TIDMGIF
RNS Number : 9166Q
Gulf Investment Fund PLC
25 February 2019
Legal Entity Identifier: 2138009DIENFWKC3PW84
Gulf Investment Fund plc
Interim Results for the six months ended 31 December 2018
-- Gulf Investment Fund's (GIF) net asset value per share (NAV)
fell by 3.5%; MSCI Emerging Markets Index fell by 9.7%
-- GIF share price +0.5%
-- Dividend of 2.0 cents per share
-- GCC markets have outperformed global emerging markets
Nick Wilson, Chairman of Gulf Investment Fund plc,
commented:
"During the six-month period, GCC markets were influenced by two
main negative trends: a decline of 32 per cent in the oil price and
a significant fall in global markets during November and December.
On the positive side, easing of foreign corporate ownership limits
in Qatar and reclassification to the Emerging Market Index in Saudi
Arabia were steadying factors.
We believe that these bearish trends will reverse and expect
2019 to be a year of progress for GCC economies, with all regional
governments setting expansive budgets despite softness in oil
prices. The GCC is expected to grow at 3.0 per cent in 2019 led by
investment projects in Saudi Arabia, the five-year development plan
in Kuwait, ongoing preparations for Expo 2020 in the UAE and FIFA
2022 in Qatar."
For further information:
Nicholas Wilson +44 (0) 1624 692 600
Qatar Investment Fund plc
Andrew Potts +44 (0) 20 7886 2500
Panmure Gordon
Maitland/AMO +44 (0) 20 7379 5151
William Clutterbuck
Chairman's Statement
On behalf of the board, I am pleased to present the interim
results for Gulf Investment Fund Plc for the six months ending 31
December 2018.
Results
For the six months ending 31 December 2018, Net Asset Value per
Share ("NAV") fell by 3.5 per cent compared with a fall of 1.4 per
cent in the S&P GCC Composite Index. The MSCI Emerging Markets
Index fell by 9.7 per cent in the same period. Following a
narrowing of the discount at which the shares trade to NAV, the
shares rose by 0.5 per cent. At the Annual General Meeting on 7
November, GIF shareholders approved a final dividend of 3.0 cents
per ordinary share in respect of the year ended 30 June 2018. The
dividend was paid on 21 December 2018 with an ex-dividend date of
15 November 2018.
During the six-month period, GCC markets were influenced by two
principal negative trends: a decline of 32 per cent in the oil
price and a significant fall in global markets during November and
December. On the positive side, easing of foreign ownership limits
in Qatar and reclassification to the Emerging Market Index in Saudi
Arabia were steadying factors. At the end of the period, the
Company had 42 holdings: 23 in Saudi Arabia, 11 in Qatar, 5 in the
UAE and 4 in Kuwait. Following the change in investment policy, the
Investment Adviser increased the proportion of the Company invested
outside of Qatar from 10 per cent (end December 2017) to 61 per
cent (end December 2018).
Related party transactions
Details of any related party transactions are contained in the
annual report as well as being addressed in note 8 of this interim
report.
Post balance sheet events
Details of these can be found in note 13 following the
accompanying financial statements.
Outlook, risks and uncertainties
Fluctuations in oil and gas prices will continue to impact GCC
economies as countries deal with budget deficits. The geopolitics
of the region and, in particular, the dispute between Qatar and
other members of the GCC brings continuing economic
uncertainty.
The Board believes that the principal risks and uncertainties
faced by the Company continue to 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 our Annual Report each year.
The Board continues to view the future of the Company with
confidence expecting healthy if slower growth in the region as a
whole, as growth in the non-hydrocarbon sector in a number of GCC
members helps to balance their economies.
Nicholas Wilson
Chairman
22 February 2019
Director's Responsibility Statement
The Directors confirm that, to the best of their knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34;
b) the interim management report and Chairman's statement
include a fair review of the information required by the Disclosure
and Transparency Rule 4.2.7R (indication of important events during
the first six months and a description of the principal risks and
uncertainties for the remaining six months of the year
respectively);
c) in accordance with Disclosure and Transparency Rule 4.2.8R
there have been no related party transactions during the six months
to 31 December 2018 and therefore nothing to report on any material
effect by such a transaction on the financial position or the
performance of the Company during that period; and there have been
no changes in this position since the last Annual Report that could
have a material effect on the financial position or performance of
the Company in the first six months of the current financial
year.
d) in accordance with Disclosure and Transparency Rule 6.4.2,
the Company confirms that its Home State is the United Kingdom.
The interim financial report has not been audited by the
Company's Independent Auditor.
Nicholas Wilson
Chairman
22 February 2019
Report of the Investment Manager and the Investment Adviser
Regional Market Overview
GCC bucked the emerging market trend in 2018, with the S&P
GCC Composite index rising 8.2 per cent while the MSCI Emerging
Markets index fell 16.6 per cent, an outperformance of 24.9 per
cent. Major developed and emerging global indices posted negative
returns.
