| Allocated to revenue: | ||
| Custody and depositary fees | 12 | 15 |
| Auditors’ remuneration: | ||
| – audit services | 25 | 25 |
| Directors’ emoluments | 82 | 89 |
| Registrar’s fee | 26 | 22 |
| Marketing fees | 10 | 22 |
| Other administration costs | 124 | 160 |
| -------- | -------- | |
| 279 | 333 | |
| -------- | -------- | |
| Allocated to capital: | ||
| Transaction charges – capital | 6 | 3 |
| -------- | -------- | |
| 285 | 336 | |
| ======== | ======== | |
| The Company’s ongoing charges, calculated as a percentage of average net assets and using expenses, excluding any interest costs and excluding taxation, were: | 1.4% | 1.4% |
| The Company’s ongoing charges, calculated as a percentage of average net assets and using expenses, including any interest costs and taxation, were: | 2.7% | 2.7% |
| ======== | ======== |
Details of the Directors’ emoluments are given in the Directors’ Remuneration Report contained within the annual report.
6. Finance costs
| 2016 | 2015 | |||||
| Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
|
| Interest on bank overdrafts | 64 | 36 | 100 | 24 | 33 | 57 |
| ======== | ======== | ======== | ======== | ======== | ======== |
Finance costs for the Company are charged 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income. Subsidiary finance costs are charged 100% to the revenue column of the Consolidated Statement of Comprehensive Income.
7. Dividends
The dividends disclosed in the table below have been considered in view of the requirements of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts declared meet the relevant requirements. Amounts recognised as distributions to ordinary shareholders during the year to 30 November 2016 were as follows:
| 2016 £’000 |
2015 £’000 |
|
| Fourth interim dividend for the year ended 30 November 2015 - 1.50p (2014: 1.5375p) | 1,734 | 1,617 |
| First interim dividend for the year ended 30 November 2016 - 1.50p (2015: 1.50p) | 1,762 | 1,603 |
| Second interim dividend for the year ended 30 November 2016 - 1.50p (2015: 1.50p) | 1,769 | 1,641 |
| Third interim dividend for the year ended 30 November 2016 -1.00p (2015: 1.50p) | 1,180 | 1,719 |
| -------- | -------- | |
| 6,445 | 6,580 | |
| ======== | ======== |
For the year ended 30 November 2016, a fourth interim dividend of 1.00p (2015: 1.50p) per ordinary share has been declared and will be paid on 20 January 2017, to shareholders on the Company’s register on 30 December 2016.
The total dividends payable in respect of the year which form the basis of section 1158 of the Corporation Tax Act 2010 are set out below:
| 2016 £’000 |
2015 £’000 |
|
| First interim dividend paid on 21 April 2016 of 1.50p (2015: 1.50p) | 1,762 | 1,603 |
| Second interim dividend paid on 22 July 2016 of 1.50p (2015: 1.50p) | 1,769 | 1,641 |
| Third interim dividend paid on 21 October 2016 of 1.00p (2015: 1.50p) | 1,180 | 1,719 |
| Fourth interim dividend payable on 20 January 2017 of 1.00p (2015: 1.50p) | 1,188 | 1,734 |
| -------- | -------- | |
| 5,899 | 6,697 | |
| ======== | ======== |
8. Consolidated earnings and net asset value per ordinary share
| 2016 | 2015 | |
| Net revenue profit attributable to ordinary shareholders (£’000) | 5,197 | 6,940 |
| Net capital loss attributable to ordinary shareholders (£’000) | 29,066 | (35,564) |
| -------- | -------- | |
| Total profit/(loss) attributable to ordinary shareholders (£’000) | 34,263 | (28,624) |
| -------- | -------- | |
| Total equity attributable to shareholders (£’000) | 98,833 | 69,430 |
| -------- | -------- | |
| The weighted average number of ordinary shares in issue during the period, on which the return per ordinary share was calculated, was: | 117,437,126 | 109,870,544 |
| The actual number of ordinary shares in issue at the year end, on which the net asset value was calculated, was: | 118,268,000 | 115,568,000 |
| -------- | -------- | |
| Revenue earnings per share | 4.43p | 6.32p |
| Capital profit/(loss) per share | 24.75p | (32.37p) |
| -------- | -------- | |
| Total earnings per share | 29.18p | (26.05p) |
| -------- | -------- | |
| Net asset value per share | 83.57p | 60.08p |
| Share price (mid-market) | 82.75p | 59.75p |
| ======== | ======== |
9. Called up share capital
| Ordinary shares number |
Total shares number |
Nominal value £’000 |
|
| Allotted, called up and fully paid share capital comprised: | |||
| Ordinary shares of 1 pence each | |||
| -------- | -------- | -------- | |
| Shares in issue at 30 November 2015 | 115,568,000 | 115,568,000 | 1,156 |
| -------- | -------- | -------- | |
| Shares issued | 2,700,000 | 2,700,000 | 27 |
| -------- | -------- | -------- | |
| At 30 November 2016 | 118,268,000 | 118,268,000 | 1,183 |
| ======== | ======== | ======== |
The number of ordinary shares in issue at the year end was 118,268,000 (2015: 115,568,000) of which none were held in treasury (2015: nil).
