Final Results

22 January 2009 BLACKROCK COMMODITIES INCOME INVESTMENT TRUST plc Announcement of results in respect of the year ended 30 November 2008 The Chairman, Alan Hodson, comments: The year to 30 November 2008 has been a period of exceptional equity market volatility. Commodity prices and commodity equity prices have tumbled in response to the credit crisis and also concerns regarding global growth and demand for commodities. The rate of this deterioration has been extraordinary. Against this difficult background, during the year the Company's net asset value ("NAV") per share declined by 47.2% and the share price fell by 49.6% (both percentages calculated in Sterling terms with income reinvested). Since the year end, the Company's NAV has increased by 7.3% and the share price has risen by 15.9%. Revenue return and dividends Revenue return per share for the year was 6.96 pence (2007: 6.31 pence). As set out in the Company's prospectus dated 22 November 2005, it is the Company's intention to pay four quarterly dividends, details of which are set out in note 7. It was the Company's aim to pay dividends amounting to at least 5.25 pence for the year ended 30 November 2008 and we are pleased to have exceeded this target by paying dividends amounting to 5.40 pence per share in total in respect of the year (2007: 5.25 pence). It is the Company's aim to pay dividends amounting to at least 5.40 pence per share for the year ending 30 November 2009. This is a target and should not be interpreted as a profit forecast. This represents a yield of 7.4% based on the share price as at close of business on 30 November 2008. Share Capital During the year, and to the date of this report, a total of 2,700,000 shares were issued from treasury at a premium to NAV, details of which are set out in note 9. Tender offer 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 20 June 2008 that it had consulted its broker UBS regarding the tender offer as at 31 August 2008 and concluded that it was not in the interests of shareholders to implement that tender offer having considered the average discount during the financial year and investor appetite for a tender at that time. On 5 January 2009 the Board announced that having consulted its broker, JPMorgan Cazenove, it had concluded it was not in the interests of shareholders to implement the tender offer as at 2 March 2009. The next possible tender offer will therefore be as at 1 September 2009. The current tender offer authority expires on 30 April 2009. A resolution for its renewal will be put to shareholders at the forthcoming AGM. Discount and share buybacks The Directors recognise the importance to investors of ensuring that any discount of the Company's share price to its underlying NAV is as small as possible. Accordingly, the Directors monitor the discount closely and will consider share repurchases in the market if the discount to NAV widens significantly. The Directors have the authority from shareholders to buy back up to 14.99% of the Company's issued share capital. This authority, which has not so far been utilised, expires at the forthcoming AGM on 13 March 2009 when a resolution will be put to shareholders to renew it. Gearing The Company operates a flexible gearing policy which depends on prevailing conditions. The maximum gearing used during the year was 15.4% and at 30 November 2008 gearing amounted to 14.5%. Directorate Graham Birch will be retiring as a Director of the Company at the forthcoming AGM. Graham has been a Director of the Company since its launch in December 2005 and his extensive experience in the natural resources sector has been invaluable to his fellow Directors. I would like to thank him on behalf of the Board for the energy, enthusiasm and insight which he has brought to our meetings. I am pleased to report that as the head of the natural resources team at BlackRock, we will still have access to his views and thoughts on the sector. Jonathan Ruck Keene, who has acted as Graham's alternate since 23 April 2007, will succeed him as a Director of the Company and a resolution regarding his appointment will be proposed at the AGM. Jonathan is the managing director at BlackRock responsible for the closed end funds division and was instrumental in the launch of the Company. He has considerable experience in the closed end funds' sector and will be a welcome addition to the Board. Corporate Broker Following the announcement that UBS Limited would be withdrawing from the UK and European Listed Investment Funds business, the Board announced on 17 December 2008 that JPMorgan Cazenove Limited will act as the Company's sole broker. Company Name The Company held a General Meeting on 21 April 2008, at which shareholders resolved to change the Company's name to BlackRock Commodities Income Investment Trust plc. The change of name was effected on 25 April 2008 following the merger in 2006 of Merrill Lynch Investment Managers with BlackRock and a full product rebrand. I am pleased to report that the Manager has borne all the costs associated with changing the Company's name and continues to invest in the BlackRock brand. Investment Objectives and Policy In addition, shareholders also voted at the General Meeting in favour of amending the Company's investment objectives by deleting the word "yield" from the objective which had been to "achieve an annual dividend yield target and, over the long term, capital growth by investing primarily in securities operating in the mining and energy sector". Approval was also given to amend the investment policy in order that the Company may invest in derivatives, including options and futures, up to a maximum of 30% of the Company and the subsidiary's assets at the time of investment, both for efficient portfolio management and in order to enhance portfolio returns. Outlook The highly volatile market conditions look likely to continue in 2009 but in the longer term we anticipate a recovery in commodity prices and commodity equities. Principle 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 policy to fulfill the Company's objectives and monitoring the performance of the Investment Manager. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and maintains 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 dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. Regulatory Risk The Company operates as an investment trust in accordance with section 842 of the ICTA. 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 quarterly dividends to ensure that the provisions of section 842 are not breached and the results are reported to the Board at each meeting. 