Qatar equities rose 20.8 per cent, helped by confidence amongst
foreign investors, followed by Abu Dhabi (up 11.7 per cent), Saudi
Arabia (up 8.3 per cent) and Kuwait (up 5.2 per cent). Dubai and
Oman were the major losers, falling 24.9 per cent and 15.2 per
cent, respectively.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting GCC markets and
global indices in 2018
Easing of restrictions on foreign ownership limits in Qatar,
Saudi Arabia reclassification to the EM index, Kuwait's inclusion
in FTSE EM Index and improving macro fundamentals helped in driving
the GCC markets higher. Additionally, sturdy US dollar pegs, low
debt levels, and robust foreign reserves reduced risk and shielded
the region from 2018's emerging market contagion, making GCC an
attractive investment destination for global investors.
For 2018, Qatar topped net foreign inflows (+US$2.5 billion)
followed by Saudi Arabia (+US$1.6 billion), Kuwait (+US$927
million) and Abu Dhabi (+US$760 million), while Dubai saw its first
net foreign outflows since 2011 (-US$258 million).
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting GCC Net Foreign
Flows 2018
Upcoming EM index inclusions in 2019 would keep GCC markets in
focus. While the EM inclusion of Saudi Arabia is expected to drive
c.US$16 billion (starting 15 March) of passive inflows, Kuwait is
also a potential for reclassification to EM within MSCI (June 2019
decision).
GCC Governments Set to Maintain or Increase Spending In 2019
Since peaking in early October, oil prices dropped 35 per cent
in late 2018, as fears receded of a supply shortage caused by US
sanctions on Iran, record high US crude production and a weaker
global economic outlook. The US decision to extend waivers to eight
of Iran's largest customers, including China, India, Japan and
South Korea, added to the bearish narrative. Despite this, GCC
sovereigns continue to chart expansionary fiscal plans for 2019
with the continued fiscal reforms.
Saudi Arabia unveiled its largest ever budget of US$295 billion
for 2019, supporting the non-oil economy through private sector
stimulus, austerity-mitigating social allowances and productive
infrastructure investments. Expenditure is set to rise by 7.4 per
cent over 2018 and tax revenue by 9 per cent. The deficit is
expected to narrow to 4.2 per cent of GDP from 4.6 per cent in
2018.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting Saudi Arabia
Budget 2019
The Investment Adviser believes that Saudi Arabia's expansionary
budget is positive for the non-oil economy, but expenditure
expectations may have to be pared back as revenue projections are
based on an optimistic oil price expectation of US$75-80 a barrel.
Saudi is seeking to spur stronger growth while maintaining the goal
of balancing the budget. Better oil prices and exports of crude
could help Saudi achieve both objectives.
Qatar is expected to enjoy a US$1.2 billion surplus in 2019 as a
result of higher energy prices in international markets along with
increasing non-oil revenues. Revenue in 2019 is anticipated to be
20.5 per cent ahead of the US$48.1 billion budgeted in 2018.
Spending on major projects in Qatar, which accounts for 43.3 per
cent of total spending, is expected to decline by 3.6 per cent as a
result of the completion of infrastructure projects relating to
FIFA 2022. Spending on salaries and wages are set to increase 9.4
per cent to meet increased demand for staff across different
sectors, including education, healthcare, security and defence. In
2019, US$13.2 billion of new projects are expected to be awarded
out of a portfolio of committed projects worth US$115.7 billion.
These new projects will boost economic growth in the country,
especially in the non-oil sector.
The UAE cabinet approved a balanced federal budget of US$16.4
billion for the 2019 fiscal year, which is 17.3 per cent higher
than 2018 and the nation's highest on record. In 2019, Dubai
maintained the pace of spending at 2018 record levels, with a focus
on the development of infrastructure, aviation and tourism sectors
- all of which are vital to the emirate's non-oil growth.
Dubai's budget for FY19 has been formulated in consideration of
the expected population growth, benefits of hosting Expo 2020,
continuous development of infrastructure and objectives of Dubai
Plan 2021. The IMF has forecasted Dubai's GDP
To grow 4.1 per cent in 2019 due to government infrastructure
spending ahead of Expo 2020, compared to 3.3 per cent in 2018.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting GCC Governments
Spending in 2019
Kuwait is estimated to spend US$74.5 billion for the fiscal year
2019/2020, an increase of 4.7 per cent over the previous year's
budgeted spending. Oman has also charted a 3 per cent rise,
bringing spending up to US$33.5 billion with a lower deficit of
US$7.3 billion.
Qatar - Recent Initiatives and Outlook Post FIFA
Qatar has bounced back from the blockade imposed in June 2017 by
neighbouring countries. The Qatari economy rebalanced, as supply
chain disruptions recovered rapidly following the blockade by
establishment of new trade routes. Banks adjusted their "funding
profile" with the reduced liquidity from GCC sources being offset
by inflows from government and related entities. The nation enacted
measures to bolster investments, such as allowing rise in foreign
ownership.
The amended law on FDI is a key development to come out of the
blockade, focusing on the industrial, agricultural, information
technology, education, health and tourism sectors. Qatar has
allocated US$3 billion to attract foreign companies to its free
zones and an additional US$2 billion to draw multinationals to its
financial centre.
Since the blockade, Qatar has implemented policies to boost its
tourism and real estate sector. The cabinet approved a new law
allowing foreigners to own property in Qatar and introduced a range
of visa facilitation measures, including allowing nationals of some
88 countries to enter Qatar visa-free and free-of-charge.
