Interim Management Statement

City Merchants High Yield Trust Limited                    

                         Interim Management Statement                          

                  for the Three Months ended 30 September 2013                   

Objective of the Company

The investment objective of City Merchants High Yield Trust Limited (the
`Company') is to seek to obtain both high income and capital growth from
investment, predominantly in high-yielding fixed-interest securities.

The Company seeks to provide a high level of dividend income relative to
prevailing interest rates through investment in fixed-interest securities,
various equity-like securities within fixed-income markets and equity-linked
securities such as convertible bonds and in direct equities that have a high
income yield. It seeks also to enhance total returns through capital
appreciation generated by investments which have equity-related
characteristics.

Material events

No material events, specifically in relation to the Company, occurred during
the period.

Dividends

The Company paid a second interim dividend of 2.5 pence per Ordinary Share on
23 August 2013 in respect of the period ended 31 December 2013. A third interim
dividend of 2.5 pence per Ordinary Share has been declared, which will be paid
on 22 November 2013, to shareholders on the register on 25 October 2013. The
Board continues to target total dividends of 10 pence for the current year.

Market background

The Company's NAV, with dividends reinvested, rose 3.4% in the third quarter.
High yield bonds performed well relative to other areas of the bond market,
providing positive returns in a period of rising government bond yields.

According to data from Merrill Lynch, European high yield bonds had a total
return for the quarter of 1.6% (in sterling terms), the aggregate yield for
this market falling 32 basis points (bps) to 5.64%. This compares to a return
of 0.5% for Gilts. Sterling investment grade corporate bonds returned 2.7%.
Within investment grade, financials outperformed, returning 3.4% compared to
2.2% for non-financials.

The actions and rhetoric of the Federal Reserve (Fed) have dominated market
sentiment throughout this period. Treasury yields rose in July and August as
comments from Fed officials and generally positive US macroeconomic data raised
expectations that the Federal Open Market Committee would soon begin to reduce
the Fed's programme of quantitative easing (QE). The sell-off was extended
across other core government bond markets and in credit. When, contrary to
expectations, the committee decided against a reduction at its September
meeting, yields fell. Markets were also boosted by modestly weaker US
employment growth in August.

High yield bonds have continued to be supported by strong demand for income and
by rising corporate earnings. Default rates have remained low. According to
Moody's, the rolling 12 month European high yield rate of default was 3.4% in
August, unchanged from July and from August 2012. Supply is up strongly on last
year, with Barclays estimating that European high yield bond issuance to the
end of September was 47% higher than at the same point last year.

Portfolio strategy & outlook

We favour higher credit quality high yield bond issuers as well as higher
yielding investment grade names. High yield bond yields are low by historical
standards but they remain relatively high compared to core government bonds,
like UK Gilts and German Bunds, and the highest credit quality corporates. We
believe we can still find opportunities, most notably in banks and other
financials, where we think aggregate yields continue to offer value. In our
view, rising capital levels, ongoing structural reform and the implementation
of new, more conservative banking sector regulations should be supportive of
subordinated bank debt for many years.

In our portfolio we have maintained a focus on financials and on seasoned high
yield issuers that we believe to be default-remote. We have continued to
invest, increasing existing positions that we think still offer good value and
adding new names. We have bought some hybrid debt instruments over this period.
We think that the opportunity to take exposure to companies with strong balance
sheets and to receive a higher yield in return for taking subordination risk
can be attractive. We have also traded where we have seen opportunities to
capture good levels of yield for the portfolio or to take profit on bonds where
the relative value has diminished. Over the period we have, for example, added
to our holdings in Enterprise 6.5% (beverages), Takko 9.875% (retail) and
Telefonica 7.625% (hybrid) (telecom). We sold Schaeffler 8.5% (industrial) and
Nexans 2.5% (manufacturing).

.

Paul Read, Paul Causer
Portfolio Managers

October 2013


Performance - Total Return

                                  3 Months      1 Year     3 Years     5 Years
                                                                              
Share Price                           3.8%       11.6%       16.4%       79.8%
                                                                              
Net Asset Value                       3.4%       17.1%       27.6%      101.5%
                                                                              
FTSE All-Share Index                  5.6%       18.9%       33.4%       66.2%
                                                                              
FTSE Government Securities -          0.5%       -3.0%       13.2%       35.0%
                                                                              
All Stocks Index                                                              

Share Price and Discount

                                        As at    For the Three Months Ended    
                                 30 September         30 September 2013        
                                         2013                                  
                                                    High        Low     Average
                                                                               
Ordinary Shares mid-market             166.75     171.00     159.00      167.18
                                                                               
price (pence)                                                                  
                                                                               
Discount                                 6.8%                                  

Source: Thomson Reuters Datastream

.


