Gulf Investment Fund - Half-year Report
23/02/2023 07:00
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RNS Number : 7484Q Gulf Investment Fund PLC 23 February 2023
Gulf Investment Fund PLC
23 February 2023
Legal Entity Identifier: 2138009DIENFWKC3PW84
Gulf Investment Fund plc (GIF)
Interim report for the six months ended 31 December 2022
- Net asset value down 1.83% vs benchmark fall of 7.09%
- Final dividend of 3.51c to be paid on 17 March 2023
- GIF shares ended the period trading at 5.2% discount to NAV
(5-year average discount 8.7%)
Anderson Whamond, Chairman of Gulf Investment Fund plc, said:
"GCC markets benefitted from rising oil prices, demand for Liquified Natural
Gas, and improvements in global stock market trends.
"The GCC region is seeing further diversification away from hydrocarbons, as
well as the ability to use the windfall from higher oil prices to invest in
green growth. Additionally, the region is seeing socio-economic reforms and
infrastructure projects. The IMF expects the GCC to grow 3.6 per cent in 2023.
"For 2022 year as a whole, the GIF NAV increased 8.4 per cent, continuing to
outperform its benchmark and index, despite Q4 being one of the worst quarters
for both Qatar and Saudi Arabia in the past 10 years.
"With gas demand likely to be more resilient than oil, alongside the world's
transition to Net Zero, Qatar should continue to see robust growth fuelled by
gas prices in the long term. GIF remains overweight in Qatar compared to the
benchmark."
++
Anderson Whamond
Chairman
Gulf Investment Fund Plc
+44 (0) 1624 692600
William Clutterbuck / Rachel Cohen
H/Advisors Maitland
+44 (0) 20 7379 5151
gulfinvestmentfund-maitland@h-advisors.global
Chairman's Statement
On behalf of the Board, I am pleased to present the interim results for Gulf
Investment Fund Plc ('GIF') for the six months ending 31 December 2022.
Results
For the six months ending 31 December 2022, Net Asset Value per Share ('NAV')
fell 1.83% to USD 1.9885 compared with a fall of 7.09% in the S&P GCC
Composite Index. During the same period the share price fell 6.68% from USD
2.020 to 1.885. As covered in more detail in the Investment Adviser's report
below, this decline in the GCC equity market was amid concerns over the global
economy, rising inflation and lower oil prices.
We saw the share price trade at a premium for much of the period under review,
after a number of favourable press comments during the period, both about the
growth of the GCC region as an investible universe and more specific
commentary about GIF and its long-term relative performance, however as a
result of the market sell off in the period, the share price discount to NAV
ended the year at 5.20%.
At the Annual General Meeting on 22nd December 2022 a final dividend of USD
3.51 cents per ordinary share for the year ended 30 June 2022 was approved.
The dividend will be paid on 17 March 2023 with an ex-dividend date of 9
February 2023.
Once again there was a tender offer to all shareholders during the period.
178,064 shares, representing c. 0.43% of the issued share capital were
tendered and cancelled.
Further to the listing facility applied for in May 2022, on 20 December 2022
75,000 ordinary shares of US$0.01 each were issued resulting in the total
ordinary shares in issue being 41,002,152.
Markets in the GCC region benefited from rising hydrocarbon prices and
improving trends in global stock markets. As at 31 December 2022 GIF had 28
holdings: 16 in Saudi Arabia, 5 in Qatar, 3 in the UAE, 3 in Kuwait and 1 in
Oman.
Outlook, risks and uncertainties
Following the recent sell-off in the market, valuations are becoming more
attractive and we believe the markets will recover as soon as global market
volatility settles down. Going into 2023 the outlook for GCC remains robust,
supported by socio-economic reforms, infrastructure projects, and favourable
oil supply-demand dynamics that provides the majority of GCC states with twin
surpluses as well as an economy that is mostly shielded from recession fears
in Europe & US.
The main risks and uncertainties faced by the Company are: 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.
Anderson Whamond
Chairman
22 February 2023
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 2022 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.
Anderson Whamond
Chairman
22 February 2023
Report of the Investment Manager and the Investment Adviser
Regional Market Overview:
Country / Region Index 31-Dec-21 30-Jun-22 1H2022 31-Dec-22 2H2022 FY2022
Qatar DSM Index 11,626 12,191 4.86% 10,681 -12.39% -8.13%
Saudi Arabia SASEIDX Index 11,282 11,523 2.14% 10,478 -9.07% -7.12%
Dubai DFMGI Index 3,196 3,223 0.85% 3,336 3.50% 4.38%
Abu Dhabi ADSMI Index 8,488 9,375 10.45% 10,211 8.92% 20.30%
Kuwait KWSEAS Index 7,043 7,409 5.19% 7,292 -1.57% 3.54%
Oman MSM30 Index 4,130 4,123 -0.18% 4,857 17.83% 17.61%
Bahrain BHSEASI Index 1,797 1,840 2.37% 1,895 3.02% 5.47%
S&P GCC SEMGGCPD Index 150 150 -0.12% 139 -7.09% -7.20%
Brent CO1 Comdty 77.78 114.81 47.61% 85.91 -25.17% 10.45%
MSCI EM MXEF Index 1,232 1,001 18.78% 956 -4.43% 22.37%
MSCI World MXWO Index 3,232 2,546 21.21% 2,603 2.22% 19.46%
Source: Bloomberg
The GCC equity market declined 7.09% in the second half of 2022 amid concerns
over the global economy, rising inflation and lower oil prices. Qatar saw the
most significant decline of 12.4 per cent, followed by Saudi Arabia that
dropped 9.07 per cent. In contrast, Oman, Abu Dhabi, Dubai, and Bahrain gained
17.8 per cent, 8.9 per cent, 3.5 per cent and 3.0 per cent respectively. In
comparison MSCI World Index rose 2.2 per cent over the period, while MSCI EM
Index was down 4.4 per cent.
The price of oil (Brent) declined 25.2 per cent in the six months to 31
December 2022, reaching ~US$85.9 per barrel, amid softening demand driven by
recession fears.
For 2022 as a whole, the performance of individual markets in the GCC were
mixed. The S&P GCC Composite index was down 7.2 per cent (MSCI World index
down 19.5 per cent; MSCI EM index down 22.4 per cent).
Among the GCC markets, in 2022 Qatar market saw a decline of 8.1 per cent,
while Saudi Arabia was down 7.1 per cent. Positive 2022 performance was led by
Abu Dhabi rising 20.3 per cent, followed by Oman with a 17.6 per cent
increase. Bahrain, Dubai and Kuwait rose 5.5 per cent, 4.4 per cent, and 3.5
per cent respectively.
GCC: Staying optimistic despite global uncertainties
According to the IMF, the GCC region's GDP is expected to grow by 6.5 per cent
in 2022 and 3.6 per cent in 2023, led by stronger hydrocarbon and
non-hydrocarbon industries.
Higher oil prices will be reflected in GCC strong twin surpluses (fiscal and
external), which should boost consumer confidence and investments. High
uncertainty surrounds the oil market outlook, with the OPEC+ alliance recently
deciding to take a more conservative production strategy considering a
deteriorating global economic outlook.
