TIDMQIF
RNS Number : 4786J
Qatar Investment Fund PLC
12 September 2016
12 September 2016
Qatar Investment Fund Plc ('QIF' or 'the company')
Annual Report for the year ended 30 June 2016
London-listed Qatar Investment Fund plc (LSE: QIF) invests in
Qatar and the Gulf Cooperation Council (GCC) region, with exposure
to economic growth in the area. QIF invests in companies on the
Qatar Exchange, with a possible allocation of up to 15% in other
listed companies in the GCC.
Qatar:
-- Qatar and other GCC markets were hit by the continuing fall in oil prices
-- Non-hydrocarbon sector now 65% of Qatar GDP, expected to rise to 69% by 2017
-- FTSE Russell upgrading Qatar from frontier to emerging market in September 2016
-- Qatar committed to diversifying the economy and investing in
infrastructure. US$200bn infrastructure investment ahead of the
2022 FIFA World Cup
Qatar Investment Fund plc:
-- Share price fell 18.2% compared to the Qatar Exchange which
fell 18.9%. Net asset value of the fund fell 20.8%
-- Shareholders received a dividend per share of 4.0c
-- The Board proposes to pay a dividend of 4.0c per share for the period to end June 2016.
-- Loss for the year $37.9m
Discount management and proposed tender offer:
-- Shareholders to vote on second graduated tender offer later in 2016
Holdings as of 30(th) June 2016:
-- At 30 June 2016 QIF was invested in 23 companies, 19 in Qatar and 4 in the UAE
-- Banks & financial services and industry remain the largest weightings
Nick Wilson, Chairman of Qatar Investment Fund plc,
commented:
"During the 12 months the entire GCC region was hit by lower oil
prices and bearish sentiment and Qatar was no exception. Despite
these headwinds Qatar has not only grown its economy 3.7% in 2015
but has continued to make remarkable progress in diversifying the
economy away from oil and gas. In 2011 the non hydrocarbon economy
was 42% of GDP, that figure is now 65% and continues to rise.
"We expect Qatar to continue to grow at around 3.7% in 2016 and
2017. This, coupled with a rising population and a government
commited to infrastructure development off a solid fiscal base,
adds up to an enviable macro-economic outlook for investors."
S
For further information please contact:
Nick Wilson
Chairman
Qatar Investment Fund plc
01624 622 851
William Clutterbuck
Maitland
0207 379 5151
Chairman's Statement
On behalf of your Board, I am pleased to present your Company's
ninth Annual Report and Financial Statements for the year to 30
June 2016.
During the twelve months, your Company's Net Asset Value per
Share ("NAV") fell by 20.85% to US$1.2138 which compares with a
fall of 18.98% in the Qatari stock market (Qatar Exchange Index)
and a fall of 14.21% in the MSCI Emerging Markets Index. Following
a narrowing of the discount at which the shares trade to NAV, the
shares fell from US$1.2600 to US$1.03125, a fall of 18.15%.
Shareholders received a dividend of 4.0c per share with an
ex-dividend date of 17 December 2015.
Results
Results for the year under review showed a loss of US$37.95m
(2015:US$22.65m profit) generated from fair value adjustments,
realised gains and dividend income. This is equivalent to basic
earnings per share (loss) of (30.03) cents (2015:15.31 cents
gain).
The continuing fall in hydrocarbon prices pressured shares on
the Qatar Exchange during the first half of the financial period
despite continued growth in the non-hydrocarbon sector. At the end
of the period we had a total of 23 holdings, 19 of which were in
Qatar and 4 in the United Arab Emirates. Banking and financial
services remains our largest sector with a 43.3% exposure.
The Company's Ongoing Charges (formerly Total Expense Ratio)
rose to 1.77% from 1.66 % in the previous year. The charges were
calculated in accordance with the methodology recommended by The
Association of Investment Companies. The increase was largely
attributable to the reduction in the net asset value of the Company
resulting in those fixed costs being spread over a smaller asset
base following the 14% tender offer and an active buy back
strategy.
Managing the Discount between the share price and NAV
Discount management remains a priority for the Board and we
continued to make use of the authority granted by shareholders to
buy back the Company's shares. During the period a total of
2,102,373 shares were bought back to be held in Treasury and
890,509 shares were cancelled, as they had been held in Treasury
for 12 months. The board works with the Investment Manager and the
broker to raise the profile of the Company, giving frequent
interviews to the financial press in order to raise the profile of
the Company with institutional and private investors. An extensive
roadshow was carried out in June 2016 visiting existing
shareholders and potential investors.
Proposed Tender Offer
As announced on 13 April 2015, the Board will give shareholders
the opportunity to vote for the second graduated tender offer with
the tender offer size a function of the average discount during the
twelve-month period prior to the tender offer date, as set out in
the table below. Under this Board proposal, the maximum size of the
tender offer would therefore be capped at 15%. Further details will
be provided later in 2016.
12 month average Tender offer
discount size
Less than 10% Nil
10.00% -10.99% 10.0%
11.00% -11.99% 11.0%
12.00% -12.99% 12.0%
13.00% - 13.99% 13.0%
14.00% - 14.99% 14.0%
15% or greater 15.0%
Proposed Dividend
For the year ended 30 June 2016, dividends received from our
investee companies were significantly lower than in the previous
year. This was due to dividends received from some of our top
holdings being reduced in order to conserve capital.
Whilst your Company has pursued a progressive dividend policy,
it is the Board's intention this year to recommend to shareholders
a maintained dividend of 4.0c per share, partly financed by a small
transfer from distributable reserves. As a result of the loss
reported for the 2016 year, the dividend, if approved by
shareholders, will not be covered by profits for 2016, and
accordingly will be paid out of retained earnings.
If the discount test described above is triggered, the dividend
proposed will be payable on the post tender offer share capital
with a record date and payment date after such tender offer.
Subject to shareholder approval at the forthcoming Annual General
Meeting, the dividend will be paid after the tender offer. Further
details on the ex-date , record date and payment date will be made
in due course.
Post Balance Sheet events
There have been no post balance sheet events.
Outlook, risks and uncertainties
The Qatari economy slowed during the period with 2015 GDP growth
of 3.7%. With the non-hydrocarbon sector now accounting for over
65% of real GDP, the impact of lower hydrocarbon prices is likely
to be ameliorated. Our investment adviser believes that near to
long-term growth prospects should remain healthy driven by a strong
infrastructure pipeline, strong fiscal spending and supportive
demographics.
There are, of course, risks to investors. The Board believes
these principally fall in the following categories; geopolitical
events, market risks, investment and strategy risks, accounting,
legal and regulatory risks, operational risks and financial risks.
Information on each of these is given in the Business Review
section of this Annual Report.
Looking to the future, the Board is confident that the Company
is invested in companies with good prospects listed on the Qatar
Exchange and elsewhere in the GCC region. The Company offers
international investors one of the few practical ways to gain
investment exposure to Qatar's vigorous economy.
The Board views the future of the Company with confidence and
firmly believes that continued growth in the non-hydrocarbon Qatari
economy combined with improving demographics will lead to
significant improvements in corporate profitability.
Annual General Meeting
I look forward to welcoming shareholders to our ninth Annual
General Meeting on 17 November 2016, which will be held at 11.00
am, at the Company's registered office at Millennium House, 46
Athol Street, Douglas, Isle of Man.
Nicholas Wilson
Chairman
9 September 2016
Business Review
The following review is designed to provide information
primarily about the Company's business and results for the year
ended 30 June 2016. It should be read in conjunction with the
Report of the Investment Manager and the Investment Adviser on
pages 7 to 18 which gives a detailed review of the investment
activities for the year and an outlook for the future.
Investment Objective and Strategy
The Company's investment objective is to capture, principally
through the medium of the Qatar Exchange (formerly the Doha
Securities Market), 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 Co-operation Council for
Arab States of the Gulf (GCC) countries.
The Company applies a top-down screening process to identify
those sectors which should most benefit from sector growth trends.
Fundamental industry and company analysis, rather than
benchmarking, forms the basis for both stock selection and
portfolio construction.
The Company's investment policy is on pages 19 to 21.
Performance Measurement and Key Performance Indicators
In order to measure the success of the Company in meeting its
objectives and to evaluate the performance of the Investment
Manager, the Directors take into account the following key
performance indicators:
Returns and Net Asset Value
At each quarterly Board meeting the Board reviews the
performance of the portfolio versus the Qatar Exchange (QE) Index
(local benchmark) as well as the net asset value, income, share
price and expense ratio for the Company.
Discount/Premium to Net Asset Value
On a weekly basis, the Board monitors the discount/premium to
net asset value. The Directors renew their authority at the annual
general meeting in order to be able to make purchases through the
market where they believe they can assist in narrowing the discount
to net asset value and where it is accretive to net asset value per
share.
On 9 August 2016 the Company announced the details of its annual
share buy-back programme which will expire on 12 November 2016.
Pursuant to, and during the term of this share buy-back programme,
the Company may purchase ordinary shares provided that:
1) the maximum price payable for an ordinary share on the London
Stock Exchange is an amount equal to the higher of:
a. 105 per cent. of the average market value of the Company's
ordinary shares as derived from the London Stock Exchange Daily
Official List for the five business days immediately preceding the
day on which such share is contracted to be purchased; and
b. In order to benefit from the exemption laid down in Article 5(1) of
Regulation (EU) No 596/2014, the Company will not purchase
shares at a price higher than the higher of the price of the last
independent trade and the highest current independent purchase bid
on the trading venue where the purchase is carried out; and
2) the aggregate number of ordinary shares which may be acquired
on behalf of the Company in connection with this share buy-back
programme shall not exceed 19,321,909 ordinary shares.
Due to the limited liquidity in the ordinary shares, a buy-back
of ordinary shares pursuant to the share buy-back programme on any
trading day is likely to represent a significant proportion of the
daily trading volume in the ordinary shares on the London Stock
Exchange (and is likely to exceed the 25% limits of the average
daily trading volume as laid down in Article 5(1) of Regulation
(EU) No 596/2014 and as such the Company will not benefit from this
exemption).
It is expected a further announcement will be made following the
2016 annual general meeting with details of the 2016/2017 share
buy-back programme.
A Board member is responsible for close monitoring of our share
price, and working with our broker to buy back shares when we
believe appropriate so as to manage any discount to net asset
value.
Yield
The Board monitors the dividend income of the portfolio and the
amount available for distribution and considers the impact on the
Company's annual dividend policy of future progressive dividend
payments, subject to the absence of exceptional market events.
Principal Risks and Uncertainties
The Board confirms that there is an on-going process for
identifying, evaluating and managing or monitoring the key risks to
the Company. These key risks have been collated in a risk matrix
document which is reviewed and updated on a quarterly basis by the
Directors. The risks are identified and graded in this process,
together with the policies and procedures for the mitigation of the
risks.
The key risks which have been identified and the steps taken by
the Board to mitigate these are as follows:
Market
The Company's investments consist of listed companies. There are
no investments in companies soon to be listed. Market risk arises
from uncertainty about the future prices of the investments. This
is commented on in Note 15 on pages 62 to 66.
Investment and Strategy
The achievement of the Company's investment objective relative
to the market involves risk. An inappropriate asset allocation may
result in underperformance against the local index. Monitoring of
these risks is carried out by the Board which, at each quarterly
Board meeting, considers the asset allocation of the portfolio, the
ratio of the larger investments within the portfolio and the
management information provided by the Investment Manager and
Investment Adviser, who are responsible for actively managing the
portfolio in accordance with the Company's investment policy. The
net asset value of the Company is published weekly.
Accounting, legal and regulatory
The Company must comply with the provisions of the Isle of Man
Companies Acts 1931 to 2004 and since its shares are listed on the
London Stock Exchange, the UK Listing Authority's Listing Rules and
Disclosure and Transparency Rules ("UKLA Rules"), a breach of
company law could result in the Company and/or the Directors being
fined or the subject of criminal proceedings. A breach of the UKLA
Rules could result in the suspension of the Company's shares. The
Board relies on its Company Secretary and advisers to ensure
adherence to company law and UKLA Rules. The Board takes legal,
accounting or compliance advice, as appropriate, to monitor changes
in the regulatory environment affecting the Company.
From 3 July 2016 the Company must comply with the Market Abuse
Regulation (MAR) which contains prohibitions for insider dealing
and market manipulation, and provisions to prevent and detect
these.
Operational
Disruption to, or the failure of, the Investment Manager, the
Investment Adviser, the Custodian or Administrator's accounting,
payment systems or custody records could prevent the accurate
reporting or monitoring of the Company's financial position.
Details of how the Board monitors the services provided by the
Investment Manager and its other suppliers, and the key elements
designed to provide effective internal control, are explained
further in the internal control section of the Corporate Governance
Report on pages 24 to 30.
Financial
The financial risks faced by the Company include market price
risk, foreign exchange risk, credit risk, liquidity risk and
interest rate risk. Further details are disclosed in Note 15 on
pages 62 to 66.
Report of the Investment Manager and Investment Adviser
Regional Equity Market Overview
Indices 30-Jun-15 30-Jun-16 % Change
--------------- ---------- ---------- ---------
Qatar (DSM) 12,201 9,885 -19.0%
--------------- ---------- ---------- ---------
Saudi (TASI) 9,087 6,500 -28.5%
--------------- ---------- ---------- ---------
Dubai (DFMGI) 4,087 3,311 -19.0%
--------------- ---------- ---------- ---------
Abu Dhabi
(ADI) 4,723 4,498 -4.8%
--------------- ---------- ---------- ---------
Kuwait (KWSE) 6,203 5,365 -13.5%
--------------- ---------- ---------- ---------
Oman (MSI) 6,425 5,777 -10.1%
--------------- ---------- ---------- ---------
Bahrain (BAX) 1,368 1,118 -18.2%
--------------- ---------- ---------- ---------
Source: Bloomberg
In the 12 months to 30 June 2016, returns from all the GCC
markets were negative, characterized by steep market volatility.
The GCC index (Bloomberg GCC200) fell 20.2%, weighed down by lower
oil prices, continued regional geopolitical tensions and concerns
about global economic growth. In the latter half of CY2015, global
equity markets received a twofold blow from the surprise
devaluation of the Chinese yuan and an extended slump in global oil
prices which continued into Q1 2016. Moreover, the normalization of
the interest rates in the US, announced in December 2015, increased
volatility across global equity markets. Following the US rate
hike, four GCC economies (Saudi Arabia, UAE, Bahrain and Kuwait)
also raised their policy rates. The Qatari market, which was the
best performing market in the GCC last year, clocked in a dismal
performance, with losses only behind the Saudi market, which was
the worst performing market in the region.
The drop in oil prices late last year weighed on the performance
of equity markets during H2 2015. All the GCC indices dropped
during this period, with Saudi Arabia reporting the highest fall of
23.9%, followed by Dubai and Oman which were down 22.9% and 15.9%,
respectively. Qatar fell 14.5% during H2 2015.
The drop in oil prices has negatively impacted the fiscal
balances of GCC countries. For the first time in 15 years, Qatar is
expected to report a fiscal deficit, estimated at 4.8% of GDP, at
about QAR 46.5 billion in FY 2016. Several GCC nations have also
announced reforms, including cuts in fuel subsidies and
conservative spending plans to face the challenging
environment.
The oil price decline continued into the early part of this
calendar year after the UN lifted sanctions over Iran, leading to
additional pressure on the already over supplied oil market. As a
result, GCC stock markets tumbled early this year and oil prices
dropped below the US$ 30 level. However, the introduction of the
Saudi National Vision 2030, expectations of continued
infrastructure spending in Qatar and a recovery in oil prices
subsequently generated optimism towards regional equity markets.
Brent crude oil recovered to touch US$ 50 per barrel in the Q2 2016
following supply disruptions in Nigeria and Canada caused by unrest
and wildfires, respectively.
During H1 2016, the performance of GCC markets was mixed.
Bahrain posted a 8.0% decline, followed by Saudi Arabia and Qatar
falling 6.0% and 5.2%, respectively. On the other hand, Oman, Dubai
and Abu Dhabi markets gained 6.9%, 5.1% and 4.4% respectively,
during the period.
