Annual Financial Report

RNS Number : 6770M

Gulf Investment Fund PLC

18 September 2019

Gulf Investment Fund PLC

18 September 2019

Legal Entity Identifier: 2138009DIENFWKC3PW84

Gulf Investment Fund plc

Annual Report for the year ended 30 June 2019

· Net asset value rose 12.7% vs the benchmark + 9.8%

· Share price rose 18.7% (2018: 13%)

· Board recommends a dividend for the year of 3c a share (2018: 3c)

· The fund is still overweight Qatar given its macro-economic resilience

· Saudi Arabia upgraded to emerging market status by MSCI and Kuwait scheduled to become an Emerging Market in early 2020

Nicholas Wilson, Chairman of Gulf Investment Fund plc, commented:

"Over the year your company has benefitted greatly from the expanded investable universe following the strategy change in early December 2017. The fund continues to outperform its benchmark. $100 invested in the fund on 11 December 2017 would have been worth $140 at the end of June 2019, while the benchmark would have given shareholders $122.

The investment managers delivered good results this year for our shareholders, despite falling oil prices and regional tensions, by fully utilising the flexibility in their GCC-wide mandate.

Your Board of Directors continues to view the future of the company with confidence expecting healthy growth in the region as a whole, as the expansion in the non-hydrocarbon sector and infrastructure spending in a number of GCC member states helps to strengthen and balance their economies."

Enquiries:

Nicholas Wilson

Gulf Investment Fund Plc

+44 (0) 1624 622 851

William Clutterbuck / Alasdair Lennon

Maitland/AMO

+44 (0) 20 7379 5151

gulfinvestmentfund-maitland@maitland.co.uk

Chairman's Statement

On behalf of the Board, I am pleased to present your Company's twelfth Annual Report and Financial Statements for the year to 30 June 2019.

During the 12 months, your Company's Net Asset Value per Share ("NAV") rose by 12.7% to US$1.3504 which compares with a gain of 8.2% in the S&P GCC composite index and a fall of -1.40% in the MSCI Emerging Markets Index. Following a narrowing of the discount at which the shares trade to NAV, the shares rose by from US$1.015 to US$1.205 for a gain over the year of 18.7%. This against a background of a 16% fall in the price of Brent crude oil. Shareholders also received a dividend of 3.0c per share which was paid on 21 December 2018.

Results

Results for the period under review showed a profit of US$16.85m generated from fair value adjustments, realised losses and dividend income. This is equivalent to a basic profit per share of 18.22c (2018 9.95c)

As will be seen in the investment managers report, the geographical split of the portfolio has changed significantly during the period with Qatar still overweight at 30.4% of NAV because of its macro-economic resilience, followed by Saudi Arabia with a weighting of 27.6%, UAE 15.5% and Kuwait 12.6%. 13.9% of NAV is in cash.

As at 30 June 2019, we had 49 holdings: 27 in Saudi Arabia, 8 in Qatar, 6 in the UAE and 8 in Kuwait. Once again our largest sector is financial at 40.4%.

During the year Saudi Arabia was upgraded to emerging market status by MSCI and Kuwait is scheduled to join in May 2020.

The Company's Ongoing Charges fell to 1.88% from 1.95% in the previous year. The charges were calculated in accordance with the methodology recommended by the Association of Investment Companies.

Proposed dividend

The Board is pleased to recommend to shareholders a dividend of 3.0c a share (2018: 3.0c), subject to shareholder approval at the forthcoming Annual General Meeting, the dividend will be paid in January 2020. Further details on the ex-date, record date and payment date will be announced in due course.

Related party transactions

Details of any related party transactions are contained in note 10 of this report.

Post balance sheet events

Details of these can be found in note 14 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 challenges. The geopolitics of the region and, in particular, the dispute between Qatar and other members of the GCC brings continuing economic uncertainty as does the situation with Iran and potential ongoing problems in the straits of Hormuz.

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 growth in the region as a whole, as growth in the non-hydrocarbon sector in a number of GCC members helps to strengthen and balance their economies.

Annual general meeting

I look forward to welcoming shareholders to our twelfth Annual general meeting on 8 November 2019, which will be held at 11.00 am at the Company's registered office at Millennium House, 46 Athol Street, Douglas, Isle of Man.

Nicholas Wilson

Chairman

17 September 2019

Business Review

The following review is designed to provide information primarily about the Company's business and results for the year ended 30 June 2019. It should be read in conjunction with the Report of the Investment Manager and the Investment Adviser on pages 7 to 14 which gives a detailed review of the investment activities for the year and an outlook for the future.

Investment objective and strategy

The Company's investment objective is to capture the opportunities for growth offered by the expanding GCC economies by investing in listed companies on one of the GCC exchanges or companies soon to be listed on one of the GCC exchanges.

The Company applies a top-down screening process to identify those sectors which should most benefit from sector growth trends. Fundamental industry and company analysis, rather than benchmarking, forms the basis for both stock selection and portfolio construction.

The Company's investment policy is on pages 15 to 16.

Performance measurement and key performance indicators

In order to measure the success of the Company in meeting its objectives and to evaluate the performance of the Investment Manager, the Directors take into account the following key performance indicators:

Returns and Net Asset Value

At each quarterly Board meeting the Board reviews the performance of the portfolio versus the S&P GCC Composite Index (local benchmark) as well as the net asset value, income, share price and expense ratio for the Company.

Discount/Premium to Net Asset Value

On a weekly basis, the Board monitors the discount/premium to net asset value. The Directors renew their authority at the Annual general meeting in order to be able to make purchases through the market where they believe they can assist in narrowing the discount to net asset value and where it is accretive to net asset value per share.

On 22 February 2017, the Company announced the details of its annual share buy-back programme. Pursuant to, and during the term of this share buy-back programme, the Company may purchase ordinary shares provided that:

1) the maximum price payable for an ordinary share on the London Stock Exchange is an amount equal to the higher of:

a. 105 per cent. of the average market value of the Company's ordinary shares as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which such share is contracted to be purchased; and

b. In order to benefit from the exemption laid down in Article 5(1) of Regulation (EU) No 596/2014, the Company will not purchase shares at a price higher than the higher of the price of the last independent trade and the highest current independent purchase bid on the trading venue where the purchase is carried out; and

2) the aggregate number of ordinary shares which may be acquired on behalf of the Company in connection with this share buy-back programme shall not exceed 17,548,355 ordinary shares (updated at last AGM to 13,859,940).

Due to the limited liquidity in the ordinary shares, a buy-back of ordinary shares pursuant to the share buy-back programme on any trading day is likely to represent a significant proportion of the daily trading volume in the ordinary shares on the London Stock Exchange (and is likely to exceed the 25% limits of the average daily trading volume as laid down in Article 5(1) of Regulation (EU) No 596/2014 and as such the Company will not benefit from this exemption). The share buy authority resolution is for up to 14.99% of the Company's issued share capital. The Board has no present intention to exercise the authority in full but will keep the matter under review, taking into account the overall financial position of the Company and the discount to net asset value at which the Company's shares trade.

Whilst the Company has the requisite shareholder authority to conduct share buy-backs, the Company has not announced a share buy-back programme since the above programme which expired on 17 November 2017, however this is under regular review by the Board.

A Board member is responsible for close monitoring of the Company's share price and working with our broker to buy back shares when we believe appropriate so as to manage any discount to net asset value.

Yield

The Board monitors the dividend income of the portfolio and the amount available for distribution and considers the impact on the Company's annual dividend policy of future progressive dividend payments, subject to the absence of exceptional market events.

Principal risks and uncertainties

The Board confirms that there is an on-going process for identifying, evaluating and managing or monitoring the key risks to the Company. These key risks have been collated in a risk matrix document which is reviewed and updated on a quarterly basis by the Directors. The risks are identified and graded in this process, together with the policies and procedures for the mitigation of the risks.

The key risks which have been identified and the steps taken by the Board to mitigate these are as follows:

Market

The Company's investments consist of listed companies. There are no investments in companies soon to be listed. Market risk arises from uncertainty about the future prices of the investments. This is commented on in Note 1(a) and 2 on pages 48 to 52.

Investment and strategy

The achievement of the Company's investment objective relative to the market involves risk. An inappropriate asset allocation may result in underperformance against the local index. Monitoring of these risks is carried out by the Board which, at each quarterly Board meeting, considers the asset allocation of the portfolio, the ratio of the larger investments within the portfolio and the management information provided by the Investment Manager and Investment Adviser, who are responsible for actively managing the portfolio in accordance with the Company's investment policy. The net asset value of the Company is published weekly.

Accounting, legal and regulatory

The Company must comply with the provisions of the Isle of Man Companies Acts 1931 to 2004 and since its shares are listed on the London Stock Exchange, the UK Listing Authority's Listing Rules and Disclosure Guidance and Transparency Rules ("UKLA Rules")' A breach of company law could result in the Company and/or the Directors being fined or the subject of criminal proceedings. A breach of the UKLA Rules could result in the suspension of the Company's shares. The Board relies on its Company Secretary and advisers to ensure adherence to company law and UKLA Rules. The Board takes legal, accounting or compliance advice, as appropriate, to monitor changes in the regulatory environment affecting the Company.

From 3 July 2016 the Company must also comply with the Market Abuse Regulation (MAR) which contains prohibitions for insider dealing and market manipulation, and provisions to prevent and detect these.

Operational

Disruption to, or the failure of, the Investment Manager, the Investment Adviser, the Custodian or Administrator's accounting, payment systems or custody records could prevent the accurate reporting or monitoring of the Company's financial position. Details of how the Board monitors the services provided by the Investment Manager and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal control section of the Corporate Governance Report on pages 19 to 25.

Financial

The financial risks faced by the Company include market price risk, foreign exchange risk, credit risk, liquidity risk and interest rate risk. Further details are disclosed in Notes 1(a), 2, 6 and 8.

Report of the Investment Manager and Investment Adviser

Regional Market Overview

After positive gains in 1Q19, regional markets tracked by the S&P GCC Composite index (S&P GCC) exhibited volatility in 2Q19 as geopolitical events kept investors on tenterhooks.

The standoff between the US and Iran hardened after Iran shot down a US drone. The event was the first direct Iranian-claimed attack on US military assets. This was the latest in an escalating series of incidents in the Gulf since mid-May this year, including suspected attacks on six tankers, and has prompted international concern that the standoff could escalate into an open confrontation.

S&P GCC index was up 9.8 per cent year-to-date (YTD), led by Saudi Arabia, which rose 12.7 per cent on much-anticipated inclusion into the FTSE and MSCI EM indices. Kuwait market also rose 14.8 per cent YTD supported by favorable stock re-weightings by the FTSE in March. Markets also reacted positively to the news of Kuwait's MSCI EM inclusion expected to take place in 2020. Markets in Qatar, Dubai and Abu Dhabi rose 1.5 per cent, 5.1 per cent and 1.3 per cent, respectively. Oman, the only market in red amongst the GCC peers, declined 10.1 per cent, while Bahrain market reported gains of 10.0 per cent.

Oil prices rose 23.7 per cent YTD 2019 led by decreasing US inventories, US imposed sanctions on Venezuela and OPEC+ decision to continue production cut. However, trade tensions dampened the demand outlook, limiting further upside.

Country	Index	Jun-18	Dec-18	2H18	Jun-19	1H19	LTM
Qatar	DSM Index	9,024	10,299	14.1%	10,456	1.5%	15.9%
Bahrain	BHSEASI Index	1,311	1,337	2.0%	1,471	10.0%	12.2%
Dubai	DFMGI Index	2,821	2,530	-10.3%	2,659	5.1%	-5.8%
Abu Dhabi	ADSMI Index	4,560	4,915	7.8%	4,980	1.3%	9.2%
Oman	MSM30 Index	4,572	4,324	-5.4%	3,885	-10.1%	-15.0%
Kuwait	KWSEAS Index	4,890	5,080	3.9%	5,832	14.8%	19.3%
Saudi Arabia	SASEIDX Index	8,314	7,827	-5.9%	8,822	12.7%	6.1%
S&P GCC Index	SEMGGCPD Index	109	107	-1.4%	118	9.8%	8.2%
Emerging Markets	MXEF Index	1,070	966	-9.7%	1,055	9.2%	-1.4%
MSCI World	MXWO Index	2,089	1,884	-9.8%	2,178	15.6%	4.3%
Brent	CO1 Comdty	79	54	-32.3%	67	23.7%	-16.2%

Source: Bloomberg

During 2H18, a steep decline in oil prices (Brent oil price was down 32.3 per cent) led to a mixed performance for GCC markets. S&P GCC index was down 1.4 per cent led by subdued performance by Saudi and Dubai markets which fell 5.9 per cent and 10.3 per cent, respectively. Qatar market reported gains of 14.1 per cent, outperforming GCC peers. Markets in Abu Dhabi and Kuwait followed Qatar with 7.8 per cent and 3.9 per cent returns.

Investment demand from international investors

Saudi Arabia has attracted US$14.3 billion in foreign inflows so far in 2019 following its inclusion into the MSCI and FTSE emerging markets indices. The MSCI upgrade began in May and takes place in two tranches; the second tranche will be in August. FTSE Russell's upgrade started in March and is spread over five tranches. As at 30 June 2019, three tranches were complete and the remaining two will take effect in September and in March 2020.

