REG - Polar Capital Global - Final Results
20/02/2025 07:15
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250220:nRST7629Xa&default-theme=true
RNS Number : 7629X Polar Capital Global Financials Tst 20 February 2025
POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC
Legal Entity Identifier: 549300G5SWN8EP2P4U41
AUDITED ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED
30 NOVEMBER 2024
PERFORMANCE HIGHLIGHTS FOR THE YEAR ENDED 30 NOVEMBER 2024
Performance (Sterling total return) For the year ended Since Inception
30 November 2024 % %
Net asset value (NAV) per ordinary share*(1) 34.8 199.2
Ordinary share price*(2) 45.4 173.1
Ordinary share price including subscription share value*(3) - 174.9
Benchmark (Sterling total return) (4)
MSCI ACWI Financials 36.1 204.8
Other Indices and peer group (Sterling total return)
MSCI World Index 26.8 285.7
FTSE All Share Index 15.8 104.3
Lipper Financial Sector (5) 37.1 161.8
Performance since Reconstruction on 22 April 2020 (Sterling total return) Since Reconstruction %
NAV per ordinary share* (6) 129.9
Benchmark (4) 128.1
Financials As at As at %
30 November 30 November Change
2024 2023
Total net assets £629,678,000 £488,198,000 +29.0
NAV per ordinary share 207.7p 158.1p +31.4
Ordinary share price 196.2p 138.8p +41.4
Discount per ordinary share* (5.5%) (12.2%)
Net gearing* 5.1% 6.5%
Earnings per Ordinary share (7) For the year ended For the year ended
30 November 2024 30 November 2023
Revenue Return 5.31p 4.97p
Capital Return 48.62p (9.84p)
Total 53.93p (4.87p)
Expenses*
Ongoing Charges 0.85% 0.86%
Ongoing charges including performance fee (8) 0.85% 0.86%
Dividends~
The Company has paid or declared the following dividends relating to the
financial year ended 30 November 2024:
Pay date Amount per Ordinary Share Record Date Ex-Date Declared Date
Ordinary Shares
In issue
First interim: 2.50p 304,272,705 2 August 2024 1 August 2024 27 June 2024
30 August 2024
Second interim: 2.20p 303,219,365 7 February 2025 6 February 2025 20 January 2025
28 February 2025
Total (2023: 4.55p) 4.70p
Note 1
The total return NAV performance for the period is calculated by reinvesting
the dividends in the assets of the Company from the relevant ex-dividend date.
Performance since inception has been calculated using the initial NAV of 98p
and the NAV on 30 November 2024. Dividends are deemed to be reinvested on the
ex-dividend date as this is the protocol used by the Company's benchmark and
other indices.
Note 2
The total return share price performance is calculated by reinvesting the
dividends in the shares of the Company from the relevant ex-dividend date.
Performance since inception has been calculated using the launch price of 100p
to the closing price on 30 November 2024.
Note 3
The total return share price performance since inception includes the value of
the subscription shares issued free of payment at launch on the basis of one
for every five Ordinary shares and assumes such were held throughout the
period from launch to the final conversion date of 31 July 2017. Performance
is calculated by reinvesting the dividends in the shares of the Company from
the relevant ex-dividend date and uses the launch price of 100p per Ordinary
share and the closing price per Ordinary share on 30 November 2024.
Note 4
Effective from 1 June 2024, the Board agreed to remove the chain linked
benchmark which had historically been provided as a point of reference for
information purposes only. The chain linked benchmark was a combination of 3
benchmarks which were in operation during the life of the Company. From
inception until 31 August 2016, the Company's benchmark was the MSCI World
Financials Index Net Total Return Index, which included Real Estate as a
constituent until its removal that year. From 1 September 2016 to 23 April
2020 the benchmark was the MSCI World Financials + Real Estate Net Total
Return Index. From 23 April 2020, the benchmark changed to MSCI ACWI
Financials Net Total Return Index due to the Company's exposure to emerging
market equities and its limited exposure to real estate equities. Performance
and any associated calculations that include the Benchmark, which is now the
MSCI ACWI Financials Net Total Return Index, as a reference point, remain
unchanged.
Note 5
Dynamic average of open-ended funds in the Lipper Financial Sector Universe
which comprised 59 open ended funds in the year under review.
Note 6
The total return NAV performance since Reconstruction is calculated by
reinvesting the dividends in the assets of the Company from the relevant
ex-dividend date. The new performance fee period runs from the date of the
Reconstruction. The opening NAV for the performance fee of 102.8p is the
closing NAV the night before the tender offer was completed.
Note 7
Refer to Note 11 below for more details.
Note 8
There was no performance fee provision in the current or prior year.
* Alternative Performance Measure, see below for further explanations.
~ Refer to Note 12 below for more
details.
Data sourced by HSBC Securities Services Limited and Polar Capital
LLP.
Status of Announcement
The figures and financial information contained in this announcement are
extracted from the draft unaudited financial results for the year ended 30
November 2024 and do not constitute statutory accounts for that year. Once
finalised, the Annual Report and Financial Statements will include the Report
of the Independent Auditors which is expected to be unqualified and not
expected to contain a statement under either section 498(2) or Section 498(3)
of the Companies Act 2006. The Annual Report and Financial Statements for the
year ended 30 November 2023 have not yet been delivered to the Registrar of
Companies.
The figures and financial information for the year ended 30 November 2023 have
been extracted from the published Annual Report and Financial Statements for
the year ended 30 November 2023 and do not constitute the statutory accounts
for that year. The Annual Report and Financial Statements for the year ended
30 November 2023 have been delivered to the Registrar of Companies and
included the Report of the Independent Auditors which was unqualified and did
not contain a statement under either section 498(2) or Section 498(3) of the
Companies Act 2006.
The Directors' Remuneration Report and certain other helpful shareholder
information have not been included in this announcement but will form part
of the finalised Annual Report which will be available on the Company's
website and will be sent to shareholders in February 2025.
National Storage Mechanism
A copy of the Annual Report once published will be submitted to the National
Storage Mechanism ('NSM') and will then be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Neither the contents of the Company's website nor the contents of any website
accessible from the hyperlinks on the Company's website (or any other website)
are incorporated into or form part of this announcement.
CHAIR'S STATEMENT
Dear Shareholders,
On behalf of myself and the Board I am pleased to provide to you the Annual
Report of the Company for the year to 30 November 2024.
The Company was able to take advantage of the strength of the financials
markets over the period, returning a net asset value per share of 34.8%, the
best annual investment performance in the Company's history. Moreover, the
Company's share price discount to NAV narrowed during the financial year,
ending at 5.5% compared to the prior year of 12.2%. This strong investment
performance and the narrowing of the discount resulted in a total share price
return for the year of 45.4%.
The investment return was marginally behind the Benchmark which rose 36.1%
during the period. About 6.5% of the Company's portfolio is invested in fixed
income securities which returned 12%. Excluding the fixed income portfolio the
investment return would have exceeded the Benchmark which includes only
equities. Longer term investment performance remains good with NAV total
return measured from the Company's reconstruction in April 2020 to the year
ending 30 November 2024 at 129.9% versus the Benchmark of 128.1%. The share
price total return for the same period was 128.3%.
Investment Performance
Headline performance figures disguise the ebb and flow of the market: markets
do not tend to progress evenly, there are many twists and turns and global
events that influence investor sentiment over any period. The financial year
under review in this set of report and accounts is no exception. Our managers
have been active with the portfolio, adjusting by country or region and by
sector as they deem appropriate. They have made some very good calls (being
overweight alternative asset managers for example) which have benefitted the
Trust but, as is typical of any active manager, not everything went their way.
The last few months of the period under review were particularly challenging.
The knife-edge US election, more muted reductions in interest rates and the
potential for slower economic growth across many regions led to a more
defensive positioning of our portfolio. Being underweight large cap US banks
meant we slightly underperformed as Trump was voted in for a second term as US
President. Overall, the Manager navigated these bouts of volatility extremely
well and delivered a good investment performance.
As in previous years, the Manager has provided a detailed account of the
team's activity and their views and outlook. I encourage Shareholders to read
this to gain a fuller understanding of the investment environment in which the
managers operate and how they evolved the portfolio throughout the year. The
Manager's report is provided in the Annual Report.
2025 Tender Offer
The Company was launched in July 2013 with a fixed seven-year life.
Shareholders approved changes to the Company's Articles of Association to make
regular tender offers to all Shareholders and to extend the Company's life
indefinitely at the Company's General Meeting held on 7 April 2020. The
Articles of Association require the Company to make tender offers for up to
100 per cent of the shares held by each Shareholder at five-yearly intervals,
with the first to commence on or before 30 June 2025 (the "2025 Tender
Offer").
Shareholders who wish to realise their investment in the Company (in whole or
in part) pursuant to the 2025 Tender Offer will be offered the opportunity to
tender their shares for sale at the prevailing NAV per ordinary share less
costs and other appropriate adjustments. A further announcement setting out
the full details, timetable of events and terms of the 2025 Tender Offer will
be published in due course.
NAV Discount Management
The Company continued to pursue a substantial share buyback policy during the
year which was positive for the NAV and helped support liquidity in the
shares. The Company bought back a total of 5,642,322 ordinary shares,
equivalent to 1.7% of the shares in issue at the start of the period, at an
average discount of 8.9%. These buybacks had an accretive effect on the NAV of
0.26p per share. No ordinary shares were bought back following the year end.
The Board issues a delegated authority to the Manager and the Corporate Broker
to buy shares under defined parameters. These are designed to ensure that the
Company does not displace any market demand for shares but provides liquidity,
if required, once market demand has been satisfied. The Board has reconfirmed
its authority to the Manager to continue the policy of share repurchases under
appropriate parameters to ensure liquidity for Shareholders and reduce the
discount at which the Company's shares trade. The Company's share price traded
in a discount range of 4.7% to 12.4%, ending at a discount of 5.5%.
Dividends
The Company currently adopts a progressive dividend policy, whereby dividends
may increase on an annual basis (the Existing Policy). There is no guarantee,
however, that such increases will be achieved. The aim is to pay two interim
dividends each year, in February and August however these interim dividends
will not necessarily be of equal amounts as dividends from the Company's
underlying investments arrive irregularly throughout the financial year.
The Board continually monitors the dividend outlook from its equity holdings,
interest income from cash and from fixed income securities. In August 2024 the
Company paid an interim dividend of 2.50p per ordinary share. The Board has
declared a further interim dividend of 2.20p per ordinary share payable to
Shareholders on the register as at 7 February 2025. This will bring the total
dividend paid for the financial year under review to 4.70p per ordinary share,
an increase of 3.3% on the previous financial year.
Following feedback from shareholders and engagement with our advisors and the
manager, the Board is mindful that many investors now seek investments that
offer a regular and attractive dividend. As such, the Board is proposing the
adoption of an "enhanced dividend" policy under which it will aim to pay, in
the absence of unforeseen circumstances, a regular dividend equivalent to
approximately 4% of the Company's NAV in a given year. It is proposed that
dividends will be paid quarterly at a level of 1% of the Company's NAV,
calculated on the last business day of each prior financial quarter. Under
this proposal, Dividends will be paid from available revenue and topped up, if
necessary, from distributable capital reserves. Further details in respect of
the payment of dividends from distributable capital reserves can be found in
Notes 22 and 23 in the financial statements. The ability to use other
distributable capital reserves to help smooth the level of dividend payments
over the longer term is a distinguishing feature of investment trusts. Any
dividend distributions by the Company will result in a decrease in NAV.
Shareholders will have the opportunity to vote on the proposed dividend policy
at the Annual General Meeting taking place on 10 April 2025. Should there be
sufficient support, and the new dividend policy be approved, it will be
effective for the financial year commencing 1 December 2025. In the absence of
unforeseen circumstances and if approved, the first dividend payable on the
new basis will be calculated by reference to the Company's NAV for the quarter
ending 27 February 2026. It is anticipated that the dividend will be announced
in mid-March 2026 and subsequently paid in April 2026. Subsequent dividends
will follow a similar pattern.
Should the proposed new dividend policy not be approved by Shareholders at the
AGM, the Board will maintain the Existing Policy as outlined above until a
dividend policy is proposed to shareholders again at the AGM to be held in
2026.
Cancellation of Share Premium Account
The Companies Act 2006 permits the Company (subject to the approval of
Shareholders and the consent of the Court) to cancel its share premium account
and credit the balance to the Company's distributable reserves. The "share
premium account" has accumulated over time as the result of the Company
issuing shares at a premium to their nominal value. The net proceeds are
apportioned to the Company's share premium account, which is a
non-distributable reserve that the Company is unable to use for the purpose of
making distributions to Shareholders.
By cancelling the share premium account, the Company further increases its
flexibility to meet tender requests under the 2025 Tender Offer, apply such
reserves for the return of capital to Shareholders and for any other general
corporate purposes. The Company is seeking to cancel the entire amount of its
share premium account, being £311,369,000 as at 30 November 2024, in order to
benefit from this flexibility and primarily to create a surplus of
distributable reserves to permit future distributions to Shareholders.
The cancellation of the share premium account requires the passing of a
special resolution at the AGM and subsequent approval of the Court.
Shareholder approval will be sought for a special resolution to cancel the
Company's share premium account at the AGM taking place on 10 April 2025. The
cancellation will not be effective until the order of the Court confirming the
cancellation has been registered with the registrar of companies.
Share Capital
As at 30 November 2024, the Company had 331,750,000 ordinary shares of 5 pence
each in issue, of which 28,530,635 shares (this represents 8.6% of the issued
share capital) were held in treasury (2023: 331,750,000 ordinary shares of 5
pence each in issue of which 22,888,313 were held in treasury).
No ordinary shares were bought back or issued following the year end.
The Board
As referenced in my statement to Shareholders last year, the Board is aware of
the FCA's Diversity and Inclusion Policy and notes that its current
composition meets two of the three 'comply or explain' targets with three of
the four members being female and one of the two senior positions being
occupied by a female. Whilst we do not meet the recommended ethnicity
requirements, the Board has put in place a succession plan based on the
recommended nine-year tenure of Directors. A key objective for the Board is to
have an appropriate blend of skills and diversity of experience and thought
around the table. When the Board next embarks upon a director search it will
set criteria that ensures candidates are sourced from a broad pool such that
the Board can consider candidates with minority ethnic backgrounds. Further
information on this can be found in the Corporate Governance Report in the
Annual Report.
As reported in the last interim report, we have been joined by a board
apprentice, Ada Okpe. The Board Apprentice program is an initiative designed
to develop aspiring board members and boost diversity in boardrooms. Ada is
spending around 12 months with the Board to gain experience which we hope he
will be able to use in his executive career and in future director roles. See
the Annual Report for an interview with Ada on his experience as a board
apprentice.
There have been no other changes to the membership of the Board during the
year under review. The Directors' biographical details are available on the
Company's website and are provided in the Annual Report.
Cost Disclosures
The Board notes the Government's stated intention to reform UK retail
disclosure rules.
The Board has engaged with the Manager to understand the potential
implications to retail disclosure rules following the publication of the FCA's
consultation paper on the new product information framework for Consumer
Composite Investments ("CCIs") in December 2024. The final rules under the new
CCI framework are expected to be published later in 2025.
Annual General Meeting
The Company's Annual General Meeting ("AGM") will be held at 16 Palace Street
at 2:00pm on Thursday, 10 April 2025. The notice of AGM has been provided to
Shareholders and will be available on the Company's website. Detailed
explanations of the formal business and the resolutions proposed at the AGM
are contained within the Shareholder Information section in the Annual Report
and in the Notice of AGM. We will upload a copy of the Manager's Investment
Presentation to the Company's website ahead of the AGM and will hold only the
formal business of the meeting in person. We have provided a zoom link in the
Notice of AGM which will enable interested parties to view the formal business
and ask questions via the on-line chat function.
The Manager will be available to answer questions and meet Shareholders
present. All formal business resolutions will be voted on by a poll and we
therefore encourage Shareholders to submit their votes ahead of the meeting by
proxy card which is provided with the Notice of Meeting. Shareholders who hold
shares via an online stockbroker or platform are encouraged to exercise their
vote through their respective platforms and where possible attend the AGM
proceedings. Further information can be found on the AIC's website and in the
Shareholder information section in the Annual Report.
We are conscious of the importance of Shareholder engagement and encourage
Shareholders to engage with the Board and the Investment Manager. As such, the
Board invites Shareholders to submit questions in writing to which we will
respond, as far as possible, ahead of the AGM date. Please send your questions
to cosec@polarcapital.co.uk on or before 7 April 2025 with the subject heading
PCFT AGM.
