TIDMQIF
RNS Number : 5919X
Qatar Investment Fund PLC
23 February 2017
23 February 2017
Qatar Investment Fund PLC
Interim Results for 6 months to 31 December 2016
Qatar Investment Fund
Qatar Investment Fund Plc's ("QIF") net asset value per share
("NAV") rose 2.89% to $1.25 in the six months compared to the Qatar
Exchange (QE) +5.6%. QIF's share price +3.75% in the period.
Annual dividend of 4.0c per share (2015: 4.0c) paid to
shareholders on 31 January 2017 (a yield of 3.7%)
Tender offer for 12% of the fund completed at $1.20 per
share
Qatar
Qatar's diversified economy is now 65% non-hydrocarbon, with
non-hydrocarbon sectors growing faster than the economy as a
whole.
Income from visitors is rising on average 45% per annum.
Qatar's population growing at 8.9%.
While lower oil prices meant Qatar's GDP growth slowed to 2.3%
in the 9 months to September 2016, the IMF stated Qatar's policy
response has been adequate, with cuts to current expenditures and
focus on non-oil revenues.
Qatar's budget is based on an oil price of $45 (the current oil
price is $57).
Qatar has announced $12.7 billion of new infrastructure
contracts for 2017.
S
For further information please contact:
Nick Wilson
Chairman
Qatar Investment Fund plc
01624 622 851
William Clutterbuck
Maitland
0207 379 5151
Chairman's Statement
On behalf of the Board, I am pleased to present the interim
results for Qatar Investment Fund Plc for the six months ending 31
December 2016.
Results
During the six months ending 31 December 2016, Net Asset Value
per share (NAV) rose by 2.89% compared to a rise in the Qatar
Exchange Index of 5.6% and an increase of 3.4% in the MSCI Emerging
Markets Index. Following a slight narrowing of the discount at
which the shares trade to NAV, the shares rose 3.75%, from US$1.03
at 30 June 2016 to US$1.07 at 31 December 2016. At the Annual
General Meeting on 17 November 2016 a dividend of 4.0c per share
was approved by shareholders and paid to ordinary shareholders on
the register as at 23 December 2016.
Although the oil price continued its recovery during the period,
forward GDP growth estimates were revised marginally lower, as the
government sought to minimise the first budget deficit for 15
years. The banking sector, including financial services, remains
our largest allocation with a 42.4% exposure on 31 December 2016.
At 31 December 2016 we had a total of 23 holdings, 16 in Qatar and
7 in the UAE.
Tender offer
As announced by the Company on 13 April 2015, the Directors
resolved to put forward a proposal to implement a tender offer in
the fourth quarter of 2016, being a graduated tender offer of up to
15% of the Company's issued share capital at the record date
(excluding treasury shares). The size of the tender offer was
determined by the average discount to NAV per share at which the
shares traded in the 12-month period from 8 October 2015 to 6
October 2016. On 18 November, the Board announced that the tender
offer for the purchase of up to 14,045,544 (representing 12% of the
shares in issue as at 18 October 2016 excluding treasury shares)
closed at 1.00 p.m. on 14 November 2016.
A total of 13,736,411 shares were validly tendered under the
Basic Entitlement of the Tender Offer. This equated to
approximately 11.7% of the Company's shares in issue as at 18
October 2016 (excluding treasury shares), and approximately 97.8%
of the shares available under the Tender Offer. Excess tenders were
satisfied to the extent of a further 309,133 shares, representing
0.47% of the excess shares tendered.
In total, 14,045,544 shares were validly tendered under the
Tender Offer, representing 12.0% of the Company's shares in issue
as at 18 October 2016 (excluding treasury shares), all of which
were repurchased by the Company and cancelled.
Managing the discount between the share price and NAV
Discount management remains a priority for the Board and as part
of this we continued to make use of the authority granted by
shareholders to buy back the Company's shares. During the period 1
July 2016 to 31 December 2016, the Company purchased 331,514 of its
ordinary shares for treasury. 963,198 shares had been repurchased
in the period ended 31 December 2015 for treasury but had been held
for over a year and were therefore cancelled in the current
financial period. The buy-backs are effected through distributable
reserves.
In addition to the share buybacks, the Board works with our
Investment Manager, Company broker and an analyst, as well as with
the financial press in order to maintain institutional and private
investor awareness of both Qatar and demand for the Company's
shares. Once again, the Company received significant positive media
coverage during the period.
Related Party Transactions
Details of related party transactions are contained in the
annual report as well as being addressed in note 14 of this interim
report.
Post balance sheet events
Details of these can be found in note 15 following the
accompanying financial statements.
Outlook, risks and uncertainties
The fall in oil and gas prices will continue to impact the
Qatari economy as certain lower priority projects may be deferred.
However, Qatar is the world's largest exporter of LNG and although
lower prices have been negotiated, Qatar is defending its market
share. In addition, the diversification policies of government over
recent years has placed Qatar in a strong position relative to
other Gulf countries with arguably over 65% of GDP currently
derived from the non-hydrocarbon sector. This, combined with
continuing population growth, improving demographics and an
extensive infrastructure pipeline, should see the economy of Qatar
continue to grow.
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 Qatari
economy, as growth in the non-hydrocarbon sector helps to offset
the slowdown in the hydrocarbon sector. Widespread infrastructure
spending underpins economic growth with valuations and dividend
yields remaining attractive.
Nicholas Wilson
Chairman
22 February 2017
Director's Responsibility Statement
The Directors confirm that, to the best of their knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34;
b) the interim management report and Chairman's statement
include a fair review of the information required by the Disclosure
and Transparency Rule 4.2.7R (indication of important events during
the first six months and a description of the principal risks and
uncertainties for the remaining six months of the year
respectively);
c) in accordance with Disclosure and Transparency Rule 4.2.8R
there have been no related party transactions during the six months
to 31 December 2016 and therefore nothing to report on any material
effect by such a transaction on the financial position or the
performance of the Company during that period; and there have been
no changes in this position since the last Annual Report that could
have a material effect on the financial position or performance of
the Company in the first six months of the current financial
year.
d) In accordance with Disclosure and Transparency Rule 6.4.2,
the Company confirms that its Home State is the United Kingdom.
The interim financial report has not been audited by the
Company's Independent Auditor.
Nicholas Wilson
Chairman
22 February 2017
Report of the Investment Manager and the Investment Adviser
Regional Equity Market Overview
The performance of the GCC markets is shown below:
Indices 30-Jun-16 29-Dec-16 % Change
--------------- ---------- ---------- ---------
Qatar (DSM) 9,885 10,437 5.6%
--------------- ---------- ---------- ---------
Saudi (TASI) 6,500 7,210 10.9%
--------------- ---------- ---------- ---------
Dubai (DFMGI) 3,311 3,531 6.6%
--------------- ---------- ---------- ---------
Abu Dhabi
(ADI) 4,498 4,546 1.1%
--------------- ---------- ---------- ---------
Kuwait (KWSE) 5,365 5,748 7.1%
--------------- ---------- ---------- ---------
Oman (MSI) 5,777 5,783 0.1%
--------------- ---------- ---------- ---------
Bahrain (BAX) 1,118 1,220 9.1%
--------------- ---------- ---------- ---------
Source: Bloomberg
2016 was the year of shocks and unforeseen results, with the UK
voting for Brexit and Trump registering an unexpected win in the US
elections. OPEC member states agreed to reduce oil production by
1.2 million barrels to 32.5 million barrels per day and the US
Federal Reserve raised its interest rate for the second time in a
decade by 25 basis points (bps) in mid-December on indications that
the US economy is expanding at a healthy pace. Globally, markets in
general closed higher compared to the previous year, with the MSCI
World Index touching a 17-month high level in December.
