TIDMGIF
RNS Number : 8803B
Gulf Investment Fund PLC
25 September 2018
The following amendment has been made to the 'Annual Financial
Report' announcement released on 25 September 2018 at 7.00 under
RNS No 7690B.
The payment date for the proposed dividend within the 'Proposed
dividend' paragraph of the Chairman's Statement has been changed
from 21 December 2019 to 21 December 2018.
All other details remain unchanged.
The full amended text is shown below.
Gulf Investment Fund plc
Annual Report for the year ended 30 June 2018
-- Gulf Investment Fund's (GIF) net asset value (NAV) +7.8%, MSCI Emerging Markets Index +5.8%
-- GIF share price +13%
-- Recommended dividend of 3.0 cents per share
-- GCC markets have outperformed other global markets
Nicholas Wilson, Chairman of Gulf Investment Fund plc,
commented:
"This year has been one of improving fortune and significant
development for the Gulf Investment Fund; in December the fund's
investment strategy and name changed. The widening of our
investment universe and the benefit of strong economic growth
across the Gulf region has led to improved performance for the
fund's net asset value and share price.
"We're confident that this growth will continue to provide
opportunities for us in the region. We are well positioned to take
advantage of them. At the year-end we held positions in the
financial services, energy and utilities across Saudi Arabia,
Qatar, Kuwait and the United Arab Emirates. Our investment adviser
believes that medium to-long term growth prospects should remain
healthy across the region, driven by a strong infrastructure
development pipeline, supportive demographics as populations
increase and as stockmarkets in the region are upgraded to emerging
market status."
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 / Finlay Donaldson
Chairman's Statement
On behalf of the Board, I am pleased to present your Company's
eleventh Annual Report and Financial Statements for the year to 30
June 2018.
During the 12 months, your Company's Net Asset Value per Share
("NAV") rose by 7.8% to US$1.1982 which compares with a gain of
8.6% in the S&P GCC composite index and 5.8% in the MSCI
Emerging Markets Index. Following a narrowing of the discount at
which the shares trade to NAV, the shares rose by from US$0.8990 to
US$1.0150 for a gain of 13.0%. Shareholders received a dividend of
3.0 cents per share which was paid on 9 February 2018 to ordinary
shareholders on the register as at 5 January 2018.
Results
Results for the period under review showed a profit US$9.68m
generated from fair value adjustments, realised losses and dividend
income. This is equivalent to a basic profit per share of 9.95
cents.
Following the actions taken on 5 June 2017 against Qatar by
Saudi Arabia, UAE, Bahrain and Egypt, Qatar acted swiftly to
implement alternative international trading arrangements. Although
there was an initial negative impact on the Qatar economy and the
stock market, by December it became apparent that the economy was
recovering aided by a stronger oil price. Accordingly, since the
change in Investment Policy referred to below, the Company remained
overweight Qatar relative to the informal benchmark, the S&P
GCC composite index.
At the end of the period, we had a total of 43 holdings: 24 in
Saudi Arabia, 9 in Qatar, 5 in the UAE and 5 in Kuwait. The
geographical split based on valuation, was Saudi Arabia 39.2%,
Qatar 36.7%, Kuwait 10%, and UAE 9.6%. We also had 4.5% in
cash.
The Company's Ongoing Charges (formerly Total Expense Ratio)
rose to 1.95% from 1.70% in the previous year. The charges were
calculated in accordance with the methodology recommended by the
Association of Investment Companies.
Proposed dividend
The Board is pleased to recommend to shareholders a dividend of
3 cents a share. Subject to shareholder approval at the forthcoming
Annual General Meeting, the dividend will be paid on 21 December
2018 with a record date of 16 November and an associated ex-date of
15 November 2018, the last day for currency elections will be 30
November 2018.
Change in investment policy
On 16 October 2017, the Board announced its intention to change
the investment policy of the Company from a largely Qatar-focused
investment strategy to a broader Gulf Cooperation Council ("GCC")
investment strategy.
Previously, the investment policy enabled the Company to invest
up to 15% of the Company in GCC countries (namely Saudi Arabia,
Kuwait, UAE, Oman and Bahrain) other than Qatar.
The proposed change in investment policy removed the 15% limit
and enabled the Company to increase its investment allocation to
other GCC countries and provide the Investment Adviser with a wider
investment universe and more flexibility to identify attractive
opportunities in the GCC region.
Alongside the Amended Investment Policy the Board resolved to
put forward a number of proposals including:
(i) making a tender offer for up to 10% of the issued Share Capital of the Company
(ii) cancelling the discontinuation vote currently scheduled for
the 2018 annual general meeting and replacing it with a
continuation vote for the 2021 annual general meeting and every
three years thereafter;
(iii) making a tender offer to shareholders for up to 100% of
the Company's share capital in 2020 subject to Shareholder approval
to be sought in 2020; and
(iv) proposing to change the name of the Company to Gulf Investment Fund PLC.
All of these changes were approved by shareholders at an
Extraordinary General Meeting (EGM) on 7 December 2017, other than
the tender offer in 2020 which will be subject to shareholder
approval in 2020.
Tender offer
Following the passing of the resolutions at the EGM on 7
December 2017 to give effect to the 10% Tender Offer, 10,273,471
Shares were tendered under the Tender Offer at the tender offer
price of USD0.9933 per share. These shares were cancelled leaving
the Company with 92,461,242 Shares in issue (excluding treasury
shares).
Related Party Transactions
Details of any related party transactions are contained in note
10 of this report.
Post balance sheet events
Details of these can be found in note 14 following the
accompanying financial statements.
Outlook, risks and uncertainties
Fluctuations in oil and gas prices will continue to impact GCC
economies, as countries deal with budget challenges. The
geopolitics of the region and, in particular, the dispute between
Qatar and other members of the GCC brings continuing economic
uncertainty.
The Board believes that the principal risks and uncertainties
faced by the Company continue to fall in the following categories;
geopolitical events, market risks, investment and strategy risks,
accounting, legal and regulatory risks, operational risks and
financial risks. Information on each of these is given in the
Business Review section of our Annual Report each year.
The Board continues to view the future of the Company with
confidence expecting healthy if slower growth in the region as a
whole, as growth in the non-hydrocarbon sector in a number of GCC
members helps to balance their economies.
Annual General Meeting
I look forward to welcoming shareholders to out eleventh Annual
General Meeting on 7 November 2018, 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
21 September 2018
Business Review
The following review is designed to provide information
primarily about the Company's business and results for the year
ended 30 June 2018. It should be read in conjunction with the
Report of the Investment Manager and the Investment Adviser on
pages 7 to 14 which gives a detailed review of the investment
activities for the year and an outlook for the future.
Investment Objective and Strategy
The Company's investment objective is to capture the
opportunities for growth offered by the expanding GCC economies by
investing in listed companies on one of the GCC exchanges or
companies soon to be listed on one of the GCC exchanges. The
Company 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 for both stock selection and
portfolio construction.
The Company's investment policy is on pages 15 to 16.
Performance Measurement and Key Performance Indicators
In order to measure the success of the Company in meeting its
objectives and to evaluate the performance of the Investment
Manager, the Directors take into account the following key
performance indicators:
Returns and Net Asset Value
At each quarterly Board meeting the Board reviews the
performance of the portfolio versus the 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 22 February 2017, the Company announced the details of its
annual share buy-back programme. Pursuant to, and during the term
of this share buy-back programme, the Company may purchase ordinary
shares provided that:
1) the maximum price payable for an ordinary share on the London
Stock Exchange is an amount equal to the higher of:
a. 105 per cent. of the average market value of the Company's
ordinary shares as derived from the London Stock Exchange Daily
Official List for the five business days immediately preceding the
day on which such share is contracted to be purchased; and
b. In order to benefit from the exemption laid down in Article
5(1) of Regulation (EU) No 596/2014, the Company will not purchase
shares at a price higher than the higher of the price of the last
independent trade and the highest current independent purchase bid
on the trading venue where the purchase is carried out; and
2) the aggregate number of ordinary shares which may be acquired
on behalf of the Company in connection with this share buy-back
programme shall not exceed 17,548,355 ordinary shares.
Due to the limited liquidity in the ordinary shares, a buy-back
of ordinary shares pursuant to the share buy-back programme on any
trading day is likely to represent a significant proportion of the
daily trading volume in the ordinary shares on the London Stock
Exchange (and is likely to exceed the 25% limits of the average
daily trading volume as laid down in Article 5(1) of Regulation
(EU) No 596/2014 and as such the Company will not benefit from this
exemption). The share buy authority resolution is for up to 14.99%
of the Company's issued share capital. The Board has no present
intention to exercise the authority in full but will keep the
matter under review, taking into account the overall financial
position of the Company and the discount to net asset value at
which the Company's shares trade.
Whilst the Company has the requisite shareholder authority to
conduct share buy-backs, the Company has not announced a share
buy-back programme since the above programme which expired on 17
November 2017, however this is under regular review by the
Board.
A Board member is responsible for close monitoring of 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 47 to 51.
Investment and Strategy
The achievement of the Company's investment objective relative
to the market involves risk. An inappropriate asset allocation may
result in underperformance against the local index. Monitoring of
these risks is carried out by the Board which, at each quarterly
Board meeting, considers the asset allocation of the portfolio, the
ratio of the larger investments within the portfolio and the
management information provided by the Investment Manager and
Investment Adviser, who are responsible for actively managing the
portfolio in accordance with the Company's investment policy. The
net asset value of the Company is published weekly.
Accounting, legal and regulatory
The Company must comply with the provisions of the Isle of Man
Companies Acts 1931 to 2004 and since its shares are listed on the
London Stock Exchange, the UK Listing Authority's Listing Rules and
Disclosure Guidance and Transparency Rules ("UKLA Rules")' A breach
of company law could result in the Company and/or the Directors
being fined or the subject of criminal proceedings. A breach of the
UKLA Rules could result in the suspension of the Company's shares.
The Board relies on its Company Secretary and advisers to ensure
adherence to company law and UKLA Rules. The Board takes legal,
accounting or compliance advice, as appropriate, to monitor changes
in the regulatory environment affecting the Company.
From 3 July 2016 the Company must also comply with the Market
Abuse Regulation (MAR) which contains prohibitions for insider
dealing and market manipulation, and provisions to prevent and
detect these.
Operational
Disruption to, or the failure of, the Investment Manager, the
Investment Adviser, the Custodian or Administrator's accounting,
payment systems or custody records could prevent the accurate
reporting or monitoring of the Company's financial position.
Details of how the Board monitors the services provided by the
Investment Manager and its other suppliers, and the key elements
designed to provide effective internal control, are explained
further in the internal control section of the Corporate Governance
Report on pages 19 to 25.
Financial
The financial risks faced by the Company include market price
risk, foreign exchange risk, credit risk, liquidity risk and
interest rate risk. Further details are disclosed in Notes 1(a), 2,
6 and 8.
Report of the Investment Manager and Investment Adviser
Regional Market Overview
In FY 2018, GCC Markets outperformed its global peers, led by
increase in oil prices and index upgradation to EM status by FTSE
and MSCI. Diverging global growth and looming trade war concerns
have shaken investor confidence, triggering flow to safe heavens,
with china suffering the most, as a result, global markets remained
almost flat in 1H18.
