Gulf Investment Fund plc Consolidated Annual Report Year ... · Qatar-focused investment strategy...
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Gulf Investment Fund plc
Consolidated Annual Report
Year ended 30 June 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
CONTENTS
Page
Management and Administration 1 - 2
Chairman’s Statement 3 - 4
Business Review 5 - 6
Report of the Investment Manager and the Investment Adviser 7 – 14
Investment Policy 15 – 16
Report of the Directors 17 – 18
Corporate Governance Report 19 – 25
Board of Directors 26
Statement of Directors’ Responsibilities 27
Audit Committee Report 28
Management Engagement Committee Report 29
Directors’ Remuneration Report 30 – 31
Report of the Independent Auditors 32 – 35
Consolidated Financial Statements:
- Consolidated Income Statement 36
- Consolidated Statement of Comprehensive Income 37
- Company Income Statement 38
- Company Statement of Comprehensive Income 39
- Consolidated Balance Sheet 40
- Company Balance Sheet 41
- Consolidated Statement of Changes in Equity 42 – 43
- Company Statement of Changes in Equity 44
- Consolidated Statement of Cash Flows 45
- Company Statement of Cash Flows 46
- Notes to the Consolidated Financial Statements 47 – 59
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Management and Administration
Directors N Wilson (Non-executive Chairman) *
P Macdonald (Non-executive Director)*
N Benedict (Non-executive Director) *
D Humbles (Non-executive Director)*
all of the registered office below
* independent
Registered Office Millennium House
46 Athol Street
Douglas
Isle of Man
IM1 1JB
Investment Manager Epicure Managers Qatar Limited
Trinity Chambers
Road Town
Tortola
British Virgin Islands
Investment Adviser Qatar Insurance Company S.A.Q.
PO Box 666
Tamin Street
West Bay
Doha
Qatar
Brokers Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Custodian HSBC Bank Middle East Limited
Qatar Branch
HSBC Security Services
PO Box No. 57
Doha
Qatar
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Management and Administration continued
Administrator Galileo Fund Services Limited
Millennium House
46 Athol Street
Douglas
Isle of Man
IM1 1JB
Auditors KPMG Audit LLC
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
Registrar Capita Registrars (Isle of Man) Limited
Third Floor
Exchange House
54-62 Athol Street
Douglas
Isle of Man
IM1 1JD
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Chairman’s Statement
On behalf of the Board, I am pleased to present your Company’s eleventh Annual Report and Financial Statements for the
year to 30 June 2018.
During the 12 months, your Company’s Net Asset Value per Share (“NAV”) rose by 7.8% to US$1.1982 which compares with
a gain of 8.6% in the S&P GCC composite index and 5.8% in the MSCI Emerging Markets Index. Following a narrowing of
the discount at which the shares trade to NAV, the shares rose by from US$0.8990 to US$1.0150 for a gain of 13.0%.
Shareholders received a dividend of 3.0 cents per share which was paid on 9 February 2018 to ordinary shareholders on the
register as at 5 January 2018.
Results
Results for the period under review showed a profit US$9.68m generated from fair value adjustments, realised losses and
dividend income. This is equivalent to a basic profit per share of 9.95 cents.
Following the actions taken on 5 June 2017 against Qatar by Saudi Arabia, UAE, Bahrain and Egypt, Qatar acted swiftly to
implement alternative international trading arrangements. Although there was an initial negative impact on the Qatar
economy and the stock market, by December it became apparent that the economy was recovering aided by a stronger oil
price. Accordingly, since the change in Investment Policy referred to below, the Company remained overweight Qatar
relative to the informal benchmark, the S&P GCC composite index.
At the end of the period, we had a total of 43 holdings: 24 in Saudi Arabia, 9 in Qatar, 5 in the UAE and 5 in Kuwait. The
geographical split based on valuation, was Saudi Arabia 39.2%, Qatar 36.7%, Kuwait 10%, and UAE 9.6%. We also had
4.5% in cash.
The Company’s Ongoing Charges (formerly Total Expense Ratio) rose to 1.95% from 1.70% in the previous year. The
charges were calculated in accordance with the methodology recommended by the Association of Investment Companies.
Proposed dividend
The Board is pleased to recommend to shareholders a dividend of 3 cents a share. Subject to shareholder approval at the
forthcoming Annual General Meeting, the dividend will be paid on 21 December 2018 with a record date of 16 November
and an associated ex-date of 15 November 2018, the last day for currency elections will be 30 November 2018.
Change in investment policy
On 16 October 2017, the Board announced its intention to change the investment policy of the Company from a largely
Qatar-focused investment strategy to a broader Gulf Cooperation Council ("GCC") investment strategy.
Previously, the investment policy enabled the Company to invest up to 15% of the Company in GCC countries (namely
Saudi Arabia, Kuwait, UAE, Oman and Bahrain) other than Qatar.
The proposed change in investment policy removed the 15% limit and enabled the Company to increase its investment
allocation to other GCC countries and provide the Investment Adviser with a wider investment universe and more flexibility to
identify attractive opportunities in the GCC region.
Alongside the Amended Investment Policy the Board resolved to put forward a number of proposals including:
(i) making a tender offer for up to 10% of the issued Share Capital of the Company
(ii) cancelling the discontinuation vote currently scheduled for the 2018 annual general meeting and replacing it with a
continuation vote for the 2021 annual general meeting and every three years thereafter;
(iii) making a tender offer to shareholders for up to 100% of the Company's share capital in 2020 subject to
Shareholder approval to be sought in 2020; and
(iv) proposing to change the name of the Company to Gulf Investment Fund PLC.
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Chairman’s Statement continued
All of these changes were approved by shareholders at an Extraordinary General Meeting (EGM) on 7 December 2017,
other than the tender offer in 2020 which will be subject to shareholder approval in 2020.
Tender offer
Following the passing of the resolutions at the EGM on 7 December 2017 to give effect to the 10% Tender Offer,
10,273,471 Shares were tendered under the Tender Offer at the tender offer price of USD0.9933 per share. These shares
were cancelled leaving the Company with 92,461,242 Shares in issue (excluding treasury shares).
Related Party Transactions
Details of any related party transactions are contained in note 10 of this report.
Post balance sheet events
Details of these can be found in note 14 following the accompanying financial statements.
Outlook, risks and uncertainties
Fluctuations in oil and gas prices will continue to impact GCC economies, as countries deal with budget challenges. The
geopolitics of the region and, in particular, the dispute between Qatar and other members of the GCC brings continuing
economic uncertainty.
The Board believes that the principal risks and uncertainties faced by the Company continue to fall in the following
categories; geopolitical events, market risks, investment and strategy risks, accounting, legal and regulatory risks,
operational risks and financial risks. Information on each of these is given in the Business Review section of our Annual
Report each year.
The Board continues to view the future of the Company with confidence expecting healthy if slower growth in the region as a
whole, as growth in the non-hydrocarbon sector in a number of GCC members helps to balance their economies.
Annual General Meeting
I look forward to welcoming shareholders to out eleventh Annual General Meeting on 7 November 2018, which will be held at
11.00 am at the Company’s registered office at Millennium House, 46 Athol Street, Douglas, Isle of Man.
Nicholas Wilson
Chairman
21 September 2018
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Business Review
The following review is designed to provide information primarily about the Company’s business and results for the year
ended 30 June 2018. It should be read in conjunction with the Report of the Investment Manager and the Investment Adviser
on pages 7 to 14 which gives a detailed review of the investment activities for the year and an outlook for the future.
Investment Objective and Strategy
The Company’s investment objective is to capture the opportunities for growth offered by the expanding GCC economies by
investing in listed companies on one of the GCC exchanges or companies soon to be listed on one of the GCC exchanges.
The Company may also invest in listed companies, or pre-IPO companies, in other GCC countries.
The Company applies a top-down screening process to identify those sectors which should most benefit from sector growth
trends. Fundamental industry and company analysis, rather than benchmarking, forms the basis for both stock selection and
portfolio construction.
The Company’s investment policy is on pages 15 to 16.
Performance Measurement and Key Performance Indicators
In order to measure the success of the Company in meeting its objectives and to evaluate the performance of the Investment
Manager, the Directors take into account the following key performance indicators:
Returns and Net Asset Value
At each quarterly Board meeting the Board reviews the performance of the portfolio versus the Qatar Exchange (QE) Index
(local benchmark) as well as the net asset value, income, share price and expense ratio for the Company.
Discount/Premium to Net Asset Value
On a weekly basis, the Board monitors the discount/premium to net asset value. The Directors renew their authority at the
annual general meeting in order to be able to make purchases through the market where they believe they can assist in
narrowing the discount to net asset value and where it is accretive to net asset value per share.
On 22 February 2017, the Company announced the details of its annual share buy-back programme. Pursuant to, and
during the term of this share buy-back programme, the Company may purchase ordinary shares provided that:
1) the maximum price payable for an ordinary share on the London Stock Exchange is an amount equal to the higher of:
a. 105 per cent. of the average market value of the Company's ordinary shares as derived from the London Stock
Exchange Daily Official List for the five business days immediately preceding the day on which such share is contracted to
be purchased; and
b. In order to benefit from the exemption laid down in Article 5(1) of Regulation (EU) No 596/2014, the Company will not
purchase shares at a price higher than the higher of the price of the last independent trade and the highest current
independent purchase bid on the trading venue where the purchase is carried out; and
2) the aggregate number of ordinary shares which may be acquired on behalf of the Company in connection with this share
buy-back programme shall not exceed 17,548,355 ordinary shares.
Due to the limited liquidity in the ordinary shares, a buy-back of ordinary shares pursuant to the share buy-back programme
on any trading day is likely to represent a significant proportion of the daily trading volume in the ordinary shares on the
London Stock Exchange (and is likely to exceed the 25% limits of the average daily trading volume as laid down in Article
5(1) of Regulation (EU) No 596/2014 and as such the Company will not benefit from this exemption). The share buy
authority resolution is for up to 14.99% of the Company’s issued share capital. The Board has no present intention to
exercise the authority in full but will keep the matter under review, taking into account the overall financial position of the
Company and the discount to net asset value at which the Company’s shares trade.
Whilst the Company has the requisite shareholder authority to conduct share buy-backs, the Company has not announced a
share buy-back programme since the above programme which expired on 17 November 2017, however this is under regular
review by the Board.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Business Review continued
A Board member is responsible for close monitoring of our share price, and working with our broker to buy back shares when
we believe appropriate so as to manage any discount to net asset value.
Yield
The Board monitors the dividend income of the portfolio and the amount available for distribution and considers the impact
on the Company’s annual dividend policy of future progressive dividend payments, subject to the absence of exceptional
market events.
Principal Risks and Uncertainties
The Board confirms that there is an on-going process for identifying, evaluating and managing or monitoring the key risks to
the Company. These key risks have been collated in a risk matrix document which is reviewed and updated on a quarterly
basis by the Directors. The risks are identified and graded in this process, together with the policies and procedures for the
mitigation of the risks.
The key risks which have been identified and the steps taken by the Board to mitigate these are as follows:
Market
The Company’s investments consist of listed companies. There are no investments in companies soon to be listed. Market
risk arises from uncertainty about the future prices of the investments. This is commented on in Note 1(a) and 2 on pages 47
to 51.
Investment and Strategy
The achievement of the Company’s investment objective relative to the market involves risk. An inappropriate asset
allocation may result in underperformance against the local index. Monitoring of these risks is carried out by the Board
which, at each quarterly Board meeting, considers the asset allocation of the portfolio, the ratio of the larger investments
within the portfolio and the management information provided by the Investment Manager and Investment Adviser, who are
responsible for actively managing the portfolio in accordance with the Company’s investment policy. The net asset value of
the Company is published weekly.
Accounting, legal and regulatory
The Company must comply with the provisions of the Isle of Man Companies Acts 1931 to 2004 and since its shares are
listed on the London Stock Exchange, the UK Listing Authority’s Listing Rules and Disclosure Guidance and Transparency
Rules (“UKLA Rules”)’ A breach of company law could result in the Company and/or the Directors being fined or the subject
of criminal proceedings. A breach of the UKLA Rules could result in the suspension of the Company’s shares. The Board
relies on its Company Secretary and advisers to ensure adherence to company law and UKLA Rules. The Board takes legal,
accounting or compliance advice, as appropriate, to monitor changes in the regulatory environment affecting the Company.
From 3 July 2016 the Company must also comply with the Market Abuse Regulation (MAR) which contains prohibitions for
insider dealing and market manipulation, and provisions to prevent and detect these.
Operational
Disruption to, or the failure of, the Investment Manager, the Investment Adviser, the Custodian or Administrator’s accounting,
payment systems or custody records could prevent the accurate reporting or monitoring of the Company’s financial position.
Details of how the Board monitors the services provided by the Investment Manager and its other suppliers, and the key
elements designed to provide effective internal control, are explained further in the internal control section of the Corporate
Governance Report on pages 19 to 25.
Financial
The financial risks faced by the Company include market price risk, foreign exchange risk, credit risk, liquidity risk and
interest rate risk. Further details are disclosed in Notes 1(a), 2, 6 and 8.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Report of the Investment Manager and Investment Adviser
Regional Market Overview
In FY 2018, GCC Markets outperformed its global peers, led by increase in oil prices and index upgradation to EM
status by FTSE and MSCI. Diverging global growth and looming trade war concerns have shaken investor confidence,
triggering flow to safe heavens, with china suffering the most, as a result, global markets remained almost flat in 1H18.
