Final Results

RNS Number : 8613O

New City High Yield Fund Limited

26 September 2011

 



To:        RNS

Date:     26 September 2011

From:    New City High Yield Fund Limited

Results for the year ended 30 June 2011

·      Net asset value total return of 19.7 per cent since 1 July 2010.

·      Ordinary share price total return of 20.6 per cent since 1 July 2010.

·      Dividend yield of 6.1 per cent, based on dividends at an annual rate of 3.87p and a share price of 63.75p at 30 June 2011.

·      Ordinary share price at a premium of 7.5 per cent to net asset value at 30 June 2011.

Chairman's Statement

 

Introduction

Your Company posted another year of strong performance against a most volatile investment backdrop, generating a total return of 19.7 per cent. 

Investment and Share Price Performance

The year ended 30 June 2011 saw your Company's net asset value rise by 11.9 per cent to 59.30 pence.  When this capital measure is adjusted for the payment of dividends totalling 3.87 pence per share in the year, the net asset value total return was 19.7 per cent.

The share price total return for the same period was a little higher than this at 20.6 per cent, reflecting the continued premium rating attaching to the Company.  I return to this subject below.

Dividends

In line with the dividend rate of the prior year, three interim dividends of 0.85p per share were paid on 26 November 2010, 25 February 2011 and 27 May 2011.  We increased the fourth interim dividend from 1.20p to 1.32p per share; this was paid after the year end on 26 August 2011.  Based on an annualised rate of 3.87p and a share price of 58.6p at the time of writing, this represents a yield of 6.6per cent.

Fund Raising

The continuing premium rating that the market attaches to the shares of your Company enabled it, for the third year in a row, to complete in September 2010 a share issue equivalent to 10 per cent of the Company's share capital.  £8.6 million was raised from new and existing shareholders, and such was the demand for shares that the Board decided to proceed with a placing and public offer for subscription in November 2010.  A further £20.1 million was raised, taking the Company's total assets to some £120 million.  As well as a modest increase in net asset value, continuing shareholders can expect to benefit from a lower total expense ratio and greater liquidity in the Company's shares.

Investment Awards

I reported in my Interim Statement to you that the Company had won the prestigious Investment Week UK Income Investment Trust of the Year Award.  This public recognition of your Company's excellent performance continued with a 2011 Money Observer Highly Commended for Best High Income Security, and the Board would like to reiterate both its congratulations to Ian Francis and his team and its thanks for the hard work that has underpinned this recognition.

Outlook

Recently the financial markets have been disturbed by problems associated with debt in both the USA and some countries in Europe.  Finding a solution to these problems is far from straightforward given the difficulties that politicians have experienced in agreeing sensible debt reduction packages.  The markets have also been mindful of the GDP growth forecasts that have been lowered in many countries, concerned that this could lead to a double-dip recession.

All of that said, as I noted last year it is precisely during periods of uncertainty such as this that the greatest opportunities are to be found in the high yield markets.  The Manager has demonstrated a reassuring sureness of touch over four difficult years, and with a widely diversified portfolio providing a balanced exposure at both the sector and currency levels, as well as a measure of protection against an inflationary threat that we continue to eye warily, I believe that we are well positioned to make further progress.

James G West

Chairman

Investment Manager's Review

The Company's financial year has been dominated by the car crash that is the peripheral sovereign debt crisis in Europe.  It was only in the first quarter, during a quiet period in the news flow from periphery, that we had a period of volatility in the Australian Dollar, with the initial weakness due to the telegraphed increased mining taxes being countered by the removal of Kevin Rudd as Prime Minister by Julia Gillard and the watering down of the tax regime.  Also in the first quarter was the Australian General Election, which took 2½ weeks to form a coalition, all of which could not derail the ongoing strength of the currency due to the country's natural resources assets and the ongoing Chinese demand for them. 

