Gulf Investment Fund PLC

25 February 2022

Legal Entity Identifier: 2138009DIENFWKC3PW84

Gulf Investment Fund plc

Interim report for the six months ended 31 December 2021

-      Net asset value rose 7.6% vs benchmark increase of 7.4%

-      Share price up 5.4%

-      Final dividend of 2.47c to be paid on 11 March 2022

-      GIF shares ended the period trading at 7.6% discount to NAV (5 year average discount 12%)

Anderson Whamond, Chairman of Gulf Investment Fund plc, commented:

"During the six-month period, GCC markets benefited from rising hydrocarbon and oil prices.

"For 2021 as a whole the post-lockdown recovery in GCC has been more consistent than other economies. The GCC rose 31.4 per cent versus the MSCI World index which increased 20.1 per cent and the MSCI EM index which fell 4.6 per cent.  In addition to economic diversification in the region, the IMF expects higher gas and oil prices to mean the GCC returns to a fiscal surplus in 2023.  The IMF has upgraded its 2022 GCC forecast to 4.2 per cent GDP growth.

"The GIF NAV continues to outperform its benchmark.  Since December 2017, when the investment mandate widened to Gulf-wide, the NAV is up 107.5 per cent versus the benchmark's 80 per cent rise.

"GIF remains overweight Qatar. While Qatar is trading at a discount to its GCC peers, valuations are compelling given the upside from the promising macro backdrop.  Additionally, Qatar's plan to allow full foreign ownership of listed companies could attract as much as QAR5.4 billion inflows."

Anderson Whamond

Chairman

Gulf Investment Fund Plc

+44 (0) 1624 692600

William Clutterbuck / Alasdair Lennon

Maitland/AMO

+44 (0) 20 7379 5151

[email protected]

 Chairman's Statement

On behalf of the board, I am pleased to present the interim results for Gulf Investment Fund Plc ('GIF') for the six months ending 31 December 2021.

Results

For the six months ending 31 December 2021, Net Asset Value per Share ('NAV') rose 7.6% to USD1.8870 compared with a rise of 7.4% in the S&P GCC Composite Index. Following a slight widening of the discount at which GIF shares trade to NAV, the share price rose 5.4% for the period.

At the Annual General Meeting on 31st December 2021 a final dividend of USD 2.47 cents per ordinary share for the year ended 30 June 2021 was approved. The dividend will be paid on 11 March 2022 with an ex-dividend date of 13 January 2022.

The main corporate event of the period was a 100% tender offer. 5,497,652 shares were tendered and cancelled. The total number of shares in issue is now 46,320,172.

Markets in the GCC region benefited from rising hydrocarbon prices and improving trends in global stock markets. As at 31 December 2021 GIF had 28 holdings: 14 in Saudi Arabia, 9 in Qatar, 4 in the UAE and 1 in Kuwait.

Outlook, risks and uncertainties

GCC economies are benefitting from higher oil and gas prices and increased oil production. Higher oil prices boost GCC government balance sheets, complementing fiscal reforms.

The main risks and uncertainties faced by the Company are: geopolitical events, market risks, investment and strategy risks, accounting, legal and regulatory risks, operational risks and financial risks. Information on each of these is given in the Business Review section of our Annual Report each year.

The board is keen to explore ways of both narrowing the discount and of attracting new shareholders to the share register and is working closely with the investment Management team and the Company's broker.

Anderson Whamond

Chairman

24 February 2022

Director's Responsibility Statement

The Directors confirm that, to the best of their knowledge:

a)             the condensed set of financial statements has been prepared in accordance with IAS 34;

b)             the interim management report and Chairman's statement include a fair review of the information required by the Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year respectively);

c)             in accordance with Disclosure and Transparency Rule 4.2.8R there have been no related party transactions during the six months to 31 December 2021 and therefore nothing to report on any material effect by such a transaction on the financial position or the performance of the Company during that period; and there have been no changes in this position since the last Annual Report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.

d)            in accordance with Disclosure and Transparency Rule 6.4.2, the Company confirms that its Home State is the United Kingdom.

The interim financial report has not been audited by the Company's Independent Auditor.

Anderson Whamond

Chairman

24 February 2022

Report of the Investment Manager and the Investment Adviser

Regional Market Overview:

Source: Bloomberg

Global stock markets saw a broad-based sell off during the second half of 2021.  When it emerged that the new omicron variant may not be as potent as initially anticipated, global stock markets rebounded.  During the period 2H2021, the MSCI World index rose 7.1 per cent, while MSCI EM Index was down 10.4 per cent.

The price of oil (Brent) rose 3.5% in 2H2021, reaching ~US$78 per barrel after declining amid concerns over the impact of the omicron variant.

After recording a gain of 22.4% in 1H2021, the S&P GCC indices continued its strong performance in 2H2021, up 7.4 per cent. The positive performance was led by Abu Dhabi market advancing 24.2 per cent, followed by Dubai with a 13.7 per cent increase. Bahrain performed similarly rising 13.2 per cent. Kuwait, Qatar and Saudi Arabia gained 10.3 per cent, 8.3 per cent and 2.7 per cent, respectively.

