TIDMQIF
RNS Number : 0301Q
Qatar Investment Fund PLC
07 September 2017
Qatar Investment Fund Plc ('QIF' or 'the company')
Annual Report for the year ended 30 June 2017
London-listed Qatar Investment Fund plc (LSE: QIF) invests in
Qatar and the Gulf Cooperation Council (GCC) region, with exposure
to economic growth in the area. QIF invests in companies on the
Qatar Exchange, with a possible allocation of up to 15% in other
listed companies in the GCC.
Nicholas Wilson, Chairman of Qatar Investment Fund plc
commented:
"The year to 30 June 2017 was one of mixed fortunes for Qatar.
During the period, the country adjusted well to the realisation
that oil prices will remain lower for longer. However, in the
latter months, a trade and travel ban by four other Gulf
Cooperation Council (GCC) countries was imposed that has hindered
growth. Qatar is working to mitigate negative impacts of this,
including prudent management of its resources and by forming other
international alliances.
"Qatar Investment Fund plc is confident that Qatar still has
good prospects for economic growth. The rift with Saudi Arabia,
UAE, Bahrain and Egypt is expected to continue for some time and
will have a negative impact on economic performance. Assuming an
eventual resumption of trade and travel links our investment
adviser believes that medium to long-term growth prospects should
remain healthy driven by a strong infrastructure pipeline and
supportive demographics.
"We will continue to monitor the situation to take advantage of
opportunities in Qatar as well as the wider GCC region."
-- Net Asset Value per share (NAV) fell by 8.4% to US$1.1113,
compared with a fall of 8.6% in the Qatar Exchange Index
-- Share price fell more than Qatar Exchange Index from
US$1.0313 to US$0.899 as discount to NAV widened
-- Board proposes a dividend of 3.0c per share (2016: 4.0 cents)
-- Loss of US$6.64m arising from fair value adjustments on
holdings and realised losses on holdings sold, equivalent to basic
loss per share of 3.60 cents
For further information:
Qatar Investment Fund Plc +44 (0) 1624 622 851
Nicholas Wilson
Panmure Gordon +44 (0) 20 7886 2500
Andrew Potts
Maitland +44 (0) 20 7379 5151
William Clutterbuck / Cebuan Bliss
Chairman's Statement
On behalf of your Board, I am pleased to present your Company's
tenth Annual Report and Financial Statements for the year to 30
June 2017.
During the twelve months, your Company's Net Asset Value per
Share ("NAV") fell by 8.4% to US$1.1113 which compares with a fall
of 8.6% in the Qatari stock market (Qatar Exchange Index) and a
gain of 21.2% in the MSCI Emerging Markets Index. Following a
widening of the discount at which the shares trade to NAV, the
shares fell from US$1.0313 to US$0.899, a fall of 12.8%.
Shareholders received a dividend of 4.0c per share with an
ex-dividend date of 31 January 2017.
Results
Results for the period under review showed a loss of US$6.64m
generated from fair value adjustments, realised losses and dividend
income. This is equivalent to basic loss per share of 3.60
cents.
A growing realisation that hydrocarbon prices were going to be
lower for longer kept pressure on Qatari stocks for most of the
twelve-month period. On 5 June, Saudi Arabia, the United Arab
Emirates, Bahrain and Egypt broke off diplomatic relations with
Qatar and took further steps to isolate the country. This prompted
a sharp sell-off on the Qatar Stock Exchange and took shares to the
lowest level for the year.
At the end of the period we had a total of 26 holdings: 19 in
Qatar (82.9%) and 7 in the UAE (7.1%). Banking and financial
services remains our largest sectoral holding at 37.8%. Cash
balances increased to 9.3%.
The Company's Ongoing Charges (formerly Total Expense Ratio)
fell to 1.70% from 1.77% in the previous year. The charges were
calculated in accordance with the methodology recommended by The
Association of Investment Companies. The decrease was largely
attributable to the revised investment management agreement,
effective 1 November 2016. As part of this agreement in the
Investment Manager's annual fee was reduced from 1.0% to 0.9%.
Managing the Discount between the share price and NAV
Discount management remains a priority for the board and we
continued to make use of the authority granted by shareholders to
buy back the Company's shares. During the period a total of 493,445
shares were bought back to be held in Treasury and 2,102,373 shares
were cancelled, as they had been held in Treasury for 12 months.
The board works with the Investment Manager and the broker to raise
the profile of the company, giving frequent interviews to the
financial press in order to raise the profile of the company with
institutional and private investors. An extensive roadshow was
carried out in March visiting existing shareholders and potential
investors.
Tender Offer
On 19 October 2016, the board announced a proposed tender offer
for 12% of the issued share capital to be voted on by shareholders
at an extraordinary general meeting to be held on 18 November. The
resolution was passed by 100% of those voting. On 12 December, the
Company announced that 14,045,544 shares tendered would be
cancelled and payment made by 19 December.
Proposed Dividend
The Board is please to recommend to shareholders a dividend of
3c per share. Subject to shareholder approval at the forthcoming
Annual General Meeting, the dividend will be paid in January 2018.
Further details on the ex-date, record date and payment date will
be made in due course.
Directorate Change
In May of this year, we were pleased to welcome David Humbles to
the Board. David's skills and experience have already proved very
helpful and we look forward to working with him in the future. As a
new director joins the board, I am sad to say that Leonard O'Brien
has decided not to stand for re-election to the board at the
forthcoming Annual General Meeting.
Leonard joined the board at inception and has been exemplary in
his contribution to the Company. We wish him all the very best for
the future.
Post Balance Sheet events
There have been no post balance sheet events.
Outlook, risks and uncertainties
The Qatari economy slowed during the period with 2016 GDP growth
of 2.2% and a further decline is expected for 2017. After 15 years
of budget surpluses, 2016 showed a deficit of USD9.2bn with a
further deficit forecast for 2017.
The ongoing rift with Saudi Arabia, UAE, Bahrain and Egypt is
expected to continue for some time and will inevitably have a
negative impact on economic performance. Although any sustained
recovery in hydrocarbon prices is not expected, the lifting of the
LNG development moratorium with a 30% increase in LNG production is
expected to have a positive effect on the economy. Assuming an
eventual resolution of the diplomatic rift, our investment adviser
believes that medium to long-term growth prospects should remain
healthy driven by a strong infrastructure pipeline, strong fiscal
spending and supportive demographics.
There are, of course, risks to investors. The Board believes
these principally 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 this Annual Report.
Annual General Meeting
I look forward to welcoming shareholders to our tenth Annual
General Meeting on 16 November 2017, 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
6 September 2017
Business Review
The following review is designed to provide information
primarily about the Company's business and results for the year
ended 30 June 2017. It should be read in conjunction with the
Report of the Investment Manager and the Investment Adviser on
pages 7 to 16 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, principally
through the medium of the Qatar Exchange (formerly the Doha
Securities Market), the opportunities for growth offered by the
expanding Qatari economy by investing in listed companies or
companies soon to be listed. The Company may also invest in listed
companies, or pre-IPO companies, in other Co-operation Council for
Arab States of the Gulf (GCC) countries.
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 17 to 18.
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 Qatar Exchange (QE) 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 9 August 2016, and updated 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) ofRegulation (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.
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).
A Board member is responsible for close monitoring of our 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 49 to 53.
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 21 to 27.
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 on pages 51 to 53.
Report of the Investment Manager and Investment Adviser
Regional Equity Market Overview
Indices 30-Jun-16 31-Dec-16 % Change 30-Jun-17 % Change % Change
(H2 2016) (H1 2017) (LTM to 30-Jun-17)
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Qatar (DSM) 9,885 10,437 5.6% 9,030 -13.5% -8.6%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Saudi (TASI) 6,500 7,210 10.9% 7,426 3.0% +14.2%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Dubai (DFMGI) 3,311 3,531 6.6% 3,392 -3.9% +2.4%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Abu Dhabi
(ADI) 4,498 4,546 1.1% 4,425 -2.7% -1.6%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Kuwait (KWSE) 5,365 5,748 7.1% 6,763 17.7% +26.1%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Oman (MSI) 5,777 5,783 0.1% 5,118 -11.5% -11.4%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Bahrain (BAX) 1,118 1,220 9.1% 1,310 7.3% +17.1%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
BGCC200 Index 60 65 8.2% 64 -1.3% +6.8%
--------------- ---------- ---------- ----------- ---------- ----------- --------------------
Source: Bloomberg; LTM (Last Twelve Months)
In the 12 months to 30 June 2017, global equity markets
witnessed several unexpected events, with the win in the US
elections being the most prominent. Additionally, OPEC member
countries agreed to collectively reduce oil production by 1.2
million barrels per day (bpd) to 32.5 million bpd and the US
Federal Reserve raised its benchmark interest rate multiple times
during the period on indications that the American economy is
expanding at a healthy pace. Following the Fed rate hikes in
December 2016 and March 2017, several central banks in the GCC
followed suit and raised benchmark rates. The GCC index (Bloomberg
GCC200) rose 6.8% during the period, as oil prices recovered
following the production cut agreement.
In the latter half of FY 2016, all GCC equity markets rose as
oil prices recovered following the production cut agreement between
OPEC countries and non-OPEC oil producers. Saudi Arabia was the
strongest performer in the period, up 10.9%, after the successful
raising of USD 17.5 billion in the largest emerging markets bond
issuance to date. The Bahrain and Kuwait equity markets followed
Saudi Arabia, up 9.1% and 7.1%, respectively. Dubai, Abu Dhabi and
Oman were up 6.6%, 1.1% and 0.1% respectively. Qatar market was up
5.6%, after the successful inclusion of Qatar in the FTSE
"secondary emerging market" category. Overall, the Bloomberg GCC
index rose 8.2%.
The decision to cut ties with Qatar by the governments of Saudi
Arabia, Bahrain, the UAE and Egypt, closing their land, air and sea
borders, was the major event of the first half of the calendar
2017. Falling oil prices added to the market pressure, as crude
prices fell c.15% during the period, with continuing expansion in
US shale drilling leading to high global supplies, despite the
OPEC-led agreement to cut production. The Qatari market dropped
13.5% on investor concerns about Qatar's trade, labour market and
liquidity conditions in the light of the blockade. The Bloomberg
GCC index also fell 1.3% during the period. However, Saudi Arabia
continued its rising trend in H1 2017, following the news of its
inclusion in MSCI Emerging Markets watchlist and the promotion to
Crown Prince of former Deputy Crown Prince, Mohammed bin Salman.
