## CQS ## NEW CITY HIGH YIELD FUND LIMITED ## Annual Report ## & Financial Statements ## 30 June 2024 CQS New City High Yield Fund Limited Annual Report & Financial Statements ## Purpose ## and Strategy ## The purpose of CQS New City High ## Yield Fund Limited (the “Company”) ## is to provide Shareholders with a ## high gross dividend yield and the ## potential for capital growth by mainly ## investing in high yielding xed ## interest securities. To achieve this, the ## strategy of the Company is to follow ## the investment policy outlined on ## page 27 of this report and to utilise ## the benets of being a closed-ended ## investment vehicle. 4.6 4.5 4.4 4.3 4.2 4.1 Dividend per share (pence) 4.0 3.9 3.8 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2023/242022/23 300 280 260 240 220 200 180 Total return index 160 NAV total return and share price total return 140 120 Dividends declared in respect of each financial year 100 80 | June | | June | June | June | June | June | June | June | June | June | June | | June | June | June | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2010 | | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | 2021 | 2022 | 2023 | 2024 | | | Share price total return (dividends reinvested) | | | | | | | | | | | Index restated to 100 from 30 June 2010 | | | | | | | NAV total return (dividends reinvested) | | | | | | | | | | | Source: BNP Paribas S.A., Jersey Branch | | | | | June 1 Bloomberg and Morningstar Source: Bloomberg CQS New City High Yield Fund Limited Annual Report & Financial Statements 2 ## Contents FINANCIAL HIGHLIGHTS INDEPENDENT AUDITOR’S REPORT 6 Financial Highlights 52 IndependentAuditor’sReporttothemembers of CQS New City High Yield Fund Limited STRATEGIC REPORT FINANCIAL STATEMENTS 10 Statement from the Chair 62 StatementofComprehensiveIncome 14 Investment Manager’s Review 63 StatementofFinancialPosition 16 ClassicationofInvestmentPortfolio 64 Statement of Changes in Equity 17 InvestmentPortfolio 65 Cash Flow Statement 19 Ten Largest Holdings 66 Notes to the Financial Statements 20 PrincipalRisksandUncertainties andRiskMitigation SUPPLEMENTAL INFORMATION 25 Stakeholders–Section172Statement AND ANNUAL GENERAL MEETING andPrincipalDecisions 27 Strategic Review 90 GlossaryofTermsandDenitions 91 AlternativePerformanceMeasures DIRECTORS’ REPORTS 95 ExplanationofAnnualGeneralMeetingResolutions AND GOVERNANCE REPORTS 98 Notice of Annual General Meeting 34 StatementofDirectors’Responsibilitiesinrespect 101 ReportoftheInvestmentManagerRelatingto oftheAnnualReportandFinancialStatements Matters under the Alternative Investment Fund 36 BoardofDirectorsandInvestmentManager Managers’Directive(unaudited) 39 Directors’Report IBC CorporateInformation 41 The Board and Committees 44 StatementofCompliancewiththeAICCode 45 Environmental, Social and Governance (“ESG”) Statement 46 ReportoftheAuditandRiskCommittee 49 Directors’RemunerationReport 3 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Highlights 4 ## Financial ## Highlights 5 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Highlights ## Financial Highlights 12 months to 12 months to 2 NAV and share price total return 30 June 2024 30 June 2023 1 NAV 19.07% 2.04% Ordinary share price 22.73% (0.68)% | | | | As at | | As at | | --- | --- | --- | --- | --- | --- | | Capital values | 30 June 2024 | | | 30 June 2023 % change | | | Total assets less current liabilities | | £308.5m £275.4m 12.02% | | | | (with the exception of the bank loan facility) 1 NAV per ordinary share 49.59p 45.83p 8.20% 3 Share price (bid) 52.20p 46.60p 12.02% 12 months to 12 months to Revenue and dividends 30 June 2024 30 June 2023 % change 2 Revenue earnings per ordinary share 4.50p 4.51p (0.22)% 2 Annual dividends per ordinary share 4.50p 4.49p 0.22% 2 Dividend cover 1.00x 1.00x Revenue reserve per ordinary share 2.93p 3.05p 2 (aer recognition of annual dividends) 2 | Ongoing charges ratio | | 1.18% 1.16% | | | | --- | --- | --- | --- | --- | | | | As at | | As at | | | 30 June 2024 | | 30 June 2023 | | 2 Dividend yield 8.62% 9.64% 2 Premium 5.26% 1.68% 2 Gearing 8.28% 11.81% Dividend history Rate xd date Record date Payment date First interim 2024 1.00p 26 October 2023 27 October 2023 30 November 2023 Second interim 2024 1.00p 25 January 2024 26 January 2024 28 February 2024 Third interim 2024 1.00p 2 May 2024 3 May 2024 31 May 2024 Fourth interim 2024 1.50p 1 August 2024 2 August 2024 30 August 2024 Annual dividend per ordinary share 4.50p First interim 2023 1.00p 27 October 2022 28 October 2022 25 November 2022 Second interim 2023 1.00p 26 January 2023 27 January 2023 28 February 2023 Third interim 2023 1.00p 27 April 2023 28 April 2023 26 May 2023 Fourth interim 2023 1.49p 27 July 2023 28 July 2023 31 August 2023 Annual dividend per ordinary share 4.49p 1 The denition of the terms used can be found in the glossary on page 90. 2 A description of the Alternative Performance Measures (“APMs”) used above and information on how they are calculated can be found on pages 91 to 94 3 Source: Bloomberg 6 7 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report 8 ## Strategic ## Report 9 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Statement from the Chair ## Caroline Hitch Chair ![img-0.jpeg](img-0.jpeg) ### Key Points NAV total return of 19.07% for the year ended 30 June 2024 Ordinary share price total return of 22.73% for the year ended 30 June 2024 Dividend yield of 8.62%, based on dividends at an annualised rate of 4.50 pence and a share price of 52.20 pence as at 30 June 2024 Ordinary share price at a premium of 5.26% as at 30 June 2024 £13,480,000 of equity issued during the year ended 30 June 2024 Dividend cover of 1.00x for the year ended 30 June 2024 ### Investment and share price performance The NAV total return of the Company for this financial period was an impressive 19.07% - an excellent result I believe. The share price enjoyed an even better year with a total return of 22.73%, resulting in an increase in the share price premium over the NAV. Many investment trusts continue to be negatively impacted by the current high interest rate environment and your Company is one of a handful that trades at a premium to their NAV and has done so for most of the year. The Company's shares closed the year on a premium of 5.26% and ongoing demand allowed us to continue issuing shares (see below), again something of a current rarity in the investment trust sector. The Company's longer-term performance remains strong. Stock markets were higher over the financial year as markets shrugged of geo-political worries arising from the conflicts in Ukraine and Israel/Gaza and, with inflation continuing to ease, focused on potential interest rate cuts. Major central banks have been fairly cautious and earlier expectations of interest rate cuts have faded as core wage inflation remains stubborn. In the UK for example, the 10-year gilt yield came down sharply from its August 2023 highs, reaching 3.50% at the end of December 2023 but has since risen to 4.10% as at 30 June 2024. This does suggest interest rate cuts in the second half of 2024 and we have indeed recently seen a reduction of 0.25% in the Bank of England base rate in July 2024. The Company's portfolio performed well in this environment with no major setbacks and several corporate actions which helped the overall return. Ian "Franco" Francis, your investment manager, gives more detail in his review on pages 14 to 15. ### Earnings and dividends I am pleased to report that revenue earnings remain strong and were 4.50 pence per ordinary share for the year to 30 June 2024 (4.51 pence for the same period in 2023). Receipts were stable over the year and we have continued to receive repayment of previous arrears by securities in the portfolio. The Board decided to increase this year's dividend, albeit marginally, maintaining the Company's record of annual dividend increases which has been unbroken since 2007. The Company declared three interim dividends of 1.00 pence in respect of the period and one interim dividend of 1.50 pence since the year end. The aggregate payment of 4.50 pence per ordinary 10 share represents a 0.22% increase on the 4.49 pence paid last year and is covered almost exactly by revenue earnings. As things stand, the Board intends to follow the same pattern of dividend payments in the 2024/2025 financial year as declared in the last and maintain or slightly increase the total level of dividends. Based on an annual rate of 4.50 pence and a share price of 51.80 pence at the time of writing, this represents an attractive dividend yield of 8.69%. As I stress in every report, the Board pays great attention to dividend payments as we understand how much shareholders value this aspect of the Company. ## Gearing The Company has a £45,000,000 loan facility with Scotiabank which is due to expire in December 2024. Out of this facility, £35,000,000 was drawn down as at 30 June 2024 and at the time of writing the Company has an effective gearing rate of 12.40%. At present, we believe that Shareholders will benefit from a modest but meaningful amount of gearing (a notable advantage of closed-ended funds compared to open-ended) and expect to maintain approximately this level of gearing during the next financial year. The Company's expects that it will refinance its loan facility on similar terms later in the year. ## Share issuance Taking advantage of the premium rating that the market continued to attach to the Company's shares, £13,480,000 was raised from new and existing shareholders during the financial year, with 26,850,000 ordinary shares issued from the block listing facility. Shares were only issued when the Investment Manager was confident he could invest the additional funds favourably. As well as a modest benefit to the NAV 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 and Task Force on Climate-related Financial Disclosure ("TCFD") reporting 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. During the year, the Board met with the Investment Manager's ESG specialists to discuss the approach and processes adopted. The Board has reviewed and agreed the responsible investment approach adopted by CQS (UK) LLP. Further details can be found on the Company's website (https://ncim.co.uk/wp/wp-content/uploads/2023/09/CQS-New-City-High-Yield-ESG-Statement-September-2023.pdf). This is the first year in which the Investment Manager is required to publish a product-level TCFD report for your Company under Financial Conduct Authority ("FCA") rules. A climate related financial disclosure report is available on the Company's website, under the following link: (https://ncim.co.uk/wp/wp-content/uploads/2024/06/CQS-New-City-High-Yield-Fund-Limited_TCFD_20231231_R-105385.pdf) ## Investment Management Company In October 2023, CQS (UK) LLP, your Company's Investment Manager, advised that it was being acquired by Manulife Investment Management, a major asset manager and insurer headquartered in Canada. This transaction completed in April 2024. This has not had a discernible impact on your Company to date and is not expected to do so going forward. The Board will continue to request and monitor information on any changes that may occur. The Investment Manager is now trading as Manulife | CQS Investment Management but at present the name of your Company is not expected to change. ## Your Board The Company has benefited from a stable Board of Directors over recent years but in accordance with good corporate governance standards, we understand the need to refresh the Board at appropriate intervals. Duncan Baxter, who is the Senior Independent Non-Executive Director and Chair of the Management Engagement Committee, has been a Director since July 2015 and has indicated that he will step down at the Annual General Meeting ("AGM") in December this year. We will very much miss Duncan's expertise and thank him for his valuable contribution to the Company. We have begun the process of recruiting a suitable replacement and will update Shareholders when we can. 11 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Statement from the Chair ### Continued Articles of Association (Articles) the Board is expecting healthy performance from your Company. A critical factor, as always, is the dividends the The Board is recommending that the Company adopt new Company pays and not only do the projections for the Articles of Association (the “New Articles”). The proposed revenue account look positive, but also the Company has changes in the New Articles are driven by a desire to comfortable revenue reserves which could be drawn on. modernise the Company’s Articles of Association in line with developments in market and industry practice, good The Board therefore expects the Company to maintain the corporate governance and to enable the Company to distribution of attractive dividends. Avoiding ‘blow ups’ promote eicient, cost eective and modern methods is a key success factor when investing in high yield bonds of engagement with Shareholders. Special Resolution and the Board has condence in the Manulife | CQS team 13 is included in the AGM notice and a description of the of credit analysts to continue monitoring the quality of proposed amendments being introduced in the New the bonds your Investment Manager selects and holds in Articles is set out on pages 96 to 97. the underlying portfolio. Outlook Caroline Hitch Will the next nancial year be as rewarding as this Chair past one? As your Investment Manager is forecasting 27 September 2024 declining interest rates, albeit at a steady pace, and the global economic outlook appears reasonably good, ## I am pleased to report that revenue ## earnings remain strong and were 4.50 ## pence per ordinary share for the year to ## 30 June 2024 (4.51 pence for the same ## period in 2023). Receipts were stable ## over the year and we have continued to ## receive repayment of previous arrears by ## securities in the portfolio. Caroline Hitch Chair 12 13 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Investment Manager’s Review Introduction Ian “Franco” Francis Our central thesis that stubborn ination will mean New City Investment Managers higher interest rates will be in place for longer than market commentators in 2023 were predicting has been very much evident over the course of our last nancial year to 30 June 2024. For your Company, the prevailing higher interest rates have meant that we have seen good opportunities to nd quality investments in stocks and sectors that have previously been too diicult to invest in as yields have been lower. In addition, the economic backdrop has improved, albeit marginally, which has helped market condence and assisted the xed interest markets. We have thankfully not seen any shocks in the portfolio from either a capital or revenue perspective and returns have been good across both metrics in the portfolio. More details of that are in the portfolio review below. The Company raised new monies this year as we issued shares at a premium. Proceeds have been invested into a wide and diverse range of sectors and stocks. The overall NAV total return for the 12 months to 30 June 2024 was a very positive one at 19.07%. Market and economic review When I wrote the market review for the interim report six months ago, I noted that a lot was going on which might impact markets, but the net result was probably less negative for Western economies than in previous years. That theme seems to have continued over the last six months with political news and widespread upheavals everywhere; meanwhile the economic news has continued to improve with recessions seemingly avoided and interest rates starting to reduce in the UK and Europe with hopefully more to follow. Ination remains as a major concern for central banks and the unending game of “whack-a-mole” keeps popping up, be it wage ination or unexpected cost pressures causing an issue. Bond markets in general had a good year with the average investment rated xed interest return being around the plus 10% mark, admittedly with most of that occurring in the rst six months of our nancial year. At the end of 2023, UK 10-year gilts were anticipating earlier interest rate cuts and fell to 3.50% but then have risen over the last six months to 4.20% as markets have worried that the Bank of England will be slow to reduce rates. 14 In the US, although the economy has seen growth across both the service and manufacturing sectors, sticky wage inflation has caused the US Federal Reserve to resist reducing rates there. Europe has seen weak manufacturing output which has caused the European Central Bank to recently cut their key interest rates by 0.25% in the hope of stimulating growth. ## Portfolio and revenue review We saw two of our larger positions being acquired during the course of our financial year. Our Virgin Money FRN position is in the process of being acquired by the Nationwide Building Society and our holding of Co-operative Bank FRN is also being acquired by the Coventry Building Society. Over our financial year, both positions have seen their bond prices increase by around 20.00% as a result and we await to see whether the terms will be amended as we go forward. We have also seen a good capital re-rating from the ATI positions we have held in other financial institutions such as Barclays and Lloyds - these have increased by around 10% over the year as confidence has returned to the banking sector. In the equity portion of the portfolio we sold our position in Euronav at a healthy profit in the latter part of 2023 and re-invested the proceeds into another shipping company called Frontline which has generated good returns to date. The Company still has a meaningful exposure to the US dollar with 15.73% of the portfolio investment in that currency and a further 13.87% in the Euro and other 'non-sterling' currencies. New entries into the top 10 this year are Frontline plc which is a world leader in shipping natural resources, TVL Finance, which is part of the Travelodge hotel group and we have been buying the 10.25% 2028 and finally RL Finance FRN is the financing company for the Royal London Mutual Insurance Society. The Co-op Bank Holdco position was rolled over into a new bond during the year. For the year to 30 June 2024, the revenue account earnings were 4.50 pence compared to 4.51 pence for the same period last year. Earnings per share were stable during the year with no negative surprises and we continued to receive repayment of historic arrears from the REA preference shares we hold. The current balance of revenue reserves provides a good level of comfort and in our regular discussions with Shareholders, 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 For the UK economy a lot will depend on how painful the first Labour budget will be and how this impacts investors and the knock on to markets. Nevertheless, we do expect another interest cut in the UK before the end of 2024. The inflation outlook is positive for now, but the public sector inflation busting pay rises given in the early days of the new government may come home to roost in future pay rounds. The presidential elections in the USA look to be a close run thing at time of writing and will have an effect on the world's largest economy. The geopolitics of the wars in Ukraine and Gaza show no signs of de-escalating, and the recent attacks by Houti rebels on tankers in the Red Sea threaten not just economic but major environmental disaster too. We expect to see a resumption of high yield and financial issuance in the end of the third and beginning of the fourth quarter of 2024. Ian "Franco" Francis New City Investment Managers 27 September 2024 15 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Classication of ## Investment Portfolio As at 30 June 2024 | By currency 2024 Total | | | | 2023 Total | | | --- | --- | --- | --- | --- | --- | | | investments | | investments | | | | | | % | | | % | Sterling 70.40 67.12 US dollar 15.73 19.09 Euro 11.76 11.59 Swedish krona 1.02 1.69 Norwegian krone 1.02 0.35 Canadian dollar 0.07 0.09 Australian dollar - 0.07 Total investments 100.00 100.00 | By asset class 2024 Total | | | | 2023 Total | | | --- | --- | --- | --- | --- | --- | | | investments | | investments | | | | | | % | | | % | 1 Fixed income securities 83.23 82.80 2 Equity shares 16.77 17.20 Total investments 100.00 100.00 1 Fixed income securities include xed and oating rate securities, convertible securities and preference shares. 