Interim Results

RNS Number : 1622P

Epicure Qatar Equity Opportunities

20 March 2009

 



20 March 2009

Epicure Qatar Equity Opportunities Plc

Interim Results for the six months ended 31 December 2008

Epicure Qatar Equity Opportunities Plc ('EQEO' or 'the Company'), the AIM listed fund established to capitalise on attractive investment opportunities in Qatar and the Gulf Cooperation Council region, announces its interim results for the six months ended 31 December 2008.

Highlights

• Global sentiment and a fall in energy prices materially affected local stockmarkets

• In 2008 the Doha Securities Market was the best performing equity market in the GCC and the tenth best performer in the world

• The Company has reduced its exposure to Dubai and Kuwait and used cash reserves to buy back and cancel 2.85 million ordinary shares 

• The Qatari government budget for fiscal 2009/10 is expected to be expansionary, backed by substantial reserves and cash flow

• In Q3 2008, Qatar's sales of gas exceeded those of crude oil for the first time

Financial highlights 

• Net asset value at 31 December 2008 of US$179.2 million, or US$0.72 per share

• Loss after tax of US$156.8 million

• Basic loss per share of US$0.63

Holdings as of 31 December 2008

• 29 companies in the GCC: 21 in Qatar, 6 in UAE and 2 in Kuwait

• Total market value of investments of US$167 million 

• The top five investments constitute 55.8% of the portfolio of the Company 

• Substantially invested in the banking and financial sector - 41.9% of investments 

David von Simson, chairman of EQEO, commented: 'Whilst conditions may remain very challenging, we believe Qatar to be better positioned than many economies in the region to withstand the economic downturn. Despite the fall in value of investments, the underlying performance of the companies in which we are invested remains strong, with all sectors reporting significant growth and most announcing increases in dividends in 2008.'

For further information

Epicure Qatar Equity Opportunities plc - +41 (0) (22) 908 1190  Leonard O'Brien
M:Communications - [phone] Tim Draper Marylene Guernier	Panmure Gordon - [phone]  Richard Gray   Andrew Potts

Chairman's Statement

I am pleased to present your Company's interim accounts for the six months ended 31 December 2008. 

Results

After a very creditable performance in the first year, the unprecedentedly challenging global environment resulted in strongly adverse market conditions in the period under review. Results for the six months showed a loss after tax of US$156.8 million, resulting from sharply lower portfolio valuations, and equating to a basic loss per share of 63.34 cents. The net asset value at 31 December 2008 was US$179.2 million, which translates into a net asset value of $0.72 per share, based on 247,527,523 ordinary shares in issue as at that date. 

The fall in both demand and prices for energy materially affected local stock markets. Against that background, it is satisfactory to note that the DSM was the best performing equity market in the GCC, and the tenth best performer in the world, at the end of the fourth quarter 2008. The Company has reduced its exposure to Dubai and Kuwait, which it considers to be the most exposed in the GCC, and increased its cash allocation.

We currently have a portfolio of 29 investments in GCC companies, with 21 of them in Qatar and a further 6 investments in UAE and 2 in Kuwait.

Dividend

The Company's stated objective remains the achievement of capital growth. The Board is therefore not recommending an interim dividend.

Outlook

Since the date of these interim results, there have been further falls in net asset value, which is published weekly. Whilst conditions may remain very challenging, we believe Qatar to be better positioned than many economies in the region to withstand the economic downturn and further turmoil caused by declining energy prices. Despite the fall in value of investments, the underlying performance of the companies in which we are invested remains strong, with all sectors reporting significant growth and most announcing increases in dividends in 2008.  

Share buy back

In common with almost all closed end funds, the Company has continued to trade at a significant discount to NAV. Subsequent to the year end and prior to the 'close period', the Company took advantage of this to buy back 2,848,571 of its ordinary shares at a price of US$0.35. The purchased shares have been cancelled on acquisition.

Following the publication of these interim results, it is the Board's intention to re-commence a share buy-back programme as announced on 19 November 2008. The Company has authority to buy back up to 14.99% of its share capital, which equates to 37,104,375 shares, although it is not the Board's current intention to fully utilise this buy back authority. The amount of any share buy back will depend on, amongst other things, market conditions and the Company's current cash balances.

