Half-yearly Report

14 July 2010 BLACKROCK COMMODITIES INCOME INVESTMENT TRUST plc Half yearly announcement of results in respect of the six months ended 31 May 2010 Chairman's Statement Performance During the six month period to 31 May 2010, commodity markets experienced mixed fortunes. The rally in commodities and commodity equity prices in the last financial year, which followed the worst economic crisis since the 1930s, began to lose momentum, as the lasting effects of the credit crisis rippled across equity markets and nervous investors began a period of profit taking. Against this difficult background, your Company has performed well during the six month period and the net asset value ("NAV") has increased by 8.1% with the share price rising by 9.0% (all percentages in sterling terms with income reinvested). Further information on investment performance is given in the Investment Manager's Report. Since the period end, the Company's NAV has decreased by 4.7% and the share price has fallen by 3.8% (with income reinvested). Revenue return and dividends The Company's objectives include an annual dividend target and since inception, the Company has had a policy of paying quarterly dividends. The revenue return per share for the six month period was 3.53 pence (six months to 31 May 2009: 3.07 pence). The target for the year ending 30 November 2010 is to pay dividends amounting to at least 5.50 pence per share in total (this is a target and should not be interpreted as a profit or dividend forecast) (2009: target of 5.40 pence). The first quarterly dividend of 1.375 pence per share was paid on 23 April 2010 and the second quarterly dividend of 1.375 pence per share will be paid on 23 July 2010 to shareholders on the register on 2 July 2010 (2009: three interim dividends each of 1.35 pence per share and a fourth interim dividend of 1.45 pence per share). Issue of shares from treasury and tender offer During the period 500,000 shares were issued from treasury at a premium to NAV for a total consideration of Â£673,000. The final tranche of 274,338 shares was sold from treasury on 4 June 2010 at a premium to NAV, for a total consideration of Â£355,000. There are no further shares held in treasury. The Directors of the Company have the discretion to make semi-annual tender offers in February and August of each year at the prevailing NAV, less 2%, for up to 20% of the Company's issued share capital. Over the six month period to 31 May 2010, the Company's shares traded at an average premium to NAV of 0.4% and have ranged between a premium of 4.6% and a discount of 5.8%. Given that the average is better than a discount of 2% to NAV, the price at which any tender offer would be made, the Board has concluded that it is not in the interests of shareholders to implement the tender offer as at 31 August 2010. Additional capital The Board is pleased to confirm that the Company intends to raise further capital later this year. After due consideration of the Company's strategy, the Board has concluded that, in response to both new investor demand and to demand from existing Shareholders, it is an appropriate time to seek to raise additional capital for the Company. It is probable that the implementation of these proposals will require the approval of shareholders at a General Meeting, which will be convened at a later date. Gearing The Company operates a flexible gearing policy which depends on prevailing market conditions. The maximum gearing used during the period was 4.5% and at 31 May 2010 net gearing was 1.0%. Directorate We are very pleased to welcome Michael Merton to the Board, having been appointed as a Director on 13 July 2010. Until 2009, Michael was a non-executive director of Quadrem International and Chairman of the Rio Tinto Pension Fund, of which he remains a trustee. Michael was also Head of Global Business Services and a member of Rio Tinto's Executive Committee. He has considerable experience in the commodities sector and will be a valuable contributor to boardroom discussions. Prospects Although the global economy shows signs of improvement, in the near term we expect commodity markets to remain volatile. The longer term positive outlook for the sector remains in place and equity prices do not appear expensive. Alan Hodson Chairman 14 July 2010 Interim Management Report and Responsibility Statement The Chairman's Statement and the Investment Manager's Report give details of the important events which have occurred during the period and their impact on the financial statements. Principal risks and uncertainties The principal risks faced by the Company can be divided into various areas as follows: - Performance; - Income/dividend; - Regulatory; - Operational; and - Financial. The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2009. A detailed explanation can be found on pages 16 and 17 of the Annual Report and Financial Statements which is available on the website maintained by the Investment Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/its. In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review. Related party transactions The Investment Manager is regarded as a related party and details of the management fee payable are set out in note 3. Directors' responsibility statement The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements. The