2 Equity shares include investment funds. ## Classication of Investment ## Portfolio by Sector As at 30 June 2024 | | 2024 Total | | | 2023 Total | | | --- | --- | --- | --- | --- | --- | | investments | | | investments | | | | | | % | | | % | Financials 43.43 44.21 Energy 17.29 21.47 Consumer discretionary 14.70 6.98 Industrials 10.42 6.50 Consumer staples 5.47 9.55 Information technology 3.93 6.22 Communication services 2.27 - Real estate 1.79 3.17 Materials 0.70 1.90 Total investments 100.00 100.00 16 # Investment Portfolio As at 30 June 2024 | Company | Sector | Valuation £'000 | Total investments % | | --- | --- | --- | --- | | Co-op Bank Holdco 23-22/05/2034 FRN | Financials | 14,505 | 4.84 | | Galaxy Finco Ltd 9.25% 19-31/07/2027 | Financials | 13,463 | 4.49 | | Shawbrook Group 22-08/06/2171 FRN | Financials | 13,378 | 4.47 | | Virgin Money 22-08/12/2170 FRN | Financials | 12,964 | 4.33 | | RL Finance No6 23-25/11/2171 FRN | Financials | 11,241 | 3.75 | | Aggregated Micro 8% 16-17/10/2036 | Energy | 10,366 | 3.46 | | Frontline Plc^{1} | Energy | 10,048 | 3.35 | | TVL Finance 10.25% 23-28/04/2028 | Consumer discretionary | 9,379 | 3.13 | | Barclays Plc 22-15/12/2170 FRN | Financials | 9,199 | 3.07 | | Stonegate Pub 8.25% 20-31/07/2025 | Consumer discretionary | 8,923 | 2.99 | | Top ten investments | | 113,466 | 37.88 | | REA Finance 8.75% 15-31/08/2025 | Consumer staples | 8,526 | 2.85 | | Mangrove Luxco 7.775% 19-09/10/2025 | Industrials | 8,342 | 2.79 | | Inspired Enterta 7.875% 21-01/06/2026 | Information technology | 7,097 | 2.37 | | Just Group Plc 8.125% 19-26/10/2029 | Financials | 6,896 | 2.30 | | Azerion Group 23-02/10/2026 FRN | Communication services | 6,813 | 2.27 | | Pinnacle Bidco P 10% 23-11/10/2028 | Consumer discretionary | 6,356 | 2.12 | | Summer BC Holdco 9.25% 19-31/10/2027 | Industrials | 5,261 | 1.76 | | Nextenergy Solar Fund Ltd | Energy | 5,022 | 1.68 | | Transocean Inc 11.5% 20-30/01/2027 | Energy | 4,894 | 1.63 | | Lloyds Banking 14-29/12/2049 FRN | Financials | 4,772 | 1.59 | | Top twenty investments | | 177,445 | 59.24 | | Diversified Energy Co Plc | Energy | 4,754 | 1.59 | | MFG/MRH Motfue TL B5 11 T/L 21/06/2025 | Consumer discretionary | 4,497 | 1.50 | | M&G Plc | Financials | 4,488 | 1.50 | | Virgin Money 23-08/06/2172 FRN | Financials | 4,478 | 1.50 | | Ithaca Energy N 9% 21-15/07/2026 | Energy | 4,405 | 1.47 | | Garfunkelux Hold 7.75% 20-01/11/2025 | Financials | 4,266 | 1.42 | | Arrow Bidco Llc 10.75% 23-15/06/2025 | Consumer discretionary | 4,260 | 1.42 | | REA Holdings Plc – PREF | Consumer staples | 4,186 | 1.40 | | Phoenix Group Holdings Plc | Financials | 4,172 | 1.39 | | Enquest Plc 11.625% 22-01/11/2027 | Energy | 4,018 | 1.34 | | Top thirty investments | | 220,969 | 73.77 | | Booster Precisio 22-28/11/2026 SR | Industrials | 3,578 | 1.19 | | Stonegate Pub 8% 20-13/07/2025 | Consumer discretionary | 3,544 | 1.18 | | Bidco Rely 23-12/05/2026 FRN | Industrials | 3,473 | 1.16 | | OSB Group 23-07/09/2028 FRN | Financials | 3,200 | 1.07 | | 3T Global 11.25% 24-22/05/2028 | Consumer discretionary | 3,188 | 1.06 | | Barclays Plc 23-15/06/2171 FRN | Financials | 3,100 | 1.03 | | Welltec Intl 8.25% 21-15/10/2026 | Energy | 2,902 | 0.97 | | VPC Specialty Lending Invest | Financials | 2,848 | 0.95 | | Doric Nimrod Air Three Ltd | Industrials | 2,684 | 0.90 | | Channel Island Property Fund | Real estate | 2,550 | 0.86 | 17 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Investment Portfolio As at 30 June 2024 Continued | Top forty investments | | 252,036 | 84.14 | | --- | --- | --- | --- | | Coventry BDG SOC 24-11/12/2172 FRN | Financials | 2,514 | 0.84 | | RM Infrastructure Income Plc | Financials | 2,470 | 0.82 | | Albion Financing 8.75% 21-15/04/2027 | Industrials | 2,464 | 0.82 | | Quilter Plc 23-18/04/2033 FRN | Financials | 2,358 | 0.79 | | TuCon Oceanic Assets Ltd | Industrials | 2,332 | 0.78 | | Gaming Innovation 23-18/12/2026 FRN | Information technology | 2,199 | 0.73 | | Skill Bidco APS 23-02/03/2028 FRN | Industrials | 2,023 | 0.68 | | Greenfood AB 21-04/11/2025 FRN | Consumer staples | 1,925 | 0.64 | | Coburn Resources 12% 21-20/03/2026 | Materials | 1,830 | 0.61 | | Deutsche Bank AG 14-30/05/2049 FRN | Financials | 1,699 | 0.58 | | Top 10y investments | | 273,850 | 91.43 | | Bluewater Hold 12% 22-10/11/2026 | Energy | 1,504 | 0.50 | | MFG/MRH Motfue TL B6 1L GBP | Consumer discretionary | 1,500 | 0.50 | | UTB Partners Plc 12.95% 23-31/03/2034 | Financials | 1,485 | 0.50 | | Kent Global Plc 10% 21-28/06/2026 | Energy | 1,475 | 0.49 | | NewRiver REIT Plc | Real estate | 1,451 | 0.48 | | Eurobank Ergasia 22-06/12/2032 Frn | Financials | 1,447 | 0.48 | | Shamaran 12% 21-30/07/2025 | Energy | 1,389 | 0.46 | | Van Lanschot 24-01/04/2172 FRN | Financials | 1,365 | 0.46 | | Cruise Yacht Upp 11.875% 24-05/07/2028 | Consumer discretionary | 1,274 | 0.43 | | West Bromwich BS 18-20/08/2172 | Financials | 1,196 | 0.40 | | Top sixty investments | | 287,936 | 96.13 | | Palace Capital Plc | Real Estate | 1,118 | 0.37 | | Boparan Finance 7.625% 20-30/11/2025 | Consumer Staples | 971 | 0.32 | | REA Trading 13.50% 21-30/09/2027 | Consumer Discretionary | 848 | 0.28 | | TWMA Group Ltd 13% 24-08/02/2027 | Industrials | 796 | 0.27 | | N0r5ke Viking 21-05/05/2024 FRN | Information Technology | 788 | 0.26 | | Neptune Bidco AS 24-28/06/2028 FRN | Financials | 745 | 0.25 | | Harbour Energy Plc | Energy | 744 | 0.25 | | Cabonline GR 22-19/04/2026 FRN | Information Technology | 739 | 0.25 | | REA Holdings Plc 7.5% 16-30/06/2026 | Consumer Staples | 695 | 0.23 | | Marex Group 22-30/12/2170 FRN | | 647 | 0.22 | | Top seventy investments | | 296,027 | 98.83 | | Other investments (48) | | 3,502 | 1.17 | | Total investments | | 299,529 | 100.00 | $^{1}$ Split into USD position (fair value of £8,543,000) and NOK position (fair value of £1,505,000). Notes: FRN – Floating Rate Note PREF – Preference shares REIT – Real Estate Investment Trust SR – Senior 18 ## Ten Largest Holdings | | | Valuation | | | Purchases | | Sales | Revaluation | | | Valuation | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 30 June 2023 | | | | | £’000 | £’000 | gain/(loss) | | 30 June 2024 | | | | | | | £’000 | | | | | | £’000 | | | £’000 | | Co-op Bank Holdco 23-22/05/2034 FRN | | | | - 12,191 - 2,314 14,505 | | | | | | | | | A bank-holding company that through its subsidiaries, oers banking services in UK. Galaxy Finco Ltd 9.25% 19-31/07/2027 12,346 - - 1,117 13,463 A specialist provider of warranties for consumer electric products. Shawbrook Group 22-08/06/2171 FRN 11,917 - - 1,461 13,378 A holding company of Shawbrook Bank Limited, a specialist lending and savings bank serving consumers in the UK. Virgin Money 22-08/12/2170 FRN 10,811 - - 2,153 12,964 A British banking company concentrating on UK retail and small and medium enterprises regional banking services. RL Finance No6 23-25/11/2171 FRN 4,417 5,955 - 869 11,241 A special purpose entity set up to raise capital whose proceeds will be used for general business and commercial activities of Royal London. Aggregated Micro 8% 16-17/10/2036 11,110 - (311) (433) 10,366 A British company using small scale, established technologies to convert wood and waste into energy in the form of heat and electricity. Frontline Plc - 7,452 (642) 3,238 10,048 Engaged in seaborne transportation of crude oil and oil products worldwide. TVL Finance 10.25% 23-28/04/2028 4,884 4,136 - 359 9,379 A special purpose entity formed for the purpose of issuing debt securities to repay existing credit facilities, renance indebtedness and for acquisition purposes of Travelodge Group. Barclays Plc 22-15/12/2170 FRN 8,262 - - 937 9,199 A global nancial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. Stonegate Pub 8.25% 20-31/07/2025 8,326 - - 597 8,923 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 UK. 72,073 29,734 (953) 12,612 113,466 19 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Principal Risks and Uncertainties ## and Risk Mitigation Risks are inherent in the investment process, but it appetite and considered whether principal risks were is important that their nature and magnitude are increasing, decreasing or static during the course of understood so that risks can be identied and either the year. The Board reviewed the impact of economic avoided or controlled. The Board has established a uncertainty and heightened levels of ination and interest detailed framework to manage the key risks that the rates post-COVID and as a result of the conicts in Europe Company is exposed to, with associated policies and and the Middle East. The Board also considered any new processes devised to mitigate or control those risks. or emerging risks. Principal risks and mitigations are discussed regularly The principal risks and mitigating factors faced by the at Board and Audit and Risk Committee meetings. At Company are set out below. the meeting held in May 2024, the Board discussed risk Increase in risk for the year ended 30 June Risk remains static Decrease in risk for the year ended 30 June 2024 in comparison to previous year. from previous year. 2024 in comparison to previous year. Risk Description Controls Dividend and The earnings that underpin the amount of dividends The Board has engaged with CQS (UK) LLP earnings risk declared and future dividend growth are generated (the “Investment Manager”), to manage by the Company’s underlying portfolio. the Company’s portfolio and therefore depends upon the Investment Manager One or more of the following factors could adversely to construct an appropriate portfolio aect the Company’s earnings and thereby, its that will produce income allowing the ability to declare a dividend: Company to meet its dividend target. ▶ A persistent low interest rate environment. The Board monitors the implementation ▶ A contraction of available investment of the investment strategy, by reviewing opportunities suitable for the Company, given its the performance of the Investment investment objective and its policy. Manager on an ongoing basis and by receiving a formal presentation from the ▶ The persistence of adverse market conditions Investment Manager on a quarterly basis. or government intervention during a macro- economic crisis resulting in cuts to dividend The Board receives and reviews detailed income. income forecasts prepared by the Investment Manager and BNP Paribas ▶ Adverse changes to the tax treatments applicable S.A., Jersey Branch (“BNP Paribas” or to the Company’s stream of investments and the “Administrator”) when the quarterly dividend income. dividends are declared. We are currently in a period of higher interest rates The Company holds revenue reserves which support the Company’s dividend payments, of £16,185,000 and cash balance of nevertheless it is not clear how far or fast interest £12,350,000 as at 30 June 2024 which rates will fall and there is still heightened economic could be used for the maintenance of the uncertainty that could impact the value of the Company’s dividend target in adverse Company’s earnings. market conditions. 20 Risk Description Controls Market risk The Company’s assets consist principally of The Board relies upon the research leading to a loss listed xed interest securities and equities. Its capabilities of the Investment Manager of share value greatest risks are consequently market related, and the people it employs that can with exposure to movements in the prices of the use their expertise to build a portfolio, Company’s investments and the loss that the utilising diversication, to mitigate Company might suer through holding investments market risk to the extent possible. in the face of negative market movements. The Board monitors the implementation A downturn in capital markets could lead to a of the investment strategy, reviews the loss in value of the Company’s shares, eroding performance of the Investment Manager the premium and causing the shares to trade at a on an ongoing basis and receives a discount. formal presentation from the Investment Manager on a quarterly basis. At this time, Failure of investee companies to respond to the the Board reviews the performance of the transition to clean energy in an appropriate and Company’s investments, including both timely fashion could lead to a decline in their realised and unrealised gains and losses. protability and ultimately impact their ability to deliver value. The Investment Manager incorporates sustainability factors into its investment process. There is continuing uncertainty regarding the timing and extent of any interest rate reductions in the UK, US and Europe, and the economic outlook remains uncertain. Key person risk Performance of the Company may be negatively The lead fund manager is responsible aected by a change in the fund management team for day-to-day portfolio management. within the Investment Manager. The Investment Manager has put in place succession and transition plans in the event the lead fund manager is no longer in this role for whatever reason. In addition, 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 at each Board meeting. The Management Engagement Committee of the Company formally reviews the performance of the Investment Manager annually. During this nancial year, the Investment Manager of the Company, CQS (UK) LLP, was acquired by Manulife Investment Management. To date, the board have had no indications that the change in ownership will impact the management team responsible for providing services to the Company. 21 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Principal Risks and Uncertainties ## and Risk Mitigation ### Continued Risk Description Controls Gearing risk A fall in the value of the underlying investments Gearing levels and compliance with could adversely aect the Company’s level of loan covenants are monitored by the gearing and exacerbate the decline in value. It could Administrator and the Investment also result in a breach of loan covenants. Manager on a monthly basis. The Board reviews compliance with the gearing levels and loan covenants at regular Board meetings. For the year ended 30 June 2024 and up until the date of this report, the Company has complied with all its loan covenants. The Board sets the gearing limits. Gearing will not exceed 25% of Shareholders’ funds at the time of borrowing. Geopolitical risk The ongoing Russian/Ukraine war has exacerbated The Investment Manager has reviewed inationary tensions post-pandemic. The more the portfolio to understand the recent outbreak of conict in the Middle East has susceptibility of investments to market added to geo-political risks. Ination and energy disruption and the results of this review prices across Europe have stabilised for now but has been discussed with the Board. upward pressure could re-emerge as a result of The robustness of corporate business European and Middle East conicts, and elections in models during this period of heightened the US are adding to political uncertainty. 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 The operating eectiveness of third party third parties and is reliant on the control systems of service providers is regularly tested, the Investment Manager and the Company’s other monitored and reported on at each Board service providers. meeting. The Audit and Risk Committee receives an International Standard for Failures at these third parties could adversely Assurance Engagement (“ISAE”) 3402 impact the security and/or maintenance of, inter report (report on the description of alia, the Company’s assets, dealing and settlement controls placed in operation, their design procedures and accounting records depend on the and operating eectiveness) on Fund eective operation of these systems. Administration. The Investment Manager delivers a risk based internal audit plan which covers dierent areas of its operations that are subject to internal audit, including front, middle and infrastructure audits. Any area of concern relevant to the Company is discussed with the Audit and Risk Committee when it meets. 22 Risk Description Controls Regulatory risk The breach of existing regulatory rules (in Jersey The Company Secretary monitors and/or the UK) or failing to adopt changes in the Company’s compliance with the regulatory rules in a timely manner, which could Listing Rules of the UK Listing Authority. lead to a suspension of the Company’s stock Compliance with the Listing Rules is exchange listing or nancial penalties. reviewed on a quarterly basis. The Company’s compliance oicer monitors the regulatory rules applicable to Jersey funds and the Board receives a quarterly report from the compliance oicer. The Administrator is regulated by the Jersey Financial Services Commission. Cyber risk The Board notes that organisations across the As well as reviewing controls reports globe are experiencing more frequent and more on the Company’s service providers, sophisticated cyber attacks and are mindful of the the Board requests information on heightened risk. cyber controls, cyber insurance and any material cyber breaches from those key Conict in Europe heightens the risk of malpractice service providers. in cyber systems generally. A cyber attack at one of the Company’s key service providers could result in loss of key data, loss of availability of systems, a ransomware demand, General Data Protection Regulation breaches and reputational damage. 23 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Principal Risks and Uncertainties ## and Risk Mitigation ### Continued Risk Description Controls Reduced The change to a high ination, high interest rate Any reduction in the share price premium market demand environment over the past two years impacted or move to a discount is discussed with for our shares the relative attractiveness of investments and the Investment Manager and Singer shied patterns of investment. Ination is now Capital Markets (the “Broker”), with reducing and interest rates are expected to follow, a view to taking action, if considered and market demand can be expected to adjust appropriate. accordingly. The Company has generally traded at There could be negative investor sentiment if a premium to NAV and has done so for investments held are deemed unacceptable from almost all of this nancial year. We have an ESG policy perspective, as investors attitudes seen strong demand for our shares develop towards these issues. throughout the year. The Investment Manager and the Broker hold regular Shareholder meetings through which investor sentiment can be gauged. Topics discussed include the performance of the Company, market liquidity, supply and demand conditions, ESG and sustainability and the dividend policy. The Board has appointed an Investor Relations company to assist in promoting our shares, particularly amongst retail investors. The Board is available to investors at the AGM and at meetings throughout the year on request, to discuss any feedback on the Company’s strategy or performance. The Board regularly discusses with the Investment Manager the impact of climate change and other ESG topics and any appropriate changes to the Company’s strategy. Emerging risks and the impact of heightened economic uncertainty on dierent sectors of the economy. This year the Board During its discussions on principal risks and uncertainties, also discussed emerging risks associated with more the Board considered any risks that were not an widespread use of Articial Intelligence (“AI”) technology immediate, quantiable threat but could materialize and the increase in State sponsored cyber attacks. The and could have signicant impact on the ability of the Board regularly discusses these with the Investment Company to continue to meet its objectives. Areas Manager and receives feedback based on the Investment discussed include longer-term impacts of climate change Manager’s research and discussions with Shareholders on the Company’s portfolio and returns, geopolitical and the Broker. risk due to the conicts in Ukraine and the Middle East 24 ## Stakeholders – Section 172 ## Statement and Principal Decisions Through adopting the 2019 Association of Investment d. impact on community and environment; Companies’ (“AIC”) Code of Corporate Governance Code e. maintaining reputation; and (the “AIC Code”), the Board acknowledges its duty to comply with section 172 of the UK Companies Act 2006 to f. act fairly as between members of the Company. act in a way that promotes the success of the Company Information on how the Board has engaged with its for the benet of its members as a whole, having regard stakeholders and promoted the success of the Company, to (amongst other things): through the decisions it has taken during the year, a. consequences of any decision in the long-term; whilst having regard to the above, is outlined below. The Company has no employees. b. the interests of the Company’s employees; c. need to foster business relationships with suppliers, customers and others; Stakeholder How 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 on the Company’s website; 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 the Broker; and 6. making themselves available to questions from Shareholders at the AGM. 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 eicient 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; and 3. undertaking an annual review via the Management Engagement Committee. 25 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Stakeholders – Section 172 ## Statement and Principal Decisions ### Continued Stakeholder How the Board engages The wider community and As a responsible corporate citizen, the Company recognises that its operations have the environment 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 nancing costs, valuations and performance, while also being capable of acting as a lever to shape and inuence 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 Principles for Responsible Investment (“PRI”), fully supporting all Principles for Responsible Investment. In line with TCFD recommendations, the Investment Manager has prepared climate related nancial disclosures which are available on the Company’s website under the following link: https://ncim.co.uk/wp/wp-content/uploads/2024/06/CQS-New-City- High-Yield-Fund-Limited_TCFD_20231231_R-105385.pdf. Principal decisions Review of dividend policy: Appointment of Investor Relations company: The Board recognises the importance Shareholders place During the year, the Board appointed TB Cardew to on the Company’s dividend policy and is cognisant of the support the Company in promoting its shares, with a need to ensure the viability of the dividend. view to widening and diversifying share ownership and maintaining the current strong demand for its shares. It was agreed it was in the best interests of the Company and Shareholders to marginally increase the fourth interim dividend for the year. 26 ## Strategic Review Introduction instruments and currencies for the purpose of eicient portfolio management. This review is part of a Strategic Report being presented by the Company and is designed to provide information There are no dened limits on listed securities and, primarily about the Company’s business and results accordingly, the Company may invest up to 100% of total for the year ended 30 June 2024. It should be read in assets in any particular type of listed security. conjunction with the Statement from the Chair on pages The Company may acquire securities that are unlisted or 10 to 13 and the Investment Manager’s Review on pages unquoted at the time of investment, but which are about 14 to 15, which give a detailed review of the investment to be convertible, at the option of the Company, into activities for the year and look to the future. securities which are listed or traded on a stock exchange. The Company may continue to hold securities that cease Principal activity and status to be listed or traded if the Investment Manager considers The Company is a closed-ended investment company and this appropriate. The Board has established a maximum was incorporated with limited liability in Jersey under investment limit in this regard of 10% (calculated at the the Companies (Jersey) Law 1991 on 17 January 2007, time of any relevant investment) of the Company’s total with registered number 95691. In addition, the Company assets. In addition, the Company may invest up to 10% constitutes and is regulated as a collective investment (calculated at the time of any relevant investment) of its fund under the Collective Investment Funds (Jersey) Law total assets in other securities that are neither listed nor 1988. traded at the time of investment. The Company’s ordinary shares are listed on the Oicial The Company will not invest more than 10% (calculated List maintained by the FCA and admitted to trading on the at the time of any relevant investment) of its total assets Main Market of the London Stock Exchange (“LSE”). in other collective investment undertakings (open-ended or closed-ended). Purpose and strategy The Board has established a maximum investment limit whereby, at the time of investment, the Company may not The Company’s purpose is stated on the inside front cover invest more than 5% of its total investments in the same of this report. investee company. Investment policy The Company uses gearing and the Board has set a current limit that gearing will not exceed 25% of The Company invests predominantly in xed income Shareholders’ funds at the time of borrowing. This limit is securities, including, but not limited to, preference reviewed from time to time by the Board. shares, loan stocks, corporate bonds (convertible and/or redeemable) and government stocks. The Company also The Investment Manager expects that the Company’s invests in equities and other income yielding securities. assets will normally be fully invested. However, during periods in which changes in economic circumstances, Exposure to higher yielding securities may also be market conditions or other factors so warrant, the obtained by investing in other closed-ended investment Company may reduce its exposure to securities and companies and open-ended collective investment increase its positions in cash, money market instruments schemes. and derivative instruments in order to seek protection There are no dened limits on countries, size or sectors. from stock market falls or volatility. Therefore the Company may invest in companies regardless of country, size or sector and accordingly, the Investment approach Company’s portfolio is constructed without reference to Investments are typically made in securities which the the composition of any stock market index or benchmark. Investment Manager has identied as undervalued by The Company may, but is not obliged to, invest in the market and which it believes will generate above derivatives, nancial instruments, money market average income returns relative to their risk, thereby 27 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Strategic Review ## Continued 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 KPIs are as follows: #### Dividend yield and dividend cover The Company pays 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 2024, the Company’s dividend yield was 8.62% (2023: 9.64%) based upon a share price of 52.20 pence (2023: 46.60 pence) (bid price) as at 30 June 2024 and its dividend cover was 1.00x (2023: 1.00x). #### Revenue earnings and dividends per ordinary share The Company has opted to follow the AIC Statement of Recommended Practice (“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 4.50 pence (2023: 4.49 pence) per ordinary share out of revenue earnings per ordinary share of 4.50 pence (2023: 4.51 pence). #### Ongoing charges The ongoing charges ratio represents the Company’s management fee and all other operating expenses incurred by the Company expressed as a percentage of the average Shareholders’ funds over the year. The Board regularly reviews the ongoing charges and monitors all Company expenses. The ongoing charges ratio for the year ended 30 June 2024 was 1.18% (2023: 1.16%). 