Half-year Report

RNS Number : 5919X

Qatar Investment Fund PLC

23 February 2017

 

23 February 2017

Qatar Investment Fund PLC

Interim Results for 6 months to 31 December 2016

Qatar Investment Fund

Qatar Investment Fund Plc's ("QIF") net asset value per share ("NAV") rose 2.89% to $1.25 in the six months compared to the Qatar Exchange (QE) +5.6%.  QIF's share price +3.75% in the period.

Annual dividend of 4.0c per share (2015: 4.0c) paid to shareholders on 31 January 2017 (a yield of 3.7%)

Tender offer for 12% of the fund completed at $1.20 per share

Qatar

Qatar's diversified economy is now 65% non-hydrocarbon, with non-hydrocarbon sectors growing faster than the economy as a whole.

Income from visitors is rising on average 45% per annum.

Qatar's population growing at 8.9%.

While lower oil prices meant Qatar's GDP growth slowed to 2.3% in the 9 months to September 2016, the IMF stated Qatar's policy response has been adequate, with cuts to current expenditures and focus on non-oil revenues.

Qatar's budget is based on an oil price of $45 (the current oil price is $57).

Qatar has announced $12.7 billion of new infrastructure contracts for 2017.

ENDS

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 the Board, I am pleased to present the interim results for Qatar Investment Fund Plc for the six months ending 31 December 2016.

Results

During the six months ending 31 December 2016, Net Asset Value per share (NAV) rose by 2.89% compared to a rise in the Qatar Exchange Index of 5.6% and an increase of 3.4% in the MSCI Emerging Markets Index. Following a slight narrowing of the discount at which the shares trade to NAV, the shares rose 3.75%, from US$1.03 at 30 June 2016 to US$1.07 at 31 December 2016. At the Annual General Meeting on 17 November 2016 a dividend of 4.0c per share was approved by shareholders and paid to ordinary shareholders on the register as at 23 December 2016.

Although the oil price continued its recovery during the period, forward GDP growth estimates were revised marginally lower, as the government sought to minimise the first budget deficit for 15 years. The banking sector, including financial services, remains our largest allocation with a 42.4% exposure on 31 December 2016. At 31 December 2016 we had a total of 23 holdings, 16 in Qatar and 7 in the UAE.

Tender offer

As announced by the Company on 13 April 2015, the Directors resolved to put forward a proposal to implement a tender offer in the fourth quarter of 2016, being a graduated tender offer of up to 15% of the Company's issued share capital at the record date (excluding treasury shares). The size of the tender offer was determined by the average discount to NAV per share at which the shares traded in the 12-month period from 8 October 2015 to 6 October 2016. On 18 November, the Board announced that the tender offer for the purchase of up to 14,045,544 (representing 12% of the shares in issue as at 18 October 2016 excluding treasury shares) closed at 1.00 p.m. on 14 November 2016.

A total of 13,736,411 shares were validly tendered under the Basic Entitlement of the Tender Offer. This equated to approximately 11.7% of the Company's shares in issue as at 18 October 2016 (excluding treasury shares), and approximately 97.8% of the shares available under the Tender Offer. Excess tenders were satisfied to the extent of a further 309,133 shares, representing 0.47% of the excess shares tendered.

In total, 14,045,544 shares were validly tendered under the Tender Offer, representing 12.0% of the Company's shares in issue as at 18 October 2016 (excluding treasury shares), all of which were repurchased by the Company and cancelled.

Managing the discount between the share price and NAV

Discount management remains a priority for the Board and as part of this we continued to make use of the authority granted by shareholders to buy back the Company's shares. During the period 1 July 2016 to 31 December 2016, the Company purchased 331,514 of its ordinary shares for treasury. 963,198 shares had been repurchased in the period ended 31 December 2015 for treasury but had been held for over a year and were therefore cancelled in the current financial period. The buy-backs are effected through distributable reserves.

In addition to the share buybacks, the Board works with our Investment Manager, Company broker and an analyst, as well as with the financial press in order to maintain institutional and private investor awareness of both Qatar and demand for the Company's shares. Once again, the Company received significant positive media coverage during the period.

Related Party Transactions

Details of related party transactions are contained in the annual report as well as being addressed in note 14 of this interim report.

Post balance sheet events

Details of these can be found in note 15 following the accompanying financial statements.

Outlook, risks and uncertainties

The fall in oil and gas prices will continue to impact the Qatari economy as certain lower priority projects may be deferred. However, Qatar is the world's largest exporter of LNG and although lower prices have been negotiated, Qatar is defending its market share. In addition, the diversification policies of government over recent years has placed Qatar in a strong position relative to other Gulf countries with arguably over 65% of GDP currently derived from the non-hydrocarbon sector. This, combined with continuing population growth, improving demographics and an extensive infrastructure pipeline, should see the economy of Qatar continue to grow.

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 Qatari economy, as growth in the non-hydrocarbon sector helps to offset the slowdown in the hydrocarbon sector. Widespread infrastructure spending underpins economic growth with valuations and dividend yields remaining attractive.

Nicholas Wilson

Chairman

22 February 2017

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 2016 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 2017

Report of the Investment Manager and the Investment Adviser

Regional Equity Market Overview

The performance of the GCC markets is shown below:

Indices	30-Jun-16	29-Dec-16	% Change
Qatar (DSM)	9,885	10,437	5.6%
Saudi (TASI)	6,500	7,210	10.9%
Dubai (DFMGI)	3,311	3,531	6.6%
Abu Dhabi (ADI)	4,498	4,546	1.1%
Kuwait (KWSE)	5,365	5,748	7.1%
Oman (MSI)	5,777	5,783	0.1%
Bahrain (BAX)	1,118	1,220	9.1%

Source: Bloomberg

2016 was the year of shocks and unforeseen results, with the UK voting for Brexit and Trump registering an unexpected win in the US elections. OPEC member states agreed to reduce oil production by 1.2 million barrels to 32.5 million barrels per day and the US Federal Reserve raised its interest rate for the second time in a decade by 25 basis points (bps) in mid-December on indications that the US economy is expanding at a healthy pace. Globally, markets in general closed higher compared to the previous year, with the MSCI World Index touching a 17-month high level in December.