Outlook
We are enthusiastic about the outlook for the global financial sector; this is
a large and diverse sector which has been overlooked by investors for many
years and where large sections of the market still trade at very attractive
valuations. We have started to see a positive change in sentiment with an
improvement in fundamentals that should drive a re-rating. Interest rates are
normalising; personal and corporate balance sheets are in good shape; and
earnings are recovering. Whether these developments are a result of lighter
touch regulation, net interest margins, insurance rates picking up or
increased fee income for asset managers, all of these factors should lead to
investors increasing their exposure to this exciting part of the investment
universe. While we will be offering Shareholders an opportunity to tender
their shares during 2025, we anticipate that most will wish to continue
investing with us and retain their exposure at what may be a pivotal point in
time.
Simon Cordery
Chair
19 February 2025
INVESTMENT MANAGER'S REPORT
Investment Review
Performance
The Trust delivered excellent returns in the year to 30 November 2024, with
its net asset value rising by 34.8% after adding back dividends. Excluding the
fixed income positions, the equity portfolio returned 36.4% before fees. This
compares to the wider equity markets as measured by the MSCI ACWI index which
rose 25.6% over the same period, but was slightly behind our equity benchmark
return of 36.1%, reflecting our allocation to fixed income and our more
defensive positioning in the US in the run-up to the US election.
Financials was the best performing sector of the global equity markets in the
period, beating information technology into second place. Following the more
dovish commentary by US Federal Reserve (the "Fed") Chair, Jerome Powell, in
December 2023, markets priced in the expectation of much lower interest rates
in 2024. While the speed and number of interest rate cuts has been slower and
fewer than expected, it has been on the back of largely stronger economic
data.
The election of Donald Trump in November with the Republicans taking control
of both houses of Congress led to US equities significantly outperforming
wider equity markets as the prospect of less regulation, lower taxes and
concern about the impact of tariffs on countries reliant on exports to the US,
led to a rotation into US equities out of non-US equities. Consequently, US
financials have erased the balance of their underperformance from 2022 and
2023.
Credit markets were buoyant as investors took advantage of the more positive
outlook for risk and the higher yields offered by corporate bonds relative to
government bonds. Consequently, the subordinated debt 1 (#_ftn1) of banks and
insurance companies returned 11.6% over the 12 months as credit spreads
contracted. As the cost of issuing debt fell there was a sharp increase in
bond issuance in the period as companies looked to take advantage of the
better environment.
A significant driver of investment activity over the year was aimed at taking
advantage of the potential ramifications of the US Federal Reserve signalling
that interest rates had peaked. Against that background, we took the
opportunity to significantly increase the Trust's exposure to those companies
we believed would benefit the most from the increased likelihood of a soft
landing for the US economy and a better background for financial markets.
The Trust was more defensively positioned than the index in the second half,
with allocations to fixed income and some specific stocks which resulted in a
modest underperformance overall. However, our stock selections helped us
outperform the subsector indices in most cases. At the subsector level, the
Trust benefited from overweight positions in, for example, alternative asset
managers and US banks. However, against the risk-on background for financial
markets, our overweight exposure to the more defensive payment and insurance
companies and a small underweight in investment banks dragged on performance.
Our fixed income holdings generated returns of 12.1% and unsurprisingly lagged
the very strong performance of equity markets although outperformed the
relevant credit markets.
Historical sub-sector weightings
On a geographical basis, while the US and Japan were the strongest performing
regions over the year, the Trust's allocation to US insurance stocks was a
relative drag on our US performance. In Asia, the relative underperformance
was due to underweights in Australia and China, both of which delivered better
than expected performance. We were cautious on Australia due to high
valuations while on China we had no exposure when the market rallied sharply
on hopes of a significant stimulus program by the Chinese government.
At the single stock level, holdings in Interactive Brokers Group a US retail
broker, Rakuten Bank a Japanese bank, and Barclays were the largest single
contributors to performance. The first was a beneficiary of interest rates not
being cut as had been expected and a continued increase in retail trading.
Rakuten benefited from the higher outlook for interest rates in Japan, while
Barclays rallied from depressed levels as it benefited from higher earnings
expectations in both its retail and investment banking arms.
The largest individual detractors were Sabre Insurance Group, a UK motor
insurer, BFF Bank, an Italian bank, and Wells Fargo, a US bank. Sabre is one
of the smallest UK motor insurers but one of the most profitable due to its
focus on underwriting higher risk drivers. However, increased competition led
to a fall in customers, and this weighed on its share price. A holding in BFF
Bank was bought following a sharp fall in its share price on the back of an
intervention from the Bank of Italy but lack of clarity on a resolution led to
its shares treading water. The decision to sell Wells Fargo was a relative
drag as the stock continued to perform well on the expectation that the
incoming Trump administration would lift restrictions on the bank, first
imposed back in 2015.
We discuss performance and investment activity by subsector below:
Diversified financials
Diversified financials is a broad category comprising alternative asset
managers, consumer finance companies, stock exchanges, investment banks,
retail brokers, payment companies, holding companies and information services
companies. As a subsector, diversified financial stocks was the best
performing category, generating portfolio returns of 40.2% against 39.2% for
the index with most of its constituents benefitting from the "risk on"
sentiment. Alternative asset managers, consumer finance companies, investment
banks and retail brokers saw the biggest rise in share prices.
We were overweight alternative asset managers which was a strong contributor
to performance. They continued to benefit from fund inflows increasing
management fees, and expectations of a pick-up in M&A activity, which
would increase performance fees. Also, a number of them have been added to the
S&P 500 Index - KKR & Co joined in June 2024 and Apollo after the
financial year end.
At the start of the year our largest holdings were Ares Management and
Intermediate Capital Group as they were both focused on private credit where
we felt rising interest rates and bond yields would provide a tailwind to
demand. However, with the more positive outlook for financial markets, we felt
private equity-focused alternative asset managers would begin to perform
better.
As a result, we bought holdings in EQT and Antin Infrastructure Partners then
rotated into new positions in KKR and Blue Owl Capital on the back of a sharp
move in the share prices of the former. KKR is one of the largest alternative
asset managers globally. A new holding was also purchased in CVC Capital
Partners when it listed on the Amsterdam Stock Exchange on its third attempt.
Later in the period, we sold Blue Owl Capital in favour of a holding in
Blackstone which we saw as having greater upside.
We also purchased a holding in BlackRock. BlackRock is the largest asset
manager in the world with over $11.5trn in assets under management. It is
possibly best known for the passive iShares ETF (Exchanged Traded Funds)
business it acquired from Barclays during the global financial crisis, albeit
it is a very large active manager of equity and fixed income funds. In the
past year, it has made several large acquisitions, notably Global
Infrastructure Partners (GIP), an infrastructure-focused asset manager,
Preqin, one of the largest data businesses in the alternative asset industry,
and HPS, a private credit asset manager.
Payment companies, exchanges and information services companies saw strong
returns but lagged the subsector reflecting their more defensive
characteristics and lower sensitivity to financial markets. Payment companies
are large constituents of the sector, notably Visa and MasterCard. We have
long liked them for their high level of profitability, low-risk business model
and growth prospects from e-commerce spending and the shift from cash to
cards. Nevertheless, we reduced our holdings in both during the period and
purchased a holding in Fidelity National Information Services which is best
known for providing core banking software for many banks.
Information services companies such as Moody's and S&P Global, the two
largest credit rating agencies, trade on some of the highest multiples in the
sector reflecting their oligopolistic characteristics and while a pickup in
bond issuance was supportive for both companies, on average they lagged the
sector. Holdings in both MSCI and S&P Global were sold during the year,
due to these high valuations as we saw them as vulnerable to any
disappointment on growth.
On exchanges, we added to our holding in Intercontinental Exchange, the
largest exchange holding in the portfolio. Its 2022 purchase of Black Knight,
a mortgage software, data and analytics company, had weighed on its share
price but with interest rates predicted to fall we expected to see an
improvement in the outlook for the business. Also a new holding was purchased
in Nasdaq, which operates a number of stock exchanges in the US and Europe.
Similarly, an acquisition, in this instance, of Adenza, a software company, in
2023, had been an overhang on its share price.
Consumer finance companies performed well as employment data reduced concerns
around delinquencies on credit card loans while the incoming Trump
administration was viewed as favourable to changes in late payment fees. Our
main exposure to the subsector had been to American Express, and we added a
new holding in Discover following the election, in the expectation that its
acquisition by Capital One would be approved and would be very accretive.
Banks
The Trust's portfolio generated an 39.3% return from its banks' exposure
compared with 36.6% for the index. Bank share prices were strong as the
reduced tail risk of an economic downturn resulted in most banks performing
well. US banks saw the largest gains over the period as markets anticipated an
easing in capital requirements, higher fee income from a pick-up in M&A
activity helping investment banking revenues and an improving outlook for net
interest income, further fuelled by the election of Donald Trump.
Banks' performance by Region
North America
US banks 66.7%
US regional banks 46.0%
Canadian banks 29.8%
Latin American banks -12.4%
Europe
UK banks 45.2%
Eurozone banks 23.4%
Asia
Australian banks 51.7%
Japanese banks 41.0%
Chinese banks 32.2%
Indian banks 15.6%
Source: Bloomberg, 30 November 2024
Note: The figures are in sterling total return terms. Past performance is not
a reliable guide to future performance.
At the beginning of the period, the portfolio was marginally overweight US
banks against the Benchmark and, while we had a cautious outlook, we felt
valuations more than discounted the risks. We therefore increased our
exposure, adding to holdings in US Bancorp, Citizens Financial Group and East
West Bancorp and also started a new holding in Citigroup where we saw
significant upside if management could hit financial targets.
Following a sharp rally, we remained overweight large US banks given their
much stronger balance sheets and the likely benefit of any watering down of
proposed new regulatory requirements, but reduced our holdings in US regional
banks, due to concerns around the US office commercial real estate market.
We saw good opportunities in UK and European banks where rising interest rates
have led to a substantial increase in profitability. UK banks performed
extremely well over the year, mostly as a result of a sharp rerating in
valuations, while sentiment on the subsector was supported by a relatively
resilient outlook versus European peers. This reflects the outlook for
relatively higher interest rates in the UK versus other European economies,
and a greater contribution from interest rate hedges which offset a lot of the
impact of declining interest rates on earnings.
We purchased a new holding in Barclays which has performed very poorly over
the past 10+ years due to legacy issues and structurally low profitability in
parts of its core businesses. With its valuation at the low end of its
historical range and low expectations for management to hit targets it was
felt there was an attractive risk/reward payoff with the added benefit of a
pickup in activity in its investment banking businesses.
In Europe our largest holdings included Unicredit, Italy's second largest
bank, Erste Group, one of Austria's largest banks and AIB Group, Ireland's
second largest bank. European banks saw very strong performance in the first
half of the reporting period but lagged their peers in the second half over
weakness in the outlook for the Eurozone economy and worries about the impact
of lower interest rates. This led us to sell our holdings in AIB Group and
Banco Santander and reduce a holding in Bank of Cyprus.
Europe saw a pickup in bank M&A activity. BBVA, Spain's second largest
bank, made an offer for Banco Sabadell, a smaller peer while Unicredit, took a
significant stake in Commerzbank, a German bank, publicly stating its interest
in acquiring it before making an offer for Banco BPM, the fourth largest
Italian bank. After the financial year end Credit Agricole, one of France's
largest banks, with operations in Italy, announced it was looking to increase
its stake in Banco BPM.
We added to the Trust's exposure to Mexican banks in the first half, by adding
to an existing position in Grupo Financiero Banorte and starting a new holding
in Gentera, a smaller bank that offers loans to lower-income customers. We saw
Mexico as continuing to benefit from so-called 'friendshoring' as
multinational companies look to build more manufacturing operations there to
circumvent increasing trade barriers between the US and China. Later in the
period, we sold our exposure due to concerns around upcoming elections in the
US and Mexico. While Mexico should continue to be a net beneficiary of rising
trade friction between the US and China, that sentiment could change quickly.
We started new holdings in two South Korean banks which, as with Japanese and
southern European banks, have traded for some time at the lowest valuations of
the banking sector and below our estimate of fair value. We had remained
cautious due to an interventionist regulator and no obvious catalysts for a
rerating. However, a push for corporate reform in South Korea around
transparency and capital return, which has had reasonable support across the
political spectrum, has resulted in more interest from investors. Following
good performance, we reduced our exposure and sold our remaining holding at a
profit after the period end due to the political crisis in South Korea.
Indian banks have consistently been one of the best performing banking sectors
globally due to their strong profitability and good growth. However we reduced
our exposure due to the outlook being less favourable around a tighter
liquidity environment and a more interventionist regulator. Consequently, we
sold the Trust's holding in HDFC Bank, India's largest private bank, which had
underperformed following its merger with parent HDFC. While the merger offers
long-term synergies, a requirement to raise deposits is a headwind to growth
and profitability in the short to medium term.
Insurance
The Trust's insurance portfolio returned 26.4% compared to 29.1% for the
subsector. Insurance stocks performed well, outperforming wider equity markets
over the period, but were held back by their defensive characteristics in the
"risk on" market environment. While there has been some concern around the
strength of liability reserves and the worsening outlook for property
catastrophe rates, US insurers still benefited from the twin drivers of rising
investment income and improved underwriting returns.
At the beginning of the period we made some small reductions to our insurance
holdings. The most significant change was
to reduce our exposure to China and Hong Kong by selling holdings in AIA Group
and Prudential, both of which had been significant detractors from performance
over 2023.
Large European reinsurance companies performed well, but in contrast, Lloyds
of London and Bermudan reinsurers saw more mixed performance. US insurers,
with large car and home insurance businesses, where we have holdings in
Progressive Corp and Allstate, performed well, but UK motor insurers performed
poorly. UK car insurance premiums, having risen significantly in recent years
to counter the rising cost of claims, fell and even though there were two bids
for Direct Line Group the first from Ageas, a Belgian insurer, and then by
Aviva, which looks likely to succeed, they still underperformed the wider
insurance sector.
We purchased a new holding in Munich Re Group as we saw it as one of the best
positioned to continue to benefit from the strong reinsurance market due to
the strength of its balance sheet. We later switched the holding into Hannover
Rueck,
a smaller peer, and less exposed to large catastrophe events.
2024 was expected to see a much larger number of hurricanes in the Atlantic
make landfall and with it, the risk of large losses.
During the year we added a number of holdings where there has been a
regulatory intervention or a short report has been published, so-called as the
research firm involved believes the shares are overvalued and should be sold
or shorted. Short reports can vary from the salacious to dogged hard work. Not
surprisingly, this leads to shares of the companies falling, often quite
sharply. Assuming that the issues raised are overstated or of a temporary
nature the publication of a short report can be an excellent opportunity to
buy. Globe Life, a US life assurance company, and Steadfast Group, an
Australian insurance broker, fell into this category as we believe they are
two high quality businesses now trading below what we see as fair value.
Fixed-income and unquoted holdings
Our fixed income exposure reduced slightly over the period from 9.4% to 6.3%,
as we took profits on a number of the positions we had bought in 2023 and
prior. We still see attractive risk/reward from holding a selective mixture of
senior and subordinated bonds of European financials but yields generally no
longer look as compelling as they did so returns going forward will be much
more modest.
The Trust has two holdings in unquoted companies, of which the largest is
Moneybox, a UK savings and wealth platform. Founded in 2015, Moneybox, has
performed very well, surpassing £10bn in assets under administration and more
than a million customers. Consequently, due to a secondary share sale that
brought in new investors, including Amundi, one of the largest European asset
managers, the holding was written up to reflect the price at which shares were
sold.
Outlook
We remain confident on the outlook for the financials sector. It is the second
largest sector globally and highly varied across banks, insurance companies
and diversified financials with companies that have significant moats to their
business models.
We continue to believe the investment background has fundamentally changed
from the challenges of the last decade. Interest rates are 'normalising' and
there is demand for significant investment in reshoring, defence and
decarbonisation. We believe the sector will be a key beneficiary of these
trends and is underpinned by household and corporate balance sheets being in
healthy shape.
The playbook from Trump 1.0 following the 2016 US election was a significant
rally in financials but also broader equity markets which lasted around 18
months. The starting point for valuations is higher this time and much higher
for wider equity markets which may temper the size of any sustained rally from
Trump 2.0. There is concern that Trump will double-down on tariffs, negatively
impacting non-US markets. Understandably, US equities have benefited already
from being seen as more defensive versus other regional markets with
significant inflows into US-focused ETFs.