The increase in hydrocarbon prices provides an opportunity for GCC countries
to shift to a green growth strategy and accelerate economic diversification by
investing their windfall in sustainable sectors. In 2022, oil exporters are
likely to benefit from strong oil prices and steady non-GDP growth, offsetting
the negative effects of high food costs and rising international interest
rates. Non-oil GDP is expected to be strong around 4.0 per cent & 3.7 per
cent in 2022 and 2023 respectively.
Real GDP Growth 2018 2019 2020 2021 2022E 2023E
GCC 4.3% 1.0% -4.5% 3.1% 6.5% 3.6%
GCC oil GDP 2.6% -1.4% -5.9% 0.2% 10.5% 3.6%
GCC non-oil GDP 5.8% 2.5% -3.6% 4.5% 4.0% 3.7%
IMF GDP growth forecast 2022 and 2023
Source: IMF World Economic Outlook and Regional Economic Outlook October 2022
GCC Budget and Economic Update
Saudi Arabia's fiscal position is expected to improve after years of deficits.
The Kingdom forecasts public revenues to reach US$301.3 billion in 2023,
leading to an expected surplus of US$4.3 billion, equivalent to a surplus of
0.4 per cent of GDP.
Saudi Arabia 2023 Budget
US$ Billions 2020 2021 2022E 2023E
Revenue 208.5 257.3 329.1 301.3
Expenditure 286.9 277.1 301.9 297.1
Surplus/ (Deficit) (78.4) (19.7) 27.2 4.3
Nominal GDP 703.5 833.6 1,055.2 1,031.7
Public Debt 227.7 250.1 262.7 253.6
Surplus/ (Deficit) - % of GDP -11.1% -2.4% 2.6% 0.4%
Public Debt - % of GDP 32.4% 30.0% 24.9% 24.6%
Source: Saudi Arabia MoF; Table contains budgeted numbers for respective year
Saudi Arabia's government spending is expected to reduce from US$301.9 billion
in 2022 to US$297.7 billion in 2023.
The anticipated Saudi budget surplus of US$27 billion in 2022 would be the
country's first surplus since 2013, compared to a 2.4 per cent budget deficit
in 2021. Another budget surplus, combined with ongoing healthy nominal GDP
growth, will support a further reduction in the public debt to GDP ratio to
24.6 per cent in 2023, owing largely to the government's plan to divert a
portion of its income surpluses to fiscal reserves while also supporting a
range of public development funds.
Saudi Arabia launched a new research, development, and innovation (RDI)
programme that seeks to add 60 billion riyals (US$16 billion) to the kingdom's
GDP by 2040. Saudi also announced US$186 million investment to develop green
economy, create quality job opportunities, and provide investment
opportunities for the private sector. This will contribute to a potential
reduction of carbon emissions by more than 278 million tons annually.
Additionally, the Kingdom signs US$10 billion investment deal for local
infrastructure projects. It aims to provide over 150,000 housing units,
different in size and design, covering 11 cities.
Saudi is also to announce initiatives for the tourism sector. It aims to
launch a near US$400 million hospitality investment fund, promoting lifestyle
hotels with 2,000 hotel rooms and other lifestyle hospitality projects in
various tourist destinations within the Kingdom.
Saudi announced US$2.5 billion funding to a green initiative in the Middle
East over the next ten years. Saudi Arabia intends to rely on renewables for
50% of its electricity output by 2030, reducing carbon emissions by 44 million
tons by 2035. It also aims to plant 50 billion trees across the Middle East
and restore an area equivalent to 200 million hectares of degraded land. The
initiative will reduce global carbon levels by 2.5 percent.
Saudi is investing about SR200 billion (US$53.2 billion) in various
development projects to improve infrastructure in vital sectors such as
transportation, water, and energy. In addition, the kingdom will spend an
another SR500 billion (US$133.34 billion) over the following ten years to
build airports, seaports, rail, and other infrastructure in order to establish
the kingdom as a worldwide transportation and logistics hub.
Saudi launched its new national strategy for industry
(https://www.arabianbusiness.com/industries/technology/amazon-opens-new-office-in-riyadh-launches-initiative-to-train-saudis)
, aimed at making the country a manufacturing power house and accelerating its
economic diversification drive. The new industrial strategy seeks to triple
the country's industrial domestic product and more than double the value of
industrial exports to SAR557 billion (US$148.2 billion). Also, it aims to
attract SAR1.3 trillion (US$350 billion) in additional investment, increase
exports of advanced technology products by sixfold and create tens of
thousands of high-quality jobs.
Qatar's 2023 budget forecasts total revenue of US$62.6 billion, up 16.3 per
cent on 2022, based on an assumed oil price of US$65/barrel up from
US$55/barrel in 2022. Government spending decrease by 2.6 per cent to US$54.7
billion in 2023, mainly due to completion of most of the costs of hosting the
World Cup and fall in projects provisions by 13.6 per cent compared to 2022.
In 2023, the surplus is expected to be US$8.0 billion, which will be used to
pay public debt, sustain the reserves of the Qatar Central Bank, and expand
the capital of the Qatar Investment Authority, reflecting the country's desire
to stimulate and diversify its economy.
Qatar 2023 Budget
US$ Billion 2017 2018 2019 2020 2021 2022E 2023E
Total Revenues 46.7 48.1 58.0 58.0 44.0 53.8 62.6
Total Expenditures 54.5 55.8 56.8 57.8 53.5 56.1 54.7
Surplus / (Deficit) (7.8) (7.7) 1.2 0.1 (9.5) (2.3) 8.0
Oil Price Assumption (USD/bbl) 45.0 45.0 55.0 55.0 40.0 55.0 65.0
Source: Qatar MoF; Table contains budgeted numbers for respective year
Qatar is projected to post the strongest growth rebound in the GCC, driven by
LNG demand in the medium term. The growth is anticipated to be boosted by
Qatar Energy's North Field Expansion Project, which is expected to be the main
driver of its growth. Qatar Energy signed joint venture agreements with five
of the world's largest oil firms to construct the North Field East, a US$29
billion project that intends to expand Qatar's annual LNG output from 77 mtpa
to 110 mtpa by 2026.
The UAE approved a budget for 2023-2026 with a total estimated expenditure of
US$68.7 billion and estimated revenues of US$69.7 billion. The primary
objectives are to meet future ambitions, stimulate entrepreneurship, attract
foreign investment, make the community happy, and secure the emirate's
position as a land of opportunities and innovation. Around US$17 billion was
approved for 2023 alone, with most allocated to development and social
benefits projects (39.3 per cent) education (15.5 per cent) and healthcare
(7.6 per cent). It seeks to develop services, provide the highest levels of
social welfare, healthcare and education, and strengthen the country's
economic environment and investment infrastructure.
The UAE government has started the first phase of the NextGenFDI programme,
which intends to attract 300 digital enterprises to boost its Foreign Direct
Investments and promote itself as a worldwide innovation hub. The advantages
include speed up licensing, facilitating the issuance of bulk or golden visas,
accelerating banking services, and providing commercial and residential lease
incentives for advanced technology companies seeking to relocate to the UAE.
The UAE's Ministry of Economy has announced a new programme called "Thabat" to
empower family enterprises, stimulate entrepreneurship, and double the
contribution of family-owned firms to US$320 billion by 2032. The goal is to
turn 200 family businesses into large corporations by 2030, and to be one of
the UAE economy's drivers for the next fifty years.