For 2021 as a whole the post-lockdown recovery in GCC has been more consistent than other economies. The S&P GCC Composite index rose 31.4 per cent versus the MSCI World index which rose 20.1 per cent and the MSCI EM index which fell 4.6 per cent.  Brent rose 50.2 per cent in 2021.

All GCC markets posted double digit gains in 2021:  Abu Dhabi and Saudi Arabia led the pack rising 68.2 per cent and 29.8 per cent, respectively. Dubai and Kuwait rose 28.2 and 27 per cent respectively. Bahrain was up 20.6 per cent. Oman gained 12.9 per cent, while Qatar was up 11.4 per cent.

GCC: recovery continues to gather pace

The IMF has revised upward its 2022 forecast GCC GDP growth rate by 0.4 per cent to 4.2 per cent as oil demand recovers and progress is made towards full inoculation.

These vaccine rollouts and higher oil prices should boost confidence and activities in the non-oil sector, which are set to grow 3.8 and 3.4 per cent in 2021 and 2022, respectively. Overall, the non-hydrocarbon economy is projected to have outperformed the oil economy in 2021.

The robust recovery is based on well-judged macroeconomic and pandemic management measures taken in 2020 and 2021. With oil prices back at their highest levels since 2014 this is helping to improve public finances, with the IMF forecasting GCC returning to a fiscal surplus in 2023.

IMF GDP growth forecast 2021 and 2022

Source: IMF World Economic Outlook and Regional Economic Outlook October 2021

The IMF also referred to new challenges facing the region. This includes rising inflation from supply disruption, higher commodity prices and the threat of more virulent variants.  All could impact the recovery.

GCC Budget and Economic Update

Saudi Arabia's fiscal position is expected to turnaround after years of deficits. The Kingdom projects government revenues to reach US$278.7 billion, a 12 per cent increase from 2021, leading to an expected surplus of US$24 billion (2.5% of GDP).

Saudi Arabia 2022 Budget

Source: Saudi Arabia MoF; Table contains budgeted numbers for respective year

Saudi's government spending should reduce from US$264 billion in 2021 to US$254.7 billion in 2022. Nevertheless, the government is committed on healthcare and education expenditures, in line with the drive to enhance quality of life as well as diversifying its economy and localisation.

The anticipated Saudi US$24 billion budget surplus in 2022 is a contrast to the 2.7 per cent budget deficit in 2021 and would be Saudi's first surplus since 2013. The surpluses will boost reserves and support national development funds and Saudi's sovereign wealth fund, the Public Investment Fund (PIF).

Real GDP growth is expected to reach 7.4 per cent in 2022 driven by continued economic recovery and strengthening of the private sector. The Investment Adviser echoes the government's sentiment of driving economic growth by increasing the role of the private sector.

Saudi Arabia announced plans to reach net zero carbon emissions by 2060. The Kingdom also launched the Riyadh Sustainability Strategy, with an aim of reducing the carbon emissions in the city by 50 per cent making the city one of the world's most sustainable. The strategy will see US$92 billion invested in sustainability initiatives and projects, stimulating the private sector and creating 350,000 new jobs.

Saudi Arabia launched the National Investment Strategy (NIS), a key enabler to deliver on Vision 2030. The strategy includes several initiatives with an objective to raise the private sector's contribution to GDP to 65 per cent; increase the contribution of FDI to GDP to 5.7 per cent; increase the contribution of non-oil exports to GDP from 16 to 50 per cent; and reduce the unemployment rate to 7 per cent. Moreover, the new strategy seeks to draw up comprehensive investment plans for sectors, including manufacturing, renewable energy, transport and logistics, tourism, digital infrastructure and health care. The Kingdom will invest more than SAR12 trillion (US$3.2 trillion) by 2030 to spur local economic growth, of which the Shareek program initiatives will inject SAR5 trillion, the Public Investment Fund is set to contribute SAR3 trillion, and the remaining SAR4 trillion will come from investments facilitated by the NIS.

Saudi Arabia also launched the National Transport and Logistics Strategy mainly aimed at positioning the kingdom as a global logistics hub. The Kingdom will invest more than US$133 billion by 2030 to expand its transport sector and has plans for more than 300 projects, including new flagship airline, to expand the sector. Additionally, the Saudi Crown Prince announced US$13 billion tourism strategy to develop Saudi Arabia's Asir region into a global tourism hub. It aims to attract more than 10 million visitors by 2030.

Qatar's 2022 budget forecasts total revenue of US$53.8 billion, up 22.4 per cent on 2021, based on an assumed oil price of US$55/barrel up from $40/barrel in 2021. Government spending should increase by 4.9 per cent related to the upcoming FIFA World Cup 2022. The budget also sees huge spending on infrastructure projects, development, and public services projects, including health and education.