Kuwait and Bahrain stock markets joined Saudi Arabia and ended the
period in green.
Arab neighbours cut ties with Qatar
On 5 June 2017, the governments of Saudi Arabia, Bahrain, the
UAE and Egypt cut ties with Qatar, accusing it of supporting
terrorism. These countries closed land, air and sea borders with
Qatar, giving Qatari nationals within their borders two weeks to
leave and instructing their own nationals in Qatar to leave
immediately. Yemen, the Maldives and the Tobruk government in Libya
subsequently joined the boycott. The four Arab nations issued a
13-point list of demands to Qatar on June 22, which included
shutting down of Al Jazeera news channel, toning down its
relationship with Iran, cutting ties with certain political groups
and shutting down the Turkish military base in Doha. Qatar was
asked to respond in ten days, which was later extended by another
48 hours at the request of Kuwait. The deadline ended on 4 July
2017. On 5 July 2017, Saudi led allies decided to continue the
blockade after Qatar refused to agree to the demands.
Qatar's export dependence on its GCC neighbours is relatively
limited; however, imports could become costlier in the near
term
Total exports from Qatar to Bahrain, Egypt, Saudi Arabia and the
UAE contributed about 3% of Qatar's gross domestic product (GDP) in
2016. Qatar continues to supply gas to the UAE through the Dolphin
gas pipeline, despite the severing of diplomatic ties. It pumps
around 2 billion cubic feet of gas per day to the UAE.
The majority of Qatari exports are destined for Asia: Japan (20%
of total exports in 2015), South Korea (19%), India (12%) and China
(6%). Asian countries account for a majority of LNG exports (c.67%
in 2016) while the MENA region accounts for a lower share (c.9%).
The Investment Adviser does not envisage significant disruption in
exports to the Asian region from the current stand-off.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Qatari exports
and imports (as % of GDP) to its neighbours.
Imports from Bahrain, Egypt, Saudi Arabia and the UAE accounted
for about 3% of Qatar's GDP in 2016. A substantial portion of
Qatari imports of consumer and industrial goods (c.17%) arrive in
the form of re-exports from UAE ports and other GCC countries. To
tackle the land and sea blockade, Qatar has diverted its trade from
UAE's Dubai port to Oman's Sohar and Salalah ports.
Qatar has one-year reserve of primary materials needed for major
construction projects. The Investment Adviser considers the near
and medium-term impact on the infrastructure programme is
manageable. However, if the current conditions continue, Qatar will
have to source building materials from elsewhere, which could
possibly widen the budget deficit.
The airspace blockade has forced Qatar Airways to shut down 52
routes and incur additional costs from diverting flights on other
routes. Qatar has approached the International Civil Aviation
Organization's (ICAO) to resolve the airspace dispute.
Qatar seeks to limit damage from the stand-off with Saudi led
allies
While the sanctions have disrupted flows of imports and other
materials into Qatar from these neighbouring countries, Qatar has
moved to address any potential food and material shortage by
sourcing alternative sources of supply.
Qatar is heavily dependent on Saudi Arabia for its food imports
(it imports roughly 40% of its food overland through Saudi Arabia),
but the Qatari authorities have routed shipments through Iran,
India and Turkey, mitigating the impact on food supplies and other
materials.
Qatar's Central bank should be able to handle tightening of
liquidity
The Saudi central bank has ordered Saudi banks not to increase
their exposure to Qatari clients and not to process payments in
Qatari riyals. The UAE Central Bank has asked local lenders to run
an enhanced customer due diligence for any accounts held in the six
Qatari banks.
December 2016 data from the seven Qatari listed banks shows
deposits and other funding from GCC countries accounted for c.8.2%
of total liabilities (QAR 88.9 billion). At the end of April 2017,
Qatari banks' net external debt totaled about USD 50 billion and
had an average maturity of less than one year. With a significant
portion of this debt in Europe and Asia, Qatari banks should be
able to handle any possible withdrawal of Gulf deposits. Moreover,
Qatar Investment Authority (QIA) has injected billions of dollars
of cash in Qatari banking system to shore up liquidity.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Qatar banking
system liabilities by geography
Expect a negotiated settlement, at some point
The Investment Adviser considers the near and medium term
economic impact from the current stand-off for Qatar is largely
manageable, given the country's small size (2.7 million
population), its wealth (GNI/capita of USD 84,000) and net foreign
assets (reserves and investment funds are more than 250% of GDP),
as well as its relatively limited trade ties with the blockading
nations.
There is room for both sides to come to a settlement, however,
the timing of this is uncertain. In the meantime, the Qatari market
is expected to remain volatile, depending on news flow. The
Investment Adviser still sees most businesses in Qatar functioning
as relatively normally.
OPEC and non-OPEC members agree to extend production cuts for
nine months
OPEC and non-OPEC members, agreed to extend the production cut
agreement to March 2018, to help balance the oil market. However,
supplies remain high and production from non-participating
countries, including the U.S., has risen, capping crude prices far
below the USD 60 a barrel level earmarked by the OPEC. Brent crude
oil dropped to its lowest level this year on the day of the
meeting, as traders expected deeper reductions or a longer duration
for the cut. Rising output from Libya and Nigeria (both exempt from
the deal to cut production) also contributes. Moreover, the
International Energy Agency sees new supplies from competitors of
OPEC and its allies outpacing global demand growth next year,
making the objective of a balance in demand-supply harder to
achieve. Industry experts fear that although the extension of the
deal to March 2018 is a good indication, but is insufficient as
muted demand would not be able to balance supply until at least the
end of 2019.
Macroeconomic Update
According to the Ministry of Development Planning and Statistics
(MDPS), the Qatari economy continued to grow in Q1 2017, with GDP
rising 2.5% compared to Q1 2016. The non-hydrocarbon sector GDP
grew 4.9% YoY, mainly driven by an expansion in construction,
financial and insurance services, and real estate activities. The
hydrocarbon sector remained flat during the quarter.
The population in Qatar grew by 7.3% YoY in FY16 and 4.0% YTD to
2.7 million at the end of May 2017, an all-time high, driven by the
continued influx of expatriates. Population growth is expected to
remain strong as large projects continue although we have not yet
seen the impact of the blockade on population numbers. Personal
consumption is expected remain high and to continue to benefit
domestic and services sector companies.
Qatar's recent decision to lift the moratorium on new gas
development at North Field could give it a competitive edge after
2020, when the global LNG market is expected to tighten as current
low LNG prices are anticipated to deter investment in high cost
competing projects, leading to tighter supply and better prices.
Qatar's low-cost base gives it a competitive advantage over other
established LNG suppliers.
Earlier this year, International Monetary Fund (IMF) indicated
that it anticipates economic growth in Qatar to remain the
strongest (at 3.4%) in the region in 2017, as preparations in the
run-up to the 2022 FIFA World Cup continue to have a positive
impact on the economy. However, the economic impact of current
situation on Qatar and the region will depend on how deep and
sustained the disruptions to trade and financing flows are.
Going forward, the Investment Adviser believes that Qatar's real
GDP growth will remain robust in the long term, driven by strong
growth in the non-hydrocarbon sector. However, in the near-term
economic growth will probably be impacted.
Other Recent Developments
S&P downgrades Qatar
S&P Global Ratings has lowered Qatar's long-term rating to
'AA-' from 'AA', due to the GCC dispute. Tension between the Arab
nations could weigh on Qatar's economic growth and fiscal metrics
in the near-term, as related revenues from regional trade will
weaken. Given the uncertainties regarding Qatar's response and the
measures that may be imposed, S&P will review the impact of the
diplomatic rift again on 25 August.
Qatar to boost its LNG output by 30% to 100 mtpa
Qatar which previously announced new gas development at the
North Field, plans to raise its LNG capacity by 30% in the next
five to seven years. The new project in the southern section is
expected to raise Qatar's total LNG production capacity to 100
million tonnes from the current 77 million tonnes per annum.
Qatar's non-oil exports reach QAR 6.3 billion in the first four
months of 2017
Qatar's non-oil exports in April 2017 stood at QAR 1.3 billion,
while the total volume of non-oil exports in the first four months
of 2017 reached QAR 6.3 billion, according to Qatar Chamber's
monthly report. As per the report, non-oil exports fell 27.3% MoM
and 18.4% YoY in April 2017.
Qatar introduces a new index to measure production volume of
industrial products
Qatar has introduced a new Industrial Production Index (IPI), an
index that measures the changes in the volume of production of a
selected basket of industrial products. The index consists of four
main components: mining (with a weight of 83.6%), manufacturing
(15.2%), electricity (0.7%) and water (0.5%).
Qatar's IPI grew 0.6% QoQ in Q1 2017, mainly on account of
production increases in crude and natural gas, as well as of
refined petroleum products and basic metals. On a yearly basis, the
IPI fell 0.2% in Q1 2017, primarily on lower production in the
manufacturing segment.
Local banks account for 97% of total QAR 762.2 billion deposits
in Qatar
Total deposits in Qatar's banking system stood at QAR 762.2
billion as of May 2017, almost 97% was with local lenders and just
over 3% with foreign banks, according to QCB data. Of the total
deposits, the private sector share stood at QAR 377.5 billion
(c.50%), followed by the public sector at QAR 200.2 billion (26%)
and non-residents at QAR 184.6 billion (24%). Moreover, of the
total deposits, QAR 519.6 billion (71%) was with conventional
lenders and QAR 217.0 billion (29%) with Islamic banks.
Qatar's inflation may rise to an average of 2.8% in 2017 on
subsidy cuts, new taxes
According to Fitch Group's BMI Research, Qatar's inflation is
expected to average 2.8% in 2017 (2.7% in 2016), as the government
has removed long-standing energy subsidies and linked domestic
petrol and diesel prices to global markets. The government has
announced plans to implement higher taxes on goods deemed harmful
to health or the environment and on certain luxury items. BMI
expects an interest rate hike of 25 basis points in 2017 and
another two similar hikes in 2018 and 2019.
Qatar construction market set to record double-digit growth
According to BMI, Qatar will be among the fastest-growing
construction markets globally over the next five years, recording
double-digit growth, as the government is committed to meet its
infrastructure needs. Qatar's construction market, with a projected
12.1% growth over 2017-21, will benefit from investment into
preparations for hosting the FIFA World Cup 2022.
