BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC HALF YEARLY FINANCIAL REPORT 31 MAY 2017

Transcription

1 BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC HALF YEARLY FINANCIAL REPORT 31 MAY 2017

2 Contents Overview Investment objective 1 Performance record 2 Chairman s statement 4 Interim management report and responsibility statement7 Investment manager s report 10 Portfolio Ten largest investments 18 Distribution of investments 20 Investments 21 Financial statements Consolidated statement of comprehensive income 25 Consolidated statement of changes in equity 26 Consolidated statement of financial position 27 Consolidated cash flow statement 28 Reconciliation of net (loss)/profit before taxation to net cash flow from operating activities 29 Notes to the financial statements 30 Additional information Directors, management and other service providers 42 Shareholder information 43

3 BlackRock Commodities Income Investment Trust plc The Company s objectives are to achieve an annual dividend target and, over the long term, capital growth by investing primarily in securities of companies operating in the mining and energy sectors. A MEMBER OF THE ASSOCIATION OF INVESTMENT COMPANIES Details about the Company are available at blackrock.co.uk/brci HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [1]

4 Performance record FINANCIAL HIGHLIGHTS Attributable to ordinary shareholders 31 May November 2016 (audited) Change % Assets Net assets () * 87,895 98, Net asset value per ordinary share 74.01p 83.57p with income reinvested -9.3 Ordinary share price (mid-market) 72.75p 82.75p with income reinvested -9.9 For the six months ended 31 May 2017 For the six months ended 31 May 2016 Change % Revenue Net revenue after taxation () 3,224 2, Revenue return per ordinary share 2.72p 2.12p 28.3 Interim dividends 1st interim 1.00p 1.50p nd interim ** 1.00p 1.50p * The change in net assets reflects market movements and the issue of 500,000 shares during the period. ** Paid on 21 July [2] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

5 PERFORMANCE FROM 31 MAY 2012 TO 31 MAY May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Share price performance NAV performance Sources: BlackRock and Datastream. Performance figures are calculated on a mid-market basis in sterling terms, with income reinvested. Share price and NAV at 31 May 2012, rebased to 100. Nov 16 May 17 PERFORMANCE TO 31 MAY 2017 Six months One year Five years (actual) Five years (annualised) Net asset value per ordinary share -9.3% 26.6% -7.7% -1.6% Ordinary share price (mid-market) -9.9% 24.9% -11.6% -2.4% All performance calculations in the above table are on the basis that any dividends are reinvested on the ex-dividend date. The net asset value ( NAV ) performance calculations are based on a cum income NAV in sterling terms. Share price performance figures are calculated on a mid-market price in sterling terms. HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [3]

6 Chairman s statement MARKET OVERVIEW The first half of the year has seen price falls both in mining and energy equities, with the latter experiencing a period of oil price decline towards the end of the period under review as supply continued to be plentiful. While there are few indications at present that the oil price will revive, there are some signs of improvement in other commodity prices with recoveries from 2016 lows, and many mining companies generating strong levels of free cash flow. Globally, the economic backdrop is starting to look more promising with indicators of concurrent growth throughout the world s developed economies for the first time since PERFORMANCE During the six months ended 31 May 2017 the Company s net asset value ( NAV ) per share fell by 9.3% and the share price fell by 9.9% (both percentages in sterling terms with income reinvested). Although the Company does not have a formal benchmark, to set this in the context of the market backdrop, the Euromoney Global Mining Index fell by 0.6% and the MSCI World Energy Index fell by 8.1% over the same period (both percentages on a total return basis and in sterling terms). Further information on investment performance is given in the Investment Manager s Report. Since the period end and up until close of business on 26 July 2017 the Company s NAV has increased by 4.3% and the share price has fallen by 1.7% (with income reinvested). REVENUE RETURN AND DIVIDENDS Revenue return per share for the six-month period was 2.72 pence (six months to 31 May 2016: 2.12 pence). The Board s current target is to declare quarterly dividends of at least 1.00 pence per share in the year to November 2017, making a total of at least 4.00 pence for the year as a whole. This target represents a yield of 5.5% based on the share price as at the close of business on 31 May The first quarterly dividend of 1.00 pence per share was paid on 21 April 2017 and the second quarterly dividend of 1.00 pence per share was paid on 21 July 2017 to shareholders on the register on 23 June 2017 (2016: two quarterly interim dividends each of 1.50 pence per share and a further two quarterly interim dividends of 1.00 pence per share were paid). 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. [4] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

