TIDMPCFT
RNS Number : 5548F
Polar Capital Global Financials Tst
11 July 2023
POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC
(the "Company")
Unaudited Results for the half year ended 31 May 2023
Legal Entity Identifier: 549300G5SWN8EP2P4U41
11 July 2023
Financial Highlights for the half year ended 31 May 2023
Since
For six months
ended 31 May
2023 Inception
Performance (Sterling total return) % %
------------------------------------------------------------------------------- -------------------------------------- ------------------
Net asset value (NAV) per Ordinary share (1) -8.1 107.6
Ordinary share price (2) -11.5 79.5
Ordinary share price including subscription share
value (3) - 83.8
------------------------------------------------------------------------------- -------------------------------------- ------------------
Benchmark (Sterling total return) (4)
MSCI ACWI Financials -8.4 104.6
Chain-linked benchmark -8.4 115.1
------------------------------------------------------------------------------- -------------------------------------- ------------------
Other Indices and peer group (Sterling total return)
MSCI World Index 0.2 185.1
FTSE All Share Index 0.2 73.7
Lipper Financial Sector (5) -9.2 88.6
------------------------------------------------------------------------------- -------------------------------------- ------------------
Performance since the Reconstruction on 22 April Since
2020 Reconstruction
(Sterling total return) %
NAV per Ordinary share (6) 59.5
Benchmark (4) 53.1
Financials % Change
Six months
As at 31 May As at 31 May As at to 31 May
2023 2022 30 November 2022 2023
------------------ ----------------------------- ---------------------------- -------------------------------------- ------------------
Total net assets GBP484,034,000 GBP536,411,000 GBP541,272,000 - 10.6
NAV per Ordinary
share 151.2p 161.8p 166.3p - 9.1
Ordinary share
price 135.2p 152.6p 154.6p - 12.5
Discount per
Ordinary share 10.6% 5.7% 7.0%
Net gearing 2.6% 3.7% 6.0%
Ordinary shares in
issue
(excluding those
held in
treasury) 320,075,000 331,525,000 325,394,000 - 1.6
Ordinary shares
held in
treasury 11,675,000 225,000 6,356,000 83.7
------------------ ----------------------------- ---------------------------- -------------------------------------- ------------------
Six months to Six months
31 May 2023 to Year to
31 May 2022 30 November 2022
(Losses)/Earnings
per Ordinary
share (7):
Revenue
Return 3.16p 2.98p 4.45p
Capital
Return (16.44p) (8.17p) (2.75p)
Total (13.28p) (5.19p) 1.70p
------------------ ----------------------------- ---------------------------- -------------------------------------- ------------------
Dividends*
First
interim 2.45p 2.40p 2.40p -
Second
interim - - 2.05p -
----------------------------- ----------------------------
Total 2.45p 2.40p 4.45p -
--------------------------------------
* The Company declares dividends in respect of a financial year
in July and January for payment at the end of the following August
and February. The first interim dividend for the year ending 30
November 2023 was declared on 11 July 2023 and will be paid on 31
August 2023 to shareholders on the register on 4 August 2023. The
shares will go ex-dividend on 3 August 2023. The second interim
dividend will be declared in December 2023 for payment in February
2024.
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 from the initial NAV of 98p and the
NAV on 31 May 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 original launch price of 100p to the closing
price on 31 May 2023.
Note 3 The total return share price performance since inception
includes the value of the subscription shares issued free of
payment at launch on the basis of one for every five Ordinary
shares and assumes such were held throughout the period from launch
to the final conversion date of 31 July 2017. Performance is
calculated by reinvesting the dividends in the shares of the
Company from the relevant ex-dividend date and uses the launch
price of 100p per Ordinary share and the closing price per Ordinary
share on 31 May 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 56 open ended funds in
the period 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 3 of the notes to the Financial Statements below for more details.
See Alternative Performance Measure below.
Data sourced from HSBC Securities Services Limited, Polar
Capital LLP, MSCI and Lipper.
For further information Simon Cordery, Chair Tel: 020 7227
please contact: Polar Capital Global Financials 2700
Trust Plc
Jumoke Kupoluyi, Company Secretary Tel: 020 7227
Polar Capital Global Financials 2700
Trust Plc
Chair's Statement
Dear Shareholders,
On behalf of the Board, I am pleased to provide you with the
Company's Half Year Report for the six months to 31 May 2023. This
is my first report to you as Chair of the Company and I would like
to express my sincere thanks to Robert Kyprianou who previously
chaired the Company from its launch in 2013 until his retirement
from the Board earlier this year.
The past six months have been a most challenging period for
investors in many asset classes as major economies and central
banks adjust to a higher inflationary environment and the highest
interest rates for a decade. Global equity markets have struggled
for direction and sectors, such as those your company invests in,
have had a particularly difficult time. We have also witnessed a
number of individual bank failures, notably Silicon Valley Bank in
the US and Credit Suisse in Europe, which had a knock-on effect on
bank share prices worldwide.
These failures brought back painful memories of the Global
Financial Crisis and understandably, investors became cautious. As
the dust settles and valuations are reappraised against the very
positive fundamentals we expect opportunities will present
themselves and investors will become interested in the sector once
again.
Performance
The Company marginally outperformed its benchmark in the period
and for the six-month period to 31 May 2023 the Ordinary Share NAV
total return performance was -8.1% compared to a decrease of 8.4%
in the Company's benchmark (MSCI ACWI Financials Net Total Return
Index in sterling) over the same period. Since the Company's
reconstruction on 22 April 2020 to the end of the period under
review, the NAV total return per Ordinary Share was 59.3% compared
to the benchmark performance of 53.1%.
As described later in the Investment Manager's report,
financials as a sector underperformed the wider market. Rising
interest rates, persistently high inflation and a number of bank
failures took their toll. US banks, which are a big component of
our portfolio, were particularly negatively affected, albeit we had
only a limited exposure to the failures via a modest holding in
Silicon Valley Bank. Outside of banks, other financial sectors
performed better with insurance and fintech adding value while
there were more mixed results in diversified financials.
Further information on investment performance can be found
within the Financial Highlights and the Investment Manager's
Report.
Share Issuance and Buybacks
In contrast to this period last year, market headwinds
(including bank failures, the continued conflict in Ukraine, high
inflation rates, reversal of QE and increasing interest rates) have
meant the Company's shares have tended to trade at a meaningful
discount to Net Asset Value (NAV). While the shares of many
investment trusts are experiencing similar discounts, the Board has
been proactively and opportunistically buying in shares. These
buy-ins, executed at substantial discounts, are accretive to NAV
and the shares can be re-issued from the treasury account when
market conditions allow. This approach is consistent with the
latter half of 2022.
From the end of November 2022 to 31 May 2023, the Company had
bought back a total of 5,319,000 Ordinary shares, all of which were
placed into the treasury account.
Since the period end to 7 July 2023, the latest practicable
date, the Company bought back a further 2,400,500 shares at an
average discount to the live NAV at the time of transaction of
10.6%. These have also been placed into treasury.
Board Succession
As reported in the last Annual Report, Susie Arnott and Angela
Henderson joined the board in December 2022 and, following these
appointments, Robert Kyprianou retired from the board in March
2023. We believe the Board, which now comprises four members, has
the requisite depth and breadth of skills to oversee the Company.