The Kuwait government has approved a National Development Plan worth US$104
billion, which involves major expansion in the building and construction
industry (major roadways, new airport terminal, new hospitals, new residential
developments, new oil refinery and exploration, new railway and metro system,
etc.). The upcoming planned initiatives include a potential US$10 billion
expansion in urgently needed energy generation capacity (via public-private
partnerships), investment in environmental remediation projects, and defense
and security opportunities.
Oman has set a budget for 2023 with total projected revenue of US$26.1
billion, based on an oil price of US$55/barrel, resulting in a deficit of
US$3.4 billion or 3 per cent of GDP in 2023. Higher oil prices boosted 2022
revenues to US$37.0 billion, leading to an expected surplus of US$3 billion.
The government estimates the average price of oil in 2022 to be US$94/barrel.
However, Oman is expected to achieve fiscal and external surpluses in the
medium term, owing mostly to increased oil revenue, fiscal discipline, and the
implementation of a value added tax.
Oman 2023 Budget
US$ Billion 2017 2018 2019 2020 2021 2022E 2023E
Total Revenues 22.6 24.7 26.3 27.8 22.5 37.0 26.1
Total Expenditures 30.4 32.5 33.5 34.3 28.3 34.0 29.5
Surplus / (Deficit) (7.8) (7.8) (7.3) (6.5) (5.8) 3.0 (3.4)
Oil Price Assumption (US$/bbl) 45.0 50.0 58.0 58.0 45.0 50.0 55.0
Source: Oman MoF; Table contains budgeted numbers for respective year
GCC central banks raises interest rates
Saudi Central Bank increased its repo rate and reverse repo rates by 50 bps
each to 5 per cent and 4.5 per cent, respectively. The Qatar Central Bank
hiked its deposit rate by 50 bps to 5 per cent, its lending rate by an equal
amount to 5.5 per cent and its repo rate by 50 bps to 5.25 per cent. The
Central Bank of the United Arab Emirates increased the base rate of its
overnight deposit facility by 50 bps to 4.4 per cent from 3.9 per cent. The
Central Bank of Bahrain increased its four-week deposit rate raising to 6 per
cent and the lending rate to 6.5 per cent. Meanwhile, the Central Bank of
Kuwait raised its discount rate by 50 bps from 3 per cent to 3.50 per cent.
GCC's IPO boom continues
The GCC region is set to see more capital markets activity in 2023 as more
companies seek public listings, having been a bright spot amid a slowdown
elsewhere this year. According to EFG Hermes, GCC firms raised approximately
US$21 billion, or 23 per cent, of the US$91 billion raised through IPOs
globally in 2022. This represents a significant increase over the previous
year, when GCC IPOs accounted for only 2 per cent, or US$10 billion, of global
IPOs.
The UAE listed 12 companies in 2022, raising US$11 billion, while Mena food
franchisee Americana raised $1.8 billion through its joint Abu Dhabi-Riyadh
listing. The Dubai market has also been particularly active in 2022. Investors
have been attracted to DEWA's steady cash flow and dividend generation
potential and saw similar strength in other major listings in 2022, including
Salik, Empower and TECOM, which collectively raised USD2.2 billion in June,
September and November, respectively.
In addition, numerous significant consumer-focused enterprises with a
private-sector affiliation were listed in 2022. Taaleem, a Dubai-listed
educational corporation, raised US$205 million. Burjeel, a healthcare
operator, listed on the Abu Dhabi stock exchange and raised US$300 million.
The GCC IPO markets continue to see increased activity levels driven by
government listings, boosting liquidity. Looking ahead, the IPO pipeline for
2023 should be the year in which more GCC private companies meet global
emerging market investors in the ongoing GCC boom.
OPEC+ continues to cut oil output
The OPEC+ alliance continue to restrict oil supply by 2 million barrels per
day, amid uncertainty about the impact of new Western sanctions against
Russia. OPEC output in November fell by 744,000 bpd from October to 28.83
million bpd, led by top exporter Saudi Arabia and other large producers such
as Iraq. However, OPEC expected to see robust global oil demand growth in 2023
with potential economic upside coming from a relaxation of China's zero-COVID
policies, which this year have pushed the country's oil use into contraction
for the first time in years. OPEC+ forecasts world oil demand will grow by
2.25 million bpd in 2023.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com (http://www.gulfinvestmentfundplc.com) Chart:
GCC countries fiscal breakeven oil price (Jan 2023)
Other Recent Developments
Saudi Arabia rating upgrade
S&P updated its outlook for Saudi Arabia to positive with its short and
long term foreign and local currency sovereign credit ratings upgraded to
A-/A-2 as the country's recovery from the pandemic accelerates. The favorable
outlook is supported by higher oil revenues, rising oil output, and the
government's goal of economic reform.
Qatar rating upgrade
Moody's upgraded Qatar's outlook from stable to positive and assigned 'Aa3'
rating. The rise in energy prices, combined with Qatar's conservative fiscal
strategy (controlling spending and reducing levels of state debt, particularly
external debt), has boosted the country's credit rating.
Standard & Poor's credit rating for Qatar has been raised to 'AA' with
stable outlook.
Bahrain rating update
Bahrain's Long-Term Foreign-Currency Issuer Default Rating (IDR) has been
affirmed by Fitch Ratings at 'B+' with a Stable Outlook. Real GDP growth is
expected to exceed 6% in 2022, driven by particularly strong non-oil growth in
tourism-related sectors as well as real estate and construction.
S&P revised Bahrain's outlook from stable to positive, enhancing the
Kingdom's financial reputation and lowering the cost of public debt while also
strengthening investor confidence in the country's attractive economic
environment.
Oman rating upgrade
S&P upgraded Oman's credit rating from "BB-" to "BB" with a stable
outlook, indicating significant improvements in Oman's fiscal performance and
balance of payments positions. Oman has made major efforts to lower public
debt in order to benefit from increased revenue, claiming that increased
hydrocarbon output and an increase in investments will boost economic growth.
Moody's revised Oman's outlook from 'stable' to 'positive' and affirmed its
rating at 'Ba3'.
Saudi Arabia PIF raises US$3bn via inaugural green bond
The Public Investment Fund (PIF) of Saudi Arabia has concluded its bond
issuance, raising US$3 billion to support or refinance its green assets. The
issuance is part of PIF initiatives to support the kingdom's green agenda,
including the launch of the MENA Voluntary Carbon Market and renewable
projects spearheaded by PIF as part of its commitment to develop 70 per cent
of Saudi Arabia's renewable energy capacity by 2030, as outlined in Saudi
Vision 2030.
Saudi Arabia plans one of the world's biggest airports
Saudi Arabia announced plans to build one of the largest airports in the
world, which will be called King Salman International Airport. The airport
aims to accommodate up to 120 million passengers by 2030, with proposals for
six parallel runways and the existing terminals. The airport is anticipated to
handle up to 185 million passengers and 3.5 million tonnes of cargo by 2050.
Saudi Arabia launches supply chain initiative to attract US$10.6bn of
investments
The Saudi Crown Prince has launched a new drive to attract global industrial
enterprises to the country, with the goal of attracting 40 billion Saudi
riyals ($10.6 billion) in investments in the first two years. This initiative
aims to boost Saudi Arabia's position in the global economy and to mitigate
the impact of global disruptions.
