Quarterly update

RNS Number : 1394R

Epicure Qatar Equity Opportunities

24 April 2009

Epicure Qatar Equity Opportunities plc

Quarterly Update to Quarter End March 2009

Report to Shareholders

A FORMATTED VERSION OF THIS REPORT IS AVAILABLE FROM THE COMPANY ADMINISTRATOR, GALILEO FUND SERVICES LIMITED, ISLE OF MAN UPON REQUEST. PLEASE CONTACT enquiries@galileofs.co.im TO REQUEST A COPY.

Epicure Qatar Equity Opportunities plc

Investment Advisers Report - Quarterly Update to Quarter End March 2009

Investment Objective

Epicure Qatar Equity Opportunities plc ('the Company' or 'EQEO') was established to capitalise on attractive investment opportunities in Qatar and the Gulf Cooperation Council ('GCC') region, resulting from the economic boom being experienced in the area. The Company invests in quoted Qatari equities listed on the Doha Securities Market ('DSM') in addition to companies soon to be listed, with a possible allocation of up to 15 per cent in regional GCC listed companies. The Investment Adviser invests using both a top-down screening process, as well as fundamental industry and company analysis, and does not benchmark itself to any regional index.

Company Activity

During the first quarter of 2009, GCC equity indices fell sharply. The DSM index fell by 38.6 per cent at its worst but recovered on bargain-hunting in March to end the quarter down 29.0 per cent. Having been the best performing equity market in the GCC and the tenth best performer in the world in the fourth quarter of 2008, the DSM was the third worst performing stock market in the world for this period.

The DSM's market capitalisation decreased 24.0 per cent to QR211 billion at the end of first quarter 2009 versus QR279 billion at the end of 2008. With the exception of Abu Dhabi (+4.1 per cent), GCC markets ended the first quarter of 2009 in negative territory. The Omani market ended the quarter with a 14.9 per cent loss, while Kuwait and Bahrain closed down 13.3 per cent and 11.5 per cent respectively. The worst performing GCC markets of 2008, Saudi Arabia and Dubai, were down by 2.1 per cent and 4.1 per cent.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting GCC Equity Market Performance

Source: Reuters, Qatar Insurance Company S.A.Q.

The Investment Adviser believes that in the last few weeks of March the markets showed some signs of capitulation. Sentiment, which was extremely negative going into the New Year, appears to have stabilised. Although the Investment Adviser does not expect a bull run to start in the near term, there is the belief that some neutral sentiment has returned and that the next few months will see range bound markets providing trading opportunities.

From a macro point of view the region is expected to experience a difficult 2009, as a result of a sharp decline in the prices of oil and related products (the oil price averaged approximately US$43 in the first quarter of 2009), global and regional de-leveraging, unprecedented weakness in global growth and a softening of the real estate sector. Historically, substantial declines in the oil price have been associated with significant contractions in real and nominal GDP in the region. This does not come as a surprise as the GCC economies are predominantly dependent on oil exports. The Investment Adviser anticipates a similar pattern this time around and expects to see declines in GDP forecasts for all of the GCC countries.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting Real GDP Growth

Source: Reuters poll for GCC GDP growth

Fourth quarter 2008 nominal GDP data released by the Qatar Statistical Authority highlighted an abrupt shift in the value of economic output as energy prices fell. The nominal headline growth rate stood at 44 per cent in 2008, the highest rate on record. This performance marks the sixth consecutive year of nominal growth rates in excess of 20 per cent and lifts the value of Qatari GDP above US$100 billion for the first time - a four-fold increase in GDP in dollar terms in the space of just five years. During the fourth quarter of 2008, Qatar's economy registered 7.8 per cent year-on-year nominal growth. It is worth noting, however, that as inflation in Qatar in the fourth quarter of 2008 reached 13.2 per cent, in real terms the Qatari economy contracted during the period.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting Selected Macroeconomic Data

Source: Qatar Insurance Company, Qatar Statistical Authority (Figures in QR. Millions)

In 2009, the Qatari economy is expected to perform at least as strongly as in 2008, driven by rapid expansion in Liquid Natural Gas (LNG) production and related industries, as well as investments aimed at economic diversification. Meanwhile, inflation is projected to fall as a result of declining international prices for food and raw materials and a slower increase in domestic rents due to an increased supply of low and middle-income housing. The fiscal and external current accounts are projected to remain in surplus in 2009, despite lower oil prices.