QSE removed Ezdan from the QSE indices
The Index Committee of the Qatar Stock Exchange (QSE)
temporarily removed Ezdan Holding Group from the QSE indices, after
the company transformed itself into a private joint stock company
and is in the process of delisting from QSE. The removal came into
effect from May 29, after QFMA approval. Ezdan's weight was
proportionately redistributed to the remaining index constituents
of the QE Index and the QE Al Rayan Islamic Index. QIF has no
holding in Ezdan.
Qatar sells QAR 5.6 billion of government bonds, focuses on long
end of the yield curve
On 17 April 2017, QCB announced that it had sold QAR 5.6 billion
(USD 1.5 billion) of domestic bonds, with the issuance heavily
focused on the long end of the yield curve. The QCB sold QAR 150
million of three-year bonds at a yield of 2.75%, QAR 800 million of
five-year at 3.35%, QAR 1.7 billion of seven-year at 4.0%, and QAR
2.9 billion of 10-year at 4.5%.
Qatargas has signed a new SPA with Shell
Qatargas has signed a new sale and purchase agreement (SPA) with
Shell, under which it will deliver up to 1.1 million tonnes of LNG
a year to Shell for five years.
Qatar sees 7% growth in tourist arrivals to May
The number of tourist arrivals to Qatar increased by 7% to May
2017, compared to the same period last year. Americans and
Europeans arrivals contributed most, with a rise of 9% and 14%,
respectively.
Leisure visitors increased 27%, demonstrating the success of the
diverse leisure options for tourists. We have yet to see the impact
of the blockade on tourist numbers.
Qatar's power generation capacity to rise 50% in two years
Qatar's power generation capacity is projected to increase by
50% in the next two years. Plans are in place to increase the
country's power capacity to 13.1 GW by 2018. Qatar needs USD 9
billion investment in its power sector from 2016-20, Mena project
tracker Venturesonsite noted in its GCC Power Market report.
Qatar's current capacity is 8.8 GW and demand is around 8.2 GW.
With the completion of ongoing projects, including the Umm Al Houl
plant, the estimated installed capacity is expected to exceed about
11,000 MW of electricity and 490 MIGD of water by the end of
2018.
FTSE Russell has doubled the weight of 20 QSE firms from 20th
March 2017
FTSE Russell (part of London Stock Exchange) has doubled the
investible weight of 20 of the 22 selected QSE-listed companies,
effective from 20th March. This was the second tranche of the
FTSE's Qatar emerging market upgrade as announced in FY16. In
September 2016, FTSE Russell confirmed the inclusion of all the
earlier indicated 22 stocks in its secondary emerging market index.
Analysts estimated the increased weightings could attract over USD
300m of fresh, passive funds to Qatar.
Global LNG demand reaches 265 million tonnes in FY16: Shell
Global demand for LNG saw imports increasing by 17 million
tonnes to reach 265 million tonnes in FY16. The demand increase was
due to the addition of six new importing countries since FY15:
Colombia, Egypt, Jamaica, Jordan, Pakistan and Poland. LNG demand
is expected to grow at the rate of 4-5% between FY15 and FY30,
according to Shell.
Qatar is expected to target a number of key LNG import growth
markets in emerging Asia and Latin America, according to BMI
Research. In BMI's view, Qatar's expanding investments abroad
allows the country to overcome domestic production constraints,
diversify its production base and secure entry into new
international markets.
Corporate Profitability
Sector Net Profit (QAR '000) LTM 6/30/2016 LTM 6/30/2017 % Change
------------------------------ -------------- -------------- ---------
Banks & Financial Services 20,426,110 19,861,369 -2.8%
------------------------------ -------------- -------------- ---------
Insurance 2,139,976 1,274,120 -40.5%
------------------------------ -------------- -------------- ---------
Services & Consumer Goods 2,171,195 1,810,140 -16.6%
------------------------------ -------------- -------------- ---------
Industry 8,692,753 6,352,023 -26.9%
------------------------------ -------------- -------------- ---------
Real Estate 3,118,177 3,959,307 27.0%
------------------------------ -------------- -------------- ---------
Telecoms 2,112,302 1,600,740 -24.2%
------------------------------ -------------- -------------- ---------
Transportation 2,187,476 1,497,843 -31.5%
------------------------------ -------------- -------------- ---------
Total 40,847,989 36,355,542 -11.0%
------------------------------ -------------- -------------- ---------
Source: QE website
Net profit calculation for the 12 months ending 30 June 2017 is
based on restated net profit numbers.
For the 12 months up to 30 June 2017, net profits of the Qatar
Exchange (QE) listed companies declined substantially by 11.0%
compared to the 12 months ending 30 June 2016. All the sectors
reported reduced profits except for the Real Estate sector. This
decline can be majorly attributed to the fall in net profits of the
industrial sector, whose performance was affected due to weaker oil
prices.
The 44 companies listed on the QE reported an overall net profit
of QAR 36.4 billion (US$10.0 billion) for the year ended 30 June
2017, as against QAR 40.8 billion (US$11.2 billion) reported for
the year ended 30 June 2016. The net profit of the Banking &
Financial Services sector dropped 2.8%, mainly driven by the fall
in profits of listed Qatari banks (net profit at Qatari listed
banks decreased 3.2% during the period). The performance of Qatari
listed banks was affected due to significant rise in loan loss
provisions during the period. However, the banking & financial
services sector heavyweight, Qatar National Bank, continued to
report strong performance, with a 7.1% rise in net profit during
the said period. Industrial sector net profit declined 26.9% due to
a dismal performance by the sector heavyweight, Industries Qatar.
Net profit at Industries Qatar fell 36.1% in the 12 months to 30
June 2017, on weaker product prices and lower demand for its
products. Mesaieed Petrochemical Holding Company reported a 17.1%
drop net profits. Gulf International Services reported losses
during the said period, primarily on lower utilisation & day
rates and also due to impairments & write-offs relating to
assets. The net profit of the Insurance sector declined 40.5%, led
by a sharp fall in net profit of Qatar General Insurance and
Re-insurance Company. Transportation sector' net profit declined by
31.5%. Net profit of the Telecom sector declined by 24.2%, led by a
sharp fall in net profit at Ooredoo QSC (the net profit was lower
as the company had made substantial gains from forex in the 12
months ending 30 June 2016). Services & consumer goods sector
reported a 16.6% fall in net profit during the period, as sector
heavyweight, Qatar Fuel Company, witnessed a 31.8% decline in its
net profit. The Real Estate sector was the only sector to report
higher profit during the period (up 27.0%), led by net profit
growth reported by Barwa Real Estate, Ezdan Holding and United
Development Company.
Looking ahead, the Investment Adviser believes that some form of
negotiated settlement would be reached between Qatar and its
neighbours over time, to resolve the current standoff. Hence, while
the near-term earnings growth in Qatari listed companies will
probably be impacted adversely, the outlook for earnings growth
over the medium to long-term is robust. Increasing infrastructure
spending, growing population, improved oil prices, robust growth in
the non-hydrocarbon sectors and new developments in the hydrocarbon
sector are key positives for domestic companies especially in the
banking, real estate, consumer and transportation sectors.
Portfolio Structure
Country Allocation
As at 30 June 2017, QIF had 26 holdings: 19 in Qatar and 7 in
the UAE (Q1 2017: 24 holdings: 18 in Qatar and 6 in the UAE). The
Investment Adviser decreased exposure to the UAE to 7.1% of NAV
from 7.9%, while exposure to Qatar was reduced to 82.9% of NAV from
84.3%. Cash at 30 June was 10.0% of NAV (Q1 2017: 7.8%).
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Country
Allocation as at 30 June 2017.
Source: QIC
Sector Allocation
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Sector Allocation
as at 30 June 2017.
The Banking sector (including Financial Services) remains a
priority sector for QIF at 37.8% of NAV (Q1 2017: 38.8%). QIF
tactically went underweight on the sector vs. QE index weighting of
46.4% (Q1 2017: 39.8%), as valuations for some banks look
expensive. The index weighting in the banking sector also increased
during the quarter following the removal of Ezdan whose weight was
redistributed proportionately to the remaining constituents. Qatar
National Bank remains QIF's largest holding (13.9% of NAV). For the
period between December 2016 to May 2017, credit in Qatar continued
to grow (up 5.0%) driven by the public sector (up 12.2%). The
Investment Adviser believes that loan growth will continue in the
medium to long term, as the Qatari government is expected to
continue with its infrastructure development plans, notwithstanding
the current standoff. Qatar is also expected to invest hugely on
new development projects in North Field in an effort to
significantly increase LNG output.
Industrials remain QIF's second largest exposure at 23.3% of NAV
(Q1 2017: 23.7%), led by Industries Qatar (10.9% of NAV). The
holding in Gulf International Services decreased to 3.4% from
4.5%.
Exposure to the Real Estate sector fell to 10.1% from 11.7%,
while holdings in the Telecom sector rose to 7.7% from 5.7%. The
exposure to the Transportation and Services & Consumer Goods
sectors decreased to 5.9% and 2.3% from 6.8% and 2.6%,
respectively. Exposure to the Insurance sector reduced marginally
to 2.9% (Q1 2017: 3.0%).
Top 10 Holdings
Company Name Sector % share of NAV
------------------------------ ---------------------------- ---------------
Qatar National Bank Banks & Financial Services 13.9%
------------------------------ ---------------------------- ---------------
Masraf Al Rayan Banks & Financial Services 11.9%
------------------------------ ---------------------------- ---------------
Industries Qatar Industrials 10.9%
------------------------------ ---------------------------- ---------------
Ooredoo Telecoms 6.6%
------------------------------ ---------------------------- ---------------
Qatar Electricity & Water Co Industrials 5.7%
------------------------------ ---------------------------- ---------------
Barwa Real Estate Real Estate 5.6%
------------------------------ ---------------------------- ---------------
Qatar Gas Transport Transportation 4.6%
------------------------------ ---------------------------- ---------------
Commercial Bank of Qatar Banks & Financial Services 4.4%
------------------------------ ---------------------------- ---------------
Gulf International Services Industrials 3.4%
------------------------------ ---------------------------- ---------------
Qatar National Cement Co Industrials 3.3%
------------------------------ ---------------------------- ---------------
Source: QIC
In Q2, the Investment Adviser increased the cash holding to
10.0% of NAV, as the Qatari market is expected to remain volatile
until a settlement on the rift with the nation's neighbours is
reached. The weighting of top 10 holdings is reduced to 70.4% from
71.0% in Q1 2017, primarily due to lower holdings in Qatar National
Bank and Gulf International Services.
