![]() ## CQS ### NEW CITY #### HIGH YIELD FUND LIMITED #### ANNUAL REPORT & FINANCIAL STATEMENTS #### 30 JUNE 2022 ![]() CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Purpose and Strategy The purpose of the Company is to provide Shareholders with a high dividend yield and the potential for capital growth by investing predominantly in high yielding fixed interest securities. To achieve this, the strategy of the Company is to follow the investment policy outlined on page 13 of this report and to utilise the benefits of being a closed-ended investment vehicle. Dividends Declared in Respect of Each Financial Year 3.5 3.6 3.7 3.8 3.9 4.0 4.1 4.2 4.3 4.4 4.5 4.6 2021/222020/212019/202018/192017/182016/172015/162014/152013/142012/132011/122010/11 Dividend per ordinary share (pence) Source: Bloomberg Net Asset Value Total Return and Share Price Total Return Index restated to 100 from 30 June 2010 Source: BNP Paribas Securities Services S.C.A., Jersey Branch Bloomberg and Morningstar 80 100 120 140 160 180 200 220 240 260 Net assetvalue totalreturn (dividends reinvested) Share price total return (dividends reinvested) June 2022 June 2021 June 2020 June 2019 June 2018 June 2017 June 2016 June 2015 June 2014 June 2013 June 2012 June 2011 June 2010 Total return index ![]() 1 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED #### CQS New City High Yield Fund Ltd Contents Financial Highlights 2 Financial Highlights Strategic Report 3 Statement from the Chair 5 Investment Manager’s Review 6 Classification of Investment Portfolio 7 Investment Portfolio 9 Ten Largest Holdings 10 Principal Risks and Uncertainties and Risk Mitigation 12 Stakeholders – Section 172 Statement and Principal Decisions 13 Strategic Review Directors’ Reports and Governance Reports 16 Statement of Directors’ Responsibilities in respect of the Annual Report and Financial Statements 17 Board of Directors and Investment Manager 20 Directors’ Report 22 The Board and Committees 24 Statement of Compliance with the AIC Code 25 ESG statement of the Company 28 Report of the Audit and Risk Committee 30 Directors’ Remuneration Report Independent Auditor’s Report 31 Independent Auditor’s Report to the members of CQS New City High Yield Fund Limited Financial Statements 36 Statement of Comprehensive Income 37 Statement of Financial Position 38 Statement of Changes in Equity 39 Cash Flow Statement 40 Notes to the Financial Statements Supplemental Information and Annual General Meeting 55 Glossary of Terms and Definitions 56 Alternative Performance Measures 59 Explanation of Annual General Meeting resolutions 60 Notice of Annual General Meeting 62 Report of the Investment Manager relating to Matters under the Alternative Investment Fund Managers’ Directive (unaudited) 63 Corporate Information ![]() 2 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Financial Highlights #### Financial Highlights NAV and share price total return \*\* Year to 30 June 2022 Year to 30 June 2021 Net asset value \* (NAV) 2.04% 21.38% Ordinary share price 1.21% 26.31% Capital Values 30 June 202230 June 2021% change Total assets less current liabilities (with the exception of the bank loan facility) £268.0m £267.2m0.30% NAV per ordinary share \* 49.30p 52.62p(6.31%) Share price (bid) 1 51.20p 54.80p(6.57%) Revenue and Dividends 30 June 202230 June 2021% change Revenue earnings per ordinary share \*\* 4.16p 4.18p(0.48%) Annual dividends per ordinary share \*\* 4.48p 4.47p0.22% Dividend cover \*\* 0.93x 0.94x(1.06%) Revenue reserve per ordinary share (after recognition of annual dividends) \*\* 3.26p 3.78p Dividend yield \*\* 8.75% 8.16% Premium \*\* 3.86% 4.14% Gearing \*\* 12.35% 9.21% Ongoing charges ratio \*\* 1.19% 1.25% Dividend History Ratexd dateRecord datePayment date First interim 20221.00p28 October 202129 October 202130 November 2021 Second interim 20221.00p27 January 202228 January 202225 February 2022 Third interim 20221.00p28 April 202229 April 202227 May 2022 Fourth interim 20221.48p28 July 202229 July 202226 August 2022 Annual dividend per ordinary share4.48p First interim 20211.00p22 October 202023 October 202030 November 2020 Second interim 20211.00p28 January 202129 January 202126 February 2021 Third interim 20211.00p29 April 202130 April 202128 May 2021 Fourth interim 20211.47p29 July 202130 July 202131 August 2021 Annual dividend per ordinary share4.47p 1 Source: Bloomberg \* The definition of the terms used can be found in the glossary on page 55. \*\* A description of the Alternative Performance Measures used above and information on how they are calculated can be found on pages 56 to 58. ![]() 3 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Statement from the Chair Strategic Report #### Statement from the Chair Highlights • Net asset value total return of 2.04% • Ordinary share price total return of 1.21% • Dividend yield of 8.75%, based on dividends at an annualised rate of 4.48 pence and a share price of 51.20 pence as at 30 June 2022 • Ordinary share price trading at a premium of 3.86% as at 30 June 2022 • £17.2m of equity raised during the year to 30 June 2022 Investment and Share Price Performance When I last wrote to Shareholders in February of this year, I reported on steady progress for the Company in terms of NAV and share price but noted there were worrying signs of increasing inflation and to mitigate this effect, central banks had begun to increase interest rates. The second half of the Company’s financial year has indeed been much more difficult as the terrible invasion of Ukraine by Russia has unfolded. Markets have been rattled by this situation and the rising energy costs which followed. However, the full year performance numbers show that the net asset value of the Company managed a small positive total return of 2.04% and 1.21% from the total share price return. The premium stood at 3.86% as at 30 June 2022, close to the previous year-end figure of 4.14%. The economic and geopolitical backdrop to your Company’s financial year, particularly the second half, has been exceptionally difficult. The ongoing COVID-19 pandemic is still causing issues across the world, notably with supply chains, to which rising inflation and interest rates and the geopolitical events in the Ukraine have been added. In terms of direct impact, the Company experienced a 3.1% portfolio loss following the write-down of Raven Property Group Ltd and Raven Russia 12% 09-31/12/2059, investments connected to Russia. Your Investment Manager, Ian (“Franco”) Francis, has many years of experience working in volatile markets utilising his underlying philosophy and stock selection to construct a diverse portfolio and this has been put togood use in the current environment. In my opinion, your Company’s portfolio results this year against this backdrop of negative news are commendable and come on the back of the net asset value total return of over 21% last year. The Investment Manager’s review on page 5 provides more details. Earnings and Dividends The Company’s revenue earnings per ordinary share were 4.16 pence for the financial year, 0.5% lower than the 4.18 pence earned last year. Earnings were impacted by the passing of coupons from Raven Property, as detailed above. In my report last year, I noted that the Board was monitoring the potential reduction in investment opportunities available to the Company because of declining yields. This trend looks to be reversing because of recent rises in interest rates from central Governments which means that the Investment Manager is finding a greater range of suitable securities to invest in. This bodes well for future earnings. The Company declared three interim dividends of 1.00 pence in respect of the period and one interim dividend of 1.48 pence since the year end. The aggregate payment of 4.48 pence per ordinary share represents a 0.22% increase on the 4.47 pence paid last year. The Board recognises the importance of the relatively high dividend to Shareholders and as flagged in previous reports, decided to utilise 0.32 pence per ordinary share of our 3.78 pence per ordinary share revenue reserves to cover the shortfall of earnings. The Board also decided to increase this year’s dividend, albeit marginally, to maintain the Company’s record of annual increases which has been unbroken since 2007. Looking forward, the Board expects to pay similar dividends in the current financial year to last, possibly drawing modestly on our reserves but anticipating some increase in earnings per ordinary share. As I wrote in last year’s report, the Board believes that this policy is supported by our Shareholders whom we consult regularly and we envisage continuing in this way in the near future, utilising one of the advantages of being a closed-ended fund. Gearing In December 2021, the Company replaced its existing loan facility with Scotiabank with a two year £45m facility at a current all-in rate of 1.45% plus a daily non-cumulative RFR rate with the same bank. Of this facility, £33m was drawn down at 30June 2022 and the Company had an effective gearing rate of 12.35%. As I have shared in previous reports, the Board believes that a modest but meaningful amount of gearing (another notable advantage of closed-ended funds compared to open-ended) is desirable and expects to maintain approximately this level of gearing during the next financial year. Share Issuance For most of the year to 30June 2022, the market attached a premium rating to your Company’s shares, allowing us to issue new shares in agradual manner and only when your Investment Manager was confident he could invest the additional funds favourably. £17.2m was raised from new and existing Shareholders during the review period, with 31.6m ordinary shares issued from the block listing facility. As well as a modest increase in net asset value from any issue of shares, the Board believes that over time existing Shareholders will benefit from lower ongoing charges and greater liquidity in the Company’s shares, all other things being equal. Environmental, Social and Governance (“ESG”) Statement The Board’s intention is to invest responsibly and to consider the Company’s broader impact on society and the environment. We believe the integration of ESG factors in the investment process is consistent with delivering sustainable attractive returns for Shareholders through deeper, more informed investment decisions. The Board has reviewed and agreed the ESG approach adopted by the Company and a summary of this is set out on pages 25 to 27. ![]() 4 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Statement from the Chair #### Statement from the Chair Notice of Annual General Meeting The notice of the Annual General Meeting to be held at 11.00 a.m. at IFC1, The Esplanade, St. Helier, Jersey, JE1 4BP on 1 December 2022, including the proposed resolutions, can be found on page 59. The Board considers that the passing of the resolutions to be proposed at the Annual General Meeting is in the best interests of the Company and its Shareholders as a whole and ismost likely to promote the success of the Company for the benefit of the Shareholders as a whole. The Board unanimously recommends that all Shareholders vote in favour of these resolutions. Outlook The environment is particularly uncertain at present and unlikely to become less so in the immediate future. We can be pretty sure we will see further interest rate rises but how this translates into the inflation trajectory and impact on economic growth is not clear. However, I believe that your Company’s portfolio has the attributes to weather the current storm. I have written before that the short remaining life of the majority of our fixed interest investments gives us some protection from rising yields and I expect that the rigorous credit analysis carried out by the team of your Investment Manager on the bond issuers reduces our default risk. Finally, the portfolio is well diversified including some exposure to currencies other than sterling and small but significant holdings in equities. All these factors add up to a robust portfolio and overall, I believe we are in good shape to continue delivering attractive returns to our shareholders. Caroline Hitch Chair 15 September 2022 ![]() 5 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Investment Manager’s Review Strategic Report #### Investment Manager’s Review Introduction After a quiet six-month period to the end of December 2021, the second half of our financial year has seen major political and economic upheavals. As the restrictions from the latest COVID-19 Omicron variant began to recede, markets began to focus more on inflation concerns and what central Governments could do to rein in rampant inflation levels. Then came the dreadful Russian invasion of Ukraine in February 2022 which brought the spectre of an all-out war to Europe and caused commodities prices, particularly in energy, to increase substantially and exacerbate the worries over inflation. Equity and Bond markets in the first six months of 2022 have fallen sharply as investors have become concerned about inflation and the potential for economic recessions. The Company’s portfolio has been affected by a Russia connected investment of which further details are provided below; nevertheless, the diverse nature of our portfolio holdings has meant that the overall net asset value total return for the 12 months to 30 June 2022 is a positive one at a modest 2.04%. Market and economic review The first half of our financial year saw economists and market commentators begin to realise that the spectre of inflation was more permanent than they had previously thought. At the end of June 2021, the UK CPI reading was an annual increase of 2.4%; by the end of December 2021 this had reached 5.4% and at our year-end in June 2022 consumer inflation was a massive 9.1%. A similar pattern emerged in the US and Europe. Up until the start of December 2021 equity stock markets seemed to shrug off worries over inflation and COVID-19 restrictions and were generally positive with major indices at near all-time highs in many markets. Markets started to come off their highs late in 2021 and fell sharply in January 2022 as economies stalled as supply chains were under pressure from rising inflation and ongoing COVID-19 restrictions. As we started February, concerns were raised about the developing mobilisation of a considerable Russian force on the border of Ukraine. Despite warnings from western governments, on 24 February 2022 we saw the terrible full-on attack on various areas of Ukraine, from which point western sanctions have been massively increased. The continuing Russian invasion of Ukraine has increased the pressures on supply chains and inflated prices for oil, gas, and many hard and soft commodities. The net effect is the slowing of economic growth and post-pandemic recovery globally. Government largesse is constrained as the concerted stimulus to protect economies during the early COVID-19 era is largely at an end. Generally, the major tool available to central banks to curb inflation is interest rates and we have started to see a wave of interest rate rises around the world. Markets have fallen sharply in 2022 as investors worry about inflation and slowing growth with the spectre of “stagflation” becoming apparent. In the UK, the FTSE All-Share Index fell by 6.6% over the six months to the end of June 2022 as the high weighting to commodity stocks help mitigate the fall whereas the Euro Stoxx 600 fell by 16% and the S&P 500 fell by 20.6% over the same period. High yield bond markets were also weak falling by around 14%. Portfolio Review We have continued to maintain a diversified portfolio across a range of sectors and during the year we have increased the proportion of the portfolio held in non-sterling currencies to help protect against sterling weakness. The Company’s portfolio was negatively affected by the Ukraine conflict as we held investments in a Guernsey domiciled company called Raven Property Group which has direct exposure to Russia. Its main business is operating warehouses for Western companies in St. Petersburg and Moscow. At the end of January, we had 2.9% of the Company’s portfolio in the Raven Property 12% preference shares and 0.2% in its ordinary shares. Following the invasion, Raven suspended its shares and advised it was unlikely to be able to continue maintaining normal operations. It has since been delisted from the stock exchange, coupon payments on the preference shares have ceased and the price of both securities has been written down to zero in the Company’s portfolio. We are monitoring the position and will wait to see what happens to Raven Property when hopefully the situation stabilises. Three of the new holdings in the top ten over the year are positions that we have held for some time and have made their way into the top ten more recently, namely REA Finance, Stonegate Pub Group and Diversified Energy. There are two other new holdings in the top ten; Mangrove Luxco 7.775% 2025 which is a holding company for a German heat exchange manufacturer and Hawk Debtco 10.5% 2024 which is a financing company for an Aberdeen based energy services firm. The revenue account has seen earnings per ordinary share of 4.16p come in below our total dividend of 4.48p for the year. In past years we have been able to put significant sums into the revenue reserves and we have again modestly utilised these this year to ensure that this dividend is paid to shareholders. In my regular discussions with shareholders the revenue and dividends are topics of crucial importance and the ability of any portfolio company to pay its coupon or expected dividend is one of the major indicators we follow. Outlook The background for the short to medium term is hardly a positive one. There is the prospect of stagflation in the UK, increasing interest rates, double digit inflation, increasing unrest from major unions in the UK promising an autumn and winter of discontent. We have a new prime Minister in the UK and she has an onerous task ahead of her in trying to change existing policies in order to tackle the cost-of-living crisis. There are also a host of external factors out of the control of the UK government such as the ongoing war in Ukraine and continuing lockdowns in China. For the Company, whilst all the above put stresses and strains on the markets, we have a diverse portfolio across sectors and currencies and imperfect markets should create opportunities for prudent investment. We have seen these types of market before and will continue to work hard for you. Ian “Franco” Francis New City Investment Managers 15 September 2022 ![]() 6 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Classification of Investment Portfolio #### Classification of Investment Portfolio As at 30 June By Currency 2022 Total investments % 2021 Total investments % Sterling 62 68 US Dollar 23 22 Euro 12 9 Swedish Krona 2 – Norwegian Krone 1 1 Total investments100 100 By Asset Class 2022 Total investments % 2021 Total investments % Bonds 81 84 Equity shares 19 15 Convertible Bonds – 1 Total investments100 100 Classification of Investment Portfolio by Sector As at 30 June 2022 Total investments % 2021 Total investments % Financials36.9 45.0 Energy21.8 16.5 Industrials10.8 10.4 Consumer Discretionary10.1 6.0 Consumer Staples9.0 8.2 Information Technology4.9 2.9 Real Estate4.3 6.9 Materials2.2 4.1 Total Investments100.0 100.0 ![]() 7 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Investment Portfolio Strategic Report #### Investment Portfolio As at 30 June 2022 CompanySector Valuation £’000 Total Investments % Galaxy Finco Ltd 9.25% 31/07/2027Financials12,7744.9 Shawbrook Group 31/12/2059 FRNFinancials12,4094.7 Virgin Money FRN PERPFinancials12,1884.6 Aggregated Micro 8% 17/10/2036Energy10,9004.1 Co-Operative Fin 25/04/2029 FRNFinancials8,6163.3 REA Finance 8.75% 31/08/2025Consumer Staples8,5923.3 Stonegate Pub 8.25% 31/07/2025Consumer Discretionary8,3083.2 Mangrove Luxco Ltd 7.775% 19-09/10/2025Financials7,6372.9 Hawk Debtco Ltd 10.5% 22/12/2024Industrials7,5072.8 Diversified Energy Co PlcEnergy7,4902.8 Top ten investments96,42136.6 Albion Financing 8.75% 21-15/04/2027Industrials7,2212.7 Boparan Finance 7.625% 30/11/2025Consumer Staples7,1922.7 Arrow Bidco LLC 9.5% 15/03/2024Consumer Discretionary6,8582.6 American Tanker 7.75% 02/07/2025Energy6,4892.5 Euronav NVEnergy6,0262.3 Garfunkelux Hold 7.75% 20-01/11/2025Financials5,7082.2 VPC Specialty Lending InvestFinancials5,0041.9 Just Group Plc 31/12/2059 FRNFinancials4,5831.7 Inspired Enterta 7.875% 21-01/06/2026Information Technology4,5371.7 Azerion Holdings 7.25% 28/04/2024Information Technology4,3441.7 Top twenty investments154,38358.6 M&G PlcFinancials4,2811.7 REA Holdings Plc PREFConsumer Staples4,2151.6 Ithaca Energy N 9% 21-15/07/2026Energy4,2081.6 Matalan Finance 9.5% 18-31/01/2024Consumer Discretionary3,8451.5 Enquest Plc 7% 15/10/2023Energy3,6891.4 Shamaran 12% 05/07/2023Energy3,5501.3 Phoenix Group Holdings PlcFinancials3,5421.3 Euronav Lux 6.25% 21-14/09/2026Energy3,5081.3 Barclays Plc 29/12/2049 FRNFinancials3,4811.3 Deutsche Bank AG 30/05/2049 FRNFinancials3,3701.3 Top thirty investments192,07272.9 Stonegrate Pub 8% 20-13/07/2025Consumer Discretionary3,3111.2 TVL Finance 9% 20-15/01/2025Consumer Discretionary3,2281.2 Welltec A/S 9.5% 01/12/2022Energy3,2001.2 Bombardier Inc 7.5% 15/03/2025Industrials3,1751.2 Channel Island Property FundReal Estate3,0601.2 Coburn Resources 12% 20/03/2026Materials3,0411.2 RM Secured Direct Lending PlcFinancials2,8641.1 Siccar Point Energy 9% 04/03/2026Energy2,7831.1 Petrotal Corp 12% 16/02/2024Energy2,7741.0 First Quantum 7.5% 01/04/2025Materials2,6401.0 Top forty investments222,14884.3 Summer BC Holdco 9.25% 19-31/10/2027Industrials2,3770.9 HDL Debenture 10.375% 93-31/07/2023Real Estate2,2700.9 Tufton Oceanic Assets LtdFinancials2,2610.9 Doric Nimrod Air Three LtdIndustrials2,1770.8 Oaknorth Bank 01/06/2028 FRNFinancials2,0200.8 Lloyds Banking 29/12/2049 FRNFinancials1,9480.7 ![]() 8 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Investment Portfolio CompanySector Valuation £’000 Total Investments % AEW UK REIT PlcReal Estate1,9290.7 Gaming Innovation 11/06/2024 FRNInformation Technology1,8930.7 Independent Oil 20/09/2024 FRNEnergy1,7520.7 Lloyds Banking 29/12/2049 FRNFinancials1,7460.7 Top fifty investments242,52192.1 NewRiver REIT plcReal Estate1,6420.6 Greenfood AB 21-04/11/2025 FRNConsumer Staples1,6390.6 Kent Global Plc 10% 28/06/2026Energy1,4400.5 Palace Capital PlcReal Estate1,2600.5 Navig Topco Holding 12% 03/05/2023Industrials1,2540.5 Regional REIT LtdReal Estate1,0720.4 Nor5ke Viking 21-03/05/2024 FRNInformation Technology1,0370.4 House Of HR 7.5% 15/01/2027Industrials1,0020.4 Harbour Energy PlcEnergy8680.3 Navigator Holdings 8% 10/09/2025Energy8180.3 Top sixty investments254,55396.6 REA Holdings Plc 7.5% 30/06/2026Consumer Staples7640.3 Casino Guichard 31/01/2049 FRNConsumer Staples7570.3 REA Trading 9.5% 21-30/06/2024Consumer Discretionary6500.3 Shamaran 12% 21-30/07/2025Energy6310.3 Croma Security Solutions GroupInformation Technology6250.2 Marex Group 22-30/12/2170 FRNFinancials6190.2 Hoist Finance AB 31/12/2060 FRNFinancials5730.2 West Bromwich BS 11% 18-12/04/2038Financials5240.2 Cabonline GR 22-19/04/2026 FRNInformation Technology4820.2 R.E.A. Holdings Plc CW 15/07/2025Consumer Staples4530.2 Top seventy investments260,63199.0 Other investments (36)2,7621.0 Total investments263,393100.0 Notes: CV – Convertible Bond FRN – Floating Rate Note PERP – Perpetual PREF – Preference Shares REIT – Real Estate Investment Trust ![]() 9 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Ten Largest Holdings Strategic Report #### Ten Largest Holdings Valuation 30 June 2021 £’000 Purchases £’000 Sales £’000 Revaluation gain/(loss) £’000 Valuation 30 June 2022 £’000 Galaxy Finco Ltd 9.25% 31/07/202712,1331,905–(1,264)12,774 A specialist provider of warranties for consumer electric products. Shawbrook Group 7.875% FRN PERP10,7932,074–(458)12,409 A British multinational banking and financial services