In November 2016, US equity markets outperformed non-US equity markets by
'only' 5.9%, compared to 7.2% this time, but a year after the election US
equities had given back that outperformance, albeit still rising by a very
credible 24.3%. Will US equities give back the outperformance we have seen in
2024? US financials did not give back their relative performance in 2017 but
the permutations this time, exacerbated by ongoing wars in Ukraine and the
Middle East, and a president who has unfinished business, are bigger so will
likely make 2025 a more volatile year for financial markets than 2024.
Against this background, the Fed is pushing back further on the number of
interest rate cuts amid concerns that inflation is stickier than central
banks' forecasts. This will require us to be pro-active in positioning the
Trust's portfolio to benefit from the sector's tailwinds and to navigate the
risks. Nevertheless, it is worthwhile reminding ourselves that high quality
financial companies continue to compound earnings and/or book value despite
the significant economic and geopolitical noise.
Over the last year we have consciously reduced the portfolio's exposure to
banks. The reasons for this are two-fold: while we believe many banks have
huge incumbency advantages so are well positioned looking forward, in the
shorter-term we have seen more attractive opportunities in diversified
financials. We have to be conscious that the share prices of banks are also
prone to sharp corrections, when sentiment for outlook deteriorates.
Banks have not grown their loan books materially over recent years so it would
take a significant economic downturn to generate losses that could justify the
lowly current multiples that some of them trade on. Equally they are not
risk-free and not immune from a downturn. As a UK banks analyst from KBW, a
research firm summed it up succinctly in a recent note (and the analogy can be
extrapolated to other banking markets), "In recent years UK banks have
survived a fall in GDP of 10%, interest rates rising by 5% and inflation
peaking at more than 11% with zero credit problems." Consequently, we continue
to believe the market is not giving banks the credit they deserve for that
reduction in risk.
The Trust's largest geographical exposure is to US financials which should be
beneficiaries of a lighter regulatory regime and a more favourable environment
for M&A. Lighter regulation has its risks but the increased regulation of
the past 15 years has weighed heavily on economic activity and often increased
costs for little or no economic benefit. The proposals in 2023 for a
substantial increase in US bank capital requirements would have resulted in JP
Morgan requiring a 25% increase in capital despite its performance during the
global financial crisis and the recent rise in interest rates.
These regulations have been watered down already and are expected to see
further revision.
One of our largest overweight positions has been to alternative asset
managers. The successful ones have a business model where good investment
performance leads to inflows into their funds which are multi-year in nature.
Unlike traditional asset managers, capital entrusted to them is locked up in
funds that rarely offer short-term liquidity to investors and so their assets
under management offer a steady stream of income with the possibility of
performance fees on top. Also, they do not suffer from competition and fee
pressure from passive investments and ETFs.
Payment companies continue to offer an attractive counterbalance to the more
cyclical parts of the portfolio, reflecting their much lower economic
sensitivity. They do not take balance sheet risks like banks or insurance
companies; the switch from cash to cards and growth in e-commerce continues to
drive revenues and profits over and above what would be expected from the
cyclical growth in spending.
We continue to like the insurance sector, in particular reinsurance companies,
which remain the Trust's largest overweight against the Benchmark. While close
to or at peak profitability, which we expect to decline, valuations imply that
profitability will fall rapidly, which we think will be proved wrong.
Furthermore, we like the defensive nature of the insurance businesses to
market volatility. For insurance companies, claims are largely the result of
accidents and weather, not the economic cycle. Furthermore, the float that
insurance companies hold to pay claims is mostly invested in cash and
short-term bonds, therefore large losses are unlikely should equity markets
fall sharply.
Unsurprisingly, there has been an increase in M&A activity during 2024; we
had a holding in Anima, an Italian asset manager, that was in receipt of a bid
from Banco BPM. We expect the M&A trend to continue and note that even
large financial companies are susceptible to bids as evidenced by Unicredit's
approaches to Commerzbank and Banco BPM. The 'Danish Compromise' that allows
banks to hold less capital against their insurance subsidiaries could be a
catalyst for further bids in the sector. This was key to the bids by Banco BPM
for Anima and BNP Paribas's acquisition of AXA Investment Managers through
BNP's insurance subsidiary.
Small-cap financials have materially derated over the past 10 years against
their larger peers. As a result, we see a great deal of value in some of the
Trust's smaller company holdings. These have been a modest drag on relative
performance to date but ultimately we believe valuations will mean revert as
either strategic or private equity investors look to take advantage of this
disconnect.
Finally, a key attraction of the sector overall is its value characteristics.
Financial companies on average have nearly always traded on lower
price-to-book ratios, lower price-to- earnings ratios and higher dividend
yields than the wider equity market and consequently are the largest
constituent of value indices. The discount at which the sector has traded
widened materially in the lead up to the pandemic reaching its peak of around
45% in October 2020. Today the discount has reduced to just under 30%, where
it was trading pre- pandemic, versus around 15% in July 2013 when the Trust
was launched, albeit today profitability is higher than where it was at the
end of 2019 and in 2013.
Against this background, financials have delivered a compound return of around
9.5%pa since launch in 2013 and 20.0%pa since the last tender offer in 2020.
With valuations for global equity markets at the high end of historical
averages and highly concentrated around a small number of US technology
companies, returns from the wider market are likely to be lower going forward,
all things being equal. In contrast, the lower valuations at which the
financials sector trades offer some downside protection, should markets
sell-off, and is also a likely beneficiary of any rotation from growth to
value strategies.
Nick Brind, George Barrow and Tom Dorner
Co-Managers
Polar Capital Global Financials Team
19 February 2025
Note
We would draw shareholders attention to
www.polarcapitalglobalfinancialstrust.com
(http://www.polarcapitalglobalfinancialstrust.com) for regular monthly
portfolio updates and commentary.
Full Investment Portfolio
As at 30 November 2024
Ranking Market Value % of total net assets
£'000
2024 2023 Stock Sector Country 2024 2023 2024 2023
1 (1) JP Morgan Chase Banks North America 45,025 31,432 7.1% 6.4%
2 (2) Mastercard Financial Services North America 28,254 27,136 4.5% 5.6%
3 (7) Bank of America Banks North America 25,594 13,002 4.1% 2.7%
4 (3) Visa Financial Services North America 23,130 21,140 3.7% 4.3%
5 (5) Berkshire Hathaway Financial Services North America 17,466 16,764 2.8% 3.4%
6 (-) Goldman Sachs Group Financial Services North America 16,785 - 2.7% -
7 (-) NASDAQ Group Financial Services North America 15,329 - 2.4% -
8 (-) Citigroup Banks North America 13,914 - 2.2% -
9 (-) Barclays Banks United Kingdom 13,689 - 2.2% -
10 (44) Sumitomo Mitsui Financial Banks Japan 13,526 4,329 2.1% 0.9%
Top 10 investments 212,712 33.8%
11 (-) Fidelity National Information Services Financial Services North America 13,458 - 2.1% -
12 (-) Globe Life Insurance North America 12,845 - 2.0% -
13 (-) Progressive Corp Insurance North America 12,744 - 2.0% -
14 (43) ICICI Bank Banks Asia (ex-Japan) 12,617 4,363 2.0% 0.9%
15 (-) Erste Bank Banks Europe 12,214 - 2.0% -
16 (-) Axis Capital Holding Insurance North America 12,136 - 1.9% -
17 (-) BlackRock Financial Services North America 11,821 - 1.9% -
18 (-) Allstate Corp Insurance North America 11,677 - 1.9% -
19 (10) RenaissanceRe Holdings Insurance North America 11,508 11,237 1.8% 2.3%
20 (-) NatWest Group Banks United Kingdom 11,060 - 1.8% -
Top 20 investments 334,792 53.2%
21 (39) Intact Financial Corporation Insurance North America 10,911 4,871 1.7% 1.0%
22 (59) IG Group Financial Services United Kingdom 10,876 2,940 1.7% 0.6%
23 (23) Beazley Insurance United Kingdom 10,844 7,422 1.7% 1.5%
24 (32) Ares Management Corporation Financial Services North America 10,828 5,932 1.7% 1.2%
25 (30) Intermediate Capital Group Financial Services United Kingdom 10,786 6,676 1.7% 1.4%
26 (-) BFF Bank Financial Services Europe 10,782 - 1.7% -
27 (25) Intercontinental Exchange Financial Services North America 10,766 7,271 1.7% 1.5%
28 (-) Interactive Brokers Group Financial Services North America 10,714 - 1.7% -
29 (13) U.S. Bancorp Banks North America 10,618 8,845 1.7% 1.8%
30 (-) Allfunds Group Financial Services Europe 10,140 - 1.7% -
Top 30 investments 442,057 70.2%
31 (9) Arch Capital Insurance North America 9,956 11,356 1.5% 2.3%
32 (-) Hannover Rueck Insurance Europe 9,261 - 1.5% -
33 (-) UniCredit Banks Europe 8,940 - 1.4% -
34 (-) Tryg Insurance Europe 8,790 - 1.4% -
35 (-) Deutsche Boerse Financial Services Europe 8,704 - 1.4% -
36 (-) BlackStone Group Financial Services North America 8,220 - 1.3% -
37 (-) Steadfast Group Insurance Asia (ex-Japan) 7,410 - 1.2% -
38 (-) Equitable Holdings Financial Services North America 7,370 - 1.2% -
39 (19) American Express Financial Services North America 7,286 7,987 1.2% 1.6%
40 (-) Rakuten Bank Banks Japan 7,076 - 1.1% -
Top 40 investments 525,070 83.4%
41 (-) Discover Financial Services Financial Services North America 6,724 - 1.1% -
42 (-) Regions Financial Banks North America 6,444 - 1.0% -
43 (-) KB Financial Group Banks Asia (ex-Japan) 6,197 - 1.0% -
44 (-) First Horizon National Banks North America 6,154 - 1.0% -
45 (-) Mercadolibre Financial Services Latin America 6,086 - 0.9% -
46 (-) Zions Bancorp Banks North America 5,859 - 0.9% -
47 (-) Bank of Cyprus Holdings Banks Europe 5,609 - 0.9% -
48 (-) Sabre Insurance Group Insurance United Kingdom 5,584 - 0.9% -
49 (-) Hong Leong Bank Banks Asia (ex-Japan) 5,539 - 0.9% -
50 (-) BDO Unibank Banks Asia (ex-Japan) 5,467 - 0.9% -
Top 50 investments 584,733 92.9%
51 (49) Moneybox (unquoted) Financial Services United Kingdom 5,418 3,773 0.9% 0.8%
52 (-) CVC Capital Partners Financial Services Europe 5,414 - 0.9% -
53 (37) Bank Central Asia Indonesia Banks Asia (ex-Japan) 5,370 4,946 0.8% 1.0%
54 (48) Macquarie Group Financial Services Asia (ex-Japan) 5,202 4,125 0.8% 0.8%
55 (-) Irish Residential Properties REIT Equity Real Estate Investment Trusts (REITs) Europe 4,412 - 0.7% -
56 (-) International Personal Finance 10.75% 2029 Bond Fixed Income Fixed Income 4,328 - 0.6% -
57 (60) Lancashire 5.625% 2041 Bond Fixed Income Fixed Income 3,167 2,820 0.5% 0.6%
58 (62) Rothesay Life 4.875% Perp Bond Fixed Income Fixed Income 2,987 2,487 0.5% 0.5%
59 (63) Pension Insurance 7.375% Perp Bond Fixed Income Fixed Income 2,696 2,480 0.4% 0.5%
60 (-) Deutsche Beteiligungs 5.5% 2030 Convertible Bond Fixed Income Fixed Income 2,373 - 0.4% -
Top 60 investments 626,100 99.4%
61 (78) VEF Financial Services Europe 2,372 1,526 0.4% 0.3%
62 (71) Aviva 6.875% Perp Bond Fixed Income Fixed Income 2,203 2,008 0.4% 0.4%
63 (79) Investec preference Fixed Income Fixed Income 2,181 1,391 0.3% 0.3%
64 (-) Atom Bank 11.5% 2035 Bond Fixed Income Fixed Income 2,103 - 0.3% -
65 (90) Litigation Capital Management Financial Services Asia (ex-Japan) 1,898 1,049 0.3% 0.2%
66 (75) Rothesay Life 6.875% Perp Bond Fixed Income Fixed Income 1,853 1,672 0.3% 0.3%
67 (74) CaixaBank 8.25% Perp Bond Fixed Income Fixed Income 1,821 1,747 0.3% 0.4%
68 (72) Riverstone Credit Opportunities Fixed Income Fixed Income 1,761 1,939 0.3% 0.4%
69 (80) Rothesay Life 5% Perp Bond Fixed Income Fixed Income 1,624 1,386 0.3% 0.3%
70 (-) Jackson Financial Insurance North America 1,572 - 0.2% -
Top 70 Investments 645,488 102.5%
71 (77) Vanquis Banking Fixed Income Fixed Income 1,424 1,535 0.2% 0.3%
Group 8.875% 2032
Bond
72 (83) Nationwide Building Society 5.75% Perp Bond Fixed Income Fixed Income 1,377 1,258 0.2% 0.3%
73 (96) Permanent TSB Group 13.25% Perp Bond Fixed Income Fixed Income 1,375 195 0.2% 0.0%
74 (84) Shawbrook Group 9% 2030 Bond Fixed Income Fixed Income 1,313 1,246 0.2% 0.3%
75 (92) Personal Group Insurance United Kingdom 1,302 566 0.2% 0.1%
76 (87) Shawbrook Group 12.25% 2034 Bond Fixed Income Fixed Income 1,284 1,194 0.2% 0.2%
77 (82) Atom Bank (unquoted) Banks United Kingdom 1,281 1,281 0.2% 0.3%
78 (89) Chesnara 4.75% 2032 Bond Fixed Income Fixed Income 1,222 1,049 0.2% 0.2%
79 (88) Hellenic Bank 10.25% 2033 Bond Fixed Income Fixed Income 1,134 1,065 0.2% 0.2%
80 (-) Coventry Building Society 8.75% Perp Bond Fixed Income Fixed Income 1,029 - 0.2% -
Top 80 Investments 658,229 104.5%
81 (70) VPC Specialty Lending Investments Fixed Income Fixed Income 1,014 2,014 0.2% 0.4%
82 (-) National Westminster 9% Pref Share Fixed Income Fixed Income 700 - 0.1% -
Total Investments 659,943 104.8%
Other net liabilities (30,265) (4.8%)
Total net assets 629,678 100.0%
Note: Figures in brackets denote comparative rankings as at 30 November 2023.
Portfolio Review
As at 30 November 2024
Geographical Exposure* Benchmark weighting 30 November 2024 30 November 2023
as at 30 November 2024**
North America 58.9% 61.0% 52.2%
Europe 12.6% 14.0% 16.2%
United Kingdom 4.0% 11.3% 11.6%
Asia (ex-Japan) 15.4% 7.9% 13.3%
Fixed Income - 6.5% 9.7%
Japan 4.5% 3.2% 1.7%
Latin America 0.9% 0.9% 1.4%
Other net liabilities - (4.8%) (6.1%)
Total 100.0% 100.0%
Sector Exposure* Benchmark weighting 30 November 2024 30 November 2023
as at 30 November 2024**
Financial services 39.5% 42.4% 31.2%
Banks 41.3% 35.3% 43.3%
Insurance 18.7% 19.9% 21.9%
Fixed Income - 6.5% 9.7%
Equity Real Estate Investment Trusts (REITs) - 0.7% -
Other net liabilities - (4.8%) (6.1%)
Total 100.0% 100.0%
Market Capitalisation*~ Benchmark weighting 30 November 2024 30 November 2023
as at 30 November 2024**
Mega Cap 39.7% 33.5% 37.8%
Large Cap 34.2% 24.5% 32.5%
Mid Cap 17.5% 12.8% 10.8%
Small Cap 7.5% 15.6% 7.6%
Smallest Cap 0.7% 11.9% 7.7%
Fixed Income - 6.5% 9.7%
Other net liabilities - (4.8%) (6.1%)
Total 100.0% 100.0%
* Based on the net assets as at 30 November 2024 of £629.7m (2023: £488.2m)
**The classifications are derived from the Benchmark as far as possible. Not
all geographical areas or sectors of the Benchmark are shown, only those in
which the Company had an investment at the year end.
~ With effect from January 2024, the market capitalisation bandings were
changed to "dynamic" and are therefore subject to change. The dynamic market
capitalisation is determined based on the percentiles of the total index
market capitalisation. The mega caps correspond to the 40th percentile, large
caps to the 70th percentile, mid caps to the 90th percentile, and small caps
to the 99th percentile. The year ended 30 November 2023 data has been
re-presented based on the dynamic market capitalisation.