Profile of Top Five Holdings (As at 30 June 2017):
Qatar National Bank (13.9% of NAV)
Qatar National Bank (QNB) is a high-quality proxy stock for
Qatari economic growth given its strong ties with the public sector
and access to state liquidity. QNB is a dominant state-owned
participant in the Banking sector and plays an important role in
the development of the Qatari economy and in funding key
infrastructure projects. The largest shareholder in QNB is the
Government of Qatar through the Qatar Investment Authority (QIA),
with a 50% equity stake. The government is strongly committed to
support QNB, thus enhancing its economic importance. QNB is the
largest bank in Qatar with total assets of QAR 768.1 billion (USD
211.0 billion) as at 30 June 2017. For the H1 2017, QNB reported a
6.5% YoY growth in net profit to QAR 6.7 billion (USD 1.8 billion).
QNB is well positioned to reap the benefits of the rapid expansion
of the domestic economy and has been growing its presence in
overseas markets as well. The bank, through its subsidiaries and
associate companies, operates in more than 31 countries, through
more than 1250 branches, supported by more than 4,300 ATMs and
employs more than 27,900 staff.
Masraf Al Rayan (11.9% of NAV)
Masraf Al Rayan (MARK) was incorporated as a Qatari Shareholding
Company under Qatar Commercial Company law on 4 January 2006. It is
licensed by the Qatar Central Bank and began commercial operations
in October 2006. The bank has three main business divisions, namely
retail banking, wholesale banking and private banking. Besides
this, the bank offers investment banking and treasury products. As
of December 2016, MARK had a network of 13 branches in strategic
locations across Qatar, and a total of 80 ATMs. As at the end of
June 2017, its financing assets stood at QAR 68.0 billion (USD 18.7
billion). In H1 2017, MARK reported a net profit of QAR 1.0 billion
(USD 0.3 billion).
Industries Qatar (10.9% of NAV)
Industries Qatar (IQCD) is a holding company with interests in
petrochemicals via 80% owned Qatar Petrochemical Co., fertilizers
via 75% owned Qatar Fertilizer Co., steel via its wholly owned
subsidiary Qatar Steel Co. and fuel additives via 50% owned Qatar
Fuel Additives Co. For H1 2017, the company's net profit declined
19.1% YoY to QAR 1.6 billion (USD 0.4 billion), majorly on lower
steel revenues. Additionally, the operational performance of
polyethylene and fertilizer segments was affected due to some
planned and unplanned maintenance during H1 2017. IQCD expects
operational performance to improve with the on-going cost
optimization programs. Moreover, IQCD is closely monitoring the
effect of the blockade and is accordingly amending the flow of
operations and activities.
Ooredoo (6.6% of NAV)
Ooredoo (ORDS) is a leading international communications company
delivering mobile, fixed, broadband internet and corporate managed
services tailored to the needs of consumers and businesses across
markets in the Middle East, North Africa and Southeast Asia.
Serving consumers and businesses in 10 countries, Ooredoo delivers
leading data experience through a broad range of content and
services via its advanced, data-centric mobile and fixed networks.
Ooredoo has a presence in several markets such as Qatar, Kuwait,
Oman, Algeria, Tunisia, Iraq, Palestine, the Maldives, Myanmar and
Indonesia. The company reported revenues of QAR 16.3 billion (USD
4.5 billion) and net profit of QAR 1.1 billion (USD 0.3 billion) in
H1 2017 and had a consolidated global customer base of 149 million
customers as at 30 June 2017.
Qatar Electricity & Water Co. (5.7% of NAV)
Qatar Electricity & Water Co. (QEWS) was established in 1990
as the first private sector company engaged in electricity
production and water desalination businesses. The company is the
second largest utility company in the North Africa and Middle East
region. In Qatar, the company enjoys a 62% market share in the
electricity business, while in the water desalination business it
commands a 79% market share. Over the past decade, the company has
been the key beneficiary of rapid development in Qatar, coupled
with the growth in population, resulting in increased demand for
electricity and water. Additionally, the company has entered into
overseas markets with the establishment of Nebras Power Company
(60% owned by QEWS), which invests globally in new and existing
power generation and water desalination projects. QEWS has a low
risk profile due to its exposure in the infrastructure and
utilities sector in Qatar. For H1 2017, the company reported 2.4%
rise in its net profit to QAR 0.8 billion (USD 0.2 billion).
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting QIF
Performance.
On 30 June 2017, the QIF share price was trading at a 19.1%
discount to NAV per share.
Historic Performance
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017
5M
----------------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------ --------
QIF NAV* 13.9% -36.4% 10.4% 29.9% 1.3% -4.7% 24.2% 20.6% -14.6% -2.6% -11.0%
----------------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------ --------
QE Index 27.0% -28.8% 1.1% 24.8% 1.1% -4.8% 24.2% 18.4% -15.1% 0.1% -13.5%
----------------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------ --------
QIF Share Price 15.5% -67.5% 97.3% 23.0% -2.3% 2.4% 26.4% 17.4% -17.0% -4.5% -16.0%
----------------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------ --------
Source: Bloomberg, QIC; Note: *Net of dividends paid
Valuations
Market Market Cap. PE (x) PB (x) Dividend Yield
(%)
-------------- ------------ -------------- ------- ---------------
USD million 2017E 2018E 2017E 2017E
-------------- ------------ ------ ------ ------- ---------------
Qatar 103,824 13.52 11.83 1.70 3.69
-------------- ------------ ------ ------ ------- ---------------
Saudi Arabia 469,991 14.86 13.29 1.56 3.03
-------------- ------------ ------ ------ ------- ---------------
Dubai 79,807 10.35 8.60 1.14 4.30
-------------- ------------ ------ ------ ------- ---------------
Abu Dhabi 115,908 11.93 10.95 1.32 4.47
-------------- ------------ ------ ------ ------- ---------------
Oman 15,121 9.67 9.07 0.90 NA
-------------- ------------ ------ ------ ------- ---------------
Source: Bloomberg, Prices as of 29 June 2017
Outlook
The Investment Adviser believes that Qatar is well positioned
for continued long-term growth as macroeconomic fundamentals remain
strong. However, if the stand-off between Qatar and its neighbours
continues, it could have short term impact on economic growth.
While the Investment Adviser believes that there is room for both
sides to come to a conclusion, the timing of normalisation in ties
is uncertain. A peaceful resolution is most likely and anticipated
to happen gradually.
Oil prices above budgeted levels (USD 45) would provide the
Qatari government flexibility in continuing its commitment to
planned major infrastructural projects in line with the Qatar
National Vision 2030. Additionally, Qatar's fiscal buffers and
sizeable assets should help it maintain its stable position in the
GCC region.
The Qatari government is likely to continue with its investment
spending program despite the current situation as it prepares for
FIFA 2022, driving the nation's non-hydrocarbon sector growth.
Moreover, Qatari authorities plan to invest heavily on new
development of gas projects in the North field is expected to
improve the contribution to GDP from the hydrocarbon sector.
The Investment Adviser believes that although the Qatari economy
is strong enough to sustain the current challenging situation,
markets could be volatile until a settlement is reached. Meanwhile,
the QIF portfolio is positioned conservatively, with cash having
been increased to about 10% to help limit volatility.
Epicure Managers Qatar Limited Qatar Insurance Company
S.A.Q.
6 September 2017 6 September 2017
Investment Policy
Investment Objective
The Company's investment objective is to capture, principally
through the medium of the Qatar Exchange, the opportunities for
growth offered by the expanding Qatari economy by investing in
listed companies or companies soon to be listed. The Company may
also invest in listed companies, or pre-IPO companies, in other GCC
countries.
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 was established to invest primarily in quoted Qatari
equities. The Company invests in listed companies on the Qatar
Exchange in addition to companies soon to be listed. The Company
may also invest in listed companies, or pre-IPO companies, in other
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
with restrictions 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 only being utilised in respect of
investments listed on the Saudi Arabian stock exchange;
-- 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 closed-ended
investment funds that invest in Qatar or other countries in the GCC
region will be limited to 10% of NAV 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 Qatar Exchange listed companies by persons
other than Qatari citizens have an ownership restriction, wherein
the law precludes persons other than Qatari citizens 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 the local Qatari market and in other GCC
markets.
(ii) Investment Guidelines
The Company has established certain investment guidelines. These
are as follows (all of which are to be calculated at the time of
investment):
-- No single investment position in a QE Index constituent may
exceed the greater of: (i) 15% of the NAV of the Company; or (ii)
125% of the constituent company's index capitalisation divided by
the index capitalisation of the QE 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 QE
Index constituent may exceed 15% of the NAV of the Company;
-- No holding may exceed 5% of the outstanding shares in any one company; and
-- The Company may hold up to a maximum of 15% of its NAV
outside Qatar, within the GCC region, including investment in
P-Notes or swaps structured financial products for investment in
companies listed on the Saudi Arabian stock exchange.
(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 which 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 investment objective is to achieve capital growth.
In accordance with the annual dividend policy the Company paid a
dividend for the year ended 30 June 2016. 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.
Life of the Company
The Company currently does not have a fixed life but the Board
considers it desirable that the 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 2018, a resolution will be proposed that the Company
ceases to continue in existence. Shareholders holding at least 51%
of the ordinary shares must vote in favour of this resolution for
it to be passed. If the resolution is not passed, a similar
resolution will be proposed at every third annual general meeting
thereafter. If the resolution is 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 Qatar
Investment Fund plc (the "Company") for the year ended 30 June
2017.
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 countries. The Company's investment
policy is detailed on pages 17 to 18.
Results and Dividends
The results of the Company for the year and its financial
position at the year- end are set out on pages 38 to 48 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 2016, the Directors declared a
dividend of US$4,116,639 (4.0c per share) which was approved by
Shareholders and paid by the Company in January 2017.
Directors
Details of Board members at the date of this report, together
with their biographical details, are set out on page 28.
Director independence and Directors' and other interests have
been detailed in the Directors' Remuneration Report on pages 32 and
33.
Creditor Payment Policy
It is the Company's policy to adhere to the payment terms agreed
with individual suppliers and to pay in accordance with its
contractual and other legal obligations.
Gearing Policy
Borrowings will be limited, as at the date on which the
borrowings are incurred, to 5% of NAV (or such other limit as may
be approved by the Shareholders in general meeting). The Company
will not make use of any hedging mechanisms or leveraged derivative
instruments.
There were no borrowings during the year (2016: US$ nil).
Donations
The Company has not made any political or charitable donations
during the year (2016: 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 the continued existence of the Company at the annual
general meeting (AGM) in 2018 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 16
November 2017 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.qatarinvestmentfund.com.