29-Jun-17 31-Dec-17 2H17 29-Jun-18 1H18 LTM
Qatar (QE) 9,030.4 8,523.4 -5.6% 9,024.0 5.9% -0.1%
---------------- ---------------- ------ ---------------- ------- -------
Saudi Arabia (TASI) 7,425.7 7,226.3 -2.7% 8,314.2 15.1% 12.0%
---------------- ---------------- ------ ---------------- ------- -------
Dubai (DFMGI) 3,392.0 3,370.1 -0.6% 2,821.0 -16.3% -16.8%
---------------- ---------------- ------ ---------------- ------- -------
Abu Dhabi (ADI) 4,425.4 4,398.4 -0.6% 4,560.0 3.7% 3.0%
---------------- ---------------- ------ ---------------- ------- -------
Kuwait (KWSE) NA NA NA 4,890.4 NA NA
---------------- ---------------- ------ ---------------- ------- -------
Oman (MSI) 5,118.3 5,099.3 -0.4% 4,571.8 -10.3% -10.7%
---------------- ---------------- ------ ---------------- ------- -------
Bahrain (BAX) 1,310.0 1,331.7 1.7% 1,311.0 -1.6% 0.1%
---------------- ---------------- ------ ---------------- ------- -------
S&P GCC Composite 100.1 99.0 -1.1% 108.7 9.8% 8.6%
---------------- ---------------- ------ ---------------- ------- -------
MSCI World 1,916.4 2,103.5 9.8% 2,089.3 -0.7% 9.0%
---------------- ---------------- ------ ---------------- ------- -------
MSCI EM 1,008.8 1,158.5 14.8% 1,069.5 -7.7% 6.0%
---------------- ---------------- ------ ---------------- ------- -------
Brent 47.4 66.9 41.1% 77.9 16.4% 64.3%
---------------- ---------------- ------ ---------------- ------- -------
Source: Bloomberg
During 2H17, most GCC markets underperformed their global peers,
affected by regional tensions, with the S&P GCC Composite index
declining by 1.1 per cent. Performance of individual markets within
the GCC was mixed. Crude prices closed 14.8 per cent higher
supported by the OPEC's production cut agreement and its extension
till December 2018.
Saudi Arabia was the major contributor to the regional
performance during the period (YTD 2018), largely because investors
looked ahead to its inclusion in EM indices. Dubai lagged the
region, amid concerns about its Real Estate & Construction
sector. The S&P GCC has gained 9.8 per cent while emerging
markets generally have fallen (MSCI EM index is down 7.7 per
cent).
GCC diversification and recovering oil prices
GCC nations are encouraging private sector participation and
improving the efficiency and transparency of the public sector.
Investor friendly regulations are being adopted, such as
allowing 100 per cent foreign ownership of businesses, and 10-year
residency visas in the UAE.
Social reforms such as Saudi women being permitted to drive and
set up their own businesses will stimulate female participation in
the economy. This should boost job creation and consumer spending,
potentially benefitting sectors such as Services, Automobile and
Insurance.
Stronger oil prices this year have bolstered the reserves of GCC
nations, facilitating fiscal reforms and helping their spending
programs. The IMF reduced its estimate for this year's GCC fiscal
deficit to 3.6 per cent of GDP (October 2017: 5.0 per cent of GDP),
and expects a 2019 deficit of 2.2 per cent.
Economic growth in the region is expected to accelerate in
2018-19, largely reflecting the continued recovery in oil prices
and slowing pace of fiscal consolidation. The IMF has estimated
aggregate growth for the region at 1.9 per cent and 2.6 per cent
for 2018 and 2019, respectively. In June, major global oil
producers agreed to increase crude output from July, this should
support GDP growth.
Saudi Arabia's production increase should boost growth in its
oil sector, adding nearly 2 per cent to GDP growth. Non-oil growth
is expected to pick up as reforms take a back seat and focus shifts
towards implementation of megaprojects. Current mega projects
include the Grand Mosque redevelopment (US$26.6 billion),
development of the Riyadh and Jeddah Metro transit system (US$34.5
billion) and Expansion of King Abdulaziz Int'l Airport (US$7.2
billion). Upcoming mega projects include the US$500 billion NEOM
Mega City, King Abdullah Economic City (US$100 billion) and
commissioning of the world's largest solar project (US$200
billion).
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting GCC Fiscal
Balances.
In June 2018, Fitch Ratings revised Qatar's Outlook to "Stable"
from "Negative" stating that Qatar has successfully managed the
effect from last year's blockade by reconfiguring supply chains and
injecting public sector liquidity. The IMF expects Qatar's real GDP
growth to quicken to 2.6 per cent in 2018 from 2.1 per cent in
2017, with the economy benefitting from continued infrastructure
investment, a slower pace of fiscal consolidation and the scaling
up of LNG production.
Kuwait delayed implementation of VAT until 2021 and the
Investment Adviser expects it has little immediate need for fresh
revenues at the current oil price. Kuwait is expected to report a
fiscal surplus for 2018 and 2019 at 7.0 per cent and 6.1 per cent
of GDP, respectively.
The UAE government eased visa and investment rules to attract
new businesses. Experts in medical, scientific, research and
technical fields as well as top students will be able to get a
residency of up to 10 years.
Dubai unveiled various plans to stimulate foreign investment.
These plans include the reduction and cancellation of some
government fees to support investors' ability to do business. Dubai
Municipality fees and those related to investment in the aviation
sector will be lowered.
To benefit from the higher oil price environment and encourage
economic growth, the Abu Dhabi government approved a 3-year AED50
billion (US$13.6 billion) economic stimulus program. The
authorities intend to make it easier to do business, spur
employment growth and increase tourism.
In April, the Central Bank of Oman eased capital and credit
exposure rules in an effort to boost economic growth. The most
prominent measure was the reduction in the capital adequacy ratio.
This should free up close to OMR2.6 billion to stimulate credit
growth.
MSCI EM Inclusion
Saudi Arabia's inclusion in the MSCI EM index from May 2019
brings its US$500 billion stock market to a wider group of
international investors. It could trigger US$40 - US$45 billion of
inflows.
MSCI also added Kuwait to its 2019 watch list for a potential
upgrade to EM, with the decision to be announced next June, further
bringing GCC nations under the investment radar of global
investors.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting Future
Potential of GCC on the MSCI EM Index.
These developments would also have a positive impact on the
broader region. In addition to increased foreign inflows, the
intangible benefits of attracting newer set of sophisticated
investors should result in improved standards of financial
disclosure and corporate governance.
Other Recent Developments
Saudi Arabia to be included in FTSE Secondary Emerging Market
Index
The Kingdom is likely to have a weight of 2.7 per cent in the
index, which could rise to about 4.6 per cent on listing of the
proposed 5 per cent IPO of state oil giant Saudi Aramco. Saudi
Arabia could see a total of US$30-US$45 billion of inflows in the
next two years if it reaches the foreign ownership levels of peer
GCC markets like UAE and Qatar.
Rising interest rates to benefit GCC banks
Most GCC central banks, including the UAE, Qatar, Kuwait and
Bahrain, hiked their benchmark interest rates in line with the US
Federal Reserve's move. Moody's expects that rising interest rate
would benefit GCC banks through higher NIM's, as banks are expected
to gradually reprice their loan books. Consensus sees further 3 to
4, 25 bps rate hikes by the US Fed.
Kuwait segmented its market to attract investors and increase
listings
Boursa Kuwait transformed its market in to a three-tiered,
segmented market along with entirely new listing requirements and
introduction of new market-capitalised indices and circuit breakers
to curb volatility. The market is segmented to create three new
markets, a Premier, a Main and an Auction market. The amendments
are expected to build a liquid, reliable and sound capital market,
providing issuers with efficient access to capital, and investors
with diverse return opportunities.
FTSE to upgrade Kuwait to emerging market in two tranches
Kuwait's stock market will be included in FTSE Russell's
emerging market index in two equal tranches in September and
December this year. FTSE projects that Kuwait would have a final
weighting of 0.4 per cent in the index. The consensus expects
around US$800 million of passive inflows to the Kuwaiti market from
global index-linked funds.
Saudi Arabia launched privatization programme
Saudi Arabia aims to generate SAR35 to 40 billion (US$10
billion) in non-oil revenues from its privatisation programme by
2020 and create up to 12,000 jobs. National Center for
Privatization & PPP (NCP's) privatization programme aims to
help increase the percentage of private sector contribution to GDP
from 40 per cent to 65 per cent.
Bahrain makes largest oil discovery in its history
Bahrain announced its biggest hydrocarbons discovery since 1932
and is expected to increase its existing reserves. Bahrain ranks
57th on the US Energy Information Administration's world list.
Currently, Bahrain's operational oil field pumps out around 50,000
barrels a day. It also shares the Abu Safah oil field with Saudi
Arabia, which produces around 150,000 barrels a day. The kingdom
raises around 80 per cent of its revenues from oil.
UAE economy to grow at 3.9 per cent in 2018
The UAE economy is expected to grow at 3.9 per cent in 2018 as
per UAE Central Bank, spurred by inflow of foreign direct
investment (FDI) as well as growth in tourism and travel sectors.
The country is expecting a growth of around 2 to 3 per cent in FDI
in 2018. Recent rollout of VAT in UAE and growth of its
construction sector, supported by demand related to the upcoming
Expo 2020, are expected to drive in more government revenues for
UAE.
British Petroleum (BP) to develop second phase of Oman's giant
Khazzan gas field
BP is set to develop second phase of Oman's giant Khazzan gas
field along with Oman Oil Company Exploration & Production. The
Ghazeer project is expected to come onstream in 2021 and deliver an
additional 0.5 bcf/d and over 15,000 bpd condensate production. The
first phase is producing at design capacity of around 1 bcf/d and
around 35,000 bpd of condensate.
Kuwait set to spend US$113 billion in 5 years
Kuwait plans to invest a massive KWD34 billion (US$113 billion)
over the next five years mainly to boost oil exploration and
production activity both inside and outside the country. This
includes raising production of non-associated gas to nearly 500
million standard cu ft per day by the end of 2018.
Kuwait added to MSCI EM watchlist
MSCI included Kuwait in MSCI EM watchlist for a potential
upgrade to EM status in June 2019, with implementation in May 2020.
According to Boursa Kuwait, Kuwait would have a potential weight of
0.3 per cent in the MSCI EM index.
UAE 7(th) most competitive in the world
The UAE has jumped three places to become the 7th most
competitive economy in the world, according to the IMD World
Competitiveness Centre's 2018 data. The UAE surpassed Norway (8),
Sweden (9), Canada (10), Germany (15), Australia (19), UK (20),
Japan (25), France (28) and Italy (42) in the rankings. Also, Qatar
(14) was ranked the 2nd most competitive economy in the GCC,
followed by Saudi Arabia (39).
Moody's changed Qatar's Outlook from Negative to Stable
Moody's changed the Outlook on the Qatar to "Stable" from
"Negative" and affirmed ratings at Aa3. Moody's believes that Qatar
has the ability to withstand the economic, financial and diplomatic
blockade by the neighbors in its current form for an extended
period of time without a material deterioration of the sovereign's
credit profile.
Saudi Arabia economy expanded by 1.2 per cent in 1Q18
Saudi Arabia reported 1.2 per cent YoY economic growth in 1Q18
following four quarter long negative real growth. The headline rate
accelerated on the back of a pick-up in oil GDP, supported by
higher oil production (but within the OPEC agreement quota) and
improved non-oil activity. The non-oil sector grew 1.6 per cent
YoY, helped by expansion in both the private (1.1 per cent YoY) and
the government (2.7 per cent YoY) sectors.
Qatar reported 1.4 per cent GDP growth in 1Q18 led by
non-hydrocarbon
Qatar's economic recovery seems to be continuing at a healthy
pace, with 1Q18 real GDP output expanding by 1.4 per cent YoY. The
non-hydrocarbon sector reported growth of 4.9 per cent YoY, driven
by gains in the construction, financial services, manufacturing and
transport and storage sectors among others. Oil and gas output,
however, declined by 2.3 per cent YoY, which partly reflects the
country's compliance with its OPEC production cut target.
Portfolio Structure
Country Allocation and Portfolio Rebalancing
Under the new GCC-wide investment policy the Investment Adviser
is monitoring a broader universe of investment opportunities across
the Gulf Cooperation Council region comprising Saudi Arabia,
Kuwait, UAE, Oman, Qatar and Bahrain. Following the adoption of
this new in investment policy, the Investment Adviser changed the
proportion of the Company invested outside Qatar from 10 per cent
(31st December 2017) to 59 per cent (30th June 2018); adding
holdings in Saudi Arabia, the UAE and Kuwait.