David von Simson

Chairman

19 March 2009

  Report of the Investment Manager and Investment Adviser

REGIONAL OVERVIEW

During the fourth quarter of 2008, GCC equity indices saw sharp declines in value. Worst affected was the Dubai Stock Exchange which ultimately ended the quarter with a 60.0 per cent fall (72.4 per cent for the whole of 2008), followed by the Abu Dhabi Securities Market shedding 39.6 per cent, the Omani market which lost 35.9 per cent, the Saudi market down 35.6 per cent and the Kuwaiti market losing 39.4 per cent. 

Overall global market sentiment continues to put pressure on the regional markets. Although the Qatari market witnessed substantial volatility during the period, the DSM ended the fourth quarter as the best performing equity market in the GCC and the tenth best performer in the world, with the index down 28.1 per cent for the year after being up 24.2 per cent up until June. The Qatar Stock Exchange saw extreme selling pressure during the quarter, falling by 40.9 per cent, but recovered in December on bargain-hunting. 

The difficulties in the markets spread to the GCC with most economists predicting a significant slowdown in economic growth, primarily due to the substantial price falls of oil and related commodities. The decline in oil prices is likely to have a negative impact on the income base of the region, where predictions are of oil revenues falling by over 60 per cent as a result of falls in both price and volume following OPEC mandated cuts.

On top of local issues, the de-leveraging that has impacted the world came to affect the regional markets, with Dubai being the first to suffer due to its highly leveraged economy. The Dubai property market witnessed price declines of 30 to 40 per cent over the last six months of the year. The problem was made worse by the large number of 'off-plan' properties that are estimated to have seen most of the defaults. This was exacerbated by banks refusing to lend into a falling market and substantial changes in the fortunes of property lending financing companies such as Tamweel and Amlak, which suddenly saw their funding sources dry up. 

The Dubai market has continued to reel under the impact of the crisis, with the market reacting to successive items of negative news. On 22 February 2009 the government of the emirate of Dubai announced the launching of a US$20 billion bond program. The Central Bank of the UAE has fully subscribed to the first tranche of the program, worth US$10 billion. We believe that this is a very positive development, as the funds will greatly ease the current refinancing constraints facing Dubai's public and quasi-public entities. Consumer and investor confidence is also expected to increase, but the overall impact on domestic demand may be limited. The Company's exposure to Dubai is only 1.69 per cent in two main positions - Emaar (which is currently trading at 0.4x price to book) and Emirates NBD, the largest bank by assets in the GCC (trading at 0.6x price to book).

Having struck first in Dubai, the global meltdown soon impacted business confidence in Qatar. Although the Investment Adviser has not yet seen the impact of the global economic crisis reported in company results, most of the management representatives that have been consulted have decided to hunker down and adopt a wait and see approach to local markets.

The Investment Adviser understands that some of the more aggressive expansion plans of regional companies have been curtailed. The Investment Adviser believes that Qatar is relatively better positioned than other regional economies to withstand any substantial economic downturn in the region thanks to the following:

1. Since inception, the Investment Adviser has believed that Qatar's economy will change from being susceptible to oil price fluctuation to benefiting from the relatively steady cash flow from gas earnings, a view which is now coming true. Even with oil at an average price of over US$100 per barrel in the third quarter, the country's gas sales exceeded those of crude for the first time. According to the Qatar Statistical Authority, the gas sector's share of the country's gross domestic product (GDP) stood at QR34.9 billion in the third quarter of 2008, while the oil sector contributed QR30.6 billion.

Qatar GDP	2007 Q1*	2007 Q2*	2007 Q3*	2007 Q4*	2008 Q1*	2008 Q2	2008 Q3
Oil	15,718	18,020	21,324	25,312	24,862	31,512	30,631
Gas	12,909	13,925	15,478	19,624	24,420	28,948	34,877
Total GDP	55,005	59,819	66,562	77,205	84,309	96,480	108,391

Source: Qatar Insurance Company, Qatar Statistical Authority

*Provisional data

2. Existing financed projects in the oil and gas sector will continue to be developed as off take is pre-committed.

3. The economy is not highly indebted and the property sector has not been developed to the same extent as elsewhere in the GCC region.

4. The government retains the ability to finance internal projects, despite substantially lower oil prices, thanks to increasing gas sales.

The government of Qatar has taken extensive, proactive steps to support the economy since the start of the crisis. Measures range from confidence building to actually investing in the local economy. The government has initiated a process of capital injection into the local banking sector by increasing equity ownership and providing long-term deposit bases. The Investment Adviser believes that the government budget for the fiscal year 2009/2010 will be an expansionary one as the government has substantial reserves and the cash flow to fund it. These and other measures are likely to provide support to the local economy and, most importantly, to the financial institutions whose capacity to recover from increasing losses on both their proprietary investments and defaults is likely to increase. The capitalisation of the DSM market decreased by 19.75 per cent to QR279.04 billion at the end of 2008 compared to QR347.7 billion at the end of 2007.