Oil prices, which reached a decade low early in 2016, surged later in the year after the oil output agreement was sealed following rigorous negotiations. Oil rose to an 18-month high by year-end and this helped lift GCC equity markets. The Qatari market edged up 0.1% to close at 10,437 points. The Telecom sector gained the most, up 22.3%, followed by Insurance, up 10.0%. Banking gained 3.8% and Transportation 4.8%. Industrials rose 3.8%, underpinned by an 8.4% gain in December, amid the surge in oil prices. Consumer and Real Estate sectors declined 1.7% and 3.8%, respectively. Dubai was the best performer among GCC markets, up 12.1%. The Bloomberg GCC index rose 4.3%.

During the first half of 2016, GCC markets were volatile, with only Oman (up 6.9%), Dubai (up 5.1%) and Abu Dhabi (up 4.4%) posting gains. The Qatar market was down 5.2% while Bahrain (down 8.0%) was the worst performer.

However by the end of the second half of 2016, all GCC markets had posted gains as oil prices reacted to the agreement between OPEC and non-OPEC oil producers to cut output in 2017. Saudi Arabia was the strongest performer in the second half, up 10.9%, after the successful raising of USD 17.5 billion in the largest emerging markets bond issuance to date. The Bahrain and Kuwait equity markets followed Saudi Arabia, up 9.1% and 7.1% respectively. Dubai, Abu Dhabi and Oman were up 6.6%, 1.1% and 0.1% respectively. Qatar market was up 5.6%, after the successful inclusion in FTSE "secondary emerging market" category. Overall, in the second half of 2016 the Bloomberg GCC index rose 8.2%.

Performance of GCC markets since June 2014

In the period from the end of June 2014 (when oil prices started falling) to end December 2016, the Qatari market was resilient compared to most other GCC markets.

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Performance of Markets since end June 2014.

Qatar's resilience during the period can be attributed to the strong growth in the non-hydrocarbon sector, fuelled by investment spending, population growth and prudent fiscal planning. In this period, the price per barrel of Brent crude fell 50.0%. Over the period, Qatar eased 9.2% while Saudi dropped 24.2%, Kuwait and Oman fell 17.5% each, and Bahrain dropped 14.5%.

The Investment Adviser remains optimistic about Qatar due to its strong macroeconomic fundamentals, ongoing infrastructure spending, rising population and superior growth prospects in the non-hydrocarbon sector. The Qatari government is committed to continue its infrastructure investment spending programme ahead of the 2022 FIFA World Cup and in line with the Qatar National Vision 2030.

On the ground: period of recovery

During 2016 the GCC markets witnessed high volatility from international events and weak oil prices. Oil prices rebounded sharply from their trough in early 2016. The WTI spot price fell close to USD 30 a barrel in February 2016, losing nearly three-quarters of its value since June 2014. However, by end of the year, prices rebounded nearly 80% from the February lows. Oil prices are expected to recover at a more measured 5-10% pace over the coming two years. We expect the recent OPEC deal to help bring the oil market back into equilibrium in early 2017, lead to a further recovery in oil prices and help ease the deficit pressure on GCC government finances. At an oil price of USD 60, it is estimated that Saudi Arabia needs another USD 31.1 billion in fiscal cutbacks to reduce the deficit, just shy of 3% of GDP, despite having adjusted more than 9% over the last two years, mainly by trimming capital expenditure.

The UAE and Qatar would not need to consolidate and reduce their deficit any further with both countries targeting higher capital expenditure to stimulate their economies. Kuwait may end up with a surplus. However, Oman and Bahrain would still need to continue with austerity steps to reduce their deficits. Broadly, the outlook seems to be a lot better, particularly with the recovery in oil prices expected to continue.

Qatar's economic growth slowed to 2.3% during the first nine-months of 2016, reflecting lower hydrocarbon prices. The IMF has indicated that the policy response of the government has been adequate, with cuts to current expenditures and increased focus on raising non-oil revenues. Qatar financed its fiscal deficit mainly through domestic and foreign borrowing without drawing down on its sovereign wealth fund. Qatar has raised a total of USD 14.5 billion of external debt and issued USD 2.6 billion of domestic bonds and Sukuk (Islamic bonds). The IMF highlights that Qatari banks remain sound and well capitalized, despite liquidity pressures, and that the non-performing loan ratio of banks in the nation is the lowest in the GCC region.

The IMF estimates Qatar's Real GDP growth to moderate to about 2.7% in 2016 and reach 3.4% in 2017, led by growth in the non-hydrocarbon sector due to World Cup-related spending and the added output from the new Barzan gas project. The IMF expects continuing fiscal adjustments during 2017-18, further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of VAT to drive inflation, which is expected to moderate back to low levels subsequently.

Qatar budget 2017 - Qatar's fiscal deficit set to decline in 2017

Qatar's 2017 budget is in line with the Qatari vision to achieve a self-sustaining economy as laid down in the Vision 2030. The budget is committed to reducing Qatar's planned deficit by 38.9%, from QAR 46.5 billion in 2016 to QAR 28.4 billion in 2017. The deficit is expected to decline due to a pickup in government revenues and continued rationalisation of current expenditure. Capital spending is expected to increase in 2017 to support Qatar's preparation for the World Cup and economic diversification objectives. The government has also outlined in the budget an intent to accelerate investment and infrastructure spending in the coming years.

The budget is based on an average oil price of USD 45 per barrel with revenues estimated at USD 46.7 billion (QAR 170.1 billion), up 9.0% from the previous year. The expenditure is estimated at USD 54.5 billion (QAR 198.5 billion), 2% lower from 2016. In the last fifteen years, 2016 was the first year when Qatar saw a budget deficit.

With Brent crude trading around ~USD 57 a barrel at the end of 2016 and expected to remain buoyed after OPEC and Non-OPEC countries recently agreed to slash output, Qatar could see a budget surplus in 2017.

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Qatar Budget in 2017.

Government led infrastructure spending relating to FIFA World cup 2022 will be the main driver for economic growth, ensuring that Qatar's GDP growth continues to outperform its GCC peers through to 2022. According to IMF estimates, Qatar is expected to grow at 3.4% in 2017 which is the highest in the GCC region.

Qatar's Budget 2017 has earmarked spending of ~USD 25.6 billion (47% of total expenditure) on major projects, including projects related to the FIFA World Cup 2022. About USD 23.9 billion (~44% of total expenditure) is earmarked for key sectors such as health, education, infrastructure and transport.