GIF is actively managed, so weightings in different GCC markets
will depend on the Investment Adviser's views on the investment
outlook and valuations of the GCC economies. GIF remains overweight
Qatar (36.7 per cent of NAV), as Qatar trades at attractive
valuations compared to other GCC markets. Holdings in Saudi,
Kuwaiti and the Emirati companies were 39.2 per cent, 10 per cent
and 9.6 per cent of the fund, respectively. Reflecting the
portfolio rebalancing, 4.5 per cent of the Company was in cash as
at 30th June 2018(1Q18: 10.3 per cent) awaiting reinvestment.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting Country
Allocation as at 30 June 2018.
As of 30th June 2018, GIF has 43 holdings: 24 in Saudi Arabia, 9
in Qatar, 5 in the UAE and 5 in Kuwait.
Sector Allocation
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting Sector
Allocation as at 30 June 2018.
Financials is GIF's largest sector at 46.4 per cent of NAV. GCC
banks have strong balance sheets and government backing and should
benefit from resurgent infrastructure spending. Recent interest
rate rises should allow them to gradually reprice their loan
books.
Other major sectors include: Energy (14.0 per cent), Materials
(8.7 per cent) and Real Estate (8.2 per cent). Recovery in oil
prices should spur growth of the Energy and Materials industry
while tighter demand should help pricing. Rising population,
investment in infrastructure and regulatory reforms should
stimulate growth in the Real Estate sector.
Top 5 Holdings
Company Name Country Sector % share of NAV
Commercial Bank of Qatar Qatar Financials 9.7%
-------------- ------------ ---------------
Qatar Gas Transport Qatar Energy 8.4%
-------------- ------------ ---------------
Qatar Electricity & Water Co Qatar Utilities 7.8%
-------------- ------------ ---------------
Al Rajhi Bank Saudi Arabia Financials 5.1%
-------------- ------------ ---------------
National Bank of Kuwait Kuwait Financials 4.1%
-------------- ------------ ---------------
Source: QIC; as of 30(th) June 2018
The stake in Qatar Gas Transport Company was increased (8.4 per
cent of NAV vs. 3.3 per cent in 1Q18) as valuations look
attractive. Holdings in Qatar National Bank and Qatar Islamic bank
were sold tactically in 2Q18 to take advantage of sharp share price
increases as their respective weights in EM indices were
increased.
The Investment Adviser took new positions primarily in the
Materials sector including National Petrochemical (1.4 per cent of
NAV) and Yanbu National Petrochemical (1.4 per cent). Other new
holdings include Kuwait International Bank (2.0 per cent).
Profile of Top Five Holdings
Commercial Bank of Qatar (9.7% of NAV)
Commercial Bank of Qatar (CBQ) is the second largest commercial
bank in Qatar established in 1975 offering banking solutions
worldwide, with primary focus on corporate and retail banking. The
Bank's nationwide network includes 31 full service branches and 174
ATMs. Under its diversification strategy, CBQ has expanded its GCC
footprint through strategic partnerships with associated banks -
the National Bank of Oman (NBO) in Oman, United Arab Bank (UAB) in
the UAE and subsidiary Alternatifbank in Turkey. Under the 5-year
turnaround strategy, the Bank is strengthening its balance sheet by
prudently managing the risks. Bottom line is expected to improve
substantially once the high provision cycle comes to an end,
moreover, ongoing cost optimisation will also add to the
bottom-line. For 1H18, CBQ reported net profit of US$235 million
(vs. US$49 million in 1H17) reflecting effective execution of the
strategy. As of 30th June 2018, the Bank has total assets of
US$38.4 billion.
Qatar Gas Transport (8.4% of NAV)
Qatar Gas Transport Company (Nakilat), established in 2004, is a
key midstream player in the hydrocarbon sector in the state of
Qatar. Nakilat owns 69 LNG and LPG vessels, making it one of the
largest LNG ship owners in the world. Out of the 65 LNG vessels, 25
are wholly owned and 40 are under joint ventures (JV). It also has
four jointly owned LPG vessels. Nakilat also provides shipping and
marine-related services to a range of participants within the
Qatari hydrocarbon sector. Nakilat is an integral component of the
supply chain of some of the largest, most advanced energy projects
in the world undertaken by Qatar Petroleum, Qatargas, Ras Gas and
their joint venture partners for the State of Qatar. For 1H18,
Nakilat reported a net profit of US$122 million compared to US$112
million during the same period in FY17, an increase of 9%. Going
forward, Qatar's North Field expansion plan paves the way for
increased transportation of gas, which may benefit the Company in
the longer run.
Qatar Electricity & Water Co. (7.8% 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 60% market share in the
electricity business, while in the water desalination business, it
commands 80% 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 is setting up
presence overseas, 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 long
term purchase agreements with government-owned Kahramaa; hence, the
Company has a low-risk business model, with secure and visible
earnings and cash flows. For 1H18, the Company reported net profit
of US$223 million.
Al Rajhi Bank (5.1% of NAV)
Established in 1957, Al Rajhi Bank is one of the largest Islamic
banks in the world with 17 per cent market share in Saudi Arabia's
financing and deposits. The Bank operates through 550 branches,
4,854 ATM's, 76,453 POS terminals installed with merchants and 234
remittance centers across the Kingdom. The Bank has an asset base
of US$92.9 billion and enjoys strong capital adequacy, lower cost
of borrowing, low NPAs and high provisioning coverage. With a
strong retail focus, the Bank is set to benefit from consumption
growth and increasing interest rates. For 1H18, the Bank reported
net profit of US$1.3 billion, an increase of 12.4 per cent. The
improvement in the Saudi economy could see better consumption
growth, benefitting the Bank going forward.
National Bank of Kuwait (4.1% of NAV)
Founded in 1952, National Bank of Kuwait (NBK) is Kuwait's
largest banking group with a dominant market position in loans and
deposits. It operates through international network with more than
140 branches covering the world's financial centers in 15
countries. The Bank is set to benefit from demand for credit from
Kuwait's development plans and from economic recovery in Egypt. As
of 30th June 2018, NBK has total assets of US$89 billion. For 1H18,
the Bank reported net profit of US$614 million (vs. US$545 million
in 1H17).
GIF Performance
YTD 2018, GIF's NAV is up 12.3 per cent whilst the S&P GCC
index rose 9.8 per cent. Since the change in investment policy in
December, GIF's NAV is 21.7 per cent higher and the S&P GCC
index is 13.0 per cent higher.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com for a chart depicting GIF
Performance.
GCC Outlook
The GCC nations are adapting to changing global economic
conditions, but challenges remain, including relatively high local
unemployment in certain states, a heavy reliance on expatriate
workers, and the ongoing dependency on the government sector to
drive growth.
Diversification and reducing the budget deficits are positive
developments. If GCC companies can weather the near-term impacts of
the many government reforms that are underway, they could
outperform global peers in the near to medium term.
Valuations
Market Market PE (x) PB (x) Dividend Yield
Cap. (%)
US$ billion 2018E 2019E 2018E 2019E 2018E 2019E
------------ ------ ------ ------ ------ -------- -------
Qatar 110.1 13.20 11.46 1.49 1.41 4.49 4.72
------------ ------ ------ ------ ------ -------- -------
Saudi Arabia 532.4 15.67 13.99 1.82 1.73 3.33 3.57
------------ ------ ------ ------ ------ -------- -------
Dubai 79.0 7.89 7.09 1.01 0.94 5.51 5.74
------------ ------ ------ ------ ------ -------- -------
Abu Dhabi 129.1 11.44 10.39 1.56 1.48 5.36 5.73
------------ ------ ------ ------ ------ -------- -------
Kuwait 97.6 12.57 10.77 1.51 1.42 NA NA
------------ ------ ------ ------ ------ -------- -------
S&P GCC 885.6 13.89 12.37 1.61 1.52 3.85 4.14
------------ ------ ------ ------ ------ -------- -------
MSCI EM 13,519.6 12.04 10.79 1.57 1.44 2.83 3.18
------------ ------ ------ ------ ------ -------- -------
MSCI World 59,907.8 15.61 14.23 2.20 2.05 2.49 2.69
------------ ------ ------ ------ ------ -------- -------
Source: Bloomberg, as of 12th July 2018
Epicure Managers Qatar Limited Qatar Insurance Company
S.A.Q.
21 September 2018 21 September 2018
Investment Policy
Investment Objective
The Company's investment objective is to capture the
opportunities for growth offered by the expanding GCC economies by
investing in listed companies on one of the GCC exchanges or
companies soon to be listed on one of the GCC exchanges. The
Company 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 invests in listed companies on any GCC Exchanges in
addition to companies soon to be listed. The Company may also
invest in listed companies, or pre-IPO companies, in other GCC
countries. The Company will also be permitted to invest in
companies listed on stock markets not located in the GCC which will
have a significant economic exposure to and/or derive a significant
amount of their revenues from GCC countries.
Whether investments will be active or passive investments
In the ordinary course of events, the Company is not an activist
investor, although the Investment Adviser will seek to engage with
investee company management where appropriate.
Holding period for investments
In the normal course of events, the Company expects to be
fully-invested, although the Company may hold cash reserves pending
new IPOs or when it is deemed financially prudent. Although the
Company is a long term financial investor, it will actively manage
its portfolio.
Spread of investments and maximum exposure limits
The Company will invest in a portfolio of investee companies.
The following investment restrictions are in place to ensure a
spread of investments and to ensure that there are maximum exposure
limits in place (see investment guidelines under Investing
Restrictions).
Policy in relation to gearing and derivatives
Borrowings will be limited, as at the date on which the
borrowings are incurred, to 5% of NAV. Borrowings will include any
financing element of a swap. The Company will not make use of
hedging mechanisms.
The Company may utilise derivative instruments in pursuit of its
investment policy subject to:
-- such derivative instruments being designed to offer the
holder a return linked to the performance of a particular
underlying listed equity security;
-- a maximum underlying equity exposure limit of 15 per cent of
NAV (calculated at the time of investment); and
-- a policy of entering into derivative instruments with more
than one counterparty in relation to an investment, where possible,
to minimise counterparty risk.
Policy in relation to cross-holdings
Cross-holdings in other listed or unlisted investment funds or
ETFs that invest in Qatar or other countries in the GCC region will
be limited to 10 per cent. of Net Asset Value at any time
(calculated at the time of investment).
Investing Restrictions
The investing restrictions for the Company are as follows:
(i) Foreign ownership restrictions
Investments in most GCC listed companies by persons other than
citizens of that specific GCC country have an ownership restriction
wherein the law precludes persons other than citizens of that
specific GCC country from acquiring a certain proportion of a
company's issued share capital. It is possible that the Company may
have problems acquiring stock if the foreign ownership interest in
one or more stocks reaches the allocated upper limit. This may
adversely impact the ability of the Company to invest in certain
companies listed on the GCC exchanges.
(ii) Investment guidelines
The Company has established certain investment guidelines. These
are as follows (all of which calculated at the time of
investment):
-- No single investment position in the S&P GCC Composite
constituent may exceed the greater of: (i) 15 per cent. of the Net
Asset Value of the Company; or (ii) 125 per cent. of the
constituent company's index capitalisation divided by the index
capitalisation of the S&P GCC Composite Index, as calculated by
Bloomberg (or such other source as the Directors and Investment
Manager may agree):
-- No single investment position in a company which is not a
S&P GCC Composite Index constituent may at the time of
investment exceed 15 per cent. of the NAV of the Company; and
-- No holding may exceed 5 per cent. of the outstanding shares
in any one company (including investment in Saudi Arabian listed
companies by way of derivative investment in P-Note or Swap
structured financial products); and
(iii) Conflicts management
The Investment Manager, the Investment Adviser, their officers
and other personnel are involved in other financial, investment or
professional activities, which may on occasion give rise to
conflicts of interest with the Company. The Investment Manager will
have regard to its obligations under the Investment Management
Agreement to act in the best interests of the Company, and the
Investment Adviser will have regard to its obligations under the
Investment Adviser Agreement to act in the best interests of the
Company, so far as is practicable having regard to their
obligations to other clients, where potential conflicts of interest
arise. The Investment Manager and the Investment Adviser will use
all reasonable efforts to ensure that the Company has the
opportunity to participate in potential investments that each
identifies that fall within the investment objective and strategies
of the Company. Other than these restrictions set out above, and
the requirement to invest in accordance with its investing policy,
there are no other investing restrictions.
