POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC
Legal Entity Identifier:
549300G5SWN8EP2P4U41
AUDITED ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR
ENDED
30 NOVEMBER 2023
PERFORMANCE HIGHLIGHTS FOR THE YEAR ENDED 30 NOVEMBER
2023
|
Performance (Sterling total return)
|
For the year ended
30 November 2023 %
|
Since Inception
%
|
|
Net asset value (NAV) per ordinary
share* (1)
|
-2.8
|
119.7
|
|
Ordinary share price*
(2)
|
-7.5
|
87.9
|
|
Ordinary share price including
subscription share value* (3)
|
-
|
91.8
|
|
Benchmark (Sterling total return) (4)
MSCI ACWI Financials
Chain-linked benchmark
|
0.3
0.3
|
124.0
135.6
|
|
Other Indices and peer group (Sterling total
return)
|
|
|
|
MSCI World Index
|
6.9
|
204.2
|
|
FTSE All Share Index
|
1.8
|
76.5
|
|
Lipper Financial Sector
(5)
|
-2.2
|
103.5
|
|
|
|
|
|
Performance since Reconstruction on 22 April 2020 (Sterling
total return)
|
Since Reconstruction %
|
|
NAV per ordinary share*
(6)
|
|
68.8
|
|
Benchmark (4)
|
|
67.7
|
|
|
|
|
|
Financials
|
As at
30 November
2023
|
As at
30 November
2022
|
%
Change
|
|
Total net assets
|
£488,198,000
|
£541,272,000
|
-9.8
|
|
NAV per ordinary share
|
158.1p
|
166.3p
|
-4.9
|
|
Ordinary share price
|
138.8p
|
154.6p
|
-10.2
|
|
Discount per ordinary
share*
|
(12.2%)
|
(7.0%)
|
|
|
Net gearing*
|
6.5%
|
6.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Ordinary share (7)
|
For the year ended
30
November 2023
|
For the year ended
30
November 2022
|
|
|
Revenue Return
|
4.97p
|
4.45p
|
|
|
Capital Return
|
(9.84p)
|
(2.75p)
|
|
|
Total
|
(4.87p)
|
1.70p
|
|
|
Expenses*
|
|
|
|
|
Ongoing Charges
|
0.86%
|
0.87%
|
|
|
Ongoing charges including
performance fee (8)
|
0.86%
|
0.65%
|
|
Dividends (9)
The Company has paid or declared
the following dividends relating to the financial year ended 30
November 2023:
|
Pay date
|
Amount per ordinary share
|
Ordinary Shares
In
issue
|
Record date
|
Ex-date
|
Declared Date
|
|
First
interim:
31 August
2023
|
2.45p
|
315,955,329
|
4 August 2023
|
3 August 2023
|
11 July 2023
|
|
Second
interim:
29
February 2024
|
2.10p
|
307,160,405
|
2 February 2024
|
1 February 2024
|
18 January 2024
|
|
Total (2022: 4.45p)
|
4.55p
|
|
|
|
|
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
2023. 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 2023.
Note
3
The total return share price performance since inception
includes the value of the subscription shares issued free of
payment at launch based on 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 2023.
Note
4
Chain linked benchmark is a combination of 3 benchmarks which
have been in operation over the period. From inception until 31
August 2016 the Company's benchmark was the MSCI World Financials
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 (in Sterling) due to the
Company's exposure to emerging market equities and its limited
exposure to real estate equities.
Note
5
Dynamic average of open-ended funds in the Lipper Financial
Sector Universe which comprised 55 open ended funds in the year
under review.
Note
6
The total return NAV performance since the 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 day before
the tender offer was completed.
Note 7
Refer to Note 11 below for more details.
Note 8
The prior year decrease in ongoing charges including
performance fee reflects the write back of the performance fee
accrual for the year ended 30 November
2022.
*
Alternative Performance Measure, see below for further
explanations.
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 2023 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 2022 have been extracted from the published Annual Report
and Financial Statements for the year ended 30 November 2022 and do
not constitute the statutory accounts for that year. The Annual
Report and Financial Statements for the year ended 30 November 2022
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 2024.
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 Shareholder
I wrote my first statement to you
as Chair of the Company within the half-year report in July 2023,
reflecting a challenging period for investors and the financials
sector which has continued for most of the year under
review.
2023 proved to be a most
frustrating year for investors in the global financials sector.
While we saw broad stock market improvements over the period,
predominantly led by technology, the financials sector
underperformed, following a few years of relative out-performance.
Sentiment has not been favourable towards the sector despite a
backdrop of historically low valuations and improving profitability
at banks in particular. It seems that rising interest rates, high
inflation and the fear of a slowdown in economic growth weighed
more heavily on investors' minds.
Several US bank failures and the
controversial events surrounding the distressed Credit Suisse sale
to UBS also played their part in denting confidence in the sector.
Although high interest rates are generally favourable to the
performance of banks, investors are focusing instead on the
potential for loan losses which these might cause. However, as
interest rate hikes moderate and succeed in reducing inflation to
target levels, central banks may start the process of lowering
rates once more and this should act as a catalyst to investment in
the financials sector.
The highest interest rates in more
than a decade have offered investors an almost risk free safe haven
in the form of government bonds and even cash, with an appealing
headline return (before the effects of inflation). This has
provided a credible alternative to equities and corporate bonds;
investors currently seem happy to wait for a better time to invest
their cash.
Geopolitical risk remains high. The ongoing war in Ukraine and
the consequences of COVID continue to impact economic activity.
Energy prices remain volatile and supply chain issues persist. The
opening up of China, post the ending of zero- COVID polices, has
not provided the fillip to the investment markets expected this
time last year. The troubles of the Chinese property market and
their impact on the local banking sector seem yet to be fully
realised. These factors have dampened investment and broader
economic activity. The more recent conflict within the Gaza Strip
has stoked geopolitical risk issues and raised tensions across the
Middle East. None of this is helpful in moving investor sentiment
to increase risk. A speedy resolution in the Middle East and any
sign of improvement with regards to Ukraine would be positives for
investors but it is difficult to see either development
currently.
Investment Performance
The Investment Managers' Report, in
the full Annual Report and Accounts, has more detail on how the
portfolio evolved over the year and the bank sub sector issues are
discussed in some detail. The MSCI ACWI Financials Index
underperformed more broadly based indices over the reporting period
and the Company's portfolio underperformed the Benchmark.
Despite having respectable returns in the first half, the
Company's overweight position in US mid sized banks meant the
second half was disappointing. We avoided the big failures (Credit
Suisse, First Republic and Signature) but took a small loss on
Silicon Valley Bank; being overweight banks generally held the
portfolio back. The portfolio was modestly geared over the period
under review which acted as an additional drag on
performance.
The Net Asset Value Total Return
(NAV TR) for the year fell by 2.8% versus the MSCI ACWI Financials
Index which rose 0.3%. Share price performance was further impacted
by the widening of the discount to NAV to 12% in common with the
investment companies' sector in general. Investment companies with
large holdings of illiquid assets such as real estate,
infrastructure and private equity saw the biggest widening in
discounts, but many investment companies with highly liquid
underlying assets were also impacted. The year-end discount to NAV
was 12.2% (2022: 7.0%), slightly below the widest discount of 13.6%
seen earlier in the year; consequently the Share Price Total Return
for the period under review fell by 7.5%.
Since launch in 2013, the NAV TR
has been 119.7% against 135.6% for the benchmark. From the point of
the Company's reconstruction in April 2020, the portfolio has
returned 68.8% and the Benchmark 67.7%.
NAV Discount management
The Company continued to pursue a
substantial share buyback policy during the year which was
accretive to NAV and helped support liquidity in the shares. The
Company bought back a total of 16,532,313 ordinary shares,
equivalent to 5.1% of the shares in issue at the start of the
financial year, at an average discount of 10.5%. These buybacks had
an accretive effect on the NAV of 0.76p per share. Following the
period end, a further 2,311,282 ordinary shares were repurchased
into treasury.
The Board issues a delegated
authority to the Manager and our 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 in order to reduce the
discount at which the Company's shares trade Share Capital
Changes.
Dividends
The Company's current dividend
policy and aim with respect to the Ordinary Shares is to pay two
interim dividends each year, in February and August. These interim
dividends will not necessarily be of equal amounts. The Board
monitors, with the help of the Manager, the prospects for dividends
from its equity holdings and interest income from cash and fixed
income securities. In August 2023 the Company paid an interim
dividend of 2.45p per ordinary share. Despite a challenging year
for markets, the portfolio has generated good dividends and in
particular collected coupons from its increased fixed interest
holdings. As a result the Company's revenue account has recovered
to pre-COVID levels. The Board has declared a further interim
dividend of 2.10p per ordinary share payable to shareholders on the
register as at 2 February 2024. This will bring the total dividend
paid for the financial year under review to 4.55p per ordinary
share, a modest increase on the previous financial year.
Share Capital
While there were no share issues
during the year, share buybacks totalling 16,532,313 resulted in a
reduction in shares issued in the market and an increase in shares
in treasury.
As at 30 November 2023, the Company
had 331,750,000 ordinary shares of 5 pence each in issue (2022:
331,750,000 shares), of which 22,888,313 shares (2022: 6,356,000)
were held in treasury. Following the period end, a further
2,311,282 ordinary shares were repurchased into treasury. Following
these share repurchases, as at 13 February 2024, the total number
of ordinary shares in issue was 331,750,000 of which 25,199,595
shares were held in treasury.
The Board
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 the Board does not
meet the recommended ethnicity requirements, it has put in place a
succession plan based on the recommended nine-year tenure of
Directors. A key objective for the Board is having 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, as it did in the most recent round of hiring, 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 full Annual Report and
Accounts.
As I mentioned in my Interim
Statement, Katrina Hart and Robert Kyprianou retired from the Board
following nine years continuous service and we welcomed Susie
Arnott and Angela Henderson to the Board. 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 and
Accounts.
Environmental, Social and Governance (ESG)
The Company's investment mandate is
not an ESG mandate, however the Manager incorporates ESG
considerations into its investment process and the Board has close
engagement with the Manager to monitor its progress. ESG is now
formally incorporated into the Terms of Reference of the Management
Engagement Committee. This Committee, chaired by Susie Arnott,
undertook a detailed analysis of the ESG methodology and engagement
process by the investment team, and was pleased to note year on
year progress in this regard.
Beyond the investment portfolio,
the Board considered the ESG aspects of the Company. As all
business operations are outsourced, the Board has limited control
over ESG deliverables, however the Manager obtains certain ESG
confirmations and attestations from suppliers annually. The Board,
via the Company Secretary and Manager, works with the Company's key
service providers to gain clear insight into their ESG strategies
and believes that adopting good ESG practices leads to better
outcomes for the Company.
Management Team
The Company's portfolio is
currently managed by Nick Brind and George Barrow. As announced in
early 2023, John Yakas retired on 30 June 2023 but remains
available to the team in an advisory capacity. On 1 December 2023,
the team was joined by senior fund manager, Tom Dorner, a highly
experienced financials investor.
Annual General Meeting
The Company's Annual General
Meeting ("AGM") will be held at 16 Palace Street at 2:00pm on
Thursday, 18 April 2024. The notice of AGM has been provided to
Shareholders and is available on the Company's website. Detailed
explanations of the formal business and the resolutions to be
proposed at the AGM are contained within the Shareholder
Information section in the full Annual Report and in the Notice of
AGM. As we have done in previous years, we will once again 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 anyone interested to view the formal
business and ask questions via the on-line chat function. The
Managers 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.
We are conscious of the importance
of shareholder engagement and would like to 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 with the subject
heading PCFT AGM.
Outlook
Looking to the year ahead, we
remain constructive on the outlook for the Financials sector
despite an uncertain backdrop. Clearly there remain significant
geopolitical issues further complicated by elections in the US and
UK, which may well weigh on the markets. However there are several
signs for optimism. Evidence suggests inflation is at last
reducing, economic growth seems to be returning to key markets and
the fears of a deep recession appear to be abating. The earnings
outlook in the financial sector has improved and valuations offer
attractive entry levels for investors who are, generally speaking,
significantly underweight financial sector exposure. As and when
these positive influences take root, a recovery in investor
sentiment should follow. I encourage you to read the detailed
Investment Managers report and the Outlook section where they set
out their thoughts on the various subsectors.
