Final Results

BlackRock Commodities Income Investment Trust plc Annual Report 30 November 2014 Performance record - Financial Highlights As As at at 30 30 November November Change 2014 2013 % Assets Net assets (Â£'000)* 96,696 101,830 -5.0 Net asset value per ordinary share 91.95p 105.79p -13.1 -with income reinvested - - -8.1 -------- -------- -------- Ordinary share price (mid-market) 99.00p 109.50p -9.6 -with income reinvested - - -4.5 ======== ======== ======== Year Year ended ended 30 30 November November Change 2014 2013 % Revenue Net revenue after taxation (Â£'000) 6,225 5,551 +12.1 Revenue return per ordinary share 6.20p 5.87p +5.6 -------- -------- -------- Interim dividends 1st interim 1.4875p 1.4750p +0.8 2nd interim 1.4875p 1.4750p +0.8 3rd interim 1.4875p 1.4750p +0.8 4th interim 1.5375p 1.5250p +0.8 -------- -------- -------- Total dividends paid and payable 6.0000p 5.9500p +0.8 ======== ======== ======== * The change in net assets reflects market movements and the issue of 8,900,000 ordinary shares in the year. Chairman's statement I am pleased to present the Annual Report to shareholders of BlackRock Commodities Income Investment Trust plc for the year ended 30 November 2014. Overview 2014 was a challenging year for investors in natural resources as economic and geopolitical fears drove sentiment. Despite a strong first half to the year, the second half has seen a dramatic sell off in both iron ore and oil, the result of Chinese growth concerns and global oversupply. The Company has remained focused on investment into high quality diversified producers that should provide a platform for recovery. Against this background, the Company's net asset value per share (NAV) has been disappointing returning -8.1% and the share price returned -4.5%. Over the same period, the Euromoney Global Mining Index (formerly the HSBC Global Mining Index) and MSCI World Energy Index returned -8.0% and -3.8% respectively. Since the launch of the Company in December 2005 the NAV has returned 42.3% and the share price 50.2% (all percentages calculated in sterling terms with income reinvested). Since the year end and up to the close of business on 29 January 2015, the Company's NAV has returned -7.4% and the share price has returned -11.1%. Revenue return and dividends The Company's revenue return per share for the year amounted to 6.20 pence (2013: 5.87 pence). It remains the Company's intention to pay four quarterly dividends. Details for the 2013 and 2014 financial years are set out in note 6 to the Financial Statements. Our objective this year was to pay dividends which in total amounted to at least 5.95 pence and I am pleased to report that we have exceeded this target by paying quarterly dividends amounting to 6.00 pence per share (2013: 5.95 pence). It is the Company's aim to pay dividends amounting to at least 6.00 pence per share for the year ending 30 November 2015. Our ability to match or exceed this target will depend on the dividend distributions from our underlying portfolio and should not be interpreted as a proï¬t forecast. The target level represents a yield of 6.1% based on the share price as at the close of business on 28 November 2014. Your Company has now been operating for nine years. We have seen considerable turbulence and share price volatility over this period. However, in each ï¬nancial year, the ordinary dividends we have been able to pay to our shareholders have been ahead of the previous year. Tender offers The Directors of the Company have the 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 9 June 2014 that it had decided not to proceed with a tender offer in August 2014 and on 12 December 2014 that the tender offer in February 2015 would not be implemented. During the year ended 30 November 2014, the Company's shares traded at an average premium to NAV of 1.5% compared to a discount of 2.0% to NAV, the price at which any tender offer would be made. A resolution 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 all shareholders. Currently, ordinary shares representing up to 10% of the Company's issued ordinary share capital can be allotted as new ordinary shares or sold from treasury. In recent years the Company has come close to exhausting this 10% authority and, as such, has decided to propose at the forthcoming AGM, as a precaution against the authority being exceeded prior to the 2016 AGM, that authority be sought to allot as new ordinary shares or sell from treasury ordinary shares representing up to 30% of the Company's issued ordinary share capital. The Company will not, and indeed is prohibited from, issuing more than 10% of its issued share capital over any twelve month period without a prospectus, and, as such, any issue over this 10% limit would only take place after a prospectus has been published. During the financial year ended 30 November 2014, the Company issued 8,900,000 ordinary shares at an average price of 107.69 pence per share for a total consideration of Â£9,526,000, before the deduction of issue costs. The ordinary shares were issued at an average premium of 2.2% 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 Â£199,000, including income of Â£61,000. Since 30 November 2014, a further 700,000 ordinary shares have been issued for consideration of Â£616,000, before the deduction of issue costs. The ordinary shares were issued at a premium of 2.1% 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. Gearing The Company operates a ï¬‚exible gearing policy which depends on prevailing market conditions. The maximum gearing used during the year was 11.2% and at 30 November 2014 gearing was 3.9%. Gearing has been calculated in accordance with AIC guidelines and on a net basis. The Board In accordance with our policy of Board refreshment we were pleased to welcome Dr Carol Bell to the Board on 1 December 2014. Carol has also joined the Company's Audit and Management Engagement Committee and the Nomination Committee. Carol has enjoyed a successful career in the City and is currently a non-executive director of Petroleum Geo-Services ASA, Salamander Energy plc and two listed holding companies of the Fred Olsen Group (Bonheur ASA and Ganger Rolf ASA), a member of the S4C authority, the governing body of the Welsh language public service broadcaster and a Trustee of the National Museum Wales. Dr Bell has previously been a director of Hardy Oil & Gas plc, Det norske oljeselskap ASA and Caracal Energy Inc. (now Glencore E&P (Canada) Inc.). I will be standing down as a Director and as Chairman at the forthcoming AGM, having served as Chairman since the Company's incorporation in November 2005. After the AGM I shall hand over the chair to Ed Warner. Ed joined the Board in July 2013 and has provided wise and trusted counsel, I am confident that he will make an excellent Chairman and wish the Company well in the future. Corporate Broker The Board announces the appointment, with immediate effect, of Winterflood Securities Limited as the Company's corporate broker to replace J.P. Morgan Cazenove Limited. Alternative Investment Fund Managers' Directive (AIFMD) BlackRock Fund Managers Limited (BFM) was appointed as the Company's Alternative Investment Fund Manager (AIFM or Manager) on 2 July 2014. The Board has also appointed BNY Mellon Trust & Depositary (UK) Limited (the Depositary) to act as the Company's depositary. In complying with its new regulatory obligations, the Board continues to act independently of the AIFM and the arrangements in respect of the management fee remain unchanged. BlackRock Investment Management (UK) Limited (BIM (UK)) continues to act as the Company's Investment Manager under a delegation agreement with BFM. Annual General Meeting The Company's AGM will be held at 10.30 a.m. on