Half-yearly Report

14 July 2009 BLACKROCK COMMODITIES INCOME INVESTMENT TRUST plc Half yearly announcement of results in respect of the six months ended 31 May 2009 The Chairman, Alan Hodson, comments: Performance I am pleased to report that during the six-month period ended 31 May 2009, commodities as well as commodity equity prices rallied markedly with raw material prices rising to their highest levels in seven months. The Company has performed well during this period and the net asset value ("NAV") increased by 35.1% with the share price rising by 50.3% (all percentages in sterling terms with income reinvested). Since the period end, the Company's NAV has decreased by 10.9% and the share price has fallen by 11.1% (with income reinvested). Revenue return and dividends As stated in previous reports, it is the Company's intention to pay quarterly dividends. The aim is to pay dividends amounting to at least 5.40 pence per share in total for the year ending 30 November 2009(*) (2008: target of 5.25 pence). The first quarterly dividend of 1.35 pence per share was paid on 24 April 2009 and the second quarterly dividend of 1.35 pence per share will be paid on 24 July 2009 to shareholders on the register on 26 June 2009 (2008: three interim dividends of 1.3125 pence per share and a fourth interim dividend of 1.4625 pence per share). *This is a target and should not be interpreted as a profit or dividend forecast. Sale of shares from treasury During the period, and to the date of this report, a total of 2,765,000 shares were sold from treasury at a premium to NAV for a total consideration of £2.6 million. Directors Graham Birch retired as a Director of your Company on 13 March 2009, following the Annual General Meeting and I would like to take this opportunity to thank him again for the energy, enthusiasm and insight which he has brought to our meetings. In his stead, we are pleased to welcome Jonathan Ruck Keene as a Director. Jonathan had formerly acted as alternate director to Graham. He is the managing director at BlackRock responsible for the closed end funds division and was instrumental in the launch of your Company. VAT Following the success of the Association of Investment Companies ("AIC") and JPMorgan Claverhouse Investment Trust plc case against HM Revenue & Customs ("HMRC"), £110,000 of VAT was recovered shortly after the period end and has been credited to the Consolidated Income Statement. A further relatively small amount in respect of interest is expected from HMRC. Tender Offer 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. On 17 June 2009, the Board announced its decision not to proceed with a semi-annual tender offer in August 2009. Over the six month period ended 31 May 2009, the Company's shares traded at an average discount to NAV of 0.1% which is less than the discount of 2% to NAV, the price at which any tender offer would be made. Having considered this fact, the Board concluded that it was not in the interest of shareholders to implement a semi-annual tender offer in August. The Board will continue to monitor the level at which shares in the Company trade relative to the NAV. Gearing The Investment Manager operates a flexible gearing policy which depends on prevailing market conditions. The maximum gearing used during the period was 9.9% and at 31 May 2009 the Group had a net cash position of 0.4%. Prospects The first six months of this year have been in sharp contrast to the previous year when, commodity prices fell severely. Although the future continues to be uncertain, confidence is gradually growing over the recovery of the global economy, with risk appetite creeping back into the commodity markets. 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 2008. A detailed explanation can be found on pages 20 and 21 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 fees 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 2009 and the above responsibility statement was signed on its behalf by the Chairman. Commenting upon performance and the outlook for the Company, Richard Davis of BlackRock Investment Management (UK) Limited, the Investment Manager, notes: Summary The Investment Manager is pleased to report that for the six-month period ended 31 May 2009, the Company's NAV returned 35.1%, while the share price returned 50.3%. The HSBC Global Mining and MSCI World Energy indices gained 53.6% and 3.6% respectively, while the FTSE All-Share Index was up by 8.0%. (All percentages are in sterling with income reinvested.) Commodity Market Overview Following a severe sell-off in the second half of 2008, commodity markets have performed well so far in 2009. In the table below, all but two of the exchange traded commodities (aluminium and natural gas) have made respectable gains during the period, while commodity equities have also been stronger, with the mining sector being particularly impressive. The moves may seem somewhat surprising given the absence of any marked improvement in demand. It should be noted, however, that the gains have been from extremely oversold positions. The extent to which commodity prices fell in the fourth quarter of 2008 was unprecedented - many commodities fell to levels well below their marginal cost of production. So why have commodities performed so well? In our view, a number of factors have contributed to their recovery, including: 1. Monetary and fiscal stimulus; 2. Chinese buying; 3. Production