In response to the global and regional economic crisis, governments in the GCC, similar to other governments around the world, have taken unprecedented and proactive steps to support their internal economies, especially the financial sector.

Measures range from confidence building to injecting capital into their domestic economies. Notable steps taken by the Qatari Government have been:

The Qatar Investment Authority (QIA) announced that it would increase equity ownership in the local banks to up to 20 per cent over the next year through preferential issues at market price. This was partially executed, with up to 5 per cent of the banks' equity being acquired.

The Ministry of Finance purchased the investment portfolios of the local banks at cost at 31 December 2008, giving the banks a five-year call option to buy the portfolios back at the sale value. The Government initiated consolidation through combining the interests of listed and unlisted companies, thus ensuring the competitiveness of various enterprises operating within Qatar. The Government also announced confidence building measures through the budgetary process.

Leading UAE banks undertook similar efforts to strengthen their capital adequacy and balance sheets through issuing subordinated bonds and converting federal deposits to Tier-II capital. In Kuwait, the government introduced a US$5.2 billion economic stimulus package aimed at supporting investment companies and the financial system.

Qatar's budget for the fiscal year 2009/2010 forecasts expenditure of QR94.5 billion. Even with oil prices significantly lower (with the budget struck at an oil price of US$40 a barrel, 28 per cent below the US$55 price assumed in the 2008-09 budget) the government has not substantially lowered its expenditure target and is expecting a slight deficit on this basis. This would be the first budget deficit in the last five years, but should provide the stimulus for the domestic economy to remain on a sound footing.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting the Qatar State Budget

Source: Qatar Insurance Company, Qatar Statistical Authority (Figures in QR. Millions)

The Investment Adviser believes that at this juncture Qatar is in a league of its own within the GCC. Substantial gas production is expected to come on stream this year (the most recent IMF projections from January are based on an 86 per cent increase in LNG production), which in 2009 will allow Qatar to be an exception in the Gulf, with real GDP growth expected to increase healthily, partly due to an expected reduction in the rate of inflation.

Company Update

In line with the regional and world markets, the Doha Stock Market (as measured by the DSM20 index) has also been under pressure, losing 29 per cent in the first quarter of 2009. As a result of the sell-off in the market, the Company's NAV has been under strain, outperforming the index over the quarter but, nonetheless, declining by 17 per cent to US$0.603 as of 26 March 2009 against US$0.724 as of 1 January 2008.

The Company has invested in 28 companies in the GCC, with 21 of them being in Qatar, five in the UAE, and two in Kuwait. The total market value of investments was US$134 million at the end of the quarter. The Company has increased its cash reserves to over 11.7 per cent of NAV. Most of the increase in cash came from reducing exposure in the Qatari market at the beginning of the quarter in anticipation of a sell-off in the market, a strategy that paid off well, and receipts of dividend payments from the local market.

Corporate Profitability

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

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting estimated dividend yields of the GCC countries in 2009

Note: Prices as of 17 February 2009.

