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