Final Results

RNS Number : 5229S

Epicure Qatar Equity Opportunities

13 September 2010

 



13 September 2010

Epicure Qatar Equity Opportunities Plc

Annual results for the twelve months ended 30 June 2010

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 annual results for the twelve months ended 30 June 2010.

Financial highlights

·      Net asset value at 30 June 2010 of US$195.6 million, or 84¢ per share (2009:76¢)

·      Profit after tax of US$17.1 million and basic earnings per share of 7.3¢ (2009:loss of 62.3¢)

·      Buybacks continued with 2.308 million shares purchased and cancelled during the period

·      Dividend of 2.5¢ per ordinary share declared per ordinary share under inaugural dividend policy

Market highlights

·      The Qatar Exchange witnessed volatility in line with international markets and on the back of increasing global concerns over the Eurozone crisis

·      Nonetheless, the DSM QE Index returned 6.3% for the period under review and was the third best performing GCC market after Saudi Arabia and Oman

·      Qatar's planned budget expenditure of QR118bn (US$32.4bn) for 2010/11 is up 25 per cent over last year's budgeted spending

·      With real GDP expected to expand by 18% in 2010, Qatar's economy should continue to stand among the fastest growing economies worldwide

Company highlights

·      Policy of declaring annual dividends instituted to broaden investor appeal

·      Discount to net asset value actively monitored and share buyback programme maintained

·      Arrangements being put in place for a potential move from AIM to the Official List of the London Stock Exchange

David von Simson, chairman of EQEO, commented: "We operate in a market that we believe will show strong and consistent growth even as worldwide conditions prove challenging, and within that market, our aim is to achieve reasonably consistent first quartile performance. By not operating as a tracker fund, but judiciously adapting our portfolio to market conditions, we continue to outperform our peer group."

"Our ambition is to remain over time the leading fund in this sector, and we are confident that the steps we are currently taking to increase the market for our shares will contribute materially to that outcome."

For further information

Epicure Qatar Equity Opportunities plc - +41 (0) (22) 908 1190

Leonard O'Brien

Milbourne - [phone] Tim Draper	Panmure Gordon - [phone] Richard Gray  Andrew Potts
Oriel Securities - [phone] Joe Winkley Neil Winward

Chairman's Statement

On behalf of the Board, I am pleased to present the Annual Report and Accounts of the Company for the year to 30^th June, 2010.

The Investment Manager's report highlights the volatility that we have experienced on the Qatar Exchange. Over the period the QE Index nevertheless showed a significant advance, which has been in further evidence since the year-end.  After a 14 per cent gain in the first quarter, we experienced a further 7 per cent gain in the QE Index in the third, but the second and fourth quarters set the QE Index back by 6 and 7 per cent respectively.

We are invested in a market that we believe will show strong and consistent growth even as worldwide conditions prove challenging, and within that market our aim is to achieve reasonably consistent first quartile performance. By not operating as a tracker fund, but judiciously adapting our portfolio to market conditions, we continue to outperform our peer group of other listed and unlisted funds focusing on the region.

The Board strives towards best practice in terms of corporate governance, independence, and achievement of shareholder value, both through constant monitoring of our investment performance and the active management of any discount to net asset value. A board member is responsible for close monitoring of our share price, and working with our brokers to buy back shares when we believe appropriate so as to manage any discount to net asset value.  Together with the investment managers and advisers, regular investor presentations are held to promote a wider following for the Company.  In that regard we recently appointed Oriel Securities to act as joint broker alongside the Company's existing broker. As detailed below, we are also taking further steps to increase the market for our shares.

The Board is mindful of best practice as set out in the corporate governance guidelines issued by the City of London Investment Group plc, which has over time become and remains today our largest shareholder.

Results

Our financial results show a profit for the year of US$17.1 million, representing 7.28 cents per ordinary share. In terms of net asset value, we recorded an increase of US$15.5 million to US$195.6 million, which translates into a year-end figure of US$0.84 per ordinary share (2009 : US$0.76) thanks in part to a selective programme of share buybacks, which is described in greater detail below.

Share Buybacks

During the year, a total of 2,307,790 ordinary shares were purchased at prices ranging from US$0.62 to US$0.76, and cancelled.  A further 60,000 shares, were purchased in the financial year at an aggregate price of US$0.75, and are held for the time being in treasury.

Proposed new dividend policy

Following consultation with our professional advisers and shareholders, we have decided to institute a policy going forward, of declaring an annual dividend.  The majority of companies listed on the Qatar Exchange pay one dividend a year and our dividend policy will follow that.

Accordingly, for the year just ended, it is proposed to pay on 22 October 2010 a dividend of 2.5 cents per ordinary share for shareholders on the register on 15 October 2010. We believe this may be of interest to a number of investors, both existing and potential, and more closely corresponds to current investor preferences.

The quantum of the dividend is calculated based on a proportion of the dividends received during the year, net of the Company's attributable costs. Any undistributed income will be set aside in a revenue reserve in order to facilitate the Company's policy of future progressive dividend payments. This policy will be subject to the absence of exceptional market events.

Move to the Main Market of the London Stock Exchange

Our shares have been quoted on AIM since our initial public offering in 2007.

In the view of the Board and its advisers and shareholders, a move to the Main Market of the London Stock Exchange, and the Official List of the UK Listing Authority, would represent potential advantages to shareholders and could lead to a narrowing of the discount to net asset value.

Accordingly arrangements are being put in place to effect the necessary changes and commence this process. We will update shareholders on this in due course.

Outlook

We believe the outlook for the region to be positive. The recent introduction of the NYSE Euronext universal trading system to the Qatar Exchange marks a significant step forward in the Qatar Exchange's aim to become a global exchange working in accordance with the best international practices and standards. In addition, we are hopeful that in the short to medium term Qatar (and potentially some other GCC economies) will be reclassified by MSCI from a 'frontier' market to an 'emerging' market.

The Board have confidence that our investment manager and investment adviser have the necessary skills and track record to continue to represent the first port of call for investors interested in our investment thesis. Our ambition is to remain over time the leading active fund in this sector, and we are confident that the steps we are currently taking to increase the market for our shares will contribute materially to that outcome.

David von Simson

Chairman

10 September 2010

Report of the Investment Manager and Investment Adviser

Regional Equity Market Overview

During the year ended 30 June 2010 the Qatar Exchange, formerly named the Doha Securities Market (DSM), witnessed volatility in line with international markets and on the back of increasing global concerns over the Eurozone crisis.