Directors confirm to the best of their knowledge and belief that: - the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with International Accounting Standard 34 `Interim Financial Reporting'; and - the interim management report together with the Chairman's Statement and Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules. The half yearly financial report was approved by the Board on 14 July 2010 and the above responsibility statement was signed on its behalf by the Chairman. Investment Manager's Report Summary The Investment Manager is pleased to report that for the six-month period ended 31 May 2010, the Company's NAV returned 8.1% and the share price rose by 9.0%. Over the same period, the HSBC Global Mining Index and MSCI World Energy Index gained 6.0% and 2.0% respectively, while the FTSE All Share Index was up by 2.7%. (All percentages are in sterling with income reinvested). Commodity market overview In the early part of 2010, commodity markets performed well, adding to the good returns generated in 2009. With global consumption steadily improving, concerns about a double-dip recession were slowly receding. In April, copper prices were trading as high as US$3.61/lb, oil had risen to US$87/Bbl and mining and energy shares had made year-to-date gains of 15% and 9% respectively (capital only, in sterling terms). In the last five to six weeks of the interim period, commodity markets suffered a major correction, driven in large part by a shift in investor sentiment rather than any change in the underlying fundamentals. The Chinese economy continued to perform well, with GDP expanding at 11.9% in the first quarter. Some investors considered this rate to be unsustainable and in an attempt to cool a property market bubble in China, authorities introduced measures to limit loan growth. The market then became concerned about a slowdown in economic growth and the negative impact this would have on commodity consumption. We believe that these tightening measures are positive in the long term. Firstly, they show that the economy is performing well. Secondly, they demonstrate that the authorities are trying to manage that growth appropriately. The key event that has sapped investor confidence, however, has been the ongoing Eurozone debt crisis and the implications of the austerity measures on longer term economic growth. By the close of the period, base metal prices had retreated 16% from their mid-April high, while crude oil was down by 15% (in US dollar terms). The table below shows the performance of the major commodities for the interim period. Another issue, specific to the Australian mining sector, which negatively impacted equity valuations was the proposed introduction of a Resource Super Profits Tax ("RSPT"). This followed an extensive review of the tax system, led by Ken Henry of the Treasury Department, which was initiated by the Australian government in 2008. The new tax structure included a 40% tax on earnings before interest and tax to be levied in addition to existing royalties and corporation taxes, thereby lifting the effective tax rate of the mining industry from around 43% to around 57%. Not surprisingly companies that operate in Australia, including Rio Tinto and BHP Billiton, strongly opposed the proposal. 30 31 Commodity November May % Base Metals (US$/tonne) 2009 2010 Change Aluminium 2,029 2,013 -0.8 Copper 6,903 6,911 0.1 Lead 2,316 1,824 -21.3 Nickel 16,335 21,277 30.3 Tin 15,183 17,840 17.5 Zinc 2,293 1,905 -16.9 Precious Metals (US$/oz) Gold 1,177.7 1,203.0 2.2 Silver (USc/oz) 1,814.0 1,853.0 2.2 Platinum 1,442.0 1,555.0 7.8 Palladium 360.5 471.0 30.7 Energy Oil (US$/Bbl)1 77.3 74.0 -4.3 Natural Gas (US$/MMBTU)2 4.4 4.3 -1.7 Uranium (US$/lb)3 43.0 40.8 -5.2 Bulk Commodities Iron ore (USc/dmtu)4 101.6 145.2 42.9 Coking coal (US$/tonne)5 162.5 222.0 36.6 Thermal coal (US$/tonne)6 81.0 99.3 22.5 Potash (US$/st)7 467.0 371.0 -20.6 Equity Indices HSBC Global Mining Index (US$) 583.1 542.9 -6.9 HSBC Global Mining Index (Â£) 355.3 373.7 5.2 MSCI World Energy Index (US$) 221.0 196.5 -11.1 MSCI World Energy Index (Â£) 134.7 135.2 0.4 1. West Texas Intermediate. 2. Henry Hub. 3. Nuexco Restricted, U3 O8. 4. CFR China (Bloomberg). 5. HCC, CFR China (Macquerie). 6. FOB Newcastle (Macquerie). 7. Standard Muriate, Saskatchewan. Source: Datastream, (except where otherwise indicated). Figures in US dollar terms and on a capital only basis. On 24 June, in an historic moment for Australia, Prime Minister Kevin Rudd stepped down and was replaced by Julia Gillard. This was seen as a positive development for the mining sector as Ms Gillard had always been an advocate of consultation with the industry. In July, it was then announced that the new tax had been radically altered in favour of the mining sector. The renamed Mineral Resources Rent Tax ("MRRT") is less onerous on the producers and now only applies to iron ore and coal extraction. The MRRT is not set in stone - the government will now undertake further industry consultation. The government plans to draw up draft legislation by mid 2011 with the changes introduced in July 2012. Looking at the individual commodities, nickel was the best performing base metal during the period, gaining 30.3% in US dollar terms. Nickel is highly geared