The budget has allocated USD 12.7 billion (QAR 46.1 billion) to new projects in 2017, which include projects related to infrastructure and transportation (USD 6.9 billion), FIFA World Cup 2022 (USD 2.3 billion), health and education (USD 1.6 billion) and others (USD 1.9 billion).

USD billion	2016	2017	Change %
Capital Expenditure	26.0	26.8	3.2%
Major projects	24.9	25.6	2.6%
Minor projects	1.0	1.2	16.2%
Current Expenditure	29.7	27.7	-6.6%
Wages and Salaries	13.6	13.2	-3.0%
Other Current expenditure	16.1	14.5	-9.6%
Total Expenditures	55.6	54.5	-2.0%

   Source: Qatar MoF. Note: 2016 numbers are budgeted

Transportation and infrastructure projects represent 21.2% of total budgeted expenditure with investments in Doha Metro, Hamad port and other road projects. These investments will play a supportive role in developing the non-oil sectors of the economy.

Health related projects have been allocated a budget of USD 6.7 billion, up 17.2% from 2016. Key projects include completion of Sidra Medical Research Centre, expanding services of Hamad Medical Corp. and a planned laborers' hospital in the industrial area. Education has also been emphasized, with USD 5.7 billion expected to be spent on constructing new schools, Qatar University and other projects and is at a similar level to 2016 spending.

In order to avoid pressure on liquidity in the domestic banking sector and to maintain its reserves and sustain investments, Qatar will continue to raise money from local and international bond markets in 2017 to finance its budget deficit.

The Investment Adviser believes that the current positive outlook for the oil market and efficiency in current expenditure will help control the fiscal deficit. Infrastructure spending should continue to fuel non-hydrocarbon growth and attract new expatriate workers, supporting domestic consumption.

Impact of Fed Rate hike on GCC region

The US Federal Reserve raised its benchmark interest rate for the second time in a decade by 25 basis points (bps) on 14^th December 2016 on indications that the American economy is expanding at a healthy pace and amid President-elect Donald J. Trump's plans for boosting federal spending. In light of the Fed action, GCC central banks followed suit and raised rates.

The Investment Adviser expects Qatari economic growth to pick up in 2017, amid the recovery in oil prices and a strong growth in the non-hydrocarbon sector. This should help the economy to face the rate hike over the course of the year. Qatari banks are expected to witness higher credit growth led by upcoming projects related to the FIFA 2022 World Cup & the Qatar National Vision 2030. At the same time, banks are also expecting liquidity conditions to ease on higher government revenue due to the rise in oil prices. QCB's data shows that banks in the nation are in good shape, with credit growth up 12.1% and deposits up 11.8% to the end of December 2016.

OPEC and Non-OPEC producers agreement

There are expectations that oil prices will stabilize at about USD 60 per barrel as levels above these could encourage increased shale production in the US.

In the Vienna meeting, OPEC member countries agreed to collectively reduce oil production by 1.2 million barrels per day to 32.5 million barrels per day. Meanwhile, 11 non-OPEC oil producers have agreed to decrease their daily oil production level by 558,000 barrels per day (Russia to reduce output by 300,000 barrels a day, and the other 10 countries to cut output by 258,000 barrels a day). The implementation of the decision to rebalance the oil market will start from January 2017 and will be valid for 6 months. OPEC will meet again on 25^th May 2017, at which point it may extend the cuts by another six months.

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting OPEC Crude Oil Production Levels.

The improvement in oil prices is expected to raise government revenue, lower budget deficits and boost the economies of the GCC countries. Stabilization in the oil price will help ease liquidity conditions, support the hydrocarbon sector and increase credit demand in the region. With Qatar successfully diversifying the economy away from the oil sector and focusing on the non-hydrocarbon sector, the impact from higher oil prices will enable the nation to accelerate this transition. The Investment Adviser maintains its positive outlook for the Qatari economy not only because of the improving oil price, which will increase government revenue and infrastructure spending, but also due to the strong expected growth in the non-hydrocarbon sectors.

Macroeconomic Update

According to the Ministry of Development Planning and Statistics (MDPS), the Qatari economy continued to grow in Q3 2016, with GDP rising 3.7% compared to Q3 2015. The non-hydrocarbon sector GDP grew 4.7%, mainly driven by expansion in construction, transportation, financial services and real estate activities. The hydrocarbon sector GDP grew 2.7% YoY despite lower oil prices.

Going forward, the Investment Adviser believes that Qatar's real GDP growth is set to remain robust, driven by strong growth in the non-hydrocarbon sector, as investment spending remains strong. Amid current oil prices, MDPS expects Qatar to remain the fastest growing economy in the MENA region in 2016 and 2017, growing by 3.9% and 3.8%, respectively, supported by growth in the non-hydrocarbon sector. Moreover, the Barzan gas project should help in raising hydrocarbon output once it is fully operational in 2017.

IMF has estimated Qatar to grow at 3.4% in 2017 which is the highest in the GCC region, as development of major projects in the run-up to the 2022 FIFA World Cup would continue to have a positive impact on the economy. QNB Group also expects real GDP growth in Qatar to remain strong at 3.8% in 2017 and 4.1% in 2018.

Qatar's population grew 8.9% between December 2015 and November 2016, to reach 2.64 million. Population growth is expected to remain strong in coming years, as large project spending related to the 2022 FIFA World Cup and other projects would continue to attract expatriates. Thus, steady growth in population and high level of personal consumption is expected to continue to benefit domestic consumer and services sector companies.

Recent Developments

International Credit rating agencies affirmed their ratings on Qatar with Stable Outlook

Credit rating agencies Fitch and S&P are positive on Qatar. Fitch Ratings affirmed Qatar's long-term foreign and local-currency IDRs at 'AA'. It also affirmed 'AA' rating on Qatar's senior unsecured foreign currency bonds. S&P Global ratings affirmed its 'AA' long-term and 'A-1+' short-term sovereign credit ratings.

According to Fitch, 'AA' ratings reflect Qatar's large sovereign assets, its fiscal adjustment efforts, large hydrocarbon endowment and one of the world's highest GDP per capita ratio.

Projects worth over QAR 38 billion are underway

As a part of Ashghal's plan to develop the country's expressways, projects amounting to more than QAR 38 billion are progressing in Qatar. As part of its ambitious Expressway Project, construction projects worth QAR 49.8 billion have been awarded by Ashghal. As per the Annual report of Ashghal, currently 11 Expressway Projects are in different stages of construction and 10 projects are in the design phase.