*UAE valuations are a market-cap weighted average of Dubai and Abu Dhabi;

**Kuwait 2009 PE column shows 2008 PE and 2010 PE column shows 2009 PE;

***GCC valuations are a market-cap weighted average of the 7 markets.

Source: HSBC estimates

The total combined net profit for all companies listed on the DSM for the year ended 31 December 2008 amounted to QR28.5 billion, compared to QR21.4 billion for the year ended 31 December 2007, a 33.4 per cent increase. This growth was relatively broadly based, with 35 (out of 43) listed companies reporting an increase in net profit. All sectors witnessed robust growth, led by the industrial and services sectors, with net profit growth of 46 per cent and 36 per cent respectively. The banking sector reported total net profit of QR10 billion, an increase of 23 per cent year-on-year.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting net income growth of the Company's top 5 holdings

Source: Qatar Insurance Company SAQ, DSM

The Company's largest allocation continues to be to the financial services industry, with 40.6 per cent of funds invested in banking. Most of the investments (all except one) are in the banking sector of Qatar. Although Qatari banks are expected to be impacted by the current slowdown, the Investment Adviser believes that they remain extremely well placed, have none of the liquidity issues that have affected other global banks, and are already discounting possible negative impacts on their profitability. In addition, steps taken recently by the government should benefit the financial sector. The services sector, which is broadly defined and includes companies in telecommunications and utilities, accounted for 25.9 per cent of all investments. Exposure to the real estate sector stood at 5.1 per cent at the end of the first quarter of 2009. The industrial and insurance sectors accounted for a further 14.4 per cent and 2.3 per cent respectively.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a pie chart depicting sector allocation (% of the market)

Source: Qatar Insurance Company

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting the top five holdings in the portfolio

Source: Qatar Insurance Company

The top five investments of the Company constitute 48.0 per cent of NAV and 41.2 per cent of funds raised.

Regional allocation

The Company currently holds 21 investments in Qatar, five investments in the UAE, and two investments in Kuwait. As of 31 March 2009, investments outside Qatar constituted 2.52 per cent of all funds.

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

Source: Qatar Insurance Company SAQ

Important news flow

Qatari Government buys banks' investment portfolios

On 9 March 2009, the Qatari government announced its intention to purchase the investment portfolios (limited to DSM-listed equities) of the local banks at book price (as at year end) and at the local banks' discretion. The government purchased listed shares worth QR6.5 billion (US$1.8 billion) within the investment portfolios of local lenders, paying in cash and bonds.

QIA completed first phase of capital subscription in banks

The QIA concluded the first phase of its plan to acquire 5 per cent stakes in the local banks and announced that the second phase, for a further 5 per cent, will start in December 2009. The QIA earlier announced that it would buy between 10 and 20 per cent of local banks' listed capital at their closing price on the DSM at 12 October 2008.

Qatar projects US$1.59 billion deficit on lower oil price

Qatar passed a budget projecting a deficit of QR5.8 billion (US$1.6 billion) for the 2009-2010 fiscal year due to lower oil prices. The Qatari government based its annual budget, which came into effect on 1 April 2009, on an oil price of US$40 a barrel compared to the previous year's price of US$55 a barrel. Qatar's income is projected to drop to QR88.7 billion in the current fiscal year from QR103.3 billion the previous year. Expenditure is expected to remain stable at QR94.5 billion compared to QR95.9 billion previously.

Qatar Shaheen refinery delayed by one year

Qatar has delayed some energy sector projects including the Shaheen refinery because of falling oil prices. Qatar has completed the preliminary engineering and design study on the project at the industrial city of Mesaieed. Planned to have capacity of up to 250,000 barrels per day, it was initially scheduled to start production in 2010.

Qtel to invest up to US$2 billion to fuel overseas growth

Qatar Telecommunications Co (Qtel) plans to invest as much as US$2.0 billion in its international operations. Qtel revealed its group-wide capital expenditure programme of between QR6.5 billion (US$1.8 billion) and QR7.3 billion (US$2.0 billion) for 2009 as it looks at expansion and improving networks in high-growth markets including Iraq and Indonesia.

Ezdan eyes merger with International Housing

Ezdan Real Estate Company announced that its board of directors is looking into conducting a feasibility study into the possibility of merging with the International Housing Company Group.

Barwa, Real Estate merger expected to complete within 4-6 months

Barwa Real Estate said that it expects to finalise a merger with Qatar Real Estate Investments Co. (Alaqaria) within four to six months, creating a firm with assets of QR30 billion (US$8.2 billion). Qatar's government ordained that the two real estate companies should merge in January.