Returns and distribution policy
The Company's primary investment objective is to achieve capital
growth. However, the Company has instituted an annual dividend
policy to return to Shareholders distributions at least equal to
reported income for each reporting period. Shareholders should note
that this cannot be guaranteed and the level of distributions for
any period remains a matter to be determined at the discretion of
the Board.
Life of the Company
The Company currently does not have a fixed life but the Board
considers it desirable that Shareholders should have the
opportunity to review the future of the Company at appropriate
intervals. Accordingly, at the annual general meeting of the
Company in 2021, a resolution will be proposed that the Company
continues in existence. More than 50 per cent. of Shareholders
voting must vote in favour for this resolution to be passed. If the
resolution is passed, a similar resolution will be proposed at
every third annual general meeting thereafter. If the resolution is
not passed, the Directors will be required to formulate proposals
to be put to Shareholders to reorganise, unitise or reconstruct the
Company or for the Company to be wound up.
Report of the Directors
The Directors hereby submit their annual report together with
the audited consolidated and Company financial statements of Gulf
Investment Fund plc (the "Company") for the year ended 30 June
2018.
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 15 to 16.
Results and Dividends
The results of the Company for the year and its financial
position at the year- end are set out on pages 36 to 46 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 2017, the Directors declared a
dividend of US$2,773,837 (3.0c per share) which was approved by
Shareholders and paid by the Company in February 2018. The
Directors recommend a dividend of 3 cents per share in respect of
the year ended 30 June 2018.
Directors
Details of Board members at the date of this report, together
with their biographical details, are set out on page 26.
Director independence and Directors' and other interests have
been detailed in the Directors' Remuneration Report on pages 30 and
31.
Creditor Payment Policy
It is the Company's policy to adhere to the payment terms agreed
with individual suppliers and to pay in accordance with its
contractual and other legal obligations.
Gearing Policy
Borrowings will be limited, as at the date on which the
borrowings are incurred, to 5% of NAV (or such other limit as may
be approved by the Shareholders in general meeting). The Company
will not make use of any hedging mechanisms.
There were no borrowings during the year (2017: US$ nil).
Donations
The Company has not made any political or charitable donations
during the year (2017: US$ nil).
Adequacy of the Information Supplied to the Auditors
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as each is aware, there is
no relevant audit information of which the Company's auditors are
unaware; and each Director has taken all steps that he ought to
have taken as a Director to make himself aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
Statement of Going Concern
The Directors are satisfied that the Company and the Group have
adequate resources to continue to operate as a going concern for
the foreseeable future and have prepared the financial statements
on that basis, however Shareholders will be given the opportunity
to vote for a 100% tender in 2020 and to vote for the continued
existence of the Company at the annual general meeting (AGM) in
2021 and every third AGM thereafter.
Independent Auditors
KPMG Audit LLC has expressed its willingness to continue in
office in accordance with Section 12 (2) of the Companies Act
1982.
Annual General Meeting
The Annual General Meeting of the Company will be held on 7
November 2018 at the Company's registered office.
A copy of the notice of Annual General Meeting is contained
within this Annual Report. As well as the business normally
conducted at such a meeting, Shareholders will be asked to renew
the authority to allow the Company to continue with share
buy-backs.
The notice of the Annual General Meeting and the Annual Report
are also available at www.gulfinvestmentfundplc.com.
Corporate Governance
Full details are given in the Corporate Governance Report on
pages 19 to 25, which forms part of the Report of the
Directors.
Substantial Shareholdings
As at the date of publication of this annual report, the Company
had been notified, or the Company is aware of the following
significant holdings in its Share Capital.
Ordinary Shares
Name %
----------------
City of London Investment Management
Company 28.80
----------------
Qatar Insurance Company S.A.Q. 18.73
----------------
1607 Capital Partners LLC 15.12
----------------
Qatar Investment Authority 11.66
----------------
Lazard Asset Management 6.10
----------------
BCV Asset Management 3.01
----------------
The above percentages are calculated by applying the
Shareholdings as notified to the Company or the Company's awareness
to the issued Ordinary Share Capital as at 31 August 2018.
On behalf of the Board
Nicholas Wilson
Chairman
21 September 2018
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. The Board considers each
of the Directors to be independent of, and free of any material
relationship with, the Investment Manager and Investment
Adviser.
The Board of Directors delegates to the Investment Manager
through the Investment Management Agreement the responsibility for
the management of the Company's assets in GCC securities in
accordance with the Company's investment policy and for retaining
the services of the Investment Adviser. The Company has no
executives or employees.
The Articles of Association require that all Directors submit
themselves for election by Shareholders at the first opportunity
following their appointment and shall not remain in office longer
than three years since their last election or re-election without
submitting themselves for re-election.
The Board meets formally at least 4 times a year and between
these meetings there is regular contact with the Investment
Manager. Other meetings are arranged as necessary. The Board
considers that it meets regularly enough to discharge its duties
effectively. The Board ensures that at all times it conducts its
business with the interests of all Shareholders in mind and in
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, Neil
Benedict and David Humbles. The Audit Committee is responsible for,
inter alia, ensuring that the financial performance of the Company
is properly reported on and monitored. The Audit Committee is
chaired by Paul Macdonald. The Audit Committee normally meets at
least twice a year when the Company's interim and final reports to
Shareholders are to be considered by the Board but meetings can be
held more frequently if the Audit Committee members deem it
necessary or if requested by the Company's auditors. The Audit
Committee will, amongst other things, review the annual and interim
accounts, results announcements, internal control systems and
procedures, preparing a note in respect of related party
transactions and reviewing any declarations of interest notified to
the Committee by the Board each on six monthly basis, review and
make recommendations on the appointment, resignation or dismissal
of the Company's auditors and accounting policies of the Company.
The Company's auditors are advised of the timing of the meetings to
consider the annual and interim accounts and the auditors shall be
asked to attend the Audit Committee meeting where the annual
audited accounts are to be considered. The Audit Committee chairman
shall report formally to the Board on its proceedings after each
meeting and compile a report to Shareholders on its activities to
be included in the Company's annual report. At least once a year,
the Audit Committee will review its performance, constitution and
terms of reference to ensure that it is operating at maximum
effectiveness and recommend any changes it considers necessary to
the Board for approval.
The terms of reference for the Audit Committee are available on
the Company's website www.gulfinvestmentfundplc.com.
Significant Issues
During its review of the Company's financial statements for the
year ended 30 June 2018, the Audit Committee considered the
following significant issues, in particular those communicated by
the auditor during their reporting:
Carrying value of quoted equity investments
The valuation of investments is undertaken in accordance with
the accounting policies, disclosed in note 1(a) to the financial
statements. The audit includes independent confirmation of the
existence of all investments from the Company's custodian. All
investments are considered liquid and 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.
Carrying value of Parent Company's loan to and investment in
subsidiary
The carrying value of the Parent Company's loan to and
investment in subsidiary represents 98.9% (2017: 99.1%) of the
Parent Company's total assets. The assessment of carrying value is
not at a high risk of significant misstatement or subject to
significant judgement as the carrying value is equal to the audited
net asset value of the subsidiary. However, due to its materiality
in the context of the Parent Company financial statements, this is
considered to be the area that had the greatest effect on the
Parent Company balance sheet.
Remuneration Committee
The Company has established a Remuneration Committee. The
Remuneration Committee is made up of at least two non-executive
Directors who are identified by the Board as being independent. Its
members are Neil Benedict (Chairman), Nicholas Wilson, Paul
Macdonald and David Humbles. The Remuneration Committee normally
meets at least once a year and at such other times as the chairman
of the Remuneration Committee shall require. The Remuneration
Committee reviews the performance of the Directors and sets the
scale and structure of their remuneration and the basis of their
letters of appointment with due regard to the interests of
Shareholders. In determining the remuneration of Directors, the
Remuneration Committee seeks to enable the Company to attract and
retain Directors of the highest calibre. No Director is permitted
to participate in any discussion of decisions concerning their own
remuneration. The Remuneration Committee reviews at least once a
year its own performance, constitutions and terms of reference to
ensure it is operating at maximum effectiveness and recommend any
changes it considers necessary to the Board for approval.
The terms of reference for the Remuneration Committee are
available on the Company's website
www.gulfinvestmentfundplc.com
Nomination Committee
The Company has established a Nomination Committee which shall
be made up of at least two members and which shall comprise all
independent non-executive Directors. The Nomination Committee
comprises Nicholas Wilson (Chairman), Neil Benedict, Paul Macdonald
and David Humbles. The Nomination Committee meets at least once a
year prior to the first quarterly Board meeting and at such other
times as the Chairman of the committee shall require. The
Nomination Committee is responsible for ensuring that the Board
members have the range of skills and qualities to meet its
principal responsibilities in a way which ensures that the
interests of Shareholders are protected and promoted and regularly
review the structure, size and composition of the Board. The
Nomination Committee shall, at least once a year, review its own
performance, constitution and terms of reference to ensure that it
is operating at maximum effectiveness and recommend any changes it
considers necessary to the Board for approval.
The Nomination Committee will assess potential candidates on
merit against a range of criteria including experience, knowledge,
professional skills and personal qualities as well as independence,
if this is required for the role. Candidates' ability to commit
sufficient time to the business of the Company is also key,
particularly in respect of the appointment of the Chairman. The
Chairman of the Nomination Committee is primarily responsible for
interviewing suitable candidates and a recommendation will be made
to the Board for final approval.
Management Engagement Committee
The Company has established a Management Engagement Committee
which is made up of at least two members who are independent
non-executive Directors. The Management Engagement Committee
members are Neil Benedict (Chairman), Paul Macdonald, Nicholas
Wilson and David Humbles. The Management Engagement Committee will
meet at least quarterly and is responsible for reviewing the
performance of the Investment Manager and other service providers,
to ensure that the Company's management contract is competitive and
reasonable for the Shareholders and to review and make
recommendations to the Board on any proposed amendment to or
material breach of the management contract and contracts with other
service providers.
Board Attendance
The number of formal meetings during the year of the Board, and
its Committees, and the attendance of the individual Directors at
those meetings, is shown in the following table:
Board Audit Committee Remuneration 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)
------ ---------------- ------------------------- ----------- ------------
David Humbles 8 (8) 6 (6) 1 (1) 2 (2) 4 (4)
------ ---------------- ------------------------- ----------- ------------
Paul Macdonald
(Chairman of
Audit Committee) 8 (8) 6 (6) 1 (1) 2 (2) 4 (4)
------ ---------------- ------------------------- ----------- ------------
The Annual General Meeting was held on 16 November 2017.
Internal Control
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. Its review takes place
at least once a year. Such a system is designed to manage rather
than eliminate the risk of failure to achieve business objectives
and can only provide reasonable and not absolute assurance against
material mis-statement or loss. The Board also determines the
nature and extent of any risks it is willing to take in order to
achieve its strategic objectives.
The Board has contractually delegated to external agencies,
including the Investment Manager and the Investment Adviser, the
management of the investment portfolio, the custodial services
(which include the safeguarding of the assets), the registration
services and the day-to-day accounting and Company Secretarial
requirements. Each of these contracts was entered into after full
and proper consideration by the Board of the quality and cost of
services offered including the control systems in operation in so
far as they relate to the affairs of the Company.
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 Investment
Manager and Investment Adviser, including its internal audit
function provide sufficient assurance that a sound system of
internal control, which safeguards Shareholders' investments and
the Company's assets, is maintained. An internal audit function,
specific to the Company, is therefore considered unnecessary.