We are aware that we do not fully meet the FCA Diversity
recommendations in that we do not have an ethnically diverse
individual on the Board. It is particularly challenging to meet all
of the recommended diversity criteria with a small number of board
members, and through the recruitment process we meet diverse
candidates and will continue to do so whenever board vacancies
arise.
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 ability to continue the Company's dividend
policy is significantly driven by income receipts from our
portfolio, and where these decline as a result of changes in the
policies of investee companies, changes in the composition of the
portfolio, regulatory intervention, or as a result of the currency
exposure underlying the portfolio, this could result in a lower
level of dividend being paid than intended or previously paid.
While markets have been difficult, the Board recognises the
importance of the dividend to many shareholders and has declared a
first interim dividend for the current financial year of 2.45p per
share, a small uplift on the previous financial year. The first
interim dividend will be paid on 31 August 2023 to shareholders on
the register on 4 August 2023.
Gearing
Under the Articles of Association the Company may utilise an
overall maximum leverage limit of 20 per cent. of NAV at the time
at which the relevant borrowing is taken out or increased. In July
2022, the Company entered into a new agreement with Royal Bank of
Scotland ("RBS"), for a three-year revolving credit facility
("RCF") in the amount of GBP50m, and two three-year term loans for
GBP15m and USD $18.4m respectively. At the period end, the term
loans had been fully drawn down; plus GBP30m and USD $12m had also
been drawn down under the RCF. As at 7 July 2023, the latest
practicable date, the portfolio was 5.8 % geared.
Outlook
Our Investment Managers began the period under review with a
cautiously optimistic outlook - the portfolio was modestly geared
and positioned to take advantage of an improving interest margin
backdrop as interest rates rose. However, as events unfolded, they
moved to a more defensive stance. At the date of writing, the
market seems to be fearing a repeat of the Global Financial Crisis
but our view is that this is unlikely to be the case. The financial
system is in far better shape than it was in 2008/09; balance
sheets and capital ratios have improved significantly while stock
market valuations are not reflecting this reality.
We remain cautious given the market uncertainty and investors
unwillingness to take risk. However, we believe the underlying
fundamentals and valuations of the sector are favourable and we
remain positive on the sector. Our Investment Managers are primed
to take advantage of opportunities as and when they arise. The
sector looks cheap relative to history and little, if any, good
news is being priced in. As and when sentiment improves, we feel
confident that our portfolio will be a beneficiary.
Simon Cordery
Chair
10 July 2023
Investment Manager's Report for the half year ended 31 May
2023
Investment Review
Performance
Equity markets were marginally lower over the six months covered
by this report. Strong performance in the technology sector was
offset by the impact of stronger sterling. Having outperformed for
two consecutive years, financials not surprisingly underperformed
as the collapse of a number of US regional banks and the forced
sale of Credit Suisse to UBS Group led to a sharp sell-off in
banking shares.
Consequently, US financials were very weak over the period under
review. 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 of a support to economic data than had
been expected.
US government bonds were largely unchanged as a resilient labour
market and stronger than expected economic data challenged the
narrative that inflation and interest rates had peaked, and would
quickly lead to more accommodative monetary policy. Against this,
the UK, Japanese and to a lesser extent German government bonds
were weaker, in the UK due to inflation coming in above
expectations.
Against this background, the Trust's net asset value fell 8.1%
while its benchmark index, the MSCI All Country World Financials
Index, fell 8.4% and the MSCI All Country World Index fell 0.3%.
The Lipper open-ended peer group of financial sector equity funds
fell by 9.2% while the Markit iBOXX Contingent Convertible AT1
Index, an index tracking the performance of subordinated bank
bonds, fell by 9.6% (in local currency terms) following the Credit
Suisse takeover which saw similar bonds zeroed.
An overweight position in US banks and gearing were drags on
performance but this was more than offset by our holdings in
payment companies and fixed income and good stock selection within
our bank holdings. For example, we had no holdings in Credit
Suisse, First Republic Bank or Signature Bank and only a very small
holding (0.3%) in Silicon Valley Bank (SVB) which was sold for an
immaterial loss on the announcement of its capital raise, prior to
its failure.
Sector Review
Banks
Negative sentiment around the outlook for growth weighed on bank
stocks over 2022 due to concerns about the impact on their
profitability from a downturn and this has continued into 2023.
Nevertheless, bank shares performed well initially in the period as
earnings expectations continued to rise on the increase in interest
rates feeding through to higher net interest income - the income
they generate from the assets they hold (ie loans and securities),
relative to what they pay out to depositors and other sources of
funding.
However, the offset to this is that due to higher interest
rates, banks are sitting on unrealised losses on their securities
portfolios from holdings they bought when interest rates were
lower. This was not new news. However, the announcement by SVB on 8
March 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
initial support for the capital raise, the loss of US$42bn in
deposits on that day led to support 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, it is believed that its
exposure to crypto assets via its Signet payments platform
unsettled depositors. This was followed shortly by the failure of
Silvergate Bank, a much smaller bank than SVB and Signature Bank,
with a much larger relative exposure to the crypto industry.
First Republic was the last of the four US banks to go into
foreclosure, despite a JP Morgan bank-led consortium injecting
US$30bn of deposits into the bank. First Republic was 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. It was ultimately bought from the Federal Deposit
Insurance Corporation by JP Morgan.
Credit Suisse, which had seen large outflows of deposits in the
last few months of 2022, saw further outflows following the
collapse of SVB. Its 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 following weekend.
The decision by Swiss regulators to write-down Credit Suisse's
AT1 bondholders to zero, which required emergency legislation,
while equity investors were not, resulted in sharp falls in similar
bond issues by other banks. Regulators in Europe, UK, Hong Kong,
Singapore and Canada announced they would stand by the creditor
hierarchy in contrast to the actions of Swiss regulators, which put
a floor under bond prices.
Not surprisingly, these events led to a sharp sell-off in bank
shares, in particular other smaller US regional banks that were
seen as vulnerable due to weaker capital. Actions by US authorities
appeared to have little impact as concerns around regional banks'
exposure to commercial real estate exacerbated share price
falls.
However, as Federal Reserve data suggested that deposit flows
stabilised within a few weeks and PacWest, a Californian bank that
had been at the centre of the sell-off, stated that it had seen
inflows of deposits, US bank shares saw a partial recovery. Asian,
European and other bank shares initially suffered falls in share
prices but stabilised quickly as the issues were seen to not be
systemic.
Insurance
With the extraordinary events in the banking sector, news flow
elsewhere in the sector came in a distant second. Unsurprisingly
against this background, the insurance subsector outperformed,
reflecting its defensive characteristics. It benefitted from the
higher interest rate tailwinds and therefore higher investment
income as well as improving underwriting returns, i.e. higher
profitability.
There was volatility in the subsector as investors fretted over
its exposure to US regional banks and Credit Suisse. Within that,
some life assurance companies have higher exposure to commercial
real estate, which has come under scrutiny and therefore suffered
weakness in share prices, but, for the vast majority of the sector,
exposure was negligible or non-existent.
In 2022, the reinsurance sector saw some companies reduce the
amount of capital they were willing to put at risk, reflecting the
poor level of profitability over the preceding few years even
though reinsurance rates had been increasing. 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 US$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, estimated by Howden, an
insurance broker, to be 37% on average. Furthermore, the attachment
points, i.e. the amount of loss born by an insurer before a
reinsurer covers the cost, also increased. The impact of this 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.