Corporate Governance
Full details are given in the Corporate Governance Report on
pages 21 to 27, 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 29.98
-------------------------------------- ----------------
Qatar Insurance Company S.A.Q. 17.90
-------------------------------------- ----------------
Qatar Investment Authority 11.66
-------------------------------------- ----------------
Lazard Asset Management 9.18
-------------------------------------- ----------------
1607 Capital Partners LLC 8.89
-------------------------------------- ----------------
Centrum Bank 4.37
-------------------------------------- ----------------
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 30 June 2017.
On behalf of the Board
Nicholas Wilson
Chairman
6 September 2017
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 QIF
plc.
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 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. Save for Leonard
O'Brien, 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 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
accord 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.
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 and Neil
Benedict. 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.qatarinvestmentfund.com.
Significant Issues
During its review of the Company's financial statements for the
year ended 30 June 2017, the Audit Committee considered the
following significant issues, in particular those communicated by
the auditor during their reporting:
Carrying value of quoted equity investmentss
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 quoted in active markets and
have been categorised as Level 1 within the IFRS 13 fair value
hierarchy and can be verified against daily market prices. 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.
Remuneration Committee
The Company has established a Remuneration Committee. The
Remuneration Committee is made up of at least two members from
amongst the non-executive Directors identified by the Board as
being independent. Its members are Neil Benedict (Chairman),
Nicholas Wilson and Paul Macdonald. 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.qatarinvestmentfund.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 Directors. The Nomination Committee comprises Nicholas
Wilson (Chairman), Neil Benedict and Paul Macdonald. 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 and which shall comprise
independent non-executive Directors. The Management Engagement
Committee members are Neil Benedict (Chairman), Paul Macdonald and
Nicholas Wilson. 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 Nomination Management
Committee Committee 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) 7 (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)
------------------------ ------ ---------------- ------------------------- ----------- ------------
Leonard O'Brien 8 (8) 0 (0)* 0 (0)* 0 (0)* 0 (0)*
------------------------ ------ ---------------- ------------------------- ----------- ------------
David Humbles 1 (1) 0 (0)* 0 (0)* 0 (0)* 0 (0)*
------------------------ ------ ---------------- ------------------------- ----------- ------------
Paul Macdonald
(Chairman of
Audit Committee) 8 (8) 6 (6) 1 (1) 2 (2) 4 (4)
------------------------ ------ ---------------- ------------------------- ----------- ------------
*Not a member of the committee.
The Annual General Meeting was held on 17 November 2016.
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 Managers, 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.
Internal Control continued
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 Managers,
including its internal audit function and the work carried out by
the Company's external Auditor, 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 2017 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
29.
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 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
theCompany 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 2018. Shareholders holding at least 51%
of the ordinary shares must vote in favour of this resolution in
order for it to pass, if it is not passed, a similar cessation vote
will be proposed at every third annual general meeting
thereafter.
On behalf of the Board
Nicholas Wilson
Chairman
6 September 2017
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 PLC and until recently was chairman of Alternative
Investment Strategies 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 Helvetica Deutschland GmbH and a Director of Helvetica Services
GmbH and Helvetica Construction GmbH. Paul is a Non-Executive
Director of PME African Infrastructure Opportunities plc.
Leonard O'Brien (Non-Executive Director)
Leonard O'Brien is Managing Director of the Salamander Fiduciary
Services Group, which consists of Salamander Associates Limited and
its two wholly owned subsidiaries. Len has had many years of
experience in the fiduciary services industry including the Silex
Trust Group, the Stonehage Financial Services Group and Barclays
Bank. During this time he has served on the boards of trust
companies in the British Virgin Islands, Jersey and Cayman Islands
and has acted as a Membre de Direction of Barclays Bank (Suisse)
SA, Geneva. Len qualified as a Chartered Accountant with KPMG in
1996. Len is also a Director of the Investment Manager.
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 Managing Director of Intelligent Edge Advisors, a New
York advisory firm. 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 has 3 children
and two grandchildren and has recently been widowed. 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 and St Paul's Property Services Ltd. These companies
own & manage a property complex in the north of the island
incorporating residential apartments, retail units & office
accommodation. Also in 2003 David formed Westminster Properties Ltd
to manage 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 the
London market. See www.oakmayneproperties.com. David was Chairman
of Epicure Berlin Property Company until February 2017, a large
private property fund which owns residential property in Berlin. 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 Parent
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 parent Company and of
their profit or loss for that period. In preparing each of the
Group and parent 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 parent 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 parent 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 parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent 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
6 September 2017
Audit Committee Report
An Audit Committee has been established in compliance with the
FSA's Disclosure 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 and Mr Neil Benedict.
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 17
November 2016. 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 6
September 2017.
Paul Macdonald
Chairman of the Audit Committee
6 September 2017
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 and
Nicholas Wilson.
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
6 September 2017
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 24.
The committee held two formal meetings 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 GBP200,000 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 GBP47,500 plus GBP10,000 with
respect to the work involved in the share buy-back programme, the
Chairman of the Audit Committee GBP32,500, the other Directors
GBP30,000.
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. At the AGM too be held on [16
November 2017] Mr Nicholas Wilson, Mr Paul Macdonald, Mr Neil
Benedict and Mr David Humbles will be retiring in accordance with
the Articles of Association and standing for re-election. . Mr
Leonard O'Brien who retires in accordance with the corporate
governance codes adopted by the Nomination Committee of the Company
has decided not to stand for re-election as a director of the
Company.
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 2017 30 June 2016
GBP GBP
---------------------------------------------------------------------------------------- ------------- -------------
Nicholas Wilson (Chairman) 57,500 57,500
Neil Benedict (Chairman of Remuneration Committee and Management Engagement Committee) 30,000 30,000
Leonard O'Brien 30,000 30,000
Paul Macdonald (Chairman of Audit Committee) 32,500 32,500
David Humbles (joined Board 15 May 2017) 3,874 -
---------------------------------------------------------------------------------------- ------------- -------------
153,874 150,000
---------------------------------------------------------------------------------------- ------------- -------------
US$ charge reflected in the financial statements 201,621 222,014
---------------------------------------------------------------------------------------- ------------- -------------
Expenses totalling US$95,424 (2016: US$116,385) 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.
Except for Leonard O'Brien, 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
Leonard O'Brien is a Director of the Investment Manager.
Save as disclosed above, 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 2017 30 June 2016
----------------- ------------- -------------
Director Shares Shares
----------------- ------------- -------------
Leonard O'Brien 31,840 36,182
----------------- ------------- -------------
Nicholas Wilson 44,000 43,000
----------------- ------------- -------------
For and on behalf of the Board
Neil Benedict
Chairman of the Remuneration Committee
6 September 2017
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Qatar Investment Fund plc
Opinions and conclusions arising from our audit
1. Our opinion is unmodified
We have audited the financial statements of Qatar Investment
Fund plc ("the Company") for the year ended 30 June 2017 which
comprise the Consolidated and Parent Company Income Statements,
Statements of Comprehensive Income, Balance Sheets, Statements of
Changes in Equity and 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
Parent Company's affairs as at 30 June 2017 and of the Group's and
Parent Company's loss 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 believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were appointed as auditor by the shareholders on 31 October
2008. The period of total uninterrupted engagement is the 10
financial years ended 30 June 2017. We have fulfilled our ethical
responsibilities under, and we remain independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities. No
non-audit services prohibited by that standard were provided.
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. We summarise below
the key audit matter (unchanged from 2016) in arriving at our audit
opinion above, together with our key audit procedures to address
that matter and, as required for public interest entities, our
results from those procedures. This matter was addressed, and our
results are based on procedures undertaken, in the context of, and
solely for the purpose of, our audit of the financial statements as
a whole, and in forming our opinion thereon, and consequently are
incidental to that opinion, and we do not provide a separate
opinion on this matter.
2. Key audit matters: our assessment of risks of material misstatement continued
The risk Our response
------------------------- ------------------------ -----------------------------------------------------------------
Carrying amount The company's portfolio Our procedures included:
of quoted equity of quoted investments * Control design: Documenting and assessing the
investments (US$102.1m; makes up 88.6% processes in place to record investment transactions
2016: US$141.2m) of the company's and to value the portfolio;
total assets (by
Refer to page value) and is
24 (Significant considered * Tests of detail: Agreeing the valuation of 100 per
Issues identified to be the key driver cent of investments in the portfolio to externally
by the Audit of results. We quoted prices; and
Committee), notes do not consider
1(a), 2 and 8 these investments
(accounting policy to be at a high * Enquiry of custodians: Agreeing 100 per cent of
for financial risk of significant investment holdings in the portfolio to independently
assets at fair misstatement, or received third party confirmations from investment
value through to be subject to custodians.
profit or loss a significant level
and financial of judgement because
risk disclosures they comprise liquid,
relating to financial quoted investments Our results: No exceptions
instruments). as at 30 June 2017. were identified.
However, due to
their materiality
in the context
of the financial
statements as a
whole, they are
considered to be
the area which
had the greatest
effect on our overall
audit strategy
and allocation
of resources in
planning and completing
our audit.
------------------------- ------------------------ -----------------------------------------------------------------
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$1,150,000 (2016: US$1,400,000), determined with reference
to a benchmark of group total assets, of which it represents 1%
(2016: 1%).
Materiality for the parent company financial statements as a
whole was set at US$1,140,000 (2016: US$1,400,000), determined with
reference to a benchmark of company total assets, of which it
represents 1% (2016: 1%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding US$57,500 for both
the group and parent company financial statements, in addition to
other identified misstatements that warranted reporting on
qualitative grounds.
The group's one subsidiary was subjected to full scope audit for
group purposes by the Group team and subject to the same
materiality level as the group and parent company audits.
4. We have nothing to report on going concern
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
Group and Company's use of that basis for a period of at least
twelve months from the date of approval of the financial
statements; or
-- the related statement under the Listing Rules set out in the
Report of the Directors on page 20 is materially inconsistent with
our audit knowledge.
We have nothing to report in these respects.
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, except as explicitly stated below, any form of
assurance conclusion thereon.
5. We have nothing to report on the other information in the Annual Report continued
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.
Directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the directors' report;
-- in our opinion the information given in the directors' report
for the financial year is consistent with the financial statements;
and
-- in our opinion the directors' report has been prepared in
accordance with the Companies Acts 1931 to 2004.