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 Investment Manager and the Company's other service providers. The security, for example, 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 control report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit and Management Engagement Committee at least twice a year. The custodian and the Investment Manager also produce annual AAF01/06 and SAS70 reports which are reviewed by their respective auditors and give assurance regarding the effective operation of controls. Financial Risks The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk and interest rate risk. Unquoted investments in the Company's portfolio are subject to additional liquidity risk. This is taken into consideration by the Directors when determining the valuation of these holdings. There are also risks linked to the Group's use of derivative transactions. Related party transactions The Investment Manager is regarded as a related party and details of the investment management fees payable are set out in note 4. Statement of Directors'Responsibilities In accordance with Disclosure and Transparency Rule 4.1.12, the Directors also confirm to the best of their knowledge and belief that: - the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and - the annual report includes a fair view of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces. Richard Davis of BlackRock Investment Management (UK) Limited, the Investment Manager, comments: Commodity Market Overview The performance of the Company for the year ended 30 November 2008 has been very disappointing. The Company's NAV and share price fell by 47.2% and 49.6% respectively. Over the same period, the HSBC Global Mining Index and the MSCI World Energy Index fell by 49.5% and 8.8% respectively, while the FTSE All-Share Index fell by 32.2%. (All percentages are in Sterling terms with income reinvested). The year under review was by far the most turbulent in the Company's short history, with the credit crisis having far reaching implications for the commodities sector. In terms of performance, the NAV and share price registered both an all time high and an all time low, unfortunately in that order. By close of business on 30 November 2008, the share price had fallen 62.4% from its May high and was trading just 9.0% above its low. The table below shows the performance of major commodities and commodity indices. 30 November % Commodity 2007 2008 Change Base Metals (US$/tonne) Aluminium 2,465 1,701 -31.0 Copper 6,956 3,581 -48.5 Lead 3,048 1,080 -64.6 Nickel 26,408 9,703 -63.3 Tin 16,988 12,308 -27.6 Zinc 2,530 1,183 -53.3 Precious Metals (US$/oz) Gold 782.7 812.7 3.8 Silver 14.2 10.1 -28.9 Platinum 1,440.0 876.0 -39.2 Palladium 349.0 187.0 -46.4 Energy Oil (WTI) (US$/Bbl) 88.7 49.8 -43.9 Natural Gas (US$/MMBTU) 7.28 6.70 -8.0 Uranium (US$/lb) 93.0 55.0 -40.9 Bulk Commodities Iron ore (Carajas fines, USc/dmtu) 80.4 137.5 71.0 Coking coal (US$/tonne) 96.0 300.0 213.0 Thermal coal (US$/tonne) 56.0 125.0 123.2 Potash (US$/st) 252.0 767.0 204.4 Equity Indices HSBC Global Mining Index (US$) 743.6 274.3 -63.1 HSBC Global Mining Index (£) 361.6 178.7 -50.6 MSCI World Energy Index (US$) 284.3 188.5 -33.7 MSCI World Energy Index (£) 138.3 122.8 -11.2 Source: Datastream Figures in US Dollar terms and on a capital only basis, except where otherwise stated. With the exception of gold, which has benefited from its "safe haven" status, negative returns were registered by all exchange traded commodities during the period under review. The year started on a positive note and by the end of the interim period (31 May 2008), most commodities were up. Commodity equities were also performing well and the NAV and share price had doubled since inception. At this time, supply/demand fundamentals were reasonably supportive. Notwithstanding the weakness in the US economy, non-OECD demand was resilient. Supply side problems, meanwhile, were an ongoing theme for many commodities. A combination of power shortages in important commodity producing regions, strikes, start-up delays and infrastructure bottlenecks all curtailed supply. It soon became clear, however, that demand for commodities was deteriorating sharply as global economic growth began to slow. Importantly, China, the engine room of commodity demand growth for the last decade, is now recording slower rates of growth. Chinese GDP grew by 9% year-on-year in the September quarter, a solid number but less than the 11.5% growth rate in the previous year. The credit crisis has also taken its toll on the sector. The lack of credit available to producers, consumers and traders has compounded the contraction in demand. Some consumers have also been forced into a de-stocking phase, which has pushed London Metal Exchange ("LME") inventories higher and prices lower. De-leveraging and de-risking by investors, such as hedge funds, led to a huge reduction in investments in commodities. This shift from net-long to net-short positions has contributed to the decline in exchange traded commodity prices. Finally, the recent rally in the US Dollar has fed into weakening US Dollar denominated commodity prices. In response to falling prices and investors' lack of appetite for risk, commodity equities have plummeted. From their peak in May to their trough in November, mining shares fell 76% in US Dollar terms, with all thirteen sub-sectors of the HSBC Global Mining Index falling over the period. There were no positive gains in any geographic location, either, with all twenty five markets included in the index ending the period lower. Energy shares fared a little better, falling by "only" 55% in US Dollar terms from peak to trough this year. Equity market volatility has been extreme during the period under review, with the Chicago Board Options Exchange Volatility Index (a popular measure of the implied volatility of S&P 500 Index options) rising to record levels. The index, known as the VIX and often referred to in the media as the "fear gauge", peaked at 89.5 points on 24 October 2008, having averaged around 20 points since its launch in the 1990s. In the mining sector, during the three month period to November 2008, the HSBC Global Mining Index recorded a daily move exceeding 5% (up or down) on twenty eight trading days and on seven of those days, the index moved by more than +/-10%. To put this into perspective, in the ten year period prior to 2008 the index moved by +/-5% on just five occasions. The portfolio writes options in order to enhance income generation. These high levels of volatility have, therefore, benefited the portfolio's ability to generate income, as the value of options has increased. The Baltic Dry Bulk Index is an interesting measure of the extent to which the credit crisis is impacting the commodity market. (The index is a measure of average short term charter rates for dry bulk vessels, including Capesize, Panamax, Supramax and Handysize ships). This index has fallen by more than 90% from its high this year. This indicates not only a fall in demand for (mainly bulk) commodities, but also how the credit freeze has made it difficult to fund cargoes. Anecdotally, the inactivity at many ports, particularly in Asia, and the rising levels of anchored vessels are testament to the slowdown. By the end of November, for example, around 100 Capesize vessels (typically used to transport up to 175,000 tonnes of coal and iron ore) were anchored waiting for business. This represents around 20% of the entire fleet, which is double the normal level of idle vessels. These ships can be hired for as little as US$3,500 per day, which is insufficient to cover operating costs of between US$6,000 and US$7,000 per day. In November 2008, the Chinese government announced a US$580 billion package intended to stimulate the domestic economy. (While this figure includes some programmes that had previously been announced, it does represent a significant increase in spending). These funds represent around 8% of Chinese GDP (per annum) and will be spent in 2009 and 2010. The