Despite reporting dismal performance last year, the Qatar market
has shown resilience compared to other GCC peers over a two year
time frame. For the period ending 24 months till June 2016, the
Qatari market fell 14.0% and was the second best performer after
Abu Dhabi (down 1.2%). During this period, the price of a barrel of
Brent crude fell 55.8%. Over the same period, the Saudi market fell
31.7%, Kuwait 23.0%, and the Bahrain and Dubai markets dropped
21.7% and 16.0%, respectively.
The Investment Adviser believes that the underperformance of the
Qatar market over 2015-16 is overdone and it will bounce back and
perform well over the medium to long term, driven by strong
macroeconomic fundamentals and its superior growth prospects. The
Qatari government is committed to continue its large infrastructure
investment spending programme and the non-oil sector is posed for a
robust growth over the next few years.
Quarterly Performance of Regional Markets
Indices 30-Jun-15 30-Sep-15 31-Dec-15 31-Mar-16 30-Jun-16
--------------- ---------- ---------- ---------- ---------- ----------
Qatar (DSM) 4.2% -6.0% -9.0% -0.5% -4.7%
--------------- ---------- ---------- ---------- ---------- ----------
Saudi (TASI) 3.5% -18.5% -6.7% -10.0% 4.4%
--------------- ---------- ---------- ---------- ---------- ----------
Dubai (DFMGI) 16.3% -12.1% -12.3% 6.5% -1.3%
--------------- ---------- ---------- ---------- ---------- ----------
Abu Dhabi
(ADI) 5.7% -4.7% -4.3% 1.9% 2.4%
--------------- ---------- ---------- ---------- ---------- ----------
Kuwait (KWSE) -1.3% -7.7% -1.9% -6.9% 2.6%
--------------- ---------- ---------- ---------- ---------- ----------
Oman (MSI) 3.0% -9.9% -6.6% 1.1% 5.7%
--------------- ---------- ---------- ---------- ---------- ----------
Bahrain (BAX) -5.7% -6.7% -4.7% -7.0% -1.1%
--------------- ---------- ---------- ---------- ---------- ----------
Source: Bloomberg
Outlook: Positives Overweigh Concerns
The long term growth prospects of the Qatari economy remain
positive, underpinned by infrastructure spending of c.US$200
billion ahead of the 2022 FIFA World Cup, in line with the Qatar
National Vision (QNV) 2030. QNV focuses on the country's
diversification policy to transform the Qatari economy from
hydrocarbon dependence to a non-hydrocarbon economy. Results are
already visible: the share of non-hydrocarbon GDP has grown from
41.9% in 2011 to 63.8% at the end of 2015. This is expected to rise
to 68.9% by the end of 2017.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting % Share of
Non-hydrocarbon sector in Nominal GDP (Qatar)
Despite the fact that Qatar is expected to report a fiscal
deficit for the first time in 15 years (about 4.8% of GDP), the
2016 budget also shows a commitment to long-term development with
allocation to major projects growing by 3.8% to QAR90.8 billion.
The majority of capital expenditure is allocated for the
infrastructure, health and education sectors, representing over
45.0% of total budgeted expenditure.
Qatar's spending cuts were modest in comparison to other GCC
nations and it is better positioned to withstand low oil prices
than GCC peers. Qatar's budget deficit for 2016 is one of the
lowest in the GCC.
Moreover, FTSE Russell confirmed that Qatar Exchange would be
upgraded to Secondary Emerging Market (EM) from Frontier Market
(FM) status in two equal tranches, first in September 2016 and
second in March 2017.
In the first tranche, Qatar would be removed from the FM Index
and a 50.0% tranche would be included to the EM Index, resulting
with a weight of c0.6% and estimated inflows of US$602 million. In
the second tranche, Qatar's representation in the EM Index would
increase to c1.2%. This should mean Qatar experiencing passive
inflows of about US$1,204 million in the all-emerging index.
Brexit Impact on GCC
The historic decision by the UK to quit the European Union is
expected to have a short term impact on the GCC nations,
particularly in the currencies and financial markets.
Sterling weakness could have both positive and negative effects
on the GCC economies. Currency weakness, for example, may
significantly impact tourist flows to the Gulf.
Moreover, the uncertainly caused by Brexit might delay the US
Fed raising interest rates. As a result of these low interest
rates, GCC governments could accelerate capital raising from
international bond markets.
However, the Investment Adviser believes that the impact of
Brexit would be minimal on GCC equities as their earnings prospects
are not strongly related. Thus, the Investment Adviser expects
equities to recover gradually as their movements are fundamentally
linked to domestic factors and oil prices.
Strong economic growth should continue to support Qatari banking
sector
In the past few years, the size of the Qatari banking sector has
not only expanded but its activities and services have also
diversified. Increased involvement by the government through the
Qatar Central Bank (QCB) in regulating, directing and controlling
sector activities have made it better organised, effective and
competitive.
However, the banking industry in Qatar has faced headwinds
recently, leading to a tighter liquidity. Loan growth has
outstripped deposit growth as lower oil and gas revenues have led
to a decline in public sector deposits, causing a tightening of
liquidity and driving banks to raise funds abroad. This has also
led to a rise in interbank rates and the cost of funding.
Additionally, Qatar Interbank Offered Rates (QIBOR) has risen
sharply over the past year.
Given the current liquidity situation, QCB has delayed the
deadline for the compliance with the 100% loan to deposit (LDR)
ratio until 2018. Banks are also in negotiation with the regulators
to amend the LDR formula to include long term wholesale funds.
Despite the effect of low oil prices, the Qatari banking system
is robust due to its overall credit profile which remains
consistent with an "Aa2" rating (by Moody's). This rating was
awarded on account of expected persistent growth, high wealth
levels, lower vulnerability to the oil price, coupled with prudent
fiscal policy when compared to its GCC peers.
According to a study by Global Investment House (based on banks
under coverage), during Q1 2016 the profitability of Qatar's
banking sector grew 1.7% YoY compared to a 0.7% drop across GCC
region banks. On an annual basis, Kuwait and the UAE banks saw
profits falling 10.1% and 7.7%, respectively, while Saudi Arabia's
bottom-line increased 6.6% YoY in the first quarter of 2016. On a
sequential basis, average profitability of GCC banks expanded 6%
QoQ, with Saudi Arabia leading the rise (up 13.9% QoQ), followed by
Qatar at 13.3%.
Qatari banks managed to maintain the highest lending growth at
16% YoY, compared to the GCC average of 8.7%. The strong rise in
lending growth was driven by an increase in public sector spending
in relation to government-backed initiatives prior to the FIFA
World Cup 2022. Total assets of the GCC banks expanded 5.6% YoY in
Q1 2016, with Qatar witnessing the strongest growth of 11.8%,
followed by the UAE and Saudi Arabia with total assets growth of
6.8% and 2.2%, respectively. However, provision for bad debts rose
sharply for Qatari banks during Q1 2016.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting GCC banking
sector credit growth
Over the longer term, as per the QCB's data, in the 21 months to
March 2016, Qatar's lending growth remained robust, up 26.6%,
followed by Saudi Arabia and Oman. Qatar also registered the
highest credit growth in FY 2015 compared to its GCC peers.
Despite strong credit growth, the asset quality of Qatari banks
remained good, driven by prudential regulation and the sizeable
proportion of high quality government-related loans. The asset
quality of Qatari banks is expected to be supported by healthy
operating environment and a robust regulatory regime.
According to the latest QCB data, total credit extended by
Qatari banks remained good with total loans increasing by 4.6%
between December 2015 and June 2016 and 13.2% YoY in June 2016.
Private sector loan growth was relatively slower at 1.7% during
first six months of 2016, while public sector growth was robust at
9.9%. However, in FY 2015, public sector loan growth was slower
(1.6%) compared to the private sector (23.4%). Strong loan growth
in the public sector could be attributed to the awarding and
execution of large infrastructure projects. Total deposits grew
5.1% during first six months of 2016. Consequently, the banking
sector's loans-to-deposit ratio (LDR) stood at 115% at the end of
June 2016, compared to 116% at the end of December 2015.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Pick up in public
sector loan growth
Public sector credit growth is expected to remain strong due to
the fact that the domestic economy has substantial funding needs
for FIFA World Cup 2022 related construction and long term
infrastructure spending in line with the Qatar National Vision
2030. Additionally, a steady rise in population should bode well
for consumer sector loan growth.
Despite on-going concerns about global economic growth, lower
oil prices and regional unrest, Qatar's economic growth is expected
to remain healthy on the back of sizeable reserves, strong
commitment by the government to infrastructure spending and a
steady rise in population leading to consumption growth. The
Investment Adviser believes that the Qatari banking sector would be
a long term beneficiary of this with the considerable opportunities
highlighted above.
GCC to introduce VAT in 2018
Low oil prices, shaving off about 20.0% of the combined 2015 GDP
in the MENA region, have strengthened the case for implementing
alternative avenues for raising revenues for the GCC
governments.
GCC government officials recently confirmed that the Gulf
countries are to introduce a unified VAT of up to 5.0% from 2018.
According to the IMF, a VAT rate of 5.0% could generate revenues in
the range of 2.0% of GDP. VAT implementation would be simultaneous
across all the GCC nations.
Health, education and social services as well as essential food
items and certain financial services would be exempt from the
tax.
The Investment Adviser believes that the introduction of VAT
would primarily affect the consumer and telecom sectors. Luxury
clothing, jewellery and watches would be an obvious target for VAT,
along with cigarettes, fuel and cars.
Macroeconomic Update
According to the Ministry of Development Planning and Statistics
(MDPS), the Qatari economy continued to grow in Q4 2015, with GDP
rising 4.0% compared to Q4 2014. The non-hydrocarbon sector GDP
grew 7.4%, mainly driven by
expansion in construction, finance, utilities and trade sectors.
Lower oil prices meant the hydrocarbon sector was GDP flat with
marginal growth of 0.7%.
Going forward, the Investment Adviser believes that Qatar's real
GDP growth is set to continue, driven by strong growth in the
non-hydrocarbon sector, as investment spending remains strong.
According to Institute of International Finance (IIF), Qatar is
expected to remain the fastest growing economy in the MENA region
in 2016 and 2017, growing by 3.7% and 3.8%, respectively.
Underpinned by preparation to host the FIFA 2022 World Cup, the
non-hydrocarbon sector expansion is expected to be at around 6.0%,
while the hydrocarbon growth is expected to be around 1.4% in both
2016 and 2017.
Qatar's population grew 2.3% between December 2015 and June
2016, to 2.48 million. Population growth is expected to remain
strong in coming years, as large project spending related to the
2022 FIFA World Cup continues to attract expatriates. Thus, steady
growth in population and high levels of personal consumption is
expected to continue to encourage the domestic consumer and
services sector companies.
Recent Developments
QSE entitled to receive applications for listing
Qatar Stock Exchange (QSE) is now the official entity to receive
the applications for public offerings, listings and admissions to
trading. The move should make it easier for issuers processing
their applications.
Qatar First Bank (QFB) plans to list on the QSE by April
2016
QFB listed its shares on the QE on 27 April 2016. QFB, is the
first independent Shari'ah compliant financial institution based in
Qatar.
QCB to issue new guidelines for insurance sector
There is huge scope for insurance sector growth arising from the
low level of insurance penetration in Qatar. Qatar Central Bank
(QCB) and Qatar Financial Centre Regulatory Authority (QFCRA) have
upgraded their guidelines for Qatar's booming insurance sector.
Qatar's insurance sector attracted premiums of QAR7.8 billion in
2015. This is expected to reach QAR8.23 billion and QAR8.58 billion
in 2016 and 2017, respectively.
Hotel projects worth US$7 billion in pipeline
Middle East Economic Digest (MEED) estimates that around 65
hotels are currently being built or are planned, with a total
investment of around US$7 billion.
Qatar sets a limit of 5% for shareholders of listed banks
According to the latest regulation set by the Qatar Central Bank
and the Qatar Financial Markets Authority, investors must limit
their holdings in Qatari banks and financial firms to 5.0% of the
company's capital or 10.0% with a central bank waiver. However,
shareholders who exceed the limit, have five years to comply.
Qatar raised US$ 9 billion of Eurobonds
Launching the Middle East's biggest ever bond issue, Qatar
issued US$ 9 billion of Eurobonds with three different maturities
in order to fill the budget deficit gap left by falling oil and gas
revenues. This was the first sale in four years from Qatar and the
size of the offer was almost double the US$ 5 billion that the
analysts had predicted.
Qatar issued US$ 3.5 billion in five-year notes at 120 bps over
US Treasuries, US$ 3.5 billion in ten-year bonds at 150 bps over US
Treasuries and US$ 2 billion of 30-year paper at a 210 bps over US
Treasuries.
FIFA World Cup 2022 stadiums to cost up to US$ 10 billion
Qatar is expected to spend up to US$ 200 billion on wider
infrastructure required to host the FIFA World Cup 2022. Qatar's
2022 World cup stadium construction costs are expected to be US$ 8
-10 billion.
Rayyan Water to be listed on QE by the end of 2016
Rayyan Water, the largest local supplier of bottled water in
Qatar, plans an IPO by the end of 2016. Rayyan is aiming to list
half of its shares. Rayyan would only be the third new listing on
QSE since 2010.
Rayyan's other interests include contracting, cement, general
sponsorship and trading.
QCB sets new guidelines for foreign bank currency holdings
The QCB issued a circular regarding new maximum limits on open
positions that a bank can hold in foreign currency, to limit the
risks of foreign currency open positions.
According to the circular, the maximum limit for dollar open
positions - surplus and deficit - is set at 25.0% of capital and
reserves, while the limit for all other currencies is set at 5.0%.
The aggregate open position for all foreign currencies is set at
30.0% of bank capital and reserves. Banks have been given a
12-month grace period to comply with the new regulations.
Qatar's share in the total value of planned GCC projects stood
at 8.57%
According to MEED, Qatar accounts for an 8.57% share in the
total value of the pipeline projects planned in the GCC (as of May
2016), which amounted to US$ 2,000 billion.
Saudi Arabia led the GCC region in terms of the value of
projects in the pre-execution stage, with 38.9% of the total value,
followed by the UAE with 34.8%. Kuwait, Oman and Bahrain accounted
for an 8.22%, 6.48% and 2.97% share, respectively of the total
value.
Scrapping of fuel subsidies likely to be a positive trigger for
Qatari economy
Given the need for fiscal consolidation, Qatar scrapped gasoline
and diesel subsidies from May 2016, as the nation is set to
register a deficit this year after more than a decade of budget
surpluses.
However, according to the Institute of International Finance,
removal of subsidies is seen to be a positive sign for the Qatari
economy, given that the subsidies create a deadweight loss as low
fuel prices lead to higher consumption at the expense of reduced
exports.
RasGas signs new deal with French energy company EDF
Recently, RasGas through Ras Laffan Liquefied Natural Gas
Company - 3 (RL 3) has entered into a new sales and purchase
agreement (SPA) with French energy company EDF to supply 2 million
tons of liquefied natural gas (LNG) per annum from 2017. This new
agreement is in addition to existing contracts signed between
RasGas and EDF group subsidiaries supplying up to 4.6 million tons
per annum to Edison in Italy and up to 3.5 million tonnes annually
to EDF Trading in Belgium.
Valuations
Market Market PE (x) PB Dividend
Cap. (x) Yield (%)
----------- -------- -------------- ------ -----------
US$ Mn 2016E 2017E 2016E 2016E
----------- -------- ------ ------ ------ -----------
Saudi
Arabia 398,465 13.6 10.9 1.4 3.7%
----------- -------- ------ ------ ------ -----------
UAE 79,676 9.8 8.4 1.1 4.4%
----------- -------- ------ ------ ------ -----------
Qatar 121,945 12.0 11.0 1.5 4.3%
----------- -------- ------ ------ ------ -----------
Abu Dhabi 119,248 12.1 11.4 1.5 5.2%
----------- -------- ------ ------ ------ -----------
Oman 16,438 11.0 10.1 1.3 5.2%
----------- -------- ------ ------ ------ -----------
Source: Bloomberg, Prices as of 30 June 2016
Despite volatile market conditions and oil prices fluctuations,
the Qatari market and Qatari companies will remain attractive to
investors on the back of strong economic fundamentals, healthy
non-hydrocarbon sector growth and large fiscal buffers.