Oil prices, which reached a decade low early in 2016, surged
later in the year after the oil output agreement was sealed
following rigorous negotiations. Oil rose to an 18-month high by
year-end and this helped lift GCC equity markets. The Qatari market
edged up 0.1% to close at 10,437 points. The Telecom sector gained
the most, up 22.3%, followed by Insurance, up 10.0%. Banking gained
3.8% and Transportation 4.8%. Industrials rose 3.8%, underpinned by
an 8.4% gain in December, amid the surge in oil prices. Consumer
and Real Estate sectors declined 1.7% and 3.8%, respectively. Dubai
was the best performer among GCC markets, up 12.1%. The Bloomberg
GCC index rose 4.3%.
During the first half of 2016, GCC markets were volatile, with
only Oman (up 6.9%), Dubai (up 5.1%) and Abu Dhabi (up 4.4%)
posting gains. The Qatar market was down 5.2% while Bahrain (down
8.0%) was the worst performer.
However by the end of the second half of 2016, all GCC markets
had posted gains as oil prices reacted to the agreement between
OPEC and non-OPEC oil producers to cut output in 2017. Saudi Arabia
was the strongest performer in the second half, up 10.9%, after the
successful raising of USD 17.5 billion in the largest emerging
markets bond issuance to date. The Bahrain and Kuwait equity
markets followed Saudi Arabia, up 9.1% and 7.1% respectively.
Dubai, Abu Dhabi and Oman were up 6.6%, 1.1% and 0.1% respectively.
Qatar market was up 5.6%, after the successful inclusion in FTSE
"secondary emerging market" category. Overall, in the second half
of 2016 the Bloomberg GCC index rose 8.2%.
Performance of GCC markets since June 2014
In the period from the end of June 2014 (when oil prices started
falling) to end December 2016, the Qatari market was resilient
compared to most other GCC markets.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Performance of
Markets since end June 2014.
Qatar's resilience during the period can be attributed to the
strong growth in the non-hydrocarbon sector, fuelled by investment
spending, population growth and prudent fiscal planning. In this
period, the price per barrel of Brent crude fell 50.0%. Over the
period, Qatar eased 9.2% while Saudi dropped 24.2%, Kuwait and Oman
fell 17.5% each, and Bahrain dropped 14.5%.
The Investment Adviser remains optimistic about Qatar due to its
strong macroeconomic fundamentals, ongoing infrastructure spending,
rising population and superior growth prospects in the
non-hydrocarbon sector. The Qatari government is committed to
continue its infrastructure investment spending programme ahead of
the 2022 FIFA World Cup and in line with the Qatar National Vision
2030.
On the ground: period of recovery
During 2016 the GCC markets witnessed high volatility from
international events and weak oil prices. Oil prices rebounded
sharply from their trough in early 2016. The WTI spot price fell
close to USD 30 a barrel in February 2016, losing nearly
three-quarters of its value since June 2014. However, by end of the
year, prices rebounded nearly 80% from the February lows. Oil
prices are expected to recover at a more measured 5-10% pace over
the coming two years. We expect the recent OPEC deal to help bring
the oil market back into equilibrium in early 2017, lead to a
further recovery in oil prices and help ease the deficit pressure
on GCC government finances. At an oil price of USD 60, it is
estimated that Saudi Arabia needs another USD 31.1 billion in
fiscal cutbacks to reduce the deficit, just shy of 3% of GDP,
despite having adjusted more than 9% over the last two years,
mainly by trimming capital expenditure.
The UAE and Qatar would not need to consolidate and reduce their
deficit any further with both countries targeting higher capital
expenditure to stimulate their economies. Kuwait may end up with a
surplus. However, Oman and Bahrain would still need to continue
with austerity steps to reduce their deficits. Broadly, the outlook
seems to be a lot better, particularly with the recovery in oil
prices expected to continue.
Qatar's economic growth slowed to 2.3% during the first
nine-months of 2016, reflecting lower hydrocarbon prices. The IMF
has indicated that the policy response of the government has been
adequate, with cuts to current expenditures and increased focus on
raising non-oil revenues. Qatar financed its fiscal deficit mainly
through domestic and foreign borrowing without drawing down on its
sovereign wealth fund. Qatar has raised a total of USD 14.5 billion
of external debt and issued USD 2.6 billion of domestic bonds and
Sukuk (Islamic bonds). The IMF highlights that Qatari banks remain
sound and well capitalized, despite liquidity pressures, and that
the non-performing loan ratio of banks in the nation is the lowest
in the GCC region.
The IMF estimates Qatar's Real GDP growth to moderate to about
2.7% in 2016 and reach 3.4% in 2017, led by growth in the
non-hydrocarbon sector due to World Cup-related spending and the
added output from the new Barzan gas project. The IMF expects
continuing fiscal adjustments during 2017-18, further subsidy cuts,
increase in public fees, a moderate recovery in global commodity
prices and the implementation of VAT to drive inflation, which is
expected to moderate back to low levels subsequently.
Qatar budget 2017 - Qatar's fiscal deficit set to decline in
2017
Qatar's 2017 budget is in line with the Qatari vision to achieve
a self-sustaining economy as laid down in the Vision 2030. The
budget is committed to reducing Qatar's planned deficit by 38.9%,
from QAR 46.5 billion in 2016 to QAR 28.4 billion in 2017. The
deficit is expected to decline due to a pickup in government
revenues and continued rationalisation of current expenditure.
Capital spending is expected to increase in 2017 to support Qatar's
preparation for the World Cup and economic diversification
objectives. The government has also outlined in the budget an
intent to accelerate investment and infrastructure spending in the
coming years.
The budget is based on an average oil price of USD 45 per barrel
with revenues estimated at USD 46.7 billion (QAR 170.1 billion), up
9.0% from the previous year. The expenditure is estimated at USD
54.5 billion (QAR 198.5 billion), 2% lower from 2016. In the last
fifteen years, 2016 was the first year when Qatar saw a budget
deficit.
With Brent crude trading around USD 57 a barrel at the end of
2016 and expected to remain buoyed after OPEC and Non-OPEC
countries recently agreed to slash output, Qatar could see a budget
surplus in 2017.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Qatar Budget in
2017.
Government led infrastructure spending relating to FIFA World
cup 2022 will be the main driver for economic growth, ensuring that
Qatar's GDP growth continues to outperform its GCC peers through to
2022. According to IMF estimates, Qatar is expected to grow at 3.4%
in 2017 which is the highest in the GCC region.
Qatar's Budget 2017 has earmarked spending of USD 25.6 billion
(47% of total expenditure) on major projects, including projects
related to the FIFA World Cup 2022. About USD 23.9 billion (44% of
total expenditure) is earmarked for key sectors such as health,
education, infrastructure and transport.
The budget has allocated USD 12.7 billion (QAR 46.1 billion) to
new projects in 2017, which include projects related to
infrastructure and transportation (USD 6.9 billion), FIFA World Cup
2022 (USD 2.3 billion), health and education (USD 1.6 billion) and
others (USD 1.9 billion).
Change
USD billion 2016 2017 %
--------------------- ----- ----- -------
Capital Expenditure 26.0 26.8 3.2%
--------------------- ----- ----- -------
Major projects 24.9 25.6 2.6%
--------------------- ----- ----- -------
Minor projects 1.0 1.2 16.2%
--------------------- ----- ----- -------
Current Expenditure 29.7 27.7 -6.6%
--------------------- ----- ----- -------
Wages and Salaries 13.6 13.2 -3.0%
--------------------- ----- ----- -------
Other Current
expenditure 16.1 14.5 -9.6%
--------------------- ----- ----- -------
Total Expenditures 55.6 54.5 -2.0%
--------------------- ----- ----- -------
Source: Qatar MoF. Note: 2016 numbers are budgeted
Transportation and infrastructure projects represent 21.2% of
total budgeted expenditure with investments in Doha Metro, Hamad
port and other road projects. These investments will play a
supportive role in developing the non-oil sectors of the
economy.