Indices	30-Jun-09	30-Jun-10	Change
Qatar (DSM)	6,492	6,900	6.3%
Saudi (TASI)	5,596	6,094	8.9%
Dubai (DFMGI)	1,784	1,462	-18.1%
Abu Dhabi (ADI)	2,631	2,514	-4.4%
Kuwait (KWSE)	8,080	6,543	-19.0%
Oman (MSI)	5,612	6,058	7.9%
Bahrain (BAX)	1,582	1,396	-11.7%

The Saudi Arabian equity market was the best performer in the 12 months to 30 June 2010 with gains of 8.9 per cent, driven by an improved outlook. Oman and Qatar returned 7.9 per cent and 6.3 per cent respectively to finish the period as the second and third best performing markets in the GCC. Kuwait and Dubai fell 19.0 per cent and 18.1 per cent respectively, while Bahrain and Abu Dhabi fell 11.7 per cent and 4.4 per cent.

Indices	30-Sep-09	31-Dec-09	31-Mar-10	30-Jun-10
Qatar (DSM)	14.2%	-6.1%	7.2%	-7.5%
Saudi (TASI)	13.0%	-3.2%	11.1%	-10.4%
Dubai (DFMGI)	22.8%	-17.7%	2.2%	-20.7%
Abu Dhabi (ADI)	18.7%	-12.2%	6.0%	-13.6%
Kuwait (KWSE)	-3.3%	-10.4%	7.5%	-13.1%
Oman (MSI)	17.1%	-3.1%	5.2%	-9.5%
Bahrain (BAX)	-1.7%	-6.2%	6.1%	-9.7%

While the Investment Adviser believes that Qatar will continue to demonstrate strong economic growth over the coming quarters, stock market performance will depend on a further improvement in both investor sentiment and liquidity. It is anticipated that the forthcoming results of Qatari companies will have a positive impact on the outlook for the bourse as their fundamentals remain robust.

QATAR'S MACRO UPDATE

Qatar sets budget at US$32.4bn, expects surplus

A key indicator of sentiment is the annual government budget, which generates substantial interest in the local market due to its importance to the local economy. This year's budget, the largest in the history of the government, reflects positively on the government's intention to continue with its expansionary policies.

Qatar's planned budget expenditure of QR118bn (US$32.4bn) for 2010/11 is up 25 per cent over last year's budgeted spending. Forecast revenues of QR128bn (US$35.0bn) represent 35 per cent of GDP. The budget has been prepared using an oil price assumption of US$55 a barrel but, given the oil price is currently much higher, the Investment Adviser expects a fiscal surplus.

Over recent years the government's revenue base has increased and larger absolute allocations have been made towards capital expenditure. The commitment of the government to develop a world class infrastructure platform continues unabated, with more than US$220bn of projects underway. The capital expenditure programme, which now stands at QR47bn, represents more than six times that of 2004 and contributes considerably to the internal economy of the country. The Investment Adviser believes that, through this budget, the Qatari government has demonstrated its intent of achieving sustainable development in the country. Allocations have been consistently made towards education, health and infrastructure projects.

Qatar's budget, QRm	2005	2006	2007	2008	2009*	2010e
Nominal GDP	154,564	206,644	259,411	365,483	305,032	359,996
Total revenues	65,685	86,063	117,850	136,278	88,695	127,503
Total expenditure	47,672	67,147	83,919	97,332	94,498	117,900
Capital expenditure	14,917	17,396	32,950	32,862	37,926	47,160
Surplus	18,013	18,916	33,931	38,946	-5,803	9,700
Expenditure / GDP	31%	32%	32%	27%	31%	32%
Capital exp. / total exp.	31%	26%	39%	34%	40%	40%
YoY Change in total exp.	32%	41%	25%	16%	-3%	40%
YoY Change in Capital exp.	90%	17%	89%	0%	15%	24%

Source: Deutsche Bank, Central Bank of Qatar * Based on initial estimates by Qatar's Ministry of Finance

Much awaited Dubai World restructuring proposal announced

During the year ended 30 June 2010 the government of Dubai, along with Dubai World and Nakheel, announced proposals for the restructuring of the two companies' liabilities. These represent the clearest proposals since the plan to restructure the debts was announced in November last year. On the surface the proposals look positive for the creditors of both companies. They anticipate full repayment of principal and interest on all liabilities, albeit with some maturity extension.

In the view of the Investment Adviser, the announced proposal and the general principle it outlines provides positive signals as to the direction the restructuring process is taking and, to a degree, has helped reduce uncertainty. Since November 2009, the market has traded on sentiment and rumour rather than tangible facts and proposals and, consequently, has deterred many foreign investors from entering the GCC markets.

Economy weathering the global downturn well

Overall, Qatar's economy continues to weather the global downturn well, and should stand among the fastest growing economies worldwide in 2010. Real GDP is expected to expand by 18 per cent, thanks to ongoing investment in the liquefied natural gas (LNG) industry, which will raise production to 77.4 million tons per year by 2012 (from 31.0 million tons in 2008) and boost export receipts. This strong growth will have favorable repercussions on Qatar's fiscal and external accounts.

The stress on the real estate and stock markets has prompted the government and the central bank to step in to shield the banking sector from potential losses arising from its exposure to these markets. The Investment Adviser believes that the

Qatari government is both able and willing to increase spending and the banks have the resources to increase their activity as risk appetite improves.

Qatar: economic outlook brighter

The Investment Adviser is looking towards the financial year to June 2011 with optimism, believing the downturn that began in late 2008 and continued into 2009 has run its course. We expect to see growth resume across the region with the pace of expansion building momentum as the year goes on. After a modest slowdown in 2009, we expect economic growth in Qatar to rebound strongly in 2010 and 2011 thanks to the continuing expansion of the country's natural gas sector and the government's investment in the country's infrastructure.

Real GDP Growth (%)	2006	2007e	2008e	2009f	2010f
Qatar	15.0	15.3	19.6	9.4	18.1
Oman	5.9	7.2	12.3	3.7	6.0
Saudi Arabia	3.2	3.4	4.2	0.2	3.7
Kuwait	6.3	4.5	5.6	-1.5	3.0
UAE	9.4	7.4	7.4	-1.1	2.0
Bahrain	6.7	8.1	5.4	0.5	1.8

Source: IMF, IIF, National Accounts, Samba

Qatar's real GDP is expected to continue to grow at a healthy pace and to stand out against that of its peers. The government is both able and willing to increase spending and the banks have the resources to increase financing activity as risk appetite improves. This augurs well for the local economy.

The Qatari government's expansionary spending on infrastructure projects is still expected to boost both the construction sector and overall economic activity in Qatar, with a number of infrastructure projects expected to be initiated in coming months. The Public Works Authority of Qatar (Ashghal) recently announced plans to implement infrastructure projects worth US$20bn in the country over the next five years. More interestingly, Ashghal announced that local companies are able to compete for 30 per cent of the value of these projects.

Elsewhere, government service spending, including healthcare and education, is likely to expand by close to 20 per cent in 2010 given that the 2010-11 budget forecasts a spending increase of almost 25 per cent. Some 15 per cent of the US$32bn budget is allocated to education and 7 per cent to healthcare.

