Half Yearly Report

RNS Number : 0234Y

Qatar Investment Fund PLC

24 February 2012

 



Qatar Investment Fund Plc

Interim Results for the six months ended 31 December 2011

Qatar Investment Fund Plc ('QIF' or 'the Company'), the main market listed fund established to invest in opportunities in Qatar and the Gulf Cooperation Council (GCC) region, announces interim results for the six months ended 31 December 2011.

David von Simson, Chairman of the Qatar Investment Fund, said:

"The Qatar stock exchange was a beacon of stability over the six months, in contrast to volatility elsewhere.  This reinforced its reputation as a refuge for investors at a time of anaemic growth in Western economies. The Qatari markets are trading at attractive valuations, relative to its earnings growth potential and profitability."

Highlights:

·    Qatar Exchange (QE) was the best performing market in the GCC and Arab region for the second consecutive year. For the second half of 2011, the Qatari market added 5% underpinning the robustness of the Qatar economy.

·    Growth prospects of the GCC economies have generally improved during 2011 as a result of substantial new spending commitments on the part of regional governments.

·    Qatar's nominal GDP increased almost 40% to QR164.8bn in the third quarter compared with the previous-year period on the back of expanding gas output. Nominal GDP in the third quarter of 2010 stood at QR118.1bn.

·    Qatar's current account balance is projected to record a surplus of 28% of GDP in 2011, up from 26% in 2010, reflecting increased exports of LNG and condensates, and higher oil and gas prices.

Financials:

·    Results for the six months ended 31st December 2011 showed a profit after tax of US$10.5 million, equivalent to basic earnings per share of 4.53 cents.

·    Net asset value per share at 31st December 2011 was US$1.05 (US$ 1.03 at 30th June 2011).

·    Dividend paid in October 2011 of 2.7 cents per share.

·    At the end of Q4 2011 the share price was trading at a 15.4% discount to NAV.

Holdings as of December 31st 2011

·    Qatar continues to be our favourite market on relatively lower political risk and higher growth prospects.

·    As at 31st December 2011, the Company was invested in eighteen companies, of which seventeen are listed in Qatar and one in Oman.

·    Banks represent the largest single sector exposure within the portfolio, with a weighting of 59.1% at the end of December 2011. Qatari banks constitute an attractive proxy for the country's strong macroeconomic outlook.

David von Simson added:

"We believe the Qatari economy is well placed to weather economic downturns that are affecting the rest of the world, by virtue of the long term nature of its LNG supply contracts, and continuing high global energy costs. We believe continued growth will be underpinned by the high level of infrastructure investment, and increases in consumer spending power.

"QIF remains well placed to benefit from the economic growth and expected increases to government spending on infrastructure in the years ahead."

For further information:

Qatar Investment Fund Plc -  David von Simson
Oriel Securities - [phone] Joe Winkley Neil Winward	Panmure Gordon - [phone] Andrew Potts

Maitland - [phone]

William Clutterbuck

Sam Turvey

Chairman's Statement

The Board is pleased to present your Company's interim results for the six month period ending 31 December 2011.

Results

Results for the period under review showed a profit after tax of US$10.5m, generated from fair value adjustments and realised gains, and equivalent to basic earnings per share of 4.53 cents.

The Qatar index remained relatively stable over the six months, in contrast to the considerable volatility seen in other markets, thereby reinforcing its reputation as a refuge for investors at a time when growth in Western economies is lacklustre.

On a net basis after expenses, and after adjusting for the dividend distribution of US$0.027, our NAV underperformed the QE Index by 53 basis points (0.53%). The QE Index represents a theoretical return, which does not take account of the custody and brokerage costs which a direct investor would have to bear, and which are higher in this region than in more developed markets.  Wherever possible, we seek to take advantage of our negotiating power to reduce these expenses.  An example is our recent change of custodian, described in post balance sheet events, which will reduce our custody costs in the future.

The aim of your Board is to achieve a Total Expense Ratio of less than 2% - a target which it continues to pursue vigorously. This target represents a percentage of our present fund size.  We will continue to engage in share buybacks where we consider them to be in the overall interests of shareholders, notwithstanding that their effect may be to cause our Total Expense Ratio to be higher than 2% of the resultingly smaller Fund.

Outlook

We believe that the Qatari economy is well placed to weather economic downturns that are affecting the rest of the world, by virtue of the long term nature of its LNG supply contracts, and continuing high global energy costs. We believe this continued growth will be underpinned by the high level of infrastructure investment, and increases in consumer spending power.

Dividend

We aim to pay dividends from income received from investee companies. Since Qatari companies only pay dividends once a year, the Board will continue its policy of not declaring interim dividends.

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.

Outlook, risks and uncertainties

Geopolitical concerns arise from Iran's threat to close the Straits of Hormuz. The Board regards a long term closure of the Straits, the impact of which would be far reaching and by no means confined to the region, to be an unlikely eventuality, given world dependence on petroleum exports from the Gulf, and the stated intention of the United States and other western powers to see international law respected.

The Board believes that the principal risks and uncertainties faced by the Company continue to fall in the following categories; 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 the Annual Report for the year ended 30 June 2011.

Post balance sheet events

As already reported via regulatory news announcements, the Board was informed that Qatar Insurance Company S.A.Q. (our investment adviser) had acquired Epicure Manager's Qatar Limited, the investment manager.  The Board considers this development to be positive in terms of simplifying the structure and contractual relationships, without in practical terms having any significant impact on the running of the Fund.