plan includes spending on housing and infrastructure and should, therefore, help bolster demand for commodities over the next two years. In early December 2008, President-elect Obama announced a stimulus package for the US economy, which should also be positive for infrastructure development. Turning to the individual commodities, base metals were significantly weaker across the board during the year under review. Not surprisingly, all metals have been impacted by the downturn in the global economy. Aluminium prices fell 31% in US Dollar terms. Aluminium is an energy intensive commodity and prices were supported early in the year following a number of power shortages in some of the key producing regions. Demand growth from emerging economies, notably China, was also strong. However, the market deteriorated rapidly in the third quarter in response to a collapse in global demand and a rise in Chinese production capacity. Inventories have risen to around 1.9 million tonnes, the highest levels since 1994. Copper prices fell by 48.5% in US Dollar terms during the period. Of all the base metals, copper is the most exposed to the US housing market and demand has also deteriorated in key Asian economies. LME inventories which had been reasonably stable at around 120,000 tonnes in the second quarter, rose to 290,000 tonnes by the end of November. In the nickel market, last year's record prices of US$50,000/tonne were followed by a period of de-stocking and a rise in LME inventories. A contraction in stainless steel demand has also weighed heavily on prices. Nickel prices fell 63.3% in US Dollar terms during the period to levels more than 80% below their all time high recorded in May 2007. Tin was the best performer, falling by 27.6% (in US Dollar terms). The metal made a new all time high of US$25,500/tonne in mid-May, driven largely by a restructuring of the Indonesian tin industry. Prices have roughly halved since then. Lead was the worst performing base metal, having been last year's top performer. The metal has been impacted by the slump in global auto sales, which is negative for battery demand. Zinc, down 53.3% this year, has been hit by the slump in Chinese galvanised steel production. The portfolio's preferred base metals include aluminium and copper. Our positions include Alcoa and Freeport McMoran Copper & Gold. We own both the equity and corporate bond of Freeport. In the bulk commodities market, iron ore prices enjoyed a sixth successive annual price increase. For the year commencing April 2008, Vale negotiated price rises of between 65% and 71%, while Rio Tinto agreed increases of 80% and 97% for fines and lump respectively. At the time these prices were negotiated, China's demand for iron ore was extremely strong and the market was in undersupply. As with most commodities, however, weakness in global economic activity has pushed spot prices lower. Shipments of iron ore from Brazil, one of the world's key producers, have slowed significantly. Meanwhile, China's inventory of iron ore has risen since the end of the year. Spot prices have stabilised recently, the Metal Bulletin and Steel Business Briefing indices indicate spot prices around US$75-80/tonne, up from their US$70/tonne lows. This would imply falls of around 13% and 20% for Brazilian and Australian 2009 contract prices respectively. Metallurgical coal contracts were also up strongly. Hard coking coal contracts for 2008 rose more than 200% to US$300/tonne, driven by supply side issues. Metallurgical coal production in the Bowen Basin in Queensland, Australia, was severely impacted by floods in January and February 2008. Subsequent to these negotiations, demand has slumped in response to the downturn in global steel production. While spot coking coal prices are not particularly meaningful, as trade is so thin, estimates for 2009 annual settlements are significantly lower. Apparently, Indian steel mills are pressuring for prices around the US$100/tonne level - back at 2007 levels, before the severe flooding in Queensland. The Company has exposure to the bulk commodities through investments in diversified mining companies such as BHP Billiton, Vale and Rio Tinto. In the precious metals market, gold prices succeeded in registering a modest gain of 3.8% during the year under review, making it the only exchange traded commodity shown in the table above to have risen over the year. The metal surpassed its previous life-time high of US$850/oz, recorded in 1980. The metal then moved quickly above the US$900/oz and US$1,000/oz levels before peaking at US$1,030/oz in mid-March following the near collapse of Bear Sterns. The key dynamic behind bullion's move was investment demand, which was driven by various factors including weakness in the US Dollar, strength in the crude market, concerns about inflation and the general need for a "safe haven" asset. Prices quickly retreated from this level, and by late October, the metal had fallen back below the US$700/oz level for the first time since September 2007. According to the latest data released by the World Gold Council ("WGC"), jewellery demand recovered strongly in the September quarter having weakened considerably at the higher price levels earlier in the year. Investment was also strong, dominated by bar hoarding in the retail sector. Total gold supply, meanwhile, fell 10% year-on-year, due mainly to the low level of central bank sales, down 87% year-on-year. Mine production is also diminishing, as companies struggle to find new deposits to replace existing production. The key factor behind the fall in gold prices was what the WGC refer to as "inferred disinvestment", essentially the difference between identifiable demand and supply. This includes flows out of the futures and OTC markets and amounted to around 300 tonnes in the third quarter, which was more than enough to outweigh physical buying. At the end of November, the net speculative long position on COMEX stood at around 260 tonnes, down 400 tonnes from its peak in February. This is the smallest net long position seen since August 2007. The Company has exposure to the gold sector, mainly through some of the larger North American producers. Elsewhere in the precious metals arena, platinum prices reached new highs during the period, breaching the US$2,000/oz level for the first time in March 2008. The metal's peak of US$2,290/oz is also a new inflation adjusted high. Supply side issues were the key driver early in the year. The impact of power disruptions in South Africa, which produces 75% of the world's primary supply, was most acute in platinum. Platinum, unlike gold, has more exposure to the industrial sector. Autocatalyst demand accounted for 53% of platinum consumption in 2007 and concerns about auto sales in 2008 and 2009 contributed to the metal's weakness. As the year progressed, the absence of any power-related supply disruptions in South Africa encouraged some selling. During the summer, the credit crisis also precipitated huge fund sales of the metal, pushing prices down to a low of US$763/oz - 66% below its high. The Company's exposure to the platinum market is through the South African stocks Impala and Anglo Platinum. Mining companies have reacted swiftly to the fall in commodity prices by closing production. The table below shows the amount of base metal production