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 APMs under guidance issued by the European Securities and Markets Authority. Additional information explaining how these are calculated is set out in the APMs section on pages 91 to 94. ### 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 AGM 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 and considering that 99% of the Shareholder’s votes at the last AGM held on 30 November 2023, were in favour of the continuation of the Company, the Board considers it likely that Shareholders will vote in favour of continuation at the forthcoming AGM. The Company’s existing loan facility as detailed on pages 74 to 75 is due to expire on 18 December 2024 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 of the current geo-political and market uncertainty 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. 28 Viability Statement In accordance with the provisions of the AIC Code, the When considering the risk of under-performance, Directors have assessed the viability of the Company over a series of stress tests was carried out including in a period longer than the 12 months required by the ‘Going particular the eects of any substantial future falls in concern’ provision. The Board conducted this viability investment value on the ability to re-pay and re-negotiate review for a period of three years. The Board continues to borrowings, potential breaches of loan covenants and the consider that this period reects the long-term objectives maintenance of dividend payments. of the Company, being a Company with no xed life, The Board considered the Company’s portfolio and whilst taking into account the impact of uncertainties in concluded that the diverse nature of investments held the markets. contributes to the stability and liquidity along with The Directors do not expect there to be any signicant exibility to be able to react positively to market and changes to the current principal and emerging risks political forces beyond the Board’s control. facing the Company and believe that the Company has The Board also considered the impact of potential suicient controls in place to mitigate those risks as regulatory changes and the control environment of far as reasonably possible. Furthermore, the Directors signicant third party providers, including the Investment do not envisage any change in strategy which would Manager. prevent the Company from operating over the three year period. This is based on the assumption that there are The Scotiabank Europe Plc (“Scotiabank”) loan facility is no signicant changes in market conditions or the tax due to expire on 18 December 2024. It is anticipated a new and regulatory environment that could not reasonably facility on comparable terms will be negotiated prior to have been foreseen. The Board also considers the annual this date. continuation vote should not be a factor to aect the The Board carries out stress testing on a range of three year period given the strong demand seen for the downside scenarios to ensure that the Company can meet Company’s shares. its liabilities in full. In making this statement the Board: (i) considered the Based on the Company’s processes for monitoring continuation vote to be proposed at the AGM which revenue and costs, with the use of frequent revenue the Board considers will be voted in favour of by forecasts and the Investment Manager’s compliance with Shareholders; and (ii) carried out a robust assessment the investment objective and policies, the Directors have of the principal and emerging risks facing the Company. concluded that there is a reasonable expectation that the These risks and their mitigations are set out on pages 20 Company will be able to continue in operation and meet to 24. its liabilities as they fall due for a period of three years The principal risks identied as most relevant to the from the date of approval of this Report. assessment of the viability of the Company were those relating to potential under-performance of the portfolio and its eect on the ability to pay 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. 29 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report ## Strategic Review ### Continued Social, community, human rights, employee Modern slavery responsibilities and environmental policy The Company would not fall into the scope of the UK The Directors recognise that their rst duty is to act in the Modern Slavery Act 2015 (as the Company does not best nancial interests of the Company’s Shareholders have any turnover derived from goods and services) if it and to achieve good nancial returns against acceptable was incorporated in the UK. Furthermore, as a closed- levels of risk, in accordance with the objectives of ended investment company, the Company has a non- the Company. In asking the Company’s Investment complex structure, no employees and its supply chain is Manager to deliver against these objectives, they have considered to be low risk given that suppliers are typically also requested that the Investment Manager take into professional advisers based in either the Channel Islands account the broader social, ethical and environmental or the UK. Based on these factors, the Board determined issues of companies within the Company’s portfolio, that it is not necessary for the Company to make a slavery acknowledging that companies failing to manage and human traicking statement. these issues adequately run a long-term risk to the By Order of the Board sustainability of their businesses. Caroline Hitch Greenhouse gas emissions Chair The Board recognises its impact on the environment, 27 September 2024 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 page 45. 30 31 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports 32 ## Directors’ ## Reports and ## Governance ## Reports 33 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Statement of Directors’ ## Responsibilities in respect ## of the Annual Report and ## Financial Statements The Directors are responsible for preparing the Annual Caroline Hitch Report and Financial Statements in accordance with Chair applicable laws and regulations. Company law requires the Directors to prepare nancial statements for each nancial year. Under this law, they have elected to prepare the Financial Statements in accordance with the International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and applicable law. Under Companies (Jersey) Law 1991, the Directors must not approve the Financial Statements unless they are satised that they give a true and fair view of the state of aairs of the Company and of its prot 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 suicient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the nancial 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 nancial statements that are free from 34 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 nancial 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 dier from legislation in other jurisdictions. Each of the Directors, whose names are listed on pages 36 to 38, conrms that, to the best of that Director’s knowledge: ▶ the Financial Statements, prepared in accordance with the IFRS as adopted by the EU, give a true and fair and balanced view of the assets, liabilities, nancial position and prot or loss of the Company; ▶ 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. ▶ 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. On behalf of the Board Caroline Hitch Chair 27 September 2024 35 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Board of Directors and ## Investment Manager Appointed: March 2018 Ltd. with investment responsibility for their agship multi asset retail funds. Skills: Caroline has extensive fund Prior roles included specialisation in management skills including specialist institutional xed income portfolio xed income portfolios. She has a deep management. She has worked in London, understanding of investment risk and Jersey, Monaco and Hong Kong. Caroline risk management both as it applies to is a UK resident. individual assets and to overall portfolio construction. She developed her skills Committee membership: of investment trust board governance – Audit and Risk Committee through many years of managing – Management Engagement Committee regulated funds, reporting to their boards – Nomination Committee and then becoming a board member (and – Remuneration Committee now Chair) herself. Remuneration: £45,000 per annum Experience: Caroline joined the board Public company directorships: abrdn aer working in the nancial services Equity Income Trust plc industry since the early 1980s mostly with Caroline Hitch the HSBC group. Her experience includes Shared Directorships with any other Independent Head of Wealth Portfolio Management Fund Directors: None Non-Executive Chair at HSBC Global Asset Management (UK) Appointed: July 2015 management companies, plus acted on a number of investment company Skills: Duncan has a broad knowledge of boards. He has experience of stewardship the nance sector gained from holding and investment in several investment senior leadership positions across a companies over twenty years and in number of International Banks and addition as a non-executive director of a Trust companies. Having also worked on number of operating public and private investment company boards, some of companies. Duncan is a Jersey resident. which in the position of Chair, Duncan has had exposure to equity raises and Committee membership: discount management. – Audit and Risk Committee – Management Engagement Committee Experience: Duncan is a retired senior – Nomination Committee banker with many years’ experience – Remuneration Committee of international banking, latterly as Managing Director of Swiss Bank Remuneration: £32,500 per annum Corporation/UBS in Jersey. Since leaving Public company directorships: None Swiss Bank Corporation/UBS in the Duncan Baxter | | late 1990s, Duncan has undertaken a | Shared Directorships with any other | | --- | --- | --- | | Senior Independent | number of consultancy projects for | Fund Directors: None | | Non-Executive Director and | international banks, trust and investment | | Chair of the Management Engagement Committee 36 Appointed: March 2016 Committee membership: – Audit and Risk Committee Skills: Wendy is a Chartered Accountant – Management Engagement Committee with signicant experience in tax, audit – Nomination Committee and commercial accountancy matters – Remuneration Committee mainly focused on the investment fund sector. Her extensive experience chairing Remuneration: £39,000 per annum audit committees of public listed entities Public company directorships: gives her the requisite leadership skills 3i Infrastructure Plc (retired on 4 July in addition to those of accounting and 2024) and Jersey Electricity Plc governance. Shared Directorships with any other Experience: Wendy began her career in Fund Directors: None audit and assurance before specializing in taxation, with a focus on nancial services and in particular the investment fund sector. She retired as partner in charge of the PricewaterhouseCoopers CI Wendy Dorman LLP (“PwC”) tax practice in June 2015 and Independent Non-Executive has since then served as non-executive Director and Chair of the director and audit committee chair of main market listed companies. Wendy is Audit and Risk Committee a Jersey resident. Appointed: October 2017 Citywire Investment Trust Performance Awards Panel. He has a Master in Skills: John’s 20-plus years’ career as Business Administration from Edinburgh an investment company analyst, with University Business School and is a a particular focus upon the UK wealth Chartered Electrical Engineer dating to management sector, gives the Board an his prior career as a Weapon Engineer important insight into the investment Oicer in the UK Royal Navy. John is requirements and processes of the the Chair of the Investment Committee types of investor, whether private or of Durham Cathedral. He has written institutional, most likely to consider the four books about nancial history, the Company for inclusion in their portfolios. most recent charting the history of The He is also skilled in the assessment of Scottish American Investment Company potential peer group funds, both in plc. John is a UK resident. terms of relative performance and other quantitative data and in the increasing Committee membership: focus upon governance and stewardship – Audit and Risk Committee matters as pre-requisites for investment. – Management Engagement Committee John Newlands – Nomination Committee Experience: John joined the Board – Remuneration Committee Independent Non-Executive shortly aer working in the managed Director and Chair of the funds sector since the mid-1990s, the Remuneration: £32,500 per annum last ten years being spent as Head Remuneration Committee Public company directorships: Develop of Investment Companies Research North plc and Gabelli Merger Plus Trust at Brewin Dolphin Limited. He was a plc member of the AIC Statistics’ Committee from 2000 to 2017 and is a member of the Shared Directorships with any other Fund Directors: None 37 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Board of Directors and ## Investment Manager ### Continued Appointed: January 2017 Committee membership: – Audit and Risk Committee Skills: Ian is a Chartered Fellow of the – Management Engagement Committee Chartered Institute for Securities & – Nomination Committee Investment and a Fellow (Chartered – Remuneration Committee Director) of the IoD. His extensive governance experience on public and Remuneration: £32,500 per annum private company boards as well as a long Public company directorships: career as a regulated person (CF3, CF2 Chairman of abrdn Asian Income Fund and CF1 controlled functions) in the asset Limited management industry gives him a broad and relevant skill set for the Board. Shared Directorships with any other Fund Directors: None Experience: Ian has over 30 years’ experience within the nancial services industry in London, Hong Kong and Jersey with a strong career emphasis on equity and equity derivative trading, risk Ian Cadby management, corporate governance and Independent Non-Executive board strategy. Ian is a Jersey resident. Director and Chair of the Nomination Committee Investment Manager Alternative Investment Fund Managers Directive (“AIFMD”) CQS (UK) LLP is appointed as Investment Manager to the Company under an Investment Management Agreement dated The Company has appointed CQS (UK) LLP as the Company’s 18 September 2019. Prior to this, the Company’s Investment alternative investment fund manager (“AIFM”). The AIFM Manager was CQS Cayman Limited Partnership. has received its approval from the FCA to act as AIFM of the Company. The Company is therefore fully compliant. An During the year, CQS (UK) LLP was acquired by Manulife additional requirement of the AIFMD is for the Company to Investment Management, a leading international nancial appoint a depositary, which will oversee the custody and services group. There are no planned changes to the investment cash arrangements and other AIFMD required depositary management team, investment strategy or name of the responsibilities. The Board has appointed BNP Paribas to act as company. the Company’s depositary. Ian Francis has day-to-day responsibility for managing the Further AIFMD disclosures are shown on pages 101 to 102. Company’s portfolio and is supported by the CQS (UK) LLP team. He joined the NCIM team in 2007. He has over 40 years’ investment experience, primarily in the xed interest and convertible spheres and his career has included Collins Stewart, West LB Panmure, James Capel and Hoare Govett. 38 # Directors' Report The Directors present their report and the audited Financial Statements for the year ended 30 June 2024. ## Results and dividends Details of the Company's results and dividends are shown on page 6 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 next AGM. ## Bank loan facility The Company has a short-term unsecured loan facility with Scotiabank. As at the year-end, the unsecured loan facility had a limit of £45,000,000 of which £35,000,000 was drawn down. The Company's existing loan facility is due to expire on 18 December 2024 after which it is anticipated the Company will take out a new facility on comparable terms. ## Share capital As at 30 June 2024, there were 551,451,858 (2023: 524,601,858) ordinary shares in issue. During the year ended 30 June 2024, the Company issued 26,850,000 (2023: 47,950,000) ordinary shares. Full details of these transactions are shown in note 13 of the 'notes to the Financial Statements'. ## Acquisition of own shares At the 2023 AGM, held on 30 November 2023, the Directors were granted authority to repurchase 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 2024 | At 30 June 2023 | | --- | --- | --- | | D A H Baxter | 195,127 | 195,127 | | I Cadby | 25,000 | 25,000 | | W Dorman | 206,781 | 149,529 | | C Hitch^{1} | 211,500 | 211,500 | | J E Newlands | 10,000 | 10,000 | $^{1}$ Inclusive of 41,500 shares held by Ms Hitch's mother On 3 June 2024, Ms Wendy Dorman purchased additional 57,252 ordinary shares. There were no other changes in the ordinary share holdings of the Directors between 1 July 2024 and 27 September 2024. ## Substantial interests in share capital During the year ended 30 June 2024, the Company had not 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 Shareholders that had an interest of greater than 5% in the Company's issued share capital. ## Investment management As part of its strategy for achieving its objectives, the Board has delegated the management of the investment portfolio to the Investment Manager, CQS (UK) LLP, with Ian Francis as the lead fund manager. Further details are provided in 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. 39 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Directors’ Report ### Continued Appointment of the Investment Manager exercising such voting rights is to protect the return from an investment. The Board considers the arrangements for the provision of investment management and other services to the Company Disclosures required under Listing Rules on an ongoing basis and a formal review is conducted (“UKLR”) 6.6.1R annually by the Management Engagement Committee. As part of the annual review the Management Engagement The FCA’s UKLR 6.6.1R requires that the Company Committee considers the continuity of the team, the includes certain information relating to arrangements investment process and the results achieved to date. made between a controlling shareholder and the Company, waivers of Directors’ fees and long-term The Board believes that the continuing appointment of CQS incentive schemes in force. The Directors conrm that (UK) LLP as AIFM and Investment Manager as set out on there are no disclosures to be made in this regard. page 38 is in the interests of Shareholders as a whole. Events aer reporting date Administration services The Board has evaluated material subsequent events for BNP Paribas was appointed as the Company Secretary, the Company occurred during the period from 1 July 2024 Administrator, Custodian, Banker and Depository on 28 through to 27 September 2024 and their eect on the November 2019. Financial Statements. A list of these events is disclosed in note 25. Independent Auditor Following a tender process in 2023, PwC has been Disclosure of information to the Auditor appointed as the Company’s auditor eective 5 July 2023. The Directors conrm that, so far as each of them is A resolution to re-appoint PwC as the Company’s auditor aware, there is no relevant audit information of which will be proposed at the Company’s 2024 AGM. the Company’s Auditor is unaware and the Directors have taken all the steps that they might have taken as Directors Delegation of responsibilities and in order to make themselves aware of any relevant audit matters reserved for the Board information and to establish that the Company’s Auditor is aware of that information. The Board has delegated the exercise of voting rights attaching to the Company’s investments to the Statement regarding Annual Report Investment Manager. All other matters are reserved for and Financial Statements the approval of the Board. Following a detailed review of the Annual Report and The Board has a schedule of matters reserved to it for Financial Statements by the Audit and Risk Committee, the decision and the requirement for Board approval on Directors consider that taken as a whole it is fair, balanced these matters is communicated directly to the Investment and understandable and provides the information Manager. Such matters include strategy, borrowings, necessary for Shareholders to assess the Company’s treasury and dividend policy. Full and timely information performance, business model and strategy. In reaching this is provided to the Board to enable the Directors to conclusion, the Directors have assumed that the reader function eectively and to discharge their responsibilities. of the Annual Report and Financial Statements has a The Board also reviews the Financial Statements, reasonable level of knowledge of the investment industry performance and revenue budgets. in general and investment companies in particular. Exercise of voting powers By Order of the Board The Investment Manager, in the absence of explicit instruction from the Board, is empowered to exercise Caroline Hitch discretion in the use of the Company’s voting rights in Chair respect of investee companies. The underlying aim of 27 September 2024 40 ## The Board and Committees Values and culture Company on behalf of the Directors. There is no notice period and no provision for compensation upon early The Board conducts itself with the core values of termination of appointment. integrity, transparency, acceptance of challenge and accountability. It achieves this through a collaborative The Company has neither executive Directors nor culture and a sense of shared endeavour. The Board employees. A management agreement between the is focused on meeting objectives for investors and all Company and its Investment Manager sets out the other stakeholders of the Company in a sustainable and matters over which the Investment Manager has authority responsible way. and the limits beyond which Board approval must be sought. All other matters, including strategy, investment The Board and dividend policies, gearing and corporate governance procedures, are reserved for the approval of the Board. The Board currently consists of a non-executive Chair and four non-executive Directors. The Board considers Duncan Baxter is the Company’s Senior Independent all of the Directors as independent of the Investment Director. He is available to Shareholders if they have Manager and free from any business or other relationship concerns where contact through the normal channels of that could materially interfere with the exercise of their the Chair or the Investment Manager is inappropriate. independent judgement. All committees’ terms of reference, the schedule The dates on which the Directors were appointed are of matters reserved for the Board, the roles and contained within their biographies shown on pages 36 to responsibilities of the Chair and the roles and 38. In accordance with the AIC Code, all Directors submit responsibilities of the Senior Independent Director are themselves for re-election on an annual basis. available on the Company’s website. New Directors receive an induction from the Company Director attendance Secretary on joining the Board and all Directors receive other relevant training as necessary. Directors’ and Directors have attended Board and Committee meetings Oicers’ liability insurance cover is maintained by the during the year ended 30 June 2024 as follows: Management Quarterly Audit and Risk Engagement Nomination Remuneration Board Ad Hoc Board Committee Committee Committee Committee 1 meetings Meeting meetings meetings meetings meetings C Hitch (Chair) 4/4 5/6 3/3 1/1 1/1 1/1 D A H Baxter 4/4 5/6 3/3 1/1 1/1 1/1 W Dorman 4/4 5/6 3/3 1/1 1/1 1/1 2 I Cadby 3/4 6/6 2/3 0/1 0/1 0/1 J E Newlands 4/4 6/6 3/3 1/1 1/1 1/1 1 Ad hoc board meetings are sometimes called at 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. 