company. Virgin Money FRN PERP–12,895–(707)12,188 A British banking company concentrating on UK Retail and SME regional banking services. Aggregated Micro 8% 17/10/20368,8382,281–(219)10,900 A British company using small scale, established technologies to convert wood and waste into energy in the form of heat and electricity. Co-Operative Finance 25/04/2029 FRN8,4661,058–(908)8,616 A retail and commercial bank in the United Kingdom. REA Finance 8.75% 15-31/08/20256,3181,881–3938,592 Cultivator of oil palms in the Indonesian province of East Kalimantan and producer of crude palm oil and palm products from fruit harvested from oil palms. Stonegate Pub 8.25% 20-31/07/20256,2713,208–(1,171)8,308 Operator of various formats ranging from high-street pubs and traditional country inns to local community pubs, student pubs, and late-night bars and venues in the United Kingdom. Mangrove Luxco 7.775% 19-09/10/2025–8,142–(505)7,637 Holding company for a German heat exchange manufacturer. Hawk Debtco Ltd 10.5% 20-22/12/20243,4943,539–4747,507 A financing company for an Aberdeen-based energy services firm. Diversified Energy Co Plc3,2053,861–4247,490 Energy Company focusing on US natural gas. 59,51840,844–(3,941)96,421 ![]() 10 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Principal Risks and Uncertainties and Risk Mitigation #### Principal Risks and Uncertainties and Risk Mitigation Risks are inherent in the investment process, but it is important that their nature and magnitude are understood so that risks can be identified and either avoided or controlled. The Board has established a detailed framework to manage the key risks that the business is exposed to, with associated policies and processes devised to mitigate or control those risks. Principal risks and mitigations are discussed regularly at Board and Audit Committee meetings. At the meeting held in June 2022 the Board discussed risk appetite and considered whether principal risks were increasing, decreasing or static during the course of the year including any ongoing impact of COVID-19 and the conflict in Ukraine. The Board also considered any new or emerging risks. The principal risks and mitigating factors faced by the Company are set out below. RiskDescriptionControls Dividend and earnings risk  The earnings that underpin the amount of dividends declared and future dividend growth are generated by the Company’s underlying portfolio. One or more of the following factors could adversely affect the Company’s earnings and, thereby, its ability to declare a dividend: • The persistence of lower interest rates. • A contraction of available investment opportunities suitable for the Company, given its investment objective and its policy. • The persistence of adverse market conditions or government intervention during a macro-economic crisis resulting in cuts to dividend income. • Adverse changes to the tax treatments applicable to the Company’s stream of investment and dividend income. Although the COVID-19 crisis has abated, at least for now, there is still heightened economic uncertainty that could impact the value of our Company’s earnings. The Board has engaged with CQS (UK) LLP, the Investment Manager, to manage the Company’s portfolio and therefore depends upon the Investment Manager to construct an appropriate portfolio that will produce income allowing the Company to meet its dividend target. The Board monitors the implementation of the investment strategy, reviewing the performance of the Investment Manager on an ongoing basis and receiving a formal presentation from the Investment Manager on a quarterly basis. The Board receives and reviews detailed income forecasts prepared by the Investment Manager and Administrator ateach Board meeting and when the quarterly dividends are declared. The Company holds revenue reserves, as at 30June 2022, of £15,595,000, which could be used for the maintenance of the Company’s dividend target in adverse market conditions. Market risk leading to a loss of share value  The Company’s assets consist principally of listed fixed interest securities and equities. Its greatest risks are consequently market related, with exposure to movements in the prices of the Company’s investments and the loss that the Company might suffer through holding investments in the face of negative market movements. A downturn in capital markets could lead to a loss in value of the Company’s shares, eroding the premium and causing the shares to trade at a discount. This risk is heightened by the impact of Brexit and ongoing COVID-19, supply chain issues, rising costs particularly energy costs, the conflict in Ukraine and Russian sanctions. The Board relies upon the research capabilities of the Investment Manager and the people it employs that can use their expertise to build a portfolio, utilising diversification, to mitigate market risk to the extent possible. The Board monitors the implementation of the investment strategy and reviews the performance of the Investment Manager on an ongoing basis and receives a formal presentation from the Investment Manager on a quarterly basis. At this time, the Board reviews the performance of the Company’s investments, including both realised and unrealised gains and losses. The Company has generally traded at a premium to NAV. Any reduction in the premium or move to a discount is discussed with the Investment Manager and Brokers, with a view to taking action if considered appropriate. The Investment Manager and Broker hold regular shareholder meetings through which investor sentiment can be gauged. Key person risk  Performance of the Company may be negatively affected by a change in the fund management team within the Investment Manager. Whilst the lead fund manager is responsible for day to day portfolio management, an Investment Committee at the Investment Manager also decides key stock selection. The Board monitors and reviews the performance of the Investment Manager on an ongoing basis and receives a formal presentation from the Investment Manager on a quarterly basis. The Management Engagement Committee of the Company formally reviews the performance of the Investment Manager annually. ![]() 11 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Principal Risks and Uncertainties and Risk Mitigation Strategic Report RiskDescriptionControls Gearing risk  A fall in the value of the underlying investments could adversely affect the Company’s level of gearing and exacerbate the decline in value. It could also result in a breach of loan covenants. Gearing levels and compliance with loan covenants are monitored by the Administrator and the Investment Manager on a monthly basis. The Board reviews compliance with the gearing levels and loan covenant compliance at regular Board meetings. The Board sets the gearing limits. Gearing will not exceed 25% of Shareholders’ funds at the time of borrowing. Geopolitical risk  The Russian invasion of Ukraine has negatively impacted supply chains and increased prices, critically in energy and food, and inflation is increasing across Europe. Ongoing tension caused by the conflict has heightened market uncertainty and increased investment risk. The Investment Manager has reviewed the portfolio to understand the susceptibility of investments to market disruption and the results of this review has been discussed with the Board. The robustness of corporate business models during this period of heightened uncertainty is considered both in relation to the current portfolio and as part of investment decision-making. Operational risk  The Company relies upon the services provided by thirdparties and is reliant on the control systems of the Investment Manager and the Company’s other service providers. Failures at these third parties could adversely impact the security and/or maintenance of, inter alia, the Company’s assets, dealing and settlement procedures, and accounting records depend on the effective operation of these systems. The operating effectiveness of third party service providers is regularly tested and monitored and reported on at each Board meeting. The Audit and Risk Committee receives an ISAE 3402 report (report on the description of controls placed in operation, their design and operating effectiveness) on Fund Administration. The Investment Manager delivers a risk based internal audit plan which covers different areas of its operations that are subject to internal audit, including front, middle and infrastructure audits. Any areas of concern relevant tothe Company are discussed with the Audit and Risk Committee when it meets. Regulatory risk  The breach of existing regulatory rules, or failing to adopt changes in regulatory rules in a timely manner, which could lead to a suspension of the Company’s stock exchange listing or financial penalties. The Company Secretary monitors the Company’s compliance with the Listing Rules of the United Kingdom (UK) Listing Authority and the Company’s Compliance Officer with the regulatory rules applicable to Jersey funds. Compliance with the Listing Rules is reviewed and the Board receives a quarterly report from the Company’s Compliance Officer. The Administrator is regulated by the Jersey Financial Services Commission.  Increase in risk for the year ended 30 June 2022 in comparison to previous year.  Risk remains static from previous reporting period.  Decrease in risk for the year ended 30 June 2022 in comparison to previous year. Emerging risks During Board discussions on principal risks and uncertainties, the Board considered any risks that were not an immediate threat but could arise in the longer term andhave significantimpact on the abilityof the Company to continue to meet its objectives. Areas discussed include longer term impacts ofclimate changeonthe Company’s portfolio and returns, Geopolitical risk due to the conflict in Ukraine and any prolongedeconomic impact of COVID-19 on different sectors of the economy. The Board regularly discusses these withthe InvestmentManager, and receives feedback based on the Investment Manager’s research, and discussions with Shareholders and Brokers. The Investment Manager’s ESG policy was reviewed and critiqued during the year, and the Board willcontinue to assess these emerging risks on a regular basis and continue to monitor and assess the requirements of impending mandatory regulations for TCFD and EU SFDR. ![]() 12 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Stakeholders – Section 172 Statement and Principal Decisions #### Stakeholders – Section 172 Statement and Principal Decisions Through adopting the AIC Code, the Board acknowledges its duty to comply with section 172 of the UK Companies Act 2006 to act in a way that promotes the success of the Company for the benefit of its members asawhole,havingregardto(amongstotherthings): a)consequences of any decision in the long-term; b)the interests of the Company’s employees; c)need to foster business relationships with suppliers, customers and others; d)impact on community and environment; e)maintaining reputation; and f)act fairly as between members of the Company. Information on how the Board has engaged with its stakeholders and promoted the success of the Company, through the decisions it has taken during the year, whilst having regard to the above, is outlined below. The Company has no employees. StakeholderHow the Board engages Shareholders Shareholders provide the capital to allow the Company to be in existence and to pursue its purpose and strategy. Accordingly, Shareholder support is essential to the continued survival and success of the Company. The Board recognises that it is important to maintain appropriate contact with major Shareholders to understand their issues and concerns. The Board engages with its Shareholders by: 1)Publishing daily NAV announcements 2)Publishing monthly fact sheets 3)Publishing half yearly and annual reports and accounts 4)Making themselves available to meet major Shareholders as requested 5)Obtaining Shareholder feedback received via the Investment Manager and Corporate Broker 6)Making themselves available to questions from Shareholders at the Annual General Meeting Service providers As a Company with no employees the Board is reliant on third party service providers to help the Company operate in a compliant and efficient manner. The Board engages with its service providers by: 1)Receiving detailed written and verbal reports at board meetings 2)Regular communication with representatives via telephone and email to discuss ad hoc matters 3)Undertaking an annual review via the Management Engagement Committee The wider community and the environment As a responsible corporate citizen the Company recognises that its operations have an environmental footprint and impact on wider society. The Board fully supports the growing importance placed on ESG factors when asking the Company’s Investment Manager to deliver against the Company’s objectives. The Board has requested that the Investment Manager take into account the broader social, ethical and environmental issues of companies within the Company’s portfolio, acknowledging that companies failing to manage these issues adequately run a long term risk to the sustainability of their businesses. The Investment Manager has stated that they view ESG factors as a key driver of financing costs, valuations and performance, while also being capable of acting as a lever to shape and influence the world for generations to come. The integration and assessment of ESG factors is a crucial part of this commitment, and a key factor in the Investment Manager’s decision-making. Through embedding ESG into its investment process the Investment Manager seeks to enhance its ability to identify value, investment opportunities and, critically, to generate the best possible returns for its stakeholders. The Investment Manager is a signatory to the United Nations PRI, fully supporting all Principles for Responsible Investment. Principal decision Review of dividend policy: The Board recognises the importance Shareholders place on the Company’s dividend policy and is cognisant of the need to ensure the viability of the dividend. It was agreed it was in the best interests of the Company and Shareholders to marginally increase the dividend for the year under review. ![]() 13 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Strategic Review Strategic Report #### Strategic Review Introduction This review is part of a Strategic Report being presented by the Company and is designed to provide information primarily about the Company’s business and results for the year ended 30 June 2022. It should be read in conjunction with the Statement from the Chair on pages 3 to 4 and the Investment Manager’s Review on page5, which give a detailed review of the investment activities for the year and look to the future. Principal Activity and Status The Company is a closed-ended investment company and was incorporated with limited liability in Jersey under the Companies (Jersey) Law 1991 on 17 January 2007, with registered number 95691. In addition, the Company constitutes and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988 (“the Law”). The Company’s ordinary shares are listed on the Official List of the UK Listing Authority and admitted to trading on the Main Market of the London Stock Exchange. Purpose and Strategy The Company’s purpose is stated on the inside front cover of this report. Investment Policy The Company invests predominantly in fixed income securities, including, but not limited to, preference shares, loan stocks, corporate bonds (convertible and/or redeemable) and government stocks. The Company also invests in equities and other income yielding securities. Exposure to higher yielding securities may also be obtained by investing in other closed-ended investment companies and open-ended collective investment schemes. There are no defined limits on securities and accordingly the Company may invest up to 100% of total assets in any particular type of security. There are no defined limits on countries, size or sectors, therefore the Company may invest in companies regardless of country, size or sector and, accordingly, the Company’s portfolio is constructed without reference to the composition of any stock market index or benchmark. The Company may, but is not obliged to, invest in derivatives, financial instruments, money market instruments and currencies for the purpose of efficient portfolio management. The Company may acquire securities that are unlisted or unquoted at the time of investment but which are about to be convertible, at the option of the Company, into securities which are listed or traded on a stock exchange. The Company may continue to hold securities that cease to be listed or traded if the Investment Manager considers this appropriate. The Board has established a maximum investment limit in this regard of 10% (calculated at the time of any relevant investment) of the Company’s total assets. In addition, the Company may invest up to 10% (calculated at the time of any relevant investment) of its total assets in other securities that are neither listed nor traded at the time of investment. The Company will not invest more than 10% (calculated at the time of any relevant investment) of its total assets in other collective investment undertakings (open-ended or closed-ended). The Company may not invest more than 7.5% of its total investments in the same investee company and that this be limited to no more than 3 investee companies with a maximum investment limit of 5% thereafter. In addition, there is a maximum investment limit whereby, at the time of investment, the Company may not invest more than 5% of its total investments in any one security. The Company uses gearing and the Board has set a current limit that gearing will not exceed 25% of Shareholders’ funds at the time of borrowing. This limit is reviewed from time to time by the Board. The Investment Manager expects that the Company’s assets will normally be fully invested. However, during periods in which changes in economic circumstances, market conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its positions in cash, money market instruments and derivative instruments in order to seek protection from stock market falls or volatility. Investment Approach Investments are typically made in securities which the Investment Manager has identified as undervalued by the market and which it believes will generate above average income returns relative to their risk, thereby also generating the scope for capital appreciation. In particular, the Investment Manager seeks to generate capital growth by exploiting the opportunities presented by the fluctuating yield base of the market and from redemptions, conversions, reconstructions and take-overs. Performance Measurement and Key Performance Indicators (KPIs) The Board uses a number of performance measures to monitor and assess the Company’s success in meeting its objectives and to measure its progress and performance. The key performance indicators are as follows: • Dividend Yield and Dividend Cover It is intended that the Company will pay four quarterly dividends each year and accordingly the Board reviews the Company’s dividend yield and dividend cover on a quarterly basis. For the year ended 30June 2022, the Company’s dividend yield was 8.75% (30June 2021: 8.16%) based upon a share price of 51.20 pence (bid price) as at 30June 2022 (30June 2021: 54.80 pence) and its dividend cover was 0.93x (30June 2021: 0.94x). • Revenue Earnings and Dividends per ordinary share The Company has opted to follow the AIC’s Statement of RecommendedPractice: Financial Statements of Investment Trusts and Venture Capital Trusts (the “AIC SORP”) and, in accordance with the provisions of the AIC SORP, distinguishes its profits derived from revenue and capital items. The Company declares and pays its dividend out of only the revenue profits of the Company. The revenue earnings, whether generated this year or in previous years and held in revenue reserves, represent the total available funds that the Directors are able to make a dividend payment from. The Board reviews revenue forecasts on a quarterly basis in order to determine the quarterly dividend. In respect of the current financial year, the Company declared dividends of 4.48 pence per ordinary share out of revenue earnings per ordinary share of 4.16 pence per ordinary share. ![]() 14 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Strategic Report Strategic Review • Ongoing Charges The ongoing charges ratio represents the Company’s management feeand all other operating expenses incurred by the Company expressed as a percentage of the average Shareholders’ funds overtheyear.TheBoard regularly reviews the ongoing charges and monitors all Companyexpenses. The ongoingcharges ratio for the year ended 30June 2022 was 1.19% (2021: 1.25%). The Board measures the Company’s performance by reviewing the KPIs against their expectations of performance from their knowledge of the industry sector. These KPIs fall within the definition of ‘Alternative Performance Measures’ (APMs) under guidance issued by the European Securities and Markets Authority. Additional information explaining how these are calculated is set out in the Alternative Performance Measures section on pages 56 to 58. Going Concern The Company does not have a fixed winding-up date and, therefore, unless Shareholders vote to wind-up the Company, Shareholders will only be able to realise their investment through the secondary market. At each Annual General Meeting of the Company, Shareholders are given the opportunity to vote on an ordinary resolution to continue the Company as an investment company. If any such resolution is not passed, the Board will put forward proposals at an extraordinary general meeting to liquidate or otherwise reconstruct or reorganise the Company. Given the performance of the Company, input from the Company’s major Shareholders and its broker, the Board considers it likely that Shareholders will vote in favour of continuation at the forthcoming Annual General Meeting. The Company’s existing loan facility as detailed on page46 is due to expire on 17 December 2023 after which it is anticipated the Company will take out a new facility on comparable terms. After making enquiries of the Investment Manager, and having considered the Company’s investment objective, nature of the investment portfolio, loan facility, expenditure projections and impact that the Russia- Ukraine conflict has on the Company, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the Financial Statements, notwithstanding that the Company is subject to an annual continuation vote as described above. Viability Statement In accordance with the provisions of the AIC Code, the Directors have assessed the viability of the Company over a period longer than the 12 months required by the ‘Going Concern’ provision. The Board conducted this viability review for a period of three years. The Board continues to consider that this period reflects the long term objectives of the Company, being a Company with no fixed life, whilst taking into account the impact of uncertainties in the markets. Whilst the Directors do not expect there to be any significant changes to the current principal and emerging risks facing the Company, certain risks have increased due to the Russia-Ukraine conflict and global rise in inflation. Despite these increased risks, the Directors believe that the Company has sufficient controls in place to mitigate those risks. Furthermore, the Directors do not envisageanychange in strategy which would prevent the Company from operating overthe three year period. This is based on the assumption that there are no significant changes in market conditions or the tax and regulatory environment that could not reasonably have been foreseen. The Board also considers the annual continuation vote should not be a factor to affectthethreeyear period given the strong demand seen for the Company’s shares. In making this statement the Board: (i) considered the continuation vote to be proposed at the Annual General Meeting which the Board considers will be voted in favour of by Shareholders; and (ii) carried out a robust assessment of the principal and emerging risks facing the Company. These risks and their mitigations are set out on pages 10 to 11. The principal risks identified as most relevant to the assessment of the viability of the Company were those relating to potential under- performance of the portfolio and its effect on the ability topay dividends. When assessing these risks the Directors have considered the risks and uncertainties facing the Company in severe but reasonable scenarios, taking into account the controls in place and mitigating actions that could be taken. When considering the risk of under-performance, a series of stress tests was carried out including in particular the effects of any substantial future falls in investment value on the ability to re-pay and re-negotiate borrowings, potential breaches of loan covenants and the maintenance of dividend payments. The Board considered the Company’s portfolio and concluded that the diverse nature of investments held contributes to the stability and liquidity along with flexibility to be able to react positively to market and political forces beyond the Board’s control. The Board also considered the impact of potential regulatory changes and the control environment of significant third party providers, including the Investment Manager. The Scotiabank loan facility is due to expireon 17 December 2023. Itis anticipated a new facility on comparable terms will be negotiated priorto this date. Based on the Company’s processes for monitoring revenue and costs, with the use of frequent revenue forecasts, and the Investment Manager’s compliance with the investment objective and policies, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of approval of this Report. Social, Community, Human Rights, Employee Responsibilities and Environmental Policy The Directors recognise that their first duty is to act in the best financial interests of the Company’s Shareholders and to achieve good financial returns against acceptable levels of risk, in accordance with the objectives of the Company. In asking the Company’s Investment Manager to deliver against these objectives, they have also requested that the Investment Manager take into account the broader social, ethical and environmental issues of companies within the Company’s portfolio, acknowledging that companies failing to manage these issues adequately run a long term risk to the sustainability of their businesses. ![]() 15 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Strategic Review Strategic Report Greenhouse Gas Emissions The Board recognises its impact on the environment, including greenhouse gas emissions, through the underlying portfolio companies which it invests in. The Board requested that ESG factors be incorporated into the Company’s investment strategy and further details on ESG can be found on pages 25 to 27. Modern slavery The Company would not fall into the scope of the UK Modern Slavery Act 2015 (as the Company does not have any turnover derived from goods and services) if it was incorporated in the UK. Furthermore, as a closed-ended investment company, the Company has a non-complex structure, no employees and its supply chain is considered to be low risk given that suppliers are typically professional advisers based in either the Channel Islands or the UK. Based on these factors, the Board determined that it is not necessary for the Company to make a slavery and human trafficking statement. By Order of the Board Caroline Hitch Chair 15 September 2022 ![]() 16 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports Statement of Directors’ Responsibilities in respect of the Annual Report and Financial Statements Statement of Directors’ Responsibilities in respect of the #### Annual Report and Financial Statements The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and applicable law. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these Financial Statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant and reliable; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; • assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with Companies (Jersey) Law, 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. The Financial Statements are published on the www.ncim.co.uk website, which is a website maintained by the Company’s Investment Manager. Legislation in Jersey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. Responsibility statement of the Directors in respect of the annual financial report We confirm that to the best of our knowledge: • the Financial Statements, prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU, give a true and fair and balanced view of the assets, liabilities, financial position and profit or loss of the Company; and • the Strategic Report and Directors’ report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces. We consider the Annual Report and Financial Statements, taken asawhole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s position and performance, business model and strategy. On behalf of the Board Caroline Hitch Chair 15 September 2022 ![]() 17 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Board of Directors and Investment Manager Directors’ Report and Governance Reports #### Board of Directors and Investment Manager Caroline Hitch Independent Non-Executive Chair Appointed: March 2018 Skills: Caroline has extensive fund management skills including specialist fixed income portfolios. She has a deep understanding of investment risk and risk management both as it applies to individual assets and to overall portfolio construction. She developed her skills of investment trust board governance through many years of managing regulated funds, reporting to their boards and then becoming a board member (and now chair) herself. Experience: Caroline joined the board after working in the financial services industry since the early 1980s, mostly with the HSBC group. Her experience includes Head of Wealth Portfolio Management at HSBC Global Asset Management (UK) Ltd. with investment responsibility for their flagship multi asset retail funds. Prior roles included specialisation in institutional fixed income portfolio management. She has worked in London, Jersey, Monaco and Hong Kong. Committee membership: Audit and Risk Committee; ManagementEngagement Committee; Nomination Committee; Remuneration Committee Remuneration: £42,500 per annum Public company directorships: Schroder Asian Total Return Investment Company plc abrdn Equity Income Trust plc Shared Directorships with any other Fund Directors: None Duncan Baxter Senior Independent Non-Executive Director and Chairofthe Management Engagement Committee Appointed: July 2015 Skills: Duncan has a broad knowledge of the finance sector gained from holding senior leadership positions across a number of International Banks and Trust companies. Having also worked on investment company boards, some of which in the position of Chair, Duncan has had exposure to equity raises, discount management. Experience: Duncan is a retired senior banker with over 25 years’ experience of international banking, latterly as Managing Director of Swiss Bank Corporation/UBS in Jersey. Since leaving Swiss Bank/UBS in the late 1990s, Duncan has undertaken a number of consultancy projects for international banks, trust and investment management companies, plus acted on a number of investment company boards. He has experience of stewardship and investment in several investment companies over twenty years and in addition as a non-executive director of a number of operating public companies. Duncan is a Jersey resident. Committee membership: Audit & Risk Committee; ManagementEngagement Committee; Nomination Committee; Remuneration Committee Remuneration: £30,000 per annum Public company directorships: None Shared Directorships with any other Fund Directors: None Wendy Dorman Independent Non-Executive Director and Chair of the Audit and Risk Committee Appointed: March 2016 Skills: Wendy is a Chartered Accountant with skills in tax, audit and commercial mainly focused on the investment fund sector. Her extensive experience chairing audit committees of public listed entities gives her the requisite leadership skills in addition to those of accounting and governance. Experience: Wendy began her career in audit and assurance before specialising in taxation. She has 25 years’ experience in tax within the financial services industry. Wendy’s career encompassed time in practice and in industry, based initially in London and later in Jersey. She retired as partner in charge of the PwC Channel Islands tax practice inJune 2015. Wendy served as President of the Jersey Society of Chartered and Certified Accountants from 2008 to 2010 and as Chair of the Jersey branch of the Institute of Directors from 2014 to 2016. Wendy is a Jersey resident. Committee membership: Audit and Risk Committee; ManagementEngagement Committee; Nomination Committee; Remuneration Committee Remuneration: £36,500 per annum Public company directorships: 3i Infrastructure plc Jersey Electricity Plc Shared Directorships with any other Fund Directors: None ![]() 18 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports Board of Directors and Investment Manager John Newlands Independent Non-Executive Director and Chair of the Remuneration Committee Appointed: October 2017 Skills: John’s 20-plus years career as an investment company analyst, with a particular focus upon the UK wealth management sector, gives the Board an important insight into the investment requirements and processes of the types of investor, whether private or institutional, most likely to consider the Company for inclusion in their portfolios. He is also skilled in the assessment of potential peer group funds, both in terms of relative performance and other quantitative data and in the increasing focus upon governance and stewardship matters as pre- requisites for investment. Experience: John joined the Board shortly after working in the managed funds sector since the mid- 1990s, the last ten years being spent as Head of Investment Companies Research at Brewin Dolphin Limited. He was a member of the Association of Investment Companies Statistics’ Committee from 2000 to 2017 and is a member of the Citywire Investment Trust Awards Panel. He has an MBA from Edinburgh University Business School and is aChartered Electrical Engineer dating to his prior career as a Weapon Engineer Officer in the UK Royal Navy. John is a member of the Investment Committee of Durham Cathedral. He has written four books about financial history, the most recent charting the history of Dunedin Income Growth Investment Trust. Committee membership: Audit and Risk Committee; Management Engagement Committee; Nomination Committee; Remuneration Committee Remuneration: £30,000 per annum Public company directorships: TOC Property Backed Lending Trust plc, Gabelli Merger Plus Trust plc Shared Directorships with any other Fund Directors: None Ian Cadby Independent Non-Executive Director and Chair of the Nomination Committee Appointed: January 2017 Skills: Ian is a Chartered Fellow of the Chartered Institute for Securities & Investment. His extensive governance experience on public and private company boards as well as a long career as a regulated person (CF3, CF2 and CF1 controlled functions) in the asset management industry gives him a broad and relevant skill set for the Board. Experience: Ian has over 30 years’ experience within the financial services industry in London, Hong Kong and Jersey with a strong career emphasis on equity and equity derivative trading,risk management, corporate governance and board strategy. Ian is a Jersey resident. Committee membership: Audit and Risk Committee; Management Engagement Committee; Nomination Committee; Remuneration Committee Remuneration: £30,000 per annum Public company directorships: abrdn Asian Income Fund Limited Shared Directorships with any other Fund Directors: None ![]() 19 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Board of Directors and Investment Manager Directors’ Report and Governance Reports Investment Manager The Company appointed New City Investment Managers (“NCIM”) as its Investment Manager with effect from launch. On 1October 2007, NCIM joined the CQS Group, a global diversified asset manager running multiple strategies with, as at 30June 2022, US$17.7 billion assets under management (including mandates with discretionary management, sub-investment discretionary management, investment advice, collateral management and intermediation). In 2014, NCIM’s rights and obligations under the Investment Management Agreement between the Company and NCIM were then transferred to CQS Cayman Limited Partnership (“CQS”). Consequently, CQS became the Company’s Investment Manager but, with the agreement of the Board, delegated that function to CQS (UK) LLP Trading Limited as NCIM. With effect from 18 September 2019 the Company entered into a new Investment Management Agreement to appoint CQS (UK) LLP as its Investment Manager. The previous Investment Management Agreement with CQS was terminated. Ian Francis has day to day responsibility for managing the Company’s portfolio and is supported by the CQS team. He joined the NCIM team in 2007. He has over 40 years’ investment experience, primarily in the fixed interest and convertible spheres, and his career has included Collins Stewart, West LB Panmure, James Capel and Hoare Govett. Alternative Investment Fund Managers Directive (“AIFMD”) The Company has appointed CQS (UK) LLP, a subsidiary of CQS, as the Company’s alternative investment fund manager (“AIFM”). The AIFM has received its approval from the FCA to act as AIFM of the Company, your Company is therefore fully compliant. An additional requirement of the AIFMD is for the Company to appoint a depositary, which will oversee the custody and cash arrangements and other AIFMD required depositary responsibilities. The Board has appointed BNP Paribas Securities Services S.C.A. Jersey Branch to act as the Company’s depositary. As part of the process the Investment Management Agreement has been updated and builds in the regulatory requirements arising as a result of the appointment of the AIFM. Further AIFMD disclosures are shown on page 62. ![]() 20 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports Directors’ Report #### Directors’ Report The Directors present their report and the audited Financial Statements for the year ended 30 June 2022. Results and Dividends Details of the Company’s results and dividends are shown on page 2 of this report. Dividend Policy Subject to market conditions and the Company’s performance, financial position and financial outlook, it is the Directors’ intention to pay an attractive level of dividend income to Shareholders on a quarterly basis. The Company intends to continue to pay all dividends as interim dividends. A resolution to approve this dividend policy will be proposed at the Annual General Meeting. Bank Facilities The Company has a short term unsecured loan facility with Scotiabank Europe Plc (“Scotiabank”). As at the year end the unsecured loan facility had a limit of £45 million of which £33 million was drawn down. The Company’s existing loan facility is due to expire on 17December 2023 after which it is anticipated the Company will take out a new facility on comparable terms. Share Capital As at 1 July 2021, there were 445,051,858 ordinary shares in issue. The Company issued a further 31,600,000 ordinary shares in the year to 30June 2022. Full details of these transactions are shown in note 13 on page 47 of this report. Following these allotments there are now 476,651,858 ordinary shares in issue as at 30June 2022. A further 4,350,000 shares have been issued since the year end. Acquisition of own shares At the 2021 AGM, held on 2 December 2021, the Directors were granted authority to repurchase 65,401,649 ordinary shares (being equal to 14.99% of the aggregate number of ordinary shares in issue at the date of the AGM) for cancellation, or to be held as treasury shares. This authority, which has not been used, will expire at the upcoming AGM. The Directors intend to seek annual renewal of this authority from Shareholders. Directors’ shareholdings The Directors who held office at the year end and their interests in the ordinary shares of the Company were as follows: At 30 June 2022At 30 June 2021 D A H Baxter 195,127195,127 I Cadby 25,00025,000 W Dorman 112,000112,000 C Hitch \* 170,000170,000 J Newlands 10,00010,000 \* inclusive of 40,000 shares held by Ms Hitch’s mother On 2 December 2021, Wendy Dorman transferred 48,000 shares from a joint broker account held with her husband, into a private self-managed pension company, of which she is the sole beneficial owner. There were no other changes in the ordinary share holdings of the Directors between 1 July 2022 and 15 September 2022. Substantial Interests in Share Capital As at 30 June 2022, the Company had been notified in accordance with Chapter 5 of the UK Listing Authority’s Disclosure Guidance and Transparency Rules (which covers the acquisition and disposal of major shareholdings and voting rights), of the following Shareholders that had an interest of greater than 5% in the Company’s issued share capital. Shareholder Number of voting rights notified to the Company on 11 September 2019 Percentage of total voting rights as per notification (%) Brewin Dolphin Limited42,104,1099.92% Between 1July 2022 and 15September 2022, the Company received no further notifications. As at 30June 2022, the percentage of total voting rights was 8.83%, being the number of voting rights notified to the Company on 11September 2019 divided by 476,651,858, the total number of ordinary shares of the Company as at 30 June 2022. Investment Management As part of its strategy for achieving its objectives, the Board has delegated the management of the investment portfolio to CQS (UK) LLP with Ian Francis as the lead fund manager. Further details are provided on note 23 to the Financial Statements. At each Board meeting, the Board receives a presentation from the Investment Manager which includes a review of investment performance, portfolio activity and market outlook. The stock selection emphasis adopted by the Investment Manager is on each holding’s unique characteristics rather than any benchmark weightings. Appointment of the Investment Manager The Board considers the arrangements for the provision of investment management and other services to the Company on an ongoing basis and a formal review is conducted annually by the Management Engagement Committee. As part of the annual review the Management Engagement Committee considers the continuity of the team, the investment process and the results achieved to date. The Board believes that the continuing appointment of CQS as AIFM and Investment Manager as set out on page43 is in the interests of Shareholders as a whole. Administration Services BNP Paribas Securities Services S.C.A., Jersey Branch (“BNPP”) were appointed as the Company Secretary and Administrator on 28November 2019, in place of R&H Fund Services (Jersey) Limited and Maitland Administration Services (Scotland) Limited; and appointed as the Company’s custodian, bankers and depositary in place of HSBC Bank PLC (“HSBC”). ![]() 21 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Directors’ Report Directors’ Report and Governance Reports Independent Auditor KPMG LLP was appointed as auditor to the Company in 2007. Following a tender process in 2016, KPMG LLP was subsequently reappointed and remained in office until 17 June 2019. Following the resignation of KPMG LLP on 17June 2019, KPMG Channel Islands Limited was appointed as the Company’s auditor effective 17 June 2019. A resolution to re-appoint KPMG Channel Islands Limited as the Company’s auditor will be proposed at the Company’s 2022 Annual General Meeting. Delegation of Responsibilities and Matters Reserved for the Board The Board has delegated the exercise of voting rights attaching to the Company’s investments to the Investment Manager. All other matters are reserved for the approval of the Board. The Board has a schedule of matters reserved to it for decision and the requirement for Board approval on these matters is communicated directly to the Investment Manager. Such matters include strategy, borrowings, treasury and dividend policy. Full and timely information is provided to the Board to enable the Directors to function effectively and to discharge their responsibilities. The Board also reviews the Financial Statements, performance and revenue budgets. Exercise of Voting Powers The Investment Manager, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company’s voting rights in respect of investee companies. The underlying aim of exercising such voting rights is to protect the return from an investment. Disclosures required under LR 9.8.4R The Financial Conduct Authority’s Listing Rule 9.8.4R requires that the Company includes certain information relating to arrangements made between a controlling shareholder and the Company, waivers of Directors’ fees, and long-term incentive schemes in force. The Directors confirm that there are no disclosures to be made in this regard. Events after reporting date The Board has evaluated material subsequent events for the Company and their effect on the annual financial report for the period from 1July 2022 through to 15September 2022. A list of these events is disclosed in note 24. Disclosure of Information to the Auditor The Directors confirm that, so far as each of them is aware, there is no relevant audit information of which the Company’s auditor is unaware and the Directors have taken all the steps that they might have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Statement Regarding Annual Report and Financial Statements Following a detailed review of the Annual Report and Financial Statements by the Audit and Risk Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy. In reaching this conclusion, the Directors have assumed that the reader of the Annual Report and Financial Statements would have a reasonable level of knowledge of the investment industry in general and investment companies in particular. By Order of the Board Caroline Hitch Chair 15 September 2022 ![]() 22 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports The Board and Committees #### The Board and Committees Values and Culture The Board conducts itself with the core values of integrity, transparency, acceptance of challenge and accountability. It achieves this through a collaborative culture and a sense of shared endeavour. The Board is focused on meeting objectives for investors and all other stakeholders of the Company in a sustainable and responsible way. The Board The Board currently consists of a non-executive Chair and four non- executive Directors. The Board considers all of the Directors as independent of the Investment Manager and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. The dates on which Directors were appointed are contained within their biographies shown on pages 17 to 18. In accordance with the AIC Code all Directors submit themselves for re-election on an annual basis. New Directors receive an induction from the Company Secretary on joining the Board, and all Directors receive other relevant training as necessary. Directors’ and Officers’ liability insurance cover is maintained by the Company on behalf of the Directors. There is no notice period and no provision for compensation upon early termination of appointment. The Company has no executive Directors or employees. A management agreement between the Company and its Investment Manager sets out the matters over which the Investment Manager has authority and the limits beyond which Board approval must be sought. All other matters, including strategy, investment and dividend policies, gearing and corporate governance procedures, are reserved for the approval of the Board. Duncan Baxter is the Company’s Senior Independent Director. He is available to Shareholders if they have concerns where contact through the normal channels of the Chair or the Investment Manager is inappropriate. All committee terms of reference, the schedule of matters reserved for the Board, the roles and responsibilities of the Chair and the roles and responsibilities of the Senior Independent Director are available on the Company’s website. Nomination Committee The Nomination Committee, which is chaired by Ian Cadby, operates within clearly defined terms of reference, comprises the full Board and is convened for the purpose of considering the appointment of additional Directors as and when considered appropriate. In considering appointments to the Board, the Nomination Committee takes into account the ongoing requirements of the Company and the need to have a balance of skills and experience within the Board. Board Evaluation During the year the Directors completed a web-based Board evaluation questionnaire which covered the Board’s composition and skills, strategy setting, workings, oversight of risk and performance, and its stakeholder management. The Board scored highly in all areas although noted that despite being 40% female, including the Chair, there is potential to improve other areas of diversity. Both the Nomination Committee and the Board recognise the importance of diversity and will consider this in respect of any new appointments. Diversity and inclusion As noted above the Board believes in the benefits of having a diverse range of skills and backgrounds, and the need to have a balance of experience, independence, diversity (including gender), and knowledge of the Company on its Board of Directors. Tenure The tenure policy which has been adopted by the Board provides that (other than in exceptional circumstances) no Director will serve on the Board for longer than nine years from the date of their first appointment. Succession planning A key duty of the Nomination Committee is to ensure plans are in place for orderly succession to the Board. The Board has adopted a formal succession plan scheduled to allow for an orderly refreshment of the board, with the intention that no director serves longer than nine years. Director Attendance Directors have attended Board and Committee meetings during the year ended 30 June 2022 as follows: Quarterly Board meetings Ad Hoc Board meetings 1 Audit and Risk Committee meetings Management Engagement Committee meetings Nomination Committee meetings Remuneration Committee meetings Committee – Loan Renewal C Hitch (Chair) 4/44/43/31/12/21/1N/A \* D A H Baxter 4/43/43/31/12/21/1N/A \* W Dorman 4/43/43/31/12/21/11/1 I Cadby 4/44/43/31/12/21/11/1 J E Newlands 4/44/43/31/12/21/11/1 \* Committee consisting of any two directors. 