Health related projects have been allocated a budget of USD 6.7
billion, up 17.2% from 2016. Key projects include completion of
Sidra Medical Research Centre, expanding services of Hamad Medical
Corp. and a planned laborers' hospital in the industrial area.
Education has also been emphasized, with USD 5.7 billion expected
to be spent on constructing new schools, Qatar University and other
projects and is at a similar level to 2016 spending.
In order to avoid pressure on liquidity in the domestic banking
sector and to maintain its reserves and sustain investments, Qatar
will continue to raise money from local and international bond
markets in 2017 to finance its budget deficit.
The Investment Adviser believes that the current positive
outlook for the oil market and efficiency in current expenditure
will help control the fiscal deficit. Infrastructure spending
should continue to fuel non-hydrocarbon growth and attract new
expatriate workers, supporting domestic consumption.
Impact of Fed Rate hike on GCC region
The US Federal Reserve raised its benchmark interest rate for
the second time in a decade by 25 basis points (bps) on 14(th)
December 2016 on indications that the American economy is expanding
at a healthy pace and amid President-elect Donald J. Trump's plans
for boosting federal spending. In light of the Fed action, GCC
central banks followed suit and raised rates.
The Investment Adviser expects Qatari economic growth to pick up
in 2017, amid the recovery in oil prices and a strong growth in the
non-hydrocarbon sector. This should help the economy to face the
rate hike over the course of the year. Qatari banks are expected to
witness higher credit growth led by upcoming projects related to
the FIFA 2022 World Cup & the Qatar National Vision 2030. At
the same time, banks are also expecting liquidity conditions to
ease on higher government revenue due to the rise in oil prices.
QCB's data shows that banks in the nation are in good shape, with
credit growth up 12.1% and deposits up 11.8% to the end of December
2016.
OPEC and Non-OPEC producers agreement
There are expectations that oil prices will stabilize at about
USD 60 per barrel as levels above these could encourage increased
shale production in the US.
In the Vienna meeting, OPEC member countries agreed to
collectively reduce oil production by 1.2 million barrels per day
to 32.5 million barrels per day. Meanwhile, 11 non-OPEC oil
producers have agreed to decrease their daily oil production level
by 558,000 barrels per day (Russia to reduce output by 300,000
barrels a day, and the other 10 countries to cut output by 258,000
barrels a day). The implementation of the decision to rebalance the
oil market will start from January 2017 and will be valid for 6
months. OPEC will meet again on 25(th) May 2017, at which point it
may extend the cuts by another six months.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting OPEC Crude Oil
Production Levels.
The improvement in oil prices is expected to raise government
revenue, lower budget deficits and boost the economies of the GCC
countries. Stabilization in the oil price will help ease liquidity
conditions, support the hydrocarbon sector and increase credit
demand in the region. With Qatar successfully diversifying the
economy away from the oil sector and focusing on the
non-hydrocarbon sector, the impact from higher oil prices will
enable the nation to accelerate this transition. The Investment
Adviser maintains its positive outlook for the Qatari economy not
only because of the improving oil price, which will increase
government revenue and infrastructure spending, but also due to the
strong expected growth in the non-hydrocarbon sectors.
Macroeconomic Update
According to the Ministry of Development Planning and Statistics
(MDPS), the Qatari economy continued to grow in Q3 2016, with GDP
rising 3.7% compared to Q3 2015. The non-hydrocarbon sector GDP
grew 4.7%, mainly driven by expansion in construction,
transportation, financial services and real estate activities. The
hydrocarbon sector GDP grew 2.7% YoY despite lower oil prices.
Going forward, the Investment Adviser believes that Qatar's real
GDP growth is set to remain robust, driven by strong growth in the
non-hydrocarbon sector, as investment spending remains strong. Amid
current oil prices, MDPS expects Qatar to remain the fastest
growing economy in the MENA region in 2016 and 2017, growing by
3.9% and 3.8%, respectively, supported by growth in the
non-hydrocarbon sector. Moreover, the Barzan gas project should
help in raising hydrocarbon output once it is fully operational in
2017.
IMF has estimated Qatar to grow at 3.4% in 2017 which is the
highest in the GCC region, as development of major projects in the
run-up to the 2022 FIFA World Cup would continue to have a positive
impact on the economy. QNB Group also expects real GDP growth in
Qatar to remain strong at 3.8% in 2017 and 4.1% in 2018.
Qatar's population grew 8.9% between December 2015 and November
2016, to reach 2.64 million. Population growth is expected to
remain strong in coming years, as large project spending related to
the 2022 FIFA World Cup and other projects would continue to
attract expatriates. Thus, steady growth in population and high
level of personal consumption is expected to continue to benefit
domestic consumer and services sector companies.
Recent Developments
International Credit rating agencies affirmed their ratings on
Qatar with Stable Outlook
Credit rating agencies Fitch and S&P are positive on Qatar.
Fitch Ratings affirmed Qatar's long-term foreign and local-currency
IDRs at 'AA'. It also affirmed 'AA' rating on Qatar's senior
unsecured foreign currency bonds. S&P Global ratings affirmed
its 'AA' long-term and 'A-1+' short-term sovereign credit
ratings.
According to Fitch, 'AA' ratings reflect Qatar's large sovereign
assets, its fiscal adjustment efforts, large hydrocarbon endowment
and one of the world's highest GDP per capita ratio.
Projects worth over QAR 38 billion are underway
As a part of Ashghal's plan to develop the country's
expressways, projects amounting to more than QAR 38 billion are
progressing in Qatar. As part of its ambitious Expressway Project,
construction projects worth QAR 49.8 billion have been awarded by
Ashghal. As per the Annual report of Ashghal, currently 11
Expressway Projects are in different stages of construction and 10
projects are in the design phase.
Qatar Stock Exchange commenced margin trading activity from
5(th) October 2016
In an effort to boost liquidity in the market and provide new
financing channels for investors, the Qatar Stock Exchange (QSE)
introduced margin trading from 5th October 2016. This facility is
applicable for 20 stocks.
2022 FIFA World Cup Projects to be delivered on time
A senior official from the Supreme Committee for Delivery and
Legacy has confirmed that all projects related to the Qatar 2022
FIFA World Cup will be delivered on time. Ali Ghanim al-Kuwari -
Executive Director, further stated that work on the Qatar 2022
projects is proceeding as planned and all the projects are in an
advanced stage of design and implementation. The first World Cup
stadium, Khalifa International, is expected to be delivered at the
beginning of 2017.
Qatar's insurance market to grow at a CAGR of 18.0% till
2020
In its annual report, Oxford Business Group estimated that
Qatar's insurance market will grow at a CAGR of 17.8% till 2020,
making it the fastest-growing insurance market in the GCC
region.
Qatargas signed an agreement to supply 1.3 mtpa of LNG to
Pakistan for 20 years
Qatargas, the world's largest producer of LNG, signed a 20 year
sale and purchase agreement with Global Energy Infrastructure
Limited (GEIL) to supply 1.3 mtpa of LNG to Pakistan, with
provision for the volume to increase to 2.3 mtpa.
Qatar named among the top 20 best performing economies in the
world
Qatar is ranked 2(nd) in the Gulf region and 18(th) globally in
the World Economic Forum's Global Competitiveness Index 2016-17.
Although it slipped from its top position in the GCC region, it
topped the region in efficiency in many areas such as macroeconomic
environment, financial market development, innovation, health and
primary education, and higher education and training.
Qatar labour reforms will benefit expatriates
The Qatari government has introduced changes in labour laws
effective from 13 December, 2016 which aims to make changing jobs
and leaving the country easier for Qatar's 2.1 million salaried
workforce.