2 Mr Cadby did not attend the Board meeting held on 23 May 2024 due to a family bereavement. 41 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## The Board and Committees ### Continued Nomination Committee despite being 40% female, including the Chair, there is potential to improve other areas of diversity. Both the The Nomination Committee, chaired by Ian Cadby, Nomination Committee and the Board recognise the operates within clearly dened terms of reference, importance of diversity and will consider this in respect of comprises the full Board and is convened for the purpose any new appointments. of considering the appointment of additional Directors as and when considered appropriate. In considering Diversity and inclusion appointments to the Board, the Nomination Committee The Board believes in the benets of having a diverse takes into account the ongoing requirements of the range of skills and backgrounds and the need to have a Company and the need to have a balance of skills and balance of experience, independence, diversity (including experience within the Board. gender and ethnicity) and knowledge of the Company on Board evaluation its Board and are endeavouring to meet diversity targets. In 2024, the Directors completed a questionnaire- The below tables set out the Board’s composition as based Board evaluation which covered the Board’s at 30 June 2024, in terms of gender identity and ethnic composition and skills, strategy setting, oversight of risk background. The below text compares this against the and performance, and its stakeholder management. targets prescribed by UKLR 6.6.6R (9)(a). The Board scored highly in all areas although noted that Number of Board members Percentage of the Board Senior positions on the Board (Senior Independent Director and Chair) Men: 3 60% Duncan Baxter – Senior Independent Non- Executive Director Women: 2 40% Caroline Hitch – Chair of the Board Wendy Dorman – Chair of the Audit and Risk Committee Number Percentage Senior positions on the Board (Senior of Board of the Board Independent Director and Chair) members White British or other White 5 100% Duncan Baxter – Senior Independent Non- (including minority-white groups) Executive Director Caroline Hitch – Chair of the Board Wendy Dorman – Chair of the Audit and Risk Committee Mixed/Multiple Ethnic Groups Nil N/A N/A Asian/Asian British Nil N/A N/A Black/African/Caribbean/Black British Nil N/A N/A Other ethnic group, including Arab Nil N/A N/A Not specied/ prefer not to say Nil N/A N/A 42 At present none of the Board members are from minority appropriateness of the Investment Manager’s continuing ethnic backgrounds which is below the target of one as appointment together with the terms and conditions prescribed by UKLR 6.6.6R (9)(a). The Board are mindful thereof and reviews the terms and quality of service of this and alongside knowledge and expertise, this will received from other service providers. form a key consideration when the Board next recruits. The Board ensures the Company adheres to independent The Nomination Committee is building diversity targets requirements in all agreements and service contracts. into its succession plans. Remuneration Committee Director re-election and tenure The Remuneration Committee determines and agrees It is the intention of the Board that each Director will with the Board the policy for the remuneration of all retire aer no longer than nine years in their role and the Directors. It is chaired by John Newlands. Board has adopted a policy whereby all Directors will be put up for re-election every year in line with the AIC Code. Audit and Risk Committee Accordingly, all Directors will be put forward for re- The composition and role of the Audit and Risk election at the forthcoming AGM, except for Mr Duncan Committee is described on page 46. Baxter. Mr Baxter is expected to retire at the Company’s next AGM Relations with Shareholders to be held in 3 December 2024 as he has reached nine The Directors place a great deal of importance on years of service. The Board is very grateful to Mr Baxter for communication with Shareholders. The Annual Report his contribution to the Company during his tenure. and Financial Statements are widely distributed to other parties who have an interest in the Company’s Succession planning performance. The Directors obtain regular feedback A key duty of the Nomination Committee is to ensure from the Investment Manager and Broker regarding plans are in place for orderly succession to the Board. shareholder engagement and will make themselves The Board has adopted a succession plan scheduled to available to shareholders upon request. Shareholders allow for an orderly refreshment of the Board, with the and investors may obtain up to date information on the intention that no director serves longer than nine years, Company through the Investment Manager’s website. other than in exceptional circumstances. Our succession The Company responds to letters from Shareholders planning takes into account gender and ethnic diversity on a wide range of issues and invites questions at the targets. Company’s Annual General Meeting. In anticipation of the retirement of Mr Baxter in 2024, the A regular dialogue is maintained with the Company’s Committee commenced a recruitment process in May institutional Shareholders. The Company Secretary is 2024 to identify candidates for Board succession. The available to answer general Shareholder queries at any Board engaged Thomas and Dessain, a recruitment rm time throughout the year. in Jersey to manage the process. Thomas and Dessain has By Order of the Board no other connections to the Company or any individual Director. Caroline Hitch Management Engagement Committee Chair The Management Engagement Committee, chaired by 27 September 2024 Duncan Baxter, operates within clearly dened terms of reference, comprises the full Board, reviews the 43 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Statement of Compliance ## with the AIC Code Introduction The Company is listed on the Equity Shares Page (Commercial Companies) segment of the LSE and is therefore required to report on how the principles of 1. Board leadership and purpose the UK Code have been applied. Being an investment Purpose 27 company, a number of the provisions of the UK Corporate Governance Code (the “UK Code”) are not Strategy 27 applicable as the Company has no executive directors Values and culture 41 or internal operations. Shareholder engagement 25 The Board has considered the principles and Stakeholder engagement 25 to 26 provisions of the AIC Code. The AIC Code addresses all the principles and provisions set out in the UK Code, as well as setting out additional provisions on issues 2. Division of responsibilities that are of specic relevance to the Company. Director independence 41 The Board considers that reporting against the Board meetings 41 principles and provisions of the AIC Code provides more relevant information to stakeholders. The AIC Relationship with Investment Manager 40 Code is available on the AIC’s website Management Engagement Committee 43 www.theaic.co.uk. The Company has complied with all the principles and 3. Composition, succession and evaluation provisions of the AIC Code during the year ended 30 June 2024. Nomination Committee 42 to 43 Set out below is where stakeholders can nd further Director re-election 43 information within the Annual Report about how the Use of an external search agency 43 Company has complied with the various Principles Board evaluation 42 and Provisions of the AIC Code. 4. Audit, risk and internal control Audit and Risk Committee 46 to 48 Emerging and principal risks 20 to 24 Risk management and internal control systems 47 to 48 Going concern statement 28 Viability statement 29 5. Remuneration Directors’ remuneration report 49 44 ## Environmental, Social and ## Governance (“ESG”) Statement Introduction Following the publication of the inaugural ISSB Standards—IFRS S1 and IFRS S2—the Financial Stability The Company is a Jersey domiciled and UK LSE listed Board has asked the IFRS Foundation to take over the investment company whose objective is to provide monitoring of the progress on companies’ climate-related investors with a high gross dividend yield and the disclosures from the TCFD. potential for capital growth by mainly investing in high yielding xed interest securities. The Board fully At the time of writing, 34.4% of the Company’s portfolio is supports the growing importance placed on ESG factors covered by Morgan Stanley Capital International (“MSCI”) when asking the Company’s Investment Manager to for their ESG rating service. MSCI has a minimum 50% deliver against the Company’s objectives. The Board threshold for xed interest portfolios before the Investment has requested that the Investment Manager take into Manager is able to provide a meaningful MSCI ESG fund account the broader social, ethical and environmental rating for the portfolio. issues of companies within the Company’s portfolio, The Investment Manager monitors this closely and engages acknowledging that companies failing to manage to try and further increase the percentage of the portfolio these issues adequately run a long-term risk to the covered. sustainability of their businesses. The Investment Manager has a three-pronged approach to engagement - Targeted Engagement Programmes CQS (UK) LLP Responsible Investment Policy which map key objectives for priority companies to the UN incorporating our ESG Statement Sustainable Development Goals, day-to-day engagement CQS (UK) LLP views ESG factors as signicant drivers as part of the research process and collaborative inuencing nancing costs, risk assessment valuations engagements. Key engagements are monitored and and performance. The assessment, integration and discussed at quarterly engagement group meetings and engagement of ESG factors are a crucial part of cover environmental, social and governance topics. the Investment Manager’s responsible investment An example of this engagement for the Company over commitment. By embedding responsible investment the reporting period was the Investment Manager’s into its investment process, the Investment Manager participation in the 2023 Carbon Disclosure Project seeks to enhance its ability to identify value, investment (“CDP”) non-disclosure campaign. The campaign was opportunity, risk and, critically, to generate the best a collaboration of 287 nancial institutions directly possible returns and outcomes for its clients. engaging with 1,590 of the highest impact companies not The Investment Manager is a signatory to the United currently disclosing environmental data through CDP. The Nations PRI, the UK Stewardship Code, the Net Zero Asset Investment Manager led on four engagements and co- Managers’ initiative and the Institutional Investors Group signed all other letters as part of the campaign. As a result on Climate Change. of the campaign, 317 companies in the campaign made disclosures on at least one of the key environmental issues The TCFD is a global initiative to promote consistent including climate, water and forests. and transparent reporting of climate-related risks and opportunities by companies and nancial institutions. As of CQS (UK) LLP has published its Responsible Investment 2024, the Investment Manager publishes annual product- Policy and a link to that policy is found here: level TCFD reporting for the Company, which enables https://www.cqs.com/documents/cqs-responsible- investors to make informed choices based on consistent investment-policy-february-2023.pdf and comparable information about the climate impact of the Company. Please nd the latest product-level TCFD reporting for the Company here: https://ncim.co.uk/wp/ wp-content/uploads/2024/06/CQS-New-City-High-Yield- Fund-Limited_TCFD_20231231_R-105385.pdf 45 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Report of the Audit ## and Risk Committee ▶ to monitor the integrity of the half-yearly and annual Membership and meetings Financial Statements of the Company by reviewing The Audit and Risk Committee (“the Committee”) is and challenging where necessary, the actions and chaired by Wendy Dorman and comprises the full Board. judgements of the Investment Manager, the Company Committee members are considered to have recent and Secretary and the Administrator; relevant nancial experience. The terms of reference of ▶ to advise the Board on whether the annual report the Committee are reviewed and re-assessed for their adequacy on an annual basis. and accounts, taken as a whole, is fair, balanced and understandable and provides the information The AIC Code requires audit committees who include necessary for Shareholders to assess the Company’s the Chair of the Board as a member of the Committee strategy, business model, position and performance; to explain why this is felt to be appropriate. The Chair, ▶ to meet with the external Auditor to review their Caroline Hitch, is a member of the Committee. Caroline was considered independent of the Company on her proposed audit programme of work and their ndings. appointment to the Board in March 2018 and the The Committee shall also uses this as an opportunity Committee is satised that she remains independent and to assess the eectiveness of the audit process; objective. Her membership of the Committee is deemed ▶ to make recommendations in relation to the appropriate given the size and nature of the Company. appointment of the external Auditor and to approve The Committee does not believe it compromises the the remuneration and terms of engagement of the integrity of the Committee or the Board. external Auditor; The Committee held three scheduled meetings during the ▶ to monitor and review annually the external Auditor’s year, as well as a number of ad hoc meetings. Meetings independence, objectivity, eectiveness, resources and were attended, by invitation, by the Investment Manager, qualication; and external auditor and members of the client service team ▶ to consider and approve all non-audit services. No of the Administrator. non-audit services are pre-approved. As part of the annual Board evaluation, a review of the work of the Committee was carried out during the year Annual Report and Financial Statements and it was evaluated to be operating eectively. The Board is ultimately responsible for the Annual Report and Financial Statements. The Committee advises the Role of the Audit and Risk Committee Board on the form and content of the Annual Report and A summary of the Committee’s main audit review Financial Statements, any issues which may arise and any functions is shown below: specic areas which require judgement. ▶ to review and monitor the internal control systems and The Company has adopted and reports against the AIC risk management systems on which the Company is Code. The Committee oversaw the work performed by reliant; the Company Secretary in ensuring that the Company ▶ to consider any changes to the principal risks facing is in compliance with the principles and provisions of the Company, including changes to the probability and the AIC Code, which is reported on in the Statement of likelihood of a risk materialising, taking into account Compliance with the AIC Code section on page 44. mitigations in place, and considering and tracking The valuation of investments was a key area of focus emerging risks that could impact over time; given their signicance to the Financial Statements as a ▶ to consider annually whether there is a need for the whole. Following discussion with the Investment Manager Company to have its own internal audit function; and external auditor, the Committee gained comfort over the valuation as included in the Annual Report and Financial Statements. 46 The Committee reviewed and considered the Annual Following professional guidelines, the audit engagement Report and Financial Statements to be fair, balanced and partner rotates aer a maximum of ve years. The understandable and recommended the Board’s approval. current audit engagement partner is Mike Byrne and it is his second year as audit engagement partner for the During the year, the Financial Reporting Council Company. carried out a review of the Annual Report and Financial Statements of the Company for the year ended 30 June Signicant risks related to the Financial 2023 and reported to the Board that they found nothing Statements of concern or that required further investigation. The main area of accounting risk considered by the External auditor Committee during the year in relation to the Company’s Financial Statements was the valuation of investments Following a tender process in 2023, PwC was appointed held by the Company. as the Company’s auditor eective 5 July 2023 and this is the second year of their appointment. The valuation of investments is undertaken in accordance with the accounting policies as set out in note 1. Details of In the May 2024 Committee meeting, PwC presented their the fair value hierarchy are set out in note 22. plan for the audit of the Financial Statements for the year ended 30 June 2024 and this was discussed with and In order to address this risk, the Company has appointed agreed by the Committee. Following the prior year audit, an Investment Manager and Custodian with clearly the Committee evaluated the audit process and were dened contracts and any breaches of these, or any law satised with the eiciency and quality of the audit. or regulation which the Company is required to comply with, are reported to the Board. The portfolio holdings At the conclusion of the audit, PwC discussed with the and their pricing are reviewed on a daily basis and Committee their audit ndings and recommendations. veried by the Investment Manager. PwC did not highlight any issues to the Committee which would cause it to qualify its audit report. PwC issued an A full portfolio analysis is prepared for each Board unmodied audit report which is included on pages 52 to meeting, including a detailed movement of the top 60 58. holdings, which is actively commented on and discussed by the Directors. As part of the review of auditor independence and eectiveness, PwC has conrmed that it is independent Internal controls of the Company and has complied with relevant auditing standards. In evaluating PwC, the Committee has taken The Committee, on behalf of the Board, is responsible into consideration the standing, skills and experience of for reviewing the Company’s system of internal control the rm and the audit team. The Committee, from direct and its eectiveness. There is an ongoing process for observation and enquiry of the Investment Manager identifying, evaluating and managing the signicant risks and the Administrator, are satised that PwC provided faced by the Company. This process has been in place for eective independent challenge in carrying out its the year under review and up to the date of approval of responsibilities. The Committee chair, Wendy Dorman this Annual Report and is regularly reviewed by the Board was a former tax partner with PwC. She retired from the and accords with Financial Reporting Council’s Guidance. partnership in 2015 and has no residual connection with The signicant principal and emerging risks faced by the the rm. No non-audit services were provided to the Company, together with mitigating controls, are set out Company by PwC during the year. on pages 20 to 24. 47 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors’ Reports and Governance Reports ## Report of the Audit ## and Risk Committee ### Continued The key components designed to provide eective In February 2024, the Board held a strategy and due internal control are outlined below: diligence meeting at the oices of the Investment Manager. This provided an opportunity to discuss ▶ the Administrator together with the Investment the portfolio and strategy in depth and consider the Manager prepare forecasts and management accounts implications of current market conditions for our which allow the Board to assess the Company’s Company. Discussions were held with various members of activities and nancial position, and review its the Investment Manager’s team and with our Broker who performance; updated the Board on developments in the market and in ▶ the Board and Investment Manager have agreed our sector. In addition, sustainability and TCFD reporting clearly dened investment criteria, specied levels of was discussed with the Investment Manager’s team. authority and exposure limits. Reports on these issues, During the year, the Directors carried out an annual including performance statistics and investment assessment of internal controls for each of their key valuations, are regularly submitted to the Board and service providers and considered documentation from there are meetings with the Investment Manager as each. The Committee assessed the control environment appropriate; as suiciently robust to mitigate to an acceptable level ▶ the Administrator carried out compliance checks the principal risks of the Company, with a particular focus throughout the year in accordance with a Compliance on operational risks including cyber and fraud. Monitoring Plan approved annually by the Board; The Directors received and reviewed the BNP Paribas’ ▶ as a matter of course the Investment Manager’s internal controls framework for the year and were pleased compliance department continually reviews the to note that no signicant issues were identied. The Investment Manager’s operations and reports to the Administrator conrmed that their internal controls were Board on an annual basis and by exception; reviewed on an ongoing basis which was overseen by the Group’s internal audit team. The Administrator has ▶ written agreements are in place which specically established an IT Governance framework that is based on dene the roles and responsibilities of the Investment a set of Level 2 procedures and IT operations. Manager, Company Secretary, Administrator and other third party service providers; Internal control systems are designed to meet the Company’s particular needs and the risks to which it is ▶ the Board has considered the need for an internal audit exposed. Accordingly, the internal control systems are function but because of the compliance and internal designed to manage rather than eliminate the risk of control systems in place at the Investment Manager, failure to achieve business objectives and by their nature the Company Secretary and the Administrator, has can only provide reasonable and not absolute assurance decided to place reliance on the Investment Manager’s, against misstatement and loss. the Company Secretary’s and the Administrator’s systems and internal audit procedures. Wendy Dorman Chair of the Audit and Risk Committee 27 September 2024 48 # 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 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. It is intended that this policy will continue for the year ending 30 June 2025 and subsequent years. On 25 May 2023, the Board approved an increased level of remuneration for the Directors with effect from 1 July 2023 as follows: | ▶ Chair | £45,000 | | --- | --- | | ▶ Audit Chair | £39,000 | | ▶ Other | £32,500 | 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: | | 2024 £ | 2023 £ | | --- | --- | --- | | C Hitch (Chair) | 45,000 | 42,500 | | D A H Baxter | 32,500 | 30,000 | | I Cadby | 32,500 | 30,000 | | W Dorman (Audit and Risk Committee Chair) | 39,000 | 36,500 | | J E Newlands | 32,500 | 30,000 | | Total | 181,500 | 169,000 | The amounts paid by the Company to the Directors were for services as non-executive Directors. ## Voting at AGM An ordinary resolution for the approval of this Directors' Remuneration Report will be put to an advisory shareholder vote at the forthcoming AGM. ## Approval The Directors' Remuneration Report on page 49 was approved by the Board of Directors and signed on its behalf. By order of the Board Caroline Hitch Chair 27 September 2024 49 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Independent Auditor’s Report 50 ## Independent Auditor’s ## Report to the members ## of CQS New City High ## Yield Fund Limited 51 Independent Auditor’s Report HEAD_3rd lineto the members of CQS New City High Yield Fund Limited CQS New City High Yield Fund Limited Annual Report & Financial Statements | Independent Auditor’s Report ## Independent Auditor’s Report ### to the members of CQS New City High Yield Fund Limited ## Report on the audit of the nancial statements Our opinion Our audit approach In our opinion, the nancial statements give a true and Overview fair view of the nancial position of CQS New City High Yield Fund Limited (the “company”) as at 30 June 2024, Audit scope and of its nancial performance and its cash ows for ▶ The company is an investment company, the year then ended in accordance with International incorporated and based in Jersey, with ordinary Financial Reporting Standards as adopted by the shares listed on the Main Market of the London Stock European Union and have been properly prepared in Exchange. accordance with the requirements of the Companies ▶ We conducted our audit of the nancial statements (Jersey) Law 1991. using information provided by BNP Paribas S.A., What we have audited Jersey Branch (the “administrator’) and CQS (UK) LLP (the “manager”). The company’s nancial statements comprise: ▶ Our audit work was performed in Jersey. We tailored ▶ the statement of nancial position as at 30 June 2024; the scope of our risk-based audit considering the ▶ the statement of comprehensive income for the year types of investments held by the company, the then ended; accounting processes and controls, and the industry in which the company operates. ▶ the statement of changes in equity for the year then ended; Key audit matters ▶ the cash ow statement for the year then ended; and ▶ Valuation and ownership of nancial assets at fair value through prot or loss. ▶ the notes to the nancial statements, comprising material accounting policy information and other ▶ Investment income recognition. explanatory information. Materiality ▶ Overall materiality: £2,734,000 (2023: £2,404,000) Basis for opinion based on 1% of net asset value. We conducted our audit in accordance with International ▶ Performance materiality: £2,050,000 (2023: Standards on Auditing (“ISAs”). Our responsibilities under £1,202,000). those standards are further described in the Auditor’s responsibilities for the audit of the nancial statements The scope of our audit section of our report. As part of designing our audit, we determined materiality We believe that the audit evidence we have obtained and assessed the risks of material misstatement in the is suicient and appropriate to provide a basis for our nancial statements. In particular, we considered where opinion. the directors made subjective judgements; for example, in respect of signicant accounting estimates that involved Independence making assumptions and considering future events that We are independent of the company in accordance with are inherently uncertain. As in all of our audits, we also the ethical requirements that are relevant to our audit addressed the risk of management override of internal of the nancial statements of the company, as required controls, including among other matters, consideration of by the Crown Dependencies’ Audit Rules and Guidance. whether there was evidence of bias that represented a risk We have fullled our other ethical responsibilities in of material misstatement due to fraud. accordance with these requirements. 52 HEAD_1st line HEAD_2nd line Key audit matters Key audit matters are those matters that, in the auditor’s professional judgement, were of most signicance in the audit of the nancial statements of the current period and include the most signicant assessed risks of material misstatement (whether or not due to fraud) identied by the auditor, including those which had the greatest eect on: the overall audit strategy; the allocation of resources in the audit; and directing the eorts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identied by our audit. Key audit matter How our audit addressed the key audit matter Valuation and ownership of nancial assets at fair value through prot or loss Refer to Note 1 (Accounting policies), Note 9 (Financial We understood and evaluated the design and assets at fair value through prot or loss), and Note 22 implementation of controls over the valuation of (Fair value hierarchy) to the nancial statements. investments at the administrator for the level 1 and level 2 investments. We focused on the valuation and ownership of nancial assets at fair value through prot or loss (“investments”) We assessed the accounting policy for valuation of because investments represent the principal element investments for compliance with applicable accounting of the net asset value as disclosed on the statement of standards and assessed whether investments had been nancial position in the nancial statements. accounted for in accordance with the stated accounting policy. The valuation of investments drives several key performance indicators, such as net asset value, which We used independent third-party pricing sources is of signicant interest to investors. Items classied as to recalculate the valuation of all level 1 and level 2 being level 1 or level 2 in the fair value hierarchy together positions within the investment portfolio and compared comprise 99.8% of the investment portfolio. it to the valuation performed by management. The nature of level 1 and level 2 investment valuations For 100% of the investment portfolio, we obtained is not deemed to be complex as they are based primarily an independent third-party conrmation from the on quoted prices from independent pricing sources. company’s custodian and compared it to the company’s However, the magnitude of the amounts involved means records of investment ownership. that there is potential for material misstatement. We have no matters to report. If the investments recorded were found not to represent what was owned by the company, this could have a signicant impact on the nancial statements. 53 HEAD_1st line HEAD_2nd line HEAD_3rd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Independent Auditor’s Report ## Independent Auditor’s Report ### to the members of CQS New City High Yield Fund Limited ### Continued ## Report on the audit of the nancial statements ### Continued Investment Income recognition We assessed the accounting policy for income recognition for compliance with applicable accounting Refer to Note 1 (Accounting Policies) and Note 2 standards and assessed whether income had been (Investment Income) to the nancial statements. accounted for in accordance with the stated accounting Investment income is earned primarily through interest policy. generated from xed interest securities and dividend For a sample of xed interest securities, we traced the income recognised in the year. The calculation and rates of interest to independent sources and recalculated recognition of income receipts and accrued income is the income recognised by the company. not considered to be complex. For a sample of equity dividends, we traced the dividend We identied the accuracy, occurrence and per share to independent sources and recalculated the completeness of income from xed interest securities income recognised by the company. and dividend income to be a key audit matter, because the incomplete or inaccurate recognition of income We traced a sample of income receipts to bank could have a material impact on the company’s nancial statements for income received, and the accrued income performance for the year. listing for items accrued at the year-end. To address the risk of incomplete income recognition, using the investment ledger of investments held by the company throughout the year ended 30 June 2024, for a sample of investments, we reconciled the income recognised by the company to independent information on the income declared by each investment within the sample, based on the holding at the ex-dates, including testing accrued income as at 30 June 2024. We have no matters to report. 54 HEAD_1st line HEAD_2nd line How we tailored the audit scope £2,050,000 (2023: £1,202,000) for the company nancial statements. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on In determining the performance materiality, we the nancial statements as a whole, taking into account considered a number of factors – the history of the structure of the company, the accounting processes misstatements, risk assessment and aggregation risk and controls, the industry in which the company operates, and the eectiveness of controls - and concluded that and we considered the risk of climate change and the an amount at the upper end of our normal range was potential impact thereof on our audit approach. appropriate. We agreed with the Audit and Risk Committee that we Materiality would report to them misstatements identied during The scope of our audit was inuenced by our application our audit above £136,000 (2023: £120,000) as well as of materiality. We set certain quantitative thresholds misstatements below that amount that, in our view, for materiality. These, together with qualitative warranted reporting for qualitative reasons. considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit Reporting on other information procedures on the individual nancial statement line The other information comprises all the information items and disclosures and in evaluating the eect of included in the Annual Report & Financial Statements misstatements, both individually and in aggregate on the (the “Annual Report”) but does not include the nancial nancial statements as a whole. statements and our auditor’s report thereon. The directors Based on our professional judgement, we determined are responsible for the other information. materiality for the nancial statements as a whole as Our opinion on the nancial statements does not cover follows: the other information and we do not express any form of assurance conclusion thereon. Overall materiality £2,734,000 (2023: £2,404,000). In connection with our audit of the nancial statements, our responsibility is to read the other information and, How we determined it 1% of net asset value in doing so, consider whether the other information is Rationale for benchmark We believe that net assets materially inconsistent with the nancial statements applied is the most appropriate or our knowledge obtained in the audit, or otherwise benchmark because appears to be materially misstated. If, based on the work this is a key metric of we have performed, we conclude that there is a material interest to investors. misstatement of this other information, we are required to It is also a generally report that fact. We have nothing to report based on these accepted measure used responsibilities. for companies in this industry. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2023: 50%) of overall materiality, amounting to 55 HEAD_1st line HEAD_2nd line HEAD_3rd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Independent Auditor’s Report ## Independent Auditor’s Report ### to the members of CQS New City High Yield Fund Limited ### Continued ## Report on the audit of the nancial statements ### Continued Responsibilities for the nancial statements As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional and the audit scepticism throughout the audit. We also: Responsibilities of the directors for the nancial ▶ Identify and assess the risks of material misstatement statements of the nancial statements, whether due to fraud As explained more fully in the Statement of Directors’ or error, design and perform audit procedures Responsibilities in respect of the Annual Report and responsive to those risks, and obtain audit evidence Financial Statements, the directors are responsible for the that is suicient and appropriate to provide a basis preparation of the nancial statements that give a true for our opinion. The risk of not detecting a material and fair view in accordance with International Financial misstatement resulting from fraud is higher than for Reporting Standards as adopted by the European Union, one resulting from error, as fraud may involve collusion, the requirements of Jersey law and for such internal forgery, intentional omissions, misrepresentations, or control as the directors determine is necessary to enable the override of internal control. the preparation of nancial statements that are free from ▶ Obtain an understanding of internal control relevant material misstatement, whether due to fraud or error. to the audit in order to design audit procedures that In preparing the nancial statements, the directors are appropriate in the circumstances, but not for the are responsible for assessing the company’s ability to purpose of expressing an opinion on the eectiveness continue as a going concern, disclosing, as applicable, of the company’s internal control. matters related to going concern and using the going ▶ Evaluate the appropriateness of accounting policies concern basis of accounting unless the directors either used and the reasonableness of accounting estimates intend to liquidate the company or to cease operations, or and related disclosures made by the directors. have no realistic alternative but to do so. ▶ Conclude on the appropriateness of the directors’ use Auditor’s responsibilities for the audit of the nancial of the going concern basis of accounting and, based statements on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that Our objectives are to obtain reasonable assurance about may cast signicant doubt on the company’s ability whether the nancial statements as a whole are free from to continue as a going concern over a period of at material misstatement, whether due to fraud or error, least twelve months from the date of approval of the and to issue an auditor’s report that includes our opinion. nancial statements. If we conclude that a material Reasonable assurance is a high level of assurance, but is uncertainty exists, we are required to draw attention not a guarantee that an audit conducted in accordance in our auditor’s report to the related disclosures in with ISAs will always detect a material misstatement the nancial statements or, if such disclosures are when it exists. Misstatements can arise from fraud or inadequate, to modify our opinion. Our conclusions error and are considered material if, individually or in are based on the audit evidence obtained up to the aggregate, they could reasonably be expected to inuence date of our auditor’s report. However, future events the economic decisions of users taken on the basis of or conditions may cause the company to cease to these nancial statements. continue as a going concern. Our audit testing might include testing complete ▶ Evaluate the overall presentation, structure and populations of certain transactions and balances, possibly content of the nancial statements, including the using data auditing techniques. However, it typically disclosures, and whether the nancial statements involves selecting a limited number of items for testing, represent the underlying transactions and events in a rather than testing complete populations. We will oen manner that achieves fair presentation. seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. 56 HEAD_1st line HEAD_2nd line We communicate with those charged with governance We have no exceptions to report arising from this regarding, among other matters, the planned scope responsibility. and timing of the audit and signicant audit ndings, including any signicant deciencies in internal control Corporate governance statement that we identify during our audit. The Listing Rules require us to review the directors’ We also provide those charged with governance with statements in relation to going concern, longer-term a statement that we have complied with relevant viability and that part of the corporate governance ethical requirements regarding independence, and to statement relating to the company’s compliance with communicate with them all relationships and other the provisions of the UK Corporate Governance Code matters that may reasonably be thought to bear on our specied for our review. Our additional responsibilities independence, and where applicable, related safeguards. with respect to the corporate governance statement as other information are described in the Reporting on other From the matters communicated with those charged with information section of this report. governance, we determine those matters that were of most signicance in the audit of the nancial statements The company has reported compliance against the 2019 of the current period and are therefore the key audit AIC Code of Corporate Governance (the “Code”) which has matters. We describe these matters in our auditor’s report been endorsed by the UK Financial Reporting Council as unless law or regulation precludes public disclosure about being consistent with the UK Corporate Governance Code the matter or when, in extremely rare circumstances, we for the purposes of meeting the company’s obligations, determine that a matter should not be communicated in as an investment company, under the Listing Rules of the our report because the adverse consequences of doing FCA. so would reasonably be expected to outweigh the public Based on the work undertaken as part of our audit, we interest benets of such communication. have concluded that each of the following elements of the corporate governance statement, included within the Use of this report Strategic Report, is materially consistent with the nancial This report, including the opinions, has been prepared for statements and our knowledge obtained during the audit, and only for the members as a body in accordance with and we have nothing material to add or draw attention to Article 113A of the Companies (Jersey) Law 1991 and for in relation to: no other purpose. We do not, in giving these opinions, ▶ The directors’ conrmation that they have carried out a accept or assume responsibility for any other purpose or robust assessment of the emerging and principal risks; to any other person to whom this report is shown or into ▶ The disclosures in the Annual Report that describe whose hands it may come save where expressly agreed by our prior consent in writing. those principal risks, what procedures are in place to identify emerging risks and an explanation of how Report on other legal and regulatory these are being managed or mitigated; requirements ▶ The directors’ statement in the nancial statements about whether they considered it appropriate to Company Law exception reporting adopt the going concern basis of accounting in preparing them, and their identication of any material Under the Companies (Jersey) Law 1991 we are required uncertainties to the company’s ability to continue to to report to you if, in our opinion: do so over a period of at least twelve months from the ▶ we have not received all the information and date of approval of the nancial statements; explanations we require for our audit; ▶ The directors’ explanation as to their assessment of ▶ proper accounting records have not been kept; or the company’s prospects, the period this assessment ▶ the nancial statements are not in agreement with the covers and why the period is appropriate; and accounting records. 57 HEAD_1st line HEAD_2nd line HEAD_3rd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Independent Auditor’s Report ## Independent Auditor’s Report ### to the members of CQS New City High Yield Fund Limited ### Continued ## Report on the audit of the nancial statements ### Continued ▶ The directors’ statement as to whether they have a We have nothing to report in respect of our responsibility reasonable expectation that the company will be able to report when the directors’ statement relating to the to continue in operation and meet its liabilities as they company’s compliance with the Code does not properly fall due over the period of its assessment, including any disclose a departure from a relevant provision of the related disclosures drawing attention to any necessary Code specied under the Listing Rules for review by the qualications or assumptions. auditors. Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process Michael Byrne supporting their statements; checking that the statements For and on behalf of PricewaterhouseCoopers CI LLP are in alignment with the relevant provisions of the Code; Chartered Accountants and Recognized Auditor and considering whether the statement is consistent Jersey, Channel Islands with the nancial statements and our knowledge and 27 September 2024 understanding of the company and its environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the nancial statements and our knowledge obtained during the audit: ▶ The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the company’s position, performance, business model and strategy; ▶ The section of the Annual Report that describes the review of eectiveness of risk management and internal control systems; and ▶ The section of the Annual Report describing the work of the Audit and Risk Committee. 58 59 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements 60 ## Financial ## Statements 61 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Statement of Comprehensive Income For the year ended 30 June 2024 | | Notes | Year ended 30 June 2024 | | | Year ended 30 June 2023 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Net capital gains/(losses) | | | | | | | | | Gains/(losses) on financial assets at fair value | 9 | – | 20,585 | 20,585 | – | (17,988) | (17,988) | | Foreign exchange gain/(loss) ^{1} | | – | 46 | 46 | – | (252) | (252) | | Revenue | | | | | | | | | Investment income | 2 | 28,582 | – | 28,582 | 26,229 | – | 26,229 | | Total Income | | 28,582 | 20,631 | 49,213 | 26,229 | (18,240) | 7,989 | | Expenses | | | | | | | | | Investment management fee | 3 | (1,663) | (554) | (2,217) | (1,591) | (530) | (2,121) | | Other expenses | 4 | (942) | (72) | (1,014) | (647) | (89) | (736) | | Total expenses | | (2,605) | (626) | (3,231) | (2,238) | (619) | (2,857) | | Profit/(loss) before finance income/(costs) and taxation | | 25,977 | 20,005 | 45,982 | 23,991 | (18,859) | 5,132 | | Finance income/(costs) | | | | | | | | | Interest income | | 256 | – | 256 | 124 | – | 124 | | Interest expense | 5 | (1,854) | (618) | (2,472) | (1,167) | (389) | (1,556) | | Profit/(loss) before taxation | | 24,379 | 19,387 | 43,766 | 22,948 | (19,248) | 3,700 | | Irrecoverable withholding tax | 6 | (350) | – | (350) | (505) | – | (505) | | Profit/(loss) after taxation and total comprehensive income/ (loss) | | 24,029 | 19,387 | 43,416 | 22,443 | (19,248) | 3,195 | | Basic and diluted earnings/ (losses) per ordinary share (pence) | 8 | 4.50p | 3.63p | 8.13p | 4.51p | (3.87)p | 0.64p | $^{1}$ Excludes foreign exchange gains and losses on financial assets at fair value through profit or loss which are presented within losses on financial assets 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 AIC. 