CQS NEW CITY HIGH YIELD FUND LIMITED ![img-0.jpeg](img-0.jpeg) Annual Report & Financial Statements 30 June 2025 --- 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 fixed interest securities. To achieve this, the strategy of the Company is to follow the investment policy outlined on page 31 of this report and to utilise the benefits of being a closed-ended investment vehicle. --- 1 ![img-1.jpeg](img-1.jpeg) Dividends declared in respect of each financial year ![img-2.jpeg](img-2.jpeg) NAV total return and share price total return --- CQS New City High Yield Fund Limited Annual Report & Financial Statements ![img-3.jpeg](img-3.jpeg) --- Contents ## FINANCIAL HIGHLIGHTS 6 Financial Highlights ## STRATEGIC REPORT 10 Statement from the Chair 14 Investment Manager's Review 18 Classification of Investment Portfolio 19 Investment Portfolio 21 Ten Largest Holdings 22 Risk Report 29 Stakeholders – Section 172 Statement and Principal Decisions 31 Strategic Review ## DIRECTORS' REPORTS AND GOVERNANCE REPORTS 38 Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements 40 Board of Directors and Investment Manager 43 Directors' Report 45 The Board and Committees 48 Statement of Compliance with the AIC Code 49 Environmental, Social and Governance ("ESG") Statement 51 Report of the Audit and Risk Committee 54 Directors' Remuneration Report ## INDEPENDENT AUDITOR'S REPORT 58 Independent Auditor's Report to the members of CQS New City High Yield Fund Limited ## FINANCIAL STATEMENTS 66 Statement of Comprehensive Income 67 Statement of Financial Position 68 Statement of Changes in Equity 69 Cash Flow Statement 70 Notes to the Financial Statements ## SUPPLEMENTAL INFORMATION AND ANNUAL GENERAL MEETING 96 Glossary of Terms and Definitions 97 Alternative Performance Measures 101 Annual General Meeting 2025 - Explanation of AGM Resolutions 103 Notice of Annual General Meeting 106 Report from the Investment Manager relating to Matters under the Alternative Investment Fund Managers' Directive (Unaudited) 108 Corporate Information --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Highlights ![img-4.jpeg](img-4.jpeg) --- # Financial Highlights --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Highlights # Financial Highlights | NAV and share price total return² | 12 months to 30 June 2025 | 12 months to 30 June 2024 | | --- | --- | --- | | NAV¹ | 6.98% | 19.07% | | Ordinary share price | 7.43% | 22.73% | | Capital values | As at 30 June 2025 | As at 30 June 2024 | % change | | --- | --- | --- | --- | | Total assets less current liabilities (with the exception of the bank loan facility) | £338.8m | £308.5m | 9.82% | | NAV per ordinary share¹ | 48.37p | 49.59p | (2.46)% | | Share price (bid)³ | 51.40p | 52.20p | (1.53)% | | Revenue and dividends | 12 months to 30 June 2025 | 12 months to 30 June 2024 | % change | | --- | --- | --- | --- | | Revenue earnings per ordinary share² | 4.43p | 4.50p | (1.56)% | | Annual dividends per ordinary share² | 4.51p | 4.50p | 0.22% | | Dividend cover² | 0.98x | 1.00x | | | Revenue reserve per ordinary share (after recognition of annual dividends)² | 2.61p | 2.93p | | | Ongoing charges ratio² | 1.17% | 1.18% | | | | As at 30 June 2025 | As at 30 June 2024 | | | Dividend yield² | 8.77% | 8.62% | | | Premium² | 6.26% | 5.26% | | | Gearing² | 10.02% | 8.28% | | | Dividend history | Rate | xd date | Record date | Payment date | | --- | --- | --- | --- | --- | | First interim 2025 | 1.00p | 24 October 2024 | 25 October 2024 | 29 November 2024 | | Second interim 2025 | 1.00p | 23 January 2025 | 24 January 2025 | 21 February 2025 | | Third interim 2025 | 1.00p | 1 May 2025 | 2 May 2025 | 30 May 2025 | | Fourth interim 2025 | 1.51p | 31 July 2025 | 1 August 2025 | 29 August 2025 | | Annual dividend per ordinary share | 4.51p | | | | | 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 | | | | 1 The definition of the terms used can be found in the glossary on page 96. 2 A description of the Alternative Performance Measures ("APMs") used above and information on how they are calculated can be found on pages 97 to 100. 3 Source: Bloomberg --- 4 ![img-5.jpeg](img-5.jpeg) --- CQS New City High Yield Fund Limited Annual Report & Financial Statements Strategic Report --- # Strategic Report --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Statement from the Chair ## Caroline Hitch Chair ![img-6.jpeg](img-6.jpeg) ## Key Points ### Performance - Ordinary share price total return¹ of 7.43% - Net Asset Value total return¹ of 6.98% ### Dividends - Dividend yield¹ of 8.77%, based on dividends at an annualised rate of 4.51 pence and a share price of 51.40 pence as at 30 June 2025 - Dividend cover¹ of 0.98x ### Premium and share issuance - Ordinary share price at a premium¹ of 6.26% to NAV as at 30 June 2025 - £33,585,000 of equity issued during the year ended 30 June 2025 ¹ A description of the APMs used above and information on how they are calculated can be found on pages 97 to 100. ## Investment and share price performance When I last updated Shareholders in February 2025, I remarked that the Company had made a positive return for the first six months of its financial year amidst a very turbulent period for the bond markets. I am pleased to report that the Company continued to achieve positive returns and the NAV total return for the full financial year was 6.98%. Additionally, the share price total return was marginally better at 7.43%, with shares continuing to trade at a premium over their NAV. Thanks to the share price premium and strong medium and longer term performance, we were able to continue issuing shares (see below for more details), positioning the Company amongst the largest issuers of investment company shares on the London Stock Exchange ("LSE") during the period under review. Stock markets remained close to all-time highs over our financial year, as markets were able to shrug off geopolitical worries arising from the conflicts in Russia/ Ukraine and Israel/Gaza as well as a rebound from tariff anxiety introduced by President Trump in April 2025. Lower inflation in the United States ("US") and Europe, together with strong corporate earnings led investors to return to the markets over the final quarter of our financial year. Global bond markets remain uncertain and major economies have seen a significant increase in government bond yields. In the United Kingdom ("UK"), 10-year gilt yields ended our financial year at 4.48%, 0.35% higher than in June 2024 even though the Bank of England base rate fell by 1.00% over this period. Against this volatile background, the Company's portfolio performed reasonably well, once again demonstrating the limited impact on its portfolio investments from interest rate and yield gyrations. Further information about the portfolio and our holdings can be read in the report by your investment manager, Ian "Franco" Francis, on pages 14 to 16. ## Earnings and dividends The Company declared three interim dividends of 1.00 pence in respect of the period and one interim dividend of 1.51 pence since the year end, making 4.51 pence in total. Revenue earnings per ordinary share were just below this amount at 4.43 pence for the year, which compares to 4.50 pence earned in the same period last year. When I wrote my report for our interim --- results, I anticipated that this year's dividend would be covered but, since then, the strength of Sterling reduced the Sterling value of some of our overseas income and this, together with a missed coupon from Selecta Group, meant that we fell very slightly short of covering the dividend. However, the Company has built up a strong revenue reserve over past years and the Board decided to utilise a minimal amount of these reserves to marginally increase this year's dividend, maintaining the Company's record of annual dividend increases which has been unbroken since 2007. The ability to use revenue reserves to smooth dividend payments in this way is one of the benefits of the investment trust structure, which the Board was happy to take advantage of this year. The aggregate payment of 4.51 pence per ordinary share represents a 0.22% increase on the 4.50 pence paid last year. Based on an annual rate of 4.51 pence and a share price of 51.4 pence at the time of writing, this represents an attractive dividend yield of 8.77%. 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. As things stand, the Board intends to follow the same pattern of dividend payments as declared last year, which is to maintain or slightly increase the total level of dividends next year. ## Gearing During the financial year, the Company entered into a new £45,000,000 loan facility with BNP Paribas, London Branch, at a competitive rate, replacing the previous loan facility from Scotia Bank. This facility is due to expire in December 2025 and we will look to renew at that time. Out of this facility, £40,000,000 was drawn down as at 30 June 2025 and at the time of writing, the Company has an effective gearing rate of 12.25%. 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, all other things being equal, expect to maintain approximately this level of gearing during the next financial year. ## Share issuance Taking advantage of the premium rating that the market continued to attach to the Company's shares, £33,585,000 was raised from new and existing Shareholders during the financial year, with 66,250,000 ordinary shares issued from the block listing facility. Shares were only issued when your Investment Manager was confident that he could invest the additional funds favourably, while remaining mindful of capacity factors in the high yield bond market. Issuing shares at a small premium is modestly positive for the Company's NAV, satisfies the strong demand for shares that we continue to see and also keeps a lid on the overall share price premium. The Board also believes that, over time, existing Shareholders will benefit from lower ongoing charges and greater liquidity in the Company's shares, all other things being equal. ## Environmental, Social and Governance ("ESG") statement The Board's intention is to invest responsibly and to consider the Company's broader impact on society and the environment. We believe the integration of ESG factors in the investment process is consistent with delivering sustainable attractive returns for Shareholders through deeper, more informed investment decisions. The Board has reviewed and agreed the ESG approach adopted by the Company and a summary of this is set out on pages 49 to 50. ## Your Board As I set out in the last Annual Report, Duncan Baxter, who was the Senior Independent Non-Executive Director and Chair of the Management Engagement Committee, stepped down at the Annual General Meeting ("AGM") in December last year and we thank him sincerely for his valuable contribution to the Company. I am very pleased that Andrew Dann was appointed as Non-Executive Director with effect from 1 February 2025. This appointment followed a search and selection process managed by an external independent recruitment consultancy. Andrew was a previous Chairman and Managing Partner at Ernst & Young Channel Islands and has over thirty years' experience with local and international financial services clients, including regulated funds, fiduciary services businesses and investment management structures. I am delighted to welcome him to the Board. Board responsibilities were reviewed following Duncan's departure. Ian Cadby was appointed Senior Independent Director and also took on the role as Chair of the --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Statement from the Chair Continued Remuneration Committee. John Newlands was appointed Chair of the Management Engagement Committee. Wendy Dorman, who joined the Board in March 2016 and is the Audit Committee Chair, has served for nine years as a Non-Executive Director and is expected to retire at the conclusion of the forthcoming AGM on 4 December 2025. My colleagues and I will miss her wise counsel and valuable contributions to the Board's deliberations. Andrew is expected to succeed Wendy as Chair of the Audit and Risk Committee and we plan to recruit another Non-Executive Director, once again using an external recruitment agency. ## Outlook The portfolio of predominantly high-yield bonds held by your Company offers in my opinion, strong value for most investors, providing diversification beyond traditional bond funds and other asset classes. As your investment manager, Ian Francis, notes in his "Outlook" on page 16, bonds with longer maturities have been weak recently. However, this has had only a limited impact on your Company's holdings, which have an average remaining life of just over three years—positioning the portfolio to withstand further short-term volatility. The bonds are also well diversified across issuers and sectors and are subject to rigorous review by Manulife | CQS Investment Management's credit analysts, further strengthening their investment case. Overall, I remain optimistic that your Company will continue to deliver attractive dividends and, over the longer term, generate some capital appreciation as well. Caroline Hitch Chair 18 September 2025 > Overall, I remain optimistic that your Company will continue to deliver attractive dividends and, over the longer term, generate some capital appreciation as well. Caroline Hitch Chair --- 13 ![img-7.jpeg](img-7.jpeg) --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Investment Manager's Review Ian "Franco" Francis New City Investment Managers ![img-8.jpeg](img-8.jpeg) ## Introduction The first six months of our financial year were dominated by the incoming Labour Government and the new Chancellor's October budget in the UK. There was intense speculation in the run-up to the budget over what would be the effect of potential tax raising measures. After these were announced, we saw most UK companies either postpone or delay their activities resulting in not much change to output in the UK. We do worry that the UK economy could move into a period of "stagflation" with inflation being stubborn and little economic growth. In contrast, during the second six-month period from January to June 2025, eyes were drawn inexorably towards the US, with President Trump's tariff programme causing disruption amongst global governments, companies and investors. Global interest rates remain at elevated levels and my view remains that markets are being far too complacent. Events which would have shocked markets historically are largely being ignored. Meanwhile, your Company raised new capital this year as we issued shares at a premium to NAV. 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 2025 was a positive 6.98%. ## Market and economic review When I wrote the market review for the interim report six months ago, my main thesis was that bond markets in the UK and the US were focussed on the increasing costs of financing government deficits, which has since led the benchmark of 10-year bond yields to increase markedly. This theme has continued and the costs of financing debt remain high, cutting into the ability of governments to spend and grow. With inflation also still a factor, it becomes more difficult for central banks to reduce interest rates. In the UK, rates reduced by 100 basis points during the full year period to reach 4.25% at the end of June 2025 (since the end of June 2025, the Bank of England base rate has fallen to 4.00% at the time of writing). In the US, meanwhile, sticky wage inflation has caused the US Federal Reserve to resist reducing rates aggressively with only a 1.00% reduction to 4.50% seen in the second half of 2024. Despite interest rates falling, the UK 10-year gilt yield increased from 4.13% at the end --- of June 2024 to 4.48% at the end of June 2025. There is a similar problem in the US, with the 10-year bond moving over the same period from 4.29% to 4.35%. In both the UK and US, equity markets have remained remarkably resilient in the face of higher interest rates and increasing tariffs. The UK economy has seen marginal improvements over the last few months. However, investor confidence is weaker than the same time last year, as global trade protectionism and UK government policies are encouraging companies to cut staff due to higher employment costs and lack of improving productivity. Data from the eurozone is not much better, as it deals with a slowing services sector and a manufacturing sector that is just about registering growth. Germany appears to be improving, while France is still in the doldrums. Employment in the eurozone is roughly constant, as the region's outlook appeared to be improving due to the major factor of recent falls in energy prices. Meanwhile, the US economy has continued to show growth throughout our financial year. However, an element of uncertainty was seen in the private sector due to prices for goods jumping sharply as tariff increases were passed down the line. This occurred in both the manufacturing and service sectors; none of which would encourage the Federal Reserve to cut rates anytime soon. President Trump is continuing to pile pressure on US Fed Chair Powell to cut rates, publicly blaming him for the upcoming problems in the economy. ## Portfolio and revenue review The largest positions in the portfolio were fairly stable over the course of our financial year. Our Virgin Money 22-08/12/2170 FRN position was repaid early in June 2025 and we have been selling down our exposure to the Co-op Bank Holdco 23-22/05/2034 FRN at good prices over the last few months. Together with some other early repayments and new monies from the share issuance programme, we have been investing into a wide range of investments such as Tullow Oil Plc 10.25% 21-15/05/2026, Selecta Group BV 8% 20-01/04/2026, Newcastle Building Society 24-06/06/2173 FRN, Cruise Yacht Upp 11.875% 24-05/07/2028, Priority1 Issuer 12.625% 24-19/11/2027, Boparan Finance 9.375% 24-07/11/2029 and Zopa Group 12.875% perpetual. New entries into the portfolio's top 10 this year were: Bellis Acquisition 8.125% 24-14/05/2030, which is the finance vehicle that funded the purchase of Asda in the UK; Azerion Group 23-02/10/2026 FRN, a Dutch online advertising company; and REA Finance 8.75% 15-31/08/2025 which we have held for many years and whose loan was repaid at the end of August 2025. Although the portfolio had a good year generally, one of our newer purchases, Selecta Group BV 8% 20-01/04/2026, has been through a turbulent refinancing process which has caused our investment to lose around 68% of its value. This has resulted in a -0.97% impact on NAV. When we invested in the company, a leading vending machine operator headquartered in Switzerland, we were fully aware of the refinancing process but did not anticipate the level of impact it would have on its senior bonds. We are monitoring the position closely and hope to reclaim some of the lost value. Sterling has been stronger over the last year, especially against the US dollar where we have 17.31% exposure in the portfolio. Although this has some associated capital and revenue costs, we like the underlying investments and believe that interest rates will reduce in the UK over the next 12 months, which should mean we see some currency gains. The Company has a further 13.31% invested in Euro dominated securities and other currencies. For the year to 30 June 2025, the revenue account earnings were 4.43 pence compared to 4.50 pence for the same period last year. Earnings per share were reasonably stable during the year with one company, Selecta Group as noted above, missing its coupon payments. Together with a stronger Sterling, this contributed towards the slight dip in revenue earnings. That being said, we are comfortable with the Company's revenue account going forwards. In our regular discussions with Shareholders, the Company's revenue and dividends are topics of crucial importance and the ability of any portfolio company to pay its coupon or expected dividend on time is one of the major indicators that we continue to follow. 15 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Investment Manager's Review Continued ## Outlook With 30 year Government bond yields across the Western world at close to 25–30 year highs, inflation proving sticky and the US imposing tariffs, global geopolitics are not improving anytime soon. This is not the end of the world however as long bonds are always more susceptible to inflation and investors therefore shun them in favour of shorter durations under 5 years. The current duration of the portfolio is just over 3 years. Another point of note is despite all the negative comment about what may or may not be part of the late November UK budget, recent UK Gilt issues have been over-subscribed multiple times, showing the market believes in the longer term the size of State intervention can be reined in. Overall, there are opportunities in the corporate sector both in the UK, Europe and Scandinavia and with the economy in the US slowing, inflation there is expected to fall. These factors offer a more positive view of bond markets over time than those we are focusing on in the very short term. Ian "Franco" Francis New City Investment Managers 18 September 2025 --- | ![img-9.jpeg](img-9.jpeg) | | | | --- | --- | --- | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Classification of Investment Portfolio As at 30 June 2025 | By currency | 2025 Total investments % | 2024 Total investments % | | --- | --- | --- | | Sterling | 69.38 | 70.40 | | US dollar | 17.31 | 15.73 | | Euro | 11.96 | 11.76 | | Swedish krona | 0.79 | 1.02 | | Norwegian krone | 0.48 | 1.02 | | Canadian dollar | 0.08 | 0.07 | | Total investments | 100.00 | 100.00 | | By asset class | 2025 Total investments % | 2024 Total investments % | | --- | --- | --- | | Fixed income securities^{1} | 87.14 | 83.23 | | Equity shares^{2} | 12.86 | 16.77 | | Total investments | 100.00 | 100.00 | 1 Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. 