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Epicure Qatar Equity (QIF)

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Monday 01 September, 2008

Epicure Qatar Equity

Final Results

RNS Number : 3858C
Epicure Qatar Equity Opportunities
01 September 2008
 



1 September 2008

Epicure Qatar Equity Opportunities Plc

Annual Results for the period 26 June 2007 - 30 June 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 (GCC) region, announces its maiden annual results for the period between 26 June 2007 and 30 June 2008.


Highlights

  • Second fundraising of US$85 million in December; total capital raised of US$256 million  
  • The Net Asset Value (NAV) of EQEO has risen by 40.5% since inception, to US$334.5 million or $1.35 per share as at 30 June 2008
  • Profit after tax of US$88.2 million
  • Basic earnings per share of 40.67 cents
  • Liquidity and transaction volumes significantly increased on the Doha Securities Market
  • After rising 25.2% in 2007, Qatar's nominal GDP is forecast to grow by 15.5% in 2008

 


Holdings as of 30 June 2008


  • 33 companies in the GCC: 22 in Qatar and 11 in UAE and Kuwait
  • Total market value of investments of US$328 million 
  • The top 10 investments constitute 76.5% of the NAV of the Company 
  • Substantially invested in the banking and financial sector at 38.1% of NAV 


David von Simson, chairman of EQEO, commented: 'We are delighted that the first year's performance of the fund has met our expectations. During a period of high volatility, the GCC markets have continued to benefit from a low correlation to global markets, as well as from rising oil prices. The Qatari and GCC economies remain dynamic and we are confident of the positive outlook for the region.'


For further information


Epicure Qatar Equity Opportunities plc - +41 (0) (22) 908 1190
Leonard O'Brien
M:Communications - +44 (0) 20 7153 1269
Tim Draper
Marylene Guernier
Panmure Gordon - +44 (0) 20 7459 3600
Richard Gray
Andrew Potts

 




Chairman's Statement

I would like to welcome shareholders to the Company and I am pleased to present your Company's first annual report. The Company was admitted to trading on AIM on 31 July 2007 and these are the results covering the period from incorporation on 26 June, 2007 to 30 June, 2008.  


As we reported with the interim results, work performed ahead of the launch of the Company on portfolio construction enabled the issue proceeds to be rapidly invested, and we were able to take advantage of the rising local stock markets throughout the late summer and autumn. As a result of further strong demand the Company raised an additional US$85 million of capital through a secondary share issue of 76.17 million shares in December which, together with the initial fund raising of US$171 million, brought the total capital raised to US$256 million. 


The proceeds of the secondary issue were also rapidly deployed, and we now have a portfolio of 33 investments in GCC companies, with 22 of them in Qatar and a further 11 investments in UAE and Kuwait. At the time of writing, the Company is substantially fully invested. 


Results


Investment performance in the second half of our financial year continued to be highly satisfactory. Results for the year as a whole show a profit after tax of US$88.2 million, and basic earnings per share of 40.67 cents. The net asset value at 30 June 2008 was US$334.5 million and translates into a net asset value of $1.35 per share based on 247,527,523 ordinary shares in issue as at that date.  


For a Company, whose first year of operation has been against a backdrop of exceptional turbulence in world markets, to have performed so well, is a creditable performance.  The share price of the Company on AIM has however not always fully reflected the positive evolution of net asset value per share, and the Board continues to monitor this closely and has the authorities in place to effect share buy backs if it considers it necessary.


As a result of the highly satisfactory performance of the Company a performance fee of US$15.4m is payable, as detailed more fully in the notes to the financial statements.


Dividend


The Company's stated objective remains the achievement of capital growth, and it is thus anticipated that substantially all realised capital gains derived from the Company's investment portfolio will continue to be re-invested. The Board is therefore not recommending a final dividend.


Borrowing/Hedging


The Company has not made use of any hedging mechanisms to date. The Company has the capacity to borrow but has no borrowings to date.


Outlook


Since the year-end, we have seen a small decline in local stock markets, owing most probably to a weakening in energy prices. The Board nevertheless maintains its positive outlook on prospects for the region.




David von Simson

Chairman

29 August 2008

  Report of the Investment Manager and Investment Adviser

Background to the Investment Opportunity


Epicure Qatar Equity Opportunities plc ('the Company') was established to capitalise on attractive investment opportunities in Qatar and the Gulf Cooperation Council ('GCC') region, due to the economic boom being experienced in the area. The Company seeks to invest in quoted Qatari equities listed on the Doha Stock Market ('DSM') in addition to companies soon to be listed, with a possible allocation of up to 15 percent in regional GCC listed companies. 


