Financial Results for period to 31 May 2018

RNS Number : 3269U

Polar Capital Global Financials Tst

11 July 2018

 

POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC (the "Company")

Unaudited Results for the half year ended 31 May 2018

Legal Entity Identifier: 549300G5SWN8EP2P4U41

11 July 2018

Financial Highlights for the half year ended 31 May 2018

Performance (Sterling total return)			For six months ended 31 May 2018 %	Since Inception %
Net asset value (NAV) per ordinary share (1)			(0.1)	70.3
Ordinary share price (2)			(1.1)	53.9
Ordinary share price including subscription share value (3)			-	57.3
Benchmark (4) MSCI World Financials + RE Index			(0.7)	67.6
Other Indices and peer group
MSCI World			3.5	82.6
S&P 500			4.8	112.4
Eurostoxx 600			0.7	55.6
FTSE All Share			6.7	50.8
Lipper Financial Sector (5)			(0.3)	49.8
Financials		As at 31 May 2018	As at 30 November 2017	% Change
Net assets per ordinary share (basic and diluted)		142.6p	144.6p	(1.4%)
Ordinary Share price		135.0p	138.2p	(2.3%)
Ordinary Shares in issue		202,775,000	202,775,000	-
		Six months to 31 May 2018	Year to 30 November 2017
Earnings per ordinary share (basic and diluted):
Revenue Return		2.92p	4.29p	-
Capital Return		(3.15)p	16.14p	-
Total		(0.23)p	20.43p	-
Ongoing charges (6)		1.02%	0.99%	-
Dividends*
First interim		2.25p	2.10p	7.1%
Second interim		-	1.80p	-
Total		2.25p	3.90p	-

*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 2018 was declared on 4 July 2018 and will be paid on 31 August 2018 to shareholders on the register on 20 July 2018, the shares will go ex-dividend on 19 July 2018. The second interim dividend will be declared in January 2019 for payment in February 2019.

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 to 31 May 2018. 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 31 May 2018.

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 1 for 5 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 and the closing price per ordinary share on 31 May 2018.

Note 4      The Benchmark was the MSCI World Financials Index to 31 August 2016, and the MSCI World Financials Index + Real Estate, for the period 1 September 2016 to 31 May 2018. See 'Benchmark' within the About Us section.

Note 5      The Lipper Financial Sector comprises 56 open ended funds.

Note 6      Ongoing charges represents the total expenses of the Company, excluding finance costs, expressed as a percentage of the average daily net asset value, calculated in accordance with AIC guidance issued in May 2012. The ongoing charges figure as at 31 May 2018 is for the six-month period from 30 November 2017 and is annualised for comparison with the full year's calculation as at 30 November 2017. From the 3 January 2018, the research cost borne by the Company is included in the ongoing charge calculation.

Data sourced by HSBC Securities Services Limited, Polar Capital LLP, MSCI and Lipper.

For further information please contact:

Tracey Lago, Company Secretary Polar Capital Global Financials Trust Plc

Tel: [phone]

Chairman's Statement

Performance

The half year financial results of the Company for the period to 31 May 2018 demonstrate a 0.1% fall in the NAV total return performance for the period. This compares to a fall of 0.7% in the benchmark performance over the same period. Further information on investment performance can be found within the Investment Manager's Report.

Dividends

I am pleased to announce that investment performance and income generation have allowed the Board to maintain the Company's record of steadily growing dividends. The Board has declared an interim dividend of 2.25p per share, payable on 31 August 2018 to shareholders on the register on 20 July 2018. This represents an increase of 7.1% over last year's first interim dividend of 2.10p.

The Company aims to pursue a policy of dividend growth, although there is no guarantee that this can be achieved. The Board monitors, with the Investment Manager, the prospects for dividends from its equity holdings, interest income from cash and fixed income securities, and the potential to earn additional revenue from writing options.

Outlook

In my last Interim Statement, I noted that sentiment towards the financial sector was finally improving, albeit from a very low level following the global financial crisis. In discussion with market participants and investors we believe this recovery in sentiment is becoming grounded in improving fundamentals. These include a better outlook for global growth; the prospect of rising bank net interest margins as the interest rate cycle turns; stronger bank balance sheets and regulatory capital; greater operational leverage from digitisation and consolidation, and the passing of the penal cycle of fines on financial services firms. It may have taken longer than we would have liked but a period of rising profitability and greater pay-outs to investors is now underway. Coupled with the fact that the sector has yet to be fully re-rated, these fundamentals present the most favourable medium and long-term outlook for the sector that we have seen since the financial crisis.

Corporate Matters:

Principal Risks and Uncertainties

The Directors consider that the principal risks and uncertainties faced by the Company for the remaining six months of the financial year, which could have a material impact on performance, remain consistent with those outlined in the Annual Report for the year ended 30 November 2017.