2 Equity shares include investment funds. # Classification of Investment Portfolio by Sector As at 30 June 2025 | | | 2025 Total investments % | 2024 Total investments % | | --- | --- | --- | --- | | Financials | | 45.70 | 43.43 | | Consumer discretionary | | 21.53 | 14.70 | | Energy | | 14.74 | 17.29 | | Consumer staples | | 6.55 | 5.47 | | Industrials | | 6.10 | 10.42 | | Communication services | | 2.68 | 2.27 | | Real estate | | 1.44 | 1.79 | | Information technology | | 1.17 | 3.93 | | Materials | | 0.09 | 0.70 | | Total investments | | 100.00 | 100.00 | --- # Investment Portfolio As at 30 June 2025 | Company | Sector | Valuation £'000 | Total investments % | | --- | --- | --- | --- | | SHAWBROOK GROUP 22-08/06/2171 FRN | Financials | 13,843 | 4.21 | | TVL FINANCE 10.25% 23-28/04/2028 | Consumer discretionary | 12,955 | 3.94 | | RL FINANCE NO6 23-25/11/2171 FRN | Financials | 11,879 | 3.61 | | STONEGATE PUB 10.75% 24-31/07/2029 | Consumer discretionary | 11,390 | 3.46 | | GALAXY BIDCO LTD 8.125% 24-19/12/2029 | Financials | 11,196 | 3.40 | | AGGREGATED MICRO 8% 16-17/10/2036 | Energy | 10,407 | 3.16 | | REA FINANCE 8.75% 15-31/08/2025 | Consumer staples | 9,591 | 2.92 | | BARCLAYS PLC 22-15/12/2170 FRN | Financials | 9,472 | 2.88 | | BELLIS ACQUISITION 8.125% 24-14/05/2030 | Financials | 9,413 | 2.86 | | AZERION GROUP 23-02/10/2026 FRN | Communication services | 8,816 | 2.69 | | Top ten investments | | 108,962 | 33.13 | | BOPARAN FINANCE 9.375% 24-07/11/2029 | Financials | 8,467 | 2.57 | | NEXTENERGY SOLAR FUND LTD | Energy | 7,394 | 2.25 | | CLOSE BROS GRP 23-29/05/2172 FRN | Financials | 6,698 | 2.04 | | ENQUEST PLC 11.625% 22-01/11/2027 | Energy | 6,683 | 2.03 | | CO-OP BANK HOLDCO 23-22/05/2034 FRN | Financials | 6,461 | 1.96 | | PINNACLE BIDCO P 10% 23-11/10/2028 | Consumer discretionary | 6,335 | 1.93 | | 3T GLOBAL 11.25% 24-22/05/2028 | Consumer discretionary | 6,024 | 1.83 | | MFG/MRH MOTFUE TL B10 1LB | Consumer discretionary | 5,963 | 1.81 | | FRONTLINE PLC | Energy | 5,826 | 1.77 | | M&G PLC | Financials | 5,655 | 1.73 | | Top twenty investments | | 174,468 | 53.05 | | CRUISE YACHT UPP 11.875% 24-05/07/2028 | Consumer discretionary | 5,471 | 1.66 | | SUMMER BC HOLDCO 9.25% 19-31/10/2027 | Industrials | 5,414 | 1.65 | | PHOENIX GROUP HOLDINGS PLC | Financials | 5,260 | 1.60 | | TULLOW OIL PLC 10.25% 21-15/05/2026 | Energy | 5,032 | 1.53 | | LLOYDS BANKING 14-29/12/2049 FRN | Financials | 4,943 | 1.50 | | SP CRUISES INTER 11.5% 25-14/03/2030 | Consumer discretionary | 4,779 | 1.45 | | REA HOLDINGS PLC -PREF SHARES | Consumer staples | 4,719 | 1.44 | | GARFUNKELUX HOLD 7.75% 20-01/11/2025 | Financials | 4,656 | 1.42 | | ASTON MARTIN 10.375% 24-31/03/2029 | Consumer discretionary | 4,653 | 1.41 | | VIRGIN MONEY 23-08/06/2172 FRN | Financials | 4,614 | 1.41 | | Top thirty investments | | 224,009 | 68.12 | | AAREAL BANK AG 25-31/07/2173 FRN | Financials | 4,487 | 1.36 | | BLUEWATER HOLD 12% 22-10/11/2026 | Energy | 4,400 | 1.34 | | STONEGATE PUB 24-31/07/2029 FRN | Consumer discretionary | 4,348 | 1.32 | | SHERWOOD FINAN 9.625% 24-15/12/2029 | Financials | 4,297 | 1.31 | | SIGMA HOLDCO 8.625% 25-15/04/2031 | Consumer staples | 4,289 | 1.30 | | ZOPA GROUP LTD 25- FRN | Financials | 4,231 | 1.29 | | NEWCASTLE BUILDING SC 24-06/06/2173 FRN | Financials | 3,935 | 1.20 | | PRIORITY1 ISSUER 12.625% 24-19/11/2027 | Industrials | 3,861 | 1.17 | | OSB GROUP 23-07/09/2028 FRN | Financials | 3,241 | 0.99 | | BARCLAYS PLC 23-15/06/2171 FRN | Financials | 3,228 | 0.98 | 19 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Investment Portfolio As at 30 June 2025 Continued | Top forty investments | | 264,326 | 80.38 | | --- | --- | --- | --- | | DORIC NIMROD AIR THREE LTD | Industrials | 3,038 | 0.92 | | BOS GMBH 25-25/06/2029 FRN | Consumer discretionary | 2,942 | 0.89 | | BOOSTER PRECISIO 22-28/11/2026 SR | Industrials | 2,927 | 0.89 | | WHEEL BIDCO 9.875% 21-15/09/2029 | Consumer discretionary | 2,764 | 0.84 | | COVENTRY BDG SOC 24-11/12/2172 FRN | Financials | 2,615 | 0.80 | | UTB PARTNERS PLC 25-30/05/2173 FRN | Financials | 2,563 | 0.78 | | CHANNEL ISLAND PROPERTY FUND | Real estate | 2,400 | 0.73 | | QUILTER PLC 23-18/04/2033 FRN | Financials | 2,399 | 0.73 | | ITHACA ENERGY N 8.125% 24-15/10/2029 | Energy | 2,282 | 0.69 | | GREENFOOD AB 24-13/11/2028 FRN | Consumer staples | 2,224 | 0.68 | | Top fifty investments | | 290,480 | 88.33 | | TUFTON OCEANIC ASSETS LTD | Industrials | 2,222 | 0.68 | | INVESTEC 24-28/08/2172 FRN | Financials | 2,201 | 0.67 | | WELLTEC INTL 8.25% 21-15/10/2026 | Energy | 2,196 | 0.67 | | GAMING INNOV 23-18/12/2026 FRN | Information technology | 2,187 | 0.67 | | LIFEFIT GROUP 24-29/08/2029 FRN | Consumer discretionary | 2,183 | 0.66 | | ENQUEST PLC 9% 22-27/10/2027 | Energy | 1,895 | 0.58 | | RM INFRASTRUCTURE INCOME PLC | Financials | 1,870 | 0.57 | | DEUTSCHE BANK AG 14-30/05/2049 FRN | Financials | 1,791 | 0.54 | | ATTICA BANK SA 25- FRN | Financials | 1,790 | 0.54 | | WEST BROMWICH BS 18-20/08/2172 | Financials | 1,776 | 0.54 | | Top sixty investments | | 310,591 | 94.45 | | UTB PARTNERS PLC 12.95% 23-31/03/2034 | Financials | 1,560 | 0.47 | | EUROBANK ERGASIA 22-06/12/2032 FRN | Financials | 1,475 | 0.45 | | VAN LANSCHOT 24-01/04/2172 FRN | Financials | 1,392 | 0.42 | | NEWRIVER REIT PLC | Real estate | 1,371 | 0.42 | | SHAMARAN 12% 21-30/07/2029 | Energy | 1,096 | 0.33 | | DIVERSIFIED ENERGY CO PLC | Energy | 1,091 | 0.33 | | ATOM HOLDCO 11.5% 24-08/01/2035 | Financials | 1,023 | 0.31 | | NORSKE VIKING I 15% 21-05/05/2049 | Information technology | 882 | 0.27 | | REA TRADING 13.50% 21-30/09/2027 | Consumer discretionary | 842 | 0.26 | | BEELUX SARL 25-14/03/2028 FRN | Industrials | 827 | 0.25 | | Top seventy investments | | 322,150 | 97.96 | | Other investments (62) | | 6,694 | 2.04 | | Total investments | | 328,844 | 100.00 | Notes: FRN – Floating Rate Note PREF – Preference shares REIT – Real Estate Investment Trust SR – Senior --- # Ten Largest Holdings | | Valuation 30 June 2024 £'000 | Purchases £'000 | Sales £'000 | Revaluation gain/(loss) £'000 | Valuation 30 June 2025 £'000 | | --- | --- | --- | --- | --- | --- | | SHAWBROOK GROUP 22-08/06/2171 FRN A holding company of Shawbrook Bank Limited, a specialist lending and savings bank serving consumers in the UK. | 13,378 | – | – | 465 | 13,843 | | TVL FINANCE 10.25% 23-28/04/2028 A special purpose entity formed for the purpose of issuing debt securities to repay existing credit facilities, refinance indebtedness and for acquisition purposes of Travelodge Group. | 9,379 | 4,099 | – | (523) | 12,955 | | RL FINANCE NO6 23-25/11/2171 FRN A special purpose entity set up to raise capital whose proceeds will be used for general business and commercial activities of Royal London. | 11,241 | – | – | 638 | 11,879 | | STONEGATE PUB 10.75% 24-31/07/2029 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. | – | 11,423 | – | (33) | 11,390 | | GALAXY BIDCO LTD 8.125% 24-19/12/2029 A specialist provider of warranties for consumer electric products. | – | 11,000 | – | 196 | 11,196 | | AGGREGATED MICRO 8% 16-17/10/2036 A British company using small scale, established technologies to convert wood and waste into energy in the form of heat and electricity. | 10,366 | – | (336) | 377 | 10,407 | | REA FINANCE 8.75% 15-31/08/2025 An agricultural company specialising in sustainable palm oil cultivation and processing. | 8,526 | – | – | 1,065 | 9,591 | | BARCLAYS PLC 22-15/12/2170 FRN A global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. | 9,199 | – | – | 273 | 9,472 | | BELLIS ACQUISITI 8.125% 24-14/05/2030 Operates as a special purpose entity. The Company was formed for the purpose of issuing debt securities to repay existing credit facilities, refinance indebtedness, and for acquisition purposes. | – | 9,523 | – | (110) | 9,413 | | AZERION GROUP 23-02/10/2026 FRN Operates a high-growth and profitable digital entertainment and media platform. | 6,813 | 2,003 | – | – | 8,816 | | | 68,902 | 38,048 | (336) | 2,348 | 108,962 | 21 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Risk Report A key element of the role of the Board is the understanding, assessment and where possible, mitigation of risks facing the Company. Risk is inherent in the investment process and the Board needs to balance risk management against generating long term attractive returns for investors. The Board has established a control framework that is overseen by the Audit and Risk Committee. Under this framework, the Audit and Risk Committee regularly evaluates the principal and emerging risks facing the Company and considers the effectiveness of mitigating controls in place. The risk control framework in operation to ensure effective oversight and management by the Board is illustrated in the diagram below. As a Company with no employees, the Board relies on our service providers to maintain effective risk management controls in various aspects of the activities of the Company. The Board and Audit and Risk Committee oversee those control procedures through regular reporting to the Committee, review of investment performance, controls reports, annual visits to the offices of some of the service providers, service providers' questionnaires and attendance at Committee and Board meetings where risk management is discussed. The Audit and Risk Committee reviews the principal risks on a quarterly basis, considers any changes or developments that might affect their impact or likelihood and assesses any changes to the control environment that might be needed. Emerging risks are also discussed on a regular basis. Changes to the impact or likelihood of principal risks and emerging risks are then discussed at Board level. Despite a deteriorating geopolitical landscape, and increased market uncertainty, the strong performance of the Company has been maintained, underpinned by a robust and disciplined risk management process. In a meeting held in May 2025, the Board carried out their annual review of risk appetite and concluded that there was no change from the previous year. Details of the work carried out by the Audit and Risk Committee during the year can be found on pages 51 to 53. --- 23 # Risk Controls Framework ## Board of Directors - Sets strategy and risk appetite; - Assesses risks and mitigation; and - Monitors performance. ## Management Engagement Committee - Overseas service providers; - Evaluates performance of service providers; and - Reviews service providers' annual questionnaires and control reports. ## Audit and Risk Committee - Monitors principal and emerging risks; - Reviews reports from service providers; and - Considers effectiveness of control environment. ## External Auditor Pricewaterhouse Coopers ("PwC") ## Oversight ## Reporting | **Investment Manager** Manulife | CQS Investment Management | **Company Secretary, Administrator, Custodian, Banker and Depository** BNP Paribas S.A., Jersey Branch | **Other service providers** - Singer Capital Markets (Financial Adviser and Corporate Broker) - Computershare Investor Services (Jersey) Limited (Registrar) | | --- | --- | --- | --- | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Risk Report Continued The principal risks and mitigating controls are set out below, with an indication as to whether each principal risk is assessed to be increasing, decreasing or static. | Risk | Description | Controls | | --- | --- | --- | | Dividend and earnings risk | The earnings that underpin the amount of dividends declared and future dividend growth are generated by the Company's underlying portfolio. One or more of the following factors could adversely affect the Company's earnings and thereby, its ability to declare a dividend: ► A persistent low interest rate environment. ► A contraction of available investment opportunities suitable for the Company, given its investment objective and its policy. ► The persistence of adverse market conditions or government intervention during a macro-economic crisis resulting in cuts to dividend income. ► Adverse changes to the tax treatments applicable to the Company's stream of investments and dividend income. ► Appreciation of Sterling against other currencies to which the Company has exposure. We are currently in a period of relatively high interest rates which support the Company's dividend payments, nevertheless it is not clear how far or fast interest rates will fall and there is still heightened economic uncertainty that could impact the value of the Company's earnings. | The Board has engaged with Manulife | CQS Investment Management (the "Investment Manager") to manage the Company's portfolio and therefore depends upon the Investment Manager to construct an appropriate portfolio that will produce income allowing the Company to meet its dividend target. The Board monitors the implementation of the investment strategy by reviewing the performance of the Investment Manager on an ongoing basis and by receiving a formal presentation from the Investment Manager on a quarterly basis. The Board receives and reviews detailed income forecasts prepared by the Investment Manager and BNP Paribas S.A., Jersey Branch ("BNP Paribas" or the "Administrator") when the quarterly dividends are declared. As at 30 June 2025, the Company held revenue reserves of £16,104,000 (2024: £16,185,000) and cash balance of £10,054,000 (2024: £12,350,000) which could be used for the maintenance of the Company's dividend target in adverse market conditions. | --- | Risk | Description | Controls | | --- | --- | --- | | Market risk leading to a loss of share value ↑ | The Company’s assets consist principally of listed fixed interest securities and equities. Its greatest risks are consequently market related, with exposure to movements in the prices of the Company’s investments and the loss that the Company might suffer through holding investments in the face of negative market movements. A downturn in capital markets could lead to a loss in value of the Company’s shares, eroding the premium and causing the shares to trade at a discount. Failure of investee companies to respond to the transition to clean energy in an appropriate and timely fashion could lead to a decline in their profitability and ultimately impact their ability to deliver value. | The Board relies upon the research capabilities of the Investment Manager and the people it employs that can use their expertise to build a portfolio, utilising diversification, to mitigate market risk to the extent possible. The Board monitors the implementation of the investment strategy, reviews the performance of the Investment Manager on an ongoing basis and receives a formal presentation from the Investment Manager on a quarterly basis. At this time, the Board reviews the performance of the Company’s investments, including both realised and unrealised gains and losses. The Investment Manager incorporates sustainability factors into its investment process. | | Key person risk ← | Performance of the Company may be negatively affected by a change in the fund management team within the Investment Manager. | The lead fund manager is responsible for day-to-day portfolio management. 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. | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Risk Report Continued | Risk | Description | Controls | | --- | --- | --- | | Gearing risk ↔ | A fall in the value of the underlying investments could adversely affect the Company's level of gearing and exacerbate the decline in value. It could also result in a breach of loan covenants. | Gearing levels and compliance with loan covenants are monitored by the Administrator and the Investment Manager on a monthly basis. The Board reviews compliance with the gearing levels and loan covenants at regular Board meetings. For the year ended 30 June 2025 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 and conflict in the Middle East has exacerbated inflationary tensions post-pandemic. Inflation and energy prices across Europe have stabilised for now but upward pressure could re-emerge as a result of European and Middle East conflicts and the impact of US tariff policy. | The Investment Manager has reviewed the portfolio to understand the susceptibility of investments to market disruption and the results of this review has been discussed with the Board. The robustness of corporate business models during this period of heightened uncertainty is considered both in relation to the current portfolio and as part of investment decision-making. | | Operational risk ↔ | The Company relies upon the services provided by third parties and is reliant on the control systems of the Investment Manager and the Company's other service providers. Failures at these third parties could adversely impact the security and/or maintenance of, inter alia, the Company's assets, dealing and settlement procedures and accounting records depend on the effective operation of these systems. | The operating effectiveness of third party service providers is regularly tested, monitored and reported on at each Board meeting. The Audit and Risk Committee receives an International Standard for Assurance Engagement ("ISAE") 3402 report (report on the description of controls placed in operation, their design and operating effectiveness) from the Investment Manager, Administrator and Registrar covering key services provided. The Investment Manager delivers a risk based internal audit plan which covers different areas of its operations that are subject to internal audit, including front, middle and infrastructure audits. Any area of concern relevant to the Company is discussed with the Audit and Risk Committee when it meets. | --- | Risk | Description | Controls | | --- | --- | --- | | Regulatory risk ↔ | The breach of existing regulatory rules (in Jersey and/or the UK) or failing to adopt changes in regulatory rules in a timely manner, which could lead to a suspension of the Company's stock exchange listing or financial penalties. | The Company Secretary monitors the Company's compliance with the Listing Rules of the UK Listing Authority. Compliance with the Listing Rules is reviewed on a quarterly basis. The Company's compliance officer monitors the regulatory rules applicable to Jersey funds and the Board receives a quarterly report from the compliance officer. The Administrator is regulated by the Jersey Financial Services Commission. | | Cyber risk ↑ | The Board notes that organisations across the globe are experiencing more frequent and more sophisticated cyber attacks and are mindful of the heightened risk. Conflict in Europe heightens the risk of malpractice 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. | As well as reviewing controls reports on the Company's service providers, the Board requests information on cyber controls, cyber insurance and any material cyber breaches from those key service providers. During the year, representatives from the Audit and Risk Committee met with BNP Paribas S.A. Jersey Branch's Chief Conduct and Controls Officer to discuss cyber security in the light of evidence of increased sophistication and effectiveness of ransomware attacks. | 27 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Risk Report Continued | Risk | Description | Controls | | --- | --- | --- | | Reduced market demand for our shares | The post-pandemic change to a high inflation, high interest rate environment impacted the relative attractiveness of investments and shifted patterns of investment. Inflation is now steadier and interest rates are gradually falling. Market demand can be expected to adjust accordingly. There could be negative investor sentiment if investments held are deemed unacceptable from an ESG policy perspective, as investors attitudes develop towards these issues. | Any reduction in the share price premium or move to a discount is discussed with the Investment Manager and Singer Capital Markets (the “Broker”), with a view to taking action, if considered appropriate. The Company has generally traded at a premium to NAV and has done so for all of this financial year. We have seen strong demand for our shares 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. In addition, the Investment Manager now holds regular webinars at which performance is discussed and investors are invited to submit questions. 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 During its discussions on principal risks and uncertainties, the Board considered any risks that were not an immediate, quantifiable threat but could materialise and could have significant impact on the ability of the Company to continue to meet its objectives. The Board is mindful of the impact of climate change, such as the increasing incidence of severe weather globally and the effect this could have over time on certain sectors of the economy and potentially the Company's portfolio and returns. We have also discussed the increased threat of cyber attacks given geo-political tension and the development of more sophisticated cyber crimes including use of Artificial Intelligence. The Board regularly discusses these with the Investment Manager and receives feedback based on the Investment Manager's research and discussions with Shareholders and the Broker. --- 29 # Stakeholders – Section 172 ## Statement and Principal Decisions Through adopting the 2019 Association of Investment Companies' ("AIC") Code of Corporate Governance Code (the "AIC Code"), the Board acknowledges its duty to comply with section 172 of the UK Companies Act 2006 to act in a way that promotes the success of the Company for the benefit of its members as a whole, having regard to (amongst other things): a. consequences of any decision in the long-term; b. the interests of the Company's employees; c. need to foster business relationships with suppliers, customers and others; d. impact on community and environment; e. maintaining reputation; and f. act fairly as between members of the Company. Information on how the Board has engaged with its stakeholders and promoted the success of the Company, through the decisions it has taken during the year, whilst having regard to the above, is outlined below. The Company has no employees. | 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 financial statements; 4. making themselves available to meet major Shareholders as requested; 5. virtual Board participation in Webinars hosted by companies such as Investor Meet Company and ShareSoc; 6. obtaining Shareholder feedback received via the Investment Manager and the Broker; and 7. 