The Investment Adviser remains optimistic that the non-oil economy will return to growth. The 2010-11 budgets are highly expansionary and signal a fresh commitment to the infrastructure projects that appeared to lose momentum last year. While banking sector data shows that lending to the private sector is still weak, there has been a marked pick-up in credit issuance to state entities. The Investment Adviser views this as a good early sign of stronger activity to come in the state-dominated economy and will look for more robust non-oil growth in the second half of the year and into 2011. The Investment Adviser continues to believe that following the completion of key projects in the gas sector in 2010, the economy will benefit from a slew of diversification-driven infrastructure spending programmes that will support growth over the next few years.

Attractive Valuations

The Investment Adviser believes that the Qatari stock market is undervalued and that the recent downturn provides highly attractive opportunities. According to the IMF, Qatar is expected to be fastest growing economy in the world in 2010. Considering Qatar's growth prospects and compared with the valuations of other regions, we consider the Qatari stock market to be undervalued.

Market	P/E 1	P/BV 1	DY 1
Levant 2	16.3	1.7	2.0
Saudi SE	15.6	2.0	2.8
Kuwait SE	13.6	1.4	4.3
MENA	13.0	1.6	3.2
GCC	12.8	1.6	3.3
North Africa	12.6	2.1	3.2
Muscat SM	11.3	1.7	5.8
Bahrain SE	10.7	1.0	4.0
Qatar SE	10.3	2.0	3.4
UAE	10.3	1.0	3.3

Source: Zawya, QIC

Note 1: Trailing twelve months

Note 2: Levant includes Amman SE, Beirut SE, Damascus SE and Palestine SE

DSM20 index rebranded to QE Index

In May 2010 the DSM20 Index was rebranded the QE Index after a reshuffle. Constituents of the new QE Index are selected mainly on the criteria of free float market capitalisation and average daily traded value. The Investment Adviser feels that the rebranding of the DSM 20 index is the first step that the Qatar Exchange has taken to bring the Qatari capital market in line with international standards and best practices. The new index improves the tradability and investability of the index while making the selection criteria simpler and maintaining a fair representation of the market as a whole.

The Qatar Exchange, which in 2009 entered a strategic partnership with NYSE Euronext, is expected to introduce a wider range of indices later this year.

MSCI retains frontier market status for Qatar

In June 2010, MSCI announced that it had decided to retain Qatar's status as a frontier market. The country was placed under review for a possible upgrade to emerging market status in MSCI's Annual Market Classification Review in June 2011. MSCI has reported positively on new regulations being considered by the Qatar Exchange. According to MSCI, as in the UAE generally, the need to set up and operate under a dual account structure with separate trading and custody accounts creates substantial operational burdens that MSCI views as incompatible with the standards required to attain emerging market status. In addition, international investors remain concerned about the stringent foreign ownership limits imposed on Qatari companies.

S&P upgrades Qatar and Qatar Petroleum to 'AA'

Standard & Poor's has upgraded Qatar's sovereign credit rating and state controlled Qatar Petroleum's to 'AA' from 'AA-', citing the gas rich Gulf Arab state's strong growth prospects. The outlook on both ratings is stable.

Qatar issues QR denominated bonds

Having completed a QR25.5bn (US$7bn) US$ denominated bond sale in November 2009, the largest sovereign debt issuance in the Middle East so far, the government of Qatar has issued QR denominated bonds worth a further QR10bn (US$2.75bn) to the local banks, split evenly between conventional and Sharia-compliant formats. These are aimed at deepening the capital markets in the state of Qatar and creating a benchmark yield curve to pave the way for further issuance. A total of nine Qatari banks bought into the bond programme, with conventional lenders purchasing QR1bn of paper each and Islamic banks each subscribing to QR1.25bn.

The Investment Adviser feels that this bond issue is a strong positive for Qatari capital markets as it will enable corporates to tap the domestic bond market in the future. Government-related corporate entities will be able to raise capital domestically until such time as the economy is growing at a more even pace.

Company Update

At the end of 30 June 2010, the Company's NAV per share stood at US$0.84 compared to US $0.76 as of 30 June 2009.

At 30 June 2010 the Company was invested in 22 companies in the GCC, with 17 of them being in Qatar, four in the UAE, and one in Kuwait (30 June 2009: 22 in Qatar, four in UAE, one in Kuwait). The total market value of investments was US$193m at the end of 30 June 2010 and the Company held cash of 1.41 per cent of NAV (US$2.7m).

Corporate Profitability

The 42 companies listed on the Qatar Exchange reported growth in net profit for the year ended 30 June 2010 of 10 per cent, reaching QR14.9bn compared to QR13.5bn in 30 June 2009. This result emphasised the strength and stability of these companies, as well as the strength of the Qatari economy.

Sector Net Profit  (QR m)	30-Jun-09	30-Jun-10	Change
Banks and Financial Institutions	5,435.1	5,951.8	10%
Insurance	492.9	537.1	9%
Services	4,162.1	5,006.1	20%
Industry	3,392.0	3,398.4	0%
Total	13,482.1	14,893.4	10%

Source: Qatar Insurance Company, Qatar Exchange

Looking at the sectoral performance of the Qatari market, all sectors reported growth in year ended 30 June 2010 with the industrial sector managing to show a slight positive performance. It is worth noting that for some companies the 30 June 2009 financials were boosted by extraordinary profits, without which the net income growth in the year ended 30 June 2010 would have looked better still.

We do not expect to see any major negative surprises in the remainder of 2010 corporate results and expect that most companies will track their last year results and announce an improved outlook.

Net profit growth of the Company's top 5 holdings

Company	LTM 6/30/2009	LTM 6/30/2010	Change
Qatar National Bank	3,863.0	4,837.8	25.2%
Industries Qatar	5,312.1	4,875.0	-8.2%
Commercial Bank of Qatar	1,606.6	1,399.0	-12.9%
Qatar Islamic Bank	1,601.6	1,111.0	-30.6%
Rayan Bank	1,053.4	1,098.9	4.3%

Figures in QR million

Source: Qatar Insurance Company, Qatar Exchange

Industry allocation

The Company's largest sector exposure continues to be to the financial services industry. Exposure to the banking sector stood at 54.0 per cent at the end of 30 June 2010 compared to 43.0 per cent at the end of 30 June 2009.

The services sector, which is broadly defined and includes companies in telecommunications and utilities, accounted for 22.1 per cent of all investments. The Company's exposure to the real estate sector stood at 5.0 per cent at the end of 30 June 2010. The industries and insurance sectors accounted for a further 12.9 per cent and 4.3 per cent respectively.

Embedded image removed - please refer to the Company's website www.epicure-quatarequity.com for a pie chart depicting industry allocation as a percentage of market value.

Portfolio Breakdown Top 5 Holdings

Company	Sector	% of NAV
Qatar National Bank	Banks	14.9%
Industries Qatar	Industries	13.0%
Commercial Bank of Qatar	Banks	12.5%
Qatar Islamic Bank	Banks	9.9%
Rayan Bank	Banks	9.3%

Figures in QR million

Source: Qatar Insurance Company, Qatar Exchange

At 30 June 2010, the top five investments of the Company constituted 59.6 per cent of NAV (52.3 per cent 30 June 2009).