UAE bond issuance
The UAE government to issue T-bonds worth Dh2.2 billion in first quarter of
2023. The bonds will be issued via two auctions of Dh1.1 billion each. The key
objective of local currency bond issuance is to establish the UAE yield curve.
The government auctioned Dh9 billion worth of T-bonds in 2022 in six auctions
of Dh1.5 billion each.
UAE launched initiative to support top 100 start-ups
UAE launched the "Future 100" project, which will annually highlight the top
100 startups that will boost the country's future readiness and
competitiveness in the UAE's future economic sector. This will support new
economic sectors such as space, renewable energy and emerging technology.
UAE announced new unemployment insurance scheme
The UAE launched an unemployment insurance system as part of measures aimed at
drawing more talent and investment to the regional commercial hub amid
increased competition. It provides compensation for up to three months for
employees in the public and private sectors who lose their jobs. It added
that the move was intended to recruit the top international and national
talent.
Bahrain EDB attracts US$1.1 Billion in Direct Investment
The Bahrain Economic Development Board (EDB) attracted US$1.1 Billion in
Direct Investment in 2022.The investment are from 88 companies and are
expected to generate over 6,300 jobs in the local market over the next three
years. It aims to enhance its business environment to increase FDI by more
than US$2.5 billion by 2023.
Bahrain new initiatives to achieve climate goals
Bahrain has set up several short-term goals to meet its climate commitments by
2035, including the launch of several national initiatives and plans, such as
the National Plan for Afforestation and the National Plan for Renewable
Energy. However, Bahrain is not a significant contributor of greenhouse gas
emissions, accounting for roughly 0.07 percent of total global emissions.
Bahrain attracts US$72.7mn investment in financial services
Bahrain has attracted $72.7 million in direct investments during the first
three quarters of 2022 through nine financial services companies either
setting up in or expanding their business within the Kingdom. The financial
service sector accounts for over 17 per cent of Bahrain's GDP and employs over
13,600, with Bahrainis representing almost 70 per cent.
Oman attracts US$4.4bn in tourism investments
Oman attracts US$4.4 bn in tourism investments as it seeks to diversify
economy. Oman's tourism development plan includes establishing a governance
system, modernising the legal framework, updating the tourism laws and their
executive regulations, overhauling the cultural heritage law and frameworks
related to an agreement to grant incentives for investment projects.
GIF portfolio
Country allocation
GIF's weightings in GCC markets are based on the Investment Adviser's
assessment of outlook and valuation.
Compared to the benchmark, GIF is overweight in Qatar (22.7 per cent vs.
S&P GCC weighting of 11.2 per cent). GIF is underweight on Saudi Arabia
(51.8 per cent vs benchmark weight of 58.1 per cent), UAE (10.2 per cent vs
17.5 per cent), Kuwait (8.6 per cent vs 11.4 per cent) and Oman (0.6 per cent
vs 1.1 per cent). The fund's cash weighting was 6.1 per cent on 31 December
2022.
During the fourth quarter, exposure to Saudi Arabia increased to 51.8 per cent
(from 40.8 per cent) as the 8.1 per cent sell off offered an attractive entry
point on valuation grounds, while exposure to Qatar and UAE decreased by 8.5
per cent points and 8.8 per cent points respectively.
The fund's Qatar overweight arises from Qatar's macroeconomic resilience,
growth prospects and attractive valuations. Qatar enjoys robust growth fueled
by gas prices over the long term. We believe gas demand should hold up better
than oil demand as the world transitions to net zero. Qatar already embarked
on a programme on North Field expansion plan which includes six LNG trains
that will ramp up Qatar's liquefaction capacity from 77 mtpa to 126 mtpa by
2027. As of 29 December 2022, Qatar was trading on P/E multiple of 12.08 times
(MSCI EM trades on 10.7 times).
GIF ended the quarter with 28 holdings: 16 in Saudi Arabia, 5 in Qatar, 3 in
the UAE, 3 in Kuwait and 1 in Oman.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com (http://www.gulfinvestmentfundplc.com) for a
chart depicting country allocation 2022.
Top 10 Holdings
Company Country Sector % NAV Weighting
Saudi National Bank Saudi Arabia Financials 9.4%
Qatar Gas Transport Qatar Energy 9.3%
Qatar Navigation Qatar Industrials 7.2%
Alamar Foods Saudi Arabia Consumer Discretionary 6.4%
Integrated Holding Company Kuwait Industrials 4.3%
Emaar Properties Company UAE Real Estate 4.1%
Riyad Bank Saudi Arabia Financials 4.1%
United International Transportation Co. Saudi Arabia Industrials 4.0%
Company for Co-op Insurance Saudi Arabia Financials 3.7%
Air Arabia UAE Industrials 3.5%
Source: QIC
Embedded image removed -please refer to the Company's website
www.gulfinvestmentfundplc.com (http://www.gulfinvestmentfundplc.com) for a
chart depicting sector exposure.
During the fourth quarter, GIF expanded exposure to the consumer
discretionary, industrials and communication services sector, as valuations
appeared undemanding and growth profiles looked strong.
Exposure to consumer discretionary was increased to 15.4 per cent of NAV from
8.5 per cent in 3Q 2022, with Americana Restaurants and Leejam Sports Company
added as new holdings. The fund subscribed for Americana Restaurants during
its IPO and subsequently added more exposure to the name to take advantage of
low penetration in the current market, population growth and the expansion
plan. Leejam Sports is expected to be beneficiary of the growing fitness
industry with a mix of premium & economy centers. A strong pipeline of new
centers should strengthen its already market leading position in Saudi.
Industrial's exposure increased to 22.8 per cent of NAV from 17.5 per cent in
3Q 2022, mainly due to new holding in United International Transportation
Company. The company intends to aggressively focus on the short-term rental
business on expectations of strong pickup in tourism activity in Saudi Arabia.
GIF exposure to financials and materials sector were reduced to capture better
opportunities elsewhere. Financial exposure fell from 39.3 per cent to 34.3
per cent of NAV; materials from 4.0 per cent to 0.0 per cent of NAV.
Profile of Top Five Holdings:
Saudi National Bank (9.4 per cent of NAV)
The Saudi National Bank (SNB), formerly The National Commercial Bank, is Saudi
Arabia's largest financial institution and one of its most powerful
institutions. It provides a range of conventional and Shariah-compliant
personal, business, and private banking solutions to individuals, corporate
and institutional customers. SNB will play a vital role in catalysing the
delivery of Vision 2030 of Saudi Arabia and supporting economic
transformation. SNB seeks to leverage the expanded scale and digital
capabilities to provide enhanced products and deliver unparalleled customer
experience. SNB robust balance sheet, resilient business model, and healthy
liquidity position enhance the bank's capability to compete locally and
regionally, as well as to enable trade and capital movements between the
Kingdom and regional and global markets.