Qatar 2022 Budget

Source: Qatar MoF; Table contains budgeted numbers for respective year

Qatar is anticipated to post a strong growth rebound among the GCC, with LNG demand underpinning medium-term prospects. The growth is likely to be spurred by construction work on the giant North Field Expansion Project as Qatar Petroleum is expected to sign the bulk of its project-related deals. The liquified natural gas (LNG) investment pipeline along with continued spending on infrastructure projects for FIFA World Cup 2022 is likely to increase non-hydrocarbon GDP growth. Additionally, Qatar is expected to record trade and current account surpluses on the strength of LNG exports.

The UAE approved a budget worth US$79 billion for the next four years (2022-2026), as the country embarks on an aggressive economic transformation plan. Around US$16 billion was approved for 2022 alone, with most allocated to development and social benefits projects (41.2 per cent) education (16.3 per cent) and healthcare (8.4 per cent). It's clear that the UAE is refocusing its efforts not only on growth, but also on the wellbeing of residents.

The UAE government announced "Projects of the 50" an initiative to boost the country's competitiveness and attract AED550 billion in foreign direct investment by 2030. The "Projects of the 50" is a series of developmental and economic projects that includes establishing 500 national companies equipped with Fourth Industrial Revolution Technologies, increasing the contribution of the manufacturing sector by 30 per cent in the next 5 years, achieving 10 per cent annual increase in exports, and spending up to AED24 billion on getting 75,000 Emiratis into private sector jobs.

The UAE also announced plans to achieve net zero carbon emissions by 2050, becoming the first gulf state to commit to net zero. This would see US$163 billion being invested in clean and renewable energy sources over the next three decades.

Kuwait intends to implement largest government restructuring in its history, which includes plans to merge ministries, abolish others and create new strategies as part of the restructuring roadmap over the next four years. The plan also aims at reviewing investment, foreign ownership, bankruptcy, and public-private partnership laws. These steps are expected to maintain control over public spending and lead to efficiency gains across the public sector.

Oman has set a budget of US$31.4 billion for 2022, up 11 per cent on 2021. Revenue for 2022 is projected at US$27.5 billion, based on an oil price of US$50/barrel, resulting in a deficit of US$3.9 billion or 5 per cent of GDP in 2022. Higher oil prices along with fiscal reforms, are expected to narrow the deficit and slow a rise in debt levels over the next few years.

Oman 2022 Budget

Source: Oman MoF; Table contains budgeted numbers for respective year

GCC stock markets: IPO activity in 2022

2022 should be another busy year of initial public offerings (IPO). Saudi Arabia's stock market, which is reviewing multiple IPO requests, is also considering allowing special purpose acquisition company (SPACs) to list on exchange.

In a bid to revive years of lackluster stock listings, the Dubai government announced plans to list ten government entities on the Dubai Financial Market (DFM). The move aims to double its market capitalization to US$817 billion. Dubai Electricity and Water Authority (Dewa), Tecom Group (business parks unit of Dubai Holding), Salik (road toll system), Emirate's subsidiaries, Dubai Airport Duty Free and DP World (ports & logistics operator) all may seek IPOs.

On top of this Dubai plans to launch a US$545 million market-maker fund to further boost trading on its stock market. It has also approved a US$250 million fund to encourage technology companies to list on the local stock market. All in, the increasing activity of capital markets across the region, particularly around IPOs shows growing confidence in the region.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com Chart: Major 2021 Listings

OPEC+ continues to ease output cuts

During the period, OPEC+ continued unwinding its pandemic-induced production cuts. OPEC+ agreed to increase supply by 0.4 million barrels per day (bpd) each month, from August 2021 to phase out 5.8 million bpd of existing output cuts implemented during the covid crisis last year. OPEC+ forecasts world oil demand will grow by 4.2 million bpd in 2022.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com Chart: GCC countries fiscal breakeven oil price (2022E)

Other Recent Developments

Saudi Arabia rating upgrade

Moody's revised Saudi's outlook to stable from negative and maintained its sovereign's rating at A1. It estimates the volume of public debt as a percentage of GDP to fall to 25 per cent by 2025 from 32.5 per cent in 2020.

Rating agency, Fitch revised Saudi Arabia's outlook to stable from negative and maintained the sovereign's rating at A, while forecasting a drop in deficit to 3.3 per cent in 2021 from 11.2 per cent in 2020.

Bahrain upgrade

S&P revised Bahrain's outlook to stable from negative as fiscal reforms and higher oil prices are seen to improve the sovereign's fiscal position. It forecasts a decline in fiscal deficit from 13 per cent in 2020, to about 7 per cent of GDP in 2021.

Oman upgrade

Fitch revised Oman's outlook to stable from negative following improvements in fiscal metrics such as government debt/GDP and the budget deficit, driven by higher oil prices and fiscal reforms, and a lessening of external financing pressures.

Kuwait rating update

S&P downgraded Kuwait's sovereign credit rating to 'A+' from 'AA-' with negative outlook amid rising deficit and the absence of a comprehensive financing strategy to augment its depleted GRF.