Qatar German for Medical Devices signs QR33 million deals with European companies

Qatar German for Medical Devices Company announced the signing of an agreement with three European companies worth QR33.0 million to expand and develop its factory as well as introduce more products.

QTEL & Vodafone Qatar sign agreement on outdoor site sharing and interconnection

Qatar Telecom (Qtel) announced the signing of an outdoor site sharing agreement and interconnection agreement with Vodafone Qatar. The outdoor site sharing agreement allows Vodafone Qatar to share Qtel mobile towers and vice versa. The interconnection agreement is a wholesale agreement allowing customers of Qtel and Vodafone Qatar to communicate with each other.

UDC establishes Information Technology Company

United Development Company (UDC) announced the formation of a wholly owned company specialising in information technology with capital of QR5 million. The new entity has the right to establish branches both within and outside the country and to engage in partnerships.

QAPCO inks deal with Sumitomo Corporation

Qatar Petrochemical Company Ltd (QAPCO), a joint venture between Industries Qatar (80 per cent) and Total Petrochemical Company France (20 per cent), signed an ethylene sales contract with Sumitomo Corporation of Asia. The contract's value is estimated at US$23.4 million. Under the terms of the contract, QAPCO will supply 36 billion tons of ethylene up to the end of 2009.

Nakilat announces the signing of a MoU with Damen Shipyards Group

Qatar Gas Transport Company Ltd. (Nakilat) has signed a Memorandum of Understanding (MoU) with Damen Shipyards Group of the Netherlands to form a joint venture which will manage a new state-of-the-art shipyard in the port of Ras Laffan, for the construction of high-value ships. Operation of the shipyard is expected to start in early 2010.

Qatar Electricity & Water sign MOU with Chubu Electric Power Company.

Qatar Electricity and Water Company announced that, along with Q-Post, it had renewed the MoU for the partnership project with Chubu Electric Power Company. The MoU extension will further develop the original MoU, focused on enhancing cooperation in the field of training, in line with the Qatari parties' desire to benefit from the Japanese company's technology and expertise.

S&P assigns 'AA-' rating to State of Qatar's US$3 billion bond issue

Standard & Poor's Ratings Services has assigned a 'AA-' rating to the US$3 billion global bond issue by the State of Qatar (AA-/Stable/A-1+). The senior fixed rate notes have two tranches: a five-year US$2 billion bond maturing 9 April 2014, and a 10-year US$1 billion bond maturing 9 April 2019. The rating is in line with Qatar's 'AA-' long-term foreign currency issuer credit rating. S&P said that the ratings on Qatar are supported primarily by strong fiscal and external balance-sheets, healthy economic prospects driven by the gas industry, and high per capita income.

Standards & Poor's (S&P) affirms QNB's ratings at A+

S&P affirmed QNB's ratings at A+ for long-term and A1 for short-term debt, with a stable outlook. QNB's rating is one of S&P's and other leading rating agencies' highest in the region. In a similar move, Fitch Ratings affirmed QNB's rating in a comprehensive review conducted by the agency in December 2008. QNB' is rated by Fitch at A+ for long-term and A1 for short-term debt.

S&P reaffirmed Nakilat rating

Qatar Gas Transport Company (Nakilat) announced that Standard and Poor's Rating Services reaffirmed the A+ Rating for the senior secured bond issued by Nakilat.

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a graph depicting the DSM20 Index since Jan 2005

Source: Reuters

Embedded image removed - please refer to the Company's website www.epicure-qatarequity.com for a table depicting the NAV performance of the Company (% net in USD).

Source: Galileo Fund Services Ltd

NAV Performance is unaudited

Performance figures are based on the NAV calculated on the last Thursday of each month and published via the regulatory news service of the London Stock Exchange.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Additional information regarding policies for calculation and reporting returns is available upon request.

Epicure Qatar Equity Opportunities plc

NAV Update

NAV at launch US$ 0.96

NAV as at 26 March 2009 US$ 0.60

Inception Date 31 July 2007

The NAV is estimated net of fees and expenses every week and announced through the regulatory news service of the London Stock Exchange.