Simon Cordery
Chair
15 February 2024
INVESTMENT MANAGER'S REPORT
Investment Review
Performance
Having outperformed for two
consecutive years, it was disappointing but perhaps not surprising
that financials underperformed the broader equity markets in the
year to November 2023. While equity markets did deliver good
returns, this was largely due to the strong performance of
technology shares, specifically the so-called 'Magnificent Seven',
(the US mega-cap technology firms of Amazon, Apple, Alphabet,
NVIDIA, Meta, Microsoft and Tesla).
The financials sector was
particularly impacted by the collapse of a number of US regional
banks and, in Europe, the forced sale of Credit Suisse to UBS Group
which led to a sharp sell off in banking shares and bonds in March.
Consequently, US financials, which comprise approximately 45% of
the portfolio, were weak over the year. Conversely, Japanese and
European financials, notwithstanding the turmoil around Credit
Suisse, stood out for their positive performance. Asian financials
were weaker than expected, following the reopening of China from
its zero-Covid policy which provided less support to economic data
than had been expected.
Government bond markets suffered
further falls during the second half of the year around concerns
that central banks would pursue interest rate increases
aggressively to choke off inflation. These falls then reversed
sharply in November on the back of much-improved inflation data,
led by lower energy and goods prices, but also concerns that the
outlook for growth was weakening.
Against this background, the
Trust's net asset value fell 2.9% while the benchmark index, the
MSCI All Country World Financials Index, rose 0.3% and the MSCI All
Country World Index rose 6%. The MSCI All Country Index excluding
the performance of the Magnificent Seven would have fallen by.
around 0.5%. The Lipper open-ended peer group of financial sector
equity funds fell by -2.2%. Financial bonds performed well,
returning 4.4% as per the ICE BofA Global Financials
index.
Performance in the first half of
the year was largely satisfactory but the second half was
disappointing. While we had no holdings in Credit Suisse, First
Republic Bank or Signature Bank and only a very small holding in
Silicon Valley Bank (SVB) an overweight position in US banks was a
headwind to performance. Overall stock selection during the period
and the negative impact of gearing were the main drivers of
underperformance.
More specifically, our bias to
higher quality companies hurt performance as they lagged peers and
our overweight position in defensive names towards the end of the
year led to some underperformance on a sharp rotation and market
rally. We realised a loss on a holding in CAB Payments, a
cross-border payments company which listed in the UK in July. In
our view, the company has a significant opportunity to disrupt the
existing correspondent banking model for cross-border transfers.
However, shortly after listing, the company issued a profits
warning following unexpected central bank action in a number of its
key markets. The share price fell sharply as a result. We expect it
will take some time for management to rebuild credibility given the
earnings downgrade so soon after the IPO and consequently the
holding was sold after the period end.
Sector review
Banks
In 2023, negative sentiment around
the outlook for growth weighed on banks' share prices due to
concerns about the impact on their profitability from an economic
downturn. Shares initially performed well in the period as earnings
expectations continued to rise benefitting from higher interest
rates which fed through to higher net interest income - the income
they generate from the assets they hold (i.e. loans and
securities), relative to what they pay out to depositors and other
sources of funding.
However, higher interest rates
resulted in significant unrealised "mark to market" losses in the
securities portfolios held by banks. Despite negligible risk of
these losses being realised, if held to maturity, these losses in
some cases were substantial relative to banks' capital. Therefore,
the announcement by SVB on 8 March 2023, that it would be selling a
portfolio of its securities at a loss, while at the same time
aiming to raise capital to strengthen its balance sheet unnerved
both investors and depositors. Despite support for the capital
raise, the loss of $42bn in deposits on that day led to it being
pulled and ultimately the bank's collapse.
Signature Bank was foreclosed two
days later as it also suffered significant deposit outflows. While
the bank was better known as a New York commercial real estate
lender, its exposure to crypto assets via its Signet payments
platform unsettled depositors as it followed shortly after the
failure of Silvergate Bank, a much smaller bank with much larger
exposure to the crypto industry whose demise received very little
coverage.
First Republic was the last of the
four US banks to go into foreclosure, being bought from the Federal
Deposit Insurance Corporation by JP Morgan. In this case, a
business model focused on lending to high net worth and
aspirational clients which had seen phenomenal growth on the back
of its customer service unravelled, despite the efforts of a JP
Morgan bank-led consortium to help by injecting $30bn of deposits
into the bank.
In Europe, Credit Suisse, which had
seen large outflows of deposits in the final few months of 2022,
saw further outflows following the collapse of SVB. Its 2022 Annual
Report alluded to "material weakness" in its internal controls and
a poorly timed or misunderstood statement from their largest
shareholder that they would "absolutely not" put more capital into
Credit Suisse knocked sentiment further. Despite support from the
Swiss National Bank and its regulator stating the bank was solvent,
it was forced into a sale to UBS Group.
The decision by Swiss regulators to
write down Credit Suisse's AT1 bondholders to zero, which required
emergency legislation, while equity investors were not, was at odds
with the established creditor hierarchy and resulted in sharp falls
in similar bonds issued by other banks. However, given the
importance of the AT1 bond market, regulators in Europe, UK, Hong
Kong, Singapore and Canada were quick to announce they would honour
the creditor hierarchy leading to a recovery in AT1 bond
prices.
Not surprisingly, these events led
to a sharp selloff in bank shares, particularly in other smaller US
regional banks that were seen as vulnerable due to weaker capital.
Initially actions by US authorities appeared to have little impact
due to concerns around regional banks' commercial real estate
exposure which exacerbated share price falls, but deposit flows
stabilised within a few weeks. Asian, European and other bank
shares stabilised quickly, as the issues were not seen as
systemic.
In comparison, the second half of
the financial year was relatively muted. Although US banks rallied
sharply in June and July, proposals from US regulators to increase
capital requirements - the so-called Basel 3 Endgame - as well as
concerns about the impact of rising government bond yields saw US
banks fall back to their May lows. Only when US Government bond
yields started to fall on softer inflation data did banks start to
perform again.
European and Japanese banks
performed extremely well over the remainder of the year, the former
on the back of positive earnings revisions, as analysts factored in
the impact of higher interest rates on their earnings, while the
latter performed on the expectation that the Bank of Japan would
increase interest rates from the current -0.1%, bringing an end to
its negative interest rate policy in place since 2016.
Banks' 12-month performance (2022-23)
Banks performance
|
Japanese Banks
|
38.7%
|
|
European Banks
|
30.3%
|
|
UK Banks
|
12.1%
|
|
Emerging market banks
|
-1.4%
|
|
Indian banks
|
-4.0%
|
|
Australian banks
|
-5.0%
|
|
Chinese banks
|
-10.0%
|
|
Canadian banks
|
-10.9%
|
|
US Banks
|
-12.4%
|
|
US regional banks
|
-26.1%
|
Source: Bloomberg, 30 November
2023
Note: The figures are in sterling
total return terms.
Insurance
With the events in the banking
sector, news flow elsewhere came a distant second. Unsurprisingly
given its defensive characteristics, the insurance subsector
outperformed. It also benefitted from the higher interest rate
tailwinds and therefore higher investment income as well as
improving underwriting returns, i.e. higher
profitability.
There was concern over the
subsectors' exposure to US regional banks and Credit Suisse, which
led to some volatility. Some life assurance companies also have
high exposure to commercial real estate which came under scrutiny,
but for most of the sector, exposure was negligible or
non-existent.
The implementation of IFRS 17, a
new accounting standard, had a significant impact on the European
insurance sector during the latter half of the year. While this
standard has not changed the products, free cashflow yields or
dividend prospects for the sector, it has significantly altered the
reporting of results, adding yet more complexity and for many
lowered reported earnings.
The reinsurance sector benefited
from the withdrawal of capital by some underwriters in 2022,
reflecting the poor level of profitability over the preceding few
years. In particular, the increased cost of claims from so-called
'secondary perils' - floods and hailstorms - as well as higher
catastrophe losses from larger events such as Hurricane Ian - which
hit Florida in September 2022, generating estimated insurance
losses of around $60bn, the second costliest hurricane on record -
impacted profitability.
Consequently, with the drop in
supply of capital underpinning the reinsurance sector but with
demand unchanged at best, reinsurance rates rose sharply in
January. This was estimated by the insurance broker Howden to be
+37% on average. Furthermore, the attachment points, i.e. the
amount of loss borne by an insurer before a reinsurer covers the
cost, also increased. The impact is that either insurance companies
would not be able to pass on losses for less costly events or the
amount they would be able to recover would be lower.
As a result, reinsurers' share
prices performed well, reflecting the much better reward from the
risks they were underwriting. Nevertheless, the subsector did
succumb to profit-taking towards the end of the period as lower
than expected inflation data led to a rotation into more cyclical
stocks that would benefit from a softer economic
landing.
Diversified financials
The performance of the diversified
financials sector was subdued and a headwind to performance. This
sector consists of a very wide group of companies, including trust
banks, investment banks, stock exchanges, asset managers,
information services companies, payment companies and consumer
finance companies. Despite some of the constituents of the
subsector being very defensive, it is sensitive to activity in
financial markets.
Asset managers saw a wide
dispersion of returns. Alternative asset managers have performed
extremely well in recent years, although some have come under
pressure over the past year due to concerns around fundraising,
valuations of their portfolio companies and the impact on
performance fees from lower returns. Overall, they outperformed,
with those with higher exposure to private credit strategies
performing particularly well on the expectation that demand for
private credit will be more resilient.
Consumer finance companies also
held up better than expected reflecting the strong jobs market and
household savings. Information services companies such as S&P
Global and Moody's performed well, both benefiting from a
resurgence in bond issuance which benefited their credit rating
businesses. Berkshire Hathaway also performed reasonably well,
reflecting its defensive positioning with exposure to the likes of
Apple and large insurance businesses offsetting its more
economically sensitive businesses.
FinTech companies saw a mixed
performance. Visa and Mastercard both performed well, reflecting
their defensive characteristics and benefiting from resilience of
consumer spending, but payment companies such as PayPal and Adyen
performed poorly over concern around margin pressure from increased
competition. At the end of May 2023, MSCI designated that payment
companies should move from the technology sector back to the
financial sector and those companies consequently now represent
10.8% of the Benchmark.
Investment Activity
At the beginning of the period, we
retained a constructive view of the outlook and despite concerns,
around a potential recession, took the view that that the sector
would weather it well given resilient earnings. Nevertheless, we
reduced risk and increased our exposure to fixed income securities,
while keeping gearing at a moderate level.
Our exposure to Asia continues to
focus on the faster growing economies of India and Indonesia. While
we have no exposure to Chinese state banks, in the first few months
of 2023 we increased our exposure to the region to benefit from the
reopening of China by adding to holdings in Hong Kong Clearing
& Exchanges, BOC Hong Kong, AIA Group and Prudential. However,
as economic data coming out of Asia disappointed over the course of
the year, we subsequently reduced exposure in AIA Group and
Prudential and sold our holdings in Hong Kong Clearing &
Exchanges and BOC Hong Kong.
At the start of the period, we had
a mid single-digit percentage exposure to small and mid-sized US
regional banks, including Cullen/Frost Bankers, Enterprise
Financial Services and East West Bancorp. This had fallen from
around a low double-digit exposure in the middle of 2022. We had
been reducing our positions due to concerns on capital, the impact
of higher deposit costs on profitability and also their higher
exposure to commercial real estate, making them more sensitive to a
US recession.
We added to holdings in European
banks including AIB Group and Nordea Bank while starting new
positions in BNP Paribas and Intesa Sanpaolo as we saw them
continuing to benefit from higher interest rates. New holdings were
also bought in Intermediate Capital Group and Ares Management, both
alternative asset managers that have significant private credit
strategies. We continue to believe they will be beneficiaries of
the much more attractive environment for credit
strategies.
Following the collapse of SVB, we
made more material changes to the portfolio, selling our remaining
holdings in small and mid-sized regional banks on the basis that
the headwinds facing US regional banks in the shorter term would
cap any rally in their shares. This was done by increasing our
exposure to larger US banks, albeit leaving the portfolio overall
underweight in US banks relative to the benchmark.
However, as valuations for US banks
dropped to levels not seen since 2016 and 2020, we started to add
again to specific holdings. Barclays, in a research note,
highlighted that US banks had seen the worst relative performance
in 2023 versus the broader US stock market since 1937, marginally
worse than their peak-to-trough underperformance during the global
financial crisis (GFC), and their fourth worst year in absolute
terms. For some quality names this seemed nonsensical.
We purchased call options on a US
regional bank ETF to participate in a recovery in US regional bank
shares. In addition we added to our holdings in Bank of America and
US Bancorp. Despite concerns over the unrealised losses in their
securities portfolio, we see both banks as conservative lenders and
valuations were attractive. We also purchased a holding in East
West Bancorp, taking our exposure back to overweight.