Tuesday, 17 March 2015 at the ofï¬ces 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 65 to 68 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 As we enter a new financial year, expectations for global economic growth have been moderating. A combination of excess supply and softening demand has seen a significant fall in commodity prices, with mining and energy share prices also declining substantially during 2014. Today many commodities are trading below their marginal cost of production, and many producers are trading well below their historic average valuation. The weaker commodity price environment has seen companies aggressively cut costs and curtail spending on future growth. As we move into 2015 we would expect continued commodity price volatility. At current prices supply is highly likely to be cut, which should ultimately be supportive for prices. Despite these falls in commodity prices companies with robust balance sheets and high quality assets remain well positioned to grow dividends. Overall, we remain cautiously optimistic and believe the Company's portfolio is well positioned in high quality companies to take advantage of opportunities that arise in 2015. Alan Hodson Chairman 2 February 2015 Strategic report The Directors present the Strategic Report of the Company for the year ended 30 November 2014. Principal activity The Company carries on business as an investment trust. 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. Objective The objectives of the Company 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. Strategy The Company seeks to achieve its objectives through a focused portfolio, consisting of approximately thirty to one hundred and fifty securities. Business model and investment policy 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. Portfolio analysis A detailed analysis of the portfolio has been provided on pages 14 to 16 of the Annual Report. Performance During the year ended 30 November 2014, the Company's NAV per share returned -8.1% and the share price returned -4.5% (both percentages are calculated in sterling terms with income reinvested). The Investment Manager's Report includes a review of the main developments during the period, together with information on investment activity within the Company's portfolio. Results and dividends The results for the Group are discussed in the Chairman's Statement and are also set out in the Consolidated Statement of Comprehensive Income. The total loss for the year, after taxation, was Â£8,681,000 (2013: loss of Â£6,331,000) of which the revenue return amounted to Â£6,225,000 (2013: Â£5,551,000) and the capital loss amounted to Â£14,906,000 (2013: loss of Â£11,882,000). The Company pays dividends quarterly and for the year ended 30 November 2014 the Company's target was to pay dividends amounting to at least 5.95 pence per share in total (2013: target of 5.90 pence). The first three quarters' dividends of 1.4875 pence per share were paid on 22 April 2014, 25 July 2014 and 24 October 2014. A fourth quarterly dividend of 1.5375 pence per share was paid on 23 January 2015 to shareholders on the register of members at the close of business on 30 December 2014. This makes a total of 6.00 pence per share which exceeds the target for the year of 5.95 pence per share. It is the Company's aim to pay dividends amounting to at least 6.00 pence per share for the year ending 30 November 2015. This represents a yield of 6.1% based on the share price as at the close of business on 30 November 2014. Key performance indicators The Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time and which are comparable to those reported by other funds are set out below. Year Year ended ended 30 30 November November 2014 2013 Net asset value movement(1) -8.1% -5.9% Share price movement(2) -4.5% -6.0% Premium to net asset value (at year end) 7.7% 3.5% Revenue return per share 6.20p 5.87p Ongoing charges(3) 1.5% 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 operating expenses excluding interest as a percentage of average shareholders' funds. The Board also regularly reviews a number of indices and ratios to understand the impact on the Company's relative performance of the various components such as asset allocation and stock selection. The Board also reviews the performance of the Company against a peer group of other funds with similar investment objectives. Share rating, issues and repurchases The Directors recognise the importance to investors that the Company's share price should not trade at a signiï¬cant discount to NAV. Accordingly, the Directors monitor the share rating closely and will consider the issue at a premium or repurchase at a discount of ordinary shares to correct any supply/ demand imbalance in the market. Any such issues or repurchases will enhance the net asset value per share for continuing shareholders. For the year under review the Company's shares have traded in the range of a premium of 7.7% to a discount of 2.8% on a cum income basis and were trading at a premium of 7.7% at the close of business on 30 November 2014. As at the close of business on 29 January 2015 the Company's shares were trading at a premium of 3.4%. Principal risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below: * Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and for monitoring the performance of the Company's Investment Manager. An inappropriate policy or strategy may lead to poor performance, dissatisfied shareholders and a widening discount. To manage this risk the Board regularly reviews the Company's investment mandate and long term strategy and the Investment Manager's explanation of significant stock selection decisions, the rationale for the composition of the investment portfolio and any movement in the level of gearing. The Board also monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the Company's investment policy. * Income/dividend risk - The amount of income and future dividend growth will depend on the Company's underlying portfolio and investment activity. Any change in the tax treatment of the income 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 income forecasts and considers the level of income at each meeting. * Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through realising investments in the face of negative market movements. Changes in general economic and market conditions, such as interest rates, rates of inflation, industry conditions, tax laws, political events and trends can also substantially and adversely affect the securities and, as a consequence, the Company's prospects and share price. The Board considers asset allocation, stock selection, any unquoted investments 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 risk - The Company's investment activities expose it to a variety of financial risks which include market price risk, currency risk, liquidity risk, credit risk and interest rate risk. Further details are disclosed in note 17 of the Annual Report, together with a summary of the policies for managing these risks. * Gearing risk - The Company has the power to borrow money (gearing) and does so when the Investment Manager is confident that market conditions and opportunities exist to enhance investment returns. However, if the investments fall in value, any borrowings will magnify the extent of this loss. All borrowings require the approval of the Board and gearing levels are discussed by the Board and Investment Manager. * Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and 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 (BNYM), who maintain the Company's accounting records and provide custodian services. The security of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored and an internal