This repricing of the reinsurance market resulted in the share
prices of reinsurers rising. Nevertheless, some share prices did
suffer from profit-taking towards the end of the period on the back
of Everest Re, a US reinsurer, raising US$1.3bn in capital to take
advantage of the more attractive opportunity to put capital at
risk, followed by RenaissanceRe's acquisition of Validus from AIG,
which also led them to raise capital to pay for the
acquisition.
Diversified financials
The diversified financials sector consists of a wider group of
companies - including trust banks, investment banks, stock
exchanges, asset managers, information services companies and
consumer finance companies - and performance reflected that. As a
generalisation, investment banks and trust banks were weak, with
Charles Schwab the hardest hit as investors were concerned about
its balance sheet and the impact of the outflow of deposits on its
earnings.
Asset managers also saw a wide dispersion of returns.
Alternative asset managers have performed extremely well in recent
years but have come under pressure over the past year due to
concern around fundraising and the impact on performance fees from
lower returns. Blackstone, the largest such company, came under
pressure regarding a jump in redemption requests on its non-traded
REIT (real estate investment trust). Nevertheless, those with
higher exposure to private credit strategies have performed well on
the expectation that demand for private credit will be more
resilient.
Consumer finance companies also held up well, reflecting the
strong jobs market and household savings (outside those on the
lowest income) despite concerns around an imminent downturn.
Information services companies were mixed, with S&P Global and
Moody's performing well but MSCI being weak. 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
FinTech companies performed well over the six months; valuations
enjoyed a recovery following sharp falls in 2022 resulting in less
downside risk for investors, while revenues remained resilient,
especially for the more established businesses. Payment companies
also benefited from the stronger than expected performance of
technology shares. At the end of the period, MSCI designated that
payment companies (the largest being Visa and MasterCard), would
move from the technology sector back to the financial sector and
consequently now represent 11% of our benchmark.
Investment Activity
At the beginning of the period, we retained a constructive view
of the outlook for financials and, notwithstanding concerns around
the impact from a slowdown in economic activity and potential
recession, we believed that the sector would weather it well.
However, with the issues in the US regional banks, we reduced risk,
with gearing only at a moderate level and the mix of holdings
reflecting that relative cautiousness by, for example, increasing
our exposure to fixed income securities following the volatility in
the UK gilt market in October 2022.
Our exposure to Asia continues to focus on the faster growing
economies of India and Indonesia, with the portfolio's largest
holdings in these countries being HDFC Bank and Bank Central Asia.
We continue to have no exposure to Chinese state banks, but in the
first few months 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 has disappointed, we
have subsequently pulled back some of that exposure.
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 a
year ago as we had been reducing our positions due to concerns on
capital - higher deposit costs would impact profitability - and
also due to their higher exposure to commercial real estate that
would make 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 see 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 which we believe will be
beneficiaries of the much more attractive environment for credit
strategies with the backup in bond yields.
Following the collapse of SVB, we made more material changes to
the portfolio, selling our remaining holdings in small and
mid-sized regional banks. We believe the headwinds facing US
regional banks in the shorter term will probably cap any rally in
their shares until there is greater clarity on their longer-term
profitability following recent events. We prefer increasing our
exposure to larger US banks, albeit overall leaving the portfolio
underweight in US banks relative to the benchmark.
We bought new holdings in American Express and took the
opportunity to add to our fixed income holdings following the
write-down of Credit Suisse's AT1 bonds. We bought new holdings in
AT1 bonds issued by AIB Group, BNP Paribas, Caixabank and Santander
among others. We added selectively to our payment exposure,
purchasing a new holding in Adyen. The net effect of these changes
was for gearing to drop to 2.8% at the end of May.
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 for all of them was a sharp outflow of deposits, similar
to that seen during the global financial crisis. Critically, this
time around has not been about toxic assets on weak bank balance
sheets as it was then - arguably quite the opposite.
SVB, which was a huge beneficiary of growth in venture capital
funding for the technology sector over recent years, failed to
hedge the interest rate risk on its large portfolio of US
Treasuries and mortgage-backed securities it had built up from the
inflow of deposits into the bank. Therefore, as interest rates
rose, this led to large unrealised losses which were a multiple of
those for any other bank, making it very vulnerable to any loss of
confidence.
Signature Bank was almost unique for a bank, having significant
exposure to the crypto industry via a payments platform it owned.
This resulted in significant inflows of deposits and, while these
were not quite on the scale seen at SVB and therefore did not leave
the bank sitting on similarly-sized losses, it had been under
pressure over the past year as these deposit flows reversed.
However, the failure of SVB along with continued negative news flow
around crypto was sufficient to start a deposit flight in short
order.
First Republic had a very conservative risk appetite that was
reflected in its loan losses being around one tenth of its peers
due to its high net worth customer base, attracted to the bank by
its unparalleled customer service reflected in a net promoter score
significantly above banking peers. However, not dissimilar in some
respects to SVB, the bank took significant unhedged interest rate
risk in its mortgage book and was therefore sitting on mark to
market losses on these mortgages should it ever need to sell
them.
Similarly, there were never any material concerns about the
assets on Credit Suisse's balance sheet, especially after it was
strengthened by a CHF 9.7bn equity raise in October. However, weak
profitability and risk management - its 2021 Annual Report had 12
pages dedicated to litigation risk - ultimately put paid to the
bank staying independent as, even though it had close to CHF 100bn
of capital that would need to be burnt through before depositors
lost a cent, the bank had lost the confidence of its investors and
depositors following a stream of negative news.
Importantly, all four stood out in having a high exposure to
uninsured depositors ie depositors whose bank deposits were not
insured by a governmental agency. 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, 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% at the time of their failure. 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 do not see this as GFC (global financial crisis) II, as the
profitability of the banking sector is vastly improved with the
rise in interest rates and the banking system has not been taking
on significant risk in recent years. Critically, outside the US,
large banks are effectively obligated by regulators to hedge their
interest rate risk and are penalised with higher capital
requirements if they do not do so. Consequently, they do not have
the vulnerabilities we have seen with US regional banks that have
suffered deposit outflows.
The report by the Federal Reserve into SVB's failure states:
"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. It goes on to
highlight that rules around the regulation of smaller US regional
banks which were relaxed under the Trump administration had played
their part.
As a result, US regional banks are facing increased regulation,
likely around capital, liquidity and stress tests which will add
significantly to costs. Furthermore, because of the outflow of
deposits from the banking system to money market funds as savers
seek better interest rates on their savings, regional banks are
having to pay up for deposits which is impacting their
profitability. First quarter results highlighted that larger US
banks were beneficiaries of this outflow, with JP Morgan even
upgrading its guidance for higher net interest income.
Furthermore, risks around commercial real estate, especially
offices which have been impacted by the post-pandemic
work-from-home trend, has also weighed on sentiment. The drop in
occupancy levels in large cities such as San Francisco has
exacerbated the fall in office property values. However, while US
regional banks have significant exposure to commercial real estate,
the largest is to multi-family properties, ie apartment blocks,
where rents have been increasing, while their exposure to office
property is on average around low single-digit percentage points
which we see as very manageable.
Opportunity
Valuations for banks and insurance companies have fallen
significantly and banks are trading in the cheapest decile of
earnings multiples since the global financial crisis. Insurance
companies are also trading close to their lowest quartile. That
reflects pessimism about the prospects for the sector. We do not
believe this is warranted.