7 The Directors announced on 13 June 2017 that over the twelve-month period to 31 May 2017 the Company s shares had traded at an average discount to NAV of 2.8% (on a cum-income basis). Although this discount was slightly wider than 2.0% to NAV per share, the level at which any tender offer would be made, the Board concluded that it was not in the interests of shareholders to implement the tender offer in August In reaching this conclusion the Board was mindful of the size of the Company and did not believe that reducing this through a tender offer would be in the best interests of shareholders in the current circumstances. GEARING The Company operates a flexible gearing policy which depends on prevailing market conditions. It is not intended that gearing will exceed 20% of the gross assets of the Company. The maximum gearing used during the period, and the level of gearing at 31 May 2017 was 8.7%. SHARE CAPITAL The Company has continued to issue shares in response to investor demand and, during the period, issued 500,000 ordinary shares at a price of pence per share for a total consideration of 438,000, before the deduction of issue costs. The shares were issued at an average premium of 2.04% to the cum income NAV at the close of business on the business day prior to each issue and at a premium to the estimated cum income NAV at the time of each transaction. Since 31 May 2017, no further shares have been issued. OUTLOOK After a challenging period, the natural resources sector remains out of favour with investors. However, an improvement in mined commodity prices has allowed the mining companies to repair balance sheets and reinstate dividends, and the Investment Manager remains positive on the outlook for capital returns over the near to medium term. It has been more challenging in the energy sector but, given recent share price falls, a number of the energy companies are trading at more attractive valuations which have the potential to deliver significant upside over the next 1-2 years with the likelihood of higher oil prices over the medium term. While conditions are likely to remain volatile in the short term, should markets begin to acknowledge the relatively low valuations in the sector and anticipate a recovery in commodity prices, a re-rating of share prices over the medium to long term is to be expected. The Company is well positioned to benefit from any such pick-up, providing balanced, diversified exposure to the sector with a defensively HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [5]

8 Chairman s statement continued positioned, high quality portfolio. Further, following the dividend cuts seen across the Company s investable universe in recent years, it is encouraging to note improved cash-flows for many mining companies, which are likely to feed through into an increase in dividend income received from the Company s portfolio. Ed Warner 28 July 2017 [6] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

9 Interim management report and responsibility statement The Chairman s Statement on pages 4 to 6 and the Investment Manager s Report on pages 10 to 17 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; Gearing; Legal and regulatory compliance; Operational; Market; 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 These risks were expanded to include within the market risk section the risk that companies operating within the sectors in which the Company invests may be impacted by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price. A detailed explanation can be found in the Strategic Report on pages 7 to 10 and in note 17 on pages 58 to 68 of the Annual Report and Financial Statements which are available on the website at blackrock.co.uk/brci. In the view of the Board, there have not been any other 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. HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [7]

10 Interim management report and responsibility statement continued GOING CONCERN The Directors, having considered the nature and liquidity of the portfolio, the Company s investment objective and the Company s projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Ongoing charges (excluding interest costs and taxation) for the year ended 30 November 2016 were approximately 1.4% of net assets. RELATED PARTY DISCLOSURE TRANSACTIONS WITH THE INVESTMENT MANAGER BlackRock Fund Managers Limited (BFM) was appointed as the Company s Alternative Investment Fund Manager (AIFM) with effect from 2 July BFM has, with the Company s consent, delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management fee payable are set out in note 4 on page 32 and note 11 on page 40. The related party transactions with the Directors are set out in note 12 on page 40. 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 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 FCA s Disclosure and Transparency Rules. [8] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

11 This half yearly report has not been audited or reviewed by the Company s Auditor. The half yearly financial report was approved by the Board on 28 July 2017 and the above responsibility statement was signed on its behalf by the Chairman. Ed Warner For and on behalf of the Board 28 July 2017 HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [9]

12 Investment manager s report MARKET OVERVIEW The first half of 2017 was another turbulent time for the shares of mining companies and especially energy companies with both sectors delivering negative returns over the period. For the first time since the global financial crisis, the beginning of 2017 saw synchronised acceleration of economic growth across developed and emerging economies, with better than expected growth in the US and Europe and economic activity in China (as measured by the PMI) building on the positive momentum from 2016, peaking in the first quarter of This saw the mining equities begin the year strongly +17% in mid-february, however, tightening measures put in place by the Chinese government at the end of the period to cool the economy saw the mining companies give up their gains. Despite the spot price of most commodities falling over the half year period, as seen in the table below, it is important to note that the first half of 2017 average prices were higher than the average prices in the second half of This has continued to improve the financial strength of the mining sector and build the foundation for an improvement in returns to shareholders, which we will discuss in further detail later. Oil prices declined by 2.2% to finish at US$48/bbl during the first half but were volatile, trading as low as US$45/bbl and as high as US$54/bbl. OPEC s agreement at the end of November 2016 to cut production by 1.2 million barrels per day (mbpd) combined with non-opec producers agreeing to cut ~ 0.5mbpd, saw oil prices surge at the beginning of the year with WTI hitting US$54/bbl in January. However, this proved short lived as the US shale producers increased production, which caused the oil price to decline as the market was concerned that this would offset both the OPEC cuts and relatively robust demand for oil. The energy equities, especially the E&P sector, performed unusually poorly relative to the modest move down in the oil price and as detailed later in the report we see this as a significant investment opportunity on a one to two year view with the portfolio positioned increasingly towards oil price sensitive companies. [10] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