1 Ad hoc board meetings are often called a short notice and only require the attendance of Jersey based directors, where possible the UK based directors attend via telephone but do not count towards the quorum. ![]() 23 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED The Board and Committees Directors’ Report and Governance Reports Management Engagement Committee The Management Engagement Committee, which is chaired by Duncan Baxter, operates within clearly defined terms of reference, comprises the full Board, and reviews the appropriateness of the Investment Manager’s continuing appointment together with the terms and conditions thereof, and to review the terms and quality of service received from other service providers. The Board ensures the Company adheres to independent requirements in all agreements and service contracts. Remuneration Committee The Remuneration Committee determines and agrees with the Boardthe policy for the remuneration of all Directors. It is chaired by John Newlands. Audit and Risk Committee The composition and role of the audit and risk committee is described on page 28. Relations with Shareholders The Directors place a great deal of importance on communication with Shareholders. The Annual Report and Financial Statements are widely distributed to other parties who have an interest in the Company’s performance. Shareholders and investors may obtain up to date information on the Company through the Investment Manager’s website. The Company responds to letters from Shareholders on a wide range of issues. A regular dialogue is maintained with the Company’s institutional Shareholders. The Company Secretary is available to answer general Shareholder queries at any time throughout the year. By Order of the Board Caroline Hitch Chair 15 September 2022 ![]() 24 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports Statement of Compliance with the AIC Code #### Statement of Compliance with the AIC Code Introduction The Company has a premium listing on the London Stock Exchange and is therefore required to report on how the principles of the UK Corporate Governance Code (the “UK Code”) have been applied. Being an investment company, a number of the provisions of the UK Code are not applicable as the Company has no executive directors or internal operations. The Board has consideredthe principles and provisions ofthe AIC Code. The AICCode addresses all the principles and provisions set outin the UK Code, as well as setting out additional provisions on issues that are ofspecific relevance to theCompany. The Board considers that reporting against the principles and provisions of theAICCodeprovides morerelevantinformationtostakeholders.The AIC Code is available on the AIC website www.theaic.co.uk . The Company has complied with all the principles and provisions of the AIC Code during the year ended 30 June 2022. Set out below is where stakeholders can find further information within the Annual Report about how the Company has complied with the various Principles and Provisions of the AIC Code. Section page 1. Board Leadership and Purpose Purpose13 Strategy13 Values and culture22 Shareholder Engagement12 Stakeholder Engagement12 2. Division of Responsibilities Director Independence22 Board meetings22 Relationship with Investment Manager23 Management Engagement Committee23 3. Composition, Succession and Evaluation Nomination Committee22 Director re-election22 Use of an external search agency 1 n/a Board evaluation22 4. Audit, Risk and Internal Control Audit Committee28 Emerging and principal risks10-11 Risk management and internal control systems29 Going concern statement14 Viability statement14 5. Remuneration Directors’ Remuneration Report30 1 The Company did not appoint any new Directors during the year. ![]() 25 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED ESG statement of the Company Directors’ Report and Governance Reports #### ESG statement of the Company CQS New City High Yield Fund Limited (“the Company”) is a Jersey domiciled and UK LSE listed investment company whose objective to provide investors with a high gross dividend yield and the potential forcapital growth by mainly investing in high yielding fixed interest securities. The Company has appointed CQS (UK) LLP (“CQS”) as its investment manager. The Board of Directorsconfirms that ESGfactorsare integral to the execution of the Company’s investment strategy. The Board’s intention is to invest responsibly and to consider the Company’s broader impact on society and the environment. The Board believes the integrationof ESG factorsintheinvestmentprocessis consistent withdelivering sustainable attractivereturnsforShareholders through deeper,more informed investment decisions. TheBoard hasreviewed and agreed the ESG approachadopted by CQSand a summaryof this, shown in red, is set out below. CQS Responsible Investment Policy incorporating our ESG Statement CQS is committed to operating in a responsible manner embedding strong and clear governance, and conducting our business in a sustainable way. In our role as an investment manager, we view ESG factors as key drivers influencing financing costs, risk assessment valuations and performance, while also acting as a lever to shape and influence the world for generations to come. The assessment, integration and engagement of ESG factors is a crucial part of the Responsible Investment commitment across the CQS investment platform, both in publicand privatelyheld companies, and a key factor in our decision-making. By embedding Responsible Investment into our investment process we enhance our ability to identify value, investment opportunity, risk and, critically, to generate the best possible returns and outcomes for our clients. OurESGprocessspecifically looksat ESGfactorsthrough integrationin our sector research process, including modelling and internal ratings with ESG methodologies applied to both public and private debt. Methodologiesincludeanalysing therelative importance and riskposedby any identified ESG issue. Research notes are stored in accessible form and available for use across the Front Office. Discussion and debate is encouraged during the ESG internal analysis, both within the CQS Research team and with Portfolio Managers. This is followed by an evaluation. Portfolio Managers are required to consider (to an appropriate degree having regard to their investment strategy) ESG risks as part of their investment decision making. This includes, but is not limited to: • Environmental: ClimateChange, Water Stress,BiodiversityandLand Use, Toxic Emissions and Waste and Environment Opportunities and other relevant sustainability risks or opportunities • Social: Labour management, Health and Safety, Privacy and Data Security, Stakeholder Opposition and Social Opportunities, Diversity and relevant sustainability risks. • Governance: Corporate Governance and Corporate Behaviour including Ethics, Corruption, Instability, Diversity and Remuneration Please see below a diagram depicting our five-stage process: #### Five-Stage ESG Investment Process Environmental, Social and Governance (ESG) Policy applies to all strategies across the CQS platform 12345 IncorporateEvaluateDecideEngageMonitor Incorporation of third- party ESG metrics and data into CQS’ systems Evaluation of ESG factors in our sector research process includes modelling, analysis, internal ratings and deployment into our front office systems. We demonstrate to companies whom we research that CQS is serious about ESG Portfolio Manages consider research analysis as part of investment decision making Changing corporate behaviour towards identified ESG risks and issues may involve proxy voting, influence or control positions, and ultimately making a decision to not trade, change exposure or exit a position altogether Periodic research re-assessments A watching brief across news wires for developing ESG considerations Weekly proprietary fund-level ESG risk reporting for our portfolio management and research teams ![]() 26 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports ESG statement of the Company Standards and Codes CQS is a signatory and/or supporter to the following: • United Nations: Principles for Responsible Investment (“UN PRI”) • Task Force on Climate-Related Financial Disclosures (“TCFD”) • CDP (“CDP”, formerly Carbon Disclosure Project) • Standards Board for Alternative Investments (“SBAI”, formerly HFSB) • Climate Action 100+ • UK Stewardship Code #### Specific Statement from the CQS Investment Managers with regard to the Company Itis our responsibilityto analyse and monitorinvesteecompanies’ financial andnon-financial (ESG)performance effectively. ESGintegration isas an importantconsiderationwhenanalysinginvestmentopportunities and we are committed to evolving our approach in support of our ESG principles. We follow the CQS firm-wide five-stage ESG investment integration process but are also guided by the following principals which have been agreed with the Board of the Company. • to engage directly in dialoguewithcompaniesto understandtheirESG approach, their ambition and disclosure, and to table questions or concerns; • to use internal and third party data and ratings providers; • where possible, to vote at Shareholder meetings; and • only as a last resort, exclude companies from our investment universe. At the time of writing, 29% (2021: 30%) of the Company’s portfolio is covered by MSCI for their ESG rating service. MSCI have a minimum 65% threshold before we are able to provide a meaningful MSCI ESG rating for the portfolio. We monitor this closely and engage to try and further increase the percentage of the portfolio covered. It is not unusual for portfolios in the credit universe to have a low level of ESG ratings and CQS (UK) LLP have been monitoring alternative measurements. One metric we have been evaluating is “Weighted average carbon intensity” or “WACI” which is a measure of the portfolio’s exposure to carbon-intensive companies, expressed in tonnes of CO2 per million USD of revenue. It follows the MSCI methodology taking the carbon intensity of a company where available and where carbon intensity is not available fora given company,a proxy estimatebasedon comparative data from MSCI is used. For proxy estimates, we apply a waterfall approach which requires a minimum of 10 issuers within the proxy estimate group. If there are not 10 issuers in the proxy estimate group, it changes to a broader category group toincrease the numberof comparable issuers and continues moving to a broader group until a minimum group size of 10 issuers is obtained or‘sector’levelisreached. Theorderissub-industry first, then industry, then industry group, then finally sector. TheWACI measure for the portfolio iscurrently 319 (2021: 238) compared to the broader credit universe which is 274 (2021: 250). We will continue tomonitorthis andothermetricsas they become available. Company Specific Example: In the next section, we highlight one of our recent engagements thatwe have hadwith aportfolio companyto give you a flavour of how active engagement can create positive outcomes. ![]() 27 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED ESG statement of the Company Directors’ Report and Governance Reports Portfolio Example A Global Copper Company MSCI ESG Rating BBB The investment manager believes that copper is the preferred metal of the green economy. The Fund has an investment in a company that owns and operates a global portfolio of copper assets. Together with CQS’s ESG team the investment manager identified a number of issues that they addressed with company management over a number of meetings. The details of the engagement are set out below and we believe that the implementation of proposed changes will allow the company to improve its MSCI ESG rating and attract new shareholders. Identified IssuesEngagement ObjectivesE, S or GProgress A Coal Fired Power Plant as the main source of power at a new major operation. Better understand management’s decision-making process during planning of construction. E The company provided additional disclosure that gave context to acquisition of the asset, decisions made by prior ownership, and suitability of other power sources at the time of construction. The Company has now outlined plans to convert half the power to renewables by 2025 and fully convert to a mixture of natural gas and renewables by 2030. The conversion is expected to be funded by cash flow. All future brownfield projects will be 100% powered by renewable energy. While environmental measures such as emissions, energy usage, and water stress are tracked annually, there are no set targets to reduce them from current or historical levels. Requesting the company set TCFD- aligned emissions targets, as well as energy usage, and water stress which are standardized to output to allow for growing production volumes. E In January 2022, the Company formally published absolute emissions reduction targets of 30% reduction by 2025 and 50% by 2030. Their plans for all future brownfield projects to use renewable energy, as well as initiatives within mining operations such as trolley assist to reduce fuel usage, will help them to achieve this. They now send their head of ESG to investor conferences, another sign that they are taking this very seriously. Company does not incorporate ESG objectives into incentive based compensation for management. Using the targets mentioned in point (2) as a first step in incorporating ESG goals into incentive compensation. G Now decarbonisation targets have been set, a next step is to incorporate these targets into executive remuneration. Structure has been highlighted by MSCI as needing additional independence. Conduct additional diligence of the board concerns with MSCI, and if needed suggesting the company consider adding board seats for independent directors and consideration of term limits. G Conversations with MSCI led us to believe that Board concerns were formulaic regarding age and tenor, and did not warrant a request to the company to change board composition. We have the company to MSCI’s standards, so they can better consider future board decisions. ![]() 28 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports Report of the Audit and Risk Committee #### Report of the Audit and Risk Committee Composition of the Audit and Risk Committee The Audit and Risk Committee is chaired by Wendy Dorman and comprises the full Board. The Audit and Risk Committee members have recent and relevant financial experience. The terms of reference of the Audit and Risk Committee are reviewed and re-assessed for their adequacy on an annual basis. The AIC Code of Corporate Governance requires Audit committees who include the Chair of the Board as a member of the Committee to explain why this is felt to be appropriate. The Chair, Caroline Hitch, is a member of the Committee. Caroline was considered independent of the Company on her appointment to the Board in March 2018 and the Committee are satisfied that she remains independent and objective. Her membership of the Committee is deemed appropriate given the size and nature of the Company. The Audit and Risk Committee does not believe it compromises the integrity of the Committee or the Board. Role of the Audit & Risk Committee A summary of the Committee’s main audit review functions is shown below: • to review and monitor the internal control systems and risk management systems on which the Company is reliant; • to consider annually whether there is a need for the Company to have its own internal audit function; • to monitor the integrity of the half-yearly and annual Financial Statements of the Company by reviewing, and challenging where necessary, the actions and judgements of the Investment Manager, the Company Secretary and the Administrator; • to advise the Board on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for Shareholders to assess the Company’s strategy, business model, position and performance; • to meet with the external Auditor, KPMG Channel Islands Limited (“KPMG”) to review their proposed audit programme of work and their findings. The Board shall also use this as an opportunity to assess the effectiveness of the audit process; • to make recommendations in relation to the appointment of the external Auditor and to approve the remuneration and terms of engagement of the external Auditor; • to monitor and review annually the external Auditor’s independence, objectivity, effectiveness, resources and qualification; and • to consider and approve all non-audit services. No non-audit services are pre-approved. Annual Report and Financial Statements The Board is responsible for preparing the Annual Report and Financial Statements. The Audit and Risk Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues which may arise and any specific areas which require judgement. The Company has adopted and reports against the AIC Code published in February 2019. The Audit and Risk Committee oversaw the work performed by the Company Secretary in ensuring that the Company isin compliance with the principles and provisions of the AIC Code, which is reported on in the Statement of Compliance with the AIC Code of Corporate Governance section on page 24. The valuation of investments was a key area of focus given their significance to the Financial Statements as a whole. Following discussion with the Investment Manager, the Audit and Risk Committee gained comfort over the valuation as included in the Annual Report and Financial Statements. The Committee reviewed and considered the Annual Report and Accounts to be fair, balanced and understandable and recommended the Board’s approval. Auditor As part of its review of the scope and results of the audit, during the year the Audit and Risk Committee considered and approved KPMG Channel Islands Limited’s (“KPMG”) plan for the audit of the Financial Statements for the year ended 30June 2022. At the conclusion of theaudit, KPMG did not highlight any issues to the Audit and Risk Committee which would cause it to qualify its audit report. KPMG issued an unmodified audit report which is included on pages31 to 35. As part of the review of auditor independence and effectiveness, KPMG has confirmed that it is independent of the Company and has complied with relevant auditing standards. In evaluating KPMG, the Audit and Risk Committee has taken into consideration the standing, skills and experience of the firm and the audit team. The Audit and Risk Committee, from direct observation and enquiry of the Investment Manager and the Administrator, remains satisfied that KPMG continues to provide effective independent challenge in carrying out its responsibilities. No non-audit services were provided to the Company by KPMG during the year. Following professional guidelines, the audit engagement partner rotates after a maximum of five years. The current audit engagement partner is James Le Bailly and it is his second year as audit engagement partner for the Company. KPMG LLP were auditors of the Company since the first year end 30 June 2008. In the interests of good governance, the Audit and Risk Committee carried out a tender process in 2016 and KPMG LLP were successfully re-appointed. KPMG LLP subsequently resigned as the Company’s auditors on 17 June 2019 and was replaced, with effect from 17 June 2019, by KPMG Channel Islands Limited. The Company also receives regular reporting on internal controls (as detailed below). Significant risks related to the Financial Statements The main area of accounting risk considered by the Committee during the year in relation to the Company’s Financial Statements was the valuation of investments held by the Company. The valuation of investments is undertaken in accordance with the accounting policies asset out in note 1. Details of the fair value hierarchy are set out in note 22. In order to address this risk, the Company has appointed an Investment Manager and Custodian with clearly defined contracts and any breaches of these, or any law or regulation which the Company is required to comply with, are reported to the Board. The portfolio holdings and their pricing is reviewed on a daily basis and verified by the Investment Manager. A full portfolio is prepared for each Board meeting, including a detailed movement of the top 60 holdings, which is actively commented on and discussed by the Directors. ![]() 29 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Report of the Audit and Risk Committee Directors’ Report and Governance Reports Internal Controls The Committee, on behalf of the Board, is responsible for the Company’s system of internal control and for reviewing its effectiveness. There is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and is regularly reviewed by the Board and accords with FRC Guidance. The significant risks faced by the Company are as follows: •financial; • operational; and •compliance. The key components designed to provide effective internal control are outlined below: • the Administrator together with the Investment Manager prepare forecasts and management accounts which allow the Board to assess the Company’s activities and review its