A grievance committee will now be formed to which expat workers
can appeal in case of denial of consent from the current employer.
Moreover, penalties have also been increased to QAR 25,000 from QAR
10,000 on employers who confiscate workers' passports. The
requirement to obtain a No Objection Certificate ("NOC") from the
current employer is still in place. However, workers on fixed-term
contracts can now change jobs without a NOC after their contract is
completed. Those on open-ended contracts must work for five years
before being able to do so. All foreigners would continue to need
the labor ministry approval before taking up a new employment.
The Investment Adviser expects that the recent changes to the
labour law are a positive development. In light of the fact that
Qatar's workforce is expected to reach 2.5 million as it prepares
for the FIFA World Cup 2022, the new labour laws could be expected
to play a significant role in attracting new and skilled workers
and contribute to the economy.
New joint venture between Qatar Port Management Company and
Milaha to manage Hamad Port
Qatar Port Management Company and Milaha, with 51% and 49% stake
respectively, will establish a new joint venture 'QTerminals' to
manage operations at Hamad Port, which is set to become a regional
commercial hub and greatly reduce transportation costs and time.
The first phase of Hamad Port commenced operations on 1(st)
December, 2016 with a handling capacity of two million twenty-foot
equivalent units per annum. The port is expected to be completed by
2020 with a handling capacity of 7 million containers per year on
completion of all the phases.
Hamad Port will increase Qatar's imports, exports and
international maritime trade and would stimulate growth and
economic diversification across the region. It will also be
connected to Gulf Cooperation Council countries through a road and
rail network.
The Qatar Investment Authority to invest USD 35 billion in US
over next five years
The Qatar Investment Authority (QIA) has announced that it will
invest USD 35 billion in the US over the next five years (2016-21).
The US and Qatar enjoy a robust and growing economic and commercial
partnership. Bilateral trade is expected to exceed USD 7.5 billion
in 2016, and Qatar is among the top four markets in the Middle East
for US exports of goods and services.
QIA to invest USD 2.6 billion in Rosneft deal
Glencore PLC and QIA finalized a deal to take a one-fifth stake
in the state-owned Russian oil giant Rosneft for about USD 10.8
billion. QIA will invest USD 2.6 billion and Glencore USD 312
million for equal stakes in a special purpose vehicle that is
buying a 19.5% stake in Rosneft from its government-owned parent
company Rosneftegaz. The deal will help improve ties between Qatar
and Russia at a time when Russia is expected to improve its
relations with the United States after Donald Trump takes over as
the President.
Second phase of Qatar's FTSE upgrade to take place in March
2017
Qatar was upgraded to "Secondary Emerging Market" category from
its earlier status of "Frontier" by FTSE Russell in its semi-annual
review in September 2016. Qatar's inclusion in the index is in two
equal tranches - the first in September 2016 and the second in
March 2017. According to Arqaam Capital, following this upgrade,
Qatar Exchange will see around USD 370 million of passive
inflows.
In Qatar, income generated from visitors amounted to QAR 54.6
billion for the year 2015
The income derived from services to 'non-residents' (visitors)
in Qatar amounted to QAR 54.6 billion in 2015, up from QAR 11
billion in 2010, with an average annual growth of 44.9%, according
to the Ministry of Economy and Commerce (MEC). The economic
activities related to tourism income grew more than nine-fold
between 2010 and 2015, and amounted to QAR 18.3 billion in 2015,
representing 33.6% of the total "services exports" in the same
year. Qatar hopes to attract 4 million visitors by 2020, according
to Euromoney Institutional.
It is essential for Qatar to project itself as a tourist
friendly country to attract visitors to FIFA 2022 and ensure its
success. Qatar has been hosting a number of cultural and sporting
events to achieve its goal of diversifying the economy away from
the oil and gas sector. The continuing investments in creating a
solid infrastructure will pave the way for a world-class tourism
industry.
Qatari bank Masraf Al Rayan, Barwa Bank and International Bank
of Qatar (IBQ) in three-way merger talks
Qatari banks Masraf Al Rayan, Barwa Bank and International Bank
of Qatar (IBQ) have begun initial talks for a potential merger, in
a deal that would create the Gulf state's second-largest bank. The
new bank would be run in compliance with Islamic banking
principles. Masraf Al Rayan and Barwa Bank are Islamic
institutions, while IBQ currently follows conventional banking
principles, indicating that IBQ would have to convert its business
to being sharia-compliant. The new bank would have assets worth
more than QAR 160 billion and a share capital of more than QAR 22
billion.
If completed, the potential merger would form the largest
sharia-compliant bank in Qatar and the third-largest in the
Middle-East.
LNG giants Qatargas and RasGas to merge
In December 2016, Qatar Petroleum announced its decision to
merge RasGas and Qatargas, to create a world scale LNG giant
"Qatargas" with 79 million tonnes of combined annual LNG production
capacity. Qatargas has a production capacity of 42 million tonnes
per annum whereas RasGas has a capacity of 37 million tonnes per
annum. The merger is expected to be completed by 2017.
The merger would not only help reduce operating cost and achieve
efficiency gains but also solidify Qatar's position in the
international LNG market.
Doha Metro progress
54-59% of the four lines of the Doha metro project are complete
and the first train would start running in late 2019 as planned.
61% of the work is complete on the 13.6km underground stretch of
the Red Line from Lusail to Wakrah, and 66.5% of the work on the
8.9km Red Line South elevated route is completed. Lusail Light Rail
Transit, which comprises 32km of lines with 35 stations, is behind
schedule with 44.8% of the project completed so far.
Qatar: corporate profits declined 3.2% in 9M 2016
The combined profit of Qatari listed companies was down 10.7%
during the first nine months of 2016 compared to the same period in
2015. This drop can be mainly attributed to a one-off gain of USD
742.2 million reported during Q1 2015 by Barwa Real Estate.
Excluding this one-off gain, profits would have been lower by
3.2%.
Sector profitability (net profit/loss in USD 000's)
Sector 9M 2015 9M 2016 % change Q3 2015 Q3 2016 % change
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Banks & Financial
Institutions 15,611,326 15,956,380 2.2% 5,279,628 5,263,219 -0.3%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Services &Consumer
Goods 1,772,911 1,575,140 -11.2% 571,346 473,262 -17.2%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Industry 7,512,802 5,894,164 -21.5% 2,668,696 1,723,927 -35.4%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Insurance 979,698 999,406 2.0% 154,638 240,055 55.2%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Real Estate 5,483,497 3,316,325 -39.5% 560,970 796,133 41.9%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Telecoms* 1,758,138 1,831,769 4.2% 755,750 369,911 -51.1%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Transportation 1,849,950 1,656,606 -10.5% 621,120 502,292 -19.1%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Total 34,968,322 31,229,790 -10.7% 10,612,148 9,368,799 -11.7%
-------------------- ----------- ----------- --------- ----------- ---------- ---------
Source: Qatar Exchange; * Excluding Vodafone Qatar because of 31
March year end
Profits in the banking and financial services sector rose 2.2%
in 9M 2016 compared with 2015. Growth was driven by a 1.8% rise in
income of Qatari listed banks. Lending was up 6.1%, led primarily
by the public sector (up 11.5%). Qatar National Bank, the largest
bank in Qatar, reported a profit growth of 10.7%. Profit of Islamic
banks rose 9.1% during 9M 2016, compared to a 0.3% fall in the
profits of conventional banks. Growth in the latter was limited by
a sharp fall in the profit of Commercial Bank of Qatar (-61.6%).
Qatar Islamic Bank, Masraf Al Rayan and Qatar International Islamic
Bank reported profit growth of 13.8%, 3.0% and 1.5%,
respectively.