Across the sector there will be banks and other financials that
benefit from the US regional banking crisis. In the short term it
is HSBC Holdings, First Citizens, New York Community Bancorp and JP
Morgan that have been able to pick over the bones of the banks that
failed, which we expect will turn out to be accretive acquisitions.
Alternative asset managers, where we have exposure, have also
highlighted the opportunity to step in and help buy assets from
regional banks looking to raise capital. A recent example is Ares
Management purchasing $3.5bn of loans from PacWest.
At Berkshire Hathaway's annual general meeting, Warren Buffett
highlighted that he saw insurance as one of the few areas where
they expect to grow earnings over 2023 against a more difficult
economic background. We have sympathy for that view which is why we
are keeping some of our powder dry for when we feel the risk/reward
justifies increasing leverage from its current level. Consequently,
we remain overweight Indian and European banks, payment companies
(which we have increased) and non-life insurers as well as a number
of other well-positioned Asian financials.
Nick Brind, John Yakas & George Barrow
10 July 2023
Note
We would draw shareholders attention to
www.polarcapitalglobalfinancialstrust.com for monthly factsheets,
regular investment commentary and portfolio updates. *index
performance figures are total return in Sterling.
Full Portfolio
Market Value % of total net
GBP'000 assets
----------------------- ---------------------
31 31
Geographical May 30 November May 30 November
2023 2022 Stock Sector Exposure 2023 2022 2023 2022
----- ----- --------------------- ---------- ---------------- --------- ------------ ------- ------------
1 (1) JP Morgan Chase Banks North America 31,583 30,627 6.5% 5.7%
Financial
2 (13) Visa Services North America 23,449 11,108 4.8% 2.1%
Financial
3 (18) Mastercard Services North America 21,662 9,805 4.5% 1.8%
4 (5) HDFC Bank Banks Asia (ex-Japan) 20,391 21,022 4.2% 3.9%
Financial
5 (4) Berkshire Hathaway Services North America 17,904 21,302 3.7% 3.9%
6 (3) CHUBB Insurance Europe 16,452 22,493 3.4% 4.2%
7 (7) HSBC Holdings Banks United Kingdom 16,266 14,656 3.4% 2.7%
Bank Central
8 (17) Asia Indonesia Banks Asia (ex-Japan) 11,711 9,890 2.4% 1.8%
9 (8) AIA Group Insurance Asia (ex-Japan) 11,094 13,874 2.3% 2.6%
10 (6) Wells Fargo Banks North America 10,970 20,754 2.3% 3.8%
-----
Top 10 investments 181,482 37.5%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
Sumitomo Mitsui
11 (12) Financial Banks Japan 10,818 11,789 2.2% 2.2%
12 (2) Bank of America Banks North America 10,439 25,887 2.2% 4.8%
13 (21) AIB Group Banks Europe 10,432 8,949 2.1% 1.7%
14 (14) Arch Capital Insurance North America 10,090 10,533 2.1% 1.9%
15 (19) Bank Rakyat Banks Asia (ex-Japan) 9,795 9,183 2.0% 1.7%
16 (15) Marsh & McLennan Insurance North America 8,134 10,041 1.7% 1.8%
Financial
17 (27) Morgan Stanley Services North America 8,089 7,558 1.7% 1.4%
18 (22) Beazley Insurance United Kingdom 7,879 8,909 1.6% 1.6%
Financial
19 (-) American Express Services North America 7,612 - 1.6% -
Toronto-Dominion
20 (11) Bank Banks North America 7,588 12,439 1.6% 2.3%
Top 20 investments 272,358 56.3%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
21 (40) Nordea Bank Banks Europe 7,256 5,502 1.5% 1.0%
Royal Bank of
22 (34) Canada Banks North America 6,947 5,858 1.4% 1.1%
23 (28) Indusind Bank Banks Asia (ex-Japan) 6,614 6,898 1.4% 1.3%
24 (49) CaixaBank Banks Europe 6,571 4,851 1.4% 0.9%
PNC Financial
25 (10) Services Banks North America 6,465 13,112 1.3% 2.4%
26 (9) DBS Group Banks Asia (ex-Japan) 6,344 13,200 1.3% 2.4%
27 (35) Tisco Financial Banks Asia (ex-Japan) 6,278 5,805 1.3% 1.1%
Financial
28 (47) S&P Global Services North America 6,214 4,923 1.3% 0.9%
29 (-) BNP Paribas Banks Europe 5,765 - 1.2% -
Intact Financial
30 (29) Corporation Insurance North America 5,702 6,836 1.2% 1.3%
Top 30 investments 336,514 69.6%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
London Stock Financial
31 (-) Exchange Services United Kingdom 5,685 - 1.2% -
32 (42) Hannover Rueck Insurance Europe 5,684 5,456 1.2% 1.0%
33 (16) DNB Bank Banks Europe 5,470 9,896 1.1% 1.8%
34 (56) Axis Bank Banks Asia (ex-Japan) 5,457 3,789 1.1% 0.7%
35 (32) Prudential Insurance United Kingdom 5,415 6,402 1.1% 1.2%
36 (-) Intesa Banks Europe 5,308 - 1.1% -
The Travelers
37 (31) Companies Insurance North America 5,264 6,484 1.1% 1.2%
38 (26) Sampo Insurance Europe 5,065 7,909 1.0% 1.4%
Financial
39 (-) Adyen Services Europe 4,941 - 1.0% -
40 (-) Renaissancere Insurance North America 4,849 - 1.0% -
Top 40 investments 389,652 80.5%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
Financial
41 (54) Ares Management Services North America 4,819 4,236 1.0% 0.8%
42 (30) Standard Chartered Banks United Kingdom 4,806 6,552 1.0% 1.2%
Financial
43 (52) Macquarie Services Asia (ex-Japan) 4,637 4,644 1.0% 0.9%
44 (46) Lancashire Insurance United Kingdom 4,475 5,024 0.9% 0.9%
45 (45) Allianz Insurance Europe 4,240 5,078 0.9% 0.9%
Hong Kong Exchanges Financial
46 (36) and Clearing Services Asia (ex-Japan) 4,200 5,746 0.9% 1.1%
Financial
47 (41) MSCI Services North America 4,058 5,497 0.8% 1.0%
48 (50) Hong Leong Bank Banks Asia (ex-Japan) 3,913 4,775 0.8% 0.9%
Financial
49 (57) Ares Capital Services North America 2,963 3,393 0.6% 0.6%
International
Personal Finance Fixed
50 (60) 9.75% 2025 Bond Income Fixed Income 2,950 2,563 0.6% 0.5%
Top 50 investments 430,713 89.0%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
Intermediate Financial
51 (-) Capital Services United Kingdom 2,907 - 0.6% -
Lancashire 5.625% Fixed
52 (65) 2041 Bond Income Fixed Income 2,862 2,348 0.6% 0.4%
Pension Insurance Fixed
53 (59) 7.375% Perp Bond Income Fixed Income 2,846 2,576 0.6% 0.5%
Financial
54 (80) Gresham House Services United Kingdom 2,631 1,625 0.5% 0.3%
Rothesay Life Fixed
55 (61) 4.875% Perp Bond Income Fixed Income 2,450 2,548 0.5% 0.5%
56 (-) Bank of Cyprus Banks Europe 2,420 - 0.5% -
