Final Results

City Natural Res High Yield Tst PLC 13 September 2004 City Natural Resources High Yield Trust plc Date: 13 September 2004 Audited results for the year ended 30 June 2004 • Net asset value total return of 23.2 per cent since 1 August 2003 compared to a total return of 10.5 per cent from the benchmark index • Ordinary Share price total return since 1 August 2003 of 21.8 per cent • Discount of 0.9 per cent The Chairman, Adrian Collins said: 'I am happy to report on the progress of the Company during what has been a busy and successful year. An Extraordinary General Meeting of the Company took place on 29 October 2003 at which Shareholders approved an issue of new ordinary shares. 42,857,143 new ordinary shares were subsequently allotted for a total amount of £30 million, and the Company assumed its current shape. Investment Performance The Company's net asset value total return between 1 August 2003 and 30 June 2004 was 23.2 per cent. This compared with a total return of 10.5 per cent from a corporate benchmark weighted two-thirds to the HSBC World Mining Index (sterling adjusted) and one-third to the MSCI Euro Sterling Corporate Index (non-financials). Dividend totalling 2.0 pence are declared in respect of the year, with a final fourth interim dividend of 0.5 pence payable on 26 November 2004. The Board have also declared a first interim dividend of 0.5 pence, payable on the same date in November, in respect of the year commencing 1 July 2004. Investment Strategy The current portfolio might be regarded as somewhat eclectic, balanced as it is between the natural resource sector and high yielding bonds; but, it was designed to appeal to investors that wished to participate in the opportunities available in the natural resource sector while having the protection of a quarterly dividend. To this end, the fund manager has endeavoured to select smaller to medium sized companies, as opposed to the leaders in the field, and by investing this way a portfolio of more exciting stocks can be constructed. It is interesting to note that the bias against emerging markets is rapidly disappearing. The Company has invested in a number of companies with projects in various countries within Africa and also the Former Soviet Union and it is noticeable how many new stocks have been admitted to trading on AIM reflecting operations in those countries. The bond portfolio is divided between high yielding resource convertibles and strategic bonds. It was decided to introduce an element of gearing and it is still possible to borrow at attractive rates even allowing for the interest rate hikes we have seen during the course of the year. Although we are not anticipating much more in the way of rate rises, our policy is to keep our gearing on a flexible basis. Shareholder Value The Company's share price rose by 20 per cent during the eleven months to 30 June 2004, the shares moving from a small premium of 0.8 per cent to a small discount of 0.9 per cent. The Company did not buy back any shares for cancellation during the year, but the Board continues to value this facility as a tool in managing the Company's discount. A resolution to renew the Company's authority to buy back shares will be proposed at the forthcoming Annual General Meeting. Outlook We continued to live in a world characterised by uncertainty. The tensions surrounding Iraq remain unresolved, and the pressure on oil prices remains upwards. In addition, we have a US presidential election in prospect. That said the outlook for interest rates is encouraging, and there are clear signs of earnings enhancements beginning to emerge from a mining sector that remains in demand. The Company offers shareholders an opportunity to invest in a rare growth industry while still receiving a healthy dividend. I believe that it will be an area of the market in which it will pay to be invested' Audited Statement of Total Return (Incorporating the revenue account) for the Year ended 30 June 2004 Notes 2004 2004 2004 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 733 733 Exchange losses - (85) (85) Income 1,818 - 1,818 Investment management fee (100) (300) (400) Other expenses (265) (20) (285) Net return before finance costs and taxation 1,453 328 1,781 Interest payable (74) (190) (264) Return on ordinary activities before tax 1,379 138 1,517 Tax on ordinary activities (297) 224 (73) Return attributable to equity shareholders 1,082 362 1,444 Dividends in respect of equity shares (1,256) - (1,256) Transfer (from)/to reserves (174) 362 188 Return per Ordinary Share 1 2.23p 0.74p 2.97p Audited Statement of Total Return (Incorporating the revenue account) for the Year ended 