REG - CQS New City HighYld - Interim Report for the period ended 31 Dec 2025
25/02/2026 11:30
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RNS Number : 3884U CQS New City High Yield Fund Ltd 25 February 2026
25 February 2026
CQS New City High Yield Fund Limited
("NCYF" or the "Company")
Interim Report for the six months ended 31 December 2025
CQS NEW CITY HIGH YIELD FUND LIMITED has published its interim report for the
period ended 31 December 2025. A copy can shortly be found on the Company's
website NCIM - CQS New City High Yield Fund LTD - Fund Page
(https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/) , on the National
Storage Mechanism (National Storage Mechanism | FCA
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) ), and will also be
provided to those shareholders who have requested a printed or electronic
copy.
Highlights:
· NAV total return of 4.85% for the six months ended 31 December
2025
· Ordinary share price total return of 4.61% for the six months
ended 31 December 2025
· Dividend yield of 8.81%, based on dividends at an annualised
rate of 4.51 pence and an ordinary share price of 51.20 pence as at 31
December 2025
· Ordinary share price at a premium of 6.33% as at 31 December
2025
· £22,545,000 of equity issued during the six months to 31
December 2025
Caroline Hitch, Chair of New City High Yield Fund, commented: "I am pleased
with the strong results in the first half of the year, where NAV total return
was 4.85%, delivered against a backdrop of continued volatility in bond
markets. The share price also performed well, delivering a total return of
4.61% while the Company continues to offer an attractive dividend yield of
8.81%. I believe NCYF is well positioned for a steady journey, despite some
on-going turbulence, partly due to the portfolio's relatively short duration
of between three and four years, which should help to moderate any impact of
interest rate and yield movements. The credit quality of our holdings is
critical, and, in this regard, we do not anticipate a significant global
economic downturn that might materially impair the balance sheets of
corporations, including possibly our issuers. Taken together with the
portfolio's broad diversification across sectors and issuers, these factors
give me confidence that the Company can deliver a full year of attractive
dividends and, potentially, a modest level of capital appreciation."
Ian "Franco" Francis, Portfolio Manager at New City High Yield Fund,
commented: "Amid elevated long-term bond yields and ongoing uncertainty, we
have maintained a short portfolio duration of just over three years. The UK
economy seems to be in a better place with both sentiment and growth improving
while globally, inflation is starting to cool. This will enable Central Banks
to cut rates further to boost economies, which should also be a positive for
bond markets. We maintain our focus on remaining diversified and continue to
see attractive opportunities across UK, European, and Scandinavian corporate
bonds. While near-term market volatility may persist, we remain confident in
the medium-term prospects for high-yield investors."
For Further Information
CQS New City High Yield Fund Limited T: +44 (0) 20 7201 6900
E: contactncim@cqsm.com
Singer Capital Markets T: +44 (0) 20 7496 3000
Cardew Group T: +44 (0) 20 7930 0777
Tania Wild M: +44 (0) 7425 536 903
Claudia De Michiel M: +44 (0) 07471 357189
E: ncyf@cardewgroup.com (mailto:ncyf@cardewgroup.com)
https://www.cardewgroup.com/ (https://www.cardewgroup.com/)
Company Secretary and Administrator T: 01534 815216
BNP Paribas S.A., Jersey Branch
Guerhardt Lamprecht
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 25 February 2026, the Company's dividend
yield was 8.84%. 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 NCIM - CQS New
City High Yield Fund LTD - Fund Page
(https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/) .
LEI: 549300KMGN75B0PTWT07
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 maximise the
benefits of being a closed-ended investment vehicle.
Financial Highlights
Six months ended Six months ended
31 December 2025
31 December 2024
NAV and ordinary share price total return(1)
NAV(2) 4.85% 3.58%
Ordinary share price 4.61% 2.91%
As at As at
Capital values 31 December 2025 30 June 2025 % change
Total assets less current liabilities (with the exception of the bank loan £358.9m £338.8m 5.93%
facility)
NAV per ordinary share(2) 48.15p 48.37p (0.45)%
Ordinary share price (bid)(3) 51.20p 51.40p (0.39)%
Six months ended Six months ended
31 December 2025
31 December 2024
Revenue and dividends % change
Revenue earnings per ordinary share(1) 2.29p 2.26p 1.33%
Dividends per ordinary share(1) 2.00p 2.00p 0.00%
As at As at
Other highlights 31 December 2025 30 June 2025
Premium(1) 6.33% 6.26%
Gearing(1) 10.92% 10.02%
Dividend history Rate xd date Record date Payment date
First interim 2026 1.00p 23 October 2025 24 October 2025 28 November 2025
Second interim 2026 1.00p 22 January 2026 23 January 2026 27 February 2026
Dividend per ordinary share 2.00p
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
Statement from the Chair
NAV and ordinary share price performance
The NAV total return of the Company for the six months to 31 December 2025 was
4.85% which I believe is a good return in a very volatile market. The ordinary
share price total return was 4.61% and your Company remains one of very few
investment trusts in the United Kingdom ("UK") that trades on a premium.