13 Commodity 31 May November 2016 Change % Base Metals (US$/tonne) Aluminium 1,926 1, % Copper 5,658 5, % Lead 2,099 2, % Nickel 8,922 11, % Tin 20,435 21, % Zinc 2,587 2, % Precious Metals (US$/oz) Gold 1,268 1, % Silver % Platinum % Palladium % Energy Oil (WTI) (US$/Bbl) % Oil (Brent) (US$/Bbl) % Natural Gas (US$/MMBTU) % Uranium (US$/lb) % Bulk Commodities (US$/tonne) Iron ore % Coking coal % Thermal coal % Potash (US$/st) % Equity Indices (Total Return) Euromoney Global Mining Index (US$) % Euromoney Global Mining Index ( ) % MSCI World Energy Index (US$) % MSCI World Energy Index ( ) % Sources: Datastream, Citi Research and Macquarie. HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [11]

14 Investment manager s report continued EUROMONEY GLOBAL MINING INDEX AND MSCI WORLD ENERGY INDEX Total Return, Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Source: Datastream. Euromoney Global Mining Index MSCI World Energy Index INCOME During the interim period the Company generated 4.0m in gross income. This enabled a dividend payment of 1.0 pence per share for the first and second quarters, a total of 2.0 pence per share for the interim period. After a tough period for the mining and energy sectors in 2015 that led to dividend cuts across the board, 2016 saw a dramatic positive change in the dividend outlook and the positive momentum continued in the first half of During the last six months, the diversified miners have shown an ability and willingness to increase dividends to shareholders, for example, Rio Tinto announced a higher than expected dividend as well as a US$500m share buyback scheme. The energy companies have not been able to increase dividends given the ongoing weakness in the oil price. However, they did not cut their dividends as aggressively as the mining companies did in In our view, even if the oil price rebounds to US$60/bbl over the remainder of the year, it is unlikely we would see widespread dividend increases from the energy companies in the short to medium term. [12] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

15 The environment for option writing was very attractive in the first quarter of the year so we modestly increased the level of option writing over the portfolio. In the second quarter the levels of volatility in the sector fell, meaning the amount of option premium received for selling options also fell therefore the level of option writing was reduced. Given the decline in the energy sector share prices towards the end of the period, the split of option selling between calls and puts was tilted towards puts to express our positive view on the market following the pullback. PORTFOLIO POSITIONING At the start of the year, the portfolio had a modest positive tilt to the energy sector as we wanted to increase our exposure following the OPEC production cuts announced at the end of Following the initial market optimism on the deal, the energy sector fell over 5% to the end of February (MSCI World Energy Total Return Index, US$) whereas the mining sector closed up 10% (having been up 19% at one point) over the same period. Following the strong performance of the miners we rotated some of the mining holdings into energy stocks and modestly increased the level of gearing in the last few months as we saw an increasingly broad array of attractive investment opportunities in the energy sector. The focus of the energy holdings that we added to during the period were North American listed E&P companies. Although they do not have the same level of dividend appeal of the European listed integrated oil companies (e.g. Royal Dutch Shell), they hold a number of characteristics that on a two-year investment horizon are appealing. Firstly, they have a greater sensitivity (in terms of valuation) to the oil price given we have a positive outlook on a two year view for the oil price, it is desirable for the portfolio to have a bias towards more oil price sensitive holdings. Secondly, the valuation of this subsector is attractive on a number of key metrics that we use to assess companies in the energy universe. Finally, a number of these companies are actively growing in the US shale sector this gives, in our view, an opportunity for material growth over the next two years, which should help drive market-beating returns for companies that are successful in executing this strategy. On the mining side the portfolio has retained its bias to the major diversified companies such as Rio Tinto, given their attractive free cash flow yield and desire to translate this into higher returns of capital to shareholders. Broadly speaking, free cash flow is rising across the sector; however it is not universal and this has resulted in a reduction or exit from holdings less exposed to this trend. For example, Norilsk Nickel (a position exited during the period) has faced a declining nickel price and strengthening rouble, which has impacted the company s ability to reduce debt and there is a risk that future dividends HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [13]

16 Investment manager s report continued will disappoint the market s expectations. This is in stark contrast to most other major miners who have been reducing debt levels over the last twelve months and are positioned to positively surprise on returns to shareholders. PORTFOLIO POSITIONING % NAV Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Source: BlackRock. Energy Mining Cash ENERGY Although macroeconomic data and underlying oil demand was supportive at the beginning of the year, energy equities came under pressure as the oil price fell during the half. This weakness in the oil price was driven by a number of factors including lower than expected supply disruptions (with stronger production from Libya and Nigeria) and higher production from the US shale producers. This resulted in global inventories remaining stubbornly high, despite production cuts from some OPEC members and robust oil demand. [14] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