Qatar is supporting a number of private-sector initiatives to
make the economy self-sufficient in the areas of food production,
logistics and manufacturing to ensure long-term economic
sustainability. Transportation and logistics firms are already
benefiting from the increase in the volume of trade arriving
directly at Qatar's new Hamad Port.
Qatar plans to add another LNG train to the three already
announced and boost LNG capacity by 43 per cent to retain its
position as the world's largest LNG exporter. Robust demand and low
break-even costs will help Qatar benefit from the additional
capacity, which should come on-line by 2024.
LNG expansion should provide a positive boost to Qatar's GDP
growth throughout the 2020s. North Field expansion requires
considerable investment, which is expected to drive growth after
the completion of the World Cup stadiums and associated
infrastructure. In addition to expanding LNG production, several
large projects will continue after the 2022 World Cup, including
expansion of Qatar's integrated rail, Hamad Port and the Lusail
"smart city".
If Qatar can capitalise on the opportunities presented by a
booming economy in the 2020s, its 2030 vision of a knowledge-based
economy may become wholly feasible.
Other Developments in the Region: Contracts, Policy and
Regulation
Saudi Arabia recently signed 25 agreements worth over US$55
billion in the energy, petrochemicals, infrastructure and
transportation sectors.
Saudi authorities have indicated a review of the policy of
imposing fees on expats as these charges proved painful for the
private sector which is already struggling to adapt to rapid policy
changes. The policy changes are yet to improve Saudi unemployment
which is at its highest level in a decade, despite more than half a
million foreigners having left the workforce.
Qatar announced its withdrawal from OPEC from January 2019.
Qatar is focused on natural gas and accounts for just 2 per cent of
OPEC output. The withdrawal is more symbolic than material.
The UAE issued a much-awaited law that will allow the federal
government to issue sovereign debt. Until now bond issuances were
only at emirate level. Banks in the UAE will also now be able to
buy central government bonds in dirhams or in foreign
currencies.
The UAE is to establish a Foreign Direct Investment Unit in the
Ministry of Economy. The unit will be responsible for promoting
initiatives to help create a more attractive investment
environment. FDI this year is expected to reach US$11 billion (+5.8
per cent), the GCC's largest.
Kuwait's central bank adjusted its lending regulations.
Borrowers can now borrow up to 25 times their income or a maximum
of KWD25,000, up from 15 times or maximum of KWD15,000. The 49 per
cent cap on foreign ownership of Kuwaiti banks is to be lifted.
This will allow foreign investors to own up to 5 per cent of a
Kuwaiti bank's capital directly or indirectly.
Bahrain's parliament approved a 5 per cent value-added tax law,
which is expected to be levied for the first time in 2019. This
comes on the heels of a US$10 billion GCC financial aid package
provided by Saudi Arabia, the UAE and Kuwait, which will be
disbursed in stages as an interest-free loan, conditional upon
Bahrain adopting economic reforms.
Portfolio structure
Country allocation
GIF's weightings in GCC markets is based on the Investment
Adviser's views on the investment outlook and valuation. GIF
remains overweight (compared to the benchmark) on Qatar (37.9 per
cent of NAV) because of Qatar's strong macro-economic backdrop.
GIF's weightings in Saudi Arabia, Kuwait and the UAE were 44.0 per
cent, 8.5 per cent and 8.3 per cent respectively. Cash decreased to
1.3 per cent of NAV as of 31 December (30 September: 7.7 per cent).
The reduction in cash was due to the payment of the dividend
distribution and rebalancing of the portfolio. The Investment
Adviser increased holdings in the Financial (+7.7 per cent) &
Consumer sectors (+3.8 per cent) and made new investments in the
Healthcare sector (+2.2 per cent).
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depictingCountry
allocation 2017 and 2018.
As of 31 December, GIF had 42 holdings: 23 in Saudi Arabia, 11
in Qatar, 4 in the UAE and 4 in Kuwait (vs. 38 holdings in 3Q18: 16
in Saudi Arabia, 13 in Qatar, 4 in the UAE and 5 in Kuwait).
Following the change in the investment policy, the Investment
Adviser increased the proportion of the fund invested outside Qatar
from 10 per cent (end December 2017) to 61 per cent (end December
2018). The Investment Adviser took new positions, principally in
Saudi Arabian companies, across a wide range of sectors.
Portfolio
Top 5 Holdings
Company Country Sector % share of GIF NAV
Qatar Gas Transport Qatar Energy 8.4%
-------------- ------------ -------------------
Al Rajhi Saudi Arabia Financials 6.3%
-------------- ------------ -------------------
Commercial Bank of Qatar Qatar Financials 6.0%
-------------- ------------ -------------------
National Commercial Bank Saudi Arabia Financials 5.7%
-------------- ------------ -------------------
National Bank of Kuwait Kuwait Financials 4.0%
-------------- ------------ -------------------
Source: QIC
The Investment Adviser continues to be positive on Qatar Gas
Transport Company as the company is well placed to benefit from
increased transport demand from Qatar's 'North Field' gas field
expansion. National Commercial Bank and Al Rajhi Bank remain among
the top 5 holdings as these banks should benefit from rising
interest rates and credit demand. Holdings in Commercial Bank of
Qatar and National Bank of Kuwait were reduced as the Investment
Adviser believes valuations are stretched.