AIB Group 6.25% Fixed
57 (69) Perp Bond Income Fixed Income 2,411 2,056 0.5% 0.4%
Financial
58 (66) Moneybox (unquoted) Services United Kingdom 2,408 2,310 0.5% 0.4%
Legal General
Group 5.625% Fixed
59 (62) Perp Bond Income Fixed Income 2,355 2,542 0.5% 0.5%
IG Group 3.125% Fixed
60 (67) 2028 Bond Income Fixed Income 2,266 2,284 0.5% 0.4%
Top 60 investments 456,269 94.3%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
Financial
61 (63) Golub Capital Services North America 2,244 2,465 0.5% 0.5%
VPC Specialty Fixed
62 (64) Lending Investments Income Fixed Income 2,239 2,428 0.5% 0.4%
Societe Generale Fixed
63 (73) 5.375% Perp Bond Income Fixed Income 2,018 1,978 0.4% 0.4%
Riverstone Credit Fixed
64 (71) Opportunities Income Fixed Income 1,981 2,026 0.4% 0.4%
Aviva 6.875% Fixed
65 (70) Perp Bond Income Fixed Income 1,907 2,030 0.4% 0.4%
66 (68) Atom Bank (unquoted) Banks United Kingdom 1,889 2,241 0.4% 0.4%
Barclays 8.875% Fixed
67 (72) Perp Bond Income Fixed Income 1,840 1,978 0.4% 0.4%
Nationwide Building
Society 5.75% Fixed
68 (76) Perp Bond Income Fixed Income 1,748 1,785 0.4% 0.3%
BNP Paribas 7% Fixed
69 (75) Perp Bond Income Fixed Income 1,731 1,867 0.3% 0.3%
Natwest Group Fixed
70 (79) 2.105% 2031 Bond Income Fixed Income 1,678 1,646 0.3% 0.3%
-----
Top 70 investments 475,544 98.3%
----------------------------------------------------------------- --------- ------------ ------- ------------
CaixaBank 8.25% Fixed
71 (-) Perp Bond Income Fixed Income 1,641 - 0.3% -
Provident Financial Fixed
72 (81) 8.875% 2032 Bond Income Fixed Income 1,609 1,593 0.3% 0.3%
CaixaBank 5.25% Fixed
73 (-) Perp Bond Income Fixed Income 1,601 - 0.3% -
Rothesay Life Fixed
74 (78) 6.875% Perp Bond Income Fixed Income 1,583 1,675 0.3% 0.3%
Royal Bank of
Scotland 6% Perp Fixed
75 (-) Bond Income Fixed Income 1,502 - 0.3% -
Banco Santander Fixed
76 (-) 4.75% Perp Bond Income Fixed Income 1,475 - 0.3% -
Rothesay Life Fixed
77 (85) 5% Perp Bond Income Fixed Income 1,299 206 0.3% 0.0%
Chesnara 4.75% Fixed
78 (82) 2032 Bond Income Fixed Income 1,276 1,275 0.3% 0.2%
Shawbrook Group Fixed
79 (83) 9% 2030 Bond Income Fixed Income 1,243 480 0.3% 0.1%
Quilter 8.625% Fixed
80 (-) 2033 Bond Income Fixed Income 1,220 - 0.3% -
Top 80 investments 489,993 101.3%
----------------------------------------------------------------- --------- ------------ ------- ------------
Hellenic Bank Fixed
81 (-) 10.25% 2033 Bond Income Fixed Income 1,008 - 0.2% -
Financial
82 (-) VEF Services Europe 974 - 0.2% -
BNP Paribas 9.25% Fixed
83 (-) Perp Bond Income Fixed Income 921 - 0.2% -
RL Finance 10.125% Fixed
84 (-) Perp Bond Income Fixed Income 502 - 0.1% -
Jupiter 8.875% Fixed
85 (84) 2030 Bond Income Fixed Income 456 456 0.1% 0.1%
Permanent TSB Fixed
86 (-) 13.25% Perp Bond Income Fixed Income 186 - - -
Total investments 494,040 102.1%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
Other net liabilities (10,006) (2.1%)
-------
Total net assets 484,034 100.0%
----------------------------------- ---------- ---------------- --------- ------------ ------- ------------
Note: Figures in brackets denote comparative rankings as at 30
November 2022.
Portfolio Analysis
Benchmark
weighting
as at 31 May
Geographical Exposure* 2023** 31 May 2023 30 November 2022
------------------------ ------------- ------------ -----------------
North America 41.8% 42.9% 50.1%
Asia (ex-Japan) 18.3% 18.7% 19.8%
Europe 16.3% 16.6% 15.5%
United Kingdom 11.0% 11.2% 9.4%
Fixed Income - 10.5% 7.8%
Japan 2.2% 2.2% 3.2%
Other net liabilities - (2.1%) (5.8%)
Total 100.0% 100.0%
------------------------ ------------- ------------ -----------------
Benchmark
weighting
as at 31 May
Sector Exposure*^ 2023** 31 May 2023 30 November 2022
----------------------- ------------- ----------- --------------------------------
Banks 44.8% 45.7% 60.1%
Financial Services 25.7% 26.4% 17.2%
Insurance 19.1% 19.5% 20.7%
Fixed Income - 10.5% 7.8%
Other net liabilities - (2.1%) (5.8%)
Total 100.0% 100.0%
----------------------- ------------- ----------- --------------------------------
Benchmark
weighting
as at 31 May
Market Cap* 2023** 31 May 2023 30 November 2022
---------------------------- ------------- ----------------------------------- --------------------------
Large (>US$5bn) 94.7% 96.7% 98.7%
Medium (US$0.5bn - US$5bn) 3.5% 3.5% 5.9%
Small (<US$0.5bn) 1.8% 1.9% 1.2%
Other net liabilities - (2.1%) (5.8%)
---------------------------- -------------
Total 100.0% 100.0%
---------------------------- ------------- ----------------------------------- --------------------------
* Based on the net assets as at 31 May 2023 of GBP484.0m (202:
GBP541.3m).
**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
period end.
^ New GICS classifications came into effect March 2023, the
Financial Services sector has replaced the Diversified Financials
and Software & Services sectors. All securities previously
included in these sectors have now been moved into the new
Financial Services sector. The previous year end exposures have
been updated to reflect this change.
Corporate Matters
Principal Risks and Uncertainties
A detailed explanation of the Company's principal risks and
uncertainties, and how they are managed through mitigation and
controls, can be found on pages 40 to 43 of the Annual Report for
the year ended 30 November 2022. These principal risks can be
summarised as business risks, including meeting the investment
objective of the Company, and market-related risks encompassing
factors such as excessive share price discount to NAV, market
volatility, stock pricing and liquidity risk, currency and interest
rate risk, counterparty risk, gearing and the ability to meet the
dividend policy. Other principal risks include infrastructure
risks, including the performance of the operational and accounting
systems and processes provided by the Investment Manager, taxation,
mis-valuation and legal and regulatory risks; and external risks
which focuses on the exposure to the economic cycles of the markets
of the underlying investments.