As noted previously, the Investment Adviser believes that Qatari banks are extremely well placed to benefit from a recovery in the local economy. Qatari banks are performing well with all major macro and banking indicators showing robust performance during the period and exceeding our initial expectations. Qatar is the fastest-growing economy in the MENA region and its banking industry is currently enjoying comfortable liquidity, strong public sector credit demand and a low-risk profile compared to regional peers.

Regional Allocation

As at 30 June 2010, the Company was invested in 17 companies in Qatar, four companies in UAE, and one company in Kuwait. Investments outside Qatar constituted 0.3 per cent of the Company's investments.

Embedded image removed - please refer to the Company's website www.epicure-quatarequity.com for a pie chart depicting country allocation as a percentage of market value.

Qatar National Bank (14.9% of NAV)

Qatar National Bank (QNB) is a high quality proxy stock for Qatari economic growth given its strong ties with the public sector and access to state liquidity. The government of Qatar owns 50% of QNB. Market shares are c.56% for loans, c.53% for deposits, and as high as 57% of the asset base of the Qatari Banking sector. This drives high asset quality, with NPLs at 0.7% in 2009, and offers superior visibility on balance-sheet momentum and earnings growth. In addition to an international presence in key financial centres around the world such as London, Paris and Geneva, QNB has been building a network of branches, representative offices and associates (Jordan, UAE, Iraq, and Tunisia) throughout the MENA region.

Industries Qatar (13.0% of NAV)

Industries Qatar (IQ) is the largest publicly traded company in Qatar. IQ is a holding company with interests in petrochemicals via 80% owned Qatar Petrochemical Co., fertilizers via 75% owned Qatar Fertilizer Co., steel via 100% owned Qatar Steel Co. and fuel additives via 50% owned Qatar Fuel Additives Co. Similar to many of its Middle Eastern peers, IQ is one of the lowest cost producers in the industry with operating and net margins in excess of 50-55% compared to global peers with operating margins in the mid-teens. The company procures its natural gas at a price range of US$1.75-2.25/mmBtu compared to current global natural gas prices in the range of US$5-5.5/mmBtu. With a low and largely fixed-cost structure, any uptick in basic chemical commodity prices should flow straight to the bottom line.

Commercial Bank of Qatar (12.5% of NAV)

Commercial Bank of Qatar (CBQ) represents the higher beta play within the Qatari banking universe having been one of the fastest growing banks in the Middle East from 2004 to 2008, but its growth has been slowed significantly by domestic and global issues. CBQ's investment case lies mostly in the strength of its balance sheet. With an equity to assets ratio of 21.0% and a Tier 1 ratio of 17.2% at the end of 2009, CBQ can afford to pursue growth opportunities either organically or through acquisition, and will likely remain a generous dividend payer in the near-term. At current prices we expect the bank to yield 7% in 2010. CBQ also has the best funding profile of its peer group, giving it a qualitative advantage in terms of its lending outlook.

Qatar Islamic Bank (9.9% of NAV)

Qatar Islamic Bank (QIB), the country's first Islamic bank, has total assets of QR39bn. It operates through a network of 25 branches and holds a 9% loan market share. The structure that QIB aims to create has a strong focus on capital markets and wholesale finance activities, which are still generally in their infancy in the Sharia compliant space. By strengthening its CIB operations domestically, QIB hopes to achieve a strong enough platform for recurring deal origination in debt and, eventually, equity markets. The international offices are intended to serve as placement and distribution centres. With local partners in the UK, Lebanon and Malaysia, the expectation is that a two-way deal flow can eventually be established, with QIB's placing power and structuring experience as the key driver.

Masraf Al Rayan (9.3% of NAV)

Masraf Al Rayan, though relatively young, operates through two branches in Qatar, and provides Sharia-compliant commercial banking, asset management, and brokerage services. The bank went public in January 2006 and has existing associates in Pakistan that deal in Takaful (Islamic insurance), and one associate in Saudi Arabia that provides consumer finance. Management aims to grow the bank's presence outside Qatar by obtaining a banking licence for its associate in Saudi Arabia, or possibly by acquiring other banks in the region. The bank's balance sheet and the calibre of its backers underscore its ability to carry out acquisitions. At the end of 2009 the bank's share of the Qatari market stood at 6% of assets, 8% of loans and 8% of deposits.

Investing Policy

Investment Objective

The Company's investment objective is to capture, principally through the medium of the Qatar Exchange (formerly the Doha Securities Market ("DSM"), the opportunities for growth offered by the expanding Qatari economy by investing in listed companies or companies soon to be listed. The Company may also invest in listed companies, or pre-IPO companies, in other GCC Countries.

GCC Countries are defined as countries of the Cooperation Council for the Arab States of the Gulf, and which include Kuwait, Qatar, Oman, the Kingdom of Saudi Arabia, the Kingdom of Bahrain and the United Arab Emirates.

The Company applies a top-down screening process to identify those sectors which should most benefit from sectoral growth trends. Fundamental industry and company analysis, rather than benchmarking, will form the basis of both stock selection and portfolio construction.

Assets or Companies in which the Company can invest

The Company has been established to invest primarily in quoted Qatari equities.

The Company invests in listed companies on the Qatar Exchange (formerly the DSM) in addition to companies soon to be listed.  The Company may also invest in listed companies, or pre-IPO companies, in other GCC Countries.

It is expected that the Gulf Cooperation Council ("GCC") markets which are most likely to offer such investment opportunities are the United Arab Emirates, Kuwait and Oman.

Whether investments will be active or passive investments

In the ordinary course, the Company is a passive investor, although the Company's Investment Adviser will seek to engage with investee company management where appropriate.

Holding period for investments

In the normal course of events, the Investment Adviser expects the Company to be fully-invested, although the Company may, however, hold cash reserves pending new IPOs. It is expected that the Company will hold positions for the long-term and thus have limited turnover.

Spread of investments and maximum exposure limits

The Company will invest in a portfolio of investee companies. The following restrictions are in place to ensure a spread of investments and that there is maximum exposure limits in place:

·      No single investment position may exceed 15 per cent. of the Net Asset Value of the Company; 

·      No holding may exceed 5 per cent. of the outstanding shares in any one company; and

·      The Company may hold up to a maximum of 15 per cent. of its Net Asset Value outside Qatar, within the GCC region, if these markets offer more liquid opportunities and/or to capture Qatari themes.

Policy in relation to gearing

The Company has the capacity to borrow but the Company will not normally borrow for the purpose of making investments, except on a short-term basis and where the investment opportunity is considered to be compelling. Borrowings will in any event be limited, as at the date on which the borrowings are incurred, to 5 per cent. of Net Asset Value.

