Half-year Report

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 [phone]

Qatar Investment Fund plc

Andrew Potts [phone]

Panmure Gordon

Maitland/AMO [phone]

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 Cap.	PE (x)		PB (x)		Dividend Yield (%)
	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  1 July 2018 to 31 December 2018	For the period from 1 July 2017 to 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  1 July 2018 to 31 December 2018	For the period from 1 July 2017 to 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 (note 4)	Total
	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 (note 4)	Total
	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 1 July 2018 to 31 December 2018	For the period from 1 July 2017 to 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 reserves	Retained earnings	Foreign currency translation reserve	Capital redemption reserve	Total
	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 £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 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 £200,000 per annum.

Nick Wilson as non-executive chairman is entitled to receive an annual fee of £52,500. 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 director and chairman of the audit committee is entitled to receive £37,500 per annum.

David Humbles and Neil Benedict in their capacity as non-executive directors receive £35,000 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 £250 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.

 

END

 

 

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