Moreover, the Qatari market remains attractive to investors due
to compelling valuations and healthy dividend yields.
Corporate Profitability
Sector Net Profit LTM 6/30/2015 LTM 6/30/2016 Change
(QAR '000)
--------------------- -------------- -------------- -------
Banks & Financial
Services* 20,253,534 20,352,247 0.5%
--------------------- -------------- -------------- -------
Insurance 2,132,421 2,139,980 0.4%
--------------------- -------------- -------------- -------
Services & Consumer
Goods 1,849,758 1,898,216 2.6%
--------------------- -------------- -------------- -------
Industry 12,014,804 9,121,580 -24.1%
--------------------- -------------- -------------- -------
Real Estate 8,361,471 3,118,177 -62.7%
--------------------- -------------- -------------- -------
Telecoms 1,144,421 2,112,302 84.6%
--------------------- -------------- -------------- -------
Transportation 2,281,080 2,187,476 -4.1%
--------------------- -------------- -------------- -------
Total 48,037,489 40,929,978 -14.8%
--------------------- -------------- -------------- -------
Net profit calculation for the 12 months to 30 June 2016 is
based on restated net profit numbers.
*Banking & Financial Services sector excludes QFBQ as it was
listed in FY 2016 and financials for prior periods are unavailable
for calculations.
Source: Qatar Exchange
For the 12 months to 30 June 2016, net profits of the Qatar
Exchange (QE) listed companies declined by 14.8% compared to the 12
months to 30 June 2015. This decline was mainly driven by the fall
in net profits of the industrial, real estate and transportation
sectors. Weaker oil prices affected the performance of the
industrial sector. However, banks & financial services,
insurance, services & consumer goods, and telecom sectors
reported a rise in net profits.
The 43 companies listed on the QE reported an overall net profit
of QAR 40.9 billion (US$11.2 billion) for the year ended 30 June
2016, compared to QAR48.0 billion (US$13.2 billion) reported for
the year ended 30 June 2015. The real estate sector reported a
massive decline in net profit (down 62.7%) due to a one-off gain
recorded during the 12 months to 30 June 2015. Excluding one-off
gain related to Barwa Real Estate, the net profit of the 43 listed
companies would have declined 9.7% for the year ended 30 June
2016.
During the 12 months to 30 June 2015, net profit of Barwa Real
Estate grew 300%, as the company reported substantial profit from
the sale of properties. Moreover, the decline in profits for the
period ended 30 June 2016 of the real estate sector widened further
by the fall in net profits of United Development Company and Mazaya
Qatar, which recorded a drop of 32.1% and 34.4%, respectively. The
banking & financial services sector net profit growth stood at
0.5%, mainly driven by the rise in profits of listed Qatari banks
(net profit at Qatari listed banks increased 1.1% during the
period). The banking & financial services sector heavyweight,
Qatar National Bank, reported an 8.7% rise in net profit.
Industrial sector net profit declined 24.1% due to a poor
performance by the sector heavyweight, Industries Qatar. Net profit
at Industries Qatar fell 32.7% in the 12 months to 30 June 2016,
due to weaker product prices. Gulf International Services also
reported a 72.3% drop in its net profit. The Transportation sector
net profit declined by 4.1%. Net profit of the Telecom sector
increased substantially by 84.6%, led by a sharp rise in net profit
at Ooredoo QSC. The services & consumer goods sector reported a
2.6% gain in the net profit during the period, as Qatar Fuel
Company, reported a 9.5% rise in its net profit.
Looking ahead, the Investment Adviser believes that earnings
growth in Qatari listed companies would improve and does not expect
any adverse shocks. Increasing infrastructure spending, growing
population, stable oil prices and robust growth in the
non-hydrocarbon sectors would likely prove to be key positives for
domestic companies especially in the banking, real estate, consumer
and transportation sectors.
Net profit growth of the Company's top 5 holdings (in QAR
'000)
Company LTM 6/30/2015 LTM 6/30/2016 Change
--------------------- -------------- -------------- -------
Qatar National Bank 10,972,771 11,923,488 8.7%
--------------------- -------------- -------------- -------
Industries Qatar 5,926,102 3,986,934 -32.7%
--------------------- -------------- -------------- -------
Masraf Al Rayan 2,096,767 2,126,010 1.4%
--------------------- -------------- -------------- -------
Qatar Electricity
and Water Co. 1,551,586 1,554,669 0.2%
--------------------- -------------- -------------- -------
Qatar Islamic Bank 1,771,290 2,114,560 19.4%
--------------------- -------------- -------------- -------
Source: Qatar Exchange
Company Update
QIF's dividend adjusted NAV fell 18.3% from June 2015 to June
2016, while the Qatar Exchange index fell 19.0% during the same
period. The outperformance was driven by portfolio companies
including Ooredoo (up 1.6%), Qatar Electricity & Water (down
8.8%), Qatar Islamic Bank (down 11.0%) and Qatar National Bank
(down 12.9%). Additionally, the investment manager removed Doha
bank (down 33.6%) from the portfolio and did not held Vodafone
(down 35.7%) for most of the year until it bottomed-out in Q1 2016,
which further contributed to the outperformance. As at 30 June
2016, the QIF share price was at a 15.0% discount to NAV. Dividend
returns were down from US$10m in 2015 to US$5.5m in 2016.
Industry Allocation
QIF remains overweight in the Qatar banking sector (including
financial services) at 43.3% of NAV (Q1 2016: 43.1%) compared to QE
weighting of 38.1%. Qatar National Bank is QIF's largest holding
(18.4% of NAV). The Qatari banking sector has a strong record of
robust growth and the Qatar Central Bank data shows 2016 (YTD till
June 2016) credit growth of 4.6%, mainly driven by public sector
(up 9.9%). The Investment Adviser believes that this sector should
benefit from government's infrastructure development plans.
Industrials remain the second largest exposure at 26.8% (Q1
2016: 27.6%), mainly in Industries Qatar (10.8% of NAV). Exposure
to Gulf International Services remained stable at 6.2% of NAV,
while exposure to Qatar Electricity and Water reduced from 7.9% in
Q1 2016 to 7.5% at the end of Q2 2016.
QIF re-entered the Services and Consumer Goods sector in Q2 2016
with an exposure of 1.8% of NAV. Exposure to the telecom sector
increased from 6.1% in Q1 2016 to 6.9% at the end of Q2 2016.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting QIF's allocation
by sector as at 30 June 2016:
Portfolio Breakdown Top 5 Holdings
Company Name Sector % Share
of NAV
------------------- ------------------- --------
Qatar National Banks & Financial
Bank Services 18.4%
------------------- ------------------- --------
Industries
Qatar Industry 10.8%
------------------- ------------------- --------
Masraf Al Banks & Financial
Rayan Services 10.0%
------------------- ------------------- --------
Qatar Electricity
& Water Industry 7.5%
------------------- ------------------- --------
Qatar Islamic Banks & Financial
Bank Services 6.9%
------------------- ------------------- --------
Source: Bloomberg, Qatar Insurance Company
At the end of June 2016, the top five investments on the company
constituted 53.5% of NAV, down from 58.4% as at 30 June 2015. The
top 10 holdings represent 79.2% of QIF's NAV (83.4% as at 30 June
2015).
Country Allocation
At 30 June, QIF had 23 holdings: 19 in Qatar and 4 in UAE (Q1
2016: 21 holdings: 18 in Qatar and 3 in UAE). UAE holdings stood at
5.6% of NAV from 3.8% as at 31 March 2016. Cash was 0.7% of NAV (Q1
2016: 3.3%).
Qatar remains the Investment Manager's favoured market in the
GCC region on account of its significant investment plans by the
government, stable political environment, sizeable hydrocarbon
reserves and increasing non-hydrocarbon sector growth.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting QIF's Allocation
by Country as at 30 June 2016:
Qatar National Bank (18.4% of NAV)
Established in 1964, 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. QNB is a dominant
state-owned participant in the banking sector and plays an
important role in the development of the Qatari economy and in
funding key infrastructure projects. The government is strongly
committed to support QNB, thus enhancing its economic importance.
The largest shareholder in QNB is the Government of Qatar, through
the Qatar Investment Authority (QIA), with a 50% equity stake. QNB
is the largest bank in Qatar and MENA, with total assets of QAR
692.0 billion (US$190.1 billion) as at 30 June 2016. For the H1
2016, QNB reported 11.8% rise in net profit to QAR 6.2 billion
(US$1.7 billion) compared to H1 2015. In June 2016, QNB completed
the acquisition of 99.81% stake in Finansbank in Turkey and is well
positioned to benefit from the rapid expansion of the domestic
economy. Moreover, in June 2016, QNB raised US$2.75 billion from
capital boosting perpetual notes which is considered to be the
single largest issue in the MENA region. With the recent inclusion
of Finansbank, QNB Group, subsidiaries and associate companies,
operate in more than 30 countries, through more than 1200 branches,
supported by over 4,300 ATMs and employing around 27,300 staff.
Industries Qatar (10.8% of NAV)
Industries Qatar is a holding company with interests in
petrochemicals via 80% owned Qatar Petrochemical Co., fertilizers
via 75% owned Qatar Fertilizer Co., steel via a wholly owned
subsidiary Qatar Steel Co. and fuel additives via 50% owned Qatar
Fuel Additives Co. For H1 2016, IQCD's net profit stood at QAR 2.0
billion, against QAR 2.4 billion in H1 2015, largely due to reduced
total revenue and lower share of results from joint ventures driven
by deflation in product prices across all operating segments, most
notably in the fertilizer and fuel additive segments. However, the
company reported improved sales volumes and operating costs on
account of ongoing cost optimisation initiatives.
Masraf Al Rayan (10.0% of NAV)
Masraf Al Rayan (MARK) was incorporated as a Qatari Shareholding
Company under Qatar Commercial Company law on 4th January 2006. It
is licensed by the Qatar Central Bank and began commercial
operations in October 2006. The bank has three main business
divisions mainly retail banking, wholesale banking and private
banking. Besides this the bank offers investment banking and
treasury products. Presently MARK has a total of 11 branches in
strategic locations around Qatar, and a total of 62 ATMs. At the
end of June 2016, the bank's financial assets stood at QAR 64.3
billion (US$17.7 billion). During H1 2016, the bank reported 5.3%
rise in net profit to QAR 1,050.9 million (US$288.7 million).
Qatar Electricity & Water Co. (7.5% of NAV)
Qatar Electricity and Water Company (QEWC) is the first private
sector company in the region, engaged in the generation of
electricity and desalinated water. Established in 1990, as a Qatari
shareholding company, the state of Qatar and its affiliates own
approximately 52% of the share capital. QEWC is the second largest
utility company in North Africa and the Middle East, with a market
share above 60% of electricity and above 79% of the water in Qatar.
In 2013, QEWC along with Qatar Petroleum International Limited and
Qatar Holding Company established Nebras Power Company to invest
globally in new and existing power generation and water
desalination projects. In H1 2016, QEWC's net profit stood at QAR
791.3 million, 7.3% higher when compared to H1 2015 on account of a
rise in electricity and water revenue. Robust growth in the next
few years is expected due to capacity expansion in both electricity
and water business. Approximately around 2,400 MW of electricity
addition along with 200 MiGD of water desalination is planned in
the next few years.
Qatar Islamic Bank (6.9% of NAV)
Qatar Islamic Bank (QIB) is Qatar's first Islamic financial
institution that follows Shari'a principles. Established in 1982,
the bank commands over 40.0% share of Islamic sector and over 11.5%
share of the overall banking sector (FY 2015). The bank has over 30
branches in Qatar and has international presence through affiliates
namely QIB - UK in London, Arab Finance House in Lebanon, Asian
Finance Bank in Malaysia, and QIB Sudan. Apart from core
businesses, the bank has core holdings in QInvest (Investment bank;
QIB subsidiary), Beema (Islamic Insurance Company), Al Jazeera
Finance (Islamic Consumer Finance) and Aqar (Real Estate Investment
and Development). As at the end of June 2016, its financing assets
stood at QAR 96.6 billion (US$26.5 billion). In H1 2016, the bank's
net profit (before deducting expense on Sukuk capital) grew 17.9%
to QAR 1,055.3 million (US$289.9 million).
Epicure Managers Qatar Limited Qatar Insurance Company
S.A.Q.
9 September 2016 9 September 2016
Investment Policy
Investment Objective
The Company's investment objective is to capture, principally
through the medium of the Qatar Exchange, 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.
The Company applies a top-down screening process to identify
those sectors which should most benefit from sector growth trends.
Fundamental industry and company analysis, rather than
benchmarking, forms the basis of both stock selection and portfolio
construction.
Assets or companies in which the Company can invest
The Company was established to invest primarily in quoted Qatari
equities. The Company invests in listed companies on the Qatar
Exchange in addition to companies soon to be listed. The Company
may also invest in listed companies, or pre-IPO companies, in other
GCC Countries.
Whether investments will be active or passive investments
In the ordinary course of events, the Company is not an activist
investor, although the Investment Adviser will seek to engage with
investee company management where appropriate.
Holding period for investments
In the normal course of events, the Company expects to be
fully-invested, although the Company may hold cash reserves pending
new IPOs or when it is deemed financially prudent. Although the
Company is a long term financial investor, it will actively manage
its portfolio.
Spread of investments and maximum exposure limits
The Company will invest in a portfolio of investee companies
with restrictions in place to ensure a spread of investments and to
ensure that there are maximum exposure limits in place (see
investment guidelines under Investing Restrictions).
Policy in relation to gearing and derivatives
Borrowings will be limited, as at the date on which the
borrowings are incurred, to 5% of NAV. Borrowings will include any
financing element of a swap. The Company will not make use of
hedging mechanisms.
The Company may utilise derivative instruments in pursuit of its
investment policy subject to:
-- such derivative instruments only being utilised in respect of
investments listed on the Saudi Arabian stock exchange;
-- such derivative instruments being designed to offer the
holder a return linked to the performance of a particular
underlying listed equity security;
-- a maximum underlying equity exposure limit of 15 per cent of
NAV (calculated at the time of investment); and
-- a policy of entering into derivative instruments with more
than one counterparty in relation to an investment, where possible,
to minimise counterparty risk.
Policy in relation to cross-holdings
Cross-holdings in other listed or unlisted closed-ended
investment funds that invest in Qatar or other countries in the GCC
region will be limited to 10% of NAV at any time (calculated at the
time of investment).
Investing Restrictions
The investing restrictions for the Company are as follows:
(i) Foreign Ownership Restrictions
Investments in most Qatar Exchange listed companies by persons
other than Qatari citizens have an ownership restriction, wherein
the law precludes persons other than Qatari citizens from acquiring
a certain proportion of a company's issued Share Capital. It is
possible that the Company may have problems acquiring stock if the
foreign ownership interest in one or more stocks reaches the
allocated upper limit. This may adversely impact the ability of the
Company to invest in the local Qatari market and in other GCC
markets.
(ii) Investment Guidelines
The Company has established certain investment guidelines. These
are as follows (all of which are to be calculated at the time of
investment):
-- No single investment position in a QE Index constituent may
exceed the greater of: (i) 15% of the NAV of the Company; or (ii)
125% of the constituent company's index capitalisation divided by
the index capitalisation of the QE Index, as calculated by
Bloomberg (or such other source as the Directors and Investment
Manager may agree);
-- No single investment position in a company which is not a QE
Index constituent may exceed 15% of the NAV of the Company;
-- No holding may exceed 5% of the outstanding shares in any one company; and
-- The Company may hold up to a maximum of 15% of its NAV
outside Qatar, within the GCC region, including investment in
P-Notes or swaps structured financial products for investment in
companies listed on the Saudi Arabian stock exchange.
(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 that each
identifies which 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 investment objective is to achieve capital growth.
In accordance with the annual dividend policy the Company paid a
dividend for the year ended 30 June 2015. 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.