cuts; and 4. Rising equity markets and US Dollar weakness. Governments around the world have loosened monetary and fiscal policies in response to the financial crisis and economic slowdown. Longer term, these policies do raise the spectre of inflation - which will be due (in part) to the rise in commodity prices. In the short term, low interest rates and the willingness of banks to lend money have begun to reactivate the commodity supply-demand chain. The extent to which some semblance of normality has returned to the commodities industry is illustrated by the Baltic Exchange Dry Freight Index, made up of a selection of shipping rates for various types of cargoes. The index is essentially driven by demand for commodities, such as iron ore, coal and steel. In 2008, the index fell by more than 90% (from peak to trough) reflecting both the fall in demand for commodities and the lack of credit available to traders and consumers. As credit markets have eased, the index has bounced strongly off its 2008 lows. Driven largely by surging Chinese imports, the index rose by almost 400% during the period - almost doubling in May alone. Commodity 30 November 2008 31 May 2009 % Change Base Metals (US$/tonne) Aluminium 1,701 1,384 -18.6 Copper 3,581 4,776 33.4 Lead 1,080 1,530 41.7 Nickel 9,703 13,765 41.9 Tin 12,308 14,300 16.2 Zinc 1,183 1,509 27.6 Precious Metals (US$/oz) Gold 812.7 959.8 18.1 Silver 10.1 15.5 53.4 Platinum 876.0 1,175.0 34.1 Palladium 187.0 236.0 26.2 Energy Oil (US$/Bbl)(1) 49.8 66.3 33.2 Natural Gas (US$/MMBTU)(2) 6.70 3.92 -41.5 Uranium (US$/lb)(3) 55.0 51.0 -7.3 Bulk Commodities Iron ore (USc/dmtu)(4) 137.5 98.8 -28.2 Coking coal (US$/tonne)(5) 300.0 128.0 -57.3 Thermal coal (US$/tonne)(5) 125.0 70.0 -44.0 Potash (US$/st)(6) 767.0 767.0 - Equity Indices HSBC Global Mining Index (US$) 274.3 436.6 59.2 HSBC Global Mining Index (£) 178.7 270.7 51.5 MSCI World Energy Index (US$) 188.5 201.5 6.9 MSCI World Energy Index (£) 122.8 125.0 1.8 1. West Texas Intermediate. 2. Henry Hub. 3. Nuexco Restricted, U3 O8 4. Vale's Carajás/Southern System average fines price to Europe. 5. FOB Australia. 6. Standard Muriate, Saskatchewan. Sources: Datastream and Bloomberg. All figures are on a capital only basis. In addition to fiscal and monetary stimuli, some governments have introduced plans to encourage the recycling of automobiles. For example, in the UK, owners of cars more than 10 years old are eligible for a £2,000 allowance when they trade their car in for a new one. A similar scheme in Germany has seen auto sales rise by 21% in February and 40% in March. These initiatives have obviously brought forward commodity consumption. China's State Reserves Bureau ("SRB"), as well as other state-owned enterprises and listed entities, has taken advantage of the pull-back in commodity prices to make significant investments in the sector. Copper imports have reached record levels so far this year, while aluminium, nickel, lead and zinc have also been purchased by the SRB. This trend is likely to continue, as China needs to import a wide range - and significant amount - of raw materials in order that its economic growth can be sustained in the long term. China is particularly reliant on imports of copper, nickel and iron ore. Unlike previous recessions, the commodity producers have reacted quickly in shutting down production. These cuts have partly offset the decline in demand and in some cases have prevented an unwieldy build in inventory. Global demand remains very weak however, and substantial surpluses could build this year in some commodities - notwithstanding the scale of supply cuts. In addition to existing production, longer term supply growth has been severely impaired as exploration and development budgets have been slashed. Commodities have also benefitted from a rally in equity markets and, more recently, weakness in the US Dollar. As investors' appetite for risk has improved, money has flowed back into commodity markets. Turning to the individual commodities, nickel was the top performer during the period under review, with a US Dollar gain of 41.9%. Nickel has experienced the deepest production cuts of the base metals, with roughly 23% of global supply taken off-line. This is the result of the metal's steep cost curve, which has put severe pressure on the higher cost producers. In terms of demand, stainless steel production is beginning to pick up, albeit from extremely low levels, while Chinese nickel imports have risen 50% year-to-date. In the nickel sector the Company has a holding in PT Inco (International Nickel Indonesia) and Eramet. Copper rose by 33.4% during the period under review and has nearly doubled from its December low. A combination of short covering and restocking by the Chinese has driven prices. In addition, scrap supplies have been extremely tight. Copper is the Company's preferred base metal. Our exposure to the metal is held through Freeport McMoran Copper & Gold and Southern Copper. We hold both the equity and corporate bond of Freeport. Some of the diversified mining companies, such as Rio Tinto, also have significant copper exposure. Aluminium has been the worst performer and is the only base metal to register a negative return during the period under review. An 18.6% fall during the period follows a 31.0% decline for the year to November 2008. In real terms, prices have fallen to an all time low and it is estimated that 70% of the aluminium