Sector allocation
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting Sector
Allocation as at 31(st) December 2018
Source: QIC
The Investment Adviser increased holdings in the Financials
sector to 55.2 per cent from 47.6 per cent in 3Q18, mainly as the
result of a new investment in Doha Bank (+3.8 per cent) and
increasing investment in Qatar Int'l Islamic Bank (+3.0 per cent).
GCC banks have strong balance sheets and government backing. Credit
growth is expected to recover as government spending underpins
economic activity and spurs private-sector growth. Pressure on
profitability should ease as banks have adapted their cost base to
the slowing economic environment, and as ongoing consolidation in
the sector takes effect.
The Investment Adviser reduced exposure to the Materials and
Energy sectors to 9.9 per cent and 12.5 per cent, down from 13.2
per cent and 14.6 per cent respectively. The near-term outlook for
these sectors has been affected by the recent oil price fall and
ongoing trade war concerns.
Holdings in the Utilities and Real Estate sectors were also
reduced, while the Investment Adviser increased holdings in the
Healthcare and Consumer sectors by 2.2 per cent and 3.8 per cent
respectively. The Investment Adviser took new positions in the
Healthcare sector which appears to be set for growth as a result of
growing populations and the introduction of mandatory health
insurance. Despite the recent slowdown, the long-term outlook of
the GCC Consumer sector remains strong thanks to favourable
demographics and a strong growth trajectory in tourism and per
capita income.
Profile of Top Five Holdings:
Qatar Gas Transport (8.4 per cent of NAV):
Qatar Gas Transport Company (Nakilat), established in 2004, is a
key midstream player in the hydrocarbon sector in the state of
Qatar. Nakilat owns 69 LNG and LPG vessels, making it one of the
largest LNG ship owners in the world. Out of the 65 LNG vessels, 25
are wholly owned and 40 are under joint ventures (JV). It also has
four jointly owned LPG vessels. Nakilat also provides shipping and
marine-related services to a range of participants within the
Qatari hydrocarbon sector. Nakilat is an integral component of the
supply chain of some of the largest, most advanced energy projects
in the world undertaken by Qatar Petroleum, Qatar gas, Ras Gas and
their joint venture partners for the State of Qatar. For 9M18,
Nakilat reported a net profit of US$181 million compared to US$167
million during the same period in FY17, an increase of 9%. Going
forward, Qatar's North Field expansion plan paves the way for
increased transportation of gas, which may benefit the Company in
the longer run.
Al Rajhi Bank (6.3 per cent of NAV):
Established in 1957, Al Rajhi Bank is one of the largest Islamic
banks in the world with 16 per cent market share in Saudi Arabia's
financing and 18% market share in deposits. The Bank operates
through 552 branches, 4,918 ATM's, 80,515 POS terminals installed
with merchants and 236 remittance centres across the Kingdom. The
Bank has an asset base of US$95 billion and enjoys strong capital
adequacy, lower cost of borrowing, low NPAs and high provisioning
coverage. With a strong retail focus, the Bank is set to benefit
from consumption growth and increasing interest rates. For 9M18,
the Bank reported net profit of US$2.0 billion, an increase of 12.8
per cent. Growth in the Saudi economy could see increased
consumption, benefitting the Bank going forward.
Commercial Bank of Qatar (6.0 per cent of NAV):
Commercial Bank of Qatar (CBQ) is the second largest commercial
bank in Qatar. CBQ established in 1975 offering banking solutions
worldwide, with a primary focus on corporate and retail banking.
The Bank's nationwide network includes 31 full service branches and
174 ATMs. Under its diversification strategy, CBQ has expanded its
GCC footprint through strategic partnerships with associated banks
- the National Bank of Oman (NBO) in Oman, United Arab Bank (UAB)
in the UAE and subsidiary Alternatifbank in Turkey. Under the
5-year turnaround strategy, the Bank is strengthening its balance
sheet by prudently managing the risks. Bottom line is expected to
improve substantially once the high provision cycle comes to an
end, moreover, ongoing cost optimisation will also add to the
bottom-line. For 9M18, CBQ reported net profit of US$346 million
(vs. US$71 million in 9M17) reflecting effective execution of the
strategy. As of 30 September 2018, the Bank has total assets of
US$38.1 billion.
National Commercial Bank (5.7 per cent of NAV):
Founded in 1953, National Commercial Bank (NCB) is the largest
bank in Saudi Arabia by assets, second largest by network size, and
controls an asset market share of c19% domestically. The Saudi
Arabian government, via PIF, PPA and GOSI, is the largest
shareholder in NCB with a c.64.3% stake. Outside the kingdom, NCB
has presence in Turkey with c67% ownership in the second largest
Turkish participation bank, Turkiye Finans (TFKB). NCB has a robust
balance sheet with healthy capital and liquidity ratios underpinned
by a diversified business model involving retail, corporate and
treasury segments. For 2018, NCB reported c.9% growth in net profit
to US$2.8 billion (vs. US$2.6 billion in 2017). The Bank has asset
base of US$121 billion.