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.

The investment manager's report comments on the performance in the period under review and the outlook for market-related risks.

The Company's risk management framework is a structured process for identifying, assessing and managing the risks associated with the Company's business. The investment portfolio is diversified by geography which mitigates risk, but the portfolio is focused on a single sector, being financials, which means that it may be more sensitive to investor sentiment than a non-sector specific investment portfolio. To further mitigate risk the investments are diversified across a variety of sub-sectors including banking, insurance, property and others.

Going Concern

The Board monitors the financial position of the Company and confirms that there continues to be a reasonable expectation that there are adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial results of the Company.

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 2018 and therefore nothing to report on any material effect by such transactions on the financial position or performance of the Company during that period. There have therefore 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.

MiFID II

As detailed in the Chairman's Statement in the Annual Report 2017 we participated in extensive discussions with Polar Capital, our Investment Manager, and have agreed a budget for research in line with the MiFID II regulatory reform which came into force from 3 January 2018. This reform aims to 'unbundle' commission payments in order that all trading is dealt at 'execution only rates'. Payments for research provided by brokers will therefore be transparent and are expected to reduce significantly.

Polar Capital Global Financials Trust plc is a specialist trust. External research is therefore of considerable value to the team and will continue to be utilised. By agreeing a mutual budget arrangement with Polar Capital, we believe we have achieved a fair and reasonable resolution to the cost of research.

We have agreed with Polar Capital that the Company will absorb the cost of specialist and bespoke research while Polar Capital will be responsible for the cost of written research otherwise termed 'Waterfront' research. We believe that this is a fair and equitable approach which will be monitored through the 2018 transitional year and will be considered again before the budget is re-set for 2019.

We have received confirmation from the Company's corporate adviser that contributing to the cost of research is not a new related party transaction and that no further approval stage is required.

Robert Kyprianou

Chairman

11 July 2018

Investment Manager's Report for the half year ended 31 May 2018

Nick Brind & John Yakas

Performance

Equity markets rose over the period covered by this report despite it being an extremely volatile one. The MSCI World Index rose by 3.5% led by US equities, while European and emerging markets lagged, after taking into account currency movements. Financial shares as illustrated by our benchmark index, the MSCI World Financials Index + Real Estate Index, fell by 0.7%. Against this background the Company's net asset value (NAV) total return over the period fell by 0.1%.

Investment performance was strong in the first three months, albeit we gave up some of this performance over the following three months as European financials, where the Company has a higher weighting than our benchmark, sold off in May and conversely real-estate investment trusts (REITs) rallied. The overall outperformance was driven by good stock selection offset by underweight positions in the US and Japan and overweight positioning in Europe as discussed above. Currency was also a small headwind for performance reflecting a lower weighting to the US dollar.

The biggest contributors to performance were the Company's holdings in Mastercard, the payments company, IntegraFin Holdings, which owns Transact, an IFA platform for administering investment portfolios, in the UK and SVB Financial, a Californian bank holding company for Silicon Valley Bank. The biggest detractors were ING Groep, a Dutch bank and one of the largest holdings in the Company's portfolio, Arrow Global a UK listed debt management business and Chubb, the largest quoted property & casualty company globally.

Investment Review

Financials had a strong start to the financial year. The two biggest pieces of news in December were the passing of US tax reform and the announcement of Basel 4 rules on what final capital requirements for banks globally would be, bringing a conclusion to post financial crisis reforms for the banking sector. US tax reform was seen as being very beneficial for earnings and while there has been an upfront hit to capital for some companies, as the value of their deferred tax assets were reduced, it has not affected companies' ability to return capital to shareholders.

The outlook for interest rates is an important driver for the banks sector as it is positively correlated to higher interest rates as that should lead to wider net interest margins and therefore profitability. Positive economic data at the start of 2018 led to an expectation for interest rate rises being pulled forward earlier than expected which helped underpin the performance of the sector, in particular US banking stocks.

Nevertheless, there was a sharp correction in equity markets at the beginning of the February as concerns about rising inflation could prompt the Federal Reserve to accelerate the pace of interest rates hikes. The sell-off was exacerbated by the collapse of a number of structured products that sold volatility derivatives albeit surprisingly, financials outperformed against this background likely reflecting the sector being seen as a beneficiary of higher interest rates which was perceived as the reason behind the correction.

Financials underperformed in March and then gave up more of their relative performance in the remaining two months of the period. Trade tariffs imposed on certain Chinese imports into the US and the departure of Secretary of State, Rex Tillerson, as well as Gary Cohn, Director of National Economic Council, also added to concerns that the direction of policy that the Trump administration would follow would become increasingly protectionist. The consequence of this led to interest rate expectations softening adding to weakening sentiment hit by a fall in leading economic indicators.