to the economic recovery and has also benefitted from supply-side issues in the early part of 2010. Lead and zinc were the worst performers, falling 21.3% and 16.9% respectively. Production restarts have caused the near term fundamentals for both metals to deteriorate. The build in LME lead inventories, which reached their highest level since 2003, also depressed prices. The base metal heavyweights, aluminium and copper, were largely unchanged over the period, although these returns mask a volatile period for both metals. Copper demand growth in China remains strong and supply growth has been limited. Copper prices hit US$3.61/lb at one point, just 10% below the all-time peak of US$4/lb reached in July 2008. Aluminium consumption is responding well as the global economy recovers and prices surged to a fifteen month high in the early part of 2010. However, the reactivation of producer cutbacks and the record level of aluminium in inventory have kept a lid on prices. In the iron ore market, the tradition of the annual contract has been replaced. The move stems from the fact that in 2009, some buyers refused to honour contracts when spot prices were low, preferring instead to buy cheaply in the spot market. When spot prices then rose back above contract prices, the buyers then reverted to those contracts. Consequently, the producers have moved to shorter term contracts based on spot pricing. Spot iron ore prices have recently traded at levels more than double the contract price. Spot iron ore prices have recently traded at levels more than double the contract price. The key driver behind the strength in iron ore pricing has been China, where steel production remains very strong. After a 41% increase in 2009, Chinese iron ore imports rose by 21% in the first quarter of 2010. The markets for thermal and metallurgical coal also remain tight. As in the iron ore market, there is a shift towards shorter term pricing for coal contracts. Gold moved to a new all time high during the period. In mid-May, intraday prices touched US$1,249/oz as investors sought out "safe haven" investments. Spurred on by the Eurozone debt crisis, investment flows into gold were particularly strong in May, after a relatively quiet first four months of the year. Elsewhere in the precious metals arena, platinum and palladium made decent returns over the period. Investment demand, particularly in palladium, has underpinned the PGM prices. Oil prices reached US$86.8/Bbl in mid-April as expectations for Chinese demand were raised and the economic outlook in the US, the world's largest consumer of oil, continued to improve. However, a strengthening US dollar (relative to the euro) pushed prices back below the US$70/Bbl level at one point. Natural gas prices closed the period down 1.7%. In the energy sector, the newsflow has been dominated by the oil spill in the Gulf of Mexico. On 20 April, a tragic explosion on the Deepwater Horizon rig resulted in a leak of oil from the Macondo well. BP is the operator of the well, while Anadarko owns a 25% non-operating position. The other companies involved in the incident include Mitsui (owner of a 10% interest in the well), Transocean (the deepwater driller), Cameron International (the supplier of the blowout preventer that failed to contain the leak) and Halliburton (responsible for cementing the well). Water depth in this part of the Gulf of Mexico is around 5,000 feet. The oil reservoir is a further 13,000 feet below the bottom of the sea. By the end of June, BP had two containment systems in place that were collecting some of the oil and gas leaking from the well. Meanwhile, two relief wells, which started drilling in May, are estimated to reach a target intercept depth of 18,000 feet where "kill" operations will take place. This is expected to occur in August. At the surface, BP has engaged more than 6,400 vessels in an effort to collect and dispose of the oil that has reached the surface. On 16 June, following a meeting with President Obama, BP agreed to create a US$20 billion fund, which will be used to satisfy legitimate claims. Coincidentally, UBS has estimated the "gross liability" at US$20 billion, although the broker points out that there are many uncertainties surrounding the ultimate size. BP has also reviewed its dividend policy and decided to cancel the previously declared first quarter dividend. No dividends will be declared for the second and third quarters of 2010. The Company's most significant exposure to the oil spill is through our position in Anadarko. At the end of May, we had 3.1% of the portfolio invested in the stock which is overweight relative to the company's 0.6% position in the portfolio's hybrid benchmark. We also wrote put options, which if exercised, would increase our stake in the company. Since the incident, Anadarko's share price has underperformed its exploration and production peers by 31%. According to one broker, the share price is now inferring Anadarko's share of the liability at over US$12 billion. The Company also has a position in BP, although we did reduce our holding in the stock following the incident. At 31 May, the Company had 2.7% of the portfolio invested in BP, which is underweight relative to the company's 3.2% position in the portfolio's hybrid benchmark. The Company had no