The Company does not intend to make use of any hedging mechanisms or derivative instruments.

Policy in relation to cross-holdings

The Company does not have a formal policy on cross-holdings, however it is not the Investment Adviser's current intention to invest in other listed or unlisted closed-ended investment funds that invest in Qatar or other countries in the GCC region.

Investing Restrictions

The investing restrictions for the Company are as follows:

(i) Foreign Ownership Restrictions

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Investments in Qatar Exchange listed companies by persons other than Qatari citizens have ownership restriction wherein the law precludes persons other than Qatari citizens from acquiring more than 25 per cent. of companies issued share capital. It is possible that the Company may have problems in acquiring stock if the foreign ownership interest in one or more stocks reaches the allowable limit. This may adversely impact the ability of the Company to invest in the local Qatari market.

(ii) Investment Guidelines

The Company has established certain investment guidelines. These are as follows:

No single investment position will exceed 15 per cent. of the Net Asset Value of the Company;

No holding will exceed 5 per cent. of the outstanding shares in any one company; and

The Company may hold up to a maximum of 15 per cent. of its Net Asset Value outside Qatar, within the GCC region, if these markets offer more liquid opportunities and/or to capture Qatari themes. It is expected that the GCC markets which are most likely to offer such investment opportunities are the United Arab Emirates, Kuwait and Oman.

(iii) Conflicts Management

The Investment Manager, the Investment Adviser, their officers and other personnel are involved in other financial, investment or professional activities, which may on occasion give rise to conflicts of interest with the Company. The Investment Manager will have regard to its obligations under the Investment Management Agreement to act in the best interests of the Company, and the Investment Adviser will have regard to its obligations under the Investment Adviser Agreement to act in the best interests of the Company, so far as is practicable having regard to their obligations to other clients, where potential conflicts of interest arise. The Investment Manager and the Investment Adviser will use all reasonable efforts to ensure that the Company has the opportunity to participate in potential investments each identifies that fall within the investment objective and strategies of the Company.

Other than these restrictions set out above, and the requirement to invest in accordance with its investing policy, there are no other investing restrictions.

Returns and Distribution Policy

The Company's objective is to achieve capital growth. It is therefore anticipated that substantially all realised capital gains derived from the Company's investment portfolio will be re-invested. Income received from the Company's investment portfolio may be distributed to Shareholders, dependent on the Company's results, financial position profits available for distribution and other factors regarded by the Directors as relevant at the time.

Investing Policy continued

Life of the Company

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 it is intended that an ordinary resolution will be proposed that the Company ceases to continue as presently constituted. If the resolution is not passed, a similar resolution will be proposed at every third annual general meeting thereafter. If the resolution is passed, the Directors will be required to formulate proposals to be put to Shareholders to reorganise, unitise or reconstruct the Company or for the Company to be wound up.

Report of the Directors

The Directors hereby submit their annual report together with the audited consolidated financial statements of Epicure Qatar Equity Opportunities plc (the "Company") for the financial period from 01 July 2009 to 30 June 2010.

The Company

The Company is incorporated in the Isle of Man and has been established to invest primarily in quoted equities of Qatar and other Gulf Co-operation Council countries.

Results and Dividends

The results of the Company for the period and its financial position at the period end are set out on pages 21 to 26 of the financial statements.

The Directors intend to manage the Company's affairs to achieve shareholders returns through capital growth rather than income, and accordingly there can be no certainty that any dividend will be paid. It is not expected that the Company will pay any significant dividends in the early years of its operations. However the Directors reserve the right to make dividend distributions to holders of Ordinary Shares if and when it is considered appropriate. Subject to shareholder approval, the Directors intend to declare a dividend as detailed in the Chairman's Statement.

Directors

The Directors during the year and up to the date of this Report were as follows. There has been no change to the constitution of the Board during the year:

	Appointed
David von Simson	26 June 2007
Paul Macdonald	26 June 2007
Leonard O'Brien	26 June 2007
Nick Wilson	26 June 2007

Director independence

The Board of Epicure Qatar Equity Opportunities plc ("EQEO" or "the Company") have been reviewing corporate governance guidelines and the position regarding Directors, both currently and in the context of the proposed move to the main market of the London Stock Exchange.

Paul Macdonald

Paul Macdonald is currently chief executive officer of Helvetica Deutschland GmbH, a real estate management company. Helvetica Deutschland GmbH is owned by Unicos Partners LLP ("Unicos"), as is Epicure Managers Qatar Limited (the "Investment Manager"). Unicos is the holding company of the Helvetica group of companies.

The Board therefore considers that Paul Macdonald is no longer deemed to be an independent director as he is not independent of the Unicos group of companies that own the Investment Manager.

Leonard O'Brien

The Board have undertaken a review of Leonard O'Brien's relationship with the Investment Manager and that of the Unicos group. Leonard O'Brien is a senior officer of the group of companies that owns Silex Trust Company Limited ("Silex"). Silex provides corporate directorship services for the Investment Manager and also provides fiduciary and administrative services to other Unicos group entities.  However, the Board are of the view that this does not represent a material business relationship between Leonard O'Brien and the Unicos group and are of the view that he is an independent director.

David von Simson

David von Simson is Chairman of a private company that is managed by entities in the Unicos group and also Chairman of PME African Infrastructure Opportunities plc ("PME"), of which Unicos has a 31.67% interest in PME's investment manager. However, the Board are of the view that these do not represent a material business relationship between David von Simson and the Unicos group and are of the view that he is an independent director.

The Board of Directors, as well as the Investment Manager, are all independent of the Company's investment adviser, Qatar Insurance Company, who take all investment portfolio decisions and manage the Company's assets on a day to day basis.

Directors' and Other Interests

Paul Macdonald is currently chief executive officer of Helvetica Deutschland GmbH, which is owned by Unicos Partners LLP ("Unicos"), as is Epicure Managers Qatar Limited (the "Investment Manager").

Save as disclosed above, none of the Directors had any interest during the year in any material contract for the provision of services which was significant to the business of the Company.

David von Simson holds 150,000 ordinary shares and 30,000 warrants in the Company.

Leonard O'Brien holds 500,000 warrants in the Company.

Independent Auditors

KPMG Audit LLC was appointed as auditors by the Directors. They have expressed their willingness to continue in office in accordance with Section 12 (2) of the Companies Act 1982.

On behalf of the Board

David von Simson

Chairman

10 September 2010

Statement of Directors' responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Consolidated Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year, which meet the requirements of Isle of Man company law.  In addition, the Directors have elected to prepare the Group and Parent Company financial statements in accordance with International Financial Reporting Standards.

The Group and Parent Company financial statements are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. 