Epicure Managers Qatar Limited was appointed as the Company's Manager. The Manager and the Company has engaged Qatar Insurance Company S.A.Q. to act as the Company's Investment Adviser. top-down screening process, as well as a fundamental industry and company analysis is employed. It is not intended that the investment performance is benchmarked to any particular regional index.



Investment Overview and Performance


The Company was admitted to AIM on 31 July, 2007 and raised a total of US$171.355 million, with the Qatar Investment Authority and Qatar Insurance Company making anchor investments of US$25 million each. The Company successfully completed a secondary share issue in the fourth quarter of 2007, of 76.17m shares at a price of US$1.1170 per share, raising additional capital of US$85.08m. This brought the total funds raised since inception to US$256.44m.


Based on the closing price of 30 June 2008, the NAV had reached US$1.35 per share (initial NAV of US$0.9641), up 40.5 percent since inception and taking into account the secondary share issueOur focus has been to invest the funds promptly, and we are pleased with the pace of investments that have taken place. As at the date of writing we are substantially fully invested.


The global markets have continued to experience substantial volatility during the second quarter of 2008During this time the GCC markets benefited from their low correlation to global markets, as well as being the prime beneficiaries of rising oil prices.  The GCC markets finished the second quarter of 2008 in positive territory, with Qatar and Oman showing double digit increases. With an increase of 24.2%, the Qatari market was the best performer in the GCC and the second best performer in the world, while Dubai and Kuwait were up 1.7% and 8.2% respectively.


We have also initiated investments in two of the regional countries, namely United Arab Emirates and Kuwait. Under the investment guidelines as more fully set out in the Company's Admission Document, the Company has the ability to invest up to 15% of its assets in countries other than Qatar. Currently 9.09% of the investments are in UAE and Kuwait distributed among eleven companies. 


The macro story for the region continues to be strong with substantial projects in the pipeline, which continues to be expanded on a daily basis. We believe that the positive macro economic trends in the region will continue to be strong in the medium term. During the second quarter of 2008, several notable events have included:


(i) Corporate Profitability

DSM-listed companies posted 63% year on year growth in net profit for the first quarter of 2008. Qatari companies have proven resilient in tackling the ongoing inflation and bottleneck issues in QatarQatar's nominal GDP grew by 25.2% in 2007 and is expected to grow by a further 15.5% in 2008. The 22 Qatari companies that the Company is invested in grew their quarter 1, 2008 profits by 59% year on year and strong numbers are anticipated for the rest of the year. 


(ii) Rights issues

During the first half of 2008, Qatari companies announced US$5.6bn worth of rights issues. During the quarter the Company deployed its funds mainly in rights issues.



Holdings as of 30 June 2008


The company has invested in 33 companies in the GCC, with 22 of them being in Qatar and 11 companies in UAE and Kuwait. The total market value of the investments is US$327.9m. The top 10 investments constitute 76.5% of the NAV of the Company. The Company is substantially invested in the banking and financial sector at 38.1% of the NAV as we continue to believe that regional banks are among the top suited to capture the growth in the regional economies. 


Security name

   No. of   Shares


US$'000

Region

Sector

Industries Qatar (IQCD)

934,288

46,085 

QATAR

Industry

Qatar National Bank (QNBK)

571,934

   35,537 

QATAR

Banks

Barwa Real Estate (BRES)

1,258,591

29,051 

QATAR

Real Estate

Commercial Bank of Qatar (CBQK)

629,097

26,059 

QATAR

Banks

Qatar Islamic Bank (QIBK)

  596,230

25,591 

QATAR

Banks

Masraf Al Rayan (MARK)

3,522,845

21,217 

QATAR

Banks

Qatar Insurance (QATI)

  340,037

   20,757 

QATAR

Insurance

Qatar Electricity & Water Co (QEWS)

  486,326

   20,371 

QATAR

Services

Qatar Navigation (QNNS)

  444,185

   18,496 

QATAR

Services

Qatar Telecom (QTEL)

  246,024

12,746 

QATAR

Services

Qatar Gas Transport (QGTS)

  791,834

8,437 

QATAR

Services

Al Khaleej Bank (KCBK)

 1,736,480

   7,808 

QATAR

Banks

Emaar Properties Company (EMAAR)

2,210,000

6,526 

UAE

Real Estate

Qatar Real Estate Invest (QRES)