In the six months to 31 May 2023, a full review of the Company's
risk map structure has been undertaken and the Directors consider
that, overall, the principal risks and uncertainties faced by the
Company for the remaining six months of the financial year have not
changed from those outlined within the Annual Report. The revised
categorisation will be detailed in the next Annual Report of the
Company. The Board continues to carefully monitor the ongoing
inflation and rising interest rates as well as the continuing
impact of the Russian invasion of Ukraine. Whilst this worsens the
macroeconomic outlook, there is no direct impact to the Company's
portfolio or the financials sector.
Further detail on the Company's performance and portfolio can be
found in the Investment Managers' Report.
Going Concern
As detailed in the notes to the financial statements, the Board
continually monitors the financial position of the Company and has
undertaken stress-testing and analysis in determining the
appropriateness of preparing the Financial Statements on a going
concern basis. Having carried out the testing, the Directors are
satisfied that it is appropriate to continue to adopt the going
concern basis in preparing the financial results of the Company. In
reaching this conclusion, the Board also considered the Company's
performance and its assessment of any material uncertainties and
events that might cast significant doubt upon the Company's ability
to continue as a going concern.
Related Party Transactions
In accordance with DTR 4.2.8R, there have been no new related
party transactions during the six month period to 31 May 2023.
There have been no changes in any related party transaction
described in the last Annual Report that could have a material
effect on the financial position or performance of the Company in
the first six months of the current financial year or to the date
of this report.
Statement of Directors' Responsibilities
The Directors of Polar Capital Global Financials Trust plc, who
are listed in the Company Information section, confirm to the best
of their knowledge that:
-- The condensed set of financial statements has been prepared
in accordance with the UK-adopted International Accounting Standard
34 and in conformity with the requirements of the Companies Act
2006 and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company as at 31 May
2023; and
-- The Interim Management Report includes a fair review of the
information required by the Disclosure Guidance and Transparency
Rules 4.2.7R and 4.2.8R.
The half-year financial report for the six-month period to 31
May 2023 has not been audited or reviewed by the Auditors. The
half-year financial report was approved by the Board on 10 July
2023 .
On behalf of the Board
Simon Cordery
Chair
Statement of Comprehensive Income for the half year ended 31 May
2023
(Unaudited) (Unaudited) (Audited)
Notes Half year ended Half year ended 31 May Year ended 30 November
31 May 2023 2022 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
return return return return return return return return return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Investment income 2 11,897 - 11,897 11,116 342 11,458 17,473 - 17,473
Other operating
income 2 421 - 421 10 - 10 146 - 146
Losses on
investments
held at fair
value - (50,944) (50,944) - (25,485) (25,485) - (5,540) (5,540)
Losses on
derivatives - (144) (144) - - - - (103) (103)
Other currency
gains/(losses) - 244 244 - (394) (394) - (819) (819)
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Total income 12,318 (50,844) (38,526) 11,126 (25,537) (14,411) 17,619 (6,462) 11,157
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Expenses
Investment management
fee (362) (1,449) (1,811) (362) (1,448) (1,810) (727) (2,907) (3,634)
Performance fee - - - - 1,164 1,164 - 1,164 1,164
Other administrative
expenses (363) (8) (371) (401) (7) (408) (870) (19) (889)
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Total expenses (725) (1,457) (2,182) (763) (291) (1,054) (1,597) (1,762) (3,359)
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Profit/(loss)
before finance
costs and tax 11,593 (52,301) (40,708) 10,363 (25,828) (15,465) 16,022 (8,224) 7,798
Finance costs (307) (1,226) (1,533) (55) (220) (275) (249) (996) (1,245)
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Profit/(loss)
before tax 11,286 (53,527) (42,241) 10,308 (26,048) (15,740) 15,773 (9,220) 6,553
Tax (1,053) 311 (742) (982) 521 (461) (1,484) 381 (1,103)
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Net profit/(loss)
for the period
and total
comprehensive
income/(expense) 10,233 (53,216) (42,983) 9,326 (25,527) (16,201) 14,289 (8,839) 5,450
-------- --------- --------- -------- --------- ---------- -------- -------- --------
Earnings/(losses)
per Ordinary
share (pence) 3 3.16 (16.44) (13.28) 2.98 (8.17) (5.19) 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 half year ended 31 May
2023
(Unaudited) Half year ended 31 May 2023
--------------------------- -------------------------------------------------------------------
Called Capital Share Special
Notes up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 half
year ended 31 May 2023 - - - - (53,216) 10,233 (42,983)
Transactions with owners,
recorded directly to
equity:
Issue costs relating to
prior
year share placings - - (11) - - - (11)
Shares bought back and held
in treasury 5 - - - (7,586) - - (7,586)
Equity dividends paid - - - - - (6,658) (6,658)
Total equity at 31 May 2023 16,588 251 311,369 120,670 21,689 13,467 484,034
(Unaudited) Half year ended 31 May 2022
--------------------------- -------------------------------------------------------------------
Called Capital Share Special
up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------- --------- ----------- -------- ------------- --------- -------- --------
Total equity at 1 December
2022 13,967 251 219,163 131,947 83,744 8,175 457,247
Total comprehensive
(expense)/income:
(Loss)/profit for the half
year ended 31 May 2022 - - - - (25,527) 9,326 (16,201)
Transactions with owners,
recorded directly to
equity:
Issue of shares out of
treasury - - 4,483 6,477 - - 10,960
Issue of new ordinary
shares
(including costs) 1,282 - 43,765 - - - 45,047
Issue of new ordinary
shares
pursuant to placings
(including
costs) 1,339 - 43,984 - - - 45,323
Shares bought back and held
in treasury 5 - - - (330) - - (330)
Equity dividends paid* - - - (831) - (4,804) (5,635)
Total equity at 31 May 2022 16,588 251 311,395 137,263 58,217 12,697 536,411
(Audited) Year ended 30 November 2022
--------------------------- -------------------------------------------------------------------
Called Capital Share Special
up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------- --------- ----------- -------- ------------- --------- -------- --------
Total equity at 1 December
2021 13,967 251 219,163 131,947 83,744 8,175 457,247
Total comprehensive 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 - - 4,483 6,477 - - 10,960
Issue of new ordinary
shares
(including costs) 1,282 - 43,765 - - - 45,047
Issue of new ordinary
shares
pursuant to placings
(including
costs) 1,339 - 43,969 - - - 45,308
Shares bought back and held
in treasury 5 - - - (9,175) - - (9,175)
Equity dividends paid* - - - (993) - (12,572) (13,565)
------- --------- ----------- -------- ------------- --------- -------- --------
Total equity at 30 November
2022 16,588 251 311,380 128,256 74,905 9,892 541,272
--------------------------- ------- --------- ----------- -------- ------------- --------- -------- --------
* All dividends are paid as interim dividends, and all have been
charged to revenue, where necessary utilising the revenue reserves,
with the exception of the interim dividends paid on 28 February
2022 and 31 August 2022. Parts of both dividends, amounting to
GBP831,000 and GBP162,000 were paid out of the special
distributable reserve.
The notes to follow form part of these financial statements.