In the absence of major domestic and external shocks, based on Saudi Arabia's weight in the index, inflows from investors could reach US$40bn.

MSCI confirmed Kuwait's inclusion in its EM index starting June 2020. This decision is expected to attract c.US$2.8 billion of inflows from passive funds. Nine Kuwaiti stocks will be added, giving the Kuwaiti market c.0.5 per cent weight in the index.

The reclassification is subject to the implementation of further market reforms to be introduced by Kuwait this year. These are due to be implemented before the end of November.

Table: Saudi Arabia Upcoming FTSE / MSCI Inclusion Timeline

FTSE (Expected Weight: 2.7%)
Date	Phase	% inclusion	Expected Inflows (US$ Bn)
19-Sep-19	IV	25%	1.5
19-Mar-20	V	25%	1.5
MSCI (Expected Weight: 2.6%)
Date	Phase	% inclusion	Expected Inflows (US$ Bn)
28-Aug-19	II	50%	5.5

Source: EFG Hermes Estimates

Economic Outlook

Economic reforms and infrastructure spending by regional governments has started yielding positive results for GCC economies, which can be seen in a pickup in non-oil growth for most countries.

GCC Non-oil GDP Growth:

	Avg. 2000-15a	2016a	2017a	2018a	2019f	2020f
Bahrain	7.1	4.3	4.9	2.5	2.2	2.5
Kuwait	6.2	1.4	2.1	2.5	3.0	3.5
Oman	6.9	6.2	0.5	2.5	2.5	3.0
Qatar	12.3	5.3	3.8	5.3	4.6	4.3
Saudi Arabia	6.2	0.2	1.3	2.1	2.6	2.9
UAE	6.2	3.2	2.5	1.3	2.7	4.0
GCC	6.9	1.9	1.9	2.3	2.9	3.3

IMF REO April 2019

Saudi Arabia's fiscal, labor and capital market reforms, undertaken over the past few years, have started bearing fruit. Non-oil growth has picked-up, female participation in the labour force has increased, the introduction of VAT has underpinned an increase in non-oil tax revenues, while energy price reforms have helped reduce per capita consumption of gasoline and electricity. Measures have also been introduced to shield lower and middle-income households from higher costs resulting from these reforms. Reforms to the capital markets, legal framework, and business environment are also progressing well.

During the period, Saudi Aramco sold US$12 billion of international bonds across five tranches, in one of the most oversubscribed debt issuances of all time.

Saudi Arabia Purchasing Managers' Index (PMI) improved to a 19-month high of 57.4 in June from 57.3 in May, as Saudi Arabian firms reported rising output and new orders. Meanwhile, the unemployment rate among Saudi nationals fell for the third consecutive quarter in the first quarter of 2019 to 12.5 per cent.

The UAE economy continued to adjust in 2018, when non-oil growth slowed to 1.3 per cent, while the overall economy grew 1.7 per cent, benefiting from increased oil production. The economy is now at a turning point, supported by public spending. A substantial amount of Expo 2020 investment should be completed by end-year, while some government related businesses are embarking on investment plans. This is expected to raise the growth rate to over 2 per cent this year and to nearly 3 per cent in 2020-21.

The stimulus plan for Dubai is directed at technology entrepreneurship, including waiving property registration fines for 60 days, freezing school fees and scrapping 19 fees related to the aviation industry. The Abu Dhabi economic stimulus plan aims to create at least 10,000 jobs for Emiratis in the private and public sectors over the next five years, as well as boosting the competitiveness of SMEs.

The Abu Dhabi government continued its efforts to open the economy, announcing plans to permit the sale of land and property in investment areas to foreigners on a freehold basis - previously limited to Emiratis and other GCC citizens. This should help boost property demand and ultimately prices. UAE also announced plans to issue permanent 'Golden Card' residency visas to high-net-worth individuals and highly skilled workers, in a bid to support foreign investment and retain exceptional talent. Around 6,800 individuals with a combined worth of about US$27 billion are currently eligible for the visa.

The UAE PMI rose to a four-year high of 59.4 in May from 57.6 in April, led by gains in new orders and output, which rose to multi-year highs.

Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank merged and with combined assets of US$115 billion became the third largest lender in the UAE. The merger comes amid ongoing consolidation efforts in the UAE banking industry to strengthen profit margins.

Qatar's overall GDP growth is projected to reach 2.6 per cent in 2019 from 2.2 per cent in 2018, supported by a recovery in hydrocarbon output and robust growth of the non-hydrocarbon sector. The projected non-hydrocarbon growth for 2019 reflects the persistent multiplier effects of continued increases in capital expenditure in recent years, the gradual pace of fiscal consolidation, ample liquidity, and increased private sector activity. Medium-term growth will be supported by increased gas production from the Barzan field and a planned increase in LNG production capacity.

Qatar's banking system remains well capitalised and asset quality is strong. Liquidity pressures that emerged following the blockade in June 2017 have waned, and foreign exchange reserves have recovered to pre-blockade levels.

In Kuwait growth has resumed, with hydrocarbon output rising by 1.2 percent in 2018 after contracting a year earlier. Buoyed by a rebound in confidence and government spending, non-oil growth has accelerated to 2.5 per cent. After the first deficit in more than two decades in 2016, the current account shifted back into surplus in 2017 and reached an estimated surplus of 12.7 per cent of GDP in 2018.

Overall growth in Kuwait is expected to strengthen. The recent OPEC+ (the grouping of OPEC members plus Russia and other oil producers) decision to cut production is expected to limit oil output growth to 2 per cent in 2019, which should rebound to 2.5 per cent in 2020 given the spare capacity. Non-oil growth is projected to increase to 3 per cent in 2019 and 3.5 per cent in 2020, driven by accelerated capital project execution. Once the headwinds from new taxes wear off, non-oil growth could reach 4 per cent. As growth strengthens, and capital projects come on stream, credit growth should pick up, aided by bank liquidity and the recent easing of lending limits on personal loans.

Oman is reportedly preparing for an international debt issue (US$2 billion) in a bid to help finance its budget deficit (estimated at 7 per cent of GDP in 2019). This comes after recent downgrades that have left its credit rating at non-investment grade. Early this year the government announced that it plans to finance 86 per cent of its deficit with foreign and domestic borrowing and the rest from its reserves.

Additionally, the Oman government plans to make changes to FDI laws to encourage investment inflows. The changes include granting foreign firms 100 per cent ownership and lowering minimum capital requirements. These laws are expected to be passed by the end of this year. Also, to boost non-oil revenues, in June the government implemented an excise tax of 100 per cent on selected goods, including sugary drinks and tobacco. A 5 per cent VAT originally planned for 2018 is likely to follow in 2020.

Other Recent Developments

In February 2019, Saudi Crown Prince Mohammed bin Salman visited China, India and Pakistan, where he signed multibillion investment contracts. This is part of the Kingdom's plan to strengthen ties with Asian countries to fuel its economic transformation programme.

In 1Q19, Saudi Arabia closed six privatisation deals worth SAR13.3 billion in the Water, Healthcare and Transportation sectors. A further 23 privatization projects, due for completion in 2022, are in the pipeline. Saudi Arabia has begun the construction of residential units in the US$500 billion Neom city project with phase 1 expected to complete in 2020. Saudi also announced the "Employment Subsidy Program for Upskilling" to encourage local nationals to work in the private sector with a subsidy equivalent to 30 per cent of their salaries for their first year.

In a bid to lure more investment to the real estate sector, Qatar plans to open further its property market to foreign investors. In line with this decision, ten locations have been identified allowing 100 per cent foreign ownership.

Portfolio structure

Country allocation

GIF's weightings in GCC markets are based on the Investment Adviser's views on investment outlook and valuation. Compared to the benchmark, GIF remains overweight Qatar (30.4 per cent of NAV) because of Qatar's macro-economic resilience. GIF's weighting in Saudi, UAE and Kuwait are 27.6 per cent, 15.5 per cent and 12.6 per cent, respectively. The investment advisor took some profits from its Saudi Arabia holdings during the period, as a result of which GIF's cash position stood at 13.9 per cent of NAV as at 30 June 2019 (30 December 2019: 1.3 per cent).

As of 30 June, GIF had 49 holdings: 29 in Saudi Arabia, 8 in Qatar, 4 in the UAE and 8 in Kuwait (vs. 42 holdings in 4Q18: 23 in Saudi Arabia, 11 in Qatar, 4 in the UAE and 4 in Kuwait).

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for charts depicting Country allocation.

Portfolio

Top 5 Holdings

Company	Country	Sector	% share of GIF NAV
Emirates NBD	UAE	Financials	9.7%
Qatar Gas Transport	Qatar	Energy	8.4%
Commercial Bank of Qatar	Qatar	Financials	4.7%
Qatar International Islamic Bank	Qatar	Financials	4.0%
Gulf International Services	Qatar	Energy	4.0%

Source: QIC

The Investment Adviser raised its holdings in Emirates NBD, a leading bank in the UAE with c.20 per cent market share of UAE's loans and deposits. The bank is consistently improving its operating metrics and earnings. It already operates in Egypt and Saudi Arabia and plans to enter the Turkish market with the acquisition of DenizBank. The Investment Adviser remains positive on Qatar Gas Transport Company as the company is well placed to benefit from increased transport demand arising from the expansion of Qatar's 'North Field' gas field.

The Investment Adviser increased the holding in Gulf International Services Co. (GISS), one of the key beneficiaries of Qatar's North Field expansion. GISS recently secured a major drilling contract from Qatar Petroleum which is expected to boost earnings in the medium-term. The Investment Adviser also increased holdings in Qatar Int'l Islamic Bank as the valuation was attractive.

The holding in Al Rajhi Bank, National commercial bank and National Bank of Kuwait were sold at a profit.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting Sector Allocation as at 30 June 2019.

The Financials sector remains GIF's major sector, making up 40.4 per cent of the fund. However, this has decreased from 55.2 per cent in 4Q18, as the Investment Adviser reduced holdings and booked profits.

The Investment Adviser increased holdings in the Consumer sector to 13.4 per cent from 5.6 per cent in December 2018. The long-term outlook of the sector remains good, thanks to favorable demographics (high young and working age population) and an expected strong growth in tourism and per capita income. Saudi government initiatives such as allowances for public sector employees, the continuation of the citizen's account programme (cash transfers deposited directly in the accounts of the beneficiary citizens) to support low income families should help boost consumer spending.

Holdings in Industrials sector rose to 8.7 per cent from 4.0 per cent in 4Q18, as the valuations were attractive. While, holdings in the Materials sector were substantially reduced to 0.8 per cent from 9.9 per cent in 4Q18, as the Investment Adviser booked profits.

Investments in the Communication Services and Healthcare sector were increased while holdings in the Real estate and Utilities sector were reduced during the period.

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. The company's LNG shipping fleet is the largest in the world, comprising of 69 LNG vessels. It also owns 1 FSRU vessel and four large LPG carriers. Out of the 69 LNG vessels, 25 are wholly owned and 44 are under joint ventures (JV). 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, Qatargas and their joint venture partners for the State of Qatar. For 1H19, Nakilat reported a net profit of US$131 million compared to US$122 million during the same period in FY18, an increase of 7.1 per cent. 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.

Commercial Bank of Qatar (4.7 per cent of NAV)

Commercial Bank of Qatar (CBQ) is the second largest commercial bank in Qatar established in 1975 offering banking solutions worldwide, with 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 1H19, CBQ reported net profit of US$257 million, an increase of 9.2 per cent, reflecting effective execution of the strategy. As of 30^th June 2019, the Bank has total assets of US$38.7 billion.

Qatar International Islamic Bank (4.0 per cent of NAV)

Established in 1991, Qatar International Islamic Bank (QIIB) is an Islamic bank in the State of Qatar offering personal and corporate Islamic banking solutions. The Bank operates through its head office located in Grand Hamad Street in Doha and 19 local branches. The bank witnessed strong growth in financing assets in the period 2011-2018 (CAGR 14.9 per cent). QIIB's total assets at end of the 1H19 stood at US$14.9 billion vs. US$13.1 billion in 1H18 representing a growth of 13.9 per cent, while financing assets grew by 13.1 per cent to reach US$8.6 billion. For 1H19, the bank's net profit grew 5.5 per cent YoY to US$140.3 million.

Gulf International Services Co. (4.0 per cent of NAV)

Gulf International Services (GISS) Co., through its subsidiaries, operates in four distinct segments - insurance and reinsurance, drilling and associated services, helicopter transportation services and catering services. Gulf drilling international (GDI), a major subsidiary, operates in the onshore and offshore oil and natural gas drilling business in Qatar. GDI currently has direct ownership of 16 drilling rigs (8 offshore rigs and 8 onshore rigs), which are used to drill wells suitable for oil and natural gas extraction, 1 jack-up accommodation barge and 2 lift boats. GDI is one of the key beneficiaries of Qatar's North Field expansion Plan. Recently, GDI secured a major drilling contract from Qatar Petroleum which is expected to boost earnings in the medium-term. For 1Q19, the Company reported net profit of US$6.9 million vs. US$1.9 million loss reported in 1Q18.