  287,140

5,196 

QATAR

Real Estate

Union Properties Company (UPP)

 3,481,893

4,802 

UAE

Real Estate

Qatar National Cement Co (QNCD)

  109,376

4.692 

QATAR

Industry

Emirates National Bank of Dubai (ENDB)

1,409,831

4,605 

UAE

Banks

Doha Bank (DHBK)

191,586

4,334

QATAR

Banks

Dlala Holdings (DBIS)

  300,084

3,860 

QATAR

Services

National Bank of Kuwait (NBK)

  539,000

3,689

KUWAIT

Banks

Qatar Shipping (QSHS)

203,748

   3,515 

QATAR

Services

The Public Warehousing Company (AGLTY)

758,500

3,366 

KUWAIT

Services

Burgan Bank (BURG)

652,000

2,403

KUWAIT

Banks

Qatar United Development Company (UDCD)

87,520

1,441

QATAR

Industry

National Leasing (NLCS)

130,000

1,343

QATAR

Services

Global Investment House K.S.C.C. (GLOBAL)

341,500

  1,310 

KUWAIT

Banks

First Gulf Bank (FGB)

150,000

1,106

UAE

Banks

National Industries Group (NIND)

214,500

1,097

KUWAIT

Industry

Tamweel PJSC (TAMWEEL)

360,000

823

UAE

Services

Qatar Ind/Manufacturing (QIMD)

62,532

  801

QATAR

Industry

Qatar Fuel (QFLS)

10,000

532

QATAR

Services

Gulf International Services (GISS)

20,000

252

QATAR

Services

Mobile Telecommunications Company K.S.C (ZAIN)

12,500

75

KUWAIT

Services

Total


327,923





Top 5 portfolio companies


Industries Qatar (14.1% of portfolio value)

Total Market Cap (USD) $26.9bn

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 favour of Qatari nationals through an IPO in 2004. It has an index weighting of 17.7% 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 is the key growth drivers.


Qatar National Bank (10.8% of portfolio value)

Total Market Cap (USD) $14.4bn 

Established in 1964 as the country's first commercial bank and is 50% owned by Government of Qatar. Qatar National Bank ('QNB') is the largest commercial bank in Qatar with an asset size of QR 152.6bn. QNB operates through 52 branches and has a 45% market share of banking assets in the country. QNB enjoys the highest credit rating among Qatari banks. (Aa3 by Moody's). 


Barwa Real Estate Company (8.9% of portfolio value)

Total Market Cap (USD) $5.3bn 

Barwa Real Estate Company is one of the largest publicly listed real estate developers in Qatar with 45% of its shares owned by Qatari Diar Real Estate Investment Company. Barwa Real Estate concentrates on building medium-sized residential and tourism development projects locally and abroad. Barwa offers exposure to Qatar's real-estate market, benefiting from double-digit GDP growth rates, high population growth, a simulative regulatory system (freehold regulations) and mortgage finance platforms. 


Commercial Bank of Qatar (7.9% of portfolio value)

Total Market Cap (USD) $7.5bn 

Established in 1975 as the first wholly owned private commercial bank in Qatar, it 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 an asset size of QR 54bnIt holds a 40% stake in National Bank of Oman and another 40% stake in United Arab Bank.


Qatar Islamic Bank (7.8% of portfolio value)

Total Market Cap (USD) $7.6bn  

Qatar Islamic Bank ('QIB') is the largest Islamic Bank in Qatar, maintaining a 7% market share of total lending and a 37% market share of Islamic lending. QIB operates through two main domestic divisions, retail & commercial Islamic Banking and investment banking. In addition, QIB has international exposure through its 20% stake in Malaysian Asian Finance House, and a 29% stake in Lebanese Arab Finance House. QIB is well placed to reap the benefits of rapid growth in the Islamic Banking sector.


Performance of regional indices 

Qatar and other regional markets were resilient to recent sell off in the world equity markets. During this time the GCC markets benefited from their low correlation to global markets, as well as being the prime beneficiaries of rising oil prices. GCC markets finished the second quarter of 2008 in positive territory, with Qatar and Oman showing double digit increases. With a rise of 24.2 per cent, the Qatari market was the best performer in the GCC and the second best performer in the world, while Dubai and Kuwait were up 1.7 per cent and 8.2 per cent respectively.  


Subsequently, in the summer months, we have witnessed small correction in the GCC market on low volumes. As of August 15th Qatar had given up some of its gains to become the second best performing GCC market with a 15% return year to date.