Profit in the services & consumer goods sector dropped 11.2%
during first nine months of 2016 compared to the same period last
year, as all the companies in the sector reported reduced profits,
with the exception of Zad Holding Company, Widam and Salam
International.
Profits in the industrials sector declined 21.5% during 9M 2016
compared to the same period in 2015. This was primarily due to a
28.9% fall in profit of Industries Qatar and a 77.0% decline in
profit of Gulf International Services, caused by the fall in
petrochemical and oil prices. However, profit of Qatar Electricity
and Water rose 8.2%, while that of Qatar Investor's Group advanced
18.5% during the same period.
In 9M 2016, the profit of the insurance sector rose 2.0%
compared to 2015, as Qatar Insurance Company and General Insurance
Company reported net profit growth of 2.5% and 34.7%, respectively
during the period.
Real estate profits declined sharply, mainly driven by the
significant drop in net profit reported by Barwa Real Estate (down
58.1%). Barwa Real Estate had reported a one-off profit on sale of
properties of USD 742.2 million (QAR 2.7 billion) in Q1 2015. As a
result, the company reported lower profit in Q1 2016 and hence in
9M 2016. Excluding this one-off gain, real estate sector profits
would have been up 19.2% in 9M 2016.
The Qatari telecom sector comprises Vodafone Qatar and Ooredoo.
Vodafone Qatar is excluded from this profit comparison, since its
fiscal year ends on 31 March. Ooredoo (formerly Qatar Telecom),
reported a 4.2% rise in profit in 9M 2016.
In the transportation sector, profits declined 10.5%, as Qatar
Navigation Company and Qatar Gas Transport Company reported profit
drops of 20.9% and 1.1%, respectively in 9M 2016. However, Gulf
Warehousing Company reported an 11.1% growth in 9M 2016 profit.
Country allocation
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Country
Allocation.
At 31 December 2016, QIF had 23 holdings: 16 in Qatar and 7 in
UAE (Q3 2016: 22 holdings: 17 in Qatar and 5 in UAE). The
Investment Adviser increased exposure to the UAE to 6.8% of NAV
from 4.3%. The cash weighting was 1.1% (Q3 2016: 3.5%).
Three holdings were added: Qatar International Islamic Bank, Air
Arabia and First Gulf Bank. QIF sold its holdings in Vodafone Qatar
and Qatar First Bank.
Sector allocation
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Sector
Allocation.
QIF remains overweight in the Qatar banking sector (including
financial services) at 42.4% of NAV (market weighting 38.4%). Qatar
National Bank remains QIF's largest holding (19.4% of NAV). For the
period January to December 2016, credit in Qatar grew 12.1%, mainly
driven by the public sector (up 25.7%). The Investment Adviser
believes that public sector loan growth will remain strong, driven
by the government's infrastructure development plans and a rising
population.
Industrials remain QIF's second largest exposure at 25.8% of
NAV, mainly in Industries Qatar (11.7% of NAV). The holding in Gulf
International Services reduced to 3.8% from 5.6% in the quarter,
while exposure to Qatar Electricity and Water increased to 7.9%
from 6.3%.
The Transportation sector is 10.1% of NAV. Qatar Gas Transport
Company rose to 6.4% of NAV from 3.5%. The holding in services and
consumer goods rose to 2.9% from 2.3%.
Exposure to the Telecom sector reduced to 5.9% (Q3 2016: 7.0%)
following the sale of Vodafone Qatar. Exposure in the Insurance
sector reduced to 1.8% from 3.4%. In Real Estate the holding in
Emaar Properties increased to 3.5% (Q3 2016: 1.8%).
Portfolio structure
Top 10 holdings
As at 31 December 2016, the top five investments constituted
55.5% of the Company's NAV, while the top 10 holdings constituted
80.0% of the Company's NAV.
Company Name Sector % share
of NAV
--------------------- ------------------- --------
Qatar National Banks & Financial
Bank Services 19.4%
--------------------- ------------------- --------
Industries Qatar Industrials 11.7%
--------------------- ------------------- --------
Banks & Financial
Masraf Al Rayan Services 9.2%
--------------------- ------------------- --------
Qatar Electricity
& Water Co Industrials 7.9%
--------------------- ------------------- --------
Banks & Financial
Qatar Islamic Bank Services 7.4%
--------------------- ------------------- --------
Qatar Gas Transport Transportation 6.4%
--------------------- ------------------- --------
Ooredoo Telecoms 5.9%
--------------------- ------------------- --------
Barwa Real Estate Real Estate 4.9%
--------------------- ------------------- --------
Gulf International
Services Industrials 3.8%
--------------------- ------------------- --------
Commercial Bank Banks & Financial
of Qatar Services 3.6%
--------------------- ------------------- --------
QIF's top 10 holdings remained unchanged in the Q4 2016. The
Investment Adviser reduced holdings in Commercial Bank of Qatar and
Gulf International Services given the outlook for these businesses
while holdings in Qatar Electricity and Water Company were
increased as valuations became attractive.
Profile of Top Five Holdings (As at 31 December 2016):
Qatar National Bank (19.4% of NAV)
Qatar National Bank (QNB) is a high quality proxy stock for
Qatari economic growth given its strong ties with the public sector
and access to state liquidity. QNB is a dominant state-owned
participant in the Banking sector and plays an important role in
the development of the Qatari economy and in funding key
infrastructure projects. The government is strongly committed to
support QNB, thus enhancing its economic importance. The largest
shareholder in QNB is the Government of Qatar through the Qatar
Investment Authority (QIA), with a 50% equity stake. QNB is the
largest bank in Qatar with total assets of QAR 719.7 billion (USD
197.7 billion) as at 31 December 2016. For the FY 2016, QNB
reported a 9.8% growth in net profit to QAR 12.4 billion (USD 3.4
billion). QNB is well positioned to reap the benefits of the rapid
expansion of the domestic economy and has been growing its presence
in the overseas markets as well. The bank, through its subsidiaries
and associate companies, operates in more than 30 countries,
through more than 1200 branches, supported by more than 4,300 ATMs
and employing more than 28,000 staff.
Industries Qatar (11.7% of NAV)
Industries Qatar (IQ) is a holding company with interests in
petrochemicals via 80% owned Qatar Petrochemical Co., fertilizers
via 75% owned Qatar Fertilizer Co., steel via a wholly owned
subsidiary Qatar Steel Co. and fuel additives via 50% owned Qatar
Fuel Additives Co. For 9M 2016, the company's net profit declined
28.9% compared to nine months of 2015 to QAR 2.7 billion (USD 0.75
billion), mainly attributed to a fall in revenue across all
segments due to product price deflation. Petrochemical and fuel
additive products witnessed substantial price deflation following
the oil price decline which began in 2014. Industries Qatar is well
positioned to benefit from the ongoing recovery in oil prices and a
rise in prices of commodities globally.
Masraf Al Rayan (9.2% of NAV)
Masraf Al Rayan (MARK) was incorporated as a Qatari Shareholding
Company under Qatar Commercial Company law on 4th January 2006. It
is licensed by the Qatar Central Bank and began commercial
operations in October 2006. The bank has three main business
divisions, namely retail banking, wholesale banking and private
banking. Besides this, the bank offers investment banking and
treasury products. As of December 2016, MARK has a network of 13
branches in strategic locations across Qatar, and a total of 80
ATMs. As at the end of December 2016, its financing assets stood at
QAR 67.6 billion (USD 18.6 billion), with government & related
agencies segment occupying the largest share of the loan basket
(over 48%). In FY 2016, Mark reported net profit of QAR 2.1 billion
(USD 0.6 billion).