In May, equity markets were hit by the political uncertainty in Italy, around the formation of a new government, and to a lesser extent Spain as well as signs of stress within certain emerging markets. The decision by the Italian president not to approve the appointment of an anti-euro finance minister in the proposed cabinet put forward by the leaders of the Five Star Movement and League parties raised concerns that fresh elections would be called which could lead to anti-euro sentiment in Italy rising. European financials and in particular Italian banks were sharply weaker on the back of this.

We sold the Company's holding in Validus, a US property & casualty insurance business, following the announcement it had agreed to be taken over by AIG. We also sold holdings in Axa, the French insurer, Yes Bank, an Indian bank, Sbanken, a Norwegian digital bank and Main Street Capital, which is a business development company. Against these we increased our exposure to Spain by adding to our holding in Banco Santander and Caixabank. We also took the opportunity to add to a number of our other largest holdings in the Company, but the net effect was to reduce the number of holdings from 74 to 69. Gearing at the end of May at 2.8% was only marginally higher than it had been at the beginning of the financial year.

Outlook

Unsurprisingly the sector's performance remains linked to the outlook for economic growth and interest rates with share prices of banks and life assurance companies positively correlated to the movement in bond yields. Meanwhile nonlife insurance stocks, while beneficiaries from rising interest rates, have lagged probably in part due to their defensive qualities, as cyclical companies have been outperforming reflecting their greater economic sensitivity, but also negative sentiment around reinsurance pricing.

US and European banks, where the largest percentage of the portfolio resides, have failed to provide any fresh impetus to the sector post results, although US banks have seen a big boost to their earnings from the fall in corporate tax rates. Nevertheless, the underlying trend of banks continuing to return capital to shareholders through buybacks and dividends has continued and with significantly more clarity on the outlook for capital requirements, this should help to underpin sentiment towards the banking sector.

While US banks have seen better underlying operating trends, benefiting from an increase in net interest margins and loan growth, than their European peers, it was only rising concerns around Italian political risk that resulted in the sell-off in European bank shares during May. The biggest risk in the short-term in Europe is if the new Italian government heads down a path of confrontation with other Eurozone governments.

In the US, after receiving Senate approval, the House of Representatives, in May, approved a series of banking reforms which rolls back part of the Dodd-Frank post financial crisis legislation and continues a trend of a gradual easing in financial regulation. One of the key aspects of the bill is a reform to increase the threshold for a bank to qualify as systemically important (raised to US$250bn in assets from US$50bn previously) which will materially reduce the cost of regulation for smaller banks. Furthermore, other proposed changes give US banks greater flexibility to return more capital via buyback and dividends to shareholders going forward. The clarity now provided on Basel 4 should also allow European banks to have more confidence on what sustainable level of dividends they can pay to shareholders as some banks had held back on returning surplus capital to shareholders until the rules on capital requirements were finalised.

We have continued to see M&A activity. In the insurance sector, other than the acquisition of Validus mentioned above, Axa announced the acquisition of XL Group, another property & casualty insurance business. In the banking sector we have seen a small pick-up in activity in the US and similarly in the UK, CYBG, the owner of Clysdale and Yorkshire Banks approached Virgin Money about a tie up. There have also been a number of acquisitions in the REIT sector.

Over the next couple of years, we would expect to see a significant increase in M&A activity in the US. There are still around 5,000 banks in the US as it was not until the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, when there were over 12,000 banks in existence, which lifted the restrictions on banks operating across state borders. One of the key drivers for increased activity will be the need for smaller banks to compete with their much larger peers where they are being outspent on technology.

We continue to see a lot of value in the sector, as at the time of writing, the financials sector, in particular banks, has pulled back relative to equity markets and, as highlighted above, European banks have been particularly weak. Against the background of rising interest rates this looks surprising and anomalous, unless economic indicators turn down sharply in due course. Therefore, notwithstanding short-term volatility in financial markets we remain very constructive on the outlook for the sector.

Nick Brind & John Yakas

11 July 2018

Note                

We would draw shareholder's attention to www.polarcapitalglobalfinancialstrust.co.uk for regular monthly portfolio updates and commentary.