STRATEGIC REPORT
The Strategic Report section of this Annual Report comprises the Chair's
Statement, the Investment Manager's Report, including information on the
portfolio, and this Strategic Report. This Report has been prepared to provide
information to Shareholders on the Company's strategy and the potential for
this strategy to succeed, including a fair review of the Company's performance
during the year ended 30 November 2024, the position of the Company at the
year end and a description of the principal risks and uncertainties, including
both economic and business risk factors, underlying any such forward-looking
information.
Business Model and Regulatory Arrangements
The Company's business model follows that of an externally managed investment
trust providing Shareholders with access to a portfolio of mostly listed or
quoted securities issued by companies in the financial sector. Its shares are
listed on the main market of the London Stock Exchange.
The Company is designated an Alternative Investment Fund ('AIF') under the
Alternative Investment Fund Management Directive ('AIFMD') and, as required by
the Directive, has contracted with Polar Capital LLP to act as the Alternative
Investment Fund Manager ('AIFM') and HSBC Bank Plc to act as the Depositary.
Both the AIFM and the Depositary have responsibilities under AIFMD for
ensuring that the assets of the Company are managed in accordance with the
investment policy and are held in safe custody. The Board remains responsible
for setting the investment strategy and operational guidelines as well as
meeting the requirements of the Financial Conduct Authority ('FCA') Listing
Rules and the Companies Act 2006.
The AIFMD requires certain information to be made available to investors in
AIFs before they invest and requires that material changes to this information
be disclosed in the Annual Report of each AIF. Investor Disclosure Documents,
which set out information on the Company's investment strategy and policies,
gearing, risk, liquidity, administration, management, fees, conflicts of
interest and other Shareholder information are available on the Company's
website.
There have been no material changes to the information requiring disclosure.
Any information requiring immediate disclosure pursuant to the AIFMD will be
disclosed to the London Stock Exchange. Statements from the Depositary and the
AIFM can be found on the Company's website.
Investment Objective and Policy
The Company's investment objective is to generate for investors a growing
dividend income together with capital appreciation. The Company seeks to
achieve its objective by investing in a global portfolio primarily consisting
of listed or quoted securities issued by companies in the financial sector
operating in banking, insurance, property and other subsectors. The portfolio
is diversified by geography, industry subsectors and stock market
capitalisation.
The Company may have a small exposure to unlisted and unquoted companies, but
in aggregate, this is not expected to exceed 10% of total assets at the time
of investment. The Company will not invest more than 10% of total assets, at
the time of investment, in other listed closed-ended investment companies and
no single investment will account for more than 10% of the portfolio at the
time of investment.
The Company may employ levels of borrowing from time to time with the aim of
enhancing returns. This is currently subject to an overall maximum of 20%
(increased from 15% at the time of the reconstruction in April 2020) of net
assets at the time the relevant borrowing is taken out. Actual levels of
borrowing may change from time to time based on the Manager's assessment of
risk and reward. The Company may invest through equities, index-linked and
other debt securities, cash deposits, money market instruments, foreign
currency exchange transactions, forward transactions, index options and other
instruments including derivatives. Forward transactions, derivatives
(including put and call options on individual positions or indices) and
participation notes may be used to gain exposure to the securities of
companies falling within the Company's investment policy or to seek to
generate income from the Company's position in such securities, as well as for
efficient portfolio management. Any use of derivatives for investment purposes
is made based on the same principles of risk spreading and diversification
that apply to the Company's direct investments. The Company may hedge exposure
to foreign currencies if considered appropriate for efficient portfolio
management.
Strategy and Investment Approach
The Manager's investment process is primarily driven by a bottom-up
fundamental analysis of individual companies, with macroeconomic inputs. The
Manager uses both quantitative and qualitative screens to rank companies on a
risk-adjusted basis using a number of variables such as profitability, risk,
growth and ESG metrics which is in addition to more detailed stock or
sector-specific research. The Portfolio Managers undertake trips to the US,
Europe and Asia to meet companies as well as regularly meeting companies at
various conferences and at the Polar offices.
The portfolio is primarily invested in companies with a market capitalisation
greater than US$5bn. There are no limits on the exposure of the investment
portfolio to either small or mid-cap companies where the Managers take
positions on an opportunistically basis. The Manager has discretion to invest
up to 10% of the portfolio in debt securities.
The investment portfolio is invested in a variety of companies that offer both
income and capital growth. This is balanced in order to meet the Company's
objective of growing dividends to Shareholders over time. The Board, together
with the Manager will continue to assess the likely income capability of the
portfolio to determine the appropriate longer-term distribution level. Please
refer to the Chair's Statement for information on the proposed changes to the
Company's future Dividend Policy.
Service Providers
Polar Capital LLP has been appointed to act as the Investment Manager and AIFM
as well as to provide or procure company secretarial, marketing and
administrative services, including accounting and portfolio valuation which it
has arranged to deliver through HSBC Securities Services ("HSS").
The Company also contracts directly, on terms agreed periodically, with
several third parties for the provision of specialist services:
· HSBC Securities Services as Custodian and Depositary;
· Stifel Nicolaus Europe Limited as Corporate Broker;
· Equiniti Limited as Share Registrars;
· PricewaterhouseCoopers LLP as Independent Auditors;
· RD:IR for Investor Relations and Shareholder Analysis;
· Marten & Co as third-party research providers;
· Camarco as PR advisors;
· Perivan as Designers and Printers for shareholder communications;
and
· Huguenot Limited as Website Designers and internet hosting
services.
Benchmark
The Company measures the Manager's performance against the MSCI ACWI
Financials Net Total Return Index ('the Benchmark'). This has been used to
measure the performance of the Company since 23 April 2020. The Manager does
not seek to replicate the index in constructing the Company's portfolio. The
portfolio may, therefore, diverge substantially from the constituents of the
Benchmark.
Although the Company evaluates its performance against the Benchmark, this is
neither a target nor a determinant of investment strategy. The purpose of the
Benchmark is to set out a reasonable measure of performance for Shareholders
and an appropriate base which, together with an additional hurdle, forms the
level above which the Manager earns a performance fee.
Investment Management Company and Management of the Portfolio
As the Company is an investment vehicle for Shareholders, the Directors have
sought to ensure that the business of the Company is managed by a leading
specialist investment management team and that the investment strategy is
attractive to Shareholders. The Directors believe that a strong working
relationship with the Manager will achieve the optimum return for
Shareholders. As such, the Board and Manager operate in a supportive,
co-operative and open environment.
The Investment Manager is Polar Capital LLP ("Polar Capital") which is
authorised and regulated by the Financial Conduct Authority, to act as
Investment Manager and AIFM of the Company with sole responsibility for the
discretionary management of the Company's assets (including uninvested cash)
and sole responsibility for decisions as to the purchase and sale of
individual investments. The Manager also has responsibility for asset
allocation within the limits of the investment policy and guidelines
established and regularly reviewed by the Board, all subject to the overall
control and supervision of the Board. Polar Capital provides a team of five
financial specialists with the portfolio jointly managed by Nick Brind, George
Barrow and Tom Dorner. The Manager has other investment resources which
support the investment team and has experience in administering and managing
other investment companies.
Fee Arrangements
Management Fee
Under the terms of the IMA, the Manager is entitled to a management fee
together with reimbursement of reasonable expenses incurred by it in the
performance of its duties. The Management fee is payable monthly in arrears
and, with effect from 7 April 2020, is charged at a rate of 0.70% per annum of
the Company's NAV. In accordance with the Directors' policy on the allocation
of expenses between income and capital, in each financial year 80% of the
management fee payable is charged to capital and the remaining 20% to revenue.
Performance Fee
The Manager may be entitled to a performance fee equal to 10% of the excess of
the performance fee hurdle and payable at the end of each five-year period,
the first period being from 23 April 2020 to 30 June 2025 and at five yearly
intervals thereafter.
For the purpose of calculating the performance fee, the Company's NAV
(adjusted to reflect dividends paid, and any performance impact caused by the
issue or buyback of ordinary shares) at 30 June 2025, being the end of the
relevant Performance Period, will be used. No performance fee has been paid or
accrued as at 30 November 2024. Where a performance fee becomes payable it
will be charged 100% to capital.
Termination Arrangements
The IMA may be terminated by either party giving 12 months' notice. The IMA
may be terminated earlier by the Company with immediate effect on the
occurrence of certain events, including: (i) if an order has been made or an
effective resolution passed for the liquidation of the Manager; (ii) if the
Manager ceases or threatens to cease to carry on its business; (iii) where the
Company is required to do so by a relevant regulatory authority; (iv) on the
liquidation of the Company; or (v) subject to certain conditions, where the
Manager commits a material breach of the IMA. In the event the IMA is
terminated by the Company, except in the event of termination by the Company
for certain specified causes, the base fee and the performance fee will be
calculated pro rata for the period up to and including the date of
termination.
Performance and Key Performance Objectives
The Board appraises the performance of the Company and the Manager as the key
supplier of services to the Company against
key performance indicators ('KPIs'). The objectives of the KPIs comprise both
specific financial and Shareholder related measures.
These KPIs have not differed from the prior year.
KPI Control process Outcome
The provision of investment returns to Shareholders measured by long-term NAV The Board reviews at each meeting the performance of the portfolio and The Company's NAV total return, over the year ended 30 November 2024, was
total return relative to the Benchmark and a comparator group. considers the views of the Manager and the value delivered to Shareholders 34.8%* while the Benchmark delivered 36.1% over the same period. Since
through NAV growth and dividends paid. inception the NAV total return was 199.2%* compared to 204.8% for the
Benchmark and 161.8% for a comparator group.
The Board also receives monthly reports on performance against both the
Benchmark and a comparator group of open-ended investment funds. As at 30 November 2024 the Company ranks 9 out of a comparator group of 31
open ended funds within the Lipper Financial Sector universe since inception
and 4 out of 6 within a smaller comparable group of funds regularly considered
by the Board.
The achievement of a progressive dividend policy.~ Financial forecasts are reviewed to track income and Distributions. A total of two interim dividends amounting to 4.70p (2023: 4.55p) per ordinary
share have been paid or declared in respect of the financial year ended 30
November 2024. While the aim to achieve dividend growth remains there is no
guarantee that this can be achieved.
Monitoring and reacting to issues created by the discount or premium of the The Board receives regular information on the composition of the share The discount of the ordinary share price to the NAV per ordinary share at the
ordinary share price to the NAV per ordinary share with the aim of reducing register including trading patterns and discount/premium levels of the year-end was 5.5%* compared with a discount of 12.2% at the year ended 30
volatility for Shareholders. Company's ordinary shares. The Board discusses and authorises the issue or buy November 2023. The average discount
back of shares when appropriate.
for the investment trust sector at 30 November 2024 was 15.6%.
The Board is aware of the vulnerability of a sector specialist investment
trust to a change in investor sentiment towards that sector. While there is no During the year under review, the Company bought back 5,642,322 ordinary
formal policy the Board discusses the market factors giving rise to any shares at an average discount of 8.9%. No ordinary shares were bought back
discount or premium, the long or short-term nature of those factors and the following the year end. All shares bought back have been placed into treasury
overall benefit to Shareholders of any mitigating actions. The market for reissue to the market under the appropriate conditions.
liquidity is also considered when authorising the issue or buy back of shares
when appropriate market conditions prevail.
A daily NAV per share, calculated in accordance with the AIC guidelines is
issued to the London Stock exchange.
To qualify and continue to meet the requirements for Sections 1158 and 1159 of The Board receives regular financial information which discloses the current The Company has been granted investment trust status annually since its launch
the Corporation Tax Act 2010 ('investment trust status'). and projected financial position of the Company against each of the tests set on 1 July 2013 and is deemed to be granted such status for each subsequent
out in Sections 1158 and 1159. year subject to the Company continuing to satisfy the conditions of Section
1158 of the Corporation Tax Act 2010 and other associated ongoing
requirements. The Directors believe that the tests have been met in the
financial year ended 30 November 2024 and will continue to be met.
Efficient operation of the Company with appropriate investment management Annually the Board considers the services provided by the Manager, both The Board, through the Audit Committee has received and considered
resources and services from third party suppliers within a stable and risk investment and administrative, and reviews the provision of services from satisfactory the internal controls report of the Manager and other key
controlled environment. third parties including the costs of their services. suppliers including contingency arrangements to facilitate the ongoing
operations of the Company in the event of withdrawal or failure of services.
The annual operating expenses are reviewed and any non-recurring project
related expenditure approved by the Board. The ongoing charges for the year ended 30 November 2024 excluding the
performance fee were 0.85% of net assets (2023: 0.86%)*. The ongoing charges
including the performance fee payable were 0.85% (2023: 0.86%)*.
* Alternative Performance Measures, see below for further explanations.
~ Please refer to the Chair's Statement for information on the proposed
changes to the Company's future Dividend Policy.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board is responsible for the management of risks faced by the Company.
Through delegation to the Audit Committee, it has established procedures to
manage risk, oversee the internal control framework and determine the nature
and extent of the principal risks the Company is willing to take to achieve
its long-term strategic objectives.
The established risk management process the Company follows identifies and
assesses various risks, their likelihood, and possible severity of impact,
considering both internal and external controls and factors that could provide
mitigation.
A post mitigation risk impact score is then determined for each principal
risk.
The Audit Committee carries out, at least annually, a robust assessment of the
principal risks and uncertainties. With the assistance of the Manager, it
monitors identified risks and meets to discuss both long-term and emerging
risks.
During the year the Audit Committee, in conjunction with the Board and the
Manager, undertook a full review of the Company's Risk Map including the
mitigating factors and controls to reduce the impact of the risks. The
Committee continues to closely monitor these risks along with any other
emerging risks as they develop and implements mitigating actions as necessary.
The Committee is mindful of the geopolitical political landscape, specifically
the ongoing military activity in Ukraine and the Middle East. Geopolitical
events such as these can have a significant impact on global financial
markets, and hence on the Company's portfolio performance. Further information
on how the Committee has assessed the Company's ability to operate as a going
concern and the Company's longer-term viability can be found in the Report of
the Audit Committee in the Annual Report.
The principal risks are detailed on the following pages along with a
high-level summary of their management through mitigation over the past
financial year.
Investor Manager Performance
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
Failure to achieve investment objective, investment performance below agreed The Board seeks to manage the impact of such risks through regular reporting
benchmark objective or market/ industry average. and monitoring of investment performance against a comparator group of
open-ended funds, the Benchmark and other agreed indicators of relative
performance. In months when the Board is not scheduled to meet, it receives a
monthly report containing financial information on the Company including
gearing and cash balances.
Performance and strategy are reviewed throughout the year at regular Board
meetings where the Board can challenge the Manager. The Board also receives a
monthly commentary from the Manager in the form of factsheets for all the
specialist financial sector funds managed by Polar Capital.
The Board is committed to a clear communication programme to ensure
Shareholders understand the investment strategy. This is maintained using
monthly factsheets which have a market commentary from the Manager as well as
portfolio data, an informative website as well as annual and half year
reports. The Management Engagement Committee considers the suitability of the
Manager based on performance and other services provided.
Loss of portfolio manager or other key staff. The strength and depth of investment team provides comfort that there is not
over-reliance on one person with alternative portfolio managers available to
act if needed. For each key business process roles, responsibilities and
reporting lines are clear and unambiguous. Key personnel are incentivised by
equity participation in the investment management company.
The ability to continue the dividend policy* may be compromised due to lower The Board monitors the level of investment income through monthly management
income because of changes in underlying companies' policies or changes in the accounts and discussion. In the event of there being insufficient income
portfolio construction, regulatory intervention, local taxes because of the during the financial year, the Company has built up revenue reserves on which
currency exposure underlying the portfolio. This could result in a lower level to draw to pay dividends. Equally, in the event of the revenue reserves being
of dividend being paid than intended or previously paid fully utilised the Company may use other distributable reserves.
The Board and the Manager will continue to assess the income capability of the
portfolio and determine the appropriate longer-term dividend level based on
how economies and businesses perform.
Risk of regular five yearly tenders being taken up at a level which leaves Under the Articles of Association, the Company is required to make tender
size of the Company unviable. offers at five-yearly intervals, with the first to commence on or before 30
June 2025. There is a risk that the size of the Company following the tender
offer may not meet the minimum size condition to continue in existence.