Qatar Electricity & Water Co. (7.9% of NAV)
Qatar Electricity & Water Co. (QEWS) was established in 1990
as a first private sector company engaged in electricity production
and water desalination businesses. The company is the second
largest utility company in North Africa and Middle East region. In
Qatar, the company enjoys a 62% market share in electricity
business while in water desalination business it commands a 79%
market share. Over the past decade, the company has been the key
beneficiary of rapid development in Qatar, coupled with the growth
in population, resulting in increased demand for electricity and
water. Additionally, the company has entered into overseas markets
with an establishment of Nebras Power Company (60% owned by QEWS),
which invests globally in new and existing power generation and
water desalination projects. The company has a low risk profile due
to its exposure in the infrastructure and utilities sector in
Qatar. For 9M 2016, the company reported 8.2% rise in its net
profit to QAR 1.2 billion (USD 0.3 billion).
Qatar Islamic Bank (7.4 % of NAV)
Qatar Islamic Bank (QIB) was the first Islamic bank to start
operating in the country in 1982 and it is still the largest
Islamic bank. The Bank currently holds a 42% share of the Islamic
banking sector and approximately 12% of the total domestic banking
sector. QIB's strong domestic presence is augmented by growing
international footprint, with investments in the UK, Malaysia,
Sudan and Lebanon. The QIB Group covers all segments of the
financial markets, including individuals, government institutions,
large corporations and SMEs, providing innovative Sharia-compliant
banking solutions. As of December 2016, QIB's financing assets
stood at QAR 98.2 billion (USD 27.0 billion) and total assets
amounted to QAR 139.8 billion (USD 38.3 billion). In FY 2016, QIB
reported net profit growth of 10.3% to QAR 2.2 billion (USD 0.6
billion).
QIF performance
QIF's NAV was down 2.6% in 2016, and the dividend adjusted NAV
was up 0.5%. The QE was up 0.1%.
On 31 December 2016, the QIF share price was trading at a 14.3%
discount to NAV.
Embedded image removed - please refer to the Company's website
www.qatarinvestmentfund.com for a chart depicting Share Price v
NAV.
Historic performance
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
5M
----------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------
QIF NAV* 13.9% -36.4% 10.4% 29.9% 1.3% -4.7% 24.2% 20.6% -14.6% -2.6%
----------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------
QE Index 27.0% -28.8% 1.1% 24.8% 1.1% -4.8% 24.2% 18.4% -15.1% 0.1%
----------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------
QIF Share
Price 15.5% -67.5% 97.3% 23.0% -2.3% 2.4% 26.4% 17.4% -17.0% -4.5%
----------- ------ ------- ------ ------ ------ ------ ------ ------ ------- ------
Source: Bloomberg, Qatar Insurance Company, Note: *Net of
dividends paid
Outlook
The Investment Adviser believes that Qatar is well positioned
for continued growth as macroeconomic fundamentals remain strong.
With the recovery in oil prices following the agreement among oil
producers to cut production, the Qatari government will have higher
flexibility in continuing its commitment to planned major
infrastructural projects in line with the Qatar National Vision
2030. Additionally, Qatar's fiscal buffers and sizeable assets
should help it maintain its position as one of the stable economies
in the GCC region.
Ongoing high investment spending will help drive growth in
Qatar's non-hydrocarbon sector, while output gains from the Barzan
gas facility will help contribution from the hydrocarbon
sector.
Banking sector credit growth is likely to be strong on the back
of higher consumer lending and project financing activities. The
Investment Adviser believes that for these reasons, the Qatari
economy and the Qatari stock market is likely to remain attractive
to investors.
Epicure Managers Qatar Limited Qatar Insurance Company
S.A.Q.
22 February 2017 22 February 2017
Consolidated Income Statement
(Unaudited) (Unaudited)
Note For the period from For the period from
1 July 2016 to 1 July 2015 to
31 December 2016 31 December 2015
US$'000 US$'000
------------------------------------------------------------------- ----- -------------------- --------------------
Income
Dividend income on quoted equity investments - -
Realised loss on sale of financial assets at fair value through
profit or loss (4,719) (2,025)
Net changes in fair value on financial assets at fair value
through profit or loss 13,417 (25,880)
Commission rebate income on quoted equity investments 7 12 -
Total net income 8,710 (27,905)
------------------------------------------------------------------- ----- -------------------- --------------------
Expenses
Investment Manager's fees 6 710 1,011
Audit fees 11 17
Other expenses 6 545 642
--------------------
Total operating expenses 1,266 1,670
------------------------------------------------------------------- ----- -------------------- --------------------
Profit/(loss) before tax 7,444 (29,575)
Income tax expense 13 - -
------------------------------------------------------------------- ----- -------------------- --------------------
Retained profit/(loss) for the period 7,444 (29,575)
------------------------------------------------------------------- ----- -------------------- --------------------
Basic and diluted earnings/(loss) per share (cents) 10 6.41 (21.94)
------------------------------------------------------------------- ----- -------------------- --------------------
Consolidated Statement of Comprehensive Income
(Unaudited) (Unaudited)
For the period from For the period from
1 July 2016 to 1 July 2015 to
31 December 2016 31 December 2015
US$'000 US$'000
----------------------------------------------------------------------- -------------------- --------------------
Profit/(loss) for the period 7,444 (29,575)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
----------------------------------------------------------------------- -------------------- --------------------
Currency translation differences 85 (35)
------------------------------------------------------------------------ -------------------- --------------------
Total items that are or may be reclassified subsequently to profit or
loss 85 (35)
------------------------------------------------------------------------ -------------------- --------------------
Other comprehensive expense for the period (net of tax) 85 (35)
------------------------------------------------------------------------ -------------------- --------------------
Total comprehensive profit/(loss) for the period 7,529 (29,610)
------------------------------------------------------------------------ -------------------- --------------------
Consolidated Balance Sheet
(Unaudited) (Audited)
Note At 31 December 2016 At 30 June 2016
US$'000 US$'000
------------------------------------------------------- ----- -------------------- ----------------
Financial assets at fair value through profit or loss 5 130,673 141,242
Other receivables and prepayments 74 346
Cash and cash equivalents 8 2,337 1,447
------------------------------------------------------- ----- -------------------- ----------------
Total current assets 133,084 143,035
======================================================= ===== ==================== ================
Issued share capital 1,043 1,194
Reserves 9 127,469 141,149
Total equity 128,512 142,343
------------------------------------------------------- ----- -------------------- ----------------
Other creditors and accrued expenses 11 4,572 692
Total liabilities 4,572 692
------------------------------------------------------- ----- -------------------- ----------------
Total equity & liabilities 133,084 143,035
======================================================= ===== ==================== ================
Consolidated Statement of Changes in Equity
Share Capital Distributable reserves Retained Earnings Other Reserves Total
(note 9)
US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Balance at 01 July 2016 1,194 103,904 36,177 1,068 142,343
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total comprehensive income
for the period
Profit for period - - 7,444 - 7,444
Other comprehensive income
Foreign currency translation
differences - - - 85 85
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total other comprehensive
expense - - - 85 85
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total comprehensive profit
for the period - - 7,444 85 7,529
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Contributions by and
distributions to owners
Dividends payable - - (4,116) - (4,116)
Shares repurchased to be
held in treasury - (370) - - (370)
Shares subject to tender
offer (141) (16,817) - 141 (16,817)
Tender offer expenses - (57) - - (57)
Shares in treasury cancelled (10) - - 10 -
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total contributions by and
distributions to owners (151) (17,244) (4,116) 151 (21,360)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Balance at 31 December 2016 1,043 86,660 39,505 1,304 128,512
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
* Retained earnings include realised gains and losses on the
sale of assets at fair value through profit or loss and net changes
in fair value on financial assets at fair value through profit or
loss. The level of dividend is calculated based only on a
proportion of the dividends received during the year, net of the
Company's attributable costs.