Regional Index Performance


Index

31-Dec-07

30-Jun-08

Change %

Qatar

9,580.5

11,863.9

23.8%

Oman

9,035.5

11,323.0

25.3%

Abu Dhabi

4,551.8

4,953.8

8.8%

Kuwait

12,558.9

15,456.2

23.1%

Saudi Arabia

11,038.7

9,352.3

-15.3%

Bahrain

2,755.3

2,859.0

3.8%

Dubai

5,932.0

5,443.8

-8.2%



Selected Macro Economic data

Wealthy in hydrocarbon resources, Qatar has become the largest exporter of liquefied natural gas (LNG) and home to the world's third largest reserves of natural gas, after Russia and Iran. The abundance in oil and natural gas has resulted in the hydrocarbons sector fuelling high growth and government surpluses, contributing to 55.6% of GDP in 2007. The turn of the century marked a milestone in Qatar's hydrocarbon sector development when significant additional quantities of oil and natural gas were explored, exponentially raising Qatar's proven reserves, and when higher exports of natural gas, in liquefied form, came online.  


(QR Million)

2004

2005

2006

2007**

2008***

1. Oil & Gas Sector

62,922

92,071

118,443

129,452

143,592

% change

24.50%

46.33%

28.64%

9.29%

10.92%

2. Non-Oil & Gas Sector

52,590

62,493

88,201

103,033

124,902

% change

49.80%

18.83%

41.14%

16.82%

21.23%

Total GDP

115,512

154,564

206,644

232,485

268,494

% change

34.80%

33.81%

33.69%

12.51%

15.49%

Total GDP ($ Million)

31,734

42,463

56,770

63,870

73,762

GDP per capita ($)

39,892

49,655

63,080

65,175

69,587

Source: Qatar Statistics Authority

** Preliminary

*** Estimates


Foreign Investor Limits

Since the inception of the Company several of the companies on the Doha Securities Market have reached their foreign ownership limits. Of the companies that the Company has invested in, three have reached these limits. The increase in foreign interest in the Qatari market will continue to reduce the investable universe, absent any changes to these limits.  


Summary:


We are pleased with the performance of the Company to date, and remain optimistic about the prospects for continued growth of the GCC region in general and of Qatar in particular. We are confident that the portfolio of investments acquired is well placed to generate returns for the Company arising from this opportunity. 




Leonard O'Brien                                          Sandeep Nanda

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

Investment Manager                                    Investment Adviser

29 August 2008                                          29 August 2008






  Consolidated Income Statement

 
Note
For the period from 26 June 2007 (date of incorporation) to 30 June 2008
 
 
US$'000
 
 
 
Income
 
 
 Interest income on cash balances
 
1,797
 Dividend income on quoted equity investments
 
6,537
 Realised gain on sale of financial assets at fair value through profit or loss
 
8,376
 Net changes in fair value on financial assets at fair value through profit or loss
 
92,300
Total net income
 
109,010
 
 
 
Expenses
 
 
 Investment Manager's fees
6.2
3,040
 Performance fees
6.2
15,434
 Audit fees
 
53
 Foreign exchange loss
 
283
 Other expenses
6
1,987
Total operating expenses
 
20,797
 
 
 
Profit before tax
 
88,213
 
 
 
Income tax expense
13
-
Retained profit for the period
 
88,213
 
 
 
Basic earnings per share (cents)
10
40.67
Diluted earnings per share (cents)
10
40.63

The Directors consider that all results derive from continuing activities.





The accompanying Notes form an integral part of these consolidated financial statements

Consolidated and Company Balance Sheets 

 
Note
Group
At 30 June 2008
Company
At 30 June 2008
 
 
US$’000
US$'000
 
 
 
 
Financial assets at fair value through profit or loss
5
327,923
87,814
Due from subsidiary
5
-
238,279
Due from broker
 
7,697
-
Dividends receivable
 
46
-
Other receivables and prepayments
 
20
20
Cash at bank
 
15,767
8,649
Total current assets
 
351,453
334,762
 
 
 
 
Issued share capital
8
2,475
2,475
Share premium
 
245,051
245,051
Retained earnings
 
88,213
88,213
Other reserves
9
(1,241)
(1,241)
Total equity
 
334,498
334,498
 
 
 
 
Other creditors and accrued expenses
11
16,955
264
Total liabilities
 
16,955
264
Total equity & liabilities
 
351,453
334,762
 

The profit earned by the Company for the period ended 30 June 2008 was $88,212,761.