During the last month of the quarter, the DSM registered double digit growth whereas the other regional markets continued their downward trend. The Qatari market was able to return to positive territory as more investors eyed it as a fundamentally stronger market than its regional peers. The Investment Adviser believes that investors are considering the macro-economic attractions of Qatar and beginning to increase their exposure to the market accordingly. This comes as a strong positive signal that the Qatari economy is viewed as being well positioned to withstand any further turmoil caused by lower oil prices.

Indices	Q1-08	Q2-08	Q3-08	Q4-08	2007	2008
Saudi (TASI)	-18.5%	4.0%	-20.2%	-35.6%	39.1%	-56.5%
Dubai (DFMGI)	-9.8%	1.7%	-24.2%	-60.4%	43.7%	-72.4%
Abu Dhabi (ADI)	0.1%	8.7%	-20.1%	-39.6%	51.7%	-47.5%
Kuwait (KWSE)	13.8%	8.2%	-16.9%	-39.4%	24.7%	-38.0%
Bahrain (BAX)	1.3%	2.5%	-13.9%	-26.7%	24.2%	-34.5%
Oman (MSI)	11.8%	12.1%	-25.0%	-35.9%	61.9%	-39.8%
Qatar (DSM)	-0.3%	24.2%	-21.5%	-26.1%	34.3%	-28.1%

Source: Qatar Insurance Company, Reuters

COMPANY UPDATE

In line with the regional and world markets, the Doha Securities Market (as measured by the DSM20 index) has also been under pressure, losing 28.1 per cent in 2008 and 26.1 per cent in the fourth quarter alone. As a result of the sell-off in the market, the Company's NAV has also been under strain, declining to US$0.72 as of 31 December 2008 from a high of US$1.39 on 12 June 2008. The Company has invested in 29 companies in the GCC, with 21 of them being in Qatar, 6 in the UAE, and 2 in Kuwait. The total market value of investments was US$167 million at the end of the quarter and total assets stood at US$180 million.

The Company has increased its cash allocation to about 6 per cent of the NAV. Most of the increase in cash came from reducing exposure to Dubai and Kuwait, as the Investment Adviser continues to be cautious about the economic crisis that is being witnessed there and its anticipated long term implications. The Investment Adviser maintains some exposure in these economies to companies that should be able to withstand current pressures and emerge successfully from the downturn. 

The Company will also benefit from the substantial dividends that have been preannounced by Doha-listed companies. Based on existing holdings, the Company should receive a cash dividend of approximately QR 30 million (US$8.2m) by April 2009.

CORPORATE PROFITABILITY

The recent strong sell-off by foreign investors across the GCC markets has left valuations at extremely compelling levels.

Markets	PE			P/B	P/Sales	ROE	DY
	Trailing	2009e	2010e	2009e	2009e	2009e	2009e
Saudi Arabia	8.7	8.4	7.4	1.7	1.2	10.5	2.9
UAE*	5.9	4.9	3.9	1	1.6	19.1	9.9
Kuwait**	7	6.7	7.2	1.1	1.6	16.3	7.9
Qatar	6.7	6.5	5.4	1.5	2.6	25.1	5.2
Abu Dhabi	6.1	4.8	4.3	1.1	1.8	21	5
Dubai	5.7	5.1	3.3	0.8	1.3	16.1	18.1
Bahrain	6.8	6.1	6	0.6	0.8	5.3	1.3
Oman	8.4	6.3	6.2	1.5	1.4	-	-
GCC***	7.6	7.1	6.4	1.4	1.5	14.4	5.2
Note: Prices as of 17 February 2009. *UAE valuations are a market-cap weighted average of Dubai and Abu Dhabi;  **Kuwait 2009 PE column shows 2008 PE and 2010 PE column shows 2009PE; ***GCC valuations are a market-cap weighted average of the 7 markets. Source: HSBC estimates

The total combined net profit for all companies listed on the DSM as of 30 September 2008 amounted to QR24 billion compared to QR15 billion for the same period in 2007, a 58 per cent increase. This growth was relatively broad based, with 37 (out of 43) listed companies reporting an increase in net profit. All sectors witnessed robust growth, led by the industrial and insurance sectors, with net profit growth of 103 per cent and 80 per cent respectively. The banking sector reported total net profit of QR8.25 billion, an increase of 35 per cent year-on-year.