controls report, which includes an assessment of operating effectiveness of internal controls. A summary of exceptions noted in the internal controls report is prepared by the Manager and reviewed by the Audit and Management Engagement Committee on a regular basis. The Manager and BNYM also produce Service Organisation Control (SOC) reports to provide assurance regarding the effective operation of controls which are reported on by their service auditors and give assurance regarding the effective operation of controls. The Board also considers succession arrangements for key employees of the Investment Manager and the business continuity arrangements for the Company's key service providers. * Regulatory risk - The Company 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. The Investment Manager monitors investment movements, the level and type of forecast income and expenditure 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 and the results are reported to the Board at each meeting. Following authorisation under the Alternative Investment Fund Managers' Directive (AIFMD) the Company and its appointed Alternative Investment Fund Manager (AIFM or Manager) are subject to the risks that the requirements of the AIFMD are not correctly complied with. The Board and Manager also monitor changes in government policy and legislation which may have an impact on the Company. 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. Social, community and human rights issues As an investment trust, the Company has no direct social or community responsibilities. However, 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 on page 28 of the Annual Report. Directors, Gender Representation and employees The Directors of the Company on 30 November 2014 are set out in the Directors' biographies on page 17 of the Annual Report. As at 30 November 2014, the Board consisted of four male Directors. With effect from 1 December 2014, following the appointment of Dr Bell, the Board consisted of four male Directors and one female Director. The Company's policy on diversity is set out on page 26 of the Annual Report. The Company does not have any employees. The information set out on pages 9 to 16 of the Annual Report including the Investment Managers Report, forms part of this Strategic Report. The Strategic Report was approved by the Board at its meeting on 2 February 2015. By order of the Board BlackRock Investment Management (UK) Limited Company Secretary 2 February 2015 Related party transactions BlackRock Investment Management (UK) Limited (BIM (UK)) provided management and administration services to the Company under a contract which was terminated with effect from 2 July 2014. BlackRock Fund Managers Limited (BFM) was appointed as the Company's AIFM with effect from 2 July 2014. BIM (UK) continues to act as the Company's Investment Manager under a delegation agreement with BFM. Further details of the investment management contract are disclosed in the Directors' Report on page 18 of the Annual Report. The investment management fee due to BIM (UK) and BFM for the year ended 30 November 2014 amounted to Â£1,255,000 (2013: Â£1,224,000). At the year end, Â£490,000 was outstanding in respect of the management fee (2013: Â£495,000). The management fee was until 2 July 2014 payable to BIM (UK) and thereafter to BFM. In addition to the above services, with effect from 1 November 2013, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the year ended 30 November 2014 amounted to Â£ 31,800 excluding VAT (2013: Â£2,600). Marketing fees of Â£34,400 (2013: Â£2,600) were outstanding at 30 November 2014. With effect from 1 December 2014, the Board consisted of five 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 2014, the Chairman received an annual fee of Â£33,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of Â£27,000 and each other Director received an annual fee of Â£22,000. As at 30 November 2014, all members of the Board, except Dr Bell, held shares in the Company. Mr Hodson held 150,000 ordinary shares, Mr Merton held 17,000 ordinary shares, Mr Ruck Keene held 14,000 ordinary shares, and Mr Warner held 20,000 ordinary shares. All of the holdings of the Directors are beneficial. Mr Warner purchased a further 12,000 ordinary shares on 7 January 2015, all other shareholdings remain unchanged. 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 ï¬nancial statements for each ï¬nancial year. Under that law, the Directors have elected to prepare the ï¬nancial statements under IFRS as adopted by the European Union. Under Company law the Directors must not approve the ï¬nancial statements unless they are satisï¬ed that they give a true and fair view of the state of affairs of the Group and of the proï¬t or loss of the Group for that period. In preparing these Group ï¬nancial statements, the Directors are required to: * present fairly the ï¬nancial position, ï¬nancial performance and cash ï¬‚ows of the Group; * select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; * present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; * make judgements and estimates that are reasonable and prudent; * state whether the ï¬nancial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the ï¬nancial statements; * provide additional disclosures when compliance with the speciï¬c requirements in IFRS as adopted by the European Union is insufï¬cient to enable users to understand the impact of particular transactions, other events and conditions on the Group's ï¬nancial position and ï¬nancial performance; and * prepare the ï¬nancial 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 sufï¬cient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the ï¬nancial position of the Group and enable them to ensure that the ï¬nancial 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 ï¬nancial information included on the BlackRock website. Legislation in the United Kingdom governing the preparation and dissemination of ï¬nancial statements may differ from legislation in other jurisdictions. Each of the Directors, whose names are listed on page 17 of the Annual Report, conï¬rm to the best of their knowledge that: * the ï¬nancial 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, ï¬nancial position and net return of the Group; and * the Strategic Report contained in the Annual Report and Financial Statements includes 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 2012 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 fulï¬ls these requirements. The process by which the Committee has reached these conclusions is set out in the Audit and Management Engagement Committee's report on pages 30 to 32 of the Annual Report. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 30 November 2014, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy. For and on behalf of the Board Alan Hodson Chairman 2 February 2015 Investment manager's report The year started strongly, with commodities outperforming all other global asset classes. However, weaker than expected global economic growth, rising supply and a strong US dollar set the stage in the second half of the year for the steepest commodity price fall since the second half of 2008, more than offsetting the initial gains in energy and mining equities. The falls were across the board, with key commodities, such as Brent oil declining by 35%, iron ore by 48% and copper by 9% in the year under review. The sell-off among mining and energy equities was equally aggressive, with several companies expecting price movements similar to 2008. In the current market we remain focused on high quality companies with low operating costs and strong balance sheets, making them well positioned to navigate through this volatile period. While the market back-drop remains challenging, we are seeing a number of interesting valuation opportunities emerging in high quality companies. Improving Capital Discipline A key theme in recent years has been a re-focusing of corporate strategy to maximise cash flow in a period of lower commodity prices. The mining sector began to respond to these changing conditions in 2012, accelerating in 2013 as new management teams at the largest mining companies implemented cost-cutting strategies and scaled back capital expenditures. However, it was only from the end of 2013 and 2014 that this began to translate into improved operating and financial results. The strength of oil prices in recent years has lessened the need for greater capital discipline among energy companies although the focus on cost cutting and reduced capital expenditure is likely to accelerate in 2015 as the sector responds to lower oil prices. An important outcome of improved cash returns to shareholders is the attractive dividend yields that the energy and mining companies are currently trading on, both relative to their own history and the broader market. For example, BHP Billiton is currently trading at a 50% dividend yield premium to the FTSE 100. Among the large cap integrated oil & gas companies and the diversified miners dividend yield is beginning to provide a floor to equity valuations. While there is a degree of uncertainty around the quantum of dividends in 2015 given recent commodity price falls, we continue to expect dividends to increase slightly year-on-year among the large mining and energy companies. This has been reiterated by the companies at their recent Capital Market Days where they have looked to prioritise dividends and the balance sheet ahead of growth and have guided the market towards flat to increasing dividends in 2015. The table below shows the performance of key commodity prices during the year under review compared to the previous year. 30 30 November November % Commodity 2013 2014 change Base Metals (US$/tonne) Aluminium 1,710 2,030 +18.7 Copper 7,054 6,412 -9.1 Lead 2,055 2,024 -1.5 Nickel 13,451 16,223 +20.6 Tin 22,789 20,276 -11.0 Zinc 1,866 2,213 +18.6 Precious Metals (US$/oz) Gold 1,253 1,182 -5.7 Silver 19.93 15.5 -22.2 Platinum 1,376 1,205 -12.4 Palladium 724 809 +11.7 Energy Oil (WTI) (US$/Bbl) 92.5 65.9 -28.8 Oil (Brent) (US$/Bbl) 111.1 71.7 -35.5 Natural Gas (HH) (US$/MMBTU) 3.8 4.2 +10.5 Uranium (US$/lb) 36.3 40.0 +10.2 Bulk Commodities (US$/tonne) Iron ore 136.4 71.3 -47.7 Coking coal 136.0 112.0 -17.6 Thermal coal 84.9 63.4 -25.3 Potash 410 370 -9.8 Equity Indices Euromoney Global Mining Index (US$) 401.2 342.9 -14.5 Euromoney Global Mining Index (Â£) 244.9 219.0 -10.6 MSCI World Energy Index (US$) 268.1 240.7 -10.2 MSCI World Energy Index (Â£) 163.7 153.7 -6.1 ======== ======== ======== Source: Bloomberg. Income During the year, the portfolio generated Â£7,641,000 (2013: Â£6,719,000) in gross income. This enabled payment of a dividend of 1.5375 pence per share for the final interim payment, bringing the total dividend for 2014 to 6.00 pence per share, a 0.8% increase compared with the previous year. As we mentioned in the interim report, the strength of sterling in the first half of the year more than offset many of the announced dividend increases. However, in the final quarter of the year, sterling fell by almost 6% versus the US dollar. Whilst this brought some welcome relief its impact will not be felt until 2015, as the first half of each year typically sees higher dividend receipts as companies pay out their final dividends. At the start of 2014, we viewed the sector as being well positioned to deliver a step change in free cash flow. Capital spending started to roll-off after a record multi-year investment cycle and new projects began to contribute to production. Companies have delivered operationally to allow this but the recent sharp falls in commodity prices have reduced the magnitude of the free cash flow that can be delivered. This meant that dividend increases in 2014 were at the low end of expectations with little scope for additional returns via special dividends or buybacks, such as those seen in 2012. Unless commodity prices, in particular the oil price, rebound during the first half of 2015, we would expect dividend growth in 2015 to be muted for the sector as a whole. While we expect the large oil & gas and mining companies to be able to increase dividends, there are some companies that will look to cut dividends in order to maintain a strong balance sheet; for example, Canadian Oil Sands (a regular strong contributor to the Company's dividend) recently slashed its dividend by 42% in response to the lower oil price. Option premia this year accounted for approximately 40% of gross income, a moderate increase versus prior years. Although the volatility of general equity markets was subdued for much of the year with the VIX Index (implied volatility on S&P 500 options) reaching multi-year lows, the volatility in the mining sector remained high for much of the year, allowing both covered calls and puts to be written at attractive premiums. In the second half of the year as a strengthening US Dollar put pressure on most commodity prices, and volatility increased in the energy sector. We took advantage of this by writing puts to re-enter positions in Southwestern and Ultra Petroleum, two gas weighted companies in the US where valuations had become attractive. Energy Over the past four years the energy market has become somewhat accustomed to a stable oil price, trading within a US$90-US$120/bbl range and creating a relatively positive backdrop for energy related equities. Investors were caught unaware by the dramatic oil price move in the second half of 2014 which saw the Brent and WTI oil price tumble to five year lows during November. A combination of weaker demand growth, particularly from Europe and Asia, reduced supply outages, notably from Libya, and continued production growth from the US have driven the oil price lower. As the oil price declined, the market looked to the OPEC cartel to reduce supply. At their 27 November 2014 meeting, OPEC chose not to cut production and set 5 June 2015 as the next meeting date. This was taken as a change of strategy by OPEC and provided no near term oil price support. At current oil price levels we would expect to see capital expenditure reduce, setting the stage for a longer term supply response over the next 12-18 months. Lower oil prices should impact on spending on higher cost oil plays where analysts estimate that the majority of production in the US is not economic at an oil price below US$70/bbl (WTI price). If correct, some wells would be marginal at current prices and reduced spending in these areas should help moderate supply growth and support prices. In addition, there is potential for certain oil producing states that are extremely dependent on oil revenues to come under significant strain. With the fiscal budgets of many OPEC nations swelling, the oil price required to balance these budgets has been rising and is currently at or above US$100/bbl for many of the world's key oil producing countries. Mining As outlined in the interim report, the mining sector had a positive start to the year spurred on by strong performance from base metals with zinc, copper and aluminium spot prices increasing by 13%, 1% and 19% respectively in the first three months of the year. However, lacklustre Chinese economic data and anaemic growth in Europe began to emerge from August and, in September, the sector suffered its largest monthly fall since June 2013. Iron ore was the worst performing commodity the effect of record new supply, primarily from the major low cost producers, combined with weakening