Shareholders will also be aware that we have changed our custody arrangements, appointing HSBC in place of Allied Irish Bank Corporation (International) PLC. This will result in significant ongoing savings, albeit at the price of some upfront cost associated with unavoidable market fees associated with the re-registration of shares held by our investment company.

.

The Board looks to the future with confidence and hopes shareholders will profit from the increasing prosperity in the region.

David von Simson

Chairman

23 February 2012

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 2011 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.

The interim financial report has not been audited by the Company's Independent Auditor.

David von Simson

Chairman

23 February 2012

Report of the Investment Manager and the Investment Adviser

Market Overview

The crisis in Europe continues to be a drag on the global economy, with the sovereign and banking crisis likely to lead to a protracted problem in the euro zone. GCC markets remained under considerable pressure throughout 2011 from news related to exogenous factors. Most investors were only too happy to see the back of 2011 and now look forward to 2012 with a sense of cautious optimism that things will be brighter. GCC markets in 2011 succumbed to global and regional pressures. Political unrest that swept across the Middle East had its ripple effects echoing in several countries. However MENA outperformed global emerging markets by a wide margin in 2011, in spite of political instability in the Middle East and North Africa throughout the year.

For the second half of the year 2011, all GCC markets ended on a lower note, barring the Qatari market that managed to inch higher, adding 5% gains underpinning the robustness of the Qatar economy. Qatar Exchange (QE) was the best performing market in the GCC and Arab region for the second consecutive year. At the end of December 2011, QE's total market capitalization reached QR457bn (US$125bn)..

On the negative side, the Bahrain Bourse posted the steepest decline amongst its GCC peers, down by 13.3% in the second half of the year. Abu Dhabi and Dubai markets ended as the second and third worst performing markets in the second half of the year. In Kuwait, the Index ended with a 6.4% decline compared to the first half of the year. The Saudi Arabian market was the second best performing market in the region with negative 2.4% return during the period.

The performance of the other GCC markets is shown below:

Indices	30-Jun-11	31-Dec-11	Change
Qatar (DSM)	8,361	8,779	5.0%
Saudi (TASI)	6,576	6,418	-2.4%
Oman (MSI)	5,916	5,695	-3.7%
Kuwait (KWSE)	6,212	5,814	-6.4%
Dubai (DFMGI)	1,517	1,353	-10.8%
Abu Dhabi (ADI)	2,704	2,402	-11.2%
Bahrain (BAX)	1,320	1,144	-13.3%

Source: Bloomberg

The Investment Adviser believes that Qatar remains the most attractive market in the GCC region.  Moreover, the growth prospects of the GCC economies as a whole have generally improved during the course of the 2011 year as a result of substantial new spending commitments on the part of the regional governments. Government spending on the other hand is also likely to increase further, which should ensure that the Gulf economies grow strongly in the near term.

Some of the possible positives for 2012 would be the opening up of Saudi Arabia for further foreign investment, MSCI reclassification of UAE & Qatar and earnings surprises. Saudi Arabia is pressing ahead with a long-awaited plan to open up its stock market to foreigners and is expected to formalize its rules by January 15, 2012. The country has been considering a wider opening of its market for several years and recently, news emerged that it plans to offer limited direct foreign ownership. Foreign investors currently are allowed to invest in Saudi Arabian companies only by share swap transactions via international investment banks, who deal with local partners.

Macroeconomic Update

The rise in oil prices, combined with the increase in oil production, has helped countries to finance increased levels of spending without damaging their fiscal balances. For 2011, despite the significant increase in fiscal spending, the Investment Adviser expects the GCC countries to achieve a fiscal surplus. The GCC economies remain well positioned by global standards to deal with any renewed economic instability.

Qatar's GDP up 40% at QR165bn in third quarter

Qatar's nominal GDP increased almost 40% to QR164.8bn in the third quarter compared with the previous-year period on the back of expanding gas output. Nominal GDP in the third quarter of 2010 stood at QR118.1bn.  The mining and quarrying sector, which includes the key gas and oil portfolios, rose 57% in current prices to QR98bn in the third quarter of this year compared with QR62.4bn in Q3, 2010.

The increase in quarterly GDP (both year-on-year as well as quarter-on quarter basis) has been driven mainly by expansion in the production levels of LNG, pipeline gas, other gas-related products and condensates, coupled with increases in hydrocarbon prices.

The manufacturing sector grew 37% to QR16.2bn in the third quarter compared with QR11.9bn in Q3, 2010. On a year-on-year basis, petrochemicals, steel and fertilizers also showed buoyancy in Q3, 2011. The construction sector accounted for QR5.36bn in the third quarter.

Country's population grows by 4.3% to breach 1.7 million mark

Qatar's population grew 4.3% in 2011 as compared to 2010 and breached the 1.7 million mark by the year-end. Qatar's population stood at little over 1.63 million on December 31, 2010. Qatar Statistics Authority (QSA) suggests there has been an increase of a little more than 70,300 people in 2011 over 2010. The Investment Adviser believe that the trend is encouraging and augurs well for local companies profitability

Consumer price inflation is expected to remain tame

Annual consumer price inflation in Qatar rose to 2.1% in November because of a jump in food costs, reaching its highest level since at least the beginning of 2010. With public spending increasing, including on salaries, and credit growth on the rise, demand pressures are likely to keep the inflation rate (excluding rents) at a similar level in 2012. Analysts polled by Reuters in September predicted Qatar would see average inflation of 2.7% in 2011, after deflation of 2.4% last year.