17 BRENT OIL PRICE US$/bbl Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Brent Oil Price (US$/bbl) We saw several transactions occur across the sector during the period that highlighted the industry s focus on assets at the lower end of the cost curve. This is supportive of our portfolio s positioning in the lower cost E&P and integrated producers. We remain confident in our view that the current oil price is unsustainably low and that higher prices will be needed to incentivise production necessary to meet medium term oil demand. During the first half, energy equities performed poorly relative to the move in the underlying oil price with a number of US E&Ps falling by 20-40%. In our view, these companies are now trading well below medium-term fair value and therefore offer an attractive investment opportunity over the next 1-2 years as the fundamentals for the oil price improve and the market recognises the long term value in companies with high quality assets. In the short term there could still be further volatility in the share prices of these companies but unless our fundamentally positive outlook on the oil price changes, we would take any additional share price weakness as an opportunity to add selectively to the portfolios holdings in these companies. HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [15]

18 Investment manager s report continued MINING Mining shares and underlying commodities began the year strongly with Chinese economic data surprising to the upside. However, tighter credit conditions in China that were imposed in March saw some profit taking with the mining shares and commodities giving back their earlier gains. While Chinese economic activity has been resilient, the market has been concerned that tighter credit could lead to a slowdown in economic activity in the second half of In our view, this negative sentiment is unwarranted with economic data and underlying trends from the key commodity consuming sectors in China, property and infrastructure, remaining positive. The key theme from the mining sector s 2016 year-end reports was the improvement in free cash flow from higher commodity prices and reduced spending on new projects. This has allowed companies to significantly strengthen balance sheets and begin returning cash to shareholders. Importantly, management teams have remained disciplined with limited increases in capital expenditure announced. We see the mining sector remaining in capital return mode for the next couple of years, which bodes well for dividends across the sector and should also underpin limited growth in the supply of most mined commodities in the near future. In the precious metals space, the gold price increased by 8.0% to finish at US$1,268/oz. The macro environment has been mixed for gold with rising geopolitical tensions in North Korea and the Middle East supportive of the gold price, while rising US interest rates and reduced political risk in Europe following the French elections have been a head-wind for the price of gold. The outlook for gold remains range bound into the second half of the year in the absence of a major global equity market correction or geopolitical event that might cause investors to meaningfully increase their demand for safe haven assets. All returns are in US$ unless otherwise stated. OUTLOOK The rise in commodity prices over the last year has allowed the mining sector to repair balance sheets and reinstate dividends. We expect the mining sector s performance to remain somewhat volatile in the near-term and linked to short-term changes in sentiment towards China. In the medium to long-term, we expect positive company fundamentals of improved free cash flow and strong balance sheets to drive a re-rating of share prices. The impact of the mining sector slashing capital expenditure and underinvesting in new projects over the past five years is beginning to be seen in the stagnation and even decline in the production of some mined commodities, which has [16] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

19 helped tighten the balance between supply and demand, which is supportive for prices. We would expect this encouraging commodity backdrop to remain in the near future as there is a lack of development activity currently underway and very few projects that can be quickly brought online. Rebalancing in the oil market is taking longer than initially expected, and oil prices are likely to remain range bound through to the end of However, on a two year view, we believe that oil prices are unsustainably low and will need to move higher to incentivise the investment required to offset the declines in non-opec, ex-us oil production. OPEC s production cut is helpful in accelerating the rebalancing of the oil market, but the rebound in shale production has put a near-term cap on the oil price. We expect the trigger for an improvement in oil prices and energy equities to be meaningful declines in non-opec, ex-us production and subsequent declines in global inventories. The latter has already begun (albeit at a slower pace than we anticipated) and should accelerate through the second half of We believe the recent share price falls have left many energy companies trading below fair value and we have looked selectively to increase the energy exposure in the Company. Olivia Markham and Tom Holl BlackRock Investment Management (UK) Limited 28 July 2017 HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [17]

20 Ten largest investments as at 31 May 2017 First Quantum Minerals: 8.6%* (2016: 7.3%) is an established and rapidly growing mining company operating seven mines and developing five projects worldwide. The company is a significant copper producer and also produces nickel, gold, zinc and platinum group elements. Royal Dutch Shell B : 6.8% (2016: 6.5%) is one of the world s leading energy companies. The Anglo-Dutch company is active in every area of the oil and gas industry within exploration and production, refining and marketing, power generation and energy trading. The company also has renewable energy interests in biofuels. Exxon Mobil: 4.7% (2016: 6.4%) is the world s largest publicly traded international oil and gas company and the largest refiner and marketer of petroleum products. Rio Tinto: 4.7% (2016: 5.1%) is one of the world s leading mining companies. The company s primary production is iron ore, but it also produces aluminium, copper, diamonds, gold, industrial minerals and energy products. Glencore: 4.6% (2016: 2.4%) is a diversified miner with activities in mining, smelting, refining, processing and marketing of metals and minerals, energy products and agricultural products globally. In addition, the company provides financing, logistics, marketing and purchasing services to producers and consumers of commodities. BP (formerly British Petroleum): 4.2% (2016: 3.6%) is one of the world s leading international oil and gas companies. The company explores for and produces oil and natural gas, refines, markets and supplies petroleum products. It also generates solar energy and manufactures chemicals. BHP Billiton: 3.7% (2016: 4.7%) is the world s largest diversified natural resources company. The company is a major producer of aluminium, iron ore, copper, thermal and metallurgical coal, manganese, uranium, nickel, silver, titanium minerals and diamonds. The company also has significant interests in oil, gas and liquefied natural gas. Newcrest Mining: 2.9% (2016: 2.4%) is an Australian-based corporation which engages in the exploration, development, mining and sale of gold and gold-copper concentrate. It is Australia s leading gold mining company with international operations in locations including Indonesia and South America. * 5.8% relates to fixed interest holdings in First Quantum Minerals. [18] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