Chinese steel production. Prices fell by 48% to record five year lows, finishing at US$71/t at the end of November. Increased volume growth, an ongoing focus on cost-cutting, lower oil prices and weaker producer currency (AUD, SA Rand and Brazilian Real) has enabled producers to lower costs, continuing to put pressure on the cost curve. While low cost producers such as Rio Tinto and BHP Billiton are still able to generate healthy profits at the current price level, we would expect to see ongoing displacement of higher cost tonnes in coming years. During the year we have seen a divergence between the performance of the base metals versus the bulk commodities. There are number of discrete drivers behind the performance of each of the base metals but, in general, many of the base metals have been in oversupply in recent years and have now seen supply curtailment sufficient to begin to tighten the market. We remain positive on the outlook for base metals, in particular copper, zinc and aluminium. Throughout the year we maintained a greater exposure to the energy sector than the mining sector as we held a broad view that developed markets, notably the US, would have stronger economic performance than emerging markets. Although we did not hold a view that China would experience a hard landing/significant negative economic event, we saw downside risk to the market's forecast of continued growth in steel output in the country. This view was driven by a combination of Government difficulty trying to transition the economy from one driven by fixed asset investment to a more consumption led economy and the crackdown on high polluting industries. As the year progressed, there was increased momentum in the strength of the US dollar as Quantitative Easing (QE) was withdrawn by the Federal Reserve and other countries, most notably Japan, increased their monetary easing programmes. A strong US dollar is typically associated with challenging markets for commodities so through the second half of the year we reduced the level of gearing in the fund from a peak of over 10% to 3% at the year end. During the last three months of the year we moderately increased the mining exposure in the fund as we increased holdings in a number of mid-cap base metal companies such as Lundin Mining. This increase was funded by reducing our positions in a number of higher cost oil producers and reducing our position in BHP Billiton given its oil exposure and disappointing lack of capital management evidenced in the company's full year results in August. The oil companies have yet to show the market what flexibility they have in their capital expenditure schedules and their operating cost base in this lower oil price environment. If indications are that these costs will be hard to drive down, we will likely reassess our high allocation to the energy sector. Outlook As we enter a new financial year, the global economy remains poised for another year of economic growth, despite moderating expectations in recent months. The US economic recovery continues and, although China's economic growth rate has slowed, the Government has showed it is committed to avoiding a so-called hard landing scenario. However, the level of uncertainty around the supply side of commodity markets has increased materially of late, in particular in the oil market. The failure of OPEC to make coordinated supply cuts to defend prices means that a forecast of range bound oil prices is no longer possible and we would anticipate increased volatility in oil prices in 2015, both to the up and down side. The trend of base metals outperforming the bulk commodities is one we expect to continue in 2015 and the portfolio reflects this view. A number of the base metals, such as copper, are close to moving into deficit so any disruption to supply or upside surprise to demand could see prices move higher. We have positioned the portfolio in a number of copper and nickel companies that would benefit if this happened. Given the recent falls in commodity prices, a step change upwards in dividends for the sector has been delayed but, even at current prices, there are some companies with higher quality assets and robust balance sheets that are well positioned to grow their dividends. We will focus the portfolio on these companies and a selection of mid-cap companies that have strong profiles to deliver long term dividend growth. Olivia Markham and Tom Holl BlackRock Investment Management (UK) Limited 2 February 2015 Distribution of investments as at 30 November 2014 ASSET ALLOCATION - GEOGRAPHY Global 35.6% Canada 18.6% USA 17.9% Europe 11.3% Latin America 6.7% Asia 2.6% China 2.4% South Africa 1.9% Australia 1.8% Africa 1.2% Source: BlackRock. ASSET ALLOCATION - COMMODITY Energy 62.3% Mining 37.7% Mining Diversified Mining 17.0% Copper 8.0% Gold 5.6% Nickel 3.6% Silver 1.4% Iron Ore 1.2% Diamonds 0.6% Fertilizers 0.3% Energy Integrated Oil 33.0% Exploration & Production 15.2% Distribution 3.8% Oil Sands 5.3% Oil Services 2.6% Coal 2.4% Source: BlackRock. Ten largest investments as at 30 November 2014 Chevron: 6.0% (2013: 7.6%) is one of the world's leading integrated energy companies engaged in every aspect of the oil, gas and power generation industries. Chevron is one of the world's `supermajor' oil companies, along with BP, ExxonMobil, Royal Dutch Shell and Total. ExxonMobil: 6.0% (2013: 5.7%) is the world's largest publicly traded international oil and gas company and the largest reï¬ner and marketer of petroleum products. Glencore: 4.4% (2013: 3.5%) is one of the world's largest globally diversified natural resource companies, it is an integrated producer and marketer of commodities, with activities in every part of the supply chain, from sourcing materials to delivering products to an international customer base. In the mining sector, the company has interests in base metals and iron ore, while its energy portfolio is focused on oil and coal. The company also has storage, handling and processing facilities for grains, oils and oilseeds, cotton and sugar. BHP Billiton: 4.1% (2013: 5.3%) is the world's largest diversiï¬ed 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 signiï¬cant interests in oil, gas and liqueï¬ed natural gas. Enbridge Income Fund Trust: 3.8% (2013: 1.8%) 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. Royal Dutch Shell: 3.6% (2013: 3.8%) is one of the world's leading energy companies. The Anglo-Dutch company is active in every area of the oil and gas industry from exploration and production, reefing and marketing, power generation and energy trading. The company also has renewable energy interests in biofuels. Eni: 3.6% (2013: 3.2%) is a major integrated energy company with activities in exploration and production, reï¬ning and marketing as well as power generation. Based in Italy, Eni is also the leading player in the European gas market. In the oil services sector, Eni owns a major stake in Saipem, a leading turnkey contractor in the oil and gas industry. Canadian Oil Sands: 3.5% (2013: 2.4%) is a company that holds a 36.7% interest in the Syncrude project - a joint venture with several other companies including Imperial Oil Resources and Suncor. It is a large oil sands mining and upgrading operation located in northeast Alberta. It produces 100% light, sweet crude oil and has a strong track record of distributing cashflows to shareholders as dividends. ConocoPhillips: 3.2% (2013: 2.1%) 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. Total: 3.2% (2013: 2.7%) is based in France and is one of the world's largest international oil and gas companies with operations covering the entire energy chain, from oil exploration and production to trading, shipping and reï¬ning and marketing of petroleum