After eliminating the effect of rent, the overall index shows an increase of 0.1% compared to CPI of October 2011, and an increase of 5.3% when compared to the month of November 2010. Average headline CPI inflation is projected at 4% in 2012.

The overall fiscal balance remained in surplus of 2.7% of GDP in 2010/11

Despite the sharp rise in current expenditure and lower than budgeted transfer of investment income from public enterprises, The current account balance is projected to record a surplus of 28% of GDP in 2011, up from 26% in 2010, reflecting increased exports of LNG and condensates, and higher oil and gas prices.

Qatar Exchange: Short-term government t-bills started trading

In a significant move QE allowed trading t-bills in the exchange with bonds and sukuk to be listed at a later stage. It is expected that a more active debt market could in turn encourage companies to issue more bonds. The listing of t-bills is the first step in the launching of a secondary bonds market on the Qatar Exchange, which is expected to boost trading interest from banks, financial institutes as well as investors

Since May the central bank in Qatar, the world's largest natural gas exporter, have been issuing about 2 billion riyals ($550 million) worth of T-bills monthly with maturities ranging from three to nine months, to drain excess funds from the banking system and help create a domestic yield curve. Qatari banks held about 8 billion riyals of T-bills at the end of September.

Qatar Exchange launch QE Venture Market

Qatar Exchange (QE) has launched the platform for the region's first dedicated special market for small and medium sized enterprises (SMEs). Named QE Venture Market the junior market is expected to be operational by the end of the year. The market would be focusing on SMEs and entrepreneurial companies. The QFMA-regulated market will be using the same trading platform as the main market (UTP), but separately branded. The junior market will have 'lighter' regulation. The QE Venture Market expects the listed companies to have a minimum operational track record of one year compared with the main market's mandatory minimum three year track record. In terms of capital requirement the QE Venture Market expects to have a minimum QR5 million compared to the minimum QR40 million subscribed capitalization of the main market. In the last few years Qatar has been trying to promote the SME sector to diversify its economy. The Qatar Exchange new initiative should support Qatar's vision to enhance the role of SME companies in supporting the national economy and in contributing to the achievement of the Qatar National Vision in 2030.

MSCI extended the review period

MSCI extended the review period for the potential reclassification of the Qatari and UAE Indices from Frontier Market to Emerging Market status. With respect to Qatar, foreign ownership limits remain the major concern as the availability of shares to international investors may be restricted at times of strong demand. No change to the current situation was decided by the Qatari regulators during the review period, and any change to the status is conditional on a reasonable increase in foreign ownership limits. The feedback from investors on the introduction of the new DVP model in the Qatari equity market was, similarly to the UAE, positive and the authorities are also making progress on the potential introduction of regulations governing Securities Borrowing and Lending (SBL) agreements and securities short selling. MSCI's next announcement on country classification decisions is scheduled for June 2012.

Corporate Profitability

Qatari companies continued to improve profitability during the first nine months of 2011 reporting an aggregate net profit of QAR 27.9bn (US$7.7bn), up 22.0% y-o-y. Of the 41 listed companies 31 recorded higher profits, 9 companies reported lower profits, while only one company incurred a loss. Aggregate Q3 2011 profits of QAR 9.9bn (US$2.7bn) represented an increase of 32.3% y-o-y and 11.6% q-o-q.

Sector Profitability  (QAR m)	9M 2010	9M 2011	% Change
Banking & Financial	9,251	11,270	21.8%
Insurance	702	700	-0.2%
Industrial	5,108	8,659	69.5%
Services	7,777	7,228	-7.1%
Total	22,838	27,857	22.0%

Source: Qatar Exchange

Banking & Financial Sector

Qatari banks reported a 21.8% growth in their 9M 2011 net profits, reaching QAR11.3bn (US$3.1bn), compared to QAR9.3bn (US$2.6bn) recorded a year earlier, accounting for 40.5% of the total profit of the market. All eight banks reported growth in their 9M 2011 results with rates ranging between 9.1% for Al-Khalij Commercial Bank and 30.4% for Qatar National Bank.

Qatar National Bank (QNB) accounted for 48.1% of the total profit of the sector, reporting a nine-month net profit of QAR5.4bn (US$1.5bn) for the period ended 30 September 2011. Total loans and advances and financing activities rose by 35.5%, while customer deposits increased by 31.3% at the end of September from a year earlier.

A recent IMF report points out that the banking sector remains profitable and robust with a capital adequacy ratio of 22.3%, average return on assets of 2.7% and non-performing loans ratio of 2.3% at end of June.   Non-financial corporates are also in an expansionary phase, with profits back at pre-crisis levels, cash resources abundant, default rates low and refinancing conditions relatively easy.

The Investment Adviser remains bullish on the sector as the macroeconomic story remains intact and underpinned by massive domestic infrastructure spending. A supportive Government and the additional growth potential of the World Cup in 2022 should translate into some of the strongest loan growth numbers in the GCC region.

Insurance Sector

The Insurance sector reported an aggregate net profit of QAR700m (US$192m) in 9M 2011, a marginal decline compared to an aggregate net profit of QAR701.5m (US$193m) in 9M 2010. Of the five listed insurance companies, three recorded lower earnings, while two companies reported profit growth.

With 9M 2011 profits of QAR459.2m (US$126m) Qatar Insurance Company (QIC), the sector heavy weight by market capitalisation, generated around 65.6% of the sector's total net profit.