During the year, we started a
holding in ICICI bank, a very well regarded Indian private sector
bank, offset by reducing our exposure to HDFC Bank, a larger but
equally well run peer. We also purchased holdings in American
Express and Intercontinental Exchange (ICE), which owns the New
York Stock Exchange among other businesses. ICE's shares had been
lacklustre following the announcement of its acquisition of Black
Knight, a mortgage software and data business where revenues were
under pressure due to high interest rates, but we anticipate a
reversal when the interest rate cycle turns.
We added to our reinsurance
exposure by starting holdings in RenaissanceRe Holdings and Everest
Group, two Bermudan reinsurance companies, partly offset by
reducing our holding in Berkshire Hathaway. We also started a
holding in Munich Re which we switched into following a sale of our
holding in Hannover Rueck as we saw it better positioned than its
German peer in the current environment. We also added to our
holding in Beazley following a fall in its share price due to
confusion around how the new IFRS 17 accounting standard had
impacted its results.
Following the write down of Credit
Suisse's AT1 bonds, we added to our fixed income exposure by either
adding to or starting new holdings in AT1 bonds issued by AIB
Group, BNP Paribas, CaixaBank and Banco Santander. Gearing, which
started the year at 6.0%, fluctuated between 2.6% and 8.2%
finishing the year at 6.5%.
Outlook
Bank Failures
Why did so many banks fail in quick
succession when the banking sector is so much better capitalised,
with significantly greater levels of liquidity and no signs of
stress? Ultimately, the catalyst was a sharp move in interest rates
which led to significant unrealised losses in banks' securities
portfolios. This spooked the markets and led to a sharp outflow of
deposits. While this deposit outflow, is similar to what was seen
during the GFC, this time around it has not been about toxic assets
on weak bank balance sheets as it was then.
The banks that failed stood out as
having a high exposure to uninsured depositors so were vulnerable
to any loss of confidence. For example, the three US banks with the
largest concentration of uninsured deposits as a percentage of
total deposits were First Republic, Signature Bank and SVB, all of
which failed, with the first at 67% and the other two at close to
90%. This compares to a median for the US banking sector of
approximately 40%. First Republic was in the strongest position of
the three but that was not sufficient to prevent a bank
run.
This is not GFC II
We did not see this as another
global financial crisis as the profitability of the banking sector
is vastly improved with the rise in interest rates supporting
earnings, greater capital cushions and the somewhat anaemic growth
in loan origination in recent years. Critically, outside the US,
large banks are required to hedge their interest rate risk and are
penalised with higher capital requirements if they do not do
so.
The report by the Federal Reserve
into SVB's failure stated: "Silicon Valley Bank failed because of a
textbook case of mismanagement by the bank. Its senior leadership
failed to manage basic interest rate and liquidity risk [and]
Federal Reserve supervisors failed to take forceful enough action".
The Federal Reserve went on to argue contentiously that rules
around the regulation of banks which were relaxed under the Trump
administration, had played their part in SVB's failure.
Basel 3 Endgame
While larger US banks were
beneficiaries of the outflow of deposits from smaller US regional
banks in March, due to their perceived safety, they were hit much
harder by proposals dubbed "Basel 3 Endgame" which will increase
their capital requirements if implemented. While ultimately these
proposals are the final piece in the jigsaw for the post-GFC
regulatory framework, they have come under criticism not only from
politicians but also regulators.
JP Morgan, one of the few banks not
to report a loss in 2008 and extremely well regarded for its risk
management, is one of the hardest affected and estimates its
capital requirements will rise by around 25%. Jamie Dimon, its
Chairman and Chief Executive, has stated non-bank competitors will
be "dancing in the streets" as a consequence. We believe a more
resilient and safer banking system is a positive for bank
shareholders, but the latest proposals appear to have not been well
thought through. While banks will be able to meet the new targets
with little difficulty, any easing of the proposals would be
positive.
Commercial real estate
A significant percentage of most
banks' balance sheets are secured against property, whether that be
residential or commercial. Since the GFC, banks have materially
tightened their underwriting of property loans in part as a
response to new regulations. Nevertheless, in the past year
investors have been understandably concerned about their exposure
to offices in particular. As a result of the pandemic and changing
work patterns, along with the rise in bond yields, valuations for
office property have fallen sharply.
Consequently, banks in recent
quarters have been increasing their provisions but as most banks'
exposure to office property is limited to a low single-digit
percentage of their loan books, this should be a very manageable
issue. However, it is likely to remain a headwind for some banks'
share prices until there is greater clarity on the outlook for real
estate markets, as illustrated by the sharp fall in the share price
of New York Community Bank, even though it is seen as an outlier,
due to it being forced by regulators to raise the level of
provisions it had set aside for potential defaults.
Positioning
The Trust's largest positions
include holdings in JP Morgan, Mastercard and Visa. The following
gives more detail on some of the sector where we see attractive
opportunities.
Insurance
We remain positive on the outlook
for the reinsurance sector where our largest holdings are Arch
Capital and RenaissanceRe Holdings. The reinsurance market is
cyclical and high returns will inevitably lead to the sector
attracting new capital which will drive down returns. However, we
have yet to see it happen in any meaningful way. Following what is
known as January renewals, where a significant number of
reinsurance contracts are agreed, results would suggest that
underwriting returns, all things being equal, should continue to be
attractive.
Many industry participants believe
it is the best underwriting market in over a decade, if not longer.
The biggest risk in the shorter term is an environment where
investors turn much more positive on the outlook for growth
globally. Cyclical sectors such as banks and therefore insurance
stocks would lag such a rally. However, with valuations for the
sector undemanding, arguably discounting a much worse outcome for
profitability and growth, we still see good value.
UK mid-cap financials
We added to our UK mid-cap
financials during the year given attractive valuations. While it is
more understandable for those that are domestically focused to
trade on lower valuations as international investors perceive
greater risks in the UK economy than we believe is warranted, it is
very evident where companies have similarly listed peers on higher
valuations. Either these companies start delivering better returns
to shareholders or are vulnerable to being taken
private.
Consequently, among others we added
to holdings in Intermediate Capital Group, as highlighted above,
and started new holdings in IG Group Holdings, an online trading
company, Hiscox, the property and casualty insurance business, and
repurchased a holding in OSB Group, a UK bank focused on the
buy-to-let market. OSB Group had seen its shares fall sharply in
2022 on the back of a profit-warning exacerbated by poor
communication from management which we felt more than discounted
the downside risks.
Alternative asset
managers
We continue to see longer-term
opportunities in alternative asset managers, so-called as they
invest in assets such as private equity, private credit,
infrastructure and real estate. They have seen strong inflows in
recent years and with little or no pressure on fees, this has led
to strong growth in profits. This contrasts with traditional long
only equity and bond asset managers who have been losing market
share to cheaper, passive funds and see fee compression.
The added attraction of alternative
asset managers is that capital is locked up for several years,
giving more certainty about future profitability. Returns for the
better performing managers have been very good. While fundraising
has been weaker in the past year, we expect them to benefit from
the improving outlook for interest rates and growth which will
allow activity in private equity markets to pick up and with that
performance and flows. Holdings we own include Ares Management, EQT
and Antin Infrastructure Partners.
Indian and Indonesian
banks
We continue to see strong tailwinds
for banks in certain emerging markets where penetration of
financial services and household debt-to-GDP ratios are low. The
added attraction of many banks in the region is the strength of
their deposit franchises, capital levels and profitability.
However, valuations reflect the stronger tailwinds and this is why
we do not have larger holdings.
Emerging markets have materially
underperformed developed markets over the past five years. A weaker
US dollar and lower bond yields historically have been a positive
for emerging markets. India and Indonesia represent our key
overweight positions there, reflecting their excellent long-term
growth prospects and the opportunity to invest in highly
profitable, well-run banks operating in a stable regulatory
framework. We have holdings in HDFC Bank, ICICI Bank, IndusInd
Bank, Bank Rakyat Indonesia and Bank Central Asia among
others.
European banks
Our largest European bank holdings
include BNP Paribas, AIB Group and Nordea Bank. European banks have
been pilloried for most of the past decade for their poor
performance, albeit the European Central Bank's (ECB) monetary
policy which squeezed net interest margins and their profits was a
significant contributor. When taking into account the lower risk
loan books of European banks, they have seen a significant increase
in capital ratios over the past decade, with many carrying excess
capital well over levels required by regulators.
They have benefited from the rise
in interest rates but share price returns have lagged earnings
growth as investors expect the ECB to lower interest rates at some
point leading to declining net interest income. Equally, they have
come under pressure over concerns around windfall taxes and the
interest they earn on excess reserves held at the central bank.
Valuations remain extremely low on almost all metrics, especially
relative to wider equity markets.
Subordinated financial
bonds
The events surrounding the Credit
Suisse takeover and the regulator's decision to allow the complete
write off of the bank's AT1 debt investors while equity investors
received compensation resulted in significant volatility in
the AT1 bond market. Following assurance from other
regulators to respect the established creditor hierarchy the event
was seen as idiosyncratic and the ATI bond market
rallied.
With rising interest rates globally
over the past two years, the high single-digit yields on offer
across the subordinated bonds of banks and insurance companies
continue to look attractive in both absolute and relative (to
history) terms, especially when taking into account the greater
resilience of the sector.
Summary
Ultimately it is the outlook for
growth and interest rates that will decide returns over any short
or medium term time period. A weaker economic outlook, all things
being equal, will lead to lower share prices and vice versa.
Financials are a play on a soft landing, as illustrated by the
sharp jump in US bank shares on the more dovish language used by
Federal Reserve Chair Jerome Powell in December when he left
interest rates on hold and indicated the era of rises was
over.
Many investors had assumed central
banks would err on keeping interest rates higher for longer for
fear of repeating the errors of the 1970s when the Federal Reserve
cut aggressively only to have to raise interest rates again as
inflation took hold. However, if actions follows words, a more
accommodative policy will reduce the tail risk of a sharper
downturn in the shorter term. Consequently, we are constructive on
the outlook for the sector as the policy reduces many of the
concerns around the US banking system with regard to the unrealised
losses on securities portfolios and the potential for increased
loan losses.
As importantly, it should help to
underpin sentiment and uncertainty around the impact of higher
interest rates on financial markets directly or indirectly. The
sector suffers swings in sentiment and at the moment is assuming a
more subdued and weaker outlook than earnings and valuations
suggest. Underlying operating performance is good and will be
underpinned at much higher levels unless interest rates return to
the levels seen two plus years ago. Consequently, we remain very
constructive on the outlook for returns from the sector over the
coming year.
Nick Brind and George Barrow
Co-Managers
Polar Capital Global Financials Team
15 February 2024
Note
We would draw shareholders
attention to www.polarcapitalglobalfinancialstrust.com
for regular monthly portfolio updates and
commentary.
Full Investment
Portfolio
As at 30 November 2023
|
Ranking
|
|
|
|
Market
Value
£'000
|
% of total net
assets
|
|
2023
|
2022
|
Stock
|
Sector
|
Country
|
2023
|
2022
|
2023
|
2022
|
|
1
|
(1)
|
JP Morgan
Chase
|
Banks
|
North
America
|
31,432
|
30,627
|
6.4%
|
5.7%
|
|
2
|
(18)
|
Mastercard
|
Financial
Services
|
North
America
|
27,136
|
9,805
|
5.6%
|
1.8%
|
|
3
|
(13)
|
Visa
|
Financial
Services
|
North
America
|
21,140
|
11,108
|
4.3%
|
2.1%
|
|
4
|
(3)
|
CHUBB
|
Insurance
|
Europe
|
19,891
|
22,493
|
4.1%
|
4.2%
|
|
5
|
(4)
|
Berkshire
Hathaway
|
Financial
Services
|
North
America
|
16,764
|
21,302
|
3.4%
|
3.9%
|
|
6
|
(6)
|
Wells
Fargo
|
Banks
|
North
America
|
13,003
|
20,754
|
2.7%
|
3.8%
|
|
7
|
(2)
|
Bank of
America
|
Banks
|
North
America
|
13,002
|
25,887
|
2.7%
|
4.8%
|
|
8
|
(15)
|
Marsh
& McLennan
|
Insurance
|
North
America
|
12,308
|
10,041
|
2.5%
|
1.8%
|
|
9
|
(14)
|
Arch
Capital
|
Insurance
|
North
America
|
11,356
|
10,533
|
2.3%
|
1.9%
|
|
10
|
(-)
|
RenaissanceRe
|
Insurance
|
North
America
|
11,237
|
-
|
2.3%
|
-
|
|
Top 10
investments
|
|
|
177,269
|
|
36.3%
|
|
|
11
|
(47)
|
S&P
Global
|
Financial
Services
|
North
America
|
10,214
|
4,923
|
2.1%
|
0.9%
|
|
12
|
(21)
|
AIB
Group
|
Banks
|
Europe
|
9,511
|
8,949
|
1.9%
|
1.7%
|
|
13
|
(20)
|
U.S.