Ongoing demand allowed us to continue issuing shares (see below), again
something of a current rarity in the investment trust sector. The Company's
longer-term performance remains strong.
Equity markets have generally shown a strong positive return over the last six
months, and bond markets have seen more modest returns as investors worry
about major Government debt levels. This has caused Gilt and Treasury yields
to remain elevated amid concerns over inflation and interest rates remaining
higher for longer. In the corporate bond market, the Sterling return of the
high yield index was just under 4%. The Company's portfolio was stable in this
environment with no major setbacks in the portfolio or in the revenue account.
Ian "Franco" Francis, your investment manager, gives more detail in his
review.
Earnings and dividends
The Company's revenue earnings per share were 2.29p for the six months,
compared to a figure of 2.26p earned in the same period last year. The revenue
account is fairly stable as portfolio income has continued to benefit from
higher interest rates. The Company has declared two dividends of 1.00p so far
in this financial period, maintaining the level of those declared in the same
period last year. As things stand, the Board expects to follow the same
pattern of dividend payments as declared last year and maintain or slightly
increase the total level of dividends for the year. Based on an annual
dividend rate of 4.51p and a share price of 51.00p as at 25 February 2026,
this represents an attractive dividend yield of 8.84%. The Board anticipates
that revenue earnings per share for the whole year will cover the total
dividend. The Board is very focused on dividend payments which we know are
important to our Shareholders and since its launch in 2007, the level of
dividends paid by the Company has increased every year.
Gearing
The Company has renewed its loan facility with BNP Paribas, London Branch,
with an increased facility amount of £50,000,000 - this is due to expire in
December 2026. Out of this facility, £40,000,000 was drawn down as at 31
December 2025; and as at 25 February 2026, the Company has an effective
gearing rate of 8.36%. At present, we believe that Shareholders benefit from a
modest but meaningful amount of gearing (a notable advantage of closed-ended
funds compared to open-ended) and expect to maintain approximately this level
of gearing during the next financial year.
Share issuance
Taking advantage of the premium rating that the market continued to attach to
the Company's shares, a record of £22,545,000 was raised from new and
existing shareholders during the last six-month period, with 44,600,000
ordinary shares issued from the block listing facility. Shares were only
issued when the Investment Manager was confident, he could invest the
additional funds favourably. As well as a modest benefit to the NAV from any
issue of shares, the Board believes that over time, existing Shareholders will
benefit from lower ongoing charges and greater liquidity in the Company's
shares, all other things being equal.
Your Board
As I set out in the last Annual Report, Wendy Dorman, who was the Audit and
Risk Committee Chair has stepped down at the Annual General Meeting ("AGM") in
December last year having served for nine years. We will miss her valuable
contribution to the Company.
Andrew Dann has succeeded Wendy as Audit and Risk Committee Chair effective 4
December 2025.
I also am very pleased that Ms Joanna Dentskevich has been appointed as a
non-executive director with effect from 1 February 2026. This appointment
follows a search and selection process managed by an external independent
recruitment consultancy. Ms Dentskevich has over 35 years of risk, finance and
investment banking experience gained in leading global banks worldwide,
alternative investments and the offshore funds industry and has served as a
non-executive director on a number of other investment companies. I am
delighted to welcome Joanna to the Board.
Outlook
The world may feel turbulent at present but I believe the Company is well
positioned for a steadier journey. One reason for this is the portfolio's
relatively short duration - between three and four years - which should help
to moderate any impact of interest rate and yield movements.
Additionally, the ongoing credit quality of our holdings is critical and, in
this regard, we do not anticipate a significant global economic downturn that
might materially impair the balance sheets of corporations, including possibly
our issuers. Furthermore, the Investment Manager has the support of Manulife |
CQS's extensive and experienced team of credit analysts, ensuring continuous
and rigorous monitoring of each holding.