The Investment Adviser believes that insurance companies will continue to do well in the future as strong macroeconomic growth, underpinned by a growing population, and the recent launch of several multi-billion dollar mega projects, should lead to an acceleration of demand for insurance products in 2012.

Industrial Sector

With an increase of 65.9% y-o-y, industrials saw the fastest profit growth of any quoted sector with an aggregate total profit of QAR8.7bn (US$2.4bn) in 9M 2011 and accounting for 31.1% of the overall market. Several factors supported this performance, in particular higher crude oil prices and an increase in the price of downstream petrochemical products in general.

Industries Qatar (IQ), the Gulf's second-largest chemical producer by market value, reported a 53.9% y-o-y jump in 9M 2011 net profits to QAR6.2bn (US$1.7bn), the biggest increase published by any Qatari company during the period and representing not only 72.1% of the sector's net profit, but also 22.4% of the total markets' net profit.

IQ is Qatar's largest conglomerate by market capitalisation and offers investors an indirect exposure to Qatar's gas potential through its diverse operations in petrochemicals, fertilizers and steel. IQ has emerged as a key player in Qatar's strategy of diversifying into industries that leverage its competitive advantages of inexpensive gas feedstock and cheap energy inputs. The Investment Adviser believes that IQ will continue to deliver superior profit growth going forward supported by attractive long-term contract prices achieved in 2011 and further capacity additions going forward.

Services Sector

The services sector reported a profits decline of 7.1% in 9M 2011 to QAR7.2bn (US$2.0bn), with 16 companies reporting profit increases, while 5 larger companies recorded lower earnings.

Qatar Navigation reported the largest profit decline in the market for the 9M 2011 period with a drop in profits of 48.4% to QAR0.58bn (US$0.16bn) compared with profits of QAR1.1bn (US$0.30bn) in 9M 2010. The net profitability was skewed due to a non-cash accounting adjustment in 2010 related to the acquisition of Qatar Shipping Company. Qatar Telecom (Q-Tel) recorded a 17.8% decline in its 9M 2011 net profit to QAR2.0bn (US$0.55bn) compared to QAR2.4bn (US$0.66bn) in 9M 2010. Q-Tel reported a y-o-y & q-o-q decline of 13.0% and 15.8% respectively in Q3 2011.

Qatar Electricity & Water returned the largest absolute increase in profits in the sector, up from QAR0.84bn (US$0.23bn) in 9M 2010 to QAR1.05bn (US$0.29bn) during the first nine months of 2011.

Country Allocation

Qatar continues to be our favourite market on relatively lower political risk and higher growth prospects. The Qatari markets are trading at attractive valuations, relative to its earnings growth potential and profitability.

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Country allocation as at 31 December 2011.

As at 31st December 2011, the Company was invested in eighteen companies, of which seventeen are listed in Qatar and one in Oman. This compares to 30th September 2011when the Company was invested in sixteen companies in Qatar and one in Oman.

Industry allocation

Banks continues to represent the largest single sector exposure within the portfolio, with a weighting of 59.1% at the end of December 2011, up from 56.2% at the end of June 2011. The increase was mainly due to the positive relative price movement of the underlying stocks held rather than any net additions to pre-existing positions. The Investment Adviser maintains a positive outlook on the Qatari banking sector and believes that banks constitute an attractive proxy for the country's strong macroeconomic outlook. The investment case for Qatari banks is further strengthened by a recovery in earnings due to a combination of healthy volume growth and improved asset quality. Overall the banking sector reported 22% y-o-y earnings growth for the first nine months of 2011, and the investment thesis has been further strengthened by evidence of double digit lending growth. This positive trend is expected to continue into 2012.

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting Industry allocation as at 31 December 2011.

The services sector, which is broadly defined and includes companies in telecommunications and utilities, accounts for 17.8% of the portfolio holdings versus 19.6% at the end of first half of 2011. The Company's exposure to the real estate sector stood at 6.6% at the end of December 2011.

The industries and insurance sectors accounted for a further 12.1% and 3.4% respectively. Exposure to these sectors is mainly through investments in Industries Qatar and Qatar Insurance Company respectively.

Portfolio Structure

Top 5 Holdings

As at 31st December 2011, the top five investments of the Company constituted 63.7% of NAV, up from 60.9% at the end of September 2011.

Company	Sector	% of NAV
Qatar National Bank	Banks	21.20%
Commercial Bank of Qatar	Banks	12.00%
Industries Qatar	Industries	11.50%
Rayan Bank	Banks	10.30%
Doha Bank	Banks	8.70%

Source: Qatar Insurance Company

Profile of Top Five Holdings (As At 31.12.11)

Qatar National Bank (21.2% 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 supporting the bank thus further enhancing its systemic importance. The largest shareholder in QNB is the Qatar Investment Authority (QIA), with a 50% equity stake. QNB is well positioned to reap the benefits of the rapid expansion of domestic economy. QNB is the largest bank in Qatar with total assets of QAR280.1bn (USD76.9bn) as at 30 September 2011. QNB is well positioned to reap the benefits of the rapid expansion of the domestic economy. The bank operates a large product distribution network in Qatar consisting of 60 branches and 200 ATMs.