industry cannot cover its cash operating cost. While significant supply cuts have been made to aluminium production, they have not prevented a substantial build in London Metal Exchange ("LME") inventory. In the six month period to 31 May 2009, aluminium stocks grew by an astonishing 135%. This has driven total LME inventories to levels last seen in the mid-1990s, when the break up of the former Soviet Union resulted in a substantial exodus of metal out of that country into the LME. In volume terms, aluminium now makes up more than 80% of the LME inventories, followed by copper at just 10%. The key issue with respect to aluminium demand is its significant exposure to the transport and construction sectors, which are suffering severely in western economies. The Company has direct exposure to the aluminium sector through its holdings in Alcoa and Alumina. Along with nickel, lead has been one of the top performing metals. Demand for lead is holding up relatively well, as evidenced by the fact that inventories are largely unchanged over the period under review. Imports of lead into China have been particularly robust in 2009. Zinc rose 27.6% during the period under review. In response to last year's fall in price, more than 10% of zinc smelter capacity has been shut, which has limited the surplus to manageable levels. The cutbacks in the zinc industry - around 8% of zinc mine production has also been closed - have also curtailed lead production by around 5%. (Lead is a common by, or, co-product of zinc production.) The Company owns Nyrstar, the European zinc smelter. Some of the diversified mining companies also provide some exposure to lead and zinc, although revenues from these metals would not be a significant part of their total revenue base. Tin prices rose by 16.2% less than other base metals (with the exception of aluminium), but then it did fall less than the others last year. Cutbacks in China and Indonesia have mitigated the sharp fall in demand. However, a sustained period of de-stocking has held prices back this year. We continue to have a position in Minsur, the Peruvian miner. Minsur operates one of the highest grade tin mines in the world. The metals and equities performed largely in tandem during the period. The Manager believes that the worst is now behind us and it is unlikely that the lows that were recorded in November/December last year will be revisited. Turning to the bulk commodities, the slowdown in global steel manufacturing has, not surprisingly, influenced annual price negotiations in favour of the consumers. Recent settlements in iron ore and coal have been significantly below 2008 figures, although they remain ahead of 2007 levels. At the end of May, iron ore prices were announced. Rio Tinto agreed terms with Japan's Nippon Steel for iron ore deliveries for the contract year commencing 1 April 2009. Prices for fines and lump will be 33% and 44% respectively lower than 2008 prices. While the numbers look disappointing, it should be noted that they represent the second highest price ever achieved by the industry. In early June, Nippon Steel then settled for a 28.2% and 45.0% cut to Vale's fines and lump respectively. The difference between the settlements for fines reflects the cost of shipping ore from Brazil (Vale) and Australia (Rio Tinto). Vale's better result this year claws back some of the relative improvement in Australia's FOB price last year when freight rates were much higher. European steel makers settled in line with the Japanese while, as this report goes to print, Chinese steel mills are yet to settle terms. In March, Australian coking coal prices were settled at US$120/tonne. This represents a considerable fall from the US$300/tonne level settled in 2008. However, the Japanese steel mills were pushing for prices below US$100/tonne. The Company's exposure to bulk commodities is predominantly through the diversified mining companies, BHP Billiton, Vale, Xstrata, Rio Tinto and Teck Resources. In the precious metals market, gold has lived up to its reputation as a store of wealth during the financial crisis. The metal gained 18.1% to US$960/oz, not far below its March 2008 peak of US$1,030/oz. Investment demand for the metal has been robust, with inflows into the gold backed Exchange Traded Funds ("ETFs") climbing to record levels in the first quarter of 2009. Many gold buyers are concerned about the long term inflationary implications of quantitative easing and are turning to bullion as a hedge against inflation. One of the important issues in the gold market today is the Central Bank Gold Agreement ("CBGA"). The CBGA, signed by most of the European central banks, limits gold sales to 500 tonnes per annum and the current 5-year agreement expires in September this year. Interestingly, to date only 140 tonnes of the 500-tonne quota have been sold. It is likely that the agreement will be renewed for another 5-year period. The second issue concerning the market is the potential for sales of gold by the IMF. This topic has been raised many times in the past but has failed to secure adequate support. However, in light of the recent financial crisis and the fact that prices are at high levels (relative to their recent history), IMF sales may finally get the green light. As the IMF does not intend to disrupt the gold market, the sales are likely to be part of a new CBGA. However, not every central bank is a seller of gold. In