In preparing these financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether they have been prepared in accordance with International Financial Reporting Standards;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Parent Company and to enable them to ensure that its financial statements comply with the Companies Acts 1931 to 2004.  They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.  Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

On behalf of the Board

David von Simson

Chairman

10 September 2010

Report of the Independent Auditors, KPMG Audit LLC, to the shareholders of Epicure Qatar Equity Opportunities plc

We have audited the Group and Parent Company financial statements (the "financial statements")  of Epicure Qatar Equity Opportunities plc for the year ended 30 June 2010 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity and the related notes.  These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company's members, as a body, in accordance with section 15 of the Companies Act 1982.  Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors

The Directors' responsibilities for preparing the Consolidated Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards are set out in the Statement of Directors' Responsibilities on page 16.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Acts 1931 to 2004.  We also report to you if, in our opinion, the Company has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read the Directors' Report and any other information accompanying the financial statements and consider whether it is consistent with the audited financial statements.  We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the audited financial statements.  Our responsibilities do not extend to any other information.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.  An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements.  It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error.  In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the financial statements:

·      give a true and fair view, in accordance with International Financial Reporting Standards of the state of the Group and Parent Company's affairs as at 30 June 2010 and of the Group's profit for the year then ended; and

·      have been properly prepared in accordance with the Companies Acts 1931 to 2004.

KPMG Audit LLC

Chartered Accountants

Douglas

Isle of Man

10 September 2010

Consolidated Income Statement

	Note	Year ended 30 June 2010	Year ended 30 June 2009
		US$'000	US$'000
Income
Interest income on cash balances		1	38
Dividend income on quoted equity investments		10,453	9,905
Realised loss on sale of financial assets at fair value through profit or loss		(16,104)	(33,194)
Net changes in fair value on financial assets at fair value through profit or loss		26,162	(124,595)
Commission rebate	7	580	-
Total net income/(loss)		21,092	(147,846)
Expenses
Investment Manager's fees	8.2	2,480	2,379
Performance fees	8.2	-	-
Audit fees		24	32
Foreign exchange loss		-	432
Nominated Advisor fees	8.1	81	77
Custodian fees	8.3	588	555
Administrator and Registrar fees	8.4	382	386
Other expenses	8	481	394
Total operating expenses		4,036	4,255
Profit/(loss) before tax		17,056	(152,101)
Income tax expense	15	-	-
Retained profit/(loss) for the year		17,056	(152,101)
Basic earnings/(loss) per share (cents)	12	7.28	(62.31)
Diluted earnings/(loss) per share (cents)	12	7.28	(62.31)

The Directors consider that all results derive from continuing activities.

Consolidated Statement of Comprehensive Income

		Year ended 30 June 2010	Year ended 30 June 2009
		US$'000	US$'000
Profit/(loss) for the year		17,056	(152,101)
Other comprehensive income/(loss)
Currency translation differences		80	2,142
Other comprehensive income/(loss) for the year (net of tax)		80	2,142
Total comprehensive profit/(loss) for the year		17,136	(149,959)

Consolidated Balance Sheet

	Note	At 30 June 2010	At 30 June 2009
		US$'000	US$'000
Financial assets at fair value through profit or loss	6	193,073	171,070
Due from broker		649	814
Other receivables and prepayments		16	16
Cash and cash equivalents	9	2,756	9,289
Total current assets		196,494	181,189
Issued share capital	10	2,336	2,359
Retained earnings		192,157	176,770
Other reserves	11	1,120	1,017
Total equity		195,613	180,146
Other creditors and accrued expenses	13	881	1,043
Total liabilities		881	1,043
Total equity & liabilities		196,494	181,189

Company Balance Sheet

	Note	At 30 June 2010	At 30 June 2009
		US$'000	US$'000
Due from subsidiary	6	193,851	177,683
Other receivables and prepayments		14	16
Cash and cash equivalents		1,938	2,633
Total current assets		195,803	180,332
Issued share capital	10	2,336	2,359
Retained earnings		192,157	176,770
Other reserves	11	1,120	1,017
Total equity		195,613	180,146
Other creditors and accrued expenses	13	190	186
Total liabilities		190	186
Total equity & liabilities		195,803	180,332

Impairment of the inter-company balances amounted to US$44,954,057 (2009:US$63,117,305) (primarily as a result of the provisions made against the investments held by the Company's subsidiary).

Consolidated Statement of Changes in Equity

	Share Capital	Share Premium	Retained Earnings	Other reserves (note 11)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 01 July 2008	2,475	245,051	88,213	(1,241)	334,498
Total comprehensive income for the period
Retained loss for the year	-	-	(152,101)	-	(152,101)
Other comprehensive income
Foreign exchange translation differences	-	-	-	2,142	2,142
Total other comprehensive income	-	-	-	2,142	2,142
Total comprehensive loss for the year	-	-	(152,101)	2,142	(149,959)
Contributions by and distributions to owners
Share buy-backs	(116)	-	(4,393)	116	(4,393)
Transfer to reserves	-	(245,051)	245,051	-	-
Total contributions by and distributions to owners	(116)	(245,051)	240,658	116	(4,393)
Balance at 30 June 2009	2,359	-	176,770	1,017	180,146

	Share Capital	Share Premium	Retained Earnings	Other reserves (note 11)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 01 July 2009	2,359	-	176,770	1,017	180,146
Total comprehensive income for the year
Retained profit for the year	-	-	17,056	-	17,056
Other comprehensive income
Foreign exchange translation differences	-	-	-	80	80
Total other comprehensive income	-	-	-	80	80
Total comprehensive income for the year	-	-	17,056	80	17,136
Contributions by and distributions to owners
Share buy-backs	(23)	-	(1,624)	23	(1,624)
Shares repurchased to be held in treasury	-	-	(45)	-	(45)
Total contributions by and distributions to owners	(23)	-	(1,669)	23	(1,669)
Balance at 30 June 2010	2,336	-	192,157	1,120	195,613

Consolidated Cash Flow Statement

	Note	Year ended 30 June 2010	Year ended 30 June 2009
		US$'000	US$'000
Cash flows from operating activities
Purchase of investments		(82,536)	(62,663)
Proceeds from sale of investments		70,444	69,599
Interest received		1	38
Dividends received		10,453	9,951
Operating expenses paid		(4,039)	(19,890)
Commission rebate		580	-
Net cash used in operating activities		(5,097)	(2,965)
Financing activities
Share buy-backs		(1,624)	(4,393)
Shares repurchased and held in treasury		(45)	-
Net cash used in financing activities		(1,669)	(4,393)
Net decrease in cash and cash equivalents		(6,766)	(7,358)
Effects of exchange rate changes on cash and cash equivalents		233	880
Cash and cash equivalents at beginning of the year		9,289	15,767
Cash and cash equivalents at end of the year	9	2,756	9,289

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 AIM 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.

In the year ended 30 June 2010 the Company purchased 2,367,790 of its ordinary shares for a total value of US$1,668,140. The majority of the purchased shares have been cancelled upon acquisition but 60,000 have been repurchased and held in treasury. The buy-back was effected through retained reserves.