exposure to Transocean, Cameron International or Halliburton. Any regulatory changes that impose restrictions on drilling will be bullish for oil prices in the long term. Portfolio review At 31 May 2010, the portfolio held 53 investments in companies within the mining and energy sectors. The Investment Manager's investment philosophy is unchanged. The vast majority of these companies have low operating costs and (importantly in this financial environment) balance sheet flexibility. The portfolio remains well diversified from a geographic and commodity perspective. Around 41% of net assets are invested in integrated oil and diversified mining companies, which themselves provide geographic and commodity diversification. A full breakdown of the Company's geographic and commodity allocation can be seen in the tables below. Asset Allocation as at 31 May 2010 - Geography USA 20.8% Global 18.2% Canada 15.6% Europe 12.2% Asia 11.9% Latin America 9.0% South Africa 5.9% Australia 2.8% China 1.7% Africa 1.0% Russia 0.9% Asset Allocation as at 31 May 2010 - Commodity Energy 52.7% Mining 47.3% Asset Allocation as at 31 May 2010 - Energy Integrated 49.0% E&P 30.2% Oil services 9.3% Coal 8.9% Distribution 2.6% Asset Allocation as at 31 May 2010 - Mining Diversified 33.0% Copper 20.2% Fertilizer 8.5% Gold 7.4% Iron Ore 7.1% Aluminium 6.9% Platinum 5.3% Nickel 5.1% Tin 3.6% Zinc 2.9% In terms of income, the Group generated Â£3.2 million in income during the period, with dividend payments from investee companies amounting to Â£1.8 million. Towards the end of the period, we took advantage of the fall in equity prices and higher volatilities to write put options in a number of stocks. If exercised, these options would put us into shares at levels significantly below their recent highs. The Group's income through option writing was Â£1.2 million. Consequently, the Investment Manager is pleased to report that the Group's revenue reserves have increased to Â£3.3 million, an increase of 21.7% for the interim period. A full analysis of income and expenses is contained in the notes to the financial statements. Outlook We remain bullish on commodity markets in the medium to long term, with demand driven by economic growth in emerging economies such as China and India. Supply growth, after many years of under-investment in new supply and a lack of exploration success, will be constrained. We predict, therefore, that prices will trend higher. We continue to be cautious about the near term outlook. While the global economy is showing signs of recovery, inventories are relatively high and many commodities will be in supply surplus in 2010. Our investment strategy will remain unchanged. We will continue to focus on companies with good quality assets that are in production and which have a record of returning cash to shareholders. The recent pullback in equity markets has, in our view, created buying opportunities. Richard Davis BlackRock Investment Management (UK) Limited 14 July 2010 Ten Largest Investments: BHP Billiton - 5.0% (2009: 5.3%, www.bhpbilliton.com) is the world's largest diversified natural resources company, formed in 2001 following the merger of UK's Billiton and Australia's BHP. The company is a major producer of aluminium, iron ore, copper, thermal and metallurgical coal, manganese, uranium, nickel, silver and titanium minerals. The company also has significant interests in oil, gas, liquefied natural gas and diamonds. Freeport McMoRan Copper & Gold - 4.7% (2009: 5.6%, www.fcx.com) following the acquisition of Phelps Dodge in 2007, Freeport became the world's largest publicly traded copper company. The company's assets include the Grasberg mine in Indonesia, the world's largest copper and gold mine. The company also operates copper mines in the US, Chile and Peru. The Company has positions in Freeport's equity and bond. Vale - 4.7% (2009: 5.9%, www.vale.com) in November 2007, CVRD changed its name to Vale. Based in Brazil, the company is the second largest mining company in the world and the largest producer of iron ore. The company has significant interests in other commodities including aluminium, coal, copper and gold. Since the 2006 acquisition of Inco, Vale is also a leading producer of nickel. In addition to its mining interests, Vale owns and operates transport infrastructure. Rio Tinto - 3.9% (2009: 4.1%, www.riotinto.com) is one of the world's leading mining companies. The company produces aluminium, copper, diamonds, gold, industrial minerals, iron ore and energy products. Occidental Petroleum - 3.8% (2009: 2.5%, www.oxy.com) headquartered in Los Angeles and listed on the New York Stock Exchange, Occidental is the fourth largest US exploration and production company engaging in oil and gas exploration, production, transportation and marketing. It operates in three core regions of the world: the United States, Middle East/North Africa and Latin America. The company is also a major producer of a variety of chemicals, petrochemicals, polymers and plastics. Niko Resources - 3.5% (2009: 3.1%, www.nikoresources.com) is an oil and gas exploration and production company. The company operates primarily in a number of oil and gas fields in Bangladesh and the Indian state of Gujurat. Niko also has interests in Kurdistan, Pakistan and Thailand. StatoilHydro - 3.5% (2009: 3.5%, www.statoilhydro.com) was established in October 2007 following the merger of Statoil with Norsk Hydro's oil and gas assets and is the leading operator on the Norwegian continental shelf. The company is one of the world's leading suppliers of gas and the largest supplier of petroleum products in Scandinavia. StatoilHydro is also a world leader in the use of deepwater technology and in carbon capture and storage. Kumba Iron Ore - 3.4% (2009: 3.3%, www.kumba.co.za) is the world's fourth largest supplier of sea-borne iron ore. Based in South Africa, the company accounts for over 80% of the country's iron ore production, most of which is exported to Europe and Asia. Anglo American owns 63% of the outstanding shares in Kumba. Anadarko Petroleum - 3.1% (2009: 3.2%, www.anadarko.com) is one of the largest independent oil and gas exploration and production companies in the world. The company's assets include ten major onshore US natural gas plays. Anadarko is also the largest independent producer in the deepwater Gulf of Mexico. The company also operates in Alaska, Algeria, Brazil, China, Ghana, Indonesia and Mozambique. Anadarko owns a 25% non-operating position in the Macondo oil field in the Gulf of Mexico. In April, an explosion on the Deepwater Horizon rig resulted in a leak of oil from the well. BP - 2.7% (2009: 4.3%, www.bp.com) is one of the world's leading energy providers and one of the six "supermajors". (The other supermajors are Chevron, ConocoPhillips, Exxon, Royal Dutch Shell and Total). The company's exploration and production division operates in 29 countries. BP produces around 3.9 million barrels of oil equivalent per day and has refining capacity of 2.7 million barrels of oil per day. BP is the operator of the stricken Macondo oil field in the Gulf of Mexico. Investments as at 31 May 2010 Main Market geographic value % of exposure Â£'000 investments Integrated Oil Occidental Petroleum USA 3,688 3.8 StatoilHydro Europe 3,393 3.5 BP Global 2,598 2.7 Total Global 2,390 2.5 Exxon Mobil Global 2,079 2.1 Chevron Global 2,030 2.1 ConocoPhillips USA 1,926 2.0 Repsol Europe 1,819 1.9 Eni Europe 1,795 1.9 Marathon Oil USA 1,070 1.1 Cenovus Energy Canada 852 0.9 Hess USA 731 0.8 Petrol Brasileiros Latin America 490 0.5 ------ ----- 24,861 25.8 ------ ----- Exploration & Production Niko Resources Asia 3,411 3.5 Anadarko Petroleum } USA 3,061 3.2 Anadarko Petroleum } put option 21/08/10} USA (133) (0.1) Peyto Energy Trust Canada 2,404 2.5 XTO Energy USA 1,618 1.7 Nexen Canada 1,501 1.5 Crescent Point Energy Trust Units Canada 1,273 1.3 Denbury Resources USA 1,244 1.3 Encana Canada 970 1.0 ------ ----- 15,349 15.9 ------ ----- Diversified BHP Billiton Global 4,782 5.0 Vale } Latin America 4,538 4.7 Vale call option } Latin 17/07/10 America (35) - Rio Tinto } Global 2,868 3.0 Rio Tinto Finance } 8.95% 01/05/14 } Global 827 0.9 Teck Resources } 10.75% 15/05/09 } Canada 1,659 1.7 Teck Resources put } option 17/07/10 } Canada (80) (0.1) Sterlite Industries Asia 491 0.5 Xstrata put option 16/07/10 Global (59) (0.1) ------ ----- 14,991 15.6 ------ ----- Copper Freeport McMoran } Copper & Gold } Asia 4,613 4.8 Freeport McMoran } Copper & Gold call } option 21/08/10 } Asia (54) (0.1) Southern Copper Latin America 2,029 2.1 Aurubis Europe 1,885 2.0 Katanga Mining 14% S/Nts 30/11/13 Africa 705 0.7 ------ ----- 9,178 9.5 ------ ----- Oil Services KBR USA 2,039 2.1 Schlumberger } USA 1,390 1.5 Schlumberger put } option 17/07/10 } USA (89) (0.1) SBM Offshore Europe 897 0.9 Precision Drilling Trust Canada 467 0.5 ------ ----- 4,704 4.9 ------ ----- Coal China Shenhua Energy China 1,655 1.7 Coal & Allied Industries Australia 1,541 1.6 Straits Asia Resources Asia 1,349 1.4 ------ ----- 4,545 4.7 ------ ----- Fertilizers Potash Corporation of Saskatchewan Canada 2,560 2.6 Agrium USA 1,322 1.4 ------ ----- 3,882 4.0 ------ ----- Gold Goldcorp Canada 1,186 1.2 Barrick Gold Canada 1,014 1.1 Petropavlovsk Russia 839 0.9 High River Gold 8% Convertible Bonds 31/12/11* Africa 325 0.3 ------ ----- 3,364 3.5 ------ ----- Iron Ore Kumba Iron Ore South Africa 3,228 3.4 ------ ----- 3,228 3.4 ------ ----- Aluminium Alcoa USA 1,999 2.1 Alumina Australia 1,160 1.2 ------ ----- 3,159 3.3 ------ ----- Platinum Impala Platinum South Africa 2,400 2.5 ------ ----- 2,400 2.5 ------ ----- Nickel International Nickel Indonesia Asia 1,767 1.8 Eramet Europe 547 0.6 ------ ----- 2,314 2.4 ------ ----- Tin Minsur Latin America 1,644 1.7 ------ ----- 1,644 1.7 ------ ----- Zinc Nyrstar } Europe 1,449 1.5 Nyrstar put option } 18/06/10 } Europe (111) (0.1) ------ ----- 1,338 1.4 ------ ----- Distribution Enbridge Income Fund Trust Canada 1,310 1.4 ------ ----- 1,310 1.4 ------ ----- Portfolio 96,267 100.0 ------ ----- * Unquoted investment at Directors' valuation All investments are in ordinary shares unless otherwise stated. The total number of holdings as at 31 May 2010 was 53 (30 November 2009: 49) The total number of open options as at 31 May 2010 was 7 (30 November 2009: 10) The negative valuations of Â£561,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 31 May 2010. CONSOLIDATED INCOME STATEMENT for the six months ended 31 May 2010 Revenue Â£'000 Capital Â£'000 Total Â£'000 Six months Six months Six months Six months Six months Six months