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 66 to 87 are an integral part of these Financial Statements. 62 As at 30 June 2024Statement of Financial Position ## Statement of Financial Position ### As at 30 June 2024 | | | As at | | As at | | --- | --- | --- | --- | --- | | | 30 June | | 30 June | | | | | 2024 | | 2023 | | Notes | | £’000 | | £’000 | Non-current assets Financial assets at fair value through prot or loss 9 299,529 266,011 Current assets Debtors and other receivables 10 4,905 7,010 Cash and cash equivalents 12,350 6,597 17,255 13,607 Total assets 316,784 279,618 Current liabilities Bank loan 11 (35,000) (35,000) Creditors and other payables 12 (8,321) (4,187) Total liabilities (43,321) (39,187) Net asset value 273,463 240,431 Stated capital and reserves Stated capital account 13 258,364 244,884 Special distributable reserve 50,385 50,385 Capital reserve (51,471) (70,858) Revenue reserve 16,185 16,020 Equity Shareholders’ funds 273,463 240,431 Net asset value per ordinary share (pence) 15 49.59p 45.83p The Financial Statements on pages 62 to 87 were approved by the Board of Directors and authorised for issue on 27 September 2024 and were signed on its behalf by: Caroline Hitch Chair 27 September 2024 The accompanying notes on pages 66 to 87 are an integral part of these Financial Statements. 63 For the year ended 30 June 2024Statement of Changes in Equity CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Statement of Changes in Equity ### For the year ended 30 June 2024 | | | Stated | | | Special | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | capital | | distributable | | | Capital | | Revenue | | | | | | | | 1 | | | 2 | | 1 | | | 3 | | | | account | | | | reserve | | reserve | | reserve | | | Total | | Notes | | £’000 | | | £’000 | | £’000 | | | £’000 | | £’000 | At 1 July 2023 244,884 50,385 (70,858) 16,020 240,431 Total comprehensive income for the year: Prot for the year – – 19,387 24,029 43,416 Transactions with owners recognised directly in equity: Dividends paid 7 – – – (23,864) (23,864) Net proceeds from issue of shares 13 13,480 – – – 13,480 At 30 June 2024 258,364 50,385 (51,471) 16,185 273,463 ### For the year ended 30 June 2023 | | | Stated | | | Special | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | capital | | distributable | | | Capital | | Revenue | | | | | | | | 1 | | | 2 | | 1 | | | 3 | | | | account | | | | reserve | | reserve | | reserve | | | Total | | Notes | | £’000 | | | £’000 | | £’000 | | | £’000 | | £’000 | At 1 July 2022 220,649 50,385 (51,610) 15,562 234,986 Total comprehensive income for the year: Prot/(loss) for the year – – (19,248) 22,443 3,195 Transactions with owners recognised directly in equity: Dividends paid 7 – – – (21,985) (21,985) Net proceeds from issue of shares 13 24,235 – – – 24,235 At 30 June 2023 244,884 50,385 (70,858) 16,020 240,431 1 Following a change in Companies (Jersey) Law 1991 eective 27 June 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. 2 The balance on the special distributable reserve of £50,385,000 (2023: £50,385,000) is treated as distributable prots 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. 3 The balance on the revenue reserve of £16,185,000 (2023: £16,020,000) is available for paying dividends. The accompanying notes on pages 66 to 87 are an integral part of these Financial Statements. 64 For the year ended 30 June 2024Cash Flow Statement ## Cash Flow Statement ### For the year ended 30 June 2024 | | | Year | | Year | | --- | --- | --- | --- | --- | | | ended | | ended | | | | 30 June | | 30 June | | | | | 2024 | | 2023 | | Notes | £’000 | | £’000 | | Operating activities 1 Prot before taxation 43,766 3,700 Adjustments to reconcile prot before taxation to net cash ows: Realised (gains)/losses on nancial assets at fair value through prot or loss 9 (847) 1,273 Unrealised (gains)/losses on nancial assets at fair value through prot or loss 9 (19,738) 16,715 Eective interest adjustment 9 (294) (243) Foreign exchange (gain)/loss (46) 252 Interest expense 2,472 1,432 2 Purchase of nancial assets at fair value through prot or loss (80,303) (77,242) 3 Proceeds from sale of nancial assets at fair value through prot or loss 74,346 57,170 Changes in working capital Decrease/(increase) in other receivables 2,307 (3,191) (Decrease)/increase in other payables (2,722) 657 Irrecoverable withholding tax paid (350) (505) Net cash generated from operating activities 18,591 18 Financing activities Dividends paid 7 (23,864) (21,985) Drawdown of bank loan 11 – 2,000 Interest paid on loan facility (2,500) (1,404) 4 Proceeds from issuance of ordinary shares 13 13,480 24,235 Net cash (used in)/generated from nancing activities (12,884) 2,846 Increase in cash and cash equivalents 5,707 2,864 Cash and cash equivalents at the start of the year 6,597 3,985 Exchange gain/(loss) 46 (252) Cash and cash equivalents at the end of the year 12,350 6,597 1 Included within prot before taxation is dividend income of £5,818,000 (2023: £4,964,000) and interest income of £22,764,000 (2023: £21,265,000). 2 Amounts due to brokers as at 30 June 2024 relating to purchases of nancial assets at fair value through prot amounted to £7,788,000 (2023: £904,000). 3 Amounts due from brokers as at 30 June 2024 relating to sales of nancial assets at fair value through prot amounted to £202,000 (2023: £nil). 4 Amounts due on new share issuance not yet received as at 30 June 2024 amounted to £nil (2023: £nil). The accompanying notes on pages 66 to 87 are an integral part of these Financial Statements. 65 Notes to the Financial Statements CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Notes to the Financial Statements 1. ACCOUNTING POLICIES 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 (a) Basis of accounting and considering that 99% of the Shareholder’s votes at These Financial Statements have been prepared the last AGM held on 30 November 2023, were in favour of in accordance with IFRS as adopted by the EU and the continuation of the Company, the Board considers it in accordance with the guidance set out in the likely that Shareholders will vote in favour of continuation SORP: Financial Statements of Investment Trust at the forthcoming AGM. Companies and Venture Capital Trusts issued by the AIC The Company’s existing loan facility as detailed on in November 2014 and updated most recently in July 2022 pages 74 to 75, is of an amount of up to £45,000,000 with consequential amendments. Notwithstanding and is due to mature on 18 December 2024 aer which that the Company is not an investment trust company, it is anticipated the Company will take out a new given the purpose of the Company and certain similar facility on comparable terms. Aer making enquiries characteristics, the Company has chosen to follow the of the Investment Manager and having considered guidance set out in the SORP where it is consistent with the Company’s investment objective, nature of the the requirements of IFRS. investment portfolio, loan facility, expenditure projections The functional and reporting currency of the Company and the impact of the current geo-political and market is pound sterling because that is the primary economic uncertainty on the Company, the Directors consider environment in which the Company operates. The that the Company has adequate resources to continue Financial Statements and notes are presented in pound in operational existence for the foreseeable future. For sterling and are rounded to the nearest thousand except this reason the Directors continue to adopt the going where otherwise indicated. concern basis in preparing the Financial Statements, notwithstanding that the Company is subject to an annual The Financial Statements have been prepared on the continuation vote as described above. historical cost basis, except that investments are stated at fair value and categorised as nancial assets at fair value Accounting developments through prot or loss. Standards and amendments to existing standards eective in current year Going concern The following new standards, amendments and At each AGM of the Company, Shareholders are given interpretations to existing standards have been issued the opportunity to vote on an ordinary resolution to and are eective in the current year and the Directors continue the Company as an investment company. If believe that the application of these amendments and any such resolution is not passed, the Board will put interpretations do not signicantly impact the Company’s forward proposals at an extraordinary general meeting Financial Statements: Eective for periods Standards beginning on or aer ▶ IFRS 17 Insurance Contracts 1 January 2023 ▶ Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 1 January 2023 ▶ Denition of Accounting Estimates – Amendments to IAS 8 1 January 2023 ▶ Deferred Tax related to Assets and Liabilities arising from a Single Transaction – 1 January 2023 Amendments to IAS 12 ▶ International Tax Reform–Pillar Two Model Rules – Amendments to IAS 12 27 May 2023 66 HEAD_1st line HEAD_2nd line Standards and amendments becoming eective in future periods The following standards, amendments and interpretations to existing standards become eective in future accounting periods and have not been early adopted by the Company, as the Directors believe that these amendments do not signicantly impact the Company’s Financial Statements: Eective for periods Standards beginning on or aer ▶ Non-current Liabilities with Covenants and Classication of Liabilities as Current or 1 January 2024 Non-current – Amendments to IAS 1 ▶ Lease Liability in a Sale and Leaseback – Amendments to IFRS 16 1 January 2024 ▶ Supplier Finance Arrangements – Amendments to IAS 7 and IFRS 7 1 January 2024 ▶ Lack of Exchangeability – Amendments to IAS 21 1 January 2025 ▶ IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027 ▶ IFRS S1 General Requirements for Disclosure of Sustainability-related Financial To be determined Information and IFRS S2** Climate-related Disclosures ▶ Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Optional Amendments to IFRS 10 and IAS 28 Critical accounting estimates and judgements are unquoted are valued by the Manulife | CQS Valuation Committee which recommends a valuation methodology The preparation of the Financial Statements necessarily which is presented and discussed at each Valuation requires the exercise of judgement both in application Committee, the minutes of which are available to the of accounting policies which are set out below and in Company’s Directors, Auditors, Administrators and the selection of assumptions used in the calculation of Depositaries. The methodologies used for hard-to-value estimates. These estimates and judgements are reviewed investments may include matrix pricing, discounted cash on an ongoing basis and are continually evaluated based ows, benchmark pricing and/or model-based pricing. on historical experience and other factors. However, actual results may dier from these estimates. There were no other signicant accounting estimates or signicant judgements in the current or previous year. The valuation of nancial assets involves estimation and judgements. The major part of the Company’s nancial A summary of the principal accounting policies which assets is its nancial assets held at fair value through have been applied to all periods presented in these prot or loss which are valued by reference to listed and Financial Statements is set out below. quoted bid prices, however some of these nancial assets are thinly traded. Such nancial assets are best valued (b) Financial assets by reference to current market price quotes provided by Financial assets which comprise equity shares, independent brokers. The Directors may overlay such convertible bonds and xed income securities, are prices with situation specic adjustments including classied as held at fair value through prot or loss as the (a) taking a second independent opinion on a specic Company’s business model is not to hold these nancial investment, or (ii) reducing the value to a net present assets for the sole purposes of collecting contractual cash value, to reect the likely time to be taken to realise a ows. In making this assessment, the Directors have given stock which the Company is actively looking to sell. The regard to the investment strategy of the Company, the fact outturn is reected in the valuations of investments as set that the performance of the portfolio is evaluated on a fair out in note 22 to the Financial Statements. value basis and the fact that the Investment Manager is Financial assets which are not listed or where trading in remunerated on a percentage of total assets. the securities of an investee company is suspended or 67 HEAD_1st line HEAD_2nd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Notes to the Financial Statements ### Continued Purchases or sales of nancial assets are recognised/ shares are recognised when the right to the return is derecognised on the date the Company trades the established. investments. On initial recognition investments are Where the Company has elected to receive its dividends in measured at fair value and classied as fair value through the form of additional shares rather than cash, an amount prot or loss with any subsequent gain or loss, including equal to the cash dividend is recognised as income. Any any gain or loss arising from a change in exchange rates, excess in the value of the shares received over the amount recognised in the Statement of Comprehensive Income. of the cash dividend is recognised in the capital reserve. Financial assets held at fair value through prot or loss are valued in accordance with the policies described in (e) Expenses, including nance charges the critical accounting estimates and judgements section All expenses are accounted for on an accruals basis. above. Expenses are charged through the revenue account except Financial assets also include the Company’s cash and cash as follows: equivalents (comprising of cash held in current accounts ▶ expenses which are incidental to the acquisition of an and overdra balances) and debtors and other receivables investment are charged to the capital account; which are held at amortised cost using eective interest ▶ expenses which are incidental to the disposal of an rate, less any impairment. investment charged to the capital account; (c) Financial liabilities ▶ the Company charges 25% of investment management Financial liabilities include amounts due to brokers, bank fees and interest costs to capital, in line with the loan, interest on bank loan and other creditors which Board’s expected long term return in the form of capital are held at amortised cost using the eective interest gains and income respectively from the investment rate method. Financial liabilities are recognised initially portfolio of the Company. For further details refer to at fair value, net of transaction costs incurred and are notes 3 and 5; and subsequently carried at amortised cost using the eective ▶ expenses incurred in connection with the maintenance interest rate method. Financial liabilities are derecognised or enhancement of the value of the investments or for when the obligation specied in the contract is the long term benet of the Company are charged to discharged, cancelled or expires. capital. (d) Investment income (f) Foreign currencies Dividends receivable on equity shares (including Transactions denominated in foreign currencies are preference shares) are recognised as income on the date recorded in the functional currency at actual exchange that the related investments are marked ex-dividend. rates at the date of the transaction. Monetary assets and Dividends receivable on equity shares where no ex- liabilities denominated in foreign currencies at the period dividend date is quoted are recognised as income when end are reported in sterling at the rates of exchange the Company’s right to receive payment is established. prevailing at the period end. Exchange gains and losses Dividends from overseas companies are shown gross on investments held at fair value through prot or loss of any non-recoverable withholding taxes which are are included in ‘Gains/(losses) on nancial assets at fair disclosed separately in the Statement of Comprehensive value’. Exchange gains and losses on other balances are Income. 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 reect the eective interest rate on those instruments. Other returns on non-equity 68 HEAD_1st line HEAD_2nd line (g) Reserves Treasury shares (i) Capital reserve. Following a change in Jersey When the Company purchases its ordinary shares to be Company law eective 27 June 2008, dividends can held in treasury, the amount of the consideration paid, be paid out of any capital account of the Company which includes directly attributable costs is recognised subject to certain solvency restrictions. It is the as a deduction from the stated capital account. When Company’s policy however to account for revenue these shares are sold subsequently, the amount received items and pay dividends through a separate revenue is recognised as an increase in equity and the resulting reserve. The following are accounted for in the capital surplus or decit on the transaction is transferred to or reserve: from the stated capital account. ▶ gains and losses on the realisation of investments; (i) Segmental information ▶ realised and unrealised exchange dierences of a The Company, holds a wide variety of dierent capital nature; investments in a wide range of issues locating in dierent ▶ expenses and nance costs charged in accordance geographies and operating in dierent sectors. However, with the policies above; and resources are allocated and the business is managed by the chief operating decision-makers, the Directors, on an ▶ increases and decreases in the valuation of aggregated basis. Strategic and nancial management investments held at the period end. decisions are determined centrally by the Directors (ii) Special distributable reserve. This reserve is treated and, on this basis, the Company operates as a single as distributable prots available to be used for all investment management business and no segmental purposes permitted by Jersey company law including reporting is provided. the buying back of ordinary shares, the payment of dividends (see note 7) and the payment of preliminary expenses. (iii) Revenue reserve. The net prot/(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 classied as equity based on the substance of the contractual arrangements and in accordance with the denition of equity instruments under International Accounting Standard (“IAS”) 32. The proceeds from the issue of ordinary shares are recognised in the Statement of Changes in Equity, net of issue costs. 69 HEAD_1st line HEAD_2nd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Notes to the Financial Statements ### Continued 2. INVESTMENT INCOME 2024 2023 £’000 £’000 1 Income from nancial assets at fair value through prot or loss Dividend income 5,818 4,964 2 Interest on xed income securities 22,764 21,265 Total income 28,582 26,229 1 All investment income arises on nancial assets valued at fair value through prot or loss. 2 Fixed income securities include xed and oating rate securities, convertible securities and preference shares. 3. INVESTMENT MANAGEMENT FEE | | 2024 | | 2024 | 2024 | | 2023 | | 2023 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | Capital | | Total | Revenue | | Capital | | Total | | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | Investment management fee 1,663 554 2,217 1,591 530 2,121 The Company’s investment manager is CQS (UK) LLP. 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 £200,000,000, 0.70% per annum of total assets in excess of £200,000,000 and up to and including £300,000,000 and 0.60% per annum thereaer. The management fee is paid monthly in arrears. The contract between the Company and the Investment Manager may be terminated by either party giving not less than 12 months’ notice of termination. During the year ended 30 June 2024, investment management fees of £2,217,000 (2023: £2,121,000) were incurred, of which £375,000 (2023: £176,000) was payable at the year-end. Investment management fees have been allocated 75% to revenue and 25% to capital. The Board has resolved to amend the apportionment ratio to 60% to revenue and 40% to capital with eect from 1 July 2024 to better reect the purpose and expected future performance of the Company. 70 HEAD_1st line HEAD_2nd line 4. OTHER EXPENSES | | 2024 | | 2024 | 2024 | | 2023 | | 2023 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | Capital | | Total | Revenue | | Capital | | Total | | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | Secretarial and administration fees 214 – 214 206 – 206 Directors’ fees 182 – 182 169 – 169 1 Auditors’ remuneration for audit services 52 – 52 51 – 51 Broker fees 30 – 30 30 – 30 Printing 34 – 34 18 – 18 Bank and custody (rebate)/charges 66 – 66 (53) – (53) Registrars’ fees 33 – 33 33 – 33 Depositary fees 45 – 45 45 – 45 Legal and professional fees 175 – 175 44 – 44 Other 111 72 183 104 89 193 942 72 1,014 647 89 736 Directors’ fees For the year ended 30 June 2024, Directors’ remuneration were as follows: Chair £45,000 Audit Chair £39,000 Other £32,500 Directors’ fees of £nil (2023: £7,500) were payable as at 30 June 2024. No pension contributions were payable in respect of any of the Directors and the Company does not have any employees. 1 Non-audit fees paid to the auditor There were no non-audit fees paid to the auditor during the years ended 30 June 2024 and 30 June 2023. 5. INTEREST EXPENSE | | 2024 | | 2024 | 2024 | | 2023 | | 2023 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | Capital | | Total | Revenue | | Capital | | Total | | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | Interest expense 1,854 618 2,472 1,167 389 1,556 Interest expense and similar charges have been allocated 75% to revenue and 25% to capital as explained in note 1(e). The Board has resolved to amend the apportionment ratio to 60% to revenue and 40% to capital with eect from 1 July 2024 to better reect the purpose and expected future performance of the Company. 71 HEAD_1st line HEAD_2nd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Notes to the Financial Statements ### Continued 6. IRRECOVERABLE WITHHOLDING TAX The taxation charge for the year is comprised of: | | 2024 | | 2024 | 2024 | | 2023 | | 2023 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | Capital | | Total | Revenue | | Capital | | Total | | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | Irrecoverable withholding tax suered 350 – 350 505 – 505 The taxation on prot diers from the theoretical expense that would apply on the Company’s prot before taxation using the applicable tax rate in Jersey of 0% for the year ended 30 June 2024 (2023: 0%) as follows: 2024 2023 £’000 £’000 Prot on ordinary activities before taxation 43,766 3,700 Theoretical tax expense at 0% (2023: 0%) – – Eects of: Foreign withholding tax 350 505 Current year revenue tax charge 350 505 7. DIVIDENDS 2024 2023 £’000 £’000 Amounts recognised as distributions to equity holders in the year: Dividends in respect of the year ended 30 June 2023 – Fourth interim dividend of 1.49p (2022: 1.48p) per ordinary share 7,817 7,054 Dividends in respect of the year ended 30 June 2024 – First interim dividend of 1.00p (2023: 1.00p) per ordinary share 5,263 4,815 – Second interim dividend of 1.00p (2023: 1.00p) per ordinary share 5,360 4,963 – Third interim dividend of 1.00p (2023: 1.00p) per ordinary share 5,424 5,153 23,864 21,985 A fourth interim dividend in respect of the year ended 30 June 2024 of 1.50p per ordinary share was paid on 30 August 2024 to Shareholders on the register on 2 August 2024, having an ex-dividend date of 1 August 2024. 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. 