National Bank of Kuwait (4.0 per cent of NAV):
Founded in 1952, National Bank of Kuwait (NBK) is the largest
banking group in Kuwait, with a dominant market position in loans
and deposits. It operates through its international network with
more than 140 branches covering the world's financial centres in 15
countries. The Bank is set to benefit from demand for credit from
Kuwait's development plans and from economic recovery in Egypt. As
of 31 December 2018, NBK has total assets of US$91 billion. For
2018, the Bank reported net profit of US$1.2 million, an increase
of 15 per cent (vs. US$1.1 million in 2017).
Performance
GIF monitors its performance against the S&P GCC index and
continues to outperform this index.
GIF paid a dividend of 3 cents per share in the quarter,
contributing to a NAV fall of 4.4 per cent in 4Q18. Adjusting for
the 3 cents dividend, the NAV for the quarter would have decreased
by 2.0 per cent. For 2018, the NAV was up 8.4 per cent (after
dividend payment), ahead of the S&P GCC index which was up 8.2
per cent. Adjusting for the dividend, the GIF NAV for 2018
increased by 11.2 per cent vs. S&P GCC's total return of 12.8
per cent. Since the investment policy widened to the Gulf
Cooperation Council (GCC) focus in December 2017, NAV rose 17.5 per
cent (after dividend payments), while the S&P GCC rose 11.4 per
cent.
On 31 December 2018, the GIF share price was trading at a 11.8
per cent discount to NAV.
GIF was included in Citywire Investment Trust Insider's Top Ten
Investment Trusts for 2018 and Investment Week's Top 15 Investment
Trusts for 2018.
Outlook
GCC economies are looking forward to 2019 as a year of progress,
with all governments setting expansive budgets despite recent
softness in oil prices. The GCC is expected to grow at 3.0 per cent
in 2019 led by investment projects in Saudi Arabia, the five-year
development plan in Kuwait, ongoing preparations for Expo 2020 in
the UAE and FIFA 2022 in Qatar.
With large investments over the next few years, we expect to see
investment opportunities in sectors such as banking, infrastructure
and industrials. The key risk remains the direction of oil prices,
which if they drop further, will limit spending by governments in
the region. The Investment Adviser remains positive on growth in
the region, led by the planned infrastructure projects and the
momentum of national reforms.
Valuations
Market Market PE (x) PB (x) Dividend Yield
Cap. (%)
US$ billion 2019E 2020E 2019E 2020E 2019E 2020E
------------ ------ ------ ------ ------ -------- -------
Qatar 142.8 13.69 12.43 1.67 1.58 4.19 4.52
------------ ------ ------ ------ ------ -------- -------
Saudi Arabia 543.7 15.27 13.85 1.82 1.72 3.51 3.82
------------ ------ ------ ------ ------ -------- -------
Dubai 70.3 6.38 6.18 0.86 0.8 6.16 6.52
------------ ------ ------ ------ ------ -------- -------
Abu Dhabi 138.1 11.94 11.25 1.61 1.53 5.43 5.85
------------ ------ ------ ------ ------ -------- -------
Kuwait 97.4 10.1 8.61 1.09 1.03 5.87 6.59
------------ ------ ------ ------ ------ -------- -------
S&P GCC 911.9 13.08 11.85 1.56 1.47 4.17 4.53
------------ ------ ------ ------ ------ -------- -------
MSCI EM 13,137.4 11.75 10.43 1.43 1.32 3.14 3.46
------------ ------ ------ ------ ------ -------- -------
MSCI World 42,914.4 14.52 13.28 2.09 1.96 2.77 2.94
------------ ------ ------ ------ ------ -------- -------
Source: Bloomberg, as of 28(th) January 2019
Epicure Managers Qatar Limited Qatar Insurance Company
S.A.Q.