Net Profit growth of the Company's top 5 holdings

Top 5 Holdings	NI (9m - 07)	NI (9m - 08)	Growth
Industries Qatar	3,401.5	7,182.0	111.1%
Qatar National Bank	1,854.6	3,002.8	61.9%
Commercial Bank of Qatar	1,009.3	1,562.2	54.8%
Qatar Islamic Bank	858.3	1,250.6	45.7%
Qatar Electricity & Water Co	514.2	596.2	15.9%

Figures in QR. Million

Source: Qatar Insurance Company, DSM.

During the fourth quarter, some Qatari companies brought forward their 2008 dividend announcements to boost investor confidence and reduce volatility in the market. Most announced substantial increases in dividends leaving some stocks trading on dividend yields above 10 per cent.

Announced 2008 dividend details of the Company's portfolio

Stock	Price	Dividend	Yield
Commercial Bank of Qatar	88.3	7.0	7.9%
Industries Qatar	100.6	8.0	8.0%
Qatar Insurance Co	90.2	3.0	3.3%
Qatar Islamic Bank	82.8	7.0	8.5%
Qatar National Bank	171.2	7.5	4.4%
Qatar Real Estate	29.1	2.0	6.9%
Qatar Telecom	109.5	10.0	9.1%
Rayan Bank	11.0	0.8	7.5%
Dlala Brokerage	20.5	2.0	9.8%
Doha Bank	42.0	5.0	11.9%
National Leasing	18.1	0.5	2.8%

Stock Price as on 4/1/2009

INDUSTRY ALLOCATION

The Company has a substantial weighting in the financial services industry, with 41.9 per cent of its investments in the banking sector. Although the global financial crisis continues, Qatari banks continue to witness robust earnings growth with QNB posting 62 per cent year-on-year third quarter net profit growth and CBQ posting 55 per cent growth against the same period last year. This growth is expected to slow down due to the current financial turmoil, the falling oil price and reduced business confidence.

The services sector, which is broadly defined and includes companies in telecommunications and utilities, accounted for 22.3 per cent of all investments.

The Company's exposure to the real estate sector stood at 8.3 per cent at the end of the fourth quarter of 2008. The industries and insurance sectors accounted for a further 15.9 per cent and 4.3 per cent respectively.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a pie chart depicting Industry Allocation (% of mkt value). 

Market Values as at 31 Dec. 2008 Source: Qatar Insurance Company S.A.Q.

PORTFOLIO BREAKDOWN

Top 5 Holdings	Sector	% of Portfolio
Industries Qatar	Industries	15.4%
Qatar National Bank	Banks	15.0%
Commercial Bank of Qatar	Banks	9.8%
Qatar Islamic Bank	Banks	8.1%
Qatar Electricity & Water Co	Services	7.5%

Source: Qatar Insurance Company S.A.Q. As at 31 Dec 2008

The top five investments of the Company constitute 55.8 per cent of the portfolio and 40.3 per cent of equity funds raised.

Industries Qatar (15.4% of portfolio value)

Formed in 2003 by Qatar Petroleum ('QP'), Industries Qatar ('IQ') has emerged as the largest listed company in Qatar in terms of market capitalization. QP divested its 30% stake in favor of Qatari nationals through an IPO in 2004. It has an index weighting of 13.7% of the DSM20. IQ operates through a diversified portfolio of four subsidiaries operating in petrochemicals, fertilizers, fuel additives & steel. IQ's feedstock advantage, as well as the massive expansion to be undertaken by its subsidiaries, are the key growth drivers.

Qatar National Bank (15.0% of portfolio value)

Established in 1964 as the country's first commercial bank, it is 50% owned by the government of Qatar. Qatar National Bank ('QNB') is the largest commercial bank in Qatar with assets of QR151.9 billion. QNB also has the largest distribution network of 42 branches and offices in addition to 11 Islamic branches and offices, and more than 149 Automated Teller Machines (ATMs). QNB has the highest credit rating among banks in Qatar from leading rating agencies including Standard & Poor's, Moody's, Fitch, and Capital Intelligence.

Commercial Bank of Qatar (9.8% of portfolio value)

Established in 1975 as the first wholly owned private commercial bank in Qatar, Commercial Bank of Qatar offers a comprehensive range of corporate, retail and investment services through a network of 23 branches. Commercial Bank of Qatar is the second largest bank in the country with assets of QR61.3 billion. It holds a 40% stake in National Bank of Oman and a 40% stake in United Arab Bank.

