New City High Yield Fund Announcements

RNS Number : 0845H New City High Yield Fund Limited 31 October 2008  
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To: RNS
Date: 31 October 2008
From: New City High Yield Fund Limited

Interim Management Statement 

For the Three Month Period from 1 July 2008 to 30 September 2008

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 2008
Net asset value per share 
-8.2%
Ordinary share price 
-10.7%

Capital Values
As at
 30 September
 2008
As at 
30 June
 2008
% Change
Net assets
£63.9 million   
£71.1 million

Net asset value per share
45.87p
51.03p
-10.1%
Share price 
46.0p
52.5p
-12.4%
Premium 
0.3%
2.9%

Gearing (100 = nil geared position) *
125
122
* Gearing = Total assets ÷ Equity Shareholders' Funds

Review for the Period:
Extreme volatility and market uncertainty has continued throughout the quarter under review. To state the very obvious, the last three months have seen the worst decimation of capital in history; Commodities, Debt, Equity, Real Estate - no area left untouched. There has been little discrimination between good and bad. The bad are sold for the obvious reasons and the good because there may be liquidity in their paper.

As the time of writing, it looks as if the Global Intervention is beginning to work with LIBOR rates in major currencies falling a little day by day. This looks to have stemmed the flow of negative news from the Banks at least in the short term. The next problem is to get the Banks to start to lend to corporates; easier said than done!  
Current levels of the I-TRAXX Crossover Index at around 780bp are implying a default rate of near on 50% of the Index stocks in the next five years. All debts, both investment grade and non investment grade, are trading wider than the height of the 1929-35 depression.
  
What does this mean for the fund? Quite simply opportunity. With many funds de-leveraging and others having redemptions, this allows us to buy assets at some very distressed levels. Whilst our holdings will subject us to the volatile markets, we feel we are well positioned to weather the storms and, importantly, income projections are secure.

During the quarter to 30 September 2008, the Company invested a further £7.4 million into new and existing holdings. These investments included £2.0 million into REA Finance, a palm oil business, and their 9.5% 31/12/17 bonds, and £1.2 million into the Athabasca Oil Sands 13% 30/7/11 bonds. A further £0.9 million was also added to the Company's holding in London Mining 11.5% 26/4/12 for continued exposure to the Norwegian Kroner with an increased yield. This proved successful when London Mining was obliged to call its bonds on 1 October 2008 at 110 some 10% above the level the bonds were trading at. 

During the quarter investment realisations totalled £5.6 million which included the Chemetall 9%, Dyno Nobel and REA Holdings 9% preference shares.  

On 18 July 2008, one of the Company's listed investments (FibreGen 8% CV 30/06/10) was suspended.  As a result the investment has been revalued at 20p per unit as opposed to the previous price of 107.5p per unit. The Investment Manager continues to work to ensure the Company's interests are protected in respect of the investment.

Dividend:
A fifth interim dividend for the period to 30 June 2008 of 1.02p per share was paid on 29 August 2008 to shareholders on the register on 1 August 2008.

Top Ten Holdings as at 30 September 2008
Company
Sector
Percentage of total assets
Balfour Beatty 10.75% CCP
Construction
6.3
BRIT Insurance 8.5% CULS 31/12/08
Insurance
4.9
REA Finance 9.5% 31/12/17
Palm oil
4.7
Cable & Wireless 8.625% 25/03/19
Telecom
3.3
London Mining 11.5% 26/04/12
Mining
3.3
Collins Stewart Tullett 8.25% 12/08/14
Financial
3.0
Iron Mountain 7.25% 15/04/14
Commercial Services
2.3
Alliance Pharma 8% CV 31/12/13
Pharmaceuticals
2.2
FMG Finance 9.75% 01/09/13
Mining
1.8
Katanga Mining 14% 30/11/13
Mining
1.8

Total

33.6

  
Analysis of Investments by Currency as at 30 September 2008

Percentage of total investments 
Sterling
50
Euro
14
US Dollar
10
Norwegian Krone
10
Australian Dollar
8
Canadian Dollar
8
Total
100
Analysis of Investments by Asset Class as at 30 September 2008

Percentage of total investments 
Bonds
61
Convertibles
27
Preference shares
8
Equities
4
Total
100
Analysis of Investments by Quotation as at 30 September 2008

Percentage of total investments 
Listed/Quoted on a recognised investment exchange
86
Unquoted (convertible into a security quoted on a recognised exchange)

9
Unquoted
5
Total
100
Significant Events or Transactions since 30 September 2008
A first interim dividend for the year to 30 June 2009 of 0.85p per share was declared on 22 October 2008. This dividend is payable to shareholders on the register on 31 October 2008 and will be paid on 24 November 2008.

Since the end of the period, uncertainty and market volatility have reached unprecedented levels causing substantial declines in equity and debt values world-wide. At 29 October 2008 the Company's NAV was 39.87p per share after providing for the first interim dividend of 0.85p per share.

The Board is not aware of any other significant events or transactions which have occurred since 30 September 2008 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 

For further information please contact:

Richard Lockwood or Ian Francis 
New City Investment Managers Limited
020 7201 6900
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