For the rest of the year all investors' eyes have been on Europe.  At the start of the third quarter there was some degree of shortlived optimism that the various support features may work.  One of the major stumbling blocks has been the lack of acceptance as to the level of cuts required; witness the ongoing protests in Athens.  We also had the fall of the Irish Government at the end of January and the fall of the Portuguese Government towards the end of March.  Subsequently the new Irish government put together a very tough budget, with public sector pay cut, pension cuts, welfare cuts, new housing taxes and water metering.  Whilst these seemed drastic at the time, it will take several years to get from the budget deficit of 10.5% of GDP to a more sustainable level of less than half of the current figure.  The new Portuguese regime was bailed out in May and again they must enact some drastic cuts to spending and increase taxes to get their deficit from 9.1% of GDP to 5.9% this year and 3% by 2013; a task that Portugal intends to be scrupulous in meeting to regain the confidence of cynical markets.  Then we come to Greece; over the year we have seen civil unrest at the measures implemented by the Greek Government to unlock the funding from the EU/ECB/IMF.  Coming to a head at the very end of the Company's financial year with the Government securing a 'no confidence' vote and winning by 155/138 vote in favour of further fiscal consolidation measures, which enables the release of funds pushing the 'disaster scenario' down the road for another six months when the next EU/ECB/IMF review will be no doubt looking at further measures to keep the programme on track.

In the UK, inflation continues to be a major worry with the Government's preferred CPI measure up from 3.2% to 4.5% over the year and RPI figure up from 4.8% to 5.2% over the same period. Most of the drivers for these figures have been external, such as higher commodity prices, but the increase in VAT at the end of January did nothing to help the cause. In another era, we would already be in a rising interest rate environment but our current view is we will not see a UK rate rise yet, given the weakness of the UK economy, shown by the failure of the UK retailers Focus. Habitat and T J Hughes and significant downsizing of Thornton and Carpetright and the electrical retailer Comet, put up for sale by its parent company, Kesa.  Add this to the static property market outside London and below inflation wage settlements, and the outlook is not great, with increasing industrial unrest amongst public sector employees who are unhappy with poor wage settlements and the increase in pension contributions, coupled with the need to work longer to reach a raised retirement age. Bringing the public sector more into line with the private sector, and reducing the potentially massive pension deficit in the public sector will be an issue which could run on for some time.

So the economic background for the Company has been volatile to say the least.

To add further to the economic mayhem we had a very concentrated period of natural disasters in the quarter from January to March with the major floods in Queensland and Victoria in Australia, the Christchurch earthquakes in New Zealand and the earthquake and tsunami off the Japanese coast at Honshu.  The associated nuclear disaster at Fukushima had far reaching consequences for the nuclear industry globally with many countries reviewing their programmes, with Germany pulling out of all nuclear power by 2022.

Nor have the manmade disasters been in short supply; away from the European debt crisis, we have had the Geo-political crisis in the Middle East and North Africa (MENA), starting with the Jasmin revolution in Tunisia back in January, giving inspiration to oppressed majorities in other MENA states to follow suit, leading to the removal of Egypt's long serving President Mubarak.  Other protests have take place in Algeria, Yemen, Jordan, Bahrain, Iraq and Mauritania with reactions of the incumbent regimes varying in levels of response.  The full scale revolution in Libya has been particularly complex, although at the time of writing the rebel forces appear to be winning the battle for control.  Elsewhere Syria appears to be oppressing the majority but without foreign media reporting it is very difficult to gauge the true situation.

The major effect of these events was the strength of the oil price - up from $94/bbl in January to $120/bbl, a level which took until the middle of June and the release of strategic reserves to push the price back down to the $94/bbl level.  This should have a positive knock on effect to inflation in Western economies.

Investment Performance

The share price total return over the year for the Company was 20.6% with the NAV total return at 19.7%; the three year performance data shows a share price total return of 50.3% (annualised at 14.5%).

The prime objective of the Company remains the maintenance of a safe income stream plus the opportunity for capital growth.

During the first half of the year we raised £28.7 million in two tranches, which were invested into the markets, mostly in existing holdings with a few new names added.