Bancorp
|
Banks
|
North
America
|
8,845
|
8,972
|
1.8%
|
1.7%
|
|
14
|
(7)
|
HSBC
Holdings
|
Banks
|
United
Kingdom
|
8,627
|
14,656
|
1.8%
|
2.7%
|
|
15
|
(19)
|
Bank
Rakyat
|
Banks
|
Asia
(ex-Japan)
|
8,431
|
9,183
|
1.7%
|
1.7%
|
|
16
|
(-)
|
BNP
Paribas
|
Banks
|
Europe
|
8,238
|
-
|
1.7%
|
-
|
|
17
|
(8)
|
AIA
Group
|
Insurance
|
Asia
(ex-Japan)
|
8,177
|
13,874
|
1.7%
|
2.6%
|
|
18
|
(40)
|
Nordea
Bank
|
Banks
|
Europe
|
8,133
|
5,502
|
1.7%
|
1.0%
|
|
19
|
(-)
|
American
Express
|
Financial
Services
|
North
America
|
7,987
|
-
|
1.6%
|
-
|
|
20
|
(34)
|
Royal Bank
of Canada
|
Banks
|
North
America
|
7,820
|
5,858
|
1.6%
|
1.1%
|
|
Top 20
investments
|
|
|
263,252
|
|
53.9%
|
|
|
21
|
(-)
|
Intesa
|
Banks
|
Europe
|
7,694
|
-
|
1.6%
|
-
|
|
22
|
(5)
|
HDFC
Bank
|
Banks
|
Asia
(ex-Japan)
|
7,607
|
21,022
|
1.6%
|
3.9%
|
|
23
|
(22)
|
Beazley
|
Insurance
|
United
Kingdom
|
7,422
|
8,909
|
1.5%
|
1.6%
|
|
24
|
(-)
|
Muenchener
Ruecker
|
Insurance
|
Europe
|
7,326
|
-
|
1.5%
|
-
|
|
25
|
(-)
|
Intercontinental Exchange
|
Financial
Services
|
North
America
|
7,271
|
-
|
1.5%
|
-
|
|
26
|
(-)
|
Grupo
Financiero Banorte
|
Banks
|
Latin
America
|
7,100
|
-
|
1.4%
|
-
|
|
27
|
(28)
|
Indusind
Bank
|
Banks
|
Asia
(ex-Japan)
|
7,055
|
6,898
|
1.4%
|
1.3%
|
|
28
|
(56)
|
Axis
Bank
|
Banks
|
Asia
(ex-Japan)
|
6,876
|
3,789
|
1.4%
|
0.7%
|
|
29
|
(-)
|
London
Stock Exchange
|
Financial
Services
|
United
Kingdom
|
6,821
|
-
|
1.4%
|
-
|
|
30
|
(-)
|
Intermediate Capital
|
Financial
Services
|
United
Kingdom
|
6,676
|
-
|
1.4%
|
-
|
|
Top 30
investments
|
|
|
335,100
|
|
68.6%
|
|
|
31
|
(-)
|
BlackRock
|
Financial
Services
|
North
America
|
6,242
|
-
|
1.3%
|
-
|
|
32
|
(54)
|
Ares
Management
|
Financial
Services
|
North
America
|
5,932
|
4,236
|
1.2%
|
0.8%
|
|
33
|
(27)
|
Morgan
Stanley
|
Financial
Services
|
North
America
|
5,565
|
7,558
|
1.1%
|
1.4%
|
|
34
|
(38)
|
East West
Bancorp
|
Banks
|
North
America
|
5,496
|
5,660
|
1.1%
|
1.0%
|
|
35
|
(35)
|
Tisco
Financial
|
Banks
|
Asia
(ex-Japan)
|
5,174
|
5,805
|
1.1%
|
1.1%
|
|
36
|
(46)
|
Lancashire
|
Insurance
|
United
Kingdom
|
5,007
|
5,024
|
1.0%
|
0.9%
|
|
37
|
(17)
|
Bank
Central Asia Indonesia
|
Banks
|
Asia
(ex-Japan)
|
4,946
|
9,890
|
1.0%
|
1.8%
|
|
38
|
(45)
|
Allianz
|
Insurance
|
Europe
|
4,943
|
5,078
|
1.0%
|
0.9%
|
|
39
|
(29)
|
Intact
Financial Corporation
|
Insurance
|
North
America
|
4,871
|
6,836
|
1.0%
|
1.3%
|
|
40
|
(-)
|
Bank of
Cyprus
|
Banks
|
Europe
|
4,674
|
-
|
1.0%
|
-
|
|
Top 40
investments
|
|
|
387,950
|
|
79.4%
|
|
|
41
|
(11)
|
Toronto-Dominion Bank
|
Banks
|
North
America
|
4,580
|
12,439
|
0.9%
|
2.3%
|
|
42
|
(-)
|
OSB
Group
|
Financial
Services
|
United
Kingdom
|
4,572
|
-
|
0.9%
|
-
|
|
43
|
(-)
|
ICICI
Bank
|
Banks
|
Asia
(ex-Japan)
|
4,363
|
-
|
0.9%
|
-
|
|
44
|
(12)
|
Sumitomo
Mitsui Financial
|
Banks
|
Japan
|
4,329
|
11,789
|
0.9%
|
2.2%
|
|
45
|
(9)
|
DBS
Group
|
Banks
|
Asia
(ex-Japan)
|
4,254
|
13,200
|
0.9%
|
2.4%
|
|
46
|
(-)
|
ING
Groep
|
Banks
|
Europe
|
4,225
|
-
|
0.9%
|
-
|
|
47
|
(31)
|
The
Travelers Companies
|
Insurance
|
North
America
|
4,216
|
6,484
|
0.9%
|
1.2%
|
|
48
|
(52)
|
Macquarie
|
Financial
Services
|
Asia
(ex-Japan)
|
4,125
|
4,644
|
0.8%
|
0.9%
|
|
49
|
(66)
|
Moneybox
(unquoted)
|
Financial
Services
|
United
Kingdom
|
3,773
|
2,310
|
0.8%
|
0.4%
|
|
50
|
(10)
|
PNC
Financial Services
|
Banks
|
North
America
|
3,740
|
13,112
|
0.8%
|
2.4%
|
|
Top 50
investments
|
|
|
430,127
|
|
88.1%
|
|
|
51
|
(30)
|
Standard
Chartered
|
Banks
|
United
Kingdom
|
3,717
|
6,552
|
0.8%
|
1.2%
|
|
52
|
(41)
|
MSCI
|
Financial
Services
|
North
America
|
3,707
|
5,497
|
0.8%
|
1.0%
|
|
53
|
(39)
|
Mitsubishi
UFJ Financial Group
|
Banks
|
Japan
|
3,691
|
5,629
|
0.8%
|
1.0%
|
|
54
|
(-)
|
Everest
Group
|
Insurance
|
North
America
|
3,560
|
-
|
0.7%
|
-
|
|
55
|
(-)
|
Hiscox
|
Insurance
|
United
Kingdom
|
3,403
|
-
|
0.7%
|
-
|
|
56
|
(60)
|
International Personal Finance 9.75% 2025 Bond
|
Fixed
Income
|
Fixed
Income
|
3,089
|
2,563
|
0.6%
|
0.5%
|
|
57
|
(57)
|
Ares
Capital
|
Financial
Services
|
North
America
|
3,067
|
3,393
|
0.6%
|
0.6%
|
|
58
|
(32)
|
Prudential
|
Insurance
|
Asia
(ex-Japan)
|
3,000
|
6,402
|
0.6%
|
1.2%
|
|
59
|
(-)
|
IG
Group
|
Financial
Services
|
United
Kingdom
|
2,940
|
-
|
0.6%
|
-
|
|
60
|
(65)
|
Lancashire
5.625% 2041 Bond
|
Fixed
Income
|
Fixed
Income
|
2,820
|
2,348
|
0.6%
|
0.4%
|
|
Top 60
investments
|
|
|
463,121
|
|
94.9%
|
|
|
61
|
(67)
|
IG Group
3.125% 2028 Bond
|
Fixed
Income
|
Fixed
Income
|
2,488
|
2,284
|
0.5%
|
0.4%
|
|
62
|
(61)
|
Rothesay
Life 4.875% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
2,487
|
2,548
|
0.5%
|
0.5%
|
|
63
|
(59)
|
Pension
Insurance 7.375% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
2,480
|
2,576
|
0.5%
|
0.5%
|
|
64
|
(-)
|
Antin
Infrastructure Partners
|
Financial
Services
|
Europe
|
2,479
|
-
|
0.5%
|
-
|
|
65
|
(62)
|
Legal General Group 5.625% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
2,477
|
2,542
|
0.5%
|
0.5%
|
|
66
|
(63)
|
Golub
Capital
|
Financial
Services
|
North
America
|
2,465
|
2,465
|
0.5%
|
0.5%
|
|
67
|
(23)
|
Citizens
Financial Group
|
Banks
|
North
America
|
2,385
|
8,570
|
0.5%
|
1.6%
|
|
68
|
(69)
|
AIB Group
6.25% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
2,347
|
2,056
|
0.5%
|
0.4%
|
|
69
|
(73)
|
Societe
Generale 5.375% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
2,104
|
1,978
|
0.4%
|
0.4%
|
|
70
|
(64)
|
VPC
Specialty Lending Investments
|
Fixed
Income
|
Fixed
Income
|
2,014
|
2,428
|
0.4%
|
0.4%
|
|
Top 70
Investments
|
|
|
486,847
|
|
99.7%
|
|
|
71
|
(70)
|
Aviva
6.875% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
2,008
|
2,030
|
0.4%
|
0.4%
|
|
72
|
(71)
|
Riverstone
Credit Opportunities
|
Fixed
Income
|
Fixed
Income
|
1,939
|
2,026
|
0.4%
|
0.4%
|
|
73
|
(75)
|
BNP
Paribas 7% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,762
|
1,867
|
0.4%
|
0.3%
|
|
74
|
(-)
|
CaixaBank
8.25% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,747
|
-
|
0.4%
|
-
|
|
75
|
(78)
|
Rothesay
Life 6.875% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,672
|
1,675
|
0.3%
|
0.3%
|
|
76
|
(72)
|
Barclays
8.875% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,562
|
1,978
|
0.3%
|
0.4%
|
|
77
|
(81)
|
Provident
Financial 8.875% 2032 Bond
|
Fixed
Income
|
Fixed
Income
|
1,535
|
1,593
|
0.3%
|
0.3%
|
|
78
|
(-)
|
VEF
|
Financial
Services
|
Europe
|
1,526
|
-
|
0.3%
|
-
|
|
79
|
(-)
|
Investec
|
Fixed
Income
|
Fixed
Income
|
1,391
|
-
|
0.3%
|
-
|
|
80
|
(85)
|
Rothesay
Life 5% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,386
|
206
|
0.3%
|
0.0%
|
|
Top 80
Investments
|
|
|
503,375
|
|
103.1%
|
|
|
81
|
(-)
|
Cab
Payments
|
Financial
Services
|
United
Kingdom
|
1,378
|
-
|
0.3%
|
-
|
|
82
|
(68)
|
Atom Bank
(unquoted)
|
Banks
|
United
Kingdom
|
1,281
|
2,241
|
0.3%
|
0.4%
|
|
83
|
(76)
|
Nationwide
Building Society 5.75% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,258
|
1,785
|
0.3%
|
0.3%
|
|
84
|
(83)
|
Shawbrook
Group 9% 2030 Bond
|
Fixed
Income
|
Fixed
Income
|
1,246
|
480
|
0.3%
|
0.1%
|
|
85
|
(-)
|
CaixaBank
5.25% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
1,240
|
-
|
0.3%
|
-
|
|
86
|
(-)
|
Quilter
8.625% 2033 Bond
|
Fixed
Income
|
Fixed
Income
|
1,211
|
-
|
0.2%
|
-
|
|
87
|
(-)
|
Shawbrook
Group 12.25% 2034 Bond
|
Fixed
Income
|
Fixed
Income
|
1,194
|
-
|
0.2%
|
-
|
|
88
|
(-)
|
Hellenic
Bank 10.25% 2033 Bond
|
Fixed
Income
|
Fixed
Income
|
1,065
|
-
|
0.2%
|
-
|
|
89
|
(82)
|
Chesnara
4.75% 2032 Bond
|
Fixed
Income
|
Fixed
Income
|
1,049
|
1,275
|
0.2%
|
0.2%
|
|
90
|
(-)
|
Litigation
Capital Management
|
Financial
Services
|
Asia
(ex-Japan)
|
1,049
|
-
|
0.2%
|
-
|
|
Top 90
Investments
|
|
|
515,346
|
|
105.6%
|
|
|
91
|
(-)
|
Banco
Bilbao Vizcaya Argentaria 8.375% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
891
|
-
|
0.2%
|
-
|
|
92
|
(-)
|
Personal
Group
|
Insurance
|
United
Kingdom
|
566
|
-
|
0.1%
|
-
|
|
93
|
(84)
|
Jupiter 8.875% 2030 Bond
|
Fixed
Income
|
Fixed
Income
|
448
|
456
|
0.1%
|
0.1%
|
|
94
|
(-)
|
Admiral
Group 8.5% 2034 Bond
|
Fixed
Income
|
Fixed
Income
|
368
|
-
|
0.1%
|
-
|
|
95
|
(-)
|
RL Finance
Bonds NO 6 10.125% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
310
|
-
|
0.0%
|
-
|
|
96
|
(-)
|
Permanent
TSB Group 13.25% Perp Bond
|
Fixed
Income
|
Fixed
Income
|
195
|
-
|
0.0%
|
-
|
|
Total
Investments
|
|
|
518,124
|
|
106.1%
|
|
|
Other net
liabilities
|
|
|
(29,926)
|
|
(6.1%)
|
|
|
Total net
assets
|
|
|
488,198
|
|
100.0%
|
|
Note: Figures in brackets denote
comparative rankings as at 30 November 2022.