The Board confirms that there is an on-going process for
identifying, evaluating and managing the Company's principal
business and operational risks that have been in place for the year
ended 30 June 2018 and up to the date of approval of the annual
report and financial statements.
Accountability and Relationship with the Investment Manager, the
Custodian and the Administrator
The Statement of Directors' Responsibilities is set out on page
27.
The Board has delegated contractually to external third parties,
including the Investment Manager, the Investment Adviser, the
Custodian and the Administrator, the management of the investment
portfolio, the custodial services (which include the safeguarding
of the assets), the day to day accounting, company secretarial and
administration requirements. Each of these contracts was entered
into after full and proper consideration by the Board of the
quality and cost of the services provided, including the control
systems in operation in so far as they relate to the affairs of the
Company.
The Investment Manager, the Investment Adviser and the
Administrator ensure that all Directors receive, in a timely
manner, all relevant management, regulatory and financial
information. Representatives of the Investment Manager and the
Administrator attend each Board meeting enabling the Directors to
probe further on matters of concern.
Continued Appointment of the Investment Manager
The Board considers the arrangements for the provision of
investment management and other services to the Company on an
on-going basis. The Board reviews investment performance at each
Board meeting and a formal review of the Investment Manager (and
Investment Adviser) is conducted annually. As a result of their
annual review, NAV performance has been found to be satisfactory
and it is the opinion of the Directors that the continued
appointment of the current Investment Manager (and Investment
Adviser) on the terms agreed is in the interests of the Company's
Shareholders as a whole.
Relations with Shareholders
The Chairman is responsible for ensuring that all Directors are
made aware of Shareholders' concerns. The Shareholder profile of
the Company is regularly monitored and the Board liaises with the
Investment Manager to canvass Shareholder opinion and communicate
views to Shareholders. The Company is concerned to provide the
maximum opportunity for dialogue between the Company and
Shareholders. It is believed that Shareholders have proper access
to the Investment Manager at any time and to the Board if they so
wish. All Shareholders are encouraged to attend annual general
meetings. Together with the Investment Manager and Investment
Adviser, regular investor presentations are held to promote a wider
following for the Company.
Viability statement
The Board makes an assessment of the longer term prospects of
the Company beyond the timeframe envisaged under the going concern
basis of accounting having regard to the Company's current position
and the principal risks it faces.
The Company is a long term investment vehicle and the Directors,
therefore, believe that it is appropriate to assess its viability
over a long term horizon. The Board considers that assessing the
Company's prospects over a period of five years is appropriate
given the nature of the Company and the inherent uncertainties of
looking out
over a longer time period. The Directors believe that a five
year period appropriately reflects the long term strategy of the
Company and over which, in the absence of any adverse change to the
regulatory environment, they do not expect there to be any
significant change to the current principal risks and to the
adequacy of the mitigating controls in place.
Notwithstanding the above the Company's Shareholders will have
the opportunity to vote for the cessation of the Company at the
annual general meeting in 2021 which will be proposed as an
ordinary resolution. In the event that the continuation vote is not
passed the Directors will be required to put forward proposals to
Shareholders to the effect that the Company be wound up,
liquidated, reorganised or unitised. If the continuation vote is
passed, a further continuation vote will be proposed at every third
annual general meeting thereafter..
On behalf of the Board
Nicholas Wilson
Chairman
21 September 2018
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 Optas GbmH. Paul is a Non-Executive Director of PME African
Infrastructure Opportunities plc.
Neil Benedict (Non-Executive Director)
Neil Benedict is based in the USA with over thirty years'
experience of financial markets. He was formerly a Managing
Director at Salomon Brothers, where he was Head of International
Capital Markets, and, prior to that, the founder and head of the
worldwide Currency Swaps group. Neil was also a Managing Director
at Dillon Read and helped establish their Tokyo office. He is
currently a Senior Managing Director at Sonenshine Partners a New
York private investment bank. Neil is a fellow member of the
Institute of Chartered Accountants in England and Wales.
David Humbles (Non-Executive Director)
David Humbles was born in 1960 and is British. He 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
21 September 2018
Audit Committee Report
An Audit Committee has been established in compliance with the
FCA's Disclosure Guidance and Transparency Rule 7.1 and the UK
Corporate Governance Code consisting of independent Directors. Its
authority and duties are clearly defined within its written terms
of reference. Paul Macdonald is Chairman of the Audit Committee,
which also comprises Mr Nicholas Wilson, Mr Neil Benedict and Mr
David Humbles.
The Committee meets at least two times a year.
.
The Committee's responsibilities, which were discharged during
the year, include:
-- monitoring and reviewing the integrity of the interim and
annual financial statements and the internal financial
controls;
-- reviewing the appropriateness of the Company's accounting policies;
-- making recommendations to the Board in relation to the
appointment of the external auditors and approving their
remuneration and terms of their engagement;
-- reviewing the external Auditor's plan for the audit of the Company's financial statements;
-- developing and implementing policy on the engagement of the
external auditors to supply non-audit services;
-- reviewing and monitoring the independence, objectivity and
effectiveness of the external auditors;
-- reviewing the arrangements in place within the Administrator
and Investment Manager/Adviser whereby their staff may, in
confidence, raise concerns about possible improprieties in matters
of financial reporting or other matters insofar as they may affect
the Company;
-- performing the annual review of the effectiveness of the
internal control systems of the Company;
-- reviewing the terms of the Investment Management Agreement;
-- considering annually whether there is a need for the Company
to have its own internal audit function; and
-- review the relationship with and the performance of the
Custodian, the Administrator and the Registrar.
The Audit Committee does not award any non-audit work. The full
Board has to approve any non-audit work and this includes
confirmation that in all such work auditor objectivity and
independence is safeguarded.
Owing to the nature of the fund's business, with all major
functions being outsourced and the absence of employees, the Audit
Committee do not feel it is necessary for the Company to have its
own internal audit function. This situation is re-evaluated
annually.
KPMG Audit LLC was re-appointed as auditor at the last AGM on 16
November 2017. 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 x
September 2018.
Paul Macdonald
Chairman of the Audit Committee
21 September 2018
Management Engagement Committee Report
A Management Engagement Committee has been established in
accordance with good corporate governance. Neil Benedict is
chairman of the Committee, which also comprises Paul Macdonald,
Nicholas Wilson and David Humbles.
The function of the Management Engagement Committee is to
monitor the performance of all the Company's service providers and
in the particular the performance of the Investment
Manager/Investment Adviser.
The performance of the Investment Manager/Investment Adviser is
formally reviewed annually at the end of the Company's financial
year. The Management Engagement Committee meets quarterly prior to
the quarterly Board meetings and the chairman of the Management
Engagement Committee monitors the performance periodically during
the intervening periods.
As regards the Investment Manager/Investment Adviser, the
Committee:
-- monitors and evaluates the investment performance both in
absolute terms and also by reference to peer group analysis
prepared by the Investment Manager/Adviser and by the Company's
broker;
-- reviews the performance fee structure to ensure that it does
not encourage excessive risk and that it rewards demonstrable
superior performance;
-- investigates any breaches of agreed investment limits and any
deviation from the agreed investment policy and strategy;
-- reviews the standard of any other services provided by the Investment Manager;
-- evaluates the level and effectiveness of any marketing
support provided by the Investment Manager, including but not
limited to, their input into quarterly reports, handling investor
relations and website monitoring and development;
-- assesses the level of fees charged by the Investment Manager
and how these fees compare with those charged to peer group
companies;
-- compares the notice period on the Investment Management Agreement with industry norms;
-- considers any other issues on the appointment of the Investment Manager.
As regards the other service providers to the Company, the
Committee:
-- monitors the terms on which they are retained and compares them to market rates;
-- examines the effectiveness of the services provided;
-- makes recommendations to the Board where changes are warranted.
At its most recent meeting, the Management Engagement Committee
concluded that the performance of the Investment Manager/Investment
Adviser had been satisfactory. The Investment Manager had adhered
to the investment policy and policy limits.
The Committee was satisfied with the current performance of the
Company's other service providers.
Neil Benedict
Chairman of the Management Engagement Committee
21 September 2018
Directors' Remuneration Report
This report meets the relevant rules of the Listing Rules of the
Financial Services Authority and describes how the Board has
applied the principles relating to Directors' remuneration. An
ordinary resolution to receive and approve this report will be put
to the Shareholders at the forthcoming Annual General Meeting.
Role of the Remuneration Committee
The role and make-up of the Remuneration Committee is more fully
discussed on page 22.
The committee held 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 GBP52,500 plus GBP10,000 with
respect to the work involved in the share buy-back programme, the
Chairman of the Audit Committee GBP37,500, the other Directors
GBP35,000.
Directors' and officers' liability insurance cover is in place
in respect of the Directors.
Reappointment
It is the Board's policy that non-independent Directors stand
for re-election every year and independent Directors stand for
re-election every three years.
Directors' fees
The fees expensed (including additional payments) by the Company
in respect of each of the Directors who served during the year, and
in the previous year, were as follows:
30 June 2018 30 June 2017
GBP GBP
---------------------------------------------------------------------------------------- ------------- -------------
Nicholas Wilson (Chairman) 58,750 57,500
Paul Macdonald (Chairman of Audit Committee) 33,750 32,500
Neil Benedict (Chairman of Remuneration Committee and Management Engagement Committee) 31,250 30,000
David Humbles 31,250 3,874
Len O'Brien - 30,000
---------------------------------------------------------------------------------------- ------------- -------------
155,000 153,874
---------------------------------------------------------------------------------------- ------------- -------------
US$ charge reflected in the financial statements 204,645 201,621
---------------------------------------------------------------------------------------- ------------- -------------
Expenses totalling US$103,684 (2017: US$95,424) were incurred by
the Directors and reimbursed during the year.
No other remuneration or compensation was paid or payable by the
Company during the period to any of the Directors.
Director independence
Mr Nicholas Wilson and Mr Paul Macdonald have each served as
independent Non-executive Directors of the Company for more than
nine years, and Mr Wilson has served as non-executive Chairman
since 13 November 2012. Notwithstanding the length of their
service, Mr Wilson and Mr Macdonald continue to demonstrate their
commitment to fulfilling their role as non-executive Chairman and
Non-executive Director respectively, and satisfy the independence
factors set out in Code Provision B.1.1 of the Code except for the
length of their service.
They are not involved in the daily management of the Company nor
in any relationships or circumstances which might possibly
interfere with their exercise of independent judgment. In addition,
they continue to demonstrate the attributes of independent
Non-executive Directors and there is no evidence that their tenure
has had any adverse impact on their independence.
The Board considers each of the Directors to be independent of,
and free of any material relationship with, the Investment Manager
and Investment Adviser.
Directors' and Other Interests
None of the Directors had any interest during the year in any
material contract for the provision of services which was
significant to the business of the Company.
Director holdings in Company:
30 June 2018 30 June 2017
Director Shares Shares
------------- -------------
Nicholas Wilson 39,600 44,000
------------- -------------
For and on behalf of the Board
Neil Benedict
Chairman of the Remuneration Committee
21 September 2018
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Gulf Investment Fund plc
Opinions and conclusions arising from our audit
1. Our opinion is unmodified
We have audited the financial statements of Gulf Investment Fund
plc ("the Company") and its subsidiary (together "the Group") for
the year ended 30 June 2018 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 2018 and of the Group's and
Parent Company's profit for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards; and
-- have been properly prepared in accordance with the provisions
of the Companies Acts 1931 to 2004.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and we remain independent of the Company
and Group in accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest entities.
We believe that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion.
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matters , in decreasing order of audit significance,
in arriving at our audit opinion above, together with our key audit
procedures to address those matters. These matters were 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 these matters.