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 efficient manner. The Board engages with its service providers by: 1. receiving detailed written and verbal reports at board meetings; 2. regular communication with representatives via telephone and email to discuss ad hoc matters; and 3. undertaking an annual review via the Management Engagement Committee. | --- 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 the environment | As a responsible corporate citizen, the Company recognises that its operations have an environmental footprint and impact on wider society. The Board fully supports the growing importance placed on ESG factors when asking the Company’s Investment Manager to deliver against the Company’s objectives. The Board has requested that the Investment Manager take into account the broader social, ethical and environmental issues of companies within the Company’s portfolio, acknowledging that companies failing to manage these issues adequately run a long term risk to the sustainability of their businesses. The Investment Manager has stated that they view ESG factors as a key driver of financing costs, valuations and performance, while also being capable of acting as a lever to shape and influence the world for generations to come. The integration and assessment of ESG factors is a crucial part of this commitment and a key factor in the Investment Manager’s decision-making. Through embedding ESG into its investment process, the Investment Manager seeks to enhance its ability to identify value, investment opportunities and critically, to generate the best possible returns for its stakeholders. The Investment Manager is a signatory to the United Nations Principles for Responsible Investment (“PRI”), fully supporting all Principles for Responsible Investment. In line with TCFD recommendations, the Investment Manager has prepared climate related financial disclosures which are available on the Company’s website under the following link: https://ncim.co.uk/wp/wp-content/uploads/2025/09/New-City-High-Yield-Fund-TCFD-Product-Level-Reporting-December-2024.pdf | ## Principal decisions ### New loan facility On 18 December 2024, the Company terminated its loan facility with Scotiabank and entered into a new £45,000,000 loan facility with BNP Paribas, London Branch at a competitive rate. ### Review of dividend policy The Board recognises the importance Shareholders place on the Company’s dividend policy and is cognisant of the need to ensure the viability of the dividend. It was agreed it was in the best interests of the Company and Shareholders to marginally increase the fourth interim dividend for the year. --- 31 # Strategic Review ## Introduction This review is part of a Strategic Report being presented by the Company and is designed to provide information primarily about the Company's business and results for the year ended 30 June 2025. It should be read in conjunction with the Statement from the Chair on pages 10 to 12 and the Investment Manager's Review on pages 14 to 16, which give a detailed review of the investment activities for the year and look to the future. ## Principal activity and status The Company is a closed-ended investment company and was incorporated with limited liability in Jersey under the Companies (Jersey) Law 1991 on 17 January 2007, with registered number 95691. In addition, the Company constitutes and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988. The Company's ordinary shares are listed on the Official List maintained by the FCA and admitted to trading on the Main Market of the LSE. ## Purpose and strategy The purpose of the Company is to provide Shareholders with a high gross dividend yield and the potential for capital growth by mainly investing in high yielding fixed interest securities. To achieve this, the strategy of the Company is to follow the investment policy outlined below and to utilise the benefits of being a closed-ended investment vehicle. ## Investment policy The Company invests predominantly in fixed income securities, including, but not limited to, preference shares, loan stocks, corporate bonds (convertible and/or redeemable) and government stocks. The Company also invests in equities and other income yielding securities. Exposure to higher yielding securities may also be obtained by investing in other closed-ended investment companies and open-ended collective investment schemes. There are no defined limits on countries, size or sectors, the Company may therefore invest in companies regardless of country, size or sector and accordingly, the Company's portfolio is constructed without reference to the composition of any stock market index or benchmark. The Company may, but is not obliged to, invest in derivatives, financial instruments, money market instruments and currencies for the purpose of efficient portfolio management. There are no defined limits on listed securities and, accordingly, the Company may invest up to 100% of total assets in any particular type of listed security. The Company may acquire securities that are unlisted or unquoted at the time of investment, but which are about to be convertible, at the option of the Company, into securities which are listed or traded on a stock exchange. The Company may continue to hold securities that cease to be listed or traded if the Investment Manager considers this appropriate. The Board has established a maximum investment limit in this regard of 10% (calculated at the time of any relevant investment) of the Company's total assets. In addition, the Company may invest up to 10% (calculated at the time of any relevant investment) of its total assets in other securities that are neither listed nor traded at the time of investment. The Company will not invest more than 10% (calculated at the time of any relevant investment) of its total assets in other collective investment undertakings (open-ended or closed-ended). The Board has established a maximum investment limit whereby, at the time of investment, the Company may not invest more than 5% of its total investments in the same investee company. The Company uses gearing and the Board has set a current limit that gearing will not exceed 25% of Shareholders' funds at the time of borrowing. This limit is reviewed from time to time by the Board. The Investment Manager expects that the Company's assets will normally be fully invested. However, during periods in which changes in economic circumstances, market conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its positions in cash, money market instruments and derivative instruments in order to seek protection from stock market falls or volatility. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Strategic Review Continued ## Investment approach Investments are typically made in securities which the Investment Manager has identified as undervalued by the market and which it believes will generate above average income returns relative to their risk, thereby also generating the scope for capital appreciation. In particular, the Investment Manager seeks to generate capital growth by exploiting the opportunities presented by the fluctuating yield base of the market and from redemptions, conversions, reconstructions and take-overs. ## Performance measurement and Key Performance Indicators ("KPIs") The Board uses a number of performance measures to monitor and assess the Company's success in meeting its objectives and to measure its progress and performance. The 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 2025, the Company's dividend yield was 8.77% (2024: 8.62%) based upon a share price of 51.40 pence (2024: 52.20 pence) (bid price) as at 30 June 2025 and its dividend cover was 0.98x (2024: 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 4.51 pence (2024: 4.50 pence) per ordinary share out of revenue earnings per ordinary share of 4.43 pence (2024: 4.50 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 2025 was 1.17% (2024: 1.18%). 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 97 to 100. ### 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 3 December 2024, 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 78 to 79 is due to expire on 18 December 2025 after which it is anticipated the Company will take out a new facility on comparable terms. In the event that current liquid assets are insufficient, the Company has the ability to realise Level 1 assets as necessary to facilitate repayment of the loan. 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 at least twelve months from the date of this report. For this reason, the Directors continue to adopt the going concern basis in preparing the Financial Statements, notwithstanding that the Company is subject to an annual continuation vote as described above. # Viability Statement In accordance with the provisions of the AIC Code, the Directors have assessed the viability of the Company over a period longer than the 12 months required by the 'going concern' provision. The Board conducted this viability review for a period of three years. The Board continues to consider that this period reflects the long-term objectives of the Company, being a Company with no fixed life, whilst taking into account the impact of uncertainties in the markets. The Directors do not expect there to be any significant changes to the current principal and emerging risks facing the Company and believe that the Company has sufficient controls in place to mitigate those risks as far as reasonably possible. Furthermore, the Directors do not envisage any change in strategy which would prevent the Company from operating over the three year period. This is based on the assumption that there are no significant changes in market conditions or the tax and regulatory environment that could not reasonably have been foreseen. The Board also considers the annual continuation vote should not be a factor to affect the three year period given the strong demand seen for the Company's shares. In making this statement the Board: (i) considered the continuation vote to be proposed at the AGM which the Board considers will be voted in favour of by Shareholders; and (ii) carried out a robust assessment of the principal and emerging risks facing the Company. These risks and their mitigations are set out on pages 24 to 28. The principal risks identified as most relevant to the assessment of the viability of the Company were those relating to potential under-performance of the portfolio and its effect on the ability 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. When considering the risk of under-performance, a series of stress tests was carried out including in particular the effects of any substantial future falls in investment value on the ability to re-pay and re-negotiate borrowings, potential breaches of loan covenants and the maintenance of dividend payments. The Board considered the Company's portfolio and concluded that the diverse nature of investments held contributes to the stability and liquidity along with flexibility to be able to react positively to market and political forces beyond the Board's control. The Board also considered the impact of potential regulatory changes and the control environment of significant third party providers, including the Investment Manager. The BNP Paribas loan facility is due to expire on 18 December 2025. It is anticipated a new facility on comparable terms will be negotiated prior to this date. The Board carries out stress testing on a range of downside scenarios to ensure that the Company can meet its liabilities in full. Based on the Company's processes for monitoring revenue and costs, with the use of frequent revenue forecasts and the Investment Manager's compliance with the investment objective and policies, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of approval of this Report. 33 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Strategic Report # Strategic Review Continued ## Social, community, human rights, employee responsibilities and environmental policy The Directors recognise that their first duty is to act in the best financial interests of the Company's Shareholders and to achieve good financial returns against acceptable levels of risk, in accordance with the objectives of the Company. In asking the Company's Investment Manager to deliver against these objectives, they have also requested that the Investment Manager take into account the broader social, ethical and environmental issues of companies within the Company's portfolio, acknowledging that companies failing to manage these issues adequately run a long-term risk to the sustainability of their businesses. ## Greenhouse gas emissions The Board recognises its impact on the environment, including greenhouse gas emissions, through the underlying portfolio companies which it invests in. The Board requested that ESG factors be incorporated into the Company's investment strategy and further details on ESG can be found on pages 49 to 50. ## Modern slavery The Company would not fall into the scope of the UK Modern Slavery Act 2015 (as the Company does not have any turnover derived from goods and services) if it was incorporated in the UK. Furthermore, as a closed-ended investment company, the Company has a non-complex structure, no employees and its supply chain is considered to be low risk given that suppliers are typically professional advisers based in either the Channel Islands or the UK. Based on these factors, the Board determined that it is not necessary for the Company to make a slavery and human trafficking statement. By Order of the Board Caroline Hitch Chair 18 September 2025 --- DOGE/USDT 0.50011 -6.13% ADA/USDT 2.1718 -9.58% TRX/USDT 0.11493 -0.06% EUR Trading Competition - 50,000 EUR to Be Won (25-17) | Price(USDT) | Amount(XLM) | Total | | --- | --- | --- | | 0.68190 | 500.0 | 340.9500 | | 0.68188 | 300.0 | 206.5648 | | 0.68183 | 1,800.0 | 3,954.6148 | | 0.68182 | 14,036.2 | 9,070.1619 | | 0.68181 | 440.0 | 299.9964 | | 0.68179 | 3,593.0 | 2,450.2169 | | 0.68178 | 4,235.8 | 2,887.8837 | | 0.68164 | 7,165.7 | 4,884.5711 | | 0.68161 | 150.8 | 102.2400 | | 0.68129 | 2,900.0 | 1,976.6110 | | 0.68128 | 17,459.3 | 11,892.3794 | | 0.68127 | 11,581.1 | 7,091.2457 | | 0.68126 | 51,832.3 | 35,313.0499 | | 0.68125 | 0.0 | 11.9914 | | 0.68124 | 2,200.0 | 1,065.7662 | | 0.68123 | 13,600.0 | 897.7180 | | 0.68122 | 0.0 | 62.2218 | | 0.68121 | 0.0 | 46.6900 | | Time | 15th | 1H | 4H | 10 | 1W | 3H | 10 | | --- | --- | --- | --- | --- | --- | --- | --- | | XLMUSDT, 3 | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | AA (7, close, 0) | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | AA (25, close, 0) | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | AA (99, close, 0) | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ![img-10.jpeg](img-10.jpeg) ![img-11.jpeg](img-11.jpeg) | Price | Amount | | --- | --- | | 50.00 | 13.70 | | 25.00 | 12.00 | | 13.70 | 12.00 | 35 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports ![img-12.jpeg](img-12.jpeg) --- # Directors' Reports and Governance Reports 37 --- 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 Caroline Hitch Chair ![img-13.jpeg](img-13.jpeg) The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable laws and regulations. Company law requires the Directors to prepare financial statements for each financial 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 satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these Financial Statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable, relevant and reliable; - state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; - assess the Company's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern; and - use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with Companies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and have general responsibility for taking such steps as --- are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. The Financial Statements are published on the www.ncim.co.uk website, which is a website maintained by the Company's Investment Manager. Legislation in Jersey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. Each of the Directors, whose names are listed on pages 40 to 42, confirms 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, financial position and profit 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 18 September 2025 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # Board of Directors and Investment Manager ![img-14.jpeg](img-14.jpeg) Caroline Hitch Independent Non-Executive Chair Appointed: March 2018 Skills: Caroline has extensive fund management skills including managing specialist fixed income portfolios. She has a deep understanding of investment risk and risk management both as it applies to individual assets and to overall portfolio construction. She developed her skills of investment trust board governance through many years of managing regulated funds, reporting to their boards and then becoming a board member (and now Chair) herself. Experience: Caroline joined the board after working in the financial services industry since the early 1980s mostly with the HSBC group. Her experience includes Head of Wealth Portfolio Management at HSBC Global Asset Management (UK) Ltd. with investment responsibility for their flagship multi asset retail funds. Prior roles included specialisation in institutional fixed income portfolio management. She has worked in London, Jersey, Monaco and Hong Kong. Caroline is a UK resident. ## Committee membership: - Audit and Risk Committee - Management Engagement Committee - Nomination Committee - Remuneration Committee ## Remuneration: £45,000 per annum ## Public company directorships: Aberdeen Equity Income Trust plc (previously 'abrdn Equity Income Trust plc') Shared Directorships with any other Fund Directors: None ![img-15.jpeg](img-15.jpeg) Ian Cadby Independent Non-Executive Director, Chair of the Nomination Committee, Chair of the Remuneration Committee and Senior Independent Director Appointed: January 2017 Skills: Ian is a Chartered Fellow of the Chartered Institute for Securities & Investment and a Fellow (Chartered Director) of the IoD. His extensive governance experience on public and private company boards as well as a long career as a regulated person (CF3, CF2 and CF1 controlled functions) in the asset management industry gives him a broad and relevant skill set for the Board. Experience: Ian has over 30 years' experience within the financial services industry in London, Hong Kong, Singapore and Jersey with a strong career emphasis on equity and equity derivative trading, risk management, corporate governance and board strategy. Ian is a Jersey resident. ## Committee membership: - Audit and Risk Committee - Management Engagement Committee - Nomination Committee - Remuneration Committee ## Remuneration: £32,500 per annum ## Public company directorships: Chairman of Aberdeen Asian Income Fund Limited (previously 'abrdn Asian Income Fund Limited') Shared Directorships with any other Fund Directors: None --- 41 ![img-16.jpeg](img-16.jpeg) ## Wendy Dorman Independent Non-Executive Director and Chair of the Audit and Risk Committee ### Appointed: March 2016 **Skills:** Wendy is a Chartered Accountant with significant experience in tax, audit and commercial accountancy matters mainly focused on the investment fund sector. Her extensive experience chairing audit committees of public listed entities gives her the requisite leadership skills in addition to those of accounting and governance. **Experience:** Wendy began her career in audit and assurance before specializing in taxation, with a focus on financial services and in particular the investment fund sector. She retired as partner in charge of the PwC tax practice in June 2015 and has since then served as non-executive director and audit committee chair of main market listed companies. Wendy is a Jersey resident. ### Committee membership: - Audit and Risk Committee - Management Engagement Committee - Nomination Committee - Remuneration Committee **Remuneration:** £39,000 per annum **Public company directorships:** Jersey Electricity Plc (retired on 30 June 2025) **Shared Directorships with any other Fund Directors:** None ![img-17.jpeg](img-17.jpeg) ## John Newlands Independent Non-Executive Director and Chair of the Management Engagement Committee ### Appointed: October 2017 **Skills:** John's 20-plus years' career as an investment company analyst, with a particular focus upon the UK wealth management sector, gives the Board an important insight into the investment requirements and processes of the types of investor, whether private or institutional, most likely to consider the Company for inclusion in their portfolios. He is also skilled in the assessment of potential peer group funds, both in terms of relative performance and other quantitative data and in the increasing focus upon governance and stewardship matters as pre-requisites for investment. **Experience:** John joined the Board shortly after working in the managed funds sector since the mid-1990s, the last ten years being spent as Head of Investment Companies Research at Brewin Dolphin Limited. He was a member of the AIC Statistics' Committee from 2000 to 2017 and was a member of the Citywire Investment Trust Performance Awards Panel from 2018 until 2024. He has a Master in Business Administration from Edinburgh University Business School and is a Chartered Electrical Engineer dating to his prior career as a Weapon Engineer Officer in the UK Royal Navy. John is the Chair of the Investment Committee of Durham Cathedral. He has written four books about financial history, the most recent charting the history of The Scottish American Investment Company plc. John is a UK resident. ### Committee membership: - Audit and Risk Committee - Management Engagement Committee - Nomination Committee - Remuneration Committee **Remuneration:** £32,500 per annum **Public company directorships:** Develop North plc and Gabelli Merchant Partners plc **Shared Directorships with any other Fund Directors:** None --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # Board of Directors and Investment Manager Continued ![img-18.jpeg](img-18.jpeg) ## Andrew Dann Independent