Balance Sheet as at 31 May 2023
(Unaudited) (Unaudited) (Audited)
30 November
31 May 2023 31 May 2022 2022
Notes GBP'000 GBP'000 GBP'000
------------------------------------ ------ ------------- ------------- -------------
Non-current assets
Investments held at fair value
through profit or loss 494,040 554,157 572,748
Current assets
Receivables 21,500 1,436 1,977
Overseas tax recoverable 1,543 1,274 1,184
Cash and cash equivalents 60,010 34,784 29,793
Fair value of open derivative
contracts - - 6
------------------------------------ ------ ------------- ------------- -------------
83,053 37,494 32,960
Total assets 577,093 591,651 605,708
------------------------------------ ------ ------------- ------------- -------------
Current liabilities
Payables (23,106) (4,055) (3,778)
Bank loan - (51,185) -
Fair value of open derivative (182) - -
contracts
------------------------------------ ------ ------------- -------------
(23,288) (55,240) (3,778)
------------------------------------ ------ ------------- ------------- -------------
Non-current Liabilities
Indian capital gains tax provision (226) - (151)
Bank loan (69,545) - (60,507)
------------------------------------ ------ ------------- ------------- -------------
(69,771) - (60,658)
------------------------------------ ------ ------------- ------------- -------------
Net assets 484,034 536,411 541,272
------------------------------------ ------ ------------- ------------- -------------
Equity attributable to equity
shareholders
Called up share capital 16,588 16,588 16,588
Capital redemption reserve 251 251 251
Share premium reserve 311,369 311,395 311,380
Special distributable reserve 120,670 137,263 128,256
Capital reserves 21,689 58,217 74,905
Revenue reserve 13,467 12,697 9,892
------------------------------------ ------ ------------- ------------- -------------
Total equity 484,034 536,411 541,272
------------------------------------ ------ ------------- ------------- -------------
Net asset value per Ordinary share
(pence) 4 151.23 161.80 166.34
The notes to follow form part of these financial statements.
Simon Cordery
Chair
10 July 2023
Cash Flow Statement for the half year ended 31 May 2023
(Unaudited) (Unaudited) (Audited)
Half year Half year Year ended
ended ended 30 November
31 May 31 May 2022
2023 2022 GBP'000
GBP'000 GBP'000
------------------------------------------------ ----------- ----------- ------------
Cash flows from operating activities
(Loss)/profit before tax (42,241) (15,740) 6,553
Adjustment for non-cash items:
Losses on investments held at fair value
through profit or loss 50,944 25,485 5,540
Losses on derivative financial instruments* 144 - 103
Scrip dividends received - - (11)
Amortisation on fixed interest securities (99) 6 (3)
------------------------------------------------ ----------- ----------- ------------
Adjusted profit before tax 8,748 9,751 12,182
------------------------------------------------ ----------- ----------- ------------
Adjustments for:
Purchases of investments, including transaction
costs (121,235) (308,429) (508,484)
Sales of investments, including transaction
costs 149,859 214,265 414,210
Proceeds on disposal of derivative financial
instruments 141 - -
Purchases of derivative financial instruments* (98) - (109)
Increase in receivables* (1,219) (818) (832)
Increase/(decrease) in payables 109 (1,151) (510)
Indian capital gains tax 128 (35) (18)
Greek sales tax - - (6)
Overseas taxation deducted at source (1,154) (1,659) (2,071)
Exchange (gains)/losses on the loan facility (853) 767 1,642
------------------------------------------------ ----------- ----------- ------------
Net cash generated from/(used in) operating
activities 34,426 (87,309) (83,996)
------------------------------------------------ ----------- ----------- ------------
Cash flows from financing activities
------------------------------------------------ ----------- ----------- ------------
Net proceeds from issue of shares out
of treasury - 11,300 11,301
Net proceeds from issue of new ordinary
shares - 45,047 45,140
Net proceeds from share placings - 45,323 45,308
Shares repurchased into treasury (7,431) (330) (9,137)
Issue costs relating to prior year share
placings (11) - (93)
Loan repaid - - (1,647)
Loan drawn 9,891 - 10,094
Equity dividends paid (6,658) (5,635) (13,565)
Net cash (used in)/generated from financing
activities (4,209) 95,705 87,401
------------------------------------------------ ----------- ----------- ------------
Net increase in cash and cash equivalents 30,217 8,396 3,405
Cash and cash equivalents at the beginning
of the period 29,793 26,388 26,388
------------------------------------------------ ----------- ----------- ------------
Cash and cash equivalents at the end of
the period 60,010 34,784 29,793
------------------------------------------------ ----------- ----------- ------------
* The prior year end has been re-presented to detail the
derivative financial instruments cash flows.
The notes to follow form part of these financial statements.
Notes to the Financial Statements for the half year ended 31 May
2023
1 General Information
The financial statements comprise the unaudited results for
Polar Capital Global Financials Trust Plc for the six-month period
to 31 May 2023.
The unaudited financial statements to 31 May 2023 have been
prepared using the accounting policies used in the Company's
financial statements to 30 November 2022. These accounting policies
are based on UK-adopted International Accounting Standards
("UK-adopted IAS").
The financial information in this half year report does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006.
The financial information for the periods ended 31 May 2023 and
31 May 2022 have not been audited. The figures and financial
information for the year ended 30 November 2022 are an extract from
the latest published accounts and do not constitute statutory
accounts for that year. Full statutory accounts for the year ended
30 November 2022, prepared under UK-adopted IAS, including the
report of the auditors which was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under section 498 of the Companies Act 2006, have been
delivered to the Registrar of Companies.
The Company's accounting policies have not varied from those
described in the financial statements for the year ended 30
November 2022.
The financial statements are presented in Pounds Sterling and
all values are rounded to the nearest thousand pounds (GBP'000),
except where otherwise stated.
The Directors believe it is appropriate to adopt the going
concern basis in preparing the financial statements. The Board
continually monitors the financial position of the Company. The
Directors have considered a detailed assessment of the Company's
ability to meets 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 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 them to continue in operational existence.
Accordingly, the Directors are satisfied that it is appropriate to
continue to adopt the going concern basis in preparing the
financial results of the Company.
There were no new UK-adopted IAS or amendments to UK-adopted IAS
applicable to the current period which had any significant impact
on the Company's Financial Statements.
2 Dividends and Other Income
(Unaudited) (Unaudited)
For the For the (Audited)
half half For the
year ended year ended year ended
31 May 31 May 30 November
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ----------- ------------
Investment income
Revenue:
UK dividends 1,461 1,882 2,660
Overseas dividends 8,832 8,968 13,812
Scrip dividends - - 11
Interest on debt securities 1,604 266 990
------------------------------------------- ----------- ----------- ------------
Total investment income allocated to
revenue 11,897 11,116 17,473
------------------------------------------- ----------- ----------- ------------
Included within income from investments is GBP288,000 (31 May 2022:
GBP394,000 and 30 November 2022: GBP748,000) of special dividends
classified as revenue in nature. No special dividends have been recognised
in capital (31 May 2022: GBP342,000* and 30 November 2023: GBPnil).
* GBP342,000 capital special dividend in the prior year half year
report at 31 May 2022 was reclassified to revenue in the financial
statements for the year ended 30 November 2022.