Share Capital Distributable reserves Retained Earnings Other Reserves Total
(note 9)
US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Balance at 01 July 2015 1,396 131,559 78,866 899 212,720
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total comprehensive income
for the period
Loss for period - - (29,575) - (29,575)
Other comprehensive income
Foreign currency translation
differences - - - (35) (35)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total other comprehensive
expense - - - (35) (35)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total comprehensive profit
for the period - - (29,575) (35) (29,610)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Contributions by and
distributions to owners
Dividends payable - - (4,742) - (4,742)
Shares repurchased to be
held in treasury - (1,193) - - (1,193)
Shares subject to tender
offer (193) (25,141) - 193 (25,141)
Tender offer expenses - (121) - - (121)
Shares in treasury cancelled (19) - - 19 -
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Total contributions by and
distributions to owners (212) (26,455) (4,742) 212 (31,197)
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Balance at 31 December 2015 1,184 105,104 44,549 1,076 151,913
----------------------------- -------------- ----------------------- ------------------ --------------- ---------
Consolidated Statement of Cash Flows
(Unaudited) (Unaudited)
Note For the period from For the period from
1 July 2016 to 1 July 2015 to
31 December 2016 31 December 2015
US$'000 US$'000
--------------------------------------------------------------- ----- -------------------- --------------------
Cash flows from operating activities
Purchase of investments (26,528) (51,004)
Proceeds from sale of investments 45,937 82,703
Dividends received - -
Operating expenses paid (1,290) (1,658)
Commission rebate 12 -
Net cash generated from operating activities 18,131 30,041
--------------------------------------------------------------- ----- -------------------- --------------------
Financing activities
Cash used in tender offer (16,817) (25,141)
Tender offer expenses (57) (121)
Cash used in share repurchases (370) (1,193)
Net cash used in financing activities (17,244) (26,455)
--------------------------------------------------------------- ----- -------------------- --------------------
Net increase in cash and cash equivalents 887 3,586
Effects of exchange rate changes on cash and cash equivalents 3 3
Cash and cash equivalents at beginning of period 1,447 5,957
--------------------------------------------------------------- ----- -------------------- --------------------
Cash and cash equivalents at end of period 8 2,337 9,546
--------------------------------------------------------------- ----- -------------------- --------------------
Notes to the Interim Consolidated Financial Statements
1 The Company
Qatar Investment Fund plc (formerly Epicure Qatar Equity
Opportunities plc) (the "Company") was incorporated and registered
in the Isle of Man under the Isle of Man Companies Acts 1931-2004
on 26 June 2007 as a public company with registered number
120108C.
Pursuant to an Admission Document dated 25 July 2007 there was
an original placing of up to 171,355,000 Ordinary Shares of 1 cent
each, with Warrants attached on the basis of 1 Warrant to every 5
Ordinary Shares. Following the placing on 31 July 2007, 171,355,000
Ordinary Shares and 34,271,000 Warrants were issued; the warrants
expired on 16 November 2012.
The Shares of the Company were admitted to trading on the AIM
market of the London Stock Exchange ("AIM") on 31 July 2007 when
dealings also commenced.
As a result of a further fund raising in December 2007, a
further 76,172,523 Ordinary Shares were issued, which were admitted
for trading on 13 December 2007.
On 4 December 2008, the share premium arising from the placing
of shares was cancelled and the amount of the share premium account
transferred to distributable reserves.
The Shares of the Company were admitted to trading on the Main
Market of the London Stock Exchange on 13 May 2011.
During the period 1 July 2016 to 31 December 2016, the Company
purchased 331,514 of its ordinary shares for a total value of
US$369,594 to be held in treasury. 963,198 shares had been
repurchased in the period ended 31 December 2015 for treasury but
had been held for over a year and were therefore cancelled in the
current financial period. The buy-backs are effected through
distributable reserves.
On 19 December 2016 the Company completed a tender offer at a
price of US$1.1973 per share. Under the offer 14,045,544 shares
were cancelled with US$16,816,730 being paid to participating
shareholders.
The shareholders approved a dividend of 4.0 cents per share on
17 November 2016; this was paid to shareholders on 31 January
2017.
The Company's agents and the Manager perform all significant
functions. Accordingly, the Company itself has no employees.
2 The Subsidiary
The Company has the following subsidiary company:
Country of incorporation Percentage of shares held
---------------------------------------------- -------------------------- --------------------------
Epicure Qatar Opportunities Holdings Limited British Virgin Islands 100%
---------------------------------------------- -------------------------- --------------------------
3 Significant Accounting Policies
The Interim Report of the Company for the period ending 31
December 2016 comprises the Company and its subsidiary (together
referred to as the "Group"). The accounting policies applied by the
Group in these condensed consolidated interim financial statements
are the same as those applied by the Group in its consolidated
financial statements for the year ended 30 June 2016. The interim
consolidated financial statements are unaudited.
3.1 Basis of presentation
These financial statements have been prepared in accordance with
International Financial Reporting Standard ("IFRS") IAS 34 Interim
Financial Reporting. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
as at and for the year ended 30 June 2016.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Board of Directors to exercise its judgement in the
process of applying the Group's accounting policies. The financial
statements do not contain any critical accounting estimates
3.2 Segment reporting
The Group has one segment focusing on maximising total returns
through investing in quoted securities in Qatar and the GCC region.
No additional disclosure is included in relation to segment
reporting, as the Group's activities are limited to one business
and geographic segment.
4 Net Asset Value per Share
The net asset value per share as at 31 December 2016 is
US$1.2489 per share based on 102,896,644 ordinary shares in issue
as at that date (excluding 1,470,689 shares held in treasury), (30
June 2016: US$1.2138 based on 117,273,702 ordinary shares in issue,
excluding 890,509 shares held in treasury).
5 Investments
31 December 2016 financial assets at fair value through profit
or loss: all quoted equity securities
Security name Number US$'000
--------------------------------------------- ---------- ---------------------------------------
Al Meera Consumer Goods (MERS QD) 58,402 2,792
Barwa Real Estate (BRES QD) 710,525 6,465
Commercial Bank of Qatar (CBQK QD) 512,588 4,375
Commercial Bank of Qatar Rights (R004 QD) 127,313 160
Gulf International Services (GISS QD) 590,904 5,044
Gulf Warehousing (GWCS QD) 304,235 4,668
Industries Qatar (IQCD QD) 480,905 15,443
Masraf Al Rayan (MARK QD) 1,188,047 12,244
Ooredoo (ORDS QD) 280,886 7,841
Qatar Electricity & Water Company (QEWS QD) 167,903 10,286
Qatar Gas Transport (QGTS QD) 1,351,398 8,531
Qatar Insurance (QATI QD) 104,426 2,388
Qatar International Islamic Bank (QIIK QD) 37,694 649
Qatar Islamic Bank (QIBK QD) 344,006 9,753
Qatar National Bank (QNBK QD) 576,981 25,655
Qatar National Cement Co (QNCD QD) 142,268 3,319
Qatar United Development Company UDCD QD) 359,122 1,972
Abu Dhabi Commercial Bank (ADCB UH) 790,000 1,484
Air Arabia (AIRARABIA UH) 400,000 144
Dubai Islamic Bank (DIB UH) 485,000 734
DXB Entertainments (DXBE UH) 2,995,627 1,060
Emaar Properties Co (EMAAR UH) 2,432,355 4,721
Emirates National Bank of Dubai (ENBD UH) 300,000 687
First Gulf Bank (FGB UH) 75,000 258
130,673
--------------------------------------------- ---------- ---------------------------------------
6 Charges and Fees
31 December 2016 31 December 2015
US$'000 US$'000
Investment Manager's fees (see below) 710 1,011
Performance fees (see below) - -
------------------------------------------------ ----------------- -----------------
Administrator and Registrar's fees (see below) 114 137
Custodian fees (see below) 67 76
Directors' fees and expenses 145 179
Directors' insurance cover 16 22
Broker fees 27 33
Other 176 195
------------------------------------------------ ----------------- -----------------
Other expenses 545 642
------------------------------------------------ ----------------- -----------------
Investment Manager's fees
Annual fees
Originally 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. That
Investment Management Agreement was subject to termination on 31
October 2013 with a revised agreement coming into effect from 1
November 2013. The revised agreement saw the annual fee reduce to
1.05% of the net asset value of the Company, reducing to an annual
fee of 1.0% of the net asset value of the Company from 1 November
2015 and further reducing to an annual fee of 0.9% of the net asset
value of the Company from 1 November 2016.