Portfolio Review
As at 30 November
2023
|
Geographical Exposure*
|
Benchmark weighting
as
at 30 November 2023**
|
30
November 2023
|
30
November 2022
|
|
North America
|
55.3%
|
52.2%
|
50.1%
|
|
Europe
|
15.3%
|
16.2%
|
15.5%
|
|
Asia (ex-Japan)
|
15.7%
|
13.3%
|
19.8%
|
|
United Kingdom
|
4.1%
|
11.6%
|
9.4%
|
|
Fixed Income
|
-
|
9.7%
|
7.8%
|
|
Japan
|
4.3%
|
1.7%
|
3.2%
|
|
Latin America
|
1.6%
|
1.4%
|
-
|
|
Other net liabilities
|
-
|
(6.1%)
|
(5.8%)
|
|
Total
|
|
100.0%
|
100.0%
|
|
Sector Exposure*
|
Benchmark weighting
as
at 30 November 2023**
|
30
November 2023
|
30
November 2022
|
|
Banks
|
41.8%
|
43.3%
|
60.1%
|
|
Financial Servies
|
38.1%
|
31.2%
|
17.2%
|
|
Insurance
|
20.1%
|
21.9%
|
20.7%
|
|
Fixed Income
|
-
|
9.7%
|
7.8%
|
|
Other net liabilities
|
-
|
(6.1%)
|
(5.8%)
|
|
Total
|
|
100.0%
|
100.0%
|
|
Market Capitalisation*
|
Benchmark weighting
as
at 30 November 2023**
|
30
November 2023
|
30
November 2022
|
|
Large (>US$5bn)
|
99.0%
|
95.5%
|
98.7%
|
|
Medium (US$0.5bn -
US$5bn)
|
1.0%
|
8.7%
|
5.9%
|
|
Small (<US$0.5bn)
|
-
|
1.9%
|
1.2%
|
|
Other net liabilities
|
-
|
(6.1%)
|
(5.8%)
|
|
Total
|
|
100.0%
|
100.0%
|
* Based on the net assets as at 30
November 2023 of 488.2m(2022: £541.3m)
**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.
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 2023,
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 financials 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
financials 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 normally 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
a six-stage process 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. The approach involves
undertaking a detailed income statement and balance sheet analysis
and values a company based on the Capital Asset Pricing Model that
compares a company's return on equity to its cost of capital (the
latter taking account of both stock and country risk) to provide a
fair price/ book valuation. This valuation (coupled with other more
standard valuation systems) is then ranked across the global
universe and added to scores focused on other variables such as
profitability, risk, ESG and growth metrics to provide a model
portfolio and a focus for additional stock-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.
There are no limits on the exposure
of the investment portfolio to either small or mid-cap companies
but the majority of the portfolio is invested in companies with a
market capitalisation greater than US$5bn. The Manager has
discretion to invest up to 10% of the portfolio in debt
securities.
The investment portfolio is
primarily invested in companies that not only offer capital
appreciation but pay dividends, which are expected to rise over
time, so as to meet the necessary income required to facilitate the
payment of a rising level of dividends to Shareholders. 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.
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.
Information is provided to the
Directors on a timely basis, covering all aspects of relevant
management, regulatory and financial information. The Board
receives a report from the Manager at each Board meeting and may
ask representatives of the Manager to attend Board meetings
enabling Directors to probe further on matters of concern or seek
clarification as appropriate. While the Board reviews the
performance of the Manager at each Board meeting, and the Company's
performance against the Benchmark and a peer group of funds with
similar objectives, the Management Engagement Committee formally
carries out an annual review of the Manager and other suppliers'
performance during the year.
Polar Capital provides a team of
financial specialists and the portfolio is jointly managed by Mr
Nick Brind and Mr George Barrow, supported by other financials
specialists within the team. The Manager has other investment
resources which support the investment team and has experience in
administering and managing other investment companies.
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.
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 purposes 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 2023. Where a performance fee becomes
payable it will be charged 100% to capital.
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 total return relative to
the Benchmark and a comparator group.
|
The Board reviews at each meeting
the performance of the portfolio and considers the views of the
Manager and the value delivered to Shareholders through NAV growth
and dividends paid.
The Board also receives monthly
reports on performance against both the Benchmark and a comparator
group of open-ended investment funds.
|
The Company's NAV total return,
over the year ended 30 November 2023, was -2.8%*while the Benchmark
delivered 0.3% over the same period. Since inception the NAV total
return was 119.7%* compared to 135.6% for the Benchmark and 103.5%
for a comparator group.
The Company ranks 13 out of a
comparator group of 31 open ended funds within the Lipper Financial
Sector universe since inception and 5 out of 7 within a smaller
comparable group of funds regularly considered by the Board as at
30 November 2023.
|
|
The achievement of a progressive
dividend policy.
|
Financial forecasts are reviewed to
track income and Distributions.
|
A total of two interim dividends
amounting to 4.55p (2022: 4.45p) per ordinary share have been paid
or declared in respect of the financial year ended 30 November
2023. 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 ordinary share price to
the NAV per ordinary share with the aim of reducing volatility for
Shareholders.
|
The Board receives regular
information on the composition of the share register including
trading patterns and discount/premium levels of the Company's
ordinary shares. The Board discusses and authorises the issue or
buy back of shares when appropriate.
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 formal
policy the Board discusses the market factors giving rise to any
discount or premium, the long or short-term nature of those factors
and the overall benefit to Shareholders of any mitigating actions.
The market 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.
|
The discount of the ordinary share
price to the NAV per ordinary share at the year-end was 12.2%*
compared with a discount of 7.0% at the year ended 30 November
2022. The discount for the investment trust sector at 30 November
2023 was 15.7%.
During the year under review, the
Company bought back 16,532,313 ordinary shares at an average
discount of 10.5%. After the year end and up to 13 February 2024,
the Company bought back a further 2,311,282 shares. All shares
bought back have been placed into treasury for reissue to the
market under the appropriate conditions.
|
|
To qualify and continue to meet the
requirements for Sections 1158 and 1159 of the Corporation Tax Act
2010 ('investment trust status').
|
The Board receives regular
financial information which discloses the current and projected
financial position of the Company against each of the tests set out
in Sections 1158 and 1159.
|
The Company has been granted
investment trust status annually since its launch on 1 July 2013
and is deemed to be granted such status for each subsequent 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 2023
and will continue to be met.
|
|
Efficient operation of the Company
with appropriate investment management resources and services from
third party suppliers within a stable and risk controlled
environment.
|
Annually the
Board considers the services provided by the Manager, both
investment and administrative, and reviews the provision of
services from third parties including the costs of their
services.
The annual operating expenses are
reviewed and any non-recurring project related expenditure approved
by the Board.
|
The Board, through the Audit
Committee has received and considered satisfactory the internal
controls report of the Manager and other key suppliers including
contingency arrangements to facilitate the ongoing operations of
the Company in the event of withdrawal or failure of
services.
The ongoing charges for the year
ended 30 November 2023 excluding the performance fee were 0.86% of
net assets (2022: 0.87%)*. The ongoing charges including the
performance fee payable were 0.86% (2022: 0.65%)*. The decrease in
ongoing charges including performance fee in the prior year
reflects the write back of the performance fee accrual during
FY22
|
* Alternative Performance Measures,
see below for further explanations.
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 continually
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
continued impact of geopolitical events as well as the effects of
inflation and rising interest rates. While there are signs of
inflation slowing and energy prices reducing, the continuation of
the Russian war on Ukraine, and also the Middle East crisis has
created further market volatility. This continues to impact supply
chains, while high interest rates continue to affect consumers.
Geopolitical events such as these can have a significant impact on
global financial markets, and the global economy. 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 are found in the Annual Report and the Report of the
Audit Committee.
|
Investor
Manager Performance
|
|
Principal Business Risks and Uncertainties
|
Management of Risks through Mitigation &
Controls
|
|
Failure to achieve investment
objective, investment performance below agreed benchmark objective
or market/ industry average.
|
The Board seeks to manage the
impact of such risks through regular reporting 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.
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|
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.
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|
Gearing, either through bank debt
or the use of derivatives may be utilised from time to time. Whilst
the use of gearing is intended to enhance the NAV total return, it
will have the opposite effect when the return on the Company's
investment portfolio is negative.
|
The arrangement of any new banking
facilities and gearing limits under such arrangements are
controlled by the Board. Derivatives are considered as a form of
gearing and their use has been agreed by the Board. The deployment
of borrowed funds (if any) is based on the Manager's assessment of
risk and reward. At 30 November 2023 the Company was 6.5% geared
(2022: 6.0%).
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|
The ability to continue the
dividend policy may be compromised due to lower income because of
changes in underlying companies' policies or changes in the
portfolio construction, regulatory intervention, local taxes
because of the currency exposure underlying the portfolio. This
could result in a lower level of dividend being paid than intended
or previously paid
|
The Board monitors income and
currency exposure through monthly management accounts and
discussion. In the event of there being insufficient income during
the financial year the Company has built up revenue reserves on
which to draw to pay dividends. Equally, in the event of the
revenue reserves being 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.
|
|
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 investment mandate
is focused on financials and thus the portfolio is more sensitive
to investor sentiment and the commercial acceptance of the sector
than a general investment portfolio.
The Company's portfolio is exposed
to risks such as market price, credit, liquidity, foreign currency
and interest rates. The portfolio is actively managed. The
Manager's style focuses primarily on the investment opportunity of
individual stocks and, accordingly, may not follow the makeup of
the Benchmark. This may result in returns which are not in line
with the Benchmark.
The degree of risk which the
Manager incurs in order to generate the investment returns and the
effect of gearing on the portfolio by borrowed funds can magnify
the portfolio returns per share positively or
negatively.
|
The Board has set appropriate
investment limits against which it monitors the position of the
portfolio. They include guidelines on exposures to certain
investment markets and sectors. The Board discusses with the
Manager at each Board meeting its views on the sector.
At each Board meeting the
composition and diversification of the portfolio by geographies,
sectors and capitalisations are considered along with sales and
purchases of investments. Individual investments are discussed with
the Manager as well as the Manager's general views on the various
investment markets and the financials sector.
Analytical performance data and
attribution analysis is presented by the Manager.
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.
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|
There is significant exposure to
the economic cycles of the markets in which the underlying
investments conduct their business operations as well as the
economic impact on investment markets where such investments are
listed.
The fluctuations of exchange rates
can also have a material impact on Shareholder returns.
|
The Board regularly discusses
global geopolitical issues and general economic conditions and
developments.