Qatar Islamic Bank (8.1% of portfolio value)

Qatar Islamic Bank (QIB) is the pioneer of Islamic banking in Qatar. It was established in July 1982. Over the years, the bank has evolved into the foremost Islamic bank domestically, and is ranked among the top 15 Islamic banks in the world today. QIB provides commercial banking services in accordance with Islamic principles, including consumer finance, corporate finance and real estate financing, with the housing and consumer finance divisions generating maximum business. QIB operates through 24 branches and 92 ATMs across Qatar. QIB's activities are not limited to Qatar alone. It has recently expanded its presence to the Lebanon, Malaysia, Sudan, Yemen, UK and Bahrain.

Qatar Electricity and Water Company (7.5% of portfolio value) 

Qatar Electricity & Water Company (QEWC) was established in 1990 and benefited from the transfer of the electricity generating assets owned by the Qatari government in May 2000. The company's core business includes generation of electricity from its power plants and purification of water from its desalination plants. QEWS is also a partner in several IPP/IWPPs. The company currently accounts for more than 60% of all electricity generation and most of the desalinated water in Qatar. The Company was listed on the Doha Securities Market in 1990. The Qatari government now retains a 52% stake including the 10% held by Qatar Petroleum. Qatar National Bank owns 10% and 1.5% is held by Qatar Insurance Company. The rest is held by the public.

REGIONAL ALLOCATION

Currently, the Company is invested in 21 companies in Qatar, six companies in UAE, and two companies in Kuwait. As at 31 December 2008, investments outside Qatar constituted 7.6 per cent of equity funds raised.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a pie chart depicting Country Allocation (% of mkt value). 

Market Values as at 31 Dec. 2008. Source: Qatar Insurance Company S.A.Q.

Conclusion

2008 started out as a promising year for the Qatari market, with a robust outlook for growth. However, having been impacted by the global credit crisis, it proved to be a challenging year with the DSM shedding 28.1 per cent. Nonetheless, within the GCC the DSM was the best performing stock market. This marked out-performance can be attributed to the fact that the Qatari economy is better positioned to weather the global crisis given its strong economic fundamentals. In December, the DSM Index reversed the bearish trend of the last five months, gaining 13.4 per cent. The Qatari economy is expected to be the least affected of the GCC economies by global turmoil and to show the strongest growth of all GCC economies, mainly due to the expected increase in LNG production and high levels of government infrastructure spending.

Leonard O'Brien                                      Sandeep Nanda

Epicure Managers Qatar Limited                 Qatar Insurance Company S.A.Q. 

Manager                                                      Investment Adviser

19 March 2009                                            19 March 2009

Consolidated Income Statement

		(Unaudited)	(Unaudited)
	Note	For the six months ended 31 December 2008	For the period from    26 June 2007 (date of incorporation) to    31 December 2007
		US$'000	US$'000
Income
Interest income on cash balances		37	1,571
Dividend income on quoted equity investments		9	-
Realised (loss)/gain on sale of financial assets at fair value through profit or loss		(5,217)	463
Net changes in fair value on financial assets at fair value through profit or loss		(149,433)	36,076
Total net (expense)/income		(154,604)	38,110
Expenses
Investment Manager's fees	6.2	1,453	1,031
Performance fees	6.2	-	4,267
Audit fees		16	8
Other expenses	6	707	811
Total operating expenses		2,176	6,117
(Loss)/Profit before tax		(156,780)	31,993
Income tax expense	11	-	-
Retained (loss)/profit for the period		(156,780)	31,993
Basic (loss)/earnings per share (cents)	9	(63.34)	17.70
Diluted (loss)/earnings per share (cents)	9	(63.34)	17.68

The accompanying notes form an integral part of these consolidated accounts

Consolidated Balance Sheet

		(Unaudited)	(Audited)
	Note	At 31 December 2008	At 30 June 2008
		US$'000	US$'000
Financial assets at fair value through profit or loss	5	167,452	327,923
Due from broker		2,522	7,697
Dividends receivable		-	46
Other receivables and prepayments		26	20
Cash at bank	7	10,314	15,767
Total current assets		180,314	351,453
Issued share capital		2,475	2,475
Share premium		-	245,051
Retained earnings		176,484	88,213
Other reserves	8	248	(1,241)
Total equity		179,207	334,498
Other creditors and accrued expenses		1,107	16,955
Total liabilities		1,107	16,955
Total equity & liabilities		180,314	351,453