Life of the Company
The Company currently does not have a fixed life but the Board
considers it desirable that the 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 2018, a resolution will be proposed that the Company
ceases to continue in existence. Shareholders holding at least 51%
of the ordinary 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
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 and Company financial statements of Qatar
Investment Fund plc (formerly Epicure Qatar Equity Opportunities
plc) (the "Company") for the year ended 30 June 2016.
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. The Company's investment
policy is detailed on pages 19 to 21.
Results and Dividends
The results of the Company for the year and its financial
position at the year- end are set out on pages 41 to 50 of the
financial statements.
The Directors manage the Company's affairs to achieve capital
growth and the Company has instituted an annual dividend policy.
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.
For the year ended 30 June 2015, the Directors declared a
dividend of US$4,741,915 (4.0c per share) which was approved by
Shareholders and paid by the Company in January 2016.
Directors
Details of Board members at the date of this report, together
with their biographical details, are set out on page 31.
Director independence and Directors' and other interests have
been detailed in the Directors' Remuneration Report on pages 35 and
36.
Creditor Payment Policy
It is the Company's policy to adhere to the payment terms agreed
with individual suppliers and to pay in accordance with its
contractual and other legal obligations.
Gearing Policy
Borrowings will be limited, as at the date on which the
borrowings are incurred, to 5% of NAV (or such other limit as may
be approved by the Shareholders in general meeting). The Company
will not make use of any hedging mechanisms or leveraged derivative
instruments.
There were no borrowings during the year (2015: US$ nil).
Donations
The Company has not made any political or charitable donations
during the year (2015: US$ nil).
Adequacy of the Information Supplied to the Auditors
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as each is aware, there is
no relevant audit information of which the Company's auditors are
unaware; and each Director has taken all steps that he ought to
have taken as a Director to make himself aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information
Statement of Going Concern
The Directors are satisfied that the Company and the Group have
adequate resources to continue to operate as a going concern for
the foreseeable future and have prepared the financial statements
on that basis.
Independent Auditors
KPMG Audit LLC has expressed its willingness to continue in
office in accordance with Section 12 (2) of the Companies Act
1982.
Annual General Meeting
The Annual General Meeting of the Company will be held on 17
November 2016 at the Company's registered office.
A copy of the notice of Annual General Meeting is contained
within this Annual Report. As well as the business normally
conducted at such a meeting, Shareholders will be asked to renew
the authority to allow the Company to continue with share
buy-backs.
The notice of the Annual General Meeting and the Annual Report
are also available at www.qatarinvestmentfund.com.
Corporate Governance
Full details are given in the Corporate Governance Report on
pages 24 to 30, which forms part of the Report of the
Directors.
Substantial Shareholdings
As at the date of publication of this annual report, the Company
had been notified, or the Company is aware of the following
significant holdings in its Share Capital.
Ordinary Shares
---------------------------- ----------------
Name %
---------------------------- ----------------
City of London Investment
Management Company 28.46
---------------------------- ----------------
Qatar Insurance Company
S.A.Q. 18.65
---------------------------- ----------------
Qatar Investment Authority 11.68
---------------------------- ----------------
Lazard Asset Management 8.07
---------------------------- ----------------
1607 Capital Partners
LLC 6.71
---------------------------- ----------------
Aberdeen Emerging Capital 4.82
---------------------------- ----------------
The above percentages are calculated by applying the
Shareholdings as notified to the Company or the Company's awareness
to the issued Ordinary Share Capital as at 30 June 2016.
On behalf of the Board
Nicholas Wilson
Chairman
9 September 2016
Corporate Governance Report
Compliance with Companies Acts
As an Isle of Man incorporated company, the Company's primary
obligation is to comply with the Isle of Man Companies Acts 1931 to
2004. The Board confirms that the Company is in compliance with the
relevant provisions of the Companies Acts.
Compliance with the Association of Investment Companies (AIC)
Code of Corporate Governance
The Company is committed to high standards of corporate
governance. The Board is accountable to the Company's shareholders
for good governance and this statement describes how the Company
applies the principles identified in the UK Corporate Governance
Code which is available on the Financial Reporting Council's
website: www.frc.org.uk. The Board confirms that the Company has
complied throughout the accounting period with the relevant
provisions contained within the UK Code.
The Board of the Company has considered the principles and
recommendations of the AIC 2014 Code of Corporate Governance (AIC
Code) by reference to the AIC Corporate Governance Guide for
investment Companies (AIC Guide). The AIC Code, as explained by the
AIC Guide, addresses all the principles set out in the UK Corporate
Governance Code, as well as setting out additional principles and
recommendations on issues that are of specific relevance to QIF
plc.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide
(which incorporates the UK Corporate Governance Code), will provide
better information to shareholders.
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of the UK Corporate Governance
Code, except as set out below.
The UK Corporate Governance Code includes provisions relating
to:
-- the role of the chief executive
-- executive directors' remuneration
-- the need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in
the UK Corporate Governance Code, the Board considers these
provisions are not relevant to the position of the Company, being
an externally managed investment company. In particular, all of the
Company's day-to-day management and administrative functions, with
the exception of portfolio management, risk management and service
provider performance management, are outsourced to third parties.
As a result, the Company has no executive directors, employees or
internal operations. The Company has therefore not reported further
in respect of these provisions.
Directors
The Directors are responsible for the determination of the
Company's investment policy and strategy and have overall
responsibility for the Company's activities including the review of
the investment activity and performance.
All of the Directors are non-executive. Save for Leonard
O'Brien, the Board considers each of the Directors to be
independent of, and free of any material relationship with, the
Investment Manager and Investment Adviser.
The Board of Directors delegates to the Investment Manager
through the Investment Management Agreement the responsibility for
the management of the Company's assets in GCC securities in
accordance with the Company's investment policy and for retaining
the services of the Investment Adviser. The Company has no
executives or employees.
The Articles of Association require that all Directors submit
themselves for election by Shareholders at the first opportunity
following their appointment and shall not remain in office longer
than three years since their last election or re-election without
submitting themselves for re-election.
The Board meets formally at least 4 times a year and between
these meetings there is regular contact with the Investment
Manager. Other meetings are arranged as necessary. The Board
considers that it meets regularly enough to discharge its duties
effectively. The Board ensures that at all times it conducts its
business with the interests of all Shareholders in mind and in
accord with Directors' duties. Directors receive the relevant
briefing papers in advance of Board and Board Committee meetings,
so that should they be unable to attend a meeting they are able to
provide their comments to the Chairman of the Board or Committee as
appropriate. The Board meeting papers are the key source of regular
information for the Board, the contents of which are determined by
the Board and contain sufficient information on the financial
condition of the Company. Key representatives of the Investment
Manager attend each Board meeting. All Board and Board Committee
meetings are formally minuted.
Board Composition and Succession Plan
Objectives of Plan
-- To ensure that the Board is composed of persons who
collectively are fit and proper to direct the Company's business
with prudence, integrity and professional skills
-- To define the Board Composition and Succession Policy, which
guides the size, shape and constitution of the Board and the
identification of suitable candidates for appointment to the
Board.
Methodology
The Board is conscious of the need to ensure that proper
processes are in place to deal with succession issues and the
Nomination Committee assists the Board in the Board selection
process, which involves the use of a Board skills matrix.
The matrix incorporates the following elements: finance,
accounting and operations; familiarity with the regions into which
the Company invests; diversity (gender, residency, cultural
background); Shareholder perspectives; investment management;
multijurisdictional compliance and risk management. In adopting the
matrix, the Nomination Committee acknowledges that it is an
iterative document and will be reviewed and revised periodically to
meet the Company's on-going needs.
The Nomination Committee monitors the composition of the Board
and makes recommendations to the Board about appointments to the
Board and its Committees.
Directors may be appointed by the Board, in which case they are
required to seek election at the first AGM following their
appointment and triennially thereafter. Directors who are not
regarded as independent are required to seek re-election annually.
In making an appointment the Board shall have regard to the Board
skills matrix.
A Director's formal letter of appointment sets out, amongst
other things, the following requirements:
-- bringing independent judgment to bear on issues of strategy,
performance, resources, key appointments and standards of conduct
and the importance of remaining free from any business or other
relationship that could materially interfere with independent
judgement;
-- having an understanding of the Company's affairs and its
position in the industry in which it operates;
-- keeping abreast of and complying with the legislative and
broader responsibilities of a Director of a company whose shares
are traded on the London Stock Exchange;
-- allocating sufficient time to meet the requirements of the
role, including preparation for Board meetings; and
-- disclosing to the Board as soon as possible any potential conflicts of interest.
The Board authorises the Nomination Committee to:
-- recommend to the Board, from time to time, changes that the
Committee believes to be desirable to the size and composition of
the Board;
-- recommend individuals for nomination as members of the Board;
-- review and recommend the process for the election of the
Chairman of the Board, when appropriate; and
-- review on an on-going basis succession planning for the
Chairman of the Board and make recommendations to the Board as
appropriate.
The Plan will be reviewed by the Board annually and at such
other times as circumstances may require (e.g. a major corporate
development or an unexpected resignation from the Board). The Plan
may be amended or varied in relation to individual circumstances at
the Board's discretion.
Board Committees
The Board has established the following committees to oversee
important issues of policy and maintain oversight outside the main
Board meetings:
-- Audit Committee
-- Remuneration Committee
-- Nomination Committee
-- Management Engagement Committee
Throughout the year the Chairman of each committee provided the
Board with a summary of the key issues considered at the meeting of
the committees and the minutes of the meetings were circulated to
the Board.
The committees operate within defined terms of reference. They
are authorised to engage the services of external advisers as they
deem necessary in the furtherance of their duties, at the Company's
expense.
Audit Committee
The Board has established an Audit Committee made up of at least
two members and comprises Paul Macdonald, Nicholas Wilson and Neil
Benedict. The Audit Committee is responsible for, inter alia,
ensuring that the financial performance of the Company is properly
reported on and monitored. The Audit Committee is chaired by Paul
Macdonald. The Audit Committee normally meets at least twice a year
when the Company's interim and final reports to Shareholders are to
be considered by the Board but meetings can be held more frequently
if the Audit Committee members deem it necessary or if requested by
the Company's auditors. The Audit Committee will, amongst other
things, review the annual and interim accounts, results
announcements, internal control systems and procedures, preparing a
note in respect of related party transactions and reviewing any
declarations of interest notified to the Committee by the Board
each on six monthly basis, review and make recommendations on the
appointment, resignation or dismissal of the Company's auditors and
accounting policies of the Company. The Company's auditors are
advised of the timing of the meetings to consider the annual and
interim accounts and the auditors shall be asked to attend the
audit committee meeting where the annual audited accounts are to be
considered. The Audit Committee chairman shall report formally to
the Board on its proceedings after each meeting and compile a
report to Shareholders on its activities to be included in the
Company's annual report. At least once a year, the Audit Committee
will review its performance, constitution and terms of reference to
ensure that it is operating at maximum effectiveness and recommend
any changes it considers necessary to the Board for approval.
The terms of reference for the Audit Committee are available on
the Company's website www.qatarinvestmentfund.com.
Significant Issues
During its review of the Company's financial statements for the
year ended 30 June 2016, the Audit Committee considered the
following significant issues, in particular those communicated by
the auditor during their reporting:
Completeness, Valuation, Existence and Ownership of
Investments
The valuation of investments is undertaken in accordance with
the accounting policies, disclosed in note 3.3 to the financial
statements. The audit includes independent confirmation of the
existence of all investments from the Company's custodian. All
investments are considered liquid and quoted in active markets and
have been categorised as Level 1 within the IFRS 13 fair value
hierarchy and can be verified against daily market prices. The
portfolio is reviewed and verified by the Manager on a regular
basis and management accounts including a full portfolio listing
are prepared each month and circulated to the Board. The Company
uses the services of an independent Custodian HSBC Bank Middle East
Limited to hold the assets of the Company. The investment portfolio
is reconciled regularly by the Manager and a reconciliation is also
reviewed by the Auditor.
Remuneration Committee
The Company has established a Remuneration Committee. The
Remuneration Committee is made up of at least two members from
amongst the non-executive Directors identified by the Board as
being independent. Its members are Neil Benedict (Chairman),
Nicholas Wilson and Paul Macdonald. The Remuneration Committee
normally meets at least once a year and at such other times as the
chairman of the Remuneration Committee shall require. The
Remuneration Committee reviews the performance of the Directors and
sets the scale and structure of their remuneration and the basis of
their letters of appointment with due regard to the interests of
Shareholders. In determining the remuneration of Directors, the
Remuneration Committee seeks to enable the Company to attract and
retain Directors of the highest calibre. No Director is permitted
to participate in any discussion of decisions concerning their own
remuneration. The Remuneration Committee reviews at least once a
year its own performance, constitutions and terms of reference to
ensure it is operating at maximum effectiveness and recommend any
changes it considers necessary to the Board for approval.
The terms of reference for the Remuneration Committee are
available on the Company's website www.qatarinvestmentfund.com
Nomination Committee
The Company has established a Nomination Committee which shall
be made up of at least two members and which shall comprise all
Independent Directors. The Nomination Committee comprises Nicholas
Wilson (Chairman), Neil Benedict and Paul Macdonald. The Nomination
Committee meets at least once a year prior to the first quarterly
Board meeting and at such other times as the Chairman of the
committee shall require. The Nomination Committee is responsible
for ensuring that the Board members have the range of skills and
qualities to meet its principal responsibilities in a way which
ensures that the interests of Shareholders are protected and
promoted and regularly review the structure, size and composition
of the Board. The Nomination Committee shall, at least once a year,
review its own performance, constitution and terms of reference to
ensure that it is operating at maximum effectiveness and recommend
any changes it considers necessary to the Board for approval.
The Nomination Committee will assess potential candidates on
merit against a range of criteria including experience, knowledge,
professional skills and personal qualities as well as independence,
if this is required for the role. Candidates' ability to commit
sufficient time to the business of the Company is also key,
particularly in respect of the appointment of the Chairman. The
Chairman of the Nomination Committee is primarily responsible for
interviewing suitable candidates and a recommendation will be made
to the Board for final approval.
Management Engagement Committee
The Company has established a Management Engagement Committee
which is made up of at least two members and which shall comprise
independent non-executive Directors. The Management Engagement
Committee members are Neil Benedict (Chairman), Paul Macdonald and
Nicholas Wilson. The Management Engagement Committee will meet at
least quarterly and is responsible for reviewing the performance of
the Investment Manager and other service providers, to ensure that
the Company's management contract is competitive and reasonable for
the Shareholders and to review
and make recommendations to the Board on any proposed amendment
to or material breach of the management contract and contracts with
other service providers.
Board Attendance
The number of formal meetings during the year of the Board, and
its Committees, and the attendance of the individual Directors at
those meetings, is shown in the following table:
Board Audit Remuneration Nomination Management
Committee Committee Committee Engagement
Committee
------------------ ------ ----------- ------------------------- ----------- ------------
Total number
of meetings
in year 9(9) 6(6) 1(1) 4(4) 3(3)
------------------ ------ ----------- ------------------------- ----------- ------------
Meetings Attended (entitled to attend)
------------------ -------------------------------------------------------------------------
Nicholas
Wilson
(Chairman
and Chairman
of Nomination
Committee) 9 (9) 6 (6) 1 (1) 4 (4) 3 (3)
------------------ ------ ----------- ------------------------- ----------- ------------
Neil Benedict
(Chairman
of Remuneration
Committee
and Chairman
of Management
Engagement
Committee) 9 (9) 6 (6) 1 (1) 4 (4) 3 (3)
------------------ ------ ----------- ------------------------- ----------- ------------
Leonard O'Brien 9 (9) 0 (0)* 0 (0)* 0 (0)* 0 (0)*
------------------ ------ ----------- ------------------------- ----------- ------------
Paul Macdonald
(Chairman
of Audit
Committee) 9 (9) 6 (6) 1 (1) 4 (4) 3 (3)
------------------ ------ ----------- ------------------------- ----------- ------------
*Not a member of the committee.
