28 March 2025

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

Monthly Factsheet as at 28 February 2025

The Company's Fact Sheet as at 28 February 2025 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 28 February 2025.

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

In the UK, the effects of the October budget - increases to minimum wage, National Insurance and business rates - are starting to be felt ahead of implementation in April with many companies putting price increases in place to offset rises in input costs. The private sector is also increasing the rate of job cuts, with employment falling sharply in February. One in three companies cited that job cuts are a direct result of the costs incurred from the budget. UK inflation hit 3% in January and is forecast to increase in the coming months. Overall demand in the economy was flat and is still skewed in favour of the service sector. Adding the inflationary element means that we see stagflation as a clear and present danger which will likely cause problems for the Bank of England in the coming months.

In Europe, economic output is also flat with the service sector marginally in growth and only just compensating for the weak manufacturing sector. Service sector inflation is still at a high level, including above average wage cost inflation, and this will likely be a concern to the European Central Bank (ECB). Recent increases in energy prices also add to input costs pointing to possible future inflation. It is quite possible that the ECB will keep rates on hold for now. We believe the major risks to European economies comes both from US tariffs and the increasing cost of defence. The latter is a result of the US putting increased pressure on Europe to spend a much larger percentage of GDP in their defence budgets.

In the US, business activity stuttered in February as the service sector witnessed weak new order growth and suppressed future order expectations, all related to uncertainty in future federal government policies. The relative strength in manufacturing was partially due to the front-running of expected tariffs with future orders and this was particularly noticeable in export-focused companies. Surveys suggest that optimism for future growth has fallen dramatically from the near 3-year highs at the beginning of January. This is a result of concerns on federal policies comprising spending cuts and tariffs, as well as ongoing geopolitical events. Although US inflation is currently muted, the tariffs will undoubtedly have a knock-on effect to the manufacturing sector by increasing inflation and squeezing profit margins.

The Company paid its second interim dividend of 1p/share on 21 February 2025.

For the Company's portfolio we continued to sell the Diversified Energy equity, we had a partial redemption of Booster Precision 10.812933% and a full redemption on Hoist Finance 7.75% perpetual bonds. We also downsized the Company's holding in Co-Op Bank 11.75% 2034 - well above par - and reinvested into the new issues of UTB 13% perpetual and Azamara Cruise line 11.5% 2030.

Looking ahead, the nature of President Trump's use of weaponised tariffs is expected to give markets increased volatility and the current state of geopolitics will likely add currency volatility to the mix.

-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 Company's dividend yield was 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/