The Company's agents and the Investment 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

The Company has 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 year ended 30 June 2010 comprise the Company and its subsidiary, Note 2, (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           Change in accounting policy

Presentation of financial statements

The Company applied revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Company presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

3.3           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 or losses arising from intra-group transactions, are eliminated in the consolidated financial statements.

3.4           Financial assets at fair value through profit or loss

Investments are designated 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 year-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 year in which they arise.

3.5           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.

3.6           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.

3.7           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.

3.8           Cash and cash equivalents

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

3.9           Investment in subsidiaries

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

3.10         Future changes in accounting policies

Up to the date of issue of these financial statements, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the accounting year ended 30 June 2010 and which have not been adopted in these financial statements.

Of these developments, the following relate to matters that may be relevant to the Company's operations and financial statements:

		Effective for
		accounting periods
		beginning on or after
Amendments to IFRS 8, Segment reporting		1 January 2010
Amendments to IAS 1 Presentation of financial statements		1 January 2010
Amendments to IAS 7 Statement of cash flows		1 January 2010
Amendments to IAS 36 Impairment to assets		1 January 2010
Amendments to IAS 39 Financial instruments: Recognition and Measurement		1 January 2010
Amendments to IAS 32 Financial instruments: Presentation - Classification of rights issues		1 January 2010
Amendments to IAS 27 Consolidated and separate financial statements		1 July 2010
IAS 24 Related party disclosures (revised 2009)		1 January 2011
Amendments to IFRS 7 Financial instruments: Disclosures		1 January 2011
IFRS 9 Financial instruments		1 January 2013

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group's results of operations and financial position.

4              Net Asset Value per Share

The net asset value per share as at 30 June 2010 is US$0.84 per share (30 June 2009: US$0.76) based on 233,461,162 (30 June 2009: 235,828,952) ordinary shares in issue as at that date.

5              Fair Value Hierarchy

The Company adopted the amendment to IFRS 7, effective 1 January 2009. This requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

All the Company's investments are classed as level 1 investments.

6              Investments and amount due from subsidiary

Group

30 June 2010: Financial assets at fair value through profit or loss; all quoted equity securities:

Security name	Number	US$'000
Al-Dar Properties (ALDAR UH)	10,000	7
First Gulf Bank (FGB DH)	95,000	387
Tamweel PJSC (TAMWEEL UH)	100,000	-
Union Properties Company (UPP UH)	1,625,096	161
Global Investment House K.S.C.C. (GLOBAL KK)	341,500	58
Al Meera Consumer Goods (MERS QD)	34,000	507
Barwa Real Estate (BRES QD)	1,000,560	7,920
Commercial Bank of Qatar (CBQK QD)	1,345,955	24,453
Doha Bank (DHBK QD)	1,164,229	14,496
Gulf International Services (GISS QD)	1,171,878	9,147
Industries Qatar (IQCD QD)	962,607	25,478
Masraf Al Rayan (MARK QD)	4,576,874	18,115
National Leasing (NLCS QD)	175,897	1,310
Qatar Electricity and Water (QEWS QD)	244,875	6,939
Qatar Gas Transport (QGTS QD)	1,709,563	8,693
Qatar Insurance (QATI QD)	459,514	8,399
Qatar Islamic Bank (QIBK QD)	993,269	19,356
Qatar National Bank (QNBK QD)	790,513	29,202
Qatar Navigation (QNNS QD)	343,711	7,605
Qatar Telecom (QTEL QD)	159,811	7,160
Qatar United Development Company (UDCD QD)	279,277	1,812
Vodaphone Qatar (VFQS QD)	844,392	1,868
		193,073

Group

30 June 2009: Financial assets at fair value through profit or loss; all quoted equity securities:

Security name	Number	US$'000
Al-Dar Properties (ALDAR UH)	10,000	10
First Gulf Bank (FGB DH)	95,000	344
Tamweel PJSC (TAMWEEL UH)	100,000	-
Union Properties Company (UPP UH)	1,625,096	407
Global Investment House K.S.C.C. (GLOBAL KK)	341,500	149
Al Khaleej Bank (KCBK QD)	889,635	3,907
Barwa Real Estate (BRES QD)	853,881	8,008
Commercial Bank of Qatar (CBQK QD)	1,013,809	17,365
Dlala Holdings (DBIS QD)	103,134	464
Doha Bank (DHBK QD)	368,669	3,754
Gulf International Services (GISS QD)	730,419	5,353
Industries Qatar (IQCD QD)	910,840	26,752
Islamic Financial Security (IFSS QD)	16,023	157
Masraf Al Rayan (MARK QD)	3,933,661	13,014
National Leasing (NLCS QD)	197,623	780
Qatar Electricity and Water Co (QEWS QD)	473,786	12,893
Qatar Fuel (QFLS QD)	10,000	463
Qatar Gas Transport (QGTS QD)	1,467,768	9,669
Qatar Insurance (QATI QD)	403,693	6,529
Qatar Islamic Bank (QIBK QD)	879,100	17,374
Qatar Islamic Insurance (QISI QD)	25,000	197
Qatar National Bank (QNBK QD)	617,463	20,321
Qatar National Cement (QNCD QD)	97,300	2,083
Qatar Navigation (QNNS QD)	533,022	9,071
Qatar Real Estate Investment (QRES QD)	392,272	2,573
Qatar Shipping (QSHS QD)	62,790	500
Qatar Telecom (QTEL QD)	239,811	8,933
		171,070

Company

	30 June 2010	30 June 2009
	US$'000	US$'000
Investment in subsidiary	-	-
Amount due from subsidiary	193,851	177,683

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

7              Commission rebate

During the year the Group received 60% brokerage commission rebates for all trades done through its Qatar brokers. This arrangement is set to continue. For the  year ended 30 June 2010 the Group received US$580,009.

8              Charges and Fees

8.1           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 year ending 30 June 2010 amounted to US$80,703 (30 June 2009: US$77,184).

8.2           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 year ended 30 June 2010 amounted to US$2,479,862 (30 June 2009: US$2,379,130) and the amount accrued but not paid at the year-end was US$673,761 (30 June 2009: US$540,028).

Performance fees

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

i)              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

ii)             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 at the Company's Annual General Meeting.

 

Performance fees accrued but not paid during the year ended 30 June 2010 amounted to US$nil (30 June 2009: US$nil).

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

8.3           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 million, subject to a minimum monthly fee of US$6,250. The Custodian was 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 year ending 30 June 2010 amounted to US$587,548 (30 June 2009: US$554,682) and the amount accrued but not paid at the year-end was US$79,605 (30 June 2009: US$90,925).

8.4           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 between US$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 year ending 30 June 2010 amounted to US$334,637 and US$47,350 for additional services (30 June 2009: US$350,653 and US$35,568 respectively).