29-Jun-17 31-Dec-17 2H17 29-Jun-18 1H18 LTM
Qatar (QE) 9,030.4 8,523.4 -5.6% 9,024.0 5.9% -0.1% Saudi Arabia (TASI) 7,425.7 7,226.3 -2.7% 8,314.2 15.1% 12.0% Dubai (DFMGI) 3,392.0 3,370.1 -0.6% 2,821.0 -16.3% -16.8% Abu Dhabi (ADI) 4,425.4 4,398.4 -0.6% 4,560.0 3.7% 3.0% Kuwait (KWSE) NA NA NA 4,890.4 NA NA Oman (MSI) 5,118.3 5,099.3 -0.4% 4,571.8 -10.3% -10.7% Bahrain (BAX) 1,310.0 1,331.7 1.7% 1,311.0 -1.6% 0.1% S&P GCC Composite 100.1 99.0 -1.1% 108.7 9.8% 8.6% MSCI World 1,916.4 2,103.5 9.8% 2,089.3 -0.7% 9.0% MSCI EM 1,008.8 1,158.5 14.8% 1,069.5 -7.7% 6.0% Brent 47.4 66.9 41.1% 77.9 16.4% 64.3% Source: Bloomberg
During 2H17, most GCC markets underperformed their global peers, affected by regional tensions, with the S&P GCC
Composite index declining by 1.1 per cent. Performance of individual markets within the GCC was mixed. Crude prices
closed 14.8 per cent higher supported by the OPEC’s production cut agreement and its extension till December 2018.
Saudi Arabia was the major contributor to the regional performance during the period (YTD 2018), largely because
investors looked ahead to its inclusion in EM indices. Dubai lagged the region, amid concerns about its Real Estate &
Construction sector. The S&P GCC has gained 9.8 per cent while emerging markets generally have fallen (MSCI EM
index is down 7.7 per cent).
GCC diversification and recovering oil prices
GCC nations are encouraging private sector participation and improving the efficiency and transparency of the public
sector.
Investor friendly regulations are being adopted, such as allowing 100 per cent foreign ownership of businesses, and 10-
year residency visas in the UAE.
Social reforms such as Saudi women being permitted to drive and set up their own businesses will stimulate female
participation in the economy. This should boost job creation and consumer spending, potentially benefitting sectors such
as Services, Automobile and Insurance.
Stronger oil prices this year have bolstered the reserves of GCC nations, facilitating fiscal reforms and helping their
spending programs. The IMF reduced its estimate for this year’s GCC fiscal deficit to 3.6 per cent of GDP (October
2017: 5.0 per cent of GDP), and expects a 2019 deficit of 2.2 per cent.
Economic growth in the region is expected to accelerate in 2018-19, largely reflecting the continued recovery in oil
prices and slowing pace of fiscal consolidation. The IMF has estimated aggregate growth for the region at 1.9 per cent
and 2.6 per cent for 2018 and 2019, respectively. In June, major global oil producers agreed to increase crude output
from July, this should support GDP growth.
Saudi Arabia’s production increase should boost growth in its oil sector, adding nearly 2 per cent to GDP growth. Non-
oil growth is expected to pick up as reforms take a back seat and focus shifts towards implementation of megaprojects.
Current mega projects include the Grand Mosque redevelopment (US$26.6 billion), development of the Riyadh and
Jeddah Metro transit system (US$34.5 billion) and Expansion of King Abdulaziz Int’l Airport (US$7.2 billion). Upcoming
mega projects include the US$500 billion NEOM Mega City, King Abdullah Economic City (US$100 billion) and
commissioning of the world’s largest solar project (US$200 billion).
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Report of the Investment Manager and Investment Adviser continued
Chart: GCC Fiscal Balances to Improve in 2018 & 2019 With Rising Oil Prices
Source: IMF REO May 2018; Fiscal Balance: Central Govt. Net Lending/Borrowing
In June 2018, Fitch Ratings revised Qatar’s Outlook to “Stable” from “Negative” stating that Qatar has successfully
managed the effect from last year’s blockade by reconfiguring supply chains and injecting public sector liquidity. The
IMF expects Qatar’s real GDP growth to quicken to 2.6 per cent in 2018 from 2.1 per cent in 2017, with the economy
benefitting from continued infrastructure investment, a slower pace of fiscal consolidation and the scaling up of LNG
production.
Kuwait delayed implementation of VAT until 2021 and the Investment Adviser expects it has little immediate need for
fresh revenues at the current oil price. Kuwait is expected to report a fiscal surplus for 2018 and 2019 at 7.0 per cent
and 6.1 per cent of GDP, respectively.
The UAE government eased visa and investment rules to attract new businesses. Experts in medical, scientific,
research and technical fields as well as top students will be able to get a residency of up to 10 years.
Dubai unveiled various plans to stimulate foreign investment. These plans include the reduction and cancellation of
some government fees to support investors’ ability to do business. Dubai Municipality fees and those related to
investment in the aviation sector will be lowered.
To benefit from the higher oil price environment and encourage economic growth, the Abu Dhabi government approved
a 3-year AED50 billion (US$13.6 billion) economic stimulus program. The authorities intend to make it easier to do
business, spur employment growth and increase tourism.
In April, the Central Bank of Oman eased capital and credit exposure rules in an effort to boost economic growth. The
most prominent measure was the reduction in the capital adequacy ratio. This should free up close to OMR2.6 billion to
stimulate credit growth.
MSCI EM Inclusion
Saudi Arabia’s inclusion in the MSCI EM index from May 2019 brings its US$500 billion stock market to a wider group of
international investors. It could trigger US$40 - US$45 billion of inflows.
MSCI also added Kuwait to its 2019 watch list for a potential upgrade to EM, with the decision to be announced next
June, further bringing GCC nations under the investment radar of global investors.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Report of the Investment Manager and Investment Adviser continued
Chart: Future Potential of GCC on the MSCI EM Index
Source: Bloomberg; Franklin Templeton Investments Note: GCC current weight taken from ISHARES MSCI Emerging Markets ETF
These developments would also have a positive impact on the broader region. In addition to increased foreign inflows,
the intangible benefits of attracting newer set of sophisticated investors should result in improved standards of financial
disclosure and corporate governance.
Other Recent Developments
Saudi Arabia to be included in FTSE Secondary Emerging Market Index
The Kingdom is likely to have a weight of 2.7 per cent in the index, which could rise to about 4.6 per cent on listing of
the proposed 5 per cent IPO of state oil giant Saudi Aramco. Saudi Arabia could see a total of US$30-US$45 billion of
inflows in the next two years if it reaches the foreign ownership levels of peer GCC markets like UAE and Qatar.
Rising interest rates to benefit GCC banks
Most GCC central banks, including the UAE, Qatar, Kuwait and Bahrain, hiked their benchmark interest rates in line with
the US Federal Reserve’s move. Moody’s expects that rising interest rate would benefit GCC banks through higher
NIM’s, as banks are expected to gradually reprice their loan books. Consensus sees further 3 to 4, 25 bps rate hikes by
the US Fed.
Kuwait segmented its market to attract investors and increase listings
Boursa Kuwait transformed its market in to a three-tiered, segmented market along with entirely new listing
requirements and introduction of new market-capitalised indices and circuit breakers to curb volatility. The market is
segmented to create three new markets, a Premier, a Main and an Auction market. The amendments are expected to
build a liquid, reliable and sound capital market, providing issuers with efficient access to capital, and investors with
diverse return opportunities.
FTSE to upgrade Kuwait to emerging market in two tranches
Kuwait’s stock market will be included in FTSE Russell’s emerging market index in two equal tranches in September
and December this year. FTSE projects that Kuwait would have a final weighting of 0.4 per cent in the index. The
consensus expects around US$800 million of passive inflows to the Kuwaiti market from global index-linked funds.
Saudi Arabia launched privatization programme
Saudi Arabia aims to generate SAR35 to 40 billion (US$10 billion) in non-oil revenues from its privatisation programme
by 2020 and create up to 12,000 jobs. National Centre for Privatization & PPP (NCP’s) privatization programme aims to
help increase the percentage of private sector contribution to GDP from 40 per cent to 65 per cent.
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Report of the Investment Manager and Investment Adviser continued
Bahrain makes largest oil discovery in its history
Bahrain announced its biggest hydrocarbons discovery since 1932 and is expected to increase its existing reserves.
Bahrain ranks 57th on the US Energy Information Administration’s world list. Currently, Bahrain’s operational oil field
pumps out around 50,000 barrels a day. It also shares the Abu Safah oil field with Saudi Arabia, which produces around
150,000 barrels a day. The kingdom raises around 80 per cent of its revenues from oil.
UAE economy to grow at 3.9 per cent in 2018
The UAE economy is expected to grow at 3.9 per cent in 2018 as per UAE Central Bank, spurred by inflow of foreign
direct investment (FDI) as well as growth in tourism and travel sectors. The country is expecting a growth of around 2 to
3 per cent in FDI in 2018. Recent rollout of VAT in UAE and growth of its construction sector, supported by demand
related to the upcoming Expo 2020, are expected to drive in more government revenues for UAE.
British Petroleum (BP) to develop second phase of Oman’s giant Khazzan gas field
BP is set to develop second phase of Oman’s giant Khazzan gas field along with Oman Oil Company Exploration &
Production. The Ghazeer project is expected to come onstream in 2021 and deliver an additional 0.5 bcf/d and over
15,000 bpd condensate production. The first phase is producing at design capacity of around 1 bcf/d and around 35,000
bpd of condensate.
Kuwait set to spend US$113 billion in 5 years
Kuwait plans to invest a massive KWD34 billion (US$113 billion) over the next five years mainly to boost oil exploration
and production activity both inside and outside the country. This includes raising production of non-associated gas to
nearly 500 million standard cu ft per day by the end of 2018.
Kuwait added to MSCI EM watchlist
MSCI included Kuwait in MSCI EM watchlist for a potential upgrade to EM status in June 2019, with implementation in
May 2020. According to Boursa Kuwait, Kuwait would have a potential weight of 0.3 per cent in the MSCI EM index.
UAE 7
th most competitive in the world
The UAE has jumped three places to become the 7th most competitive economy in the world, according to the IMD
World Competitiveness Centre’s 2018 data. The UAE surpassed Norway (8), Sweden (9), Canada (10), Germany (15),
Australia (19), UK (20), Japan (25), France (28) and Italy (42) in the rankings. Also, Qatar (14) was ranked the 2nd most
competitive economy in the GCC, followed by Saudi Arabia (39).
Moody’s changed Qatar’s Outlook from Negative to Stable
Moody’s changed the Outlook on the Qatar to “Stable” from “Negative” and affirmed ratings at Aa3. Moody’s believes
that Qatar has the ability to withstand the economic, financial and diplomatic blockade by the neighbors in its current
form for an extended period of time without a material deterioration of the sovereign’s credit profile.
Saudi Arabia economy expanded by 1.2 per cent in 1Q18
Saudi Arabia reported 1.2 per cent YoY economic growth in 1Q18 following four quarter long negative real growth. The
headline rate accelerated on the back of a pick-up in oil GDP, supported by higher oil production (but within the OPEC
agreement quota) and improved non-oil activity. The non-oil sector grew 1.6 per cent YoY, helped by expansion in both
the private (1.1 per cent YoY) and the government (2.7 per cent YoY) sectors.
Qatar reported 1.4 per cent GDP growth in 1Q18 led by non-hydrocarbon
Qatar’s economic recovery seems to be continuing at a healthy pace, with 1Q18 real GDP output expanding by 1.4 per
cent YoY. The non-hydrocarbon sector reported growth of 4.9 per cent YoY, driven by gains in the construction,
financial services, manufacturing and transport and storage sectors among others. Oil and gas output, however,
declined by 2.3 per cent YoY, which partly reflects the country’s compliance with its OPEC production cut target.
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Report of the Investment Manager and Investment Adviser continued
Portfolio Structure
Country Allocation and Portfolio Rebalancing
Under the new GCC-wide investment policy the Investment Adviser is monitoring a broader universe of investment
opportunities across the Gulf Cooperation Council region comprising Saudi Arabia, Kuwait, UAE, Oman, Qatar and
Bahrain. Following the adoption of this new in investment policy, the Investment Adviser changed the proportion of the
Company invested outside Qatar from 10 per cent (31st December 2017) to 59 per cent (30th June 2018); adding
holdings in Saudi Arabia, the UAE and Kuwait.
GIF is actively managed, so weightings in different GCC markets will depend on the Investment Adviser’s views on the
investment outlook and valuations of the GCC economies. GIF remains overweight Qatar (36.7 per cent of NAV), as
Qatar trades at attractive valuations compared to other GCC markets. Holdings in Saudi, Kuwaiti and the Emirati
companies were 39.2 per cent, 10 per cent and 9.6 per cent of the fund, respectively. Reflecting the portfolio
rebalancing, 4.5 per cent of the Company was in cash as at 30th June 2018(1Q18: 10.3 per cent) awaiting
reinvestment.
Chart: Country Allocation
Source: QIC; as of 30
th June 2018
As of 30th June 2018, GIF has 43 holdings: 24 in Saudi Arabia, 9 in Qatar, 5 in the UAE and 5 in Kuwait.
Sector Allocation
Source: QIC; as of 30
th June 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Report of the Investment Manager and Investment Adviser continued
Financials is GIF’s largest sector at 46.4 per cent of NAV. GCC banks have strong balance sheets and government
backing and should benefit from resurgent infrastructure spending. Recent interest rate rises should allow them to
gradually reprice their loan books.
Other major sectors include: Energy (14.0 per cent), Materials (8.7 per cent) and Real Estate (8.2 per cent). Recovery in
oil prices should spur growth of the Energy and Materials industry while tighter demand should help pricing. Rising
population, investment in infrastructure and regulatory reforms should stimulate growth in the Real Estate sector.
Top 5 Holdings
Company Name Country Sector % share of NAV
Commercial Bank of Qatar Qatar Financials 9.7%
Qatar Gas Transport Qatar Energy 8.4%
Qatar Electricity & Water Co Qatar Utilities 7.8%
Al Rajhi Bank Saudi Arabia Financials 5.1%
National Bank of Kuwait Kuwait Financials 4.1%
Source: QIC; as of 30th June 2018
The stake in Qatar Gas Transport Company was increased (8.4 per cent of NAV vs. 3.3 per cent in 1Q18) as valuations
look attractive. Holdings in Qatar National Bank and Qatar Islamic bank were sold tactically in 2Q18 to take advantage
of sharp share price increases as their respective weights in EM indices were increased.
The Investment Adviser took new positions primarily in the Materials sector including National Petrochemical (1.4 per
cent of NAV) and Yanbu National Petrochemical (1.4 per cent). Other new holdings include Kuwait International Bank
(2.0 per cent).