Qatar Gas Transport (9.3 per cent of NAV)
Qatar Gas Transport Company (Nakilat) is a leader in energy transportation,
with the world's largest LNG shipping fleet of 74 vessels. It is responsible
for transporting the country's LNG production to its global customers and is
integral to the state's LNG supply chain. Taking fleet management in-house and
the huge North Field Expansion project should generate further growth. It
plans to expand capacity with ship building agreements for 100+ vessels worth
over QAR70 billion. Nakilat is set to be a major beneficiary of Qatar's LNG
expansion. Given the long-term nature of its charter, Nakilat has a Stable
profile with industry-leading EBITDA margins and attractive dividend/FCF
yields.
Qatar Navigation (7.2 per cent of NAV)
Qatar Navigation (Milaha) is one of the largest and most diversified maritime
and logistics companies in the Middle East with a focus on providing marine
transport and services, as well as supply chain solutions. Higher shipping
rates and volumes should drive revenue from container shipping and logistic
business. In Logistic business, new global network partnerships and work
related to NFE project should bring uplift in warehousing and freight
forwarding activities. Ports management (QTerminals) business should also
benefit from volume uptick/phase II expansion at the Hamad Port and growth
associated with the NFE project. Recently, QNNS has signed an EPCI contract
with Qatar Energy valued at more than QR. 1.4 Bn over the period of 5 years
which will boost profitability. Milaha Offshore is also set to benefit from
the NFE project.
Alamar Foods (6.4 per cent of NAV)
Alamar Foods is a Saudi-based leading Quick Service Restaurant (QSR) operator
in the Middle East, North Africa, and Pakistan (MENAP Region). It develops and
operates two globally recognized brands - Dominos and Dunkin Donuts. Dominos
has exclusive rights to develop and operate across 16 countries in the MENAP
region. Dunkin Donuts has exclusive rights to develop and operate stores in
Egypt & Morocco. As a group, it has more than 600 stores in both the
brands. Alamar is well positioned to benefit from a strong growth runway
driven by a combination of store expansion, higher sales per store and
continued investment in technology.
Integrated Holding Company (4.3 per cent of NAV)
Integrated Holding Kuwait caters to business opportunities in Oil & Gas,
Petrochemical, and Power in Kuwait, Qatar, Oman, and Saudi Arabia. It is the
fourth largest in the world with crane ownership and leasing ability. It
provides services for logistics, heavy lift, engineering and equipment
requirements to MENA region. The Company's main activities are divided into
five divisions: General transportation, Equipment hire division, Heavy lift
handling, Forwarding and custom clearing division and Contracting division.
GIF Performance:
NAV was down 1.8 per cent during 2H2022, while the Fund's benchmark, the
S&P GCC total Index, was down 7.1 per cent.
For 2022, GIF NAV is up 8.4 per cent vs benchmark index down 4.8 per cent,
outperforming its benchmark by 13.1 per cent over the year. GIF continue to
outperform index, although 4Q 2022 was one of the worst quarters for Qatar and
Saudi Arabia in past 10 years with Qatar market down 15.9 per cent while Saudi
market was down 8.1 per cent. This comes in contrast with a recovery in global
markets. During the quarter, MSCI World and EM were up 9.4 per cent and 9.2
per cent respectively.
During the year, markets in the region remained volatile and gains made during
the first four months of the year were more than offset by declines in the
months thereafter.
Since the investment mandate widened from Qatari-focused to Gulf-wide in
December 2017, NAV has risen 124.9 per cent (dividend included), as against
the 71.4 per cent returns recorded by S&P GCC total return index. On 31
December 2022, the GIF share price was trading at a 5.2 per cent discount to
NAV, below the five-year average discount of 8.7 per cent.
Embedded image removed - please refer to the Company's website
www.gulfinvestmentfundplc.com (http://www.gulfinvestmentfundplc.com) for a
chart depicting GIF NAV v Reference Index.
GCC Outlook:
Valuations are turning attractive, and we believe markets will recover as
global market volatility settles down. Going into 2023, we believe the outlook
for GCC remains robust, supported by socio-economic reforms, infrastructure
projects, favorable oil supply-demand dynamics that provides majority of GCC
twin surpluses as well as an economy that is mostly shielded from recession
fears in Europe & US.
While global investors generally are underweight Qatar, Kuwait, and Saudi, the
weighting of the GCC in EM indexes is expected to increase as more IPOs are
listed, governments sell stakes, and foreign ownership limits increase.
Oil continues to support the GCC's economic stability, as other economies are
still facing elevated inflation and interest rate hikes. A combination of high
oil prices, tax and expenditure reforms (like the introduction of VAT) and
continued non-oil growth will lead to an improved GCC fiscal balance of 7.3
per cent of GDP by 2022, which is expected to remain positive for the
foreseeable future. GCC countries have benefited from significantly higher oil
prices, which have converted budget deficits into surpluses for 2022.
The increase in hydrocarbon prices provides an opportunity for GCC countries
to shift to a green growth strategy and accelerate economic diversification by
investing their windfall in sustainable sectors. GDP growth for GCC is
expected to more than double vs 2021, reaching 6.5 per cent in 2022. Despite
continued increase in inflation levels not seen in decades in many parts of
the world, the inflation outlook for the GCC is relatively benign at 3.6% in
2022 and 2.6% in 2023, according to IMF's Regional Economic Outlook for
October 2022.Global investors interest in GCC should increase. However,
foreign inflows to the GCC will continue, attracted by credible fixed currency
rates, generous dividend yields, high oil prices and market reforms.
Valuation:
Market Market Cap. PE (x) PB (x) Dividend Yield (%)
US$ billion 2023E 2024E 2023E 2024E 2023E 2024E
Qatar 150.2 11.01 9.95 1.39 1.32 5.06 5.59
Saudi Arabia 2,607.1 14.52 12.73 2.11 1.96 3.53 3.86
Dubai 119.8 9.28 9.09 1.03 0.95 4.61 4.65
Abu Dhabi 687.6 13.40 13.32 1.84 1.74 2.56 2.58
Kuwait 153.0 16.49 N/A N/A N/A N/A N/A
S&P GCC 3,252.7 13.39 11.91 0.46 0.42 8.23 9.72
MSCI EM 19,070.4 11.37 11.41 1.55 1.42 3.41 3.26
MSCI World 55,880.8 15.52 14.80 2.61 2.41 2.25 2.37
Source: Bloomberg, as of 29 Dec 2022; Market Cap. as of 29 Dec 2022
Epicure Managers Qatar
Limited
Qatar Insurance Company S.A.Q.
