Interim Management Statement

City Merchants High Yield Trust Limited                    

                         Interim Management Statement                          

                   for the Three Months ended 30 September 2014                   

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

The Company became an AIF, or Alternative Investment Fund, under the EU
Alternative Investment Fund Managers Directive on 22 July 2014. The Company has
appointed Invesco Fund Managers Limited as its AIFM, or Alternative Investment
Fund Manager, and BNY Mellon Trust & Depositary (UK) Limited as its depositary,
both effective from 22 July 2014. The portfolio managers responsible for the
portfolios on a day to day basis have not changed and nor has the custodian,
The Bank of New York Mellon. However, they now operate under delegated
authority from the contracted AIFM and depositary.

In the three months to 30 September 2014 the Company issued 1,275,000 ordinary
shares at an average price of 188.56p. The Company has issued a further 200,000
ordinary shares, at an average price of 186.54p since 30 September 2014.

Dividends

The Company paid a second interim dividend of 2.5 pence per ordinary share on
22 August 2014 in respect of the period ending 31 December 2014. The Company
has declared a third interim dividend, in respect of the year ending 31
December 2014, of 2.5 pence per ordinary share, which will be paid on 21
November 2014 to shareholders on the register on 24 October 2014. The Board
continues to target total dividends of 10 pence for the current year.

Market Background

Bond market returns over the quarter were driven by interest rate expectations,
further deterioration of the European economy and wider geopolitical concerns.
Persistent low inflation and low economic growth in the Eurozone made investors
more cautious and, as a result, demand for higher quality credits increased.
Measures taken by the European Central Bank (ECB) and expectations of further
policy actions intensified this bias toward quality. So far, the ECB has cut
its policy rates, announced a program to purchase private sector bonds and
provided cheap loans to banks to lend on to corporates. To date, these measures
have not been effective and market expectations have increased that full blown
quantitative easing will be required. This expectation has pushed government
bond yields lower. As a consequence, higher quality corporate bonds with a
higher sensitivity to interest rate change outperformed those of lower credit
quality.

In contrast to Europe, positive economic growth in the US and UK has raised
interest rate expectations; however, geopolitical uncertainty in the Middle
East and Ukraine, as well as the situation in Europe, has helped suppress bond
yields in both countries.

Alongside the macro concerns, there was a reminder of company specific risk
with two high profile companies blowing up. Portuguese group Banco Espirito
Santo was forced to restructure in July and Phones 4U collapsed in September.
Both companies' difficulties led to an increase in the level of market
volatility.

According to data from Merrill Lynch, on a sterling hedged basis, European
currency high yield bonds had a total return in the quarter of -0.7%. There was
however considerable variance within the sector: CCC and below rated bonds
returned -6.4% whilst BB rated returned +0.5%. Meanwhile, Euro investment grade
corporate bonds returned 1.9% and sterling investment grade returned 2.8%.
Gilts returned 3.9%. The aggregate yield of the European currency high yield
market rose to 4.82%.

Portfolio Strategy & Outlook

Over the 3 months to 30 September 2014 the NAV total return for the company was
-0.9%. However, whilst parts of the high yield sector experienced significant
drops in demand, particularly during late July/early August, the City Merchants
High Yield Trust continued to trade at a premium to its NAV throughout the
period.

High yield bond yields remain low by historical standards but they are
relatively high compared to core government bond yields. This is particularly
the case in Europe where Bund yields are negative out to 3 years. 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, ongoing
structural reform and the implementation of new, more conservative banking
sector regulations should remain supportive of legacy subordinated bank debt.
We also see areas of value in hybrid debt securities. We feel the excess yield
available in return for the subordination risk on these securities can be
attractive, typically a 1-2% pick up in yield over equivalent senior bonds. Our
investments here are focused on issuers with strong balance sheets, mainly in
utility, telecom and insurance names. Our outlook is relatively defensive, with
a bias toward higher quality credits.