Profile of Top Five Holdings
Commercial Bank of Qatar (9.7% of NAV)
Commercial Bank of Qatar (CBQ) is the second largest commercial bank in Qatar established in 1975 offering banking
solutions worldwide, with primary focus on corporate and retail banking. The Bank’s nationwide network includes 31 full
service branches and 174 ATMs. Under its diversification strategy, CBQ has expanded its GCC footprint through
strategic partnerships with associated banks - the National Bank of Oman (NBO) in Oman, United Arab Bank (UAB) in
the UAE and subsidiary Alternatifbank in Turkey. Under the 5-year turnaround strategy, the Bank is strengthening its
balance sheet by prudently managing the risks. Bottom line is expected to improve substantially once the high provision
cycle comes to an end, moreover, ongoing cost optimisation will also add to the bottom-line. For 1H18, CBQ reported
net profit of US$235 million (vs. US$49 million in 1H17) reflecting effective execution of the strategy. As of 30th June
2018, the Bank has total assets of US$38.4 billion.
Qatar Gas Transport (8.4% of NAV)
Qatar Gas Transport Company (Nakilat), established in 2004, is a key midstream player in the hydrocarbon sector in the
state of Qatar. Nakilat owns 69 LNG and LPG vessels, making it one of the largest LNG ship owners in the world. Out of
the 65 LNG vessels, 25 are wholly owned and 40 are under joint ventures (JV). It also has four jointly owned LPG
vessels. Nakilat also provides shipping and marine-related services to a range of participants within the Qatari
hydrocarbon sector. Nakilat is an integral component of the supply chain of some of the largest, most advanced energy
projects in the world undertaken by Qatar Petroleum, Qatargas, Ras Gas and their joint venture partners for the State of
Qatar. For 1H18, Nakilat reported a net profit of US$122 million compared to US$112 million during the same period in
FY17, an increase of 9%. Going forward, Qatar’s North Field expansion plan paves the way for increased transportation
of gas, which may benefit the Company in the longer run.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
13
Report of the Investment Manager and Investment Adviser continued
Qatar Electricity & Water Co. (7.8% of NAV)
Qatar Electricity & Water Co. (QEWS) was established in 1990 as the first private sector company engaged in electricity
production and water desalination businesses. The Company is the second largest utility company in the North Africa
and Middle East region. In Qatar, the Company enjoys ~60% market share in the electricity business, while in the water
desalination business, it commands ~80% market share. Over the past decade, the Company has been the key
beneficiary of rapid development in Qatar, coupled with the growth in population, resulting in increased demand for
electricity and water. Additionally, the Company is setting up presence overseas, with the establishment of Nebras
Power Company (60% owned by QEWS), which invests globally in new and existing power generation and water
desalination projects. QEWS has long term purchase agreements with government-owned Kahramaa; hence, the
Company has a low-risk business model, with secure and visible earnings and cash flows. For 1H18, the Company
reported net profit of US$223 million.
Al Rajhi Bank (5.1% of NAV)
Established in 1957, Al Rajhi Bank is one of the largest Islamic banks in the world with ~17 per cent market share in
Saudi Arabia’s financing and deposits. The Bank operates through 550 branches, 4,854 ATM’s, 76,453 POS terminals
installed with merchants and 234 remittance centers across the Kingdom. The Bank has an asset base of US$92.9
billion and enjoys strong capital adequacy, lower cost of borrowing, low NPAs and high provisioning coverage. With a
strong retail focus, the Bank is set to benefit from consumption growth and increasing interest rates. For 1H18, the Bank
reported net profit of US$1.3 billion, an increase of 12.4 per cent. The improvement in the Saudi economy could see
better consumption growth, benefitting the Bank going forward.
National Bank of Kuwait (4.1% of NAV)
Founded in 1952, National Bank of Kuwait (NBK) is Kuwait’s largest banking group with a dominant market position in
loans and deposits. It operates through international network with more than 140 branches covering the world’s financial
centers in 15 countries. The Bank is set to benefit from demand for credit from Kuwait’s development plans and from
economic recovery in Egypt. As of 30th June 2018, NBK has total assets of US$89 billion. For 1H18, the Bank reported
net profit of US$614 million (vs. US$545 million in 1H17).
GIF Performance
YTD 2018, GIF’s NAV is up 12.3 per cent whilst the S&P GCC index rose 9.8 per cent. Since the change in investment
policy in December, GIF’s NAV is 21.7 per cent higher and the S&P GCC index is 13.0 per cent higher.
Source: QIC, Bloomberg as of 30
th June 2018, reference index: DSM/SEMGGC Index
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
14
Report of the Investment Manager and Investment Adviser continued
GCC Outlook
The GCC nations are adapting to changing global economic conditions, but challenges remain, including relatively high
local unemployment in certain states, a heavy reliance on expatriate workers, and the ongoing dependency on the
government sector to drive growth.
Diversification and reducing the budget deficits are positive developments. If GCC companies can weather the near-
term impacts of the many government reforms that are underway, they could outperform global peers in the near to
medium term.
Valuations
Market
Market Cap. PE (x) PB (x) Dividend Yield (%)
US$ billion 2018E 2019E 2018E 2019E 2018E 2019E
Qatar 110.1 13.20 11.46 1.49 1.41 4.49 4.72
Saudi Arabia 532.4 15.67 13.99 1.82 1.73 3.33 3.57
Dubai 79.0 7.89 7.09 1.01 0.94 5.51 5.74
Abu Dhabi 129.1 11.44 10.39 1.56 1.48 5.36 5.73
Kuwait 97.6 12.57 10.77 1.51 1.42 NA NA
S&P GCC 885.6 13.89 12.37 1.61 1.52 3.85 4.14
MSCI EM 13,519.6 12.04 10.79 1.57 1.44 2.83 3.18
MSCI World 59,907.8 15.61 14.23 2.20 2.05 2.49 2.69
Source: Bloomberg, as of 12th July 2018
Epicure Managers Qatar Limited Qatar Insurance Company S.A.Q.
21 September 2018 21 September 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
15
Investment Policy
Investment Objective
The Company’s investment objective is to capture the opportunities for growth offered by the expanding GCC
economies by investing in listed companies on one of the GCC exchanges or companies soon to be listed on one of the
GCC exchanges. The Company may also invest in listed companies, or pre-IPO companies, in other GCC countries.
The Company applies a top-down screening process to identify those sectors which should most benefit from sector
growth trends. Fundamental industry and company analysis, rather than benchmarking, forms the basis of both stock
selection and portfolio construction.
Assets or companies in which the Company can invest
The Company invests in listed companies on any GCC Exchanges in addition to companies soon to be listed. The
Company may also invest in listed companies, or pre-IPO companies, in other GCC countries. The Company will also
be permitted to invest in companies listed on stock markets not located in the GCC which will have a significant
economic exposure to and/or derive a significant amount of their revenues from GCC countries.
Whether investments will be active or passive investments
In the ordinary course of events, the Company is not an activist investor, although the Investment Adviser will seek to
engage with investee company management where appropriate.
Holding period for investments
In the normal course of events, the Company expects to be fully-invested, although the Company may hold cash
reserves pending new IPOs or when it is deemed financially prudent. Although the Company is a long term financial
investor, it will actively manage its portfolio.
Spread of investments and maximum exposure limits
The Company will invest in a portfolio of investee companies. The following investment restrictions are in place to
ensure a spread of investments and to ensure that there are maximum exposure limits in place (see investment
guidelines under Investing Restrictions).
Policy in relation to gearing and derivatives
Borrowings will be limited, as at the date on which the borrowings are incurred, to 5% of NAV. Borrowings will include
any financing element of a swap. The Company will not make use of hedging mechanisms.
The Company may utilise derivative instruments in pursuit of its investment policy subject to:
• such derivative instruments being designed to offer the holder a return linked to the performance of a
particular underlying listed equity security;
• a maximum underlying equity exposure limit of 15 per cent of NAV (calculated at the time of investment); and
• a policy of entering into derivative instruments with more than one counterparty in relation to an investment,
where possible, to minimise counterparty risk.
Policy in relation to cross-holdings
Cross-holdings in other listed or unlisted investment funds or ETFs that invest in Qatar or other countries in the GCC
region will be limited to 10 per cent. of Net Asset Value at any time (calculated at the time of investment).
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
16
Investment Policy continued
Investing Restrictions The investing restrictions for the Company are as follows: (i) Foreign ownership restrictions
Investments in most GCC listed companies by persons other than citizens of that specific GCC country have an
ownership restriction wherein the law precludes persons other than citizens of that specific GCC country from acquiring
a certain proportion of a company’s issued share capital. It is possible that the Company may have problems acquiring
stock if the foreign ownership interest in one or more stocks reaches the allocated upper limit. This may adversely
impact the ability of the Company to invest in certain companies listed on the GCC exchanges. (ii) Investment guidelines
The Company has established certain investment guidelines. These are as follows (all of which calculated at the time of
investment):
• No single investment position in the S&P GCC Composite constituent may exceed the greater of: (i) 15 per
cent. of the Net Asset Value of the Company; or (ii) 125 per cent. of the constituent company’s index capitalisation
divided by the index capitalisation of the S&P GCC Composite Index, as calculated by Bloomberg (or such other source
as the Directors and Investment Manager may agree):
• No single investment position in a company which is not a S&P GCC Composite Index constituent may at the
time of investment exceed 15 per cent. of the NAV of the Company; and
• No holding may exceed 5 per cent. of the outstanding shares in any one company (including investment in
Saudi Arabian listed companies by way of derivative investment in P-Note or Swap structured financial products); and (iii) Conflicts management
The Investment Manager, the Investment Adviser, their officers and other personnel are involved in other financial,
investment or professional activities, which may on occasion give rise to conflicts of interest with the Company. The
Investment Manager will have regard to its obligations under the Investment Management Agreement to act in the best
interests of the Company, and the Investment Adviser will have regard to its obligations under the Investment Adviser
Agreement to act in the best interests of the Company, so far as is practicable having regard to their obligations to other
clients, where potential conflicts of interest arise. The Investment Manager and the Investment Adviser will use all
reasonable efforts to ensure that the Company has the opportunity to participate in potential investments that each
identifies that fall within the investment objective and strategies of the Company. Other than these restrictions set out
above, and the requirement to invest in accordance with its investing policy, there are no other investing restrictions. Returns and distribution policy
The Company’s primary investment objective is to achieve capital growth. However, the Company has instituted an
annual dividend policy to return to Shareholders distributions at least equal to reported income for each reporting period.
Shareholders should note that this cannot be guaranteed and the level of distributions for any period remains a matter
to be determined at the discretion of the Board.
Life of the Company
The Company currently does not have a fixed life but the Board considers it desirable that Shareholders should have
the opportunity to review the future of the Company at appropriate intervals. Accordingly, at the annual general meeting
of the Company in 2021, a resolution will be proposed that the Company continues in existence. More than 50 per cent.
of Shareholders voting must vote in favour for this resolution to be passed. If the resolution is passed, a similar
resolution will be proposed at every third annual general meeting thereafter. If the resolution is not passed, the Directors
will be required to formulate proposals to be put to Shareholders to reorganise, unitise or reconstruct the Company or
for the Company to be wound up.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
17
Report of the Directors
The Directors hereby submit their annual report together with the audited consolidated and Company financial
statements of Gulf Investment Fund plc (the “Company”) for the year ended 30 June 2018.
The Company
The Company is incorporated in the Isle of Man and has been established to invest primarily in quoted equities of Qatar
and other Gulf Co-operation Council countries. The Company’s investment policy is detailed on pages 15 to 16.
Results and Dividends
The results of the Company for the year and its financial position at the year- end are set out on pages 36 to 46 of the
financial statements.
The Directors manage the Company’s affairs to achieve capital growth and the Company has instituted an annual
dividend policy. The quantum of the dividend is calculated based on a proportion of the dividends received during the
year, net of the Company’s attributable costs. Any undistributed income will be set aside in a revenue reserve in order to
facilitate the Company’s policy of future progressive dividend payments. This policy will be subject to the absence of
exceptional market events.
For the year ended 30 June 2017, the Directors declared a dividend of US$2,773,837 (3.0c per share) which was
approved by Shareholders and paid by the Company in February 2018. The Directors recommend a dividend of 3 cents
per share in respect of the year ended 30 June 2018.
Directors
Details of Board members at the date of this report, together with their biographical details, are set out on page 26.
Director independence and Directors’ and other interests have been detailed in the Directors’ Remuneration Report on
pages 30 and 31.
Creditor Payment Policy
It is the Company’s policy to adhere to the payment terms agreed with individual suppliers and to pay in accordance
with its contractual and other legal obligations.
Gearing Policy
Borrowings will be limited, as at the date on which the borrowings are incurred, to 5% of NAV (or such other limit as may
be approved by the Shareholders in general meeting). The Company will not make use of any hedging mechanisms.
There were no borrowings during the year (2017: US$ nil).
Donations
The Company has not made any political or charitable donations during the year (2017: US$ nil).
Adequacy of the Information Supplied to the Auditors
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as each is aware, there
is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all steps
that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
18
Report of the Directors continued
Statement of Going Concern
The Directors are satisfied that the Company and the Group have adequate resources to continue to operate as a going
concern for the foreseeable future and have prepared the financial statements on that basis, however Shareholders will
be given the opportunity to vote for a 100% tender in 2020 and to vote for the continued existence of the Company at
the annual general meeting (AGM) in 2021 and every third AGM thereafter.
Independent Auditors
KPMG Audit LLC has expressed its willingness to continue in office in accordance with Section 12 (2) of the Companies
Act 1982.
Annual General Meeting
The Annual General Meeting of the Company will be held on 7 November 2018 at the Company’s registered office.
A copy of the notice of Annual General Meeting is contained within this Annual Report. As well as the business normally
conducted at such a meeting, Shareholders will be asked to renew the authority to allow the Company to continue with
share buy-backs.
The notice of the Annual General Meeting and the Annual Report are also available at www.gulfinvestmentfundplc.com.
Corporate Governance
Full details are given in the Corporate Governance Report on pages 19 to 25, which forms part of the Report of the
Directors.
Substantial Shareholdings
As at the date of publication of this annual report, the Company had been notified, or the Company is aware of the
following significant holdings in its Share Capital.