As at 26 March 2009

Market Price -Shares US$0.35

Market Price -Warrants US$0.02

Key Features

Domicile Isle of Man

Shares Issued 247,527,523

(10,698, 571 shares are in the process of being

cancelled)

Warrants Issued 34,271,000

Maturity Continuation vote at 2012 Annual General Meeting

Year End 30 June

Management Fee 1.25% of NAV

Performance Fee

The performance fee is 20% of the of the increase in Adjusted Net Asset Value per Ordinary Share above the Target Net Asset Value per Ordinary Share, subject to the achievement of two tests (i) the year end Adjusted Net Asset Value per Ordinary Share is greater than the High Watermark and (ii) the year end Adjusted Net Asset Value per Ordinary Share exceeds the Target Net Asset Value per Ordinary Share during the relevant Performance Period. The Target Net Asset Value per Ordinary Share for the first performance period is the US$1 placing price increased by the hurdle rate of 8% per annum. For further details, please refer to the Company's admission document.

Investment Manager Epicure Managers Qatar Limited

Investment Adviser Qatar Insurance Company S.A.Q

Administrator Galileo Fund Services Limited

Custodian Anglo Irish Bank Corporation, International PLC

Nominated Adviser and Broker Panmure Gordon (UK) Limited

Auditor & Tax Adviser KPMG I.O.M.

Legal Adviser Stephenson Harwood

Ordinary Shares

ISIN IM00B1Z40704

SEDOL B1Z4070

Bloomberg ticker EQEO

Valoren 3268997

Warrants

ISIN IM00B1Z40G96

SEDOL B1Z40G9

Bloomberg ticker EQEW

Valoren 3271492

Exchange Rate US$1.00=QR3.64

Webpage: www.epicure-qatarequity.com

Contacts

Epicure Qatar Equity Opportunities plc

Leonard O'Brien

T: +41 (22) 908 1190

Nominated Adviser & Broker

Panmure Gordon (UK) Limited

Moorgate Hall

London, EC2M 6XB

T: +44(0) 207 459 3600

Administrator & Registrar

Galileo Fund Services Limited

Third Floor

Britannia House

St George's Street

Douglas

Isle of Man, IM1 1JE

T: +44(0)1624 692600

F: +44 (0)1624 692 601

E: enquiries@galileofs.co.im

Custodian

Anglo Irish Bank Corporation (International) PLC

Jubilee Buildings

Victoria Street

Douglas

Isle of Man, IM1 2SH

PR/ Media Contact

Tim Draper

M Communications

T: +44 20 7153 1267

Marylene Guernier

M Communications

T +44 20 7153 1269

1 Ropemaker Street

Ninth Floor

London

EC2Y 9HT

www.mcomgroup.com

Disclaimer

The contents of this document have been prepared by Qatar Insurance Company S.A.Q as Investment Adviser to the Epicure Qatar Equity Opportunities Fund PLC ('the Company'). This document has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of the Investment Adviser or the Company to any person to buy or sell any security or investment product. Any reference to past performance is not necessarily a guide to the future. The information and analyses contained in this publication have been compiled, or arrived at from sources believed to be reliable, but the Investment Adviser does not make any representation as to their accuracy or completeness, and does not accept liability for any loss arising from their use. The investments discussed in this report may not be suitable for all investors and are provided for information purposes only. The ordinary shares and warrants in the Company have not been, and will not be, registered under the United States Securities Act of 1933 as amended (the 'Securities Act') or qualified for sale under the laws of any state of the United States or under the applicable laws of any of Canada, Australia, Republic of South Africa or Japan and, subject to certain exceptions, may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national, resident or citizen of Canada, Australia, Republic of South Africa or Japan. None of the Company, the Manager or any of their respective members, directors, officers or employees, nor any other person, accepts any liability whatsoever for any loss, however arising, from any use of such information or opinions.