21 Enbridge Income Fund Trust: 2.8% (2016: 2.8%) is a Canadian listed company that is focused on energy infrastructure assets in North America. It has a strong commitment to paying cash flow out to shareholders, with a long term target of paying out approximately 80% of cash generated and available for distribution on a monthly basis. Anadarko Petroleum: 2.8% (2016: 3.0%) is one of the world s largest independent oil and natural gas exploration and production companies. Anadarko currently has production assets in the gulf of Mexico, US onshore, West and North Africa. The exploration portfolio includes assets in the production regions as well as East Africa and Colombia. All percentages reflect the value of the holding as a percentage of total investments. For this purpose where more than one class of securities is held, these have been aggregated. The percentages in brackets represent the value of the holding as at 30 November Together, the ten largest investments represent 45.8% of total investments (ten largest investments as at 30 November 2016: 45.9%). HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [19]

22 Distribution of investments as at 31 May 2017 ASSET ALLOCATION GEOGRAPHY Source: BlackRock. Global 51.9% USA 19.5% Canada 11.8% Australia 5.1% Latin America 4.6% Europe 2.7% Africa 2.5% Mali 1.5% Asia 0.4% ASSET ALLOCATION COMMODITY Energy 50.9% Mining 49.1% Source: BlackRock. Diversified Mining 19.7% Gold 11.0% Copper 9.7% Silver 3.5% Iron Ore 2.2% Steel 1.2% Coal & Uranium 0.8% Diamonds 0.6% Fertilizers 0.4% Integrated Oil 22.0% Exploration & Production 19.5% Distribution 3.9% Oil Services 3.3% Agricultural Science 2.2% [20] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

23 Investments as at 31 May 2017 Main geographic exposure Market value % of investments Integrated Oil Royal Dutch Shell B Global 6, Exxon Mobil Global 4, BP Global 4, ConocoPhillips USA 2, ConocoPhillips Put Option 16/06/17 USA } (48) (0.1) Occidental Petroleum USA 1, Statoil Europe 1, Chevron Global , Diversified Mining Rio Tinto Global 4, Glencore Global 4, BHP Billiton Global 3, Vale Latin America 2, South32 Global 1, Teck Resources Canada 1, Teck Resources Put Option 16/06/17 Canada } (59) (0.1) Lundin Petroleum Europe Lundin Mining Europe Lundin Mining Put Option 16/06/17 Europe (14) 18, Exploration & Production Anadarko Petroleum USA 2, Anadarko Petroleum Put Option 16/06/17 USA } (76) (0.1) EOG Resources USA 2, Hess Global 1, Cimarex Energy USA 1, Pioneer Natural Resources USA 1, Noble Energy Global 1, Devon Energy USA 1, Encana Canada 1, } HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [21]

24 Investments continued as at 31 May 2017 Main geographic exposure Market value % of investments Exploration & Production continued Marathon Oil Global 1, Marathon Oil Put Option 16/06/17 Global } (119) (0.1) Laredo Petroleum USA 1, Cabot Oil & Gas USA Cabot Oil & Gas Call Option 16/06/17 USA } (21) Painted Pony Energy Canada Crescent Point Energy Canada International Petroleum Global [22] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC 18, Gold Newcrest Mining Australia 2, Nevsun Resources Africa 1, Randgold Resources Mali 1, Agnico Eagle Mines Canada 1, Newmont Mining Global 1, Franco-Nevada Global Goldcorp Canada Eldorado Gold Asia Gold Fields Africa Gold Fields Call Option 16/06/17 Africa } (3) AngloGold Ashanti Global 7 Detour Gold Canada 2 10, Copper First Quantum Minerals 7.25% 15 May 2022 Global } 4, First Quantum Minerals Global 2, First Quantum Minerals 7.5% 1 Apr 2025 Global First Quantum Minerals 7.25% 1 Apr 2023 Global First Quantum Minerals Call Option 16/06/17 Global (15) Avanco Resources Latin America 1, ,

25 Main geographic exposure Market value % of investments Distribution Enbridge Income Fund Trust Canada 2, TransCanada Canada 1, , Silver Wheaton Precious Metals Global 1, Fresnillo Latin America 1, Tahoe Resources USA Tahoe Resources Call Option 16/06/17 USA (15) Oil Services 3, Baker Hughes USA 1, Baker Hughes Call Option 16/06/17 USA (7) Superior Energy Services USA Precision Drilling Canada , Agriculture Science Monsanto Global 2, , Iron Ore Fortescue Metals Australia 2, , Steel Arcelormittal Global 1, , Coal & Uranium Cameco Canada Cameco Call Option 16/06/17 Canada (10) } } } HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [23]