Ordinary Shares
Name %
City of London Investment Management Company 28.80
Qatar Insurance Company S.A.Q. 18.73
1607 Capital Partners LLC 15.12
Qatar Investment Authority 11.66
Lazard Asset Management 6.10
BCV Asset Management 3.01
The above percentages are calculated by applying the Shareholdings as notified to the Company or the Company’s
awareness to the issued Ordinary Share Capital as at 31 August 2018.
On behalf of the Board
Nicholas Wilson
Chairman
21 September 2018
Millennium House
46 Athol Street
Douglas
Isle of Man
IM1 1JB
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
19
Corporate Governance Report
Compliance with Companies Acts
As an Isle of Man incorporated company, the Company’s primary obligation is to comply with the Isle of Man Companies
Acts 1931 to 2004. The Board confirms that the Company is in compliance with the relevant provisions of the
Companies Acts.
Compliance with the Association of Investment Companies (AIC) Code of Corporate Governance
The Company is committed to high standards of corporate governance. The Board is accountable to the Company’s
shareholders for good governance and this statement describes how the Company applies the principles identified in
the UK Corporate Governance Code which is available on the Financial Reporting Council’s website: www.frc.org.uk.
The Board confirms that the Company has complied throughout the accounting period with the relevant provisions
contained within the UK Code.
The Board of the Company has considered the principles and recommendations of the AIC 2014 Code of Corporate
Governance (AIC Code) by reference to the AIC Corporate Governance Guide for investment Companies (AIC Guide).
The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance
Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to QIF
plc.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to
the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK
Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to:
• the role of the chief executive
• executive directors’ remuneration
• the need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers
these provisions are not relevant to the position of the Company, being an externally managed investment company. In
particular, all of the Company’s day-to-day management and administrative functions, with the exception of portfolio
management, risk management and service provider performance management, are outsourced to third parties. As a
result, the Company has no executive directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
Directors
The Directors are responsible for the determination of the Company’s investment policy and strategy and have overall
responsibility for the Company’s activities including the review of the investment activity and performance.
All of the Directors are non-executive. The Board considers each of the Directors to be independent of, and free of any
material relationship with, the Investment Manager and Investment Adviser.
The Board of Directors delegates to the Investment Manager through the Investment Management Agreement the
responsibility for the management of the Company’s assets in GCC securities in accordance with the Company’s
investment policy and for retaining the services of the Investment Adviser. The Company has no executives or
employees.
The Articles of Association require that all Directors submit themselves for election by Shareholders at the first
opportunity following their appointment and shall not remain in office longer than three years since their last election or
re-election without submitting themselves for re-election.
The Board meets formally at least 4 times a year and between these meetings there is regular contact with the
Investment Manager. Other meetings are arranged as necessary. The Board considers that it meets
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
20
Corporate Governance Report continued
Directors continued
regularly enough to discharge its duties effectively. The Board ensures that at all times it conducts its business with the
interests of all Shareholders in mind and in accord with Directors' duties. Directors receive the relevant briefing papers
in advance of Board and Board Committee meetings, so that should they be unable to attend a meeting they are able to
provide their comments to the Chairman of the Board or Committee as appropriate. The Board meeting papers are the
key source of regular information for the Board, the contents of which are determined by the Board and contain
sufficient information on the financial condition of the Company. Key representatives of the Investment Manager attend
each Board meeting. All Board and Board Committee meetings are formally minuted.
Board Composition and Succession Plan
Objectives of Plan
• To ensure that the Board is composed of persons who collectively are fit and proper to direct the Company’s
business with prudence, integrity and professional skills
• To define the Board Composition and Succession Policy, which guides the size, shape and constitution of the
Board and the identification of suitable candidates for appointment to the Board.
Methodology
The Board is conscious of the need to ensure that proper processes are in place to deal with succession issues and the
Nomination Committee assists the Board in the Board selection process, which involves the use of a Board skills matrix.
The matrix incorporates the following elements: finance, accounting and operations; familiarity with the regions into
which the Company invests; diversity (gender, residency, cultural background); Shareholder perspectives; investment
management; multijurisdictional compliance and risk management. In adopting the matrix, the Nomination Committee
acknowledges that it is an iterative document and will be reviewed and revised periodically to meet the Company’s on-
going needs.
The Nomination Committee monitors the composition of the Board and makes recommendations to the Board about
appointments to the Board and its Committees.
Directors may be appointed by the Board, in which case they are required to seek election at the first AGM following
their appointment and triennially thereafter. Directors who are not regarded as independent are required to seek re-
election annually. In making an appointment the Board shall have regard to the Board skills matrix.
A Director’s formal letter of appointment sets out, amongst other things, the following requirements:
• bringing independent judgment to bear on issues of strategy, performance, resources, key appointments and
standards of conduct and the importance of remaining free from any business or other relationship that could
materially interfere with independent judgement;
• having an understanding of the Company’s affairs and its position in the industry in which it operates;
• keeping abreast of and complying with the legislative and broader responsibilities of a Director of a company
whose shares are traded on the London Stock Exchange;
• allocating sufficient time to meet the requirements of the role, including preparation for Board meetings; and
• disclosing to the Board as soon as possible any potential conflicts of interest.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
21
Corporate Governance Report continued
The Board authorises the Nomination Committee to:
• recommend to the Board, from time to time, changes that the Committee believes to be desirable to the size
and composition of the Board;
• recommend individuals for nomination as members of the Board;
• review and recommend the process for the election of the Chairman of the Board, when appropriate; and
• review on an on-going basis succession planning for the Chairman of the Board and make recommendations
to the Board as appropriate.
The Plan will be reviewed by the Board annually and at such other times as circumstances may require (e.g. a major
corporate development or an unexpected resignation from the Board). The Plan may be amended or varied in relation to
individual circumstances at the Board’s discretion.
Board Committees
The Board has established the following committees to oversee important issues of policy and maintain oversight
outside the main Board meetings:
• Audit Committee
• Remuneration Committee
• Nomination Committee
• Management Engagement Committee
Throughout the year the Chairman of each committee provided the Board with a summary of the key issues considered
at the meeting of the committees and the minutes of the meetings were circulated to the Board.
The committees operate within defined terms of reference. They are authorised to engage the services of external
advisers as they deem necessary in the furtherance of their duties, at the Company’s expense.
Audit Committee
The Board has established an Audit Committee made up of at least two members and comprises Paul Macdonald,
Nicholas Wilson, Neil Benedict and David Humbles. The Audit Committee is responsible for, inter alia, ensuring that the
financial performance of the Company is properly reported on and monitored. The Audit Committee is chaired by Paul
Macdonald. The Audit Committee normally meets at least twice a year when the Company’s interim and final reports to
Shareholders are to be considered by the Board but meetings can be held more frequently if the Audit Committee
members deem it necessary or if requested by the Company’s auditors. The Audit Committee will, amongst other
things, review the annual and interim accounts, results announcements, internal control systems and procedures,
preparing a note in respect of related party transactions and reviewing any declarations of interest notified to the
Committee by the Board each on six monthly basis, review and make recommendations on the appointment,
resignation or dismissal of the Company’s auditors and accounting policies of the Company. The Company’s auditors
are advised of the timing of the meetings to consider the annual and interim accounts and the auditors shall be asked to
attend the Audit Committee meeting where the annual audited accounts are to be considered. The Audit Committee
chairman shall report formally to the Board on its proceedings after each meeting and compile a report to Shareholders
on its activities to be included in the Company’s annual report. At least once a year, the Audit Committee will review its
performance, constitution and terms of reference to ensure that it is operating at maximum effectiveness and
recommend any changes it considers necessary to the Board for approval.
The terms of reference for the Audit Committee are available on the Company’s website
www.gulfinvestmentfundplc.com.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
22
Corporate Governance Report continued
Significant Issues
During its review of the Company’s financial statements for the year ended 30 June 2018, the Audit Committee
considered the following significant issues, in particular those communicated by the auditor during their reporting:
Carrying value of quoted equity investments
The valuation of investments is undertaken in accordance with the accounting policies, disclosed in note 1(a) to the
financial statements. The audit includes independent confirmation of the existence of all investments from the
Company’s custodian. All investments are considered liquid and quoted in active markets and have been categorised as
Level 1 within the IFRS 13 fair value hierarchy and can be verified against daily market prices. The portfolio is reviewed
and verified by the Manager on a regular basis and management accounts including a full portfolio listing are prepared
each month and circulated to the Board. The Company uses the services of an independent Custodian HSBC Bank
Middle East Limited to hold the assets of the Company. The investment portfolio is reconciled regularly by the Manager
and a reconciliation is also reviewed by the Auditor.
Carrying value of Parent Company’s loan to and investment in subsidiary
The carrying value of the Parent Company’s loan to and investment in subsidiary represents 98.9% (2017: 99.1%) of
the Parent Company’s total assets. The assessment of carrying value is not at a high risk of significant misstatement or
subject to significant judgement as the carrying value is equal to the audited net asset value of the subsidiary. However,
due to its materiality in the context of the Parent Company financial statements, this is considered to be the area that
had the greatest effect on the Parent Company balance sheet.
Remuneration Committee
The Company has established a Remuneration Committee. The Remuneration Committee is made up of at least two
non-executive Directors who are identified by the Board as being independent. Its members are Neil Benedict
(Chairman), Nicholas Wilson, Paul Macdonald and David Humbles. The Remuneration Committee normally meets at
least once a year and at such other times as the chairman of the Remuneration Committee shall require. The
Remuneration Committee reviews the performance of the Directors and sets the scale and structure of their
remuneration and the basis of their letters of appointment with due regard to the interests of Shareholders. In
determining the remuneration of Directors, the Remuneration Committee seeks to enable the Company to attract and
retain Directors of the highest calibre. No Director is permitted to participate in any discussion of decisions concerning
their own remuneration. The Remuneration Committee reviews at least once a year its own performance, constitutions
and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers
necessary to the Board for approval.
The terms of reference for the Remuneration Committee are available on the Company’s website
www.gulfinvestmentfundplc.com Nomination Committee
The Company has established a Nomination Committee which shall be made up of at least two members and which
shall comprise all independent non-executive Directors. The Nomination Committee comprises Nicholas Wilson
(Chairman), Neil Benedict, Paul Macdonald and David Humbles. The Nomination Committee meets at least once a year
prior to the first quarterly Board meeting and at such other times as the Chairman of the committee shall require. The
Nomination Committee is responsible for ensuring that the Board members have the range of skills and qualities to
meet its principal responsibilities in a way which ensures that the interests of Shareholders are protected and promoted
and regularly review the structure, size and composition of the Board. The Nomination Committee shall, at least once a
year, review its own performance, constitution and terms of reference to ensure that it is operating at maximum
effectiveness and recommend any changes it considers necessary to the Board for approval.
The Nomination Committee will assess potential candidates on merit against a range of criteria including experience,
knowledge, professional skills and personal qualities as well as independence, if this is required for the role.
Candidates’ ability to commit sufficient time to the business of the Company is also key, particularly in respect of the
appointment of the Chairman. The Chairman of the Nomination Committee is primarily responsible for interviewing
suitable candidates and a recommendation will be made to the Board for final approval.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
23
Corporate Governance Report continued
Management Engagement Committee
The Company has established a Management Engagement Committee which is made up of at least two members who
are independent non-executive Directors. The Management Engagement Committee members are Neil Benedict
(Chairman), Paul Macdonald, Nicholas Wilson and David Humbles. The Management Engagement Committee will meet
at least quarterly and is responsible for reviewing the performance of the Investment Manager and other service
providers, to ensure that the Company’s management contract is competitive and reasonable for the Shareholders and
to review and make recommendations to the Board on any proposed amendment to or material breach of the
management contract and contracts with other service providers. Board Attendance
The number of formal meetings during the year of the Board, and its Committees, and the attendance of the individual
Directors at those meetings, is shown in the following table:
Board Audit Committee
Remuneration Committee
Nomination Committee
Management Engagement Committee
Total number of meetings in year
8(8) 6(6) 1(1) 2(2) 4(4)
Meetings Attended (entitled to attend)
Nicholas Wilson (Chairman and Chairman of Nomination Committee)
7 (8) 6 (6) 1 (1) 2 (2) 4 (4)
Neil Benedict (Chairman of Remuneration Committee and Chairman of Management Engagement Committee)
8 (8) 6 (6) 1 (1) 2 (2) 4 (4)
David Humbles 8 (8) 6 (6) 1 (1) 2 (2) 4 (4)
Paul Macdonald (Chairman of Audit Committee)
8 (8) 6 (6) 1 (1) 2 (2) 4 (4)
The Annual General Meeting was held on 16 November 2017.
Internal Control
The Board is responsible for the Company’s system of internal control and for reviewing its effectiveness. Its review
takes place at least once a year. Such a system is designed to manage rather than eliminate the risk of failure to
achieve business objectives and can only provide reasonable and not absolute assurance against material mis-
statement or loss. The Board also determines the nature and extent of any risks it is willing to take in order to achieve its
strategic objectives.
The Board has contractually delegated to external agencies, including the Investment Manager and the Investment
Adviser, the management of the investment portfolio, the custodial services (which include the safeguarding of the
assets), the registration services and the day-to-day accounting and Company Secretarial requirements. Each of these
contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered
including the control systems in operation in so far as they relate to the affairs of the Company.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
24
Corporate Governance Report continued
Internal Control continued
The Board, assisted by the Investment Manager and Investment Adviser, has undertaken regular risk and controls
assessments. The business risks have been analysed and recorded in a risk and internal controls report which is
regularly reviewed. The Board has reviewed the need for an internal audit function. The Board has decided that the
systems and procedures employed by the Investment Manager and Investment Adviser, including its internal audit
function provide sufficient assurance that a sound system of internal control, which safeguards Shareholders’
investments and the Company’s assets, is maintained. An internal audit function, specific to the Company, is therefore
considered unnecessary.
The Board confirms that there is an on-going process for identifying, evaluating and managing the Company’s principal
business and operational risks that have been in place for the year ended 30 June 2018 and up to the date of approval
of the annual report and financial statements.
Accountability and Relationship with the Investment Manager, the Custodian and the Administrator
The Statement of Directors’ Responsibilities is set out on page 27.