The financial statements were approved by the Directors on 29 August 2008 and signed on their behalf by:


Director                                                                     Director





The accompanying Notes form an integral part of these consolidated financial statements

Consolidated Statement of Changes in Equity 

 
Share Capital
Share Premium
Retained Earnings
Other reserves
(note 9)
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
-
(8,913)
-
672
(8,241)
Foreign exchange translation differences
-
-
-
(1,913)
(1,913)
Retained profit for the period
-
-
88,213
-
88,213
Balance at 30 June 2008
2,475
245,051
88,213
(1,241)
334,498
 






The accompanying Notes form an integral part of these consolidated financial statements


Consolidated Cash Flow Statement 

 
Note
For the period from 26 June 2007 (date of incorporation) to 30 June 2008
 
 
US$'000
 
 
 
Cash flows from operating activities
 
 
Purchase of investments
 
(258,404)
Proceeds from sale of investments
 
21,223
Interest received
 
1,797
Dividends received
 
6,497
Operating expenses paid
 
(3,581)
Net cash used in operating activities
 
(232,468)
 
 
 
Financing activities
 
 
Proceeds from the issue of shares
 
256,439
Share issue costs
 
(8,241)
Net cash generated from financing activities
 
248,198
 
 
 
Net increase in cash and cash equivalents
 
15,730
Effects of exchange rate changes on cash and cash equivalents
 
37
Cash and cash equivalents at 26 June 2007
 
-
Cash and cash equivalents at 30 June 2008
7
15,767
 
 

 







The accompanying Notes form an integral part of these consolidated financial statements

Notes to the 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, 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.


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


Duration

The Company currently does not have a fixed life but the Board considers it desirable that Shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, at the annual general meeting of the Company in 2012 a resolution will be proposed that the Company ceases to continue as presently constituted. Shareholders holding at least fifty one per cent of the shares must vote in favour of this resolution for it to be passed. If the resolution is not passed, a similar resolution will be proposed at every third annual general meeting of the Company thereafter. If the resolution is passed, the Directors will be required, within 3 months of the resolution, to formulate proposals to be put to Shareholders to reorganise, unitise or reconstruct the Company or for the Company to be wound up. 


2    The Subsidiary


During the period the Company established the following subsidiary company:

 

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

Epicure Qatar Opportunities Holdings Limited is a wholly owned subsidiary of the Company, and was incorporated in the British Virgin Islands on 4 July 2007 under the provisions of the Companies Act 2001, as a limited liability company with registered number 1415393. 


3    Significant Accounting Policies


The consolidated financial statements of the Company for the period ended 30 June 2008 comprise the Company and its subsidiary (together referred to as the 'Group'). 


3.1    Basis of presentation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS')The financial statements have been prepared under the historic cost convention, as modified by the revaluation of financial assets held at fair value through profit or loss. 


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    Basis of consolidation


Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. 


Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in the consolidated financial statements. 

 

3.3    Financial assets at fair value through profit or loss

Investments are designated as at fair value through profit or loss on initial recognition. The Group invests in quoted equities for which fair value is based on quoted market prices. The quoted market price used for financial assets held by the Group is the current bid price ruling at the period end without regard to selling prices. 


Purchases and sales of investments are recognised on trade date - the date on which the Group commits to purchase or sell the asset. Investments are initially recorded at fair value, and transaction costs for all financial assets and financial liabilities carried at fair value through profit and loss are expensed as incurred.


Gains and losses arising from changes in the fair value of the financial assets and liabilities are included in the income statement in the period in which they arise.


3.4    Foreign currency translation

The Qatari Riyal is the currency of the primary economic environment in which the entity operates ('the functional currency').


The US Dollar is the currency in which the financial statements are presented ('the presentational currency').


Monetary assets and liabilities denominated in foreign currencies as at the date of these financial statements are translated to Qatari Riyal at exchange rates prevailing on that date. Income and expenses are translated into Qatari Riyal based on exchange rates on the date of the transaction. All resulting exchange differences are recognised in the income statement.


The financial statements are presented in US Dollars by translating the assets and liabilities denominated in Qatari Riyal at the exchange rate prevailing on the balance sheet date. Items of revenue and expense are translated at exchange rates on the date of the relevant transactions or an average rate. Components of equity are translated at the date of the relevant transaction and not retranslated. All resulting exchange differences are recognised in the foreign currency translation reserve.