The Board, Investment Manager and Corporate Broker maintain a close
relationship with Shareholders. Regular reports are provided to the Board on
communications with Shareholders and feedback received is discussed at Board
meetings. Ahead of the tender, further engagement will be held with
Shareholders and an assessment will be undertaken to determine Shareholders
likely to remain invested in the Company post tender.
Market, Economic and Political Risk
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
While the portfolio is diversified across a number of stock markets worldwide, The Board has set appropriate investment limits against which it monitors the
the investment mandate is focused on financials and thus the portfolio is more position of the portfolio. They include guidelines on exposures to certain
sensitive to investor sentiment and the commercial acceptance of the sector investment markets and sectors. The Board discusses with the Manager at each
than a general investment portfolio. Board meeting its views on the sector.
The Company's portfolio is exposed to risks such as market price, credit, At each Board meeting the composition and diversification of the portfolio by
liquidity, foreign currency and interest rates. The portfolio is actively geographies, sectors and capitalisations are considered along with sales and
managed. The Manager's style focuses primarily on the investment opportunity purchases of investments. Individual investments are discussed with the
of individual stocks and, accordingly, may not follow the makeup of the Manager as well as the Manager's general views on the various investment
Benchmark. This may result in returns which are not in line with the markets and the financials sector.
Benchmark.
Analytical performance data and attribution analysis is presented by the
The degree of risk which the Manager incurs in order to generate the Manager.
investment returns and the effect of gearing on the portfolio by borrowed
funds can magnify the portfolio returns per share positively or negatively.
The policies for managing the risks posed by exposure to market prices,
interest rates, foreign currency exchange rates, credit and liquidity are set
out in the financial statements. Shareholders have sight of the entire
portfolio and geographic exposure of investments.
There is significant exposure to the economic cycles of the markets in which The Board regularly discusses global geopolitical issues and general economic
the underlying investments conduct their business operations as well as the conditions and developments.
economic impact on investment markets where such investments are listed.
The impact on the portfolio from other geopolitical changes and the overall
The fluctuations of exchange rates can also have a material impact on economic and geopolitical environment in which the Company operates is
Shareholder returns. monitored through existing control systems and discussed regularly by the
Board.
Note 27 in the Annual Report describes the risks posed by changes in foreign
exchange rates. The Manager can hedge foreign currency if it is thought
appropriate at the time.
Operational and Regulatory Risk
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
There are risks from the failure of, or disruption to, operational and At each Board meeting the Board receives an administration report that
accounting systems and processes provided by the Manager including any provides details on general corporate matters including legislative and
subcontractors to which the Manager has delegated a task as well as directly regulatory developments and changes.
appointed suppliers.
The Board conducts an annual review of suppliers and their internal control
The mis-valuation of investments or the loss of assets from the custodian or reports, which includes the disaster recovery procedures of the Manager.
sub custodians could affect the NAV per share or lead to a loss of Shareholder
value. Regular reporting from the Depositary on the safe custody of the Company's
assets and the operation of control systems related to the portfolio
There is taxation risk that the Company may fail to continue as an investment reconciliation is monitored. Specialist advice is sought on taxation issues as
trust and suffer capital gains tax or fail to recover as fully as possible and when required. The Audit Committee has oversight of such work.
withholding taxes on overseas investments.
Information and guidance on legal and regulatory risks is managed by using the
The legal and regulatory risks include failure to comply with the FCA's Manager or professional advisers where necessary and the submission of reports
Prospectus Rules, Listing Rules and Disclosure Guidance and Transparency to the Board for discussion and, if required, any remedial action or changes
Rules; not meeting the provisions of the Companies Act 2006 and other UK and considered necessary. The Board monitors new developments and changes in the
overseas legislation affecting UK companies and not complying with accounting regulatory environment. Whilst it has no control over such changes, the Board
standards. Further risks arise from not keeping abreast of changes in seeks to ensure that their impact on the Company is understood and complied
legislation and regulations which have in recent years been substantial. with.
Cyber-attack causing disruption to or failure of operational and accounting The number, severity and success rate of cyber-attacks have increased
systems and processes provided by the Investment Manager creating an considerably over recent years. Detailed controls are in place and the Board
unexpected event and/or adverse impact on personnel or the portfolio. proactively seeks to keep abreast of developments through updates with
representatives of the Investment Manager who undertakes meetings with
relevant service providers.
Investor Relations and Stewardship
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
Persistent excessive share price premium/discount to NAV. In consultation with its advisors, including the corporate broker, the Board
regularly considers the level of the share price premium/discount to the NAV
and the Board reviews ways to enhance Shareholder value including share
issuance and buy backs.
Failure to communicate effectively and timeously with investors or the Polar Capital Sales Team and the Corporate Broker provide periodic reports to
issuance of erroneous or misleading information. the Board on communications with shareholders and feedback received.
The Investment Manager also has regular interaction with clients, Shareholders
and investors. This is through a combination of channels including one to one
meetings, presentations at retail, professional events or at Polar's Annual
Investor conference.
The Board is committed to a clear communication programme to ensure
Shareholders understand the investment strategy. This is maintained using
monthly factsheets which have market commentary from the Investment Manager
portfolio data, an informative website and annual and half year reports.
Contact details and how to contact the Board are provided in regulatory
announcements and the Board will be present at the AGM to speak to
Shareholders.
* Please refer to the Chair's Statement for information on the proposed
changes to the Company's future Dividend Policy.
SECTION 172 OF THE COMPANIES ACT 2006
The statutory duties of the Directors are listed in s171-177 of the Companies
Act 2006. Under s172, Directors have a duty to promote the success of the
Company for the benefit of its members (its Shareholders) as a whole and in
doing so have regard to the consequences of any decision in the long term, as
well as having regard to the Company's wider stakeholders amongst other
considerations. The fulfilment of this duty not only helps the Company achieve
its Investment Objective but ensures decisions are made in a responsible and
sustainable way for Shareholders.
To ensure that the Directors are aware of, and understand, their duties, they
are provided with an induction when they first join the Board, including
details of all relevant regulatory and legal duties as a director and continue
to receive regular and ongoing updates on relevant legislative and regulatory
developments. They have continued access to the advice and services of the
Company Secretary and, when deemed necessary, the Directors can seek
independent professional advice. The Schedule of Matters Reserved for the
Board, and the Terms of Reference of its committees, are reviewed annually and
further describe Directors' responsibilities and obligations and include any
statutory and regulatory duties.
The Board seeks to understand the needs and priorities of the Company's
stakeholders and these are taken into account during discussions and as part
of the decision-making process. As an externally managed investment company,
the Company does not have any employees or customers, however the key
stakeholders and a summary of the Board's consideration and actions where
possible in relation to each group of stakeholders are described in the table
below.
Stakeholder Group How we engage with them
Shareholders The Directors have considered this duty when making the strategic decisions
during the year that affect Shareholders, including the continued appointment
of the Investment Manager and the recommendation that Shareholders vote in
favour of the resolutions for the Company to continue and to renew the
allotment and buy back authorities at the AGM. The Directors have also engaged
with and taken account of Shareholders' interests during the year.
The Company's AGM will be held at 2:00pm on Thursday 10 April 2025 at the
offices of Polar Capital, 16 Palace Street, London SW1E 5JD. The Board
recognises that the AGM is an important event for Shareholders and the Company
and is keen to ensure that Shareholders can exercise their right to vote and
participate. Any changes to these arrangements will be communicated through
the Company's website and via a Regulatory Information Service announcement.
The Board believes that Shareholder engagement remains important and is keen
that the AGM be a participative event for all. Shareholders will have the
opportunity to hear a pre-recorded presentation from the Manager, reviewing
the Company's performance in the year and the outlook for 2024-2025 in advance
of the AGM. The presentation will be uploaded to the Company's website ahead
of the AGM. In addition, Shareholders will be able to watch the proceedings of
the AGM live via Zoom Conference. Details of how to access the online link are
provided in the Notice of AGM. The AGM in-person meeting will comprise the
formal business and questions only. All formal business resolutions will be
voted on by a poll and we therefore encourage Shareholders to submit their
votes ahead of the meeting by proxy card which is provided with the Notice of
Meeting. Shareholders who hold their shares via an online stockbroker or
platform are encouraged to exercise their vote in advance of the meeting
through their respective platforms. Further information can be found on the
AIC's website and in the Shareholder information section in the Annual
Report.
Shareholders are encouraged to send any questions (on or before 7 April 2025)
ahead of the AGM to the Board via the Company Secretary at
cosec@polarcapital.co.uk stating the subject matter as PCFT-AGM. The Chair of
the Board and of the Committees, along with the Managers, will attend the AGM
and will be available to respond to questions and concerns from Shareholders.
Should any significant votes be cast against a resolution, the Board will
engage with Shareholders and explain in its announcement of the results of the
AGM the actions it intends to take to consult Shareholders to understand the
reasons behind the votes against. Following the consultation, an update will
be published no later than six months after the AGM and the Annual Report will
detail the impact the Shareholder feedback has had on any decisions the Board
has taken and any actions or resolutions proposed.
Relations with Shareholders
The Board and the Manager consider maintaining good communications and
engaging with Shareholders through meetings and presentations a key priority.
The Board regularly considers the share register of the Company and receives
regular reports from the Manager and the Corporate Broker on meetings attended
with Shareholders and any concerns that are raised in those meetings. The
Board reviews any correspondence from Shareholders and members of the Board
attend Manager presentations to investors.
Shareholders are kept informed by the publication of annual and half year
reports, monthly fact sheets, access to commentary from the Manager via the
Company's website and attendance at events at which the Manager presents.
Shareholders can raise any concerns directly with the Chair or the Board
without intervention of the Manager or Company Secretary. They may do this
either in person at the AGM or at other events, or in writing either via the
registered office of the Company or to the Chair's specific email address
Chair.PCFT@polarcapital.co.uk.
The Company, through the sales and marketing efforts of the Manager,
encourages retail investment platforms to engage with underlying Shareholders
in relation to Company communications and enable those Shareholders to cast
their votes on Shareholder resolutions; the Company however has no
responsibility over such platforms. The Board therefore encourages
Shareholders invested via platforms to regularly visit the Company's website
or to contact the Company directly to obtain copies of Shareholder
communications.
The Company has made arrangements with its registrar for Shareholders who own
their shares directly rather than through a nominee or share scheme to view
their account online at www.shareview.co.uk. Other services are available via
this website.
Outcomes and strategic decisions during the year
2025 Tender Offer
Ahead of the Tender Offer to be made to Shareholders in 2025, Directors
continue to engage with the Manager, Polar Sales and the Company's Brokers to
understand Shareholder views and the proposed mechanisms and timetable for the
Tender.
Buybacks
Further to Shareholder authority being granted, the Company has the facility
to conduct share buy backs when, in normal market conditions, it is in the
best interests of Shareholders to do so. The Company bought back a total of
5,642,322 shares during the year under review. No ordinary shares were bought
back following the year end.
AGM
To enable more Shareholders the opportunity to hear the Investment Manager's
AGM presentation, the Board has opted to pre-record and upload this to the
website ahead of the voting deadline and in-person formal business AGM. In
addition, Shareholders can watch the proceedings of the AGM live via Zoom
Conference. Details of how to access the online link are provided in the
Notice of AGM.
Manager Through the Board meeting cycle, regular updates and the work of the
Management Engagement Committee in reviewing the services of the Manager
annually, the Board is able to safeguard Shareholder interests by:
• Ensuring excessive risk is not undertaken in the pursuit of investment
performance;
• Ensuring adherence to the Investment Policy;
• Ensuring adherence to the Investment Management Agreement and
reviewing the agreed management and performance fees;
• Ensuring compliance with statutory legal requirements, regulations and
other advisory guidance such as consumer duty and aspects of operational
resilience; and
• Reviewing the Manager's decision making and consistency of its
investment process.
Maintaining a close and constructive working relationship with the Manager is
crucial as the Board and the Manager both aim to continue to deliver
consistent, long-term returns in line with the Investment Objective. The
culture which the Board maintains to achieve this involves encouraging open
discussion with the Manager, ensuring that the interests of Shareholders and
the Manager are aligned, providing constructive challenge and making
Directors' experience available to support the Manager. This culture is
aligned with the collegiate and meritocratic culture which Polar Capital has
developed and maintains.
Outcomes and strategic decisions during the year
ESG
The Board continued to engage with the Investment Manager to oversee how ESG
has been integrated into the overall house methodology as well as the bespoke
financials team investment approach, engagement and decision making. The Board
also receives information on how ESG affects Polar Capital as a business and
the financials team.
Consumer Duty
The Board has worked with the Investment Manager to ensure the obligations of
the new Consumer Duty regulations are appropriately applied to the Company. In
light of the obligations, all communications including the website, fact
sheets and other published documentation, have been reviewed to ensure they
are appropriate for all end users. A 'value for money' assessment has also
been undertaken and is made available to distributors on request for their due
diligence processes.
Cost Disclosure
The Board has engaged with the Manager to understand the implications of the
FCA's forbearance statement and explore any changes that could be applied to
key documentation to take advantage of the exemption from PRIIPs and the cost
disclosure aspects of MiFID. The Board has reviewed the changes to the
Company's Key Information Document and Factsheet, both of which have been
updated in line with industry guidance.
Management
On the recommendation of the Management Engagement Committee the Board has
resolved to the continue the appointment of the Manager on the terms agreed
within the Investment Management Agreement.
Investee Companies The Board has instructed the Manager to consider the published corporate
governance policies of the companies in which they invest.
The Board has also considered the Investment Manager's Stewardship Code and
Proxy Voting Policy. The Voting Policy is for the Investment Manager to vote
at all general meetings of companies in favour of resolutions proposed by the
management where it believes that the proposals are in the interests of
shareholders. However, in exceptional cases, where the Investment Manager
believes that a resolution would be detrimental to the interests of
shareholders or the financial performance of the Company, appropriate
notification will be given and abstentions or a vote against will be lodged.
The Manager voted at 68 company meetings over the year ended 30 November 2024,
with 37% of meetings having at least one vote against, withheld or abstained.
The Manager reports to the Board, when requested, on the application of the
Stewardship Code and Voting Policy. The Manager's Stewardship Code and Voting
Policy can be found on the Manager's website in the Corporate Governance
section (www.polarcapital.co.uk). Further information on how the Manager
considers ESG in its engagement with investee companies can be found in the
ESG Report in the Annual Report.
Outcomes and strategic decisions during the year
The Board receives information on the ratings of investee companies and can
use this as a tool to inform discussions with the Manager during Board
meetings.
Service Providers The Directors oversee the Company's service providers through the annual cycle
of reporting and due diligence meetings or site visits undertaken by the
Manager. This engagement is undertaken with the aim of having effective
oversight of delegated services, seeking to improve the processes for the
benefit of the Company and to understand the needs and views of the Company's
service providers, as stakeholders in the Company. Further information on the
Board's engagement with service providers is included in the Corporate
Governance Statement and the Report of the Audit Committee. During the year
under review, due diligence meetings have been undertaken by the Investment
Manager and where possible, service providers have joined meetings to present
their reports directly to the Board or the Audit Committee as appropriate.
Outcomes and strategic decisions during the year
The reviews of the Company's service providers have been positive and the
Directors believe their continued appointment is in the best interests of
Shareholders. The accounting and administration services of HSBC Securities
Services (HSS) are contracted through Polar Capital and provided to the
Company under the terms of the IMA. However, the Board continues to conduct
due diligence service reviews in conjunction with the Company Secretary and is
satisfied that the services received continue to be of a satisfactory
standard.
Proxy Advisors The support of the major institutional investors and proxy adviser agencies is
important to the Directors, as the Company seeks to retain a reputation for
high standards of corporate governance, which the Directors believe
contributes to the long-term sustainable success of the Company. The Directors
consider the recommendations of these various proxy voting agencies when
contemplating decisions that will affect Shareholders and when reporting to
Shareholders through the Half Year and Annual Reports.
Recognising the principles of stewardship, as promoted by the UK Stewardship
Code, the Board welcomes engagement with all its investors. The Board
recognises that the views, questions from, and recommendations of many
institutional investors and proxy adviser agencies provide a valuable feedback
mechanism and play a part in highlighting evolving shareholders' expectations
and concerns.
Outcomes and strategic decisions during the year
Where possible the Chair and other representatives of the Company have engaged
with the stewardship teams of some larger investors to understand and address
their expectations in terms of board governance, recruitment and diversity.
Prior to AGMs, the Company engages with these agencies to fact check their
advisory reports and clarify any areas or topics contained within the report.