performance; • the Board and Investment Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the Investment Manager as appropriate; • as a matter of course the Investment Manager’s compliance department continually reviews the Investment Manager’s operationsand reports to the Board on an annual basis and by exception; • written agreements are in place which specifically define the roles and responsibilities of the Investment Manager, Company Secretary, Administrator and other third party service providers; • the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place at the Investment Manager, the Company Secretary and the Administrator, has decided to place reliance on the Investment Manager’s, the Company Secretary’s and the Administrator’s systems and internal audit procedures. The Directors have reviewed BNP Paribas Securities Services’ ISAE 3402 report for the period from 1 April 2021 to 31March 2022 (report on the description of controls placed in operation, their design and operating effectiveness) on Fund Administration and are pleased to note that no significant issues were identified. The Administrator has confirmed there has been no change to their internal controls as described in the aforementioned report for the period 1April 2022 through 30June 2022, which would materially affect the Company’s internal control environment. In November 2021, the Board held a strategy and due diligence meeting at the offices of the Investment Manager. This provided an opportunity to discuss the portfolio and strategy in depth, as well as focussing on ESG matters, particularly climate change and sustainability, and risk and compliance. We met various members of the Investment Manager team including General Counsel, The Risk Manager, Head of Infrastructure Controls and Head of Information Technology. Details of the research and investment process were discussed, as well as ESG policies and procedures. During the year, the Committee carried out an annual assessment ofinternal controls for the year ended 30June 2022 by considering documentation from the Investment Manager, the Company Secretary and Administrator, including the internal audit and compliance functions. The results of the assessment were then reported to the Board. Internal control systems are designed to meet the Company’s particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss. During the year, the Committee monitored the effectiveness of the internal control framework in place at key third party service providers. The Committee assessed the control environment as sufficiently robust to mitigate any ongoing impact of COVID-19 on the Company, together with heightened risks arising from Russian sanctions and cyber security. The principal and emerging risks affecting the Company, a description of those risk and controls mitigating those risks are disclosed on pages 10 to 11. Wendy Dorman Chair of the Audit and Risk Committee 15 September 2022 ![]() 30 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Directors’ Report and Governance Reports Directors’ Remuneration Report #### Directors’ Remuneration Report Remuneration Committee The Remuneration Committee, which is chaired by John Newlands, operates within clearly defined terms of reference. The Committee comprises the full Board. The remuneration of the Directors has been set in order to attract individuals of a calibre appropriate to the future development of the Company. The Company’s policy on Directors’ remuneration, together with details of the remuneration of each Director, is shown below. Policy on Directors’ Remuneration The Company’s Articles of Association limit the aggregate fees payable to the Board of Directors to a total of £250,000 per annum. Subject to this overall limit, it is the Company’s policy that the remuneration of non-executive Directors should reflect the experience of the Board as a whole, be fair and comparable to that of other relevant investment companies that are similar in size and have similar investment objectives and structures. Furthermore, the level of remuneration should be sufficient to attract and retain the Directors needed to oversee properly the Company and to reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company’s affairs. Itis intended that this policy will continue for the year ending 30 June 2023 and subsequent years. On 3 June 2021, the Board approved an increased level of remuneration for the Directors with effect from 1 July 2021 as follows: Chair£42,500 (2021: £40,000) Audit Chair£36,500 (2021: £34,000) Other£30,000 (2021: £27,500) No element of the Directors’ remuneration is performance related. No Director past or present has any entitlement to pensions and the Company has not awarded any share options or long-term performance incentives to any of the Directors. It is the Board’s policy that Directors do not have service contracts, but new Directors are provided with a letter of appointment. Directors’ Emoluments The Directors who served in the year received the following fees: 2022 £ 2021 £ C Hitch (Chair) 42,500 40,000 D A H Baxter30,000 27,500 I Cadby30,000 27,500 W Dorman (Audit and Risk Committee Chair) 36,500 34,000 J E Newlands30,000 27,500 Totals169,000156,500 The amounts paid by the Company to the Directors were for services as non-executive Directors. Voting at Annual General Meeting An ordinary resolution for the approval of this Directors’ Remuneration Report will be put to an advisory shareholder vote at the forthcoming Annual General Meeting. Approval The Directors’ Remuneration Report on page30 was approved by the Board of Directors and signed on its behalf on 15 September 2022. On behalf of the Board Caroline Hitch Chair 15 September 2022 ![]() 31 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Independent Auditor’s Report to the members of CQS New City High Yield Fund Limited Independent Auditor’s Report Our opinion is unmodified We have audited the financial statements of CQS New City High Yield Fund Limited (the “Company”), which comprise the statement of financial position as at 30 June 2022, the statements of comprehensive income, changes in equity and the cash flow statement for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying financial statements: • give a true and fair view of the financial position of the Company as at 30 June 2022, and of the Company’s financial performance and cash flows for the year then ended; • are prepared in accordance with International Financial Reporting Standards as adopted by the EU; and • have been properly prepared in accordance with the Companies (Jersey) Law, 1991. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies’ Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. # Independent # auditor’s report #### to the Members of CQS New City High Yield Fund #### Limited ![]() 32 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Independent Auditor’s Report Independent Auditor’s Report to the members of CQS New City High Yield Fund Limited Key audit matters: our assessment of the risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2021): The riskOur response Valuation of investments £263m; (2021: £257m) Refer to page 28 (Report of the Audit and Risk Committee), note 1(a) and 1(b) (accounting policy), note 9 (financial assets designated at fair value through profit or loss) and notes 16 (financial instruments) and 22 (fair value hierarchy). Basis: The Company’s portfolio of investments makes up 97.1% of the Company’s total assets (by value). 92.2% of the investments comprise investments where the fair values are readily available from a number of independent pricing sources (such as stock exchanges or multiple brokers) and therefore we do not consider these investments to be at a high risk of misstatement. The fair value of the Company’s remaining investments holdings of £20.5m, which represent 7.8% of the investments, are not readily available from a number of independent pricing sources and are valued by the Company using valuation techniques taking into account, where appropriate, latest dealing prices, broker statements, and other relevant factors or information. Risk: The valuation of the Company’s investments is a significant area of our audit, given that it represents a significant portion of the total assets of the Company. The valuation risk of the investments also relates to those investments where the fair values are not readily available from a number of independent pricing sources given the estimation and judgements that may be involved in the determination of their fair values. Our audit procedures included: Internal Controls: We assessed the design and implementation of controls over the valuation of investments where the fair values are not readily available from a number of independent pricing sources given the estimation and judgements that may be involved in the determination of their fair values. Use of KPMG Specialists: We engaged our valuation specialist to: -Independently price investments to a third party pricing source and compare the price to that used by the Company, where prices are readily available; and -Derive independent valuations for the remaining investments (where fair value not readily available from a number of independent pricing sources) by using a model-based valuation (like discounted cash flow model) to calculate a price and compared it to the price used by the Company. Assessing disclosures: We also considered the Company’s disclosures (see note 1 – critical accounting estimates and judgements) in relation to the use of estimates and judgements regarding the valuation of investments and the Company’s investment valuation policies adopted in note 16 and fair value disclosures in note 22 for compliance with IFRS as adopted by the EU. Our application of materiality and an overview of the scope of our audit Materiality for the financial statements as a whole was set at £2,790,000, determined with reference to a benchmark of total assets of £271,197,000, of which it represents approximately 1.0% (2021: 1.0%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £2,092,000. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £139,000, in addition to other identified misstatements that warranted reporting on qualitative grounds. In addition, we applied a lower materiality of £1,680,000, to the investment income balance (£22.4m) for which we believe misstatements of a lesser amount than materiality for the financial statements as a whole could be reasonably expected to influence the Company’s members’ assessment of the financial performance of the Company. Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. ![]() 33 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Independent Auditor’s Report to the members of CQS New City High Yield Fund Limited Independent Auditor’s Report Going concern The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the “going concern period”). In our evaluation of the directors’ conclusions, we considered the inherent risks to the Company’s business model and analysed how those risks might affect the Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to affect the Company’s financial resources or ability to continue operations over this period were: • Availability of capital to meet operating costs and other financial commitments; • The outcome of the upcoming continuation vote at the forthcoming Annual General Meeting of the Company; • The ability to successfully refinance or repay debt which is due to mature by end of 2023; and • The ability of the Company to comply with debt covenants. We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Company’s financial forecasts. We also considered the risk that the outcome of the continuation vote could affect the Company over the going concern period, by considering outcomes of previous votes held by the Company, reviewing correspondence from the brokers that they have no concerns regarding the outcome of the continuation vote, and considering key financial metrics including discount/premium of the Company’s share price against its reported net asset value per share, over the past 12 months. We considered whether the going concern disclosure in note 1(a) to the financial statements gives a full and accurate description of the directors’ assessment of going concern. Our conclusions based on this work: • we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the the Company’s ability to continue as a going concern for the going concern period; and • we have nothing material to add or draw attention to in relation to the directors’ statement in the notes to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company’s use of that basis for the going concern period, and that statement is materially consistent with the financial statements and our audit knowledge. However, as we cannot predict all future events orconditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation. Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • enquiring of management as to the Company’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud; • reading minutes of meetings of those charged with governance; and • using analytical procedures to identify any unusual or unexpected relationships. As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company’s revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks. We performed procedures including • Identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; and • incorporating an element of unpredictability in our audit procedures. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company’s ability to operate. We identified financial services regulation ![]() 34 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Independent Auditor’s Report Independent Auditor’s Report to the members of CQS New City High Yield Fund Limited as being the area most likely to have such an effect, recognising the regulated nature of the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify non- compliance with theselaws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higherrisk of non- detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Disclosures of emerging and principal risks and longer term viability We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. we have nothing material to add or draw attention to in relation to: • the directors’ confirmation within the Viability Statement (page 14) that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity; • the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated; • the directors’ explanation in the Viability Statement (page 14) as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to review the Viability Statement, set out on page14 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge. Corporate governance disclosures We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate governance disclosures and the financial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge: • the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy; • the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, and how these issues were addressed; and • the section of the annual report that describes the review of the effectiveness of the Company’s risk management and internal control systems. We are required to review the part of Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect. We have nothing to report on other matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Company; or • the Company’s financial statements are not in agreement with the accounting records; or • we have not received all the information and explanations we require for our audit. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 16, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the ![]() 35 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Independent Auditor’s Report to the members of CQS New City High Yield Fund Limited Independent Auditor’s Report preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities . The purpose of this report and restrictions on its use by persons other than the Company’s members as a body This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. James Le Bailly For and on behalf of KPMG Channel Islands Limited Chartered Accountants and Recognized Auditors Jersey 15 September 2022 ![]() 36 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Statement of Comprehensive Income #### Statement of Comprehensive Income For the year ended 30 June 2022 Year ended 30 June 2022 Year ended 30 June 2021 Notes Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Net capital gains/(losses) (Losses)/gains on financial assets designated at fair value9 –(14,459)(14,459) –23,91323,913 Foreign exchange gain/(loss) \* –6161 –(36)(36) Revenue Investment income2 22,362–22,362 21,151–21,151 Total Income22,362(14,398)7,96421,15123,87745,028 Expenses Investment management fee3 (1,595)(531)(2,126) (1,456)(485)(1,941) Other expenses4 (772)(75)(847) (800)(14)(814) Total expenses(2,367)(606)(2,973) (2,256)(499)(2,755) Profit/(loss) before finance costs and taxation19,995(15,004)4,991 18,89523,37842,273 Finance income/(costs) Interest income 1–1 ––– Interest expense5 (456)(152)(608) (326)(107)(433) Profit/(loss) before taxation19,540(15,156)4,384 18,56923,27141,840 Irrecoverable withholding tax6 (377)–(377) (267)–(267) Profit/(loss) after taxation and total comprehensive income/(loss)19,163(15,156)4,007 18,30223,27141,573 Basic and diluted earnings/(losses) per ordinary share (pence) 8 4.16(3.29)0.87 4.185.329.50 \* Excludes foreign exchange gains and losses on financial assets designated through profit and loss which are presented within (losses)/gains on financial assets designated at fair value. The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the EU (refer to note 1). The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. There is no other comprehensive income as all income is recorded in the Statement of Comprehensive Income above. All revenue and capital items in the above statement are derived from continuing operations. No operations were acquired or discontinued in the year. The accompanying notes on pages 40 to 54 are an integral part of these Financial Statements. 36 Financial Statements Statement of Comprehensive Income ![]() 37 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Statement of Financial Position Financial Statements #### Statement of Financial Position As at 30 June 2022 Notes As at 30 June 2022 £’000 As at 30 June 2021 £’000 Non-current assets Financial assets designated at fair value through profit or loss9 263,393257,467 Current assets Debtors and other receivables10 3,819 3,585 Cash and cash equivalents 3,985 11,427 7,804 15,012 Total assets271,197272,479 Non-current liabilities Bank loan11 (33,000) – Current liabilities Bank loan11 – (33,000) Creditors and other payables12 (3,211) (5,301) Total liabilities(36,211) (38,301) Net asset value234,986234,178 Stated capital and reserves Stated capital account13 220,649 203,416 Special distributable reserve 50,385 50,385 Capital reserve (51,610) (36,454) Revenue reserve 15,562 16,831 Equity Shareholders’ funds234,986234,178 Net asset value per ordinary share (pence) 15 49.30p52.62p The Financial Statements on pages36to54 were approved by the Board of Directors and authorised for issue on 15September 2022 and were signed on its behalf by: Caroline Hitch Chair 15 September 2022 The accompanying notes on pages 40 to 54 are an integral part of these Financial Statements. ![]() 38 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Statement of Changes in Equity #### Statement of Changes in Equity For the year ended 30 June 2022 Notes Stated capital account \* £’000 Special distributable reserve ‡ £’000 Capital reserve \* £’000 Revenue reserve † £’000 Total £’000 At 1 July 2021 203,41650,385(36,454)16,831234,178 Total comprehensive income for the year: Profit/(loss) for the year ––(15,156)19,1634,007 Transactions with owners recognised directly in equity: Dividends paid7 –––(20,432)(20,432) Net proceeds from issue of shares13 17,233–––17,233 At 30 June 2022220,64950,385(51,610)15,562234,986 For the year ended 30 June 2021 Notes Stated capital account \* £’000 Special distributable reserve ‡ £’000 Capital reserve \* £’000 Revenue reserve † £’000 Total £’000 At 1 July 2020197,03750,385(59,725)17,982205,679 Total comprehensive income for the year: Profit for the year––23,27118,30241,573 Transactions with owners recognised directly in equity: Dividends paid7–––(19,453)(19,453) Net proceeds from issue of shares136,379–––6,379 At 30 June 2021 203,41650,385(36,454)16,831234,178 \* Following a change in Jersey Company Law effective 27June 2008, dividends can be paid out of any capital account of the Company subject to certain solvency restrictions. However, it is the Company’s policy to account for revenue items and pay dividends, drawing where necessary from a separate revenue reserve. ‡ The balance on the special distributable reserve of £50,385,000 (2021: £50,385,000) is treated as distributable profits available to be used for all purposes permitted by Jersey Company Law including the buying back of ordinary shares, the payment of dividends and the payment of preliminary expenses. † The balance on the revenue reserve of £15,562,000 (2021: £16,831,000) is available for paying dividends. The accompanying notes on pages 40 to 54 are an integral part of these Financial Statements. ![]() 39 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Cash Flow Statement Financial Statements #### Cash Flow Statement For the year ended 30 June 2022 Notes Year ended 30 June 2022 £’000 Year ended 30 June 2021 £’000 Operating activities Profit before finance income/(cost) and taxation 1 4,991 42,273 Adjustments to reconcile profit before tax to net cash flows: Realised (gains)/losses on financial assets designated at fair value through profit or loss9 (3,631) 11,575 Unrealised losses/(gains) on financial assets designated at fair value through profit or loss9 18,090 (35,489) Effective interest adjustment9 (154) (232) Foreign exchange (gain)/loss (61) 36 Purchase of financial assets designated at fair value through profit or loss 2 (110,433) (70,415) Proceeds from sale of financial assets designated at fair value through profit or loss 3 85,833 73,280 Changes in working capital (Increase)/decrease in other receivables (508) 51 Increase/(decrease) in other payables 2,266 (422) Irrecoverable withholding tax paid (377) (267) Net cash (used in)/generated from operating activities(3,984) 20,390 Financing activities Dividends paid7 (20,432) (19,453) Drawdown of bank loan11 – 2,000 Finance costs (595) (431) Proceeds from issuance of ordinary shares 4 13 17,508 6,104 Net cash used in financing activities(3,519) (11,780) (Decrease)/increase in cash and cash equivalents (7,503) 8,610 Cash and cash equivalents at the start of the year 11,427 2,853 Exchange gain/(loss) 61 (36) Cash and cash equivalents at the end of the year3,985 11,427 1 Included within profit before finance income/(cost) and taxation is dividend income of £3,684,000 (30 June 2021: £2,934,000) and interest income of £18,678,000 (30 June 2021: £18,217,000). 2 Amounts due to brokers as at 30 June 2022 relating to purchases of financial assets designated at fair value through profit amounted to £613,000 (30 June 2021: £4,980,000). 3 Amounts due from brokers as at 30June 2022 relating to sales of financial assets designated at fair value through profit amounted to £nil (30 June 2021: £nil). 