April China announced purchases of 454 tonnes of gold since 2003, increasing its total holdings to 1,054 tonnes. This makes China the 5th largest holder of gold behind the US, Germany, France and Italy. However, this gold represents less than 2% of China's foreign exchange reserves, compared with in excess of 40% for the US and European central banks. The Investment Manager views this news as positive for gold prices. Firstly, it suggests that China considers gold to be an important reserve asset. Secondly, with only a small percentage of reserves in gold, the potential for further purchases is potentially significant. The portfolio's exposure to the gold sector is principally through the North American senior producers, such as Barrick Gold and Goldcorp. Platinum prices gained 34.1% during the period to US$1,175/oz and is 61.0% above its October low of US$730/oz. The upcoming creation of a new platinum ETF in the US has boosted prices. Platinum jewellery demand has also been supported by the sharp contraction in platinum's premium over gold prices. The portfolio holds the South African platinum producer Impala Platinum. In the agriculture sector, credit issues and the fall in grain and soft commodity prices resulted in a near stagnation in the fertilizer market in the latter half of 2008. By the end of December, for example, approximately 50% of global phosphate production had been taken off-line as customers delayed purchases in expectation of lower prices. The portfolio's exposure to fertilizer is principally to potash, where prices have held up well, due to the high concentration of the production base. Our holdings include Agrium, K+S and Potash Corporation of Saskatchewan. An interesting corporate tussle is ongoing in the fertilizer market. Agrium has made a bid for CF Industries, which in turn has made a bid for Terra Industries. The portfolio sold out of its position in Terra following the bid. The oil price (West Texas Intermediate) bottomed out at US$31/Bbl in December. Since then it has risen steadily, peaking at US$66/Bbl at the end of May, despite the fact that supply-demand data has been generally bearish. Demand is weak, particularly in the US, which has resulted in a steady build in inventories. All three of the key inventories - crude oil, gasoline and distillates - are comfortably above their five-year range. On a more positive note, OPEC's production cuts appear to be having an impact. OPEC has cut 4.2 million barrels per day since its peak in July last year. At the latest meeting in Vienna in May, OPEC decided to maintain current production targets and importantly expressed its intention to improve levels of compliance. One of the features in the oil market has been the steep contango. (A contango exists when forward prices exceed spot prices.) This probably reflects the disappointing outlook for new oil supply growth going forward as well as the depletion of existing OECD supply. The bulk of the portfolio's energy exposure is through the integrated oil companies, such as Eni, Total and BP and some of the North American E&P companies such as Anadarko. In contrast to oil markets, gas prices have been extremely weak. Gas demand has been savaged by the deterioration in the US economy. Meanwhile, the growth in supply in the industry in 2008 carried over into 2009, resulting in significant oversupply. Natural gas prices (Henry Hub) fell below US$4/MMBtu for the first time since 2002. Australian thermal coal contract prices were settled in March with the Japanese power utilities at US$70/tonne. This represents a 44% decline on the previous year's settlement, although it was higher than spot prices. Uranium prices fell by 7.3% during the six-month period. The market has been uneventful, with few transactions as customers remain on the sidelines. The portfolio has no exposure to pure-play uranium producers. BHP Billiton and Rio Tinto are significant producers of the commodity. In the six months to 31 May 2009, the mining sector outperformed energy shares by approximately 50%. For this reason, we have been taking profits in some of the mining shares and reinvesting the proceeds in the energy sector. The Company's option strategy also reflects this switch. The most important development in the commodity equity markets centred on Rio Tinto. In November 2008, BHP Billiton withdrew its bid for the company, claiming it was no longer in the best interests of its shareholders. In February 2009, with the share price having traded below £15 per share and with a requirement to re-finance its sizeable debt burden on the horizon, Rio Tinto announced that it had reached an agreement with Chinalco. (Chinalco, with Alcoa, had purchased a 9% stake in Rio Tinto in February 2008 at £60 per share.) Rio Tinto would sell to Chinalco a convertible bond as well as minority stakes in some of its assets. The transaction would raise US$19.5 billion. However, since the announcement of the Chinalco transaction, financial markets - and Rio Tinto's share price - have improved. In early June, with the share price trading close to £30 per share, Rio Tinto announced a US$15 billion rights issue. This will enable the company to meet its debt repayments relating to the purchase of Alcan fully in 2009 and substantially in 2010. At the same time, Rio Tinto and BHP Billiton have agreed to joint venture ("JV") their iron ore assets in the Pilbara region of Western Australia. BHP will pay US$6 