ended ended Year to ended ended Year to ended ended Year to 31.05.10 31.05.09 30.11.09 31.05.10 31.05.09 30.11.09 31.05.10 31.05.09 30.11.09 Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) Income from investments held at fair value through profit or loss 2 1,981 1,933 3,412 - - - 1,981 1,933 3,412 Other income 2 1,185 1,275 2,471 - - - 1,185 1,275 2,471 ----- ----- ----- ----- ------ ------ ----- ------ ------ Total revenue 3,166 3,208 5,883 - - - 3,166 3,208 5,883 ----- ----- ----- ----- ------ ------ ----- ------ ------ Gain on investments held at fair value through profit or loss - - - 5,102 18,380 30,023 5,102 18,380 30,023 ----- ----- ----- ----- ------ ------ ----- ------ ------ 3,166 3,208 5,883 5,102 18,380 30,023 8,268 21,588 35,906 ----- ----- ----- ----- ------ ------ ----- ------ ------ Expenses Investment management fee 3 (141) (102) (215) (424) (305) (648) (565) (407) (863) Write back of prior years' VAT refund 3 - 28 27 - 82 83 - 110 110 Other expenses 4 (128) (131) (251) - - - (128) (131) (251) ----- ----- ----- ----- ------ ------ ----- ------ ------ Total operating expenses (269) (205) (439) (424) (223) (565) (693) (428) (1,004) ----- ----- ----- ----- ------ ------ ----- ------ ------ Profit before finance costs and taxation 2,897 3,003 5,444 4,678 18,157 29,458 7,575 21,160 34,902 Finance costs (3) (11) (20) (9) (33) (35) (12) (44) (55) ----- ----- ----- ----- ------ ------ ----- ------ ------ Profit before taxation 2,894 2,992 5,424 4,669 18,124 29,423 7,563 21,116 34,847 Taxation 5 (237) (757) (1,194) - 71 168 (237) (686) (1,026) ----- ----- ----- ----- ------ ------ ----- ------ ------ Profit for the period 7 2,657 2,235 4,230 4,669 18,195 29,591 7,326 20,430 33,821 ===== ===== ===== ===== ====== ====== ===== ====== ====== Earnings per ordinary share 7 3.53p 3.07p 5.74p 6.21p 25.01p 40.13p 9.74p 28.08p 45.87p ====== ====== ====== ====== ====== ====== ====== ====== ====== The total column of this statement represents the Consolidated Income Statement, prepared in accordance with International Financial Reporting Standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All income is attributable to the equity shareholders of BlackRock Commodities Income Investment Trust plc. There are no minority interests. Details of dividends paid and proposed at the balance sheet date are given in note 6. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Ordinary Share share premium Special Capital Revenue capital account reserve reserves reserve Total Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the six months ended 31 May 2010 (unaudited) At 30 November 2009 756 1,223 70,219 14,281 3,781 90,260 Net profit for the period - - - 4,669 2,657 7,326 Proceeds of sale of shares from treasury - 24 649 - - 673 Dividends paid 6 - - - - (2,121) (2,121) --- ----- ------ ------ ----- ------ At 31 May 2010 756 1,247 70,868 18,950 4,317 96,138 --- ----- ------ ------ ----- ------ Ordinary Share share premium Special Capital Revenue capital account reserve reserves reserve Total Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the six months ended 31 May 2009 (unaudited) At 30 November 2008 756 1,223 67,355 (15,310) 3,601 57,625 Net profit for the period - - - 18,195 2,235 20,430 Proceeds of sale of shares from treasury - - 2,102 - - 2,102 Dividends paid 6 - - - - (2,036) (2,036) --- ----- ------ ------ ----- ------ At 31 May 2009 756 1,223 69,457 2,885 3,800 78,121 --- ----- ------ ------ ----- ------ Ordinary Share share premium Special Capital Revenue capital account reserve reserves reserve Total Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the year ended 30 November 2009 (audited) At 30 November 2008 756 1,223 67,355 (15,310) 3,601 57,625 Net profit for the year - - - 29,591 4,230 33,821 Proceeds of sale of shares from treasury - - 2,865 - - 2,865 Cost of sale of shares from treasury - - (1) - - (1) Dividends paid 6 - - - - (4,050) (4,050) --- ----- ------ ------ ----- ------ At 30 November 2009 756 1,223 70,219 14,281 3,781 90,260 --- ----- ------ ------ ----- ------ The transaction costs incurred on the acquisition and disposal of investments are included within the capital reserve. Purchase and sale costs amounted to Â£16,000 and Â£15,000, respectively for the six months ended 31 May 2010 (six months ended 31 May 2009: Â£9,000 and Â£15,000; year ended 30 November 2009: Â£47,000 and Â£22,000). CONSOLIDATED BALANCE SHEET as at 31 May 2010 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 Note (unaudited) (unaudited) (audited) Non current assets Investments held at fair value through profit or loss 96,267 77,758 85,794 ------- ------ ------ Current assets Investments held at fair value through profit or loss - - 1,422 Other receivables 1,283 816 887 Cash and cash equivalents 3,338 2,560 2,931 ------- ------ ------ 4,621 3,376 5,240 ------- ------ ------ Total assets 100,888 81,134 91,034 ------- ------ ------ Current liabilities Other payables (416) (767) (763) Bank overdrafts (4,334) (2,246) (11) ------- ------ ------ (4,750) (3,013) (774) ------- ------ ------ Net assets 96,138 78,121 90,260 ======= ====== ====== Equity attributable to equity holders Ordinary share capital 756 756 756 Share premium account 1,247 1,223 1,223 Special reserve 70,868 69,457 70,219 Capital reserves 18,950 2,885 14,281 Revenue