Non-Executive Director **Appointed:** February 2025 **Skills:** Andrew is a Chartered Accountant with significant experience within the financial and non-financial sectors, including reporting to and discussions with Audit Committees and Boards, experience of private equity and real estate sectors, with strong regulation and corporate governance knowledge, including ESG. **Experience:** Andrew was a previous Chairman and Managing Partner at Ernst & Young Channel Islands and has over thirty years' experience with local and international financial services clients, including regulated funds, fiduciary services businesses, and investment management structures. He is a Fellow of the Institute of Chartered Accountants of England and Wales since 1987 and a Member of the Institute of Directors. **Committee membership:** - Audit and Risk Committee - Management Engagement Committee - Nomination Committee - Remuneration Committee **Remuneration:** £32,500 per annum **Public company directorships:** None ## Investment Manager Manulife | CQS Investment Management is appointed as Investment Manager to the Company under an Investment Management Agreement dated 18 September 2019. Prior to this, the Company's Investment Manager was CQS Cayman Limited Partnership. Ian Francis has day-to-day responsibility for managing the Company's portfolio and is supported by the Manulife | CQS Investment Management team. He joined the NCIM team in 2007. He has over 40 years' investment experience, primarily in the fixed interest and convertible spheres and his career has included Collins Stewart, West LB Panmure, James Capel and Hoare Govett. ## Alternative Investment Fund Managers Directive ("AIFMD") The Company has appointed Manulife | CQS Investment Management as the Company's AIFM. The AIFM has received its approval from the FCA to act as AIFM of the Company. The Company is therefore fully compliant. An additional requirement of the AIFMD is for the Company to appoint a depository, which will oversee the custody and cash arrangements and other AIFMD required depositary responsibilities. The Board has appointed BNP Paribas to act as the Company's depository. Further AIFMD disclosures are shown on pages 106 to 107. --- Directors' Report The Directors present their report and the audited Financial Statements for the year ended 30 June 2025. ## 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 BNP Paribas, London Branch. As at the year-end, the unsecured loan facility had a limit of £45,000,000 of which £40,000,000 was drawn down. Refer to note 11 of the 'Notes to the Financial Statements' for further details. The Company's existing loan facility is due to expire on 18 December 2025 after which it is anticipated the Company will take out a new facility on comparable terms. ## Share capital As at 30 June 2025, there were 617,701,858 (2024: 551,451,858) ordinary shares in issue. During the year ended 30 June 2025, the Company issued 66,250,000 (2024: 26,850,000) 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 2024 AGM, held on 3 December 2024, 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 2025 | At 30 June 2024 | | --- | --- | --- | | Caroline Hitch¹ | 211,500 | 211,500 | | Ian Cadby | 25,000 | 25,000 | | Wendy Dor man | 245,381 | 206,781 | | John Newlands | 10,000 | 10,000 | | Andrew Dann² | 25,000 | n/a | | Duncan Baxter³ | n/a | 195,127 | ¹ inclusive of 41,500 shares held by Caroline Hitch's mother. ² Andrew Dann was appointed to the Board on 1 February 2025. ³ Duncan Baxter retired from the Board on 3 December 2024. On 3 March 2025, Wendy Dorman purchased an additional 38,600 ordinary shares. On 27 June 2025, Andrew Dann purchased 25,000 ordinary shares. There were no changes in the ordinary share holdings of the Directors between 1 July 2025 and 18 September 2025. ## Substantial interests in share capital During the year ended 30 June 2025, 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, Manulife | CQS Investment Management, 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. 43 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # Directors' Report Continued ## Appointment of the Investment Manager The Board considers the arrangements for the provision of investment management and other services to the Company on an ongoing basis and a formal review is conducted annually by the Management Engagement Committee. As part of the annual review the Management Engagement Committee considers the continuity of the team, the investment process and the results achieved to date. The Board believes that the continuing appointment of Manulife | CQS Investment Management as AIFM and Investment Manager as set out on page 42 is in the interests of Shareholders as a whole. ## Administration services BNP Paribas is the Company Secretary, Administrator, Custodian, Banker and Depository. ## Independent Auditor PwC was appointed as the Company's auditor in July 2023. A resolution to re-appoint PwC as the Company's auditor will be proposed at the Company's 2025 AGM. ## Delegation of responsibilities and matters reserved for the Board The Board has delegated the exercise of voting rights attaching to the Company's investments to the Investment Manager. All other matters are reserved for the approval of the Board. The Board has a schedule of matters reserved to it for decision and the requirement for Board approval on these matters is communicated directly to the Investment Manager. Such matters include strategy, borrowings, treasury and dividend policy. Full and timely information is provided to the Board to enable the Directors to function effectively and to discharge their responsibilities. The Board also reviews the Financial Statements, performance and revenue budgets. ## Exercise of voting powers The Investment Manager, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company's voting rights in respect of investee companies. The underlying aim of exercising such voting rights is to protect the return from an investment. ## Disclosures required under Listing Rules ("UKLR") 6.6.1R The FCA's UKLR 6.6.1R requires that the Company includes certain information relating to arrangements made between a controlling shareholder and the Company, waivers of Directors' fees and long-term incentive schemes in force. The Directors confirm that there are no disclosures to be made in this regard. ## Events after reporting date The Board has evaluated material subsequent events for the Company occurred during the period from 1 July 2025 through to 18 September 2025 and their effect on the Financial Statements. A list of these events is disclosed in note 25. ## Disclosure of information to the Auditor The Directors confirm that, so far as each of them is aware, there is no relevant audit information of which the Company's Auditor is unaware and the Directors have taken all the steps that they might have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. ## Statement regarding Annual Report and Financial Statements Following a detailed review of the Annual Report and Financial Statements by the Audit and Risk Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy. In reaching this conclusion, the Directors have assumed that the reader of the Annual Report and Financial Statements has a reasonable level of knowledge of the investment industry in general and investment companies in particular. By Order of the Board Caroline Hitch Chair 18 September 2025 --- # The Board and Committees ## Values and culture The Board conducts itself with the core values of integrity, transparency, acceptance of challenge and accountability. It achieves this through a collaborative culture and a sense of shared endeavour. The Board is focused on meeting objectives for investors and all other stakeholders of the Company in a sustainable and responsible way. ## The Board The Board currently consists of a non-executive Chair and four non-executive Directors. The Board considers all of the Directors as independent of the Investment Manager and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. The dates on which the Directors were appointed are contained within their biographies shown on pages 40 to 42. In accordance with the AIC Code, all Directors submit themselves for re-election on an annual basis. New Directors receive an induction from the Company Secretary on joining the Board and all Directors receive other relevant training as necessary. Directors' and Officers' liability insurance cover is maintained by the Company on behalf of the Directors. There is no notice period and no provision for compensation upon early termination of appointment. The Company has neither executive Directors nor employees. A management agreement between the Company and its Investment Manager sets out the matters over which the Investment Manager has authority and the limits beyond which Board approval must be sought. All other matters, including strategy, investment and dividend policies, gearing and corporate governance procedures, are reserved for the approval of the Board. Following the retirement of Duncan Baxter, with effect from 3 December 2024, Ian Cadby replaced the former as Senior Independent Director. He is available to Shareholders if they have concerns where contact through the normal channels of the Chair or the Investment Manager is inappropriate. All committees' terms of reference, the schedule of matters reserved for the Board, the roles and responsibilities of the Chair and the roles and responsibilities of the Senior Independent Director are available on the Company's website. ## Director attendance Directors have attended Board and Committee meetings during the year ended 30 June 2025 as follows: | | Quarterly Board meetings | Ad Hoc Board Meeting^{1} | Audit and Risk Committee meetings | Management Engagement Committee meetings | Nomination Committee meetings | Remuneration Committee meetings | | --- | --- | --- | --- | --- | --- | --- | | Caroline Hitch (Chair) | 3/3 | 6/6 | 3/3 | 1/1 | 2/2 | 1/1 | | Ian Cadby | 3/3 | 6/6 | 3/3 | 1/1 | 2/2 | 1/1 | | Wendy Dorman | 3/3 | 6/6 | 3/3 | 1/1 | 2/2 | 1/1 | | John Newlands | 3/3 | 6/6 | 3/3 | 1/1 | 2/2 | 1/1 | | Andrew Dann^{2} | 1/3 | 2/6 | 2/3 | 1/1 | 1/2 | 1/1 | | Duncan Baxter^{3} | 2/3 | 3/6 | 1/3 | 0/1 | 1/2 | 0/1 | 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. Andrew Dann was appointed to the Board on 1 February 2025. 3. Duncan Baxter retired from the Board on 3 December 2024. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # The Board and Committees Continued ## Nomination Committee The Nomination Committee, chaired by Ian Cadby, operates within clearly defined terms of reference, comprises the full Board and is convened for the purpose of considering the appointment of additional Directors as and when considered appropriate. In considering appointments to the Board, the Nomination Committee takes into account the ongoing requirements of the Company and the need to have a balance of skills and experience within the Board. ## Board evaluation In 2024, the Directors completed a questionnaire-based Board evaluation which covered the Board's composition and skills, strategy setting, oversight of risk and performance, and its stakeholder management. The Board scored highly in all areas although noted that despite being 40% female, including the Chair, there is potential to improve other areas of diversity. Both the Nomination Committee and the Board recognise the importance of diversity and will consider this in respect of any new appointments. ## Diversity and inclusion The Board believes in the benefits of having a diverse range of skills and backgrounds and the need to have a balance of experience, independence, diversity (including gender and ethnicity) and knowledge of the Company on its Board and are endeavouring to meet diversity targets. The below tables set out the Board's composition as at 30 June 2025, in terms of gender identity and ethnic background. The below text compares this against the targets prescribed by UKLR 6.6.6R (9)(a). | Number of Board members | Percentage of the Board | Senior positions on the Board (Senior Independent Director and Chair) | | --- | --- | --- | | Men: 3 | 60% | Ian Cadby – Senior Independent Non-Executive Director | | Women: 2 | 40% | Caroline Hitch – Chair of the Board Wendy Dorman – Chair of the Audit and Risk Committee | | | Number of Board members | Percentage of the oard | Senior positions on the Board (Senior Independent Director and Chair) | | --- | --- | --- | --- | | White British or other White (including minority-white groups) | 5 | 100% | Caroline Hitch – Chair of the Board Ian Cadby – Senior Independent Non-Executive Director 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 specified/ prefer not to say | Nil | N/A | N/A | 40% of Board members are female, which meets the target of 40% prescribed by UKLR 6.6.6R (9)(a). At least one of the female directors needs to have a senior position within the Board. The roles of Chair of the Board and Chair of the Audit and Risk Committee, being senior positions, are held by women. --- At present none of the Board members are from minority ethnic backgrounds which is below the target of one as prescribed by UKLR 6.6.6R (9)(a). The Board are mindful of this and alongside knowledge and expertise, this will form a key consideration when the Board next recruits. The Nomination Committee is building diversity targets into its succession plans. ## Director re-election and tenure It is the intention of the Board that each Director will retire after no longer than nine years in their role and the Board has adopted a policy whereby all Directors will be put up for re-election every year in line with the AIC Code. Accordingly, all Directors will be put forward for re-election at the forthcoming AGM, with the exception of Andrew Dann who will be put forward for election for the first time and Wendy Dorman who has reached nine years of service. ## Succession planning A key duty of the Nomination Committee is to ensure plans are in place for orderly succession to the Board. The Board has adopted a succession plan scheduled to allow for an orderly refreshment of the Board, with the intention that no director serves longer than nine years, other than in exceptional circumstances. Our succession planning takes into account gender and ethnic diversity targets. Having served on the Board for nine years, Duncan Baxter retired from the Company at the last AGM held on 3 December 2024. The Committee commenced a recruitment process with the intention to identify candidates for Board succession in 2025. The Board engaged Thomas & Dessain, a specialist Jersey recruitment consultant, to manage the process. Through a proper and thorough process, Andrew Dann was appointed as a non-executive Director of the Company on 1 February 2025. Thomas & Dessain had no other connections to the Company or any individual Director. The recruitment processes focused not only on the qualifications of each candidate but also on each candidate's independence and ensuring that no appointment would create conflicts of interest. ## Management Engagement Committee With effect from 3 December 2024, the Management Engagement Committee is chaired by John Newlands, replacing Duncan Baxter who retired from the Board. The Management Engagement Committee operates within clearly defined terms of reference, comprises the full Board, reviews the appropriateness of the Investment Manager's continuing appointment together with the terms and conditions thereof and reviews the terms and quality of service received from other service providers. The Board ensures the Company adheres to independent requirements in all agreements and service contracts. ## Remuneration Committee The Remuneration Committee determines and agrees with the Board the policy for the remuneration of all Directors. With effect from 3 December 2024, it is chaired by Ian Cadby, replacing John Newlands. ## Audit and Risk Committee The composition and role of the Audit and Risk Committee is described on pages 51 to 53. ## Relations with Shareholders The Directors place a great deal of importance on communication with Shareholders. The Annual Report and Financial Statements are widely distributed to other parties who have an interest in the Company's performance. The Directors obtain regular feedback from the Investment Manager and Broker regarding shareholder engagement and will make themselves available to shareholders upon request. Shareholders and investors may obtain up to date information on the Company through the Investment Manager's website. The Company responds to letters from Shareholders on a wide range of issues and invites questions at the Company's Annual General Meeting. A regular dialogue is maintained with the Company's institutional Shareholders. The Company Secretary is available to answer general Shareholder queries at any time throughout the year. By Order of the Board Caroline Hitch Chair 18 September 2025 --- 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 (Commercial Companies)' segment on the LSE and is therefore required to report on how the principles of the UK Code have been applied. Being an investment company, a number of the provisions of the UK Corporate Governance Code (the "UK Code") are not applicable as the Company has no executive directors or internal operations. The Board has considered the principles and 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 that are of specific relevance to the Company. The Board considers that reporting against the principles and provisions of the AIC Code provides more relevant information to stakeholders. The AIC Code is available on the AIC's website www.theaic.co.uk. The Company has complied with all the principles and provisions of the AIC Code during the year ended 30 June 2025. Set out below is where stakeholders can find further information within the Annual Report about how the Company has complied with the various Principles and Provisions of the AIC Code. | | Pages | | --- | --- | | 1. Board leadership and purpose | | | Purpose | 31 | | Strategy | 31 | | Values and culture | 45 | | Shareholder engagement | 29 | | Stakeholder engagement | 29 to 30 | | 2. Division of responsibilities | | | Director independence | 47 | | Board meetings | 45 | | Relationship with Investment Manager | 43 to 44 | | Management Engagement Committee | 47 | | 3. Composition, succession and evaluation | | | Nomination Committee | 46 to 47 | | Director re-election | 47 | | Use of an external search agency | 47 | | Board evaluation | 46 | | 4. Audit, risk and internal control | | | Audit and Risk Committee | 51 to 53 | | Emerging and principal risks | 22 to 28 | | Risk management and internal control systems | 52 to 53 | | Going concern statement | 32 to 33 | | Viability statement | 33 | | 5. Remuneration | | | Directors' remuneration report | 54 | --- 49 # Environmental, Social and Governance ("ESG") Statement ## Introduction The Company is a Jersey domiciled and UK LSE listed investment company whose objective is to provide investors with a high gross dividend yield and the potential for capital growth by mainly investing in high yielding fixed interest securities. 