billion to Rio Tinto in order to bring its interest in the JV to 50%. It has been estimated that the value of the synergies amount to US$10 billion. The equity issue and JV, will replace the convertible bond and asset sale to Chinalco. Not surprisingly, the Chinese are displeased with Rio's decision. China is the world's largest importer of iron ore, 75% of which is supplied by the Pilbara region. China is concerned that the JV would reduce its bargaining position when negotiating annual prices, despite the fact that Rio and BHP have stated they will market their iron ore separately. One Chinese official hinted that antitrust laws may be used in an attempt to block the deal. Elsewhere, mining and energy companies have taken advantage of the rally in equity markets to issue equity and/or debt in order to shore up their balance sheets. Most of these issues have generally been well received by the market. The Company has participated in a number of these transactions, such as the debt issuance by Rio Tinto and Teck Corporation. Portfolio review At 31 May 2009, the portfolio held 55 investments in companies within the mining and energy sectors. The Investment Manager's investment philosophy is unchanged, with the majority of these companies having low operating costs and (importantly in this financial environment) balance sheet flexibility. The portfolio remains well diversified from a geographic and commodity perspective. Approximately 44% 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 is as follows. Asset Allocation as at 31 May 2009 - Commodity Mining 49.2% Energy 50.8% Asset Allocation as at 31 May 2009 - Energy Integrated 49.0% E&P 32.0% Oil services 10.1% Coal 6.3% Distribution 2.6% Asset Allocation as at 31 May 2009 - Mining Diversified 38.8% Gold 13.4% Copper 13.0% Fertilizer 10.4% Aluminium 5.9% Platinum 5.5% Nickel 4.7% Tin 3.3% Zinc 3.0% Iron ore 2.0% Asset Allocation as at 31 May 2009 - Geography Global 22.1% Canada 18.2% USA 17.3% Asia 12.4% Europe 12.2% Latin America 10.3% S Africa 3.7% China 1.6% Australia 1.0% Russia 0.7% Africa 0.5% Outlook There is no doubt that sentiment has improved since the commodity market's nadir in the final quarter of 2008. Demand, however, remains weak for most commodities. The Investment Manager is, therefore, reasonably cautious about the near term outlook. The summer months in particular can be poor in terms of metal demand in the northern hemisphere. Longer term, the outlook is more positive. Demand growth will be driven by emerging economies, such as China and India, as their intensity of use of commodities increases from relatively low levels. Supply, meanwhile, will remain constrained following years of underinvestment in new capacity. Indeed, due to the extensive cuts in expenditure in the commodity industry in the past twelve months, the growth in supply will be even more constrained. Under this scenario, commodity prices are likely to trend higher. The Investment Manager will continue to look through the volatility in the equity market with relatively long term investments. We will also continue to focus on companies that are in production with quality assets and a record of returning cash to shareholders. Ten Largest Investments: BHP Billiton - 6.8% (2008: 8.1%, 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 rival Rio Tinto. In November 2008, BHP Billiton then withdrew its bid for the company, claiming it was no longer in the best interests of its shareholders. In early June 2009, Rio Tinto and BHP Billiton agreed to joint venture their iron ore assets in the Pilbara region of Western Australia. BHP will pay US$6 billion to Rio Tinto in order to bring its interest in the JV to 50%. It has been estimated that the value of the synergies amount to US$10 billion. Vale - 4.7% (2008: 3.4%, 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. Freeport McMoran Copper & Gold - 4.5% (2008: 2.7%, 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. Freeport is developing the world-class Tenke Fungurume project in the Democratic Republic of Congo. The Company has positions in Freeport's equity and bond. Eni - 4.3% (2008: 2.8%, www.eni.com) is an integrated energy company based in Italy. The company engages in oil and gas exploration and production, refining and marketing and the generation and sale of electricity. In Italy, the company is the leader in the marketing of refined products under its Agip brand. Eni also operates in the transport, distribution and sale of natural gas and is active in the petrochemical, oilfield service and engineering industries. Total - 3.4% (2008: 4.2%, 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. StatoilHydro - 3.3% (2008: 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. BP - 3.3% (2008: 4.2%, 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 & Production ("E &P") 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. Niko Resources - 2.9% (2008: 2.5%, www.nikoresources.com) is an oil and gas E&P company listed on the Toronto Stock Exchange. 