4 Amounts due on new share issuance not yet received as at 30 June 2022 amounted to £nil (30 June 2021: £275,000). The accompanying notes on pages 40 to 54 are an integral part of these Financial Statements. ![]() 40 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements #### Notes to the Financial Statements 1Accounting Policies (a) Basis of accounting These Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and in accordance with the guidance set out in the Statement of Recommended Practice (“SORP”): Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the AIC in November 2014 and updated most recently in April 2021 with consequential amendments. Notwithstanding that CQS New City High Yield Fund Limited (the “Company”) is not an investment trust company, given the purpose of the Company and certain similar characteristics, the Company has chosen to follow the guidance set out in the SORP where it is consistent with the requirements of IFRS. The functional and reporting currency of the Company is pound sterling because that is the primary economic environment in which the Company operates. The notes and Financial Statements are presented in pound sterling and are rounded to the nearest thousand except where otherwise indicated. The Financial Statements have been prepared on the historical cost basis, except that investments are stated at fair value and categorised as financial assets at fair value through profit or loss. Going concern At each Annual General Meeting of the Company, Shareholders are given the opportunity to vote on an ordinary resolution to continue the Company as an investment company. If any such resolution is not passed, the Board will put forward proposals at an extraordinary general meeting to liquidate or otherwise reconstruct or reorganise the Company. Given the performance of the Company, input from the Company’s major Shareholders and its broker, the Board considers it likely that Shareholders will vote in favour of continuation at the forthcoming Annual General Meeting. The Company’s existing loan facility as detailed on page 46 has been renewed for an amount of up to £45 million and is due to mature on 17December 2023 after which it is anticipated the Company will take out a new facility on comparable terms.After making enquiries of the Investment Manager, and having considered the Company’s investment objective, nature of the investment portfolio, loan facility, expenditure projections, impact of COVID-19 and the impact of the Russia-Ukraine conflict on the Company, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the Financial Statements, notwithstanding that the Company is subject to an annual continuation vote as described above. Accounting Developments Standards and amendments to existing standards effective in current year: Interest Rate Benchmark Reform – Phase 2 These amendments address issues that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in IFRS9, IAS39, IFRS7, IFRS4 and IFRS16 relating to changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities; and hedge accounting (no impact). Change in basis for determining cash flows The amendments require an entity to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability. At the beginning of the period, the Company had an unsecured loan facility with Scotiabank Europe Plc that had a limit of £35 million of which £33 million was drawn down at an interest rate of 1.35% + LIBOR. Pursuant to a Seventh Amendment Agreement with effective date 17 December 2021, the loan facility was increased to a committed limit of £45 million (with an option to increase by a further £5 million) of which £33 million was still drawn down as at the year end. The interest rate was changed to 1.45% plus a compounded reference rate. As from 17September 2021, the Company had replaced LIBOR by SONIA for the calculation of interest on the loan facility. The Company held floating rate investments securities which were subject to the IBOR reform during the period given that their interest rates referenced LIBOR. All of those positions have replaced LIBOR by SONIA as from 1 July 2021, for the determination of the interest amounts due to the Company. Standards and amendments becoming effective in future periods: A number of amendments and interpretations to existing standards have been issued, but are not yet effective, that are not relevant to the Company’s operations. The Directors believe that the application of these amendments and interpretations will not impact the Company’s Financial Statements when they become effective. ![]() 41 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements Critical accounting estimates and judgements The preparation of the Financial Statements necessarily requires the exercise of judgement both in application of accounting policies which are set out below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates. The valuation of financial assets involves estimation and judgements. The major part of the Company’s financial assets is its financial assets held at fair value through profit or loss which is valued by reference to listed and quoted bid prices, however some of these financial assets are thinly traded. Such financial assets are best valued by reference to current market price quotes provided by independent brokers. The Directors may overlay such prices with situation specific adjustments including (a) taking a second independent opinionon a specific investment, or (ii) reducing the value to a net present value, to reflect the likely time to be taken to realise a stock which the Company is actively looking to sell. The outturn is reflected in the valuations of investments as set out in note 22 to the Financial Statements. Financial assets which are not listed or where trading in the securities of an investee company is suspended are valued at the Board’s estimate of fair value in accordance with International Private Equity and Venture Capital (IPEV) valuation guidance. Unquoted financial assets are valued by the Directors on the basis of all the information available to them at the time of valuation. This includes a review of the financial and trading information of the investee company, covenant compliance, ability to pay the interest due and cash held. For convertible bonds this also includes consideration of their discounted cash flows and underlying equity value based on information provided by the Investment Manager. In respect of two of the Company’s investments in particular, Raven Property Group Ltd and Raven Russia 12% 09-31/12/2059, the Investment Manager marked the positions to a fair value of nil as at 30 June 2022, following the Russian/Ukraine conflict. Raven suspended its shares during the year and advised it was unlikely to be able to continue maintaining normal operations. It has since been delisted from the stock exchange, coupon payments on the preference shares have ceased and the price of both securities has been written down to zero in the Company’s portfolio. There were no other significant accounting estimates or significant judgements in the current or previous year. A summary of the principal accounting policies which have been applied to all periods presented in these Financial Statements is set out below. (b) Financial assets Financial assets which comprise equity shares, convertible bonds and fixed income securities, are classified as held at fair value through profit or loss as the Company’s business model is not to hold these financial assets for the sole purposes of collecting contractual cash flows. In making this assessment, the Directors have given regard to the investment strategy of the Company, the fact that the performance of the portfolio is evaluated on a fair value basis and the fact that the Investment Manager is remunerated on a percentage of total assets. Purchases or sales of financial assets are recognised/derecognised on the date the Company trades the investments. On initial recognition investments are measured at fair value and classified as fair value through profit or loss with any subsequent gain or loss, including any gain or loss arising from a change in exchange rates, recognised in the Statement of Comprehensive Income. Financial assets held at fair value through profit or loss are valued in accordance with the policies described in the critical accounting estimates and judgements section above. Financial assets also include the Company’s cash and cash equivalents (comprising of cash held in current accounts and overdraft balances) and debtors and other receivables which are held at amortised cost using effective interest rate, less any impairment. (c) Financial liabilities Financial liabilities include amounts due to brokers, bank loan, interest on bank loan and other creditors which are held at amortised cost using the effective interest rate method. Financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently carried at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires. (d) Income Dividends receivable on equity shares (including preference shares) are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company’s right to receive payment is established. Dividends from overseas companies are shown gross of any non-recoverable withholding taxes which are disclosed separately in the Statement of Comprehensive Income. Fixed returns on non-equity shares and debt securities (including preference shares) are recognised on a time apportioned basis so as to reflect the effective interest rate on those instruments. Other returns on non-equity shares are recognised when the right to the return is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, an amount equal to the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserve. ![]() 42 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements (e) Expenses, including finance charges All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as follows: –expenses which are incidental to the acquisition of an investment are charged to the capital account; –expenses which are incidental to the disposal of an investment charged to the capital account; –the Company charges 25% of investment management fees and interest costs to capital, in line with the Board’s expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. For further details refer to notes 3 and 5; and –expenses incurred in connection with the maintenance or enhancement of the value of the investments or for the long term benefit of the Company are charged to capital. (f) Foreign currencies Transactions denominated in foreign currencies are recorded in the functional currency at actual exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported in sterling at the rates of exchange prevailing at the period end. Exchange gains and losses on investments held at fair value through profit or loss are included in ‘Gains or losses on investments held at fair value through profit or loss’. Exchange gains and losses on other balances are disclosed separately in the Statement of Comprehensive Income. (g) Reserves (a) Capital reserve. Following a change in Jersey Company law effective 27June 2008, dividends can be paid out of any capital account of the Company subject to certain solvency restrictions. It is the Company’s policy however to account for revenue items and pay dividends through a separate revenue reserve. The following are accounted for in the capital reserve: –gains and losses on the realisation of investments; –realised and unrealised exchange differences of a capital nature; –expenses and finance costs charged in accordance with the policies above; and –increases and decreases in the valuation of investments held at the period end. (b) Special distributable reserve. This reserve is treated as distributable profits available to be used for all purposes permitted by Jersey company law including the buying back of ordinary shares, the payment of dividends (see note 7) and the payment of preliminary expenses. (c) Revenue reserve. The net profit/(loss) and total comprehensive income/(loss) arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve and is available for paying dividends. (h) Share capital Ordinary shares The Company’s ordinary shares are classified as equity based on the substance of the contractual arrangements and in accordance with the definition of equity instruments under IAS 32. The proceeds from the issue of ordinary shares are recognised in the Statement of Changes in Equity, net of issue costs. Treasury shares When the Company purchases its ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs is recognised as a deduction from the stated capital account. When these shares are sold subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to or from the stated capital account. (i) Segmental information The Company, holds a wide variety of different investments in a wide range of issues locating in different geographies and operating in different sectors. However, resources are allocated and the business is managed by the chief operating decision-makers, the directors, on an aggregated basis. Strategic and financial management decisions are determined centrally by the Directors and, on this basis, the Company operates as a single investment management business and no segmental reporting is provided. 2 Income 2022 £’000 2021 £’000 Income from investments \* Dividend income 3,684 2,934 Interest on fixed income securities † 18,678 18,217 Total income22,362 21,151 \* All investment income arises on financial assets valued at fair value through profit or loss. † Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. ![]() 43 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements 3Investment management fee 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 2021 Revenue £’000 2021 Capital £’000 2021 Total £’000 Investment management fee 1,5955312,126 1,4564851,941 The Company’s investment manager is CQS (UK) LLP (“CQS”). As per the Investment Management Agreement dated 18 September 2019, the management fee is charged at a rate of 0.80% per annum on the Company’s total assets (being total assets less current liabilities (other than bank borrowings and ignoring any taxation which is or may be payable by the Company)) up to £200 million, 0.70% per annum of total assets in excess of £200 million and up to and including £300 million and 0.60% per annum thereafter. The management fee is paid monthly in arrears. The contract between the Company and CQS (UK) LLP may be terminated by either party giving not less than 12 months’ notice of termination. During the year ended 30 June 2022, investment management fees of £2,126,000 were incurred (year ended 30June 2021: £1,941,000), of which £173,000 was payable at the period end (year ended 30 June 2021: £168,000). Investment management fees have been allocated 75% to revenue and 25% to capital. 4Other Expenses 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 2021 Revenue £’000 2021 Capital £’000 2021 Total £’000 Secretarial and administration fees 207–207 202–202 Directors’ fees 169–169 157–157 Auditors’ remuneration for: – audit services 48–48 40–40 Broker fees 30–30 30–30 Printing 8–8 20–20 Bank and custody charges 110–110 84–84 Registrars’ fees 37–37 34–34 Depositary fees 45–45 45–45 Legal and professional fees 40–40 43–43 Other 7875153 14514159 77275847 80014814 Directors’ fees On 3 June 2021, the Board approved an increased level of remuneration for the Directors from £156,500 (Chair: £40,000; Audit Chair: £34,000 and other directors: £27,500) to £169,000 with annual effect from 1 July 2021 as follows: Chair £42,500 Audit Chair£36,500 Other £30,000 Directors’ fees of £7,500 were accrued as at 30 June 2022. Further details are provided in the Directors’ Remuneration Report on page 30. No pension contributions were payable in respect of any of the Directors and the Company does not have any employees. Non-audit fees paid to the auditor There were no non-audit fees paid to the auditor during the year ended 30 June 2022 (year ended 30 June 2021: £nil). ![]() 44 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements 5Interest expense 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 2021 Revenue £’000 2021 Capital £’000 2021 Total £’000 Interest expense 456152608 326107433 Interest expense and similar charges have been allocated 25% to capital and 75% to revenue as explained in note 1(e). 6 Taxation The taxation charge for the year is comprised of: 2022 Revenue £’000 2022 Capital £’000 2022 Total £’000 2021 Revenue £’000 2021 Capital £’000 2021 Total £’000 Irrecoverable withholding tax suffered 377–377 267–267 The taxation on profit differs from the theoretical expense that would apply on the Company’s profit before taxation using the applicable tax rate in Jersey of 0% (2021: 0%) as follows: 2022 £’000 2021 £’000 Profit on ordinary activities before taxation 4,384 41,840 Theoretical tax expense at 0% (2021: 0%) – – Effects of: Foreign withholding tax 377 267 Current year revenue tax charge 377 267 7 Dividends 2022 £’000 2021 £’000 Amounts recognised as distributions to equity holders in the year: Dividends in respect of the year ended 30 June 2021 – Fourth interim dividend of 1.47p (2020: 1.46p) per ordinary share 6,557 6,319 Dividends in respect of the year ended 30 June 2022 – First interim dividend of 1.00p (2021: 1.00p) per ordinary share 4,552 4,359 – Second interim dividend of 1.00p (2021: 1.00p) per ordinary share 4,636 4,383 – Third interim dividend of 1.00p (2021: 1.00p) per ordinary share 4,687 4,392 20,432 19,453 A fourth interim dividend in respect of the year ended 30 June 2022 of 1.48p per ordinary share was paid on 26August 2022 to Shareholders on the register on 29 July 2022, having an ex-dividend date of 28 July 2022. In accordance with IFRS, dividends paid to the Company’s Shareholders are recognised when they become payable on the ex-dividend date, consequently the fourth interim dividend has not been included as a liability in these Financial Statements and will be recognised in the period in which it becomes payable. ![]() 45 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements 8Basic and diluted earnings per Ordinary Share 2022 Revenue pence 2022 Capital pence 2022 Total pence 2021 Revenue pence 2021 Capital pence 2021 Total pence Basic and diluted earnings/(loss) per ordinary share 4.16p(3.29p)0.87p 4.18p5.32p9.50p The revenue earnings per ordinary share is based on the net profit after taxation of £19,163,000 (year ended 30June 2021: £18,302,000) and the capital return per ordinary share is based on a net capital loss of £15,156,000 (year ended 30 June 2021: net capital gain of £23,271,000). Both the revenue and capital earnings per ordinary share is based on a weighted average of 460,845,694 (year ended 30June 2021: 437,519,666) ordinary shares in issue throughout the year. Total earnings per ordinary share reflects both revenue earnings and capital returns per ordinary share. The Company has not issued any instruments that could potentially dilute basic earnings per ordinary share in the future. Therefore, the Company’s basic earnings per ordinary share is equivalent to its diluted earnings per ordinary share. There have been no transactions involving the Company’s ordinary shares between 1 July 2022 and 15 September 2022 other than those disclosed in note 24, which were issued at a premium to the 30 June 2022 NAV. 9Financial assets designated at fair value through profit or loss All financial assets are valued at fair value through profit or loss. Gains or losses arising from changes in the fair value of investments are included in the Statement of Comprehensive Income. 2022 £’000 2021 £’000 Equity shares 49,687 39,090 Fixed income securities \* 213,706 218,377 263,393 257,467 \* Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. 2022 £’000 2021 £’000 Opening valuation257,467 230,741 Purchases at cost 106,064 80,009 Sales proceeds (85,833) (77,428) Realised gains/(losses) on sales 3,631 (11,575) Effective interest adjustment 154 232 Unrealised (losses)/gains (18,090) 35,488 Closing valuation263,393 257,467 Losses on investments 2022 £’000 2021 £’000 Realised gains/(losses) 1 3,631 (11,575) Unrealised (losses)/gains 2 (18,090) 35,488 Gains/(losses) on investments(14,459) 23,913 1 Realised gains/(losses) on financial assets designated at fair value through profit or loss is made up of gains of £5,680,000 (2021: 2,755,000) and losses of £2,049,000 (2021: 14,330,000). 2 Unrealised (losses)/gains on financial assets designated at fair value through profit or loss is made up of gains of £14,225,000 (2021: 47,622,000) and losses of £32,315,000 (2021: 12,133,000). ![]() 46 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements 10Debtors and Other Receivables 2022 £’000 2021 £’000 Amounts due on new share issuance – 275 Accrued income 3,807 3,302 Prepayments and other debtors 12 8 3,819 3,585 11Bank Loan 2022 £’000 2021 £’000 Bank loan facility – opening balance33,000 31,000 Drawdowns – 2,000 Bank loan facility – closing balance33,000 33,000 The Company had a short term unsecured loan facility of £35 million with Scotiabank Europe Plc (“Scotiabank”) at the start of the year. On 17 December 2021, the Company entered into a Seventh Amendment Agreement with Scotiabank on the following terms: • the committed loan facility has been increased to £45 million; •the Agreement contains an option to increase the facility by a further £5 million – no commitment fees are payable on the £5 million until this option is exercised. • the tenor of the facility would be 2 years from the renewal date; • the interest on the loan would be a margin of 1.45% p.a plus a daily non-cumulative compounded RFR rate. • the commitment fees would be 0.375% p.a on the daily Available Commitment if the utilised Commitment exceeds 50 per cent of the Commitment and 0.425% on the daily Available Commitment if the utilised Commitment is less than or equal to 50 per cent of the Commitment. As at 30 June 2022, an amount of £33 million (30 June 2021: £33 million) was drawn down from the facility. The following are the covenants for the facility held as at 30 June 2022: • the borrower shall not permit the adjusted asset coverage to be less than 4 to 1 • the borrower shall not permit the net asset value to be less than £95,000,000 at any time • the borrower shall maintain an additional adjusted asset coverage of at least 1.5 to 1 at all times For the year ended 30 June 2022 and up until the date of this report, the Company has complied with all covenants of the loan facility. The bank loan facility is a financial liability held at amortised cost. 12Creditors and Other Payables 2022 £’000 2021 £’000 Amounts due to brokers 613 4,980 Interest on bank loan facility 28 16 Other creditors \* 2,570 305 3,211 5,301 \* Included in other creditors is an amount of £2,196,000 which relates to an overpayment of dividend by one of the Company’s equity investments, Aggregated Micro 8PCT 16-171036. The excess dividend was paid back to Aggregated Micro 8PCT 16-171036 on 5 July 2022. ![]() 47 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements 13Stated Capital Account Authorised The authorised share capital of the Company is represented by an unlimited number of ordinary shares of no par value. Allotted, called up and fully-paid Number of ordinary shares Amount received £’000 Share Issue Costs £’000 Share capital £’000 Total as at 1 July 2021445,051,858203,416 1,000,000 ordinary shares of no par value allotted on 1 July 2021 at 55.30p1,000,000553(4)549 2,100,000 ordinary shares of no par value allotted on 4 August 2021 at 54.80p2,100,0001,151(9)1,142 500,000 ordinary shares of no par value allotted on 10 August 2021 at 54.80p500,000274(2)272 500,000 ordinary shares of no par value allotted on 13 August 2021 at 54.40p500,000272(2)270 500,000 ordinary shares of no par value allotted on 19 August 2021 at 54.40p500,000272(2)270 5,500,000 ordinary shares of no par value allotted on 9 September 2021 at 54.90p5,500,0003,020(23)2,997 1,000,000 ordinary shares of no par value allotted on 1 November 2021 at 55.50p1,000,000555(4)551 500,000 ordinary shares of no par value allotted on 2 November 2021 at 55.50p500,000278(3)275 500,000 ordinary shares of no par value allotted on 6 December 2021 at 55.50p500,000278(2)276 600,000 ordinary shares of no par value allotted on 15 December 2021 at 56.00p600,000336(3)333 1,750,000 ordinary shares of no par value allotted on 23 December 2021 at 55.90p1,750,000978(7)971 1,400,000 ordinary shares of no par value allotted on 24 December 2021 at 55.90p1,400,000783(6)777 2,750,000 ordinary shares of no par value allotted on 29 December 2021 at 55.90p2,750,0001,537(11)1,526 1,100,000 ordinary shares of no par value allotted on 1 February 2022 