products. All percentages reï¬‚ect 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 2013. Together, the ten largest investments represents 41.4% of total investments (ten largest investments as at 30 November 2013: 42.5%). Investments as at 30 November 2014 Main % geographic Market of exposure value investments Â£'000 % Integrated Oil Chevron Global 5,915 6.0 ExxonMobil Global 5,899 6.0 Royal Dutch Shell Global 3,577 3.6 Eni Europe 3,521 3.6 ConocoPhillips USA 3,164 3.2 Total Global 3,111 3.2 Statoil Europe 2,510 2.4 Repsol Europe 1,982 2.0 Occidental Petroleum USA 1,833 1.9 BP Global 1,051 1.1 -------- -------- 32,563 33.0 -------- -------- Diversified Mining Glencore Global 4,351 4.4 BHP Billiton Global 4,246 4.3 BHP Billiton put option 19/12/14 Global (170) (0.2) Rio Tinto Global 2,993 3.0 Rio Tinto put option 19/12/14 Global (29) - Lundin Mining Europe 1,821 1.8 Lundin Mining 7.875% 1/11/22 Europe 659 0.7 Vale Latin America 2,379 2.4 Vale call option 20/12/14 Latin America (17) - Teck Resources Canada 561 0.6 Teck Resources call option 17/01/15 Canada (10) - -------- -------- 16,784 17.0 -------- -------- Exploration & Production Anadarko Petroleum USA 2,299 2.3 Ultra Petroleum USA 2,042 2.1 Southwestern Energy USA 1,952 2.0 Peyto Explorations & Development Canada 1,835 1.9 Devon Energy USA 1,770 1.8 Encana Canada 1,714 1.7 Vermilion Energy Canada 1,485 1.5 Crescent Point Energy Canada 1,172 1.2 Pioneer Natural Resources USA 733 0.7 -------- -------- 15,002 15.2 -------- -------- Copper Freeport-McMoRan Copper & Gold Asia 2,553 2.6 First Quantum Minerals Global 1,399 1.4 First Quantum Minerals put option 17/01/15 Global (67) (0.1) Southern Copper Latin America 1,314 1.3 Antofagasta Latin America 1,194 1.2 Antofagasta call option 19/12/14 Latin America (37) - Hudbay Minerals 9.5% 1/10/20 Canada 1,156 1.2 Southern Peru Copper Latin America 385 0.4 -------- -------- 7,897 8.0 -------- -------- Gold Eldorado Gold Global 2,479 2.5 Gold Fields South Africa 1,309 1.3 Nevsun Resources Africa 1,139 1.2 Nevsun Resources call option 17/01/15 Africa (37) - Goldcorp Canada 627 0.6 Goldcorp call option 20/12/14 Canada (11) - -------- -------- 5,506 5.6 -------- -------- Oil Sands Canadian Oil Sands Canada 3,334 3.5 Suncor Energy Canada 1,131 1.1 Cenovus Energy Canada 711 0.7 -------- -------- 5,176 5.3 -------- -------- Distribution Enbridge Income Fund Trust Canada 3,721 3.8 -------- -------- 3,721 3.8 -------- -------- Nickel MMC Norilsk Nickel USA 2,495 2.5 Western Areas Australia 1,124 1.1 -------- -------- 3,619 3.6 -------- -------- Oil Services Baker Hughes USA 910 0.9 Aker Solutions Europe 765 0.8 Schlumberger USA 494 0.5 Akastor Global 381 0.4 -------- -------- 2,550 2.6 -------- -------- Coal China Shenhua Energy China 2,350 2.4 -------- -------- 2,350 2.4 -------- -------- Silver Fresnillo Latin America 1,135 1.2 Fresnillo put option 19/12/14 Latin America (52) (0.1) First Majestic Latin America 259 0.3 -------- -------- 1,342 1.4 -------- -------- Iron Ore Fortescue Metals Australia 716 0.7 Fortescue Metals call option 18/12/14 Australia (48) - Labrador Iron Ore Canada 504 0.5 Labrador Iron Ore call option 20/12/14 Canada (3) - London Mining Europe - - -------- -------- 1,169 1.2 -------- -------- Diamonds Petra Diamonds South Africa 561 0.6 -------- -------- 561 0.6 -------- -------- Fertilizers Potash Corporation of Saskatchewan Canada 333 0.3 -------- -------- 333 0.3 -------- -------- Total investments 98,573 100.00 ======== ======== All investments are ordinary shares unless otherwise stated. The total number of holdings (including open options) at 30 November 2014 was 64 (30 November 2013: 75). The total number of open options as at 30 November 2014 was 11 (30 November 2013: 14). The negative valuations of Â£481,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 30 November 2014. As at 30 November 2014, the Company did not hold any equity interests comprising more than 3% of any company's share capital. Financial statements Consolidated statement of comprehensive income for the year ended 30 November 2014 Notes Revenue Revenue Capital Capital Total Total 2014 2013 2014 2013 2014 2013 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Losses on investments held at fair value through profit or loss - - (13,859) (10,866) (13,859) (10,866) Income from investments held at fair value through profit or loss 3 4,519 4,534 - - 4,519 4,534 Other income 3 3,122 2,185 - - 3,122 2,185 -------- -------- -------- -------- -------- -------- Total income 7,641 6,719 (13,859) (10,866) (6,218) (4,147) -------- -------- -------- -------- -------- -------- Expenses Investment management fees 4 (314) (306) (941) (918) (1,255) (1,224) Other operating expenses 5 (313) (279) (6) - (319) (279) -------- -------- -------- -------- -------- -------- Total operating expenses (627) (585) (947) (918) (1,574) (1,503) -------- -------- -------- -------- -------- -------- Profit/(loss) on ordinary activities before finance costs and taxation 7,014 6,134 (14,806) (11,784) (7,792) (5,650) -------- -------- -------- -------- -------- -------- Finance costs (44) (38) (100) (98) (144) (136) -------- -------- -------- -------- -------- -------- Profit/(loss) before taxation 6,970 6,096 (14,906) (11,882) (7,936) (5,786) -------- -------- -------- -------- -------- -------- Taxation (745) (545) - - (745) (545) -------- -------- -------- -------- -------- -------- Net profit/ (loss) on ordinary activities after taxation 6,225 5,551 (14,906) (11,882) (8,681) (6,331) -------- -------- -------- -------- -------- -------- Earnings/(loss) per ordinary share 7 6.20p 5.87p (14.85p) (12.57p) (8.65p) (6.70p) ======== ======== ======== ======== ======== ======== The total column of this statement represents the Group's Consolidated 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 total net loss of the Company and the Group for the year was Â£8,681,000 (2013: loss of Â£6,331,000). The Group does not have any other recognised gains or losses. The net profit/(loss) disclosed above represents the Group's total comprehensive income/(loss). Statements of changes in equity for the year ended 30 November 2014 Group Ordinary Share share premium Special Capital Revenue Notes capital account reserve reserves reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the year ended 30 November 2014 At 30 November 2013 963 27,584 71,223 (1,075) 3,135 101,830 Total comprehensive income: Net (loss)/ profit for the year - - - (14,906) 6,225 (8,681) Transaction with owners, recorded directly to equity: Shares issued 8 89 9,437 - - - 9,526 Share issue costs - (18) - - - (18) Dividends paid 6 - - - - (5,961) (5,961) ------ ------ ------ ------ ------ ------ At 30 November 2014 1,052 37,003 71,223 (15,981) 3,399 96,696 ====== ====== ====== ====== ====== ====== For the year ended 30 November 2013 At 30 November 2012 943 25,429 71,223 10,807 3,261 111,663 Total comprehensive income: Net (loss)/ profit for the year - - - (11,882) 5,551 (6,331) Transaction with owners, recorded directly to equity: Shares issued 8 20 2,158 - - - 2,178 Share issue costs - (3) - - - (3) Dividends paid 6 - - - - (5,677) (5,677) ------ ------ ------ ------ ------ ------ At 30 November 2013 963 27,584 71,223 (1,075) 3,135 101,830 ====== ====== ======= ======= ======= ======= Company Ordinary Share share premium Special Capital Revenue Notes capital account reserve reserves reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the year ended 30 November 2014 At 30 November 2013 963 27,584 71,223 326 1,734 101,830 Total comprehensive income: Net (loss)/ profit for the year - - - (15,001) 6,320 (8,681) Transaction with owners, recorded directly to equity: Shares issued 8 89 9,437 - - - 9,526 Share issue costs - (18) - - - (18) Dividends