Investment Activity

This year was spent keeping the balance of the portfolio, whilst adding new holdings in an effort to diversify the exposure.  We continued to sell bonds which, through good performance, had moved to a level well above par and reinvest in bonds with a greater yield below par, hence preserving capital.  One example of which was the sale of BAA 9.2% 2023 well above par, reinvesting into the shorter dated BAA 71/8 % 2017 below par.  We also sold the Lloyds 161/8 CoCo 2024 well above par and reinvested into the Lloyds 12¾ CoCo 2020 with a much smaller premium to par.

We opened holdings in Bergen Group FRN 2013, which provides ship building and repair services to the offshore oil industry, also in Morpol FRN 2014, a global salmon processor, as part of the diversification process, plus as Floating Rate Notes affording some protection in a rising interest rate environment in economies further down the recovery road than the UK.

With an eye to the dangers of inflation and forthcoming redemptions/conversions  of existing holdings, we added two iron ore companies: London Mining 8¼ Convertible 2016 by way of a new issue at the end of January and Dannemora  11¾ 2016 Bond.

Towards the end of the year the Company sold the holding in Noreco 12.9% 2016 close to its all time high.  Although it still had an excellent yield in Norwegian Krone, the resignation of the CEO and the need to refinance a non core asset, where the sale fell through, was a strong sell signal not to be ignored.  The income was replaced by the inclusion in the portfolio of Consolidated Minerals 8¾% 2016 in US$, a major manganese producer in Australia and Ghana.  The holding of Santander 11.3% Perpetual was reduced with one eye on the Peripheral Sovereign debt crisis and reinvested into Investec 95/8% below par.  Further diversification was achieved by the later purchase of Old Mutual 8% 2021 also in sterling, by way of the new issue market.

Outlook

Whilst the portfolio looks in good shape to provide secure income for shareholders, we continue to recognise the imperative of capital preservation and, wherever possible, increasing the capital value of the portfolio.  We will look to switch out of investments which have a drain on capital to redemption, or call dates, and redirect the investment into similar yielding (on a running yield basis) stocks below par value. 

The global economic background is still very uncertain yet the diversified nature of the portfolio should maintain a sensible balance of both currency and sector exposure. 

Ian Francis

New City Investment Managers

Audited Income Statement

For the year ended 30 June 2011

	Year ended 30 June 2011
		£ '000	£'000	£'000
	Notes	Revenue	Capital	Total
Capital gains on investments
Gains on investments		-	9,612	9,612
Liquidation distribution		-	259	259
Exchange losses		-	(303)	(303)
Revenue
Income		10,030	-	10,030
		10,030	9,568	19,598
Expenses
Investment management fee		(702)	(234)	(936)
Other expenses		(415)	-	(415)
Total expenses		(1,117)	(234)	(1,351)
Profit before finance costs and taxation		8,913	9,334	18,247
Finance costs
Interest payable and similar charges		(140)	(46)	(186)
Profit before taxation		8,773	9,288	18,061
Irrecoverable withholding tax		(69)	-	(69)
Profit after taxation		8,704	9,288	17,992
Earnings per ordinary share (pence)	2	4.67p	4.98p	9.65p

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS (refer to note 1).  The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement are derived from continuing operations.

No operations were acquired or discontinued in the year.

Audited Income Statement

For the year ended 30 June 2010

	Year ended 30 June 2010
		£'000	£'000	£'000
	Notes	Revenue	Capital	Total
Capital gains on investments
Gains on investments		-	15,234	15,234
Exchange gains		-	55	55
Revenue
Investment Income		7,754	-	7,754
		7,754	15,289	23,043
Expenses
Investment management fee		(528)	(176)	(704)
Other expenses		(367)	-	(367)
Total expenses		(895)	(176)	(1,071)
Profit before finance costs and taxation		6,859	15,113	21,972
Finance costs
Interest payable and similar charges		(117)	(39)	(156)
Profit before taxation		6,742	15,074	21,816
Irrecoverable withholding tax		(62)	-	(62)
Profit after taxation		6,680	15,074	21,754
Earnings per ordinary share (pence)	2	4.36p	9.83p	14.19p