The Annual General Meeting was held on 12 November 2015.
Internal Control
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. Its review takes place
at least once a year. Such a system is designed to manage rather
than eliminate the risk of failure to achieve business objectives
and can only provide reasonable and not absolute assurance against
material mis-statement or loss. The Board also determines the
nature and extent of any risks it is willing to take in order to
achieve its strategic objectives.
The Board has contractually delegated to external agencies,
including the Managers, the management of the investment portfolio,
the custodial services (which include the safeguarding of the
assets), the registration services and the day-to-day accounting
and Company Secretarial requirements. Each of these contracts was
entered into after full and proper consideration by the Board of
the quality and cost of services offered including the control
systems in operation in so far as they relate to the affairs of the
Company.
The Board, assisted by the Investment Manager and Investment
Adviser, has undertaken regular risk and controls assessments. The
business risks have been analysed and recorded in a risk and
internal controls report which is regularly reviewed. The Board has
reviewed the need for an internal audit function. The Board has
decided that the systems and procedures employed by the Managers,
including its internal audit function and the work carried out by
the Company's external Auditor, provide sufficient assurance that a
sound system of internal control, which safeguards Shareholders'
investments and the Company's assets, is maintained. An internal
audit function, specific to the Company, is therefore considered
unnecessary.
The Board confirms that there is an on-going process for
identifying, evaluating and managing the Company's principal
business and operational risks that have been in place for the year
ended 30 June 2016 and up to the date of approval of the annual
report and financial statements.
Accountability and Relationship with the Investment Manager, the
Custodian and the Administrator
The Statement of Directors' Responsibilities is set out on page
32.
The Board has delegated contractually to external third parties,
including the Investment Manager, the Investment Adviser, the
Custodian and the Administrator, the management of the investment
portfolio, the custodial services (which include the safeguarding
of the assets), the day to day accounting, company secretarial and
administration requirements. Each of these contracts was entered
into after full and proper consideration by the Board of the
quality and cost of the services provided, including the control
systems in operation in so far as they relate to the affairs of the
Company.
The Investment Manager, the Investment Adviser and the
Administrator ensure that all Directors receive, in a timely
manner, all relevant management, regulatory and financial
information. Representatives of the Investment Manager and the
Administrator attend each Board meeting enabling the Directors to
probe further on matters of concern.
Continued Appointment of the Investment Manager
The Board considers the arrangements for the provision of
investment management and other services to the Company on an
on-going basis. The Board reviews investment performance at each
Board meeting and a formal review of the Investment Manager (and
Investment Adviser) is conducted annually. As a result of their
annual review, NAV performance has been found to be satisfactory
and it is the opinion of the Directors that the continued
appointment of the current Investment Manager (and Investment
Adviser) on the terms agreed is in the interests of the Company's
Shareholders as a whole.
Relations with Shareholders
The Chairman is responsible for ensuring that all Directors are
made aware of Shareholders' concerns. The Shareholder profile of
the Company is regularly monitored and the Board liaises with the
Investment Manager to canvass Shareholder opinion and communicate
views to Shareholders. The Company is concerned to provide the
maximum opportunity for dialogue between the Company and
Shareholders. It is believed that Shareholders have proper access
to the Investment Manager at any time and to the Board if they so
wish. All Shareholders are encouraged to attend annual general
meetings. Together with the Investment Manager and Investment
Adviser, regular investor presentations are held to promote a wider
following for the Company.
Viability statement
The Board makes an assessment of the longer term prospects of
the Company beyond the timeframe envisaged under the going concern
basis of accounting having regard to the Company's current position
and the principal risks it faces.
The Company is a long term investment vehicle and the directors,
therefore, believe that it is appropriate to assess its viability
over a long term horizon. The Board considers that assessing the
Company's prospects over a period of five years is appropriate
given the nature of the Company and the inherent uncertainties of
looking out over a longer time period. The directors believe that a
five year period appropriately reflects the long term strategy of
the Company and over which, in the absence of any adverse change to
the regulatory environment, they do not expect there to be any
significant change to the current principal risks and to the
adequacy of the mitigating controls in place.
On behalf of the Board
Nicholas Wilson
Chairman
9 September 2016
Board of Directors
Nicholas Wilson (Non-Executive Chairman)
Nicholas Wilson has over 40 years of experience in hedge funds,
derivatives and global asset management. He has run offshore branch
operations for Mees Pierson Derivatives Limited, ADM Investor
Services International Limited and several other London based
financial services companies. He is a director of EPE Special
Opportunities PLC and until recently was chairman of Alternative
Investment Strategies Limited. He is a resident of the Isle of
Man.
Paul Macdonald (Non-Executive Director)
Paul Macdonald qualified as a chartered accountant in 1979. He
worked for Pilkington plc for sixteen years, the last seven of
these in Germany. In Germany he was Managing Director for
Pilkington Deutschland GmbH (holding company) and Managing Director
of both Flachglas AG (glass manufacturer) and Dahlbusch AG
(property and holding company). For the last fourteen years Paul
has been active in the private equity market and has been
successful in developing a number of companies covering a number of
industries including Sirona Beteiligungs GmbH (Germany), a
leveraged buy-out from Siemens. He is currently the Geschäftsführer
for Helvetica Deutschland GmbH and a Director of Helvetica Services
GmbH and Helvetica Construction GmbH. Paul is a Non-Executive
Director of PME African Infrastructure Opportunities plc.
Leonard O'Brien (Non-Executive Director)
Leonard O'Brien is Managing Director of the Salamander Fiduciary
Services Group, which consists of Salamander Associates Limited and
its two wholly owned subsidiaries. Len has had many years of
experience in the fiduciary services industry including the Silex
Trust Group, the Stonehage Financial Services Group and Barclays
Bank. During this time he has served on the boards of trust
companies in the British Virgin Islands, Jersey and Cayman Islands
and has acted as a Membre de Direction of Barclays Bank (Suisse)
SA, Geneva. Len qualified as a Chartered Accountant with KPMG in
1996. Len is also a Director of the Investment Manager.
Neil Benedict (Non-Executive Director)
Neil Benedict is based in the USA with over thirty years'
experience of financial markets. He was formerly a Managing
Director at Salomon Brothers, where he was Head of International
Capital Markets, and, prior to that, the founder and head of the
worldwide Currency Swaps group. Neil was also a Managing Director
at Dillon Read and helped establish their Tokyo office. He is
currently a Managing Director of Intelligent Edge Advisors, a New
York advisory firm. Neil is a fellow member of the Institute of
Chartered Accountants in England and Wales.
Statement of Directors' responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the 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 and
Parent Company 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.
Under applicable law and regulations, the Directors are also
responsible for preparing the Directors' Report, the Corporate
Governance Report and the Directors' Remuneration Report that
comply with that law and those regulations.
The Directors confirm that they have complied with the above
requirements in preparing the Annual Report and financial
statements.
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.
DTR Compliance statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with
International Financial Reporting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole;
-- that in the opinion of the Directors, the Annual Report and
Accounts taken as a whole, is fair, balanced and understandable and
it provides the information necessary to assess the Company's
performance, business model and strategy; and
-- the Business Review, Report of the Investment Manager and
Investment Adviser and the Report of the Directors include a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
On behalf of the Board
Nicholas Wilson
Chairman
9 September 2016
Audit Committee Report
An Audit Committee has been established in compliance with the
FSA's Disclosure and Transparency Rule 7.1 and the UK Corporate
Governance Code consisting of independent Directors. Its authority
and duties are clearly defined within its written terms of
reference. Paul Macdonald is Chairman of the Audit Committee, which
also comprises Mr Nicholas Wilson and Mr Neil Benedict.
The Committee meets at least two times a year.
.
The Committee's responsibilities, which were discharged during
the year, include:
-- monitoring and reviewing the integrity of the interim and
annual financial statements and the internal financial
controls;
-- reviewing the appropriateness of the Company's accounting policies;
-- making recommendations to the Board in relation to the
appointment of the external auditors and approving their
remuneration and terms of their engagement;
-- reviewing the external Auditor's plan for the audit of the Company's financial statements;
-- developing and implementing policy on the engagement of the
external auditors to supply non-audit services;
-- reviewing and monitoring the independence, objectivity and
effectiveness of the external auditors;
-- reviewing the arrangements in place within the Administrator
and Investment Manager/Adviser whereby their staff may, in
confidence, raise concerns about possible improprieties in matters
of financial reporting or other matters insofar as they may affect
the Company;
-- performing the annual review of the effectiveness of the
internal control systems of the Company;
-- reviewing the terms of the Investment Management Agreement;
-- considering annually whether there is a need for the Company
to have its own internal audit function; and
-- review the relationship with and the performance of the
Custodian, the Administrator and the Registrar.
The Audit Committee does not award any non-audit work. The full
Board has to approve any non-audit work and this includes
confirmation that in all such work auditor objectivity and
independence is safeguarded.
Owing to the nature of the fund's business, with all major
functions being outsourced and the absence of employees, the Audit
Committee do not feel it is necessary for the Company to have its
own internal audit function. This situation is re-evaluated
annually.
KPMG Audit LLC was re-appointed as auditor at the last AGM on 12
November 2015. The Audit Committee considered the experience and
tenure of the audit partner and staff and the nature and level of
services provided. The Audit Committee receives confirmation from
the auditor that they have complied with the relevant UK
professional and regulatory requirements on independence. The
Company's Audit Committee meets representatives of the
Administrator, who report as to the proper conduct of the business
in accordance with the regulatory environment in which the Company,
the Administrator, and the Investment Manager/Adviser operate. The
Company's external auditor also attends this Audit Committee
meeting at its request and reports if the Company has not kept
proper accounting records, or if it has not received all the
information and explanations required for its audit.
The Audit Committee also monitors the risks to which the Company
is exposed and makes recommendations as to the mitigation of these
risks. This task is facilitated by using an extensive risk matrix
that enables the committee to make a quantitative analysis of the
individual risks and to highlight those areas where risk is high or
increasing.
This report was reviewed and approved by the Board on 9
September 2016.
Paul Macdonald
Chairman of the Audit Committee
9 September 2016
Management Engagement Committee Report
A Management Engagement Committee has been established in
accordance with good corporate governance. Neil Benedict is
chairman of the committee, which also comprises Paul Macdonald and
Nicholas Wilson.
The function of the Management Engagement Committee is to
monitor the performance of all the Company's service providers and
in the particular the performance of the Investment
Manager/Investment Adviser.
The performance of the Investment Manager/Investment Adviser is
formally reviewed annually at the end of the Company's financial
year. The Management Engagement Committee meets quarterly prior to
the quarterly Board meetings and the chairman of the Management
Engagement Committee monitors the performance periodically during
the intervening periods.
As regards the Investment Manager/Investment Adviser, the
Committee:
-- monitors and evaluates the investment performance both in
absolute terms and also by reference to peer group analysis
prepared by the Investment Manager/Adviser and by the Company's
broker;
-- reviews the performance fee structure to ensure that it does
not encourage excessive risk and that it rewards demonstrable
superior performance;
-- investigates any breaches of agreed investment limits and any
deviation from the agreed investment policy and strategy;
-- reviews the standard of any other services provided by the Investment Manager;
-- evaluates the level and effectiveness of any marketing
support provided by the Investment Manager, including but not
limited to, their input into quarterly reports, handling investor
relations and website monitoring and development;
-- assesses the level of fees charged by the Investment Manager
and how these fees compare with those charged to peer group
companies;
-- compares the notice period on the Investment Management Agreement with industry norms;
-- considers any other issues on the appointment of the Investment Manager.
As regards the other service providers to the Company, the
Committee:
-- monitors the terms on which they are retained and compares them to market rates;
-- examines the effectiveness of the services provided;
-- makes recommendations to the Board where changes are warranted.
At its most recent meeting, the Management Engagement Committee
concluded that the performance of the Investment Manager/Investment
Adviser had been satisfactory. The Investment Manager had adhered
to the investment policy and policy limits.
The Committee was satisfied with the current performance of the
Company's other service providers.
Neil Benedict
Chairman of the Management Engagement Committee
9 September 2016
Directors' Remuneration Report
This report meets the relevant rules of the Listing Rules of the
Financial Services Authority and describes how the Board has
applied the principles relating to Directors' remuneration. An
ordinary resolution to receive and approve this report will be put
to the Shareholders at the forthcoming Annual General Meeting.
Role of the Remuneration Committee
The role and make-up of the Remuneration Committee is more fully
discussed on page 27.
The committee held two formal meetings during the year, during
which it addressed all the matters under its remit.
Consideration by the Directors of Matters relating to the
Directors' remuneration
As the Board is comprised entirely of non-executive Directors
the Board as a whole consider the Directors' remuneration but it
has appointed its Remuneration Committee to consider matters
relating thereto.
Remuneration Policy
The Company's Articles of Association limit the basic fees
payable to the Directors to GBP200,000 per annum in aggregate.
Subject to this overall limit it is the Company's policy that the
fees payable to the Directors should reflect the time spent by the
Board on the Company's affairs and the responsibilities borne by
the Directors and should be sufficient to enable candidates of high
calibre to be recruited. The Directors are also entitled to receive
reimbursement of any expenses incurred in relation to their
appointment.
The policy is for the Chairman of the Board and Chairman of the
Audit Committee to be paid a higher fee than the other Directors in
recognition of their more onerous roles and more time spent.
In the year under review the Directors' fees were paid at the
following annual rates: the Chairman GBP47,500 plus GBP10,000 with
respect to the work involved in the share buy-back programme, the
Chairman of the Audit Committee GBP32,500, the other Directors
GBP30,000.
Directors' and officers' liability insurance cover is in place
in respect of the Directors.
Reappointment
It is the Board's policy that non-independent Directors stand
for re-election every year and independent Directors stand for
re-election every three years.
Directors' fees
The fees expensed (including additional payments) by the Company
in respect of each of the Directors who served during the year, and
in the previous year, were as follows:
30 June 2016 30 June 2015
GBP GBP
---------------------------------------------------------------------------------------- ------------- -------------
Nicholas Wilson (Chairman) 57,500 57,500
Neil Benedict (Chairman of Remuneration Committee and Management Engagement Committee) 30,000 30,000
Leonard O'Brien 30,000 30,000
Paul Macdonald (Chairman of Audit Committee) 32,500 32,500
---------------------------------------------------------------------------------------- ------------- -------------
150,000 150,000
---------------------------------------------------------------------------------------- ------------- -------------
US$ charge reflected in the financial statements 222,014 239,169
---------------------------------------------------------------------------------------- ------------- -------------
Expenses totalling US$116,385 (2015: US$103,184) were incurred
by the Directors and reimbursed during the year.
No other remuneration or compensation was paid or payable by the
Company during the period to any of the Directors.
Director independence
Except for Leonard O'Brien, the Board considers each of the
Directors to be independent of, and free of any material
relationship with, the Investment Manager and Investment
Adviser.
Directors' and Other Interests
Leonard O'Brien is a Director of 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.
Director holdings in Company:
30 June 30 June
2016 2015
---------- -------- --------
Director Shares Shares
---------- -------- --------
Leonard
O'Brien 36,182 42,071
---------- -------- --------
Nicholas
Wilson 43,000 50,000
---------- -------- --------
Subsequent to 30 June 2016, Nicholas Wilson acquired a further
7,000 shares.
For and on behalf of the Board
Neil Benedict
Chairman of the Remuneration Committee
9 September 2016
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Qatar Investment Fund plc
Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of Qatar Investment
Fund plc for the year ended 30 June 2016 which comprise the
Consolidated and Parent Company Income Statements, the Consolidated
and Parent Company Statements of Comprehensive Income, the
Consolidated and Parent Company Balance Sheets, the Consolidated
and Parent Company Statements of Changes in Equity and the
Consolidated and Parent Company Statements of Cash Flows and the
related notes. In our opinion the financial statements:
-- give a true and fair view of the state of the Group's and
Parent Company's affairs as at 30 June 2016 and of the Group's and
Parent Company's loss for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards; and
-- have been properly prepared in accordance with the provisions
of the Companies Acts 1931 to 2004.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial
statements, the risk of material misstatement that had the greatest
effect on our audit was as follows:
Carrying amount of quoted equity investments
Refer to page 27 (Significant Issues identified by the Audit
Committee), note 3.3 (accounting policy for financial assets at
fair value through profit or loss) and note 15 (financial risk
disclosures relating to financial instruments).