at 55.50p1,100,000611(6)605 900,000 ordinary shares of no par value allotted on 11 February 2022 at 55.30p900,000498(4)494 850,000 ordinary shares of no par value allotted on 21 February 2022 at 55.60p850,000473(3)470 650,000 ordinary shares of no par value allotted on 22 February 2022 at 55.40p650,000360(3)357 650,000 ordinary shares of no par value allotted on 23 February 2022 at 55.40p650,000360(3)357 500,000 ordinary shares of no par value allotted on 15 March 2022 at 53.40p500,000267(2)265 400,000 ordinary shares of no par value allotted on 24 March 2022 at 53.60p400,000214(2)212 2,250,000 ordinary shares of no par value allotted on 4 May 2022 at 54.70p2,250,0001,231(8)1,223 500,000 ordinary shares of no par value allotted on 16 May 2022 at 53.80p500,000269(2)267 500,000 ordinary shares of no par value allotted on 27 May 2022 at 53.90p500,000267(2)265 1,000,000 ordinary shares of no par value allotted on 31 May 2022 at 53.80p1,000,000538(4)534 600,000 ordinary shares of no par value allotted on 6 June 2022 at 53.80p600,000323(2)321 600,000 ordinary shares of no par value allotted on 15 June 2022 at 54.00p600,000324(2)322 1,500,000 ordinary shares of no par value allotted on 21 June 2022 at 53.60p1,500,000804(5)799 1,000,000 ordinary shares of no par value allotted on 22 June 2022 at 53.80p1,000,000537(4)533 Total as at 30 June 2022476,651,85817,363(130)220,649 The balance of shares left in Treasury at the year-end was nil (2021: nil shares). On 13 July 2022, a block listing facility for 45,600,000 new shares was approved by the UK Listing Authority. This facility is used for the purposes of satisfying market demand. Since 30 June 2022, a further 4,350,000 ordinary shares have been issued for consideration of £2,273,000. Because the criteria in paragraphs 16c and 16d of IAS 32 Financial Instruments: Presentation have been met, the stated capital of the Company is classified as equity even though there is an annual continuation vote. Ordinary shares issued are accounted for based on the associated trade date. 14 Reserves The capital of the Company is managed in accordance with its investment policy, in pursuit of its investment objective, which is detailed on page 13. On 24 May 2007, the Royal Court of the Island of Jersey confirmed that the amount standing to the credit of the Company’s stated capital account be reduced by 75% and was used to create the special distributable reserve in the Company’s accounts. This reserve is treated as distributable profits available to be used for all purposes permitted by Jersey company law including the buying back of ordinary shares, the payment of dividends and the payment of preliminary expenses. Capital management policies and procedures The Board defines capital as financial resources available to the Company. The Company’s capital as at 30 June 2022 comprises its stated capital, special distributable reserve, capital reserve and revenue reserve at a total of £234,986,000 (2021: £234,178,000). ![]() 48 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements The Company’s capital management objectives are: –to ensure that the Company will be able to continue as a going concern; and –to maximise the capital return to its equity Shareholders through an appropriate balance of equity capital and debt. The Board normally seeks to limit gearing to 25% of Shareholders’ funds at any given time. The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Investment Manager’s views on the market, and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company has no externally imposed capital requirements. The capital of the Company is managed in accordance with its investment policy detailed in the Strategic Review on page 13. 15Net Asset Value per Ordinary Share The net asset value per ordinary share and the net asset value attributable to the ordinary sharesat the year-end calculated in accordance with their entitlements in the Articles of Association were as follows: 20222021 Net Asset Value (£'000) 234,986 234,178 Net Asset per ordinary share (pence) 49.30p 52.62p NAV per ordinary share has been calculated based on the share capital in issue as at year end.The issued share capital as at 30June 2022 comprised of 476,651,858 ordinary shares (30 June 2021: 445,051,858). 16Financial Instruments The Company’s financial instruments comprise its investment portfolio, cash balances, bank loan and debtors and creditors that arise directly from its operations. As an investment company, the Company holds a portfolio of financial assets and financial liabilities in pursuit of its investment objective. The Company uses flexible borrowings for short term purposes, and to seek to enhance the returns to Shareholders, when considered appropriate by the Investment Manager. Financial assets designated at fair value through profit or loss (see note 9) are held at fair value. For listed securities trading actively, fair value is considered to be equivalent to the most available recent bid price. Where listed securities are not trading actively, independent broker quotes are referenced to estimate fair value. For unlisted securities, fair value is determined by the Board using valuation techniques based on unobservable inputs, mainly using broker quotes. The fair value of other receivables, cash and cash equivalents and other payables is represented by their carrying value in the Statement of Financial Position shown on page 37. These are short term financial assets and liabilities whose carrying value approximate fair value. The main risks that the Company faces arising from its financial instruments are: (i) market price risk, being the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices and comprises currency risk, interest rate risk and other price risk; (ii) interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates; (iii) foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency exchange rates; (iv) credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and (v) liquidity risk, being the risk that the bank may demand repayment of the loan and/or that the Company may not be able to liquidate quickly its investments. The Company held the following categories of financial instruments as at 30 June 2022 all of which are held at amortised cost, other than financial assets designated at fair value through profit or loss, which are held at fair value. The Directors are of the opinion that for the financial instruments held at amortised cost, the carrying value approximates their fair value. ![]() 49 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements 2022 £’000 2021 £’000 Financial assets Financial assets designated at fair value through profit or loss 263,393 257,467 Cash and cash equivalents 3,985 11,427 Amounts due on new share issuance – 275 Accrued income 3,807 3,302 Financial liabilities Amount due to brokers 613 4,980 Bank loan 33,000 33,000 Interest on bank loan facility 28 16 Other creditors 2,570 305 17Market Price Risk Market price risk (including other price risk) arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the Board’s investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy. Investment and portfolio performance are discussed in the Investment Manager’s Review and further information on the investment portfolio is set out on pages 7 to 8. These pages do not form part of the audited Financial Statements. If the investment portfolio valuation fell 7.5% at 30June 2022, the impact on the profit or loss and the net asset value would have been negative £19.8 million (2021: a fall of 7.5% would have impacted the profit or loss and the net asset value by negative £19.4 million). Due to the effect of gearing, the impact on the net asset value per ordinary share would have been a decrease of 8.4% (2021: decrease of 8.3%). If the investment portfolio valuation rose by the same amount, the effect would have been equal and opposite. The calculations are based on the portfolio valuation at the Statement of Financial Position date and is not representative of the period as a whole, and may not be reflective of future market conditions. The Directors believe 7.5% is a relevant percentage based on average market volatility in recent years. 18Interest Rate Risk The Company’s financial assets and liabilities, with the exception of cash and cash equivalents (see below), that are subject to interest rate risk are detailed below. 2022 £’000 2022 Weighted average interest rate (%) 2022 Weighted average period for which the rate is fixed (years) 2021 £’000 2021 Weighted average interest rate (%) 2021 Weighted average period for which the rate is fixed (years) Financial assets: Fixed rate instruments & convertible securities 158,9417.124.31 130,8147.104.31 Floating rate notes 54,5314.08n/a 78,5915.97n/a Preference shares 23411.90n/a 8,97211.89n/a Financial liabilities: Bank Loan 33,0002.64n/a 33,0001.43n/a ![]() 50 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements Financial assets Fixed, floating rate and preference share yields, and their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government’s fiscal position, short term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company. Interest rates on fixed income instruments are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. Consequentially, if a fixed income instrument is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a fixed income instrument the market price at any given time will depend on the market environment at that time. Therefore, a fixed income instrument sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred. Interest rates on floating rate instruments vary throughout the life of the instrument based on movements in the applicable underlying base rate. Consequentially, the total return achieved on these positions changes throughout the life of position. In addition, over the life of the financial instrument, the market price of such instruments will depend on the market environment at that time. Therefore, a floating rate instrument sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred. Cash and cash equivalents When the Company retains cash balances they are held in floating ratedeposit accounts. As at 30 June 2022, cash and cash equivalents included cash amount of £4,088,000 held in sterling (2021: £10,335,000) and an immaterial amount of cash overdraft of £103,000 in a range of other currencies (2021: positive cash balance of £1,092,000). The benchmark rate which determines the interest payments received on sterling interest bearing cash balances is the UK bank base rate, which was 1.25% at 30 June 2022 (2021: 0.10%). Financial liabilities The Company has borrowed in sterling at a variable rate of interest based on the UK bank base rate. If the bank base rate increased by 1.00%, the impact on the net assets would have been a loss of £330,000 (2021: £330,000). If the bank base rate had decreased by 1.00%, the impact on the profit or loss would have been equal and opposite. The calculations are based on borrowings as at the respective Statement of Financial Position dates and are not representative of the year as a whole. The Directors believe 1.00% is relevant based on observed interest rate adjustments in recent years. At year end, the Company held bank loans of £33 million from Scotiabank, details of which are contained in note 11 on page 46. 19Foreign Currency Risk The Company invests in overseas securities and may hold foreign currency cash balances which give rise to currency risks. It is not the Company’s policy to hedge this risk on a continuing basis but it may do so from time to time. Foreign currency exposure at 30 June 2022 was as follows: 2022 Investments £’000 2022 Cash £’000 2022 Accrued Income £’000 2022 Total £’000 2021 Investments £’000 2021 Cash £’000 2021 Accrued Income £’000 2021 Total £’000 Euro 31,977(22)23732,192 22,08381720223,102 Australian dollar 191––191 5872–589 US dollar 61,126(315)1,41863,229 56,4032381,31057,951 Norwegian krone 1,064–151,079 1,45416341,504 Canadian dollar 314191–505 686184708 Swedish Krona 4,01543384,096 1,110051,115 99,687(103)1,708101,292 82,3231,0911,55584,969 If the value of sterling had weakened against each of the currencies in the portfolio by 5% (2021: 5%), the impact on the profit or loss and the net asset value would have been positive £5.3 million (2021: positive £4.4 million). If the value of sterling had strengthened by the same amount the impact on the profit or loss and the net asset value would have been negative £4.8 million (2021: negative £3.9 million). The calculations are based on the portfolio valuation and accrued income balances at the balance sheet date and are not representative of the period as a whole and may not be reflective of future market conditions. The Directors believe 5% is relevant based on the average market volatility in exchange rates in recent years. ![]() 51 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements 20Credit Risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum risk exposure at the balance sheet date. At the reporting date, the Company’s financial assets exposed to credit risk amounted to the following: 2022 £’000 2021 £’000 Fixed income securities \* 213,706 218,377 Cash and cash equivalents 3,985 11,427 Amounts due on new share issuance – 275 Accrued income 3,807 3,302 221,498 233,381 \* Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. Credit risk on fixed income securities and convertible bonds instruments is considered to be part of market price. The credit ratings for the fixed income securities held by the Company as at 30 June have been listed below: Rating of fixed income securities 2022 % 2021 % BB- 5.3 4.0 B+ 4.0 2.7 B 4.0 6.7 B- 1.3 2.7 CC 1.3 – CCC 2.7 4.0 CCC+ 6.7 4.0 CCC- 1.3 1.3 Not rated 73.4 74.6 100.0 100.0 Source: 2022: S&P, 2021: S&P The percentage above represents the value of fixed income securities of £213,706,000 (2021: £218,377,000) included in the Statement of Financial Position which are exposed to credit and counterparty risk by credit rating. Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the acceptable credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk. The Company’s cash and most of the assets are held by BNP Paribas Securities Services S.C.A. The Company holds a residual cash balance with HSBC of £11,000 (2021: £11,000). The rating agency Moody’s assigns a rating of A1 to HSBC and A2 to BNPP. Should the credit quality or the financial position of BNPP or HSBC deteriorate significantly the Investment Manager will move the cash holdings to another bank. There were no contingencies or guarantees outstanding at the balance sheet date. ![]() 52 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements 21Liquidity Risk Market liquidity risk The Company’s financial instruments include investments which are not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate these investments within a short time frame. The Company’s listed securities are considered to be readily realisable. Funding liquidity risk The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. 30 June 2022 Contractual cash flows Carrying amount £000 0-1 year £000 1-2 years £000 Bank loan 33,000(318)(33,318) Creditors and other payables 3,211(3,211)– 36,211(6,388)(36,177) 30 June 2021 Contractual cash flows Carrying amount £000 0-1 year £000 1-2 years £000 Bank loan33,000(33,172) Creditors and other payables5,301(5,301)– 38,501(38,473)– The table above illustrates the contractual undiscounted cash flows relating to the financial liabilities of the Company. As disclosed in Note 11, the Company has availed of a secured bank loan facility of £45 million with Scotiabank, out of which, £33 million has been drawn-down and is outstanding as at 30 June 2022. In addition to this, the Company maintains sufficient cash and readily realisable securities to pay accounts payable, accrued expenses and any repayment on its bank facility. The interest payments on the bank loan in the table above reflect market forward interest rates available at the reporting date and these amounts may change as market interest rates change. The Company’s liquidity risk is managed on an ongoing basis by the Investment Manager in accordance with policies and procedures in place as described in the Directors’ Report. The Company’s overall liquidity risks are monitored on a quarterly basis by the Board. 22Fair Value Hierarchy International Financial Reporting Standard (“IFRS”) 13 Fair Value Measurement requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows: • Level 1 – investments quoted in an active market; • Level 2 – investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices; • Level 3 – investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or based on observable market data. Transfers in and out of the levels are deemed to have occurred at the start of the reporting period. Investments valued using stock market active prices are disclosed as Level 1 and this is the case for the quoted equity investments that the Company holds. Securities in Level 2 are priced using evaluated prices from a third party vendor, together with a price comparison made to evaluated secondary and tertiary third party sources, including broker quotes and benchmarks. As a result, these investments are disclosed as Level 2 - recognising that the fair values of these investments are not as visible as quoted investments and their higher inherent pricing risk. ![]() 53 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notes to the Financial Statements Financial Statements Investments included as Level 3 are priced by the investment manager using a valuation technique reviewed by the Board taking into account, where appropriate, latest dealing prices, broker statements, valuation information and other relevant factors. Financial assets at fair value Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 Fixed income securities \* 234209,6273,845213,706 Equity shares 45,1954,03845449,687 As at 30 June 202245,429213,6654,299263,393 Financial assets at fair value Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 Fixed income securities \* 8,972208,783622218,377 Equity shares33,5785,4981439,090 As at 30 June 202142,550214,281636257,467 \* Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. Transfers between level 1 and level 2: SQN Secured Income Fund Plc £353,000 (2021: £1,283,000) and Croma Security Solutions Gro £625,000 (2021: £700,000) were transferred out of level 1 to level 2 because they were not traded on active markets. If the market value of the Level 3 investments fell by 5% (2021: 5%), the impact on the profit or loss and the net asset value would have been negative £0.21 million (2021: negative £0.03 million). If the value of the Level 3 investments rose by the same amount, the effect would have been equal and opposite. IFRS13 requires disclosure, by class of financial instrument, if the effect of changing one or more input to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believes that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly. The following shows a reconciliation from the beginning to the end of the year for fair value measurements in Level 3 of the fair value hierarchy. Level 3 Financial Assets 2022 £’000 2021 £’000 Opening valuation 636 8,864 Additions 374 – Sales (88) (942) Unrealised (losses)/gains (9,954) 9,973 Realised gains/(losses) 198 (10,436) Transfers out of Level 3 (623) (7,775) Transfers into Level 3 13,756 952 Closing valuation4,299 636 Transfers in and out of level 3: Raven Russia 12% 09-31/12/2059 £nil (2021: £8,757,000) and Raven Property Group Ltd £nil (2021: £455,000) were transferred out of level 1 to level 3 because they were delisted during the year. Matalan Finance 9.5% 18-31/01/2024 £3,845,000 (2021: £4,543,000) was transferred out of level 2 to level 3 because of the significant impact of unobservable inputs in determining its fair value as at the year end. Brighthouse Fin 9% 18-15/05/2023 £nil (2021: £nil) was transferred out of level 2 to level 3 because it has been categorized as default/zero value PIK. REA Holdings plc 7.5% 30/06/2022 £764,000 (2021: £622,000) and Oro Negro Drilli 7.5% 24/01/2023 £41,000 (2021: £nil) were transferred out of level 3 to level 2 since they have been priced through broker quotes. ![]() 54 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Financial Statements Notes to the Financial Statements Quantitative information of significant unobservable inputs – Level 3 The following tables summarise the significant unobservable inputs the Company used to value its significant investments categorised within Level 3 as at 30 June 2022 and 30 June 2021: 30 June 2022 Description Fair value as at 30 June 2022 £000 Valuation technique Significant Unobservable inputs Range/input Weighted Average Matalan Finance 9.5% 18-31/01/2024 3,845Vendor PricingUnadjusted Broker Quote1N/A R.E.A Holdings Plc CW 15/07/2025 454Black Scholes modelVolatility57.1N/A Total4,299 30 June 2021 Description Fair value as at 30 June 2021 £000 Valuation technique Significant Unobservable inputsRange/input Weighted Average REA Holdings Plc 7.5% 30/06/2022622Vendor PricingUnadjusted Broker Quote1N/A R.E.A Holdings Plc CW 15/07/202514Black Scholes modelVolatility57.1N/A Total 636 The remaining 22 investments (2021: 20) classified as Level 3 have not been included in the above analysis as they have fair value of nil as at 30 June 2022 and 30 June 2021. 23Transaction with the Investment Manager and Related Parties All transactions with related parties are carried out at an arm’s length basis. There are no transactions with the Board other than aggregated remuneration for services as Directors as disclosed in the Directors’ Remuneration Report on page 30 and as set out in note 4 to the Financial Statements. The beneficial interests of the Directors in the shares of the Company are disclosed on page 20. There are no outstanding balances to the Directors at the year end. Details of the fee arrangement with the Investment Manager are disclosed in note 3. 24Subsequent Events The Board has evaluated subsequent events for the Company through to 15 September 2022, the date the Financial Statements were available to be issued, and has concluded that the material events listed below do not require adjustment of the Financial Statements. Share Issues Following the year end the Company undertook further issues of shares issuing, in total, an additional 4,350,000 ordinary shares of no par value for total consideration of £2,273,000. As at the date of this report, the total number of ordinary shares by the Company was 481,001,858. Dividend declaration The fourth interim dividend of 1.48 pence per ordinary share was announced on 21 July 2022 and paid on 26 August 2022 to Shareholders on the register on 29 July 2022, having an ex-dividend date of 28 July 2022. Block listing facility On 13 July 2022, a block listing facility for 45,600,000 new shares was approved by the UK Listing Authority. This facility is used for the purposes of satisfying market demand. ![]() 55 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Glossary of Terms and Definitions Supplemental Information and Annual General Meeting #### Supplemental Information and Annual General Meeting Glossary of Terms and Definitions AIC Code Association of Investment Companies Code of Corporate Governance published in February 2019. Alternative Performance Measures (“APMs”) Alternative performance measures are numerical measures of the Company’s current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company’s applicable financial framework includes IFRS and the AIC SORP. Company CQS New City High Yield Fund Limited ESG Environmental, Social and Governance. FCA Financial Conduct Authority. FRN Floating Rate Note. ISAE International Standard for Assurance Engagements. Net Asset Value or NAV and NAV per ordinary share The value of total assets less total liabilities. Liabilities for this purpose include current and long–term liabilities. To calculate the net asset value per ordinary share, the net asset value divided by the number of shares in issue. PIK Payment in kind. Reference rate (RFR) The SONIA (Sterling Overnight Index Average) reference rate displayed in the relevant screen of any authorised distributor of that reference rate. SME Small and medium–sized enterprises. United Nations PRI United Nations Principles for Responsible Investment ![]() 56 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Supplemental Information and Annual General Meeting Alternative Performance Measures In accordance with European Securities and Markets Authority (“ESMA”) Guidelines on APMs the Board has considered what APMs are included in the Annual Financial Report and Financial Statements which require further clarification. The Company uses the following APMs (as described below) to present a measure of profitability which is aligned with the requirements of our investors and potential investors, to draw out meaningful data around revenues and earnings, and to provide additional information not required for disclosure under accounting standards: • Net Asset Value total return • Ordinary share price total return • Revenue earnings per ordinary share • Annual dividends per ordinary share • Dividend cover • Revenue reserve per ordinary share • Dividend yield •Premium •Gearing • Ongoing charges ratio All APMs relate to past performance. The following tables detail the methodology of the Company’s APMs. NAV and ordinary share price total return The return to Shareholders is calculated on a per ordinary share basis by adding dividends paid and declared in the period to the increase or decrease in the share price (bid) or net asset value. The dividends are assumed to have been reinvested in the form of ordinary shares or net assets. 