26 Investments continued as at 31 May 2017 Main geographic exposure Market value % of investments Diamonds Petra Diamonds 7.25% 1 May 2022 Africa Fertilizers CF Industries Holdings USA Oil Sands Suncor Energy Put Option 16/06/17 Canada (3) (3) Industrial Resources Iluka Resources OTC Put Option 29/06/17 Australia (38) (38) Portfolio 95, Comprising: Equity and debt investments 95, Derivative financial instruments written options (428) (0.4) 95, All investments are ordinary shares unless otherwise stated. The total number of holdings (including options) at 31 May 2017 was 72 (30 November 2016: 70). The total number of open options as at 31 May 2017 was 13 (30 November 2016:16). The negative valuations of 428,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 31 May As at 31 May 2017, the Company did not hold any equity interests comprising more than 3% of any company s share capital. [24] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

27 Consolidated statement of comprehensive income for the six months ended 31 May 2017 Notes Revenue Capital Total Six months ended Year ended (audited) Six months ended Year ended (audited) Six months ended Year ended (audited) Income from investments held at fair value through profit or loss 3 1,810 1,476 2,836 1,810 1,476 2,836 Other income 3 2,198 1,610 3,694 2,198 1,610 3,694 Total revenue 4,008 3,086 6,530 4,008 3,086 6,530 (Loss)/profit on investments held at fair value through profit or loss (11,770) 3,709 29,133 (11,770) 3,709 29,133 (Loss)/profit on foreign exchange (29) (29) Total 4,008 3,086 6,530 (11,799) 3,801 29,856 (7,791) 6,887 36,386 Expenses Investment management fee 4 (126) (84) (201) (377) (252) (602) (503) (336) (803) Other operating expenses 5 (169) (137) (279) (2) (2) (6) (171) (139) (285) Total operating expenses (295) (221) (480) (379) (254) (608) (674) (475) (1,088) Net profit/(loss) before finance costs and taxation 3,713 2,865 6,050 (12,178) 3,547 29,248 (8,465) 6,412 35,298 Finance costs 6 (51) (9) (64) (38) (26) (36) (89) (35) (100) Net profit/(loss) on ordinary activities before taxation 3,662 2,856 5,986 (12,216) 3,521 29,212 (8,554) 6,377 35,198 Taxation (438) (378) (789) (57) (146) (438) (435) (935) Net profit/(loss) for the period 8 3,224 2,478 5,197 (12,216) 3,464 29,066 (8,992) 5,942 34,263 Earnings/(loss) per ordinary share (pence) p 2.12p 4.43p (10.29p) 2.96p 24.75p (7.57p) 5.08p 29.18p The total column of this statement represents the Group s Consolidated Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or disposed of during the period. The Group does not have any other comprehensive income. The net profit/(loss) disclosed above represents the Group s total comprehensive income/(loss). HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [25]

28 Consolidated statement of changes in equity for the six months ended 31 May 2017 Note Called-up share capital Share premium account Special reserve Capital reserves Revenue reserve Total For the six months ended 31 May 2017 At 30 November ,183 46,395 71,223 (22,479) 2,511 98,833 Total comprehensive income: Net (loss)/profit for the period (12,216) 3,224 (8,992) Transactions with owners, recorded directly to equity: Share issues Share issue costs (7) (7) Dividends paid (a) 7 (2,376) (2,376) At 31 May ,188 46,820 71,223 (34,695) 3,359 87,895 For the six months ended 31 May 2016 At 30 November ,156 44,837 71,223 (51,545) 3,759 69,430 Total comprehensive income: Net profit for the period 3,464 2,478 5,942 Transactions with owners, recorded directly to equity: Share issues 24 1,314 1,338 Share issue costs 1 1 Dividends paid (b) 7 (3,496) (3,496) At 31 May ,180 46,152 71,223 (48,081) 2,741 73,215 For the year ended 30 November 2016 (audited) At 30 November ,156 44,837 71,223 (51,545) 3,759 69,430 Total comprehensive income: Net profit for the year 29,066 5,197 34,263 Transactions with owners, recorded directly to equity: Share issues 27 1,559 1,586 Share issue costs (8) (8) Tender issue costs rebated 7 7 Dividends paid (c) 7 (6,445) (6,445) At 30 November ,183 46,395 71,223 (22,479) 2,511 98,833 (a) 4th interim dividend of 1.00 pence per share for the year ended 30 November 2016, declared on 16 December 2016 and paid on 20 January 2017 and 1st interim dividend of 1.00 pence per share for the year ended 30 November 2017, declared on 14 March 2017 and paid on 21 April (b) 4th interim dividend of 1.50 pence per share for the year ended 30 November 2015, declared on 17 December 2015 and paid on 22 January 2016 and 1st interim dividend of 1.50 pence per share for the year ended 30 November 2016, declared on 14 March 2016 and paid on 21 April (c) 4th interim dividend of 1.50 pence per share for the year ended 30 November 2015, declared on 17 December 2015 and paid on 22 January 2016, 1st interim dividend of 1.50 pence per share for the year ended 30 November 2016, declared on 14 March 2016 and paid on 21 April 2016, 2nd interim dividend of 1.50 pence per share for the year ended 30 November 2016, declared on 14 June 2016 and paid on 22 July 2016 and 3rd interim dividend of 1.00 pence per share for the year ended 30 November 2016, declared on 12 September 2016 and paid on 21 October Costs relating to the acquisition and disposal of investments amounted to 107,000 and 12,000 respectively for the six months ended 31 May 2017 (six months ended 31 May 2016: 67,000 and 28,000; year ended 30 November 2016: 162,000 and 81,000). All transaction costs have been included within the capital reserves. [26] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