-- The risk: The Group's quoted equity investment portfolio
makes up 98.7% of total assets (by value) and is considered to be
the key driver of the Group's capital and revenue performance. We
do not consider these investments to be at high risk of significant
misstatement, or to be subject to a significant level of judgment,
because they comprise liquid, quoted investments. However, due to
their materiality in the context of the financial statements as a
whole, they are considered to be the area which had the greatest
effect on our overall audit strategy and allocation of resources in
planning and completing our audit.
-- Our response: Our procedures over the completeness,
valuation, ownership and existence of the Group's quoted equity
investment portfolio included, but were not limited to:
-- documenting and assessing the processes in place to record
investment transactions and to value the portfolio;
-- agreeing the valuation of 100% of portfolio investments to
independent externally quoted prices; and
-- agreeing 100% of portfolio investment holdings to
independently received third party confirmations from the
custodian.
3. Our application of materiality and an overview of the scope of our audit
Materiality is a term used to describe the acceptable level of
precision in financial statements. Auditing standards describe a
misstatement or an omission as 'material' if it could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements. We identify a monetary amount as
'materiality for the
financial statements as a whole' based on this criteria and
apply the concept of materiality in planning and performing the
audit, and in evaluating the effect of identified misstatements on
the audit and of uncorrected misstatements, if any, on the
financial statements and in forming our opinion on them.
The materiality for the financial statements as a whole was set
at US$1,400,000. This has been determined with reference to a
benchmark of Group total assets (of which it represents 1%). Total
assets, which is primarily composed of the Group's investment
portfolio, is considered to be the key driver of the Group's
capital and revenue performance and, as such, we consider it to be
one of the principal considerations for members of the Company in
assessing the financial performance of the Group.
We agreed with the Audit Committee to report to it all corrected
and uncorrected misstatements we identified through our audit with
a value in excess of US$70,000, in addition to other audit
misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality level
specified above and was all performed at the head office of the
administrator, Galileo Fund Services Limited, in the Isle of
Man.
4. We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
-- the corporate governance report on pages 24 to 30 concerning
the principal risks, their management, and, based on that, the
directors' assessment and expectations of the group's continuing in
operation; or
-- the statement of Going Concern on page 23 and the disclosures
in note 3.1 concerning the use of the going concern basis of
accounting.
5. We have nothing to report in respect of the matters on which
we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a
material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise
misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our audit and the directors' statement
that they consider that the annual report and financial statements
taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
performance, business model and strategy; or
-- the Audit Committee Report does not appropriately address
matters communicated by us to the Audit Committee.
Under the Companies Acts 1931 to 2004 we are required to report
to you if, in our opinion:
-- proper books of account have not been kept by the Parent
Company and proper returns adequate for our audit have not been
received from branches not visited by us; or
-- the Parent Company's balance sheet and income statement are
not in agreement with the books of account and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
-- the Directors' statements set out on pages 23 and 29 in
relation to going concern and longer term viability; and
-- the part of the Corporate Governance Report on pages 24 to 30
relating to the Company's compliance with the nine provisions of
the 2010 UK Corporate Governance Code specified for our review.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 32, the Directors are responsible for the
preparation of financial statements that give a true and fair view.
Our responsibility is to audit, and express an opinion on, the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of an audit of financial statements performed in
accordance with ISAs (UK and Ireland)
An audit in accordance with ISAs (UK and Ireland) involves
obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that
the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Group's and
Company's circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation of
the financial statements. In addition we read all the financial and
non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we consider
the implications for our report.
The risks of material misstatement detailed in the section of
our report titled "Our assessment of risks of material
misstatement", are those risks that we have deemed, in our
professional judgement, had the greatest effect on: the overall
audit strategy; the allocation of resources in our audit; and
directing the efforts of the engagement team. Our audit procedures
relating to these risks were designed in the context of our audit
of the financial statements as a whole. Our opinion on the
financial statements is not modified with respect to any of these
risks, and we do not express an opinion on these individual
risks.
Materiality is a term used to describe the acceptable level of
precision in financial statements. We identify a monetary amount of
'materiality for the financial statements as a whole' based on our
judgement as to the quantitative amount of a misstatement or an
omission that could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements. The concept of materiality is applied both in planning
and performing the audit, and in evaluating the effect of
identified misstatements on the audit and of uncorrected
misstatements, if any, on the financial statements and in forming
the opinion in our report.
When planning and performing the audit, materiality is used in
evaluating the risk of material misstatement for each financial
statement caption, and therefore the extent and persuasiveness of
audit evidence required by us. In turn, materiality will also
define the level of precision applied to individual audit
procedures.
Materiality is also used in the calculation of the quantitative
level below which individual misstatements are considered to be
clearly trivial and do not need to be reported to those charged
with governance or corrected. If, in the specific circumstances of
the entity, there is one or more particular classes of transaction,
account balances or disclosures for which misstatements of lesser
amounts than materiality for the financial statements as a whole
could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements, we also
determine the materiality level or levels to be applied to those
particular classes of transaction, account balances or
disclosures.
When evaluating the effect of identified misstatements on the
audit, and of uncorrected misstatements on the financial
statements, we request that misstatements are corrected and then
apply judgement in identifying whether an uncorrected
misstatement or omission is material. To do so we make reference
to the monetary amount of 'materiality for the financial statements
as a whole' determined when planning the audit. The materiality
determined when planning the audit does not necessarily establish
an amount below which uncorrected misstatements, individually or in
the aggregate, will always be evaluated as immaterial. We also
consider the impact of misstatements on individual account balances
or classes of transaction.
Scope of an audit of financial statements performed in
accordance with ISAs (UK and Ireland)
Furthermore, the qualitative circumstances related to some
misstatements may cause us to evaluate them as material even if
they are below the relevant quantitative materiality level.
Similarly, the circumstance related to some misstatements (for
instance those relating to classification or presentation) may
cause us to evaluate them as not material to the financial
statements as a whole even if they are above the relevant
quantitative materiality level.
Whilst an audit conducted in accordance with ISAs (UK and
Ireland) is designed to provide reasonable assurance of identifying
material misstatements or omissions it is not guaranteed to do so.
Rather the auditor plans the audit to determine the extent of
testing needed to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the financial
statements as a whole. This testing requires us to conduct
significant audit work on a broad range of assets, liabilities,
income and expense as well as devoting significant time of the most
experienced members of the audit team, in particular the engagement
partner responsible for the audit, to subjective areas of
accounting and reporting.
The purpose of this report and restrictions on its use by
persons other than the Company's members as a body
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.
Simon Nicholas
Responsible Individual
For and on behalf of KPMG Audit LLC
Statutory Auditor
9 September 2016
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
Consolidated Income Statement
Note Year ended Year ended
30 June 2016 30 June 2015
US$'000 US$'000
---------------------------- ----- -------------- --------------
Income
Dividend income
on quoted equity
investments 5,551 10,054
Realised (loss)/gain
on sale of financial
assets at fair value
through profit or
loss (4,268) 47,458
Net changes in fair
value on financial
assets at fair value
through profit or
loss (36,278) (31,408)
Commission rebate
income on quoted
equity investments 7 - 282
Total net (expense)/income (34,995) 26,386
---------------------------- ----- -------------- --------------
Expenses
Investment Manager's
fees 8 1,722 2,409
Performance fees 8 - -
Audit fees 34 46
Other expenses 8 1,196 1,281
Total operating
expenses 2,952 3,736
---------------------------- ----- -------------- --------------
(Loss)/profit before
tax (37,947) 22,650
Income tax expense 14 - -
---------------------------- ----- -------------- --------------
(Loss)/profit for
the year (37,947) 22,650
---------------------------- ----- -------------- --------------
Basic (loss)/earnings
per share (cents) 12 (30.03) 15.31
---------------------------- ----- -------------- --------------
Diluted (loss)/earnings
per share (cents) 12 (30.03) 15.31
---------------------------- ----- -------------- --------------
The Directors consider that all results derive from continuing
activities.
Consolidated Statement of Comprehensive Income
Year ended 30 June 2016 Year ended 30 June 2015
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
(Loss)/profit for the year (37,947) 22,650
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences (33) (82)
---------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to
profit or loss (33) (82)
---------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive expense for the year (net of tax) (33) (82)
---------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive (loss)/profit for the year (37,980) 22,568
---------------------------------------------------------------- ------------------------ ------------------------
Company Income Statement
Note Year ended Year ended
30 June 2016 30 June 2015
US$'000 US$'000
---------------------------- ----- -------------- --------------
Income
Net change in investment
in and amounts due
from subsidiary (40,372) 19,182
Intercompany loan
interest income 3,551 4,502
Total net (expense)/income (36,821) 23,684
---------------------------- ----- -------------- --------------
Expenses
Audit fees 34 46
Other expenses 8 1,125 1,070
Total operating expenses 1,159 1,116
---------------------------- ----- -------------- --------------
(Loss)/profit before
tax (37,980) 22,568
Income tax expense - -
---------------------------- ----- -------------- --------------
(Loss)/profit for
the year (37,980) 22,568
---------------------------- ----- -------------- --------------
Company Statement of Comprehensive Income
Year ended 30 June 2016 Year ended 30 June 2015
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
(Loss)/profit for the year (37,980) 22,568
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences - -
--------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to - -
profit or loss
--------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive income for the year (net of tax) - -
--------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive (loss)/profit for the year (37,980) 22,568
---------------------------------------------------------------- ------------------------ ------------------------
Consolidated Balance Sheet
Note At 30 June At 30 June
2016 2015
US$'000 US$'000
--------------------------- ----- ----------- -----------
Current Assets
Financial assets
at fair value through
profit or loss 6(a) 141,242 206,552
Other receivables
and prepayments 346 956
Cash and cash equivalents 9 1,447 5,956
--------------------------- ----- ----------- -----------
Total current assets 143,035 213,464
=========================== ===== =========== ===========
Equity
Issued share capital 10 1,194 1,396
Retained earnings 140,081 210,425
Other reserves 11 1,068 899
----------- -----------
Total equity 142,343 212,720
--------------------------- ----- ----------- -----------
Current liabilities
Other payables and
accrued expenses 13 692 744
--------------------------- ----- ----------- -----------
Total current liabilities 692 744
--------------------------- ----- ----------- -----------
Total equity and
liabilities 143,035 213,464
=========================== ===== =========== ===========
The financial statements were approved by the Directors on 9
September 2016 and signed on their behalf by:
Paul Macdonald Leonard O'Brien
Director Director
Company Balance Sheet
Note At 30 June At 30 June
2016 2015
US$'000 US$'000
--------------------------- ----- ----------- -----------
Current assets
Due from subsidiary 6(b) 141,041 211,063
Other receivables
and prepayments 1,002 542
Cash and cash equivalents 9 398 1,228
--------------------------- ----- ----------- -----------
Total current assets 142,441 212,833
=========================== ===== =========== ===========
Equity
Issued share capital 10 1,194 1,396
Reserves 141,149 211,324
----------- -----------
Total equity 142,343 212,720
--------------------------- ----- ----------- -----------
Current liabilities
Other payables and
accrued expenses 13 98 113
--------------------------- ----- ----------- -----------
Total current liabilities 98 113
--------------------------- ----- ----------- -----------
Total equity and
liabilities 142,441 212,833
=========================== ===== =========== ===========
The financial statements were approved by the Directors on 9
September 2016 and signed on their behalf by:
Paul Macdonald Leonard O'Brien
Director Director
Consolidated Statement of Changes in Equity
Share Capital Distributable Retained Earnings Other reserves Total
(note 10) Reserves (note 11) (note 11)
(note 11)
US$'000 US$'000 US$'000 US$'000 US$'000
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Balance at 1 July 2014 1,589 155,847 61,091 788 219,315
Total comprehensive income for
the year
Profit for the year - - 22,650 - 22,650
Other comprehensive income
Foreign exchange translation
differences - - - (82) (82)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Total other comprehensive expense - - - (82) (82)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Total comprehensive income for
the year - - 22,650 (82) 22,568
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Contributions by and
distributions to owners
Dividends paid - - (4,875) - (4,875)
Shares repurchased to be held in
treasury - (1,169) - - (1,169)
Shares subject to tender offer (155) (22,998) - 155 (22,998)
Tender offer expenses - (121) - - (121)
Shares in treasury cancelled (38) - - 38 -
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Total contributions by and
distributions to owners (193) (24,288) (4,875) 193 (29,163)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Balance at 30 June 2015 1,396 131,559 78,866 899 212,720
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Share Capital Distributable Retained Earnings Other reserves Total
Reserves
US$'000 US$'000 US$'000 US$'000 US$'000
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Balance at 1 July 2015 1,396 131,559 78,866 899 212,720
Total comprehensive income for
the year
Loss for the year - - (37,947) - (37,947)
Other comprehensive income
Foreign exchange translation
differences - - - (33) (33)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Total other comprehensive expense - - - (33) (33)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Total comprehensive expense for
the year - - (37,947) (33) (37,980)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Contributions by and
distributions to owners
Dividends paid - - (4,742) - (4,742)
Shares repurchased to be held in
treasury - (2,399) - - (2,399)
Shares subject to tender offer (193) (25,141) - 193 (25,141)
Tender offer expenses - (115) - - (115)
Shares in treasury cancelled (9) - - 9 -
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Total contributions by and
distributions to owners (202) (27,655) (4,742) 202 (32,397)
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Balance at 30 June 2016 1,194 103,904 36,177 1,068 142,343
---------------------------------- -------------- -------------- ------------------ --------------- ---------
Company Statement of Changes in Equity
Share Capital Reserves Total
US$'000 US$'000 US$'000
---------------------------------------------------- -------------- --------- ---------
Balance at 1 July 2014 1,589 217,726 219,315
Total comprehensive income for the year
Profit for the year - 22,568 22,568
Total comprehensive income for the year - 22,568 22,568
---------------------------------------------------- -------------- --------- ---------
Contributions by and distributions to owners
Dividends paid - (4,875) (4,875)
Shares repurchased to be held in treasury - (1,169) (1,169)
Shares subject to tender offer (155) (22,843) (22,998)
Tender offer expenses (121) (121)
Shares in treasury cancelled (38) 38 -
---------------------------------------------------- -------------- --------- ---------
Total contributions by and distributions to owners (193) (28,970) (29,163)
---------------------------------------------------- -------------- --------- ---------
Balance at 30 June 2015 1,396 211,324 212,720
---------------------------------------------------- -------------- --------- ---------
Share Capital Reserves Total
US$'000 US$'000 US$'000
---------------------------------------------------- -------------- --------- ---------
Balance at 1 July 2015 1,396 211,324 212,720
Total comprehensive income for the year
Loss for the year - (37,980) (37,980)
Total comprehensive expense for the year - (37,980) (37,980)
---------------------------------------------------- -------------- --------- ---------
Contributions by and distributions to owners
Dividends paid - (4,742) (4,742)
Shares repurchased to be held in treasury - (2,399) (2,399)
Shares subject to tender offer (193) (24,948) (25,141)
Tender offer expenses - (115) (115)
Shares in treasury cancelled (9) 9 -
---------------------------------------------------- -------------- --------- ---------
Total contributions by and distributions to owners (202) (32,195) (32,397)
---------------------------------------------------- -------------- --------- ---------
Balance at 30 June 2016 1,194 141,149 142,343
---------------------------------------------------- -------------- --------- ---------
Consolidated Statement of Cash Flows
Note Year ended Year ended
30 June 2016 30 June 2015
US$'000 US$'000
---------------------------- ----- -------------- --------------
Cash flows from
operating activities
Purchase of investments (105,650) (152,247)
Proceeds from sale
of investments 131,172 163,590
Dividends received 5,551 10,054
Operating expenses
paid (3,125) (3,841)
Commission rebate - 282
---------------------------- ----- -------------- --------------
Net cash generated
from operating activities 27,948 17,838
---------------------------- ----- -------------- --------------
Financing activities
Dividends paid (4,742) (4,875)
Cash used in tender
offer (25,141) (22,998)
Tender offer expenses (115) (121)
Cash used in share
repurchases (2,399) (1,169)
Net cash used in
financing activities (32,397) (29,163)
---------------------------- ----- -------------- --------------
Net decrease in
cash and cash equivalents (4,449) (11,325)
Effects of exchange
rate changes on
cash and cash equivalents (60) (14)
Cash and cash equivalents
at beginning of
the year 5,956 17,295
---------------------------- ----- -------------- --------------
Cash and cash equivalents
at end of the year 9 1,447 5,956
---------------------------- ----- -------------- --------------
Company Statement of Cash Flows
Note Year ended Year ended
30 June 2016 30 June 2015
US$'000 US$'000
---------------------------- ------ -------------- --------------
Cash flows from
operating activities
Due from subsidiary 32,605 31,145
Operating expenses
paid (1,038) (1,116)
Net cash generated
from operating activities 31,567 30,029
------------------------------------ -------------- --------------
Financing activities
Dividends paid (4,742) (4,875)
Cash used in tender
offer (25,141) (22,998)
Tender offer expenses (115) (121)
Cash used in share
repurchases (2,399) (1,169)
Net cash used in
financing activities (32,397) (29,163)
------------------------------------ -------------- --------------
Net (decrease)/increase
in cash and cash
equivalents (830) 866
Effects of exchange
rate changes on
cash and cash equivalents - (4)
Cash and cash equivalents
at beginning of
the year 1,228 366
------------------------------------ -------------- --------------
Cash and cash equivalents
at end of the year 398 1,228
------------------------------------ -------------- --------------
Notes to the Consolidated Financial Statements
1 The Company
Qatar Investment Fund plc (formerly Epicure Qatar Equity
Opportunities plc) (the "Company") was incorporated and registered
in the Isle of Man under the Isle of Man Companies Acts 1931 to
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 warrants expired on
16 November 2012.
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.