2022 Annual dividend per ordinary shareNAV Share price (bid) 30 June 20214.47p52.6254.80 30 June 20224.48p49.3051.20 Capital return(6.31%)(6.57%) Effect of dividend reinvestment8.35%7.78% Total return2.04%1.21% 2021 Annual dividend per ordinary shareNAV Share price (bid) 30 June 20204.46p47.5247.40 30 June 20214.47p52.6254.80 Capital return10.73%15.61% Effect of dividend reinvestment10.65%10.70% Total return21.38%26.31% Revenue earnings per ordinary share Revenue earnings (which includes dividends paid out during the year) divided by the weighted average number of ordinary shares in issue during the financial year. 20222021 Revenue earningsa £19,164,000 £18,302,000 Weighted average number of ordinary shares in issueb 460,845,694 437,519,666 Revenue earnings per ordinary share(a/b) \* 1004.16p4.18p #### Alternative Performance Measures ![]() 57 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Alternative Performance Measures Supplemental Information and Annual General Meeting Annual dividend per ordinary share The total amount of dividends declared for every issued ordinary share over the Company’s financial year. Dividend HistoryRatexd dateRecord datePayment date First interim 20221.00p28 October 202129 October 202130 November 2021 Second interim 20221.00p27 January 202228 January 202225 February 2022 Third interim 20221.00p28 April 202229 April 202227 May 2022 Fourth interim 20221.48p28 July 202229 July 202226 August 2022 Annual dividend per ordinary share4.48p First interim 20211.00p22 October 202023 October 202030 November 2020 Second interim 20211.00p28 January 202129 January 202126 February 2021 Third interim 20211.00p29 April 202130 April 202128 May 2021 Fourth interim 20211.47p29 July 202130 July 202131 August 2021 Annual dividend per ordinary share4.47p Dividend cover Earnings per ordinary share divided by the annual dividend per ordinary share expressed as a ratio. 20222021 Earnings per ordinary sharea4.16p4.18p Annual dividend per ordinary shareb4.48p4.47p Dividend covera/b0.93x0.94x Revenue reserves per ordinary share Revenue reserve (which includes dividends paid out during the year) divided by the number of ordinary shares at the balance sheet date. 20222021 Revenue reservea£15,562,000£16,830,543 Ordinary shares in issueb476,651,858445,051,858 Revenue reserves per ordinary share(a/b) \* 1003.26p3.78p Dividend yield The annual dividend per ordinary share expressed as a percentage of the share price (bid price). 20222021 Annual dividend per ordinary sharea4.48p4.47p Share price (bid price)b51.20p54.80p Dividend yielda/b8.75%8.16% ![]() 58 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Supplemental Information and Annual General Meeting Alternative Performance Measures Premium The amount by which the market price per ordinary share of an investment company is higher or lower than the net asset value per ordinary share. The discount or premium is expressed as a percentage of the net asset value per ordinary share. 20222021 Share price (bid price)a51.20p54.80p NAV per ordinary shareb49.30p52.62p Premium(a-b)/b3.86%4.14% Gearing The level of borrowing that the Company has undertaken. Represented by total assets (being total assets less current liabilities (excluding borrowings)) less all cash, expressed as a percentage of Shareholders’ funds (being the Net Asset Value of the Company) minus 100. 2022 £’000 2021 £’000 Total assets271,197272,479 Current liabilities (excluding borrowings)(3,211)(5,301) Cash and cash equivalents(3,985)(11,427) Total a 264,001255,751 Net Asset Valueb234,980234,178 Gearing((a/b)-1) \* 10012.35%9.21% Ongoing charges ratio A measure of all operating costs incurred in the reporting period, calculated as a percentage of average net assets in that year. Operating costs exclude costs suffered within underlying investee funds, costs of buying and selling investments, interest costs, taxation and the costs of buying back or issuing ordinary shares. 2022 £ 2021 £ Average NAVa239,974,073214,507,033 Operating expenses per Statement of Comprehensive Income2,972,7632,754,644 Ineligible expenses(124,839)(64,535) Operating expensesb2,847,9242,690,109 Ongoing charges figure (calculated using the AIC methodology)b/a1.19%1.25% ![]() 59 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Explanation of Annual General Meeting resolutions Supplemental Information and Annual General Meeting #### Explanation of Annual General Meeting resolutions Resolution 1: Annual Financial Statements and Directors’ and Auditor’s Reports The Directors are required to lay before the AGM copies of the Company’s most recent Annual Financial Statements and the Directors’ Report and Auditor’s Report in respect of the financial year. Shareholders will be given an opportunity at the meeting to ask questions on these items before being invited to receive them. Resolution 2: Remuneration Report As a Jersey domiciled Company, the Directors are not required to present the Company’s remuneration policy to shareholders at the AGM. In line with best practice, however, the Directors present the Board’s remuneration report as contained in the Company’s Annual Financial Statements to shareholders for approval. Resolution 3: Dividend Policy To approve the Company’s dividend policy as detailed on page 20. Resolutions 4 to 8: Re-election, and appointment of Directors In accordance with the recommendations of the AIC Code of Corporate Governance (the “AIC Code”), all Directors submit themselves for annual re-election at the AGM. Resolution 9: Re-appointment and remuneration of the Auditor Shareholders are requested to approve the reappointment of the Company’s Auditor, KPMG Channel Islands Limited, each year and are asked to give Directors the authority to determine the Auditor’s remuneration. KPMG Channel Islands Limited has expressed its willingness to continue as Auditor of the Company. Resolution 10:Continuation Vote In accordance with the Articles of Association this resolution proposes to continue the Company as an investment company. In the event that the resolution is not passed the Board would put forward further proposals at an extraordinary general meeting to liquidate or reconstruct the Company. Resolution 11: Directors’ Authority to Allot Shares Under the Articles the Directors are required to seek a disapplication of pre-emption rights from shareholders before issuing new shares on a non pre-emptive basis. In order to continue with its programme of new share issues, your Board is therefore also proposing that the annual disapplication of preemption rights authority is given to the Directors so that they may continue to issue shares as and when appropriate is renewed. Accordingly, Resolution 11 proposes a renewal of the disapplication of the pre-emption rights in respect of 10% of the ordinary shares in issue, set to expire on the earlier of eighteen months from the date of the resolution or at the conclusion of the Annual General Meeting to be held in 2023. New ordinary shares will not be issued at a price less than the prevailing net asset value per ordinary share, after taking into account any costs incurred by the Company in connection with such issue. Any issues of new ordinary shares will be carried out in accordance with the Listing Rules. Resolution 12: Directors’ Authority to Buy Back Shares The current authority of the Company to make purchases of up to approximately 14.99% of its issued capital expires at the end of the Annual General Meeting and Resolution 12 seeks renewal of such authority until the next Annual General Meeting (or the expiry of fifteen months from the date of the passing of the resolution, if earlier). The maximum and minimum prices to be paid for shares are set out in Resolution 12. This power will be exercised only if, in the opinion of the Directors, a repurchase would result in an increase in net asset value per ordinary share and would be in the best interests of shareholders as a whole. Any shares purchased under this authority will either be held in treasury or cancelled. ![]() 60 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Supplemental Information and Annual General Meeting Notice of Annual General Meeting #### Notice of Annual General Meeting Notice is hereby given that the fifteenth Annual General Meeting of CQS New City High Yield Fund Limited will be held at 11.00 a.m. at IFC1, The Esplanade, St. Helier, Jersey, JE1 4BP on 1 December 2022 for the following purposes: To consider and, if thought fit, pass resolutions 1 to 10 as ordinary resolutions and resolutions 11 and 12 as special resolutions: Ordinary Business 1. To receive the Annual Financial Statements of the Company andthe reports of the Directors and Auditor for the year ended 30 June 2022. 2. To approve the Directors’ Remuneration Report for the year ended 30 June 2022. 3. To approve the Company’s Dividend Policy. 4. That Caroline Hitch be re-elected as a Director of the Company. 5. That Duncan Baxter be re-elected as a Director of the Company. 6. That Wendy Dorman be re-elected as a Director of the Company. 7. That John Newlands be re-elected as a Director of the Company. 8. That Ian Cadby be re-elected as a Director of the Company. 9. To re-appoint KPMG Channel Islands Limited as Independent Auditor and that the Directors be authorised to determine their remuneration. 10. That, pursuant to Article 164 of the Company’s Articles of Association, the Company shall continue as an investment Company until the conclusion of the next Annual General Meeting of the Company. Special Business 11. That, the Company be authorised to issue equity securities for cash, including by way of a sale of ordinary shares held by the Company as treasury shares, in such amount as represents up to 10% of the Company’s issued share capital as at the date of the passing of this resolution, provided that such authorisation shall expire (unless and to the extent previously revoked, varied or renewed by the Company in general meeting by Ordinary Resolution) at the earlier of the conclusion of the annual general meeting of the Company to be held in 2022 or eighteen months from the date of this resolution but so that this power shall enable the Company to make offers or agreements before such expiry which would or might require equity securities to be issued after such expiry and the directors of the Company may issue equity securities in pursuance of any such offer or agreement as if such expiry had not occurred. 12. That, pursuant to Article 57 of the Companies (Jersey) Law 1991, the Company be generally and unconditionally authorised to make one or more market purchases of ordinary shares of no par value in the capital of the Company (ordinary shares) provided that: (i) the maximum aggregate number of ordinary shares authorised to be purchased shall be equal to 14.99% of the total issued share capital of the Company on the date at which the resolution is passed; (ii) the minimum price which may be paid for an ordinary share is 1p; (iii) the maximum price which may be paid for an ordinary share is an amount equal to the higher of: (a) 105% of the average of the middle market quotations for an ordinary share as derived from the Daily Official List of the London Stock Exchange for the five business days immediately preceding the day on which the ordinary share is purchased; and (b) the higher of (1) the price of the last independent trade in ordinary shares and (2) the highest current independent bid for ordinary shares on the London Stock Exchange’s Main Market; (iv) any ordinary shares to be purchased may be cancelled or held as treasury shares in accordance with the Companies (Jersey) Law, 1991, provided that the Company shall not hold as treasury shares more than 10% of the aggregate number of ordinary shares in issue at any one time; (v) this authority expires at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or fifteen months from the date of the passing of this resolution, whichever is earlier; (vi) the Company may make a contract to purchase ordinary shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority, and may make a purchase of ordinary shares in pursuance of any such contract; and (vii) the Directors provide a statement of solvency in accordance with Articles 55 and 57 of the Companies (Jersey) Law, 1991. The Company requests that any shareholders wishing to attend the Annual General Meeting to advise the Company Secretary by email or in writing as detailed in note 3 below. By Order of the Board BNP Paribas Securities Services Company Secretary 15 September 2022 ![]() 61 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Notice of Annual General Meeting Supplemental Information and Annual General Meeting Notes: 1. Information about this meeting is available from the Company’s website; www.ncim.co.uk 2. As a member who is entitled to attend and vote at this meeting you are entitled to appoint one or more proxies to exercise all or any of your rights to attend, speak and vote on your behalf. Such a proxy need not also be a member of the Company. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise the rights attached to any one share. 3. Any shareholder wishing to attend the Annual General Meeting can advise the company of their intention to do so by writing to the Compnay Secretary at BNP Paribas, IFC 1, The Esplanade, StHelier, Jersey, JE1 4BP or by email at jersey.bp2s.ncyf.cosec@ bnpparibas.com , any attendance at the meeting is subject to the local COVID-19 restrictions in place. 4. A form of proxy is enclosed for use at the meeting. To be valid, the proxy card and any power of attorney or other authority, if any, under which it is signed, or a certified copy thereof must be lodged with the Company’s registrar, Computershare Investor Services (Jersey) Limited, c/o The Pavilions, Bridgewater Road, Bristol BS99 6ZY at least 48 hours before the meeting. 5. Completion of the proxy card will not prevent a shareholder from attending the meeting and voting in person. 6. Pursuant to Article 40 of the Companies (Uncertificated Securities) (Jersey) Order 1999, the Company has specified that only those shareholders registered on the register of members of the Company as at 6.00 pm on 28 November 2022, or in the event that the meeting is adjourned, on the register of members 48 hours before the time of the meeting, shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that relevant time. Changes to entries on the register of members after 6.00 pm on 28November 2022, or in the event that the meeting is adjourned to a later time, on the register of members 48 hours before the time of any adjourned meeting, shall be disregarded in determining the rights of any person to attend and vote at the meeting. Electronic receipt of proxies 7. To appoint one or more proxies or give an instruction to a proxy (whether previously appointed or otherwise) via the CREST system, CREST messages must be received by the Company’s agent (IDnumber 3RA50) no later than the 30 November 2022 at 11am. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp generated by the CREST system) from which the issuer’s agent is able to retrieve the message. TheCompany may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 or the relevant provisions of the Companies (Uncertificated Securities) (Jersey) Order 1999. Instructions on how to vote through CREST can be found on the website www.euroclear.com ![]() 62 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Supplemental Information and Annual General Meeting Report of the Investment Manager Report of the Investment Manager relating to Matters under the #### Alternative Investment Fund Managers’ Directive (unaudited) Risk management systems The Company’s Annual Report andPre-investment DisclosureDocument setsoutthe risks to which theCompany isexposed. The UK Investment Manageremploys risk management disciplineswhich monitor the Company’s portfolio and to quantify and manage the associated market and other risks. A permanent independent department has been established by the UK Investment Manager to perform the risk managementfunction. Theriskmanagement andperformance analysisteam (“RMPA”) is led by the Chief Risk Officer and is functionally and hierarchically separate from the operating units of the portfolio managers of the Company. RMPA is a dedicated control function over the operating units of the Investment Manager and is not involved in the performance activities of the Company. RMPA has designed, documented and implemented effective risk management policies, processes and procedures in order to identify, quantify, analyse, monitor, report on and manage allmaterial risks relevant to the Company’s investment strategy. Thesystems include third party vendor applications such as Tradar, Sungard Front Arena and MSCI Risk Metrics, complemented with a number of proprietary applications. Material changes to information required to be made available to investors of the Company No material changes. Assets of the Company subject to special arrangements arising from their illiquid nature There are no assets of the Company which are subject to special arrangements arising from their illiquid nature. Remuneration The AIFM has adopted a remuneration policy which meets the requirements of the Directive and has been in place for the current financial year of the Company. The variable remuneration period of the AIFM ended on 31 December 2021. The remuneration process isoverseen bythe remuneration committee (comprised predominately ofindependent non-executive parties). An internal working group encompassing senior management is responsible forgatheringrelevantinformation(bothquantitativeandqualitative)to evaluate the performance (both short and long term) of individuals, teams and the AIFM as a whole, against external market benchmarks and to utilise this to develop proposals for fixed and variable remuneration for all staff. The remuneration committee receives these proposals and the supporting information and is responsible for independently reviewing and scrutinising the proposals and evidence provided in line with the AIFM’s stated objectives and developing its final recommendations for delivery to the governing body of the AIFM and other entities associated with the AIFM. The variable remuneration of all staff in excess of a threshold, which includes those individuals categorised as remuneration code staff (“code staff”), is subject to the following: • deferred payment of up to 50% of the variable remuneration for a period of 3 years, • deferred remuneration is linked to funds managed by the AIFM, • the breaching of certain covenants may lead to forfeiture of deferred remuneration, and • a claw-backprovision of deferredremuneration incertain circumstances including future performance issuesby the individuals. The below information provides the total remuneration paid by the AIFM (and any delegates) for the year ending, December 31, 2021 This has been presented in line with the information available to the Company. There is no allocation made by the AIFM to each AIF and as such the disclosure reflects the remuneration paid to individuals who are partly or fully involved in the AIF, as well as staff of any delegate to which the firm has delegated portfolio management and/or risk management responsibilities in relation to the AIF. Of the total AIFM remuneration paid of $92.9m for the year ending December 31, 2021 to 248 individuals (full time equivalent), $34.5m has been paid as fixed remuneration determined based upon the FCA guidance with the remainder being paid as variable remuneration. The AIFM has assessed the members of staff whom it determines to be code staff in line with AIFMD as reflected in SYSC 19b.3.4R. Senior management and staff engaged in the control functions are identified based upon their roles and responsibilities within the AIFM and the delegates. With respect to investment professionals, in determining whether such staff are code staff, due consideration is taken of the allocated capital and trading limitsthatapply to the funds managed and whether the individuals report into and seek consent for investment decisions from others who are themselves code staff. There are 16.6 individuals (full time equivalent) who meet this definition and these individuals have collectively been compensated $45.1m. Not all individuals are directly remunerated by the AIFM due to the structure of the AIFM entity, however in the interests of meeting the underlying requirement of this disclosure all staff involved have been assessed as if directly remunerated by the AIFM. ![]() 63 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Report of the Investment Manager Supplemental Information and Annual General Meeting This page is intentionally left blank ![]() 64 CQS NEW CITY HIGH YIELD FUND LIMITEDANNUAL REPORT 30 JUNE 2022 Supplemental Information and Annual General Meeting Report of the Investment Manager This page is intentionally left blank ![]() 65 ANNUAL REPORT 30 JUNE 2022CQS NEW CITY HIGH YIELD FUND LIMITED Corporate Information Supplemental Information and Annual General Meeting #### Corporate Information Registered Number 95691 Registered Office CQS New City High Yield Fund Limited IFC1 The Esplanade St Helier Jersey JE1 4BP Directors Caroline Hitch (Chair) Duncan A H Baxter Ian Cadby Wendy Dorman John E Newlands Investment Manager CQS (UK) LLP 1 Strand London WC2N 5HR AIFM CQS (UK) LLP 1 Strand London WC2N 5HR Company Secretary and Administrator Custodian Bankers and Depositary BNP Paribas Securities Services S.C.A. Jersey Branch IFC1 The Esplanade St Helier Jersey JE1 4BP Registrars Computershare Investor Services (Jersey) Limited 13 Castle Street St. Helier, Jersey JE1 1ES Channel Islands Financial Adviser and Corporate Broker Singer Capital Markets 1 Bartholomew Lane London EC2N 2AX Independent Auditor KPMG Channel Islands Limited 37 Esplanade St Helier Jersey JE4 8WQ Jersey Legal Advisors Ogier Ogier House, The Esplanade St. Helier Jersey, JE4 9WG Channel Islands UK Legal Advisors Dentons LLP One Fleet Place, London EC4M 7WS Website www.ncim.co.uk ISIN JE 00B1LZS514 Shareholder Information Net Asset Value/Share Price The net asset value of the Company’s ordinary shares may be obtained by contacting CQS on 0207 201 6900 or by email at clientservice@cqsm.com or alternatively by visiting the Company’s web site at www.ncim.co.uk . ![]() #### CQS #### NEW CITY HIGH YIELD FUND LIMITED