23 January 2025

CQS New City High Yield Fund Limited
("NCYF" or the "Company")

Monthly Factsheet as at 31 December 2024

The Company's Fact Sheet as at 31 December 2024 has been submitted and is available for inspection on the Company's website, https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/.

The investment manager updates on the wider macro-economic environment and on key changes to the portfolio positions as at 31 December 2024.

Ian 'Franco' Francis, Investment Manager at New City High Yield Fund comments:

The UK private sector is facing a depressing set of circumstances as we move into 2025; inflation has risen to 2.6%, employment is slumping and economic growth is almost non-existent. The economic growth of the first quarter of 2024 is proving to be a distant memory with the level of business confidence hit by the prospect of increased staff costs resulting from the National Insurance (NI) changes announced in the budget. The UK economy could be looking down the barrel of "stagflation" unless the private sector can improve its productivity further, as the public sector appears unlikely to improve its efficiency anytime soon. The forecasts of four rate cuts by the Bank of England in 2025 may well have been too bullish given the baked in increase of employer's NI contributions and minimum wage increases from April.

Households too appear to have responded negatively to the budget, with footfall in the high street up 7.1% on November but down 2.2% versus December 2023. Initial data suggests there was an increase in online shopping of 6.1% compared with last year, with electronics and homeware the strongest; up 7%. However, clothing and accessories sales fell compared to December last year. Hospitality displayed only modest performance, with sales growth broadly in line with inflation. Overall, we believe 2025 is going to be a challenging year for the UK economy and the private sector in particular.

In Europe, political uncertainty in the major economies of France and Germany are preventing measures to implement a short to medium-term boost to growth and, until this can be rectified, we believe the economies will show continued weakness. Manufacturing is still very weak with output falling at the fastest pace in 2024, continued destocking and a decrease in new orders. As a result, employment levels in the sector were cut for the fifth month in succession. The only positive note came from the service sector, where the growth last witnessed in September and October returned. However, this is yet to see any benefit in increased staffing levels. Overall, we see dangers in Europe from inflation, increasing debt, recession and political populism; it will likely be an interesting year in European markets.

In the US, the services sector goes from strength-to-strength leading to the total economy growing at an annualised rate of 3% in December. However, manufacturing, like the rest of the western world, is weakening with a lack of demand from export markets. A lot is going to depend on how drastic and disruptive Donald Trump's second term will be with many headline grabbing ideas in the pipeline. These include his "Drill baby drill" rhetoric, threats to take over the Panama Canal, buying Greenland from Denmark for its natural resources, and increased tariffs and the associated trade wars. We await Trump's first comments on the X social media platform with interest as this appears to be his chosen platform for letting the World know what is coming.

For the Company, the holding of Domestic and General 9.25% was refinanced into a 8 1/8% coupon. We rolled the majority of the holding into the new bond and invested the remainder in a new issue from Newcastle Building Society 14% perpetual to make up for the shortfall in income. We also participated in a new US dollar issue from Priority 1, an Irish logistics business, with a 12 5/8% coupon and a 3-year maturity. We continued to downsize the Company's holdings in the equities of Diversified Energy and Croma Group.

ENDS-

About CQS New City High Yield Fund Limited

CQS New City High Yield Fund Limited aims to provide investors with a high dividend yield and the potential for capital growth by investing in high-yielding, fixed interest securities. These include, but are 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.

Since the Fund's launch in 2007, the Board has increased the level of dividends paid every year. As at 31 December 2024, the Fund's dividend yield is 8.79%. In addition to quarterly dividend payments, the Fund seeks to deliver investors access to a high-income asset class across a well-diversified portfolio with low duration to help mitigate interest rate risk.

Further information can be found on the Company's website at https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/