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. ## Manulife | CQS Investment Management Responsible Investment Policy incorporating our ESG Statement Manulife | CQS Investment Management views ESG factors as significant drivers influencing financing costs, risk assessment valuations and performance. The assessment, integration and engagement of ESG factors are a crucial part of the Investment Manager's responsible investment commitment. By embedding responsible investment into its investment process, the Investment Manager seeks to enhance its ability to identify value, investment opportunity, risk and, critically, to generate the best possible returns and outcomes for its clients. The Investment Manager is a signatory to the United Nations PRI, the UK Stewardship Code, the Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC). The TCFD is a global initiative to promote consistent and transparent reporting of climate-related risks and opportunities by companies and financial institutions. As of 2025, the Investment Manager publishes annual product-level TCFD reporting for the Company which enables investors to make informed choices based on consistent and comparable information about the climate impact of the Company. Please find the latest product-level TCFD reporting for the Company here: https://ncim.co.uk/wp/wp-content/uploads/2025/09/New-City-High-Yield-Fund-TCFD-Product-Level-Reporting-December-2024.pdf At the time of writing, 38.2% of the Company's portfolio is covered by Morgan Stanley Capital International ("MSCI") for their ESG rating service. MSCI has a minimum 50% threshold for fixed interest portfolios before the Investment Manager is able to provide a meaningful MSCI ESG fund rating for the portfolio. The Investment Manager monitors this closely and engages to try and further increase the percentage of the portfolio covered. Engagement is part of a wider approach to the assessment and integration of ESG factors. The Investment Manager has a three-pronged approach to engagement: Targeted Engagement Programmes which track whether a company is net-zero aligned and whether we have engaged with a company on net zero; day-to-day engagement as part of the research process; and collaborative engagements where appropriate and relevant. Key engagements are monitored and discussed at quarterly Engagement Group meetings and cover environmental, social and governance topics. An example of this engagement for the Company over the reporting period was the Investment Manager's participation in collaborative engagements aligned with its net zero strategy. Since 2020, Manulife | CQS Investment Management has been active supporters of the Carbon Disclosure Project's ("CDP's") Non-Disclosure Campaign ("NDC"), and believes that better environmental reporting - including carbon emissions - is critical to achieving global climate targets. In 2024, Manulife | CQS Investment Management participated in its fifth NDC. This was a collaboration of over 250 global financial institutions holding $21 trillion in assets and sought to encourage greater corporate environmental disclosures and boost data transparency. During the 2024 NDC, a record 1,998 companies were targeted to enhance disclosure. This marked a 26% increase in the number of companies targeted in the previous year. Most of the companies targeted in the campaign have been targeted over multiple years. Crucially, the results show that transparency drives action at all levels, with tangible progress on carbon emission reduction seen within two years of a successful investor request. For this campaign, Manulife | CQS Investment Management led on five engagements, of which four were focused on climate change. In a bid to foster in-depth dialogue, --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # Environmental, Social and Governance ("ESG") Statement Continued the letters encouraged the companies to complete the relevant CDP questionnaire (climate, water or forests impact assessment). We will continue contributing to this campaign in 2025, committing to lead on six engagements covering corporate bonds and loans. Manulife | CQS Investment Management has published its Responsible Investment Policy and a link to that policy is found here: https://www.manulifeim.com/content/dam/mim-institutional/global/documents/resources/cqs-policies-and-procedures/2025-03-mcqs-responsible-investment-policy.pdf --- 51 # Report of the Audit and Risk Committee ## Membership and meetings The Audit and Risk Committee (the "Committee") is chaired by Wendy Dorman and comprises the full Board. Committee members are considered to have recent and relevant financial experience. The terms of reference of the Committee are reviewed and re-assessed for their adequacy on an annual basis. The AIC Code requires audit committees who include the Chair of the Board as a member of the Committee to explain why this is felt to be appropriate. The Chair, Caroline Hitch, is a member of the Committee. Caroline was considered independent of the Company on her appointment to the Board in March 2018 and the Committee is satisfied that she remains independent and objective. Her membership of the Committee is deemed appropriate given the size and nature of the Company. The Committee does not believe it compromises the integrity of the Committee or the Board. The Committee held three scheduled meetings during the year. Meetings were attended, by invitation, by the Investment Manager, external auditor and members of the client service team of the Administrator. As part of the annual Board evaluation, a review of the work of the Committee was carried out during the year and it was evaluated to be operating effectively. ## Role of the Audit and Risk Committee A summary of the Committee's main audit review functions is shown below: - to review and monitor the internal control systems and risk management systems on which the Company is reliant; - to consider any changes to the principal risks facing the Company, including changes to the probability and likelihood of a risk materialising, taking into account mitigations in place, and considering and tracking emerging risks that could impact over time; - to consider annually whether there is a need for the Company to have its own internal audit function; - to monitor the integrity of the half-yearly and annual Financial Statements of the Company by reviewing and challenging where necessary, the actions and judgements of the Investment Manager, the Company Secretary and the Administrator; - to advise the Board on whether the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's strategy, business model, position and performance; - to meet with the external Auditor to review their proposed audit programme of work and their findings. The Committee shall also uses this as an opportunity to assess the effectiveness of the audit process; - to make recommendations in relation to the appointment of the external Auditor and to approve the remuneration and terms of engagement of the external Auditor; - to monitor and review annually the external Auditor's independence, objectivity, effectiveness, resources and qualification; and - to consider and approve all non-audit services. No non-audit services are pre-approved. ## Annual Report and Financial Statements The Board is ultimately responsible for the Annual Report and Financial Statements. The Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues which may arise and any specific areas which require judgement. The Company has adopted and reports against the AIC Code. The Committee oversaw the work performed by the Company Secretary in ensuring that the Company is in compliance with the principles and provisions of the AIC Code, which is reported on in the Statement of Compliance with the AIC Code section on page 48. The valuation of investments was a key area of focus given their significance to the Financial Statements as a whole. Following discussion with the Investment Manager and external auditor, the Committee gained comfort over the valuation as included in the Annual Report and Financial Statements. The Committee reviewed and considered the Annual Report and Financial Statements to be fair, balanced and understandable and recommended the Board's approval. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # Report of the Audit and Risk Committee Continued ## External auditor Following a tender process in 2023, PwC was appointed as the Company's auditor effective 5 July 2023 and this is the third year of their appointment. In an Audit and Risk Committee meeting held in May 2025, PwC presented their plan for the audit of the Financial Statements for the year ended 30 June 2025 and this was discussed with and agreed by the Committee. Following the prior year audit, the Committee evaluated the audit process and were satisfied with the efficiency and quality of the audit. At the conclusion of the current year audit, PwC discussed with the Committee their audit findings and recommendations. PwC did not highlight any issues to the Committee which would cause it to qualify its audit report. PwC issued an unmodified audit report which is included on pages 58 to 63. As part of the review of auditor independence and effectiveness, PwC has confirmed that it is independent of the Company and has complied with relevant auditing standards. In evaluating PwC, the Committee has taken into consideration the standing, skills and experience of the firm and the audit team. The Committee, from direct observation and enquiry of the Investment Manager and the Administrator, are satisfied that PwC provided effective independent challenge in carrying out its responsibilities. The Committee chair, Wendy Dorman, was a former tax partner with PwC. She retired from the partnership in 2015 and has no residual connection with the firm. No non-audit services were provided to the Company by PwC during the year. Following professional guidelines, the audit engagement partner rotates after a maximum of five years. The current audit engagement partner is Mike Byrne and it is his third year as audit engagement partner for the Company. Although no non-audit services have been carried out by the auditor this year or in recent years, the non-audit services policy of the Company was extended to include the process of approval of any services by the auditor in the event that the requirement for any such services is identified. ## Significant risks related to the Financial Statements The main area of accounting risk considered by the Committee during the year in relation to the Company's Financial Statements was the valuation of investments held by the Company. The valuation of investments is undertaken in accordance with the accounting policies as set out in note 1. Details of the fair value hierarchy are set out in note 22. In order to address this risk, the Company has appointed an Investment Manager and Custodian with clearly defined contracts and any breaches of these, or any law or regulation which the Company is required to comply with, are reported to the Board. The portfolio holdings and their pricing are reviewed on a daily basis and verified by the Investment Manager. A full portfolio analysis is prepared for each Board meeting, including a detailed movement of the top 60 holdings, which is actively commented on and discussed by the Directors. ## Internal controls The Committee, on behalf of the Board, is responsible for reviewing the Company's system of internal control and its effectiveness. There is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and is regularly reviewed by the Board and accords with Financial Reporting Council's ("FRC") Guidance. In January 2024, the FRC published an update to the Corporate Governance Code ("the 2024 Code"). The effective date for changes to the Code is 1 January 2025, apart from the new provision 29 which comes into force on 1 January 2026. Provision 29 (contained in new provision 34 of the AIC Code) includes enhanced risk management disclosures, and will require directors to make a declaration of the effectiveness of material controls at the balance sheet date. In anticipation of this new provision, which will apply for our year ending 30 June 2027, the Committee has --- requested enhanced reporting from service providers and is considering the expanded requirement to include reporting on effectiveness of material non-financial reporting controls. The significant principal and emerging risks faced by the Company, together with mitigating controls, are set out on pages 22 to 28. The key components designed to provide effective internal control are outlined below: - the Administrator together with the Investment Manager prepare forecasts and management accounts which allow the Board to assess the Company's activities and financial position, and review its performance; - the Board and Investment Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the Investment Manager as appropriate; - the Administrator carried out compliance checks throughout the year in accordance with a Compliance Monitoring Plan approved annually by the Board; - as a matter of course the Investment Manager's compliance department continually reviews the Investment Manager's operations and reports to the Board on an annual basis and by exception; - written agreements are in place which specifically define the roles and responsibilities of the Investment Manager, Company Secretary, Administrator and other third party service providers; - the Board has considered the need for an internal audit function but because of the compliance and internal control systems in place at the Investment Manager, the Company Secretary and the Administrator, has decided to place reliance on the Investment Manager's, the Company Secretary's and the Administrator's systems and internal audit procedures. In February 2025, the Board held a strategy and due diligence meeting at the offices of the Investment Manager. This provided an opportunity to discuss the portfolio and strategy in depth and consider the implications of current market conditions for our Company. Discussions were held with various members of the Investment Manager's team and with our Broker who updated the Board on developments in the market and in our sector. In addition, operational issues including compliance, IT security and cyber risks were discussed with the Investment Manager's team. During the year, the Directors carried out an annual assessment of internal controls for each of their key service providers and considered documentation from each. The Committee assessed the control environment as sufficiently robust to mitigate to an acceptable level the principal risks of the Company, with a particular focus on operational risks including cyber and fraud. The Directors received and reviewed the BNP Paribas' internal controls framework for the year and were pleased to note that no significant issues were identified. The Administrator confirmed that their internal controls were reviewed on an ongoing basis which was overseen by the Group's internal audit team. The Administrator has established an IT Governance framework that is based on a set of Level 2 procedures and IT operations. Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss. Wendy Dorman Chair of the Audit and Risk Committee 18 September 2025 53 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Directors' Reports and Governance Reports # Directors' Remuneration Report ## Remuneration Committee The Remuneration Committee, which is chaired by Ian Cadby, 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 2026 and subsequent years. On 21 May 2025, the Board approved an increased level of remuneration for the Directors with effect from 1 July 2025 as follows: - Chair £50,000 - Audit Chair £44,000 - Other £37,500 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: | | 2025 £ | 2024 £ | | --- | --- | --- | | Caroline Hitch (Chair) | 45,000 | 45,000 | | Ian Cadby | 32,500 | 32,500 | | Wendy Dorman (Audit and Risk Committee Chair) | 39,000 | 39,000 | | John Newlands | 32,500 | 32,500 | | Andrew Dann^{1} | 13,356 | n/a | | Duncan Baxter^{2} | 13,801 | 32,500 | | Total | 176,157 | 181,500 | 1 Andrew Dann was appointed to the Board on 1 February 2025. 2 Duncan Baxter retired from the Board on 3 December 2024. 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 54 was approved by the Board of Directors and signed on its behalf. By order of the Board Caroline Hitch Chair 18 September 2025 --- | ![img-19.jpeg](img-19.jpeg) | | | | --- | --- | --- | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Independent Auditor's Report ![img-20.jpeg](img-20.jpeg) --- 57 Independent Auditor's Report to 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 financial statements ## Our opinion In our opinion, the financial statements give a true and fair view of the financial position of CQS New City High Yield Fund Limited (the "company") as at 30 June 2025, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991. ## What we have audited The company's financial statements comprise: - the statement of financial position as at 30 June 2025; - the statement of comprehensive income for the year then ended; - the statement of changes in equity for the year then ended; - the cash flow statement for the year then ended; and - the notes to the financial statements, comprising material accounting policy information and other explanatory information. ## Basis for opinion We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ## Independence We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements of the company, as required by the Crown Dependencies' Audit Rules and Guidance. We have fulfilled our other ethical responsibilities in accordance with these requirements. ## Our audit approach ### Overview #### Audit scope - The company is an investment company, incorporated and based in Jersey, with ordinary shares listed on the Main Market of the London Stock Exchange. - Our audit work was performed in Jersey. We conducted our audit of the financial statements using information provided by BNP Paribas S.A., Jersey Branch (the "administrator") and CQS (UK) LLP (the "manager"). - We tailored the scope of our risk-based audit considering the types of investments held by the company, the accounting processes and controls, and the industry in which the company operates. #### Key audit matters - Valuation and ownership of financial assets at fair value through profit or loss. #### Materiality - Overall materiality: £2,987,000 (2024: £2,734,000) based on 1% of net asset value. - Performance materiality: £2,240,000 (2024: £2,050,000). ## The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. --- 59 # Key audit matters Key audit matters are those matters that, in the auditor's professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. | Key audit matter | How our audit addressed the key audit matter | | --- | --- | | Valuation and ownership of financial assets at fair value through profit or loss | | | Refer to Note 1 (Accounting policies), Note 9 (Financial assets at fair value through profit or loss), and Note 22 (Fair value hierarchy) to the financial statements. | We understood and evaluated the design and implementation of controls over the valuation of investments for the level 1 and level 2 investments. | | We focused on the valuation and ownership of financial assets at fair value through profit or loss (the "investments") because investments represent the principal element of the net asset value as disclosed on the statement of financial position in the financial statements. | We assessed the accounting policy for valuation of investments for compliance with applicable accounting standards and whether investments had been accounted for in accordance with the stated accounting policy. | | The valuation of investments drives several key performance indicators, such as net asset value, which is of significant interest to investors. Items classified as being level 1 or level 2 in the fair value hierarchy together comprise 99.7% of the investment portfolio. | We used independent third-party pricing sources to recalculate the valuation of all level 1 and level 2 positions within the investment portfolio and compared it to the valuation performed by management. | | The value of level 3 investments within the portfolio is immaterial. | We obtained independent third-party confirmations from the company's custodians and compared them to the company's records of investment ownership. | | The nature of level 1 and level 2 investment valuations is not deemed to be complex as they are based primarily on quoted prices from independent pricing sources. However, the magnitude of the amounts involved means 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 significant impact on the financial statements. | | --- 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 financial statements Continued ## How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, the industry in which the company operates, and we considered the risk of climate change and the potential impact thereof on our audit approach. ## Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: | Overall materiality | £2,987,000 (2024: £2,734,000). | | --- | --- | | How we determined it | 1% of net asset value | | Rationale for benchmark applied | We believe that net assets is the most appropriate benchmark because this is the key metric of interest to investors. It is also a generally accepted measure used 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. Specifically, 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% (2024: 75%) of overall materiality, amounting to £2,240,000 (2024: £2,050,000) for the company financial statements. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £149,000 (2024: £136,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. ## Reporting on other information The other information comprises all the information included in the Annual Report & Financial Statements (the "Annual Report") but does not include the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. --- 61 # Responsibilities for the financial statements and the audit ## Responsibilities of the directors for the financial statements As explained more fully in the Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements, the directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, the requirements of Jersey law and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. ## Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often 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. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. - Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. --- 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 financial statements Continued We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. ## Use of this report This report, including the opinions, has been prepared for and only for the members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. ## Report on other legal and regulatory requirements ### Company Law exception reporting Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion: - we have not received all the information and explanations we require for our audit; - proper accounting records have not been kept; or - the financial statements are not in agreement with the accounting records. We have no exceptions to report arising from this responsibility. ### Corporate governance statement The Listing Rules require us to review the directors' statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report. The company has reported compliance against the 2019 AIC Code of Corporate Governance (the "Code") which has been endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance Code for the purposes of meeting the company's obligations, as an investment company, under the Listing Rules of the FCA. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement, included within the Strategic Report is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: - The directors' confirmation that they have carried out a robust assessment of the emerging and principal risks; - The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; - The directors' statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; - The directors' explanation as to their assessment of the company's prospects, the period this assessment covers and why the period is appropriate; and --- 63 The directors' statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. 