that has been curtailed. As a result, some metals have now moved into backwardation, which is indicative of a market that is not in over supply. Production curtailed as % of 2007 Commodity supply Aluminium 7.1 Copper - mining 0.5 Copper - smelting 0.6 Ferrochrome 24.8 Iron ore 8.7 Nickel 12.8 Platinum & Palladium 1.6 Zinc - mining 7.3 Zinc - smelting 6.7 Source: UBS. Mining companies have also reduced their capital budgets, which will impact longer term supply growth. By the end of November 2008, Credit Suisse estimated that 119 new projects are likely to be deferred, representing capital expenditure of around US$200 billion. Supply growth in a range of commodities has now been pushed out by at least two years. The following table shows the amount of potential future production that has been deferred. New production deferred Deferrals as % (million of global Commodity tonnes) supply Aluminium 4.7 12 Copper 4.5 25 Iron ore 559 66* Nickel 0.4 28 Zinc 0.6 4 Source: Credit Suisse. *Global seaborne market The portfolio has a number of investments in fertilizer producers. Grain and soft commodity prices have been generally strong in recent years, as demand has outstripped supply resulting in extremely low levels of inventory. Consequently, demand for fertilizer products has increased as farmers strive to increase yields and prices have risen accordingly. There are three key types of fertilizer, potash, phosphate and urea, which respectively provide the elements potassium (K), phosphorous (P) and nitrogen (N) that are essential for plant growth. Our preferred fertilizer commodity is potash, which in our view has the best fundamentals. Potash prices rose by more than 200% during the period under review. Supply/demand dynamics have been extremely tight, with most producers operating close to full capacity. Notwithstanding the weakness in commodity markets, there appears to be no loss in momentum in potash prices to date. In November, Canpotex, the organisation that markets Canadian potash supply, announced that it had concluded new supply contracts with its Japanese contract customers covering shipments for the first half of 2009 at a price increase of US$200-220/tonne (depending on grade) over current contract prices. The new contract price reflects an average equivalent delivered price to Japan of over US$900/tonne. Urea and phosphate prices, on the other hand, have fallen sharply in the second half of the year, with the credit crisis having a major detrimental impact on near term usage. Demand has fallen sharply in Latin America and South East Asia, for example, as farmers are simply unable to make purchases due to their inability to obtain credit. Trade has almost ground to a standstill in some markets. Our fertilizer holdings include Potash Corporation of Saskatchewan, Agrium and K&S. In the energy market, oil prices reached a new all time high of US$146/Bbl (West Texas Intermediate) in July, more than US$40/Bbl above its previous inflation adjusted high recorded in April 1980. Many investors argued that this move was driven largely by speculators. However, the market had been considerably tighter than predicted. Early in the year, non-OECD demand was strong, while supply growth had been overestimated. A combination of high prices and slowing economic growth resulted in significant demand destruction and oil prices quickly retreated back to the US$50/Bbl level as the market began pricing in a deep recession. Demand has deteriorated at an unprecedented level. According to recent estimates, for example, US oil demand for 2008 is expected to decline by 1.4 million barrels per day compared with 2007 levels. As demand has fallen away, crude inventories have risen to substantial levels. Inventories at Cushing, Oklahoma, the delivery point for the NYMEX WTI (West Texas Intermediate) contract, have built to record levels of 28 million barrels. In response to the weak market, OPEC announced production cuts of 1.5 million barrels per day in October 2008. Then in December, OPEC announced a further cut of 2.2 million barrels per day - the cartel's deepest ever cut. This cut will reduce OPEC output to 24.9 million barrels per day, which is 15% below September production levels. The cut will also bring this year's total cut to OPEC supply to 4.5 million barrels per day, which represents around 5% of total global production. The longer term outlook for oil supply is becoming increasingly fragile. The latest report from the International Energy Agency indicates that current decline rates are around 9.1% (pre-investment) and 6.4% (post investment). We are seeing many new projects being delayed or shelved as a result of lower oil prices rendering them uneconomic. The inability to obtain financing is also delaying the development of new projects. Capital expenditure among US exploration and production companies in 2009 is estimated to be reduced by around one third compared with 2008 levels. Having failed to perform in line with oil on the way up, energy equities have been relatively resilient in the face of declining prices. Indeed, some of the major integrated oil companies have significantly outperformed global equity markets this year. Exxon, for example, rose 22.8% during the 12 month period to the end of November 2008, compared with a 8.8% fall in the MSCI World Energy Index (numbers in Sterling with dividends re-invested). US natural gas was one of the best performing commodities during the interim period. Driven by strong demand growth, prices rose to a high of US$13.3/MMBtu (Henry Hub) in July 2008. However, prices have fallen sharply in recent months as the slowdown in the US economy weakens industrial demand. A milder than expected summer in the US also negatively impacted generation demand. By the close of the period, gas prices were trading at US$6.7/MMBtu, down 50% from its high. At these levels, some production facilities have been closed and companies have started to reduce their capital expenditures. The portfolio's exposure to the oil and gas sector is mainly through the integrated oil companies including Total, BP, Exxon and StatoilHydro. We also own some of the (mainly North American) E&P companies such as Anadarko. Thermal coal supply/demand dynamics looked reasonably robust at the start of the year against a backdrop of strong demand growth in Asia and Europe. However, in the March quarter there were two major supply disruptions that had profound implications for 2008 contract pricing. Firstly, severe winter storms in China led to a temporary ban on coal exports. Secondly, power outages in South Africa, the result of stockpile mismanagement and underinvestment by state power utility ESKOM, also curtailed exports. Elsewhere, supply was impacted by the floods in Queensland's Bowen Basin, where around one quarter of output is thermal coal. Heavy rains also impacted Indonesian output, while Vietnam cut exports of anthracite in order to build stockpiles for new domestic consumption. Thermal coal contracts for 2008 were set at US$125/tonne, up 125% from the previous year. Recently, however, spot prices have fallen sharply in response to the negative impact of an economic slowdown on power generation. While China's coal and power shortage has eased, a slowdown in electricity production in key thermal coal importing countries such as South Korea