The Board has delegated contractually to external third parties, including the Investment Manager, the Investment
Adviser, the Custodian and the Administrator, the management of the investment portfolio, the custodial services (which
include the safeguarding of the assets), the day to day accounting, company secretarial and administration
requirements. Each of these contracts was entered into after full and proper consideration by the Board of the quality
and cost of the services provided, including the control systems in operation in so far as they relate to the affairs of the
Company.
The Investment Manager, the Investment Adviser and the Administrator ensure that all Directors receive, in a timely
manner, all relevant management, regulatory and financial information. Representatives of the Investment Manager and
the Administrator attend each Board meeting enabling the Directors to probe further on matters of concern.
Continued Appointment of the Investment Manager
The Board considers the arrangements for the provision of investment management and other services to the Company
on an on-going basis. The Board reviews investment performance at each Board meeting and a formal review of the
Investment Manager (and Investment Adviser) is conducted annually. As a result of their annual review, NAV
performance has been found to be satisfactory and it is the opinion of the Directors that the continued appointment of
the current Investment Manager (and Investment Adviser) on the terms agreed is in the interests of the Company’s
Shareholders as a whole.
Relations with Shareholders
The Chairman is responsible for ensuring that all Directors are made aware of Shareholders’ concerns. The
Shareholder profile of the Company is regularly monitored and the Board liaises with the Investment Manager to
canvass Shareholder opinion and communicate views to Shareholders. The Company is concerned to provide the
maximum opportunity for dialogue between the Company and Shareholders. It is believed that Shareholders have
proper access to the Investment Manager at any time and to the Board if they so wish. All Shareholders are encouraged
to attend annual general meetings. Together with the Investment Manager and Investment Adviser, regular investor
presentations are held to promote a wider following for the Company.
Viability statement
The Board makes an assessment of the longer term prospects of the Company beyond the timeframe envisaged under
the going concern basis of accounting having regard to the Company’s current position and the principal risks it faces.
The Company is a long term investment vehicle and the Directors, therefore, believe that it is appropriate to assess its
viability over a long term horizon. The Board considers that assessing the Company's prospects over a period of five
years is appropriate given the nature of the Company and the inherent uncertainties of looking out
over a longer time period. The Directors believe that a five year period appropriately reflects the long term strategy of
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
25
Corporate Governance Report continued
the Company and over which, in the absence of any adverse change to the regulatory environment, they do not expect
there to be any significant change to the current principal risks and to the adequacy of the mitigating controls in place.
Notwithstanding the above the Company’s Shareholders will have the opportunity to vote for the cessation of the
Company at the annual general meeting in 2021 which will be proposed as an ordinary resolution. In the event that the
continuation vote is not passed the Directors will be required to put forward proposals to Shareholders to the effect that
the Company be wound up, liquidated, reorganised or unitised. If the continuation vote is passed, a further continuation
vote will be proposed at every third annual general meeting thereafter.
On behalf of the Board
Nicholas Wilson
Chairman
21 September 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
26
Board of Directors
Nicholas Wilson (Non-Executive Chairman)
Nicholas Wilson has over 40 years of experience in hedge funds, derivatives and global asset management. He has run
offshore branch operations for Mees Pierson Derivatives Limited, ADM Investor Services International Limited and
several other London based financial services companies. He is a director of EPE Special Opportunities PLC and until
recently was chairman of Alternative Investment Strategies Limited. He is a resident of the Isle of Man.
Paul Macdonald (Non-Executive Director)
Paul Macdonald qualified as a chartered accountant in 1979. He worked for Pilkington plc for sixteen years, the last
seven of these in Germany. In Germany he was Managing Director for Pilkington Deutschland GmbH (holding
company) and Managing Director of both Flachglas AG (glass manufacturer) and Dahlbusch AG (property and holding
company). For the last fourteen years Paul has been active in the private equity market and has been successful in
developing a number of companies covering a number of industries including Sirona Beteiligungs GmbH (Germany), a
leveraged buy-out from Siemens. He is currently the Geschäftsführer for Optas GbmH. Paul is a Non-Executive Director
of PME African Infrastructure Opportunities plc.
Neil Benedict (Non-Executive Director)
Neil Benedict is based in the USA with over thirty years’ experience of financial markets. He was formerly a Managing
Director at Salomon Brothers, where he was Head of International Capital Markets, and, prior to that, the founder and
head of the worldwide Currency Swaps group. Neil was also a Managing Director at Dillon Read and helped establish
their Tokyo office. He is currently a Senior Managing Director at Sonenshine Partners a New York private investment
bank. Neil is a fellow member of the Institute of Chartered Accountants in England and Wales.
David Humbles (Non-Executive Director)
David Humbles was born in 1960 and is British. He has 3 children and two grandchildren and has recently been
widowed. He worked in the downstream oil industry for 25 years and relocated to the Isle of Man in 1998 as Director of
Total. In 2003, David purchased Abbey Properties Ltd and St Paul's Property Services Ltd. These companies own &
manage a property complex in the north of the island incorporating residential apartments, retail units & office
accommodation. Also in 2003 David formed Westminster Properties Ltd to manage a large portfolio of residential and
commercial properties on the island. David has been Managing Director of Oakmayne since 2006. This company is a
residential developer in the London market. See www.oakmayneproperties.com. David was Chairman of Epicure Berlin
Property Company until February 2017, a large private property fund which owns residential property in Berlin. He has
served on the board of two AIM listed companies.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
27
Statement of Directors’ responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year.
Under the law they have elected to prepare the Group and Parent Company financial statements in accordance with
International Financial Reporting Standards (IFRSs).
Under company law the directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In
preparing each of the Group and parent Company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant and reliable;
• state whether they have been prepared in accordance with IFRSs;
• assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with the Companies Acts 1931 to 2004. They
are responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Directors’ Report and Corporate
Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the company’s website. Legislation governing the preparation and dissemination of financial statements may differ from
one jurisdiction to another.
Disclosure Guidance and Transparency Rules responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included
in the consolidation taken as a whole;
• that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and
understandable and it provides the information necessary to assess the Company’s position, performance,
business model and strategy; and
• the Business Review, Report of the Investment Manager and Investment Adviser and the Report of the Directors
include a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Nicholas Wilson
Chairman
21 September 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
28
Audit Committee Report
An Audit Committee has been established in compliance with the FCA’s Disclosure Guidance and Transparency Rule
7.1 and the UK Corporate Governance Code consisting of independent Directors. Its authority and duties are clearly
defined within its written terms of reference. Paul Macdonald is Chairman of the Audit Committee, which also comprises
Mr Nicholas Wilson, Mr Neil Benedict and Mr David Humbles.
The Committee meets at least two times a year.
.
The Committee’s responsibilities, which were discharged during the year, include:
• monitoring and reviewing the integrity of the interim and annual financial statements and the internal financial
controls;
• reviewing the appropriateness of the Company's accounting policies;
• making recommendations to the Board in relation to the appointment of the external auditors and approving
their remuneration and terms of their engagement;
• reviewing the external Auditor's plan for the audit of the Company's financial statements;
• developing and implementing policy on the engagement of the external auditors to supply non-audit services;
• reviewing and monitoring the independence, objectivity and effectiveness of the external auditors;
• reviewing the arrangements in place within the Administrator and Investment Manager/Adviser whereby their
staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other
matters insofar as they may affect the Company;
• performing the annual review of the effectiveness of the internal control systems of the Company;
• reviewing the terms of the Investment Management Agreement;
• considering annually whether there is a need for the Company to have its own internal audit function; and
• review the relationship with and the performance of the Custodian, the Administrator and the Registrar.
The Audit Committee does not award any non-audit work. The full Board has to approve any non-audit work and this
includes confirmation that in all such work auditor objectivity and independence is safeguarded.
Owing to the nature of the fund’s business, with all major functions being outsourced and the absence of employees,
the Audit Committee do not feel it is necessary for the Company to have its own internal audit function. This situation is
re-evaluated annually.
KPMG Audit LLC was re-appointed as auditor at the last AGM on 16 November 2017. The Audit Committee considered
the experience and tenure of the audit partner and staff and the nature and level of services provided. The Audit
Committee receives confirmation from the auditor that they have complied with the relevant UK professional and
regulatory requirements on independence. The Company’s Audit Committee meets representatives of the Administrator,
who report as to the proper conduct of the business in accordance with the regulatory environment in which the
Company, the Administrator, and the Investment Manager/Adviser operate. The Company’s external auditor also
attends this Audit Committee meeting at its request and reports if the Company has not kept proper accounting records,
or if it has not received all the information and explanations required for its audit.
The Audit Committee also monitors the risks to which the Company is exposed and makes recommendations as to the
mitigation of these risks. This task is facilitated by using an extensive risk matrix that enables the Committee to make a
quantitative analysis of the individual risks and to highlight those areas where risk is high or increasing.
This report was reviewed and approved by the Board on x September 2018.
Paul Macdonald
Chairman of the Audit Committee 21 September 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
29
Management Engagement Committee Report
A Management Engagement Committee has been established in accordance with good corporate governance. Neil
Benedict is chairman of the Committee, which also comprises Paul Macdonald, Nicholas Wilson and David Humbles.
The function of the Management Engagement Committee is to monitor the performance of all the Company’s service
providers and in the particular the performance of the Investment Manager/Investment Adviser.
The performance of the Investment Manager/Investment Adviser is formally reviewed annually at the end of the
Company’s financial year. The Management Engagement Committee meets quarterly prior to the quarterly Board
meetings and the chairman of the Management Engagement Committee monitors the performance periodically during
the intervening periods.
As regards the Investment Manager/Investment Adviser, the Committee:
• monitors and evaluates the investment performance both in absolute terms and also by reference to peer
group analysis prepared by the Investment Manager/Adviser and by the Company’s broker;
• reviews the performance fee structure to ensure that it does not encourage excessive risk and that it rewards
demonstrable superior performance;
• investigates any breaches of agreed investment limits and any deviation from the agreed investment policy
and strategy;
• reviews the standard of any other services provided by the Investment Manager;
• evaluates the level and effectiveness of any marketing support provided by the Investment Manager, including
but not limited to, their input into quarterly reports, handling investor relations and website monitoring and
development;
• assesses the level of fees charged by the Investment Manager and how these fees compare with those
charged to peer group companies;
• compares the notice period on the Investment Management Agreement with industry norms;
• considers any other issues on the appointment of the Investment Manager.
As regards the other service providers to the Company, the Committee:
• monitors the terms on which they are retained and compares them to market rates;
• examines the effectiveness of the services provided;
• makes recommendations to the Board where changes are warranted.
At its most recent meeting, the Management Engagement Committee concluded that the performance of the Investment
Manager/Investment Adviser had been satisfactory. The Investment Manager had adhered to the investment policy and
policy limits.
The Committee was satisfied with the current performance of the Company’s other service providers.
Neil Benedict
Chairman of the Management Engagement Committee
21 September 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
30
Directors’ Remuneration Report
This report meets the relevant rules of the Listing Rules of the Financial Services Authority and describes how the
Board has applied the principles relating to Directors’ remuneration. An ordinary resolution to receive and approve this
report will be put to the Shareholders at the forthcoming Annual General Meeting.
Role of the Remuneration Committee
The role and make-up of the Remuneration Committee is more fully discussed on page 22.
The committee held two formal meetings during the year, during which it addressed all the matters under its remit.
Consideration by the Directors of Matters relating to the Directors’ remuneration
As the Board is comprised entirely of non-executive Directors the Board as a whole consider the Directors’
remuneration but it has appointed its Remuneration Committee to consider matters relating thereto.
Remuneration Policy
The Company’s Articles of Association limit the basic fees payable to the Directors to £200,000 per annum in
aggregate. Subject to this overall limit it is the Company’s policy that the fees payable to the Directors should reflect the
time spent by the Board on the Company’s affairs and the responsibilities borne by the Directors and should be
sufficient to enable candidates of high calibre to be recruited. The Directors are also entitled to receive reimbursement
of any expenses incurred in relation to their appointment.
The policy is for the Chairman of the Board and Chairman of the Audit Committee to be paid a higher fee than the other
Directors in recognition of their more onerous roles and more time spent.
In the year under review the Directors’ fees were paid at the following annual rates: the Chairman £52,500 plus £10,000
with respect to the work involved in the share buy-back programme, the Chairman of the Audit Committee £37,500, the
other Directors £35,000.
Directors’ and officers’ liability insurance cover is in place in respect of the Directors.
Reappointment
It is the Board’s policy that non-independent Directors stand for re-election every year and independent Directors stand
for re-election every three years.
Directors’ fees
The fees expensed (including additional payments) by the Company in respect of each of the Directors who served
during the year, and in the previous year, were as follows: 30 June 2018 30 June 2017 £ £
Nicholas Wilson (Chairman) 58,750 57,500
Paul Macdonald (Chairman of Audit Committee) 33,750 32,500
Neil Benedict (Chairman of Remuneration Committee and Management Engagement Committee)
31,250 30,000
David Humbles 31,250 3,874
Len O’Brien - 30,000
155,000 153,874
US$ charge reflected in the financial statements 204,645 201,621
Expenses totalling US$103,684 (2017: US$95,424) were incurred by the Directors and reimbursed during the year.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
31
Directors’ Remuneration Report continued
No other remuneration or compensation was paid or payable by the Company during the period to any of the Directors.
Director independence
Mr Nicholas Wilson and Mr Paul Macdonald have each served as independent Non-executive Directors of the Company
for more than nine years, and Mr Wilson has served as non-executive Chairman since 13 November 2012.
Notwithstanding the length of their service, Mr Wilson and Mr Macdonald continue to demonstrate their commitment to
fulfilling their role as non-executive Chairman and Non-executive Director respectively, and satisfy the independence
factors set out in Code Provision B.1.1 of the Code except for the length of their service.
They are not involved in the daily management of the Company nor in any relationships or circumstances which might
possibly interfere with their exercise of independent judgment. In addition, they continue to demonstrate the attributes of
independent Non-executive Directors and there is no evidence that their tenure has had any adverse impact on their
independence.
The Board considers each of the Directors to be independent of, and free of any material relationship with, the
Investment Manager and Investment Adviser.
Directors’ and Other Interests
None of the Directors had any interest during the year in any material contract for the provision of services which was
significant to the business of the Company.