GIF Performance

YTD 2019, the NAV is up 16.8 per cent against the benchmark's +9.8 per cent. This continues the outperformance trend since the investment policy extended to include the Gulf Cooperation Council (GCC) region in late 2017.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting GIF Performance.

GCC Outlook

Growth in the region is expected to improve to 2.1 per cent in 2019, up from 2 per cent in 2018 (source: IMF estimates). Government spending and multiyear infrastructure plans will likely provide support to economic activity in Kuwait and Saudi Arabia, while Dubai Expo 2020-related spending in Dubai, and Abu Dhabi's stimulus plan are expected to support growth in the UAE. In Qatar, the beginning of the Barzan Gas Project operations will boost oil growth; however, non-hydrocarbon growth there is projected to moderate in 2019.

With large investments expected over the next few years, the Investment Adviser expects to see rising 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 start to 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 reforms across nations.

Valuations

Market	Market Cap.	PE (x)		PB (x)		Dividend Yield (%)
	US$ billion	2019E	2020E	2019E	2020E	2019E	2020E
Qatar	139.1	14.56	13.45	1.73	1.64	3.95	4.17
Saudi Arabia	550.0	16.55	15.22	1.99	1.90	3.48	3.73
Dubai	77.8	7.40	7.11	1.06	0.98	4.68	4.93
Abu Dhabi	147.6	13.92	12.79	1.72	1.64	4.77	5.08
Kuwait	112.5	14.69	13.64	1.18	1.08	5.54	6.01
S&P GCC	933.9	15.03	13.80	1.65	1.56	4.01	4.32
MSCI EM	14,670.4	13.07	11.50	1.53	1.37	2.97	3.26
MSCI World	47,500.4	16.59	15.17	2.33	2.19	2.48	2.62

Source: Bloomberg, as of 24^th July 2019; Market Cap. as of 23^rd July 2019

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

17 September 2019 17 September 2019

Investment Policy

Investment objective

The Company applies a top-down screening process to identify those sectors which should most benefit from sector growth trends. Fundamental industry and company analysis, rather than benchmarking, forms the basis of both stock selection and portfolio construction.

Assets or companies in which the Company can invest

The Company invests in listed companies on any GCC Exchanges in addition to companies soon to be listed. The Company may also invest in listed companies, or pre-IPO companies, in other GCC countries. The Company will also be permitted to invest in companies listed on stock markets not located in the GCC which will have a significant economic exposure to and/or derive a significant amount of their revenues from GCC countries.

Whether investments will be active or passive investments

In the ordinary course of events, the Company is not an activist investor, although the Investment Adviser will seek to engage with investee company management where appropriate.

Holding period for investments

In the normal course of events, the Company expects to be fully-invested, although the Company may hold cash reserves pending new IPOs or when it is deemed financially prudent. Although the Company is a long-term financial investor, it will actively manage its portfolio.

Spread of investments and maximum exposure limits

The Company will invest in a portfolio of investee companies. The following investment restrictions are in place to ensure a spread of investments and to ensure that there are maximum exposure limits in place (see investment guidelines under Investing Restrictions).

Policy in relation to gearing and derivatives

Borrowings will be limited, as at the date on which the borrowings are incurred, to 5% of NAV. Borrowings will include any financing element of a swap. The Company will not make use of hedging mechanisms.

The Company may utilise derivative instruments in pursuit of its investment policy subject to:

· such derivative instruments being designed to offer the holder a return linked to the performance of a particular underlying listed equity security;

· a maximum underlying equity exposure limit of 15 per cent of NAV (calculated at the time of investment); and

· a policy of entering into derivative instruments with more than one counterparty in relation to an investment, where possible, to minimise counterparty risk.

Policy in relation to cross-holdings

Cross-holdings in other listed or unlisted investment funds or ETFs that invest in Qatar or other countries in the GCC region will be limited to 10 per cent. of Net Asset Value at any time (calculated at the time of investment).

Investing restrictions

The investing restrictions for the Company are as follows:

(i) Foreign ownership restrictions

Investments in most GCC listed companies by persons other than citizens of that specific GCC country have an ownership restriction wherein the law precludes persons other than citizens of that specific GCC country from acquiring a certain proportion of a company's issued share capital. It is possible that the Company may have problems acquiring stock if the foreign ownership interest in one or more stocks reaches the allocated upper limit. This may adversely impact the ability of the Company to invest in certain companies listed on the GCC exchanges.

(ii) Investment guidelines

The Company has established certain investment guidelines. These are as follows (all of which calculated at the time of investment):

· No single investment position in the S&P GCC Composite constituent may exceed the greater of: (i) 15 per cent. of the Net Asset Value of the Company; or (ii) 125 per cent. of the constituent company's index capitalisation divided by the index capitalisation of the S&P GCC Composite Index, as calculated by Bloomberg (or such other source as the Directors and Investment Manager may agree):

· No single investment position in a company which is not a S&P GCC Composite Index constituent may at the time of investment exceed 15 per cent. of the NAV of the Company; and

· No holding may exceed 5 per cent. of the outstanding shares in any one company (including investment in Saudi Arabian listed companies by way of derivative investment in P-Note or Swap structured financial products); and

(iii) Conflicts management

The Investment Manager, the Investment Adviser, their officers and other personnel are involved in other financial, investment or professional activities, which may on occasion give rise to conflicts of interest with the Company. The Investment Manager will have regard to its obligations under the Investment Management Agreement to act in the best interests of the Company, and the Investment Adviser will have regard to its obligations under the Investment Adviser Agreement to act in the best interests of the Company, so far as is practicable having regard to their obligations to other clients, where potential conflicts of interest arise. The Investment Manager and the Investment Adviser will use all reasonable efforts to ensure that the Company has the opportunity to participate in potential investments that each identifies that fall within the investment objective and strategies of the Company. Other than these restrictions set out above, and the requirement to invest in accordance with its investing policy, there are no other investing restrictions.

Returns and distribution policy

The Company's primary investment objective is to achieve capital growth. However, the Company has instituted an annual dividend policy to return to Shareholders distributions at least equal to reported income for each reporting period. Shareholders should note that this cannot be guaranteed and the level of distributions for any period remains a matter to be determined at the discretion of the Board.

Life of the Company

The Company currently does not have a fixed life but the Board considers it desirable that Shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, at the annual general meeting of the Company in 2021, a resolution will be proposed that the Company continues in existence. More than 50 per cent. of Shareholders voting must vote in favour for this resolution to be passed. If the resolution is passed, a similar resolution will be proposed at every third annual general meeting thereafter. If the resolution is not passed, the Directors will be required to formulate proposals to be put to Shareholders to reorganise, unitise or reconstruct the Company or for the Company to be wound up.

Report of the Directors

The Directors hereby submit their annual report together with the audited consolidated and Company financial statements of Gulf Investment Fund plc (the "Company") for the year ended 30 June 2019.

The Company

The Company is incorporated in the Isle of Man and has been established to invest primarily in quoted equities of Qatar and other Gulf Co-operation Council (GCC) countries. The Company's investment policy is detailed on pages 15 to 16.

Results and Dividends

The results of the Company for the year and its financial position at the year- end are set out on pages 37 to 47 of the financial statements.

The Directors manage the Company's affairs to achieve capital growth and the Company has instituted an annual dividend policy. The quantum of the dividend is calculated based on a proportion of the dividends received during the year, net of the Company's attributable costs. Any undistributed income will be set aside in a revenue reserve in order to facilitate the Company's policy of future progressive dividend payments. This policy will be subject to the absence of exceptional market events.

For the year ended 30 June 2018, the Directors declared a dividend of US$2,773,837 (3.0c per share) which was approved by Shareholders and paid by the Company in December 2018. The Directors recommend a dividend of 3 cents per share in respect of the year ended 30 June 2019.

Directors

Details of Board members at the date of this report, together with their biographical details, are set out on page 26.

Director independence and Directors' and other interests have been detailed in the Directors' Remuneration Report on pages 30 and 31.

Creditor payment policy

It is the Company's policy to adhere to the payment terms agreed with individual suppliers and to pay in accordance with its contractual and other legal obligations.

Gearing policy

Borrowings will be limited, as at the date on which the borrowings are incurred, to 5% of NAV (or such other limit as may be approved by the Shareholders in general meeting). The Company will not make use of any hedging mechanisms.

There were no borrowings during the year (2018: US$ nil).

Donations

The Company has not made any political or charitable donations during the year (2018: US$ nil).

Adequacy of the Information Supplied to the Auditors

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as each is aware, there is no relevant audit information of which the Company's auditors are unaware; and each Director has taken all steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Statement of going concern

The Directors are satisfied that the Company and the Group have adequate resources to continue to operate as a going concern for the foreseeable future and have prepared the financial statements on that basis, however Shareholders will be given the opportunity to vote for a 100% tender in 2020 and to vote for the continued existence of the Company at the annual general meeting (AGM) in 2021 and every third AGM thereafter.

Independent Auditors

KPMG Audit LLC has expressed its willingness to continue in office in accordance with Section 12 (2) of the Companies Act 1982.

Annual general meeting

The Annual General Meeting of the Company will be held on 8 November 2019 at the Company's registered office.

A copy of the notice of Annual General Meeting is contained within this Annual Report. As well as the business normally conducted at such a meeting, Shareholders will be asked to renew the authority to allow the Company to continue with share buy-backs.

The notice of the Annual General Meeting and the Annual Report are also available at www.gulfinvestmentfundplc.com.

Corporate governance

Full details are given in the Corporate Governance Report on pages 19 to 25, which forms part of the Report of the Directors.

Substantial shareholdings

As at the date of publication of this annual report, the Company had been notified, or the Company is aware of the following significant holdings in its Share Capital.

	Ordinary Shares
Name	%
City of London Investment Management Company	28.24
Qatar Insurance Company S.A.Q.	18.73
1607 Capital Partners LLC	15.47
Qatar Investment Authority	11.66
Lazard Asset Management	5.99
Aberdeen Emerging Capital	3.15

Certain of these substantial shareholdings can be further broken down as follows:

Qatar Insurance Company S.A.Q.:

QIC	12,768,260	13.81%
QIC - separately managed	3,779,107	4.09%
Q-Re LLC - separately managed	772,391	0.84%
Total	17,319,758	18.73%

Lazard Asset Management:

Lazard - voting rights	3,609,169	3.90%
Lazard - non voting rights	1,930,266	2.09%
Total	5,539,435	5.99%

The above percentages are calculated by applying the Shareholdings as notified to the Company or the Company's awareness to the issued Ordinary Share Capital as at 31 May 2019.

On behalf of the Board

Nicholas Wilson

Chairman

17 September 2019

Millennium House

46 Athol Street

Douglas

Isle of Man

IM1 1JB

Corporate Governance Report

Compliance with Companies Acts

As an Isle of Man incorporated company, the Company's primary obligation is to comply with the Isle of Man Companies Acts 1931 to 2004. The Board confirms that the Company is in compliance with the relevant provisions of the Companies Acts.

Compliance with the Association of Investment Companies (AIC) Code of Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company applies the principles identified in the UK Corporate Governance Code which is available on the Financial Reporting Council's website: www.frc.org.uk. The Board confirms that the Company has complied throughout the accounting period with the relevant provisions contained within the UK Code.

The Board of the Company has considered the principles and recommendations of the AIC 2014 Code of Corporate Governance (AIC Code) by reference to the AIC Corporate Governance Guide for investment Companies (AIC Guide). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders.

The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code, except the length of service of Mr. Wilson and Mr. MacDonald and as set out below.

The UK Corporate Governance Code includes provisions relating to:

• the role of the chief executive

• executive directors' remuneration

• the need for an internal audit function

For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions, with the exception of portfolio management, risk management and service provider performance management, are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions.

Directors

The Directors are responsible for the determination of the Company's investment policy and strategy and have overall responsibility for the Company's activities including the review of the investment activity and performance.

All of the Directors are non-executive. The Board considers each of the Directors to be independent of, and free of any material relationship with, the Investment Manager and Investment Adviser.

The Board of Directors delegates to the Investment Manager through the Investment Management Agreement the responsibility for the management of the Company's assets in GCC securities in accordance with the Company's investment policy and for retaining the services of the Investment Adviser. The Company has no executives or employees.

The Articles of Association require that all Directors submit themselves for election by Shareholders at the first opportunity following their appointment and shall not remain in office longer than three years since their last election or re-election without submitting themselves for re-election.

The Board meets formally at least 4 times a year and between these meetings there is regular contact with the Investment Manager. Other meetings are arranged as necessary. The Board considers that it meets regularly enough to discharge its duties effectively. The Board ensures that at all times it conducts its business with the interests of all Shareholders in mind and in accordance with Directors' duties. Directors receive the relevant briefing papers in advance of Board and Board Committee meetings, so that should they be unable to attend a meeting they are able to provide their comments to the Chairman of the Board or Committee as appropriate. The Board meeting papers are the key source of regular information for the Board, the contents of which are determined by the Board and contain sufficient information on the financial condition of the Company. Key representatives of the Investment Manager attend each Board meeting. All Board and Board Committee meetings are formally minuted.