paid 6 - - - - (5,961) (5,961) ------ ------ ------ ------ ------ ------ At 30 November 2014 1,052 37,003 71,223 (14,675) 2,093 96,696 ====== ====== ====== ====== ====== ====== For the year ended 30 November 2013 At 30 November 2012 943 25,429 71,223 12,441 1,627 111,663 Total comprehensive income: Net (loss)/ profit for the year - - - (12,115) 5,784 (6,331) Transaction with owners, recorded directly to equity: Shares issued 8 20 2,158 - - - 2,178 Share issue costs - (3) - - - (3) Dividends paid 6 - - - - (5,677) (5,677) ------ ------ ------ ------ ------ ------ At 30 November 2013 963 27,584 71,223 326 1,734 101,830 ======= ======= ======= ======== ======= ======= Statements of financial position as at 30 November 2014 2014 2014 2013 2013 Notes Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Non current assets Investments designated as held at fair value through profit or loss 99,054 100,360 108,127 109,528 -------- -------- -------- -------- Current assets Other receivables 1,127 1,127 3,905 3,905 Collateral pledged with brokers 1,804 - 1,484 - Cash and cash equivalents 776 776 47 47 -------- -------- -------- -------- 3,707 1,903 5,436 3,952 -------- -------- -------- -------- Total assets 102,761 102,263 113,563 113,480 ======== ======== ======== ======== Current liabilities Other payables (1,908) (1,530) (879) (715) Derivative financial liabilities held at fair value through profit or loss (481) (481) (704) (704) Bank overdraft (3,676) (3,556) (10,150) (10,231) -------- -------- -------- -------- (6,065) (5,567) (11,733) (11,650) -------- -------- -------- -------- Net current liabilities (2,358) (3,664) (6,297) (7,698) -------- -------- -------- -------- Net assets 96,696 96,696 101,830 101,830 ======== ======== ======== ======== Equity attributable to equity holders Ordinary share capital 8 1,052 1,052 963 963 Share premium account 37,003 37,003 27,584 27,584 Special reserve 71,223 71,223 71,223 71,223 Capital reserves (15,981) (14,675) (1,075) 326 Revenue reserve 3,399 2,093 3,135 1,734 -------- -------- -------- -------- Total equity 96,696 96,696 101,830 101,830 ======== ======== ======== ======== Net asset value per ordinary share 7 91.95p 91.95p 105.79p 105.79p ======== ======== ======== ======== Cash flow statements for the year ended 30 November 2014 2014 2014 2013 2013 Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Operating activities Loss before taxation (7,936) (8,314) (5,786) (5,950) Add back interest paid 153 142 126 121 Losses on investments held at fair value through profit or loss including transaction costs 13,859 13,954 10,866 11,099 Decrease/(increase) in other receivables 16 16 (11) (11) Increase in other payables 9 9 59 59 Decrease/(increase) in amounts due from brokers 2,497 2,497 (2,166) (2,166) Movements in investments held at fair value through profit or loss (4,974) (4,974) (3,164) (3,164) -------- -------- -------- -------- Net cash inflow/(outflow) from operating activities before interest and taxation 3,624 3,330 (76) (12) -------- -------- -------- -------- Interest paid (153) (142) (126) (121) Taxation (paid)/recovered (164) - (240) 55 Taxation on investment income included within gross income (380) (380) (436) (436) -------- -------- -------- -------- Net cash inflow/(outflow) from operating activities 2,927 2,808 (878) (514) -------- -------- -------- -------- Financing activities Share issue costs paid (18) (18) (3) (3) Proceeds from shares issued 10,610 10,610 1,094 1,094 Equity dividends paid (5,961) (5,961) (5,677) (5,677) -------- -------- -------- -------- Net cash inflow/(outflow) from financing activities 4,631 4,631 (4,586) (4,586) -------- -------- -------- -------- Increase/(decrease) in cash and cash equivalents 7,558 7,439 (5,464) (5,100) -------- -------- -------- -------- Cash and cash equivalents at start of the year (8,619) (10,184) (3,158) (5,087) Effect of foreign exchange rate changes (35) (35) 3 3 -------- -------- -------- -------- Cash and cash equivalents at the end of year (1,096) (2,780) (8,619) (10,184) -------- -------- -------- -------- Comprised of: Cash and cash equivalents 776 776 47 47 Collateral pledged with brokers 1,804 - 1,484 - Bank overdraft (3,676) (3,556) (10,150) (10,231) -------- -------- -------- -------- (1,096) (2,780) (8,619) (10,184) ======== ======== ======== ======== 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 ninth 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 in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Consolidated 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 (Â£'000) except when otherwise stated. Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts, issued by the AIC in January 2009, is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP. A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 December 2013, and have not been applied in preparing these financial statements (major changes and new standards issued detailed below). None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company however, additional disclosures will be required. 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 & 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. The standard is effective from 1 January 2018 with earlier application permitted but has not yet been endorsed by the European Commission. The Group does not plan to early adopt this standard. IFRS 10 Consolidated Financial Statements Investment Entities amendments (effective 1 January 2014) establish 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 judgment to determine which entities are controlled, and therefore are required to be consolidated by a parent. Consolidated financial statements are prepared and the provisions of these amendments are applicable. However, these changes have no material impact. IFRS 12 Disclosure of Interest in Other Entities (effective 1 January 2014) requires additional disclosures that relate to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. The amendments to IFRS 12 introduce new disclosure requirements related to investment entities which have been set out in note 11 of the Annual Report however, these amendments have not had any impact on the financial position or results of operations of the Group. IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016) allows first time IFRS adopters to continue to account for `regulatory deferral account balances' in accordance with previous GAAP. As the Company has already adopted IFRS the provisions of this standard are not applicable. 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 Group's revenue streams from financial instruments the provisions of this standard are not expected to be applicable. The SORP was revised and reissued in November 2014 (effective 1 January 2015) and where compatible with IFRS will be applied to financial statements in subsequent reporting periods. (b) Basis of consolidation The Group's financial statements 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. The consolidated financial statements are made up to 30 November each year and incorporate the financial statements of the Company and its wholly-owned subsidiary, 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 Consolidated 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 period end are treated as revenue for the year. Provision is made for any dividends not expected to be received. Special dividends, if any, 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. Premia on written options are recognised as income. Options are marked to market and the gain or loss is taken to capital. Where options are exercised the loss is taken to capital. (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: ïµ 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 on page 48 of the Annual Report; ïµ expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and ïµ the investment management fees and finance costs of borrowing borne by the Company 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 taxation in the future or right to pay less taxation 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 recognised as held 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 instruments is based on their quoted bid price at the financial reporting date, without the deduction for any estimated future selling costs. Any unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Association Guidelines. 