Qatar Stock Exchange commenced margin trading activity from 5^th October 2016

In an effort to boost liquidity in the market and provide new financing channels for investors, the Qatar Stock Exchange (QSE) introduced margin trading from 5th October 2016. This facility is applicable for 20 stocks.

2022 FIFA World Cup Projects to be delivered on time

A senior official from the Supreme Committee for Delivery and Legacy has confirmed that all projects related to the Qatar 2022 FIFA World Cup will be delivered on time. Ali Ghanim al-Kuwari - Executive Director, further stated that work on the Qatar 2022 projects is proceeding as planned and all the projects are in an advanced stage of design and implementation. The first World Cup stadium, Khalifa International, is expected to be delivered at the beginning of 2017.

Qatar's insurance market to grow at a CAGR of 18.0% till 2020

In its annual report, Oxford Business Group estimated that Qatar's insurance market will grow at a CAGR of 17.8% till 2020, making it the fastest-growing insurance market in the GCC region.

Qatargas signed an agreement to supply 1.3 mtpa of LNG to Pakistan for 20 years

Qatargas, the world's largest producer of LNG, signed a 20 year sale and purchase agreement with Global Energy Infrastructure Limited (GEIL) to supply 1.3 mtpa of LNG to Pakistan, with provision for the volume to increase to 2.3 mtpa.

Qatar named among the top 20 best performing economies in the world

Qatar is ranked 2^nd in the Gulf region and 18^th globally in the World Economic Forum's Global Competitiveness Index 2016-17. Although it slipped from its top position in the GCC region, it topped the region in efficiency in many areas such as macroeconomic environment, financial market development, innovation, health and primary education, and higher education and training.

Qatar labour reforms will benefit expatriates

The Qatari government has introduced changes in labour laws effective from 13 December, 2016 which aims to make changing jobs and leaving the country easier for Qatar's 2.1 million salaried workforce.

A grievance committee will now be formed to which expat workers can appeal in case of denial of consent from the current employer. Moreover, penalties have also been increased to QAR 25,000 from QAR 10,000 on employers who confiscate workers' passports. The requirement to obtain a No Objection Certificate ("NOC") from the current employer is still in place. However, workers on fixed-term contracts can now change jobs without a NOC after their contract is completed. Those on open-ended contracts must work for five years before being able to do so. All foreigners would continue to need the labor ministry approval before taking up a new employment.

The Investment Adviser expects that the recent changes to the labour law are a positive development. In light of the fact that Qatar's workforce is expected to reach 2.5 million as it prepares for the FIFA World Cup 2022, the new labour laws could be expected to play a significant role in attracting new and skilled workers and contribute to the economy.

New joint venture between Qatar Port Management Company and Milaha to manage Hamad Port

Qatar Port Management Company and Milaha, with 51% and 49% stake respectively, will establish a new joint venture 'QTerminals' to manage operations at Hamad Port, which is set to become a regional commercial hub and greatly reduce transportation costs and time. The first phase of Hamad Port commenced operations on 1^st December, 2016 with a handling capacity of two million twenty-foot equivalent units per annum. The port is expected to be completed by 2020 with a handling capacity of 7 million containers per year on completion of all the phases.

Hamad Port will increase Qatar's imports, exports and international maritime trade and would stimulate growth and economic diversification across the region. It will also be connected to Gulf Cooperation Council countries through a road and rail network.

The Qatar Investment Authority to invest USD 35 billion in US over next five years

The Qatar Investment Authority (QIA) has announced that it will invest USD 35 billion in the US over the next five years (2016-21). The US and Qatar enjoy a robust and growing economic and commercial partnership. Bilateral trade is expected to exceed USD 7.5 billion in 2016, and Qatar is among the top four markets in the Middle East for US exports of goods and services.

QIA to invest USD 2.6 billion in Rosneft deal

Glencore PLC and QIA finalized a deal to take a one-fifth stake in the state-owned Russian oil giant Rosneft for about USD 10.8 billion. QIA will invest USD 2.6 billion and Glencore USD 312 million for equal stakes in a special purpose vehicle that is buying a 19.5% stake in Rosneft from its government-owned parent company Rosneftegaz. The deal will help improve ties between Qatar and Russia at a time when Russia is expected to improve its relations with the United States after Donald Trump takes over as the President.

Second phase of Qatar's FTSE upgrade to take place in March 2017

Qatar was upgraded to "Secondary Emerging Market" category from its earlier status of "Frontier" by FTSE Russell in its semi-annual review in September 2016. Qatar's inclusion in the index is in two equal tranches - the first in September 2016 and the second in March 2017. According to Arqaam Capital, following this upgrade, Qatar Exchange will see around USD 370 million of passive inflows.

In Qatar, income generated from visitors amounted to QAR 54.6 billion for the year 2015

The income derived from services to 'non-residents' (visitors) in Qatar amounted to QAR 54.6 billion in 2015, up from QAR 11 billion in 2010, with an average annual growth of 44.9%, according to the Ministry of Economy and Commerce (MEC). The economic activities related to tourism income grew more than nine-fold between 2010 and 2015, and amounted to QAR 18.3 billion in 2015, representing 33.6% of the total "services exports" in the same year. Qatar hopes to attract 4 million visitors by 2020, according to Euromoney Institutional.

It is essential for Qatar to project itself as a tourist friendly country to attract visitors to FIFA 2022 and ensure its success. Qatar has been hosting a number of cultural and sporting events to achieve its goal of diversifying the economy away from the oil and gas sector. The continuing investments in creating a solid infrastructure will pave the way for a world-class tourism industry.

Qatari bank Masraf Al Rayan, Barwa Bank and International Bank of Qatar (IBQ) in three-way merger talks

Qatari banks Masraf Al Rayan, Barwa Bank and International Bank of Qatar (IBQ) have begun initial talks for a potential merger, in a deal that would create the Gulf state's second-largest bank. The new bank would be run in compliance with Islamic banking principles. Masraf Al Rayan and Barwa Bank are Islamic institutions, while IBQ currently follows conventional banking principles, indicating that IBQ would have to convert its business to being sharia-compliant. The new bank would have assets worth more than QAR 160 billion and a share capital of more than QAR 22 billion.

If completed, the potential merger would form the largest sharia-compliant bank in Qatar and the third-largest in the Middle-East.