This ensures that whilst the proxy advisory reports provided to shareholders
are objective and independent, the Company's actions and intentions are
represented as clearly as possible to assist with shareholders' decision
making when considering the resolutions proposed at the AGM.
AIC The Company is a member of the AIC and has supported various lobbying
activities. Representatives of the Manager sit on a variety of forums run by
the AIC which aids development and understanding of new policies and
procedures. The Directors may cast votes in the AIC Board Elections each year
and regularly attend AIC events.
Approved by the Board on 19 February 2025.
By order of the Board
Jumoke Kupoluyi, ACG
Polar Capital Secretarial Services Limited
Company Secretary
STATEMENT OF DIRECTORS' RESPONSIBILITIES
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 Financial Statements for each
financial year. Under that law the Directors have prepared the Financial
Statements in accordance with the UK-adopted International Accounting
Standards (UK-adopted IAS) and applicable law. Additionally, the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules require the
directors to prepare the Financial Statements in accordance with UK-adopted
IAS.
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 Company and of the profit or loss of the Company for that
period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether they have been prepared in accordance with
UK-adopted IAS, subject to any material departures disclosed and explained in
the Financial Statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements and the Directors'
Remuneration Report comply with the Companies Act 2006. They are responsible
for such internal controls 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 Company
and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that comply 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 in the UK governing the preparation and dissemination of Financial
Statements may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors 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 Company's position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in the Strategic
Report, confirm that, to the best of their knowledge:
· the Company's Financial Statements, which have been prepared in
accordance with applicable accounting standards give a true and fair view of
the assets, liabilities, financial position and profit/loss of the Company;
and
· the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors' Report is
approved:
· so far as the Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
· they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Company's auditors are aware of that information.
Simon Cordery
Chair
19 February 2025
Statement of Comprehensive Income
For the year ended 30 November 2024
Notes Year ended 30 November 2024 Year ended 30 November 2023
Revenue Capital Total Revenue Capital Total
return return return return return return
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 3 19,067 - 19,067 19,143 - 19,143
Other operating income 4 1,505 - 1,505 916 - 916
Gains/(losses) on investments held at fair value 5 - 156,916 156,916 - (25,777) (25,777)
Losses on derivatives - (251) (251) - (442) (442)
Other currency losses 6 - (2,312) (2,312) - (152) (152)
Total income/(expense) 20,572 154,353 174,925 20,059 (26,371) (6,312)
Expenses
Investment management fee 7 (772) (3,088) (3,860) (704) (2,815) (3,519)
Other administrative expenses 8 (798) (46) (844) (774) (20) (794)
Total expenses (1,570) (3,134) (4,704) (1,478) (2,835) (4,313)
Profit/(loss) before finance costs and tax 19,002 151,219 170,221 18,581 (29,206) (10,625)
Finance costs 9 (799) (3,196) (3,995) (722) (2,887) (3,609)
Profit/(loss) before tax 18,203 148,023 166,226 17,859 (32,093) (14,234)
Tax 10 (1,988) 337 (1,651) (1,986) 695 (1,291)
Net profit/(loss) for the year and total comprehensive income/(expense) 16,215 148,360 164,575 15,873 (31,398) (15,525)
Earnings/(losses) per ordinary share (pence) 11 5.31 48.62 53.93
4.97 (9.84) (4.87)
The total column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
The amounts dealt with in the Statement of Comprehensive Income are all
derived from continuing activities.
The notes to follow form part of these financial statements.
Statement of Changes in Equity
For the year ended 30 November 2024
Notes Year ended 30 November 2024
Called up share capital Capital redemption reserve Share premium reserve Special distributable reserve Capital reserves Revenue reserve Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Total equity at 1 December 2023 16,588 251 311,369 105,117 43,507 11,366 488,198
Total comprehensive income:
Profit for the year ended 30 November 2024 - - - - 148,360 16,215 164,575
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury 15 - - - (9,038) - - (9,038)
Equity dividends paid 12 - - - - - (14,057) (14,057)
Total equity at 30 November 2023 16,588 251 311,369 96,079 191,867 13,524 629,678
Notes Year ended 30 November 2023
Called up share capital Capital redemption reserve Share premium reserve Special distributable reserve Capital reserves Revenue reserve Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Total equity at 1 December 2022 16,588 251 311,380 128,256 74,905 9,892 541,272
Total comprehensive (expense)/income:
(Loss)/profit for the year ended 30 November 2023 - - - - (31,398) 15,873 (15,525)
Transactions with owners, recorded directly to equity:
Issue costs relating to prior year share placings - - (11) - - - (11)
Shares bought back and held in treasury 15 - - - (23,139) - - (23,139)
Equity dividends paid 12 - - - - - (14,399) (14,399)
Total equity at 30 November 2023 16,588 251 311,369 105,117 43,507 11,366 488,198
The notes to follow form part of these financial statements.
Balance Sheet
As at 30 November 2024
Notes 30 November 2024 30 November 2023
£'000 £'000
Non-current assets
Investments held at fair value through profit or loss 13 659,943 518,124
Current assets
Cash and cash equivalents 14 28,178 37,262
Fair value of open derivative contracts 13 728 506
Receivables 22,873 8,419
51,779 46,187
Total assets 711,722 564,311
Current liabilities
Bank overdraft 14 - (1)
Fair value of open derivative contracts 13 (378) (316)
Payables (2,335) (6,502)
Bank loan (78,935) -
(81,648) (6,819)
Non-current liabilities
Bank loan - (69,031)
Indian capital gains tax provision (396) (263)
(396) (69,294)
Net assets 629,678 488,198
Equity attributable to equity shareholders
Called up share capital 15 16,588 16,588
Capital redemption reserve 251 251
Share premium reserve 311,369 311,369
Special distributable reserve 96,079 105,117
Capital reserves 191,867 43,507
Revenue reserve 13,524 11,366
Total equity 629,678 488,198
Net asset value per ordinary share (pence) 16 207.66 158.06
The notes to follow form part of these financial statements.
Cash Flow Statement
For the year ended 30 November 2024
Notes Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Cash flows from operating activities
Profit/(loss) before tax 166,226 (14,234)
Adjustment for non-cash items:
(Profit)/losses on investments held at fair value through profit or loss (156,916) 25,777
Losses on derivative investments 251 442
Amortisation on fixed interest securities (141) (186)
Adjusted profit before tax 9,420 11,799
Adjustments for:
Purchases of investments, including transaction costs (670,314) (284,542)
Sales of investments, including transaction costs 667,632 311,263
Purchases of derivative financial instruments (3,621) (1,794)
Proceeds on disposal of derivative financial instruments 3,210 1,168
Increase in receivables (548) (549)
Increase in payables 167 479
(Decrease)/increase in Indian capital gain tax (199) 114
Overseas tax deducted at source (1,450) (1,596)
Net cash generated from operating activities 4,297 36,342
Cash flows from financing activities
Shares repurchased into treasury (9,227) (22,988)
Issue cost paid - (11)
Loan drawn 10,000 9,891
Exchange gains on the loan facility (96) (1,367)
Equity dividends paid (14,057) (14,399)
Net cash used in financing activities (13,380) (28,874)
Net (decrease)/increase in cash and cash equivalents (9,083) 7,468
Cash and cash equivalents at the beginning of the year 37,261 29,793
Cash and cash equivalents at the end of the year 15 28,178 37,261
The notes to follow form part of these financial statements.
Notes to the Financial Statements
For the year ended 30 November 2024
1 General Information
Polar Capital Global Financials Trust plc is a public limited company
registered in England and Wales whose shares are traded on the London Stock
Exchange.
The principal activity of the Company is that of an investment trust company
within the meaning of Section 1158/1159 of the Corporation Tax Act 2010 and
its investment approach is detailed in the Strategic Report.
The Board has determined that Sterling is the Company's functional currency
and the presentational currency of the financial statements because it is the
currency which is most relevant to the majority of the Company's Shareholders
and creditors and is the currency in which the majority of the Company's
operating expenses are paid. All figures are rounded to the nearest thousand
pounds (£'000) except as otherwise stated.
2 Accounting Policies
The material principal accounting policies, which have been applied
consistently for all years presented, are set out below:
(a) Basis of Preparation
The Group and Company's Financial Statements have been prepared and approved
by the Directors in accordance with UK-adopted international accounting
standards ("UK-adopted IAS") and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards.
The financial statements have been prepared on a going concern basis under the
historical cost convention, as modified by the revaluation of investments and
derivative financial instruments at fair value through profit or loss.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) for investment trusts issued by the Association of Investment Companies
(AIC) in July 2022 is consistent with the requirements of UK-adopted IAS, the
Directors have sought to prepare the financial statements on a basis compliant
with the recommendations of the SORP.
The financial position of the Company as at 30 November 2024 is shown in the
balance sheet on page above. As at 30 November 2024 the Company's total assets
exceeded its total liabilities by a multiple of over 8.7. The assets of the
Company consist mainly of securities that are held in accordance with the
Company's Investment Policy and these securities are readily realisable.
The Directors have considered a detailed assessment of the Company's ability
to meet its liabilities as they fall due. The assessment took account of the
Company's current financial position, its cash flows and its liquidity
position. In addition to the assessment, the Company also considered its loan
repayment obligations in July 2025 and carried out stress testing which used a
variety of falling parameters to demonstrate the effects on the Company's
share price and net asset value. Should the loan facilities not be renewed in
July 2025, the Board is satisfied that the Company could fund the repayment
and ongoing cash flow requirements through the sale of a portion of the
portfolio of listed securities in all severe but plausible downside scenarios
considered. In light of the results of these tests, the Company's cash
balances, and the liquidity position, the Directors consider that the Company
has adequate financial resources to enable it to continue in operational
existence for at least 12 months from the date of issuance of these Financial
Statements. As part of this assessment, the Board also considered the tender
offer taking place on or before 30 June 2025. If the resultant size of the
Company following the 2025 tender offer does not meet a size at which its
business model remains viable, the Board may consider putting forward
liquidation proposals. However, based on extensive discussions with its
advisors and the long term relative and absolute performance of the Company,
the Board believes that there is sufficient support to indicate that the 2025
Tender Offer will not result in the Company failing to reach an adequate
minimum size. Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the Company's Financial
Statements.
(b) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and
in accordance with the guidance set out by the AIC, supplementary information
which analyses the Statement of Comprehensive Income between items of a
revenue and capital nature has been presented alongside the Statement of
Comprehensive Income. The result presented in the revenue return column is the
measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in Section 1158 of the
Corporation Tax Act 2010.
(c) Income
Dividends receivable from equity shares are taken to the revenue return column
of the Statement of Comprehensive Income on an ex-dividend basis.
Special dividends are recognised on an ex-dividend basis and may be considered
to be either revenue or capital items. The facts and circumstances are
considered on a case-by-case basis before a conclusion on appropriate
allocation is reached.
Where the Company has received dividends in the form of additional shares
rather than in cash, the amount of the cash dividend foregone is recognised in
the revenue return column of the Statement of Comprehensive Income. Any excess
in value of shares received over the amount of cash dividend foregone is
recognised in the capital return column of the Statement of Comprehensive
Income.
The fixed returns on debt securities and non-equity shares are recognised
under the effective interest rate method.
Bank interest is accounted for on an accrual basis. Interest outstanding at
the year end is calculated on a time apportionment basis using market rates of
interest.
(d) Written Options
The Company may write exchange-traded options with a view to generating
income. This involves writing short-dated covered call options and put
options. The use of financial derivatives is governed by the Company's
policies, as approved by the Board.
These options are recorded initially at fair value, based on the premium
income received, and are then measured at subsequent reporting dates at fair
value. Changes in the fair value of the options are recognised in the capital
return for the year.
The option premiums are recognised evenly over the life of the option and
shown in the revenue return, with an appropriate amount shown in the capital
return to ensure the total return reflects the overall change in the fair
value of the options.
Where an option is exercised, any balance of the premium is recognised
immediately in the revenue return with a corresponding adjustment in the
capital return based on the amount of the loss arising on exercise of the
option.
(e) Expenses and Finance Costs
All expenses, including the management fee, are accounted for on an accrual
basis.
Expenses are allocated wholly to the revenue column of the Statement of
Comprehensive Income except as follows:
Expenses are charged to the capital column of the Statement of Comprehensive
Income where a connection with the maintenance or enhancement of the value of
investments can be demonstrated. In this respect the investment management
fees have been charged to the Statement of Comprehensive Income in line with
the Board's expected long-term split of returns, in the form of capital gains
and income from the Company's portfolio. As a result, 20% of the investment
management fees are charged to the revenue account and 80% charged to the
capital account of the Statement of Comprehensive Income.
Finance costs are calculated using the effective interest rate method and are
accounted for on an accruals basis and, in line with the management fee
expense, are charged 20% to the revenue account and 80% to the capital account
of the Statement of Comprehensive Income.
Any performance fee accrued is charged entirely to capital as the fee is based
on the outperformance of the Benchmark and is expected to be attributable
largely, if not wholly, to capital performance. A provision will be recognised
when outperformance has been achieved in accordance with the calculations
detailed in the Annual Report.
The research costs relate solely to specialist financial research and are
accounted for on an accrual basis. They are allocated 20% to revenue and 80%
to capital in line with the expected long-term split of revenue and capital
return from the Company's investment portfolio.
(f) Tax
The tax expense represents the sum of the overseas withholding tax deducted
from investment income, tax currently payable and deferred tax.
The tax currently payable is based on the taxable profits for the year ended
30 November 2024. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted at the balance sheet date.
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns in the
supplementary information in the Statement of Comprehensive Income is the
"marginal basis". Under this basis, if taxable income is capable of being
offset entirely by expenses presented in the revenue return column of the
Statement of Comprehensive Income, then no tax relief is transferred to the
capital return column.
Deferred tax is the tax expected to be payable or recoverable on temporary
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised.
Investment trusts which have approval as such under Section 1158 of the
Corporation Tax Act 2010 are not liable for taxation on UK capital gains.
The Company is liable to Indian capital gains tax under Section 115 AD of the
Indian Income Tax Act 1961. The Indian capital gains tax provision represents
an estimate of the amount of tax payable by the Company. Tax amounts payable
may differ from this provision depending on when the Company disposes of its
investments. The current provision for Indian capital gains tax is calculated
based on the long term (securities held more than one year) or short term
(securities held less than one year) nature of the investments and the
applicable tax rate at the year end. With effect from 23 July 2024, the
short-term tax rate is 20% (previously 15%) and the long-term tax rate is
12.5% (previously 10%). The estimated tax charge is subject to regular review
including a consideration of the likely period of ownership, tax rates and
market valuation movements. The provision at the year end is recognised in the
Balance Sheet and the year-on-year movement in the provision is recognised in
the Statement of Comprehensive Income.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or when the asset is realised based on
tax rates that have been enacted or substantively enacted at the balance sheet
date.
Deferred tax is charged or credited in the Statement of Comprehensive Income,
except when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity.
(g) Investments Held at Fair Value Through Profit or Loss
When a purchase or sale is made under contract, the terms of which require
delivery within the timeframe of the relevant market, the investments
concerned are recognised or derecognised on the trade date and are initially
measured at fair value.
On initial recognition the Company has designated all of its investments as
held at fair value through profit or loss as defined by UK-adopted IAS. All
investments are measured at subsequent reporting dates at fair value, which is
either the bid price or the last traded price, depending on the convention of
the exchange on which the investment is quoted.
Written and purchased options are valued at fair value using quoted bid
prices.
Index futures are valued at the difference between exchange settlement prices
and inception prices.
All investments, classified as fair value through profit or loss, are further
categorised into the fair value hierarchy in the Annual Report.
Changes in fair value of all investments and derivatives held at fair value
are recognised in the capital return column of the Statement of Comprehensive
Income. Gains or losses on derivative financial instruments are treated as
capital or revenue depending on the motive and circumstances of the
transaction. Where positions are undertaken to protect or enhance capital, the
returns are capital and where they are generating or protecting revenue, the
returns are revenue.
In respect of unquoted investments, or where the market for a financial
instrument is not active, fair value is established by using various valuation
techniques, in accordance with the International Private Equity and Venture
Capital ("IPEVC") Valuation Guidelines - Edition December 2022. These may
include using reference to recent arm's length market transactions between
knowledgeable, willing parties, if available, reference to recent rounds of
re-financing undertaken by investee companies involving knowledgeable parties,
reference to the current fair value of another instrument that is
substantially the same or a relevant comparable.
(h) Receivables
Receivables are initially recognised at fair value and subsequently measured
at amortised cost. Receivables do not carry any interest and are short-term in
nature and are accordingly stated at their nominal value (amortised cost) as
reduced by appropriate allowances for estimated irrecoverable amounts.