The impact on the portfolio from
other geopolitical changes is monitored through existing control
systems and discussed regularly by the Board. The longer-term
effects of geopolitical events will continue to be assessed by the
Audit Committee in light of how they will impact the Company's
portfolio and the overall economic and geopolitical environment in
which the Company operates.
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 accounting systems and
processes provided by the Manager including any subcontractors to
which the Manager has delegated a task as well as directly
appointed suppliers.
The mis-valuation of investments or
the loss of assets from the custodian or sub custodians could
affect the NAV per share or lead to a loss of Shareholder
value.
There is taxation risk that the
Company may fail to continue as an investment trust and suffer
capital gains tax or fail to recover as fully as possible
withholding taxes on overseas investments.
The legal and regulatory risks
include failure to comply with the FCA's Prospectus Rules, Listing
Rules and Disclosure Guidance and Transparency Rules; not meeting
the provisions of the Companies Act 2006 and other UK and overseas
legislation affecting UK companies and not complying with
accounting standards. Further risks arise from not keeping abreast
of changes in legislation and regulations which have in recent
years been substantial.
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At each Board meeting the Board
receives an administration report that provides details on general
corporate matters including legislative and regulatory developments
and changes.
The Board conducts an annual review
of suppliers and their internal control reports, which includes the
disaster recovery procedures of the Manager.
Regular reporting from the
Depositary on the safe custody of the Company's assets and the
operation of control systems related to the portfolio
reconciliation is monitored. Specialist advice is sought on
taxation issues as and when required. The Audit Committee has
oversight of such work.
Information and guidance on legal
and regulatory risks is managed by using the Manager or
professional advisers where necessary and the submission of reports
to the Board for discussion and, if required, any remedial action
or changes considered necessary. The Board monitors new
developments and changes in the regulatory environment. Whilst it
has no control over such changes, the Board seeks to ensure that
their impact on the Company is understood and complied
with.
|
|
Cyber-attack causing disruption to
or failure of operational and accounting systems and processes
provided by the Investment Manager creating an unexpected event
and/or adverse impact on personnel or the portfolio.
|
The number, severity and success
rate of cyber-attacks have increased considerably over recent
years. Detailed controls are in place and the Board 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 issuance of erroneous or
misleading information.
|
Polar Capital Sales Team and the
Corporate Broker provide periodic reports to the Board on
communications with shareholders and feedback received.
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 Investment Manager as well
as portfolio data, an informative website as well as annual and
half year reports. Contact details and how to contact the Board are
provided in regulatory announcements and the Board are present at
the AGM to speak to shareholders.
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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 also 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, as well as 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.
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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 18 April 2024 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, especially in the current market
conditions 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's, reviewing the Company's
performance in the year and the outlook for 2023-2024, 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. Shareholders are encouraged to send any questions
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
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 16,532,313 shares during the year under review. After the year
end and up to 13 February 2024, the Company bought back a
further2,311,282 shares.
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.
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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 adherence to the Investment Policy;
•
Ensuring excessive risk is not undertaken in the pursuit of
investment performance;
• 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.
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.
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|
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 75 company
meetings over the year ended 30 November 2023, with 7% of all votes
being against management and 35% 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.
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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.
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|
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.
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|
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 15
February 2024.
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
15 February 2024
Statement of Comprehensive
Income
For the year ended 30 November
2023
|
|
Notes
|
Year ended 30 November
2023
|
Year ended 30 November
2022
|
|
Revenue
return
£'000
|
Capital
return
£'000
|
Total
return
£'000
|
Revenue
return
£'000
|
Capital
return
£'000
|
Total
return
£'000
|
|
Investment
income
|
3
|
19,143
|
-
|
19,143
|
17,473
|
-
|
17,473
|
|
Other
operating income
|
4
|
916
|
-
|
916
|
146
|
-
|
146
|
|
Losses on
investments held at fair value
|
5
|
-
|
(25,777)
|
(25,777)
|
-
|
(5,540)
|
(5,540)
|
|
Losses on
derivatives
|
|
-
|
(442)
|
(442)
|
-
|
(103)
|
(103)
|
|
Other
currency losses
|
6
|
-
|
(152)
|
(152)
|
-
|
(819)
|
(819)
|
|
Total
income/(expense)
|
|
20,059
|
(26,371)
|
(6,312)
|
17,619
|
(6,462)
|
11,157
|
|
Expenses
|
|
|
|
|
|
|
|
|
Investment
management fee
|
7
|
(704)
|
(2,815)
|
(3,519)
|
(727)
|
(2,907)
|
(3,634)
|
|
Performance Fee
|
7
|
-
|
-
|
-
|
-
|
1,164
|
1,164
|
|
Other
administrative expenses
|
8
|
(774)
|
(20)
|
(794)
|
(870)
|
(19)
|
(889)
|
|
Total
expenses
|
|
(1,478)
|
(2,835)
|
(4,313)
|
(1,597)
|
(1,762)
|
(3,359)
|
|
Profit/(loss) before finance costs and tax
|
|
18,581
|
(29,206)
|
(10,625)
|
16,022
|
(8,224)
|
7,798
|
|
Finance
costs
|
9
|
(722)
|
(2,887)
|
(3,609)
|
(249)
|
(996)
|
(1,245)
|
|
Profit/(loss) before
tax
|
|
17,859
|
(32,093)
|
(14,234)
|
15,773
|
(9,220)
|
6,553
|
|
Tax
|
10
|
(1,986)
|
695
|
(1,291)
|
(1,484)
|
381
|
(1,103)
|
|
Net profit/(loss) for the
year and total comprehensive income/(expense)
|
|
15,873
|
(31,398)
|
(15,525)
|
14,289
|
(8,839)
|
5,450
|
|
Earnings/(losses) per
ordinary share (pence)
|
11
|
4.97
|
(9.84)
|
(4.87)
|
4.45
|
(2.75)
|
1.70
|
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
2023
|
|
Notes
|
Year
ended 30 November 2023
|
|
Called up share capital
£'000
|
Capital redemption
reserve
£'000
|
Share premium reserve
£'000
|
Special distributable
reserve
£'000
|
Capital reserves
£'000
|
Revenue reserve
£'000
|
Total equity
£'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
|
|
|
Notes
|
Year
ended 30 November 2022
|
|
Called up share capital
£'000
|
Capital redemption
reserve
£'000
|
Share premium reserve
£'000
|
Special distributable
reserve
£'000
|
Capital reserves
£'000
|
Revenue reserve
£'000
|
Total equity
£'000
|
|
Total equity at 1 December
2021
|
|
13,967
|
251
|
219,163
|
131,947
|
83,744
|
8,175
|
457,247
|
|
Total comprehensive
(expense)/income:
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the year ended 30 November 2022
|
|
-
|
-
|
-
|
-
|
(8,839)
|
14,289
|
5,450
|
|
Transactions with owners,
recorded directly to equity:
|
|
|
|
|
|
|
|
|
|
Issue of
shares out of treasury
|
15
|
-
|
-
|
4,483
|
6,477
|
-
|
-
|
10,960
|
|
Issue of
new ordinary shares (including costs)
|
15
|
1,282
|
-
|
43,765
|
-
|
-
|
-
|
45,047
|
|
Issue of
new ordinary shares pursuant to placings (including
costs)
|
15
|
1,339
|
-
|
43,969
|
-
|
-
|
-
|
45,308
|
|
Shares
bought back and held in treasury
|
15
|
-
|
-
|
-
|
(9,175)
|
-
|
-
|
(9,175)
|
|
Equity
dividends paid
|
12
|
-
|
-
|
-
|
(993)
|
-
|
(12,572)
|
(13,565)
|
|
Total equity at 30 November
2022
|
|
16,588
|
251
|
311,380
|
128,256
|
74,905
|
9,892
|
541,272
|
The notes
to follow form part of these financial statements.
Balance
Sheet
As at 30 November 2023
|
|
Notes
|
30 November 2023
£'000
|
30 November 2022
£'000
|
|
Non-current assets
|
|
|
|
|
Investments held at fair value
through profit or loss
|
13
|
518,124
|
572,748
|
|
Current assets
|
|
|
|
|
Cash and
cash equivalents
|
14
|
37,262
|
29,793
|
|
Fair value
of open derivative contracts
|
13
|
506
|
6
|
|
Receivables*
|
|
8,419
|
3,161
|
|
|
|
46,187
|
32,960
|
|
Total assets
|
|
564.311
|
605,708
|
|
Current liabilities
|
|
|
|
|
Bank overdraft
|
14
|
(1)
|
-
|
|
Fair value of open derivative
contracts
|
13
|
(316)
|
-
|
|
Payables
|
|
(6,502)
|
(3,778)
|
|
|
|
(6,819)
|
(3,778)
|
|
Non-current liabilities
|
|
|
|
|
Bank loan
|
|
(69,031)
|
(60,507)
|
|
Indian capital gains tax
provision
|
|
(263)
|
(151)
|
|
|
|
(69,294)
|
(60,658)
|
|
Net assets
|
|
488,198
|
541,272
|
|
Equity attributable to equity shareholders
|
|
|
|
|
Called up share capital
|
15
|
16,588
|
16,588
|
|
Capital redemption
reserve
|
|
251
|
251
|
|
Share premium reserve
|
|
311,369
|
311,380
|
|
Special distributable
reserve
|
|
105,117
|
128,256
|
|
Capital reserves
|
|
43,507
|
74,905
|
|
Revenue reserve
|
|
11,366
|
9,892
|
|
Total equity
|
|
488,198
|
541,272
|
|
Net asset value per ordinary share
(pence)
|
16
|
158.06
|
166.34
|
* In the prior years overseas
tax recoverable was disclosed separately on the face of the balance
sheet. The total receivable has been re-presented to include
overseas tax recoverable. Full disclosure of the overseas tax
recoverable is available in Note 14 within the Annual
Report.
The notes to follow form part of
these financial statements.
Cash Flow
Statement
For the year ended 30 November
2023
|
|
Notes
|
Year ended
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Cash flows from operating activities
|
|
|
|
|
(Loss)/profit before tax
|
|
(14,234)
|
6,553
|
|
Adjustment for non-cash
items:
|
|
|
|
|
Losses on investments held at fair
value through profit or loss
|
|
25,777
|
5,540
|
|
Losses on derivative
investments*
|
|
442
|
103
|
|
Scrip dividends received
|
|
-
|
(11)
|
|
Amortisation on fixed interest
securities
|
|
(186)
|
(3)
|
|
Adjusted profit before
tax
|
|
11,799
|
12,182
|
|
Adjustments for:
|
|
|
|
|
Purchases of investments, including
transaction costs
|
|
(284,542)
|
(508,484)
|
|
Sales of investments, including
transaction costs
|
|
311,263
|
414,210
|
|
Purchases of derivative financial
instruments*
|
|
(1,794)
|
(109)
|
|
Proceeds on disposal of derivative
financial instruments*
|
|
1,168
|
-
|
|
Increase in receivables
|
|
(549)
|
(832)
|
|
Increase/(decrease) in
payables
|
|
479
|
(510)
|
|
Indian capital gains tax
|
|
114
|
(18)
|
|
Greek sales tax
|
|
-
|
(6)
|
|
Overseas tax deducted at
source
|
|
(1,596)
|
(2,071)
|
|
Net cash generated from/(used in) operating
activities
|
|
36,342
|
(85,638)
|
|
Cash flows from financing activities
|
|
|
|
|
Net proceeds from issue of shares
out of treasury
|
|
-
|
11,301
|
|
Net proceeds from issue of new
ordinary shares
|
|
-
|
45,140
|
|
Net proceeds from share
placings
|
|
-
|
45,308
|
|
Shares repurchased into
treasury
|
|
(22,988)
|
(9,137)
|
|
Issue cost paid
|
|
(11)
|
(93)
|
|
Loan repaid
|
17
|
-
|
(1,647)
|
|
Loan drawn
|
17
|
9,891
|
10,094
|
|
Exchange (gains)/losses on the loan
facility*
|
|
(1,367)
|
1,642
|
|
Equity dividends paid
|
12
|
(14,399)
|
(13,565)
|
|
Net cash (used in)/generated from financing
activities
|
|
(28,874)
|
89,043
|
|
Net increase in cash and cash equivalents
|
|
7,468
|
3,405
|
|
Cash and cash equivalents at
the beginning of the year
|
|
29,793
|
26,388
|
|
Cash and cash equivalents at the end of the
year
|
15
|
37,261
|
29,793
|
* The prior year has been updated
for presentational purposes only. There is no impact to the
movement in the total cash flows and the year end cash
position.