3.5    Interest income and dividend income

Interest income is recognised on a time-proportionate basis using the effective interest rate method. 


Dividend income is recognised when the right to receive payment is established.


3.6    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.

 

3.7    Cash and cash equivalents

Cash and cash equivalents comprise cash deposited with banks and bank overdrafts repayable on demand. 


3.8    Investment in subsidiaries

Investment in subsidiaries in the Company balance sheet is stated at fair value. 


3.9    Future changes in accounting policies


IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements:


 
Effective date
International Accounting Standards (IAS/IFRS)
(accounting periods commencing after)
 
 
IFRS 8      Operating segments
1 January 2009
IAS 1       Amendment – Presentation of financial statements
1 January 2009
IAS 23     Amendment – Borrowing costs
1 January 2009
IAS 32    Amendment – Financial instruments: Presentation
1 January 2009
  
International Financial Reporting Interpretations Committee (IFRIC)
 
IFRIC13    Customer loyalty programmes
1 July 2008
 
 

The Directors do not expect the adoption of the other standards and interpretations to have a material impact on the Group's financial statements in the period of initial application.


4    Net Asset Value per Share

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


5    Investments and amount due from subsidiary


Group

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


Security name

Number

US$'000

Emaar Properties Company (EMAAR UH)

2,210,000

6,526

Emirates National Bank of Dubai (ENDB UH)

1,409,831

4,605

First Gulf Bank (FGB DH)

150,000

1,106

Tamweel PJSC (TAMWEEL UH)

360,000

823

Union Properties Company (UPP UH)

3,418,893

4,802

Burgan Bank (BURG KK)

652,000

2,403

Global Investment House K.S.C.C. (GLOBAL KK)

341,500

1,310

Mobile Telecommunications Company K.S.C. (ZAIN KK)

12,500

75

National Bank of Kuwait (NBK KK)

539,000

3,689

National Industries Group (NIND KK)

214,500

1,097

The Public Warehousing Company (AGLTY KK)

758,500

3,366

Al Khaleej Bank (KCBK QD) 

1,736,480

7,808

Barwa Real Estate (BRES QD)

1,258,591

29,051

Commercial Bank of Qatar (CBQK QD)

629,097

26,059

Dlala Holdings (DBIS QD)

300,084

3,860

Doha Bank (DHBK QD)

191,586

4,334

Gulf International Services (GISS QD)

20,000

252

Industries Qatar (IQCD QD)

934,288

46,085

Masraf Al Rayan (MARK QD)

3,522,845

21,217

National Leasing (NLCS QD)

130,000

1,343

Qatar Electricity & Water Co (QEWS QD)

486,326

20,371

Qatar Fuel (QFLS QD)

10,000

532

Qatar Gas Transport (QGTS QD)

791,834

8,437

Qatar Ind/Manufacturing (QIMD QD)

62,532

801

Qatar Insurance (QATI QD)

340,037

20,757

Qatar Islamic Bank (QIBK QD)

596,230

25,591

Qatar National Bank (QNBK QD)

571,934

35,537

Qatar National Cement Co (QNCD QD)

109,376

4,692

Qatar Navigation (QNNS QD)

444,185

18,496

Qatar Real Estate Invest (QRES QD)

287,140

5,196

Qatar Shipping (QSHS QD)

203,748

3,515

Qatar Telecom (QTEL QD)

246,024

12,746

Qatar United Development Company (UDCD QD)

87,520

1,441



327,923



Company



US$'000



Investment in subsidiary

87,814

Amount due from subsidiary

238,279


Amount due from subsidiary is unsecured, interest free, and repayable on demand. 


6    Charges and Fees


6.1    Nominated Adviser

As nominated adviser to the Company 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.


Advisory fees paid to the Nominated Adviser for the period ending 30 June 2008 amounted to US$45,752.


6.2    Investment Manager's fees

In accordance with the terms of the Placing, the Investment Manager was paid a project fee of 3% of the gross proceeds of the initial Placing and 2.5% of the secondary placing and was responsible for paying the Placing Agent and the Distribution Adviser for their services. Fees paid for the period ending 30 June 2008 amounted to US$7,352,918 and have been charged to equity as a share issue expense.


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 30 June 2008 amounted to US$3,040,437 and the amount accrued but not paid at the period end was US$1,113,709


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 of 8% pro rata per annum. For each subsequent performance period, the target net asset value per Ordinary Share means the net asset value, 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. The performance fee is payable within 21 days of the approval of this annual report. 