Saudi Arabia bond issuance

Saudi Arabia sold US$3.25 billion in dual-tranche bonds (attracting US$11 billion in orders) completing its third international issuance in 2021. The first tranche was for US$2 billion maturing in 9.5 years and yielding 2.25 per cent, while the second was for US$1.25 billion maturing in 30 years and yielding 3.25 per cent.

Saudi PIF Plans to Issue Green Debt 

Saudi Arabia's Public Investment Fund (PIF) plans to announce its first green sukuk issuance, as it looks to increase the role that Environmental, Social and Governance principles (ESG) play in its investments. Furthermore, the Kingdom aims to deploy 50 per cent of its investments in renewable and sustainable power sources.

Saudi Arabia Announces Human Capability Development Program

The Saudi Crown Prince launched the Human Capability Development Program (HCDP) in line with its Vision 2030. The program aims to boost the citizen's capabilities, locally and globally and includes 89 initiatives aimed at achieving 16 strategic objectives of Saudi Vision 2030.

Saudi Arabia plans world's largest floating industrial complex

The Saudi Crown Prince announced the launch of NEOM's industrial city known as OXAGON, the largest floating industrial complex in the world. The net-zero city will be powered by 100 per cent clean energy and is positioned to be one of the world's most technologically advanced logistics hubs with state-of-the-art integrated port and airport connectivity.

UAE Central Bank Starts Gradual Curb of Stimulus Measures

The UAE Central Bank has started a gradual withdrawal of its Targeted Economic Support Scheme (TESS) launched in response to the pandemic as the economy shows signs of gradual recovery. However, the Central Bank will not change the temporarily reduced reserve requirements for banks for now. Furthermore, it expects the UAE economy to grow at 2.1 per cent in 2021 and 4.2 per cent in 2022.

UAE bond issuance

The UAE government has secured US$4 billion in its first multi-tranche bond sale, after attracting over US$22.5 billion in demand. The multi-tranche issue included a US$1 billion 10-year at 70 bps over US treasuries (UST), a US$1 billion 20-year at 105 bps over UST, and US$2 billion in 40-year Formosa bonds at 3.25 per cent.

UAE's ADNOC to invest US$127 billion up to 2026

UAE's state-run oil company ADNOC announced a capital spending plan of US$127 billion for 2022-2026 as it reported a 4 billion barrels of oil and 16 trillion cubic feet of gas increase in hydrocarbon reserves. The investment is expected to help the company expand its upstream production capacity and downstream portfolio, as well as its low carbon fuels business and clean energy ambitions.

UAE adopts four-and-a-half-day week

The UAE announced that Friday afternoon, Saturday and Sunday will now be the new weekend for federal government employees. This will better align the UAE with global markets and improve work-life balance.

Bahrain increases VAT to 10 per cent

Bahrain's parliament doubled VAT to 10 per cent. The rise could yield receipts of about 3 per cent of GDP in the next few years, up from about 1.7 per cent this year.

Bahrain new tourism strategy

This seeks to increase the number of tourists to the kingdom to 14.1 million by 2026. The strategy seeks to increase the contribution of tourism to GDP to reach 11.4 per cent by 2026.

GIF portfolio

Country allocation

GIF's weightings in GCC markets are based on the Investment Adviser's assessment of outlook and valuation.

Compared to the benchmark, GIF remained overweight Qatar (42.6 per cent of NAV vs. the S&P GCC Qatar weight of 11.9 per cent), overweight UAE (19.4 per cent vs S&P GCC of 13.5 per cent). GIF is underweight Saudi Arabia (33.2 per cent vs S&P GCC weighting of 61.5 per cent) and Kuwait (4.3 per cent vs S&P GCC of 10.6 per cent). The fund's cash weighting was 0.6 per cent on 31 December 2021.

During the quarter, exposure to Saudi Arabia increased 4.5 per cent, while exposure to UAE reduced by 2.9 per cent as valuations looked stretched.              

The fund's Qatar overweight arises from Qatar's macroeconomic resilience, growth prospects and attractive valuations. While Qatar is trading at a discount to its GCC peers, valuations are compelling given the upside from the promising macro backdrop. The North Field Expansion (a 64 per cent increase in LNG production) and FIFA World Cup activities should mean stronger economic activity in 2022. Additionally, Qatar's plan to allow full foreign ownership of listed companies could attract as much as QAR5.4 billion inflows.

The fund remains underweight Saudi Arabia due to relatively expensive valuations. Following the Shareek program announcements, major Saudi stocks, particularly banks rallied. On 31 December 2021 Saudi was trading on a P/E multiple of 25 times compared to MSCI EM on 14 times.

GIF ended the quarter with 28 holdings: 14 in Saudi Arabia, 9 in Qatar, 4 in the UAE and 1 in Kuwait.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting country allocation 2020.

Top 10 Holdings

Source: QIC

The ongoing recovery in the GCC region is expected to solidify in 2022 as restrictions are further lifted and vaccines are rolled out. The Investment Adviser seeks companies likely to benefit from the recovery. That said we expect markets will remain volatile in the near term, and hence will continue to focus on companies with solid balance sheets and stable cash flows, trading at attractive valuations.