Commercial Bank of Qatar (12% of NAV)

CBQ was incorporated in 1975 and since then it has been developing its business as a full service commercial bank, offering a broad range of corporate, retail, Islamic, and investment banking products and services. CBQ is the second-largest commercial bank in Qatar with total assets of QAR70.4bn (USD19.4bn) as at 30 September 2011. The bank has a regional business focus and accounted for 11.3% of aggregate banking assets in the country at end-September 2011. CBQ offers retail, corporate Islamic and investment banking products in Qatar and through its associates also in the UAE and Oman. CBQ has a diversified ownership profile with the Qatar government the single largest shareholder with a 16.7% equity stake held through the QIA. CBQ's capitalisation is strong with a Tier 1 ratio of 16.4% at 30 September 2011. Asset quality has been improving since 2009. The NPLs ratio stood at 2.74% as at 30 September 2011, down from 3.16% as at end-2010.

Industries Qatar (11.5% of NAV)

Industries Qatar (IQ) is the largest publicly traded company in 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 100% owned Qatar Steel Co. and fuel additives via 50% owned Qatar Fuel Additives Co. Similar to many of its Middle Eastern peers, IQ is one of the lowest cost producers in the industry with operating and net margins in excess of 50-55% compared to global peers with operating margins in the mid-teens. The company procures its natural gas at a price range of US$1.75- 2.25/mmBtu compared to current global natural gas prices in the range of US$5-5.5/mmBtu. With a low and largely fixed-cost structure, any uptick in basic chemical commodity prices should flow straight to the bottom line.

Masraf Al Rayan (10.3% of NAV)

Masraf Al Rayan, though relatively young, operates through two branches in Qatar, and provides Sharia compliant commercial banking, asset management, and brokerage services. The bank went public in January 2006 and has existing associates in Pakistan that deal in Takaful (Islamic insurance) and one associate in Saudi Arabia that provides consumer finance. MARK was the first Sharia compliant bank in Qatar to receive Moody's ratings of A3 and Prime-2 in 2009. The bank's balance sheet and the calibre of its backers underscore its ability to carry out acquisitions. Bank's share of the Qatari market stood at 8% of loans and 36.2% share in Islamic loans.

Doha Bank (8.7% of NAV)

Established in 1978, Doha Bank is one of the largest private commercial banks in Qatar. The bank, which is headquartered in Doha, is the third largest commercial bank in Qatar in terms of total asset base. Doha Bank provides conventional banking services in Qatar and abroad. The bank has 37 branches in Qatar. Internationally, Doha Bank operates through three overseas branches in the United States, the United Arab Emirates and Kuwait. It also has representative offices in United Kingdom, Singapore, Turkey, China, Japan, South Korea and Romania. The bank has historically focused on 'smaller ticket' segments of Qatar's emerging private economy, namely and increasingly SMEs/family businesses.

The chart below shows the NAV compared to the share price

Embedded image removed - please refer to the Company's website www.qatarinvestmentfund.com for a chart depicting NAV compared to share price.

Historic performance against the QE Index:

	2011	2010	2009	2008	2007 5M
QIF NAV*	1.3%	29.9%	10.4%	-36.4%	13.9%
QE Index	1.1%	24.8%	1.1%	-28.8%	27.0%

Source: Bloomberg

*NAV is net of dividends

Outlook

The Investment Adviser believes that the outlook for the Qatari market is particularly compelling with no significant negative earnings surprises expected in Q4 2011 with most companies expecting to improve on previous quarterly figures.

Qatar's successful 20-year investment programme in hydrocarbons culminated at the end of 2011. While real hydrocarbon GDP will slow down to less than 3% from next year due to Qatar's self-imposed moratorium on development of new hydrocarbon projects until 2015, large infrastructure investment and increased production in the manufacturing sector will boost growth in real non hydrocarbon GDP, which will accelerate to 9%. The IMF forecast the real GDP growth rate in Qatar to be around 6% in 2012.

Qatar's economic indicators signal strong signs of growth with surging revenues from oil & gas, strong government financing support, diversification in non-hydrocarbon sectors, external surpluses and the easing of deflationary pressures. The Investment Adviser believes that due to the global economic and regional political concerns investors have largely ignored the strong economic fundamentals of the Qatari market and it continues to remain undervalued, providing highly attractive investment opportunities in the short term and medium term.

The Investment Adviser believes that Qatari companies will deliver sustained growth in profitability as domestic fiscal policy remains expansionary in support of the Government's US$226bn five year National Development Strategy and that this will be of particular benefit to non-hydrocarbon sectors. This combination of highly visible GDP growth and dynamic earnings outlook makes Qatar one of the most attractive investment destinations amongst the emerging and frontier markets.

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

23 February 2012                                                                                                                   24 February 2012

Consolidated Income Statement

		(Unaudited)	(Unaudited)
	Note	For the period from  1 July 2011 to 31 December 2011	For the period from 1 July 2010 to 31 December 2010
		US$'000	US$'000
Income
Interest income on cash balances		1	2
Realised gain/(loss) on sale of financial assets at fair value through profit or loss		3,681	(1,378)
Net changes in fair value on financial assets at fair value through profit or loss		9,690	56,445
Commission rebate income on quoted equity investments	7	37	64
Total net income		13,409	55,133
Expenses
Investment Manager's fees	6	1,516	1,385
Audit fees		15	16
Other expenses	6	1,354	802
Total operating expenses		2,885	2,203
Profit before tax		10,524	52,930
Income tax expense	13	-	-
Retained profit for the period		10,524	52,930
Basic and diluted earnings per share (cents)	10	4.53	22.67

Consolidated Statement of Comprehensive Income

		(Unaudited)	(Unaudited)
		For the period from  1 July 2011 to 31 December 2011	For the period from 1 July 2010 to 31 December 2010
		US$'000	US$'000
Profit for the period		10,524	52,930
Other comprehensive loss
Currency translation differences		(15)	(336)
Other comprehensive loss for the period (net of tax)		(15)	(336)
Total comprehensive profit  for the period		10,509	52,594

Consolidated Balance Sheet

		(Unaudited)	(Audited)
	Note	At 31 December 2011	At 30 June 2011
		US$'000	US$'000
Financial assets at fair value through profit or loss	5	241,874	239,945
Due from broker		-	297
Other receivables and prepayments		75	301
Cash and cash equivalents	8	2,648	1,199
Total current assets		244,597	241,742
Issued share capital		2,334	2,335
Reserves	9	241,232	238,040
Total equity		243,566	240,375
Other creditors and accrued expenses	11	1,031	1,367
Total liabilities		1,031	1,367
Total equity & liabilities		244,597	241,742

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 2010	2,336	238,989	(46,832)	1,120	195,613
Total comprehensive income for the period
Profit	-	-	52,930	-	52,930
Other comprehensive income
Foreign currency translation differences	-	-	-	(336)	(336)
Total other comprehensive expense	-	-	-	(336)	(336)
Total comprehensive profit/(loss) for the period	-	-	52,930	(336)	52,594
Contributions by and distributions to owners
Dividends paid *	-	-	(5,835)	-	(5,835)
Shares repurchased to be held in treasury	-	(30)	-	-	(30)
Total contributions by and distributions to owners	-	(30)	(5,835)	-	(5,865)
Balance at 31 December 2010	2,336	238,959	263	784	242,342

* 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 2011	2,335	238,592	(1,357)	805	240,375
Total comprehensive income for the period
Profit	-	-	10,524	-	10,524
Other comprehensive income
Foreign currency translation differences	-	-	-	(15)	(15)
Total other comprehensive expense	-	-	-	(15)	(15)
Total comprehensive profit/(loss) for the period	-	-	10,524	(15)	10,509
Contributions by and distributions to owners
Dividends paid*	-	-	(6,275)	-	(6,275)
Shares repurchased to be held in treasury	-	(1,043)	-	-	(1,043)
Shares in treasury cancelled	(1)	-	-	1	-
Total contributions by and distributions to owners	(1)	(1,043)	(6,275)	1	(7,318)
Balance at 31 December 2011	2,334	237,549	2,892	791	243,566

Consolidated Statement of Cash Flows

		(Unaudited)	(Unaudited)
	Note	For the period from 1 July 2011 to 31 December 2011	For the period from 1 July 2010 to 31 December 2010
		US$'000	US$'000
Cash flows from operating activities
Purchase of investments		(11,357)	(24,498)
Proceeds from sale of investments		23,017	32,763
Interest received		-	2
Operating expenses paid		(2,924)	(2,117)
Commission rebate		37	-
Net cash generated from operating activities		8,773	6,150
Financing activities
Dividends paid		(6,275)	(5,835)
Cash used in share repurchases		(1,043)	(30)
Net cash used in financing activities		(7,318)	(5,865)
Net increase in cash and cash equivalents		1,455	285
Effects of exchange rate changes on cash and cash equivalents		(6)	(697)
Cash and cash equivalents at beginning of period		1,199	2,756
Cash and cash equivalents at end of period	8	2,648	2,344

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 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 2011 to 31 December 2011, the Company purchased 1,202,714 of its ordinary shares for a total value of US$1,043,341 to be held in treasury. 41,855 shares had been repurchased in the year ended 30 June 2011 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 27 October 2011 the Company paid a dividend of 2.7 cents per share (US$6,274,746).

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 2011 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 2011. 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 2011.

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 2011 is US$1.0508 per share based on 231,793,752 ordinary shares in issue as at that date (excluding 1,625,555 shares held in treasury), (30 June 2011: US$1.0317 based on 232,996,466 ordinary shares in issue, excluding 464,696 shares held in treasury).

5              Investments

31 December 2011 financial assets at fair value through profit or loss: all quoted equity securities

Security name	Number	US$'000
Oman Qatari Telecommunication Co (NWRS OM)	918,048	1,533
Al Meera Consumer Goods Co (MERS QD)	30,566	1,267
Barwa Real Estate (BRES QD)	1,959,213	16,078
Commercial Bank of Qatar (CBQK QD)	1,279,938	29,333
Doha Bank (DHBK QD)	1,205,614	21,012
Gulf International Services (GISS QD)	925,662	6,006
Industries Qatar (IQCD QD)	773,620	28,240
Masraf Al Rayan (MARK QD)	3,288,234	25,089
National Leasing (NLCS QD)	185,653	2,387
Qatar Electricity & Water Company (QEWS QD)	300,203	11,461
Qatar Gas Transport (QGTS QD)	223,562	1,074
Qatar Insurance (QATI QD)	387,729	8,269
Qatar Islamic Bank (QIBK QD)	733,750	16,937
Qatar National Bank (QNBK QD)	1,245,055	51,942
Qatar National Cement Co (QNCD QD)	48,775	1,479
Qatar Navigation (QNNS QD)	550,977	11,523
Qatar Telecom (QTEL QD)	211,182	8,143
Qatar United Development Co  (UDCD QD)	15,000	101
		241,874

6              Charges and Fees

	31 December 2011	31 December 2010
	US$'000	US$'000
Investment Manager's fees (see below)	1,516	1,385
Performance fees (see below)	-	-
Administrator and Registrar's fees (see below)	200	213
Custodian fees (see below)	270	255
Directors' fees and expenses	196	145
Directors' insurance cover	29	20
Broker fees	57	57
Commission*	336	-
Other	266	112
Other expenses	1,354	802

*these costs relate to the re-registering of stocks with HSBC

Investment Manager's fees

Annual fees

The Investment Manager is entitled to an annual management fee of 1.25% of the Net Asset Value of the Group calculated monthly and payable quarterly in arrears.