Performance fees accrued but not paid during the period ended 30 June 2008 amounted to US$15,433,798.


The Investment Manager is responsible for the payment of all fees to the Investment Adviser.


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.


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 Company up to US$100 million and 6 basis points per annum of the net asset value in excess of US$100 millionsubject to a minimum monthly fee of US$6,250The Custodian is also entitled to an inception fee by reference to time spent subject to a minimum fee of US$10,000. Subcustodian fees are also payable.


Custodian and subcustodian fees for the period ending 30 June 2008 amounted to US$849,670 and the amount accrued but not paid at the period end was US$161,561.


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 Company betweeUS$0 and US$100 million, 12.5 basis points of the net asset value of the Company between US$100 and US$200 million and 10 basis points of the net asset value of the Company in excess of US$200 million, subject to a minimum monthly fee of US$15,000, payable quarterly in arrears.  The Administrator has also received an inception fee on a time and charges basis subject to a minimum fee of US$20,000. 


The Administrator assists in the preparation of the financial statements of the Company 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 30 June 2008 amounted to US$348,005, and US$19,449 for additional services. 


7    Cash and Cash Equivalents



30 June 2008


US$'000



Bank balances

15,766

Deposit balances

1

Cash and cash equivalents

15,767


8    Share Capital


Ordinary Shares of 1c each

Number

US$'000




In issue at the start of the period

-

-

Issued during the period

247,527,523

2,475

In issue at 30 June 2008

247,527,523

2,475


The authorised share capital of the Company is US$5 million divided into 500 million Ordinary Shares of US$0.01 each.


The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regards to the Company's assets.


Warrants

34,271,000 warrants were issued pursuant to the initial Placing (one warrant for every five ordinary shares issued). The warrants entitle the holder to subscribe for one Ordinary Share of 1 cent each in the Company in cash on 31 October in any of the years 2008 to 2012 inclusive, at a price of US$1.25 per Share payable in full on subscription.



Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Company. The Board manages the Group's affairs to achieve shareholder returns through capital growth rather than income, and monitors the achievement of this through growth in net asset value per share.  


Group capital comprises share capital, share premium and reserves.


Neither the Company nor its subsidiary are subject to externally imposed capital requirements.


9    Other reserves


 
Foreign currency translation reserve
Other reserves
30 June 2008
 
US$'000
US$'000
US$'000
 
 
 
 
Balance at 26 June 2007
-
-
-
Foreign exchange translation differences
(1,913)
-
(1,913)
Share issue expenses relating to options
-
672
672
Balance at 30 June 2008
(1,913)
672
(1,241)
 

10    Earnings per Share


Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.


Basic earnings per share

 

 
2008
 
 
 
 
Profit attributable to equity holders of the Company (US$’000)
88,213
Weighted average number of ordinary shares in issue (thousands)
216,922
Basic earnings per share (cents per share)
40.67
 
 The difference between basic and diluted ordinary shares in issue arises from the assumption that dilutive share options were exercised (Note 6.2). The warrants (Note 8) are not dilutive as the average share price for the period is less than the exercise price of the warrants. 



Diluted earnings per share


2008





Profit attributable to equity holders of the Company (US$'000)

88,213

Weighted average number of ordinary shares in issue (thousands)

216,922

Adjustment for share options

211


217,133

Fully diluted earnings per share (cents per share)

40.63


11    Trade and other payables


Group


30 June 2008


US$'000

Management fee payable

1,114

Performance fee payable

15,434

Administration fee payable

140

Accruals and sundry creditors

267


16,955


Company


30 June 2008


US$'000

Administration fee payable

101

Accruals and sundry creditors

163


264


12    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 30 June 2008 amounted to US$304,100; with the total amount payable at the period end being US$59,663

 

13    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 will be zero. The Company will be 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 Company 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 Company on disposal of shares in Qatari companies will not be subject to tax in Qatar


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

 

14    Financial instruments

The Group's activities expose it to a variety of financial risks: market price risk, foreign exchange risk, credit riskliquidity risk and interest rate risk.


Market price risk

The Group's strategy for the management of investment risk is driven by the Group's investment objective. The main objective of the Group is to capture the opportunities for growth offered by the expanding Qatari economy by investing in listed companies or companies soon to be listed. This will be principally through the medium of the Doha Securities Market ('DSM'). 


All investments present a risk of loss of capital through movements in market prices. The Manager and Investment Adviser moderate this risk through a careful selection of securities within specified limits. The Manager and the Investment Adviser review the position on a day to day basis and the Directors review the position at Board meetings. 