22 February 2019 22 February 2019
Consolidated Income Statement
(Unaudited) (Unaudited)
Note For the period from For the period from
1 July 2018 to 1 July 2017 to
31 December 2018 31 December 2017
US$'000 US$'000
------------------------------------------------------------------- ----- -------------------- --------------------
Income
Dividend income on quoted equity investments 625 -
Realised loss on sale of financial assets at fair value through
profit or loss (10,558) (4,979)
Net changes in fair value on financial assets at fair value
through profit or loss 9,962 3,392
Interest income 14 -
Total net income/(expense) 43 (1,587)
------------------------------------------------------------------- ----- -------------------- --------------------
Expenses
Investment Manager's fees 6 493 507
Other expenses 6 556 558
Total operating expenses 1,049 1,065
------------------------------------------------------------------- ----- -------------------- --------------------
Loss before tax (1,006) (2,652)
Income tax expense - -
------------------------------------------------------------------- ----- -------------------- --------------------
Retained loss for the period (1,006) (2,652)
------------------------------------------------------------------- ----- -------------------- --------------------
Basic and diluted loss per share (cents) 3 (1.09) (2.60)
------------------------------------------------------------------- ----- -------------------- --------------------
Consolidated Statement of Comprehensive Income
(Unaudited) (Unaudited)
For the period from For the period from
1 July 2018 to 1 July 2017 to
31 December 2018 31 December 2017
US$'000 US$'000
----------------------------------------------------------------------- -------------------- --------------------
Loss for the period (1,006) (2,652)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
----------------------------------------------------------------------- -------------------- --------------------
Currency translation differences (84) 184
------------------------------------------------------------------------ -------------------- --------------------
Total items that are or may be reclassified subsequently to profit or
loss (84) 184
------------------------------------------------------------------------ -------------------- --------------------
Other comprehensive income for the period (net of tax) (84) 184
------------------------------------------------------------------------ -------------------- --------------------
Total comprehensive loss for the period (1,090) (2,468)
------------------------------------------------------------------------ -------------------- --------------------
Consolidated Balance Sheet
(Unaudited) (Audited)
Note At 31 December 2018 At 30 June 2018
US$'000 US$'000
------------------------------------------------------- ----- -------------------- ----------------
Current Assets
Financial assets at fair value through profit or loss 1 105,761 104,619
Other receivables and prepayments 654 2,683
Cash and cash equivalents 12 1,560 5,380
------------------------------------------------------- ----- -------------------- ----------------
Total current assets 107,975 112,682
======================================================= ===== ==================== ================
Equity
Issued share capital 925 925
Reserves 4 105,994 109,858
Total equity 106,919 110,783
------------------------------------------------------- ----- -------------------- ----------------
Current liabilities
Other creditors and accrued expenses 5 1,056 1,899
Total current liabilities 1,056 1,899
------------------------------------------------------- ----- -------------------- ----------------
Total equity & liabilities 107,975 112,682
======================================================= ===== ==================== ================
Consolidated Statement of Changes in Equity
Share Capital Distributable Reserves Retained Earnings Other Reserves Total
(note 4)
US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Balance at 01 July 2018 925 76,198 32,331 1,329 110,783
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Total comprehensive income
for the period
Loss for period - - (1,006) - (1,006)
Other comprehensive income
Foreign currency translation
differences - - - (84) (84)
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Total other comprehensive
expense - - - (84) (84)
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Total comprehensive loss for
the period - - (1,006) (84) (1,090)
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Contributions by and
distributions to owners
Dividends paid - - (2,774) - (2,774)
Shares subject to tender
offer
Tender offer expenses - - - - -
Shares in treasury cancelled - - - -
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Total contributions by and
distributions to owners - - (2,774) - (2,774)
------------------------------ -------------- ----------------------- ------------------ --------------- --------
Balance at 31 December 2018 925 76,198 28,551 1,245 106,919
------------------------------ -------------- ----------------------- ------------------ --------------- --------
* Retained earnings include realised gains and losses on the
sale of assets at fair value through profit or loss and net changes
in fair value on financial assets at fair value through profit or
loss. The level of dividend is calculated based only on a
proportion of the dividends received during the year, net of the
Company's attributable costs.
Share Capital Distributable Reserves Retained Earnings Other Reserves Total
(note 4)
US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Balance at 01 July 2017 1,032 86,486 25,425 1,227 114,170
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total comprehensive income
for the period
Loss for period - - (2,652) - (2,652)
Other comprehensive income
Foreign currency translation
differences - - - 184 184
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total other comprehensive
income - - - 184 184
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total comprehensive loss for
the period - - (2,652) 184 (2,468)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Contributions by and
distributions to owners
Dividends paid - - - - -
Shares subject to tender
offer (103) (10,205) - 103 (10,205)
Tender offer expenses - (83) - - (83)
Shares in treasury cancelled (4) - - 4 -
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total contributions by and
distributions to owners (107) (10,288) - 107 (10,288)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Balance at 31 December 2017 925 76,198 22,773 1,518 101,414
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Consolidated Statement of Cash Flows
(Unaudited) (Unaudited)
Note For the period from For the period from
1 July 2018 to 1 July 2017 to
31 December 2018 31 December 2017
US$'000 US$'000
--------------------------------------------------------------- ----- -------------------- --------------------