Management fees for the period ended 31 December 2011 amounted to US$1,515,882 (31 December 2010: US$1,385,425).

Performance fees

Up until 17 March 2011 the Investment Manager received a performance fee if the following were met:

i)              a high watermark was exceeded, whereby the adjusted net asset value per Ordinary Share at the end of the relevant performance period must have been higher than the high watermark; and

ii)             a performance test must have been met where the adjusted net asset value per Ordinary Share at the end of the relevant performance exceeded the target net asset value per Ordinary Share.

If the performance test described above was met and the high watermark described was exceeded, the performance fee would be equal to 20% of the increase in the adjusted net asset value per ordinary share at the end of the relevant performance period above the target net asset value per Ordinary Share multiplied in each case by the weighted average of the number of Ordinary Shares in issue in the performance period. For the first performance period, the target net asset value per Ordinary Share was the Placing price increased by the hurdle rate. For each subsequent performance period, the target net asset value per Ordinary Share meant the net asset value per share, adjusted for any prior year performance fees paid, at the start of the relevant performance period as increased by the hurdle rate of 8% pro rata per annum.

At 17 March 2011 there was no performance fee payable or paid.

Effective from 17 March 2011, the performance fee structure is based upon the relative performance of the Company against the performance of the QE Index. The performance fee is payable by reference to the increase in Adjusted Net Asset Value per Ordinary Share in excess of the Target Net Asset Value per Ordinary Share (Opening Net Asset Value per ordinary share adjusted by the movement on the Qatar Exchange Index) over the course of a Performance Period. The Net Asset Value per Ordinary Share on the date of the passing of the Resolution (17 March 2011) has been set as the initial reference point.

The Investment Manager is entitled to a performance fee in respect of a Performance Period only if the Adjusted Net Asset Value per Ordinary Share at the end of the relevant Performance Period, after excluding dividends paid and received, exceeds the Target Net Asset Value per Ordinary Share.

If the performance test is met, the performance fee will be an amount equal to 15%.of the amount by which the Adjusted Net Asset Value per Ordinary Share at the end of the relevant Performance Period exceeds the Target Net Asset Value per Ordinary Share multiplied by the time weighted average of the number of Ordinary Shares in issue in the Performance Period together, if applicable, with an amount equal to the VAT thereon.

In any Outperformance Period which follows any one or more Underperformance Periods, the performance fee payable shall be calculated by multiplying X minus Y by 15% (where X is the increase in the Adjusted Net Asset Value per Ordinary Share at the end of the relevant Outperformance Period above the Target Net Asset Value per Ordinary Share for that Performance Period and Y is the aggregate of the Shortfall Returns for the previous Underperformance Periods) and multiplied by the time weighted average of the number of Ordinary Shares in issue in the Performance Period. If X minus Y is a negative figure, no performance fee shall be payable.

If the Adjusted Net Asset Value per Ordinary Share at the end of the relevant Performance Period is higher than the Target Net Asset Value per Ordinary Share but is less than the Opening NAV, any accrued performance fee will be withheld and shall not be payable and will only become payable in the event that the Target Net Asset Value per Ordinary Share and the Opening NAV is exceeded in respect of a subsequent Performance Period. For the avoidance of doubt, in the event that the Target Net Asset Value per Ordinary Share and the Opening NAV is exceeded in respect of a subsequent Performance Period, all accrued but unpaid performance fee(s) in respect of previous Performance Periods will become due and payable.

If there has been a Shortfall Return in respect of a Performance Period and performance fees have been accrued but withheld in respect of one or more prior Performance Periods, the accrued but withheld performance fees will be reduced by treating the prior Performance Period(s) and the current Performance Period as one Performance Period and calculating any performance fee due over that aggregated period. For the avoidance of doubt, in the event that the Target Net Asset Value per Ordinary Share and the Opening NAV is exceeded in respect of a subsequent Performance Period, all accrued but unpaid performance fee(s) in respect of previous Performance Periods will become due and payable.

The Investment Manager will not be entitled to such part of any performance fee to which it would otherwise be entitled if:

(i)             payment of such part of any performance fee would cause the aggregate performance fee in respect of a Performance Period, excluding any accrued but unpaid performance fee in respect of previous Performance Periods, to exceed 1.5% of the Net Asset Value of the Company at the end of the relevant Performance Period (or, in the case of the any Performance Period of less than a year, 1.5% multiplied by the number of days in that Performance Period divided by 365); or

(ii)            payment of such part within the Performance Period would have caused the performance test or Opening NAV not to be met.

Performance fees accrued but not paid during the period ended 31 December 2011 amounted to US$nil (31 December 2010: US$nil).

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

The Investment Management Agreement is subject to termination, inter alia, on 12 months' notice by either party.