Emaar Properties (EMAAR) and Qatar Gas Transport (QGTS) were GIF's top holdings owing to their strong fundamentals. The Investment Adviser increased exposure to Qatar Gas Transport, while reducing exposure to Qatar National Bank.

Embedded image removed -please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting sector exposure.

The financial sector remains the largest exposure for GIF at 43.7 per cent of NAV. The Investment Adviser believes that most GCC banks have strong capital and liquidity buffers to safeguard them from systematic risk. That said, lower interest rates along with an expected increase in non-performing loans could impact profitability in the near term. As a result, GIF remained underweight the sector compared to the index.

The Investment Adviser increased exposure to the real estate sector to 11.1 per cent of NAV (vs 6.5 per cent in 2Q 2021), while investments in the consumer and industrial sectors were reduced as valuations looked stretched.

Profile of Top Five Holdings:

Emaar Properties (8.5 per cent of NAV)

Emaar Properties (EMAAR) is the UAE's largest real estate developer. The Group's business encompasses UAE & International Development, Emaar Malls, Emaar Hospitality, and Entertainment & Leasing. The brand EMAAR has a varied retail asset portfolio, which includes the Burj Khalifa, Dubai Mall, and Dubai Fountain. The reopening of the economy is expected to boost demand for retail operators. Additionally, the recovery in the real estate sector supported by the strong property sales will support topline growth. EMAAR also has a growing presence in international markets such as India, Egypt, KSA, and Turkey. Furthermore, the developer has a strong balance sheet, a strong credit profile, substantial debt coverage, and has generated significant brand loyalty.

Qatar Gas Transport (7.9 per cent of NAV)

Qatar Gas Transport Company (Nakilat) is a leader in energy transportation, with the world's largest LNG shipping fleet of 74 vessels. It is responsible for transporting the country's LNG production to its global customers and is integral to the state's LNG supply chain. Taking fleet management in-house and the huge North Field Expansion project should generate further growth. It plans to expand capacity with ship building agreements for 100+ vessels worth over QAR70 billion. Nakilat is set to be a major beneficiary of Qatar's LNG expansion. Given the long-term nature of its charter, Nakilat has a Stable profile with industry-leading EBITDA margins and attractive dividend/FCF yields.

Masraf Al Rayan (7.7 per cent of NAV)

Masraf Al Rayan (MARK) is a Sharia bank, offering corporate and personal banking, asset management, treasury and trade finance. The bank has expanded its operations in United Kingdom through its subsidiary Al Rayan Bank PLC. Post-merger with Al Khalij Commercial Bank, MARK emerges as one of the largest Sharia compliant banks with over US$47 billion total assets, as of 2021. MARK is expected to remain cost efficient with cost to Income ratio below 25 per cent. Post-merger cost synergies will further enhance its efficiency ratio. MARK's asset quality remains robust as indicated by a NPL ratio of 1.67 per cent reflecting prudent risk management policies. Asset quality to remain superior as primary exposure is to the government sector. Furthermore, MARK is strongly capitalized and has one of the lowest non-performing-loans ratios in the sector.

Commercial Bank of Qatar (7.2 per cent of NAV)

Commercial Bank of Qatar (CBQ) is the second-largest commercial bank in Qatar. As part of its 5-year turnaround strategy, it is strengthening its balance sheet by cautiously managing its risk exposure. CBQK is selectively growing credit as it continues to de-risk the portfolio away from property exposure and into the high-quality public sector. Banks Govt. & Public sector lending increased to 18per cent in 2021 from 9 per cent in 2018. Under its diversification strategy, CBQ has expanded its GCC footprint through strategic partnerships with associated banks, which include the National Bank of Oman (NBO) in Oman, United Arab Bank (UAB) in the UAE and its subsidiary Alternatifbank in Turkey. CBQK possess strong and stable management, having good track record and have delivered business plan targets on consistent basis.

Industries Qatar (5.3 per cent of NAV)

Industries Qatar (IQ) mainly operates in steel, petrochemicals, and fertilizers sectors. The significant uptick in commodity prices along with the growth momentum prompted by the easing of lockdown related restrictions is expected to have positive impact on the company's earning trajectory. In addition, we expect a favorable financial impact on IQ's earnings following the recent acquisition of the remaining 25 per cent stake in its Fertilizer JV "QAFCO" and the extension of feedstock gas arrangements until 2035. Furthermore, IQ may seek similar opportunities, acquiring remaining stakes in other JVs which would give the company more exposure to petrochemicals.

GIF Performance:

NAV rose 7.6 per cent during 2H2021, while the Fund's benchmark, the S&P GCC Index, rose 7.4 per cent.

For 2021, GIF NAV is up 29.8 per cent vs benchmark index up 35.2 per cent, so GIF underperformed its benchmark by 5.4 per cent. The underperformance arose in Q1 because the fund was underweight Saudi Arabia when the $1.3 trillion Shareek program to boost private investments fueled a market rally. The fund outperformed in the following 3 quarters.