During the year 2,700,000 (2015: 10,410,000) shares were issued for a total consideration of £1,586,000 (2015: £8,086,000) before deduction of issue costs. Since 30 November 2016, a further 500,000 shares have been issued for a total consideration of £438,000 before deduction of issue costs.
The ordinary shares carry the right to receive any dividends and have one voting right per ordinary share. There are no restrictions on the voting rights of the ordinary shares or on the transfer of the ordinary shares.
10. Share premium account
| 2016 £’000 |
2015 £’000 |
|
| At start of the year | 44,837 | 37,003 |
| Premium on shares issued | 1,559 | 7,982 |
| Share issue costs | (8) | (148) |
| Tender issue costs rebated | 7 | – |
| -------- | -------- | |
| At 30 November 2016 | 46,395 | 44,837 |
| ======== | ======== |
11. Reserves
| Group | Special reserve £’000 |
Capital reserve – arising on investments sold £’000 |
Capital reserve – arising on investments held £’000 |
Revenue reserve £’000 |
| At 1 December 2015 | 71,223 | (23,840) | (27,705) | 3,759 |
| Movement during the year: | ||||
| Net (loss)/ profit for the year | – | (10,787) | 39,853 | 5,197 |
| Dividends paid | – | – | – | (6,445) |
| -------- | -------- | -------- | -------- | |
| At 30 November 2016 | 71,223 | (34,627) | 12,148 | 2,511 |
| ======== | ======== | ======== | ======== |
| Company | Special reserve £’000 |
Capital reserve – arising on investments sold £’000 |
Capital reserve – arising on investments held £’000 |
Revenue reserve £’000 |
| At 1 December 2015 | 71,223 | (23,840) | (26,161) | 2,215 |
| Movement during the year: | ||||
| Net (loss)/ profit for the year | – | (11,605) | 39,631 | 6,237 |
| Dividends paid | – | – | – | (6,445) |
| -------- | -------- | -------- | -------- | |
| At 30 November 2016 | 71,223 | (35,445) | 13,470 | 2,007 |
| ======== | ======== | ======== | ======== |
12. Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Statements of Financial Position at their fair value (investment and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Group are explained in the fair value hierarchy below.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price in an active market for an identical instrument
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques used to price securities based on observable inputs
This category includes quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives, include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs could have a significant impact on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The investment manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
Over-the-counter derivative option contracts have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Group.
The investment in the subsidiary is classified within Level 3 since the subsidiary is not an open ended entity. The fair value of the investment in subsidiary is calculated based on the fair value of the underlying balances within the subsidiary. Therefore, no sensitivity analysis has been presented.
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
| Financial instruments at fair value through profit or loss at 30 November 2016 - Group | Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity and debt investments | 103,127 | – | – | 103,127 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (482) | – | (482) |
| -------- | -------- | -------- | -------- | |
| 103,127 | (482) | – | 102,645 | |
| ======== | ======== | ======== | ======== | |
| Financial instruments at fair value through profit or loss at 30 November 2016 - Company | Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity and debt investments | 103,127 | – | 1,322 | 104,449 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (482) | – | (482) |
| -------- | -------- | -------- | -------- | |
| 103,127 | (482) | 1,322 | 103,967 | |
| ======== | ======== | ======== | ======== | |
| Financial instruments at fair value through profit or loss at 30 November 2015 - Group | Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity and debt investments | 69,610 | – | – | 69,610 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (623) | – | (623) |
| -------- | -------- | -------- | -------- | |
| 69,610 | (623) | – | 68,987 | |
| ======== | ======== | ======== | ======== |
| Financial instruments at fair value through profit or loss at 30 November 2015 - Company | Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity and debt investments | 69,610 | – | 1,544 | 71,154 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (623) | – | (623) |
| -------- | -------- | -------- | -------- | |
| 69,610 | (623) | 1,544 | 70,531 | |
| ======== | ======== | ======== | ======== |
A reconciliation of fair value measurement in Level 3 is set out below.
| Level 3 Financial assets at fair value through profit or loss at 30 November – Company | 2016 £’000 |
2015 £’000 |
| Opening fair value | 1,544 | 1,306 |
| Total gains or losses included in gains/(losses) on investments in the Consolidated Statement of Comprehensive Income: – assets held at the end of the year |
||
| (222) | 238 | |
| -------- | -------- | |
| 1,322 | 1,544 | |
| ======== | ======== |
13. Related party disclosure: directors’ emoluments
The related party transactions with Directors are set out in the Directors’ Remuneration Report contained within the annual report. At 30 November 2016, £nil (2015: £nil) was outstanding in respect of Directors’ fees.
14. Contingent liabilities
There were no contingent liabilities at 30 November 2016 (2015: nil).
15. Pulication of non-statutory accounts
The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2016 Annual Report and Financial Statements will be filed with the Registrar of Companies shortly.
The report of the auditor for the year ended 30 November 2016 contains no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.
This announcement was approved by the Board of Directors on 1 February 2017.
16. Annual report
Copies of the Annual Report will be sent to members shortly and will be available from the registered office c/o The Company Secretary, BlackRock Commodities Income Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
17. Annual general meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 14 March 2017 at 10.30 am.
ENDS
For further information, please contact:
Mark Johnson, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited
Tel: 020 7743 2300
Press enquires:
Lucy Horne, Lansons Communications - 020 7294 3689
E-mail:lucyh@lansons.com
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London
EC2N 2DL
1 February 2017
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