Board composition and succession plan

Objectives of Plan

· To ensure that the Board is composed of persons who collectively are fit and proper to direct the Company's business with prudence, integrity and professional skills

· To define the Board Composition and Succession Policy, which guides the size, shape and constitution of the Board and the identification of suitable candidates for appointment to the Board.

Methodology

The Board is conscious of the need to ensure that proper processes are in place to deal with succession issues and the Nomination Committee assists the Board in the Board selection process, which involves the use of a Board skills matrix.

The matrix incorporates the following elements: finance, accounting and operations; familiarity with the regions into which the Company invests; diversity (gender, residency, cultural background); Shareholder perspectives; investment management; multijurisdictional compliance and risk management. In adopting the matrix, the Nomination Committee acknowledges that it is an iterative document and will be reviewed and revised periodically to meet the Company's on-going needs.

The Nomination Committee monitors the composition of the Board and makes recommendations to the Board about appointments to the Board and its Committees.

Directors may be appointed by the Board, in which case they are required to seek election at the first AGM following their appointment and triennially thereafter. Directors who are not regarded as independent are required to seek re-election annually. In making an appointment the Board shall have regard to the Board skills matrix.

A Director's formal letter of appointment sets out, amongst other things, the following requirements:

· bringing independent judgment to bear on issues of strategy, performance, resources, key appointments and standards of conduct and the importance of remaining free from any business or other relationship that could materially interfere with independent judgement;

· having an understanding of the Company's affairs and its position in the industry in which it operates;

· keeping abreast of and complying with the legislative and broader responsibilities of a Director of a company whose shares are traded on the London Stock Exchange;

· allocating sufficient time to meet the requirements of the role, including preparation for Board meetings; and

· disclosing to the Board as soon as possible any potential conflicts of interest.

The Board authorises the Nomination Committee to:

· recommend to the Board, from time to time, changes that the Committee believes to be desirable to the size and composition of the Board;

· recommend individuals for nomination as members of the Board;

· review and recommend the process for the election of the Chairman of the Board, when appropriate; and

· review on an on-going basis succession planning for the Chairman of the Board and make recommendations to the Board as appropriate.

The Plan will be reviewed by the Board annually and at such other times as circumstances may require (e.g. a major corporate development or an unexpected resignation from the Board). The Plan may be amended or varied in relation to individual circumstances at the Board's discretion.

The Board will review Mr. Wilson's position as Chairman after the 100% tender offer in 2020.

Board Committees

The Board has established the following committees to oversee important issues of policy and maintain oversight outside the main Board meetings:

· Audit Committee

· Remuneration Committee

· Nomination Committee

· Management Engagement Committee

Throughout the year the Chairman of each committee provided the Board with a summary of the key issues considered at the meeting of the committees and the minutes of the meetings were circulated to the Board.

The committees operate within defined terms of reference. They are authorised to engage the services of external advisers as they deem necessary in the furtherance of their duties, at the Company's expense.

Audit Committee

The Board has established an Audit Committee made up of at least two members and comprises Paul Macdonald, Nicholas Wilson, Neil Benedict and David Humbles. The Audit Committee is responsible for, inter alia, ensuring that the financial performance of the Company is properly reported on and monitored. The Audit Committee is chaired by Paul Macdonald. The Audit Committee normally meets at least twice a year when the Company's interim and final reports to Shareholders are to be considered by the Board but meetings can be held more frequently if the Audit Committee members deem it necessary or if requested by the Company's auditors. The Audit Committee will, amongst other things, review the annual and interim accounts, results announcements, internal control systems and procedures, preparing a note in respect of related party transactions and reviewing any declarations of interest notified to the Committee by the Board each on six monthly basis, review and make recommendations on the appointment, resignation or dismissal of the Company's auditors and accounting policies of the Company. The Company's auditors are advised of the timing of the meetings to consider the annual and interim accounts and the auditors shall be asked to attend the Audit Committee meeting where the annual audited accounts are to be considered. The Audit Committee chairman shall report formally to the Board on its proceedings after each meeting and compile a report to Shareholders on its activities to be included in the Company's annual report. At least once a year, the Audit Committee will review its performance, constitution and terms of reference to ensure that it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

The terms of reference for the Audit Committee are available on the Company's website www.gulfinvestmentfundplc.com.

Significant Issues

During its review of the Company's financial statements for the year ended 30 June 2019, the Audit Committee considered the following significant issues, in particular those communicated by the auditor during their reporting:

Valuation and existence of investments

The valuation of investments is undertaken in accordance with the accounting policies, disclosed in note 1(a) to the financial statements. The audit includes independent confirmation of the existence of all investments from the Company's custodian. All investments are considered liquid and priced based on quoted process in active markets and have been categorised as Level 1 or level 2 within the IFRS 13 fair value hierarchy. The portfolio is reviewed and verified by the Manager on a regular basis and management accounts including a full portfolio listing are prepared each month and circulated to the Board. The Company uses the services of an independent Custodian HSBC Bank Middle East Limited to hold the assets of the Company. The investment portfolio is reconciled regularly by the Manager and a reconciliation is also reviewed by the Auditor.

Carrying value of Parent Company's loan to and investment in subsidiary

The carrying value of the Parent Company's loan to and investment in subsidiary represents 98.9% (2018: 98.9%) of the Parent Company's total assets. The assessment of carrying value is not at a high risk of significant misstatement or subject to significant judgement as the carrying value is equal to the net asset value of the subsidiary. However, due to its materiality in the context of the Parent Company financial statements, this is considered to be the area that had the greatest effect on the Parent Company balance sheet.

Remuneration Committee

The Company has established a Remuneration Committee. The Remuneration Committee is made up of at least two non-executive Directors who are identified by the Board as being independent. Its members are Neil Benedict (Chairman), Nicholas Wilson, Paul Macdonald and David Humbles. The Remuneration Committee normally meets at least once a year and at such other times as the chairman of the Remuneration Committee shall require. The Remuneration Committee reviews the performance of the Directors and sets the scale and structure of their remuneration and the basis of their letters of appointment with due regard to the interests of Shareholders. In determining the remuneration of Directors, the Remuneration Committee seeks to enable the Company to attract and retain Directors of the highest calibre. No Director is permitted to participate in any discussion of decisions concerning their own remuneration. The Remuneration Committee reviews at least once a year its own performance, constitutions and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

The terms of reference for the Remuneration Committee are available on the Company's website www.gulfinvestmentfundplc.com

Nomination Committee

The Company has established a Nomination Committee which shall be made up of at least two members and which shall comprise all independent non-executive Directors. The Nomination Committee comprises Nicholas Wilson (Chairman), Neil Benedict, Paul Macdonald and David Humbles. The Nomination Committee meets at least once a year prior to the first quarterly Board meeting and at such other times as the Chairman of the committee shall require. The Nomination Committee is responsible for ensuring that the Board members have the range of skills and qualities to meet its principal responsibilities in a way which ensures that the interests of Shareholders are protected and promoted and regularly review the structure, size and composition of the Board. The Nomination Committee shall, at least once a year, review its own performance, constitution and terms of reference to ensure that it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

The Nomination Committee will assess potential candidates on merit against a range of criteria including experience, knowledge, professional skills and personal qualities as well as independence, if this is required for the role.

Candidates' ability to commit sufficient time to the business of the Company is also key, particularly in respect of the appointment of the Chairman. The Chairman of the Nomination Committee is primarily responsible for interviewing suitable candidates and a recommendation will be made to the Board for final approval.

Management Engagement Committee

The Company has established a Management Engagement Committee which is made up of at least two members who are independent non-executive Directors. The Management Engagement Committee members are Neil Benedict (Chairman), Paul Macdonald, Nicholas Wilson and David Humbles. The Management Engagement Committee will meet at least quarterly and is responsible for reviewing the performance of the Investment Manager and other service providers, to ensure that the Company's management contract is competitive and reasonable for the Shareholders and to review and make recommendations to the Board on any proposed amendment to or material breach of the management contract and contracts with other service providers.

Board Attendance

The number of formal meetings during the year of the Board, and its Committees, and the attendance of the individual Directors at those meetings, is shown in the following table:

	Board	Audit Committee	Remuneration Committee	Nomination Committee	Management Engagement Committee
Total number of meetings in year	8(8)	6(6)	1(1)	2(2)	4(4)
	Meetings Attended (entitled to attend)
Nicholas Wilson (Chairman and Chairman of Nomination Committee)	8 (8)	6 (6)	1 (1)	2 (2)	4 (4)
Neil Benedict (Chairman of Remuneration Committee and Chairman of Management Engagement Committee)	8 (8)	6 (6)	1 (1)	2 (2)	4 (4)
David Humbles	8 (8)	6 (6)	1 (1)	2 (2)	4 (4)
Paul Macdonald (Chairman of Audit Committee)	8 (8)	6 (6)	1 (1)	2 (2)	4 (4)

The Annual General Meeting was held on 7 November 2018.

Internal Control

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. Its review takes place at least once a year. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material mis-statement or loss. The Board also determines the nature and extent of any risks it is willing to take in order to achieve its strategic objectives.

The Board has contractually delegated to external agencies, including the Investment Manager and the Investment Adviser, the management of the investment portfolio, the custodial services (which include the safeguarding of the assets), the registration services and the day-to-day accounting and Company Secretarial requirements. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered including the control systems in operation in so far as they relate to the affairs of the Company.

The Board, assisted by the Investment Manager and Investment Adviser, has undertaken regular risk and controls assessments. The business risks have been analysed and recorded in a risk and internal controls report which is regularly reviewed. The Board has reviewed the need for an internal audit function. The Board has decided that the systems and procedures employed by the Investment Manager and Investment Adviser, including its internal audit function provide sufficient assurance that a sound system of internal control, which safeguards Shareholders' investments and the Company's assets, is maintained. An internal audit function, specific to the Company, is therefore considered unnecessary.

The Board confirms that there is an on-going process for identifying, evaluating and managing the Company's principal business and operational risks that have been in place for the year ended 30 June 2019 and up to the date of approval of the annual report and financial statements.

Accountability and Relationship with the Investment Manager, the Custodian and the Administrator

The Statement of Directors' Responsibilities is set out on page 27.

The Board has delegated contractually to external third parties, including the Investment Manager, the Investment Adviser, the Custodian and the Administrator, the management of the investment portfolio, the custodial services (which include the safeguarding of the assets), the day to day accounting, company secretarial and administration requirements. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of the services provided, including the control systems in operation in so far as they relate to the affairs of the Company.

The Investment Manager, the Investment Adviser and the Administrator ensure that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. Representatives of the Investment Manager and the Administrator attend each Board meeting enabling the Directors to probe further on matters of concern.

Continued Appointment of the Investment Manager

The Board considers the arrangements for the provision of investment management and other services to the Company on an on-going basis. The Board reviews investment performance at each Board meeting and a formal review of the Investment Manager (and Investment Adviser) is conducted annually. As a result of their annual review, NAV performance has been found to be satisfactory and it is the opinion of the Directors that the continued appointment of the current Investment Manager (and Investment Adviser) on the terms agreed is in the interests of the Company's Shareholders as a whole.

Relations with Shareholders

The Chairman is responsible for ensuring that all Directors are made aware of Shareholders' concerns. The Shareholder profile of the Company is regularly monitored and the Board liaises with the Investment Manager to canvass Shareholder opinion and communicate views to Shareholders. The Company is concerned to provide the maximum opportunity for dialogue between the Company and Shareholders. It is believed that Shareholders have proper access to the Investment Manager at any time and to the Board if they so wish. All Shareholders are encouraged to attend annual general meetings. Together with the Investment Manager and Investment Adviser, regular investor presentations are held to promote a wider following for the Company.

Viability statement

The Board makes an assessment of the longer term prospects of the Company beyond the timeframe envisaged under the going concern basis of accounting having regard to the Company's current position and the principal risks it faces. The Board does this by performing robust risk assessments using a detailed risk matrix at each of its scheduled audit committee meetings.

The Company is a long term investment vehicle and the Directors, therefore, believe that it is appropriate to assess its viability over a long term horizon. The Board considers that assessing the Company's prospects over a period of five years is appropriate given the nature of the Company and the inherent uncertainties of looking out over a longer time period. The Directors believe that a five year period appropriately reflects the long term strategy of the Company and over which, in the absence of any adverse change to the regulatory environment, they do not expect there to be any significant change to the current principal risks and to the adequacy of the mitigating controls in place.

Notwithstanding the above the Company's Shareholders will have the opportunity to vote for the cessation of the Company at the annual general meeting in 2021 which will be proposed as an ordinary resolution. In the event that the continuation vote is not passed the Directors will be required to put forward proposals to Shareholders to the effect that the Company be wound up, liquidated, reorganised or unitised. If the continuation vote is passed, a further continuation vote will be proposed at every third annual general meeting thereafter. In addition, the Directors are committed to making a tender offer to shareholders for up to 100% of the share capital in 2020 subject to shareholder approval.

On behalf of the Board

Nicholas Wilson

Chairman

17 September 2019

Board of Directors

Nicholas Wilson (Non-Executive Chairman)

Nicholas Wilson has over 40 years of experience in hedge funds, derivatives and global asset management. He has run offshore branch operations for Mees Pierson Derivatives Limited, ADM Investor Services International Limited and several other London based financial services companies. He is a director of EPE Special Opportunities Limited. He is a resident of the Isle of Man.

Paul Macdonald (Non-Executive Director)

Paul Macdonald qualified as a chartered accountant in 1979. He worked for Pilkington plc for sixteen years, the last seven of these in Germany. In Germany he was Managing Director for Pilkington Deutschland GmbH (holding company) and Managing Director of both Flachglas AG (glass manufacturer) and Dahlbusch AG (property and holding company). For the last fourteen years Paul has been active in the private equity market and has been successful in developing a number of companies covering a number of industries including Sirona Beteiligungs GmbH (Germany), a leveraged buy-out from Siemens. He is currently the Geschäftsführer for Optas GbmH. Paul is a Non-Executive Director of PME African Infrastructure Opportunities plc.

Neil Benedict (Non-Executive Director)

Neil Benedict is based in the USA with over thirty years' experience of financial markets. He was formerly a Managing Director at Salomon Brothers, where he was Head of International Capital Markets, and, prior to that, the founder and head of the worldwide Currency Swaps group. Neil was also a Managing Director at Dillon Read and helped establish their Tokyo office. He is currently a Senior Managing Director at Sonenshine Partners a New York private investment bank. Neil is a fellow member of the Institute of Chartered Accountants in England and Wales.

David Humbles (Non-Executive Director)

David Humbles was born in 1960 and is British. He worked in the downstream oil industry for 25 years and relocated to the Isle of Man in 1998 as Director of Total. In 2003, David purchased Abbey Properties Ltd which owns and manages a property complex in the north of the island. David owns Westminster Properties Ltd which manages a large portfolio of residential and commercial properties on the island. David has been Managing Director of Oakmayne since 2006. This company is a residential developer in London. He has served on the board of two AIM listed companies.

Statement of Directors' responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under the law they have elected to prepare the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of their profit or loss for that period. In preparing each of the Group and Company financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable, relevant and reliable;

· state whether they have been prepared in accordance with IFRSs;

· assess the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Acts 1931 to 2004. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

Disclosure Guidance and Transparency Rules responsibility statement

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position, performance, business model and strategy; and

· the Business Review, Report of the Investment Manager and Investment Adviser and the Report of the Directors include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

Nicholas Wilson

Chairman

17 September 2019

Audit Committee Report

An Audit Committee has been established in compliance with the FCA's Disclosure Guidance and Transparency Rule 7.1 and the UK Corporate Governance Code consisting of independent Directors. Its authority and duties are clearly defined within its written terms of reference. Paul Macdonald is Chairman of the Audit Committee, which also comprises Mr Nicholas Wilson, Mr Neil Benedict and Mr David Humbles.

The Committee meets at least two times a year.

The Committee's responsibilities, which were discharged during the year, include:

• monitoring and reviewing the integrity of the interim and annual financial statements and the internal financial controls;

• reviewing the appropriateness of the Company's accounting policies;

• making recommendations to the Board in relation to the appointment of the external auditors and approving their remuneration and terms of their engagement;

• reviewing the external Auditor's plan for the audit of the Company's financial statements;

• developing and implementing policy on the engagement of the external auditors to supply non-audit services;

• reviewing and monitoring the independence, objectivity and effectiveness of the external auditors;

• reviewing the arrangements in place within the Administrator and Investment Manager/Adviser whereby their staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters insofar as they may affect the Company;

• performing the annual review of the effectiveness of the internal control systems of the Company;

• reviewing the terms of the Investment Management Agreement;

• considering annually whether there is a need for the Company to have its own internal audit function; and

• review the relationship with and the performance of the Custodian, the Administrator and the Registrar.

The Audit Committee does not award any non-audit work. The full Board has to approve any non-audit work and this includes confirmation that in all such work auditor objectivity and independence is safeguarded.

Owing to the nature of the fund's business, with all major functions being outsourced and the absence of employees, the Audit Committee do not feel it is necessary for the Company to have its own internal audit function. This situation is re-evaluated annually.

KPMG Audit LLC was re-appointed as auditor at the last AGM on 7 November 2018. The Audit Committee considered the experience and tenure of the audit partner and staff and the nature and level of services provided. The Audit Committee receives confirmation from the auditor that they have complied with the relevant UK professional and regulatory requirements on independence. The Company's Audit Committee meets representatives of the Administrator, who report as to the proper conduct of the business in accordance with the regulatory environment in which the Company, the Administrator, and the Investment Manager/Adviser operate. The Company's external auditor also attends this Audit Committee meeting at its request and reports if the Company has not kept proper accounting records, or if it has not received all the information and explanations required for its audit.

The Audit Committee also monitors the risks to which the Company is exposed and makes recommendations as to the mitigation of these risks. This task is facilitated by using an extensive risk matrix that enables the Committee to make a quantitative analysis of the individual risks and to highlight those areas where risk is high or increasing.

This report was reviewed and approved by the Board on 17 September 2019.

Paul Macdonald

Chairman of the Audit Committee

17 September 2019

Management Engagement Committee Report

A Management Engagement Committee has been established in accordance with good corporate governance. Neil Benedict is chairman of the Committee, which also comprises Paul Macdonald, Nicholas Wilson and David Humbles.

The function of the Management Engagement Committee is to monitor the performance of all the Company's service providers and in the particular the performance of the Investment Manager/Investment Adviser.

The performance of the Investment Manager/Investment Adviser is formally reviewed annually at the end of the Company's financial year. The Management Engagement Committee meets quarterly prior to the quarterly Board meetings and the chairman of the Management Engagement Committee monitors the performance periodically during the intervening periods.

As regards the Investment Manager/Investment Adviser, the Committee:

· monitors and evaluates the investment performance both in absolute terms and also by reference to peer group analysis prepared by the Investment Manager/Adviser and by the Company's broker;

· reviews the performance fee structure to ensure that it does not encourage excessive risk and that it rewards demonstrable superior performance;

· investigates any breaches of agreed investment limits and any deviation from the agreed investment policy and strategy;

· reviews the standard of any other services provided by the Investment Manager;

· evaluates the level and effectiveness of any marketing support provided by the Investment Manager, including but not limited to, their input into quarterly reports, handling investor relations and website monitoring and development;

· assesses the level of fees charged by the Investment Manager and how these fees compare with those charged to peer group companies;

· compares the notice period on the Investment Management Agreement with industry norms;

· considers any other issues on the appointment of the Investment Manager.

As regards the other service providers to the Company, the Committee:

· monitors the terms on which they are retained and compares them to market rates;

· examines the effectiveness of the services provided;

· makes recommendations to the Board where changes are warranted.

At its most recent meeting, the Management Engagement Committee concluded that the performance of the Investment Manager/Investment Adviser had been satisfactory. The Investment Manager had adhered to the investment policy and policy limits.

The Committee was satisfied with the current performance of the Company's other service providers.

Neil Benedict

Chairman of the Management Engagement Committee

17 September 2019

Directors' Remuneration Report

This report meets the relevant rules of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles relating to Directors' remuneration. An ordinary resolution to receive and approve this report will be put to the Shareholders at the forthcoming Annual General Meeting.

Role of the Remuneration Committee

The role and make-up of the Remuneration Committee is more fully discussed on page 22.

The committee held one formal meeting during the year, during which it addressed all the matters under its remit.

Consideration by the Directors of Matters relating to the Directors' remuneration

As the Board is comprised entirely of non-executive Directors the Board as a whole consider the Directors' remuneration but it has appointed its Remuneration Committee to consider matters relating thereto.

Remuneration policy

The Company's Articles of Association limit the basic fees payable to the Directors to £200,000 per annum in aggregate. Subject to this overall limit it is the Company's policy that the fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Directors and should be sufficient to enable candidates of high calibre to be recruited. The Directors are also entitled to receive reimbursement of any expenses incurred in relation to their appointment.

The policy is for the Chairman of the Board and Chairman of the Audit Committee to be paid a higher fee than the other Directors in recognition of their more onerous roles and more time spent.

In the year under review the Directors' fees were paid at the following annual rates: the Chairman £52,500 plus £10,000 with respect to the work involved in the share buy-back programme, the Chairman of the Audit Committee £37,500, the other Directors £35,000.

Directors' and officers' liability insurance cover is in place in respect of the Directors.

Reappointment

It is the Board's policy that non-independent Directors stand for re-election every year and independent Directors stand for re-election every three years.

Directors' fees

The fees expensed (including additional payments) by the Company in respect of each of the Directors who served during the year, and in the previous year, were as follows:

	30 June 2019	30 June 2018
	£	£
Nicholas Wilson (Chairman)	62,500	58,750
Paul Macdonald (Chairman of Audit Committee)	37,500	33,750
Neil Benedict (Chairman of Remuneration Committee and Management Engagement Committee)	35,000	31,250
David Humbles	35,000	31,250
	170,000	155,000
US$ charge reflected in the financial statements	215,736	204,645

Expenses totalling US$89,720 (2018: US$103,684) were incurred by the Directors and reimbursed during the year.

No other remuneration or compensation was paid or payable by the Company during the period to any of the Directors.

Director independence

Mr Nicholas Wilson and Mr Paul Macdonald have each served as independent Non-executive Directors of the Company for more than nine years, and Mr Wilson has served as non-executive Chairman since 13 November 2012. Notwithstanding the length of their service, Mr Wilson and Mr Macdonald continue to demonstrate their commitment to fulfilling their role as non-executive Chairman and Non-executive Director respectively and satisfy the independence factors set out in Code Provision B.1.1 of the Code except for the length of their service.

They are not involved in the daily management of the Company nor in any relationships or circumstances which might possibly interfere with their exercise of independent judgment. In addition, they continue to demonstrate the attributes of independent Non-executive Directors and there is no evidence that their tenure has had any adverse impact on their independence.

The Board considers each of the Directors to be independent of, and free of any material relationship with, the Investment Manager and Investment Adviser.

Directors' and Other Interests

None of the Directors had any interest during the year in any material contract for the provision of services which was significant to the business of the Company.

Director holdings in Company:

	30 June 2019	30 June 2018
Director	Shares	Shares
Nicholas Wilson	39,600	39,600

For and on behalf of the Board

Neil Benedict

Chairman of the Remuneration Committee

17 September 2019

Report of the Independent Auditors, KPMG Audit LLC, to the members of Gulf Investment Fund plc

1. Our opinion is unmodified

We have audited the financial statements of Gulf Investment Fund plc ("the Company") and its subsidiary (together "the Group") for the year ended 30 June 2019 which comprise the Consolidated and Company Income Statements, Statements of Comprehensive Income, Balance Sheets, Statements of Changes in Equity, Statements of Cash Flows and the related notes and accounting policies.

In our opinion the financial statements:

· give a true and fair view of the state of the Group's and Company's affairs as at 30 June 2019 and of the Group's and Company's profit for the year then ended;

· have been properly prepared in accordance with International Financial Reporting Standards; and

· have been properly prepared in accordance with the provisions of the Companies Acts 1931 to 2004.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and we remain independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:

The risk

Our response

Valuation and existence of investments (US$116.0m; 2018: US$104.6m)

Refer to page 22 (Significant Issues identified by the Audit Committee), notes 1(a), 2 and 8 (accounting policy for financial assets at fair value through profit or loss and financial risk disclosures relating to financial instruments).

Incorrect valuation and existence

The Group's portfolio of investments makes up 85.8% (2018: 92.8%) of the Group's total assets (by value) and is considered to be the key driver of results. Of this amount, US$51.1m (2018: US$43.9m) was held via P-Notes; held to obtain exposure to Saudi Arabia where direct investment in equities is not possible for foreign investors.

Incorrect asset pricing or a failure to maintain proper title of assets by the Group could have a significant impact on the investment portfolio valuation and the return generated for shareholders.

Additional risks arise with regard to the P-Notes as follows:

- they are issued by counterparty financial institutions and therefore are subject to counterparty risk; and

- they are classified as level 2 in the fair value hierarchy as there is no quoted price in an active market for the P-Note instrument itself - instead they are priced based on the quoted price of the underlying equity to which they relate.

Our procedures included:

- Control design: Documenting and assessing the processes in place to record investment transactions and to value the portfolio;

- Tests of detail: Agreeing the valuation of 100 per cent of investments in the portfolio to externally quoted prices (in the case of P-Notes this represents the quoted price of the underlying equity);

- Tests of detail - P-Notes: Assessing the credit worthiness of the P-Note issuers by examining their credit ratings or financial statements in the absence of a credit rating and inspecting the P-Note legal instruments to assess whether they provide the full return of the underlying share;

- Assessing transparency - P-Notes: Consideration of the appropriateness, in accordance with relevant accounting standards, of the disclosures in respect of the P-Notes including their level in the fair value hierarchy; and

- Enquiry of custodians: Agreeing 100 per cent of investment holdings in the portfolio to independently received third party confirmations from investment custodians.

Carrying value of the Company's loan to and investment in subsidiary

(US$63.5m and US$60.0m respectively, 2018: US$64.3m and US$45.4m respectively)

Refer to page 22 (Significant Issues identified by the Audit Committee) and note 1(b) (note relating to loan to and investment in subsidiary).

Low risk, high value

The carrying value of the Company's loan to and investment in subsidiary represents 98.8% (2018: 98.9%) of the Company's total assets. The assessment of carrying value is not at a high risk of significant misstatement or subject to significant judgement as the carrying value is equal to the net asset value of the subsidiary. However, due to its materiality in the context of the Company financial statements, this is considered to be the area that had the greatest effect on our overall Company audit.

Our procedures included:

- Tests of detail: Assessing the loan to and investment in subsidiary to identify, with reference to the subsidiary's accounts, whether it has sufficient net asset value to cover the debt owed and the carrying value of the investment in subsidiary; and

- Assessing subsidiary audits: The audit of the Group was performed as if it was a single aggregated set of financial information.

3. Our application of materiality and an overview of the scope of our audit

Materiality for the Group financial statements as a whole was set at US$1,250,000 (2018: US$1,130,000), determined with reference to a benchmark of Group total assets, of which it represents 1% (2018: 1%). For this purpose total assets for 2019 has been adjusted to deduct unsettled trades of US$9,945,000 (2018: nil).

Materiality for the Company financial statements as a whole was set at US$1,250,000 (2018: US$1,110,000), determined with reference to a benchmark of Company total assets, of which it represents 1% (2018: 1%).

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding US$62,500 (2018: US$56,500) for the Group financial statements and US$62,500 (2018: US$55,500) for the Company financial statements, in addition to other identified misstatements that warranted reporting on qualitative grounds.

The Group team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality level set out above and covered 100% of the total Group income, total Group profit before tax and total Group assets and liabilities.

4. We have nothing to report on going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group or to cease their operations, and as they have concluded that the Company's and Group's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements ("the going concern period").

Our responsibility is to conclude on the appropriateness of the Directors' conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Company and Group will continue in operation.

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's and Group's business model and analysed how those risks might affect the Company's and Group's financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures.

Based on this work, we are required to report to you if we have anything material to add or draw attention to in relation to the Directors' statement in Note 13.1 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company's and Group's use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in this respect and we did not identify going concern as a key audit matter.

5. We have nothing to report on the other information in the Annual Report

The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Disclosures of principal risks and longer-term viability

Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

· the Directors' confirmation within the viability statement on page 24 that they have carried out a robust assessment of the principal risks facing the Group and Company, including those that would threaten its business model, future performance, solvency and liquidity;

· the principal risks disclosures describing these risks and explaining how they are being managed and mitigated; and

· the Directors' explanation in the viability statement of how they have assessed the prospects of the Group and Company, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group and Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgments that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group's and Company's longer-term viability.

Corporate governance disclosures

We are required to report to you if:

· we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and Company's position and performance, business model and strategy; or

· the section of the annual report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.

We have nothing to report in these respects.

6. We have nothing to report on the other matters on which we are required to report by exception

Under the Companies Acts 1931 to 2004, we are required to report to you if, in our opinion:

· proper books of account have not been kept by the Company and proper returns adequate for our audit have not been received from branches not visited by us; or

· the Company's financial statements are not in agreement with the books of account and returns; or

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 27, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud, or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

8. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body, in accordance with Section 15 of the Companies Act 1982. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Nicholas Quayle

Responsible Individual

For and on behalf of KPMG Audit LLC

Chartered Accountants and Recognised Auditors

17 September 2019

Heritage Court

41 Athol Street

Douglas

Isle of Man

IM99 1HN

Consolidated Income Statement

	Note	Year ended 30 June 2019	Year ended 30 June 2018
		US$'000	US$'000

Income
Dividend income on quoted equity investments		4,387	4,095
Realised loss on sale of financial assets at fair value through profit or loss		(1,998)	(7,186)
Net changes in fair value on financial assets at fair value through profit or loss		16,695	14,619
Interest income		57	20
Net foreign exchange (loss)/gain		(46)	290
Total net income		19,095	11,838

Expenses
Investment manager's fees	7	1,023	995
Other expenses	7	1,141	1,129
Total operating expenses		2,164	2,124

Profit before tax		16,931	9,714

Income tax expense	9	82	34
Profit for the year		16,849	9,680

Basic profit per share (cents)	4	18.22	9.95
Diluted profit per share (cents)	4	18.22	9.95

The Directors consider that all results derive from continuing activities.

Consolidated Statement of Comprehensive Income

	Year ended 30 June 2019	Year ended 30 June 2018
	US$'000	US$'000

Profit for the year	16,849	9,680
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences	-	(5)
Total items that are or may be reclassified subsequently to profit or loss	-	(5)
Other comprehensive expense for the year (net of tax)	-	(5)
Total comprehensive income for the year	16,849	9,675

Company Income Statement

	Note	Year ended 30 June 2019	Year ended 30 June 2018
		US$'000	US$'000

Income
Net change in investment in subsidiary		14,593	7,702
Intercompany loan interest income		3,211	2,979
Total net income		17,804	10,681

Expenses
Expenses	7	955	1,006
Total operating expenses		955	1,006

Profit before tax		16,849	9,675

Income tax expense		-	-
Profit for the year		16,849	9,675

Company Statement of Comprehensive Income

	Year ended 30 June 2019	Year ended 30 June 2018
	US$'000	US$'000

Profit for the year	16,849	9,675
Other comprehensive income	-	-
Total comprehensive income for the year	16,849	9,675

Consolidated Balance Sheet

	Note	At 30 June 2019	At 30 June 2018
		US$'000	US$'000

Assets
Financial assets at fair value through profit or loss	1(a)	116,016	104,619
Other receivables and prepayments		183	2,683
Cash and cash equivalents		19,007	5,380
Total assets		135,206	112,682

Equity
Issued share capital	5	925	925
Retained earnings		46,406	32,331
Distributable reserves		76,198	76,198
Other reserves		1,329	1,329
Total equity		124,858	110,783

Current liabilities
Other payables and accrued expenses	6	10,348	1,899
Total current liabilities		10,348	1,899
Total equity and liabilities		135,206	112,682

The financial statements were approved by the Directors on 17 September 2019 and signed on their behalf by:

Nick Wilson David Humbles

Chairman Director

Company Balance Sheet

	Note	At 30 June 2019	At 30 June 2018
		US$'000	US$'000
Assets
Investment in subsidiary	1(b)	60,035	45,442
Due from subsidiary	1(b)	63,462	64,322
Other receivables and prepayments		1,194	812
Cash and cash equivalents		272	382
Total assets		124,963	110,958

Equity
Issued share capital	5	925	925
Reserves		123,933	109,858
Total equity		124,858	110,783

Current liabilities
Other payables and accrued expenses	6	105	175
Total current liabilities		105	175
Total equity and liabilities		124,963	110,958

The financial statements were approved by the Directors on 17 September 2019 and signed on their behalf by:

Nick Wilson David Humbles

Chairman Director

Consolidated Statement of Changes in Equity

	Share capital (note 5)	Distributable reserves	Retained earnings	Foreign Currency translation reserve	Capital redemption reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2017	1,032	86,486	25,425	(216)	1,443	114,170
Total comprehensive income for the year
Profit for the year	-	-	9,680	-	-	9,680
Other comprehensive income
Foreign exchange translation differences	-	-	-	(5)	-	(5)
Total other comprehensive expense	-	-	-	(5)	-	(5)
Total comprehensive income for the year	-	-	9,680	(5)	-	9,675
Contributions by and distributions to owners
Dividends paid	-	-	(2,774)	-	-	(2,774)
Shares subject to tender offer	(102)	(10,205)	-	-	102	(10,205)
Tender offer expenses	-	(83)	-	-	-	(83)
Shares in treasury cancelled	(5)	-	-	-	5	-
Total contributions by and distributions to owners	(107)	(10,288)	(2,774)	-	107	(13,062)
Balance at 30 June 2018	925	76,198	32,331	(221)	1,550	110,783

The capital redemption reserve is created on the cancellation of shares equal to par value of shares cancelled. This reserve is not distributable.

	Share capital (note 5)	Distributable reserves	Retained earnings	Foreign currency translation reserve	Capital redemption reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2018	925	76,198	32,331	(221)	1,550	110,783
Total comprehensive income for the year
Profit for the year	-	-	16,849	-	-	16,849
Other comprehensive income
Foreign exchange translation differences	-	-	-	-	-	-
Total other comprehensive expense	-	-	-	-	-	-
Total comprehensive income for the year	-	-	16,849	-	-	16,849
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 30 June 2019	925	76,198	46,406	(221)	1,550	124,858

The capital redemption reserve is created on the cancellation of shares equal to par value of shares cancelled. This reserve is not distributable.

Company Statement of Changes in Equity

	Share capital	Reserves	Total
	US$'000	US$'000	US$'000
Balance at 1 July 2017	1,032	113,138	114,170
Total comprehensive income for the year
Profit for the year	-	9,675	9,675
Total comprehensive income for the year	-	9,675	9,675
Contributions by and distributions to owners
Dividends paid	-	(2,774)	(2,774)
Shares subject to tender offer	(102)	(10,103)	(10,205)
Tender offer expenses	-	(83)	(83)
Shares in treasury cancelled	(5)	5	-
Total contributions by and distributions to owners	(107)	(12,955)	(13,062)
Balance at 30 June 2018	925	109,858	110,783

	Share capital	Reserves	Total
	US$'000	US$'000	US$'000
Balance at 1 July 2018	925	109,858	110,783
Total comprehensive income for the year
Profit for the year	-	16,849	16,849
Total comprehensive profit for the year	-	16,849	16,849
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 30 June 2019	925	123,933	124,858

Consolidated Statement of Cash Flows

	Year ended 30 June 2019	Year ended 30 June 2018
	US$'000	US$'000

Cash flows from operating activities
Purchase of investments	(167,457)	(143,781)
Proceeds from sale of investments	181,844	149,319
Dividends received	4,376	4,000
Operating expenses paid	(2,280)	(2,142)
Interest received	57	20
Net cash generated from operating activities	16,540	7,416

Financing activities
Dividends paid	(2,774)	(2,774)
Cash used in tender offer	-	(10,205)
Tender offer expenses	-	(83)
Net cash used in financing activities	(2,774)	(13,062)

Net increase/(decrease) in cash and cash equivalents	13,766	(5,646)
Effects of exchange rate changes on cash and cash equivalents	(139)	356
Cash and cash equivalents at beginning of the year	5,380	10,670
Cash and cash equivalents at end of the year	19,007	5,380

Company Statement of Cash Flows

	Note	Year ended 30 June 2019	Year ended 30 June 2018
		US$'000	US$'000

Cash flows from operating activities
Investment in and amount due from subsidiary		3,684	14,214
Operating expenses paid		(1,018)	(964)
Net cash generated from operating activities		2,666	13,250

Financing activities
Dividends paid		(2,774)	(2,774)
Cash used in tender offer		-	(10,205)
Tender offer expenses		-	(83)
Net cash used in financing activities		(2,774)	(13,062)

Net (decrease)/increase in cash and cash equivalents		(108)	188
Effects of exchange rate changes on cash and cash equivalents		(2)	(5)
Cash and cash equivalents at beginning of the year		382	199
Cash and cash equivalents at end of the year		272	382

Notes to the Consolidated Financial Statements

1(a) Financial assets at fair value through profit or loss

Investments are classified as fair value through profit or loss. The Group invests in quoted equities for which fair value is based on quoted market prices and in P-Notes. The quoted market price used for quoted equities held by the Group is the current bid price ruling at the year-end without regard to selling prices. The fair value of P-Notes is based on the quoted year end bid price of the underlying equity to which they relate. P-Notes are promissory notes issued by certain counterparty banks that are designed to offer the holder a return linked to the performance of a particular underlying equity security or market and used where direct investment in the relevant underlying equity security or market is not possible for regulatory or other reasons. To the extent dividends are received on the securities to which the P-Notes are linked, these are taken to investment income.

At 30 June 2019 the Group held 29 P-Notes (2018: 25) with a value of US$53,652,517 (2018: US$46,083,216), held to obtain exposure to Saudi Arabia where direct investment in equities is not possible for foreign investors.

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.

