Interim Management Statement

RNS Number : 5580A
Queen's Walk Investment Limited
04 August 2008

Queen's Walk Investment Limited (the "Company")
4 August 2008

This interim management statement relates to the period from 31 March 2008 to 4 August 2008 and has been prepared solely in order to
comply with the requirement (pursuant to the EU Transparency Directive as implemented by the Disclosure and Transparency Directive) for an
interim management statement to be made by the Company no earlier than 9 June 2008 and no later than 19 August 2008. The Company is
currently in the process of preparing its quarterly report for the period ended 30 June 2008 and this is expected to be released in
September 2008. The Company wishes to make clear that unless otherwise noted, the financial information provided in this interim management
statement (and the asset valuations underlying that financial information) are as at 31 March 2008 and that such financial information (and
underlying valuations) will be stated as at a more recent date in the Company's forthcoming quarterly report.

Performance Summary

In the quarter ended 31 March 2008, the Company estimated cash flows for the June quarter of EUR12 million. Actual cash flows recorded
in the quarter ended 30 June 2008 exceeded EUR12.2 million. The Company had a net cash balance in excess of EUR31m at 30 June 2008 (after
taking into account payment of the dividend on 18 July 2008). Net leverage as at 31 March 2008 was 6.2%.

As at 31 March 2008, the company's NAV was EUR6.42 per share down from a NAV of EUR6.90 per share as at 31 December 2007. A significant
proportion of the fair value write downs that have been effected by the Company in the quarter ended 31 March 2008 are attributable to
higher market discount rates and therefore do not impact the ability of the assets to generate cash. The Company reflected the expected
deterioration in the UK and continental European mortgage markets in its cash flow forecasts as at 31 March 2008.

Since 18 July 2007, the Company has returned in excess of EUR50 million of capital to shareholders using a combination of on-market
share repurchases pursuant to its general authority and off-market tender offers. In the past year, the Company has completed two tender
offers of EUR20 million and EUR15 million respectively. At present, the discount in the share price to the 31 March 2008 NAV, provides an
opportunity for the Company to continue with its share buyback programme and add value for existing shareholders. On 21 July 2008, the
Company announced its intention to conduct a fixed price tender offer of EUR15 million at EUR5 per share. The Company will hold an EGM on 12
August 2008 to seek shareholder approval of the proposed tender offer.

Given current market opportunities the Company intends to balance the return of capital with new investments. The Company will continue
with its share buy back programme in the near term and will seek approval at its forthcoming AGM on 4 September 2008 for a general buyback
authority to repurchase up to 14.99% of shares outstanding at that date.

Investment Portfolio

The tables below summarise the Company's investment portfolio as at 31 March 2008.

Portfolio Composition by Jurisdiction as at 31 March 2008*
*By reference to underlying asset jurisdiction. Figures stated as a percentage of the fair value of the Company's residual investments
including accrued interest.

Jurisdiction %
Portugal 30.7%

UK 30.6%

Germany 17.9%

Italy 12.9%

Holland 6.7%

CDO 1.2%

US 0.04%

Portfolio Composition by Asset Type as at 31 March 2008*
*By reference to underlying asset collateral. Figures stated as a percentage of the fair value of the Company's residual investments
including accrued interest.

Portfolio Composition %
Prime 44.9%

SME 24.6%

NearPrime 15.8%

SubPrime 13.6%

CDO 1.2%

As at 28 July 2008, the securitisations to which the Company had exposure through its investment portfolio were:

Issuer Description of Underlying Assets
Alba 2005-1 plc UK non-conforming and buy-to-let residential mortgages
Alba 2006-1 plc UK non-conforming residential mortgages, primarily first-ranking
Amstel Corporate Loan Offering Middle market corporate loans
BV 2006-1

Cheyne CLO Investments I Investment grade CLOs
Limited

Cheyne High Grade ABS CDO, Ltd Investment grade ABS CDOs with exposure to the US sub-prime
mortgage market

Earls Eight Limited (Tranche SME loans
312B)

Eirles Three Limited (Tranche SME loans
227B)

Eirles Three Limited (Tranche SME loans
236B)