and Japan has also pushed the seaborne trade further into surplus. At 30 November 2008, spot prices for Newcastle (Australia) coal, for example, were US$100/ tonne down from the mid-year peaks of around US$200/tonne. Uranium fell 40.9% in US Dollar terms during the year under review. Prices had been under pressure since mid-2007 when the US Department of Energy released data on inventories, which saw many utilities leave the market in anticipation of lower prices. This year, the credit crisis put further pressure on prices as some investors were forced to unwind positions. Prices began to rally towards the end of the period as utilities returned to the market ahead of the winter. Recent news from the supply side has also been gloomy. Kazatomprom, for example, announced that it expects 2009 production to be approximately 14% below previous estimates, while technical issues remain at Cameco's McArthur River project. The Company does not hold any "pure play" uranium companies such as Cameco. Our exposure to uranium is through holdings in the diversified mining companies BHP Billiton and Rio Tinto. BHP Billiton has postponed the expansion of the Olympic Dam mine in South Australia until at least 2015. At increased production rates, Olympic Dam will be the largest source of mined uranium in the world. In November 2008, BHP Billiton decided to reactivate the Yeelirrie project in Western Australia following a government decision to overturn a ban on uranium mining. The most important corporate transaction during the period was the attempted takeover of Rio Tinto by BHP Billiton. In November 2007, BHP Billiton confirmed that it had made an unsolicited approach to Rio Tinto, offering three BHP Billiton shares for every Rio Tinto share held. In February 2008, BHP Billiton then made a formal offer at an improved 3.4 to 1 ratio. One week prior to BHP Billiton's bid, Chinalco (Aluminium Corporation of China) and Alcoa jointly purchased 9% of Rio Tinto's issued capital. The Company sold part of its Rio Tinto holding to the consortium at £60 share, representing a 21% premium to Rio Tinto's share price prior to the announcement. On 24 November 2008, BHP Billiton withdrew from the offer, claiming it was no longer in the best interest of its shareholders given the uncertainty in financial and commodity markets. The company also cited potential difficulties in divesting certain assets in today's market and the high levels of debt on Rio Tinto's balance sheet. Rio Tinto shares plummeted almost 40% following the news, while BHP Billiton shares rallied. The net effect on the Company's performance was to reduce the NAV by approximately 1.5%. The Company was, however, the "right way around" with respect to relative performance. The portfolio was modestly overweight and underweight in BHP Billiton and Rio Tinto respectively. In December 2008, Rio Tinto announced a series of initiatives aimed at reducing its debt position. Importantly for the portfolio's income stream, Rio Tinto will not cut its 2009 dividend. Elsewhere in the mining sector, Xstrata and Vale failed to agree merger terms. In Australia, Oxiana and Zinifex merged to form a base and precious metals mining company called Oz Minerals. In the energy sector, Eni, the Italian integrated energy company, completed the acquisition of First Calgary Petroleum. First Calgary is active in oil and gas exploration and development in Algeria. A number of acquisitions in the energy sector were made at the project rather than company level. For example, a number of integrated oil companies, such as BP and StatoilHydro, have bought into unconventional gas plays in the US. Portfolio The portfolio remains largely invested in established producing companies within the mining and energy sectors, with little exposure to exploration and development companies. At 30 November 2008, the portfolio held 61 securities, with around 45% of assets invested in integrated oil and diversified mining companies. A full breakdown of the portfolio's commodity exposure is below. A brief description of the portfolio's top ten holdings, which make up 44.2% of net assets, is also provided. Asset Allocations Sector Mining 46.7% Energy 53.3% Source: BlackRock. Geography Global 26.0% USA 22.8% Canada 14.3% Europe 10.5% Asia 8.2% Latin America 8.1% S Africa 4.2% Russia 2.6% Australia 1.5% China 1.1% Africa 0.7% Source: BlackRock. Mining Diversified 35.8% Gold 15.6% Copper 11.5% Fertilizers 9.7% Aluminium 9.1% Platinum 7.2% Nickel 3.9% Iron ore 3.4% Tin 2.5% Zinc 1.3% Source: BlackRock. Energy Integrated oil 52.5% E&P 30.9% Oil services 10.5% Coal 3.9% Distribution 2.2% Source: BlackRock. Whilst capital return for the year under review has been disappointing, income generation has exceeded expectations. The Group has generated £4.9 million in net income during the year, up 5% compared with the previous year. In the derivatives market, the Group sells put and call options in order to enhance income under guidelines set by the Board. During the year, the Group generated £2.8 million of income through option writing, up from £2.1 million in the previous year. Given the relatively high levels of volatility, option writing has been a useful source of income for the Group. Our strategy of writing options to enhance income returns will be continued. At the year end, the portfolio had five outstanding options, the notional value (if exercised) of which represents 4.9% of the assets. Other sources of income include corporate bonds and bank deposit interest. A full analysis of income and expenses is contained in the notes to the financial statements. Outlook Long term, the outlook for the commodities market is reasonably positive. Two key factors have been driving the market for the past decade and these remain largely intact. These factors are: - Robust demand growth - this will be driven by rising intensity of use in emerging economies such as China and India. - Weak supply growth - this is the result of many years of under investment in new capacity. In today's volatile market, however, many investors tend to have a shorter term investment focus. Currently, demand for raw materials is undoubtedly poor and may well deteriorate further in the near term. However, the sell-off in commodity equities has been savage and their valuations may already be pricing in further downside in commodity prices. While equities may look attractive, sentiment remains almost universally bearish. The Investment Manager's investment strategy remains largely unchanged. Our aim is to "look through" the volatility in the equity with relatively long term investments. We will continue to focus on companies that are in production with quality assets and a record of returning cash to shareholders. While earnings will undoubtedly contract in 2009, we believe that companies will continue to pay dividends. Ten Largest Investments (as a percentage of the investment portfolio) BHP Billiton - 8.1% (2007: 5.1%, 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. In February 2008, BHP Billiton launched a formal bid for Rio Tinto, however in November 2008, BHP then withdrew from the offer, claiming it was no longer in the best interest of its shareholders given the uncertainty in financial and commodity markets. Total - 4.2% (2007: 3.5%, http://www.total.com), is one of the largest publicly traded