Management fees for the period ended 31 December 2016 amounted
to US$710,101 (31 December 2015: US$1,011,421).
Performance fees
As a result of the amended Investment Management Agreement which
came into effect on 1 November 2016 the Investment Manager is no
longer entitled to a performance fee.
Performance fees for the period ended 31 December 2016 amounted
to US$nil (31 December 2015: US$nil).
The Investment Manager is responsible for the payment of all
fees to the Investment Adviser.
Custodian fees
The Custodian is entitled to receive fees of US$7,200 per annum
and US$25 per processed transaction from Qatar Investment Fund
PLC.
In addition the Custodian is entitled to receive fees of 8 basis
points per annum in respect of Qatari securities held by the group
and 10 basis points per annum in respect of non-Qatari, GCC
securities held by the group and $45 per settled transaction
(Qatar)/$50 per settled transaction (GCCC excluding Qatar).
Custodian and sub-custodian fees for the period ending 31
December 2016 amounted to US$66,582 (31 December 2015:
US$75,971).
Administrator and Registrar fees
The Administrator is entitled to receive a fee of 12.5 basis
points per annum of the net asset value of the Company between US$0
and US$100 million, 10 basis points of the net asset value of the
Company above US$100 million.
This is subject to a minimum monthly fee of US$15,000, payable
quarterly in arrears. The Administrator receives an additional fee
of GBP1,200 per month for providing monthly valuation data to the
Association of Investment Companies.
The Administrator assists in the preparation of the financial
statements of the Group and provides general secretarial
services.
Administration fees paid for the period ending 31 December 2016
amounted to US$113,588 and US$32,129 for additional services (31
December 2015: US$136,962 and US$29,451 respectively).
7 Commission rebate
The Company received 50% brokerage commission rebates for all
trades done through its DLALA Qatar brokers. However, during
previous periods the Company changed its Qatar broker to AHLI
brokers to take advantage of more competitive commission rates and
no commission rebate was received. For the period ended 31 December
2016 the Group used a mixture of the DLALA and AHLI brokerages and
received US$ 12,317 (2015: US$ Nil).
8 Cash and Cash Equivalents
31 December 2016 30 June 2016
US$'000 US$'000
--------------------------- ----------------- -------------
Bank balances 2,337 1,447
Cash and cash equivalents 2,337 1,447
--------------------------- ----------------- -------------
9 Other Reserves
Distributable Retained Earnings Foreign currency Capital redemption Total
Reserves translation reserve reserves
US$'000 US$'000 US$'000 US$'000 US$'000
--------------------- -------------------- ------------------ -------------------- -------------------- ---------
Balance at 1 July
2016 103,904 36,177 (213) 1,281 141,149
Foreign exchange
translation
differences - - 85 - 85
Retained profit for
period - 7,444 - - 7,444
Dividends paid - (4,116) - - (4,116)
Shares repurchased
into Treasury (370) - - - (370)
Shares subject to
tender offer (16,817) - - 141 (16,676)
Tender offer
expenses (57) - - - (57)
Shares in Treasury
cancelled - - - 10 10
Balance at 31
December 2016 86,660 39,505 (128) 1,432 127,469
--------------------- -------------------- ------------------ -------------------- -------------------- ---------
10 Earnings per Share
Basic and diluted earnings per share are calculated by dividing
the profit attributable to equity holders of the Group by the
weighted average number of ordinary shares in issue during the
period:
31 December 2016 31 December 2015
----------------------------------------------------------------------- ----------------- -----------------
Profit/(loss) attributable to equity holders of the Company (US$'000) 7,444 (29,575)
Weighted average number of ordinary shares in issue (thousands) 116,114 134,803
----------------------------------------------------------------------- ----------------- -----------------
Basic earnings/(loss) per share (cents per share) 6.41 (21.94)
----------------------------------------------------------------------- ----------------- -----------------
11 Trade and other payables
31 December 2016 30 June 2016
US$'000 US$'000
------------------------------- ----------------- -------------
Dividend payable* 4,116 -
Due to broker - 221
Management fee payable 329 357
Administration fee payable 57 56
Accruals and sundry creditors 70 58
------------------------------- ----------------- -------------
4,572 692
------------------------------- ----------------- -------------
* a dividend of US$ 0.040 per Ordinary Share was announced, this
was approved by shareholders at the Annual General Meeting on 17
November 2016 and was paid on 31 January 2017 to ordinary
shareholders on the register as at 23 December 2016 (the "Record
Date"). The corresponding ex-dividend date was 22 December
2016.
12 Directors' Remuneration
The maximum amount of remuneration payable to the Directors
permitted under the Articles of Association is GBP200,000 per
annum.
Nick Wilson as non-executive chairman is entitled to receive an
annual fee of GBP47,500. He also receives an additional fee in
respect of his work regarding the Company's share buy-back
programme of GBP10,000 per annum.
Paul Macdonald as non-executive chairman of the audit committee
is entitled to receive GBP32,500 per annum.
Leonard O'Brien and Neil Benedict in their capacity as
non-executive directors receive GBP30,000 each per annum.
The Directors are each entitled to receive reimbursement of any
expenses incurred in relation to their appointment. Total fees and
expenses paid to the Directors for the period ended 31 December
2016 amounted to US$145,068 (31 December 2015: US$178,883).
13 Taxation
Isle of Man taxation
The Company is resident for taxation purposes in the Isle of Man
by virtue of being incorporated in the Isle of Man and is
technically subject to taxation on its income but the rate of tax
is zero. The Group is required to pay an annual corporate charge of
GBP250 per annum.
The Company became registered for VAT from 1 February 2011.
Qatar taxation
It is the intention of the Directors to conduct the affairs of
the Company so that it is not considered to be either resident in
Qatar or doing business in Qatar.
Qatar does not impose withholding tax on dividend distributions
by Qatari companies to non-residents.
Capital gains made by the Company on disposal of shares in
Qatari companies will not be subject to tax in Qatar.
There is no stamp duty or equivalent tax on the transfer of
shares in Qatari companies.
Kuwait taxation
Since 1 January 2009 dividends paid on behalf of holdings in
Kuwait are to have withholding tax deducted at 15%.
14 Related Party Transactions
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the other party in making financial or operational
decisions.
The Investment Adviser is Qatar Insurance Company S.A.Q. The
Group holds shares in Qatar Insurance Company S.A.Q. (see note 5).
It is paid fees by the Investment Manager.
The Investment Manager, Epicure Managers Qatar Limited, is a
related party by virtue of its ability to make operational
decisions for the Company and through common directors. Fees
payable to the Investment Manager are disclosed in note 6.
Epicure Managers Qatar Limited is a wholly owned subsidiary of
the Investment Adviser, Qatar Insurance Company S.A.Q.
Leonard O'Brien is a director of the Company and of the
Investment Manager.
15 Post Balance Sheet Events
Shareholders received a dividend of 4.0 cents per share on 31
January 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKBDKABKDCBB
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February 23, 2017 02:00 ET (07:00 GMT)
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