Eurosail 2006-1 plc UK non-conforming and buy-to-let residential mortgages

Lusitano Mortgages No. 1 plc First-ranking, fully amortising Portuguese residential mortgages
Lusitano Mortgages No. 2 plc First-ranking, fully amortising Portuguese residential mortgages
Lusitano Mortgages No. 3 plc First-ranking, fully amortising Portuguese residential mortgages
Magellan Mortgages No. 1 plc First ranking, fully amortising Portuguese residential mortgages
Magellan Mortgages No. 2 plc First ranking mortgage rights (or second-ranking where
first-ranking is also transferred) Portuguese residential
mortgages
Newgate Funding plc UK non-conforming residential mortgages, primarily first-ranking
RASC Series 2006-KS2 Trust US Sub-prime residential mortgages, primarily first-ranking

RMAC 2004-NSP4 plc UK non-conforming residential mortgages, primarily first-ranking
RMAC 2005 NS3 plc UK non-conforming residential mortgages, primarily first-ranking
RMAC 2005 NS4 plc UK non-conforming residential mortgages, primarily first-ranking
Sestante Finance S.R.L. First-ranking prime Italian residential mortgages

The Company sold Cheyne ABS Investments I plc in the period from 31 March 2008 to 4 August 2008. Other than this the Company did not buy
or sell any assets in its Investment Portfolio during that period.

In October 2007, the Company purchased EUR28 million notional of two year put options struck against 90% of the September 2007 value of
the Halifax UK house price index. This hedge is intended to minimise portfolio losses in the event that house prices give up the gains that
occurred between early 2006 and mid to late 2007. As at 30 June 2008, the value of the UK house price index was 90.8% of its September 2007
value. The value of the put option has increased since the date the Company purchased the option.

Outlook

The current credit crisis has continued to spread beyond the sub-prime mortgage market and has begun to have a significant impact on the
US and European economies. The housing market in countries such as the US, UK, Spain and Ireland has deteriorated considerably and house
price falls in these regions are expected to continue. As expected, banks have reduced the availability of credit and tightened lending
standards in response to weaker fundamentals and deteriorating capital bases.

In the European securitisation markets, issuance of transactions to third party investors has come to a near standstill. Securitisations
that are completed are often retained and used for collateral with either the Bank of England or the European Central Bank. Given current
market conditions, the securitisation markets are unlikely to provide financial institutions with an attractive source of funding in 2008.

Tighter lending conditions in mortgage markets in both the UK and continental Europe have started to result in fewer house purchases and
mortgage transactions. In the UK, refinancing of mortgages slowed for the first time in May 2008 and is currently below the 6 months rolling
average. There have been similar slowdowns of mortgage lending activity in Spain. In general the slowdown in mortgage repayments will be
beneficial to the Company's portfolio of residual investments.

We expect the weakening of the real economy to lead to increased tiering, in both performance and price, between different asset types
and securitisation transactions. To identify value between these transactions requires considerable amounts of data, analytical modelling
and structural analysis. As a consequence of the lack of liquidity in the ABS markets, combined with a high hurdle to entry, spreads of
mezzanine ABS bonds are trading at historical wides. From an absolute return perspective, investments in A-rated ABS assets have an expected
total return of 15-20% per year. In addition, there are an increasing number of long-short strategies that take advantage of distinctions in
asset performance between originators and transaction structures. Given the continued illiquidity in the ABS sector, these investments are
better suited for investors with a longer term investment horizon.

The Company has also been approached to facilitate transactions that allow banks to deconsolidate a significant portion of their
AAA-rated ABS risk and release balance sheet as well as regulatory capital. These investments are typically structured as equity investments
in a term funded portfolio of AAA-rated bonds. The Company's target returns for these types of assets are in excess of 20%.

The Investment Manager is also exploring the purchase of fundamentally sound credit assets at substantial discounts from distressed
sellers in order to realise their fair value over time.

The Company is in a strong position to take advantage of these market opportunities, and believes that now is the right time to commit
capital. The Company's analytical infrastructure combined with extensive loan level data, allows for detailed analysis of portfolios and
identification of relative value. The Company has already identified pricing and structural anomalies that it is able to exploit. The
current dislocations in the ABS markets offer investors a superior risk return profile without significant leverage requirements. Exploiting
these opportunities will help the Company to achieve its return targets with a reduced risk profile.

This information is provided by RNS
The company news service from the London Stock Exchange

END

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