integrated oil and gas companies in the world. The company's key production regions are the North Sea, Africa and the Middle East. Total is Western Europe's leader in refining and marketing and one of the world's major traders of crude oil and refined products. Total also produces petrochemical and fertilizer products and has interests in coal mining and the power generation sector. BP - 4.2% (2007: 1.5%, www.bp.com), is one of the largest integrated energy companies in the world. With operations in more than 100 countries, BP has an estimated global market share of around 3% of oil and gas production and 4% of refining capacity. BP also has an alternative energy business, which invests in solar, wind, biofuels and the capture and storage of carbon dioxide. Exxon Mobil - 4.1% (2007: 1.6%, www.exxonmobil.com), is the world's largest publicly traded international oil and gas company. The company controls an industry leading inventory of global oil and gas resources and is the world's largest refiner and marketer of petroleum products. Exxon's petrochemical business also ranks among the world's largest. StatoilHydro - 3.5% (2007: 5.2%, 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. Vale - 3.4% (2007: 4.4%, 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. Alcoa - 3.3% (2007: 3.1%, www.alcoa.com), is the world's leader in alumina production and the third largest producer of aluminium. Headquartered in the USA, Alcoa is also active in other businesses including packaging and consumer products, fastening systems, precision castings and electrical distribution systems for cars and trucks. In February, Alcoa, in partnership with Chinalco (Aluminium Corporation of China), acquired a 12% interest in the UK listed shares of Rio Tinto. Rio Tinto - 3.3% (2007: 5.4%, www.riotinto.com), is the world's third largest mining company. The company has interests in aluminium, copper, diamonds, energy products, gold, industrial minerals (borates, titanium dioxide, salt and talc), and iron ore. In November, BHP Billiton withdrew from its bid for the company. Anadarko Petroleum - 3.2% (2007: 1.8%, www.anadarko.com), is one of the largest independent oil and natural gas exploration and production companies in the world. The company has operations in Alaska, Algeria, Brazil, China, Indonesia, Mozambique and West Africa. Anadarko is also the largest independent deep water producer in the Gulf of Mexico. ConocoPhillips - 2.9% (2007: 1.9%, www.conocophillips.com), headquartered in Houston, Texas, ConocoPhillips is the third largest integrated energy company in the United States. The company operates worldwide with assets and businesses in nearly 40 countries and is the fifth largest refiner and the sixth largest reserves holder of non government controlled companies. ConocoPhillips is known worldwide for its technological expertise in reservoir management and exploration, 3-D Seismic technology, high grade petroleum coke upgrading and sulphur removal. Investments as at 30 November 2008 Main Market geographic value % of exposure £'000 investments Integrated Oil Total Global 2,634 4.2 BP Global 2,634 4.2 Exxon Mobil Global 2,611 4.1 StatoilHydro Europe 2,197 3.5 ConocoPhillips USA 1,848 2.9 Eni Europe 1,759 2.8 Occidental Petroleum USA 1,588 2.5 Chevron Global 1,416 2.2 Marathon Oil USA 848 1.3 Petrol Brasileiros Latin America 273 0.4 Total call option 16/01/09 Global (34) (0.1) ------ ----- 17,774 28.0 ------ ----- Diversified BHP Billiton Global 5,172 8.1 Rio Tinto Global 2,090 3.3 Vale Capital 5.5% 15/06/10 Latin America 1,140 1.8 Vale Latin America 1,011 1.6 Sterlite Industries Asia 513 0.8 Straits Resources Australia 237 0.4 Oz Minerals Asia 105 0.2 Xstrata Global 121 0.2 Xstrata put option 19/12/08 Global (30) 0.0 BHP Billiton call option 20/02/09 Global (47) (0.1) BHP Billiton call option 16/01/09 Global (80) (0.1) ------ ----- 10,232 16.2 ------ ----- Exploration & Production Anadarko Petroleum USA 2,003 3.2 Niko Resources Asia 1,611 2.5 Encana Canada 1,396 2.2 XTO Energy USA 1,368 2.2 Peyto Energy Trust Canada 1,365 2.1 Nexen Canada 1,260 2.0 Crescent Point Energy Trust Units Canada 698 1.1 Denbury Resources USA 681 1.1 ------ ----- 10,382 16.4 ------ ----- Gold Goldcorp Canada 1,406 2.2 Peter Hambro Mining 7% Convertible Bonds 19/10/12 Russia 1,303 2.1 Barrick Gold Canada 672 1.1 Jaguar Mining 10.5% 23/03/12 Latin America 626 1.0 Agnico-Eagle Mines USA 375 0.6 Peter Hambro Mining Group 7.125% Convertible Bonds 11/08/10 Russia 345 0.5 High River Gold 8% Convertible Bonds 31/12/11* Africa 139 0.2 ------ ----- 4,866 7.7 ------ ----- Oil Services KBR USA 1,209 1.9 Schlumberger USA 1,187 1.9 SBM Offshore Europe 656 1.0 Precision Drilling Trust Canada 498 0.8 ------ ----- 3,550 5.6 ------ ----- Copper Southern Copper Latin America 1,388 2.2 Freeport McMoran Copper & Gold 6.75% 05/01/10 Asia 1,057 1.7 Freeport McMoran Copper & Gold Asia 663 1.0 Katanga Mining 14% S/Nts 30/11/13 Africa 331 0.5 Katanga Mining Convertible Warrants 20/11/11 Africa 1 0.0 Southern Copper call option 17/01/09 Latin America (55) (0.1) ------ ----- 3,385 5.3 ------ ----- Fertilizers Potash Corporation of Saskatchewan Canada 1,003 1.6 Agrium USA 713 1.1 K & S Europe 701 1.0 Terra Industries USA 479 0.8 ------ ----- 2,896 4.5 ------ ----- Aluminium Alcoa USA 2,098 3.3 Alumina Australia 642 1.0 ------ ----- 2,740 4.3 ------ ----- Platinum Impala Platinum South Africa 1,204 1.9 Johnson Matthey Europe 519 0.8 Anglo Platinum South Africa 448 0.7 ------ ----- 2,171 3.4 ------ ----- Coal China Shenhua Energy China 731 1.1 Straits Asia Resources Asia 457 0.7 Bumi Resources Asia 149 0.3 ------ ----- 1,337 2.1 ------ ----- Nickel International Nickel Indonesia Asia 637 1.0 Eramet Europe 481 0.8 Minara Resources Australia 62 0.1 ------ ----- 1,180 1.9 ------ ----- Iron Ore Kumba Iron Ore South Africa 1,011 1.6 ------ ----- 1,011 1.6 ------ ----- Tin Minsur Latin America 737 1.2 ------ ----- 737 1.2 ------ ----- Distribution Enbridge Income Fund Trust Canada 749 1.2 ------ ----- 749 1.2 ------ ----- Zinc Nyrstar Europe 376 0.6 ------ ----- 376 0.6 ------ ----- Portfolio 63,386 100.0 ------ ----- * Unquoted investments at Directors' valuation All investments are in ordinary shares unless otherwise stated. The total number of securities as at 30 November 2008 was 61 (2007: 59) The total number of open options as at 30 November 2008 was 5 (2007: 5) The negative valuations of £246,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 30 November 2008. CONSOLIDATED INCOME STATEMENT for the year ended 30 November 2008 Revenue Revenue Capital Capital Total Total 2008 2007 2008 2007 2008 2007 Notes £'000 £'000 £'000 £'000 £'000 £'000 Income from investments held at fair value through profit or loss 3 4,369 4,832 - - 4,369 4,832 Other income 3 2,962 2,232 - - 2,962 2,232 ------ ------ -------- -------- -------- -------- Total revenue 7,331 7,064 - - 7,331 7,064 (Losses)/gains on investments held at fair value through profit or loss - - (55,148) 37,690 (55,148) 37,690 ------ ------ -------- -------- -------- -------- 7,331 7,064 (55,148) 37,690 (47,817) 44,754 Expenses Investment 4 (294) (305) (882) (913) (1,176) (1,218) management fees Other expenses 5 (199) (69) - - (199) (69) ------ ------ -------- -------- -------- -------- Total operating expenses (493) (374) (882) (913) (1,375) (1,287) ------ ------ -------- -------- -------- -------- Profit/(loss) before finance costs and taxation 6,838 6,690 (56,030) 36,777 (49,192) 43,467 ------ ------ -------- -------- -------- -------- Finance costs 6 (142) (135) (407) (369) (549) (504) ------ ------ -------- -------- -------- -------- Profit/(loss) before taxation 6,696 6,555 (56,437) 36,408 (49,741) 42,963 ------ ------ -------- -------- -------- -------- Taxation (1,782) (1,874) 369 385 (1,413) (1,489) ------ ------ -------- -------- -------- -------- Profit/(loss) for the year 4,914 4,681 (56,068) 36,793 (51,154) 41,474 ===== ===== ====== ====== ====== ====== Earnings per ordinary share 8 6.96p 6.31p (79.44p) 49.60p (72.48p) 55.91p ===== ===== ====== ====== ====== ====== The total column of this statement represents the Group's Consolidated Income Statement, prepared in accordance with IFRS. The supplementary revenue and capital return columns are both prepared under guidance published by the AIC. The Company had no recognised gains or losses other than those disclosed in the Consolidated Income Statement. 