Since the investment mandate widened from Qatari-focused to Gulf-wide in December 2017, NAV has risen 107.5% (dividend included), as against the 80.0% returns recorded by S&P GCC total return index. On 31 December 2021, the GIF share price was trading at a 7.6 per cent discount to NAV, below the five-year average discount of 12.0 per cent.

Embedded image removed - please refer to the Company's website www.gulfinvestmentfundplc.com for a chart depicting GIF NAV v Reference Index.

GCC Outlook:

The GCC remains well positioned for robust growth, led by easing restrictions, sustained economic recovery and wider vaccine coverage than most countries. The IMF expects high mid-single digit GDP growth, partly on the back of higher oil prices. Higher oil prices will boost GCC government balance sheets, complementing fiscal reforms. We foresee all GCC countries reporting fiscal surpluses in 2022.

In Saudi Arabia, the government is pressing ahead with an ambitious reform agenda to deliver economic growth, following a slow start in recent years. Higher oil prices have refilled the Kingdom's coffers and are likely to provide additional resources for PIF and state funds to press ahead with investment plans. Saudi remains our second largest portfolio holdings at 33.2%, with exposure mainly in the financial sector of 11.3% to ride on the nation's progressive economic reforms.

Qatar is the biggest beneficiary of rising energy prices, while the FIFA World Cup preparation works, and LNG production expansion are growth drivers. The North Field project should boost LNG capacity by 64% with Nakilat (7.9% of NAV) set to be a beneficiary of the expansion. Qatar's external and fiscal positions are in a sweet spot, one of the strongest positions in the GCC.

UAE is enjoying a cyclical recovery, in particular Dubai, which was impacted last year due to Covid restrictions. The easing of these is boosting economic activity in tourism and retail. As the economy reopens, EMAAR (8.5% of NAV) with a varied retail asset portfolio should benefit from footfall rise in malls and shopping markets. Elsewhere, the switch to a Monday-Friday work week is also expected to improve UAE's prospects in the medium term.

Overall, we see strong opportunities among the stocks benefiting from re-opening. Regional banks should benefit from higher short-term interest rates. We see opportunities arising from sustained high commodity prices and supply disruptions coinciding with re-opening pent-up demand.

While global investors generally are underweight Qatar, Kuwait, and Saudi, the GCC weighting in EM indexes should increase as IPOs join the market, as Public Investment Fund PIF/government stake sales are made, and foreign ownership limits (FOL) are raised.

Qatar's weighting should increase as FOL are eased and likely attracting US$1.1-1.4bn of inflows, making us highly positive on the country. Global investors interest in GCC should increase. Therefore, foreign inflows to the GCC will continue, attracted by credible fixed currency rates, generous dividend yields, high oil prices and market reforms.

Valuation:

Source: Bloomberg, as of 30 January 2022; Market Cap. as of 27 January 2021

Epicure Managers Qatar Limited                                                                        Qatar Insurance Company S.A.Q.

24 February 2022                                                                                                  24 February 2022

Income Statement

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Interim Financial Statements

1(a)         Investment at fair value through profit or loss

The Company has one subsidiary, Epicure Qatar Opportunities Holdings Limited ("the Subsidiary"), which holds the portfolio of investments and has the investment management and custodian agreements. The investment in subsidiary is stated at fair value through profit or loss in accordance with the IFRS 10 Investment Entity Consolidation Exception. The fair value of the investment in Subsidiary is based on the year-end net asset value of the Subsidiary as reported by the Administrator. The loan to Subsidiary, with an aggregate principal amount of US$10,416,171 (2020: US$64,570,629), is included within this balance. The loan is subject to interest on the aggregate principal amount drawn down from 1 January 2011, at the US prime rate per annum. All loan repayments made by the Subsidiary will first be deducted from the outstanding loan interest before being applied to the principal balance. The loan is secured by fixed and floating charges over the assets of the Subsidiary and is repayable on demand. Additions and disposals regarding the investment in subsidiary are recognised on trade date.

1(b)         Financial assets at fair value through profit or loss held by the Subsidiary

The Subsidiary holds a portfolio of quoted equities and P-Notes which are classified as fair value through profit or loss. The fair value for quoted equities is based on the current bid price ruling at the year-end without regard to selling prices. The fair value of P-Notes is based on the quoted period-end bid price of the underlying equity to which they relate. P-Notes are promissory notes issued by certain counterparty banks that are designed to offer the holder a return linked to the performance of a particular underlying equity security or market and used where direct investment in the relevant underlying equity security or market is not possible for regulatory or other reasons. To the extent dividends are received on the securities to which the P-Notes are linked, these are taken to investment income.

At 31 December 2021 the Subsidiary held 19 P-Notes with a value of US$38,530,006, (June 2021 21 P-Notes US$41,621,442) held to obtain exposure to Saudi Arabia where direct investment in equities is not possible for foreign investors.

Purchases and sales of investments are recognised on trade date - the date on which the Company commits to purchase or sell the asset. Investments are initially recorded at fair value, and transaction costs for all financial assets and financial liabilities carried at fair value through profit and loss are expensed as incurred.