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 28 that they have carried out a robust assessment of the
principal risks facing the Group, 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, 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 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.
Under the Listing Rules we are required to review the viability
statement. We have nothing to report in this respect.
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 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 parent
Company and proper returns adequate for our audit have not been
received from branches not visited by us; or
-- the parent 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.
6. We have nothing to report on the other matters on which we
are required to report by exception continued
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 29,
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 parent 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 parent 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, other irregularities, 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, other irregularities 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. The risk of not detecting a
material misstatement resulting from fraud or other irregularities
is higher than for one resulting from error, as they may involve
collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control and may involve any area of law
and regulation not just those directly affecting 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
Statutory Auditor
6 September 2017
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
Consolidated Income Statement
Note Year ended 30 Year ended 30 June
June 2017 2016
US$'000 US$'000
------------------------------- ----- -------------- -------------------
Income
Dividend income on quoted
equity
investments 4,707 5,551
Realised loss on sale
of financial assets at
fair value through profit
or loss (3,922) (4,268)
Net changes in fair value
on financial assets at
fair value through profit
or loss (4,912) (36,278)
Commission rebate income 15 -
on quoted equity investments
Net foreign exchange loss (181) -
Total net expense (4,293) (34,995)
------------------------------- ----- -------------- -------------------
Expenses
Investment Manager's
fees 7 1,281 1,722
Performance fees 7 - -
Other expenses 7 1,061 1,230
Total operating expenses 2,342 2,952
------------------------------- ----- -------------- -------------------
Loss before tax (6,635) (37,947)
Income tax expense 9 - -
------------------------------- ----- -------------- -------------------
Loss for the year (6,635) (37,947)
------------------------------- ----- -------------- -------------------
Basic loss per share (cents) 4 (6.06) (30.03)
------------------------------- ----- -------------- -------------------
Diluted loss per share
(cents) 4 (6.06) (30.03)
------------------------------- ----- -------------- -------------------
The Directors consider that all results derive from continuing
activities.
Consolidated Statement of Comprehensive Income
Year ended 30 June 2017 Year ended 30 June 2016
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
Loss for the year (6,635) (37,947)
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences (3) (33)
---------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to
profit or loss (3) (33)
---------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive expense for the year (net of tax) (3) (33)
---------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive loss for the year (6,638) (37,980)
---------------------------------------------------------------- ------------------------ ------------------------
Company Income Statement
Note Year ended 30 Year ended 30 June
June 2017 2016
US$'000 US$'000
----------------------------- ----- -------------- -------------------
Income
Net change in investment
in and amounts due from
subsidiary (8,848) (40,372)
Intercompany loan interest
income 2,969 3,551
Total net expense (5,879) (36,821)
----------------------------- ----- -------------- -------------------
Expenses
Expenses 7 759 1,159
Total operating expenses 759 1,159
----------------------------- ----- -------------- -------------------
Loss before tax (6,638) (37,980)
Income tax expense - -
----------------------------- ----- -------------- -------------------
Loss for the year (6,638) (37,980)
----------------------------- ----- -------------- -------------------
Company Statement of Comprehensive Income
Year ended 30 June 2017 Year ended 30 June 2016
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
Loss for the year (6,638) (37,980)
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences - -
--------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to - -
profit or loss
--------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive income for the year (net of tax) - -
--------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive loss for the year (6,638) (37,980)
---------------------------------------------------------------- ------------------------ ------------------------
Consolidated Balance Sheet
Note At 30 June 2017 At 30 June 2016
US$'000 US$'000
------------------------------ ----- ---------------- ----------------
Current Assets
Financial assets at fair
value through profit or
loss 1(a) 102,124 141,242
Other receivables and
prepayments 2,468 346
Cash and cash equivalents 10,670 1,447
------------------------------ ----- ---------------- ----------------
Total current assets 115,262 143,035
============================== ===== ================ ================
Equity
Issued share capital 5 1,032 1,194
Retained earnings 25,425 36,177
Distributable reserves 86,486 103,904
Other reserves 1,227 1,068
---------------- ----------------
Total equity 114,170 142,343
------------------------------ ----- ---------------- ----------------
Current liabilities
Other payables and accrued
expenses 6 1,092 692
------------------------------ ----- ---------------- ----------------
Total current liabilities 1,092 692
------------------------------ ----- ---------------- ----------------
Total equity and liabilities 115,262 143,035
============================== ===== ================ ================
The financial statements were approved by the Directors on 6
September 2017 and signed on their behalf by:
Paul Macdonald Leonard O'Brien
Director Director
Company Balance Sheet
Note At 30 June 2017 At 30 June 2016
US$'000 US$'000
------------------------------ ----- ---------------- ----------------
Current assets
Due from subsidiary 1(b) 113,276 141,041
Other receivables and
prepayments 848 1,002
Cash and cash equivalents 199 398
------------------------------ ----- ---------------- ----------------
Total current assets 114,323 142,441
============================== ===== ================ ================
Equity
Issued share capital 5 1,032 1,194
Reserves 113,138 141,149
---------------- ----------------
Total equity 114,170 142,343
------------------------------ ----- ---------------- ----------------
Current liabilities
Other payables and accrued
expenses 6 153 98
------------------------------ ----- ---------------- ----------------
Total current liabilities 153 98
------------------------------ ----- ---------------- ----------------
Total equity and liabilities 114,323 142,441
============================== ===== ================ ================
The financial statements were approved by the Directors on 6
September 2017 and signed on their behalf by:
Paul Macdonald Leonard O'Brien
Director Director
Consolidated Statement of Changes in Equity
Share Capital Distributable Retained Foreign Currency Capital Total
(note 10) Reserves Earnings Translation Redemption
Reserve Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 1 July
2015 1,396 131,559 78,866 (180) 1,079 212,720
Total
comprehensive
income for the
year
Loss for the year - - (37,947) - (37,947)
Other -
comprehensive
income
Foreign exchange
translation
differences - - - (33) - (33)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total other
comprehensive
expense - - - (33) - (33)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
comprehensive
expense for the
year - - (37,947) (33) - (37,980)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Contributions by
and distributions
to owners
Dividends paid - - (4,742) - - (4,742)
Shares
repurchased to
be held in
treasury - (2,399) - - - (2,399)
Shares subject to
tender offer (193) (25,141) - - 193 (25,141)
Tender offer
expenses - (115) - - - (115)
Shares in
treasury
cancelled (9) - - - 9 -
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
contributions by
and
distributions to
owners (202) (27,655) (4,742) (33) 202 (32,397)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 30
June 2016 1,194 103,904 36,177 (213) 1,281 142,343
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Share Capital Distributable Retained Foreign Currency Capital Total
(note 10) Reserves Earnings Translation Redemption
Reserve Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 1 July
2016 1,194 103,904 36,177 (213) 1,281 142,343
Total
comprehensive
income for the
year
Loss for the year - - (6,635) - - (6,635)
Other
comprehensive
income
Foreign exchange
translation
differences - - - (3) - (3)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total other
comprehensive
expense - - - (3) - (3)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
comprehensive
expense for the
year - - (6,635) (3) - (6,638)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Contributions by
and distributions
to owners
Dividends paid - - (4,117) - - (4,117)
Shares
repurchased to
be held in
treasury - (543) - - - (543)
Shares subject to
tender offer (140) (16,817) - - 140 (16,817)
Tender offer
expenses* - (58) - - - (58)
Shares in
treasury
cancelled (22) - - - 22 -
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
contributions by
and
distributions to
owners (162) (17,418) (4,117) - 162 (21,535)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 30
June 2017 1,032 86,486 25,425 (216) 1,443 114,170
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
*Exceptional expenses relating to tender offer
The capital redemption reserve is created on the cancellation of
shares equal to par value of shares cancelled. This reserve is not
distributable.
Company Statement of Changes in Equity
Share Capital Reserves Total
US$'000 US$'000 US$'000
---------------------------------------------------- -------------- --------- ---------
Balance at 1 July 2015 1,396 211,324 212,720
Total comprehensive income for the year
Loss for the year - (37,980) (37,980)
Total comprehensive expense for the year - (37,980) (37,980)
---------------------------------------------------- -------------- --------- ---------
Contributions by and distributions to owners
Dividends paid - (4,742) (4,742)
Shares repurchased to be held in treasury - (2,399) (2,399)
Shares subject to tender offer (193) (24,948) (25,141)
Tender offer expenses - (115) (115)
Shares in treasury cancelled (9) 9 -
---------------------------------------------------- -------------- --------- ---------
Total contributions by and distributions to owners (202) (32,195) (32,397)
---------------------------------------------------- -------------- --------- ---------
Balance at 30 June 2016 1,194 141,149 142,343
---------------------------------------------------- -------------- --------- ---------
Share Capital Reserves Total
US$'000 US$'000 US$'000
---------------------------------------------------- -------------- --------- ---------
Balance at 1 July 2016 1,194 141,149 142,343
Total comprehensive income for the year
Loss for the year - (6,638) (6,638)
Total comprehensive expense for the year - (6,638) (6,638)
---------------------------------------------------- -------------- --------- ---------
Contributions by and distributions to owners
Dividends paid - (4,117) (4,117)
Shares repurchased to be held in treasury - (543) (543)
Shares subject to tender offer (140) (16,677) (16,817)
Tender offer expenses - (58) (58)
Shares in treasury cancelled (22) 22 -
---------------------------------------------------- -------------- --------- ---------
Total contributions by and distributions to owners (162) (21,373) (21,535)
---------------------------------------------------- -------------- --------- ---------
Balance at 30 June 2017 1,032 113,138 114,170
---------------------------------------------------- -------------- --------- ---------
Consolidated Statement of Cash Flows
Note Year ended 30 Year ended 30 June
June 2017 2016
US$'000 US$'000
-------------------------------- ------ -------------- -------------------
Cash flows from operating
activities
Purchase of investments (62,272) (105,650)
Proceeds from sale of
investments 90,788 131,172
Dividends received 4,707 5,551
Operating expenses paid (2,357) (3,125)
Commission rebate 15 -
-------------------------------- ------ -------------- -------------------
Net cash generated from
operating activities 30,881 27,948
---------------------------------------- -------------- -------------------
Financing activities
Dividends paid (4,117) (4,742)
Cash used in tender offer (16,817) (25,141)
Tender offer expenses (58) (115)
Cash used in share repurchases (543) (2,399)
Net cash used in financing
activities (21,535) (32,397)
---------------------------------------- -------------- -------------------
Net increase/(decrease)
in cash and cash equivalents 9,346 (4,449)
Effects of exchange rate
changes on cash and cash
equivalents (123) (60)
Cash and cash equivalents
at beginning of the year 1,447 5,956
---------------------------------------- -------------- -------------------
Cash and cash equivalents
at end of the year 10,670 1,447
---------------------------------------- -------------- -------------------
Company Statement of Cash Flows
Note Year ended 30 Year ended 30 June
June 2017 2016
US$'000 US$'000
-------------------------------- ------ -------------- -------------------
Cash flows from operating
activities
Due from subsidiary 22,162 32,605
Operating expenses paid (824) (1,038)
Net cash generated from
operating activities 21,338 31,567
---------------------------------------- -------------- -------------------
Financing activities
Dividends paid (4,117) (4,742)
Cash used in tender offer (16,817) (25,141)
Tender offer expenses (58) (115)
Cash used in share repurchases (543) (2,399)
Net cash used in financing
activities (21,535) (32,397)
---------------------------------------- -------------- -------------------
Net decrease in cash and
cash equivalents (197) (830)
Effects of exchange rate (2) -
changes on cash and cash
equivalents
Cash and cash equivalents
at beginning of the year 398 1,228
---------------------------------------- -------------- -------------------
Cash and cash equivalents
at end of the year 199 398
---------------------------------------- -------------- -------------------
Notes to the Consolidated Financial Statements
1(a) Financial assets at fair value through profit or loss
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
Group
30 June 2017: Financial assets at fair value through profit or
loss; all quoted equity securities.