Taken together with the portfolio's broad diversification across sectors and
issuers, these factors give me confidence that the Company can deliver a full
year of attractive dividends and, potentially, a modest level of capital
appreciation.
Caroline Hitch
Chair
25 February 2026
Investment Manager's Review
Introduction
It has been difficult for investors and market commentators to look beyond the
sheer volume of political and economic news that has come out of the United
States ("US") over the past year. In contrast, the UK has been quiet during
the last six-month period under review. Growth has been subdued, and inflation
is still sticky at between 3.2% and 3.8% per annum. I would categorise the
last budget from the Chancellor as a "Tax later, Spend now" exercise which was
mainly shrugged off by the market. The hospitality sector has been the hardest
hit with minimum wage increases and forthcoming business rate hikes leaving
the industry worried about the viability of its businesses post-April 2026.
We continue to worry that the UK economy could move into a period of
"stagflation" with inflation being stubborn to fall and little economic
growth.
In the portfolio, it has been a busy time as companies have looked to
refinance their securities. Record share issuance by the Company has provided
significant funds to invest in attractive bond issuance opportunities -
further details of that are set out below. We have also not seen any shocks in
the portfolio from either a capital or revenue perspective, while returns have
been good with the NAV total return for the 6 months to 31 December 2025 of
+4.85%.
Market and economic review
In previous reports, I have written about how the bond markets in the UK and
US have focussed on the increasing costs of financing Government deficits
which has resulted in the benchmark 10-year bond yields remaining at elevated
levels. Despite several interest rate cuts in the UK during 2025, the 10-year
Gilt yield only moved from 4.6% at the end of December 2024 to 4.45% at the
end of December 2025. The US 10-year bond has moved over the same period from
4.6% to 4.3% again despite interest rate cuts. We are seeing that markets
are looking for higher interest rates to finance large Government deficits,
which has real implications as the cost of financing debt reduces governments'
ability to spend and grow. In the UK, rates reduced by 50 basis points to
reach 3.75% at the end of December. In the US, sticky wage inflation has
caused the US Federal Reserve to reduce rates slowly with only a 0.5%
reduction to 3.75% seen in the second half of 2025.
Portfolio review
In the portfolio, we saw large calls/early repayments from Aggregated Micro 8%
16-17/10/2036 and Azerion Group 23-02/10/2026 FRN. We also sold our positions
in Deutsche Bank AG 14-30/05/2049 FRN and Lloyds Banking 14-29/12/2049 FRN as
their relative yields dropped.
We had a record intake of funds as the Company issued new shares in the last
six months and have opened new positions in Sherwood Financing 9.625%
24-15/12/2029, Cidron Aida Financing 9.125% 25-27/10/2031 and Wheel Bidco
9.875% 21-15/09/2029. Sherwood Financing 9.625% 24-15/12/2029 and Cidron Aida
Financing 9.125% 25-27/10/2031 are also new entries into the top ten in the
portfolio. Sherwood Financing 9.625% 24-15/12/2029 is a European fund manager
based in Manchester with a focus on investing in private and public credit and
is part of the Arrow Global Group. Cidron Aida Financing 9.125% 25-27/10/2031
is part of Advanz Pharma, a global pharmaceutical company headquartered in
London. Wheel Bidco is the financing arm of Pizza Express UK.
The Company's foreign currency exposure, other than Sterling, is mainly to the
US dollar with 16.62% of the portfolio invested in that currency and a further
9.00% in the Euro and other 'non-Sterling' currencies.
Revenue account earnings for the six months to 31 December 2025 were 2.29p per
share compared to the equivalent number of 2.26p for the year earlier. The
current balance of revenue reserves provides a good level of comfort for
Shareholders.
Outlook
Despite the political turmoil, the UK economy seems to be in a better place
with both sentiment and growth improving. Elsewhere, inflation is starting to
cool globally and will enable Central Banks to cut rates further to boost
economies which should also be a positive for bond markets.
As always geopolitics remain difficult to predict, so it is important to
remain diversified. We continue to see opportunities across issuers with
strong balance sheets and resilient cash flows, recurring revenues and
earnings visibility. The attractive yields in the Company's portfolio should
provide investors with the potential for meaningful income and improved risk
adjusted returns.
Ian "Franco" Francis
New City Investment Managers
25 February 2026
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