Gains and losses (realised and unrealised) arising from changes in the fair value of the financial assets are included in the income statement in the year in which they arise.

Investments held by the Subsidiary

31 December 2021: Financial assets at fair value through profit or loss; all quoted equity securities or P-Notes:

2              Net Asset Value per Share

The net asset value per share as at 31 December 2021 is US$1.8887 per share based on 46,320,172 ordinary shares in issue as at that date (30 June 2021: US$1.7552 based on 51,817,824 ordinary shares in issue).

3              Profit per Share

Basic and diluted profit/(loss) per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period:

4              Other payables and accrued expenses

5              Charges and Fees

Investment management fees and custodian fees borne by the Subsidiary were US$373,438 and US$44,328 respectively (2020: US$585,762 and US$85,903 respectively).

Investment Manager's fees

Annual fees

The Investment Manager is entitled to an annual fee of 0.80% of the net asset value of the Company.

Management fees for the period ended 31 December 2021 amounted to US$373,438 (31 December 2020: US$585,762) and the amount accrued but not paid at the period-end was US$182,957 (31 December 2020: US$322,754). This fee is borne by the Subsidiary.

Custodian fees

The Custodian is entitled to receive fees of US$7,200 per annum and US$25 per processed transaction.

In addition the Custodian is entitled to receive fees of 8 basis points per annum in respect of Qatari securities held by the Subsidiary and 10 basis points per annum in respect of non-Qatari, GCC securities held by the Subsidiary and $45 per settled transaction (Qatar)/$50 per settled transaction (GCC excluding Qatar). From 1 March 2013 the custodian agreed to a 25% reduction in custodian fees relating to the Qatari market.

Custodian and sub-custodian fees for the period ending 31 December 2021 amounted to US$44,328 (31 December 2020: US$85,903). This fee is borne by the Subsidiary

Administrator and Registrar fees

The Administrator is entitled to receive a fee of 12.5 basis points per annum of the net asset value of the Company between US$0 and US$100 million, 10 basis points of the net asset value of the Company above US$100 million.

This is subject to a minimum monthly fee of US$12,000, payable quarterly in arrears. The Administrator receives an additional fee of US$1,200 per month for providing monthly valuation data to the Association of Investment Companies.5

The Administrator assists in the preparation of the financial statements of the Company and provides general secretarial services.

Administration fees paid for the period ending 31 December 2021 amounted to US$82,688 and US$8,594 for additional services (31 December 2020: US$99,665 and US$9,482 respectively).

Directors' Remuneration

The maximum amount of remuneration payable to the Directors permitted under the Articles of Association is £200,000 per annum.

Nick Wilson as non-executive chairman was entitled to receive an annual fee of £43,750.

David Humbles as non-executive chairman of the Audit Committee is entitled to receive an annual fee of £26,250.

Neil Benedict and Anderson Whamond in their capacity as non-executive directors receive £24,500 each per annum.

From 1 January 2022 Anderson Whamond replaced Nick Wilson as non-executive chairman and is entitled to receive an annual fee of £35,000.

The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. Total fees and expenses paid to the Directors for the period ended 31 December 2021 amounted to US$85,898 (31 December 2020: US$98,914).

6              Taxation

Isle of Man taxation

The Company is resident for taxation purposes in the Isle of Man by virtue of being incorporated in the Isle of Man and is subject to taxation at the rate of 0% in the Isle of Man.

7              Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.

The Investment Adviser is Qatar Insurance Company S.A.Q. The Company holds shares in Qatar Insurance Company S.A.Q. (see note 1(a)). The Investment Adviser's fees are paid by the Investment Manager.

The Investment Manager, Epicure Managers Qatar Limited, is a related party by virtue of its ability to make operational decisions for the Company (via the Subsidiary) and through common Directors. Fees paid and payable to the Investment Manager are disclosed in note 5.

Epicure Managers Qatar Limited is a wholly owned subsidiary of the Investment Adviser, Qatar Insurance Company S.A.Q.

8              The Company

Gulf Investment Fund plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931-2004 on 26 June 2007 as a public company with registered number 120108C.

Pursuant to an Admission Document dated 25 July 2007 there was an original placing of up to 171,355,000 Ordinary Shares of 1 cent each, with Warrants attached on the basis of 1 Warrant to every 5 Ordinary Shares. Following the placing on 31 July 2007, 171,355,000 Ordinary Shares and 34,271,000 Warrants were issued; the warrants expired on 16 November 2012.

The Shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ("AIM") on 31 July 2007 when dealings also commenced.

As a result of a further fund raising in December 2007, a further 76,172,523 Ordinary Shares were issued, which were admitted for trading on 13 December 2007.

On 4 December 2008, the share premium arising from the placing of shares was cancelled and the amount of the share premium account transferred to distributable reserves.

The Shares of the Company were admitted to trading on the Main Market of the London Stock Exchange on 13 May 2011.

On 8 December 2017 the Company's shareholders approved a change in investment policy from a largely Qatar focussed strategy to one which focusses more on a broader Gulf Co-operation Council strategy.