72 HEAD_1st line HEAD_2nd line 8. BASIC AND DILUTED EARNINGS/(LOSSES) PER ORDINARY SHARE (PENCE) | | 2024 | | 2024 | 2024 | | 2023 | | 2023 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | Capital | | Total | Revenue | | Capital | | Total | | | pence | | pence | pence | | pence | | pence | pence | Basic and diluted earnings/(losses) per ordinary share (pence) 4.50p 3.63p 8.13p 4.51p (3.87p) 0.64p The revenue earnings per ordinary share is based on the net prot aer taxation of £24,029,000 (2023: £22,443,000) and the capital return per ordinary share is based on a net capital gain of £19,387,000 (2023: net capital loss of £19,248,000). Both the revenue and capital earnings per ordinary share is based on a weighted average of 533,873,033 (2023: 497,695,146) ordinary shares in issue throughout the year. Total earnings per ordinary share reects 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 2024 and 27 September 2024 other than those disclosed in note 25, which were issued at a premium to the 30 June 2024 NAV. 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS All nancial assets are valued at fair value through prot or loss. Gains or losses arising from changes in the fair value of investments are included in the Statement of Comprehensive Income. 2024 2023 £’000 £’000 1 Equity shares 50,226 45,763 2 Fixed income securities 249,303 220,248 299,529 266,011 1 Equity shares include investment funds. 2 Fixed income securities include xed and oating rate securities, convertible securities and preference shares. 2024 2023 £’000 £’000 Opening valuation 266,011 263,393 Purchases at cost 87,187 77,533 Sales proceeds (74,548) (57,170) Realised gains/(losses) on sales 847 (1,273) Eective interest adjustment 294 243 Unrealised gains/(losses) 19,738 (16,715) Closing valuation 299,529 266,011 73 CQS New City High Yield Fund Limited Annual Report & Financial Statements ¹ Financial Statements # Notes to the Financial Statements Continued | | 2024 £'000 | 2023 £'000 | | --- | --- | --- | | Losses on investments | | | | Realised gains/(losses) ¹ | 847 | (1,273) | | Unrealised gains/(losses) ² | 19,738 | (16,715) | | | 20,585 | (17,988) | ¹ Realised gains/(losses) on financial assets at fair value through profit or loss is made up of gains of £6,250,000 (2023: 6,030,000) and losses of £5,403,000 (2023: 7,303,000). ² Unrealised losses on financial assets at fair value through profit or loss is made up of gains of £34,325,000 (2023: 8,225,000) and losses of £14,587,000 (2023: 24,940,000). ## 10. DEBTORS AND OTHER RECEIVABLES | | 2024 £'000 | 2023 £'000 | | --- | --- | --- | | Accrued income | 4,679 | 7,000 | | Amounts due from brokers | 202 | – | | Prepayments and other debtors | 24 | 10 | | | 4,905 | 7,010 | ## 11. BANK LOAN | | 2024 £'000 | 2023 £'000 | | --- | --- | --- | | Bank loan facility- opening balance | 35,000 | 33,000 | | Drawdowns | – | 2,000 | | Bank loan facility – closing balance | 35,000 | 35,000 | The Company had a short-term unsecured loan facility with Scotiabank up to a limit of £45,000,000 which expired on 17 December 2023. On 20 December 2023, the Company entered into an Amendment and Restatement Agreement with Scotiabank to renew the loan facility, under the following terms: - ▶ the Agreement contains an option to increase the facility by a further £5,000,000 – no commitment fees are payable on the £5,000,000 until this option is exercised; - ▶ the loan facility is due to expire on 18 December 2024; - ▶ the interest on the loan is a margin of 2.00% per annum plus the daily non-cumulative compounded Reference Rate (RFR); and - ▶ the commitment fees payable is 0.675% per annum on the daily available commitment. As at 30 June 2024, the drawn down amount of the facility was £35,000,000 (2023: £35,000,000). 74 HEAD_1st line HEAD_2nd line For the year ended 30 June 2024 and up until the date of this report, the Company has complied with all covenants of the loan facility, which are as follows: ▶ the borrower shall not permit the adjusted asset coverage to be less than 4 to 1; ▶ the borrower shall not permit the NAV to be less than £95,000,000 at any time; and ▶ the borrower shall maintain an additional adjusted asset coverage of at least 1.5 to 1 at all times. The bank loan facility is a nancial liability held at amortised cost. 12. CREDITORS AND OTHER PAYABLES 2024 2023 £’000 £’000 Amounts due to brokers 7,788 904 Interest on bank loan facility 28 56 Other creditors 505 3,227 8,321 4,187 13. STATED 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 Share | Number of | | Amount | | Issue | Share | | --- | --- | --- | --- | --- | --- | | ordinary | | received | | Costs | capital | | | shares | | £’000 | £’000 | £’000 | Total as at 1 July 2023 524,601,858 244,884 1,750,000 ordinary shares of no par value allotted on 1,750,000 858 (6) 852 29 September 2023 at 49.00p 1,500,000 ordinary shares of no par value allotted on 1,500,000 722 (5) 717 1 November 2023 at 48.15p 1,500,000 ordinary shares of no par value allotted on 1,500,000 732 (5) 727 24 November 2023 at 48.80p 500,000 ordinary shares of no par value allotted on 500,000 245 (2) 243 30 November 2023 at 49.00p 750,000 ordinary shares of no par value allotted on 750,000 368 (3) 365 7 December 2023 at 49.00p 500,000 ordinary shares of no par value allotted on 500,000 245 (1) 244 14 December 2023 at 49.10p 75 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements ## Continued | 500,000 ordinary shares of no par value allotted on 20 December 2023 at 49.90p | 500,000 | 250 | (2) | 248 | | --- | --- | --- | --- | --- | | 750,000 ordinary shares of no par value allotted on 21 December 2023 at 50.00p | 750,000 | 375 | (3) | 372 | | 500,000 ordinary shares of no par value allotted on 22 December 2023 at 50.00p | 500,000 | 250 | (2) | 248 | | 2,700,000 ordinary shares of no par value allotted on 4 January 2024 at 50.20p | 2,700,000 | 1,355 | (10) | 1,345 | | 500,000 ordinary shares of no par value allotted on 9 January 2024 at 50.40p | 500,000 | 252 | (2) | 250 | | 800,000 ordinary shares of no par value allotted on 30 January 2024 at 50.00p | 800,000 | 400 | (3) | 397 | | 500,000 ordinary shares of no par value allotted on 3 April 2024 at 51.80p | 500,000 | 259 | (2) | 257 | | 2,500,000 ordinary shares of no par value allotted on 5 April 2024 at 51.60p | 2,500,000 | 1,290 | (10) | 1,280 | | 2,000,000 ordinary shares of no par value allotted on 8 April 2024 at 51.60p | 2,000,000 | 1,032 | (8) | 1,024 | | 500,000 ordinary shares of no par value allotted on 9 April 2024 at 51.60p | 500,000 | 258 | (2) | 256 | | 4,850,000 ordinary shares of no par value allotted on 9 May 2024 at 51.20p | 4,850,000 | 2,483 | (19) | 2,464 | | 500,000 ordinary shares of no par value allotted on 17 May 2024 at 51.60p | 500,000 | 258 | (2) | 256 | | 2,000,000 ordinary shares of no par value allotted on 7 June 2024 at 52.00p | 2,000,000 | 1,040 | (8) | 1,032 | | 1,250,000 ordinary shares of no par value allotted on 17 June 2024 at 52.00p | 1,250,000 | 650 | (5) | 645 | | 500,000 ordinary shares of no par value allotted on 18 June 2024 at 52.00p | 500,000 | 260 | (2) | 258 | | Total as at 30 June 2024 | 551,451,858 | 13,582 | (102) | 258,364 | The balance of shares led in Treasury at the year-end was nil (2023: nil shares). On 7 May 2024, a block listing facility for 34,000,000 new shares was approved by the UK Listing Authority. This facility is used for the purposes of satisfying market demand. 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. 76 ## 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 27. 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 2024 comprises its stated capital, special distributable reserve, capital reserve and revenue reserve at a total of £273,463,000 (2023: £240,431,000). 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 the time of borrowing. 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 27. ## 15. NET ASSET VALUE PER ORDINARY SHARE The NAV per ordinary share and the NAV attributable to the ordinary shares at the year-end calculated in accordance with their entitlements in the Articles of Association were as follows: | | 2024 | 2023 | | --- | --- | --- | | NAV (£'000) | 273,463 | 240,431 | | NAV per ordinary share (pence) | 49.59p | 45.83p | NAV per ordinary share has been calculated based on the share capital in issue as at year end. The issued share capital as at 30 June 2024 comprised of 551,451,858 (2023: 524,601,858) ordinary shares. 77 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 16. FINANCIAL 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 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 recently available 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 63. 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 2024, all of which are held at amortised cost, other than financial assets 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. | | 2024 £'000 | 2023 £'000 | | --- | --- | --- | | Financial assets | | | | Financial assets at fair value through profit or loss | 299,529 | 266,011 | | Cash and cash equivalents | 12,350 | 6,597 | | Accrued income | 4,679 | 7,000 | | Amount due from brokers | 202 | – | | Financial liabilities | | | | Amount due to brokers | (7,788) | (904) | | Bank loan | (35,000) | (35,000) | | Interest on bank loan facility | (28) | (56) | | Other creditors | (505) | (3,227) | 78 HEAD_1st line HEAD_2nd line 17. MARKET PRICE RISK Market price risk (including other price risk) arises mainly from uncertainty about future prices of nancial instruments held. It represents the potential loss the Company might suer through holding market positions in the face of price movements. To mitigate the risk the Investment Manager’s investment strategy is: ▶ to select investments for their fundamental value. Stock selection is based on disciplined accounting, thorough market and sector analysis, with the emphasis on investments that will redeem in full at the end of their maturity date. ▶ to ensure that an appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specic to a country or sector. ▶ to monitor market prices throughout the year and report 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 16 to 19. These pages do not form part of the audited Financial Statements. If the investment portfolio valuation fell 7.5% (2023: fall of 7.5%) at 30 June 2024, the impact on the prot or loss and the NAV would have been negative £22,465,000 (2023: negative £19,951,000). Due to the eect of gearing, the impact on the NAV per ordinary share would have been a decrease of 8.2% (2023: decrease of 8.3%). If the investment portfolio valuation rose by the same amount, the eect 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 reective of future market conditions. The Directors believe 7.5% is a relevant percentage based on average market volatility in recent years. 18. INTEREST RATE RISK The Company’s nancial assets and liabilities, with the exception of cash and cash equivalents (see below), that are subject to interest rate risk are detailed below. 2024 2024 2024 2023 2023 2023 | | | | Weighted | | | | Weighted | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | average | | | | average | | | Weighted | | period for | | Weighted | | period for | | | | average | | which the | | average | | which the | | | | interest | rate is xed | | | interest | rate is xed | | | | £’000 | rate (%) | | | (years) £’000 | rate (%) | | | (years) | Financial assets: Fixed rate instruments & convertible 137,867 7.47 3.92 144,383 7.35 4.09 securities Floating rate notes 111,200 6.34 n/a 75,637 5.08 n/a Preference shares 236 0.00 n/a 228 0.00 n/a Financial liabilities: Bank Loan 35,000 6.90 n/a 35,000 6.38 n/a 79 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements ## Continued ### 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. Consequently, 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. Consequently, 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 rate deposit accounts. As at 30 June 2024, cash and cash equivalents included cash amount of £5,975,000 (2023: £2,987,000) held in sterling and £6,375,000 (2023: £3,610,000) in a range of other currencies. The benchmark rate which determines the interest payments received on sterling interest bearing cash balances is the UK bank base rate, which was 5.25% (2023: 5.00%) at 30 June 2024. ### Financial liabilities The Company has borrowed in sterling at a variable rate of interest based on the UK bank base rate. The impact of a 1% increase (or decrease) in the bank base rate would be a NAV loss (or gain) of £350,000 (2023: £350,000). The impact is linear – in other words, a 2% increase (or decrease) in the bank base rate would result in twice the NAV loss (or gain) as 1%. 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. At year-end, the Company held a bank loan of £35,000,000 from Scotiabank, details of which are contained in note 11 on pages 74 to 75. 80 HEAD_1st line HEAD_2nd line 19. FOREIGN 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 2024 and 30 June 2023 was as follows: | | | | | 2024 | | | | | | 2023 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2024 | 2024 | Accrued | | 2024 | | 2023 | 2023 | Accrued | | 2023 | | Investments | | Cash | Income | | Total | Investments | | Cash | Income | | Total | | | £’000 | £’000 | | £’000 | £’000 | | £’000 | £’000 | | £’000 | £’000 | Euro 35,223 1,215 492 36,930 30,838 1,168 331 32,337 Australian dollar – 2 – 2 193 5 – 198 US dollar 47,104 5,139 824 53,067 50,770 2,298 1,011 54,079 Norwegian krone 3,044 2 16 3,062 929 51 17 997 Canadian dollar 236 9 – 245 228 4 – 232 Swedish krona 3,044 2 60 3,106 4,507 84 72 4,663 Swiss Franc – 6 – 6 – – – – 88,651 6,375 1,392 96,418 87,465 3,610 1,431 92,506 If the value of sterling had weakened against each of the currencies in the portfolio by 5% (2023: 5%), the impact on the prot or loss and the NAV would have been positive £4,288,000 (2023: positive £4,679,000). If the value of sterling had strengthened by the same amount the impact on the prot or loss and the NAV would have been negative £4,739,000 (2023: negative £4,233,000). The calculations are based on the portfolio valuation and accrued income balances at the Statement of Financial Position date are not representative of the period as a whole and may not be reective of future market conditions. The Directors believe 5% is relevant based on the average market volatility in exchange rates in recent years. 20. CREDIT RISK Credit risk is the risk that a counterparty to a nancial 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 nancial assets best represents the maximum risk exposure at the Statement of Financial Position date. At the reporting date, the Company’s nancial assets exposed to credit risk amounted to the following: 2024 2023 £’000 £’000 1 Fixed income securities 249,303 220,248 Cash and cash equivalents 12,350 6,597 Accrued income 4,679 7,000 Amount due from brokers 202 – 266,534 233,845 1 Fixed income securities include xed and oating rate securities, convertible securities and preference shares. 81 HEAD_1st line HEAD_2nd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Notes to the Financial Statements ### Continued Credit risk on xed income securities and convertible bonds instruments is considered to be part of market price. The credit ratings for the xed income securities held by the Company as at 30 June have been listed below: 2024 2023 Rating of xed income securities % % BB 2.4 – BB- 5.8 9.1 B+ 2.3 3.9 B 4.6 3.9 B- 3.4 2.6 BBB 1.1 1.3 CCC 1.1 2.6 CCC+ 2.3 3.9 C- – 1.3 Not rated 77.0 71.4 100.0 100.0 Source: 2024: S&P, 2023: S&P The percentage above represents the value of xed income securities of £249,303,000 (2023: £220,248,000) 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 the Administrator. The Company holds a residual cash balance with The Hong Kong and Shanghai Banking Corporation (“HSBC”) of £11,000 (2023: £11,000). The rating agency Moody’s assigns a rating of A1 to HSBC and Aa3 to BNP Paribas. There were no contingencies or guarantees outstanding at the Statement of Financial Position date. 21. LIQUIDITY RISK Market liquidity risk The Company’s nancial 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. 82 HEAD_1st line HEAD_2nd line Funding liquidity risk The following are the remaining contractual maturities of nancial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. Contractual | | Carrying | | cash ows | | | | --- | --- | --- | --- | --- | --- | | | amount | | | 0-1 year | | | 30 June 2024 | | £000 | | | £000 | Bank loan 35,000 (37,520) Creditors and other payables 8,321 (8,321) 43,321 (45,841) Contractual | | Carrying | | cash ows | | | | --- | --- | --- | --- | --- | --- | | | amount | | | 0-1 year | | | 30 June 2023 | | £000 | | | £000 | Bank loan 35,000 (37,232) Creditors and other payables 4,187 (4,187) 39,187 (41,419) The table above illustrates the contractual undiscounted cash ows relating to the nancial liabilities of the Company. As disclosed in note 11, the Company has availed of a short-term unsecured bank loan facility of £45,000,000 with Scotiabank, out of which, £35,000,000 has been drawn-down and is outstanding as at 30 June 2024. In addition to this, the Company maintains suicient 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 reect 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. 83 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 22. FAIR VALUE HIERARCHY 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. Investments included as Level 3 are priced by the investment manager using a generally acceptable 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 ^{1} | 237 | 249,002 | 64 | 249,303 | | Equity shares ^{2} | 49,771 | – | 455 | 50,226 | | As at 30 June 2024 | 50,008 | 249,002 | 519 | 299,529 | | Financial assets at fair value | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Fixed income securities ^{1} | 228 | 219,970 | 50 | 220,248 | | Equity shares ^{2} | 42,088 | 3,621 | 54 | 45,763 | | As at 30 June 2023 | 42,316 | 223,591 | 104 | 266,011 | $^{1}$ Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. $^{2}$ Equity shares include investment funds. Transfer between Level 1 and Level 2 Croma Security Solutions Gro of £583,000 (2023: £420,000) and Channel Island Property Fund of £2,550,000 (2023: £2,880,000) were transferred from Level 2 to Level 1 because they are quoted in active markets. If the market value of the Level 3 investments fell by 5% (2023: 5%), the impact on the profit or loss and the NAV would have been negative £26,000 (2023: negative £5,000). If the value of the Level 3 investments rose by the same amount, the effect would have been equal and opposite. 84 IFRS 13 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 | 2024 £'000 | 2023 £'000 | | --- | --- | --- | | Opening valuation | 104 | 4,299 | | Additions | 551 | 1,231 | | Sales | (362) | (204) | | Unrealised gains | 2,632 | 1,949 | | Realised losses | (2,734) | (7,292) | | Transfers out of Level 3 | (8) | – | | Transfers into Level 3 | 336 | 121 | | Closing valuation | 519 | 104 | #### Transfers into Level 3 Secured Income Fund PLC of £16,000 (2023: £321,000) was transferred out of Level 2 to Level 3 because its shares were delisted during the year. New Look Plc Shareholder T/L 09/11/2025 of £2,000 (2023: £5,000) and Telford Offshore 12% 19-31/12/2060 of £11,000 (2023: £10,000) were transferred out of Level 2 to Level 3 due to a significant reduction in observable market inputs. #### Transfers out of Level 3 Oro Negro Drilling 7.5% 14-24/01/2019 DFLT £9,000 (2023: £8,000) was transferred out of Level 3 to Level 2 since it has been priced through broker quotes. 85 HEAD_1st line HEAD_2nd line CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ## Notes to the Financial Statements ### Continued Quantitative information of signicant unobservable inputs – Level 3 The following tables summarise the signicant unobservable inputs the Company used to value its signicant investments categorised within Level 3 as at 30 June 2024 and 30 June 2023: 30 June 2024 Fair value as | | at 30 June | | | | | Signicant | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2024 | | Valuation | Unobservable | | | Range/ | | Weighted | | Description | | £000 | | technique | | | inputs | | input | Average | | Cabonline Group Holding Ab 381 Recent | | | | | Restructuring | | | | 5.23 N/A | | | | | | transaction | | | | Price | | | | | R.E.A Holdings Plc CW 15/07/2025 59 Black | | | | | | Volatility 40.6 N/A | | | | | Scholes model | ORO SG 12% 19-20/12/2025 DFLT 50 Vendor | | | Unadjusted | 1 N/A | | --- | --- | --- | --- | --- | | | Pricing | Broker Quote | | | | Secured Income Fund Plc 16 Vendor | | | Unadjusted | 1 N/A | | | Pricing | Broker Quote | | | | Telford Oshore 12% 19-31/12/2060 11 Vendor | | | Unadjusted | 6 N/A | | | Pricing | Broker Quote | | | | New Look Plc Shareholder T/L 09/11/2025 2 Vendor | | | Unadjusted | 2.5 N/A | | | Pricing | Broker Quote | | | Total 519 30 June 2023 Fair value as | | at 30 June | | | | Signicant | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2023 | Valuation | Unobservable | | | | Range/ | Weighted | | Description | | £000 | technique | | | | inputs | input | Average | | R.E.A Holdings Plc CW 15/07/2025 54 Black | | | | | | Volatility 50.1 N/A | | | | Scholes model | ORO SG 12% 19-20/12/2025 DFLT 42 Vendor | | | Unadjusted | 1 N/A | | --- | --- | --- | --- | --- | | | | Pricing | Broker Quote | | | ORO NEGRO DRIL 7.5% 14-24/01/2019 | 8 Vendor | | Unadjusted | 1 N/A | | DFLT | | Pricing | Broker Quote | | Total 104 The remaining 24 investments (2023: 22) classied as Level 3 have not been included in the above analysis as they have fair value of £nil as at 30 June 2024 and 30 June 2023. 86 ## 23. TRANSACTION 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 note 4 to the Financial Statements. The beneficial interests of the Directors in the shares of the Company are disclosed on page 39. 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. ## 24. CONTROLLING PARTY In the Directors' opinion, the Company has no ultimate controlling party. ## 25. SUBSEQUENT EVENTS The Board has evaluated subsequent events for the Company through to 27 September 2024, 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. There were no other subsequent events other than those discussed within the Annual Report and Financial Statements or detailed below. ### Dividend declaration The fourth interim dividend of 1.50 pence per ordinary share was announced on 23 July 2024 and paid on 30 August 2024 to Shareholders on the register on 2 August 2024, having an ex-dividend date of 1 August 2024. ### Share issuance Between 1 July 2024 and 27 September 2024, the Company has undertaken a further eight issues of ordinary shares issuing, in total, an additional 16,200,000 ordinary shares of no par value for total consideration of £8,345,000. As at the date of this report, the issued share capital of the Company was 567,651,858 ordinary shares of no par value. 87 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting 88 ## Supplemental ## Information ## and Annual ## General Meeting 89 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting ## Glossary of Terms and Denitions Alternative Performance Alternative performance measures are numerical measures of the Company’s current, Measures (“APMs”) historical or future performance, nancial position or cash ows, other than nancial measures dened or specied in the applicable nancial framework. The Company’s applicable nancial framework includes IFRS and the AIC SORP. Net Asset Value or NAV and The value of total assets less total liabilities. Liabilities for this purpose include current NAV per ordinary share and long-term liabilities. To calculate the NAV per ordinary share, the NAV divided by the number of shares in issue. Reference rate (“RFR”) The SONIA (Sterling Overnight Index Average) reference rate displayed in the relevant screen of any authorised distributor of that reference rate. Shareholder Investor who holds shares in the Company. 