22 February
2023
22 February 2023
Income Statement
(Unaudited) (Unaudited)
Note For the period from For the period from
1 July 2021 to
1 July 2022 to
31 December 2021
31 December 2022
US$'000 US$'000
Income
Net income/(loss) in investment at fair value through profit or loss 203 (11,874)
Distribution received from subsidiary - 20,000
Interest income on loan 131 70
Total net income 334 8,196
Expenses
Expenses 5 384 309
Total operating expenses 384 309
(Loss)/profit before tax (50) 7,887
Income tax expense - -
Retained (loss)/profit for the period (50) 7,887
Basic and diluted (loss)/profit per share (cents) 3 (0.12) 15.76
Statement of Comprehensive Income
(Unaudited) (Unaudited)
For the period from For the period from
1 July 2021 to
1 July 2022 to
31 December 2021
31 December 2022
US$'000 US$'000
Loss/(profit) for the period (50) 7,887
Other comprehensive income - -
Total comprehensive (loss)/income for the period (50) 7,887
Statement of Financial Position
(Unaudited) (Audited)
Note At 31 December 2022 At 30 June 2022
US$'000 US$'000
Assets
Investment at fair value through profit or loss - comprising: 1(a)
- equity interest in subsidiary 76,909 76,705
- loan to subsidiary 4,304 6,500
81,213 83,205
Other receivables and prepayments 286 65
Cash and cash equivalents 11 114 67
Total assets 81,613 83,337
Equity
Issued share capital 410 411
Share premium 150 -
Reserves 80,974 82,853
Total equity 81,534 83,264
Current liabilities
Other payables and accrued expenses 4 79 73
Total current liabilities 79 73
Total equity and liabilities 81,613 83,337
Statement of Changes in Equity
Share capital Share premium Reserves Total
US$'000 US$'000 US$'000 US$'000
Balance at 1 July 2021 576 - 90,375 90,951
Total comprehensive income for the period
Profit for the period - - 7,887 7,887
Total comprehensive income for the period - - 7,887 7,887
Contributions by and distributions to owners
Dividends paid - - (1,275) (1,275)
Shares subject to tender offer (55) - (9,772) (9,827)
Tender offer expenses - - (253) (253)
Total contributions by and distributions to owners (55) - (11,300) (11,355)
Balance at 31 December 2021 521 - 86,962 87,483
Share capital Share premium Reserves Total
US$'000 US$'000 US$'000 US$'000
Balance at 1 July 2022 411 - 82,853 83,264
Total comprehensive income for the period
Loss for the period - - (50) (50)
Total comprehensive loss for the period - - (50) (50)
Contributions by and distributions to owners
Dividends paid - - (1,443) (1,443)
Shares subject to tender offer (2) - (345) (347)
Tender offer expenses - - (41) (41)
Proceeds from shares issued 1 150 - 151
Total contributions by and distributions to owners (1) 150 (1,829) (1,680)
Balance at 31 December 2022 410 150 80,974 81,534
Statement of Cash Flows
(Unaudited) (Unaudited)
Note For the period from For the period from
1 July 2022 to 1 July 2021 to
31 December 2022 31 December 2021
US$'000 US$'000
Cash flows from operating activities
Received from investment at fair value through profit or loss 2,344 11,592
Operating expenses paid (470) (81)
Increase in trade and other receivables (150) -
Net cash generated from operating activities 1,724 11,511
Financing activities
Proceeds from shares issued 151 -
Dividends paid (1,443) (1,275)
Cash used in tender offer (347) (9,827)
Tender expenses (41) (253)
Net cash used in financing activities (1,680) (11,355)
Net increase in cash and cash equivalents 44 156
Effects of exchange rate changes on cash and cash equivalents 3 1
Cash and cash equivalents at beginning of period 67 127
Cash and cash equivalents at end of period 11 114 284
Notes to the Interim Financial Statements
(a) Investment at fair value through profit or loss
31 December 2022 30 June 2022
US$'000 US$'000
Equity interest in subsidiary 76,909 76,705
Loan to subsidiary 4,304 6,500
Total investment in subsidiary 81,213 83,205
The Company has one subsidiary, Epicure Qatar Opportunities Holdings Limited
("the Subsidiary"), which holds the portfolio of investments and has the
investment management and custodian agreements. The investment in subsidiary
is stated at fair value through profit or loss in accordance with the IFRS 10
Investment Entity Consolidation Exception. The fair value of the investment in
Subsidiary is based on the year-end net asset value of the Subsidiary as
reported by the Administrator. The loan to Subsidiary, with an aggregate
principal amount of US$4,304,261 (2021: US$6,500,000), is included within this
balance. The loan 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. Additions and disposals regarding the investment in
subsidiary are recognised on trade date.
1(b) Financial assets at fair value through profit or loss
held by the Subsidiary
The Subsidiary holds a portfolio of quoted equities and P-Notes which are
classified as fair value through profit or loss. The fair value for quoted
equities is based on the current bid price ruling at the year-end without
regard to selling prices. The fair value of P-Notes is based on the quoted
period-end bid price of the underlying equity to which they relate. P-Notes
are promissory notes issued by certain counterparty banks that are designed to
offer the holder a return linked to the performance of a particular underlying
equity security or market and used where direct investment in the relevant
underlying equity security or market is not possible for regulatory or other
reasons. To the extent dividends are received on the securities to which the
P-Notes are linked, these are taken to investment income.
At 31 December 2022 the Subsidiary held 17 P-Notes with a value of
US$42,299,490, (June 2022 17 P-Notes US$28,259,031) held to obtain exposure to
Saudi Arabia where direct investment in equities is not possible for foreign
investors.
Purchases and sales of investments are recognised on trade date - the date on
which the Company commits to purchase or sell the asset. Investments are
initially recorded at fair value, and transaction costs for all financial
assets and financial liabilities carried at fair value through profit and loss
are expensed as incurred.
Gains and losses (realised and unrealised) arising from changes in the fair
value of the financial assets are included in the income statement in the year
in which they arise.
Investments held by the Subsidiary
31 December 2022: Financial assets at fair value through profit or loss; all
quoted equity securities or P-Notes:
Security name Number US$'000
National Commercial Bank* 564,500 7,587
Qatar Gas Transport (QGTS QD) 7,458,694 7,500
Qatar Navigation (QNNS QD) 2,089,250 5,725
Alamar Foods* 139,891 5,131
Integrated Holding Company 2,860,000 3,432
Emaar Properties Company (EMAAR UH) 2,103,122 3,355
Riyad Bank* 395,000 3,338
United International Transportation Co* 265,000 3,216
Company for Co-op Insurance* 140,935 3,020
AIR ARABIA B23DL40 4,840,182 2,820
Saudi British Bank B12LSY7* 261,000 2,678
Alinma Bank* 308,000 2,664
Bupa Arabia Co* 68,942 2,635
Seera Group Holdings* 563,000 2,610
Jazeera Airways 376,885 2,334
Americana Restaurants 2,585,400 2,084
Arabian Contracting Services* 70,655 1,982
Qatar National Bank (QNBK QD) 400,000 1,975
Saudi Telecom* 200,000 1,948
Americana Restaurants USD* 2,150,000 1,733
Qatar Insurance (QATI QD) 3,086,378 1,630
Commercial Bank of Qatar (CBQK QD) 1,002,436 1,376
Tanmiah Food* 36,867 1,287
Mezzan Holding Co (Mezzan KK) 920,797 1,180
Leejam Sports Co* 38,000 848
Riyadh Cables* 79,200 764
Bank Muscat USD* 650,000 455
Gulf Insurance* 61,581 403
Total 75,710
*P-notes
2 Net Asset Value per Share
The net asset value per share as at 31 December 2022 is US$1.9885 per share
based on 41,002,152 ordinary shares in issue as at that date (30 June 2022:
US$2.0256 based on 41,105,216 ordinary shares in issue).