On 7 October 2021, the Company concluded a tender offer for 5,497,652 shares at a price of US$1.7877 per share. These shares were purchased by the Company and the funds paid to tendering shareholders on 3 November 2021.

In the Circular published by the Company on 25 March 2021 the Board announced the implementation of an enhanced dividend policy targeting an annual dividend equivalent to 4 per cent. of Net Asset Value at the end of the preceding year, to be paid in semi-annual instalments.

The Net Asset Value per Share at 30 June 2020 was US$1.2323 per share and pursuant to the above stated policy, the directors declared a first interim dividend for the year ended 30 June 2021 of 2.46 cents per ordinary share.

The dividend was paid on 17 September 2021 to ordinary shareholders on the register as at 20 August 2021 (the "Record Date").

The shareholders also approved a dividend of 2.47 cents per share on 31 December 2021. This will be paid to shareholders in March 2022.

The Company's agents and the Manager perform all significant functions. Accordingly, the Company itself has no employees.

9              The Subsidiary

The Company has the following subsidiary company:

Epicure Qatar Opportunities Holdings Limited is a wholly owned subsidiary of the Company and was incorporated in the British Virgin Islands on 4 July 2007 under the provisions of the BVI Companies Act 2001, as a limited liability company with registration number 1415393. The principal activity of the Subsidiary is holding investments on behalf of the Company.

10            Significant Accounting Policies

The accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial statements for the year ended 30 June 2021.

10.1         Basis of presentation

These financial statements have been prepared in accordance with International Financial Reporting Standard ("IFRS") IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company as at and for the year ended 30 June 2021.

In accordance with IFRS 10, 'Consolidated financial statements', the Directors have concluded that the Company falls under the definition of an investment entity because the Company has the following characteristics:

·      the Company has obtained funds for the purpose of providing investors with investment management services;

·      the Company's investing policy, which was communicated directly to investors, is investment solely for returns from capital appreciation and investment income; and

·      the performance of investments is measured and evaluated on a fair value basis.

As a result, the Company does not consolidate its subsidiaries, instead it is required to account for these subsidiaries at fair value through profit or loss in accordance with IFRS 9, 'Financial instruments' and prepares separate company financial statements only.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Company's accounting policies. The financial statements do not contain any critical accounting estimates

10.2         Segment reporting

The Company is organised into one operating segment, comprising the investment in a portfolio of equity securities in the GCC region via the wholly owned subsidiary. The financial performance of this portfolio is presented to and monitored by the Board of Directors, being the chief operating decision makers as defined under IFRS 8. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole.

11            Cash and Cash Equivalents

12            Post Balance Sheet Events

There were no post balance sheet events.

Appendix

Unaudited consolidated financial information

Consolidated Income Statement

Notes:

1)     Consolidated information has been presented to assist the user in interpreting the results of the Company and to be consistent with previous years. This information consolidates the results of the Subsidiary with the Company. It is based on IFRS requirements that would apply if the IFRS 10 consolidation exception for investment entities did not apply to the Company.

2)     Where relevant to understanding the risks of financial instruments held by the Company certain disclosures relating to the subsidiary's assets and liabilities have been given in the notes to the Financial Statements and would be relevant to understanding the consolidated position presented in this appendix.

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Glossary

Alternative performance measures (APM)

An APM is a measure of performance or financial position that is not defined in applicable accounting standards and cannot be directly derived from the financial statements. The Company's APMs are set out below and are cross-referenced where relevant to the financial inputs used to derive them as contained in other sections of the Interim Financial report.

Ongoing charges ratio

Ongoing charges (%) = Annualised ongoing charges divided by Average undiluted net asset value in the period

Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue, and which relate to the operation of the investment company as a collective fund. Ongoing charges are based on costs incurred in the period as being the best estimate of future costs and include the annual management charge. As recommended by the AIC in its guidance, ongoing charges are calculated using the Company's annualised revenue and capital expenses (excluding finance costs, direct transaction costs, custody transaction charges, non-recurring charges and taxation) expressed as a percentage of the average daily net assets of the Company during the period. The inputs that have been used to calculate the ongoing charges percentage are set out in the following table:

*Including expenses of the Subsidiary.

Discount and premium

Shares can frequently trade at a discount to net asset value (NAV). This occurs when the share price (based on the mid-market share price) is less than the NAV and investors may therefore buy shares at less than the value attributable to them by reference to the underlying assets. The discount is the difference between the share price and the NAV, expressed as a percentage of the NAV. As at 31 December 2021, the share price was 1.7350c and the unaudited NAV per share was 1.8887c, giving a discount of 5.7%. A premium occurs when the share price (based on the mid-market share price) is more than the NAV and investors would therefore be paying more than the value attributable to the shares by reference to the underlying assets.

Period to date net asset value

This is the fall or rise, calculated as a percentage, in value of the Company's assets attributable to one ordinary share since 30 June 2021. The net asset value per share is calculated by dividing 'equity shareholders' funds' by the total number of ordinary shares in issue (excluding treasury shares). The rise in period to date NAV is set out in the table below: