Half-year Report

RNS Number : 1077E

Gulf Investment Fund PLC

26 February 2020

 

Legal Entity Identifier: 2138009DIENFWKC3PW84

Gulf Investment Fund plc

Interim Results for the six months ended 31 December 2019

-  Gulf Investment Fund (GIF) net asset value per share (NAV) grew by 3.4%; the S&P GCC Composite Index fell 1.4%

-  GIF share price +7.44%

-  Dividend of 3.0 cents per share

Nick Wilson, Chairman of the Gulf Investment Fund plc, commented:

During the six months GCC markets were affected by two major conflicting trends: on the positive side a continuation of the decade old global bull market led by the United States and on the negative side an increase in regional geopolitical tensions. The IPO of Saudi Aramco created some interest from foreign investors, despite scepticism from western investment banks. Following the IPO and the inclusion of Kuwait, the weighting of the GCC in the MSCI Emerging Market Index will increase from 4% to 6.7%

The Board continues to view the future of the Company with confidence. Coronavirus is causing volatility in stock markets globally. That said we expect continuing if slower growth in the GCC region helped by progress in the non-hydrocarbon sector of several GCC states seeking to balance their economies.

For further information:

Nicholas Wilson [phone]

Gulf Investment Fund plc

Atholl Tweedie [phone]

Panmure Gordon

Maitland/AMO [phone]

William Clutterbuck / Alasdair Lennon

Chairman's Statement

On behalf of the board, I am pleased to present the interim results for Gulf Investment Fund Plc for the six months ending 31 December 2019.

Results

For the six months ending 31 December 2019, Net Asset Value per Share ("NAV") rose by 3.4% compared with a fall of 1.4% in the S&P GCC Composite Index. The MSCI Emerging Markets Index rose by 5.7% in the same period. Following a slight narrowing of the discount at which the shares trade to NAV, the shares rose by 5.0%.

At the Annual General Meeting on 8 November, GIF shareholders approved a final dividend of 3.0 cents per ordinary share in respect of the year ended 30 June 2019. The dividend was paid on 10 January 2020 with an ex-dividend date of 28 November 2019.

During the six-month period, GCC markets were influenced by two major conflicting trends: on the positive side a continuation of the decade old global bull market led by the United States and on the negative side an increase in regional geopolitical tensions. The IPO of Saudi Aramco created some interest from foreign investors post the IPO, despite a level of scepticism on the part of western investment banks. Following the IPO and the inclusion of Kuwait in the MSCI Emerging Market Index, the weighting of the GCC in the index will increase from 4% to 6.7%

At the end of the period, the Company had 45 holdings: 20 in Saudi Arabia, 10 in Qatar, 9 in Kuwait, 5 in the UAE and 1 in Oman.

Related party transactions

Details of any related party transactions are contained in the annual report as well as being addressed in note 8 of this interim report.

Post balance sheet events

Details of these can be found in note 13 following the accompanying financial statements.

Outlook, risks and uncertainties

Fluctuations in oil and gas prices will continue to impact GCC economies as countries deal with budget deficits. The continuing spread of Coronavirus is causing some volatility in stock markets globally and China's short term demand for oil has been impacted.

Longer term the geopolitics of the region and, in particular, the dispute between Qatar and other members of the GCC brings continuing economic uncertainty.

The Board believes that the principal risks and uncertainties faced by the Company continue to fall in the following categories; geopolitical events, market risks, investment and strategy risks, accounting, legal and regulatory risks, operational risks and financial risks. Information on each of these is given in the Business Review section of our Annual Report each year.

The Board continues to view the future of the Company with confidence expecting continuing if slower growth in the region as a whole, as growth in the non-hydrocarbon sector in a number of GCC members helps to balance their economies.

Nicholas Wilson

Chairman

25 February 2020

Director's Responsibility Statement

The Directors confirm that, to the best of their knowledge:

a)  the condensed set of financial statements has been prepared in accordance with IAS 34;

b)  the interim management report and Chairman's statement include a fair review of the information required by the Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year respectively);

c)  in accordance with Disclosure and Transparency Rule 4.2.8R there have been no related party transactions during the six months to 31 December 2019 and therefore nothing to report on any material effect by such a transaction on the financial position or the performance of the Company during that period; and there have been no changes in this position since the last Annual Report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.

d)  in accordance with Disclosure and Transparency Rule 6.4.2, the Company confirms that its Home State is the United Kingdom.

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

Nicholas Wilson

Chairman

25 February 2020

Report of the Investment Manager and the Investment Adviser

Regional Market Overview

Global equity markets ended 2019 near record highs. GCC markets rose, with the S&P GCC index up 8.3 per cent in 2019. Kuwait outperformed the others, ending the year up 23.7 per cent. Bahrain performed similarly closing the year up 20.4 per cent. Dubai and Saudi Arabia posted rises of 9.3 and 7.2 per cent respectively. Qatar rose 1.2 per cent, while Oman closed the year down 7.9 per cent.

Country (Index)	31-Dec-18	30-Jun-19	1H19	31-Dec-19	2H19	FY19
Qatar (DSM)	10,299.0	10,455.7	1.5%	10,425.5	-0.3%	1.2%
Saudi (TASI)	7,826.7	8,821.8	12.7%	8,389.2	-4.9%	7.2%
Dubai (DFMGI)	2,529.8	2,658.6	5.1%	2,764.9	4.0%	9.3%
Abu Dhabi (ADI)	4,915.1	4,980.0	1.3%	5,075.8	1.9%	3.3%
Kuwait (KWSE)	5,079.6	5,832.1	14.8%	6,282.5	7.7%	23.7%
Oman (MSI)	4,323.7	3,884.9	-10.1%	3,981.2	2.5%	-7.9%
Bahrain (BAX)	1,337.3	1,471.0	10.0%	1,610.2	9.5%	20.4%
S&P GCC Composite	107.2	117.7	9.8%	116.1	-1.4%	8.3%
Crude (Brent)	53.8	66.6	23.7%	66.0	-0.8%	22.7%
Emerging Markets (MSCI EM)	965.7	1,054.9	9.2%	1,114.7	5.7%	15.4%
World (MXWO)	1,883.9	2,178.4	15.6%	2,358.5	8.3%	25.2%

Source: Bloomberg

Military action by US and Iran has heightened tensions in the region, but it has not, at the time of writing, caused any of the GCC governments to change their economic outlooks.  Nor do we expect it to, given that these sorts of events have occurred in the past.

Saudi Arabia raised US$25.6 billion by listing just 1.5 per cent of Aramco's shares on its exchange, the Tadawul. This translates to a US$2 trillion valuation, as the stock price rose on the first two days of trading.

Following the Aramco IPO, MSCI and FTSE announced Aramco will be included in their emerging market indices. Aramco will have a weight of c 0.15 per cent  in MSCI EM which is expected as a result to attract US$700 million of passive inflows. Aramco will have a c. 0.3 per cent weight in FTSE EM which should see it attract passive inflows of c. US$650 million.

Kuwait's MSCI EM inclusion in May 2020 will mean it has a weighting of 0.69 per cent of the index, and this should attract US$2.7 billion from passive investors.

The proposed c.5 per cent listing of Aramco, higher foreign ownership limits in UAE and Kuwait's inclusion will take the weight of GCC in the MSCI EM Index to c.6.7 per cent (current weight 4.0 per cent).

Table: Saudi Arabia and Kuwait Upcoming FTSE / MSCI Inclusion Events

Saudi Arabia FTSE Inclusion (Expected Weight: 2.7%)
Date	Phase	% inclusion	Expected Inflows (US$ Bn)
Mar 2020	V	25%	1.5
Kuwait MSCI Inclusion (Expected Weight: 0.69%)
Date	Phase	% inclusion	Expected Inflows (US$ Bn)
May 2020	-	-	Passive:2.7

Source: EFG Hermes Estimates, Arqaam Capital, KMEFIC

GCC Budget and Economic Outlook 2020

Economic growth in the GCC slowed in 2019 with aggregate growth projected at 0.7 per cent, down significantly from 2.0 per cent in 2018. A subdued Oil sector (-1.4 per cent) was the major contributor to this fall amid restricted oil production activity in line with the OPEC+ agreement. However, the non-oil sector continued to report steady growth, signaling the continued results of diversification initiatives.

Table: Real GDP Growth in the GCC

	2000-15 Avg.	2016	2017	2018	2019f	2020f
Real GDP	4.8%	2.3%	-0.3%	2.0%	0.7%	2.5%
Oil	3.0%	2.9%	-3.0%	2.5%	-1.4%	1.9%
Non-Oil	6.7%	1.9%	1.9%	1.9%	2.4%	2.8%

Source: IMF REO October 2019

Overall GCC growth in 2020 is expected to rebound to 2.5 per cent, primarily driven by recovery in oil sector on rising oil and gas output. Oil Real GDP is expected to grow 1.9 per cent in 2020. Meanwhile, the non-oil sector is expected to report growth of 2.8 percent in 2020, up from 2.4 per cent in 2019. Kuwait and the UAE will receive boosts in tourism from their respective Expo 2020. Qatar will continue its preparations towards hosting the 2022 World Cup.

Moreover, recent improvements by GCC nations in the World Bank's Ease of Doing Business ranking confirm that continued efforts towards structural reform are being effectively implemented. Saudi Arabia, Bahrain and Kuwait ranked among top 10 global improvers in the World Bank's assessment. Separately, most GCC economies have cut their interest rates in line with the Fed' rate policy in 2H19. This should support business activity and assist in lowering debt servicing costs.

Saudi Arabia approved a US$272.0 billion budget for 2020, marginally lower than the expected expenditure of 2019. This budget underlines the significance of the economic transformation being sought with the nation's National Vision 2030. Government revenues are estimated at US$222.1 billion and the budget deficit is US$50 billion or 6.5 per cent of GDP. Actual spending for 2019 is expected to reach US$279 billion, and the total actual government revenue is anticipated to be US$245 billion, with a deficit of US$35 billion or 4.7 per cent of the GDP.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting Saudi Arabia Budget 2020.

Qatar announced its 2020 budget with spending at US$57.8 billion, the largest in the last five years. Major projects have received the largest share (43 per cent), reflecting the country's commitment to complete projects in sectors including healthcare, education, and transportation, as well as those related to the hosting of the FIFA World Cup in 2022. Government revenue for 2020 is projected at US$58.0 billion based on an assumed oil price of US$55/barrel generating a surplus of US$137 million.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting Qatar Budget 2020.

The UAE Cabinet approved a balanced budget of US$16.7 billion for the 2020 year, which is 1.8 per cent higher than in 2019 and the nation's highest on record. The Dubai government has also announced an expansionary budget for 2020 with the largest ever spending at US$18.1 billion. The budget aims to make Dubai one of the most livable counties in the world by focusing on key sectors such as social services, health, education, and housing.

Kuwait has charted a budget of US$74.5 billion for the fiscal year starting April 2020, unchanged over current year. Revenues are estimated at US$49.0 billion, 6.5 per cent lower than estimated revenues for current year. The budget assumes an oil price of US$55 a barrel and expected to report a deficit of US$25.5 billion (before deducting the sovereign wealth fund's share).

Oman has announced a budget of US$34.3 billion for 2020, an increase of 2.3 per cent over 2019. Revenue for 2020 is projected at US$27.8 billion, predicated on an oil price assumption of US$58/barrel, resulting in a deficit of US$6.5 billion, 10.7 per cent lower than 2019.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting GCC Budget 2020.

GCC Economic Update 2H19

Saudi Arabia PMI fell to 56.9 in December but persisted steadily over 50 indicating MoM improvement in non-oil private activity. Saudi unemployment continued to trend down, with the rate falling from 12.3 per cent in 2Q19 to 12 per cent in 3Q19, the fifth consecutive quarterly improvement.

Saudi Arabia decided to waive fees on expatriate workers borne by companies in the industrial sector, after businesses voiced concern over higher operating costs, though fees on expatriate dependents will continue. Moreover, Saudi Arabia is expected to end the use of expatriate workers in its hospitality sector by year-end.

Qatari authorities revealed that North Field gas has almost double the reserves than its earlier estimates (as large as 1,760 tcf). As a result, Qatar is planning to build two more LNG mega trains by 2027, which would boost LNG output by 64 per cent to 126 million tonnes.

The UAE and China signed a series of strategic agreements in a bid to strengthen economic ties. The agreements included a partnership between the Abu Dhabi National Oil Company (ADNOC) and China National Offshore Oil Company (CNOOC) in relation to upstream exploration and development, oil refining and LNG trade.

The UAE will start applying excise tax of 100 per cent and 50 per cent on electronic smoking products and sweetened drinks respectively, starting January 2020.

Dubai 's government issued 38,377 new business licenses in 2019, up 90 per cent YoY. Government's decision to allow 100 per cent foreign ownership in certain sectors aided the increase in new business licenses. Moreover, the emirates preparations ahead of the Expo 2020 have attracted companies in the sectors like Hospitality and Logistic & Supply chain.

This highlight Dubai's economic competitiveness and its ability to attract investors to grow and expand their businesses.

Abu Dhabi issued US$10 billion in bonds, the first issuance in two years, which took advantage of low rates.

Bahrain marked its return to the international debt markets during the period, raising US$2 billion from a US$1 billion sukuk due in 2027 with a yield of 4.5 per cent and a US$1 billion conventional bond maturing in 2031 at 5.625 per cent.

S&P updated Bahrain 's rating outlook to positive from stable, on account of the country's progress on its fiscal consolidation program. Although the sovereign is rated non-investment grade (B+), the upgrade in outlook should boost investor confidence.

GIF Portfolio structure

Country allocation

GIF's weightings in GCC markets are based on the Investment Adviser's views of investments' outlook and valuations. Compared to the benchmark, GIF continued to be overweight Qatar (32.1 per cent of NAV vs. S&P GCC Qatar: 15.3 per cent). GIF's weightings in Saudi Arabia, UAE and Kuwait are 26.2 per cent, 22.6 per cent and 16.7 per cent respectively (vs. S&P GCC weights: Saudi Arabia:54.5 per cent, UAE: 14.3 per cent, Kuwait: 12.5 per cent).

During the period (2H19), the Investment Adviser increased exposure to the UAE and Kuwait by 7.2 per cent and 4.1 per cent, respectively. As a result, the fund's cash position reduced to 2.3 per cent of NAV as of 31 December 2019 (30 June 2019: 13.9 per cent).

As of 31 December, GIF had 45 holdings: 20 in Saudi Arabia, 10 in Qatar, 5 in the UAE, 9 in Kuwait and 1 in Oman (vs. 48 holdings in 2Q19: 27 in Saudi Arabia, 8 in Qatar, 5 in the UAE, 8 in Kuwait and 0 in Oman).

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting country allocation 2019.

Portfolio

Top 5 Holdings

Company	Country	Sector	% share of GIF NAV
Emirates NBD	UAE	Financials	13.3%
Qatar Gas Transport	Qatar	Energy	8.1%
Commercial Bank of Qatar	Qatar	Financials	7.0%
Qatar National Bank	Qatar	Financials	5.0%
Abu Dhabi Islamic Bank	UAE	Financials	3.9%

Source: QIC; as of 31 December 2019

Emirates NBD (ENBD), Qatar Gas Transport Co. (QGTS) and Commercial Bank of Qatar (CBQ) continued to remain GIF's top holdings. The Investment Adviser increased the fund's holding in Qatar National Bank (QNB) and Abu Dhabi Islamic Bank.

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

The Investment Adviser increased exposure to the Financials sector to 47.3 per cent from 40.4 per cent in the 2Q19. The Investment Adviser believes that in the medium term, lower interest rates are expected to support private sector credit growth and overall credit demand in the region.

The Materials sector becomes second largest sector at 12.1 per cent. GIF has invested c.10 per cent of the portfolio in the Saudi Arabian cement sector. The Investment Adviser expects cement volumes to grow in 2020 as demands from the development of mega projects increases. Significant increases in construction activity in recent quarters support the strong outlook for the sector. The value of contracts awarded in the sector in 3Q19 reached US$12.7 billion, up 164 per cent YoY, taking the total value of cement contracts awarded in the first nine months of 2019 to US$23.3 billion, an increase of 117 per cent YoY.

Holdings in the Real Estate sector were increased, while investments in the Utilities, Energy and Consumer sectors were reduced as valuations looked stretched.

Profile of Top Five Holdings:

Emirates NBD (13.3 per cent of NAV)

ENBD is a leading UAE bank with c.20 per cent market share of the UAE's loans and deposits, as well as strong capital buffers to weather economic challenges and developing regulatory requirements. Being backed by the UAE government, it is one of the largest financial institution in the MENA region. ENBD has delivered strong returns to its shareholders with net profit growth of CAGR 23.1 per cent (period: 2014-2019) with high return on equity (2019: c.22 per cent). Its recent acquisition of Deniz Bank has expanded its geographic reach to 13 countries. Emirates NBD is well placed to fund organic growth and its international expansion strategy through its capital-generative core business. For FY19, ENBD reported net profit of US$3,952 million vs. US$2,736 million in FY18, an increase of 44.4 per cent (including the impact of the Network International transaction). As of 31-December-2019, the Bank has total assets of US$186.2 billion.

Qatar Gas Transport (8.1 per cent of NAV)

Qatar Gas Transport Company (Nakilat), established in 2004, is a leader in energy transportation, with the world's largest Liquified Natural Gas (LNG) carrier fleet in operation. This comprises 74 vessels including 69 LNG vessels, 4 LPG vessels and 1 floating storage regasification unit FSRU vessel. QGTS is well placed to benefit from increased transport demand arising from the Qatar's North Field expansion plan. For 9M19, Nakilat reported a net profit of US$199.8 million vs. US$180.7 million in 9M18, an increase of 10.5 per cent.

Commercial Bank of Qatar (7.0 per cent of NAV)

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. For 9M19, CBQ reported net profit of US$412.9 million (vs. US$345.8 million in 9M18) reflecting effective execution of the strategy. As of 30-September-2019, the Bank has total assets of US$40.0 billion. We expect healthy growth in the bottom line in the forecasted period led by strong growth in loan book and normalisation of provisions as high provision cycle comes to an end.

Qatar National Bank (5.0 per cent of NAV)

QNB is the largest bank in the Middle East and Africa (MEA) region with a presence in 31 countries. The Qatari government is the largest shareholder in the bank and is strongly committed to supporting it. The bank is geographically diversified with stable growth (2012-2019 net profit CAGR of 8.1 per cent) and a high return on equity (2019: c.19 per cent). Focused on public sector and high-end corporates clients, QNB maintains a strong balance sheet backed by comfortable capital and liquidity as well as low asset quality risk, with non-performing loans at one of the lowest amongst large financial institutions in the MEA region (~1.9 per cent). For FY19, QNB reported net profit of US$3,940 million vs. US$3,785 million in FY18, an increase of 10.5 per cent. As of 31-December-2019, the Bank has total assets of US$259.4 billion.

Abu Dhabi Islamic Bank (3.9 per cent of NAV)

Abu Dhabi Islamic Bank is a leading regional Islamic financial services group with 80+ retail branches across UAE. Majority owned by members of the ruling family of Abu Dhabi and the sovereign wealth fund, the bank has an overseas presence in UK, Saudi Arabia, Qatar, Iraq, Sudan, and Egypt. The bank has 4.7 per cent loan market share in the UAE and has reported stable growth with a CAGR of 11.3 per cent (period: 2014-2018) with return of equity of ~18 per cent (2018). For 9M19, the bank reported net profit of US$504.0 million vs. US$477.4 million in 9M18), an increase of 5.6 per cent. As of 30^th September 2019, the Bank has total assets of US$33.9 billion.

Performance

NAV rose 3.4 per cent in 2H19. The fund's benchmark, the S&P GCC index, was down 1.4 per cent. NAV went ex-dividend during the period. Including the 3c per share dividend paid on 10 January 2020, the NAV for the period would have increased 5.7 per cent.

For 2019 as a whole, the NAV increased 20.7 per cent, ahead of the S&P GCC index, which was up 8.3 per cent. Including the 3c per share dividend, NAV was up 23.5 per cent against the S&P GCC total return of 12.5 per cent.

Looking back to when the investment mandate widened from Qatari-focused to Gulf-wide in December 2017, NAV has risen 48.4 per cent (dividend included), against the S&P GCC total return of 30.5 per cent.

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

On 31 December 2019, the GIF share price was trading at a 9.4 per cent discount to NAV.

Outlook

The IMF expects growth in the region rise to 2.5 per cent in 2020, up from 0.7 per cent in 2019. Gradual recovery in oil prices and continued infrastructure spending will likely boost economic activity in the medium term. Rising oil output in Kuwait and Saudi Arabia, and gas output in Qatar and Oman, should support growth in the hydrocarbon sector.

With large investments anticipated over the next few years, the Investment Adviser expects to see increasing opportunities in banking, infrastructure and industrials. The oil price remains a key risk.  Further decreases in oil prices would lead to GCC governments limiting spending. Despite this, the Investment Adviser remains optimistic on the regional growth prospects, buoyed by planned infrastructure projects and positive momentum in economic and social reforms.

Valuations

Market	Market Cap.	PE (x)		PB (x)		Dividend Yield (%)
	US$ billion	2020E	2021E	2020E	2021E	2020E	2021E
Qatar	147.2	13.93	12.98	1.58	1.50	4.07	4.34
Saudi Arabia	2,358.2	16.86	15.38	1.93	1.84	3.65	3.96
Dubai	82.5	7.82	7.19	0.97	0.91	4.98	5.25
Abu Dhabi	147.4	12.59	11.86	1.59	1.52	5.11	5.48
Kuwait	119.2	14.10	NA	NA	NA	4.55	NA
S&P GCC	2,788.4	14.63	13.47	1.54	1.46	4.03	4.34
MSCI EM	18,402.1	13.15	11.55	1.56	1.44	2.97	3.27
MSCI World	51,429.2	17.50	15.96	2.44	2.29	2.38	2.50

Source: Bloomberg; Valuations as of 26-January-2020; Market Cap. As of 23-January-2020

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

25 February 2020  25 February 2020

Consolidated Income Statement

		(Unaudited)	(Unaudited)
	Note	For the period from  1 July 2019 to 31 December 2019	For the period from 1 July 2018 to 31 December 2018
		US$'000	US$'000
Income
Dividend income on quoted equity investments		504	625
Realised gain/(loss) on sale of financial assets at fair value through profit or loss		4,605	(10,558)
Net changes in fair value on financial assets at fair value through profit or loss		3,070	9,962
Interest income		15	14
Total net income		8,194	43
Expenses
Investment Manager's fees	6	569	493
Other expenses	6	596	556
Total operating expenses		1,165	1,049
Profit/(loss) before tax		7,029	(1,006)
Income tax expense		-	-
Retained profit/(loss) for the period		7,029	(1,006)
Basic and diluted profit/(loss) per share (cents)	3	7.60	(1.09)

Consolidated Statement of Comprehensive Income

		(Unaudited)	(Unaudited)
		For the period from  1 July 2019 to 31 December 2019	For the period from 1 July 2018 to 31 December 2018
		US$'000	US$'000
Profit/(loss) for the period		7,029	(1,006)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences		(35)	(84)
Total items that are or may be reclassified subsequently to profit or loss		(35)	(84)
Other comprehensive income for the period (net of tax)		(35)	(84)
Total comprehensive profit/(loss) for the period		6,994	(1,090)

Consolidated Balance Sheet

		(Unaudited)	(Audited)
	Note	At 31 December 2019	At 30 June 2019
		US$'000	US$'000
Current Assets
Financial assets at fair value through profit or loss	1	127,645	116,016
Other receivables and prepayments		954	183
Cash and cash equivalents	12	3,255	19,007
Total current assets		131,854	135,206
Equity
Issued share capital		925	925
Reserves	4	128,153	123,933
Total equity		129,078	124,858
Current liabilities
Other creditors and accrued expenses	5	2,776	10,348
Total current liabilities		2,776	10,348
Total equity & liabilities		131,854	135,206

Consolidated Statement of Changes in Equity

	Share Capital	Distributable Reserves	Retained Earnings	Other Reserves (note 4)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 01 July 2019	925	76,198	46,406	1,329	124,858
Total comprehensive income for the period
Profit for period	-	-	7,029	-	7,029
Other comprehensive income
Foreign currency translation differences	-	-	-	(35)	(35)
Total other comprehensive expense	-	-	-	(35)	(35)
Total comprehensive profit for the period	-	-	7,029	(35)	6,994
Contributions by and distributions to owners
Dividends paid	-	-	(2,774)	-	(2,774)
Total contributions by and distributions to owners	-	-	(2,774)	-	(2,774)
Balance at 31 December 2019	925	76,198	50,661	1,294	129,078

* Retained earnings include realised gains and losses on the sale of assets at fair value through profit or loss and net changes in fair value on financial assets at fair value through profit or loss. The level of dividend is calculated based only on a proportion of the dividends received during the year, net of the Company's attributable costs.

	Share Capital	Distributable Reserves	Retained Earnings	Other Reserves (note 4)	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 01 July 2018	925	76,198	32,331	1,329	110,783
Total comprehensive income for the period
Loss for period	-	-	(1,006)	-	(1,006)
Other comprehensive income
Foreign currency translation differences	-	-	-	(84)	(84)
Total other comprehensive income	-	-	-	(84)	(84)
Total comprehensive loss for the period	-	-	(1,006)	(84)	(1,090)
Contributions by and distributions to owners
Dividends paid	-	-	(2,774)	-	(2,774)
Total contributions by and distributions to owners	-	-	(2,774)	-	(2,774)
Balance at 31 December 2018	925	76,198	28,551	1,245	106,919

Consolidated Statement of Cash Flows

		(Unaudited)	(Unaudited)
	Note	For the period from 1 July 2019 to 31 December 2019	For the period from 1 July 2018 to 31 December 2018
		US$'000	US$'000
Cash flows from operating activities
Purchase of investments		(157,264)	(83,743)
Proceeds from sale of investments		144,872	83,177
Dividends received		475	696
Interest received		15	14
Operating expenses paid		(1,186)	(1,142)
Net cash used in operating activities		(13,088)	(998)
Financing activities
Dividends paid		(2,774)	(2,774)
Net cash used in financing activities		(2,774)	(2,774)
Net decrease in cash and cash equivalents		(15,862)	(3,772)
Effects of exchange rate changes on cash and cash equivalents		110	(48)
Cash and cash equivalents at beginning of period		19,007	5,380
Cash and cash equivalents at end of period	12	3,255	1,560

Notes to the Interim Consolidated Financial Statements

1  Investments

Investments are designated at fair value through profit or loss on initial recognition. The Group invests in quoted equities and quoted convertible bonds for which fair value is based on quoted market prices. The quoted market price used for financial assets held by the Group is the current bid price ruling at the year-end without regard to selling prices.

Purchases and sales of investments are recognised on trade date - the date on which the Group commits to purchase or sell the asset. Investments are initially recorded at fair value, and transaction costs for all financial assets and financial liabilities carried at fair value through profit and loss are expensed as incurred. Gains and losses (realised and unrealised) arising from changes in the fair value of the financial assets are included in the income statement in the year in which they arise

31 December 2019 financial assets at fair value through profit or loss: all quoted equity securities

Security name	Number					US$'000
Abu Dhabi Islamic Bank		3,529,728			5,169
Aramex (ARMX)		160,000			155
Dubai Islamic Bank (DIB)		2,855,051			4,282
Emaar Development		2,575,000			2,657
Emirates National Bank of Dubai (ENBD UH)		2,728,268			9,654
Ahli United Bank		2,640,000			2,797
Alafco Aviation Lease and Finance		5,132,484			4,543
Burgan Bank (BURG KK)		1,200,000			1,196
Gulf Bank of Kuwait		1,947,842			2,234
Integrated Holding Company		595,000			1,079
Kuwait International Bank		1,594,930			1,438
Mezzan Holding Co (Mezzan KK)		2,364,988			3,891
Mobile Telecommunications Company (ZAIN KK)		200,000			1,678
National Mobile Telecommunications (Ooredoo)		1,143,499			3,086
Al Anwar Ceramic		705,117			142
Al Khaleej Bank (KCBK QD)		6,829,700			2,593
Commercial Bank of Qatar (CBQK QD)		6,983,857			9,271
Doha Bank (DHBK QD)		1,400,000			973
Gulf International Services (GISS QD)		8,847,411			3,801
Masraf Al Rayan (MARK QD)		1,620,000			1,870
Medicare Group		1,127,265			2,616
Qatar Gas Transport (QGTS QD)		16,246,306			10,662
Qatar National Bank (QNBK QD)		1,174,476			6,579
Qatar Navigation (QNNS QD)		1,633,848			2,487
Qatar United Development Company (UDCD QD)		3,093,354			1,283
Al Rajhi Co for Co-op Insurance		40,000			677
Arabian Cement		199,604			1,957
Arabian Centres Limited		275,000			2,132
Arabian Pipes Co		385,000			1,307
Company for Co-op Insurance		248,031			5,062
Emirates NBD USD Stock		2,224,330			7,871
Fawaz Abdulaziz Al		299,857			2,041
Herfy Food Services Co		62,778			898
Middle East Healthcare		90,532			716
Mouwasat Medical Services Co SHAMAL 13.02.19		10,000			235
Najran Cement Company		1,444,690			4,604
Riyad Bank		90,093			576
Saudi Cement Company		51,000			950
Saudi Fransi Co-operative Ins Co		30,074			222
Saudi Ground Services		166,383			1,831
Savola Group		87,587			798
Tabuk Cement Co		254,135			1,066
United Electronics Co				122,960                     2,444

Yamama Cement                                                                                                       353,448                      2,439

Yanbu Cement                                                                                                           271,642                      2,761

Zamil Industrial Investment Co                                                                                   191,116                        922

Total                                                                                                                                                        127,645

2  Net Asset Value per Share

The net asset value per share as at 31 December 2019 is US$1.3960 per share based on 92,461,242 ordinary shares in issue as at that date (30 June 2019: US$1.3504 based on 92,461,242 ordinary shares in issue).

3  Profit/(loss) per Share

Basic and diluted profit/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the period:

	31 December 2019	31 December 2018
Profit/(loss) attributable to equity holders of the Company (US$'000)	7,029	(1,006)
Weighted average number of ordinary shares in issue (thousands)	92,461	92,461
Basic profit/(loss) per share (cents per share)	7.60	(1.09)

4  Other Reserves

	Distributable reserves	Retained earnings	Foreign currency translation reserve	Capital redemption reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2019	76,198	46,406	(221)	1,550	123,933
Foreign exchange translation differences	-	-	(35)	-	(35)
Retained profit for period	-	7,029	-	-	7,029
Dividends paid	-	(2,774)	-	-	(2,774)
Balance at 31 December 2019	76,198	50,661	(256)	1,550	128,153

5  Trade and other payables

	31 December 2019	30 June 2019
	US$'000	US$'000
Due to broker	2,364	9,945
Management fee payable	297	287
Administration fee payable	59	58
Accruals and sundry creditors	56	58
	2,776	10,348

6  Charges and Fees

	31 December 2019	31 December 2018
	US$'000	US$'000
Investment Manager's fees (see below)	569	493
Performance fees (see below)	-	-
Administrator and Registrar's fees (see below)	113	113
Custodian fees (see below)	109	65
Directors' fees and expenses	158	160
Directors' insurance cover	15	16
Broker fees	26	27
Other	175	175
Other expenses	596	556

 

Investment Manager's fees

Annual fees

The Investment Manager is entitled to an annual fee of 0.90% of the net asset value of the Company. This was due for termination on 31 October 2019 but was rescinded and the fee continues.

Management fees for the period ended 31 December 2019 amounted to US$569,055 (31 December 2018: US$493,399).

Custodian fees

The Custodian is entitled to receive fees of US$7,200 per annum and US$25 per processed transaction from Gulf Investment Fund PLC.

In addition the Custodian is entitled to receive fees of 8 basis points per annum in respect of Qatari securities held by the group and 10 basis points per annum in respect of non-Qatari, GCC securities held by the group and $45 per settled transaction (Qatar)/$50 per settled transaction (GCCC excluding Qatar).

Custodian and sub-custodian fees for the period ending 31 December 2019 amounted to US$108,860 (31 December 2018: US$64,680).

Administrator and Registrar fees

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

This is subject to a minimum monthly fee of US$15,000, payable quarterly in arrears. The Administrator receives an additional fee of £1,200 per month for providing monthly valuation data to the Association of Investment Companies.

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

Administration fees paid for the period ending 31 December 2019 amounted to US$113,195 and US$28,345 for additional services (31 December 2018: US$113,455 and US$31,547 respectively).

Directors' Remuneration

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

Nick Wilson as non-executive chairman is entitled to receive an annual fee of £52,500. He also receives an additional fee in respect of his work regarding the Company's share buy-back programme of £10,000 per annum.

Paul Macdonald as non-executive director and chairman of the audit committee is entitled to receive £37,500 per annum.

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

The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. Total fees and expenses paid to the Directors for the period ended 31 December 2019 amounted to US$158,376 (31 December 2018: US$160,315).

7  Taxation

Isle of Man taxation

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

The Company became registered for VAT from 1 February 2011.

Qatar/United Arab Emirates/Saudi Arabia/Kuwait/Oman taxation

The Company invests in equities in the GCC region. As at 31 December 2019 the Company held investments in Qatar, United Arab Emirates (U.A.E.), Saudi Arabia, Kuwait and Oman.

It is the intention of the Directors to conduct the affairs of the Company so that it is not considered to be either resident or doing business in any of these countries.

With the exception of Saudi Arabia, none of these countries impose withholding tax on dividend distributions to non-residents. Saudi Arabia imposes a 5% withholding tax on dividend distributions to non-residents.

Capital gains made by the Company on disposal of shares in Qatar, U.A.E., Saudi Arabia, Kuwait and Oman 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/Oman companies.

8  Related Party Transactions

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

The Investment Adviser is Qatar Insurance Company S.A.Q. The Group holds shares in Qatar Insurance Company S.A.Q. (see note 1(a)). The Investment Adviser's fees are paid by the Investment Manager.

The Investment Manager, Epicure Managers Qatar Limited, is a related party by virtue of its ability to make operational decisions for the Company. Fees paid and payable to the Investment Manager are disclosed in note 6.

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

9  The Company

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

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

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

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

On 4 December 2008, the share premium arising from the placing of shares was cancelled and the amount of the share premium account transferred to distributable reserves.

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

On 8 December 2017 the Company's shareholders approved a change in investment policy from a largely Qatar focussed strategy to one which focusses more on a broader Gulf Co-operation Council strategy.

During the period 1 July 2019 to 31 December 2019, the Company purchased none of its ordinary shares.

The shareholders approved a dividend of 3.0 cents per share on 8 November 2019. This was paid to shareholders on 10 January 2020.

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

10  The Subsidiary

The Company has the following subsidiary company:

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

11  Significant Accounting Policies

The Interim Report of the Company for the period ending 31 December 2019 comprises the Company and its subsidiary (together referred to as the "Group"). The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 June 2019.

11.1  Basis of presentation

These financial statements have been prepared in accordance with International Financial Reporting Standard ("IFRS") IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2019 .

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

11.2   Segment reporting

The Group has one segment focusing on maximising total returns through investing in quoted securities in the GCC region. No additional disclosure is included in relation to segment reporting, as the Group's activities are limited to one business and geographic segment.

12  Cash and Cash Equivalents

	31 December 2019	30 June 2019
	US$'000	US$'000
Bank balances	3,255	19,007
Cash and cash equivalents	3,255	19,007

13  Post Balance Sheet Events

There were no post balance sheet events to report.

 

END

 

 

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