reserve 4,317 3,800 3,781 ------- ------ ------ Total equity 96,138 78,121 90,260 ======= ====== ====== Net asset value per ordinary share 7 127.63p 105.46p 120.63p ======= ======= ======= CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 May 2010 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Net cash (outflow)/inflow from operating activities before financial activities (2,450) 5,815 9,685 ----- ----- ----- Financing activities Shares sold from treasury 673 2,102 2,864 Equity dividends paid (2,121) (2,036) (4,050) ----- ----- ----- Net cash (outflow)/inflow from financing activities (1,448) 66 (1,186) ----- ----- ----- (Decrease)/increase in cash and cash equivalents (3,898) 5,881 8,499 Effect of foreign exchange rate changes (18) 34 22 ----- ----- ----- Change in cash and cash equivalents (3,916) 5,915 8,521 Cash and cash equivalents at start of period 2,920 (5,601) (5,601) ----- ----- ----- Cash and cash equivalents at end of period (996) 314 2,920 ==== ===== ===== Comprised of: Cash at bank 3,338 2,560 2,931 Bank overdrafts (4,334) (2,246) (11) ----- ----- ----- (996) 314 2,920 ==== ===== ===== RECONCILIATION OF NET INCOME BEFORE TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Profit before taxation 7,563 21,116 34,847 Gains on investments held at fair value through profit or loss including transaction costs (5,102) (18,380) (30,023) (Increase)/decrease in other receivables (210) (223) 125 (Decrease)/increase in other payables (7) (7) 64 Increase in amounts due from brokers (177) - (444) Movements in investments held at fair value through profit or loss (5,353) 3,973 7,593 Movements in cash fund held at fair value through profit or loss 1,422 - (1,422) Taxation paid (422) (515) (797) Taxation on investment income included within gross income (164) (149) (258) ----- ----- ----- Net cash (outflow)/inflow from operating activities (2,450) 5,815 9,685 ===== ===== ===== 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 sub-sections 1158-1165 of the Corporation Tax Act 2010. The principal activity of the subsidiary, BlackRock Commodities Securities Income Company Limited, is investment dealing and options writing. Basis of preparation The half yearly financial statements have been prepared using the same accounting policies as set out in the Company's annual report and financial statements for the year ended 30 November 2009 and in accordance with International Accounting Standard 34. The taxation charge has been calculated by applying an estimate of the annual effective taxation rate to any profit for the period. 2. Income Six months Six months Year ended ended ended 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Investment income: Overseas listed dividends 1,656 1,430 2,462 Fixed interest 160 219 460 UK listed dividends 165 284 490 ----- ----- ----- 1,981 1,933 3,412 ----- ----- ----- Other income: Deposit interest 8 5 5 Option premium income, stock lending income and other income 1,177 1,270 2,466 ----- ----- ----- 1,185 1,275 2,471 ----- ----- ----- Total income 3,166 3,208 5,883 ----- ----- ----- Option premium income is stated after deducting transaction costs incurred on the purchase and sale of investments. 3. Investment management fee Six months Six months Year ended ended ended 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Revenue: Investment management fee 141 102 215 Prior years' VAT refund - (28) (27) --- --- --- 141 74 188 --- --- --- Capital: Investment management fee 424 305 648 Prior years' VAT refund - (82) (83) --- --- --- 424 223 565 --- --- --- Total: Investment management fee 565 407 863 Prior years' VAT refund - (110) (110) --- --- --- 565 297 753 --- --- --- 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. Both the management fee and the refund of VAT have been allocated 25% to the revenue account and 75% to the capital account. 4. Other Expenses Six months Six months Year ended ended ended 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Custody fee 12 8 13 Auditors' remuneration: - audit services 11 10 22 - other audit services* 5 5 5 Directors' emoluments 31 31 63 Other administrative costs 69 77 148 --- --- --- 128 131 251 --- --- --- *Other audit services for the period ended 31 May 2010 relate to the review of the half yearly financial report. 5. Taxation The Company's effective rate of taxation in the revenue account of the Income Statement has fallen from 25.3% for the interim period to 31 May 2009 to 8.2% for the interim period to 31 May 2010. This reduction reflects the fact that from 1 July 2009 most foreign dividends received by the Company were no longer subject to UK Corporation Tax. 6. Dividends Ordinary dividends on equity shares are analysed below: Six months Six months Year ended ended ended 31 31 30 May May November 2010 2009 2009 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) First interim dividend for the period ended 28 February 2010 of 1.375p (2009: 1.35p) 1,036 986 986 Second interim dividend for the period ended 31 May 2010 of 1.375p (2009: 1.35p) 1,040 1,004 1,004 Third interim dividend for the period ended 31 August 2009 of 1.35p (2008: 1.3125p) - - 1,010 Fourth interim dividend for the period ended 30 November 2009 of 1.45p (2008: 1.4625p) - - 1,085 ----- ----- ----- 2,076 1,990 4,085 ===== ===== ===== A first interim dividend for the period ended 28 February 2010 of Â£1,036,000 (1.375p per ordinary share) was paid on 23 April 2010 to shareholders on the register at 26 March 2010. A second interim dividend of Â£1,040,000 (1.375p per ordinary share) is proposed and will be paid on 23 July 2010 to shareholders on the register at 2 July 2010. This dividend has not been accrued in the financial statements for the six months ended 31 May 2010, as under International Financial Reporting Standards ("IFRS"), interim dividends are not recognised until paid. Dividends are debited directly to the revenue reserve. The third and fourth interim dividends will be declared in September 2010 and December 2010 respectively. 