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. Under IFRS, the investment in the trading subsidiary is carried at fair value which is deemed to be the total equity of the subsidiary. (i) 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. (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 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 and on demand deposits. 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) Derivatives Derivatives 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. 3. Income 2014 2013 Â£'000 Â£'000 Investment Income: Overseas listed dividends 3,484 3,652 Fixed interest 212 57 UK listed dividends 823 825 -------- -------- 4,519 4,534 -------- -------- Other income: Deposit interest 29 - Option premium income 3,093 2,185 -------- -------- 3,122 2,185 -------- -------- Total 7,641 6,719 ======== ======== Option premium income is stated after commission expenses incurred on transactions. During the year, the Group received option premium income totalling Â£3,093,000 (2013: Â£2,185,000) for writing covered put/call options for the purposes of revenue generation which were taken to income. At 30 November 2014, there were 11 (2013: 14) open positions with an associated liability of Â£481,000 (2013: Â£704,000). 4. Investment management fees 2014 2013 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management fee 314 941 1,255 306 918 1,224 ======= ======= ======= ======= ======= ======= The investment management fee is levied at a rate of 1.1% of gross assets per annum based on the gross assets on the last day of each quarter and is allocated 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income. 5. Other operating expenses 2014 2013 Â£'000 Â£'000 Custody and depositary fees 10 18 Auditors' remuneration: - audit services 25 24 - other services 6 6 Directors' emoluments 90 86 Registrar's fee 29 28 Marketing fees 32 3 Other administration costs 121 114 -------- -------- 313 279 ======== ======== The Company's ongoing charges, calculated as a percentage of average net assets and using expenses, excluding any interest costs and excluding taxation, were: 1.5% 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: 2.4% 1.9% Fees paid to the Auditor for other services comprise Â£6,250 (2013: Â£6,000, excluding VAT) relating to the review of the half yearly financial statements. Details of the Directors' emoluments are given in the Directors' Remuneration Report on page 24 of the Annual Report. 6. 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 2014 were as follows: 2014 2013 Â£'000 Â£'000 Fourth interim dividend for the year ended 30 November 2013 - 1.5250p (2012: 1.5875p) 1,468 1,496 First interim dividend for the year ended 30 November 2014 - 1.4875p (2013: 1.4750p) 1,482 1,390 Second interim dividend for the year ended 30 November 2014 - 1.4875p (2013: 1.4750p) 1,502 1,390 Third interim dividend for the year ended 30 November 2014 - 1.4875p (2013: 1.4750p) 1,509 1,401 -------- -------- 5,961 5,677 ======== ======== For the year ended 30 November 2014, a fourth interim dividend of 1.5375p (2013: 1.5250p) per ordinary share has been declared and will be paid on 23 January 2015, to shareholders on the Company's register on 30 December 2014. 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: 2014 2013 Â£'000 Â£'000 First interim dividend paid on 22 April 2014 of 1.4875p (2013: 1.4750p) 1,482 1,390 Second interim dividend paid on 25 July 2014 of 1.4875p (2013: 1.4750p) 1,502 1,390 Third interim dividend paid on 24 October 2014 of 1.4875p (2013: 1.4750p) 1,509 1,401 Fourth interim dividend paid on 23 January 2015 of 1.5375p (2013: 1.5250p) 1,617 1,468 -------- -------- 6,110 5,649 ======== ======== 7. Consolidated earnings and net asset value per ordinary share 2014 2013 Net revenue profit attributable to ordinary shareholders (Â£'000) 6,225 5,551 Net capital loss attributable to ordinary shareholders ('000) (14,906) (11,882) -------- -------- Total loss attributable to ordinary shareholders (Â£'000) (8,681) (6,331) -------- -------- Equity shareholders' funds (Â£'000) 96,696 101,830 -------- -------- The weighted average number of ordinary shares in issue during the period, on which the return per ordinary share was calculated, was: 100,393,478 94,551,836 The actual number of ordinary shares in issue at the year end, on which the net asset value was calculated, was: 105,158,000 96,258,000 The number of ordinary shares in issue including treasury shares at the year end was: 105,158,000 96,258,000 -------- -------- Revenue return per share 6.20p 5.87p Capital loss per share (14.85p) (12.57p) -------- -------- Total loss per share (8.65p) (6.70p) -------- -------- Net asset value per share 91.95p 105.79p Share price (mid-market) 99.00p 109.50p ======= ======= 8. share capital Ordinary Total Nominal shares shares value number number Â£'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 1 pence each -------- -------- -------- Shares in issue at 30 November 2013 96,258,000 96,258,000 963 -------- -------- -------- Shares issued 8,900,000 8,900,000 89 -------- -------- -------- At 30 November 2014 105,158,000 105,158,000 1,052 ======== ======== ======== The number of ordinary shares in issue at the year end was 105,158,000 (2013: 96,258,000) of which none were held in treasury (2013: nil). During the year 8,900,000 (2013: 2,000,000) shares were issued for a total consideration of Â£9,526,000 (2013: Â£2,178,000) before deduction of issue costs. Since 30 November 2014, a further 700,000 shares have been issued for a total consideration of Â£616,000 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. 9. Contingent liabilities There were no contingent liabilities at 30 November 2014 (2013: nil). 10. PUBLICATION OF NON STATUTORY ACCOUNTS The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2014 annual report and financial statements will be filed with the Registrar of Companies shortly. The report of the Auditor for the period ended 30 November 2014 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures are extracts from the audited financial statements of BlackRock Commodities Income Investment Trust plc for the year ended 30 November 2013, which have been filed with the Registrar of Companies. The report of the Auditor on those accounts contained no qualification or statement under section 498 of the Companies Act. This announcement was approved by the Board of Directors on 2 February 2015. 11. 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. 12. ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 17 March 2015 at 10.30 a.m. ENDS The Annual Report will also be available on the BlackRock website at blackrock.co.uk/brci. Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement. FOR FURTHER INFORMATION, PLEASE CONTACT: Mark Johnson, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited Tel: 020 7743 2300 Olivia Markham / Tom Holl, BlackRock Investment Management (UK) Limited Tel: 020 7743 3347 / 020 7743 2013 Henrietta Guthrie, Lansons Communications Tel: 020 7294 3612 2 February 2015 12 Throgmorton Avenue London EC2N 2DL

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