Assets and Gearing

                                  30 September 2013
                                                   
Total Gross Assets (£m)                       130.2
                                                   
of which cash (£m)                              5.5
                                                   
Borrowings (£m)                                   -
                                                   
Cum Income Net Asset Value                    178.9
                                                   
(pence)                                            
                                                   
Gross Gearing                                  0.0%
                                                   
Net Cash                                       4.2%

`Gross Gearing' reflects the amount of gross borrowings in use by the Company
and takes no account of any cash balances. It is based on gross borrowings as a
percentage of shareholders' funds. `Net Cash' reflects the net exposure to cash
and cash equivalents expressed as a percentage of shareholders' funds after any
offset against borrowings.

.


Bond Rating

                                  30 September 2013
                                                   
AA-                                            0.0%
                                                   
A+                                             0.0%
                                                   
A                                              0.0%
                                                   
A-                                             1.9%
                                                   
BBB+                                           4.9%
                                                   
BBB                                            6.3%
                                                   
BBB-                                           7.8%
                                                   
BB+                                            8.1%
                                                   
BB                                            12.9%
                                                   
BB-                                            6.6%
                                                   
B+                                             9.2%
                                                   
B                                             10.6%
                                                   
B-                                             4.1%
                                                   
CCC+                                           2.4%
                                                   
CCC                                            0.2%
                                                   
CCC-                                           0.0%
                                                   
CC                                             0.0%
                                                   
C                                              0.0%
                                                   
D                                              0.0%
                                                   
NR (including equity)                         25.0%
                                                   
                                             100.0%

.


Top Ten Holdings

Ranking   Top Ten Holdings                                    % of   
Now                                                         Portfolio
                                                                     
1         Lloyds Banking      7.975% Sep 2024 & 6.439% May    5.8%   
          Group               2020 & 6.385% May 2020 & 9%            
                              Dec 2019                               
                                                                     
2         General Motors      Wts Jul 2019 & Wts Jul 2016     4.8%   
                                                                     
3         Aviva               6.125% Perpetual & 8.875%       4.1%   
                              Preference                             
                                                                     
4         Société Genérale    8.875% FRN Perpetual, 8.25%     3.8%   
                              Perpetual                              
                                                                     
5         Premier Farnell     89.2p Convertible Preference    3.4%   
                                                                     
6         Intesa Sanpaolo     8.375% FRN Perpetual            2.3%   
                                                                     
7         Abengoa             8.5% Mar 2016 & 4.5% Cnv Feb    2.3%   
                              2017 & 6.875% Cnv Jul 2014 &           
                              6.25% Cnv Jan 2019                     
                                                                     
8         Credit Agricole     7.589% FRN Perpetual & 8.125%   2.2%   
                              FRN Perpetual                          
                                                                     
9         Enterprise Inns     6.5% Dec 2018 (SNR)             2.1%   
                                                                     
10        UPC                 5.625% Apr 2023, 9.625% Dec     2.1%   
                              2019                                   

.


Changes to Share Capital

                              Ordinary Shares of no par 
                                        value           
                                                        
                                    Issued   Treasury   
                                                        
As at 30 June 2013              72,786,327             0
                                                        
Ordinary shares bought back              0             0
                                                        
Ordinary shares issued                   0             0
                                                        
As at 30 September 2013         72,786,327             0

The Company has authority to buy back shares and to issue new shares
(disapplying pre-emption rights), in each case within specified limits. The
Company expects to renew these authorities each year.

.


Price and Performance

The Company's Ordinary shares are listed on the London Stock Exchange and the
price is published in the Financial Times under `Investment Companies' and in
the Daily Telegraph under `Investment Trusts'.

The Company's net asset value is calculated daily and can be viewed on the
London Stock Exchange website at www.londonstockexchange.com.

Further information can be obtained from Invesco Perpetual as follows:

Free Investor Helpline: 0800 085 8677 (available Monday to Friday from 8.30am
to 6.00pm)

Internet address: www.invescoperpetual.co.uk/investmenttrusts

The information provided in this statement should not be considered as a
financial promotion or recommendation.

Issued for and on behalf of City Merchants High Yield Trust Limited

Contact:

Hilary Jones
R&H Fund Services (Jersey) Limited
Telephone: [phone]

15 October 2013