We have taken the opportunity of recent weakness in the sector to add some
selective exposure to higher quality high yield names. For example, we added a
new issue by Pizza Express and in the secondary market added exposure to
clothing manufacturer Takko. In line with our overall defensive stance we are
not using the loan facility and are maintaining a significant cash level. In
more volatile markets this positions us, as a provider of liquidity, to be able
to drive hard bargains.

Paul Read, Paul Causer, Rhys Davies
Portfolio Managers
15 October 2014



Performance - Total Return

                                  3 Months      1 Year     3 Years     5 Years
                                                                              
Share Price                          -0.8%       18.0%       46.6%       70.0%

Net Asset Value                      -0.9%        8.6%       48.1%       72.7%

Source: Thomson Reuters Datastream



Share Price and Discount

                                        As at                                  
                                 30 September    For the Three Months Ended    
                                         2014         30 September 2014        
                                                    High        Low     Average
                                                                               
Ordinary Shares mid-market             186.50     191.00     183.00      187.69
price (pence) 
                                                                 
(Premium)/Discount                     (1.8)%                                  

Source: Thomson Reuters Datastream



Assets and Gearing

                                            30 September 2014
                                                             
Total Gross Assets (£m)                                 145.0
                                                             
of which cash (£m)                                        6.3
                                                             
Borrowings (£m)                                             -
                                                             
Total Shareholders' Funds (£m)                          145.0
                                                             
Cum Income Net Asset Value (pence)                      183.2
                                                             
Net Cash                                                 4.4%

`Gross Gearing' reflects the amount of gross borrowings 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 its gearing.

.

Bond Rating

                                  30 September 2014
                                                   
A-                                             0.8%
                                                   
BBB+                                           9.4%
                                                   
BBB                                            5.1%
                                                   
BBB-                                           1.9%
                                                   
BB+                                           14.0%
                                                   
BB                                             7.2%
                                                   
BB-                                            9.6%
                                                   
B+                                            14.2%
                                                   
B                                             10.5%
                                                   
B-                                             3.9%
                                                   
CCC+                                           3.0%
                                                   
CCC                                            0.1%
                                                   
NR (including equity)                         20.3%
                                                   
                                             100.0%

.

Top Ten Holdings

Ranking   Top Ten Holdings                                                 % of
Now                                                                   Portfolio
                                                                               
1         Lloyds Banking     7.875% Perpetual, 7% Var Perpetual            5.2%
          Group                                                                
                                                                               
2         Aviva              6.125% Perpetual, 8.875% Preference           3.9%
                                                                               
3         Société Genérale   8.875% FRN Perpetual, 8.25% Perpetual,        3.7%
                             7.875% FRN Perpetual                              
                                                                               
4         Premier Farnell    89.2p Convertible Preference                  3.0%
                                                                               
5         General Motors     Wts 10 Jul 2019, Wts 10 Jul 2016              3.0%
                                                                               
6         Credit Agricole    7.589% FRN Perpetual, 8.125% Perpetual,       2.8%
                             7.5% Var Perpetual                                
                                                                               
7         Standard Chartered 9.5% FRN Perpetual, 5.7% 26 Mar 2044,         2.5%
                             5.125% 06 Jun 2034Perpetual                       
                                                                               
8         Telefonica Europe  6.75% Perpetual, 5.875 Perpetual              2.5%
                                                                               
9         Iron Mountain      6.75% 15 Oct 2018, 8.125 15 Sep 2022          2.5%
                                                                               
10        Intesa Sanpaolo    8.375% FRN Perpetual                          2.2%

.

Changes to Share Capital

                               Ordinary Shares of no par
                                                   value
                                                  Issued
                                                        
As at 30 June 2014                            77,861,327
                                                        
Ordinary shares bought back                            0
                                                        
Ordinary shares issued                         1,275,000
                                                        
As at 30 September 2014                       79,136,327

The Company has issued a further 200,000 ordinary shares since 30 September
2014.

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 2014



Registered Office
Ordnance House, 31 Pier Road,
St Helier, Jersey, JE4 8PW
Registered in Jersey No 109714
In accordance with the Companies (Jersey) Law 1991
Regulated by the Jersey Financial Services Commission