The financial statements were approved by the Board of Directors on 19 March 2009 and signed on their behalf by:

N Wilson                L O'Brien

Director                Director

The accompanying notes form an integral part of these consolidated accounts

Consolidated Statement of Changes in Equity

	Share Capital	Share Premium	Retained Earnings	Other Reserves (note 8)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 26 June 2007	-	-	-	-	-
Proceeds from shares issued	2,475	253,964	-	-	256,439
Share issue expenses	-	(8,341)	-	-	(8,341)
Retained profit for the period	-	-	31,993	-	31,993
Foreign exchange translation differences	-	-	-	(447)	(447)
Balance at 31 December 2007	2,475	245,623	31,993	(447)	279,644

Balance at 01 July 2008	2,475	245,051	88,213	(1,241)	334,498
Transfer to retained earnings	-	(245,051)	245,051	-	-
Retained loss for the period	-	-	(156,780)	-	(156,780)
Foreign exchange translation differences	-	-	-	1,489	1,489
Balance at 31 December 2008	2,475	-	176,484	248	179,207

On 4 December 2008, the share premium account arising from the placing of shares was cancelled and the amount of the share premium account transferred to retained earnings 

The accompanying notes form an integral part of these consolidated accounts

Consolidated Cash Flow Statement

	Note	For the six months ended   31 December 2008	For the period from    26 June 2007 (date of incorporation) to    31 December 2007
		US$'000	US$'000
Cash flows from operating activities
Purchase of investments		(8,216)	(187,691)
Proceeds from sale of investments		23,022	2,699
Interest received		37	1,523
Dividends received		55	-
Performance fee paid		(15,434)	-
Operating expenses paid		(2,940)	(844)
Net cash used in operating activities		(3,476)	(184,313)
Financing activities
Proceeds from the issue of shares		-	256,439
Cash held at broker to finance share buybacks		(1,900)	-
Share issue costs		-	(6,096)
Net cash (used in)/generated from financing activities		(1,900)	250,343
Net (decrease)/increase in cash and cash equivalents		(5,376)	66,030
Effects of exchange rate changes on cash and cash equivalents		(77)	(13)
Cash and cash equivalents at beginning of period		15,767	-
Cash and cash equivalents at end of period	7	10,314	66,017

The accompanying notes form an integral part of these consolidated accounts

Notes to the Interim Consolidated Financial Statements

1    The Company

Epicure Qatar Equity Opportunities plc (the 'Company') was incorporated and registered in the Isle of Man under the Isle of Man Companies Act 1931-2004 on 26 June 2007 as a public company with registered number 120108C.

Pursuant to an Admission Document dated 25 July 2007 there was an original placing of up to 171,355,000 Ordinary Shares of 1 cent each, with Warrants attached on the basis of 1 Warrant to every 5 Ordinary Shares. Following the placing on 31 July 2007, 171,355,000 Ordinary Shares and 34,271,000 Warrants were issued. 

The Shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ('AIM') on 31 July 2007 when dealings also commenced. 

As a result of a further fund raising in December 2007, a further 76,172,523 Ordinary Shares were issued, which were admitted for trading on 13 December 2007.

On 4 December 2008, the share premium arising from the placing of shares was cancelled and the amount of the share premium account transferred to retained earnings.

The Company's agents and the Manager perform all significant functions. Accordingly, the Company itself has no employees.

2    The Subsidiary

The Company has the following subsidiary company:

	Country of incorporation	Percentage of shares held
Epicure Qatar Opportunities Holdings Limited	British Virgin Islands	100%

3    Significant Accounting Policies

The Interim Report of the Company for the period ending 31 December 2008 comprises the Company and its subsidiaries (together referred to as the 'Group'). The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the period ended 30 June 2008. The interim consolidated financial statements are unaudited.

3.1    Basis of presentation

These financial statements have been prepared in accordance with International Financial Reporting Standard ('IFRS') IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the period ended 30 June 2008.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Group's accounting policies. The financial statements do not contain any critical accounting estimates. 

3.2    Segment reporting

The Group has one segment focusing on maximising total returns through investing in quoted securities in Qatar and the GCC region. No additional disclosure is included in relation to segment reporting, as the Group's activities are limited to one business and geographic segment.

4    Net Asset Value per Share

The net asset value per share as at 31 December 2008 is US$0.72 per share based on 247,527,523 ordinary shares in issue as at that date (30 June 2008: US$1.35).