Investment Management Agreement definitions

Adjusted Net Asset Value per Ordinary Share	at a particular time, the total of A minus B plus C where: (i)           A is the Net Asset Value per Ordinary Share at that time calculated on a basis that does not recognise any liability of the Company to the Investment Manager in respect of any performance fee that is, or may become, payable; (ii)          B is the sum of all dividends received by the Company since 1 January 2011 divided by the number of Ordinary Shares in issue at the time of each dividend; and (iii)         C is the sum of all dividends paid by the Company since 1 January 2011 divided by the number of Ordinary Shares in issue at the time of each dividend;
Performance Period	each period in respect of which the Company produces audited accounts and, if different, the final period for which the Investment Management Agreement subsists or any shorter period where there has been an issue of Ordinary Shares which exceeds 10% of the then existing share capital of the Company, subject always to the discretion of the Board. The first Performance Period commenced on date of the passing of the Resolution (17 March 2011)
Outperformance Period	any Performance Period in which the Adjusted Net Asset Value per Ordinary Share at the end of the relevant Performance Period exceeds the Target Net Asset Value per Ordinary Share
Shortfall Return	the amount by which the Target Net Asset Value per Ordinary Share exceeds the Adjusted Net Asset Value per Ordinary Share in respect of a Performance Period

Under the terms of an option agreement dated 25 July 2007 the Investment Manager was granted an option to acquire 1,713,550 shares at an option price of US$1.00 per share. The Investment Manager Option Deed provides for the transfer of the options by the Investment Manager to the Distribution Adviser and the Placing Agent. This transfer has now taken place.

The option may be exercised by the Distribution Adviser and the Placing Agent in whole or in part at any time before the fifth anniversary of admission to trading on AIM.

The option was independently valued using a Black-Scholes model giving a fair value of US$672,300 which was charged to equity as a share issue expense.

Custodian fees

The Custodian was entitled to receive fees calculated as 7.5 basis points per annum of the net asset value of the Group between US$0 and US$100 million and 6 basis points per annum of the net asset value in excess of US$100 million, subject to a minimum monthly fee of US$6,250. Subcustodian fees are also payable.

Custodian and subcustodian fees for the period ending 31 December 2011 amounted to US$269,782 (31 December 2010: US$253,729). A new custodian was appointed with effect from 1 February 2012 as per note 15.

Administrator and Registrar fees

The Administrator is entitled to receive a fee of 15 basis points per annum of the net asset value of the Company between US$0 and US$100 million, 12.5 basis points of the net asset value of the Company between US$100 and US$200 million and 10 basis points of the net asset value of the Company in excess of US$200 million, subject to a minimum monthly fee of US$15,000, payable quarterly in arrears.

The Administrator assists in the preparation of the financial statements of the Group and provides general secretarial services.

Administration fees paid for the period ending 31 December 2011 amounted to US$172,712 and US$27,306 for additional services (31 December 2010: US$186,230 and US$26,767 respectively).

7              Commission rebate

During the period the Company received 60% brokerage commission rebates for all trades done through its Qatar brokers. This arrangement is set to continue. For the period ended 31 December 2011 the Group received US$36,726 (2010: US$64,766).

8              Cash and Cash Equivalents

	31 December 2011	30 June 2011
	US$'000	US$'000
Bank balances	2,648	1,199
Cash and cash equivalents	2,648	1,199

9              Other Reserves

	Distributable Reserves	Retained Earnings	Foreign currency translation reserve	Capital redemption reserves	Other reserves	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2011	238,592	(1,357)	(7)	140	672	238,040
Foreign exchange translation differences	-	-	(15)	-	-	(15)
Retained earnings for period	-	10,524	-	-	-	10,524
Dividends paid	-	(6,275)	-	-	-	(6,275)
Shares repurchased into Treasury	(1,043)	-	-	-	-	(1,043)
Share buy-backs			-	1	-	1
Balance at 31 December 2011	237,549	2,892	(22)	141	672	241,232

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 2011	31 December 2010
Profit attributable to equity holders of the Company (US$'000)	10,524	52,930
Weighted average number of ordinary shares in issue (thousands)	232,483	233,432
Basic and diluted earnings per share (cents per share)	4.53	22.67

There is no difference between basic and diluted earnings per share as the warrants and options are not dilutive in 2011.

11            Trade and other payables

	31 December 2011	30 June 2011
	US$'000	US$'000
Due to broker	-	70
Management fee payable	768	759
Administration fee payable	86	86
Accruals and sundry creditors	177	452
	1,031	1,367

12            Directors' Remuneration

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

David von Simson as non-executive chairman is entitled to receive an annual fee of £45,000.

Nick Wilson as chairman of the audit committee and in respect of his work regarding share repurchases is entitled to receive an annual fee of £42,500.

Leonard O'Brien, Paul Macdonald 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 2011 amounted to US$196,411 (31 December 2010: US$144,666).

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.

13            Taxation continued

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.

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

15            Post Balance Sheet Events

During the period, we renegotiated the terms of our custody arrangements to arrive at a lower cost for the Company. This new agreement was executed with effect from 1 February 2012, the new custodian is HSBC who replace Anglo Irish Bank Corporation (International) PLC.

On 27 January 2012 Qatar Insurance Company S.A.Q., the Company's Investment Adviser, acquired 100% of the share capital of the Company's Investment Manager, Epicure Manager's Qatar Limited. As a result of this Paul Macdonald is no longer a related party to the Company and is regarded as independent.

Paul Macdonald was appointed to the Audit Committee on 7 February 2012.

 

END

 

 

IR LLFEEFLIVFIF