New City High Yield Fund Ltd : Interim Manageme...

To:      THOMSON REUTERS
Date:  16 November 2012
From: New City High Yield Fund Limited

Interim Management Statement

For the Three Month Period from 1 July 2012 to 30 September 2012

Investment Objective

The investment objective of the Company is to provide investors with a high dividend yield and the potential for capital growth by investing mainly in high yielding fixed interest securities.

Performance Summary

Total Return	For the three month period ended 30 September 2012
Net asset value per share	+6.2%
Ordinary share price	+9.7%

Capital Values	As at  30 September 2012	As at 30 June 2012	% Change
Net assets	£128.7 million	£124.1 million
Net asset value per share	58.44p	56.36p	+3.7%
Share price	63.00	58.75p	+4.3%
Premium	7.8%	4.2%
Gearing (100 = nil geared position) *	107	106

• Gearing = Total assets ÷ Equity Shareholders' Funds 

Review for the Period:

The first three months of the new financial year continued to be dominated by the European sovereign debt crisis, with Spain in the crosshairs, and the smaller banks and the regional governments needing emergency funding to avoid becoming bankrupt.  This culminated in one of the most aggressive statements from the European Central Bank (ECB) President, Mario Draghi, saying "within our mandate, the ECB is willing to do whatever it takes to preserve the Euro, and, believe me it will be enough .. " plus "To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmissions channel, they come within our mandate .."  At the time it was expected in Europe that Spain would apply for a bail out in double quick time, which would allow a period of calm to reign in Europe.  The politicians, however, managed to look hard for a banana skin; the Spanish Deputy Prime Minister duly found it, asking in a public forum "how much the ECB intended to spend on the purchase of Spanish bonds if a bail out was requested?".  One may ask which part of the "unlimited", stated by Mario Draghi, did he not understand?  Any figure given to markets proves a target for speculators to aim at and further destabilise the system.  Add to this the dangerous game of chicken being employed by the Spanish Prime Minister by not requesting a bail out in the hope that the market continues to fund them.

The other major feature of the quarter was the third tranche of Quantitative Easing (QE3) which had a large positive effect initially on commodity prices (gold in particular) and has had a longer term effect on equity and high yield markets.

The performance of the high yield asset class in Europe is best shown by the iTraxx xover generic 5 year index (which takes the margin of 80 European high yield credit default swaps on the most liquid non-investment grade corporate entities) starting the period at 646bp, tightened to 460bp in the middle of September and widening again at the end of the quarter to 568bps.

The Company announced and paid its fourth interim dividend of 1.37p, up from 1.32p last year, to make a total of 4.01p for the financial year versus 3.87p in the previous year - an increase of 3.62%.

Top Ten Holdings as at 30 September 2012

Company	Sector	Percentage of total assets
Balfour Beatty 10.75% Pref	Construction	3.6
REA Finance 9.5% 2017	Food products	3.5
Antares Energy 10% 2013	Oil and Gas	3.5
Cable & Wireless 8.625% 2019	Telecommunications	3.0
Skipton 10% 2018	Financial	2.3
Northland Resources 13% 2017	Mining	2.1
Phoenix Life 7.25% 2049	Insurance	2.1
House of Fraser 8.875%	Retail	2.1
Southern Water 8.5%	Utilities	2.0
Direct Line Insurance 9.25% 2042	Insurance	2.0
Total		26.2

Analysis of Investments by Currency as at 30 September 2012

	Percentage of total investments
Sterling	57
US Dollar	16
Australian Dollar	10
Euro	3
Norwegian Krone	7
Swedish Krone	4
Canadian Dollar	3
Total	100

Analysis of Investments by Asset Class as at 30 September 2012

	Percentage of total investments
Bonds	78
Convertibles	12
Preference shares	6
Equities	4
Total	100

Analysis of Investments by Quotation as at 30 September 2012  

	Percentage of total investments
Listed/Quoted on a recognised investment exchange	98
Unquoted (convertible into a security quoted on a recognised exchange)	1
Unquoted	1
Total	100

Significant Events or Transactions since 30 September 2012
A first interim dividend for the year to 30 June 2013 of 0.90p per share was declared on 25 October 2012, an increase of 2.3% on the first interim dividend paid last year.  This dividend is payable to shareholders on the register on 2 November 2012 and will be paid on 30 November 2012.

The Board is not aware of any other significant events or transactions which have occurred since 30 September 2012 and the date of publication of this statement which would have a material impact on the financial position of the Company.

Daily and Key Information
Further information regarding the Company including the share price and the recent monthly fact sheet, can be found at the Investment Manager's website www.ncim.co.uk

Disclaimer
This interim management statement has been prepared solely to provide information to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules.

For further information please contact:
Ian Francis, New City Investment Managers    
020 7201 5366

Martin Cassels, R&H Fund Services Limited
0131 625 2951

---

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: New City High Yield Fund Ltd via Thomson Reuters ONE

HUG#1658766