LNG giants Qatargas and RasGas to merge

In December 2016, Qatar Petroleum announced its decision to merge RasGas and Qatargas, to create a world scale LNG giant "Qatargas" with 79 million tonnes of combined annual LNG production capacity. Qatargas has a production capacity of 42 million tonnes per annum whereas RasGas has a capacity of 37 million tonnes per annum. The merger is expected to be completed by 2017.

The merger would not only help reduce operating cost and achieve efficiency gains but also solidify Qatar's position in the international LNG market.

Doha Metro progress

54-59% of the four lines of the Doha metro project are complete and the first train would start running in late 2019 as planned. 61% of the work is complete on the 13.6km underground stretch of the Red Line from Lusail to Wakrah, and 66.5% of the work on the 8.9km Red Line South elevated route is completed. Lusail Light Rail Transit, which comprises 32km of lines with 35 stations, is behind schedule with 44.8% of the project completed so far.

Qatar: corporate profits declined 3.2% in 9M 2016

The combined profit of Qatari listed companies was down 10.7% during the first nine months of 2016 compared to the same period in 2015. This drop can be mainly attributed to a one-off gain of USD 742.2 million reported during Q1 2015 by Barwa Real Estate. Excluding this one-off gain, profits would have been lower by 3.2%.

Sector profitability (net profit/loss in USD 000's)

Sector	9M 2015	9M 2016	% change	Q3 2015	Q3 2016	% change
Banks & Financial Institutions	15,611,326	15,956,380	2.2%	5,279,628	5,263,219	-0.3%
Services &Consumer Goods	1,772,911	1,575,140	-11.2%	571,346	473,262	-17.2%
Industry	7,512,802	5,894,164	-21.5%	2,668,696	1,723,927	-35.4%
Insurance	979,698	999,406	2.0%	154,638	240,055	55.2%
Real Estate	5,483,497	3,316,325	-39.5%	560,970	796,133	41.9%
Telecoms*	1,758,138	1,831,769	4.2%	755,750	369,911	-51.1%
Transportation	1,849,950	1,656,606	-10.5%	621,120	502,292	-19.1%
Total	34,968,322	31,229,790	-10.7%	10,612,148	9,368,799	-11.7%

Source: Qatar Exchange; * Excluding Vodafone Qatar because of 31 March year end

Profits in the banking and financial services sector rose 2.2% in 9M 2016 compared with 2015. Growth was driven by a 1.8% rise in income of Qatari listed banks. Lending was up 6.1%, led primarily by the public sector (up 11.5%). Qatar National Bank, the largest bank in Qatar, reported a profit growth of 10.7%. Profit of Islamic banks rose 9.1% during 9M 2016, compared to a 0.3% fall in the profits of conventional banks. Growth in the latter was limited by a sharp fall in the profit of Commercial Bank of Qatar (-61.6%). Qatar Islamic Bank, Masraf Al Rayan and Qatar International Islamic Bank reported profit growth of 13.8%, 3.0% and 1.5%, respectively.

Profit in the services & consumer goods sector dropped 11.2% during first nine months of 2016 compared to the same period last year, as all the companies in the sector reported reduced profits, with the exception of Zad Holding Company, Widam and Salam International.

Profits in the industrials sector declined 21.5% during 9M 2016 compared to the same period in 2015. This was primarily due to a 28.9% fall in profit of Industries Qatar and a 77.0% decline in profit of Gulf International Services, caused by the fall in petrochemical and oil prices. However, profit of Qatar Electricity and Water rose 8.2%, while that of Qatar Investor's Group advanced 18.5% during the same period.

In 9M 2016, the profit of the insurance sector rose 2.0% compared to 2015, as Qatar Insurance Company and General Insurance Company reported net profit growth of 2.5% and 34.7%, respectively during the period.

Real estate profits declined sharply, mainly driven by the significant drop in net profit reported by Barwa Real Estate (down 58.1%). Barwa Real Estate had reported a one-off profit on sale of properties of USD 742.2 million (QAR 2.7 billion) in Q1 2015. As a result, the company reported lower profit in Q1 2016 and hence in 9M 2016. Excluding this one-off gain, real estate sector profits would have been up 19.2% in 9M 2016.

The Qatari telecom sector comprises Vodafone Qatar and Ooredoo. Vodafone Qatar is excluded from this profit comparison, since its fiscal year ends on 31 March. Ooredoo (formerly Qatar Telecom), reported a 4.2% rise in profit in 9M 2016.

In the transportation sector, profits declined 10.5%, as Qatar Navigation Company and Qatar Gas Transport Company reported profit drops of 20.9% and 1.1%, respectively in 9M 2016. However, Gulf Warehousing Company reported an 11.1% growth in 9M 2016 profit.

Country allocation

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Country Allocation.

At 31 December 2016, QIF had 23 holdings: 16 in Qatar and 7 in UAE (Q3 2016: 22 holdings: 17 in Qatar and 5 in UAE). The Investment Adviser increased exposure to the UAE to 6.8% of NAV from 4.3%. The cash weighting was 1.1% (Q3 2016: 3.5%).

Three holdings were added: Qatar International Islamic Bank, Air Arabia and First Gulf Bank. QIF sold its holdings in Vodafone Qatar and Qatar First Bank.

Sector allocation

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Sector Allocation.

QIF remains overweight in the Qatar banking sector (including financial services) at 42.4% of NAV (market weighting 38.4%). Qatar National Bank remains QIF's largest holding (19.4% of NAV). For the period January to December 2016, credit in Qatar grew 12.1%, mainly driven by the public sector (up 25.7%). The Investment Adviser believes that public sector loan growth will remain strong, driven by the government's infrastructure development plans and a rising population.

Industrials remain QIF's second largest exposure at 25.8% of NAV, mainly in Industries Qatar (11.7% of NAV). The holding in Gulf International Services reduced to 3.8% from 5.6% in the quarter, while exposure to Qatar Electricity and Water increased to 7.9% from 6.3%.

The Transportation sector is 10.1% of NAV. Qatar Gas Transport Company rose to 6.4% of NAV from 3.5%. The holding in services and consumer goods rose to 2.9% from 2.3%.

Exposure to the Telecom sector reduced to 5.9% (Q3 2016: 7.0%) following the sale of Vodafone Qatar. Exposure in the Insurance sector reduced to 1.8% from 3.4%. In Real Estate the holding in Emaar Properties increased to 3.5% (Q3 2016: 1.8%).