Cash flows from operating activities
Purchase of investments (83,743) (33,156)
Proceeds from sale of investments 83,177 37,002
Dividends received 696 -
Interest received 14 -
Operating expenses paid (1,142) (1,071)
Commission rebate - -
Net cash generated from operating activities (998) 2,775
--------------------------------------------------------------- ----- -------------------- --------------------
Financing activities
Dividends paid (2,774) -
Cash used in tender offer - (10,205)
Tender offer expenses - (83)
Net cash used in financing activities (2,774) (10,288)
--------------------------------------------------------------- ----- -------------------- --------------------
Net (decrease)/increase in cash and cash equivalents (3,772) (7,513)
Effects of exchange rate changes on cash and cash equivalents (48) 473
Cash and cash equivalents at beginning of period 5,380 10,670
--------------------------------------------------------------- ----- -------------------- --------------------
Cash and cash equivalents at end of period 12 1,560 3,630
--------------------------------------------------------------- ----- -------------------- --------------------
Notes to the Interim Consolidated Financial Statements
1 Investments
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
31 December 2018 financial assets at fair value through profit
or loss: all quoted equity securities
Security name Number US$'000
-------------------------------------- ----------- --------------------
Qatar Gas Transport 1,834,196 9,030
Al Rajhi 292,044 6,777
Commercial Bank of Qatar 599,505 6,420
National Commercial Bank 483,613 6,165
National Bank of Kuwait 1,564,594 4,286
Barwa Real Estate 379,761 4,133
Doha Bank 673,379 4,079
Qatar Electricity & Water Co 80,432 4,041
Samba Financial Group 472,603 3,954
Gulf International Services 782,412 3,648
Qatar International Islamic Bank 195,294 3,546
Saudi British Bank 366,579 3,184
Banque Saudi Fransi 372,953 3,110
Dubai Islamic Bank 1,905,465 2,583
Saudi Basic Industries 80,849 2,499
Riyad Bank 466,181 2,459
Saudi Kayan Petrochemical Co 625,000 2,195
Emirates NBD USD Stock 825,000 1,976
Bank AlJazira 515,000 1,959
Humansoft Holding 181,556 1,931
Masraf Al Rayan 170,153 1,930
Industries Qatar 51,204 1,878
Emaar Properties Company 1,520,283 1,709
Emirates National Bank of Dubai 703,029 1,684
Kuwait International Bank 1,893,683 1,642
Almarai Co. Ltd 125,000 1,599
Saudi Cement Company 119,471 1,536
Mouwasat Medical Services Co 70,000 1,503
Qatar Navigation 79,654 1,444
United Electronics Company 85,000 1,440
Arab National Bank - Shamal 169,154 1,438
Saudi Arabian Fertiliser Co 61,281 1,254
Ahli United Bank 1,820,000 1,213
Yanbu Cement 175,000 1,119
National Central Cooling Company 2,003,135 905
Dallah Healthcare 60,000 900
Bupa Arabia Co 35,379 764
Yanbu Nat Petroche 42,178 716
Rabigh Refining and Petrochemical Co 140,000 712
Abdullah Al Othaim Markets Co 36,349 679
Saudi Industrial Investment Group 110,000 670
Advanced Petrochemicals 49,553 656
Widam Food Company 20,563 395
--------------------------------------- ---------- -----------------
105,761
--------------------------------------- ---------- -----------------
2 Net Asset Value per Share
The net asset value per share as at 31 December 2018 is
US$1.1564 per share based on 92,461,242 ordinary shares in issue as
at that date (30 June 2018: US$1.1982 based on 92,461,242 ordinary
shares in issue.
3 Loss per Share
Basic and diluted loss per share is calculated by dividing the
loss attributable to equity holders of the Group by the weighted
average number of ordinary shares in issue during the period:
31 December 2018 31 December 2017
----------------------------------------------------------------- ----------------- -----------------
Loss attributable to equity holders of the Company (US$'000) (1,006) (2,652)
Weighted average number of ordinary shares in issue (thousands) 92,461 102,065
----------------------------------------------------------------- ----------------- -----------------
Basic loss per share (cents per share) (1.09) (2.60)
----------------------------------------------------------------- ----------------- -----------------
4 Other Reserves
Distributable Retained earnings Foreign currency Capital redemption Total
reserves translation reserve reserve
US$'000 US$'000 US$'000 US$'000 US$'000
--------------------- --------------------- ------------------ -------------------- -------------------- --------
Balance at 1 July
2018 76,198 32,331 (221) 1,550 109,858
Foreign exchange
translation
differences - - (84) - (84)
Retained loss for
period - (1,006) - - (1,006)
Dividends paid - (2,774) - - (2,774)
Balance at 31
December 2018 76,198 28,551 (305) 1,550 105,994
--------------------- --------------------- ------------------ -------------------- -------------------- --------
5 Trade and other payables
31 December 2018 30 June 2018
US$'000 US$'000
------------------------------- ----------------- -------------
Due to broker 684 1,456
Management fee payable 261 267
Administration fee payable 58 57
Accruals and sundry creditors 53 119
------------------------------- ----------------- -------------
1,056 1,899
------------------------------- ----------------- -------------
6 Charges and Fees
31 December 2018 31 December 2017
US$'000 US$'000
Investment Manager's fees (see below) 493 507
Performance fees (see below) - -
------------------------------------------------ ----------------- -----------------
Administrator and Registrar's fees (see below) 113 114
Custodian fees (see below) 65 53
Directors' fees and expenses 160 167
Directors' insurance cover 16 15
Broker fees 27 26
Other 175 183
------------------------------------------------ ----------------- -----------------
Other expenses 556 558
------------------------------------------------ ----------------- -----------------
Investment Manager's fees
Annual fees
The Investment Manager is entitled to an annual fee of 0.90% of
the net asset value of the Company this is subject to termination
on 31 October 2019.
Management fees for the period ended 31 December 2018 amounted
to US$493,399 (31 December 2017: US$506,755).
Custodian fees
The Custodian is entitled to receive fees of US$7,200 per annum
and US$25 per processed transaction from Gulf Investment Fund
PLC.
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 (GCCC excluding Qatar).
Custodian and sub-custodian fees for the period ending 31
December 2018 amounted to US$64,680 (31 December 2017:
US$53,095).
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 receives an additional fee
of GBP1,200 per month for providing monthly valuation data to the
Association of Investment Companies.
The Administrator assists in the preparation of the financial
statements of the Group and provides general secretarial
services.
Administration fees paid for the period ending 31 December 2018
amounted to US$113,455 and US$31,547 for additional services (31
December 2017: US$113,626 and US$33,032 respectively).