30 June 2003 Notes 2003 2003 2003 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (794) (794) Exchange losses (9) (27) (36) Income 348 172 520 Investment management fee (30) (256) (286) Other expenses (255) (147) (402) Net return before finance costs and taxation 54 (1,052) (998) Interest Payable - (40) (40) Return on ordinary activities before tax 54 (1,092) (1,038) Tax on ordinary activities (41) (121) (162) Return attributable to equity shareholders 13 (1,213) (1,200) Dividends in respect of equity shares - - - Transfer to/ (from) reserves 13 (1,213) (1,200) Return per Ordinary Share 1 0.07p (6.07)p (6.00)p Audited Balance Sheet as at 30 June 2004 2003 £'000 £'000 Fixed assets Investments 50,238 8,291 Current assets Debtors 762 1,404 Cash at bank and on deposit 368 1,554 1,130 2,958 Creditors: amounts falling due within one year (11,397) (924) Net current (liabilities)/assets (10,267) 2,034 Net Assets 39,971 10,325 Capital and reserves Called-up share capital 15,714 5,000 Share premium account - 11,642 Special reserve 30,386 - Warrant reserve 2,353 2,353 Other reserves: Capital reserve - realised (7,791) (8,376) Capital reserve - unrealised (887) (664) Revenue reserve 196 370 Equity shareholders' funds 39,971 10,325 Net asset value per share 2 63.59p 51.62p Audited Summarised Statement of Cash Flows Year to 30 June Year to 30 2004 June 2003 £'000 £'000 Net cash inflow from operating activities 252 2 Servicing of finance (168) - Taxation 83 (132) Capital expenditure and financial investment (40,104) 1,070 Equity dividends paid (628) - Net cash (outflow)/inflow before financing (40,565) 940 Financing 39,458 - (Decrease)/increase in cash (1,107) 940 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the year (1,107) 940 Cash inflow from drawdown of loans (10,000) - Exchange losses (79) (27) Net funds at 1 July 2003 1,554 641 Net (debt)/funds at 30 June 2004 (9,632) 1,554 Reconciliation of net revenue before finance costs and taxation to net cash inflow from operating activities Net revenue before finance costs and taxation 1,453 54 Increase in accrued income (604) - (Decrease)/increase in other creditors (221) 261 Increase in other debtors (15) (52) Refund of CGT suffered - 172 Capitalised expenses taken to non-distributable reserves (320) (403) Overseas witholding tax suffered (41) (30) Net cash inflow from operating activities 252 2 Notes 1. The basic revenue return per Ordinary share is based on the net return after taxation of £1,082,000 (2003: £13,000) and on 48,571,429 (2003: 20,000,000) Ordinary shares being the weighted average number of Ordinary shares in issue during the year. The basic capital return per Ordinary share is based on a capital return of £362,000 (2003: loss of £1,213,000) and on 48,571,429 (2003: 20,000,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. Fully diluted returns calculated on the basis set out in Financial Reporting Standard 14 'Earning per share' indicate that the exercise of Warrants in issue would have no dilutive effect on returns. 2. During the year the Company issued 42,857,143 Ordinary shares of 25p each for a total consideration of £30,000,000. The Company did not purchase any shares for cancellation during the year. The basic net asset value per Share is based on 62,857,143 shares (2003: 20,000,000), being the total number of Ordinary shares in issue at the end of the year. The fully diluted net asset value per Ordinary share for both 2004 and 2003 has not been calculated as the Warrant exercise price, being 85p, was higher than the basic net asset value throughout both years. 3. The Board has declared a fourth interim dividend of 0.5p per share payable on 26 November 2004 to shareholders on the register on 29 October 2004, having an ex-dividend date of 27 October 2004. The Board has also declared a first interim dividend of 0.5p per share, in respect of the year commencing 1 July 2004, payable on 26 November 2004 to shareholders on the register on 29 October 2004, having an ex-dividend date of 27 October 2004. Shareholders will receive a single payment in respect of the two aforementioned dividends. 4. These are not full statutory accounts in terms of Section 240 of the Companies Act 1985. The full audited accounts for the year to 30 June 2003, which were unqualified, have been lodged with the Registrar of Companies. The 2004 annual report will be sent to shareholders during September 2004 and will be available for inspection at 80 George Street, Edinburgh EH2 3BU, the registered office of the Company. This information is provided by RNS The company news service from the London Stock Exchange

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