Portfolio structure

Top 10 holdings

As at 31 December 2016, the top five investments constituted 55.5% of the Company's NAV, while the top 10 holdings constituted 80.0% of the Company's NAV.

Company Name	Sector	% share of NAV
Qatar National Bank	Banks & Financial Services	19.4%
Industries Qatar	Industrials	11.7%
Masraf Al Rayan	Banks & Financial Services	9.2%
Qatar Electricity & Water Co	Industrials	7.9%
Qatar Islamic Bank	Banks & Financial Services	7.4%
Qatar Gas Transport	Transportation	6.4%
Ooredoo	Telecoms	5.9%
Barwa Real Estate	Real Estate	4.9%
Gulf International Services	Industrials	3.8%
Commercial Bank of Qatar	Banks & Financial Services	3.6%

QIF's top 10 holdings remained unchanged in the Q4 2016. The Investment Adviser reduced holdings in Commercial Bank of Qatar and Gulf International Services given the outlook for these businesses while holdings in Qatar Electricity and Water Company were increased as valuations became attractive.

Profile of Top Five Holdings (As at 31 December 2016):

Qatar National Bank (19.4% of NAV)

Qatar National Bank (QNB) is a high quality proxy stock for Qatari economic growth given its strong ties with the public sector and access to state liquidity. 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 with total assets of QAR 719.7 billion (USD 197.7 billion) as at 31 December 2016. For the FY 2016, QNB reported a 9.8% growth in net profit to QAR 12.4 billion (USD 3.4 billion). QNB is well positioned to reap the benefits of the rapid expansion of the domestic economy and has been growing its presence in the overseas markets as well. The bank, through its subsidiaries and associate companies, operates in more than 30 countries, through more than 1200 branches, supported by more than 4,300 ATMs and employing more than 28,000 staff.

Industries Qatar (11.7% of NAV)

Industries Qatar (IQ) is a holding company with interests in petrochemicals via 80% owned Qatar Petrochemical Co., fertilizers via 75% owned Qatar Fertilizer Co., steel via a wholly owned subsidiary Qatar Steel Co. and fuel additives via 50% owned Qatar Fuel Additives Co. For 9M 2016, the company's net profit declined 28.9% compared to nine months of 2015 to QAR 2.7 billion (USD 0.75 billion), mainly attributed to a fall in revenue across all segments due to product price deflation. Petrochemical and fuel additive products witnessed substantial price deflation following the oil price decline which began in 2014. Industries Qatar is well positioned to benefit from the ongoing recovery in oil prices and a rise in prices of commodities globally.

Masraf Al Rayan (9.2% 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, namely retail banking, wholesale banking and private banking. Besides this, the bank offers investment banking and treasury products. As of December 2016, MARK has a network of 13 branches in strategic locations across Qatar, and a total of 80 ATMs. As at the end of December 2016, its financing assets stood at QAR 67.6 billion (USD 18.6 billion), with government & related agencies segment occupying the largest share of the loan basket (over 48%). In FY 2016, Mark reported net profit of QAR 2.1 billion (USD 0.6 billion).

Qatar Electricity & Water Co. (7.9% of NAV)

Qatar Electricity & Water Co. (QEWS) was established in 1990 as a first private sector company engaged in electricity production and water desalination businesses. The company is the second largest utility company in North Africa and Middle East region. In Qatar, the company enjoys a 62% market share in electricity business while in water desalination business it commands a 79% market share. Over the past decade, the company has been the key beneficiary of rapid development in Qatar, coupled with the growth in population, resulting in increased demand for electricity and water. Additionally, the company has entered into overseas markets with an establishment of Nebras Power Company (60% owned by QEWS), which invests globally in new and existing power generation and water desalination projects. The company has a low risk profile due to its exposure in the infrastructure and utilities sector in Qatar. For 9M 2016, the company reported 8.2% rise in its net profit to QAR 1.2 billion (USD 0.3 billion).

Qatar Islamic Bank (7.4 % of NAV)

Qatar Islamic Bank (QIB) was the first Islamic bank to start operating in the country in 1982 and it is still the largest Islamic bank. The Bank currently holds a 42% share of the Islamic banking sector and approximately 12% of the total domestic banking sector. QIB's strong domestic presence is augmented by growing international footprint, with investments in the UK, Malaysia, Sudan and Lebanon. The QIB Group covers all segments of the financial markets, including individuals, government institutions, large corporations and SMEs, providing innovative Sharia-compliant banking solutions. As of December 2016, QIB's financing assets stood at QAR 98.2 billion (USD 27.0 billion) and total assets amounted to QAR 139.8 billion (USD 38.3 billion). In FY 2016, QIB reported net profit growth of 10.3% to QAR 2.2 billion (USD 0.6 billion).

QIF performance 

QIF's NAV was down 2.6% in 2016, and the dividend adjusted NAV was up 0.5%.  The QE was up 0.1%.

On 31 December 2016, the QIF share price was trading at a 14.3% discount to NAV.

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Share Price v NAV.

Historic performance

	2007 5M	2008	2009	2010	2011	2012	2013	2014	2015	2016
QIF NAV*	13.9%	-36.4%	10.4%	29.9%	1.3%	-4.7%	24.2%	20.6%	-14.6%	-2.6%
QE Index	27.0%	-28.8%	1.1%	24.8%	1.1%	-4.8%	24.2%	18.4%	-15.1%	0.1%
QIF Share Price	15.5%	-67.5%	97.3%	23.0%	-2.3%	2.4%	26.4%	17.4%	-17.0%	-4.5%

Source: Bloomberg, Qatar Insurance Company, Note: *Net of dividends paid

Outlook

The Investment Adviser believes that Qatar is well positioned for continued growth as macroeconomic fundamentals remain strong. With the recovery in oil prices following the agreement among oil producers to cut production, the Qatari government will have higher flexibility in continuing its commitment to planned major infrastructural projects in line with the Qatar National Vision 2030. Additionally, Qatar's fiscal buffers and sizeable assets should help it maintain its position as one of the stable economies in the GCC region.

Ongoing high investment spending will help drive growth in Qatar's non-hydrocarbon sector, while output gains from the Barzan gas facility will help contribution from the hydrocarbon sector.

Banking sector credit growth is likely to be strong on the back of higher consumer lending and project financing activities. The Investment Adviser believes that for these reasons, the Qatari economy and the Qatari stock market is likely to remain attractive to investors.