2. Key audit matters: our assessment of risks of material misstatement continued
The risk Our response
Carrying amount High value Our procedures included:
of quoted equity The Group's portfolio * Control design: Documenting and assessing the
investments (US$104.6m; of quoted investments processes in place to record investment transactions
2017: US$102.1m) makes up 92.8% and to value the portfolio;
of the Group's
Refer to page total assets (by
24 (Significant value) and is * Tests of detail: Agreeing the valuation of 100 per
Issues identified considered cent of investments in the portfolio to externally
by the Audit to be the key driver quoted prices; and
Committee), notes of results. We
1(a), 2 and 8 do not consider
(accounting policy these investments * Enquiry of custodians: Agreeing 100 per cent of
for financial to be at a high investment holdings in the portfolio to independently
assets at fair risk of significant received third party confirmations from investment
value through misstatement, or custodians.
profit or loss to be subject to
and financial a significant level
risk disclosures of judgement because
relating to financial they comprise liquid,
instruments). quoted investments
as at 30 June 2018.
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.
------------------------ -----------------------------------------------------------------
Carrying value High value Our procedures included:
of Parent Company's The carrying value * Tests of detail: Assessing the loan to and investment
loan to and investment of the Parent Company's in subsidiary to identify, with reference to the
in subsidiary loan to and investment subsidiary's accounts, whether it has sufficient net
(New this year) in subsidiary asset value to cover the debt owed; and
(US$64.3m and represents
US$45.4m respectively, 98.9% (2017: 99.1%)
2017: US$75.5m of the Parent Company's * Assessing subsidiary audits: The audit of the Group
and US$37.7m total assets. The was performed as if it was a single aggregated set of
respectively) assessment of carrying financial information.
value is not at
Refer to note a high risk of
1(b) (note relating significant
to loan to and misstatement
investment in or subject to
subsidiary). significant
judgement as the
carrying value
is equal to the
audited net asset
value of the
subsidiary.
However, due to
its materiality
in the context
of the Parent Company
financial statements,
this is considered
to be the area
that had the greatest
effect on our overall
Parent Company
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$1,130,000 (2017: US$1,150,000), determined with reference
to a benchmark of group total assets, of which it represents 1%
(2017: 1%).
Materiality for the Parent Company financial statements as a
whole was set at US$1,110,000 (2017: US$1,140,000), determined with
reference to a benchmark of Company total assets, of which it
represents 1% (2017: 1%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding US$56,500 (2017:
US$57,500) for the Group financial statements and US$55,500 (2017:
US$57,000) for the Parent Company financial statements, in addition
to other identified misstatements that warranted reporting on
qualitative grounds.
The Group team performed the audit of the Group, as if it was a
single aggregated set of financial information. The audit was
performed using the materiality level set out above and covered
100% of the total Group income, total Group profit before tax and
total Group assets and liabilities.
4. We have nothing to report on going concern
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. We have nothing to report in
this respect.
5. We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
-- the Directors' confirmation within the viability statement on
page 24 that they have carried out a robust assessment of the
principal risks facing the Group and Company, including those that
would threaten its business model, future performance, solvency and
liquidity;
-- the principal risks disclosures describing these risks and
explaining how they are being managed and mitigated; and
-- the Directors' explanation in the viability statement of how
they have assessed the prospects of the Group and Company, over
what period they have done so and why they considered that period
to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group and Company will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or
assumptions.
Corporate governance disclosures
We are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our financial statements audit and the
directors' statement that they consider that the annual report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group's and Company's position and
performance, business model and strategy; or
-- the section of the annual report describing the work of the
Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the eleven
provisions of the 2016 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.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 27,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Group and 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, or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Section 15 of the Companies Act 1982. Our audit
work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
Nicholas Quayle
Responsible Individual
For and on behalf of KPMG Audit LLC
Chartered Accountants and Recognised Auditors, Isle of Man
24 September 2018
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
Consolidated Income Statement
Note Year ended 30 Year ended 30 June
June 2018 2017
US$'000 US$'000
---------------------------------- ----- -------------- -------------------
Income
Dividend income on quoted
equity
investments 4,095 4,707
Realised loss on sale
of financial assets at
fair value through profit
or loss (7,186) (3,922)
Net changes in fair value
on financial assets at
fair value through profit
or loss 14,619 (4,912)
Interest income 20 -
Commission rebate income
on quoted equity investments - 15
Net foreign exchange gain/(loss) 256 (181)
Total net income/(expense) 11,804 (4,293)
---------------------------------- ----- -------------- -------------------
Expenses
Investment Manager's
fees 7 995 1,281
Other expenses 7 1,129 1,061
Total operating expenses 2,124 2,342
---------------------------------- ----- -------------- -------------------
Profit/(loss) before tax 9,680 (6,635)
Income tax expense 9 - -
---------------------------------- ----- -------------- -------------------
Profit/(loss) for the
year 9,680 (6,635)
---------------------------------- ----- -------------- -------------------
Basic profit/(loss) per
share (cents) 4 9.95 (6.06)
---------------------------------- ----- -------------- -------------------
Diluted profit/(loss)loss
per share (cents) 4 9.95 (6.06)
---------------------------------- ----- -------------- -------------------
The Directors consider that all results derive from continuing
activities.
Consolidated Statement of Comprehensive Income
Year ended 30 June 2018 Year ended 30 June 2017
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
Profit/(loss) for the year 9,680 (6,635)
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences (5) (3)
---------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to
profit or loss (5) (3)
---------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive expense for the year (net of tax) (5) (3)
---------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive profit/(loss) for the year 9,675 (6,638)
---------------------------------------------------------------- ------------------------ ------------------------
Company Income Statement
Note Year ended 30 Year ended 30 June
June 2018 2017
US$'000 US$'000
----------------------------- ----- -------------- -------------------
Income
Net change in investment
in and amounts due from
subsidiary 7,702 (8,848)
Intercompany loan interest
income 2,979 2,969
Total net income/(expense) 10,681 (5,879)
----------------------------- ----- -------------- -------------------
Expenses
Expenses 7 1,006 759
Total operating expenses 1,006 759
----------------------------- ----- -------------- -------------------
Profit/(loss) before tax 9,675 (6,638)
Income tax expense - -
----------------------------- ----- -------------- -------------------
Profit/(loss) for the year 9,675 (6,638)
----------------------------- ----- -------------- -------------------
Company Statement of Comprehensive Income
Year ended 30 June 2018 Year ended 30 June 2017
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
Profit/(loss) for the year 9,675 (6,638)
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences - -
--------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to - -
profit or loss
--------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive income for the year (net of tax) - -
--------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive profit/(loss) for the year 9,675 (6,638)
---------------------------------------------------------------- ------------------------ ------------------------
Consolidated Balance Sheet
Note At 30 June 2018 At 30 June 2017
US$'000 US$'000
------------------------------ ----- ---------------- ----------------
Current Assets
Financial assets at fair
value through profit or
loss 1(a) 104,619 102,124
Other receivables and
prepayments 2,683 2,468
Cash and cash equivalents 5,380 10,670
------------------------------ ----- ---------------- ----------------
Total current assets 112,682 115,262
============================== ===== ================ ================
Equity
Issued share capital 5 925 1,032
Retained earnings 32,331 25,425
Distributable reserves 76,198 86,486
Other reserves 1,329 1,227
---------------- ----------------
Total equity 110,783 114,170
------------------------------ ----- ---------------- ----------------
Current liabilities
Other payables and accrued
expenses 6 1,899 1,092
------------------------------ ----- ---------------- ----------------
Total current liabilities 1,899 1,092
------------------------------ ----- ---------------- ----------------
Total equity and liabilities 112,682 115,262
============================== ===== ================ ================
The financial statements were approved by the Directors on 21
September 2018 and signed on their behalf by:
Nick Wilson David Humbles
Chairman Director
Company Balance Sheet
Note At 30 June 2018 At 30 June 2017
US$'000 US$'000
------------------------------ ----- ---------------- ----------------
Investment in subsidiary 1(b) 45,442 37,739
Due from subsidiary 1(b) 64,322 75,537
Other receivables and
prepayments 812 848
Cash and cash equivalents 382 199
------------------------------ ----- ---------------- ----------------
Total assets 110,958 114,323
============================== ===== ================ ================
Equity
Issued share capital 5 925 1,032
Reserves 109,858 113,138
---------------- ----------------
Total equity 110,783 114,170
------------------------------ ----- ---------------- ----------------
Current liabilities
Other payables and accrued
expenses 6 175 153
------------------------------ ----- ---------------- ----------------
Total current liabilities 175 153
------------------------------ ----- ---------------- ----------------
Total equity and liabilities 110,958 114,323
============================== ===== ================ ================
The financial statements were approved by the Directors on 21
September 2018 and signed on their behalf by:
Nick Wilson David Humbles
Chairman Director
Consolidated Statement of Changes in Equity
Share Capital Distributable Retained Foreign Currency Capital Total
(note 5) Reserves Earnings Translation Redemption
Reserve Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 1 July
2016 1,194 103,904 36,177 (213) 1,281 142,343
Total
comprehensive
income for the
year
Loss for the year - - (6,635) - - (6,635)
Other
comprehensive
income
Foreign exchange
translation
differences - - - (3) - (3)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total other
comprehensive
expense - - - (3) - (3)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
comprehensive
expense for the
year - - (6,635) (3) - (6,638)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Contributions by
and distributions
to owners
Dividends paid - - (4,117) - - (4,117)
Shares
repurchased to
be held in
treasury - (543) - - - (543)
Shares subject to
tender offer (140) (16,817) - - 140 (16,817)
Tender offer
expenses - (58) - - - (58)
Shares in
treasury
cancelled (22) - - - 22 -
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
contributions by
and
distributions to
owners (162) (17,418) (4,117) - 162 (21,535)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 30
June 2017 1,032 86,486 25,425 (216) 1,443 114,170
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Share Capital Distributable Retained Foreign Currency Capital Total
(note 5) Reserves Earnings Translation Redemption
Reserve Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 1 July
2017 1,032 86,486 25,425 (216) 1,443 114,170
Total
comprehensive
income for the
year
Profit for the
year - - 9,680 - - 9,680
Other
comprehensive
income
Foreign exchange
translation
differences - - - (5) - (5)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total other
comprehensive
expense - - - (5) - (5)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
comprehensive
income for the
year - - 9,680 (5) - 9,675
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Contributions by
and distributions
to owners
Dividends paid - - (2,774) - - (2,774)
Shares subject to
tender offer (102) (10,205) - - 102 (10,205)
Tender offer
expenses* - (83) - - - (83)
Shares in
treasury
cancelled (5) - - - 5 -
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Total
contributions by
and
distributions to
owners (107) (10,288) (2,774) - 107 (13,062)
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
Balance at 30
June 2018 925 76,198 32,331 (221) 1,550 110,783
------------------ -------------- -------------- ----------------- ----------------- ----------------- ---------
The capital redemption reserve is created on the cancellation of
shares equal to par value of shares cancelled. This reserve is not
distributable.