The shares of the Company were admitted to trading on the Main
Market of the London Stock Exchange on 13 May 2011.
In the year ended 30 June 2016, the Company purchased 2,102,373
(2015: 890,509) of its Ordinary Shares for a total value of
US$2,339,545 (2015:US$1,168,628) to be held in treasury. 890,509
shares had been repurchased in the year ended 30 June 2015 for
treasury but had been held for over a year and were therefore
cancelled in the current financial year. The buy-backs are effected
through retained reserves.
On 7 December 2015 the Company completed a tender offer at a
price of US$1.3004 per share (previous offer US$1.4859 per share).
Under the offer 19,333,165 shares were cancelled (previous offer
15,477,601 shares) with US$25,140,848 being paid to participating
shareholders (previous offer US$22,998,167).
The shareholders approved a dividend of 4.0 cents per share on
12 November 2015 (previous dividend 3.5 cents per share); this was
paid to shareholders on 13 January 2016.
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 2018 a resolution will be proposed that the Company
ceases to continue in existence.
2 The Subsidiary
The Company has the following subsidiary company:
Country of Percentage
incorporation of shares held
----------------------------- ---------------- ----------------
Epicure Qatar Opportunities British Virgin
Holdings Limited 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 BVI
Companies Act 2001, as a limited liability company with
registration number 1415393. The principal activity of the
subsidiary is holding investments on behalf of the Company.
3 Significant Accounting Policies
The consolidated financial statements of the Company for the
year ended 30 June 2016 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") and Isle of Man Companies Act 1931 to 2004. 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 and investments in and amounts due
from subsidiary which are stated at fair value.
The accounting policies applied in these financial statements
are the same as those applied in the Group's consolidated financial
statements as at the year ended 30 June 2015.
These consolidated financial statements have been prepared on
the going concern basis, as the Board of Directors has a reasonable
expectation that the Group and Company have the resources to
continue in business for the foreseeable future. In making this
assessment, the Directors have considered a wide range of
information relating to present and future conditions, including
the date of the next continuation vote for the Company (as
described in the Investment Policy), future projections of
profitability, cash flows and capital resources.
The Group's principal activities, investment objective and
strategy and principal risks and uncertainties are described in the
Chairman's Statement, Business Review, Investment Policy and
Corporate Governance Report.
The Group's approach to capital management is described in note
10. The Group's objectives, policies and processes for managing
credit, foreign exchange, liquidity and market risk along with the
are described in Note 26 of the financial statements.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Board of Directors to exercise its judgement in the
process of applying the Group's accounting policies. The financial
statements do not contain any critical accounting estimates.
3.2 Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries and subsidiary undertakings). Control is achieved
where the Company has power over an investee, exposure or rights to
variable returns and the ability to exert power to affect those
returns.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains
or losses arising from intra-group transactions, are eliminated in
full in the consolidated financial statements.
3.3 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 and
quoted convertible bonds 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 (realised and unrealised) arising from changes
in the fair value of the financial assets are included in the
income statement in the year in which they arise.
3.4 Foreign currency translation
The Qatari Riyal is the currency of the primary economic
environment in which the entity operates ("the functional
currency").
The US Dollar is the currency in which the financial statements
are presented ("the presentational currency").
Monetary assets and liabilities denominated in foreign
currencies as at the date of these financial statements are
translated to Qatari Riyal at exchange rates prevailing on that
date. Income and expenses are translated into Qatari Riyal based on
exchange rates on the date of the transaction. All resulting
exchange differences are recognised in the income statement at the
exchange rate prevailing on the balance sheet date. Items of income
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
other comprehensive income.
3.5 Dividend income
Dividend income is recognised when the right to receive payment
is established.
3.6 Segment reporting
The Group has one segment focusing on maximising total returns
through investing in quoted securities in Qatar and the GCC region.
No additional disclosure is included in relation to segment
reporting, as the Group's activities are limited to one business
and geographic segment.
3.7 Cash and cash equivalents
Cash and cash equivalents comprise cash deposited with banks and
bank overdrafts repayable on demand.
3.8 Investments in and amounts due from subsidiary
Investments in and amounts due from subsidiary in the Company
balance sheet are stated at fair value.
3.9 Treasury shares
In accordance with shareholder authority shares continue to be
bought back to be held in Treasury in order to manage the discount
between share price and NAV.
3.10 Future changes in accounting policies
A number of new standards, amendments to standards and
interpretation are not yet effective for year ended 30 June 2016,
and have not been applied in preparing these financial statements.
None of these are expected to have a significant effect on the
measurement of the amounts recognised on the Company's financial
statements; however, IFRS 9, Financial Instruments ("IFRS9") may
change the classification of financial assets. This is first
effective for accounting periods beginning on or after 1 January
2018.
There are no other standards, interpretations or amendments to
existing standards that are not yet effective that would be
expected to have a significant impact on the Company.
4 Net Asset Value per Share
The net asset value per share as at 30 June 2016 is US$1.2138
per share (30 June 2015: US$1.5336) based on 117,273,702 (30 June
2015: 138,709,240) Ordinary Shares in issue as at that date.
5 Fair Value Hierarchy
IFRS 13 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
All the Group's investments are classed as level 1
investments.
All financial assets and liabilities not stated at fair value in
the financial statements are categorised as level 2 in the fair
value hierarchy.
6(a) Financial assets at fair value through profit or loss
Group
30 June 2016: Financial assets at fair value through profit or
loss; all quoted equity securities.
Security name Number US$'000
--------------------------------------------- ----------- --------
Qatar National Bank (QNBK QD) 683,713 26,339
Industries Qatar (IQCD QD) 572,193 15,385
Masraf Al Rayan (MARK QD) 1,524,260 14,135
Qatar Electricity & Water Co (QEWS QD) 190,508 10,541
Qatar Islamic Bank (QIBK QD) 374,001 9,810
Gulf International Services (GISS QD) 888,779 8,900
Ooredoo (ORDS QD) 338,144 8,212
Commercial Bank of Qatar (CBQK QD) 713,923 7,247
Qatar United Development Company (UDCD QD) 1,310,961 6,837
Qatar Gas Transport (QGTS QD) 845,564 5,399
Emaar Properties Company (EMAAR UH) 3,013,500 5,077
Gulf Warehousing (GWCS QD) 311,235 4,918
Qatar Insurance (QATI QD) 204,421 4,044
Qatar National Cement Co (QNCD QD) 142,268 3,326
Barwa Real Estate (BRES QD) 306,692 2,743
Al Meera Consumer Goods Co (MERS QD) 30,874 1,780
Vodaphone Qatar (VFQS QD) 567,971 1,644
ABU DHABI Commercial Bank (ADCB UH) 775,000 1,274
National Leasing (NLCS QD) 217,437 1,041
First Gulf Bank (FGB UH) 250,000 854
Dubai Parks & Resorts (DUBAIPARKS UH) 1,780,725 783
Al Khaleej Bank (KCBK QD) 152,060 672
Qatar First Bank (QFBQ QD) 90,000 281
141,242
--------------------------------------------- ----------- --------
Group
30 June 2015: Financial assets at fair value through profit or
loss; all quoted equity securities:
Security name Number US$'000
--------------------------------------------- ----------- --------
Qatar National Bank (QNBK QD) 682,395 35,050
Industries Qatar (IQCD QD) 778,999 30,458
Masraf al Rayan (MARK QD) 1,902,372 23,958
Commercial Bank of Qatar (CBQK QD) 1,212,892 18,104
Qatar Islamic Bank (QIBK QD) 522,014 15,440
Gulf International Services (GISS QD) 651,802 13,564
Doha Bank (DHBK QD) 757,082 11,009
Qatar Electricity and Water (QEWS QD) 166,573 10,366
Barwa Real Estate (BRES QD) 651,496 9,367
Qatar Navigation (QNNS QD) 331,809 8,785
Ooreedo (ORDS QD) 307,377 7,253
Emaar Properties Company (EMAAR UH) 2,745,000 5,865
Medicare Group (MCGS QD) 89,542 4,582
Qatar United Development Company (UDCD QD) 518,317 3,456
Emirates National Bank of Dubai (ENBD UH) 983,500 2,607
Widam Food Company (WDAM QD) 132,928 2,261
Gulf Warehousing (GWCS QD) 100,388 2,052
National Leasing (NLCS QD) 350,641 2,034
Qatar Insurance (QATI QD) 10,944 290
Mazaya Real Estate Development (MRDS QD) 25 51
--------------------------------------------- ----------- --------
206,552
--------------------------------------------- ----------- --------
6(b) Investments and amount due from subsidiary
30 June 2016 30 June 2015
US$'000 US$'000
---------------------------- ------------- -------------
Investment in subsidiary - -
Amount due from subsidiary 141,041 211,063
---------------------------- ------------- -------------
The amount due from the subsidiary is subject to interest on the
aggregate principal amount drawn down from 1 January 2011, at the
US prime rate per annum. All loan repayments made by the subsidiary
will first be deducted from the outstanding loan interest before
being applied to the principal balance. The loan is secured by
fixed and floating charges over the assets of the subsidiary and is
repayable on demand.
7 Commission rebate
In previous years the Company received 50% brokerage commission
rebates for all trades done through its Qatar brokers. However,
during this year the Company changed its Qatar broker to take
advantage of more competitive commission rates. For the year ended
30 June 2016 the Group received US$Nil (2015: US$281,829).
8 Charges and Fees
Group 30 June 2016 Company Group Company 30 June 2015
30 June 2016 30 June 2015
US$'000 US$'000 US$'000 US$'000
------------------------------------------ ------------------- -------------- -------------- ---------------------
Investment Manager's fees (see below) 1,722 - 2,409 -
------------------------------------------ ------------------- -------------- -------------- ---------------------
Performance fees (see below) - - - -
------------------------------------------ ------------------- -------------- -------------- ---------------------
Administrator and Registrar's fees (see
below) 261 233 308 280
Custodian fees (see below) 139 7 174 2
Directors' fees and expenses note 16 338 338 342 342
Directors' insurance cover 37 37 43 43
Broker fees 59 59 106 106
Other 362 451 308 297
------------------------------------------ ------------------- -------------- -------------- ---------------------
Other expenses 1,196 1,125 1,281 1,070
------------------------------------------ ------------------- -------------- -------------- ---------------------
Investment Manager's fees
Annual fees
The Investment Manager was entitled to an annual management fee
of 1.25% of the Net Asset Value of the Group, calculated monthly
and payable quarterly in arrears. The Investment Management
Agreement was subject to termination on 31 October 2013 with a
revised agreement coming into effect from 1 November 2013. The
revised agreement sees the annual fee reduce to 1.05% of the net
asset value of the Company further reducing to an annual fee of
1.0% of the net asset value of the Company from 1 November
2015.
Annual management fees for the year ended 30 June 2016 amounted
to US$1,722,189 (30 June 2015: US$2,408,770) and the amount accrued
but not paid at the year-end was US$356,885 (30 June 2015:
US$556,692).
Performance fees
The performance fee structure is based upon the relative
performance of the Company against the performance of the QE Index.
The performance fee is payable by reference to the increase in
Adjusted Net Asset Value per Ordinary Share in excess of the Target
Net Asset Value per Ordinary Share (Opening Net Asset Value per
Ordinary Share adjusted by the movement on the Qatar Exchange
Index) over the course of a Performance Period.
The Investment Manager is entitled to a performance fee in
respect of a Performance Period only if the Adjusted Net Asset
Value per Ordinary Share at the end of the relevant Performance
Period, after excluding dividends paid and received, exceeds the
Target Net Asset Value per Ordinary Share..
If the performance test is met, the performance fee will be an
amount equal to 15% of the amount by which the Adjusted Net Asset
Value per Ordinary Share at the end of the relevant Performance
Period exceeds the Target Net Asset Value per Ordinary Share
multiplied by the time weighted average of the number of Ordinary
Shares in issue in the Performance Period together, if applicable,
with an amount equal to the VAT thereon.
In any Outperformance Period which follows any one or more
Underperformance Periods, the performance fee payable shall be
calculated by multiplying X minus Y by 15% (where X is the increase
in the Adjusted Net Asset Value per Ordinary Share at the end of
the relevant Outperformance Period above the Target Net Asset Value
per Ordinary Share for that Performance Period and Y is the
aggregate of the Shortfall Returns for the previous
Underperformance Periods) and multiplied by the time weighted
average of the number of Ordinary Shares in issue in the
Performance Period. If X minus Y is a negative figure, no
performance fee shall be payable.
If the Adjusted Net Asset Value per Ordinary Share at the end of
the relevant Performance Period is higher than the Target Net Asset
Value per Ordinary Share but is less than the Opening NAV, any
accrued performance fee will be withheld and shall not be payable
and will only become payable in the event that the Target Net Asset
Value per Ordinary Share and the Opening NAV is exceeded in respect
of a subsequent Performance Period. For the avoidance
of doubt, in the event that the Target Net Asset Value per
Ordinary Share and the Opening NAV is exceeded in respect of a
subsequent Performance Period, all accrued but unpaid performance
fee(s) in respect of previous Performance Periods will become due
and payable.
If there has been a Shortfall Return in respect of a Performance
Period and performance fees have been accrued but withheld in
respect of one or more prior Performance Periods, the accrued but
withheld performance fees will be reduced by treating the prior
Performance Period(s) and the current Performance Period as one
Performance Period and calculating any performance fee due over
that aggregated period. For the avoidance of doubt, in the event
that the Target Net Asset Value per Ordinary Share and the Opening
NAV is exceeded in respect of a subsequent Performance Period, all
accrued but unpaid performance fee(s) in respect of previous
Performance Periods will become due and payable.
The Investment Manager will not be entitled to such part of any
performance fee to which it would otherwise be entitled if:
(i) payment of such part of any performance fee would cause the
aggregate performance fee in respect of a Performance Period,
excluding any accrued but unpaid performance fee in respect of
previous Performance Periods, to exceed 1.5% of the Net Asset Value
of the Company at the end of the relevant Performance Period (or,
in the case of the any Performance Period of less than a year, 1.5%
multiplied by the number of days in that Performance Period divided
by 365); or
(ii) payment of such part within the Performance Period would
have caused the performance test or Opening NAV not to be met.
