Dear Directors,
City of London currently holds on behalf of its institutional clients 12,634,852 shares (7.1%) in BlackRock World Mining Trust (BRWM).
BRWM’s investment returns over the three years to the end of October 2011 have exceeded 150%. This is very satisfactory compared to the benchmark HSBC Global Mining Index return over the same period of 128% and we congratulate the investment manager.
However, we are disappointed that this good investment record is not more fully reflected in the share price which remains at an unreasonably large discount to NAV. This is clearly an area where the board needs to be more assertive.
The Chairman’s statement in the Annual Report acknowledges the importance of actively monitoring the discount. We naturally agree but we are dismayed by the lack of action: monitoring the discount without a plan of action when it becomes unreasonable is pointless.
The discount to NAV is currently 17% and over the past three years it has averaged over 15%. We find this unacceptable and we call on the board to formulate a policy in order to reduce significantly the discount to NAV.
BlackRock Commodities Income Investment Trust (BRCI) shows what can be achieved when a Trust is fully focused on maximising returns for its shareholders. In their Annual Report, BRCI’s Directors explicitly recognise “the importance to investors of ensuring that any discount of the Company’s share price to its underlying NAV is as small as possible”.
BRCI has traded close to its NAV on average over the past three years and in our opinion shareholders in BRWM would like the same. We therefore urge the board to consider carefully suitable measures to recommend to BRWM shareholders that will achieve this.
We have written to you previously on this issue – in April 2010 and in June 2011 – and we consider that the time for action is long overdue.
We have decided to publish this latest letter in order to encourage other shareholders to join us in requesting that the board adopt best practice in respect of discount control.
City of London intends to oppose continuation at the next AGM unless the board brings forward acceptable proposals.
We look forward to hearing from you.
Simon Westlake
Executive, City of London Investment Group