Company Statement of Changes in Equity
Share Capital Reserves Total
US$'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
---------------------------------------------------- -------------- --------- ---------
Share Capital Reserves Total
US$'000 US$'000 US$'000
---------------------------------------------------- -------------- --------- ---------
Balance at 1 July 2017 1,032 113,138 114,170
Total comprehensive income for the year
Profit for the year - 9,675 9,675
Total comprehensive profit for the year - 9,675 9,675
---------------------------------------------------- -------------- --------- ---------
Contributions by and distributions to owners
Dividends paid - (2,774) (2,774)
Shares subject to tender offer (102) (10,103) (10,205)
Tender offer expenses - (83) (83)
Shares in treasury cancelled (5) 5 -
---------------------------------------------------- -------------- --------- ---------
Total contributions by and distributions to owners (107) (12,955) (13,062)
---------------------------------------------------- -------------- --------- ---------
Balance at 30 June 2018 925 109,858 110,783
---------------------------------------------------- -------------- --------- ---------
Consolidated Statement of Cash Flows
Year ended 30 Year ended 30 June
June 2018 2017
US$'000 US$'000
-------------------------------- -------------- -------------------
Cash flows from operating
activities
Purchase of investments (143,781) (62,272)
Proceeds from sale of
investments 149,319 90,788
Dividends received 4,000 4,707
Operating expenses paid (2,108) (2,357)
Interest received 20 -
Commission rebate - 15
--------------------------------- -------------- -------------------
Net cash generated from
operating activities 7,450 30,881
--------------------------------- -------------- -------------------
Financing activities
Dividends paid (2,774) (4,117)
Cash used in tender offer (10,205) (16,817)
Tender offer expenses (83) (58)
Cash used in share repurchases - (543)
Net cash used in financing
activities (13,062) (21,535)
--------------------------------- -------------- -------------------
Net increase/(decrease)
in cash and cash equivalents (5,612) 9,346
Effects of exchange rate
changes on cash and cash
equivalents 322 (123)
Cash and cash equivalents
at beginning of the year 10,670 1,447
--------------------------------- -------------- -------------------
Cash and cash equivalents
at end of the year 5,380 10,670
--------------------------------- -------------- -------------------
Company Statement of Cash Flows
Note Year ended 30 Year ended 30 June
June 2018 2017
US$'000 US$'000
-------------------------------- ------ -------------- -------------------
Cash flows from operating
activities
Investment in and amount
due from subsidiary 14,214 22,162
Operating expenses paid (964) (824)
Net cash generated from
operating activities 13,250 21,338
---------------------------------------- -------------- -------------------
Financing activities
Dividends paid (2,774) (4,117)
Cash used in tender offer (10,205) (16,817)
Tender offer expenses (83) (58)
Cash used in share repurchases - (543)
Net cash used in financing
activities (13,062) (21,535)
---------------------------------------- -------------- -------------------
Net increase/(decrease)
in cash and cash equivalents 188 (197)
Effects of exchange rate
changes on cash and cash
equivalents (5) (2)
Cash and cash equivalents
at beginning of the year 199 398
---------------------------------------- -------------- -------------------
Cash and cash equivalents
at end of the year 382 199
---------------------------------------- -------------- -------------------
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 2018: Financial assets at fair value through profit or
loss; all quoted equity securities:
Security name Number US$'000
----------------------------------------------------- ----------- --------
Commercial Bank of Qatar (CBQK QD) 1,019,959 10,396
Qatar Gas Transport (QGTS QD) 2,117,667 9,187
Qatar Electricity & Water Co (QEWS QD) 166,478 8,326
Al Rajhi SHAMAL 09.02.2020 244,544 5,620
National Bank of Kuwait (NBK KK) 1,846,250 4,542
Gulf International Services (GISS QD) 866,679 4,052
Barwa Real Estate (BRES QD) 406,396 3,808
Samba Financial Group - SHAMAL (03.01.2022) 418,036 3,596
Company for Co-op Insurance 186,966 3,530
Bank AlJazira 830,000 3,258
Emaar Properties Company (EMAAR UH) 2,430,283 3,255
Saudii Kayan Petrochemical Co 695,000 2,913
Dubai Islamic Bank (DIB) 2,085,000 2,764
Kuwait International Bank 3,043,683 2,252
Emirates National Bank of Dubai (ENBD UH) 825,000 2,179
National Medical Care Company 132,000 2,084
National Commercial Bank 155,613 2,014
Mobile Telecommunications Company K.S.C. (ZAIN KK) 1,390,000 1,989
Dar Al Arkan Real 700,000 1,961
Kuwait Finance House KFIN 1,079,000 1,913
Saudi British Bank B12LSY7 225,000 1,887
Banque Saudi Fransi - SHAMAL 05.06.19 185,000 1,660
Qatar Insurance (QATI QD) 166,722 1,625
National Petrochemical Company 198,000 1,561
Yanbu Nat Petroche (YANSAB) 77,000 1,519
Fawaz Abdulaziz Al 210,000 1,443
Saudi Basic Industries 41,000 1,376
Rabigh Refining and Petrochemical Co 180,000 1,359
Middle East Healthcare 80,000 1,244
Saudi Industrial Investment Group 130,000 1,006
Abdullah Al Othaim Markets Co 50,000 1,000
Widam Food Company (WDAM) 56,279 960
Bupa Arabia Co 38,536 922
National Central Cooling Company (TABREED) 2,039,713 922
ABU DHABI Commercial Bank (ADCB UH) 475,000 913
Al Tayyar Travel Group 125,000 894
Qatar Fuel (QFLS QD) 20,000 802
Arab National Bank - Shamal 88,054 747
Saudi Cement Company 50,000 659
----------------------------------------------------- ---------- --------
Group
Security name Number US$'000
---------------------------------- --------- --------
Emirates NBD USD Stock 225,000 594
Southern Province Cement Co 50,000 546
Alinma Bank 90,000 513
Ooredoo (ORDS) 25,000 499
Agility Public Warehousing AGLTY 127,075 329
104,619
-------------------------------------------- --------
Group
30 June 2017: Financial assets at fair value through profit or
loss; all quoted equity securities:
Security name Number US$'000
------------------------------------------------- ----------- --------
Qatar National Bank (QNBK QD) 475,653 16,088
Masraf Al Rayan (MARK QD) 1,307,544 13,798
Industries Qatar (IQCD QD) 496,285 12,595
Ooredoo (ORDS QD) 313,557 7,598
Qatar Electricity & Water Co (QEWS QD) 130,960 7,153
Barwa Real Estate (BRES QD) 754,724 6,482
Qatar Gas Transport (QGTS QD) 1,170,619 5,329
Commercial Bank of Qatar (CBQK QD) 626,605 5,022
Gulf International Services (GISS QD) 714,227 3,912
Qatar National Cement Co (QNCD QD) 218,303 3,837
Emaar Properties Company (EMAAR UH) 1,288,408 2,718
Qatar Insurance (QATI QD) 185,453 2,585
Qatar United Development Company (UDCD QD) 541,612 2,473
Al Meera Consumer Goods Co (MERS QD) 58,402 2,123
ABU DHABI Commercial Bank (ADCB UH) 1,098,579 2,096
Dubai Islamic Bank (DIB UH) 1,060,000 1,642
Gulf Warehousing (GWCS QD) 121,250 1,540
Qatar Islamic Bank (QIBK QD) 120,645 1,251
Vodaphone Qatar (VFQS QD) 552,351 1,247
Emirates National Bank of Dubai (ENBD UH) 300,000 653
First Abu Dhabi Bank (FAB UH) 180,000 510
DXB ENTERTAINMENTS (DXB UH)Doha Bank (DHBK QD) 2,395,627 493
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
------------------------------------------------- ---------- --------
1(b) Investment in and amount due from subsidiary
30 June 2018 30 June 2017
US$'000 US$'000
---------------------------- ------------- -------------
Investment in subsidiary 45,442 37,739
Amount due from subsidiary 64,322 75,537
---------------------------- ------------- -------------
Investment in subsidiary is stated at fair value. 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.
1(c) Risks relating to financial instruments
Risks relating to financial instruments comprise market price
risk, credit risk, interest rate risk, liquidity risk and foreign
currency risk. These are detailed below and in notes 2, 6 and
8.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Group.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost.
Credit risk continued
At the reporting date, the Group's financial assets exposed to
credit risk comprised the following:
30 June 2018 30 June 2017
US$'000 US$'000
-------------------------------- ------------- -------------
Financial assets at fair value
through profit or loss 104,619 102,124
Cash and cash equivalents 5,380 10,670
Other receivables 2,683 2,468
-------------------------------- ------------- -------------
112,682 115,262
-------------------------------- ------------- -------------
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 2018 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$'000
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Financial Assets
Financial assets
at fair value
through profit
or loss - - - - - 104,619 104,619
Other receivables
and prepayments - - - - - 2,683 2,683
Cash 5,380 - - - - - 5,380
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total financial
assets 5,380 - - - - 107,302 112,682
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Financial Liabilities
Other creditors
and accrued
expenses - - - - - 1,899 1,899
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total financial
liabilities - - - - - 1,899 1,899
----------------------- -------- ----------- --------- ---------- -------- ------------- --------
Total interest 5,380 - - - -
rate sensitivity
gap
----------------------- -------- ----------- --------- ---------- --------
30 June 2017 Less 1-3 months 3 months 1-5 years Over Non-interest Total
than to 1 5 bearing
1month year years
US$'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
----------------------- -------- ----------- --------- ---------- --------
All interest received on cash balances are at variable rates. A
sensitivity analysis for changes in interest rates on cash balances
has not been provided as it is not deemed significant.
2 Fair Value Hierarchy
IFRS 13 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
All the Group's investments are classed as level 1
investments.
The fair value of other financial instruments, including cash
and short-term receivables and payables is a reasonable
approximation of fair value.
Market price risk
The Group's strategy for the management of investment risk is
driven by the Group's investment objective. The main objective of
the Group is to capture the opportunities for growth offered by the
Gulf Cooperation Council region ("GCC") by investing in GCC
countries.
All investments present a risk of loss of capital through
movements in market prices. The Investment Manager and Investment
Adviser moderate this risk through a careful selection of
securities within specified limits. The Investment Manager and the
Investment Adviser review the position on a day to day basis and
the Directors review the position at Board meetings.
The Group's market price risk is managed through the
diversification of the investment portfolio. Approximately 89% of
the net assets attributable to holders of Ordinary Shares is
invested in equity securities.
At 30 June 2018, if the market value of the investment portfolio
had increased/decreased by 2.50% (as per the movement in the
SEMGGCPD Index post year-end) with all other variables held
constant, this would have increased/decreased net assets
attributable to Shareholders by approximately US$2.61 million (30
June 2017 : 0.87% : US$0.88 million).
3 Consolidated Net Asset Value per Share
The consolidated net asset value per share as at 30 June 2018 is
US$1.1982 per share (30 June 2017: US$1.1113) based on 92,461,242
(30 June 2017: 102,734,713) Ordinary Shares in issue as at that
date.
4 Earnings per Share
Basic and diluted earnings per share are calculated by dividing
the profit attributable to equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the
year.
30 June 2018 30 June 2017
----------------------------------------------------------------------- ------------- -------------
Profit/(loss) attributable to equity holders of the Company (US$'000) 9,680 (6,635)
Weighted average number of Ordinary Shares in issue (thousands) 97,302 109,498
----------------------------------------------------------------------- ------------- -------------
Basic and diluted earnings/(loss) per share (cents per share) 9.95 (6.06)
----------------------------------------------------------------------- ------------- -------------
5 Share Capital
30 June 2018 30 June 2017
US$'000 US$'000
----------------------------------------- ------------- -------------
Authorised 500,000,000 Ordinary shares
of US$0.01 each 5,000,000 5,000,000
----------------------------------------- ------------- -------------
Issued, Called-up and Fully-Paid:
92,461,242 (2017: 102,734,713) Ordinary
Shares of US$0.01 each in issue, with
full voting rights 925 1,027
Nil (2017: 493,445) Ordinary Shares
of US$0.01 each held in Treasury - 5
----------------------------------------- ------------- -------------
Issued share capital 925 1,032
----------------------------------------- ------------- -------------
During the year to 30 June 2018 the Company repurchased nil
(2017: 493,445) Ordinary Shares, to be held in treasury, at a cost
of US$ nil (2017: US$542,871) and cancelled 493,445 (2017:
2,102,373) 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 27 December 2017 the Company completed a tender offer at a
price of US$0.9933 per share (12 December 2016: US$1.1973 per
share). Under the tender offer 10,273,471 shares (12 December 2016:
14,045,544) were repurchased and cancelled.
During the year US$83,457 (2017: US$58,373) tender expenses were
deducted from equity.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the Group. The Board manages the Group's
affairs to achieve Shareholder returns through capital growth
rather than income, and monitors the achievement of this through
growth in net asset value per share.
Group capital comprises Share Capital and Reserves. Neither the
Company nor its subsidiary is subject to externally imposed capital
requirements. The Company also has an active share buyback
program.
6 Other payables and accrued expenses
Group
30 June 2018 30 June 2017
US$'000 US$'000
------------------------------- ------------- -------------
Due to broker* 1,456 649
Management fee payable 267 278
Administration fee payable 57 56
Accruals and sundry creditors 119 109
------------------------------- ------------- -------------
1,899 1,092
------------------------------- ------------- -------------
*includes unsettled positions trading balances.