Performance fees accrued but not paid during the year ended 30
June 2016 amounted to US$nil as the performance target was not
reached (30 June 2015: US$nil).
The Investment Manager is responsible for the payment of all
fees to the Investment Adviser.
Investment Management Agreement definitions
Adjusted at a particular time, the sum of A plus
Net Asset B minus C minus D plus E where:
Value per (i) A is the Net Asset Value per Ordinary
Ordinary Share at that time calculated on a basis
Share that does not recognise any liability
of the Company to the Investment Manager
in respect of any performance fee that
is, or may become, payable;
(ii) B is the amount by which any corporate
action undertaken by the Company after
1 November 2013 (including, without
limit, the issue of Ordinary Shares
or rights to subscribe for, or convert
into. Ordinary Shares, the issue of
a scrip dividend, or the consolidation
or sub-division of Ordinary Shares)
results, at the time of calculation,
in a dilution to the Net Asset Value
per Ordinary Share divided by the number
of Ordinary Shares in issue at the time
of such corporate action;
(iii) C is the amount by which any accretion
to the Net Asset Value per Ordinary
Share has arisen solely as a result
of the repurchase by the Company of
its Ordinary Shares or any return of
capital by the Company to its shareholders
since 1 November 2013 divided by the
number of Ordinary Shares in issue at
the time of such repurchase or return
of capital;
(iv) D is the sum of all dividends received
by the Company since 1 January 2011
divided by the number of Ordinary Shares
in issue at the time of each dividend;
and
(v) E is the sum of all dividends paid
by the Company since 1 January 2011
divided by the number of Ordinary Shares
in issue at the time of each dividend,
Performance each period in respect of which the
Period Company produces audited accounts and,
if different, the final period for which
the Investment Management Agreement
subsists or any shorter period where
there has been an issue of Ordinary
Shares which exceeds 10% of the then
existing Share Capital of the Company,
subject always to the discretion of
the Board. The first Performance Period
commenced on date of the passing of
the Resolution (17 March 2011).
Outperformance any Performance Period in which the
Period Adjusted Net Asset Value per Ordinary
Share at the end of the relevant Performance
Period exceeds the Target Net Asset
Value per Ordinary Share.
Shortfall the amount by which the Target Net Asset
Return Value per Ordinary Share exceeds the
Adjusted Net Asset Value per Ordinary
Share in respect of a Performance Period.
Administrator and Registrar fees
The Administrator is entitled to receive a fee of 12.5 basis
points per annum of the net asset value of the Company between US$0
and US$100 million, 10 basis points of the net asset value of the
Company above US$100 million.
This is subject to a minimum monthly fee of US$15,000, payable
quarterly in arrears.
The Administrator assists in the preparation of the financial
statements of the Group and provides general secretarial
services.
The Administrator may utilise the services of a CREST accredited
registrar for the purposes of settling share transactions through
CREST. The cost of this service will be borne by the Company. It is
anticipated that the cost will be in the region of GBP12,000 per
annum subject to the number of CREST settled transactions
undertaken.
Administration fees paid for the year ending 30 June 2016
amounted to US$261,255 and US$33,061 for additional services (30
June 2015: US$308,041 and US$38,837 respectively). Outstanding
Administration fees at the year end amounted to US$56,320 (30 June
2015: US$75,059).
Custodian fees
The Custodian is entitled to receive fees of US$7,200 per annum
and US$25 per processed transaction from the Company.
In addition the Custodian is entitled to receive fees of 8 basis
points per annum in respect of Qatari securities held by the Group
and 10 basis points per annum in respect of non-Qatari, GCC
securities held by the Group and $45 per settled transaction
(Qatar)/$50 per settled transaction (GCC excluding Qatar). From 1
March 2013 the custodian agreed to a 25% reduction in custodian
fees relating to the Qatari market.
Custodian and sub-custodian fees for the year ending 30 June
2016 amounted to US$139,116 (30 June 2015: US$176,008) and the
amount accrued but not paid at the year-end was US$5,615 (30 June
2015: US$11,016).
9 Cash and Cash Equivalents
Group Company Group Company
30 June 2016 30 June 2016 30 June 2015 30 June 2015
US$'000 US$'000 US$'000 US$'000
--------------------------- -------------- -------------- -------------- --------------
Bank balances 1,447 398 5,956 1,228
--------------------------- -------------- -------------- -------------- --------------
Cash and cash equivalents 1,447 398 5,956 1,228
--------------------------- -------------- -------------- -------------- --------------
10 Share Capital
30 June 30 June
2016 2015
US$'000 US$'000
----------------------------------- ---------- ----------
Authorised 500,000,000 Ordinary
shares of US$0.01 each 5,000,000 5,000,000
----------------------------------- ---------- ----------
Issued, Called-up and Fully-Paid:
117,273,702 (2015: 138,709,240)
Ordinary Shares of US$0.01
each in issue, with full voting
rights 1,173 1,387
2,102,373 (2015: 890,509)
Ordinary Shares of US$0.01
each held in Treasury 21 9
----------------------------------- ---------- ----------
Issued share capital 1,194 1,396
----------------------------------- ---------- ----------
During the year to 30 June 2016 the Company repurchased
2,102,373 (2015: 890,509) Ordinary Shares, to be held in treasury,
at a cost of US$2,339,545 (2015: US$1,168,628) and cancelled
890,509 (2015: 3,793,272) Ordinary Shares in treasury which had
been held for more than one year. The Ordinary Shares held in
treasury have no voting rights and are not entitled to
dividends.
On 7 December 2015 the Company completed a tender offer at a
price of US$1.3004 per share (30 January 2015: US$1.4859 per
share). Under the tender offer 19,333,165 shares (30 January 2015:
15,477,601) were repurchased and cancelled.
During the year US$114,983 tender expenses were deducted from
equity.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the Group. The Board manages the Group's
affairs to achieve Shareholder returns through capital growth
rather than income, and monitors the achievement of this through
growth in net asset value per share.
Group capital comprises Share Capital and Reserves. Neither the
Company nor its subsidiary is subject to externally imposed capital
requirements. The Company also has an active share buyback
program.
11 Reserves - Group
Distributable Retained Earnings Foreign Currency Capital Redemption 30 June 2015
Reserves Translation Reserve Total
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------- ------------------- ------------------ ------------------- ------------------- -------------
Balance at 1 July
2015 131,559 78,866 (180) 1,079 211,324
Dividends paid - (4,742) - - (4,742)
Shares subject to
tender offer (25,141) - - 193 (24,948)
*Tender expenses (115) - - - (115)
Foreign exchange
translation
differences - - (33) - (33)
Retained earnings - (37,947) - - (37,947)
Shares in treasury
cancelled - - - 9 9
Share buy-backs (2,399) - - - (2,399)
------------------- ------------------- -------------
Balance at 30 June
2016 103,904 36,177 (213) 1,281 141,149
-------------------- ------------------- ------------------ ------------------- ------------------- -------------
*Exceptional expenses related to tender offer
The capital redemption reserve is created on the cancellation of
shares equal to the par value of shares cancelled. This reserve is
not distributable.
12 Earnings per Share
Basic and diluted earnings per share are calculated by dividing
the profit attributable to equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the
year.
30 June 2016 30 June 2015
----------------------------------------------------------------------- ------------- -------------
(Loss)/profit attributable to equity holders of the Company (US$'000) (37,947) 22,650
Weighted average number of Ordinary Shares in issue (thousands) 126,353 147,918
----------------------------------------------------------------------- ------------- -------------
Basic and diluted (loss)/earnings per share (cents per share) (30.03) 15.31
----------------------------------------------------------------------- ------------- -------------
13 Other payables and accrued expenses
Group
30 June 2016 30 June 2015
US$'000 US$'000
------------------------------- ------------- -------------
Due to broker 221 51
Management fee payable 357 557
Administration fee payable 56 75
Accruals and sundry creditors 58 61
------------------------------- ------------- -------------
692 744
------------------------------- ------------- -------------
Company
30 June 2016 30 June 2015
US$'000 US$'000
------------------------------- ------------- -------------
Administration fee payable 50 68
Accruals and sundry creditors 48 45
------------------------------- ------------- -------------
98 113
------------------------------- ------------- -------------
14 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 GBP250 per annum.
The Company became registered for VAT from 1 February 2011.
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 have withholding tax deducted at 15%.
15 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 Qatar Exchange.
All investments present a risk of loss of capital through
movements in market prices. The Investment Manager and Investment
Adviser moderate this risk through a careful selection of
securities within specified limits. The Investment 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
other Co-operation Council for Arab States of the Gulf (GCC).
At 30 June 2016, if the market value of the investment portfolio
had increased/decreased by 6.5% with all other variables held
constant, this would have increased/decreased net assets
attributable to Shareholders by approximately US$9.2 million (30
June 2015 : 9.0% : US$18.6 million).
Foreign exchange risk
The Group's operations are conducted in jurisdictions which
generate revenue, expenses, assets and liabilities in currencies
other than Qatari Riyal. As a result, the Group is subject to the
effects of exchange rate fluctuations with respect to these
currencies.
The Group's policy is not to enter into any currency hedging
transactions.
At the reporting date the Group had the following exposure:
Currency 30 June 30 June
2016 2015
% %
------------ -------- --------
British
Pound 0.02 0.01
Omani Rial 0.00 0.04
US Dollar 0.02 0.62
Qatari
Riyal 93.79 95.31
Kuwaiti
Dinar 0.00 0.00
UAE Dirham 6.17 4.02
------------ -------- --------
The following table sets out the Group's total exposure to
foreign currency risk and the net exposure to foreign currencies of
the monetary assets and liabilities:
30 June 2016 Monetary Monetary Net Exposure
Assets Liabilities
US$'000 US$'000 US$'000
--------------- --------- ------------- -------------
British Pound 26 (5) 21
US Dollar 497 (466) 31
Qatari Riyal 133,504 - 133,504
UAE Dirham 8,787 - 8,787
--------------- --------- ------------- -------------
142,814 (471) 142,343
--------------- --------- ------------- -------------
30 June 2015 Monetary Monetary Net Exposure
Assets Liabilities
US$'000 US$'000 US$'000
British Pound 30 (6) 24
Omani Rial 82 - 82
US Dollar 2,009 (738) 1,271
Qatari Riyal 202,796 - 202,796
UAE Dirham 8,547 - 8,547
--------------- --------- ------------- -------------
213,464 (744) 212,720
--------------- --------- ------------- -------------
Foreign currency sensitivity risk - presentational currency
At 30 June 2016 had the US Dollar weakened/strengthened by 1%
(2015 : weakened/strengthened 1%) in relation to all currencies,
with all other variables held constant, net assets attributable to
equity holders of the Company would have increased/decreased by the
amounts shown below:
30 June US$'000
2016
------------ --------
British -
Pound
Omani Rial -
Kuwaiti -
Dinar
UAE Dirham 88
------------ --------
Effect
on net
assets 88
------------ --------
30 June US$'000
2015
------------ --------
British -
Pound
Omani Rial 1
Kuwaiti -
Dinar
UAE Dirham 85
------------ --------
Effect
on net
assets 86
------------ --------
Foreign currency sensitivity risk - functional currency
As 93% of net assets are denominated in QAR and QAR is the
functional currency there is no significant functional currency
risk. The Qatari Riyal is pegged to the USD within a tight band and
therefore it is not included in the sensitivity analysis.
In addition, since QAR is the functional currency of the Group
and USD is the presentational currency any effect of changes in the
foreign exchange rates between these currencies is included in the
translation reserve on consolidation.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Group.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost.
At the reporting date, the Group's financial assets exposed to
credit risk comprised the following:
30 June 30 June
2016 2015
US$'000 US$'000
--------------------------- -------- --------
Financial assets at
fair value through
profit or loss 141,242 206,552
Cash and cash equivalents 1,447 5,956
Other receivables 346 956
--------------------------- -------- --------
143,035 213,464
--------------------------- -------- --------
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet.
Management does not expect any counterparty to fail to meet its
obligations and there are no debts past their due dates as at the
year-end.
The Group uses the banking services of HSBC (Middle East) Ltd
and Barclays (Isle of Man) PLC. HSBC has a credit rating of A2
assigned by Moody and Barclays has a credit rating of A- from
Standard and Poors.
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient
cash for operations and the ability to realise market positions.
The Group's liquidity position is monitored by the Investment
Manager and the Board of Directors.
The residual undiscounted contractual maturities of financial
liabilities are in the table below:
30 June 2016 Less 1-3 3 months 1-5 Over No stated
than months to 1 years 5 years maturity
1 month year
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- --------- -------- --------- -------- --------- ----------
Financial liabilities
Other creditors 692 - - - - -
and accrued
expenses
---------------------- --------- -------- --------- -------- --------- ----------
692 - - - - -
---------------------- --------- -------- --------- -------- --------- ----------
30 June 2015 Less 1-3 3 months 1-5 Over No stated
than months to 1 years 5 years maturity
1 month year
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- --------- -------- --------- -------- --------- ----------
Financial liabilities
Other creditors 744 - - - - -
and accrued
expenses
---------------------- --------- -------- --------- -------- --------- ----------
744 - - - - -
---------------------- --------- -------- --------- -------- --------- ----------
Interest rate risk
The majority of the Group's financial assets are non-interest
bearing. Cash held by the Group is invested at short-term market
interest rates. As a result, the Group is not subject to fair value
interest rate risk due to fluctuations in the prevailing levels of
market interest rates. However it is subject to cash flow risk
arising from changes in market interest rates.
The table below summarises the Group's exposure to interest rate
risks. It includes the Group's financial assets and liabilities at
the earlier of contractual re-pricing or maturity date, measured by
the carrying value of assets and liabilities:
30 June Less 1-3 3 months 1-5 Over Non-interest Total
2016 than months to 1 years 5 bearing
1month year years
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- -------- -------- --------- -------- -------- ------------- --------
Financial
Assets
Financial
assets at
fair value
through
profit or
loss - - - - - 141,242 141,242
Other receivables
and prepayments - - - - - 346 346
Cash 1,447 - - - - - 1,447
------------------- -------- -------- --------- -------- -------- ------------- --------
Total financial
assets 1,447 - - - - 141,588 143,035
------------------- -------- -------- --------- -------- -------- ------------- --------
Financial
Liabilities
Other creditors
and accrued
expenses - - - - (692) (692)
------------------- -------- -------- --------- -------- -------- ------------- --------
Total financial
liabilities - - - - - (692) (692)
------------------- -------- -------- --------- -------- -------- ------------- --------
Total interest
rate sensitivity
gap 1,447
------------------- -------- -------- --------- -------- --------
30 June Less 1-3 3 months 1-5 Over Non-interest Total
2015 than months to 1 years 5 bearing
1month year years
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 - - - - - 206,552 206,552
Other receivables
and prepayments - - - - - 956 956
Cash 5,956 - - - - - 5,956
------------------- -------- -------- --------- -------- -------- ------------- --------
Total financial
assets 5,956 - - - - 207,508 213,464
------------------- -------- -------- --------- -------- -------- ------------- --------
Financial
Liabilities
Other creditors
and accrued
expenses - - - - - (744) (744)
------------------- -------- -------- --------- -------- -------- ------------- --------
Total financial
liabilities - - - - - (744) (744)
------------------- -------- -------- --------- -------- -------- ------------- --------
Total interest
rate sensitivity
gap 5,956
------------------- -------- -------- --------- -------- --------
All interest received on cash balances are at variable rates. A
sensitivity analysis for changes in interest rates on cash balances
has not been provided as it is not deemed significant.
16 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).
The Investment Adviser's fees are paid 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.
Epicure Managers Qatar Limited is a wholly owned subsidiary of
the Investment Adviser, Qatar Insurance Company S.A.Q.
Leonard O'Brien is a Director of the Company and of the
Investment Manager.
17 Post Balance Sheet Events
There have been no post balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKNNEEKKEFF
(END) Dow Jones Newswires
September 12, 2016 02:00 ET (06:00 GMT)
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