29 Consolidated statement of financial position as at 31 May 2017 Notes 31 May May November 2016 (audited) Non current assets Investments held at fair value through profit or loss 95,938 75, ,127 Current assets Other receivables 441 1, Cash and cash equivalents 8,627 4,125 7,208 Collateral held on margin deposit with brokers 1,906 1,556 2,990 10,974 6,880 11,114 Total assets 106,912 82, ,241 Current liabilities Other payables (858) (3,449) (3,239) Derivative financial instruments held at fair value through profit or loss (428) (292) (482) Bank overdraft (17,731) (5,502) (11,687) (19,017) (9,243) (15,408) Net current liabilities (8,043) (2,363) (4,294) Net assets 87,895 73,215 98,833 Equity attributable to equity holders Called up share capital 9 1,188 1,180 1,183 Share premium account 46,820 46,152 46,395 Special reserve 71,223 71,223 71,223 Capital reserves (34,695) (48,081) (22,479) Revenue reserve 3,359 2,741 2,511 Total equity 87,895 73,215 98,833 Net asset value per ordinary share p 62.06p 83.57p HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [27]

30 Consolidated cash flow statement for the six months ended 31 May 2017 Six months ended 31 May 2017 Six months ended 31 May 2016 Year ended 30 November 2016 (audited) Net cash (outflow)/inflow from operating activities (2,561) 877 (88) Financing activities Interest paid (89) (35) (100) Share issue costs paid (7) 1 (8) Tender issue costs rebated 7 Proceeds from share issues 437 1,338 1,586 Dividends paid (2,376) (3,496) (6,445) Net cash outflow from financing activities (2,035) (2,192) (4,960) Decrease in cash and cash equivalents (4,596) (1,315) (5,048) Effect of foreign exchange rate changes (29) Change in cash and cash equivalents (4,625) (1,223) (4,325) Cash and cash equivalents at start of period (4,479) (154) (154) Cash and cash equivalents at end of period (9,104) (1,377) (4,479) Comprised of: Cash and cash equivalents 8,627 4,125 7,208 Bank overdraft (17,731) (5,502) (11,687) (9,104) (1,377) (4,479) [28] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

31 Reconciliation of net (loss)/profit before taxation to net cash flow from operating activities for the six months ended 31 May 2017 Six months ended 31 May 2017 Six months ended 31 May 2016 Year ended 30 November 2016 (audited) Operating activities: (Loss)/profit before taxation (8,554) 6,377 35,198 Add back interest paid Losses/(profits) on investments held at fair value through profit or loss 11,770 (3,709) (29,133) Net losses/(profit) on foreign exchange 29 (92) (723) Sales of investments held at fair value through profit or loss 33,476 33,946 73,535 Purchases of investments held at fair value through profit or loss (38,111) (36,537) (78,060) Decrease/(increase) in other receivables (13) Decrease in other payables (14) (247) (203) Decrease/(increase) in amounts due from brokers 448 (767) (448) (Decrease)/increase in amounts due to brokers (2,335) 2,589 2,335 Net movement in cash held on margin deposit with brokers 1,084 (244) (1,678) Taxation paid (353) (416) (845) Taxation on investment income included within gross income (117) (81) (153) Net cash (outflow)/inflow from operating activities (2,561) 877 (88) HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [29]

32 Notes to the financial statements for the six months ended 31 May PRINCIPAL ACTIVITY The principal activity of the Company is that of an investment trust company within the meaning of sections of the Corporation Tax Act The principal activity of the subsidiary, BlackRock Commodities Securities Income Company Limited, is investment dealing and options writing. 2. 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 2016 (which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and as applied in accordance with the provisions of the Companies Act 2006) and in accordance with International Accounting Standard 34, Interim Financial Reporting. Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014 is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP. The taxation charge has been calculated by applying an estimate of the annual effective tax rate to any profit for the period. [30] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