Company
30 June 2018 30 June 2017
US$'000 US$'000
------------------------------- ------------- -------------
Administration fee payable 51 50
Accruals and sundry creditors 124 103
------------------------------- ------------- -------------
175 153
------------------------------- ------------- -------------
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient
cash for operations and the ability to realise market positions.
The Group's liquidity position is monitored by the Investment
Manager and the Board of Directors.
The residual undiscounted contractual maturities of financial
liabilities are in the table below:
30 June 2018 Less than 1-3 3 months 1-5 years Over 5 No stated
1 month months to 1 year years maturity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ---------- -------- ----------- ---------- -------- ----------
Financial liabilities
Other creditors 1,899 - - - - -
and accrued expenses
---------------------- ---------- -------- ----------- ---------- -------- ----------
1,899 - - - - -
---------------------- ---------- -------- ----------- ---------- -------- ----------
30 June 2017 Less than 1-3 3 months 1-5 years Over 5 No stated
1 month months to 1 year years maturity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- ---------- -------- ----------- ---------- -------- ----------
Financial liabilities
Other creditors 1,092 - - - - -
and accrued expenses
---------------------- ---------- -------- ----------- ---------- -------- ----------
1,092 - - - - -
---------------------- ---------- -------- ----------- ---------- -------- ----------
7 Charges and Fees
Group 30 June 2018 Company Group Company 30 June 2017
30 June 2018 30 June 2017
US$'000 US$'000 US$'000 US$'000
------------------------------------------ ------------------- -------------- -------------- ---------------------
Investment Manager's fees (see below) 995 - 1,281 -
------------------------------------------ ------------------- -------------- -------------- ---------------------
Administrator and Registrar's fees (see
below) 226 200 225 199
Audit fees 34 34 28 28
Custodian fees (see below) 109 4 119 4
Directors' fees and expenses 308 308 297 297
Directors' insurance cover 30 30 31 31
Broker fees 53 53 51 51
Other 369 377 310 149
------------------------------------------ ------------------- -------------- -------------- ---------------------
Other expenses 1,129 1,006 1,061 759
------------------------------------------ ------------------- -------------- -------------- ---------------------
Investment Manager's fees
Annual fees
The Investment Manager was entitled to an annual management fee
of 1.25% of the Net Asset Value of the Group, calculated monthly
and payable quarterly in arrears. The Investment Management
Agreement was subject to termination on 31 October 2013 with a
revised agreement coming into effect from 1 November 2013. Under
the revised agreement the annual fee reduced to 1.05% of the net
asset value of the Company and further reduced to an annual fee of
0.90% of the net asset value of the Company from 1 November 2016
subject to termination on 31 October 2019.
Annual management fees for the year ended 30 June 2018 amounted
to US$994,814 (30 June 2017: US$1,281,315) and the amount accrued
but not paid at the year-end was US$267,445 (30 June 2017:
US$277,684).
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 2018
amounted to US$225,774 and US$32,087 for additional services (30
June 2017: US$225,086 and US$32,838 respectively). Outstanding
Administration fees at the year end amounted to US$57,385 (30 June
2017: US$56,747).
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
2018 amounted to US$109,172 (30 June 2017: US$118,780) and the
amount accrued but not paid at the year-end was US$8,756 (30 June
2017: US$4,034).
8 Foreign currency translation
The US Dollar is the currency of the primary economic
environment in which the entity operates ("the functional
currency"). The US Dollar is the currency in which the financial
statements are presented ("the presentational currency") as
reporting to shareholders is in US Dollars and the shares are
quoted in US Dollars.
Monetary assets and liabilities denominated in foreign
currencies as at the date of these financial statements are
translated to US Dollar at exchange rates prevailing on that date.
Income and expenses are translated into US Dollar based on exchange
rates on the date of the transaction. All resulting exchange
differences are recognised in the income statement at the exchange
rate prevailing on the balance sheet date. Items of income and
expense are translated at exchange rates on the date of the
relevant transactions or an average rate. Components of equity are
translated at the date of the relevant transaction and not
retranslated. All resulting exchange differences are recognised in
other comprehensive income.
Foreign exchange risk
The Group's operations are conducted in jurisdictions which
generate revenue, expenses, assets and liabilities in currencies
other than US Dollar. As a result, the Group is subject to the
effects of exchange rate fluctuations with respect to these
currencies. The Group's policy is not to enter into any currency
hedging transactions
At the reporting date the Group had the following exposure:
Currency 30 June 2018 30 June 2017
% %
--------------- ------------- -------------
British Pound (0.04) (0.03)
Omani Rial 0.00 0.00
US Dollar 41.86 0.41
Qatari Riyal 36.25 88.19
Kuwaiti Dinar 10.51 0.00
Saudi Arabia
Riyal 0.09 0.00
UAE Dirham 11.32 11.43
--------------- ------------- -------------
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 2018 Monetary Monetary Net Exposure
Assets Liabilities
US$'000 US$'000 US$'000
-------------------- --------- ------------- -------------
British Pound 18 (61) (43)
US Dollar 46,759 (382) 46,377
Qatari Riyal 40,161 - 40,161
UAE Dirham 12,545 - 12,545
Kuwait Dinar 11,647 - 11,647
Saudi Arabia Riyal 96 - 96
-------------------- --------- ------------- -------------
111,226 (443) 110,783
-------------------- --------- ------------- -------------
30 June 2017 Monetary Monetary Net Exposure
Assets Liabilities
US$'000 US$'000 US$'000
British Pound 20 (59) (39)
US Dollar 852 (384) 468
Qatari Riyal 100,689 - 100,689
UAE Dirham 13,052 - 13,052
-------------------- --------- ------------- -------------
114,613 (443) 114,170
-------------------- --------- ------------- -------------
Foreign currency sensitivity risk - presentational currency
At 30 June 2018 had the US Dollar weakened/strengthened by 1%
(2017 : weakened/strengthened 1%) in relation to all currencies,
with all other variables held constant, net assets attributable to
equity holders of the Company would have increased/decreased by the
amounts shown below:
30 June 2018 US$'000
--------------- --------
British Pound -
Kuwaiti Dinar 116
UAE Dirham 125
Saudi Arabia
Riyal 1
--------------- --------
Effect on
net assets 242
--------------- --------
30 June 2017 US$'000
--------------- --------
British Pound -
Kuwaiti Dinar -
UAE Dirham 130
--------------- --------
Effect on
net assets 130
--------------- --------
Foreign currency sensitivity risk - functional currency
As 42% of net assets are denominated in USD and USD is the
functional currency there is no significant functional currency
risk. The Qatari Riyal is pegged to the USD within a tight band and
therefore it is not included in the sensitivity analysis.
As USD is the functional currency of the Group and USD is the
presentational currency any effect of changes in the foreign
exchange rates between USD and the other currencies is assumed to
relate to the investments and is included in the unrealised
gain/loss of the investments on consolidation.
9 Taxation
Isle of Man taxation
The Company is resident for taxation purposes in the Isle of Man
by virtue of being incorporated in the Isle of Man and is
technically subject to taxation on its income but the rate of tax
will be zero. The Company is required to pay an annual corporate
charge of GBP250 per annum.
The Company became registered for VAT from 1 February 2011.
Qatar/United Arab Emirates(U.A.E)./Saudi Arabia taxation
The Company invests in equities in the GCC region. As at 30 June
2018 the Company held investment in Qatar, United Arab Emirates
(U.A.E.), Saudi Arabia and Kuwait.
It is the intention of the Directors to conduct the affairs of
the Company so that it is not considered to be either resident or
doing business in any of these countries.
With the exception of Saudi Arabia, none of these countries
impose withholding tax on dividend distributions to non-residents.
Saudi Arabia imposes a 5% withholding tax on dividend distributions
to non-residents.
Capital gains made by the Company on disposal of shares in
Qatar, U.A.E., Saudi Arabia and Kuwait are not subject to tax in
those countries.
There is no stamp duty or equivalent tax on the transfer of
shares in Qatar/U.A.E./Saudi Arabia companies.
10 Related Party Transactions
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the other party in making financial or operational
decisions.
The Investment Adviser is Qatar Insurance Company S.A.Q. The
Group holds shares in Qatar Insurance Company S.A.Q. (see note
1(a)). The Investment Adviser's fees are paid by the Investment
Manager.
The Investment Manager, Epicure Managers Qatar Limited, is a
related party by virtue of its ability to make operational
decisions for the Company and through common Directors. Fees paid
and payable to the Investment Manager are disclosed in notes 6 and
7.
Epicure Managers Qatar Limited is a wholly owned subsidiary of
the Investment Adviser, Qatar Insurance Company S.A.Q.
11 The Company
Gulf Investment Fund plc (formerly Qatar Investment Fund plc)
(the "Company") was incorporated and registered in the Isle of Man
under the Isle of Man Companies Acts 1931 to 2004 on 26 June 2007
as a public company with registered number 120108C.
Pursuant to an Admission Document dated 25 July 2007 there was
an original placing of up to 171,355,000 Ordinary Shares, with
Warrants attached on the basis of 1 Warrant to every 5 Ordinary
Shares. Following the placing on 31 July 2007, 171,355,000 Ordinary
Shares and 34,271,000 Warrants were issued. The warrants expired on
16 November 2012.
The shares of the Company were admitted to trading on the AIM
market of the London Stock Exchange ("AIM") on 31 July 2007, when
dealings also commenced.
As a result of a further fund raising in December 2007, a
further 76,172,523 Ordinary Shares were issued, which were admitted
for trading on AIM on 13 December 2007.
On 4 December 2008, the Share Premium arising from the placing
of shares was cancelled and the amount of the Share Premium account
transferred to Retained Earnings.
The shares of the Company were admitted to trading on the Main
Market of the London Stock Exchange on 13 May 2011.
In the year ended 30 June 2018, the Company purchased nil (2017:
493,445) of its Ordinary Shares for a total value of US$ nil
(2017:US$542,871) to be held in treasury. 493,445 shares had been
repurchased in the year ended 30 June 2017 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 27 December 2017 the Company completed a tender offer at a
price of US$0.9933 per share (previous offer US$1.1973 per share).
Under the offer 10,273,471 shares were cancelled (previous offer
14,045,544 shares) with US$10,204,639 being paid to participating
shareholders (previous offer US$16,816,730).
The shareholders approved a dividend of 3.0 cents per share on
16 November 2017 (previous dividend 4.0 cents per share); this was
paid to shareholders on 9 February 2018.
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 2021 a resolution will be proposed that the Company
ceases to continue in existence and there is the possibility of a
100% tender in 2020.
12 The Subsidiary
The Company has the following subsidiary company:
Country of incorporation Percentage of
shares held
----------------------------- -------------------------- --------------
Epicure Qatar Opportunities British Virgin
Holdings 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 2018 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 2017. Certain comparatives
have been reclassified in accordance with the presentation adopted
in these financial statements. In particular, in the Company
Balance Sheet the balances with subsidiary have in the current year
been presented as two components: Investment in Subsidiary and
Amount due from Subsidiary. In the prior year financial statements
these balances were shown as one aggregated amount: Amount Due from
Subsidiary. This reclassification had no effect on total assets,
net assets or profit or loss and was made in order to better
present the nature of the underlying balances.
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.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains
or losses arising from intra-group transactions, are eliminated in
full in the consolidated financial statements.
13.3 Segment reporting
The Group has one segment focusing on maximising total returns
through investing in quoted securities in the GCC region. No
additional disclosure is included in relation to segment reporting,
as the Group's activities are limited to one business and
geographic segment.
13.4 Investment in subsidiary
Investment in subsidiary in the Company balance sheet is 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. Buy-backs are recorded in equity.
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 2018,
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.
14 Post balance sheet events
There are no post balance sheet events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BBGDCXBDBGIU
(END) Dow Jones Newswires
September 25, 2018 07:27 ET (11:27 GMT)
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