 Audited Balance Sheet

		As at	As at
		30 June 2011	30 June 2010
	Notes	£'000	£'000
Non-current assets
Investments held at fair value		130,773	88,933
Current assets
Other receivables		3,982	2,581
Cash and cash equivalents		15	53
		3,997	2,634
Total assets		134,770	91,567
Current liabilities
Bank loan facility		(12,927)	(10,166)
Other payables		(1,230)	(161)
Total liabilities		(14,157)	(10,327)
Net assets		120,613	81,240
Stated capital and reserves
Stated capital account		57,567	29,455
Special distributable reserve		50,385	50,385
Capital reserve		5,469	(3,819)
Revenue reserve		7,192	5,219
Equity shareholders' funds		120,613	81,240
Net asset value per ordinary share (pence)	3	59.30p	52.99p

Audited Statement of Changes in Equity

For the year ended 30 June 2011

		Stated	Special
		capital	distributable	Capital	Revenue
		account	reserve+	reserve	reserve#	Total
		£'000	£'000	£'000	£'000	£'000
At 1 July 2010		29,455	50,385	(3,819)	5,219	81,240
Total comprehensive income for the year:
Profit for the year		-	-	9,288	8,704	17,992
Transactions with owners recognised directly in equity:
Dividends paid		-	-	-	(6,731)	(6,731)
Issue of shares		28,112	-	-	-	28,112
At 30 June 2011		57,567	50,385	5,469	7,192	120,613

Audited Statement of Changes in Equity

For the year ended 30 June 2010

		Stated	Special
		capital	distributable	Capital	Revenue
		Account*	reserve+	reserve	reserve#	Total
		£'000	£'000	£'000	£'000	£'000
At 1 July 2009		29,455	50,385	(18,893)	4,134	65,081
Total comprehensive income for the year:
Profit for the year		-	-	15,074	6,680	21,754
Transactions with owners recognised directly in equity:
Dividends paid		-	-	-	(5,595)	(5,595)
At 30 June 2010		29,455	50,385	(3,819)	5,219	81,240

# The balance on the revenue reserve of £7,192,000 (2010: £5,219,000) is available for paying  dividends.

+ The balance on the special distributable reserve of £50,385,000 (2010: £50,385,000) is treated as distributable profits available to be used for all purposes permitted by Jersey company law including the buying back of shares, the payment of dividends and the payment of preliminary expenses.

* Following a change in Jersey Company Law effective 27 June 2008 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.

Audited Cash Flow Statement

	Year	Year
	Ended	Ended
	30 June 2011	30 June 2010
	£'000	£'000
Operating activities
Profit before finance costs and taxation	18,247	21,972
Gains on investments	(9,612)	(15,234)
Exchange losses/ (gains)	303	(55)
Increase in other receivables	(739)	(590)
Decrease in other payables	(3)	(20)
Net cash inflow from operating activities before interest and taxation	8,196	6,073
Interest paid	(172)	(248)
Irrecoverable withholding tax paid	(69)	(62)
Net cash inflow from operating activities	7,955	5,763
Investing activities
Purchases of investments	(67,245)	(48,796)
Sales of investments	35,413	36,955
Net cash outflow/(inflow) from investing activities	(31,832)	(11,841)
Financing
Equity dividends paid	(6,731)	(5,595)
Drawdown of bank loan facility	2,761	2,166
Issue of ordinary shares	28,112	299
Net cash inflow/(outflow) from financing	24,142	(3,130)
Increase/(decrease) in cash and cash equivalents	265	(9,208)
Cash and cash equivalents at the start of the year	(10,113)	1,206
Drawdown of bank loan facility	(2,761)	(2,166)
Exchange (losses)/gains	(303)	55
Cash and cash equivalents at the end of the year+	(12,912)	(10,113)
Dividend income received	992	658
Interest on fixed interest securities received	8,392	6,629

⁺ Cash and cash equivalent includes cash held at bank and bank loan facility.