Group

30 June 2019: Financial assets at fair value through profit or loss; all quoted equity securities or P-Notes:

Security name		Number		US$'000

	Qatar Gas Transport (QGTS)		1,773,637		11,202
	Emirates NBD USD Stock (ENBD)*		3,434,957		10,613
	Commercial Bank of Qatar (CBQK)		4,933,760		6,245
	Gulf International Services (GISS)		10,082,450		5,343
	Qatar International Islamic Bank (QIIK)		2,607,340		5,334
	Arab National Bank - Shamal (1080)*		691,231		4,758
	Qatar National Bank (QNBK)		880,010		4,625
	Qatar Navigation (QNNS)		247,644		4,365
	Mouwasat Medical Services Co SHAMAL 13.02.19 (4002)*		141,525		3,388
	DP World Limited (DPW)*		198,244		3,172
	Alafco Aviation Lease and Finance (ALAFCO)		3,739,402		3,086
	Mezzan Holding Co (Mezzan)		1,400,545		2,855
	Kuwait International Bank (KIB)		3,144,930		2,822
	National Bank of Kuwait (NBK)		843,910		2,713
	Emirates National Bank of Dubai (ENBD)		823,029		2,543
	United Electronics Company (4003)*		140,000		2,509
	Dubai Islamic Bank (DIB)		1,750,000		2,434
	Fawaz Abdulaziz Al (4240)*		390,962		2,382
	Mobile Telecommunications Company K.S.C. (ZAIN)		1,250,000		2,170
	Arabian Centres Limited (4321)*		310,000		2,126
	Almarai Co. Ltd (2280)*		143,391		2,039
	Qatar Electricity & Water Co (QEWS)		446,480		2,011
	Saudi British Bank B12LSY7 (1060)*		167,579		1,816
	Gulf Bank of Kuwait (GBK)		1,775,000		1,762
	Bank AlJazira (1020)*		410,000		1,666
	Al Khaleej Bank (KCBK)		4,682,760		1,517
	Jarir Marketing Co (4190)*		30,479		1,349
	Mobile Telecommunications Company SAR (7030)*		401,403		1,334
	Saudi Telecom (7010)*		45,000		1,242
	Ahli United Bank (Almutahed) (AUB)		1,191,963		1,234

	Bupa Arabia Co (8210)*		45,000			1,166
	Al Tayyar Travel Group (1810)*		242,655			1,155
	Herfy Food Services Co (6002)*		73,857			1,103
	Saudi Co for Hardware (4008)*		60,000			1,087
	Emaar Properties Company (EMAAR)		875,000			1,060
	National Central Cooling Company (TABREED)		2,200,000			1,036
	Leejam Sports Co (1830)*		50,818			1,015
	Savola Group (2050)*		114,839			992
	Saudia Dairy (2270)*		32,259			983
Samba Financial Group - SHAMAL (03.01.2022) (1090)*		102,988			974
Banque Saudi Fransi - SHAMAL 05.06.19 (1050)*		85,453			946
National Commercial Bank (1180)*		56,613			837
National Medical Care Company (4005)*		46,750			722
Abdullah Al Othaim Markets Co (4001)*		31,349			647
Saudi Cement Company (3030)*		31,352			585
Burgan Bank (BURG)		480,000			551
Yamama Cement (3020)*		50,000			231
Yanbu Cement (3060)*		27,000			221
Qassim Cement Co (3040)*		4,003			50
				116,016

*P-Notes.

Group

30 June 2018: Financial assets at fair value through profit or loss; all quoted equity securities or P-Notes:

Security name		Number		US$'000

	Commercial Bank of Qatar (CBQK)		1,019,959		10,396
	Qatar Gas Transport (QGTS)		2,117,667		9,187
	Qatar Electricity & Water Co (QEWS)		166,478		8,326
	Al Rajhi SHAMAL 09.02.2020 (1120)*		244,544		5,620
	National Bank of Kuwait (NBK)		1,846,250		4,542
	Gulf International Services (GISS)		866,679		4,052
	Barwa Real Estate (BRES)		406,396		3,808
	Samba Financial Group - SHAMAL (03.01.2022) (1090)*		418,036		3,596
	Company for Co-op Insurance (8010)*		186,966		3,530
	Bank AlJazira (1020)*		830,000		3,258
	Emaar Properties Company (EMAAR)		2,430,283		3,255
	Saudii Kayan Petrochemical Co (2350)*		695,000		2,913
	Dubai Islamic Bank (DIB)		2,085,000		2,764
	Kuwait International Bank (KIB)		3,043,683		2,252
	Emirates National Bank of Dubai (ENBD)		825,000		2,179
	National Medical Care Company (4005)*		132,000		2,084
	National Commercial Bank (1180)*		155,613		2,014
	Mobile Telecommunications Company K.S.C. (ZAIN)		1,390,000		1,989
	Dar Al Arkan Real (4300)*		700,000		1,961
	Kuwait Finance House (KFIN)		1,079,000		1,913
	Saudi British Bank B12LSY7*		225,000		1,887
	Banque Saudi Fransi - SHAMAL 05.06.19 (1050)*		185,000		1,660
	Qatar Insurance (QATI)		166,722		1,625

. 30 June 2018: Financial assets at fair value through profit or loss; all quoted equity securities or P-Notes

Security name		Number			US$'000

	National Petrochemical Company (2002)*			198,000			1,561
	Yanbu Nat Petroche (YANSAB)*			77,000			1,519
	Fawaz Abdulaziz Al (4240)*			210,000			1,443
	Saudi Basic Industries (2010)*			41,000			1,376
	Rabigh Refining and Petrochemical Co (2380)*			180,000			1,359
	Middle East Healthcare (4009)*			80,000			1,244
	Saudi Industrial Investment Group (2250)*			130,000			1,006
	Abdullah Al Othaim Markets Co (4001)*			50,000			1,000
	Widam Food Company (WDAM)			56,279			960
	Bupa Arabia Co (8210)*			38,536			922
	National Central Cooling Company (TABREED)			2,039,713			922
	ABU DHABI Commercial Bank (ADCB)			475,000			913
Al Tayyar Travel Group*			125,000			894
Qatar Fuel (QFLS QD)			20,000			802
Arab National Bank - Shamal*			88,054			747
Saudi Cement Company*			50,000			659
Emirates NBD USD Stock*			225,000			594
Southern Province Cement Co*			50,000			546
Alinma Bank*			90,000			513
Ooredoo (ORDS)			25,000			499
Agility Public Warehousing AGLTY			127,075			329
					104,619

*P-Notes

1(b) Investment in and amount due from subsidiary

	30 June 2019	30 June 2018
	US$'000	US$'000

Investment in subsidiary	60,035	45,442
Amount due from subsidiary	63,462	64,322

Investment in subsidiary is stated at fair value. The amount due from the subsidiary is stated at amortised cost and subject to interest on the aggregate principal amount drawn down from 1 January 2011, at the US prime rate per annum. All loan repayments made by the subsidiary will first be deducted from the outstanding loan interest before being applied to the principal balance. The loan is secured by fixed and floating charges over the assets of the subsidiary and is repayable on demand.

1(c) Risks relating to financial instruments

Risks relating to financial instruments comprise market price risk, credit risk, interest rate risk, liquidity risk and foreign currency risk. These are detailed below and in notes 2, 6 and 8.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost.

At the reporting date, the Group's financial assets exposed to credit risk comprised the following:

	30 June 2019	30 June 2018
	US$'000	US$'000
Financial assets at fair value through profit or loss	116,016	104,619
Cash and cash equivalents	19,007	5,380
Other receivables	183	2,683
	135,206	112,682

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Management does not expect any counterparty to fail to meet its obligations and there are no debts past their due dates as at the year-end. All amounts are due within one month of the year end.

Investments are held by the Custodian, HSBC Bank (Middle East) Ltd.

P-Notes are issued by counterparty financial institutions and therefore the Group is exposed to credit risk in relation to these financial institutions. The value of P-Notes held at the year is disclosed in note 1(a). The counterparties are Merrill Lynch International & Co C.V. (guaranteed by Bank of America Corporation) and EFG-Hermes MENA Securities Limited (guaranteed by EFG-Hermes Holding S.A.E.).

The credit ratings of the financial institutions are as follows:

Merrill Lynch international A+

Bank of America Corporation A-

These ratings are from Standard and Poors.

EFG Hermes MENA Securities Limited and

EFG Hermes Holding S.A.E. do not have a credit rating. However, the Board and Investment Advisor have reviewed their credit worthiness and consider it to be acceptable.

The Group uses the banking services of HSBC (Middle East) Ltd and Barclays (Isle of Man) PLC. HSBC has a credit rating of A2 assigned by Moody and Barclays has a credit rating of A- from Standard and Poors.

Other receivables principally comprise unsettled trades.

Interest rate risk

The majority of the Group's financial assets are non-interest bearing. Cash held by the Group is invested at short-term market interest rates. As a result, the Group is not subject to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates. However it is subject to cash flow risk arising from changes in market interest rates.

The table below summarises the Group's exposure to interest rate risks. It includes the Group's financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying value of assets and liabilities:

30 June 2019	Less than 1month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	Non-interest bearing	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial assets
Financial assets at fair value through profit or loss	-	-	-	-	-	116,016	116,016
Other receivables and prepayments	-	-	-	-	-	183	183
Cash	19,007	-	-	-	-	-	19,007
Total financial assets	19,007	-	-	-	-	116,199	135,206
Financial liabilities
Other payables and accrued expenses	-	-	-	-	-	10,348	10,348
Total financial liabilities	-	-	-	-	-	10,348	10,348

Total interest rate sensitivity gap	19,007	-	-	-	-

30 June 2018	Less than 1month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	Non-interest bearing	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial assets
Financial assets at fair value through profit or loss	-	-	-	-	-	104,619	104,619
Other receivables and prepayments	-	-	-	-	-	2,683	2,683
Cash	5,380	-	-	-	-	-	5,380
Total financial assets	5,380	-	-	-	-	107,302	112,682
Financial liabilities
Other payables and accrued expenses	-	-	-	-	-	1,899	1,899
Total financial liabilities	-	-	-	-	-	1,899	1,899

All interest received on cash balances are at variable rates. A sensitivity analysis for changes in interest rates on cash balances has not been provided as it is not deemed significant.

2 Fair value hierarchy

IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

All the Group's listed equity investments are classed as level 1 investments. The P-Notes are classed as level 2. In last year's financial statements the P-Notes were classed as level 1. The comparative figures have been revised to accord with the current year classification. The analysis between level 1 and level 2 is as follows:

Financial assets/(liabilities at fair value through profit or loss at 30 June 2019	Level 1 US$'000	Level 2 US$'000	Level 3 US$'000	Total US$'000
Assets:
Equity Investments	64,907	-	-	64,907
P-Notes	-	51,109	-	51,109
	64,907	51,109	-	116,016

Financial assets/(liabilities at fair value through profit or loss at 30 June 2018	Level 1 US$'000	Level 2 US$'000	Level 3 US$'000	Total US$'000
Assets:
Equity Investments	60,714	-	-	60,714
P-Notes	-	43,905	-	43,905
	60,714	43,905	-	104,619

The fair value of other financial instruments, including cash and short-term receivables and payables is a reasonable approximation of fair value.

Market price risk

The Group's strategy for the management of investment risk is driven by the Group's investment objective. The main objective of the Group is to capture the opportunities for growth offered by the Gulf Cooperation Council region ("GCC") by investing in GCC countries.

All investments present a risk of loss of capital through movements in market prices. The Investment Manager and Investment Adviser moderate this risk through a careful selection of securities within specified limits. The Investment Manager and the Investment Adviser review the position on a day to day basis and the Directors review the position at Board meetings.

The Group's market price risk is managed through the diversification of the investment portfolio. Approximately 93% (2018: 89%) of the net assets attributable to holders of Ordinary Shares is invested in equity securities.

At 30 June 2019, if the market value of the investment portfolio had increased/decreased by 1.90% (as per the movement in the SEMGGCPD Index post year-end measured at 25 July 2019) with all other variables held constant, this would have increased/decreased net assets attributable to Shareholders by approximately US$2.20 million (30 June 2018 : 2.50% : US$2.61 million).

3 Consolidated net asset value per share

The consolidated net asset value per share as at 30 June 2019 is US$1.3504 per share (30 June 2018: US$1.1982) based on 92,461,242 (30 June 2018: 92,461,242) Ordinary Shares in issue as at that date.

4 Earnings per share

Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

	30 June 2019	30 June 2018

Profit attributable to equity holders of the Company (US$'000)	16,849	9,680
Weighted average number of Ordinary shares in issue (thousands)	92,461	97,302
Basic and diluted earnings per share (cents per share)	18.22	9.95

5 Share capital

	30 June 2019	30 June 2018
	US$'000	US$'000
Authorised 500,000,000 Ordinary shares of US$0.01 each	5,000,000	5,000,000
Issued, Called-up and Fully-Paid:
92,461,242 (2018: 92,461,242) Ordinary shares of US$0.01 each in issue, with full voting rights	925	925
Issued share capital	925	925

In the year ended 30 June 2019 the Company had no tender offer (27 December 2017: US$0.9933 per share) with nil shares (27 December 2017: 10,273,471) being repurchased and cancelled.

During the year US$nil (2018: US$83,457) tender expenses were deducted from equity.

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Group. The Board manages the Group's affairs to achieve Shareholder returns through capital growth rather than income and monitors the achievement of this through growth in net asset value per share.

Group capital comprises Share Capital and Reserves. Neither the Company nor its subsidiary is subject to externally imposed capital requirements. The Company also has an active share buyback program.

6 Other payables and accrued expenses

Group

	30 June 2019	30 June 2018
	US$'000	US$'000
Due to broker*	9,945	1,456
Management fee payable	287	267
Administration fee payable	58	57
Accruals and sundry creditors	58	119
	10,348	1,899

*includes unsettled positions' trading balances.