(i) Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are
short-term, maturity of three months or less, highly liquid investments that
are readily convertible to known amounts of cash.
(j) Dividends Payable
Interim dividends payable to Shareholders are recognised in the financial
statements in the period in which they are paid.
(k) Payables
Payables are not interest-bearing and are initially valued at fair value and
subsequently stated at their nominal value (amortised cost).
(l) Bank Loans
Interest-bearing bank loans are initially recognised at cost, being the
proceeds received net of direct issue costs, and subsequently at amortised
cost. The amounts falling due for repayment within one year are included under
current liabilities and more than one year under non-current liabilities in
the Balance Sheet.
(m) Foreign Currency Translation
Transactions in foreign currencies are translated into Sterling at the rate of
exchange ruling on the date of each transaction. Monetary assets, monetary
liabilities and equity investments in foreign currencies at the balance sheet
date are translated into Sterling at the rates of exchange ruling on that
date.
Realised profits or losses on exchange, together with differences arising on
the translation of foreign currency assets or liabilities, are taken to the
capital return column of the Statement of Comprehensive Income.
Foreign exchange gains and losses arising on investments held at fair value
are included within changes in fair value.
(n) Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new ordinary shares or options are shown in
equity, as a deduction, net of tax, from the proceeds.
(o) Capital Reserves
Capital reserve arising on investments sold includes:
- gains/losses on disposal of investments;
- exchange differences on currency balances; and
- other capital charges and credits charged to this account in accordance with
the accounting policies above.
Capital reserve arising on investments held includes:
- increases and decreases in the valuation of investments held at the balance
sheet date.
All of the above are accounted for in the Statement of Comprehensive Income.
When making a distribution to Shareholders, the Directors determine the
profits available for distribution by reference to the 'Guidance on realised
and distributable profits under the Companies Act 2006' issued by the
Institute of Chartered Accountants in England and Wales and the Institute of
Chartered Accountants of Scotland in April 2017. The availability of
distributable reserves in the Company is dependent on those dividends meeting
the definition of qualifying consideration within the guidance and on the
available cash resources of the Company and other accessible sources of funds.
The distributable reserves are therefore subject to any future restrictions or
limitations at the time such distribution is made.
(p) Repurchase of Ordinary Shares (including those held in treasury)
Where applicable, the costs of repurchasing Ordinary Shares including related
stamp duty and transaction costs are taken directly to equity and reported
through the Statement of Changes in Equity as a charge on the special
distributable reserve. Share repurchase transactions are accounted for on a
trade date basis.
The nominal value of ordinary share capital repurchased and cancelled is
transferred out of called up share capital and into the capital redemption
reserve.
Where shares are repurchased and held in treasury, the transfer to capital
redemption reserve is made if and when such shares are subsequently cancelled.
Where the shares held in treasury are reissued, the amount of the sales
proceed up to the repurchased cost of those shares is transferred back into
special distributable reserve, the excess of the sales proceeds over the
repurchased cost is transferred to share premium.
(q) Share Issue Costs
Where applicable, costs incurred directly in relation to the issue of new
shares together with additional share listing costs have been deducted from
the share premium reserve.
(r) Segmental Reporting
Under IFRS 8 Operating Segments, operating segments are considered to be the
components of an entity about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The chief
operating decision maker has been identified as the Investment Manager (with
oversight from the Board).
The Directors are of the opinion that the Company has only one operating
segment and as such no distinct segmental reporting is required.
(s) Key Estimates and Judgements
The preparation of financial statements in conformity with UK-adopted IAS
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets, liabilities,
income and expenses. Estimates and assumptions used in preparing the financial
statements are reviewed on an ongoing basis and are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances. The results of these estimates and assumptions form the
basis of making judgements about carrying values of assets and liabilities
that are not readily apparent from other sources.
The key judgements and sources of estimation uncertainty that have a
significant risk of causing material adjustment to the carrying amounts of
assets and liabilities and expenses in future periods are as follows:
Valuation of Level 3 Investments
Investments valued using valuation techniques include unlisted financial
investments, which by their nature, do not have an externally quoted price
based on regular trades.
The valuation techniques used may include the techniques described in note
2(g). When determining the inputs into the valuation techniques used, priority
is given to publicly available prices from independent sources when available,
but overall the source of pricing is chosen with the objective of arriving at
a fair value measurement that reflects the price at which an orderly
transaction would take place between market participants at the balance sheet
date.
(t) New and revised accounting Standards
There were no new UK-adopted IAS or amendments to UK-adopted IAS applicable to
the current year which had any significant impact on the Company's financial
statements.
i) The following new or amended standards became effective for the current
annual reporting period and the adoption of the standards and interpretations
have not had a material impact on the Financial Statements of the
Company.
Standards & Interpretations Effective for periods commencing on or after
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Requirement amended to disclose material accounting policies instead of 1 January 2023
Statement 2) significant accounting policies and provided guidance in making materiality
judgements to accounting policy disclosure.
Definition of Accounting Estimates (amendments to IAS 8) Introduced the definition of accounting estimates and included other 1 January 2023
amendments to IAS 8 to help entities distinguish changes in accounting
estimates from changes in accounting policy.
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12) A mandatory temporary exception to the accounting for deferred taxes arising 1 January 2023
from the jurisdictional implementation of the Pillar Two model rules; and
disclosure requirements for affected entities to help users of the Financial
Statements to better understand an entity's exposure to Pillar Two income
taxes arising from that legislation, particularly before its effective date.
ii) At the date of authorisation of the Company's Financial Statements, the
following relevant standards that potentially impact the Company are in issue
but are not yet effective and have not been applied in the Financial
Statements:
Standards & Interpretations Effective for periods commencing on or after
Amendments to IAS 1 Presentation of Financial Statements The amendments clarify that only covenants with which an entity must comply on 1 January 2024
- Non-current liabilities with Covenants or before the reporting date will affect a liability's classification as
- Deferral of Effective Date Amendment (published 15 July 2020) current or non-current and the disclosure requirement in the Financial
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) Statements for the risk that non-current liabilities with covenant could
(publicised 23 January 2020) become repayable within twelve months.
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) The amendments address the disclosure requirements to enhance the transparency 1 January 2024
of supplier finance arrangements and their effects on a company's liabilities,
cash flows and exposure to liquidity risk.
The Directors expect that the adoption of the standards listed above will have
either no impact or that any impact will not be material on the financial
statements of the Company in future
periods.
3 Investment Income
Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Revenue:
UK dividends 2,933 2,391
Overseas dividends 13,182 13,313
Interest on debt securities 2,952 3,439
Total investment income 19,067 19,143
Included within income from investments is £1,460,000 (2023: £623,000) of
special dividends classified as revenue in nature in accordance with note 2
(c). No special dividends have been recognised in capital (2023: nil).
4 Other Operating Income
Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Bank interest 1,505 916
Total other operating income 1,505 916
5 Gains/(losses) on Investments Held at Fair Value
Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Net gains/(losses) on disposal of investments at historic cost 68,405 (1,274)
Less fair value adjustments in earlier years (21,042) (26,371)
Gains/(losses) based on carrying value at previous balance sheet date 47,363 (27,645)
Valuation gains on investments held during the year 109,553 1,868
156,916 (25,777)
6 Other Currency Losses
Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Exchange losses on currency balances (2,408) (1,519)
Exchange gains on the loan facility 96 1,367
(2,312) (152)
7 Investment Management and Performance Fee
Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Management fee
- charged to revenue 772 704
- charged to capital 3,088 2,815
Investment management fee payable to Polar Capital LLP 3,860 3,519
Management fees are allocated 20% to revenue and 80% to capital. Details of
the investment management and performance fees are set out in the Strategic
Report in the Annual Report.
8 Other Administrative Expenses (including VAT where appropriate)
Year ended Year ended
30 November 2024 30 November 2023
£'000 £'000
Directors' fees(1) 142 145
Directors' NIC 15 15
Auditors' remuneration - for audit of the Financial Statements(2) 54 50
Depositary fee(3) 37 34
HSBC administration fee(3) 206 205
Registrar fee 38 39
Custody and other bank charges(4) 77 87
UKLA and LSE listing fees 57 49
Legal & professional fees 3 (3)
AIC fees 21 21
Directors' and officers' liability insurance 19 19
Corporate broker's fee(5) 16 16
Marketing expenses(6) 72 72
Research costs - allocated to revenue(7) 11 5
Shareholder communications 22 17
Other expenses 8 3
Total other administrative expenses 798 774
allocated to revenue
Research costs - allocated to capital(7) 46 20
Total other administrative expenses 844 794
1 Full disclosure is given in the Directors' Remuneration Report within
the Annual Report.
2 The base audit fee for the statutory audit in the current year was £53,500 (2023: £49,480).
3 Fees are determined on the pre-approved rate card with HSBC.
4 Fee is based on the value of the assets and geographical activity and
determined on the pre-approved rate card with HSBC.
5 Corporate Broker fee is reduced by the commission received on the share
buybacks during the year.
6 Includes bespoke marketing budget of £50,000 (2023:
£50,000).
7 Research costs (which applied from 3 January 2018) payable by the
Company relate solely to specialist financial research. The budget for the
year is $75,000 (2023:
$40,000).
Ongoing charges represents the total expenses of the Company, excluding
finance costs and tax, expressed as a percentage of the average daily net
asset value, in accordance with AIC guidance issued in July 2022.
The ongoing charges ratio excluding performance fee for the year ended 30
November 2024 was 0.85% (2023: 0.86%). See Alternative Performance Measures
below.
9 Finance Costs
Year ended 30 November 2024 Year ended 30 November 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on loans and overdrafts 781 3,123 3,904 699 2,795 3,494
Loan arrangement fees 18 73 91 23 92 115
799 3,196 3,995 722 2,887 3,609
Finance costs are allocated 20% to revenue and 80% to capital.
10 Tax
a) Analysis of tax charge/(credit) for the year:
Year ended 30 November 2024 Year ended 30 November 2023
Revenue Capital Total Revenue Capital Total
return return return return return return
£'000 £'000 £'000 £'000 £'000 £'000
Overseas tax 1,319 - 1,319 1,438 - 1,438
Tax relief in capital 669 (669) - 693 (693) -
Withholding tax recovered - - - (145) - (145)
Indian capital gains tax - 332 332 - (2) (2)
Total tax charge/(credit) for the year (see note 10b) 1,988 (337) 1,651 1,986 (695) 1,291
b) Factors affecting tax charge/(credit) for the year:
The charge/(credit) for the year can be reconciled to the profit/(loss) before
tax per the Statement of Comprehensive Income as follows:
Year ended 30 November 2024 Year ended 30 November 2023
Revenue return Capital return Total return Revenue return Capital return Total return
£'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) before tax 17,859 (32,093) (14,234) 15,773 (9,220) 6,553
Tax at the UK corporation tax rate of 25% (2023: effective tax rate of 23%) 4,551 37,006 41,557 4,108 (7,381) (3,273)
Tax effect of non-taxable dividends (3,871) - (3,871) (3,382) - (3,382)
Capital (gains)/losses that are not taxable - (38,589) (38,589) - 6,065 6,065
Overseas tax suffered 1,319 - 1,319 1,438 - 1,438
Indian capital gains tax - 332 332 - (2) (2)
Unrelieved current period expenses and deficits - 914 914 - 623 623
Withholding tax recovered - - - (145) - (145)
Tax relief on overseas tax suffered (11) - (11) (33) - (33)
Total tax charge/(credit)for the year (see note 10a) 1,988 (337) 1,651 1,986 (695) 1,291
c) Factors that may affect future tax charges:
The Company has an unrecognised deferred tax asset of £3,524,000 (2023:
£2,618,000). The deferred tax asset is based on the current corporation tax
rate of 25% (2023:
25%).
It is unlikely that the Company will generate sufficient taxable profits in
the future to utilise these expenses and deficits and therefore no deferred
tax asset has been recognised.
Due to the Company's tax status as an investment trust and the intention to
continue meeting the conditions required to obtain approval of such status in
the foreseeable future, the Company has not provided UK tax on any capital
gains arising on the revaluation or disposal of investments held by the
Company.
The Company is liable to Indian capital gains tax under Section 115 AD of the
Indian Income Tax Act 1961. A tax provision on Indian capital gains is
calculated based on the long term (securities held more than one year) or
short term (securities held less than one year) nature of the investments and
the applicable tax rate at the year end. The current rates from 23 July 2024
of short-term tax rates are 20% (previously 15%) and the long term tax rates
are 12.5% (previously 10%) respectively. At the year ended 30 November 2024,
the Company has a deferred tax liability of £396,000 (2023: £263,000) on
capital gains which may arise if Indian investments are sold.
.
11 Earnings/(Losses) Per Ordinary Share
Year ended 30 November 2024 Year ended 30 November 2023
Revenue Capital Total Revenue Capital Total
return return return return return return
The calculation of basic earnings/(losses) per share is based on the following
data:
Net profit/(loss) for the year (£'000) 16,215 148,360 164,575 15,873 (31,398) (15,525)
Weighted average number of ordinary shares in issue during the year
in issue during the year 305,146,436 305,146,436 305,146,436 319,065,538 319,065,538 319,065,538
Basic - ordinary shares (pence) 5.31 48.62 53.93 4.97 (9.84) (4.87)
As at 30 November 2024 there were no potentially dilutive shares in issue
(2023: nil).
12 Amounts Recognised as Distributions to Ordinary Shareholders in the Year
Dividends paid in the year ended 30 November 2024
Payment date No. of shares Amount per share Year ended
30 November 2024
£'000
29 February 2024 307,160,405 2.10p 6,450
30 August 2024 304,272,705 2.50p 7,607
14,057
The revenue available for distribution by way of dividend for the year is
£16,215,000 (2023: £15,837,000).
The total dividends payable in respect of the financial year ended 30 November
2024, which is the basis on which the requirements of section 1158 Corporation
Tax Act 2010 are considered, are set out below:
Payment date No. of shares Amount per share Year ended
30 November 2024
£'000
30 August 2024 304,272,705 2.50p 7,607
28 February 2025 303,219,365 2.20p 6,671
14,278
The total dividends payable in respect of the financial year ended 30 November
2023, which is the basis on which the requirements of section 1158 Corporation
Tax Act 2010 are considered, are set out below:
Payment date No. of shares Amount per share Year ended
30 November 2023
£'000
31 August 2023 315,955,329 2.45p 7,741
29 February 2024 307,160,405 2.10p 6,450
14,191
All dividends are paid as interim dividends, and all have been charged to
revenue, where necessary utilising the revenue reserve and in exceptional
circumstances utilising the special distributable reserve.
13 Investments Held at Fair Value Through Profit or Loss
a) Investments held at fair value through profit or loss
30 November 2024 £'000 30 November 2023
£'000
Opening book cost 476,645 506,766
Opening investment holding gains 41,479 65,982
Opening fair value 518,124 572,748
Analysis of transactions made during the year
Purchases at cost 666,169 286,636
Sales proceeds received (681,407) (315,669)
Gains/(losses) on investments held at fair value 156,916 (25,777)
Amortisation on fixed interest securities 141 186
Closing fair value 659,943 518,124
Closing book cost 529,953 476,645
Closing investment holding gains 129,990 41,479
Closing fair value 659,943 518,124
The Company received £681,407,000 (2023: £315,669,000) from disposal of
investments in the year. The book cost of these investments when they were
purchased were £613,002,000 (2023: £316,943,000). These investments have
been revalued over time and until they were sold any unrealised gains/losses
were included in the fair value of the investments.
The following transaction costs, including stamp duty and broker commissions,
were incurred during the year:
30 November 2024 £'000 30 November 2023 £'000
On acquisitions 924 473
On disposals 561 246
1,485 719
b) Changes in Derivative Financial Instruments
(i) Futures 30 November 2024 £'000 30 November 2023 £'000
Valuation at 1 December (288) 6
Additions at cost 1,816 683
Proceeds of disposal (984) (386)
Losses on disposal (832) (297)
Valuation gains/ (losses) 638 (294)
Valuation at 30 November 350 (288)
The Company invested in currency and index futures during the year for the
purposes of efficient portfolio management. As at 30 November 2024, the
Company held a short position of 80 CME British pound/ Japanese Yen December
2024 contracts and a short position of 250 CME Euro December 2024 contracts
with a market value gain of £350,000. (2023: Long position of 80 CME Japanese
Yen December 2023 contracts, a short position of 250 CME British Pound
December 2023 contracts and a short position of 20 CME British Pound/Japanese
Yen December 2023 contracts with a market value loss of
£288,000).