The notes to follow form part of
these financial statements.
Notes to the Financial
Statements
For the year ended 30 November
2023
1
General
Information
Polar Capital Global Financial
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 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.
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 2023 is shown in the balance sheet above.
As at 30 November 2023 the Company's total assets exceeded its
total liabilities by a multiple of over 7.4. The assets of the
Company consist mainly of securities that are held in accordance
with the Company's Investment Policy, as set out in the Annual
Report 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
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. 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. 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) Taxation
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 2023. 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. Currently, the short-term tax rate is 15% and the
long-term tax rate is 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) There were no relevant standards
effective for the current annual reporting period that potentially
impact the Company in issue.
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
|
|
Disclosure
of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
|
Requirement amended to disclose
material accounting policies instead of significant accounting
policies and provided guidance in making materiality judgements to
accounting policy disclosure.
|
1 January 2023
|
|
Definition
of Accounting Estimates (amendments to IAS 8)
|
The amendment introduced the
definition of accounting estimates and included other amendments to
IAS 8 to help entities distinguish changes in accounting estimates
from changes in accounting policy.
|
1 January 2023
|
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
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Revenue:
|
|
|
|
UK dividends
|
2,391
|
2,660
|
|
Overseas dividends
|
13,313
|
13,812
|
|
Scrip dividends
|
-
|
11
|
|
Interest on debt
securities
|
3,439
|
990
|
|
Total investment income
|
19,143
|
17,473
|
Included within income from
investments is £623,000 (2022: £748,000) of special dividends
classified as revenue in nature in accordance with note 2 (c). No
special dividends have been recognised in capital (2022:
nil).
4
Other Operating Income
|
|
Year ended
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Bank interest
|
916
|
146
|
|
Total other operating income
|
916
|
146
|
5
Losses on Investments Held at Fair
Value
|
|
Year ended
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Net losses on disposal of
investments at historic cost
|
(1,274)
|
(11,901)
|
|
Less fair value adjustments in
earlier years
|
(26,371)
|
(32,737)
|
|
Losses based on carrying value at previous balance sheet
date
|
(27,645)
|
(44,638)
|
|
Valuation gains on investments held
during the year
|
1,868
|
39,098
|
|
|
(25,777)
|
(5,540)
|
6
Other Currency
Losses
|
|
Year ended
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Exchange (losses)/gains on currency
balances
|
(1,519)
|
823
|
|
Exchange gains/(losses) on the loan
facility
|
1,367
|
(1,642)
|
|
|
(152)
|
(819)
|
7
Investment Management and Performance
Fee
|
|
Year ended
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Management fee
|
|
|
|
- charged to revenue
|
704
|
727
|
|
- charged to capital
|
2,815
|
2,907
|
|
Investment management fee payable to Polar Capital
LLP
|
3,519
|
3,634
|
|
Performance fee payable to Polar Capital (charged wholly to
capital)*
|
|
|
|
-
|
(1,164)
|
* In 2022, the company
underperformed and the prior year provisions have been written back
resulting in a credit to the Statement of Comprehensive
Income.
|
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
30
November 2023
£'000
|
Year ended
30
November 2022
£'000
|
|
Directors'
fees1
|
|
145
|
144
|
|
Directors' NIC
|
|
15
|
13
|
|
Auditors' remuneration - for audit
of the Financial Statements2
|
50
|
50
|
|
Depositary
fee3
|
|
34
|
35
|
|
HSBC administration
fee3
|
|
205
|
171
|
|
Registrar fee
|
|
39
|
31
|
|
Custody and other bank
charges4
|
|
87
|
114
|
|
UKLA and LSE listing
fees
|
|
49
|
36
|
|
Legal & professional
fees5
|
|
(3)
|
36
|
|
AIC fees
|
21
|
19
|
|
Directors' and officers' liability
insurance
|
|
19
|
16
|
|
Corporate broker's
fee6
|
|
16
|
43
|
|
Marketing
expenses7
|
|
72
|
88
|
|
Research costs - allocated to
revenue8
|
|
5
|
5
|
|
Shareholder
communications
|
|
17
|
24
|
|
Other
expenses9
|
|
3
|
45
|
|
Total other administrative expenses
allocated to revenue
|
|
774
|
870
|
|
Research costs - allocated to
capital8
|
|
20
|
19
|
|
Total other administrative expenses
|
|
794
|
889
|
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 £49,980. The base audit fee for the statutory
audit in the prior year was £44,000. Overrun fee of £6,000 incurred
in the completion of the 2021 audit due to
the change in performance fee
methodology.
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
Includes VAT recovered which is greater than the
total fees paid during the current
year.
6
Corporate Broker fee is reduced by the commission
received on the share buybacks during the
year.
7
Includes bespoke marketing budget of £50,000
(2022: £50,000).
8
Research costs (which applied from 3 January 2018)
payable by the Company relate solely to specialist financial
research.
9
Includes non-executive Director search costs in
the prior year
only.
.
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 May 2012.
The ongoing charges ratio excluding
performance fee for the year ended 30 November 2023 was 0.86%
(2022: 0.87%). The ongoing charges ratio including the performance
fee was 0.86% (2022: 0.65%). See Alternative Performance Measures
below.
9 Finance Costs
|
|
Year ended 30
November 2023
|
Year ended 30 November
2022
|
|
Revenue
£'000
|
Capital
£'000
|
Total
£'000
|
Revenue
£'000
|
Capital
£'000
|
Total
£'000
|
|
Interest on loans and
overdrafts
|
699
|
2,795
|
3,494
|
201
|
804
|
1,005
|
|
Loan arrangement fees
|
23
|
92
|
115
|
48
|
192
|
240
|
|
|
722
|
2,887
|
3,609
|
249
|
996
|
1,245
|
Finance costs are allocated 20% to
revenue and 80% to capital.
10
Taxation
a)
Analysis of tax charge/(credit) for the year:
|
|
Year ended 30 November
2023
|
Year ended 30 November
2022
|
|
Revenue
return
£'000
|
Capital
return
£'000
|
Total
return
£'000
|
Revenue
return
£'000
|
Capital
return
£'000
|
Total
return
£'000
|
|
|
|
|
|
|
|
|
|
Overseas tax
|
1,438
|
-
|
1,438
|
1,465
|
-
|
1,465
|
|
Tax relief in capital
|
693
|
(693)
|
-
|
19
|
(19)
|
-
|
|
Withholding tax
recovered
|
(145)
|
-
|
(145)
|
-
|
-
|
-
|
|
Indian capital gains tax
|
-
|
(2)
|
(2)
|
-
|
(368)
|
(368)
|
|
Greek Sales tax
|
-
|
-
|
-
|
-
|
6
|
6
|
|
Total tax charge/(credit) for the year (see note
10b)
|
1,986
|
(695)
|
1,291
|
1,484
|
(381)
|
1,103
|
|
|
|
|
|
|
|
|
b)
Factors affecting tax charge/(credit) for the
year:
|
The charge/(credit) for the year
can be reconciled to the profit/(loss) per the Statement of
Comprehensive Income as follows:
|
|
|
Year ended 30 November
2023
|
Year ended 30 November
2022
|
|
|
Revenue return
£'000
|
Capital return
£'000
|
Total return
£'000
|
Revenue return
£'000
|
Capital return
£'000
|
Total return
£'000
|
|
Profit/(loss) before tax
|
17,859
|
(32,093)
|
(14,234)
|
15,773
|
(9,220)
|
6,553
|
|
Tax at the UK corporation effective
tax rate of 23% (2022: 19%)
|
4,108
|
(7,381)
|
(3,273)
|
2,997
|
(1,751)
|
1,246
|
|
Tax effect of non-taxable
dividends
|
(3,382)
|
-
|
(3,382)
|
(2,940)
|
-
|
(2,940)
|
|
Losses on investments that are not
taxable
|
-
|
6,065
|
6,065
|
-
|
1,228
|
1,228
|
|
Overseas tax suffered
|
1,438
|
-
|
1,438
|
1,465
|
-
|
1,465
|
|
Indian capital gains tax
|
-
|
(2)
|
(2)
|
-
|
(368)
|
(368)
|
|
Greek sales tax
|
-
|
-
|
-
|
-
|
6
|
6
|
|
Unrelieved current period expenses
and deficits
|
-
|
623
|
623
|
-
|
504
|
504
|
|
Withholding tax
recovered
|
(145)
|
-
|
(145)
|
-
|
-
|
-
|
|
Tax relief on overseas tax
suffered
|
(33)
|
-
|
(33)
|
(38)
|
-
|
(38)
|
|
Total tax charge/(credit)for the year (see note
10a)
|
1,986
|
(695)
|
1,291
|
1,484
|
(381)
|
1,103
|
c)
Factors that may affect future tax charges:
The
Company has an unrecognised deferred tax asset of £2,618,000 (2022:
£1,968,000). The deferred tax asset is based on the current
corporation tax rate of 25% (2022: 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 of
short-term tax rates are 15% and the long term tax rates are 10%
respectively. At the year ended 30 November 2023, the Company
has a deferred tax liability of £263,000 (2022: £151,000) on
capital gains which may arise if Indian investments are sold.
11
Earnings/(Losses) Per Ordinary
Share
|
|
Year ended 30 November
2023
|
Year ended 30 November
2022
|
|
Revenue
return
|
Capital
return
|
Total
return
|
Revenue
return
|
Capital
return
|
Total
return
|
|
The
calculation of basic earnings/(losses) per share is based on the
following data:
|
|
|
|
|
|
|
|
Net
profit/(loss) for the year (£'000)
|
15,873
|
(31,398)
|
(15,525)
|
14,289
|
(8,839)
|
5,450
|
|
Weighted
average number of ordinary shares in issue during the
year
|
|
|
|
|
|
|
|
From
continuing operations
|
319,065,538
|
319,065,538
|
319,065,538
|
320,762,691
|
320,762,691
|
320,762,691
|
|
Basic -
ordinary shares (pence)
|
4.97
|
(9.84)
|
(4.87)
|
4.45
|
(2.75)
|
1.70
|
As at 30 November 2023 there were
no potentially dilutive shares in issue (2022: nil).
12
Amounts Recognised as Distributions to Ordinary Shareholders
in the Year
Dividends paid in
the year ended 30 November 2023
|
Payment date
|
No. of shares
|
Amount per share
|
Year ended
30
November 2023
£'000
|
|
28 February 2023
|
324,779,000
|
2.05p
|
6,658
|
|
31 August 2023
|
315,955,329
|
2.45p
|
7,741
|
|
|
|
|
14,399
|
The revenue available for
distribution by way of dividend for the year is £15,873000 (2022:
£14,289,000).