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

22 February 2017                                                                                                  22 February 2017

Consolidated Income Statement
		(Unaudited)	(Unaudited)
	Note	For the period from  1 July 2016 to 31 December 2016	For the period from 1 July 2015 to 31 December 2015
		US$'000	US$'000
Income
Dividend income on quoted equity investments		-	-
Realised loss on sale of financial assets at fair value through profit or loss		(4,719)	(2,025)
Net changes in fair value on financial assets at fair value through profit or loss		13,417	(25,880)
Commission rebate income on quoted equity investments	7	12	-
Total net income		8,710	(27,905)
Expenses
Investment Manager's fees	6	710	1,011
Audit fees		11	17
Other expenses	6	545	642
Total operating expenses		1,266	1,670
Profit/(loss) before tax		7,444	(29,575)
Income tax expense	13	-	-
Retained profit/(loss) for the period		7,444	(29,575)
Basic and diluted earnings/(loss) per share (cents)	10	6.41	(21.94)

Consolidated Statement of Comprehensive Income

		(Unaudited)	(Unaudited)
		For the period from  1 July 2016 to 31 December 2016	For the period from 1 July 2015 to 31 December 2015
		US$'000	US$'000
Profit/(loss) for the period		7,444	(29,575)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences		85	(35)
Total items that are or may be reclassified subsequently to profit or loss		85	(35)
Other comprehensive expense for the period (net of tax)		85	(35)
Total comprehensive profit/(loss)  for the period		7,529	(29,610)

Consolidated Balance Sheet

		(Unaudited)	(Audited)
	Note	At 31 December 2016	At 30 June 2016
		US$'000	US$'000
Financial assets at fair value through profit or loss	5	130,673	141,242
Other receivables and prepayments		74	346
Cash and cash equivalents	8	2,337	1,447
Total current assets		133,084	143,035
Issued share capital		1,043	1,194
Reserves	9	127,469	141,149
Total equity		128,512	142,343
Other creditors and accrued expenses	11	4,572	692
Total liabilities		4,572	692
Total equity & liabilities		133,084	143,035

Consolidated Statement of Changes in Equity

	Share Capital	Distributable reserves	Retained Earnings	Other Reserves (note 9)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 01 July 2016	1,194	103,904	36,177	1,068	142,343
Total comprehensive income for the period
Profit for period	-	-	7,444	-	7,444
Other comprehensive income
Foreign currency translation differences	-	-	-	85	85
Total other comprehensive expense	-	-	-	85	85
Total comprehensive profit for the period	-	-	7,444	85	7,529
Contributions by and distributions to owners
Dividends payable	-	-	(4,116)	-	(4,116)
Shares repurchased to be held in treasury	-	(370)	-	-	(370)
Shares subject to tender offer	(141)	(16,817)	-	141	(16,817)
Tender offer expenses	-	(57)	-	-	(57)
Shares in treasury cancelled	(10)	-	-	10	-
Total contributions by and distributions to owners	(151)	(17,244)	(4,116)	151	(21,360)
Balance at 31 December 2016	1,043	86,660	39,505	1,304	128,512

* 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 (note 9)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 01 July 2015	1,396	131,559	78,866	899	212,720
Total comprehensive income for the period
Loss for period	-	-	(29,575)	-	(29,575)
Other comprehensive income
Foreign currency translation differences	-	-	-	(35)	(35)
Total other comprehensive expense	-	-	-	(35)	(35)
Total comprehensive profit for the period	-	-	(29,575)	(35)	(29,610)
Contributions by and distributions to owners
Dividends payable	-	-	(4,742)	-	(4,742)
Shares repurchased to be held in treasury	-	(1,193)	-	-	(1,193)
Shares subject to tender offer	(193)	(25,141)	-	193	(25,141)
Tender offer expenses	-	(121)	-	-	(121)
Shares in treasury cancelled	(19)	-	-	19	-
Total contributions by and distributions to owners	(212)	(26,455)	(4,742)	212	(31,197)
Balance at 31 December 2015	1,184	105,104	44,549	1,076	151,913

Consolidated Statement of Cash Flows

		(Unaudited)	(Unaudited)
	Note	For the period from 1 July 2016 to 31 December 2016	For the period from 1 July 2015 to 31 December 2015
		US$'000	US$'000
Cash flows from operating activities
Purchase of investments		(26,528)	(51,004)
Proceeds from sale of investments		45,937	82,703
Dividends received		-	-
Operating expenses paid		(1,290)	(1,658)
Commission rebate		12	-
Net cash generated from operating activities		18,131	30,041
Financing activities
Cash used in tender offer		(16,817)	(25,141)
Tender offer expenses		(57)	(121)
Cash used in share repurchases		(370)	(1,193)
Net cash used in financing activities		(17,244)	(26,455)
Net increase in cash and cash equivalents		887	3,586
Effects of exchange rate changes on cash and cash equivalents		3	3
Cash and cash equivalents at beginning of period		1,447	5,957
Cash and cash equivalents at end of period	8	2,337	9,546

Notes to the Interim 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 1931-2004 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.

During the period 1 July 2016 to 31 December 2016, the Company purchased 331,514 of its ordinary shares for a total value of US$369,594 to be held in treasury. 963,198 shares had been repurchased in the period ended 31 December 2015 for treasury but had been held for over a year and were therefore cancelled in the current financial period. The buy-backs are effected through distributable reserves.

On 19 December 2016 the Company completed a tender offer at a price of US$1.1973 per share. Under the offer 14,045,544 shares were cancelled with US$16,816,730 being paid to participating shareholders.

The shareholders approved a dividend of 4.0 cents per share on 17 November 2016; this was paid to shareholders on 31 January 2017.

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

2              The Subsidiary

The Company has the following subsidiary company:

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

3              Significant Accounting Policies

The Interim Report of the Company for the period ending 31 December 2016 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 2016. The interim consolidated financial statements are unaudited.

3.1           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 2016.

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           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.

4              Net Asset Value per Share

The net asset value per share as at 31 December 2016 is US$1.2489 per share based on 102,896,644 ordinary shares in issue as at that date (excluding 1,470,689 shares held in treasury), (30 June 2016: US$1.2138 based on 117,273,702 ordinary shares in issue, excluding 890,509 shares held in treasury).