Security name Number US$'000
------------------------------------------------- ----------- --------
475,653 16,088
Qatar National Bank (QNBK QD) 1,307,544 13,798
Masraf Al Rayan (MARK QD) 496,285 12,595
Industries Qatar (IQCD QD) 313,557 7,598
Ooredoo (ORDS QD) 130,960 7,153
Qatar Electricity & Water Co (QEWS QD) 754,724 6,482
Barwa Real Estate (BRES QD) 1,170,619 5,329
Qatar Gas Transport (QGTS QD) 626,605 5,022
Commercial Bank of Qatar (CBQK QD) 714,227 3,912
Gulf International Services (GISS QD) 218,303 3,837
Qatar National Cement Co (QNCD QD) 1,288,408 2,718
Emaar Properties Company (EMAAR UH) 185,453 2,585
Qatar Insurance (QATI QD) 541,612 2,473
Qatar United Development Company (UDCD QD) 58,402 2,123
Al Meera Consumer Goods Co (MERS QD) 1,098,579 2,096
ABU DHABI Commercial Bank (ADCB UH) 1,060,000 1,642
Dubai Islamic Bank (DIB UH) 121,250 1,540
Gulf Warehousing (GWCS QD) 120,645 1,251
Qatar Islamic Bank (QIBK QD) 552,351 1,247
Vodaphone Qatar (VFQS QD) 300,000 653
Emirates National Bank of Dubai (ENBD UH) 180,000 510
First Abu Dhabi Bank (FAB UH) 2,395,627 493
DXB ENTERTAINMENTS (DXB UH)Doha Bank (DHBK QD) 51,303 415
National Leasing (NLCS QD) 65,678 248
Union National Bank (UNB UH) 150,000 190
Al Khaleej Bank (KCBK QD) 34,968 126
102,124
------------------------------------------------- ----------- --------
Group
30 June 2016: Financial assets at fair value through profit or
loss; all quoted equity securities:
Security name Number US$'000
--------------------------------------------- ----------- --------
Qatar National Bank (QNBK QD) 683,713 26,339
Industries Qatar (IQCD QD) 572,193 15,385
Masraf Al Rayan (MARK QD) 1,524,260 14,135
Qatar Electricity & Water Co (QEWS QD) 190,508 10,541
Qatar Islamic Bank (QIBK QD) 374,001 9,810
Gulf International Services (GISS QD) 888,779 8,900
Ooredoo (ORDS QD) 338,144 8,212
Commercial Bank of Qatar (CBQK QD) 713,923 7,247
Qatar United Development Company (UDCD QD) 1,310,961 6,837
Qatar Gas Transport (QGTS QD) 845,564 5,399
Emaar Properties Company (EMAAR UH) 3,013,500 5,077
Gulf Warehousing (GWCS QD) 311,235 4,918
Qatar Insurance (QATI QD) 204,421 4,044
Qatar National Cement Co (QNCD QD) 142,268 3,326
Barwa Real Estate (BRES QD) 306,692 2,743
Al Meera Consumer Goods Co (MERS QD) 30,874 1,780
Vodaphone Qatar (VFQS QD) 567,971 1,644
ABU DHABI Commercial Bank (ADCB UH) 775,000 1,274
National Leasing (NLCS QD) 217,437 1,041
First Gulf Bank (FGB UH) 250,000 854
Dubai Parks & Resorts (DUBAIPARKS UH) 1,780,725 783
Al Khaleej Bank (KCBK QD) 152,060 672
Qatar First Bank (QFBQ QD) 90,000 281
141,242
--------------------------------------------- ----------- --------
Risks relating to financial instruments comprise market price
risk, credit risk, interest rate risk and foreign currency risk.
These are detailed below and in notes 2, 6 and 8.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Group.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost.
At the reporting date, the Group's financial assets exposed to
credit risk comprised the following:
30 June 2017 30 June 2016
US$'000 US$'000
-------------------------------- ------------- -------------
Financial assets at fair value
through profit or loss 102,124 141,242
Cash and cash equivalents 10,670 1,447
Other receivables 2,468 346
-------------------------------- ------------- -------------
115,262 143,035
-------------------------------- ------------- -------------
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet.
Management does not expect any counterparty to fail to meet its
obligations and there are no debts past their due dates as at the
year-end. All amounts are due within one month of the year end.
Investments are held by the Custodian, HSBC Bank (Middle East)
Ltd.
The Group uses the banking services of HSBC (Middle East) Ltd
and Barclays (Isle of Man) PLC. HSBC has a credit rating of A2
assigned by Moody and Barclays has a credit rating of A- from
Standard and Poors.
Other receivables principally comprise unsettled trades.
Interest rate risk
The majority of the Group's financial assets are non-interest
bearing. Cash held by the Group is invested at short-term market
interest rates. As a result, the Group is not subject to fair value
interest rate risk due to fluctuations in the prevailing levels of
market interest rates. However it is subject to cash flow risk
arising from changes in market interest rates.
The table below summarises the Group's exposure to interest rate
risks. It includes the Group's financial assets and liabilities at
the earlier of contractual re-pricing or maturity date, measured by
the carrying value of assets and liabilities:
30 June 2017 Less 1-3 months 3 months 1-5 years Over Non-interest Total
than to 1 5 bearing
1month year years
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Financial Assets
Financial assets
at fair value
through profit
or loss - - - - - 102,124 102,124
Other receivables
and prepayments - - - - - 2,468 2,468
Cash 10,670 - - - - - 10,670
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total financial
assets 10,670 - - - - 104,592 115,262
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Financial Liabilities
Other creditors
and accrued
expenses - - - - - (1,092) (1,092)
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total financial
liabilities - - - - - (1,092) (1,092)
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total interest 10,670 - - - -
rate sensitivity
gap
----------------------- -------- ----------- --------- ---------- --------
Interest rate risk continued
30 June 2016 Less 1-3 months 3 months 1-5 years Over Non-interest Total
than to 1 5 bearing
1month year years
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Financial Assets
Financial assets
at fair value
through profit
or loss - - - - - 141,242 141,242
Other receivables
and prepayments - - - - - 346 346
Cash 1,447 - - - - - 1,447
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total financial
assets 1,447 - - - - 141,588 143,035
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Financial Liabilities
Other creditors
and accrued
expenses - - - - - (692) (692)
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total financial
liabilities - - - - - (692) (692)
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total interest 1,447 - - - -
rate sensitivity
gap
----------------------- -------- ----------- --------- ---------- --------
All interest received on cash balances are at variable rates. A
sensitivity analysis for changes in interest rates on cash balances
has not been provided as it is not deemed significant.
1(b) Investments and amount due from subsidiary
30 June 2017 30 June 2016
US$'000 US$'000
---------------------------- ------------- -------------
Investment in subsidiary - -
Amount due from subsidiary 113,276 141,041
---------------------------- ------------- -------------
The amount due from the subsidiary is 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.
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 investments are classed as level 1
investments.
All financial assets and liabilities not stated at fair value in
the financial statements are categorised as level 2 in the fair
value hierarchy.
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
expanding Qatari economy by investing in listed companies or
companies soon to be listed. This will be principally through the
medium of the Qatar Exchange.
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 89% of
the net assets attributable to holders of Ordinary Shares is
invested in equity securities, of which a maximum of 15% is to be
invested outside Qatar. Investment opportunities are available in
other Co-operation Council for Arab States of the Gulf (GCC).
At 30 June 2017, if the market value of the investment portfolio
had increased/decreased by 0.87% (as per the movement in the Qatar
Exchange Index post year-end) with all other variables held
constant, this would have increased/decreased net assets
attributable to Shareholders by approximately US$0.88 million (30
June 2016 : 6.5% : US$9.2 million).
3 Net Asset Value per Share
The net asset value per share as at 30 June 2017 is US$1.1113
per share (30 June 2016: US$1.2138) based on 102,734,713 (30 June
2016: 117,273,702) Ordinary Shares in issue as at that date.
4 Earnings per Share
Basic and diluted earnings per share are calculated by dividing
the profit attributable to equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the
year.
30 June 2017 30 June 2016
----------------------------------------------------------------- ------------- -------------
Loss attributable to equity holders of the Company (US$'000) (6,635) (37,947)
Weighted average number of Ordinary Shares in issue (thousands) 109,498 126,353
----------------------------------------------------------------- ------------- -------------
Basic and diluted (loss)/earnings per share (cents per share) (6.06) (30.03)
----------------------------------------------------------------- ------------- -------------
5 Share Capital
30 June 2017 30 June 2016
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:
102,734,713 (2016: 117,273,702) Ordinary
Shares of US$0.01 each in issue, with
full voting rights 1,027 1,173
493,445 (2016: 2,102,373) Ordinary
Shares of US$0.01 each held in Treasury 5 21
------------------------------------------ ------------- -------------
Issued share capital 1,032 1,194
------------------------------------------ ------------- -------------
During the year to 30 June 2017 the Company repurchased 493,445
(2016: 2,102,373) Ordinary Shares, to be held in treasury, at a
cost of US$542,871 (2016: US$2,339,545) and cancelled 2,102,373
(2016: 890,509) Ordinary Shares in treasury which had been held for
more than one year. The Ordinary Shares held in treasury have no
voting rights and are not entitled to dividends.