Other operating income
Bank interest 421 10 146
Total other operating income 421 10 146
------------------------------------------- ----------- ----------- ------------
3 Earnings/(loss) per ordinary share
(Unaudited) (Unaudited)
For the For the (Audited)
half half For the
year ended year ended year ended
31 May 31 May 30 November
2023 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------------
Basic earnings/(loss) per share
Net profit/(loss) for the period:
Revenue 10,233 9,326 14,289
Capital (53,216) (25,527) (8,839)
-------------------------------------- ------------ ------------ ------------
Total (42,983) (16,201) 5,450
-------------------------------------- ------------ ------------ ------------
Weighted average number of shares in
issue during the period 323,774,103 312,453,455 320,762,691
Basic - Ordinary shares (pence)
Revenue 3.16p 2.98p 4.45p
Capital (16.44)p (8.17)p (2.75)p
-------------------------------------- ------------ ------------ ------------
Total (13.28)p (5.19)p 1.70p
-------------------------------------- ------------ ------------ ------------
As at 31 May 2023 there were no potentially dilutive shares in
issues (31 May 2022 and 30 November 2022: same).
4 Net Asset Value per Ordinary Share
(Unaudited) (Unaudited)
For the For the (Audited)
half half For the
year ended year ended year ended
31 May 31 May 30 November
2023 2022 2022
------------------------------------------------- ----------- ----------- ------------
Net assets attributable to Ordinary shareholders
(GBP'000) 484,034 536,411 541,272
Ordinary shares in issue at end of period 320,075,000 331,525,000 325,394,000
------------------------------------------------- ----------- ----------- ------------
Net asset value per Ordinary share (pence) 151.23 161.80 166.34
------------------------------------------------- ----------- ----------- ------------
As at 31 May 2023 there were no potentially dilutive shares in
issues (31 May 2022 and 30 November 2022: same).
5 Share Capital
During the six months ended 31 May 2023, there were 5,319,000
ordinary shares repurchased into treasury (31 May 2022: 225,000; 30
November 2022: 6,356,000) for a total consideration of GBP7,586,000
(31 May 2022: GBP330,000; 30 November 2022: GBP9,175,000).
Following this, the company's issued share capital consists of
320,075,000 ordinary shares and an additional 11,675,000 ordinary
shares held in treasury.
6 Dividends
The first interim dividend for the year ending 30 November 2023
was declared on 11 July 2023 and will be paid on 31 August 2023; it
is anticipated that the second interim dividend for the year ending
30 November 2023 will be declared on or around December 2023 and
will be paid on 29 February 2024.
7 Related Party Transactions
There have been no related party transactions that have
materially affected the financial positions or the performance of
the Company during the six month period to 31 May 2023.
8 Post Balance Sheet Events
After the period end, a further 2,400,500 ordinary shares were
repurchased into treasury. Following these share repurchases, the
total number of ordinary shares in issue was 317,674,500 and
14,075,000 shares were held in treasury as at 9 July 2023.
There are no other significant events that have occurred after
the end of the reporting period to the date of this report which
require disclosure.
Forward-looking Statements
Certain statements included in this half year Report 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 be 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 Annual Report for the financial year
ended 30 November 2022. No part of these 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.
Company Website
www.polarcapitalglobalfinancialstrust.com
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) is incorporated into or forms part
of this announcement.
Alternative Performance Measures (APM's)
In assessing the performance of the Company, the 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:
Net Asset Value (NAV)
The NAV is the value attributed to the underlying assets of the
Company less the liabilities, presented either on a per share or
total basis.
The NAV is often expressed in pence per share after being
divided by the number of shares which have been issued. The NAV per
share is unlikely to be the same as the share price which is the
price at which the Company's shares can be bought or sold by an
investor. See Note 4 above for detailed calculations. The NAV per
ordinary share is published daily.
NAV Total Return (APM)
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.
For the half Year ended
year ended 30 November
31 May 2023 2022
--------------------------------- --------- ------------- -------------
Opening NAV per share a 166.3p 167.5p
Closing NAV per share b 151.2p 166.3p
Dividend reinvestment factor c 1.010439 1.026183
Adjusted closing NAV per share d=b*c 152.8p 170.7p
NAV total return for the period (d/a)-1 -8.1% 1.9%
--------------------------------- --------- ------------- -------------
NAV Total Return Since Inception (APM)
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.
For the half Year ended
year ended 30 November
31 May 2023 2022
---------------------------------- --------- ------------- -------------
NAV per share at inception a 98.0p 98.0p
Closing NAV per share b 151.2p 166.3p
Dividend reinvestment factor c 1.345361 1.331251
Adjusted closing NAV per share d=b*c 203.4p 221.4p
NAV total return since inception (d/a)-1 107.6% 125.9%
---------------------------------- --------- ------------- -------------
NAV Total Return Since Reconstruction (APM)
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 2021, assuming that
dividends paid to shareholders are reinvested on the ex-dividend
date in ordinary shares at their net asset value.
For the half Year ended
year ended 30 November
31 May 2023 2022
----------------------------------------- --------- ------------- -------------
Rebased NAV per share at reconstruction a 102.8p 102.8p
Closing NAV per share b 151.2p 166.3p
Dividend reinvestment factor c 1.084361 1.073252
Adjusted closing NAV per share d=b*c 164.0p 178.5p
NAV total return since reconstruction (d/a)-1 59.5% 73.6%
----------------------------------------- --------- ------------- -------------
Share Price Total Return (APM)
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.
For the half Year ended
year ended 30 November
31 May 2023 2022
------------------------------ --------- ------------- -------------
Opening share price a 154.6p 172.0p
Closing share price b 135.2p 154.6p
Dividend reinvestment factor c 1.012007 1.028037
Adjusted closing share price d=b*c 136.8p 158.9p
Share price total return for
the period (d/a)-1 -11.5% -7.6%
------------------------------ --------- ------------- -------------
Share Price Total Return Since Inception (APM)
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.
For the half Year ended
year ended 30 November
31 May 2023 2022
-------------------------------- --------- ------------- -------------
Share price at inception a 100.0p 100.0p
Closing share price b 135.2p 154.6p
Dividend reinvestment factor c 1.327663 1.311772
Adjusted closing share price d=b*c 179.5p 202.8p
Share price total return since
inception (d/a)-1 79.5% 102.8%
-------------------------------- --------- ------------- -------------
Share Price Total Return Including Subscription Share Value
(APM)
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.
For the half Year ended
year ended 30 November
31 May 2023 2022
------------------------------------ --------- ------------- -------------
Share price at inception a 100.0p 100.0p
Closing share price b 135.2p 154.6p
Dividend reinvestment factor c 1.359467 1.340750
Adjusted closing share price d=b*c 183.8p 207.3p
Share price total return including
subscription share value since
inception (d/a)-1 83.8% 107.3%
------------------------------------ --------- ------------- -------------
Premium/(Discount) (APM)
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
31 May 2023 2022
--------------------------------- ------- ------------ --------------
Closing share price a 135.2p 154.6p
Closing NAV per share b 151.2p 166.3p
(Discount)/premium per ordinary (a /
share b)-1 -10.6% -7.0%
--------------------------------- ------- ------------ --------------
Net Gearing (APM)
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
31 May 2023 2022
---------------------------------------- ----------- ---------------- ----------------
Net assets a GBP484,034,000 GBP541,272,000
Bank loan b GBP69,545,000 GBP60,507,000
---------------- ----------------
c = GBP553,579,000 GBP601,779,000
Total assets (a+b)
d GBP57,157,000 GBP27,855,000
Cash and cash equivalents (including
amounts awaiting settlement and
overdrafts)
Net gearing (c-d)/a-1 2.6% 6.0%
---------------------------------------- ----------- ---------------- ----------------
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END
IR BLGDRGDBDGXG
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July 11, 2023 02:00 ET (06:00 GMT)
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