(ii) Options 30 November 2024 £'000 30 November 2023 £'000
Valuation at 1 December 478 -
Additions at cost 1,805 1,111
Proceeds of disposal (2,226) (782)
(Losses)/gains on disposal (201) 293
Valuation gains/ (losses) 144 (144)
Valuation at 30 November - 478
The Company invested in purchased call and put options during the year for the
purposes of efficient portfolio management. As at 30 November 2024, the
company had sold out of all options. (2023: £478,000 - SPDR S&P Regional
Banking ETF call option).
(c) Fair Value of Open Derivative Contracts 30 November 2024 £'000 30 November 2023 £'000
CME Japanese Yen December 2023 Futures - 28
SPDR S&P Regional Banking ETF Call Options - 478
CME Euro December 2024 Futures 728 -
728 506
CME British Pound December 2023 Futures - (231)
CME British Pound/Japanese Yen December 2024 Futures (378) (85)
(378) (316)
Total 350 190
(d) Fair value hierarchy
The Company's financial instruments within the scope of IFRS 7 that are held
at fair value comprise its investment portfolio and derivative financial
instruments.
They are categorised into a hierarchy consisting of the following three
levels:
Level 1 - valued using quoted prices in active markets for identical assets or
liabilities.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted market prices
included within Level
1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to 'the fair value measurement of the
relevant
asset'.
Details of the valuation techniques used by the Company are given in note
2(g).
The following tables set out the fair value measurements using the IFRS 7
hierarchy at 30 November 2024 and
2023:
30 November 2024
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity Investments and derivative financial instruments 612,625 - 6,699 619,324
Interest bearing securities 40,969 - - 40,969
Total 653,594 - 6,699 660,293
The Level 3 investment relates to the shares in Atom Bank and Moneybox.
30 November 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity Investments and derivative financial instruments 464,999 478 5,054 470,531
Interest bearing securities 47,783 - - 47,783
Total 512,782 478 5,054 518,314
The Level 2 investment relates to the SPDR S&P Regional Banking ETF Call
Options.
The Level 3 investment relates to the shares in Atom Bank and Moneybox.
There have been no transfers during the year between Levels 1 and 2. A
reconciliation of fair value measurements in Level 3 is set out below.
Level 3 investments at fair value through profit or loss 30 November 2024 £'000 30 November 2023 £'000
Opening balance 5,054 4,551
Total gains included in the Statement of Comprehensive Income - on assets held 1,645 503
at the year end.
Closing balance 6,699 5,054
Level 3 Investments are recognised at fair value through profit or loss on a
recurring basis.
Level 3 investments are valued in accordance with the accounting policy in
Note 2(g) above.
A +/- 10% change in the price used to value the investment in the level 3
investments at the year end would result in a +/- £670,000 (2023: £505,000)
impact on the gains or losses on investments held at fair value in the
Statement of Comprehensive Income.
.
e) Unquoted investments
The value of the unquoted investments as at 30 November 2024 was £6,699,000
(2023: £5,04,000) and the portfolio comprised the following holdings:
30 November 2024 30 November 2023
£'000 £'000
Atom Bank 1,281 1,281
Moneybox 5,418 3,773
6,699 5,054
Atom Bank is a UK digital bank founded in 2014 and based in Durham. It
currently offers fixed rate and instant access savings products, business
banking loans and retail mortgages.
At 31 March 2024 (Atom Bank's financial year end), Atom Bank announced that it
had made a pre-tax profit of £6,700,000 (2023: losses £10,097,000) and had
net assets attributable to Shareholders of £402,400,000 (2023:
£283,134,000).
The valuation of Atom Bank was reviewed by the Investment Manager and the
Board during both the half year and full year
financial results process. The valuation of Atom Bank at the year end is
supported by the secondary transaction announced by the company in November
2024. To factor in any uncertainty surrounding the current price, if the fair
value of the investment at the reporting date has been stressed by +/- 10%
(2023: +/- 10%) the fair value would increase/decrease by £128,000
(2023:£128,000).
Moneybox is an on-line UK savings and wealth platform and provides mobile
applications which enable customers to make regular savings into tax efficient
products, such as ISAs, or a personal pension, as well as various savings
accounts.
At 31 May 2024 (Moneybox's financial year end), Moneybox announced that it had
made pre-tax profit of £26,542,000 (2023:losses £4,141,000) and had net
assets attributable to Shareholders of £87,173,000 (2023: £62,569,000).
The valuation of Moneybox was reviewed by the Investment Manager and the Board
during both the half year and full year financial results process. During the
year, the valuation of Moneybox was increased following the announcement of
the company's completion of a secondary share sale bringing in new investors.
The valuation for the current year has been calculated using the price of this
recent arms length transaction. To factor in any uncertainty surrounding the
current price, if the fair value of the investment at the reporting date has
been stressed by +/- 10% the fair value would increase/decrease by £542,000.
In the prior year the valuation of Moneybox was calculated by calculating the
average enterprise value to sales ratio of a peer group of listed companies
and then applying a discount to reflect the smaller size and narrower focus of
Moneybox. This was cross checked using a discounted cash flow analysis. An
increase/decrease in the discount used of 5% would decrease/increase the
fair value by £290,000 and an increase/decrease of the multiple of sales of
the peer group used of 0.5x would increase/decrease the fair value by
£295,000.
See Note 13(d) for further details
14 Receivables
30 November 2024 30 November 2023
£'000 £'000
Securities sold awaiting settlement 18,708 4,933
Dividends and interest receivable 2,480 1,930
VAT recoverable 32 36
Overseas tax recoverable 1,618 1,487
Prepayments 35 33
22,873 8,419
15 Cash and Cash Equivalents
30 November 2024 30 November 2023
£'000 £'000
Cash at bank 26,436 36,406
Cash held at derivative clearing houses 1,742 856
Cash and Cash Equivalents 28,178 37,262
Bank overdraft - (1)
28,178 37,261
16 Called Up Share Capital
30 November 2024 November 2023
£'000 £'000
Allotted, Called up and Fully paid:
Ordinary shares of 5p each:
Opening balance of 308,861,687* (2023: 325,394,000) 15,443 16,270
Repurchase of 5,642,322 (2023: 16,532,313) ordinary shares into treasury (282) (827)
Allotted, Called up and Fully paid: 303,219,365 (2023: 308,861,687) ordinary 15,161 15,443
shares of
5p
28,530,635 (2023: 22,888,313) ordinary shares held in treasury 1,427 1,145
At 30 November 2024 16,588 16,588
*Excluding shares held in Treasury
During the year, there were 5,642,322 ordinary shares repurchased into
treasury (2023: 16,532,313) for a total consideration
£9,038,000 (2023: £23,139,000). No ordinary shares were issued during the
year (2023: nil).
The ordinary shares held in treasury have no voting rights and are not
entitled to dividends.
16. Net Asset Value Per Ordinary
Share
30 November 2024 30 November 2023
Net assets attributable to ordinary Shareholders (£'000) 629,678 488,198
Ordinary shares in issue at end of year (excluding shares held in treasury) 303,219,365 308,861,687
Net asset value per ordinary share (pence) 207.66 158.06
As at 30 November 2024, there were no potentially dilutive shares in issue
(2023: nil).
17. Transactions with the Investment Manager and Related Party Transactions
a) Transactions with the manager
Under the terms of an agreement dated 11 June 2013 the Company has appointed
Polar Capital LLP ("Polar Capital") to provide investment management,
accounting, secretarial and administrative services. Details of the fee
arrangement for these services are given in the Strategic Report. The total
fees, paid under this agreement to Polar Capital in respect of the year ended
30 November 2024 were £3,860,000 (2023: £3,519,000) of which £350,000
(2023: £278,000) was outstanding at the year
end.
A performance fee based on cumulative relative performance since 23 April
2020, amounting to £nil (2023: £nil) has been accrued at the year end. Any
accrued performance fee is payable at the end of each five-year tender period,
the next being in 2025. See Strategic Report in the Annual Report for more
details.
In addition, the total research costs in respect of the year from 1 December
2023 to the year ended 30 November 2024 were £57,000 (2023: £25,000) of
which £19,000 (2023: £8,000) was outstanding.
b) Related party transactions
The Company has no employees and therefore no key management personnel other
than the Directors. The Company paid £142,000 (2023: £145,000) to the
Directors of which £35,000 (2023: £23,000) was outstanding at the year
end. The Remuneration Report is set out in the Annual Report. When dividends
are paid by the Company these are received by the Directors who own shares at
the same rates and terms as by all other Shareholders.
18. Post Balance Sheet Events
There are no significant events that have occurred after the end of the
reporting period to the date of this report which
require disclosure.
Alternative Performance Measures (APMs)
In assessing the performance of the Company, the Investment Manager and the
Directors use the following APMs which are not defined in accounting standards
or law but are considered to be known industry metrics:
NAV Total Return
The NAV total return shows how the net asset value per share has performed
over a period of time taking into account both capital returns and dividends
paid to Shareholders. The NAV total return performance for the period is
calculated by reinvesting the dividends in the assets of the Company from the
relevant ex-dividend date.
Year ended Year ended
30 November 2024 30 November 2023
Opening NAV per share a 158.1p 166.3p
Closing NAV per share b 207.7p 158.1p
Dividend reinvestment factor c 1.025875 1.022930
Adjusted closing NAV per share d = b*c 213.1p 161.7p
NAV total return for the year (d / a)-1 34.8% -2.8%
NAV Total Return Since Inception
NAV total return since inception is calculated as the change in NAV from the
initial NAV of 98p, assuming that dividends paid to Shareholders are
reinvested on the ex-dividend date in ordinary shares at their net asset
value.
Year ended Year ended
30 November 2024 30 November 2023
NAV per share at inception a 98.0p 98.0p
Closing NAV per share b 207.7p 158.1p
Dividend reinvestment factor c 1.411532 1.361991
Adjusted closing NAV per share d = b*c 293.2p 215.3p
NAV total return since inception (d / a)-1 199.2% 119.7%
NAV Total Return Since Reconstruction
NAV total return since reconstruction is calculated as the change in NAV from
the NAV of 102.8p, which was the closing NAV the day before the tender offer
on 22 April 2020, assuming that dividends paid to Shareholders are reinvested
on the ex-dividend date in ordinary shares at their net asset value.
Year ended Year ended
30 November 2024 30 November 2023
Rebased NAV per share at reconstruction a 102.8p 102.8p
Closing NAV per share b 207.7p 158.1p
Dividend reinvestment factor c 1.137893 1.097861
Adjusted closing NAV per share d = b*c 236.3p 173.6p
NAV total return since reconstruction (d / a)-1 129.9% 68.8%
Share Price Total Return
Share price total return shows how the share price has performed over a period
of time. It assumes that dividends paid to Shareholders are reinvested in the
shares at the time the shares are quoted
ex-dividend.
Year ended Year ended
30 November 2024 30 November 2023
Opening share price a 138.8p 154.6p
Closing share price b 196.2p 138.8p
Dividend reinvestment factor c 1.028511 1.030408
Adjusted closing share price d = b*c 201.8p 143.0p
Share price total return for the year (d / a)-1 45.4% -7.5%
Share Price Total Return Since Inception
Share price total return since inception is calculated as the change in share
price from the launch price of 100p, assuming that dividends paid to
Shareholders are reinvested on the ex-dividend
date.
Year ended Year ended
30 November 2024 30 November 2023
Share price at inception a 100.0p 100.0p
Closing share price b 196.2p 138.8p
Dividend reinvestment factor c 1.391998 1.353458
Adjusted closing share price d = b*c 273.1p 187.9p
Share price total return since inception (d / a)-1 173.1% 87.9%
Share Price Total Return Including Subscription Share Value
The share price total return including subscription share value performance
since inception includes the value of the subscription shares issued free of
payment at launch on the basis of one-for-five ordinary shares and assumes
such were held throughout the period from launch to the conversion date of 31
July 2017. Performance is calculated by reinvesting the dividends in the
shares of the Company from the relevant ex-dividend date and uses the launch
price of 100p per ordinary
share.
Year ended Year ended
30 November 2024 30 November 2023
Share price at inception a 100.0p 100.0p
Closing share price b 196.2p 138.8p
Dividend reinvestment factor c 1.401121 1.381556
Adjusted closing share price d = b*c 274.9p 191.8p
Share price total return including subscription share value since inception (d / a)-1 174.9% 91.8%
(Discount)/Premium
A description of the difference between the share price and the net asset
value per share usually expressed as a percentage (%) of the net asset value
per share. If the share price is higher than the NAV per share the result is a
premium. If the share price is lower than the NAV per share, the shares are
trading at a discount.
30 November 2024 30 November 2023
Closing share price a 196.2p 154.6p
Closing NAV per share b 207.7p 166.3p
Discount per ordinary share (a / b)-1 -5.5% -7.0%
Ongoing Charges
Ongoing charges are calculated in accordance with AIC guidance by taking the
Company's annual ongoing charges, excluding performance fees and exceptional
items, if any, and expressing them as a percentage of the average daily net
asset value of the Company over the year.
Ongoing charges include all regular operating expenses of the Company.
Transaction costs, interest payments, tax and non-recurring expenses are
excluded from the calculation as are the costs incurred in relation to share
issues and share buybacks.
Where a performance fee is paid or is payable, a second ongoing charge is
provided, calculated on the same basis as the above but incorporating the
movement in the performance fee provision.
Year ended Year ended
30 November 2024 30 November 2023
Investment Management Fee (Note 7 above) £3,860,000 £3,519,000
Other Administrative Expenses (Note 8 above) £844,000 £794,000
a £4,704,000 £4,313,000
Average daily net assets value b £552,193,000 £502,339,000
Ongoing Charges excluding performance fee a / b 0.85% 0.86%
Performance fee (Note 7 above) c - -
d = a+c £4,704,000 £4,313,000
Ongoing charges including performance fee d / b 0.85% 0.86%
Net Gearing
Gearing is calculated in line with AIC guidelines and represents net gearing.
This is defined as total assets less cash and cash equivalents divided by net
assets. The total assets are calculated by adding back the bank loan. Cash and
cash equivalents are cash and purchases and sales for future settlement
outstanding at the year
end.
30 November 2024 30 November 2023
Net assets a £629,678,000 £488,198,000
Bank loan b £78,935,000 £69,031,000
Total assets c = (a+b) £708,613,000 £557,229,000
Cash and cash equivalents (including amounts awaiting settlement) d £46,510,000 £37,484,000
Net gearing (c-d)/a-1 5.1% 6.5%
AGM
The Annual Report and separate Notice of Annual General Meeting will be posted
to Shareholders in February 2025 and will be available from the Company
Secretary at the Company's Registered Office, (16 Palace Street London SW1E
5JD) and on the Company's website. The AGM will be held at the Company's
Registered Office at 2:00pm on Thursday 10 April 2025.
Forward Looking Statements
Certain statements included above contain forward-looking information
concerning the Company's strategy, operations, financial performance or
condition, outlook, growth opportunities or circumstances in the countries,
sectors or markets in which the Company operates. By their nature,
forward-looking statements involve uncertainty because they depend on future
circumstances, and relate to events, not all of which are within the Company's
control or can be predicted by the Company. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
no assurance can be given that such expectations will prove to have been
correct. Actual results could differ materially from those set out in the
forward-looking statements. For a detailed analysis of the factors that may
affect our business, financial performance or results of operations, we urge
you to look at the principal risks and uncertainties included in the Strategic
Report Section of the Annual Report and Financial Statements.
No part of these preliminary results constitutes, or shall be taken to
constitute, an invitation or inducement to invest in Polar Capital Global
Financials Trust plc or any other entity and must not be relied upon in any
way in connection with any investment decision. The Company undertakes no
obligation to update any forward-looking statements. Neither the contents of
the Company's website nor the contents of any website accessible from
hyperlinks on the Company's website (or any other website) is incorporated
into, or forms part of, this announcement.
1 (#_ftnref1) The most junior debt security in a financial company's capital
structure. It ranks ahead of
equity but behind senior debt and depositors of a bank or policyholders of an
insurance
company.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SFIFWUEISEEERecent news on Polar Capital Global Financials Trust
See all newsREG - Polar Capital Global - Net Asset Value(s)
AnnouncementRCS - Polar Capital Global - QuotedData's In The HotSeat
AnnouncementREG - Polar Capital Global - Net Asset Value(s)
AnnouncementREG - Polar Capital Global - Net Asset Value(s)
AnnouncementREG - Polar Capital Global - Net Asset Value(s)
Announcement