QHI Quartrly.Hit

RNS Number:5741M
Quarterly High Income Trust PLC
2 November 2001


2 November 2001


               The Quarterly High Income Investment Trust P.L.C

(Incorporated and registered in England and Wales under the Companies Act 1985
                         with registered no 2691478)

                                  St Helen's

                                 1 Undershaft

                               London EC3P 3DQ


                              Financial Position



Overview

The Company currently has total gross assets of #119.3 million which are
represented as follows:

Bank borrowings in euros        #12.4 million

Bank borrowings in sterling     #71.8 million

Zero Dividend Preference Shares (at current entitlement)     #35.1 million

Ordinary Shares     #0 million

As at 26 October 2001 (the latest practicable date before this announcement),
the net asset value of a Zero Dividend Preference Share was 120.3p and of an
Ordinary Share was nil pence. The market prices of these Shares, being the
middle market price at the close of business on that date, were 43p and 6.5p,
respectively.

The Company has an issued share capital of 29,525,200 Zero Dividend Preference
Shares and 103,915,591 Ordinary Shares.

Morley Fund Management act as the managers to the Company.

Banking Facilities

The Company has Loan facilities amounting to #71,750,000 and 20,000,000 euros.
These have been syndicated with a group of banks for which Chase Manhattan
International Limited is the agent. The Loan Agreement currently requires that
the amount of the Company's total borrowings shall not exceed 125 per cent. of
its adjusted net asset value. So as to avoid a breach of this covenant, the
Company has entered into an arrangement with the lending banks under which the
Company has deposited a sum of #35 million into an escrow account with Chase
Manhattan International Limited as security and in return is permitted to
offset the deposited sum against the amount of its outstanding borrowings
until 31 December 2001. The lending banks will thereafter consider whether or
not to extend this arrangement. The lending banks have also agreed to allow
the debt to net asset value test to be amended until 19 November 2001 to 150
per cent. from the current 125 per cent. As at the date of this announcement,
the Company complies with this test.

The cash deposited into the escrow account is treated as having effectively
repaid that portion of the Company's liabilities for the purpose of the debt
to net assets test set out above. On this basis, as at 26 October 2001, total
borrowings amounted to 140 per cent. of the Company's adjusted net asset
value.

The interest rates payable under the loan facilities are 7.15 per cent. on the
sterling loan and 6.355 per cent. on the euro loan. These interest rates have
been fixed by an interest rate swap agreement until the Planned Winding-up
Date of the Company on 30 March 2007. In the event that the interest rate swap
agreements are terminated the Company will be liable to breakage costs. These
would amount to around #4.5 million.

Investment Objective and dividend profile

The Company's current investment objective is to provide a high dividend yield
whilst seeking to repay the Ordinary Shares 127p (being the net asset value of
the Company on 30 April 1999 immediately following its reorganisation) and
also to achieve the level of capital return necessary to meet the
pre-determined capital entitlement of the Zero Dividend Preference Share of
181.7p on the expected winding up date of 30 April 2007.

The Company is an investment company for the purpose of the Companies Act. As
such it can pay dividends out of its accumulated revenue profits without
regard to capital losses. However it may only do so if, at the relevant time
as shown in the appropriate set of accounts, the amount of its assets is at
least one and half times its aggregate liabilities and the payment of the
dividend does not reduce the assets below this level. As at 26 October 2001
the Company's assets amounted to 1.42 times its liabilities. Currently this
means that the interim dividend payment in December 2001 will probably be
suspended unless the Company's assets increase sufficiently prior to the
ex-dividend date of 24 November 2001.

Investment Policy and Portfolio

The Company's policy is to invest predominantly in geared ordinary shares and
income shares of split capital investment companies with the balance being
invested in fixed income securities. The assets of the Company include many
split capital investment companies and trusts which are themselves geared by
bank loans or other forms of gearing and some split capital trusts which
themselves partly invest or wholly in other split capital investment
companies.

The Company's portfolio is currently comprised of #39.6 million of cash and #
79.7 million of investments in geared ordinary and other shares issued by
split capital investment companies.

The split capital investment company portfolio comprises holdings in 69
different companies providing diverse geographic and sector exposure. The top
twenty holdings are:

                       Top 20                              #m          % of
                                                                       Fund

Morley Absolute Growth Units                             4.750        3.98%
Global Opportunities Units                               4.092        3.43%
European Monthly Income                                  3.984        3.34%
JZ Equity                                                3.448        2.89%
BFS Managed Properties                                   2.633        2.21%
Legg Mason Strategic                                     2.520        2.11%
Royal London UK Equity & Income                          2.437        2.04%
Jupiter Dividend & Growth                                2.160        1.81%
American Monthly                                         2.086        1.75%
BFS Asian Assets Units                                   2.070        1.73%
European Assets                                          2.060        1.73%
Murray Emerging                                          1.966        1.65%
Acorn Income                                             1.927        1.62%
Real Estate Opportunities                                1.868        1.57%
US Growth & Income                                       1.860        1.56%
Property Income & Growth                                 1.820        1.53%
Geared Opportunities                                     1.738        1.46%
Global High Yield Bond                                   1.650        1.38%
Premier Pacific                                          1.482        1.24%
LeggMason American                                       1.479        1.24%
Top 20                                                   48.030       40.25%

The dramatic decline in the net asset value of the Company is a result of the
performance of certain elements of the Company's split capital investment
trust portfolio in recent months and the downward impact on the Company's
assets of the high level of gearing.

Options available to the Company

In the light of the financial position described above, the Directors and the
Manager are considering the alternatives available to the Company at this time
and are taking advice from UBS Warburg Ltd.. The Company and the Manager
continue in their discussions with the lending banks.

Enquiries

Quarterly High Investment Trust

Robert Brooks      01420 562 280

David Keen         020 7809 6007

Morley Fund Management Ltd.

Gerard Quirke      020 7809 6000

Neil Smith         020 7809 6151

David Keen         020 7809 6007

UBS Warburg Ltd.

Will Rogers        020 7568 2939

John Szymanowski   020 7568 4219

Alex Bance         020 7568 2506

Grandfield

Fiona Monro        020 7417 4170

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