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. STATEMENTS OF CHANGES IN EQUITY for the year ended 30 November 2008 Ordinary Share Share premium Special Capital Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Group For year ended 30 November 2008 At 30 November 2007 756 737 64,987 40,758 2,780 110,018 Net (loss)/profit for the year - - - (56,068) 4,914 (51,154) Proceeds of sale of shares from treasury (note 9) - 486 2,371 - - 2,857 Cost of sale of shares from treasury (note 9) - - (3) - - (3) Dividends paid (note 7) - - - - (4,093) (4,093) --- ----- ------ ------- ----- ------- At 30 November 2008 756 1,223 67,355 (15,310) 3,601 57,625 --- ----- ------ ------- ----- ------- For year ended 30 November 2007 At 30 November 2006 756 737 72,750 3,965 1,576 79,784 Net profit for the year - - - 36,793 4,681 41,474 Shares purchased (note 9) - - (7,684) - - (7,684) Share purchase costs (note 9) - - (79) - - (79) Dividends paid (note 7) - - - - (3,477) (3,477) --- ----- ------ ------- ----- ------- At 30 November 2007 756 737 64,987 40,758 2,780 110,018 --- ----- ------ ------- ----- ------- Company For year ended 30 November 2008 At 30 November 2007 756 737 64,987 41,927 1,611 110,018 Net (loss)/profit for the year - - - (54,975) 3,821 (51,154) Proceeds of sale of shares from treasury (note 9) - 486 2,371 - - 2,857 Cost of sale of shares from treasury (note 9) - - (3) - - (3) Dividends paid (note 7) - - - - (4,093) (4,093) --- ----- ------ ------- ----- ------ At 30 November 2008 756 1,223 67,355 (13,048) 1,339 57,625 --- ----- ------ ------- ----- ------ For year ended 30 November 2007 At 30 November 2006 756 737 72,750 4,589 952 79,784 Net profit for the year - - - 37,338 4,136 41,474 Shares purchased (note 9) - - (7,684) - - (7,684) Share purchase costs (note 9) - - (79) - - (79) Dividends paid (note 7) - - - - (3,477) (3,477) --- --- ------ ------ ----- ------- At 30 November 2007 756 737 64,987 41,927 1,611 110,018 --- --- ------ ------ ----- ------- BALANCE SHEET as at 30 November 2008 Group Company Group Company 2008 2008 2007 2007 Notes £'000 £'000 £'000 £'000 Non current assets Investments held at fair value through profit or loss 63,386 65,648 112,861 114,030 Current assets Other receivables 571 571 1,438 1,438 Cash and cash equivalents 2,778 211 1,694 - ------ ------ ------- ------- 3,349 782 3,132 1,438 ------ ------ ------- ------- Total assets 66,735 66,430 115,993 115,468 ------ ------ ------- ------- Current liabilities Other payables (731) (426) (1,969) (1,444) Bank overdrafts (8,379) (8,379) (4,006) (4,006) ------ ------ ------- ------- (9,110) (8,805) (5,975) (5,450) ------ ------ ------- ------- Net assets 57,625 57,625 110,018 110,018 ------ ------ ------- ------- Equity attributable to equity holders Ordinary share capital 9 756 756 756 756 Share premium account 1,223 1,223 737 737 Special reserve 67,355 67,355 64,987 64,987 Capital reserve (15,310) (13,048) 40,758 41,927 Revenue reserve 3,601 1,339 2,780 1,611 ------ ------ ------- ------- Total equity 57,625 57,625 110,018 110,018 ------ ------ ------- ------- Net asset value per ordinary share 8 80.25p 80.25p 158.05p 158.05p ====== ====== ====== ====== CASH FLOW STATEMENTS for the year ended 30 November 2008 Group Company Group Company 2008 2008 2007 2007 Note £'000 £'000 £'000 £'000 Operating activities (Loss)/profit before taxation (49,741) (50,602) 42,963 42,322 Add back interest paid 553 546 599 587 Losses/(gains) on investments held at fair value through profit or loss including transaction costs 55,148 54,055 (37,690) (38,235) Decrease/(increase) in other receivables 312 312 (214) (214) Decrease in other payables (113) (113) (167) (167) Decrease in amounts due from brokers 602 602 2,227 2,227 Decrease in amounts due to brokers (824) (824) (412) (412) Movements in investments held at fair value through profit or loss (5,830) (5,830) 6,021 6,021 ------- ------- ------- ------- Net cash inflow/(outflow) from operating activities before interest and taxation 107 (1,854) 13,327 12,129 ------- ------- ------- ------- Interest paid (553) (546) (599) (587) Taxation paid (1,397) (316) (947) (546) Taxation on investment income included within gross income (364) (364) (339) (339) ------- ------- ------- ------- Net cash (outflow)/inflow from operating activities (2,207) (3,080) 11,442 10,657 ------- ------- ------- ------- Financing activities Shares issued/(repurchased) 2,854 2,854 (7,778) (7,778) Equity dividends paid 7 (4,093) (4,093) (3,477) (3,477) ------- ------- ------- ------- Net cash outflow from financing activities (1,239) (1,239) (11,255) (11,255) ------- ------- ------- ------- (Decrease)/increase in cash and cash equivalents (3,446) (4,319) 187 (598) ------- ------- ------- ------- Cash and cash equivalents at start of the year (2,312) (4,006) (2,417) (3,326) Effect of foreign exchange rate changes 157 157 (82) (82) ------- ------- ------- ------- Cash and cash equivalents at end of the year (5,601) (8,168) (2,312) (4,006) ------- ------- ------- ------- Comprised of: Cash and cash equivalents 2,778 211 1,694 - Bank overdrafts (8,379) (8,379) (4,006) (4,006) ------- ------- ------- ------- (5,601) (8,168) (2,312) (4,006) ------- ------- ------- ------- NOTES TO THE RESULTS 1. Principal activities The principal activity of the Company is that of an Investment trust company within the meaning of section 842 of the Income and Corporation Taxes Act 1988. The principal activity of the subsidiary undertaking, BlackRock Commodities Securities Income Company Limited, is investment dealing and options writing. 2. 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 1985. The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish its individual income statement and related notes. The Group's financial statements are presented in Sterling, which is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated. Insofar as the Statement of Recommended Practice ("SORP") for investment trusts issued by the AIC, revised in December 2005 is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP. 3. Income 2008 2007 £'000 £'000 Investment income: Overseas listed dividends 3,461 4,320 Fixed interest 395 204 UK listed dividends 513 308 ----- ----- 4,369 4,832 ----- ----- Other operating income: Deposit interest 128 105 Option premium income and stock lending 2,834 2,127 income ----- ----- 2,962 2,232 ----- ----- Total income 7,331 7,064 ----- ----- Option premium income is stated after deducting transaction costs incurred on the purchases and sales of investments. At 30 November 2008 no securities were held out on loan by the Group (2007: £ 1,971,000). The maximum aggregate value of securities on loan at any one time during the year ended 30 November 2008 was £3,764,000 (2007: £4,773,000). 