Principal Risks and Uncertainties

The Company's assets consist principally of listed fixed interest securities and its principal risks are therefore market related.  The Company is also exposed to currency risk in respect of the markets in which it invests. Other risks include the following:

·      External risks - any events or developments which can affect the general level of share prices including, for instance, terrorism, disease, protectionism, inflation or deflation, economic recessions and movements in interest rates.

·      Investment and strategic - inappropriate strategy, asset allocation (including use of gearing), diversification and stock selection could all lead to poor returns for shareholders.

·      Regulatory - breach of regulatory rules could lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. 

·      Operational - failure of the Investment Manager's systems or disruption to the Investment Manager's business, or that of third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.

·      Financial - inadequate controls by the Investment Manager or other third party service providers could lead to misappropriation of assets.  Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of laws, rules or regulations.

The Board seeks to mitigate and manage these risks through continual review, policy setting and reliance upon contractual obligations.  It also regularly monitors the investment environment and the enforcement of the Company's investment portfolio, and applies the principles detailed in the internal control guidance issued by the Financial Reporting Council.

Statement of Directors' Responsibilities in Respect of the Annual Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules, the Directors confirm that to the best of their knowledge, in respect of the annual report for the year ended 30 June 2011, of which this statement of results is an extract:

·      The financial statements, have been prepared in accordance with applicable International Financial Reporting Standards, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      The Chairman's Statement and Investment Manager's Review include a fair review of the important events that have occurred during the financial year and their impact on the financial statements;

·      'Principal Risks and Risk Management' includes a description of the Company's principal risks and uncertainties; and

·      Note 6 and the Annual Report includes details of related party transactions that have taken place during the financial year.

On behalf of the Board

JG West

Chairman

23 September 2011

Notes (audited)

1.   The annual results which cover the year to 30 June 2011 have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the International Accounting Standards Board (IASB) and in accordance with the guidance set out in the Statement of Recommended Practice ('SORP') for investment trust companies and venture capital trusts issued by the Association of Investment Companies ('AIC') in January 2009.

Statements and amendments not yet effective

The following standards have been issued but are not effective for this accounting period and have not been adopted early:

·      In November 2009, the IASB issued IFRS 9 'Financial Instruments' which becomes effective for accounting periods commencing on or after 1 January 2013.  This represents the first of a three-part project to replace IAS 39 'Financial Instruments; Recognition and Measurement'.  The objective of the standard is to enhance the ability of investors and other users of financial information to understand the accounting of financial assets and to reduce complexity.

·      In May 2010, the IASB issued improvements to IFRS for 2010 which will become effective for periods commencing on or after 1 January 2011.  These cover eleven amendments to six standards, none of which are expected to materially affect the Company.

The Company does not consider that the future adoption of any new standards, in the form currently available, will have any material impact on the financial statements as presented.

2.    Earnings per ordinary share

       The revenue earnings per ordinary share is based on the net profit after taxation of £8,704,000 (2010: £6,680,000) and on 186,387,820 (2010: 153,303,028) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

       The capital profit per ordinary share is based on a net capital profit of £9,288,000 (2010: £15,074,000) and on 186,387,820 (2010: 153,303,028) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

3.    Net asset value per ordinary share

       The net asset value per ordinary share is based on net assets of £120,613,000 (2010: £81,240,000) and on 203,404,249 (2010: 153,303,028) ordinary shares, being the number of ordinary shares in issue at the year end.

4.    Dividends

       A fourth interim dividend in respect of the year ended 30 June 2011 of 1.32p per ordinary share was paid on 26 August 2011 to shareholders on the register on 29 July 2011.  In accordance with IFRS this dividend has not been included as a liability in these accounts and will be recognised in the period in which it is paid.

5.     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 in pursuit of its investment objective. The Company uses flexible borrowing for short term purposes, and to seek to enhance the returns to shareholders, when considered appropriate by the Investment Manager.

Investments held are valued at fair value. For listed securities this is either bid price or the last traded price depending on the convention of the exchange on which the investment is listed. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet. The fair value of the loan is not materially different from the carrying value in the Balance Sheet.