On 12 December 2016 the Company completed a tender offer at a
price of US$1.1973 per share (7 December 2015: US$1.3004 per
share). Under the tender offer 14,045,544 shares (7 December 2015:
19,333,165) were repurchased and cancelled.
During the year US$58,373 tender expenses were deducted from
equity.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the Group. The Board manages the Group's
affairs to achieve Shareholder returns through capital growth
rather than income, and monitors the achievement of this through
growth in net asset value per share.
Group capital comprises Share Capital and Reserves. Neither the
Company nor its subsidiary is subject to externally imposed capital
requirements. The Company also has an active share buyback
program.
6 Other payables and accrued expenses
Group
30 June 2017 30 June 2016
US$'000 US$'000
------------------------------- ------------- -------------
Due to broker 649 221
Management fee payable 278 357
Administration fee payable 56 56
Accruals and sundry creditors 109 58
------------------------------- ------------- -------------
1,092 692
------------------------------- ------------- -------------
Company
30 June 2017 30 June 2016
US$'000 US$'000
------------------------------- ------------- -------------
Administration fee payable 50 50
Accruals and sundry creditors 103 48
------------------------------- ------------- -------------
153 98
------------------------------- ------------- -------------
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient
cash for operations and the ability to realise market positions.
The Group's liquidity position is monitored by the Investment
Manager and the Board of Directors.
The residual undiscounted contractual maturities of financial
liabilities are in the table below:
30 June 2017 Less than 1-3 3 months 1-5 years Over 5 No stated
1 month months to 1 year years maturity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ---------- -------- ----------- ---------- -------- ----------
Financial liabilities
Other creditors 1,092 - - - - -
and accrued expenses
---------------------- ---------- -------- ----------- ---------- -------- ----------
1,092 - - - - -
---------------------- ---------- -------- ----------- ---------- -------- ----------
30 June 2016 Less than 1-3 3 months 1-5 years Over 5 No stated
1 month months to 1 year years maturity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ---------- -------- ----------- ---------- -------- ----------
Financial liabilities
Other creditors 692 - - - - -
and accrued expenses
---------------------- ---------- -------- ----------- ---------- -------- ----------
692 - - - - -
---------------------- ---------- -------- ----------- ---------- -------- ----------
7 Charges and Fees
Group 30 June 2017 Company Group Company 30 June 2016
30 June 2017 30 June 2016
US$'000 US$'000 US$'000 US$'000
------------------------------------------ ------------------- -------------- -------------- ---------------------
Investment Manager's fees (see below) 1,281 - 1,722 -
------------------------------------------ ------------------- -------------- -------------- ---------------------
Performance fees (see below) - - - -
------------------------------------------ ------------------- -------------- -------------- ---------------------
Administrator and Registrar's fees (see
below) 225 199 261 233
Audit fees 28 28 34 34
Custodian fees (see below) 119 4 139 7
Directors' fees and expenses 297 297 338 338
Directors' insurance cover 31 31 37 37
Broker fees 51 51 59 59
Other 310 149 362 451
------------------------------------------ ------------------- -------------- -------------- ---------------------
Other expenses 1,061 759 1,230 1,159
------------------------------------------ ------------------- -------------- -------------- ---------------------
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. The
revised agreement sees the annual fee reduce to 1.05% of the net
asset value of the Company further reducing 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 2017 amounted
to US$1,281,315 (30 June 2016: US$1,722,189) and the amount accrued
but not paid at the year-end was US$277,684 (30 June 2016:
US$356,885).
Performance fees
From 1 November 2016 the Investment Manager was no longer
entitled to a performance fee.
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 GBP12,000 per
annum subject to the number of CREST settled transactions
undertaken.
Administration fees paid for the year ending 30 June 2017
amounted to US$225,086 and US$32,838 for additional services (30
June 2016: US$261,255 and US$33,061 respectively). Outstanding
Administration fees at the year end amounted to US$56,747 (30 June
2016: US$56,320).
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 ending 30 June
2017 amounted to US$118,780 (30 June 2016: US$139,116) and the
amount accrued but not paid at the year-end was US$4,034 (30 June
2016: US$5,615).
8 Foreign currency translation
The Qatari Riyal 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 Qatari Riyal at exchange rates prevailing on that
date. Income and expenses are translated into Qatari Riyal 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 Qatari Riyal. 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 2017 30 June 2016
% %
--------------- ------------- -------------
British Pound (0.03) 0.02
Omani Rial 0.00 0.00
US Dollar 0.41 0.02
Qatari Riyal 88.19 93.79
Kuwaiti Dinar 0.00 0.00
UAE Dirham 11.43 6.17
--------------- ------------- -------------
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 2017 Monetary Monetary Net Exposure
Assets Liabilities
US$'000 US$'000 US$'000
--------------- --------- ------------- -------------
British Pound 20 (59) (39)
US Dollar 852 (384) 468
Qatari Riyal 100,689 - 100,689
UAE Dirham 13,052 - 13,052
--------------- --------- ------------- -------------
114,613 (443) 114,170
--------------- --------- ------------- -------------
30 June 2016 Monetary Monetary Net Exposure
Assets Liabilities
US$'000 US$'000 US$'000
British Pound 26 (5) 21
US Dollar 497 (466) 31
Qatari Riyal 133,504 - 133,504
UAE Dirham 8,787 - 8,787
--------------- --------- ------------- -------------
142,814 (471) 142,343
--------------- --------- ------------- -------------
Foreign currency sensitivity risk - presentational currency
At 30 June 2017 had the US Dollar weakened/strengthened by 1%
(2016 : weakened/strengthened 1%) in relation to all currencies,
with all other variables held constant, net assets attributable to
equity holders of the Company would have increased/decreased by the
amounts shown below:
30 June 2017 US$'000
--------------- --------
British Pound -
Kuwaiti Dinar -
UAE Dirham 130
--------------- --------
Effect on
net assets 130
--------------- --------
30 June 2016 US$'000
--------------- --------
British Pound -
Kuwaiti Dinar -
UAE Dirham 88
--------------- --------
Effect on
net assets 88
--------------- --------
Foreign currency sensitivity risk - functional currency
As 88% of net assets are denominated in QAR and QAR 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.
In addition, since QAR is the functional currency of the Group
and USD is the presentational currency any effect of changes in the
foreign exchange rates between these currencies is included in the
translation reserve 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 GBP250 per annum.
The Company became registered for VAT from 1 February 2011.
Qatar/United Arab Emirates(U.A.E.) taxation
It is the intention of the Directors to conduct the affairs of
the Company so that it is not considered to be either resident in
Qatar/U.A.E. or doing business in Qatar/U.A.E.
Qatar/U.A.E. does not impose withholding tax on dividend
distributions by Qatar/U.A.E. companies to non-residents.
Capital gains made by the Company on disposal of shares in
Qatar/U.A.E. companies will not be subject to tax in
Qatar/U.A.E.
There is no stamp duty or equivalent tax on the transfer of
shares in Qatar/U.A.E. companies.
Kuwait taxation
Since 1 January 2009 dividends paid on behalf of holdings in
Kuwait have withholding tax deducted at 15%
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
payable to the Investment Manager are disclosed in note 7.
Epicure Managers Qatar Limited is a wholly owned subsidiary of
the Investment Adviser, Qatar Insurance Company S.A.Q.
Leonard O'Brien is a Director of the Company and of the
Investment Manager.
11 The Company
Qatar Investment Fund plc (formerly Epicure Qatar Equity
Opportunities plc) (the "Company") was incorporated and registered
in the Isle of Man under the Isle of Man Companies Acts 1931 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.
In the year ended 30 June 2017, the Company purchased 493,445
(2016: 2,102,373) of its Ordinary Shares for a total value of
US$542,871 (2016:US$2,339,545) to be held in treasury. 2,102,373
shares had been repurchased in the year ended 30 June 2016 for
treasury but had been held for over a year and were therefore
cancelled in the current financial year. The buy-backs are effected
through retained reserves.
On 12 December 2016 the Company completed a tender offer at a
price of US$1.1973 per share (previous offer US$1.3004 per share).
Under the offer 14,045,544 shares were cancelled (previous offer
19,333,165 shares) with US$16,816,730 being paid to participating
shareholders (previous offer US$25,140,848).
The shareholders approved a dividend of 4.0 cents per share on
17 November 2016 (previous dividend 4.0 cents per share); this was
paid to shareholders on 31 January 2017.
The Company's agents and the Investment Manager perform all
significant functions. Accordingly, the Company itself has no
employees.
Duration
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 2018 a resolution will be proposed that the Company
ceases to continue in existence.
12 The Subsidiary
The Company has the following subsidiary company:
Country of incorporation Percentage of shares
held
-------------------------------------- -------------------------- ---------------------
Epicure Qatar Opportunities Holdings British Virgin
Limited 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 2017 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 presentation
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") and Isle of Man Companies Act 1931 to 2004. 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 and amounts due
from subsidiary which are stated at fair value.
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 2016.
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 date of the next continuation vote for the Company (as
described in the Investment Policy), future projections of
profitability, cash flows and capital resources.
The Group's principal activities, investment objective and
strategy and principal risks and uncertainties are described in the
Chairman's Statement, Business Review, Investment Policy and
Corporate Governance Report.
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.
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.
13.2 Basis of consolidation continued
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 Qatar and the GCC region.
No additional disclosure is included in relation to segment
reporting, as the Group's activities are limited to one business
and geographic segment.
13.4 Investments in and amounts due from subsidiary
Investments in and amounts due from subsidiary in the Company
balance sheet are stated at fair value.
13.5 Treasury shares
In accordance with shareholder authority shares continue to be
bought back to be held in treasury in order to manage the discount
between share price and NAV.
13.6 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.
13.7 Future changes in accounting policies
A number of new standards, amendments to standards and
interpretation are not yet effective for year ended 30 June 2017,
and have not been applied in preparing these financial statements.
None of these are expected to have a significant effect on the
measurement of the amounts recognised on the Company's financial
statements; however, IFRS 9, Financial Instruments ("IFRS9") may
change the classification of financial assets. This is first
effective for accounting periods beginning on or after 1 January
2018.
There are no other standards, interpretations or amendments to
existing standards that are not yet effective that would be
expected to have a significant impact on the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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