Director holdings in Company:
30 June 2018 30 June 2017
Director Shares Shares
Nicholas Wilson 39,600 44,000
For and on behalf of the Board
Neil Benedict
Chairman of the Remuneration Committee
21 September 2018
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
32
Report of the Independent Auditors, KPMG Audit LLC, to the members of Gulf Investment Fund plc
Opinions and conclusions arising from our audit
1. Our opinion is unmodified
We have audited the financial statements of Gulf Investment Fund plc (“the Company”) and its subsidiary (together “the
Group”) for the year ended 30 June 2018 which comprise the Consolidated and Parent Company Income Statements,
Statements of Comprehensive Income, Balance Sheets, Statements of Changes in Equity and Statements of Cash
Flows, and the related notes and accounting policies.
In our opinion the financial statements:
• give a true and fair view of the state of the Group’s and Parent Company’s affairs as at 30 June 2018 and of the
Group’s and Parent Company’s profit for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards; and
• have been properly prepared in accordance with the provisions of the Companies Acts 1931 to 2004.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and we remain
independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities. We believe that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion.
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters ,
in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to
address those matters. These matters were addressed, and our results are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
33
Report of the Independent Auditors, KPMG Audit LLC, to the members of Gulf Investment Fund plc continued
2. Key audit matters: our assessment of risks of material misstatement continued The risk Our response
Carrying amount of quoted equity investments
(US$104.6m; 2017: US$102.1m) Refer to page 24 (Significant Issues identified by the Audit Committee), notes 1(a), 2 and 8 (accounting policy for financial assets at fair value through profit or loss and financial risk disclosures relating to financial instruments).
High value
The Group’s portfolio of quoted investments makes up 92.8% of the Group’s total assets (by value) and is considered to be the key driver of results. We do not consider these investments to be at a high risk of significant misstatement, or to be subject to a significant level of judgement because they comprise liquid, quoted investments as at 30 June 2018. However, due to their materiality in the context of the financial statements as a whole, they are considered to be the area which had the greatest effect on our overall audit strategy and allocation of resources in planning and completing our audit.
Our procedures included: — Control design: Documenting
and assessing the processes in place to record investment transactions and to value the portfolio;
— Tests of detail: Agreeing the
valuation of 100 per cent of investments in the portfolio to externally quoted prices; and
— Enquiry of custodians:
Agreeing 100 per cent of investment holdings in the portfolio to independently received third party confirmations from investment custodians.
Carrying value of Parent Company’s loan to and investment in subsidiary (New this year)
(US$64.3m and US$45.4m respectively, 2017: US$75.5m and US$37.7m respectively) Refer to note 1(b) (note relating to loan to and investment in subsidiary).
High value
The carrying value of the Parent Company’s loan to and investment in subsidiary represents 98.9% (2017: 99.1%) of the Parent Company’s total assets. The assessment of carrying value is not at a high risk of significant misstatement or subject to significant judgement as the carrying value is equal to the audited net asset value of the subsidiary. However, due to its materiality in the context of the Parent Company financial statements, this is considered to be the area that had the greatest effect on our overall Parent Company audit.
Our procedures included:
— Tests of detail: Assessing the loan to and investment in subsidiary to identify, with reference to the subsidiary’s accounts, whether it has sufficient net asset value to cover the debt owed; and
— Assessing subsidiary audits: The audit of the Group was performed as if it was a single aggregated set of financial information.
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at US$1,130,000 (2017: US$1,150,000), determined
with reference to a benchmark of group total assets, of which it represents 1% (2017: 1%).
Materiality for the Parent Company financial statements as a whole was set at US$1,110,000 (2017: US$1,140,000),
determined with reference to a benchmark of Company total assets, of which it represents 1% (2017: 1%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding
US$56,500 (2017: US$57,500) for the Group financial statements and US$55,500 (2017: US$57,000) for the Parent
Company financial statements, in addition to other identified misstatements that warranted reporting on qualitative
grounds.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
34
Report of the Independent Auditors, KPMG Audit LLC, to the members of Gulf Investment Fund plc continued
The Group team performed the audit of the Group, as if it was a single aggregated set of financial information. The audit
was performed using the materiality level set out above and covered 100% of the total Group income, total Group profit
before tax and total Group assets and liabilities.
4. We have nothing to report on going concern
We are required to report to you if we have anything material to add or draw attention to in relation to the Directors’
statement in note 13.1 to the financial statements on the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group and Company’s use of that basis for a period of at least
twelve months from the date of approval of the financial statements. We have nothing to report in this respect.
5. We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified material misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw
attention to in relation to:
• the Directors’ confirmation within the viability statement on page 24 that they have carried out a robust assessment
of the principal risks facing the Group and Company, including those that would threaten its business model, future
performance, solvency and liquidity;
• the principal risks disclosures describing these risks and explaining how they are being managed and mitigated;
and
• the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group and
Company, over what period they have done so and why they considered that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group and Company will be able to continue
in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our financial statements
audit and the directors’ statement that they consider that the annual report and financial statements taken as a
whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the
Group’s and Company’s position and performance, business model and strategy; or
• the section of the annual report describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the
eleven provisions of the 2016 UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
35
Report of the Independent Auditors, KPMG Audit LLC, to the members of Gulf Investment Fund plc continued
6. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Acts 1931 to 2004, we are required to report to you if, in our opinion:
• proper books of account have not been kept by the Parent Company and proper returns adequate for our audit
have not been received from branches not visited by us; or
• the Parent Company’s financial statements are not in agreement with the books of account and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit. We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 27, the Directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error; assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend
to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud, or error, and to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Section 15 of the Companies Act
1982. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Nicholas Quayle
Responsible Individual
For and on behalf of KPMG Audit LLC
Chartered Accountants and Recognised Auditors, Isle of Man
24 September 2018
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
36
Consolidated Income Statement
Note Year ended 30 June 2018 Year ended 30 June 2017
US$’000 US$'000
Income
Dividend income on quoted equity
investments
4,095 4,707
Realised loss on sale of financial assets at fair value through profit or loss
(7,186) (3,922)
Net changes in fair value on financial assets at fair value through profit or loss
14,619 (4,912)
Interest income 20 -
Commission rebate income on quoted equity investments
- 15
Net foreign exchange gain/(loss) 256 (181)
Total net income/(expense) 11,804 (4,293)
Expenses
Investment Manager's fees 7 995 1,281
Other expenses 7 1,129 1,061
Total operating expenses 2,124 2,342
Profit/(loss) before tax 9,680 (6,635)
Income tax expense 9 - -
Profit/(loss) for the year 9,680 (6,635)
Basic profit/(loss) per share (cents) 4 9.95 (6.06)
Diluted profit/(loss)loss per share (cents)
4 9.95 (6.06)
The Directors consider that all results derive from continuing activities.
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
37
Consolidated Statement of Comprehensive Income
Year ended 30 June 2018
Year ended 30 June 2017
US$'000 US$'000
Profit/(loss) for the year 9,680 (6,635)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences (5) (3)
Total items that are or may be reclassified subsequently to profit or loss
(5) (3)
Other comprehensive expense for the year (net of tax)
(5) (3)
Total comprehensive profit/(loss) for the year 9,675 (6,638)
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
38
Company Income Statement
Note Year ended 30 June 2018 Year ended 30 June 2017
US$’000 US$'000
Income
Net change in investment in and amounts due from subsidiary
7,702 (8,848)
Intercompany loan interest income 2,979 2,969
Total net income/(expense) 10,681 (5,879)
Expenses
Expenses 7 1,006 759
Total operating expenses 1,006 759
Profit/(loss) before tax 9,675 (6,638)
Income tax expense - -
Profit/(loss) for the year 9,675 (6,638)
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
39
Company Statement of Comprehensive Income
Year ended 30 June 2018
Year ended 30 June 2017
US$'000 US$'000
Profit/(loss) for the year 9,675 (6,638)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences - -
Total items that are or may be reclassified subsequently to profit or loss
- -
Other comprehensive income for the year (net of tax) - -
Total comprehensive profit/(loss) for the year 9,675 (6,638)
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
40
Consolidated Balance Sheet
Note At 30 June 2018 At 30 June 2017
US$’000 US$'000
Current Assets
Financial assets at fair value through profit or loss
1(a) 104,619 102,124
Other receivables and prepayments 2,683 2,468
Cash and cash equivalents 5,380 10,670
Total current assets 112,682 115,262
Equity
Issued share capital 5 925 1,032
Retained earnings 32,331 25,425
Distributable reserves 76,198 86,486
Other reserves 1,329 1,227
Total equity 110,783 114,170
Current liabilities
Other payables and accrued expenses 6 1,899 1,092
Total current liabilities 1,899 1,092
Total equity and liabilities 112,682 115,262
The financial statements were approved by the Directors on 21 September 2018 and signed on their behalf by:
Nick Wilson David Humbles
Chairman Director
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
41
Company Balance Sheet
Note At 30 June 2018 At 30 June 2017
US$’000 US$'000
Investment in subsidiary 1(b) 45,442 37,739
Due from subsidiary 1(b) 64,322 75,537
Other receivables and prepayments 812 848
Cash and cash equivalents 382 199
Total assets 110,958 114,323
Equity
Issued share capital 5 925 1,032
Reserves 109,858 113,138
Total equity 110,783 114,170
Current liabilities
Other payables and accrued expenses 6 175 153
Total current liabilities 175 153
Total equity and liabilities 110,958 114,323
The financial statements were approved by the Directors on 21 September 2018 and signed on their behalf by:
Nick Wilson David Humbles
Chairman Director
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
42
Consolidated Statement of Changes in Equity
Share Capital (note 5)
Distributable Reserves
Retained Earnings
Foreign Currency
Translation Reserve
Capital Redemption
Reserve
Total
US$'000 US$'000 US$'000 US$'000 US$’000 US$'000
Balance at 1 July 2016 1,194 103,904 36,177 (213) 1,281 142,343
Total comprehensive income for the year
Loss for the year - - (6,635) - - (6,635)
Other comprehensive income
Foreign exchange translation differences
- - - (3) - (3)
Total other comprehensive expense
- - - (3) - (3)
Total comprehensive expense for the year
- - (6,635) (3) - (6,638)
Contributions by and distributions to owners
Dividends paid - - (4,117) - - (4,117)
Shares repurchased to be held in treasury
- (543) - - - (543)
Shares subject to tender offer
(140) (16,817) - - 140 (16,817)
Tender offer expenses - (58) - - - (58)
Shares in treasury cancelled (22) - - - 22 -
Total contributions by and distributions to owners
(162) (17,418) (4,117) - 162 (21,535)
Balance at 30 June 2017 1,032 86,486 25,425 (216) 1,443 114,170
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
43
Consolidated Statement of Changes in Equity continued
The capital redemption reserve is created on the cancellation of shares equal to par value of shares cancelled. This
reserve is not distributable.
The accompanying notes form an integral part of these consolidated financial statements
Share Capital (note 5)
Distributable Reserves
Retained Earnings
Foreign Currency
Translation Reserve
Capital Redemption
Reserve
Total
US$'000 US$'000 US$'000 US$'000 US$’000 US$'000
Balance at 1 July 2017 1,032 86,486 25,425 (216) 1,443 114,170
Total comprehensive income for the year
Profit for the year - - 9,680 - - 9,680
Other comprehensive income
Foreign exchange translation differences
- - - (5) - (5)
Total other comprehensive expense
- - - (5) - (5)
Total comprehensive income for the year
- - 9,680 (5) - 9,675
Contributions by and distributions to owners
Dividends paid - - (2,774) - - (2,774)
Shares subject to tender offer
(102) (10,205) - - 102 (10,205)
Tender offer expenses* - (83) - - - (83)
Shares in treasury cancelled (5) - - - 5 -
Total contributions by and distributions to owners
(107) (10,288) (2,774) - 107 (13,062)
Balance at 30 June 2018 925 76,198 32,331 (221) 1,550 110,783
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
44
Company Statement of Changes in Equity
Share Capital Reserves
Total
US$'000 US$'000 US$'000
Balance at 1 July 2016 1,194 141,149 142,343
Total comprehensive income for the year
Loss for the year - (6,638) (6,638)
Total comprehensive expense for the year
- (6,638) (6,638)
Contributions by and distributions to owners
Dividends paid - (4,117) (4,117)
Shares repurchased to be held in treasury
- (543) (543)
Shares subject to tender offer (140) (16,677) (16,817)
Tender offer expenses - (58) (58)
Shares in treasury cancelled (22) 22 -
Total contributions by and distributions to owners
(162) (21,373) (21,535)
Balance at 30 June 2017 1,032 113,138 114,170
Share Capital Reserves
Total
US$'000 US$'000 US$'000
Balance at 1 July 2017 1,032 113,138 114,170
Total comprehensive income for the year
Profit for the year - 9,675 9,675
Total comprehensive profit for the year
- 9,675 9,675
Contributions by and distributions to owners
Dividends paid - (2,774) (2,774)
Shares subject to tender offer (102) (10,103) (10,205)
Tender offer expenses - (83) (83)
Shares in treasury cancelled (5) 5 -
Total contributions by and distributions to owners
(107) (12,955) (13,062)
Balance at 30 June 2018 925 109,858 110,783
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
45
Consolidated Statement of Cash Flows
Year ended 30 June 2018 Year ended 30 June 2017
US$’000 US$'000
Cash flows from operating activities
Purchase of investments (143,781) (62,272)
Proceeds from sale of investments 149,319 90,788
Dividends received 4,000 4,707
Operating expenses paid (2,108) (2,357)
Interest received 20 -
Commission rebate - 15
Net cash generated from operating activities
7,450 30,881
Financing activities
Dividends paid (2,774) (4,117)
Cash used in tender offer (10,205) (16,817)
Tender offer expenses (83) (58)
Cash used in share repurchases - (543)
Net cash used in financing activities (13,062) (21,535)
Net increase/(decrease) in cash and cash equivalents
(5,612) 9,346
Effects of exchange rate changes on cash and cash equivalents
322 (123)
Cash and cash equivalents at beginning of the year
10,670 1,447
Cash and cash equivalents at end of the year
5,380 10,670
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
46
Company Statement of Cash Flows
Note Year ended 30 June 2018 Year ended 30 June 2017
US$’000 US$'000
Cash flows from operating activities
Investment in and amount due from subsidiary
14,214 22,162
Operating expenses paid (964) (824)
Net cash generated from operating activities
13,250 21,338
Financing activities
Dividends paid (2,774) (4,117)
Cash used in tender offer (10,205) (16,817)
Tender offer expenses (83) (58)
Cash used in share repurchases - (543)
Net cash used in financing activities (13,062) (21,535)
Net increase/(decrease) in cash and cash equivalents
188 (197)
Effects of exchange rate changes on cash and cash equivalents
(5) (2)
Cash and cash equivalents at beginning of the year
199 398
Cash and cash equivalents at end of the year
382 199
The accompanying notes form an integral part of these consolidated financial statements
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
47
Notes to the Consolidated Financial Statements
1(a) Financial assets at fair value through profit or loss
Investments are designated at fair value through profit or loss on initial recognition. The Group invests in quoted equities
and quoted convertible bonds for which fair value is based on quoted market prices. The quoted market price used for
financial assets held by the Group is the current bid price ruling at the year-end without regard to selling prices.