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
|
The total dividends payable in
respect of the financial year ended 30 November 2022, 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 2022
£'000
|
|
31 August 2022
|
330,440,000
|
2.40p
|
7,930
|
|
28 February 2023
|
324,779,000
|
2.05p
|
6,658
|
|
|
|
|
14,588
|
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. £162,000 for the dividend paid on 31 August 2022 was
partially paid from 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 2023 £'000
|
30
November 2022
£'000
|
|
Opening book cost
|
506,766
|
422,479
|
|
Opening investment holding
gains
|
65,982
|
59,621
|
|
Opening fair value
|
572,748
|
482,100
|
|
Analysis of transactions made during the
year
|
|
|
|
Purchases at cost
|
286,636
|
510,922
|
|
Sales proceeds received
|
(315,669)
|
(414,737)
|
|
Losses on investments held at fair
value
|
(25,777)
|
(5,540)
|
|
Amortisation on fixed interest
securities
|
186
|
3
|
|
Closing fair value
|
518,124
|
572,748
|
|
|
|
|
|
Closing book cost
|
476,645
|
506,766
|
|
Closing investment holding
gains
|
41,479
|
65,982
|
|
Closing fair value
|
518,124
|
572,748
|
The Company received £315,669,000
(2022: £414,737,000) from disposal of investments in the year. The
book cost of these investments when they were purchased were
£316,943,000 (2022: £426,638,000). 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 2023 £'000
|
30
November 2022 £'000
|
|
On acquisitions
|
473
|
565
|
|
On disposals
|
246
|
327
|
|
|
719
|
892
|
b)
Changes in Derivative Financial Instruments
|
(i) Futures
|
30
November 2023 £'000
|
30
November 2022 £'000
|
|
Valuation at 1 December
|
6
|
-
|
|
Additions at cost
|
683
|
109
|
|
Proceeds of disposal
|
(386)
|
-
|
|
Losses on disposal
|
(297)
|
(109)
|
|
Valuation gains
|
(294)
|
6
|
|
Valuation at 30 November
|
(288)
|
6
|
The Company invested in currency
and index futures during the year for the purposes of efficient
portfolio management. As at 30 November 2023, the company held a
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. (2022: 15 ICF Long
Gilt March 2023 with a market value gain of
£6,000).
|
(ii) Options
|
30
November 2023 £'000
|
30
November 2022 £'000
|
|
Valuation at 1 December
|
-
|
-
|
|
Additions at cost
|
1,111
|
-
|
|
Proceeds of disposal
|
(782)
|
-
|
|
Losses on disposal
|
293
|
-
|
|
Valuation losses
|
(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 2023, the company held SPDR
S&P Regional Banking ETF call options and the market value of
this open call option position was £478,000 (2022:
£nil).
|
(c) Fair Value of Open Derivative Contracts
|
30
November 2023 £'000
|
30
November 2022 £'000
|
|
CME Japanese Yen December 2023
Futures
|
28
|
-
|
|
ICF Long Gilt March 2023
Futures
|
-
|
6
|
|
SPDR S&P Regional Banking ETF
Call Options
|
478
|
-
|
|
|
506
|
6
|
|
CME British Pound December 2023
Futures
|
(231)
|
-
|
|
CME British Pound/Japanese Yen
December 2023 Futures
|
(85)
|
-
|
|
|
(316)
|
-
|
|
Total
|
190
|
6
|
(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
2023 and
2022:
|
|
30 November
2023
|
|
Level 1
£'000
|
Level 2
£'000
|
Level 3
£'000
|
Total
£'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.
|
|
|
30 November
2022
|
|
Level 1
£'000
|
Level 2
£'000
|
Level 3
£'000
|
Total
£'000
|
|
Equity Investments and derivative
financial instruments
|
526,173
|
-
|
4,551
|
530,724
|
|
Interest bearing
securities
|
42,030
|
-
|
-
|
42,030
|
|
Total
|
568,203
|
-
|
4,551
|
572,754
|
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 2023 £'000
|
30
November 2022 £'000
|
|
Opening balance
|
4,551
|
1,921
|
|
Additions at cost
|
-
|
3,000
|
|
Total gains/(losses) included in
the Statement of
Comprehensive Income - on assets
held at the year end
|
503
|
(370)
|
|
Closing balance
|
5,054
|
4,551
|
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 +/- £505,000 (2022: £455,000) 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 2023 was £5,054,000 (2022:
£4,551,000) and the portfolio comprised the following
holdings:
|
|
30
November 2023
£'000
|
30
November 2022
£'000
|
|
Atom Bank
|
1,281
|
2,241
|
|
Moneybox
|
3,773
|
2,310
|
|
|
5,054
|
4,551
|
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 2023 (Atom Bank's
financial year end), Atom Bank announced that it had made pre-tax
losses of £10,097,000 (2022: £11,927,000) and had net assets
attributable to shareholders of £283,134,000 (2022:
£251,094,000).
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. In November
2023, the investment of Atom Bank was decreased to the price at
which the bank raised £100m of capital. See Note 13(d) above
further
details.
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 2023 (Moneybox's
financial year end), Moneybox announced that it had made pre-tax
profit of £4,141,000 (2022: pre-tax loss of £10,198,000) and had
net assets attributable to shareholders of £62,569,000 (2022:
£31,917,000).
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 based on the strong
performance of the company. The valuation 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) above for further details.
14
Receivables
|
|
30
November 2023
£'000
|
30
November 2022
£'000
|
|
Securities sold awaiting
settlement
|
4,933
|
527
|
|
Dividends and interest
receivable
|
1,930
|
1,395
|
|
VAT recoverable
|
36
|
25
|
|
Overseas tax
recoverable*
|
1,487
|
1,184
|
|
Prepayments
|
33
|
30
|
|
|
8,419
|
3,161
|
*The prior year figure, previously
disclosed on the face of the balance sheet has been re-presented to
be included as part of the total receivables
figure.
15
Cash and Cash
Equivalents
|
|
30
November 2023
£'000
|
30
November 2022
£'000
|
|
Cash at bank
|
36,406
|
29,652
|
|
Cash held at derivative clearing
houses
|
856
|
141
|
|
Cash and Cash Equivalents
|
37,262
|
29,793
|
|
Bank overdraft
|
(1)
|
-
|
|
|
37,261
|
29,793
|
16 Called Up Share
Capital
|
|
30
November 2023
£'000
|
November 2022
£'000
|
|
Allotted, Called up and Fully
paid:
|
|
|
|
Ordinary shares of 5p
each:
|
|
|
|
Opening balance of 325,394,000*
(2022: 272,980,000)
|
16,270
|
13,649
|
|
Issue of
nil (2022: 25,644,680) new ordinary shares
|
-
|
1,282
|
|
Issue of nil (2022: 26,775,320) new
ordinary shares pursuant to placings
|
-
|
1,339
|
|
Issue of nil (2022: 6,350,000)
ordinary shares out of treasury
|
-
|
318
|
|
Repurchase of 16,532,313 (2022:
6,356,000) ordinary shares into treasury
|
(827)
|
(318)
|
|
Allotted, Called up and Fully paid: 308,861,687 (2022:
325,394,000) ordinary shares of 5p
|
15,443
|
16,270
|
|
|
|
|
|
22,888,313 (2022: 6,356,000)
ordinary shares held in treasury
|
1,145
|
318
|
|
At
30 November 2023
|
16,588
|
16,588
|
*Excluding shares held in
Treasury
During the year, there were
16,532,313 ordinary shares repurchased into treasury for a total
consideration £23,139,000 (2022: £9,175,000). There were no (2022:
6,350,000) ordinary shares issued out of treasury (for a total net
consideration of 2022:
£10,960,000).
There
were no new ordinary shares issues in the current year. In the
prior year the Company issued 25,644,680 new ordinary shares from
the blocklisting facility for a total consideration of £45,140,000
less expenses of £93,000. In addition, the Company also undertook a
share placing programme, the first placing at the end of January
2022 and second placing at the end of February 2022 under the
Prospectus issued on 12 May 2021. This resulted in a total
allotment of 26,775,320 new ordinary shares for a total
consideration of £46,022,000 less expenses of £714,000.
Subsequent to the year end to 13 February 2024, the Company
has purchased a further 2,311,282 shares out of treasury for a
total consideration of £3,595,473 into treasury.
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 2023
|
30
November 2022
|
|
Net assets attributable to ordinary
shareholders (£'000)
|
488,198
|
541,272
|
|
Ordinary shares in issue at end of
year (excluding shares held in treasury)
|
308,861,687
|
325,394,000
|
|
Net asset value per ordinary share (pence)
|
158.06
|
166.34
|
As at 30 November 2023, there were
no potentially dilutive shares in issue (2022: 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 2023 were
£3,519,000 (2022: £3,634,000) of which £278,000 (2022: £305,000)
was outstanding at the year
end.
A
performance fee based on cumulative relative performance since 23
April 2020, amounting to £nil (2022: £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 within the Annual Report for more details.
In
addition, the total research costs in respect of the period from 1
January 2023 to the year ended 30 November 2023 were £25,000 (2022:
£24,000) of which £8,000 (2022: £11,000) was outstanding at the
year
end.
b)
Related party
transactions
The
Company has no employees and therefore no key management personnel
other than the Directors. The Company paid £145,000 (2022:
£144,000) to the Directors of which £23,000 (2022: £47,000)
was outstanding at the year end. The Remuneration Report is
provided 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
After the year end, a further
2,311,282 ordinary shares were bought back and held in treasury.
Following these buy backs, the total number of ordinary shares in
issue was 306,550,405 and the shares held in treasury was
25,199,595.
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
30
November 2023
|
Year ended
30
November 2022
|
|
Opening NAV per share
|
a
|
166.3p
|
167.5p
|
|
|
|
|
|
|
Closing NAV per share
|
b
|
158.1p
|
166.3p
|
|
Dividend reinvestment
factor
|
c
|
1.022930
|
1.026183
|
|
Adjusted closing NAV per
share
|
d = b*c
|
161.7p
|
170.7p
|
|
NAV total return for the year
|
(d / a)-1
|
-2.8%
|
1.9%
|
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
30
November 2023
|
Year ended
30
November 2022
|
|
NAV per share at
inception
|
a
|
98.0p
|
98.0p
|
|
|
|
|
|
|
Closing NAV per share
|
b
|
158.1p
|
166.3p
|
|
Dividend reinvestment
factor
|
c
|
1.361991
|
1.331251
|
|
Adjusted closing NAV per
share
|
d = b*c
|
215.3p
|
221.4p
|
|
NAV total return since inception
|
(d / a)-1
|
119.7%
|
125.9%
|
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
30
November 2023
|
Year ended
30
November 2022
|
|
Rebased NAV per share at
reconstruction
|
a
|
102.8p
|
102.8p
|
|
|
|
|
|
|
Closing NAV per share
|
b
|
158.1p
|
166.3p
|
|
Dividend reinvestment
factor
|
c
|
1.097861
|
1.073252
|
|
Adjusted closing NAV per
share
|
d = b*c
|
173.6p
|
178.5p
|
|
NAV total return since reconstruction
|
(d / a)-1
|
68.8%
|
73.6%
|
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
30
November 202
|
Year ended
30
November 2022
|
|
Opening share price
|
a
|
154.6p
|
172.0p
|
|
|
|
|
|
|
Closing share price
|
b
|
138.8p
|
154.6p
|
|
Dividend reinvestment
factor
|
c
|
1.030408
|
1.028037
|
|
Adjusted closing share
price
|
d = b*c
|
143.0p
|
158.9p
|
|
Share price total return for the year
|
(d / a)-1
|
-7.5%
|
-7.6%
|
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
30
November 2023
|
Year ended
30
November 2022
|
|
Share price at inception
|
a
|
100.0p
|
100.0p
|
|
|
|
|
|
|
Closing share price
|
b
|
138.8p
|
154.6p
|
|
Dividend reinvestment
factor
|
c
|
1.353458
|
1.311772
|
|
Adjusted closing share
price
|
d = b*c
|
187.9p
|
202.8p
|
|
Share price total return since inception
|
(d / a)-1
|
87.9%
|
102.8%
|
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
30
November 2023
|
Year ended
30
November 2022
|
|
Share price at inception
|
a
|
100.0p
|
100.0p
|
|
|
|
|
|
|
Closing share price
|
b
|
138.8p
|
154.6p
|
|
Dividend reinvestment
factor
|
c
|
1.381556
|
1.340750
|
|
Adjusted closing share
price
|
d = b*c
|
191.8p
|
207.3p
|
|
Share price total return including subscription share value
since inception
|
(d / a)-1
|
91.8%
|
107.3%
|
(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 2023
|
30
November 2022
|
|
Closing share price
|
a
|
138.8p
|
154.6p
|
|
Closing NAV per share
|
b
|
158.1p
|
166.3p
|
|
Discount per ordinary share
|
(a / b)-1
|
-12.2%
|
-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 nonrecurring 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
30
November 2023
|
Year ended
30
November 2022
|
|
Investment Management Fee (Note 7
above)
|
|
£3,519,000
|
£3,634,000
|
|
Other Administrative Expenses (Note
8 above)
|
|
£794,000
|
£889,000
|
|
|
a
|
£4,313,000
|
£4,523,000
|
|
Average daily net assets
value
|
b
|
£502,339,000
|
£519,515,000
|
|
Ongoing Charges excluding performance fee
|
a / b
|
0.86%
|
0.87%
|
|
|
|
|
|
|
Performance fee (Note 7
above)
|
c
|
-
|
(£1,164,000)
|
|
|
d = a+c
|
£4,313,000
|
£3,359,000
|
|
Ongoing charges including performance fee
|
d / b
|
0.86%
|
0.65%
|
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 2023
|
30
November 2022
|
|
Net assets
|
a
|
£488,198,000
|
£541,272,000
|
|
Bank loan
|
b
|
£69,031,000
|
£60,507,000
|
|
Total assets
|
c = (a+b)
|
£557,229,000
|
£601,779,000
|
|
Cash and cash equivalents
(including amounts awaiting settlement)
|
d
|
£37,484,000
|
£27,855,000
|
|
Net gearing
|
(c-d)/a-1
|
6.5%
|
6.0%
|
AGM
The Annual Report and separate
Notice of Annual General Meeting will be posted to Shareholders in
February 2024 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 18
April 2024.
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.