33 3. INCOME Six months ended 31 May 2017 Six months ended 31 May 2016 Year ended 30 November 2016 (audited) Investment income: Overseas listed dividends ,222 Overseas special dividends 34 UK listed dividends ,028 Fixed interest income ,810 1,476 2,836 Other income: Deposit interest Option premium income 2,194 1,607 3,687 2,198 1,610 3,694 Total Income 4,008 3,086 6,530 Dividends and interest received in the period amounted to 1,568,000 and 214,000 (six months ended 31 May 2016: 1,213,000 and 3,000; year ended 30 November 2016: 2,226,000 and 525,000) respectively. During the period, the Group received option premium income totalling 1,988,000 (six months ended 31 May 2016: 1,884,000; year ended 30 November 2016: 4,103,000) for writing put and covered call options for the purposes of revenue generation. Option premiums of 2,194,000 (six months ended 31 May 2016: 1,607,000; year ended 30 November 2016: 3,687,000) were amortised to income. At 31 May 2017, there were 13 open positions (31 May 2016: 12; 30 November 2016: 16) with an associated liability of 428,000 (31 May 2016: 292,000; 30 November 2016: 482,000). HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [31]

34 Notes to the financial statements continued for the six months ended 31 May INVESTMENT MANAGEMENT FEE Revenue Six months ended 31 May 2017 Capital Total Revenue Six months ended 31 May 2016 Capital Total Revenue Year ended 30 November 2016 (audited) Capital Total Investment management fee The management fee is levied at 0.95% of gross assets per annum on the first 250 million of the Company s gross assets reducing to 0.90% thereafter. The fee is allocated 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income. [32] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

35 5. OTHER OPERATING EXPENSES Six months ended 31 May 2017 Six months ended 31 May 2016 Year ended 30 November 2016 (audited) Allocated to revenue: Custody fee Auditor s remuneration - audit services Directors emoluments Registrar s fee Broker fees Depositary fees Marketing fees Marketing fees written back (59) Other administrative costs Allocated to capital: Transaction charges - capital HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [33]

36 Notes to the financial statements continued for the six months ended 31 May FINANCE COSTS Revenue Six months ended 31 May 2017 Capital Total Revenue Six months ended 31 May 2016 Capital Total Revenue Year ended 30 November 2016 (audited) Capital Total Interest payable bank overdraft Total [34] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC

37 7. DIVIDENDS The Board s current dividend target is to declare quarterly dividends of 1.00 pence per share in the year to 30 November 2017, making a total of at least 4.00 pence for the year as a whole. A first interim dividend for the period ending 28 February 2017 of 1,188,000 (1.00p per share) was paid on 21 April 2017 to shareholders on the register on 24 March The Directors have declared a second interim dividend for the period ended 31 May 2017 of 1.00p per ordinary share. The total cost of the dividend was 1,188,000 and was paid on 21 July 2017 to shareholders on the Company s register on 23 June This dividend has not been accrued in the financial statements for the six months ended 31 May 2017, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves. The third and fourth interim dividends will be declared in September 2017 and December 2017 respectively. Dividends on equity shares paid during the period were: Six months ended 31 May 2017 Six months ended 31 May 2016 Year ended 30 November 2016 (audited) Second interim dividend for the year ended 30 November 2016 of 1.50p (2015: 1.50p) 1,769 Third interim dividend for the year ended 30 November 2016 of 1.00p (2015: 1.50p) 1,180 Fourth interim dividend for the year ended 30 November 2016 of 1.00p (2015: 1.50p) 1,188 1,734 1,734 First interim dividend for the year ending 30 November 2017 of 1.00p (2016: 1.50p) 1,188 1,762 1,762 2,376 3,496 6,445 HALF YEARLY FINANCIAL REPORT 31 MAY 2017 [35]

38 Notes to the financial statements continued for the six months ended 31 May CONSOLIDATED EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE Total revenue and capital returns per share are shown below and have been calculated using the following: Six months ended 31 May 2017 Six months ended 31 May 2016 Year ended 30 November 2016 (audited) Net revenue profit attributable to ordinary shareholders () 3,224 2,478 5,197 Net capital (loss)/profit attributable to ordinary shareholders () (12,216) 3,464 29,066 Total (loss)/profit attributable to ordinary shareholders () (8,992) 5,942 34,263 Total equity attributable to shareholders () 87,895 73,215 98,833 The weighted average number of ordinary shares in issue during each period on which the return per ordinary share was calculated was: 118,735, ,880, ,437,126 The actual number of ordinary shares in issue (excluding treasury shares) at the period end on which the net asset value was calculated was: 118,768, ,968, ,268,000 Return per share Revenue earnings per share 2.72p 2.12p 4.43p Capital (loss)/earnings per share (10.29p) 2.96p 24.75p Total (loss)/earnings per share (7.57p) 5.08p 29.18p At 31 May 2017 At 31 May 2016 At 30 November 2016 (audited) Net asset value per share 74.01p 62.06p 83.57p Share price 72.75p 62.00p 82.75p Basic and diluted earnings per share and net asset value per share are the same as the Company does not have any dilutive securities outstanding. The Company did not have any treasury shares at the period end, or at the date of this report. [36] BLACKROCK COMMODITIES INCOME INVESTMENT TRUST PLC