4. Investment management fees Revenue Capital Total Revenue Capital Total 2008 2008 2008 2007 2007 2007 £'000 £'000 £'000 £'000 £'000 £'000 Investment management fees 294 882 1,176 290 869 1,159 VAT - - - 15 44 59 ------ ------ ------- ------ ------ ------- 294 882 1,176 305 913 1,218 ------ ------ ------- ------ ------ ------ The investment management fee is levied quarterly, based on the gross assets on the last day of each quarter, and is charged 25% to the revenue account and 75% to the capital account. Following the outcome of the JPMorgan Claverhouse case, management fees are now exempt from VAT. 5. Other expenses 2008 2007 £'000 £'000 Custody fee 25 (63) Auditor's remuneration: - audit services 21 18 - other services 5 5 Directors' emoluments 60 57 Registrar's fee 19 11 Other administrative costs 69 41 --- --- 199 69 --- --- The Company's total expense ratio, calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, was: 1.2% 1.0% ---- ---- Fees paid to the Auditor for other services comprise £4,500 (2007: £4,500) relating to the review of the half yearly financial statements. An amount of £70,000 has been credited against operating expenses for the year ended 30 November 2007 relating to the release of an overprovision for custody fees for the year ended 30 November 2006. 6. Finance costs Revenue Capital Total Revenue Capital Total 2008 2008 2008 2007 2007 2007 £'000 £'000 £'000 £'000 £'000 £'000 Interest on bank overdrafts 142 407 549 135 369 504 ----- ----- ----- --- ---- ---- Finance costs are charged 25% to the revenue account and 75% to the capital account. 7. Dividends Under IFRS final dividends are not recognised until approved by shareholders. They are also debited directly to reserves. Amounts recognised as distributions to ordinary shareholders during the year to 30 November 2008 were as follows: 2008 2007 £'000 £'000 Fourth interim dividend for the year ended 30 November 2007 of 1.8750p (2006: 1.3125p) 1,305 992 First interim dividend for the year ended 30 November 2008 of 1.3125p (2007: 1.125p) 929 851 Second interim dividend for the year ended 30 November 2008 of 1.3125p (2007: 1.125p) 929 851 Third interim dividend for the year ended 30 November 2008 of 1.3125p (2007: 1.125p) 930 783 ----- ----- 4,093 3,477 ----- ----- For the year ended 30 November 2008, a fourth interim dividend of 1.4625p (2007: 1.875p) per ordinary share has been declared and will be paid on 20 January 2009, to shareholders on the Company's register on 30 December 2008. The total dividends payable in respect of the year which form the basis of section 842 of the Income and Corporation Taxes Act 1988 are set out below: 2008 2007 £'000 £'000 First interim paid on 25 April 2008 of 1.3125p (2007: 1.125p) 929 851 Second interim paid on 25 July 2008 of 1.3125p (2007: 1.125p) 929 851 Third interim paid on 24 October 2008 of 1.3125p (2007: 1.125p) 930 783 Fourth interim payable on 20 January 2009 of 1.4625p (2008: 1.875p) 1,050 1,305 ----- ----- 3,838 3,790 ----- ----- 8. Consolidated earnings per ordinary share and net asset value per ordinary share Revenue and capital returns per share are shown below and have been calculated using the following: 2008 2007 Net revenue return attributable to ordinary shareholders (£'000) 4,914 4,681 Net capital (loss)/return attributable to ordinary shareholders (£'000) (56,068) 36,793 -------- ------- Total (loss)/earnings attributable to ordinary shareholders (£'000) (51,154) 41,474 -------- ------- Equity shareholders' funds (£'000) 57,625 110,018 -------- ------- The weighted average number of ordinary shares in issue during each period, on which the return per ordinary share was calculated, was: 70,573,777 74,172,404 The actual number of ordinary shares in issue at the year end, on which the net asset value was calculated, was: 71,810,662 69,610,662 The number of ordinary shares in issue including treasury shares at the year end, was: 75,600,000 75,600,000 Revenue return per share 6.96p 6.31p Capital (loss)/return per share (79.44p) 49.60p ---------- ---------- Total (loss)/earnings per share (72.48p) 55.91p ---------- ---------- Net asset value per share 80.25p 158.05p Share price 72.50p 149.75p ---------- ---------- As the Company's share price at 30 November 2008 stood at a discount to the NAV, shares could not be sold out of treasury. Consequently there was no dilution to the Company's NAV or return per share at the year end date. 9. Share Capital Ordinary Treasury Total shares shares shares number number number £'000 Authorised share capital comprised: Ordinary shares of 1p each 505,000,000 - 505,000,000 5,050 ----------- ----------- ----------- ----- Allotted, issued and fully paid: Shares in issue at 30 November 2007 69,610,662 5,989,338 75,600,000 756 Shares transferred from treasury 2,200,000 (2,200,000) - - ----------- ----------- ----------- ----- At 30 November 2008 71,810,662 3,789,338 75,600,000 756 ----------- ----------- ----------- ----- During the year 2,200,000 shares were sold from treasury at an average price of £1.30 per share for a total consideration of £2,854,000 net of issue costs (2007: 5,989,338 shares were purchased for a consideration of £7,763,000). The number of ordinary shares in issue at the year end was 75,600,000 of which 3,789,338 were held in treasury (2007: 5,989,338). Since 30 November 2008, 500,000 shares have been sold from treasury at a premia to NAV for a total consideration of £434,000. The number of ordinary shares in issue at the date of this report was 75,600,000 of which 3,289,338 were held in treasury. 10. Publication of non statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The 2008 annual report and financial statements will be filed with the Registrar of Companies after the Annual General Meeting. The report of the Auditor for the year ended 30 November 2008 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 and its subsidiary for the year ended 30 November 2007, 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. 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, 33 King William Street, London EC4R 9AS. This report will also be available on the BlackRock Investment Management website at www.blackrock.com.uk/its. 12. Annual General Meeting The Annual General Meeting of the Company will be held at 33 King William Street, London EC4R 9AS on Friday, 13 March 2009 at 10:30 a.m. For further information, please contact: Jonathan Ruck Keene, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited Tel: 020 7743 2178 Richard Davis, Natural Resources Team, BlackRock Investment Management (UK) Limited Tel: 020 7743 2668 Emma Phillips, Media & Communication, BlackRock Investment Management (UK) Limited Tel: 020 7743 2922 William Clutterbuck, The Maitland Consultancy Tel: 020 7379 5151 22 January 2009 33 King William Street London EC4R 9AS

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