Purchases and sales of investments are recognised on trade date – the date on which the Group commits to purchase
or sell the asset. Investments are initially recorded at fair value, and transaction costs for all financial assets and
financial liabilities carried at fair value through profit and loss are expensed as incurred.
Gains and losses (realised and unrealised) arising from changes in the fair value of the financial assets are included in
the income statement in the year in which they arise.
Group
30 June 2018: Financial assets at fair value through profit or loss; all quoted equity securities:
Security name Number US$'000
Commercial Bank of Qatar (CBQK QD) 1,019,959 10,396 Qatar Gas Transport (QGTS QD) 2,117,667 9,187 Qatar Electricity & Water Co (QEWS QD) 166,478 8,326 Al Rajhi SHAMAL 09.02.2020 244,544 5,620 National Bank of Kuwait (NBK KK) 1,846,250 4,542 Gulf International Services (GISS QD) 866,679 4,052 Barwa Real Estate (BRES QD) 406,396 3,808 Samba Financial Group - SHAMAL (03.01.2022) 418,036 3,596 Company for Co-op Insurance 186,966 3,530 Bank AlJazira 830,000 3,258 Emaar Properties Company (EMAAR UH) 2,430,283 3,255 Saudii Kayan Petrochemical Co 695,000 2,913 Dubai Islamic Bank (DIB) 2,085,000 2,764 Kuwait International Bank 3,043,683 2,252 Emirates National Bank of Dubai (ENBD UH) 825,000 2,179 National Medical Care Company 132,000 2,084 National Commercial Bank 155,613 2,014 Mobile Telecommunications Company K.S.C. (ZAIN KK) 1,390,000 1,989 Dar Al Arkan Real 700,000 1,961 Kuwait Finance House KFIN 1,079,000 1,913 Saudi British Bank B12LSY7 225,000 1,887 Banque Saudi Fransi - SHAMAL 05.06.19 185,000 1,660 Qatar Insurance (QATI QD) 166,722 1,625 National Petrochemical Company 198,000 1,561 Yanbu Nat Petroche (YANSAB) 77,000 1,519 Fawaz Abdulaziz Al 210,000 1,443 Saudi Basic Industries 41,000 1,376 Rabigh Refining and Petrochemical Co 180,000 1,359 Middle East Healthcare 80,000 1,244 Saudi Industrial Investment Group 130,000 1,006 Abdullah Al Othaim Markets Co 50,000 1,000 Widam Food Company (WDAM) 56,279 960 Bupa Arabia Co 38,536 922 National Central Cooling Company (TABREED) 2,039,713 922 ABU DHABI Commercial Bank (ADCB UH) 475,000 913 Al Tayyar Travel Group 125,000 894 Qatar Fuel (QFLS QD) 20,000 802 Arab National Bank - Shamal 88,054 747 Saudi Cement Company 50,000 659
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
48
Notes to the Consolidated Financial Statements continued
1(a) Financial assets at fair value through profit or loss (continued)
Group
30 June 2018: Financial assets at fair value through profit or loss; all quoted equity securities (continued):
Group
30 June 2017: Financial assets at fair value through profit or loss; all quoted equity securities:
1(b) Investment in and amount due from subsidiary
30 June 2018 30 June 2017
US$’000 US$'000
Investment in subsidiary 45,442 37,739
Amount due from subsidiary 64,322 75,537
Investment in subsidiary is stated at fair value. The amount due from the subsidiary is subject to interest on the
aggregate principal amount drawn down from 1 January 2011, at the US prime rate per annum. All loan repayments
made by the subsidiary will first be deducted from the outstanding loan interest before being applied to the principal
balance. The loan is secured by fixed and floating charges over the assets of the subsidiary and is repayable on
demand.
Security name Number US$’000
Emirates NBD USD Stock 225,000 594 Southern Province Cement Co 50,000 546 Alinma Bank 90,000 513 Ooredoo (ORDS) 25,000 499 Agility Public Warehousing AGLTY 127,075 329
104,619
Security name Number US$’000
Qatar National Bank (QNBK QD) 475,653 16,088 Masraf Al Rayan (MARK QD) 1,307,544 13,798 Industries Qatar (IQCD QD) 496,285 12,595 Ooredoo (ORDS QD) 313,557 7,598 Qatar Electricity & Water Co (QEWS QD) 130,960 7,153 Barwa Real Estate (BRES QD) 754,724 6,482 Qatar Gas Transport (QGTS QD) 1,170,619 5,329 Commercial Bank of Qatar (CBQK QD) 626,605 5,022 Gulf International Services (GISS QD) 714,227 3,912 Qatar National Cement Co (QNCD QD) 218,303 3,837 Emaar Properties Company (EMAAR UH) 1,288,408 2,718 Qatar Insurance (QATI QD) 185,453 2,585 Qatar United Development Company (UDCD QD) 541,612 2,473 Al Meera Consumer Goods Co (MERS QD) 58,402 2,123 ABU DHABI Commercial Bank (ADCB UH) 1,098,579 2,096 Dubai Islamic Bank (DIB UH) 1,060,000 1,642 Gulf Warehousing (GWCS QD) 121,250 1,540 Qatar Islamic Bank (QIBK QD) 120,645 1,251 Vodaphone Qatar (VFQS QD) 552,351 1,247 Emirates National Bank of Dubai (ENBD UH) 300,000 653 First Abu Dhabi Bank (FAB UH) 180,000 510 DXB ENTERTAINMENTS (DXB UH)Doha Bank (DHBK QD) 2,395,627 493 Doha Bank (DHBK QD) 51,303 415 National Leasing (NLCS QD) 65,678 248 Union National Bank (UNB UH) 150,000 190 Al Khaleej Bank (KCBK QD) 34,968 126 102,124
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
49
Notes to the Consolidated Financial Statements continued
1(c) Risks relating to financial instruments
Risks relating to financial instruments comprise market price risk, credit risk, interest rate risk, liquidity risk and foreign
currency risk. These are detailed below and in notes 2, 6 and 8.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it
has entered into with the Group.
The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date.
This relates also to financial assets carried at amortised cost.
Credit risk continued
At the reporting date, the Group’s financial assets exposed to credit risk comprised the following:
30 June 2018 30 June 2017
US$’000 US$’000
Financial assets at fair value through profit or loss 104,619 102,124
Cash and cash equivalents 5,380 10,670
Other receivables 2,683 2,468
112,682 115,262
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance
sheet. Management does not expect any counterparty to fail to meet its obligations and there are no debts past their
due dates as at the year-end. All amounts are due within one month of the year end.
Investments are held by the Custodian, HSBC Bank (Middle East) Ltd.
The Group uses the banking services of HSBC (Middle East) Ltd and Barclays (Isle of Man) PLC. HSBC has a credit
rating of A2 assigned by Moody and Barclays has a credit rating of A- from Standard and Poors.
Other receivables principally comprise unsettled trades.
Interest rate risk
The majority of the Group’s financial assets are non-interest bearing. Cash held by the Group is invested at short-term
market interest rates. As a result, the Group is not subject to fair value interest rate risk due to fluctuations in the
prevailing levels of market interest rates. However it is subject to cash flow risk arising from changes in market interest
rates.
The table below summarises the Group’s exposure to interest rate risks. It includes the Group’s financial assets and
liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying value of assets and liabilities:
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
50
Notes to the Consolidated Financial Statements continued
1(c) Risks relating to financial instruments continued
Interest rate risk continued
30 June 2018 Less than
1month
1-3 months 3 months
to 1 year
1-5 years Over 5
years
Non-
interest
bearing
Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Financial Assets
Financial assets at fair
value through profit or
loss
- - - - - 104,619 104,619
Other receivables and
prepayments
- - - - - 2,683 2,683
Cash 5,380 - - - - - 5,380
Total financial assets 5,380 - - - - 107,302 112,682
Financial Liabilities
Other creditors and
accrued expenses
- - - - - 1,899 1,899
Total financial
liabilities
- - - - - 1,899 1,899
Total interest rate
sensitivity gap
5,380 - - - -
30 June 2017 Less than
1month
1-3 months 3 months
to 1 year
1-5 years Over 5
years
Non-
interest
bearing
Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Financial Assets
Financial assets at fair
value through profit or
loss
- - - - - 102,124 102,124
Other receivables and
prepayments
- - - - - 2,468 2,468
Cash 10,670 - - - - - 10,670
Total financial assets 10,670 - - - - 104,592 115,262
Financial Liabilities
Other creditors and
accrued expenses
- - - - - (1,092) (1,092)
Total financial
liabilities
- - - - - (1,092) (1,092)
Total interest rate
sensitivity gap
10,670 - - - -
All interest received on cash balances are at variable rates. A sensitivity analysis for changes in interest rates on cash
balances has not been provided as it is not deemed significant.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
51
Notes to the Consolidated Financial Statements continued
2 Fair Value Hierarchy
IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
All the Group’s investments are classed as level 1 investments.
The fair value of other financial instruments, including cash and short-term receivables and payables is a reasonable
approximation of fair value.
Market price risk
The Group’s strategy for the management of investment risk is driven by the Group’s investment objective. The main
objective of the Group is to capture the opportunities for growth offered by the Gulf Cooperation Council region (“GCC”)
by investing in GCC countries.
All investments present a risk of loss of capital through movements in market prices. The Investment Manager and
Investment Adviser moderate this risk through a careful selection of securities within specified limits. The Investment
Manager and the Investment Adviser review the position on a day to day basis and the Directors review the position at
Board meetings.
The Group’s market price risk is managed through the diversification of the investment portfolio. Approximately 89% of
the net assets attributable to holders of Ordinary Shares is invested in equity securities.
At 30 June 2018, if the market value of the investment portfolio had increased/decreased by 2.50% (as per the
movement in the SEMGGCPD Index post year-end) with all other variables held constant, this would have
increased/decreased net assets attributable to Shareholders by approximately US$2.61 million (30 June 2017 : 0.87% :
US$0.88 million).
3 Consolidated Net Asset Value per Share
The consolidated net asset value per share as at 30 June 2018 is US$1.1982 per share (30 June 2017: US$1.1113)
based on 92,461,242 (30 June 2017: 102,734,713) Ordinary Shares in issue as at that date.
4 Earnings per Share
Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of Ordinary Shares in issue during the year.
30 June 2018 30 June 2017
Profit/(loss) attributable to equity holders of the Company (US$’000)
9,680 (6,635)
Weighted average number of Ordinary Shares in issue (thousands)
97,302 109,498
Basic and diluted earnings/(loss) per share (cents per share) 9.95 (6.06)
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
52
Notes to the Consolidated Financial Statements continued
5 Share Capital
30 June 2018 30 June 2017
US$’000 US$’000
Authorised 500,000,000 Ordinary shares of US$0.01 each 5,000,000 5,000,000
Issued, Called-up and Fully-Paid:
92,461,242 (2017: 102,734,713) Ordinary Shares of US$0.01 each in
issue, with full voting rights 925 1,027
Nil (2017: 493,445) Ordinary Shares of US$0.01 each held in
Treasury - 5
Issued share capital 925 1,032
During the year to 30 June 2018 the Company repurchased nil (2017: 493,445) Ordinary Shares, to be held in treasury,
at a cost of US$ nil (2017: US$542,871) and cancelled 493,445 (2017: 2,102,373) Ordinary Shares in treasury which
had been held for more than one year. The Ordinary Shares held in treasury have no voting rights and are not entitled
to dividends.
On 27 December 2017 the Company completed a tender offer at a price of US$0.9933 per share (12 December 2016:
US$1.1973 per share). Under the tender offer 10,273,471 shares (12 December 2016: 14,045,544) were repurchased
and cancelled.
During the year US$83,457 (2017: US$58,373) tender expenses were deducted from equity.
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the Group. The Board manages the Group’s affairs to achieve Shareholder returns
through capital growth rather than income, and monitors the achievement of this through growth in net asset value per
share.
Group capital comprises Share Capital and Reserves. Neither the Company nor its subsidiary is subject to externally
imposed capital requirements. The Company also has an active share buyback program.
6 Other payables and accrued expenses
Group 30 June 2018 30 June 2017 US$’000 US$'000
Due to broker* 1,456 649
Management fee payable 267 278
Administration fee payable 57 56
Accruals and sundry creditors 119 109
1,899 1,092
*includes unsettled positions trading balances.