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. Anadarko Petroleum - 2.8% (2008: 3.2%, www.anadarko.com) is one of the largest independent oil and gas E&P companies in the world. The company's assets include 10 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. Exxon Mobil - 2.8% (2008: 4.1%, www.exxonmobil.com) is the largest integrated oil and gas company in the world and one of the largest publicly traded corporate entities. Exxon's daily production rate is around 3.9 million barrels of oil equivalent per day. The company operates refineries in 21 countries with total capacity of 6.3 million barrels of oil per day. Investments as at 31 May 2009 Main % of geographic Market investments exposure value £'000 Integrated Oil Eni Europe 3,367 4.3 Total Global 2,682 3.4 StatoilHydro Europe 2,606 3.3 BP Global 2,555 3.3 Exxon Mobil Global 2,150 2.8 Occidental Petroleum USA 1,873 2.4 ConocoPhillips USA 1,535 2.0 Chevron Global 1,137 1.5 Marathon Oil USA 988 1.3 Petrol Brasileiros Latin America 546 0.7 Occidental Petroleum put option 22/08/09 USA (2) - Chevron put option 18/07/09 Global (24) - Hess put option 22/08/09 USA (43) (0.1) ------ ----- 19,370 24.9 ------ ----- Diversified BHP Billiton Global 5,314 6.8 Vale Capital 5.5% 15/06/2010 } Latin America 2,060 2.7 Vale } Latin America 1,542 2.0 Xstrata Global 1,744 2.2 Rio Tinto } Global 1,400 1.8 Rio Tinto Finance 8.95% 01/05/2014 } Global 666 0.9 Sterlite Industries Asia 1,302 1.7 Teck Resources 10.75% 15/05/09 Canada 1,276 1.6 BHP Billiton call option 19/06/09 Global (30) - BHP Billiton call option 17/07/09 Global (50) (0.1) Xstrata call option 19/06/09 Global (370) (0.5) ------ ----- 14,854 19.1 ------ ----- Exploration & Production Niko Resources Asia 2,273 2.9 Anadarko Petroleum USA 2,222 2.8 Peyto Energy Trust Canada 1,601 2.0 Nexen Canada 1,542 2.0 Encana Canada 1,528 2.0 XTO Energy USA 1,458 1.9 Denbury Resources USA 1,173 1.5 Crescent Point Energy Trust Units Canada 902 1.2 ------ ----- 12,699 16.3 ------ ----- Gold Goldcorp Canada 1,971 2.5 Jaguar Mining 10.5% 23/03/12 Latin America 1,379 1.8 Barrick Gold Canada 827 1.1 Agnico-Eagle mines Canada 587 0.7 Peter Hambro Mining Group 7.125% Convertible Bonds 11/08/10 Russia 541 0.7 High River Gold 8% Convertible Bonds 31/12/11* Africa 93 0.1 Goldcorp put option 20/06/09 Canada (241) (0.3) ------ ----- 5,157 6.6 ------ ----- Copper Freeport McMoran Copper & Gold 6.75% 01/05/2010 } Asia 2,036 2.6 Freeport McMoran Copper & Gold } Asia 1,433 1.9 Southern Copper Latin America 1,233 1.6 Katanga Mining 14% 30/11/13 Africa 350 0.4 Southern Copper call option 20/06/09 Latin America (48) (0.1) ------ ----- 5,004 6.4 ------ ----- Oil Services KBR USA 1,542 2.0 Schlumberger USA 1,277 1.6 SBM Offshore Europe 859 1.1 Precision Drilling Trust Canada 343 0.4 ------ ----- 4,021 5.1 ------ ----- Fertilizers Potash Corporation of Saskatchewan Canada 1,796 2.3 K&S Europe 1,101 1.4 Agrium Canada 1,065 1.4 ------ ----- 3,962 5.1 ------ ----- Coal China Shenhua Energy China 1,236 1.6 Straits Asia Resources Asia 959 1.2 Bumi Resources Asia 323 0.4 ------ ----- 2,518 3.2 ------ ----- Aluminium Alcoa USA 1,428 1.9 Alumina Australia 792 1.0 ------ ----- 2,220 2.9 ------ ----- Platinum Impala Platinum South Africa 2,085 2.7 ------ ----- 2,085 2.7 ------ ----- Nickel International Nickel Indonesia Asia 1,302 1.7 Eramet Europe 493 0.6 ------ ----- 1,795 2.3 ------ ----- Tin Minsur Latin America 1,210 1.6 ------ ----- 1,210 1.6 ------ ----- Zinc Nyrstar Europe 1,129 1.5 ------ ----- 1,129 1.5 ------ ----- Distribution Enbridge Income Fund Trust Canada 986 1.3 ------ ----- 986 1.3 ------ ----- Iron Ore Kumba Iron Ore South Africa 748 1.0 ------ ----- 748 1.0 ------ ----- Portfolio 77,758 100.0 ------ ----- * Unquoted investment at Directors' valuation The total number of holdings as at 31 May 2009 was 55 (30 November 2008: 61) The total number of open options as at 31 May 2009 was 8 (30 November 2008: 5) The negative valuations in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 31 May 2009. CONSOLIDATED INCOME STATEMENT for the six months ended 31 May 2009 Revenue return Capital Return Total £'000 £'000 £'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 31.05.09 31.05.08 30.11.08 31.05.09 31.05.08 30.11.08 31.05.09 31.05.08 30.11.08 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) Income from investments held at fair value through profit or loss (note 2) 1,933 2,570 4,369 - - - 1,933 2,570 4,369 Other income (note 2) 1,275 1,607 2,962 - - - 1,275 1,607 2,962 ----- ----- ----- ------ ------ ------ ------ ------ ------ Total revenue 3,208 4,177 7,331 - - - 3,208 4,177 7,331 ----- ----- ----- ------ ------ ------ ------ ------ ------ Gain/(loss) on investments held at fair value through profit or loss - - - 18,380 18,120 (55,148) 18,380 18,120 (55,148) ----- ----- ----- ------ ------ ------ ------ ------ ------ 3,208 4,177 7,331 18,380 18,120 (55,148) 21,588 22,297 (47,817) ----- ----- ----- ------ ------ ------ ------ ------ ------ Expenses Investment management fees (note 3) (102) (174) (294) (305) (522) (882) (407) (696) (1,176) Prior years' VAT refund (note 3) 28 - - 82 - - 110 - - Other expenses (note 4) (131) (96) (199) - - - (131) (96) (199) ----- ----- ----- ------ ------ ------ ------ ------ ------ Total operating expenses (205) (270) (493) (223) (522) (882) (428) (792) (1,375) ----- ----- ----- ------ ------ ------ ------ ------ ------ Profit/ (loss) before finance costs and taxation 3,003 3,907 6,838 18,157 17,598 (56,030) 21,160 21,505 (49,192) ----- ----- ----- ------ ------ ------ ------ ------ ------ Finance costs (11) (70) (142) (33) (191) (407) (44) (261) (549) Profit/ (loss) before taxation 2,992 3,837 6,696 18,124 17,407 (56,437) 21,116 21,244 (49,741) ----- ----- ----- ------ ------ ------ ------ ------ ------ Taxation (757) (1,039) (1,782) 71 209 369 (686) (830) (1,413) ----- ----- ----- ------ ------ ------ ------ ------ ------ Profit/(loss) for the period (note 6) 2,235 2,798 4,914 18,195 17,616 (56,068) 20,430 20,414 (51,154) ====== ====== ====== ====== ====== ====== ====== ====== ====== Earnings/ (loss) per ordinary share (note 6) 3.07p 3.99p 6.96p 25.01p 25.10p (79.44p) 28.08p 29.09p (72.48p) ====== ====== ====== ====== ====== ====== ====== ====== ====== 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 5. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Ordinary Share share premium Special Capital Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'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 - - - - (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 reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 For the six months ended 31 May 2008 (unaudited) At 30 November 2007 756 737 64,987 40,758 2,780 110,018 Net profit for the period - - - 17,616 2,798 20,414 Proceeds of sale of shares from treasury - 486 1,555 - - 2,041 Cost of sale of shares from treasury - (7) - - (7) Dividends paid - - - - (2,234) (2,234) ---- ----- ------ ----- ----- ------ At 31 May 2008 756 1,223 66,535 58,374 3,344 130,232 ---- ----- ------ ----- ----- ------ Ordinary Share share premium Special Capital Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 For the year ended 30 November 2008 (audited) 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 - 486 2,371 - - 2,857 Cost of sale of shares from treasury - - (3) - - (3) Dividends paid - - - - (4,093) (4,093) ---- ----- ------ ------ ----- ------ At 30 November 2008 756 1,223 67,355 (15,310) 3,601 57,625 ---- ----- ------ ------- ----- ------ The transaction costs incurred on the acquisition and disposal of investments are included within the capital reserve. Purchases and sale costs amounted to £ 9,000 and £15,000 respectively for the six months ended 31 May 2009 (six months ended 31 May 2008: £25,000 and £21,000; year ended 30 November 2008: £103,000 and £61,000). CONSOLIDATED BALANCE SHEET as at 31 May 2009 31 31 30 May May November 2009 2008 2008 £'000 £'000 £'000 Note (unaudited) (unaudited) (audited) Non current assets Investments held at fair value through profit or loss 77,758 137,317 63,386 ------ ------- ------ Current assets Other receivables 816 1,019 571 Cash and cash equivalents 2,560 3,212 2,778 ------ ------- ------ 3,376 4,231 3,349 ------ ------- ------ Total assets 81,134 141,548 66,735 ------ ------- ------ Current liabilities Other payables (767) (1,009) (731) Bank overdrafts (2,246) (10,307) (8,379) ------ ------- ------ (3,013) (11,316) (9,110) ------ ------- ------ Net assets 78,121 130,232 57,625 ====== ======= ====== Equity attributable to equity holders Ordinary share capital 756 756 756 Share premium account 1,223 1,223 1,223 Special reserve 69,457 66,535 67,355 Capital reserve 2,885 58,374 (15,310) Revenue reserve 3,800 3,344 3,601 ------ ------- ------ Total equity 78,121 130,232 57,625 ======= ======= ====== Net asset value per ordinary share 6 105.46p 183.92p 80.25p ======= ======= ====== CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 May 2009 Six months Six months Year ended ended ended 31 31 30 May May November 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net cash inflow/(outflow) from operating activities before financial activities 5,815 (4,625) (2,207) ------ ------ ----- Financing activities Shares sold from treasury 2,102 2,034 2,854 Equity dividends paid (2,036) (2,234) (4,093) ------ ------ ----- Net cash inflow/(outflow) from financing activities 66 (200) (1,239) ------ ------ ----- Increase/(decrease) in cash and cash equivalents 5,881 (4,825) (3,446) Effect of foreign exchange rate changes 34 42 157 ------ ------ ----- Change in cash and cash equivalents 5,915 (4,783) (3,289) Cash and cash equivalents at start of period (5,601) (2,312) (2,312) ------ ------ ----- Cash and cash equivalents at end of period 314 (7,095) (5,601) ====== ====== ====== Comprised of: Cash at bank 2,560 3,212 2,778 Bank overdrafts (2,246) (10,307) (8,379) ------ ------ ----- 314 (7,095) (5,601) ====== ====== ====== RECONCILIATION OF NET INCOME BEFORE TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Six months Six months Year ended ended ended 31 31 30 May May November 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Profit/(loss) before taxation 21,116 21,244 (49,741) (Gain)/loss on investments held at fair value through profit or loss including transaction costs (18,380) (18,120) 55,148 (Increase)/decrease in other receivables (223) 204 312 (Decrease)/increase in other payables (7) 53 (113) Decrease in amounts due from brokers - 264 602 Decrease in amounts due to brokers - (824) (824) Movements in investments held at fair value through profit or loss 3,973 (6,378) (5,830) Taxation paid (515) (798) (1,397) Taxation on investment income included within gross income (149) (270) (364) ----- ------ ----- Net cash inflow/(outflow) from operating activities 5,815 (4,625) (2,207) ===== ===== ===== Notes to the financial statements Principal activity 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, 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 Report and Accounts for the year ended 30 November 2008 and in accordance with International Accounting Standard 34. The taxation charge has been calculated by applying an estimate of the annual effective tax rate to any profit for the period. 