Directors' Remuneration
The maximum amount of remuneration payable to the Directors
permitted under the Articles of Association is GBP200,000 per
annum.
Nick Wilson as non-executive chairman is entitled to receive an
annual fee of GBP52,500. He also receives an additional fee in
respect of his work regarding the Company's share buy-back
programme of GBP10,000 per annum.
Paul Macdonald as non-executive director and chairman of the
audit committee is entitled to receive GBP37,500 per annum.
David Humbles and Neil Benedict in their capacity as
non-executive directors receive GBP35,000 each per annum.
The Directors are each entitled to receive reimbursement of any
expenses incurred in relation to their appointment. Total fees and
expenses paid to the Directors for the period ended 31 December
2018 amounted to US$160,315 (31 December 2017: US$167,448).
7 Taxation
Isle of Man taxation
The Company is resident for taxation purposes in the Isle of Man
by virtue of being incorporated in the Isle of Man and is
technically subject to taxation on its income but the rate of tax
is zero. The Group is required to pay an annual corporate charge of
GBP250 per annum.
The Company became registered for VAT from 1 February 2011.
Qatar/United Arab Emirates/Saudi Arabia taxation
The Company invests in equities in the GCC region. As at 31
December 2018 the Company held investments in Qatar, United Arab
Emirates (U.A.E.), Saudi Arabia and Kuwait.
It is the intention of the Directors to conduct the affairs of
the Company so that it is not considered to be either resident or
doing business in any of these countries.
With the exception of Saudi Arabia, none of these countries
impose withholding tax on dividend distributions to non-residents.
Saudi Arabia imposes a 5% withholding tax on dividend distributions
to non-residents.
Capital gains made by the Company on disposal of shares in
Qatar, U.A.E., Saudi Arabia and Kuwait are not subject to tax in
those countries.
There is no stamp duty or equivalent tax on the transfer of
shares in Qatar/U.A.E./Saudi Arabia/Kuwait companies.
8 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
1(a)). 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. Fees paid and payable to the Investment
Manager are disclosed in note 6.
Epicure Managers Qatar Limited is a wholly owned subsidiary of
the Investment Adviser, Qatar Insurance Company S.A.Q.
9 The Company
Gulf Investment Fund plc (formerly Qatar Investment Fund plc)
(the "Company") was incorporated and registered in the Isle of Man
under the Isle of Man Companies Acts 1931-2004 on 26 June 2007 as a
public company with registered number 120108C.
Pursuant to an Admission Document dated 25 July 2007 there was
an original placing of up to 171,355,000 Ordinary Shares of 1 cent
each, with Warrants attached on the basis of 1 Warrant to every 5
Ordinary Shares. Following the placing on 31 July 2007, 171,355,000
Ordinary Shares and 34,271,000 Warrants were issued; the 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 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 distributable reserves.
The Shares of the Company were admitted to trading on the Main
Market of the London Stock Exchange on 13 May 2011.
On 8 December 2017 the Company's shareholders approved a change
in investment policy from a largely Qatar focussed strategy to one
which focusses more on a broader Gulf Co-operation Council
strategy.
During the period 1 July 2018 to 31 December 2018, the Company
purchased none of its ordinary shares.
The shareholders approved a dividend of 3.0 cents per share on 7
November 2018. This was paid to shareholders on 21 December
2018.
The Company's agents and the Manager perform all significant
functions. Accordingly, the Company itself has no employees.
10 The Subsidiary
The Company has the following subsidiary company:
Country of incorporation Percentage of shares held
---------------------------------------------- -------------------------- --------------------------
Epicure Qatar Opportunities Holdings Limited British Virgin Islands 100%
---------------------------------------------- -------------------------- --------------------------
11 Significant Accounting Policies
The Interim Report of the Company for the period ending 31
December 2018 comprises the Company and its subsidiary (together
referred to as the "Group"). The accounting policies applied by the
Group in these condensed consolidated interim financial statements
are the same as those applied by the Group in its consolidated
financial statements for the year ended 30 June 2018, with the
exception of the adoption of IFRS 9, Financials Instruments.
However, the adoption of this new accounting standard, as from 1
July 2018, has not had a significant effect on the measurement of
financial instruments in the current or prior period. In terms of
classification, cash, due from broker and receivables are now
classified as at amortised cost (previously as loans and
receivables) and equity investments are now classified as
mandatorily at fair value through profit and loss (previously
designated at fair value through profit and loss on initial
recognition). The adoption of IFRS 9 has not had a significant
effect on the accounting policies related to financial liabilities.
The interim consolidated financial statements are unaudited.
11.1 Basis of presentation
These financial statements have been prepared in accordance with
International Financial Reporting Standard ("IFRS") IAS 34 Interim
Financial Reporting. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
as at and for the year ended 30 June 2018.
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
11.2 Segment reporting
The Group has one segment focusing on maximising total returns
through investing in quoted securities in 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.
12 Cash and Cash Equivalents
31 December 2018 30 June 2018
US$'000 US$'000
--------------------------- ----------------- -------------
Bank balances 1,560 5,380
Cash and cash equivalents 1,560 5,380
--------------------------- ----------------- -------------
13 Post Balance Sheet Events
There were no post balance sheet events to report.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BUGDDGXDBGCD
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