3 Profit per Share
Basic and diluted profit/(loss) per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the period:
31 December 2022 31 December 2021
(Loss)/profit attributable to equity holders of the Company (US$'000) (50) 7,887
Weighted average number of ordinary shares in issue (thousands) 41,034 50,055
Basic (loss)/profit per share (cents per share) (0.12) 15.76
4 Other payables and accrued expenses
31 December 2022 30 June 2022
US$'000 US$'000
Administration fee payable 40 39
Accruals and sundry creditors 39 34
79 73
5 Charges and Fees
31 December 2022 31 December 2021
US$'000 US$'000
Administrator and Registrar's fees (see below) 81 83
Audit fees 44 17
Custodian fees (see below) 2 1
Directors' fees and expenses 68 86
Directors' insurance cover 22 23
Broker fees 22 28
Other 145 71
Other expenses 384 309
Investment management fees and custodian fees borne by the Subsidiary were
US$346,166 and US$45,546 respectively (2021: US$373,438 and US$44,328
respectively).
Investment Manager's fees
Annual fees
The Investment Manager is entitled to an annual fee of 0.80% of the net asset
value of the Company.
Management fees for the period ended 31 December 2022 amounted to US$346,166
(31 December 2021: US$373,438) and the amount accrued but not paid at the
period-end was US$170,108 (31 December 2021: US$182,957). This fee is borne by
the Subsidiary.
Custodian fees
The Custodian is entitled to receive fees of US$7,200 per annum and US$25 per
processed transaction.
In addition the Custodian is entitled to receive fees of 8 basis points per
annum in respect of Qatari securities held by the Subsidiary and 10 basis
points per annum in respect of non-Qatari, GCC securities held by the
Subsidiary 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 period ending 31 December 2022
amounted to US$45,546 (31 December 2021: US$44,328). This fee is borne by the
Subsidiary
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$12,000, payable quarterly in
arrears. The Administrator receives an additional fee of US$1,200 per month
for providing monthly valuation data to the Association of Investment
Companies.
5 Charges and Fees continued
Administrator and Registrar fees continued
The Administrator assists in the preparation of the financial statements of
the Company and provides general secretarial services.
Administration fees paid for the period ending 31 December 2022 amounted to
US$80,555 and US$8,594 for additional services (31 December 2021: US$82,688
and US$8,594 respectively).
Directors' Remuneration
The maximum amount of remuneration payable to the Directors permitted under
the Articles of Association is £200,000 per annum.
Anderson Whamond as non-executive chairman was entitled to receive an annual
fee of £35,000.
David Humbles as non-executive chairman of the Audit Committee is entitled to
receive an annual fee of £26,250.
Neil Benedict as non-executive director receives £24,500 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 2022 amounted to US$67,892 (31
December 2021: US$85,898).
6 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 subject to taxation at the rate
of 0% in the Isle of Man.
7 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 Company 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 (via the
Subsidiary) and through common Directors. Fees paid and payable to the
Investment Manager are disclosed in note 5.
Epicure Managers Qatar Limited is a wholly owned subsidiary of the Investment
Adviser, Qatar Insurance Company S.A.Q.
8 The Company
Gulf Investment Fund plc (the "Company") was incorporated and registered in
the Isle of Man under the Isle of Man Companies Acts 1931-2004 on 26 June 2007
as a public company with registered number 120108C.
Pursuant to an Admission Document dated 25 July 2007 there was an original
placing of up to 171,355,000 Ordinary Shares of 1 cent each, with Warrants
attached on the basis of 1 Warrant to every 5 Ordinary Shares. Following the
placing on 31 July 2007, 171,355,000 Ordinary Shares and 34,271,000 Warrants
were issued; the warrants expired on 16 November 2012.
The Shares of the Company were admitted to trading on the AIM market of the
London Stock Exchange ("AIM") on 31 July 2007 when dealings also commenced.
As a result of a further fund raising in December 2007, a further 76,172,523
Ordinary Shares were issued, which were admitted for trading on 13 December
2007.
On 4 December 2008, the share premium arising from the placing of shares was
cancelled and the amount of the share premium account transferred to
distributable reserves.
The Shares of the Company were admitted to trading on the Main Market of the
London Stock Exchange on 13 May 2011.
On 8 December 2017 the Company's shareholders approved a change in investment
policy from a largely Qatar focussed strategy to one which focusses more on a
broader Gulf Co-operation Council strategy.
In the Circular published by the Company on 25 March 2021 the Board announced
the implementation of an enhanced dividend policy targeting an annual dividend
equivalent to 4 per cent. of Net Asset Value at the end of the preceding year,
to be paid in semi-annual instalments.
The Net Asset Value per Share at 30 June 2021 was US$1.7552 per share and
pursuant to the above stated policy, the directors declared a first interim
dividend for the year ended 30 June 2022 of 3.51 cents per ordinary share.
The dividend was paid on 21 October 2022 to ordinary shareholders on the
register as at 9 September 2022 (the "Record Date").
The shareholders also approved a dividend of 3.51 cents per share on 31
December 2022. This will be paid to shareholders in March 2023.
The Company's agents and the Manager perform all significant functions.
Accordingly, the Company itself has no employees.
9 The Subsidiary
The Company has the following subsidiary company:
Country of incorporation Percentage of shares held
Epicure Qatar Opportunities Holdings Limited British Virgin Islands 100%
Epicure Qatar Opportunities Holdings Limited is a wholly owned subsidiary of
the Company and was incorporated in the British Virgin Islands on 4 July 2007
under the provisions of the BVI Companies Act 2001, as a limited liability
company with registration number 1415393. The principal activity of the
Subsidiary is holding investments on behalf of the Company.
10 Significant Accounting Policies
The accounting policies applied by the Company in these condensed interim
financial statements are the same as those applied by the Company in its
financial statements for the year ended 30 June 2022.
10.1 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 financial statements of
the Company as at and for the year ended 30 June 2022.
In accordance with IFRS 10, 'Consolidated financial statements', the Directors
have concluded that the Company falls under the definition of an investment
entity because the Company has the following characteristics:
· the Company has obtained funds for the purpose of providing
investors with investment management services;
· the Company's investing policy, which was communicated directly
to investors, is investment solely for returns from capital appreciation and
investment income; and
· the performance of investments is measured and evaluated on a
fair value basis.
As a result, the Company does not consolidate its subsidiaries, instead it is
required to account for these subsidiaries at fair value through profit or
loss in accordance with IFRS 9, 'Financial instruments' and prepares separate
company financial statements only.
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 Company's
accounting policies. The financial statements do not contain any critical
accounting estimates
10.2 Segment reporting
The Company is organised into one operating segment, comprising the investment
in a portfolio of equity securities in the GCC region via the wholly owned
subsidiary. The financial performance of this portfolio is presented to and
monitored by the Board of Directors, being the chief operating decision makers
as defined under IFRS 8. All of the Company's activities are interrelated, and
each activity is dependent on the others. Accordingly, all significant
operating decisions are based upon analysis of the Company as one segment. The
financial results from this segment are equivalent to the financial statements
of the Company as a whole.
11 Cash and Cash Equivalents
31 December 2022 30 June 2022
US$'000 US$'000
Bank balances 114 67
Cash and cash equivalents 114 67
12 Post Balance Sheet Events
There were no post balance sheet events.