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 supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statement is consistent with the financial statements and our knowledge and 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 financial 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 effectiveness of risk management and internal control systems; and - The section of the Annual Report describing the work of the Audit and Risk Committee. We have nothing to report in respect of our responsibility to report when the directors' statement relating to the company's compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors. Michael Byrne For and on behalf of PricewaterhouseCoopers CI LLP Chartered Accountants and Recognised Auditor Jersey, Channel Islands 18 September 2025 --- COS News Dry High Yield Fund Limited Annual Report & Financial Statements | Financial Statements ![img-21.jpeg](img-21.jpeg) --- # Financial Statements ![img-22.jpeg](img-22.jpeg) --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Statement of Comprehensive Income For the year ended 30 June 2025 | | Notes | Year ended 30 June 2025 | | | Year ended 30 June 2024 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Net capital (losses)/gains (Losses)/gains on financial assets at fair value | 9 | - | (6,187) | (6,187) | - | 20,585 | 20,585 | | Foreign exchange gains¹ | | - | 12 | 12 | - | 46 | 46 | | Revenue | | | | | | | | | Investment income | 2 | 29,467 | - | 29,467 | 28,582 | - | 28,582 | | Total income/(loss) | | 29,467 | (6,175) | 23,292 | 28,582 | 20,631 | 49,213 | | Expenses | | | | | | | | | Investment management fee | 3 | (1,456) | (971) | (2,427) | (1,663) | (554) | (2,217) | | Other expenses | 4 | (1,034) | (104) | (1,138) | (942) | (72) | (1,014) | | Total expenses | | (2,490) | (1,075) | (3,565) | (2,605) | (626) | (3,231) | | Profit/(loss) before finance income/(costs) and taxation | | 26,977 | (7,250) | 19,727 | 25,977 | 20,005 | 45,982 | | Finance income/(costs) | | | | | | | | | Interest income | | 181 | - | 181 | 256 | - | 256 | | Interest expense | 5 | (1,408) | (938) | (2,346) | (1,854) | (618) | (2,472) | | Profit/(loss) before taxation | | 25,750 | (8,188) | 17,562 | 24,379 | 19,387 | 43,766 | | Irrecoverable withholding tax | 6 | (107) | - | (107) | (350) | - | (350) | | Profit/(loss) after taxation and total comprehensive income/(loss) | | 25,643 | (8,188) | 17,455 | 24,029 | 19,387 | 43,416 | | Basic and diluted earnings/(losses) per ordinary share (pence) | 8 | 4.43p | (1.42)p | 3.01p | 4.50p | 3.63p | 8.13p | ¹ Excludes foreign exchange gains and losses on financial assets at fair value through profit or loss which are presented within 'losses/gains 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 70 to 92 are an integral part of these Financial Statements. --- # Statement of Financial Position As at 30 June 2025 | | Notes | As at 30 June 2025 £'000 | As at 30 June 2024 £'000 | | --- | --- | --- | --- | | Non-current assets | | | | | Financial assets at fair value through profit or loss | 9 | 328,844 | 299,529 | | Current assets | | | | | Debtors and other receivables | 10 | 4,623 | 4,905 | | Cash and cash equivalents | | 10,054 | 12,350 | | | | 14,677 | 17,255 | | Total assets | | 343,521 | 316,784 | | Current liabilities | | | | | Bank loan | 11 | (40,000) | (35,000) | | Creditors and other payables | 12 | (4,742) | (8,321) | | Total liabilities | | (44,742) | (43,321) | | Net asset value | | 298,779 | 273,463 | | Stated capital and reserves | | | | | Stated capital account | 13 | 291,949 | 258,364 | | Special distributable reserve | | 50,385 | 50,385 | | Capital reserve | | (59,659) | (51,471) | | Revenue reserve | | 16,104 | 16,185 | | Equity Shareholders' funds | | 298,779 | 273,463 | | Net asset value per ordinary share (pence) | 15 | 48.37p | 49.59p | The Financial Statements on pages 66 to 92 were approved by the Board of Directors and authorised for issue on 18 September 2025 and were signed on its behalf by: Caroline Hitch Chair 18 September 2025 The accompanying notes on pages 70 to 92 are an integral part of these Financial Statements. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Statement of Changes in Equity For the year ended 30 June 2025 | | Notes | Stated capital account^{1} £'000 | Special distributable reserve^{2} £'000 | Capital reserve^{1} £'000 | Revenue reserve^{3} £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | At 1 July 2024 | | 258,364 | 50,385 | (51,471) | 16,185 | 273,463 | | Total comprehensive income for the year: | | | | | | | | Profit/(loss) for the year | | – | – | (8,188) | 25,643 | 17,455 | | Transactions with owners recognised directly in equity: | | | | | | | | Dividends paid | 7 | – | – | – | (25,724) | (25,724) | | Net proceeds from issue of shares | 13 | 33,585 | – | – | – | 33,585 | | At 30 June 2025 | | 291,949 | 50,385 | (59,659) | 16,104 | 298,779 | For the year ended 30 June 2024 | | Notes | Stated capital account^{1} £'000 | Special distributable reserve^{2} £'000 | Capital reserve^{1} £'000 | Revenue reserve^{3} £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | At 1 July 2023 | | 244,884 | 50,385 | (70,858) | 16,020 | 240,431 | | Total comprehensive income for the year: | | | | | | | | Profit 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 | 1. In accordance with the Companies (Jersey) Law 1991, dividends can be paid out of any capital account of the Company subject to certain solvency restrictions. 2. The balance on the special distributable 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. 3. The balance on the revenue reserve is available for paying dividends. The accompanying notes on pages 70 to 92 are an integral part of these Financial Statements. --- # Cash Flow Statement For the year ended 30 June 2025 | | Notes | Year ended 30 June 2025 £'000 | Year ended 30 June 2024 £'000 | | --- | --- | --- | --- | | Operating activities | | | | | Profit before taxation¹ | | 17,562 | 43,766 | | Adjustments to reconcile profit before taxation to net cash flows: | | | | | Realised losses/(gains) on financial assets at fair value through profit or loss | 9 | 4,989 | (847) | | Unrealised losses/(gains) on financial assets at fair value through profit or loss | 9 | 1,198 | (19,738) | | Effective interest adjustment | 9 | (260) | (294) | | Foreign exchange gain | | (12) | (46) | | Interest expense | | 2,346 | 2,472 | | Purchase of financial assets at fair value through profit or loss² | | (155,696) | (80,303) | | Proceeds from sale of financial assets at fair value through profit or loss³ | | 117,155 | 74,346 | | Changes in working capital | | | | | Decrease in other receivables | | 81 | 2,307 | | Decrease in other payables | | (128) | (2,722) | | Irrecoverable withholding tax paid | | (107) | (350) | | Net cash (used in)/generated from operating activities | | (12,872) | 18,591 | | Financing activities | | | | | Dividends paid | 7 | (25,724) | (23,864) | | Repayment of bank loan | 11 | (35,000) | - | | Drawdown of bank loan | 11 | 40,000 | - | | Interest paid on loan facility | | (2,297) | (2,500) | | Proceeds from issuance of ordinary shares⁴ | 13 | 33,585 | 13,480 | | Net cash generated from/(used in) financing activities | | 10,564 | (12,884) | | (Decrease)/increase in cash and cash equivalents | | (2,308) | 5,707 | | Cash and cash equivalents at the start of the year | | 12,350 | 6,597 | | Exchange gain | | 12 | 46 | | Cash and cash equivalents at the end of the year | | 10,054 | 12,350 | ¹ Included within profit before taxation is dividend income of £4,181,000 (2024: £5,818,000) and interest income of £25,286,000 (2024: £22,764,000). ² Amounts due to brokers as at 30 June 2025 relating to purchases of financial assets at fair value through profit or loss amounted to £4,289,000 (2024: £7,788,000). ³ Amounts due from brokers as at 30 June 2025 relating to sales of financial assets at fair value through profit or loss amounted to £nil (2024: £202,000). ⁴ Amounts due on new share issuance not yet received as at 30 June 2025 amounted to £nil (2024: £nil). The accompanying notes on pages 70 to 92 are an integral part of these Financial Statements. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements ## 1. ACCOUNTING POLICIES ### (a) Basis of accounting These Financial Statements have been prepared in accordance with IFRS as adopted by the EU and in accordance with the guidance set out in the SORP: Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the AIC in July 2022. Notwithstanding that the Company is not an investment trust company, given the purpose of the Company and certain similar characteristics, the Company has chosen to follow the guidance set out in the SORP where it is consistent with the requirements of IFRS. The functional and reporting currency of the Company is pound sterling because that is the primary economic environment in which the Company operates. The Financial Statements and notes are presented in pound sterling and are rounded to the nearest thousand except where otherwise indicated. The Financial Statements have been prepared on the historical cost basis, except that investments are stated at fair value and categorised as financial assets at fair value through profit or loss. ### Going concern At each 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 3 December 2024, 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 78 to 79, is of an amount of up to £45,000,000 and is due to mature on 18 December 2025 after which it is anticipated the Company will take out a new facility on comparable terms. In the event that current liquid assets are insufficient, the Company has the ability to realise Level 1 assets as necessary to facilitate repayment of the loan. 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 the 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 at least twelve months from the date of this report. For this reason, the Directors continue to adopt the going concern basis in preparing the Financial Statements, notwithstanding that the Company is subject to an annual continuation vote as described above. ### Accounting developments Standards and amendments to existing standards effective in current year The following new standards, amendments and interpretations to existing standards have been issued and are effective in the current year and the Directors believe that the application of these amendments and interpretations do not significantly impact the Company's Financial Statements: | IFRS | Effective for periods beginning on or after | | --- | --- | | Lease Liability in a Sale and Leaseback – Amendments to IFRS 16 Leases | 1 January 2024 | | Classification of liabilities as Current or Non-Current and Non-current Liabilities with Covenants – Amendments to IAS 1 Presentation of Financial Statements | 1 January 2024 | | Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures – Supplier Finance Arrangements | 1 January 2024 | --- 71 # Standards and amendments becoming effective in future periods The following standards, amendments and interpretations to existing standards become effective in future accounting periods and have not been early adopted by the Company: | IFRS | Effective for periods beginning on or after | | --- | --- | | Lack of Exchangeability – Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates | 1 January 2025 | | Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures | 1 January 2026 | | Annual Improvements to IFRS Accounting Standards – Amendments to: • IFRS 1 First-time Adoption of International Financial Reporting Standards; • IFRS 7 Financial Instruments: Disclosures and its accompanying Guidance on implementing IFRS 7; • IFRS 9 Financial Instruments; • IFRS 10 Consolidated Financial Statements; and • IAS 7 Statement of Cash flows | 1 January 2026 | | Contracts Referencing Nature-dependent Electricity – Amendments to IFRS 9 and IFRS 7 | 1 January 2026 | | IFRS 18 – Presentation and disclosure in financial statements | 1 January 2027 | | IFRS 19 Subsidiaries without Public Accountability: Disclosures | 1 January 2027 | | IFRS for SMES third edition | 1 January 2027 | | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures | To be determined | The Directors believe that the above are not applicable to the operations of the Company, except for IFRS 18, which includes requirements for all entities applying IFRS Accounting Standards for the presentation and disclosure of information in financial statements. IFRS 18 introduces new requirements for presentation within the statement of profit or loss, including specified totals and subtotals. Although IFRS 18 has not yet been endorsed for use in the EU, it is set to replace IAS 1. Furthermore, entities are required to classify all income and expenses within the statement of profit or loss into one of five categories: operating, investing, financing, income taxes and discontinued operations, whereof the first three are new. ## Critical accounting estimates and judgements The preparation of the Financial Statements necessarily requires the exercise of judgement both in application of accounting policies which are set out below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates. The valuation of financial assets involves estimation and judgements. The major part of the Company's financial assets is its financial assets held at fair value through profit or loss which are valued by reference to listed and quoted bid prices, however some of these financial assets are thinly traded. Such financial assets are best valued by reference to current market price quotes provided by independent brokers. The Directors may overlay such prices with situation specific adjustments including (a) taking a second independent opinion on a specific investment, or (ii) reducing the value to a net present value, to reflect the likely time to be taken to realise a stock which the Company is actively looking to sell. The outturn is reflected in the valuations of investments as set out in note 22 to the Financial Statements. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued Financial assets which are not listed or where trading in the securities of an investee company is suspended or are unquoted are valued by the Manulife | CQS Valuation Committee which recommends a valuation methodology which is presented and discussed at each Valuation Committee, the minutes of which are available to the Company's Directors, Auditors, Administrators and Depositories. The methodologies used for hard-to-value investments may include matrix pricing, discounted cash flows, benchmark pricing and/or model-based pricing. There were no other significant accounting estimates or significant judgements in the current or previous year. A summary of the principal accounting policies which have been applied to all periods presented in these Financial Statements is set out below. ## (b) Financial assets Financial assets which comprise equity shares, convertible bonds and fixed income securities, are classified as held at fair value through profit or loss as the Company's business model is not to hold these financial assets for the sole purposes of collecting contractual cash flows. In making this assessment, the Directors have given regard to the investment strategy of the Company, the fact that the performance of the portfolio is evaluated on a fair value basis and the fact that the Investment Manager is remunerated on a percentage of total assets. Purchases or sales of financial assets are recognised/ derecognised on the date the Company trades the investments. On initial recognition investments are measured at fair value and classified as fair value through profit or loss with any subsequent gain or loss, including any gain or loss arising from a change in exchange rates, recognised in the capital column of the Statement of Comprehensive Income. Financial assets held at fair value through profit or loss are valued in accordance with the policies described in the critical accounting estimates and judgements section above. Financial assets also include the Company's cash and cash equivalents (comprising of cash held in current accounts and overdraft balances) and debtors and other receivables which are held at amortised cost using effective interest rate, less any impairment. ## (c) Financial liabilities Financial liabilities include amounts due to brokers, bank loan, interest on bank loan and other creditors which are held at amortised cost using the effective interest rate method. Financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently carried at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires. ## (d) Investment income Dividends receivable on equity shares (including preference shares) are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company's right to receive payment is established. Dividends from overseas companies are shown gross of any non-recoverable withholding taxes which are disclosed separately in the Statement of Comprehensive Income. Fixed returns on non-equity shares and debt securities (including preference shares) are recognised on a time apportioned basis so as to reflect the effective interest rate on those instruments. Other returns on non-equity shares are recognised when the right to the return is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, an amount equal to the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserve. ## (e) Expenses, including finance charges All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as follows: - expenses which are incidental to the acquisition of an investment are charged to the capital account; - expenses which are incidental to the disposal of an investment are charged to the capital account; --- 73 - the Company charges 40% of investment management fees and interest costs to capital, in line with the Board’s expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. For further details refer to notes 3 and 5; and - expenses incurred in connection with the maintenance or enhancement of the value of the investments or for the long term benefit of the Company are charged to capital. ## (f) Foreign currencies Transactions denominated in foreign currencies are recorded in the functional currency at actual exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported in sterling at the rates of exchange prevailing at the period end. Exchange gains and losses on investments held at fair value through profit or loss are included in ‘Gains/(losses) on financial assets at fair value’. Exchange gains and losses on other balances are disclosed separately in the Statement of Comprehensive Income. ## (g) Reserves (i) Capital reserve. Under Jersey Company law, dividends can be paid out of any capital account of the Company subject to certain solvency restrictions. It is the Company’s policy however to account for revenue items and pay dividends through a separate revenue reserve. The following are accounted for in the capital reserve: - gains and losses on the realisation of investments; - realised and unrealised exchange differences of a capital nature; - expenses and finance costs charged in accordance with the policies above; and - increases and decreases in the valuation of investments held at the period end. (ii) Special distributable reserve. This reserve is treated as distributable profits available to be used for all purposes permitted by Jersey company law including the buying back of ordinary shares, the payment of dividends (see note 7) and the payment of preliminary expenses. (iii) Revenue reserve. The net profit/(loss) and total comprehensive income/(loss) arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve and is available for paying dividends. ## (h) Share capital ### Ordinary shares The Company’s ordinary shares are classified as equity based on the substance of the contractual arrangements and in accordance with the definition of equity instruments under 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. ### Treasury shares When the Company purchases its ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs is recognised as a deduction from the stated capital account. When these shares are sold subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is transferred to or from the stated capital account. ## (i) Segmental information The Company holds a wide variety of different investments in a wide range of issuers located in different geographies and operating in different sectors. However, resources are allocated and the business is managed by the chief operating decision-makers, the Directors, on an aggregated basis. Strategic and financial management decisions are determined centrally by the Directors and, on this basis, the Company operates as a single investment management business and no segmental reporting is provided. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 2. INVESTMENT INCOME | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Income from financial assets at fair value through profit or loss^{1} | | | | Dividend income | 4,181 | 5,818 | | Interest on fixed income securities^{2} | 25,286 | 22,764 | | Total income | 29,467 | 28,582 | 1. All investment income arises on financial assets valued at fair value through profit or loss. 2. Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. ## 3. INVESTMENT MANAGEMENT FEE | | 2025 Revenue £'000 | 2025 Capital £'000 | 2025 Total £'000 | 2024 Revenue £'000 | 2024 Capital £'000 | 2024 Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Investment management fee | 1,456 | 971 | 2,427 | 1,663 | 554 | 2,217 | The Company's investment manager is Manulife | CQS Investment Management. 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 thereafter. 