The Group's market price risk is managed through the diversification of the investment portfolioApproximately 80% of the net assets attributable to holders of ordinary shares is invested in equity securities, of which a maximum of 15% is to be invested outside QatarInvestment opportunities are available in the United Arab Emirates and Kuwait.  


At 30 June 2008, if the market value of the investment portfolio had increased/decreased by 5% with all other variables held constant, this would have increased/decreased net assets attributable to shareholders by approximately US$16.4 million


Foreign exchange risk

The Group's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than Qatari Riyal. As a result, the Group is subject to the effects of exchange rate fluctuations with respect to these currencies.


The Group's policy is not to enter into any currency hedging transactions. 


At the reporting date the Group had the following exposure:


Currency
30 June 2008
 
%
 
 
US Dollar
(2.48)
Qatari Riyal
92.38
Kuwaiti Dinar
4.08
UAE Dirham
6.02
 
 

The following table sets out the Group's total exposure to foreign currency risk and the net exposure to foreign currencies of the monetary assets and liabilities:


 
Monetary Assets
 
US$’000
Monetary Liabilities
 
US$’000
Net Exposure
 
US$’000
30 June 2008
 
 
 
 
 
 
 
US Dollar
8,670
(16,955)
(8,285)
Qatari Riyal
309,020
-
309,020
Kuwaiti Dinar
13,637
-
13,637
UAE Dirham
20,126
-
20,126
 
351,453
(16,955)
334,498
 
 

At 30 June 2008, had the Qatari Riyal strengthened by 5% in relation to the Kuwaiti Dinar and the UAE Dirham, with all other variables held constant, net assets attributable to equity holders of the Company and the profit for the period would have decreased by the amounts shown below:


30 June 2008
US$’000
 
 
Kuwaiti Dinar
639
UAE Dirham
943
Effect on net assets
1,582
 
 

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group


The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost, as they have a short term maturity. 


At the reporting date, the Company's financial assets exposed to credit risk comprised the following:


 
30 June 2008
 
US$’000
Financial assets at fair value through profit or loss
327,923
Cash at bank
15,767
Other receivables
7,763
 
351,453

 


The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Management does not expect any counterparty to fail to meet its obligations and there are no debts past their due dates as at the period end. 


Liquidity risk

The Group manages its liquidity risk by maintaining sufficient cash and the ability to close out market positions. 


The Group's liquidity position is monitored by the Manager and the Board of Directors. 


The residual undiscounted contractual maturities of financial liabilities are in the table below:


 
 
Less than
1 month
1-3
months
3 months to 1 year
1-5 years
Over 5 years
No stated maturity
 
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Financial liabilities
 
 
 
 
 
 
Other creditors and accrued expenses
16,955
-
-
-
-
-
 
16,955
-
-
-
-
-

 


Interest rate risk

The majority of the Group's financial assets are non-interest bearing. Cash held by the Group is invested at short-term market interest rates. As a result, the Group is not subject to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates. However it is subject to cash flow risk arising from changes in market interest rates. 


The table below summarises the Group's exposure to interest rate risks. It includes the Group's financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying value of assets and liabilities:


 
Less than 1month
1-3 months
3 months
to 1 year
1-5 years
Over 5
years
Non-interest
bearing
Total
 
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Financial Assets
 
 
 
 
 
 
 
Financial assets at fair value through profit or loss
-
-
-
-
-
327,923
327,923
Other receivables and prepayments
-
-
-
-
-
7,763
7,763
Cash
15,767
-
-
-
-
-
15,767
Total financial assets
15,767
-
-
-
-
335,686
351,453
 
 
 
 
 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
Other creditors and accrued expenses
-
-
-
-
-
(16,955)
(16,955)
Total financial liabilities
-
-
-
-
-
(16,955)
(16,955)
 
 
 
 
 
 
 
 
Total interest rate sensitivity gap
15,767
-
-
-
-
 
 
 
 

All interest received on cash balances is at variable rates. Hence no sensitivity analysis regarding changes in value of financial assets or liabilities is required. 


15    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 Principle Capital Holdings SA, of which Mr O'Brien is a minority shareholder. Fees payable to the Investment Manager are disclosed in note 6.2. 


16    Post Balance Sheet Events


There are no post balance sheet events that require to be brought to the attention of Shareholders.

























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END
 
 
FR SEFFMUSASELA