2. Income Six months Six months Year ended ended ended 31 31 30 May May November 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Investment income: Overseas listed dividends 1,430 2,099 3,461 Fixed interest 219 200 395 UK listed dividends 284 271 513 ----- ----- ----- 1,933 2,570 4,369 ----- ----- ----- Other income: Deposit interest 5 52 128 Option premium income, stock lending income & other income 1,270 1,555 2,834 ----- ----- ----- 1,275 1,607 2,962 ----- ----- ----- Total income 3,208 4,177 7,331 ----- ----- ----- 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 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Revenue: Investment management fee 102 174 294 Prior years' VAT refund (28) - - --- --- ----- 74 174 294 --- --- ----- Capital: Investment management fee 305 522 882 Prior years' VAT refund (82) - - --- --- ----- 223 522 882 --- --- ----- Total: Investment management fee 407 696 1,176 Prior years' VAT refund (110) - - --- --- ----- 297 696 1,176 --- --- ----- 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 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Custody fee 8 9 25 Auditors' remuneration: - audit services 10 10 21 - other services 5 5 5 Directors' emoluments 31 30 60 Other administrative costs 77 42 88 --- --- --- 131 96 199 --- --- --- 5. Dividends Ordinary dividends on equity shares are analysed below: Six months Six months Year ended ended ended 31 31 30 May May November 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) First interim dividend for the period ended 28 February 2009 of 1.35p (2008: 1.3125p) 986 929 929 Second interim dividend for the period ended 31 May 2009 of 1.35p (2008: 1.3125p) 1,003 929 929 Third interim dividend for the period ended 31 August 2008 of 1.3125p (2007: 1.125p) - - 930 Fourth interim dividend for the period ended 30 November 2008 of 1.4625p (2007: 1.875p) - - 1,050 ----- ----- ----- 1,989 1,858 3,838 ===== ===== ===== A first interim dividend for the period ended 28 February 2009 of £986,000 (1.35p per ordinary share) was paid on 24 April 2009 to shareholders on the register at 27 March 2009. A second interim dividend of £1,003,000 (1.35p per ordinary share) is proposed and will be paid on 24 July 2009 to shareholders on the register at 26 June 2009. This dividend has not been accrued in the financial statements for the period ended 31 May 2009, as under IFRS, interim dividends are not recognised until payment has been authorised. Dividends are debited directly to reserves. The third and fourth interim dividends will be declared in September 2009 and December 2009 respectively. 6. Consolidated earnings per ordinary share and net asset value per share Six months Six months Year ended ended ended 31 31 30 May May November 2009 2008 2008 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net revenue return attributable to ordinary shareholders (£'000) 2,235 2,798 4,914 Net capital return/(loss) attributable to ordinary shareholders (£'000) 18,195 17,616 (56,068) ------ ------- ------ Total earnings/(loss) attributable to ordinary shareholders (£'000) 20,430 20,414 (51,154) ------ ------- ------ Equity shareholders funds (£'000) 78,121 130,232 57,625 ------ ------- ------ The weighted average number of ordinary shares in issue during the period excluding treasury shares, on which the return per ordinary share was calculated, was: 72,748,519 70,181,154 70,573,777 The actual number of ordinary shares in issue at the period end, excluding treasury shares, on which the net asset value was calculated, was: 74,075,662 70,810,662 71,810,662 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 3.07p 3.99p 6.96p Capital return/(loss) per share 25.01p 25.10p (79.44p) ------- ------- ------- Total earnings/(loss) per share 28.08p 29.09p (72.48p) ------- ------- ------- Net asset value per share 105.46p 183.92p 80.25p Share price 105.50p 184.00p 72.50p ======= ======= ======= 7. 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 2009 and 31 May 2008 has not been audited. The information for the year ended 30 November 2008 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 24 July 2009. 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. 8. Annual results The Board expects to announce the annual results for the year ended 30 November 2009, as prepared under IFRS in mid January 2010. Copies of the preliminary announcement can be obtained from the Secretary on 020 7743 3000. The annual report should be available at the beginning of February 2010, with the Annual General Meeting being held in March 2010. 14 July 2009 33 King William Street London EC4R 9AS Independent Review Report to BlackRock Commodities Income Investment Trust plc Introduction We have been instructed 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 2009 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 1 to 8. 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 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 International Financial Reporting Standards ("IFRS") as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with IAS 34 as adopted by the European Union. 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 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 performed 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 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union. Ernst & Young LLP London 14 July 2009 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

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