Company

	30 June 2019	30 June 2018
	US$'000	US$'000
Administration fee payable	51	51
Accruals and sundry creditors	54	124
	105	175

Liquidity risk

The Group manages its liquidity risk by maintaining sufficient cash for operations and the ability to realise market positions. The Group's liquidity position is monitored by the Investment Manager and the Board of Directors.

The residual undiscounted contractual maturities of financial liabilities are in the table below:

30 June 2019	Less than 1 month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	No stated maturity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Other creditors and accrued expenses	10,348	-	-	-	-	-
	10,348	-	-	-	-	-

30 June 2018	Less than 1 month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	No stated maturity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Other creditors and accrued expenses	1,899	-	-	-	-	-
	1,899	-	-	-	-	-

7 Charges and fees

	Group 30 June 2019	Company 30 June 2019	Group 30 June 2018	Company 30 June 2018
	US$'000	US$'000	US$'000	US$'000
Investment manager's fees (see below)	1,023	-	995	-
Administrator and Registrar's fees (see below)	225	199	226	200
Audit fees	24	24	34	34
Custodian fees (see below)	138	3	109	4
Directors' fees and expenses	305	305	308	308
Directors' insurance cover	31	31	30	30
Broker fees	53	53	53	53
Other	365	340	369	377
Other expenses	1,141	955	1,129	1,006

Investment manager's fees

Annual fees

The Investment Manager was entitled to an annual management fee of 1.25% of the Net Asset Value of the Group, calculated monthly and payable quarterly in arrears. The Investment Management Agreement was subject to termination on 31 October 2013 with a revised agreement coming into effect from 1 November 2013. Under the revised agreement the annual fee reduced to 1.05% of the net asset value of the Company and further reduced to an annual fee of 0.90% of the net asset value of the Company from 1 November 2016 subject to termination on 31 October 2019.

Annual management fees for the year ended 30 June 2019 amounted to US$1,022,783 (30 June 2018: US$994,814) and the amount accrued but not paid at the year-end was US$287,489 (30 June 2018: US$267,445).

Administrator and Registrar fees

The Administrator is entitled to receive a fee of 12.5 basis points per annum of the net asset value of the Company between US$0 and US$100 million, 10 basis points of the net asset value of the Company above US$100 million.

This is subject to a minimum monthly fee of US$15,000, payable quarterly in arrears.

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

The Administrator may utilise the services of a CREST accredited registrar for the purposes of settling share transactions through CREST. The cost of this service will be borne by the Company. It is anticipated that the cost will be in the region of £12,000 per annum subject to the number of CREST settled transactions undertaken.

Administration fees paid for the year ended 30 June 2019 amounted to US$225,192 and US$32,087 for additional services (30 June 2018: US$225,774 and US$32,087 respectively). Outstanding Administration fees at the year end amounted to US$57,385 (30 June 2018: US$57,767).

Custodian fees

The Custodian is entitled to receive fees of US$7,200 per annum and US$25 per processed transaction from the Company.

In addition the Custodian is entitled to receive fees of 8 basis points per annum in respect of Qatari securities held by the Group and 10 basis points per annum in respect of non-Qatari, GCC securities held by the Group and $45 per settled transaction (Qatar)/$50 per settled transaction (GCC excluding Qatar). From 1 March 2013 the custodian agreed to a 25% reduction in custodian fees relating to the Qatari market.

Custodian and sub-custodian fees for the year ended 30 June 2019 amounted to US$138,467 (30 June 2018: US$109,172) and the amount accrued but not paid at the year-end was US$9,579 (30 June 2018: US$8,756).

8 Foreign currency translation

The US Dollar is the currency of the primary economic environment in which the entity operates ("the functional currency"). The US Dollar is the currency in which the financial statements are presented ("the presentational currency") as reporting to shareholders is in US Dollars and the shares are quoted in US Dollars.

Monetary assets and liabilities denominated in foreign currencies as at the date of these financial statements are translated to US Dollar at exchange rates prevailing on that date. Income and expenses are translated into US Dollar based on exchange rates on the date of the transaction. All resulting exchange differences are recognised in the income statement at the exchange rate prevailing on the balance sheet date. Items of income and expense are translated at exchange rates on the date of the relevant transactions or an average rate. Components of equity are translated at the date of the relevant transaction and not retranslated. All resulting exchange differences are recognised in other comprehensive income.

Foreign exchange risk

The Group's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than US Dollar. As a result, the Group is subject to the effects of exchange rate fluctuations with respect to these currencies. The Group's policy is not to enter into any currency hedging transactions.

At the reporting date the Group had the following exposure:

Currency	30 June 2019	30 June 2018
	%	%

US Dollar	43.01	41.86
Qatari Riyal	34.28	36.25
Kuwaiti Dinar	14.63	10.51
UAE Dirham	8.01	11.32
Saudi Arabia Riyal	0.05	0.09
British Pound	0.02	(0.04)
Omani Rial	0.00	0.00

The following table sets out the Group's total exposure to foreign currency risk and the net exposure to foreign currencies of the monetary assets and liabilities:

30 June 2019	Monetary assets	Monetary liabilities	Net exposure
	US$'000	US$'000	US$'000
US Dollar	61,805	(8,109)	53,696
Qatari Riyal	42,805	-	42,805
Kuwait Dinar	19,745	(1,475)	18,270
UAE Dirham	10,756	(759)	9,997
Saudi Arabia Riyal	68	-	68
British Pound	27	(5)	22
	135,206	(10,348)	124,858
30 June 2018	Monetary assets	Monetary liabilities	Net exposure
	US$'000	US$'000	US$'000
US Dollar	47,332	(955)	46,377
Qatari Riyal	40,161	-	40,161
UAE Dirham	12,545	-	12,545
Kuwait Dinar	12,530	(883)	11,647
Saudi Arabia Riyal	96	-	96
British Pound	18	(61)	(43)
	112,682	(1,899)	110,783

Foreign currency sensitivity risk - presentational currency

At 30 June 2019 had the US Dollar weakened/strengthened by 1% (2018 : weakened/strengthened 1%) in relation to all currencies, with all other variables held constant, net assets attributable to equity holders of the Company would have increased/decreased by the amounts shown below:

30 June 2019	US$'000
British Pound	-
Kuwaiti Dinar	183
UAE Dirham	100
Saudi Arabia Riyal	1
Effect on net assets	284

30 June 2018	US$'000
British Pound	-
Kuwaiti Dinar	116
UAE Dirham	125
Saudi Arabia Riyal	1
Effect on net assets	242

Foreign currency sensitivity risk - functional currency

As 43% of net assets are denominated in USD and USD is the functional currency there is no significant functional currency risk. The Qatari Riyal is pegged to the USD within a tight band and therefore it is not included in the sensitivity analysis.

As USD is the functional currency of the Group and USD is the presentational currency any effect of changes in the foreign exchange rates between USD and the other currencies is assumed to relate to the investments and is included in the unrealised gain/loss of the investments on consolidation.

9 Taxation

Isle of Man taxation

The Company is resident for taxation purposes in the Isle of Man by virtue of being incorporated in the Isle of Man and is technically subject to taxation on its income but the rate of tax will be zero. The Company is required to pay an annual corporate charge of £250 per annum.

The Company became registered for VAT from 1 February 2011.

Qatar/United Arab Emirates(U.A.E)./Saudi Arabia/Kuwait taxation

The Company invests in equities in the GCC region. As at 30 June 2019 the Company held investment 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. The tax charge in the Consolidated Income Statement relates to this: 2019: US$81,495 (2018: US$33,839).

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.

10 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 and through common Directors. Fees paid and payable to the Investment Manager are disclosed in notes 6 and 7.

Epicure Managers Qatar Limited is a wholly owned subsidiary of the Investment Adviser, Qatar Insurance Company S.A.Q.

11 The Company

Gulf Investment Fund plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 26 June 2007 as a public company with registered number 120108C.

Pursuant to an Admission Document dated 25 July 2007 there was an original placing of up to 171,355,000 Ordinary Shares, with Warrants attached on the basis of 1 Warrant to every 5 Ordinary Shares. Following the placing on 31 July 2007, 171,355,000 Ordinary Shares and 34,271,000 Warrants were issued. The warrants expired on 16 November 2012.

The shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ("AIM") on 31 July 2007, when dealings also commenced.

As a result of a further fund raising in December 2007, a further 76,172,523 Ordinary Shares were issued, which were admitted for trading on AIM on 13 December 2007.

On 4 December 2008, the Share premium arising from the placing of shares was cancelled and the amount of the Share Premium account transferred to Retained earnings.

The shares of the Company were admitted to trading on the Main Market of the London Stock Exchange on 13 May 2011.

For the year ended 30 June 2019 there was no tender offer (2018: US$0.9933 per share). Therefore nil shares were cancelled (2018: 10,273,471 shares) with US$ nil being paid to participating shareholders (2018: US$10,204,639).

The shareholders approved a dividend of 3.0 cents per share on 7 November 2018 (previous year 3.0 cents per share); this was paid to shareholders on 21 December 2018.

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

Duration

12 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%

Epicure Qatar Opportunities Holdings Limited is a wholly owned subsidiary of the Company and was incorporated in the British Virgin Islands on 4 July 2007 under the provisions of the BVI Companies Act 2001, as a limited liability company with registration number 1415393. The principal activity of the subsidiary is holding investments on behalf of the Company.

13 Significant accounting policies

The consolidated financial statements of the Company for the year ended 30 June 2019 comprise the Company and its subsidiary, Note 1(b), (together referred to as the "Group").

Accounting policies for certain items have been included in the relevant note.

13.1 Basis of preparation

Principal activities

The Group's principal activities, investment objective and strategy and principal risks and uncertainties and the planned tender offer in 2020 are described in the Chairman's Statement, Business Review, Investment Policy and Corporate Governance Report.

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and Isle of Man Companies Act 1931 to 2004.

Basis of measurement

The financial statements have been prepared under the historic cost convention, as modified by the revaluation of financial assets held at fair value through profit or loss and investments in subsidiary, which are stated at fair value.

Going concern

These consolidated financial statements have been prepared on the going concern basis, as the Board of Directors has a reasonable expectation that the Group and Company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including the 100% tender offer in 2020 (subject to shareholder approval), the date of the next continuation vote for the Company scheduled for 2021, future projections of profitability, cash flows and capital resources.

Functional and presentation currency

These consolidated financial statements are presented in USD Dollar, which is the Group's functional currency. All financial information presented in USD Dollar has been rounded to the nearest dollar.

Disclosure on changes in significant accounting policies

The accounting policies applied in these financial statements are the same as those applied in the Group's consolidated financial statements as at the year ended 30 June 2018 with the exception of IFRS 9, as described below.

IFRS 9 Financial Instruments

The Group adopted IFRS 9 Financial Instruments on its effective date of 1 July 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement and introduces new requirements for classification and measurement, impairment and hedge accounting.

IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income and fair value through profit or loss. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

Changes in accounting policies resulting from the adoption of IFRS 9 were applied retrospectively, with the exception that, the Company has taken advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 would be recognised in retained earnings and reserves as at 1 July 2018. There were no changes in the carrying amounts as a result of the adoption of IFRS 9.

As a result of the adoption of IFRS 9, the Company adopted consequential amendments to IAS 1 Presentation of Financial Statements which requires impairment of financial assets to be presented in a separate line item in the statement of comprehensive income. Additionally, the Company adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures, but not applied to comparative information.

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortised cost, but not to investments in equity instruments. IFRS 9 requires the Company to record ECLs on all of its trade receivables, either on a 12-month or lifetime basis. Given the limited exposure of Company to credit risk, this amendment has not had a material impact on the financial statements. The Company only holds receivables with no financing component and which have maturities of less than 12 months at amortised cost and therefore has adopted an approach similar to the simplified approach to calculation of ECLs.

The Group's approach to capital management is described in note 5. The Group's objectives, policies and processes for managing credit, foreign exchange, liquidity and market risk along with the are described in Notes 1(a), 2, 6 and 8 of the financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Group's accounting policies. The financial statements do not contain any critical accounting estimates.

Certain comparative figures have been revised to accord with the presentation adopted in the current year, in particular the fair value hierarchy level for the P-Notes (note 2) and the separate disclosure of withholding tax (Consolidated Income Statement).

13.2 Basis of consolidation

Subsidiaries

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries and subsidiary undertakings). Control is achieved where the Company has power over an investee, exposure or rights to variable returns and the ability to exert power to affect those returns.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are eliminated in full in the consolidated financial statements.

13.3 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.

13.4 Investment in and loan to subsidiary

Investment in subsidiary in the Company balance sheet is stated at fair value. Loan to subsidiary is stated at amortised cost.

13.5 Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

13.6 Future changes in accounting policies

The International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") have issued the following standards and interpretations with an effective date after the date of these financial statements:

IFRS Standards and Interpretations (IAS/IFRS)

Effective date (accounting periods commencing on or after)

IFRS 16 - Leases (issued on 13 January 2016)

1 January 2019

IFRIC 23- Uncertainty over Income Tax Treatments

(issued on 07 June 2017)

1 January 2019

14 Post balance sheet events

There are no material post balance sheet events.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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