5    Investments

Financial assets at fair value through profit or loss: all quoted equity securities

Security name	Number	US$'000
Al-Dar Properties (ALDAR)	10,000	11
Emaar Properties Company (EMAAR)	1,715,016	1,050
Emirates National Bank of Dubai (ENBD)	1,409,831	1,170
First Gulf Bank (FGB)	95,000	233
Tamweel PJSC (TAMWEEL)	100,000	27
Union Properties Company (UPP)	2,821,451	553
Global Investment House K.S.C.C. (GLOBAL)	341,500	297
National Bank of Kuwait (NBK)	409,000	1,705
Al Khaleej Bank (KCBK)	1,836,480	3,599
Barwa Real Estate (BRES)	1,179,591	9,892
Commercial Bank of Qatar (CBQK)	679,017	16,437
Dlala Holdings (DBIS)	103,134	579
Doha Bank (DHBK)	213,265	2,513
Gulf International Services (GISS)	83,500	515
Industries Qatar (IQCD)	934,588	25,767
Islamic Financial Security (IFSS)	16,023	209
Masraf Al Rayan (MARK)	3,657,845	11,027
National Leasing (NLCS)	161,476	797
Qatar Electricity & Water Company (QEWS)	410,111	12,476
Qatar Fuel (QFLS)	10.000	354
Qatar Gas Transport (QGTS)	791,834	4,644
Qatar Insurance (QATI)	314,514	7,818
Qatar Islamic Bank (QIBK)	593,230	13,546
Qatar National Bank (QNBK)	538,934	25,109
Qatar National Cement Co (QNCD)	109,376	2,947
Qatar Navigation (QNNS)	444,185	8,813
Qatar Real Estate Invest (QRES)	443,700	3,526
Qatar Shipping (QSHS)	203,748	2,100
Qatar Telecom (QTEL)	323,031	9,738
Total Investments		167,452

6    Charges and Fees

6.1    Nominated Adviser

As nominated adviser to the Group for the purposes of the AIM Rules, the Nominated Adviser is entitled to receive an annual fee of £40,000 payable twice yearly in advance on 1 January and 1 July with the first payment being made on 1 January 2008.

Advisory fees paid to the Nominated Adviser for the period ended 31 December 2008 amounted to US$44,265 (31 December 2007: US$nil).

6.2    Investment Manager's fees

Annual fees

The Investment Manager is entitled to an annual management fee of 1.25% of the Net Asset Value of the Group payable quarterly in arrears.

Annual management fees for the period ended 31 December 2008 amounted to US$1,452,982 (31 December 2007: US$1,030,532).

Performance fees

The Investment Manager receives a performance fee if the following are met:

• a high watermark is exceeded, whereby the adjusted net asset value per Ordinary Share at the end of the relevant performance period must be higher than the high watermark; and

• a performance test must be met where the adjusted net asset value per Ordinary Share at the end of the relevant performance exceeds the target net asset value per Ordinary Share.

If the performance test described above is met and the high watermark described is exceeded, the performance fee will be equal to 20% of the increase in the adjusted net asset value per ordinary share at the end of the relevant performance period above the target net asset value per Ordinary Share multiplied in each case by the weighted average of the number of Ordinary Shares in issue in the performance period. For the first performance period, the target net asset value per Ordinary Share is the Placing price increased by the hurdle rate. For each subsequent performance period, the target net asset value per Ordinary Share means the net asset value per share, adjusted for any prior year performance fees paid, at the start of the relevant performance period as increased by the hurdle rate of 8% pro rata per annum. 

Performance fees accrued but not paid during the period ended 31 December 2008 amounted to US$nil (31 December 2007: US$4,266,535).

Under the terms of an option agreement dated 25 July 2007 the Investment Manager was granted an option to acquire 1,713,550 shares at an option price of $1.00 per share. The Investment Manager Option Deed provides for the transfer of the options by the Investment Manager to the Distribution Adviser and the Placing Agent. This transfer has now taken place.

The option may be exercised by the Distribution Adviser and the Placing Agent in whole or in part at any time before the fifth anniversary of admission to trading on AIM.

The option has been independently valued using a Black-Scholes model giving a fair value of $672,300 which has been charged to equity as a share issue expense.

6.3    Custodian fees

The Custodian is entitled to receive fees calculated as 7.5 basis points per annum of the net asset value of the Group between US$0and US$100 million and 6 basis points per annum of the net asset value in excess of US$100 million, subject to a minimum monthly fee of US$6,250. Subcustodian fees are also payable. 