9              Cash and Cash Equivalents

	30 June 2010	30 June 2009
	US$'000	US$'000
Bank balances	2,756	6,795
Cash at Broker	-	2,494
Cash and cash equivalents	2,756	9,289

10            Share Capital

	30 June 2010 US$'000	30 June 2009 US$'000
Authorised:
500,000,000 Ordinary shares of US$0.01 each	5,000,000	5,000,000
Allotted, Called-up and Fully-Paid:
233,461,162 (2009: 235,828,952) Ordinary shares of US$0.01 each in issue, with full voting rights	2,335	2,359
60,000 (2009: nil) Ordinary shares of US$0.01 each held in Treasury	1	-
	2,336	2,359

During the year to 30 June 2010 the Company repurchased 60,000 (2009: nil) Ordinary shares, to be held in treasury, at a cost of US$45,000 (2009: nil). The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.

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 and reserves. Neither the Company nor its subsidiary is subject to externally imposed capital requirements.

11            Other reserves

	Foreign currency translation reserve	Capital redemption reserve	Other reserves*	30 June 2010 Total
	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2009	229	116	672	1,017
Foreign exchange translation differences	80	-	-	80
Share buy-backs	-	23	-	23
Balance at 30 June 2010	309	139	672	1,120

*Other reserves figure is comprised of share issue expenses relating to the issue of share options.

12            Earnings/(loss) per Share

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

Basic and diluted earnings/(loss) per share	30 June 2010	30 June 2009
Profit/(loss) attributable to equity holders of the Company (US$'000)	17,056	(152,101)
Weighted average number of ordinary shares in issue (thousands)	234,445	244,091
Basic and diluted earnings/(loss) per share (cents per share)	7.28	(62.31)

There is no difference between basic and diluted ordinary shares in issue as the options and the warrants (Note 10) are not dilutive in 2010.

13            Trade and other payables

Group

	30 June 2010	30 June 2009
	US$'000	US$'000
Due to broker	-	158
Management fee payable	673	540
Administration fee payable	81	66
Withholding tax provision*	-	84
Accruals and sundry creditors	127	195
	881	1,043

*From the 4^th Feb 2008 the Company was liable to withholding tax of 15% on Kuwaiti dividends.

Company

	30 June 2010	30 June 2009
	US$'000	US$'000
Administration fee payable	74	60
Accruals and sundry creditors	116	126
	190	186

14            Directors' Remuneration

The maximum amount of remuneration payable to the Directors permitted under the Articles of Association is £200,000 per annum.

David von Simson as non-executive chairman is entitled to receive an annual fee of £42,500.

Nick Wilson as chairman of the audit committee and in respect of his work regarding share buy-backs is entitled to receive an annual fee of £42,500.

Leonard O'Brien and Paul MacDonald in their capacity as non-executive directors receive £25,000 each 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 year ended 30 June 2010 amounted to US$287,270 (30 June 2009: US$221,405); with the total amount payable at the year-end being US$nil (30 June 2009: US$47,602).

15            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 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 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.

Kuwait taxation

Since 1 January 2009 dividends paid on behalf of holdings in Kuwait are to have withholding tax deducted at 15%.

16            Financial instruments

The Group's activities expose it to a variety of financial risks: market price risk, foreign exchange risk, credit risk, liquidity 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 portfolio. Approximately 99% 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 Qatar. Investment opportunities are available in the United Arab Emirates and Kuwait. 

At 30 June 2010, if the market value of the investment portfolio had increased/decreased by 1% with all other variables held constant, this would have increased/decreased net assets attributable to shareholders by approximately US$1.9 million (30 June 2009 : 25% : US$42.8 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 currency giving rise to this risk is primarily US Dollars.

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 2010	30 June 2009
	%	%
US Dollar	0.86	1.16
Qatari Riyal	98.83	96.46
Kuwaiti Dinar	0.03	1.16
UAE Dirham	0.28	1.22

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 2010
US Dollar	2,559	(881)	1,678
Qatari Riyal	193,322	-	193,322
Kuwaiti Dinar	58	-	58
UAE Dirham	555	-	555
	196,494	(881)	195,613

	Monetary Assets US$'000	Monetary Liabilities US$'000	Net Exposure US$'000
30 June 2009
US Dollar	2,950	(885)	2,065
Qatari Riyal	173,947	(158)	173,789
Kuwaiti Dinar	2,088	-	2,088
UAE Dirham	2,204	-	2,204
	181,189	(1,043)	180,146

At 30 June 2010, had the US Dollar weakened by 1% (2009 : weakened 1%) in relation to all currencies, with all other variables held constant, net assets attributable to equity holders of the Company would have increased (2009 : increased) by the amounts shown below:

30 June 2010	US$'000
Qatar Riyal	1,933
Kuwaiti Dinar	1
UAE Dirham	5
Effect on net assets	1,939

30 June 2009	US$'000
Qatar Riyal	1,738
Kuwaiti Dinar	21
UAE Dirham	22
Effect on net assets	1,781

In addition, since QAR is the functional currency of the Group and USD is the presentational currency any effect of changes in the foreign exchange rates between these currencies will be included in the translation reserve on consolidation.

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 Group's financial assets exposed to credit risk comprised the following:

	30 June 2010	30 June 2009
	US$'000	US$'000
Financial assets at fair value through profit or loss	193,073	171,070
Cash and cash equivalents	2,756	9,289
Other receivables	665	830
	196,494	181,189

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 year-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:

30 June 2010	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	881	-	-	-	-	-
	881	-	-	-	-	-

30 June 2009	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	1,043	-	-	-	-	-
	1,043	-	-	-	-	-

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:

30 June 2010	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	-	-	-	-	-	193,073	193,073
Other receivables and prepayments	-	-	-	-	-	665	665
Cash	2,756	-	-	-	-	-	2,756
Total financial assets	2,756	-	-	-	-	193,738	196,494

Financial Liabilities
Other creditors and accrued expenses	-	-	-	-	-	(881)	(881)
Total financial liabilities	-	-	-	-	-	(881)	(881)
Total interest rate sensitivity gap	2,756	-	-	-	-	-	-

30 June 2009	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	-	-	-	-	-	171,070	171,070
Other receivables and prepayments	-	-	-	-	-	830	830
Cash	9,289	-	-	-	-	-	9,289
Total financial assets	9,289	-	-	-	-	171,900	181,189

Financial Liabilities
Other creditors and accrued expenses	-	-	-	-	-	(1,043)	(1,043)
Total financial liabilities	-	-	-	-	-	(1,043)	(1,043)
Total interest rate sensitivity gap	9,289	-	-	-	-

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.

17            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 6). 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. Fees payable to the Investment Manager are disclosed in note 8.2.

Paul Macdonald is currently chief executive officer of Helvetica Deutschland GmbH, which is owned by Unicos Partners LLP ("Unicos"), as is Epicure Managers Qatar Limited (the "Investment Manager").

18            Post Balance Sheet Events

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

 

END

 

 

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