Company 30 June 2018 30 June 2017 US$’000 US$'000
Administration fee payable 51 50
Accruals and sundry creditors 124 103
175 153
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient cash for operations and the ability to realise market
positions. The Group’s liquidity position is monitored by the Investment Manager and the Board of Directors.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
53
Notes to the Consolidated Financial Statements continued
6 Other payables and accrued expenses continued
Liquidity risk continued
The residual undiscounted contractual maturities of financial liabilities are in the table below:
30 June 2018
Less than
1 month
1-3
months
3 months to
1 year
1-5 years Over 5
years
No stated
maturity
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Financial liabilities
Other creditors and accrued
expenses
1,899 - - - - -
1,899 - - - - -
30 June 2017
Less than
1 month
1-3
months
3 months to
1 year
1-5 years Over 5
years
No stated
maturity
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Financial liabilities
Other creditors and accrued
expenses
1,092 - - - - -
1,092 - - - - -
7 Charges and Fees Group
30 June 2018
Company 30 June 2018
Group 30 June 2017
Company 30 June 2017
US$’000 US$'000 US$'000 US$'000
Investment Manager’s fees (see below)
995 - 1,281 -
Administrator and Registrar’s fees (see below)
226 200 225 199
Audit fees 34 34 28 28
Custodian fees (see below) 109 4 119 4
Directors’ fees and expenses 308 308 297 297
Directors’ insurance cover 30 30 31 31
Broker fees 53 53 51 51
Other 369 377 310 149
Other expenses 1,129 1,006 1,061 759
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
54
Notes to the Consolidated Financial Statements continued
7 Charges and Fees continued
Investment Manager’s fees
Annual fees
The Investment Manager was entitled to an annual management fee of 1.25% of the Net Asset Value of the Group,
calculated monthly and payable quarterly in arrears. The Investment Management Agreement was subject to
termination on 31 October 2013 with a revised agreement coming into effect from 1 November 2013. Under the revised
agreement the annual fee reduced to 1.05% of the net asset value of the Company and further reduced to an annual fee
of 0.90% of the net asset value of the Company from 1 November 2016 subject to termination on 31 October 2019.
Annual management fees for the year ended 30 June 2018 amounted to US$994,814 (30 June 2017: US$1,281,315)
and the amount accrued but not paid at the year-end was US$267,445 (30 June 2017: US$277,684).
Administrator and Registrar fees
The Administrator is entitled to receive a fee of 12.5 basis points per annum of the net asset value of the Company
between US$0 and US$100 million, 10 basis points of the net asset value of the Company above US$100 million.
This is subject to a minimum monthly fee of US$15,000, payable quarterly in arrears.
The Administrator assists in the preparation of the financial statements of the Group and provides general secretarial
services.
The Administrator may utilise the services of a CREST accredited registrar for the purposes of settling share
transactions through CREST. The cost of this service will be borne by the Company. It is anticipated that the cost will
be in the region of £12,000 per annum subject to the number of CREST settled transactions undertaken.
Administration fees paid for the year ending 30 June 2018 amounted to US$225,774 and US$32,087 for additional
services (30 June 2017: US$225,086 and US$32,838 respectively). Outstanding Administration fees at the year end
amounted to US$57,385 (30 June 2017: US$56,747).
Custodian fees
The Custodian is entitled to receive fees of US$7,200 per annum and US$25 per processed transaction from the
Company.
In addition the Custodian is entitled to receive fees of 8 basis points per annum in respect of Qatari securities held by
the Group and 10 basis points per annum in respect of non-Qatari, GCC securities held by the Group and $45 per
settled transaction (Qatar)/$50 per settled transaction (GCC excluding Qatar). From 1 March 2013 the custodian agreed
to a 25% reduction in custodian fees relating to the Qatari market.
Custodian and sub-custodian fees for the year ending 30 June 2018 amounted to US$109,172 (30 June 2017:
US$118,780) and the amount accrued but not paid at the year-end was US$8,756 (30 June 2017: US$4,034).
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
55
Notes to the Consolidated Financial Statements continued
8 Foreign currency translation
The US Dollar is the currency of the primary economic environment in which the entity operates (“the functional
currency”). The US Dollar is the currency in which the financial statements are presented (“the presentational currency”)
as reporting to shareholders is in US Dollars and the shares are quoted in US Dollars.
Monetary assets and liabilities denominated in foreign currencies as at the date of these financial statements are
translated to US Dollar at exchange rates prevailing on that date. Income and expenses are translated into US Dollar
based on exchange rates on the date of the transaction. All resulting exchange differences are recognised in the income
statement at the exchange rate prevailing on the balance sheet date. Items of income and expense are translated at
exchange rates on the date of the relevant transactions or an average rate. Components of equity are translated at the
date of the relevant transaction and not retranslated. All resulting exchange differences are recognised in other
comprehensive income.
Foreign exchange risk
The Group’s operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in
currencies other than US Dollar. As a result, the Group is subject to the effects of exchange rate fluctuations with
respect to these currencies. The Group’s policy is not to enter into any currency hedging transactions
At the reporting date the Group had the following exposure:
Currency 30 June 2018 30 June 2017
% %
British Pound (0.04) (0.03)
Omani Rial 0.00 0.00
US Dollar 41.86 0.41
Qatari Riyal 36.25 88.19
Kuwaiti Dinar 10.51 0.00
Saudi Arabia Riyal 0.09 0.00
UAE Dirham 11.32 11.43
The following table sets out the Group’s total exposure to foreign currency risk and the net exposure to foreign
currencies of the monetary assets and liabilities:
30 June 2018 Monetary Assets Monetary Liabilities Net Exposure
US$’000 US$’000 US$’000
British Pound 18 (61) (43)
US Dollar 46,759 (382) 46,377
Qatari Riyal 40,161 - 40,161
UAE Dirham 12,545 - 12,545
Kuwait Dinar 11,647 - 11,647
Saudi Arabia Riyal 96 - 96
111,226 (443) 110,783
30 June 2017 Monetary Assets Monetary Liabilities Net Exposure
US$’000 US$’000 US$’000
British Pound 20 (59) (39)
US Dollar 852 (384) 468
Qatari Riyal 100,689 - 100,689
UAE Dirham 13,052 - 13,052
114,613 (443) 114,170
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
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Notes to the Consolidated Financial Statements continued
8 Foreign currency translation continued
Foreign currency sensitivity risk – presentational currency
At 30 June 2018 had the US Dollar weakened/strengthened by 1% (2017 : weakened/strengthened 1%) in relation to all
currencies, with all other variables held constant, net assets attributable to equity holders of the Company would have
increased/decreased by the amounts shown below:
30 June 2018 US$’000
British Pound -
Kuwaiti Dinar 116
UAE Dirham 125
Saudi Arabia Riyal 1
Effect on net assets 242
30 June 2017 US$’000 British Pound - Kuwaiti Dinar - UAE Dirham 130
Effect on net assets 130
Foreign currency sensitivity risk – functional currency
As 42% of net assets are denominated in USD and USD is the functional currency there is no significant functional
currency risk. The Qatari Riyal is pegged to the USD within a tight band and therefore it is not included in the sensitivity
analysis.
As USD is the functional currency of the Group and USD is the presentational currency any effect of changes in the
foreign exchange rates between USD and the other currencies is assumed to relate to the investments and is included
in the unrealised gain/loss of the investments on consolidation.
9 Taxation
Isle of Man taxation
The Company is resident for taxation purposes in the Isle of Man by virtue of being incorporated in the Isle of Man and
is technically subject to taxation on its income but the rate of tax will be zero. The Company is required to pay an annual
corporate charge of £250 per annum.
The Company became registered for VAT from 1 February 2011.
Qatar/United Arab Emirates(U.A.E)./Saudi Arabia taxation
The Company invests in equities in the GCC region. As at 30 June 2018 the Company held investment in Qatar, United
Arab Emirates (U.A.E.), Saudi Arabia and Kuwait.
It is the intention of the Directors to conduct the affairs of the Company so that it is not considered to be either resident
or doing business in any of these countries.
With the exception of Saudi Arabia, none of these countries impose withholding tax on dividend distributions to non-
residents. Saudi Arabia imposes a 5% withholding tax on dividend distributions to non-residents.
Capital gains made by the Company on disposal of shares in Qatar, U.A.E., Saudi Arabia and Kuwait are not subject to
tax in those countries.
There is no stamp duty or equivalent tax on the transfer of shares in Qatar/U.A.E./Saudi Arabia companies.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
57
Notes to the Consolidated Financial Statements continued
10 Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or to exercise significant
influence over the other party in making financial or operational decisions.
The Investment Adviser is Qatar Insurance Company S.A.Q. The Group holds shares in Qatar Insurance Company
S.A.Q. (see note 1(a)). The Investment Adviser’s fees are paid by the Investment Manager.
The Investment Manager, Epicure Managers Qatar Limited, is a related party by virtue of its ability to make operational
decisions for the Company and through common Directors. Fees paid and payable to the Investment Manager are
disclosed in notes 6 and 7.
Epicure Managers Qatar Limited is a wholly owned subsidiary of the Investment Adviser, Qatar Insurance Company
S.A.Q.
11 The Company
Gulf Investment Fund plc (formerly Qatar Investment Fund plc) (the “Company”) was incorporated and registered in the
Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 26 June 2007 as a public company with registered
number 120108C.
Pursuant to an Admission Document dated 25 July 2007 there was an original placing of up to 171,355,000 Ordinary
Shares, with Warrants attached on the basis of 1 Warrant to every 5 Ordinary Shares. Following the placing on 31 July
2007, 171,355,000 Ordinary Shares and 34,271,000 Warrants were issued. The warrants expired on 16 November
2012.
The shares of the Company were admitted to trading on the AIM market of the London Stock Exchange (“AIM”) on 31
July 2007, when dealings also commenced.
As a result of a further fund raising in December 2007, a further 76,172,523 Ordinary Shares were issued, which were
admitted for trading on AIM on 13 December 2007.
On 4 December 2008, the Share Premium arising from the placing of shares was cancelled and the amount of the
Share Premium account transferred to Retained Earnings.
The shares of the Company were admitted to trading on the Main Market of the London Stock Exchange on 13 May
2011.
In the year ended 30 June 2018, the Company purchased nil (2017: 493,445) of its Ordinary Shares for a total value of
US$ nil (2017:US$542,871) to be held in treasury. 493,445 shares had been repurchased in the year ended 30 June
2017 for treasury but had been held for over a year and were therefore cancelled in the current financial year. The buy-
backs are effected through retained reserves.
On 27 December 2017 the Company completed a tender offer at a price of US$0.9933 per share (previous offer
US$1.1973 per share). Under the offer 10,273,471 shares were cancelled (previous offer 14,045,544 shares) with
US$10,204,639 being paid to participating shareholders (previous offer US$16,816,730).
The shareholders approved a dividend of 3.0 cents per share on 16 November 2017 (previous dividend 4.0 cents per
share); this was paid to shareholders on 9 February 2018.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
58
Notes to the Consolidated Financial Statements continued
11 The Company continued
The Company’s agents and the Investment Manager perform all significant functions. Accordingly, the Company itself
has no employees.
Duration
The Company currently does not have a fixed life but the Board considers it desirable that Shareholders should have
the opportunity to review the future of the Company at appropriate intervals. Accordingly, at the annual general meeting
of the Company in 2021 a resolution will be proposed that the Company ceases to continue in existence and there is the
possibility of a 100% tender in 2020.
12 The Subsidiary
The Company has the following subsidiary company:
Country of incorporation Percentage of shares held
Epicure Qatar Opportunities 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.
13 Significant Accounting Policies
The consolidated financial statements of the Company for the year ended 30 June 2018 comprise the Company and its
subsidiary, Note 1(b), (together referred to as the “Group”).
Accounting policies for certain items have been included in the relevant note.
13.1 Basis of presentation
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) and Isle of Man Companies Act 1931 to 2004. The financial statements have been prepared under
the historic cost convention, as modified by the revaluation of financial assets held at fair value through profit or loss and
investments in and amounts due from subsidiary which are stated at fair value.
The accounting policies applied in these financial statements are the same as those applied in the Group’s consolidated
financial statements as at the year ended 30 June 2017. Certain comparatives have been reclassified in accordance
with the presentation adopted in these financial statements. In particular, in the Company Balance Sheet the balances
with subsidiary have in the current year been presented as two components: Investment in Subsidiary and Amount due
from Subsidiary. In the prior year financial statements these balances were shown as one aggregated amount: Amount
Due from Subsidiary. This reclassification had no effect on total assets, net assets or profit or loss and was made in
order to better present the nature of the underlying balances.
These consolidated financial statements have been prepared on the going concern basis, as the Board of Directors has
a reasonable expectation that the Group and Company have the resources to continue in business for the foreseeable
future. In making this assessment, the Directors have considered a wide range of information relating to present and
future conditions, including the date of the next continuation vote for the Company (as described in the Investment
Policy), future projections of profitability, cash flows and capital resources.
The Group’s principal activities, investment objective and strategy and principal risks and uncertainties are described in
the Chairman’s Statement, Business Review, Investment Policy and Corporate Governance Report.
The Group’s approach to capital management is described in note 5. The Group’s objectives, policies and processes for
managing credit, foreign exchange, liquidity and market risk along with the are described in Notes 1(a), 2, 6 and 8 of the
financial statements.
GULF INVESTMENT FUND PLC Annual Report 30 June 2018
59
Notes to the Consolidated Financial Statements continued
13 Significant Accounting Policies continued
13.1 Basis of presentation continued
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires the Board of Directors to exercise its judgement in the process of applying the Group’s accounting policies. The
financial statements do not contain any critical accounting estimates.
13.2 Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries and subsidiary undertakings). Control is achieved where the Company has power over an
investee, exposure or rights to variable returns and the ability to exert power to affect those returns.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are
eliminated in full in the consolidated financial statements.
13.3 Segment reporting
The Group has one segment focusing on maximising total returns through investing in quoted securities in the GCC region.
No additional disclosure is included in relation to segment reporting, as the Group’s activities are limited to one business and
geographic segment.
13.4 Investment in subsidiary
Investment in subsidiary in the Company balance sheet is stated at fair value.
13.5 Treasury shares
In accordance with shareholder authority shares continue to be bought back to be held in treasury in order to manage the
discount between share price and NAV. Buy-backs are recorded in equity.
13.6 Cash and Cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term highly liquid investments that are
readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.
13.7 Future changes in accounting policies
A number of new standards, amendments to standards and interpretation are not yet effective for year ended 30 June 2018,
and have not been applied in preparing these financial statements. None of these are expected to have a significant effect
on the measurement of the amounts recognised on the Company’s financial statements; however, IFRS 9, Financial
Instruments (“IFRS9”) may change the classification of financial assets. This is first effective for accounting periods
beginning on or after 1 January 2018.
There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be
expected to have a significant impact on the Company.
14 Post balance sheet events
There are no post balance sheet events.