Custodian and subcustodian fees for the period ending 31 December 2008 amounted to US$261,510 (31 December 2007: US$294,252). 

6.4    Administrator and Registrar fees

The Administrator is entitled to receive a fee of 15 basis points per annum of the net asset value of the Group between US$0 and US$100 million, 12.5 basis points of the net asset value of the Group between US$100 and US$200 million and 10 basis points of the net asset value of the Group in excess of US$200 million, subject to a minimum monthly fee of US$15,000, payable quarterly in arrears.

The Administrator assists in the preparation of the financial statements of the Group and provides general secretarial services. 

The Administrator may utilise the services of a CREST accredited registrar for the purposes of settling share transactions through CREST. The cost of this service will be borne by the Company. It is anticipated that the cost will be in the region of £6,000 per annum subject to the number of CREST settled transactions undertaken.

Administration fees paid for the period ending 31 December 2008 amounted to US$211,653 and US$28,048 for additional services (31 December 2007: US$120,307 and US$13,753 respectively).

7    Cash and Cash Equivalents

	31 December 2008	30 June 2008
	US$'000	US$'000
Bank balances	10,314	15,766
Deposit balances	-	1
Cash and cash equivalents	10,314	15,767

8    Other Reserves

	Foreign currency translation reserve	Other reserves (see note 6.2)	30 June 2008
	US$'000	US$'000	US$'000
Balance at 1 July 2008	(1,913)	672	(1,241)
Foreign exchange translation differences	1,489	-	1,489
Balance at 31 December 2008	(424)	672	248

9    (Loss)/Earnings per Share

Basic (loss)/earnings per share

Basic and diluted (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the period:

	31 December 2008	31 December 2007
(Loss)/Profit attributable to equity holders of the Company (US$'000)	(156,780)	31,993
Weighted average number of ordinary shares in issue (thousands)	247,528	180,753
Basic (loss)/earnings per share (cents per share)	(63.34)	17.70

The difference between basic and diluted ordinary shares in issue arises from the assumption that dilutive share options were exercised (see note 6.2). The warrants are not dilutive as the average share price for both periods is less than the exercise price of the warrants. 

Diluted (loss)/earnings per share

	31 December 2008	31 December 2007
(Loss)/Profit attributable to equity holders of the Company (US$'000)	(156,780)	31,993
Weighted average number of ordinary shares in issue (thousands)	247,528	180,753
Adjustment for share options	-	223
	247,528	180,976
Fully diluted (loss)/earnings per share (cents per share)	(63.34)	17.68

10    Directors' Remuneration

The maximum amount of remuneration payable to the Directors permitted under the Articles of Association is £200,000 per annum. The non-executive chairman is entitled to receive an annual fee of £42,500 and the non-executive directors receive £25,000 each per annum. The chairman of the audit committee receives an additional £7,500 per annum. The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. Total fees and expenses paid to the Directors for the period ended 31 December 2008 amounted to US$79,846 (31 December 2007: US$141,887).

11    Taxation

Isle of Man taxation

The Company is resident for taxation purposes in the Isle of Man by virtue of being incorporated in the Isle of Man and is technically subject to taxation on its income but the rate of tax is zero. The Group is required to pay an annual corporate charge of £250 per annum. 

Qatar taxation

It is the intention of the Directors to conduct the affairs of the Group so that it is not considered to be either resident in Qatar or doing business in Qatar. 

Qatar does not impose withholding tax on dividend distributions by Qatari companies to non-residents. 

Capital gains made by the Group on disposal of shares in Qatari companies are not subject to tax in Qatar. 

There is no stamp duty or equivalent tax on the transfer of shares in Qatari companies. 

12    Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions. 

The Investment Adviser is Qatar Insurance Company S.A.Q. The Group holds shares in Qatar Insurance Company S.A.Q. (see note 5).  It is paid fees by the Investment Manager.

The Investment Manager, Epicure Managers Qatar Limited, is a related party by virtue of its ability to make operational decisions for the Company and through common directors. The director of the Investment Manager is Silex Management Limited, of which Leonard O' Brien is a director. Silex Management Limited is ultimately owned by Principal Capital Holdings SA, of which Mr O' Brien is a minority shareholder. Fees payable to the Investment Manager are disclosed in note 6.2.

13    Post Balance Sheet Events

On 16 January 2009 the Company purchased 2,848,571 of its ordinary shares at a price per share of US$0.35. The purchased shares have been cancelled upon acquisition. The buyback was effected through retained reserves.

 

END

 

 

IR EKLFFKXBEBBQ