Unaudited consolidated financial information
Consolidated Income Statement
(Unaudited) (Unaudited)
For the period from 1 July 2022 to 31 December 2022 For the period from 1 July 2021 to 31 December
2021
US$'000 US$'000
Income
Dividend income on quoted equity 1,175 430
investments
Realised gain on sale of financial assets at fair 1,108 13,483
value through profit or loss
Net changes in fair value on financial assets at fair value through profit or (1,593) (5,249)
loss
Commission - 12
Interest income 68 -
Total net income 758 8,676
Expenses
Investment manager's fees 346 373
Other expenses 462 416
Total operating expenses 808 789
(Loss)/profit before tax (50) 7,887
Income tax expense - -
(Loss)/profit for the year (50) 7,887
Basic (loss)/profit per share (cents) (0.12) 15.76
Diluted (loss)/profit per share (cents) (0.12) 15.76
Notes:
1) Consolidated information has been presented to assist the user in
interpreting the results of the Company and to be consistent with previous
years. This information consolidates the results of the Subsidiary with the
Company. It is based on IFRS requirements that would apply if the IFRS 10
consolidation exception for investment entities did not apply to the Company.
2) Where relevant to understanding the risks of financial instruments
held by the Company certain disclosures relating to the subsidiary's assets
and liabilities have been given in the notes to the Financial Statements and
would be relevant to understanding the consolidated position presented in this
appendix.
Consolidated Statement of Comprehensive Income
(Unaudited) (Unaudited)
For the period from For the period from
1 July 2021 to
1 July 2022 to
31 December 2021
31 December 2022
US$'000 US$'000
(Loss)/profit for the year (50) 7,887
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences - -
Total items that are or may be reclassified subsequently to profit or loss - -
Other comprehensive expense for the year (net of tax) - -
Total comprehensive (expense)/income for the year (50) 7,887
Consolidated Statement of Financial Position
At 31 December 2022 At 30 June 2022
US$'000 US$'000
Assets
Financial assets at fair value through profit or loss 75,710 73,851
Other receivables and prepayments 1,170 2,731
Cash and cash equivalents 4,938 6,951
Total assets 81,818 83,533
Equity
Issued share capital 410 411
Share premium 150 -
Reserves 80,974 82,853
Total equity 81,534 83,264
Current liabilities
Other payables and accrued expenses 284 269
Total current liabilities 284 269
Total equity and liabilities 81,818 83,533
Consolidated Statement of Changes in Equity
Share capital Share premium Distributable Retained earnings Foreign currency translation reserve Capital redemption reserve Total
reserves
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 July 2021 576 - 15,096 73,543 (221) 1,957 90,951
Total comprehensive income for the period
Profit for the period - - - 7,887 - - 7,887
Other comprehensive income
Foreign exchange translation differences - - - - - - -
Total comprehensive income for the period - - - 7,887 - - 7,887
Contributions by and distributions to owners
Dividends paid - - - (1,275) - - -
Shares subject to tender offer (55) - (9,827) - - 55 (9,827)
Tender offer expenses - - (253) - - - (253)
Total contributions by and distributions to owners - - - - - - -
Balance at 31 December 2021 521 - 5,016 80,155 (221) 2,012 87,483
Balance at 1 July 2022 411 - (6,356) 87,366 (221) 2,064 83,264
Total comprehensive income for the period
Loss for the period - - - (50) - - (50)
Other comprehensive income
Foreign exchange translation differences - - - - - - -
Total other comprehensive expense - - - (50) - - (50)
Contributions by and distributions to owners
Dividends paid - (1,443) - - (1,443)
Shares subject to tender offer (2) - (347) - - 2 (347)
Tender offer expenses - - (41) - - - (41)
Proceeds from shares issued 1 150 - - - - 151
Total contributions by and distributions to owners (1) 150 (388) (1,443) - 2 (1,680)
Balance at 31 December 2022 410 150 (6,744) 85,873 (221) 2,066 81,534
Consolidated Statement of Cash Flows
(Unaudited) (Unaudited)
For the period from For the period from
1 July 2022 to 1 July 2021 to
31 December 2022 31 December 2021
US$'000 US$'000
Cash flows from operating activities
Purchase of investments (143,023) (90,901)
Proceeds from sale of investments 142,662 101,290
Dividends received 958 452
Operating expenses paid (904) (530)
Interest received 68 12
Increase in trade and other receivables (149) -
Net cash generated from operating activities (388) 10,323
Financing activities
Proceeds from share issue 151 -
Dividends paid (1,443) (1,275)
Cash used in tender offer (347) (9,827)
Tender expenses (41) (253)
Net cash used in financing activities (1,680) (11,355)
Net decrease in cash and cash equivalents (2,068) (1,032)
Effects of exchange rate changes on cash and cash equivalents 55 16
Cash and cash equivalents at beginning of the period 6,951 1,802
Cash and cash equivalents at end of the period 4,918 786
Alternative performance measures (APM)
An APM is a measure of performance or financial position that is not defined
in applicable accounting standards and cannot be directly derived from the
financial statements. The Company's APMs are set out below and are
cross-referenced where relevant to the financial inputs used to derive them as
contained in other sections of the Interim Financial report.
Ongoing charges ratio
Ongoing charges (%) = Annualised ongoing charges divided by Average undiluted
net asset value in the period
Ongoing charges are those expenses of a type which are likely to recur in the
foreseeable future, whether charged to capital or revenue, and which relate to
the operation of the investment company as a collective fund. Ongoing charges
are based on costs incurred in the period as being the best estimate of future
costs and include the annual management charge. As recommended by the AIC in
its guidance, ongoing charges are calculated using the Company's annualised
revenue and capital expenses (excluding finance costs, direct transaction
costs, custody transaction charges, non-recurring charges and taxation)
expressed as a percentage of the average daily net assets of the Company
during the period. The inputs that have been used to calculate the ongoing
charges percentage are set out in the following table:
Ongoing charges calculation* 31 December 2022 31 December 2021
US$'000 US$'000
Management fee (note 5) 346 373
Other operating expenses 462 416
Total management fee and other operating expenses for the period 808 789
Total annualised expenses 1,603 1,578 a
Average net assets in the period 85,784 92,073 b
Ongoing charges (c=a/b) 1.87% 1.71% c
*Including expenses of the Subsidiary.
Discount and premium
Shares can frequently trade at a discount to net asset value (NAV). This
occurs when the share price (based on the mid-market share price) is less than
the NAV and investors may therefore buy shares at less than the value
attributable to them by reference to the underlying assets. The discount is
the difference between the share price and the NAV, expressed as a percentage
of the NAV. As at 31 December 2022, the share price was 1.8850c and the
unaudited NAV per share was 1.9885c, giving a discount of 5.2%. A premium
occurs when the share price (based on the mid-market share price) is more than
the NAV and investors would therefore be paying more than the value
attributable to the shares by reference to the underlying assets.
Period to date net asset value
This is the fall or rise, calculated as a percentage, in value of the
Company's assets attributable to one ordinary share since 30 June 2022. The
net asset value per share is calculated by dividing 'equity shareholders'
funds' by the total number of ordinary shares in issue (excluding treasury
shares). The fall in period to date NAV is set out in the table below:
Date Equity Number of ordinary shares in issue Net asset value per share
30 June 2022 83,264,663 41,105,216 2.0256 a
31 December 2022 81,534,490 41,002,152 1.9885 b
PTD Change in NAV (c=(b-a)/a) (1.83%) c
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