7. Consolidated earnings per ordinary share and net asset value per ordinary share Six months Six months Year ended ended ended 31 31 30 May May November 2010 2009 2009 (unaudited) (unaudited) (audited) Net revenue return attributable to ordinary shareholders (Â£'000) 2,657 2,235 4,230 Net capital return attributable to ordinary shareholders (Â£'000) 4,669 18,195 29,591 ------ ------ ------ Total earnings attributable to ordinary shareholders (Â£'000) 7,326 20,430 33,821 ------ ------ ------ Equity shareholders' funds (Â£'000) 96,138 78,121 90,260 ------ ------ ------ The weighted average number of ordinary shares in issue during the period on which the return per ordinary share was calculated, was: 75,204,783 72,748,519 73,739,251 The actual number of ordinary shares in issue at the period end on which the net asset value was calculated, was: 75,325,662 74,075,662 74,825,662 The number of ordinary shares in issue including treasury shares at the period end, was: 75,600,000 75,600,000 75,600,000 Revenue return per share 3.53p 3.07p 5.74p Capital return per share 6.21p 25.01p 40.13p ------- ------- ------- Total earnings per share 9.74p 28.08p 45.87p ------- ------- ------- Net asset value per share 127.63p 105.46p 120.63p ------- ------- ------- Share price 127.75p 105.50p 119.75p ======= ======= ======= 8. Related Party Disclosure The related party transaction with BlackRock is set out in note 3. The fees due to the Investment Manager for the six months ended 31 May 2010 amounted to Â£565,000 (six months ended 31 May 2009: Â£407,000 and the year ended 30 November 2009 Â£863,000). At the period end Â£176,000 was outstanding in respect of these fees (six months ended 31 May 2009: Â£147,000 and year ended 30 November 2009: Â£163,000). 9. Publication of non-statutory accounts The financial information contained in this half yearly financial report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 31 May 2010 and 31 May 2009 has not been audited. The information for the year ended 30 November 2009 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the Auditors on those accounts contained no qualification or statement under sections 498(2) or (3) of the Companies Act 2006. Copies of the half yearly financial report will be posted to shareholders by 23 July 2010. Copies will also be available to the public from the Company's registered office at 33 King William Street, London EC4R 9AS, and on BlackRock Investment Management's website at www.blackrock.co.uk/its. 10. Annual results The Board expects to announce the annual results for the year ending 30 November 2010, as prepared under IFRS in mid January 2011. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000. The annual report should be available at the beginning of February 2011, with the Annual General Meeting being held in March 2011. 14 July 2010 33 King William Street London EC4R 9AS Independent Review Report to BlackRock Commodities Income Investment Trust plc Introduction We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the six month period ended 31 May 2010 which comprises the Consolidated Income Statement, Consolidated Statement of Changes in Equity, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Reconciliation of Net Income before Taxation to Net Cash Flow from Operating Activities, and the related notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in the International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' responsibilities The half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half yearly financial report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the annual financial statements of the Company are 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 condensed set of financial statements included in this half yearly financial report has been prepared in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports". Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review. Scope of review We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six month period ended 31 May 2010 is not prepared, in all material respects, in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports" and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. Ernst & Young LLP London 14 July 2010 For further information please contact: Jonathan Ruck Keene, Managing Director Investment Trusts - 020 7743 2178 Richard Davis, Fund Manager - 020 7743 2668 Emma Phillips, Media & Communications - 020 7743 2922 BlackRock Investment Management (UK) Limited or William Clutterbuck - 020 7379 5151 The Maitland Consultancy END

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