90 # Alternative Performance Measures In accordance with European Securities and Markets Authority Guidelines on APMs the Board has considered what APMs are included in the Annual 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: - NAV 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 NAV. The dividends are assumed to have been reinvested in the form of ordinary shares or net assets. | 2024 | Annual dividend per ordinary share | NAV | Share price (bid) | | --- | --- | --- | --- | | 30 June 2023 | 4.49p | 45.83 | 46.60 | | 30 June 2024 | 4.50p | 49.59 | 52.20 | | Capital return | | 8.20% | 12.02% | | Effect of dividend reinvestment | | 10.87% | 10.71% | | Total return | | 19.07% | 22.73% | | 2023 | Annual dividend per ordinary share | NAV | Share price (bid) | | --- | --- | --- | --- | | 30 June 2022 | 4.48p | 49.30 | 51.20 | | 30 June 2023 | 4.49p | 45.83 | 46.60 | | Capital return | | (7.04)% | (8.98)% | | Effect of dividend reinvestment | | 9.08% | 8.30% | | Total return | | 2.04% | (0.68)% | 91 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting # Alternative Performance Measures ## Continued ### 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. | | | 2024 | 2023 | | --- | --- | --- | --- | | Revenue earnings | a | £24,029,000 | £22,443,000 | | Weighted average number of ordinary shares in issue | b | 533,873,033 | 497,695,146 | | Revenue earnings per ordinary share | (a/b)*100 | 4.50p | 4.51p | ### Annual dividend per ordinary share The total amount of dividends declared for every issued ordinary share over the Company's financial year. | Dividend History | Rate | xd date | Record date | Payment date | | --- | --- | --- | --- | --- | | First interim 2024 | 1.00p | 26 October 2023 | 27 October 2023 | 30 November 2023 | | Second interim 2024 | 1.00p | 25 January 2024 | 26 January 2024 | 28 February 2024 | | Third interim 2024 | 1.00p | 2 May 2024 | 3 May 2024 | 31 May 2024 | | Fourth interim 2024 | 1.50p | 1 August 2024 | 2 August 2024 | 30 August 2024 | | Annual dividend per ordinary share | 4.50p | | | | | First interim 2023 | 1.00p | 27 October 2022 | 28 October 2022 | 25 November 2022 | | Second interim 2023 | 1.00p | 26 January 2023 | 27 January 2023 | 28 February 2023 | | Third interim 2023 | 1.00p | 27 April 2023 | 28 April 2023 | 26 May 2023 | | Fourth interim 2023 | 1.49p | 28 July 2023 | 29 July 2023 | 31 August 2023 | | Annual dividend per ordinary share | 4.49p | | | | ### Dividend cover Revenue earnings per ordinary share divided by the annual dividend per ordinary share expressed as a ratio. | | | 2024 | 2023 | | --- | --- | --- | --- | | Revenue earnings per ordinary share | a | 4.50p | 4.51p | | Annual dividend per ordinary share | b | 4.50p | 4.49p | | Dividend cover | a/b | 1.00x | 1.00x | 92 ## Revenue reserves per ordinary share Revenue reserve (which includes dividends paid out during the year) divided by the number of ordinary shares at the Statement of Financial Position date. | | | 2024 | 2023 | | --- | --- | --- | --- | | Revenue reserve | a | £16,185,100 | £16,020,000 | | Ordinary shares in issue | b | 551,451,858 | 524,601,858 | | Revenue reserves per ordinary share | (a/b)*100 | 2.93p | 3.05p | ## Dividend yield The annual dividend per ordinary share expressed as a percentage of the share price (bid price). | | | 2024 | 2023 | | --- | --- | --- | --- | | Annual dividend per ordinary share | a | 4.50p | 4.49p | | Share price (bid price) | b | 52.20p | 46.60p | | Dividend yield | (a/b)*100 | 8.62% | 9.64% | ## Premium The amount by which the market price per ordinary share of an investment company is higher or lower than the NAV per ordinary share. The discount or premium is expressed as a percentage of the NAV per ordinary share. | | | 2024 | 2023 | | --- | --- | --- | --- | | Share price (bid price) | a | 52.20p | 46.60p | | NAV per ordinary share | b | 49.59p | 45.83p | | Premium | (a-b)/b | 5.26% | 1.68% | ## 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 NAV of the Company) minus 100. | | | 2024 £'000 | 2023 £'000 | | --- | --- | --- | --- | | Total assets | | 316,784 | 279,618 | | Current liabilities (excluding borrowings) | | (8,321) | (4,187) | | Cash and cash equivalents | | (12,350) | (6,597) | | Total | a | 296,113 | 268,834 | | NAV | b | 273,463 | 240,431 | | Gearing | ((a/b)-1)*100 | 8.28% | 11.81% | 93 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting # Alternative Performance Measures ## Continued ### 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. | | | 2024 | 2023 | | --- | --- | --- | --- | | Average NAV | a | 252,603,178 | 239,062,011 | | Operating expenses per Statement of Comprehensive Income | | 3,231,000 | 2,857,000 | | Ineligible expenses | | (245,000) | (79,000) | | Operating expenses | b | 2,986,000 | 2,778,000 | | Ongoing charges figure (calculated using the AIC methodology) | (b/a)*100 | 1.18% | 1.16% | 94 ## Explanation of AGM 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 nancial 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 39. Resolutions 4 to 7: Re-election and appointment of Directors In accordance with the recommendations of the AIC Code of Corporate Governance (the “AIC Code”), all Directors apart from Duncan Baxter, who is due to retire at the AGM, put themselves forward for re-election. Resolution 8: Re-appointment and remuneration of the Auditor Shareholders are requested to approve the reappointment of the Company’s Auditor, PricewaterhouseCoopers CI LLP, each year and are asked to give Directors the authority to determine the Auditor’s remuneration. PricewaterhouseCoopers CI LLP has expressed its willingness to continue as Auditor of the Company. Resolution 9: Continuation Vote In accordance with the Articles of Association (the “Existing Articles”) 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 10 and 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 pre-emption rights authority is given to the Directors so that they may continue to issue shares as and when appropriate is renewed. Accordingly, Resolutions 10 and 11 authorise the Board to allot on a non-pre-emptive basis: (a) (pursuant to Resolution 10) up to 10% of the issued ordinary share capital of the Company; and (b) (pursuant to Resolution 11) up to a further 10% of the issued ordinary share capital of the Company. If both Resolution 10 and Resolution 11 are passed, Shareholders will be granting the Directors the authority to allot a total of up to 20% of the existing issued ordinary share capital of the Company in aggregate on a non pre-emptive basis. If Resolution 10 is passed but Resolution 11 is not passed, Shareholders will only be granting Directors the authority to allot up to 10% of the existing issued ordinary share capital of the Company on a non pre-emptive basis. 95 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting ## Explanation of AGM Resolutions ### Continued New ordinary shares will not be issued at a price less than the prevailing NAV per ordinary share, aer 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 UK Listing Rules. Each of the authorities granted pursuant to Resolution 10 and Resolution 11 shall expire on the earlier of eighteen month from the date of the resolution or at the conclusion of the next Annual General Meeting. 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 een 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 NAV 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. Resolution 13: Amendment to Articles of Association Resolution 13 seeks Shareholder approval to adopt new Articles of Association (the “New Articles”) in order to update the Company’s current Articles of Association (“the Existing Articles”). The proposed amendments being introduced in the New Articles are driven by a desire to modernise the Company’s Articles of Association in line with developments in market and industry practice, and enable the Company to promote eicient, cost eective and modern methods of engagement with Shareholders. This summary is intended only to highlight the principal amendments which are likely to be of interest to shareholders. It is not intended to be comprehensive and cannot be relied upon to identify amendments or issues which may be of interest to all shareholders. This summary is not a substitute for reviewing the full terms of the New Articles. A copy of the New Articles, together with a blackline showing amendments from the Existing Articles, will be available for inspection on the Company’s website at www.ncim.co.uk and on the national storage mechanism, from the date of the AGM Notice until the close of the AGM, and will also be available for inspection at the venue of the AGM, being IFC 1, The Esplanade, St Helier, Jersey, JE1 4BP, from 15 minutes before and up until the close of the AGM. Set out below is a summary of the principal amendments included in the New Articles: ▶ introducing a new mechanism for the Company to request information from Shareholders relating to their tax residency, to the extent required by the Company to comply with its international tax reporting obligations under Foreign Account Tax Compliance Act (FATCA), Common Reporting Standard (CRS) (or other obligations as applicable), and provide the Company with powers to remove non-compliant Shareholders from its register; ▶ reducing the period before which shareholders who have not claimed or cashed dividends forfeit their shares from twelve (12) years to ten (10) years; ▶ removing the requirement to advertise in leading newspapers when dealing with untraced shareholders, and permit the Company to engage a professional asset reunication company or other tracing agent to locate untraced shareholders; ▶ permit the Company to apply the proceeds of sale of shares of untraced shareholders that have been forfeited to the business of the Company, investments or to charitable or good causes that the Board may decide; 96 ▶ updating and modernising the provisions dealing with how dividends are paid to permit the Board to determine the most appropriate method of payment to Shareholders (including payment by bank transfer or other electronic means); ▶ amendments in response to the requirements of AIFM Regulations and all applicable rules and regulations implementing AIFMD; ▶ amendments to the provisions on dividends and distributions on a winding up to ensure that all dividends shall be declared and paid, and all distributions on a winding up calculated, pro rata to the number of Shares held by each Shareholder rather than by reference to the amounts paid up on the Shares; ▶ modernising the appointment and retirement of Directors, including providing for all Directors to tender themselves for re-election at every AGM (down from the current 3-year requirement), in accordance with good corporate governance); ▶ minor updating and further modernisation changes, including to execution of documents electronically, removing the requirement for a Company Seal and putting it at the Directors’ discretion, explicitly providing for electronic attendance and voting at general meetings and for Directors to attend Directors’ meetings by video or a similar form of communication, and electronic communication with Shareholders (including in the provisions of electronic copies of the Company’s accounts to Shareholders, unless Shareholders request the Company deliver such documents by post); and ▶ a small number of additional, non-substantive amendments have also been proposed to update references to applicable law and regulation. 97 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting ## Notice of Annual General Meeting Notice is hereby given that the eighteenth Annual General Special Business Meeting of CQS New City High Yield Fund Limited (the 10. That, the Company be authorised to issue equity “Company”) will be held at 11.00 a.m. at IFC1, The securities (as dened in Article 16.2 of the Company’s Esplanade, St. Helier, Jersey, JE1 4BP on 3 December 2024 Articles of Association) for cash, as if the provisions for the following purposes: of Article 16.2 did not apply to any such issue, including by way of a sale of ordinary shares held by To consider and, if thought t, pass resolutions 1 to 9 as the Company as treasury shares, in such amount as ordinary resolutions and resolutions 10 to 13 as special represents up to 10% of the Company’s issued share resolutions: capital as at the date of the passing of this resolution, Ordinary Business provided that such authorisation shall expire (unless and to the extent previously revoked, varied or 1. To receive and adopt the Annual Financial Statements renewed by the Company in general meeting by of the Company and the reports of the Directors and Special Resolution) at the earlier of the conclusion of Auditor for the year ended 30 June 2024. the next annual general meeting of the Company or 2. To approve the Directors’ Remuneration Report for eighteen months from the date of this resolution but the year ended 30 June 2024. so that this power shall enable the Company to make oers or agreements before such expiry which would 3. To approve the Company’s Dividend Policy. or might require equity securities to be issued aer 4. That Caroline Hitch be re-elected as a Director of the such expiry and the directors of the Company may Company. issue equity securities in pursuance of any such oer 5. That Wendy Dorman be re-elected as a Director of the or agreement as if such expiry had not occurred. Company. 11. That, in addition to any authority granted under 6. That John Newlands be re-elected as a Director of the Resolution 10 above, the Company be authorised to Company. issue equity securities for cash, as if the provisions of Article 16.2 did not apply to any such issue, 7. That Ian Cadby be re-elected as a Director of the including by way of a sale of ordinary shares held by Company. the Company as treasury shares, in such amount as 8. To re-appoint PwC as Independent Auditor and represents up to 10% of the Company’s issued share that the Directors be authorised to determine their capital as at the date of the passing of this resolution, remuneration. provided that such authorisation shall expire (unless and to the extent previously revoked, varied or 9. That, pursuant to Article 164 of the Company’s renewed by the Company in general meeting by Articles of Association, the Company shall continue Special Resolution) at the earlier of the conclusion of as an investment fund until the conclusion of the next the next annual general meeting of the Company or Annual General Meeting of the Company. eighteen months from the date of this resolution but so that this power shall enable the Company to make oers or agreements before such expiry which would or might require equity securities to be issued aer such expiry and the directors of the Company may issue equity securities in pursuance of any such oer or agreement as if such expiry had not occurred. 98 12. That, pursuant to Article 57 of the Companies (vi) the Company may make a contract to purchase (Jersey) Law 1991, the Company be generally and ordinary shares under this authority before the unconditionally authorised to make one or more expiry of the authority which will or may be market purchases of ordinary shares of no par value executed wholly or partly aer the expiry of the | in the capital of the Company (ordinary shares) | | | authority and may make a purchase of ordinary | | --- | --- | --- | --- | | provided that: | | | shares in pursuance of any such contract; and | | (i) the maximum aggregate number of ordinary | | (vii) the Directors provide a statement of solvency | | | | shares authorised to be purchased shall be equal | | in accordance with Articles 55 and 57 of the | | | to 14.99% of the total issued share capital of the | | Companies (Jersey) Law, 1991. | Company on the date at which the resolution is 13. That, with eect from the conclusion of the meeting passed; the dra articles of association produced to the (ii) the minimum price which may be paid for an meeting and signed by the chair of the meeting for ordinary share is 1p; the purposes of identication be adopted as the articles of association of the Company in substitution (iii) the maximum price which may be paid for an for, and to the exclusion of, the Company’s existing ordinary share is an amount equal to the higher articles of association. of: The Company requests that any Shareholders wishing (a) 105% of the average of the middle market to attend the Annual General Meeting to advise the quotations for an ordinary share as derived Company Secretary by email or in writing as detailed in from the Daily Oicial List of the LSE for the note 3 below. ve business days immediately preceding the day on which the ordinary share is purchased; and (b) the higher of (1) the price of the last By Order of the Board independent trade in ordinary shares and BNP Paribas S.A., Jersey Branch (2) the highest current independent bid for Company Secretary ordinary shares on the LSE’s Main Market; 27 September 2024 (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 aer the passing of this resolution or een months from the date of the passing of this resolution, whichever is earlier; 99 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting ## Notice of Annual General Meeting ### Continued | Notes: | | Electronic receipt of proxies | | | --- | --- | --- | --- | | 1. Information about this meeting is available from the | | 7. To appoint one or more proxies or give an instruction | | | | Company’s website; www.ncim.co.uk | | to a proxy (whether previously appointed or | otherwise) via the CREST system, CREST messages 2. As a member who is entitled to attend and vote at must be received by the Company’s agent (ID number this meeting you are entitled to appoint one or more 3RA50) no later than the 29 November 2024 at 11am. proxies to exercise all or any of your rights to attend, For this purpose, the time of receipt will be taken speak and vote on your behalf. Such a proxy need to be the time (as determined by the timestamp not also be a member of the Company. You may generated by the CREST system) from which the appoint more than one proxy provided each proxy issuer’s agent is able to retrieve the message. The is appointed to exercise rights attached to dierent Company may treat as invalid a proxy appointment shares. You may not appoint more than one proxy to sent by CREST in the circumstances set out in exercise the rights attached to any one share. Regulation 35(5)(a) of the Uncerticated Securities 3. Any Shareholder wishing to attend the Annual Regulations 2001 or the relevant provisions of the General Meeting can advise the company of their Companies (Uncerticated Securities) (Jersey) Order intention to do so by writing to the Company 1999. Instructions on how to vote through CREST can Secretary at BNP Paribas S.A., Jersey Branch, IFC 1, be found on the website www.euroclear.com. The Esplanade, St Helier, Jersey, JE1 4BP or by email at jersey.bp2s.ncyf.cosec@bnpparibas.com. 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 certied 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 (Uncerticated Securities) (Jersey) Order 1999, the Company has specied that only those Shareholders registered on the register of members of the Company as at 6.00 pm on 29 November 2024, 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 aer 6.00 pm on 22 November 2024, 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. 100 Report of the Investment Manager Fund Managers’ Directive (unaudited)Relating to Matters under the Alternative Investment HEAD_1st line HEAD_2nd line ## Report of the Investment Manager ### Relating to Matters under the Alternative Investment ### Fund Managers’ Directive (unaudited) Risk management systems The Company’s Annual Report and Pre-investment Disclosure Document sets out the risks to which the Company is exposed. The UK Investment Manager employs risk management disciplines which 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 management function. The risk management and performance analysis team (“RMPA”) is led by the Chief Risk Oicer 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 eective risk management policies, processes and procedures in order to identify, quantify, analyse, monitor, report on and manage all material risks relevant to the Company’s investment strategy. The systems 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 nancial year of the Company. The variable remuneration period of the AIFM ended on 31 December 2023 and therefore does not coincide with the nancial year of the Company. The remuneration process is overseen by the remuneration committee (comprised predominately of independent non-executive parties). An internal working group encompassing senior management is responsible for gathering relevant information (both quantitative and qualitative) 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 xed and variable remuneration for all sta. 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 nal recommendations for delivery to the governing body of the AIFM and other entities associated with the AIFM. The variable remuneration of all sta in excess of a threshold, which includes those individuals categorised as remuneration code sta (“code sta”), 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-back provision of deferred remuneration in certain circumstances including future performance issues by the individuals. The below information provides the total remuneration paid by the AIFM (and any delegates) for the year ended 31 December 2023. 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 reects the remuneration paid to individuals who are partly or fully involved in the AIF, as well as sta of any delegate to which the rm has delegated portfolio management and/or risk management responsibilities in relation to the AIF. 101 CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting ## Report of the Investment Manager ### Continued Of the total AIFM remuneration paid of $43.6m for the year ended 31 December 2023 to 164 individuals (full time equivalent), $26.2m has been paid as xed remuneration determined with the remainder being paid as variable remuneration. The AIFM has assessed the members of sta whom it determines to be code sta in accordance with the requirements of SYSC 19.B of the FCA Handbook (the AIFM Remuneration Code). There are 12 individuals (full time equivalent) who meet this denition and these individuals have collectively been compensated $14.1m. 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 sta involved have been assessed as if directly remunerated by the AIFM. 102 ### Corporate Information ## Corporate Information Registered Number Financial Adviser and Corporate Broker 95691 Singer Capital Markets 1 Bartholomew Lane London Registered Oice EC2N 2AX CQS New City High Yield Fund Limited IFC1 | The Esplanade | Independent Auditor | | --- | --- | | St Helier | PricewaterhouseCoopers CI LLP | | Jersey JE1 4BP | 37 Esplanade, St Helier | Jersey, Channel Islands JE1 4XA Directors Caroline Hitch (Chair) Duncan A H Baxter Jersey Legal Advisors Ian Cadby Ogier Wendy Dorman (Audit and Risk Committee Chair) Ogier House, The Esplanade John E Newlands St. Helier Jersey, JE4 9WG Channel Islands Investment Manager CQS (UK) LLP | 1 Strand | UK Legal Advisors | | --- | --- | | London | Dentons LLP | | WC2N 5HR | One Fleet Place, | London EC4M 7WS AIFM | CQS (UK) LLP | Investor Relations Adviser | | --- | --- | | 1 Strand | TB Cardew | | London | 29 Lincoln’s Inn Fields | | WC2N 5HR | London WC2A 3EG | Website Company Secretary, Administrator, www.ncim.co.uk Custodian, Banker and Depositary BNP Paribas S.A., Jersey Branch IFC1 ISIN The Esplanade JE 00B1LZS514 St Helier Jersey JE1 4BP Shareholder Information Net Asset Value/Share Price Registrars The net asset value of the Company’s ordinary shares Computershare Investor Services (Jersey) Limited may be obtained by contacting Manulife | CQS on 020 | 13 Castle Street | 7201 6900 or by email at clientservice@cqsm.com or | | --- | --- | | St. Helier, Jersey JE1 1ES | alternatively by visiting the Company’s web site at | | Channel Islands | www.ncim.co.uk. | ## CQS ## NEW CITY HIGH YIELD FUND LIMITED