The main risks that the Company faces arising from its financial instruments are:

(i)  market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;

(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 overdraft and or that the Company may not be able to liquidate quickly its investments.

Market price risk

Market 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 Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. 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. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy.

Interest rate risk

Financial assets

Bond 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. Returns from bonds and preference shares are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. Consequentially, if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond 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 rate risk on fixed interest instruments is considered to be part of market price risk as disclosed above.

Floating rate

When the Company retains cash balances they are held in floating rate deposit accounts. The benchmark rate which determines the interest payments received on interest bearing cash balances is the UK bank base rate, which was 0.5 per cent at 30 June 2011.

Financial liabilities

The Company may utilise the bank loan facility to meet any liabilities due. The Company has borrowed in sterling at a variable rate of interest based on the UK bank base rate. The Board sets borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis.

At the year end, the Company had borrowings of £12,927,000 from HSBC Bank plc.

Fixed rate

The Company holds fixed interest investments.

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.

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 balance sheet date. Credit risk on unlisted instruments is considered to be part of market price risk.

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 issued. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.

The cash held by the Company and all the assets of the Company which are traded on a recognised exchange are held by HSBCBank plc ('HSBC'), the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to the cash and securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports.

Should the credit quality or the financial position of HSBC deteriorate significantly the Investment Manager will move the cash holdings to another bank.

The Company did not have any exposure to any financial assets which were past due or impaired at the year end.

There were no significant concentrations of credit risk to counterparties at 30 June 2011. No individual investment exceeded 4.3 per cent of the net assets attributable to the Company's shareholders at 30 June 2011.

Liquidity risk

The Company's financial instruments include investments in unlisted 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 at an amount close to their fair value.

The Company's listed securities are considered to be readily realisable.

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.

The Company maintains sufficient cash, has a short term bank loan facility and readily realisable securities to pay accounts payable and accrued expenses.  The Company also maintains sufficient cash and readily realisable securities to meet any demand repayment on its overdraft facility.

6.    Related parties

The following are considered related parties: the Board of Directors ("the Board") and CQS/New City Investment Managers.

Mr G Breeze is a Director of the Company and on 23 November 2010 purchased 3,466,204 shares of the Company at a price of 57.70 pence per share pursuant to the placing and public offer for subscription.

Mr G Ross, a Director, is a Director of the Company Secretary and Administrator, R&H Fund Services (Jersey) Limited which receive fees from the Company. Administration fees for the year were £16,500 (2010: £15,000).

Canaccord Genuity Limited provides advisory and brokerage services to the Company.  Mr J. West, a Director, is Chairman of Canaccord Genuity Limited.

All transactions with related parties are carried out at an arms length basis.

There are no other transactions with the Board other than aggregated remuneration for services as Directors and there are no outstanding balances with the Board at the year end.

7.    Bank loan facility

On 9 October 2009 the unsecured bank loan facility with the Allied Irish Bank was fully repaid.  On this date a short form overdraft facility was agreed with HSBC Bank Plc.  This facility allows up to 20 per cent of the value of shareholders' funds to be borrowed with the drawn down amount repayable on demand.  As at the year end the unsecured loan facility had a limit of £20.0 million of which £12.9 million was drawn down at the year end.

8.     Financial information

These are not full statutory accounts for the year ended 30 June 2011.  The full audited annual report and accounts for the year ended 30 June 2011 will be sent to shareholders in October 2011 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The full audited accounts for the period ended 30 June 2010, which were unqualified, have been lodged with the Registrar of Companies.

9.    The report and accounts for the year ended 30 June 2011 will be made available on the website www.ncim.co.uk.  Copies may also be obtained from the Company's registered office, Ordnance House, 31 Pier Road, St. Helier, Jersey, JE4 8PW, Channel Islands

Enquiries:

Ian Francis, New City Investment Managers:                    020 7201 5366

Martin Cassels, UK Administrator                                    020 7628 8000

 

END

 

 

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