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 2025, investment management fees of £2,427,000 (2024: £2,217,000) were incurred, of which £207,000 (2024: £375,000) was payable at the year-end. Investment management fees have been allocated 60% to revenue and 40% to capital, effective from 1 July 2024, to better reflect the purpose and expected future performance of the Company. Prior to 1 July 2024, the fees were allocated 75% to revenue and 25% to capital. --- 75 # 4. OTHER EXPENSES | | 2025 Revenue £'000 | 2025 Capital £'000 | 2025 Total £'000 | 2024 Revenue £'000 | 2024 Capital £'000 | 2024 Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Secretarial and administration fees | 244 | – | 244 | 214 | – | 214 | | Directors’ fees | 176 | – | 176 | 182 | – | 182 | | Auditors’ remuneration for audit services¹ | 55 | – | 55 | 52 | – | 52 | | Broker fees | 30 | – | 30 | 30 | – | 30 | | Printing | 60 | – | 60 | 34 | – | 34 | | Bank and custody charges | 69 | – | 69 | 66 | – | 66 | | Registrars’ fees | 39 | – | 39 | 33 | – | 33 | | Depositary fees | 45 | – | 45 | 45 | – | 45 | | Legal and professional fees | 135 | – | 135 | 175 | – | 175 | | Other | 181 | 104 | 285 | 111 | 72 | 183 | | | 1,034 | 104 | 1,138 | 942 | 72 | 1,014 | ## Directors' fees For the year ended 30 June 2025, Directors' remuneration was as follows: Chair £45,000 Audit Chair £39,000 Other £32,500 Directors' fees of £nil (2024: £nil) were payable as at 30 June 2025. No pension contributions were payable in respect of any of the Directors and the Company does not have any employees. ## ¹Non-audit fees paid to the auditor There were no non-audit fees paid to the auditor during the years ended 30 June 2025 and 30 June 2024. # 5. INTEREST EXPENSE | | 2025 Revenue £'000 | 2025 Capital £'000 | 2025 Total £'000 | 2024 Revenue £'000 | 2024 Capital £'000 | 2024 Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Interest expense | 1,408 | 938 | 2,346 | 1,854 | 618 | 2,472 | Interest expense and similar charges have been allocated 60% to revenue and 40% to capital as explained in note 1(e), effective from 1 July 2024, to better reflect the purpose and expected future performance of the Company. Prior to 1 July 2024, the costs were allocated 75% to revenue and 25% to capital. --- 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: | | 2025 Revenue £'000 | 2025 Capital £'000 | 2025 Total £'000 | 2024 Revenue £'000 | 2024 Capital £'000 | 2024 Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Irrecoverable withholding tax suffered | 107 | – | 107 | 350 | – | 350 | The taxation on profit differs from the theoretical expense that would apply on the Company's profit before taxation using the applicable tax rate in Jersey of 0% for the year ended 30 June 2025 (2024: 0%) as follows: | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Profit on ordinary activities before taxation | 17,562 | 43,766 | | Theoretical tax expense at 0% (2024: 0%) | – | – | | Effects of: | | | | Foreign withholding tax | 107 | 350 | | Current year revenue tax charge | 107 | 350 | ## 7. DIVIDENDS | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Amounts recognised as distributions to equity holders in the year: | | | | Dividends in respect of the year ended 30 June 2024 | | | | – Fourth interim dividend of 1.50p (2023: 1.49p) per ordinary share | 8,272 | 7,817 | | Dividends in respect of the year ended 30 June 2025 | | | | – First interim dividend of 1.00p (2024: 1.00p) per ordinary share | 5,692 | 5,263 | | – Second interim dividend of 1.00p (2024: 1.00p) per ordinary share | 5,816 | 5,360 | | – Third interim dividend of 1.00p (2024: 1.00p) per ordinary share | 5,944 | 5,424 | | | 25,724 | 23,864 | A fourth interim dividend in respect of the year ended 30 June 2025 of 1.51p per ordinary share was paid on 29 August 2025 to Shareholders on the register on 1 August 2025, having an ex-dividend date of 31 July 2025. 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. --- 8. BASIC AND DILUTED EARNINGS/(LOSSES) PER ORDINARY SHARE (PENCE) | | 2025 | 2024 | | --- | --- | --- | | Revenue profit after taxation (£'000) | 25,643 | 24,029 | | Weighted average number of ordinary shares | 579,270,488 | 533,873,033 | | Revenue earnings per ordinary share (pence) | 4.43p | 4.50p | | Capital (loss)/gain (£'000) | (8,188) | 19,387 | | Weighted average number of ordinary shares | 579,270,488 | 533,873,033 | | Capital return per ordinary share (pence) | (1.42)p | 3.63p | | Total basic and diluted earnings per ordinary share (pence) | 3.01p | 8.13p | Total earnings per ordinary share reflects both revenue earnings and capital returns per ordinary share. The Company has not issued any instruments that could potentially dilute basic earnings per ordinary share in the future. Therefore, the Company's basic earnings per ordinary share is equivalent to its diluted earnings per ordinary share. There have been no transactions involving the Company's ordinary shares between 1 July 2025 and 18 September 2025 other than those disclosed in note 25, which were issued at a premium to the 30 June 2025 NAV. 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS All financial assets are valued at fair value through profit or loss. Gains or losses arising from changes in the fair value of investments are included in the Statement of Comprehensive Income. | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Equity shares¹ | 42,295 | 50,226 | | Fixed income securities² | 286,549 | 249,303 | | | 328,844 | 299,529 | ¹ Equity shares include investment funds. ² Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Opening valuation | 299,529 | 266,011 | | Purchases at cost | 152,195 | 87,187 | | Sales proceeds | (116,953) | (74,548) | | Realised (losses)/gains on sales | (4,989) | 847 | | Effective interest adjustment | 260 | 294 | | Unrealised (losses)/gains | (1,198) | 19,738 | | Closing valuation | 328,844 | 299,529 | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued | (Losses)/gains on investments | 2025 | 2024 | | --- | --- | --- | | | £'000 | £'000 | | Realised (losses)/gains¹ | (4,989) | 847 | | Unrealised (losses)/gains² | (1,198) | 19,738 | | | (6,187) | 20,585 | ¹ Realised gains/(losses) on financial assets at fair value through profit or loss is made up of gains of £5,653,000 (2024: £6,250,000) and losses of £10,642,000 (2024: £5,403,000). ² Unrealised gains/(losses) on financial assets at fair value through profit or loss is made up of gains of £21,675,000 (2024: £34,325,000) and losses of £22,873,000 (2024: £14,587,000). ## 10. DEBTORS AND OTHER RECEIVABLES | | 2025 | 2024 | | --- | --- | --- | | | £'000 | £'000 | | Accrued income | 4,605 | 4,679 | | Amounts due from brokers | - | 202 | | Prepayments and other debtors | 18 | 24 | | | 4,623 | 4,905 | ## 11. BANK LOAN | | 2025 | 2024 | | --- | --- | --- | | | £'000 | £'000 | | Bank loan facility- opening balance | 35,000 | 35,000 | | Repayment of bank loan | (35,000) | - | | Drawdown of bank loan | 40,000 | - | | Bank loan facility – closing balance | 40,000 | 35,000 | The Company had a short-term unsecured loan facility with Scotiabank up to a limit of £45,000,000 which terminated on 18 December 2024. The terms of the loan facility were as follows: - the interest on the loan was a margin of 2.00% per annum plus the daily non-cumulative compounded Reference Rate ("RFR"); and - the commitment fees payable was 0.675% per annum on the daily available commitment. On 18 December 2024, the Company entered into a Facility Agreement with BNP Paribas, London Branch in respect of a new short-term unsecured loan facility of up to £45,000,000. The terms of this new loan facility are as follows: - the loan facility is due to expire on 18 December 2025; - the interest on the loan is a margin of 1.40% per annum plus the daily non-cumulative compounded RFR; and - the commitment fees payable is 0.45% per annum on the daily available commitment. --- Up until 18 December 2024, the Company has complied with all covenants of the Scotiabank loan facility which were 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. From 19 December 2024 up until the date of this report, the Company has complied with all covenants of the new loan facility with BNP Paribas, London Branch, which are as follows: - at any time, the borrower shall ensure that its NAV is no less than £100,000,000; - at any time, the Borrower shall ensure that the loan to value (“LTV”) ratio is below the Maximum LTV Ratio which is 25%; - at any time, the Borrower shall ensure that the aggregate Financial Indebtedness is covered 1 time by the Adjusted Total Assets Value; and - the borrower will not incur or permit to be outstanding any Financial Indebtedness other than Permitted Financial Indebtedness. The bank loan facility is a financial liability held at amortised cost. ## 12. CREDITORS AND OTHER PAYABLES | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Amounts due to brokers | 4,289 | 7,788 | | Interest on bank loan facility | 76 | 28 | | Other creditors | 377 | 505 | | | 4,742 | 8,321 | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 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 | | Number of ordinary shares | Amount received £'000 | Share issue costs £'000 | Share capital £'000 | | --- | --- | --- | --- | --- | | Total as at 1 July 2024 | 551,451,858 | | | 258,364 | | 6,600,000 ordinary shares of no par value allotted on 6 August 2024 at 51.40p | 6,600,000 | 3,392 | (25) | 3,367 | | 2,000,000 ordinary shares of no par value allotted on 9 August 2024 at 51.20p | 2,000,000 | 1,024 | (7) | 1,017 | | 1,000,000 ordinary shares of no par value allotted on 22 August 2024 at 51.60p | 1,000,000 | 516 | (4) | 512 | | 1,850,000 ordinary shares of no par value allotted on 5 September 2024 at 51.60p | 1,850,000 | 955 | (7) | 948 | | 1,000,000 ordinary shares of no par value allotted on 9 September 2024 at 51.60p | 1,000,000 | 516 | (4) | 512 | | 1,000,000 ordinary shares of no par value allotted on 10 September 2024 at 51.60p | 1,000,000 | 516 | (4) | 512 | | 1,250,000 ordinary shares of no par value allotted on 16 September 2024 at 51.80p | 1,250,000 | 648 | (5) | 643 | | 1,500,000 ordinary shares of no par value allotted on 27 September 2024 at 51.90p | 1,500,000 | 779 | (6) | 773 | | 1,500,000 ordinary shares of no par value allotted on 14 October 2024 at 52.10p | 1,500,000 | 782 | (6) | 776 | | 3,750,000 ordinary shares of no par value allotted on 29 October 2024 at 51.30p | 3,750,000 | 1,924 | (14) | 1,910 | | 1,500,000 ordinary shares of no par value allotted on 14 November 2024 at 51.20p | 1,500,000 | 768 | (6) | 762 | | 1,000,000 ordinary shares of no par value allotted on 26 November 2024 at 51.60p | 1,000,000 | 516 | (4) | 512 | | 2,000,000 ordinary shares of no par value allotted on 4 December 2024 at 51.45p | 2,000,000 | 1,029 | (8) | 1,021 | | 2,500,000 ordinary shares of no par value allotted on 6 January 2025 at 51.70p | 2,500,000 | 1,292 | (10) | 1,282 | | 500,000 ordinary shares of no par value allotted on 7 January 2025 at 51.90p | 500,000 | 260 | (2) | 258 | --- | 750,000 ordinary shares of no par value allotted on 9 January 2025 at 52.00p | 750,000 | 390 | (3) | 387 | | --- | --- | --- | --- | --- | | 500,000 ordinary shares of no par value allotted on 13 January 2025 at 52.00p | 500,000 | 260 | (2) | 258 | | 2,000,000 ordinary shares of no par value allotted on 30 January 2025 at 51.15p | 2,000,000 | 1,023 | (8) | 1,015 | | 3,500,000 ordinary shares of no par value allotted on 12 March 2025 at 51.10p | 3,500,000 | 1,788 | (13) | 1,775 | | 4,500,000 ordinary shares of no par value allotted on 2 April 2025 at 51.10p | 4,500,000 | 2,299 | (17) | 2,282 | | 1,000,000 ordinary shares of no par value allotted on 10 April 2025 at 50.40p | 1,000,000 | 504 | (4) | 500 | | 1,750,000 ordinary shares of no par value allotted on 16 April 2025 at 50.50p | 1,750,000 | 884 | (6) | 878 | | 5,500,000 ordinary shares of no par value allotted on 7 May 2025 at 49.80p | 5,500,000 | 2,739 | (21) | 2,718 | | 1,000,000 ordinary shares of no par value allotted on 12 May 2025 at 49.90p | 1,000,000 | 499 | (3) | 496 | | 2,500,000 ordinary shares of no par value allotted on 13 May 2025 at 50.00p | 2,500,000 | 1,250 | (9) | 1,241 | | 4,000,000 ordinary shares of no par value allotted on 29 May 2025 at 50.25p | 4,000,000 | 2,010 | (15) | 1,995 | | 1,000,000 ordinary shares of no par value allotted on 5 June 2025 at 50.80p | 1,000,000 | 508 | (4) | 504 | | 1,000,000 ordinary shares of no par value allotted on 10 June 2025 at 51.00p | 1,000,000 | 510 | (4) | 506 | | 1,250,000 ordinary shares of no par value allotted on 11 June 2025 at 51.10p | 1,250,000 | 639 | (5) | 634 | | 1,000,000 ordinary shares of no par value allotted on 12 June 2025 at 51.20p | 1,000,000 | 512 | (4) | 508 | | 1,300,000 ordinary shares of no par value allotted on 16 June 2025 at 51.40p | 1,300,000 | 668 | (5) | 663 | | 1,500,000 ordinary shares of no par value allotted on 19 June 2025 at 51.30p | 1,500,000 | 769 | (6) | 763 | | 3,250,000 ordinary shares of no par value allotted on 24 June 2025 at 51.40p | 3,250,000 | 1,670 | (13) | 1,657 | | Total issued share capital at 30 June 2025 | 617,701,858 | 33,839 | (254) | 291,949 | The balance of shares left in Treasury at the year-end was nil (2024: nil shares). On 12 December 2024, a block listing facility for 76,000,000 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. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 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 31. 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 financial statements. 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 2025 comprises its stated capital, special distributable reserve, capital reserve and revenue reserve at a total of £298,779,000 (2024: £273,463,000). 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 31. ## 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: | | 2025 | 2024 | | --- | --- | --- | | NAV (£'000) | 298,779 | 273,463 | | Ordinary shares in issue | 617,701,858 | 551,451,858 | | NAV per ordinary share (pence) | 48.37p | 49.59p | --- # 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 67. 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 2025, 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. | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Financial assets | | | | Financial assets at fair value through profit or loss | 328,844 | 299,529 | | Cash and cash equivalents | 10,054 | 12,350 | | Accrued income | 4,605 | 4,679 | | Amount due from brokers | - | 202 | | Financial liabilities | | | | Amount due to brokers | (4,289) | (7,788) | | Bank loan | (40,000) | (35,000) | | Interest on bank loan facility | (76) | (28) | | Other creditors | (377) | (505) | --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 17. MARKET PRICE RISK Market price risk (including other price risk) arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the 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 specific 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 19 to 20. These pages do not form part of the audited Financial Statements. If the investment portfolio valuation fell 7.5% (2024: fall of 7.5%) at 30 June 2025, the impact on the profit or loss and the NAV would have been negative £24,663,000 (2024: negative £22,465,000). Due to the effect of gearing, the impact on the NAV per ordinary share would have been a decrease of 8.3% (2024: decrease of 8.2%). If the investment portfolio valuation rose by the same amount, the effect would have been equal and opposite. The calculations are based on the portfolio valuation at the Statement of Financial Position date and is not representative of the period as a whole and may not be reflective of future market conditions. The Directors believe 7.5% is a relevant percentage based on average market volatility in recent years. ## 18. INTEREST RATE RISK The Company's financial assets and liabilities, with the exception of cash and cash equivalents (see below), that are subject to interest rate risk are detailed below. | | 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | | --- | --- | --- | --- | --- | --- | --- | | | £'000 | Weighted average interest rate (%) | Weighted average period for which the rate is fixed (years) | £'000 | Weighted average interest rate (%) | Weighted average period for which the rate is fixed (years) | | Financial assets: | | | | | | | | Fixed rate instruments & convertible securities | 162,835 | 7.55 | 5.91 | 137,867 | 7.47 | 3.92 | | Floating rate notes | 123,449 | 6.73 | n/a | 111,200 | 6.34 | n/a | | Preference shares | 265 | 0.00 | n/a | 236 | 0.00 | n/a | | Financial liabilities: | | | | | | | | Bank Loan | 40,000 | 6.38 | n/a | 35,000 | 6.90 | n/a | --- 85 # 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 2025, cash and cash equivalents included cash amount of £9,726,000 (2024: £5,975,000) held in Sterling and £328,000 (2024: £6,375,000) 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 4.25% (2024: 5.25%) at 30 June 2025. # 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 £400,000 (2024: £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 £40,000,000 from BNP Paribas, London Branch, details of which are contained in note 11 on pages 78 to 79. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 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 2025 and 30 June 2024 was as follows: | | 2025 | | | | | 2024 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2025 Investments £'000 | 2025 Cash £'000 | Accrued Income £'000 | 2025 Total £'000 | 2024 Investments £'000 | 2024 Cash £'000 | Accrued Income £'000 | 2024 Total £'000 | | Euro | 39,335 | 65 | 520 | 39,920 | 35,223 | 1,215 | 492 | 36,930 | | Australian dollar | - | 1 | - | 1 | - | 2 | - | 2 | | US dollar | 56,920 | 175 | 1,252 | 58,347 | 47,104 | 5,139 | 824 | 53,067 | | Norwegian krone | 1,570 | 22 | 21 | 1,613 | 3,044 | 2 | 16 | 3,062 | | Canadian dollar | 265 | 6 | - | 271 | 236 | 9 | - | 245 | | Swedish krona | 2,606 | 51 | 27 | 2,684 | 3,044 | 2 | 60 | 3,106 | | Swiss Franc | - | 6 | - | 6 | - | 6 | - | 6 | | | 100,696 | 326 | 1,820 | 102,842 | 88,651 | 6,375 | 1,392 | 96,418 | If the value of sterling had weakened against each of the currencies in the portfolio by 5% (2024: 5%), the impact on the profit or loss and the NAV would have been positive £5,126,000 (2024: positive £4,519,000). If the value of sterling had strengthened by the same amount the impact on the profit or loss and the NAV would have been negative £5,126,000 (2024: negative £4,519,000). 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 reflective 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 financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum risk exposure at the Statement of Financial Position date. At the reporting date, the Company's financial assets exposed to credit risk amounted to the following: | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Fixed income securities¹ | 286,549 | 249,303 | | Cash and cash equivalents | 10,054 | 12,350 | | Accrued income | 4,605 | 4,679 | | Amount due from brokers | - | 202 | | | 301,208 | 266,534 | ¹ Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. --- Credit risk on fixed income securities and convertible bonds instruments is considered to be part of market price. The credit ratings for the fixed income securities held by the Company as at 30 June 2025 and 2024 have been listed below: | Rating of fixed income securities | 2025 % | 2024 % | | --- | --- | --- | | BB | 1.9 | 2.4 | | BB- | 5.7 | 5.8 | | B+ | 2.8 | 2.3 | | B | 3.8 | 4.6 | | B- | 1.9 | 3.4 | | BBB | 0.9 | 1.1 | | CCC | 0.9 | 1.1 | | CCC+ | 2.8 | 2.3 | | Not rated | 79.3 | 77.0 | | | 100.0 | 100.0 | Source: S&P Global Ratings The percentage above represents the value of fixed income securities of £286,549,000 (2024: £249,303,000) 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 HSBC Bank plc of £12,000 (2024: £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 financial instruments include investments which are not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate these investments within a short time frame. The Company's listed securities are considered to be readily realisable. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## Funding liquidity risk The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. | 30 June 2025 | Carrying amount £000 | Contractual cash flows 0-1 year £000 | | --- | --- | --- | | Bank loan | 40,000 | (42,247) | | Creditors and other payables | 4,742 | (4,742) | | | 44,742 | (46,989) | | 30 June 2024 | Carrying amount £000 | Contractual cash flows 0-1 year £000 | | --- | --- | --- | | Bank loan | 35,000 | (37,520) | | Creditors and other payables | 8,321 | (8,321) | | | 43,321 | (45,841) | The table above illustrates the contractual undiscounted cash flows relating to the financial liabilities of the Company. As disclosed in note 11, the Company has availed of a short-term unsecured bank loan facility of £45,000,000 with BNP Paribas, London Branch, out of which, £40,000,000 has been drawn-down and is outstanding as at 30 June 2025. In addition to this, the Company maintains sufficient cash and readily realisable securities to pay accounts payable, accrued expenses and any repayment on its bank facility. The interest payments on the bank loan in the table above reflect market forward interest rates available at the reporting date and these amounts may change as market interest rates change. The Company's liquidity risk is managed on an ongoing basis by the Investment Manager in accordance with policies and procedures in place as described in the Directors' Report. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. --- # 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} | 266 | 285,400 | 883 | 286,549 | | Equity shares^{2} | 42,287 | – | 8 | 42,295 | | As at 30 June 2025 | 42,553 | 285,400 | 891 | 328,844 | | 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 | 1. Fixed income securities include fixed and floating rate securities, convertible securities and preference shares. 2. Equity shares include investment funds. If the market value of the Level 3 investments fell by 7.5% (2024: 5%), the impact on the profit or loss and the NAV would have been negative £67,000 (2024: negative £26,000). If the value of the Level 3 investments rose by the same amount, the effect would have been equal and opposite. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued 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 | 2025 £'000 | 2024 £'000 | | --- | --- | --- | | Opening valuation | 519 | 104 | | Additions | – | 551 | | Sales | (8) | (362) | | Unrealised gains | 2,611 | 2,632 | | Realised losses | (2,969) | (2,734) | | Transfers out of Level 3 | (50) | (8) | | Transfers into Level 3 | 788 | 336 | | Closing valuation | 891 | 519 | Transfers into Level 3 N0r5ke Viking 21-03/05/2024 FRN of £882,000 (2024: £788,000) was transferred out of Level 2 to Level 3 due to a significant reduction in observable market inputs. Transfers out of Level 3 ORO SG 12% 19-20/12/2025 DFLT of £52,000 (2024: £50,000) was transferred out of Level 3 to Level 2 since it has been priced through broker quotes. --- # Quantitative information of significant unobservable inputs – Level 3 The following tables summarise the significant unobservable inputs the Company used to value its significant investments categorised within Level 3 as at 30 June 2025 and 30 June 2024: 30 June 2025 | Description | Fair value as at 30 June 2025 £000 | Valuation technique | Significant Unobservable inputs | Range/ input | Weighted Average | | --- | --- | --- | --- | --- | --- | | N0r5ke Viking 21-03/05/2024 FRN | 882 | Vendor Pricing | Unadjusted Broker Quote | 1 | N/A | | Secured Income Fund Plc | 8 | Vendor Pricing | Unadjusted Broker Quote | 1 | N/A | | New Look Plc Shareholder T/L 09/11/2025 | 1 | Vendor Pricing | Unadjusted Broker Quote | 2.5 | N/A | | Total | 891 | | | | | 30 June 2024 | Description | Fair value as at 30 June 2024 £000 | Valuation technique | Significant Unobservable inputs | Range/ input | Weighted Average | | --- | --- | --- | --- | --- | --- | | Cabonline Group Holding Ab | 381 | Recent transaction | Restructuring Price | 5.23 | N/A | | R.E.A Holdings Plc CW 15/07/2025 | 59 | Black Scholes model | Volatility | 40.6 | N/A | | ORO SG 12% 19-20/12/2025 DFLT | 50 | Vendor Pricing | Unadjusted Broker Quote | 1 | N/A | | Secured Income Fund Plc | 16 | Vendor Pricing | Unadjusted Broker Quote | 1 | N/A | | Telford Offshore 12% 19-31/12/2060 | 11 | Vendor Pricing | Unadjusted Broker Quote | 6 | N/A | | New Look Plc Shareholder T/L 09/11/2025 | 2 | Vendor Pricing | Unadjusted Broker Quote | 2.5 | N/A | | Total | 519 | | | | | The remaining 28 investments (2024: 24) classified as Level 3 have not been included in the above analysis as they have fair value of £nil as at 30 June 2025 and 30 June 2024. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Financial Statements # Notes to the Financial Statements Continued ## 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 43. 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 18 September 2025, 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 1.51 pence per ordinary share was announced on 22 July 2025 and paid on 29 August 2025 to Shareholders on the register on 1 August 2025, having an ex-dividend date of 31 July 2025. ### Share issuance Between 1 July 2025 and 18 September 2025, the Company has undertaken a further seven issues of ordinary shares issuing, in total, an additional 21,000,000 ordinary shares of no par value for total consideration of £10,644,000. As at the date of this report, the issued share capital of the Company was 638,701,858 ordinary shares of no par value. --- 93 1202 AH 7 DOHARS CHECK APA COWGOOD ESB EIG ROCK COWGOOD VINTAGE CHECK VERMONT BLEND CHECK VERMONT CUBE 202 600 COWBOOK LINE CUBES EI LOBESTAR EI ROED KEITHS EI STONE STOUT EI RODER KOMBUCHA Brans on Off Veil Fashion E-traps Arche/Howchand Rex/sepplite Eco Anzand/By Etsoro Cup Glass Super-trap --- CQS New City High Yield Fund Limited Subsidiary of Financial Statements Supplemental Information and Annual General Meeting --- # Supplemental Information and Annual General Meeting --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting # Glossary of Terms and Definitions Alternative Performance Measures ("APMs") Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes IFRS and the AIC SORP. Net Asset Value or NAV and NAV per ordinary share The value of total assets less total liabilities. Liabilities for this purpose include current and long-term liabilities. To calculate the NAV per ordinary share, the NAV is 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. --- # 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. | 2025 | Annual dividend per ordinary share | NAV | Ordinary share price (bid) | | --- | --- | --- | --- | | 30 June 2024 | 4.50p | 49.59 | 52.20 | | 30 June 2025 | 4.51p | 48.37 | 51.40 | | Capital return | | (2.46%) | (1.53%) | | Effect of dividend reinvestment | | 9.44% | 8.96% | | Total return | | 6.98% | 7.43% | | 2024 | Annual dividend per ordinary share | NAV | Ordinary 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% | --- 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. | | | 2025 | 2024 | | --- | --- | --- | --- | | Revenue earnings | a | £25,643,000 | £24,029,000 | | Weighted average number of ordinary shares in issue | b | 579,270,488 | 533,873,033 | | Revenue earnings per ordinary share | (a/b)*100 | 4.43p | 4.50p | ## 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 2025 | 1.00p | 24 October 2024 | 25 October 2024 | 29 November 2024 | | Second interim 2025 | 1.00p | 23 January 2025 | 24 January 2025 | 21 February 2025 | | Third interim 2025 | 1.00p | 1 May 2025 | 2 May 2025 | 30 May 2025 | | Fourth interim 2025 | 1.51p | 31 July 2025 | 01 August 2025 | 29 August 2025 | | Annual dividend per ordinary share | 4.51p | | | | | 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 | | | | ## Dividend cover Revenue earnings per ordinary share divided by the annual dividend per ordinary share expressed as a ratio. | | | 2025 | 2024 | | --- | --- | --- | --- | | Revenue earnings per ordinary share | a | 4.43p | 4.50p | | Annual dividend per ordinary share | b | 4.51p | 4.50p | | Dividend cover | a/b | 0.98x | 1.00x | --- 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. | | | 2025 | 2024 | | --- | --- | --- | --- | | Revenue reserve | a | £16,104,000 | £16,185,100 | | Ordinary shares in issue | b | 617,701,858 | 551,451,858 | | Revenue reserves per ordinary share | (a/b)*100 | 2.61p | 2.93p | Dividend yield The annual dividend per ordinary share expressed as a percentage of the share price (bid price). | | | 2025 | 2024 | | --- | --- | --- | --- | | Annual dividend per ordinary share | a | 4.51p | 4.50p | | Share price (bid price) | b | 51.40p | 52.20p | | Dividend yield | (a/b)*100 | 8.77% | 8.62% | 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. | | | 2025 | 2024 | | --- | --- | --- | --- | | Share price (bid price) | a | 51.40p | 52.20p | | NAV per ordinary share | b | 48.37p | 49.59p | | Premium | (a-b)/b | 6.26% | 5.26% | 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. | | | 2025 £'000 | 2024 £'000 | | --- | --- | --- | --- | | Total assets | | 343,521 | 316,784 | | Current liabilities (excluding borrowings) | | (4,742) | (8,321) | | Cash and cash equivalents | | (10,054) | (12,350) | | Total | a | 328,725 | 296,113 | | NAV | b | 298,779 | 273,463 | | Gearing | ((a/b)*100)-100 | 10.02% | 8.28% | --- 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. | | | 2025 | 2024 | | --- | --- | --- | --- | | Average NAV | a | 281,489,049 | 252,603,178 | | Operating expenses per Statement of Comprehensive Income | | 3,565,000 | 3,231,000 | | Ineligible expenses | | (264,000) | (245,000) | | Operating expenses | b | 3,301,000 | 2,986,000 | | Ongoing charges figure (calculated using the AIC methodology) | (b/a)*100 | 1.17% | 1.18% | --- 101 # 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 directors' report and audited financial statements of the Company for the year ended 30 June 2025, together with the auditors' report thereon. 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 its remuneration policy to Shareholders at the AGM. In line with best practice, however, the Directors present the remuneration report in the form set out in the Company's annual financial report for 2025 to Shareholders for approval. ## Resolution 3: Dividend Policy To approve the Company's dividend policy as detailed on page 43. ## Resolutions 4 to 7: Re-election and Appointment of Directors In accordance with the recommendations of the AIC Code of Corporate Governance, all Directors apart from Ms Wendy Dorman, who is due to retire at the AGM, and Mr Andrew Dann, put themselves forward for re-election. Mr Andrew Dann is proposed to be elected as a Director. ## Resolutions 8 and 9: Re-appointment and Remuneration of the Auditor Shareholders are requested to approve the reappointment of the Company's Auditor, PricewaterhouseCoopers CI LLP, and are also 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 10: Continuation Vote In accordance with the Company's Articles of Association (the 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 11 and 12: Directors' Authority to Allot Shares Pursuant to the Company's 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, the Board is therefore 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. Accordingly, Resolutions 11 and 12 authorise the Board to allot on a non-pre-emptive basis: (a) (pursuant to Resolution 11) up to 10% of the issued ordinary share capital of the Company; and (b) (pursuant to Resolution 12) up to a further 10% of the issued ordinary share capital of the Company. If both Resolution 11 and Resolution 12 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 11 is passed but Resolution 12 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. --- 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, after taking into account any costs incurred by the Company in connection with such issue. Any issues of new ordinary shares will be carried out in accordance with the UK Listing Rules. Each of the authorities granted pursuant to Resolution 11 and Resolution 12 shall expire on the earlier of eighteen months from the date of the resolution or at the conclusion of the next Annual General Meeting. The authority granted by Resolution 12 shall be in addition to, and not in place of, the authority set out in Resolution 11 and any subsequent renewal thereof. # Resolution 13: 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 13 seeks renewal of such authority until the next Annual General Meeting (or the expiry of fifteen months from the date of the passing of the resolution, if earlier). The maximum and minimum prices to be paid for shares are set out in Resolution 13. 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. 102 --- 103 # Notice of Annual General Meeting NOTICE is hereby given that the nineteenth Annual General Meeting of CQS New City High Yield Fund Limited (the “Company”) will be held at the Company’s registered office of IFC1, The Esplanade, St. Helier, Jersey, JE1 4BP on 4 December 2025 at 11:00 a.m. GMT for the following purpose: To consider and, if thought fit, pass resolutions 1 to 10 as ordinary resolutions and resolutions 11 to 13 as special resolutions: ## Ordinary Business 1. To receive the directors' report and audited financial statements of the Company for the year ended 30 June 2025, together with the auditors' report thereon. 2. To approve the directors' remuneration report in the form set out in the Company’s annual financial report for 2025. 3. To approve the Company’s Dividend Policy. 4. To re-elect Ms Caroline Hitch as a director of the Company. 5. To re-elect Mr Ian Cadby as a director of the Company. 6. To re-elect Mr John Newlands as a director of the Company. 7. To elect Mr Andrew Dann as a director of the Company. 8. To re-appoint PricewaterhouseCoopers LLP as the Company’s independent auditors. 9. To authorise the directors to agree the remuneration of the Company’s independent auditors. 10. That, pursuant to Article 172 of the Company’s Articles of Association, the Company shall continue as an investment fund until the conclusion of the next Annual General Meeting of the Company. ## Special Business 11. That, the Company be authorised to issue equity securities (as defined in Article 16.2 of the Company’s Articles of Association) for cash, as if the provisions of Article 16.2 did not apply to any such issue, including by way of a sale of ordinary shares held by the Company as treasury shares, in such amount as represents up to 10% of the Company’s issued share capital as at the date of the passing of this resolution, provided that such authorisation shall expire (unless and to the extent previously revoked, varied or renewed by the Company in general meeting by Special Resolution) at the earlier of the conclusion of the next annual general meeting of the Company or eighteen months from the date of this resolution but so that this power shall enable the Company to make offers or agreements before such expiry which would or might require equity securities to be issued after such expiry and the directors of the Company may issue equity securities in pursuance of any such offer or agreement as if such expiry had not occurred. 12. That, the Company be authorised to issue equity securities (as defined in Article 16.2 of the Company’s Articles of Association) for cash, as if the provisions of Article 16.2 did not apply to any such issue, including by way of a sale of ordinary shares held by the Company as treasury shares, in such amount as represents up to 10% of the Company’s issued share capital as at the date of the passing of this resolution, provided that such authorisation shall expire (unless and to the extent previously revoked, varied or renewed by the Company in general meeting by Special Resolution) at the earlier of the conclusion of the next annual general meeting of the Company or eighteen months from the date of this resolution but so that this power shall enable the Company to make offers or agreements before such expiry which would or might require equity securities to be issued after such expiry and the directors of the Company may issue equity securities in pursuance of any such offer or agreement as if such expiry had not occurred. The authority granted by this Resolution 12 shall be in addition to, and not in place of, the authority set out in Resolution 11 and any subsequent renewal thereof. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting # Notice of Annual General Meeting Continued 13. That, pursuant to Article 57 of the Companies (Jersey) Law 1991, the Company be generally and unconditionally authorised to make one or more market purchases of ordinary shares of no par value in the capital of the Company (ordinary shares) provided that: (i) the maximum aggregate number of ordinary shares authorised to be purchased shall be equal to 14.99% of the total issued share capital of the Company on the date at which the resolution is passed; (ii) the minimum price which may be paid by the Company for an ordinary share is 1p; (iii) the maximum price, exclusive of expenses, which may be paid for an ordinary share is an amount equal to the higher of: (a) 105% of the average of the middle market quotations for an ordinary share as derived from the Daily Official List of the LSE for the five business days immediately preceding the day on which the ordinary share is purchased; and (b) the higher of (1) the price of the last independent trade in ordinary shares and (2) the highest current independent bid for ordinary shares on the LSE's Main Market; (iv) any ordinary shares to be purchased may be cancelled or held as treasury shares in accordance with the Companies (Jersey) Law, 1991, provided that the Company shall not hold as treasury shares more than 10% of the aggregate number of ordinary shares in issue at any one time; (v) this authority expires at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or fifteen months from the date of the passing of this resolution, whichever is earlier; (vi) the Company may make a contract to purchase ordinary shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority and may make a purchase of ordinary shares in pursuance of any such contract; and (vii) the Directors provide a statement of solvency in accordance with Articles 55 and 57 of the Companies (Jersey) Law, 1991. The Company requests that any Shareholders wishing to attend the Annual General Meeting to advise the Company Secretary by email or in writing as detailed in note 3 below. By Order of the Board BNP Paribas S.A., Jersey Branch Company Secretary 18 September 2025 --- 105 Notes: 1. Information about this meeting is available from the Company's website; www.ncim.co.uk. 2. As a member who is entitled to attend and vote at this meeting you are entitled to appoint one or more proxies to exercise all or any of your rights to attend, speak and vote on your behalf. Such a proxy need not also be a member of the Company. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise the rights attached to any one share. 3. Any Shareholder wishing to attend the Annual General Meeting can advise the Company of their intention to do so by writing to the Company Secretary at BNP Paribas S.A., Jersey Branch, IFC 1, 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 certified copy thereof must be lodged with the Company's registrar, Computershare Investor Services (Jersey) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 6ZZ at least 48 hours before the meeting. 5. Completion of the proxy card will not prevent a Shareholder from attending the meeting and voting in person. 6. Pursuant to Article 40 of the Companies (Uncertificated Securities) (Jersey) Order 1999, the Company has specified that only those Shareholders registered on the register of members of the Company as at 6.00 pm on 2 December 2025, or in the event that the meeting is adjourned, on the register of members 48 hours before the time of the meeting, shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that relevant time. Changes to entries on the register of members after 6.00 pm on 25 November 2025, or in the event that the meeting is adjourned to a later time, on the register of members 48 hours before the time of any adjourned meeting, shall be disregarded in determining the rights of any person to attend and vote at the meeting. Electronic receipt of proxies 7. To appoint one or more proxies or give an instruction to a proxy (whether previously appointed or otherwise) via the CREST system, CREST messages must be received by the Company's agent (ID number 3RA50) no later than the 2 December 2025 at 11am. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp generated by the CREST system) from which the issuer's agent is able to retrieve the message. The Company may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 or Article 34 of the Companies (Uncertificated Securities) (Jersey) Order 1999. Instructions on how to vote through CREST can be found on the website www.euroclear.com. --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting # 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 Officer and is functionally and hierarchically separate from the operating units of the portfolio managers of the Company. RMPA is a dedicated control function over the operating units of the Investment Manager and is not involved in the performance activities of the Company. RMPA has designed, documented and implemented effective risk management policies, processes and procedures in order to identify, quantify, analyse, monitor, report on and manage 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 financial year of the Company. The variable remuneration period of the AIFM ended on 31 December 2024 and therefore does not coincide with the financial 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 fixed and variable remuneration for all staff. The remuneration committee receives these proposals and the supporting information and is responsible for independently reviewing and scrutinising the proposals and evidence provided in line with the AIFM's stated objectives and developing its final recommendations for delivery to the governing body of the AIFM and other entities associated with the AIFM. The variable remuneration of all staff in excess of a threshold, which includes those individuals categorised as remuneration code staff ("code staff"), is subject to the following: - deferred payment of up to 50% of the variable remuneration for a period of 3 years, - deferred remuneration is linked to funds managed by the AIFM, - the breaching of certain covenants may lead to forfeiture of deferred remuneration, and - a claw-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 2024. This has been presented in line with the information available to the Company. There is no allocation made by the AIFM to each AIF and as such the disclosure reflects the remuneration paid to individuals who are partly or fully involved in the AIF, as well as staff of any delegate to which the firm has delegated portfolio management and/or risk management responsibilities in relation to the AIF. Of the total AIFM remuneration paid of $45m for the year ended 31 December 2024 to 137 individuals (full time equivalent), $20.2m has been paid as fixed remuneration determined with the remainder being paid as variable remuneration. The AIFM has assessed the members of staff whom it determines to be code staff in accordance with the requirements of SYSC 19.B of the FCA Handbook (the AIFM Remuneration Code). There are 9.2 individuals (full time equivalent) who meet this definition and these individuals have collectively been compensated $18.5m. Not all individuals are directly remunerated by the AIFM due to the structure of the AIFM entity, however in the interests of meeting the underlying requirement of this disclosure all staff involved have been assessed as if directly remunerated by the AIFM. 107 --- CQS New City High Yield Fund Limited Annual Report & Financial Statements | Supplemental Information and Annual General Meeting # Corporate Information ## Registered Number 95691 ## Registered Office CQS New City High Yield Fund Limited IFC1 The Esplanade St Helier Jersey JE1 4BP ## Directors Caroline Hitch (Chair) Ian Cadby Wendy Dorman (Audit and Risk Committee Chair) John Newlands Andrew Dann (appointed on 1 February 2025) Duncan Baxter (retired on 3 December 2024) ## Investment Manager Manulife | CQS Investment Management 1 Strand London WC2N 5HR ## AIFM Manulife | CQS Investment Management 1 Strand London WC2N 5HR ## Company Secretary, Administrator, Custodian, Banker and Depositary BNP Paribas S.A., Jersey Branch IFC1 The Esplanade St Helier Jersey JE1 4BP ## Registrar Computershare Investor Services (Jersey) Limited 13 Castle Street St. Helier, Jersey JE1 1ES Channel Islands ## Financial Adviser and Corporate Broker Singer Capital Markets 1 Bartholomew Lane London EC2N 2AX ## Independent Auditor PricewaterhouseCoopers CI LLP 37 Esplanade, St Helier Jersey, Channel Islands JE1 4XA ## Jersey Legal Advisors Ogier Ogier House, The Esplanade St. Helier Jersey, JE4 9WG Channel Islands ## UK Legal Advisors Dentons LLP One Fleet Place, London EC4M 7WS ## Investor Relations Adviser Cardew Group 29 Lincoln's Inn Fields London WC2A 3EG ## Website www.ncim.co.uk ## ISIN JE 00B1LZS514 ## Shareholder Information Net Asset Value/Share Price The net asset value of the Company's ordinary shares may be obtained by contacting Manulife | CQS on 020 7201 6900 or by email at clientservice@cqsm.com or alternatively by visiting the Company's web site at www.ncim.co.uk. --- Produced by Black&Callow www.blackandcallow.com --- CQS NEW CITY HIGH YIELD FUND LIMITED