5              Investments

31 December 2016 financial assets at fair value through profit or loss: all quoted equity securities

Security name	Number	US$'000
Al Meera Consumer Goods (MERS QD)	58,402	2,792
Barwa Real Estate (BRES QD)	710,525	6,465
Commercial Bank of Qatar (CBQK QD)	512,588	4,375
Commercial Bank of Qatar Rights (R004 QD)	127,313	160
Gulf International Services (GISS QD)	590,904	5,044
Gulf Warehousing (GWCS QD)	304,235	4,668
Industries Qatar (IQCD QD)	480,905	15,443
Masraf Al Rayan (MARK QD)	1,188,047	12,244
Ooredoo (ORDS QD)	280,886	7,841
Qatar Electricity & Water Company (QEWS QD)	167,903	10,286
Qatar Gas Transport (QGTS QD)	1,351,398	8,531
Qatar Insurance (QATI QD)	104,426	2,388
Qatar International Islamic Bank (QIIK QD)	37,694	649
Qatar Islamic Bank (QIBK QD)	344,006	9,753
Qatar National Bank (QNBK QD)	576,981	25,655
Qatar National Cement Co (QNCD QD)	142,268	3,319
Qatar United Development Company UDCD QD)	359,122	1,972
Abu Dhabi Commercial Bank (ADCB UH)	790,000	1,484
Air Arabia (AIRARABIA UH)	400,000	144
Dubai Islamic Bank (DIB UH)	485,000	734
DXB Entertainments (DXBE UH)	2,995,627	1,060
Emaar Properties Co (EMAAR UH)	2,432,355	4,721
Emirates National Bank of Dubai (ENBD UH)	300,000	687
First Gulf Bank (FGB UH)	75,000	258
		130,673

6              Charges and Fees

	31 December 2016	31 December 2015
	US$'000	US$'000
Investment Manager's fees (see below)	710	1,011
Performance fees (see below)	-	-
Administrator and Registrar's fees (see below)	114	137
Custodian fees (see below)	67	76
Directors' fees and expenses	145	179
Directors' insurance cover	16	22
Broker fees	27	33
Other	176	195
Other expenses	545	642

 

Investment Manager's fees

Annual fees

Originally 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. That 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 saw the annual fee reduce to 1.05% of the net asset value of the Company, reducing to an annual fee of 1.0% of the net asset value of the Company from 1 November 2015 and further reducing to an annual fee of 0.9% of the net asset value of the Company from 1 November 2016.

Management fees for the period ended 31 December 2016 amounted to US$710,101 (31 December 2015: US$1,011,421).

Performance fees

As a result of the amended Investment Management Agreement which came into effect on 1 November 2016 the Investment Manager is no longer entitled to a performance fee.

Performance fees for the period ended 31 December 2016 amounted to US$nil (31 December 2015: US$nil).

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

Custodian fees

The Custodian is entitled to receive fees of US$7,200 per annum and US$25 per processed transaction from Qatar 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 2016 amounted to US$66,582 (31 December 2015: US$75,971).

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 £1,200 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 2016 amounted to US$113,588 and US$32,129 for additional services (31 December 2015: US$136,962 and US$29,451 respectively).

7              Commission rebate

The Company received 50% brokerage commission rebates for all trades done through its DLALA Qatar brokers. However, during previous periods the Company changed its Qatar broker to AHLI brokers to take advantage of more competitive commission rates and no commission rebate was received. For the period ended 31 December 2016 the Group used a mixture of the DLALA and AHLI brokerages and received US$ 12,317 (2015: US$ Nil).

8              Cash and Cash Equivalents

	31 December 2016	30 June 2016
	US$'000	US$'000
Bank balances	2,337	1,447
Cash and cash equivalents	2,337	1,447

9              Other Reserves

	Distributable Reserves	Retained Earnings	Foreign currency translation reserve	Capital redemption reserves	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2016	103,904	36,177	(213)	1,281	141,149
Foreign exchange translation differences	-	-	85	-	85
Retained profit for period	-	7,444	-	-	7,444
Dividends paid	-	(4,116)	-	-	(4,116)
Shares repurchased into Treasury	(370)	-	-	-	(370)
Shares subject to tender offer	(16,817)	-	-	141	(16,676)
Tender offer expenses	(57)	-	-	-	(57)
Shares in Treasury cancelled	-	-	-	10	10
Balance at 31 December 2016	86,660	39,505	(128)	1,432	127,469

10            Earnings per Share

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

	31 December 2016	31 December 2015
Profit/(loss) attributable to equity holders of the Company (US$'000)	7,444	(29,575)
Weighted average number of ordinary shares in issue (thousands)	116,114	134,803
Basic earnings/(loss) per share (cents per share)	6.41	(21.94)

11            Trade and other payables

	31 December 2016	30 June 2016
	US$'000	US$'000
Dividend payable*	4,116	-
Due to broker	-	221
Management fee payable	329	357
Administration fee payable	57	56
Accruals and sundry creditors	70	58
	4,572	692

* a dividend of US$ 0.040 per Ordinary Share was announced, this was approved by shareholders at the Annual General Meeting on 17 November 2016 and was paid on 31 January 2017 to ordinary shareholders on the register as at 23 December 2016 (the "Record Date"). The corresponding ex-dividend date was 22 December 2016.

12            Directors' Remuneration

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

Nick Wilson as non-executive chairman is entitled to receive an annual fee of £47,500. He also receives an additional fee in respect of his work regarding the Company's share buy-back programme of £10,000 per annum.

Paul Macdonald as non-executive chairman of the audit committee is entitled to receive £32,500 per annum.

Leonard O'Brien and Neil Benedict in their capacity as non-executive directors receive £30,000 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 2016 amounted to US$145,068 (31 December 2015: US$178,883).

13            Taxation

Isle of Man taxation

The Company is resident for taxation purposes in the Isle of Man by virtue of being incorporated in the Isle of Man and is technically subject to taxation on its income but the rate of tax is zero. The Group is required to pay an annual corporate charge of £250 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 are to have withholding tax deducted at 15%.

14            Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.

The Investment Adviser is Qatar Insurance Company S.A.Q. The Group holds shares in Qatar Insurance Company S.A.Q. (see note 5). It is paid fees by the Investment Manager.

The Investment Manager, Epicure Managers Qatar Limited, is a related party by virtue of its ability to make operational decisions for the Company and through common directors. Fees 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.

Leonard O'Brien is a director of the Company and of the Investment Manager.

15            Post Balance Sheet Events

Shareholders received a dividend of 4.0 cents per share on 31 January 2017.

 

END

 

 

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