*index performance figures are total return in sterling

Portfolio as at 31 May 2018

				Market Value (£'000)		% of total net assets
				31 May	30 November	31 May	30 November
		Stock	Country	2018	2017	2018	2017
1	(1)	JP Morgan Chase	North America	15,502	14,315	5.4%	4.9%
2	(2)	Bank Of America	North America	12,834	11,209	4.4%	3.8%
3	(4)	Wells Fargo	North America	10,022	9,351	3.5%	3.2%
4	(3)	ING Groep	Europe	8,280	9,958	2.9%	3.4%
5	(5)	Chubb	Europe	8,121	8,939	2.8%	3.0%
6	(10)	Mastercard	North America	8,097	6,050	2.8%	2.1%
7	(6)	Citigroup	North America	7,852	8,404	2.7%	2.9%
8	(14)	Sumitomo Mitsui Financial	Japan	7,715	5,630	2.7%	1.9%
9	(7)	BNP Paribas	Europe	6,578	8,350	2.3%	2.8%
10	(11)	Toronto-Dominion Bank	North America	6,492	5,965	2.2%	2.0%
Top 10 investments				91,493		31.7%
11	(13)	KBC Groep	Europe	6,449	5,898	2.2%	2.0%
12	(9)	Marsh & McLennan	North America	6,420	6,340	2.2%	2.2%
13	(8)	PNC Financial Services	North America	6,143	6,369	2.1%	2.2%
14	(12)	Sampo	Europe	5,795	5,945	2.0%	2.0%
15	(19)	Oversea-China Banking Corp	Asia (ex-Japan)	5,760	5,074	2.0%	1.7%
16	(17)	US Bancorp	North America	5,611	5,092	1.9%	1.7%
17	(16)	Keycorp	North America	5,588	5,400	1.9%	1.9%
18	(20)	Pacific Premier Bancorp	North America	5,376	5,067	1.9%	1.7%
19	(15)	First Republic Bank	North America	5,340	5,431	1.8%	1.9%
20	(50)	Arch Capital	North America	4,850	2,914	1.7%	1.0%
Top 20 investments				148,825		51.4%
21	(21)	Banco Santander	Europe	4,707	4,926	1.6%	1.7%
22	(23)	Allianz	Europe	4,683	4,517	1.6%	1.5%
23	(18)	Swedbank	Europe	4,625	5,077	1.6%	1.7%
24	(30)	SVB Financial	North America	4,613	3,899	1.6%	1.3%
25	(25)	Commonwealth Bank of Australia	Asia (ex-Japan)	4,455	4,397	1.5%	1.5%
26	(26)	Solar Capital	North America	4,266	4,151	1.5%	1.4%
27	(29)	Blackstone	North America	4,101	4,008	1.4%	1.4%
28	(24)	Intesa Sanpaolo	Europe	3,985	4,488	1.4%	1.5%
29	(36)	Lloyds Banking Group	United Kingdom	3,931	3,537	1.4%	1.2%
30	(34)	Ares Capital	North America	3,889	3,673	1.3%	1.3%
Top 30 investments				192,080		66.3%
31	(39)	E Sun Financial	Asia (ex-Japan)	3,826	3,335	1.3%	1.1%
32	(33)	Mapletree Commercial	Asia (ex-Japan)	3,763	3,719	1.3%	1.3%
33	(31)	Direct Line Insurance	United Kingdom	3,649	3,734	1.3%	1.3%
34	(41)	East West Bancorp	North America	3,632	3,229	1.3%	1.1%
35	(28)	UBS Group	Europe	3,629	4,085	1.3%	1.4%
36	(49)	Citizens Financial Group	North America	3,602	2,930	1.2%	1.0%
37	(45)	OneSavings Bank	United Kingdom	3,527	3,132	1.2%	1.1%
38	(27)	Fortune REIT	Asia (ex-Japan)	3,488	4,137	1.2%	1.4%
39	(56)	Charter Court Financial Services	United Kingdom	3,448	2,522	1.2%	0.9%
40	(37)	Tisco Financial	Asia (ex-Japan)	3,408	3,479	1.2%	1.2%
Top 40 investments				228,052		78.8%
41	-	IntegraFin	United Kingdom	3,360	-	1.2%	-
42	(40)	BOC Hong Kong	Asia (ex-Japan)	3,333	3,295	1.2%	1.1%
43	(43)	TBC Bank	United Kingdom	3,330	3,177	1.2%	1.1%
44	(38)	HSBC Holdings	Asia (ex-Japan)	3,306	3,352	1.1%	1.1%
45	-	Mitsubishi UFJ	Japan	3,291	-	1.1%	-
46	(47)	VPC Specialty Lending Investments	Fixed Income	3,198	3,044	1.1%	1.0%
47	(42)	Atom Bank (unquoted)	United Kingdom	3,191	3,191	1.1%	1.1%
48	(44)	Nationwide Building Society 10.25% CCDS	Fixed Income	3,090	3,140	1.1%	1.1%
49	(52)	HDFC Bank	Asia (ex-Japan)	2,958	2,782	1.0%	0.9%
50	(35)	Arrow Global Group	United Kingdom	2,860	3,663	1.0%	1.3%
Top 50 investments				259,969		89.9%
51	(51)	Frasers Centrepoint Trust	Asia (ex-Japan)	2,837	2,808	1.0%	1.0%
52	-	CaxiaBank	Europe	2,826	-	1.0%	-
53	(55)	City of London Investment Group	United Kingdom	2,722	2,645	0.9%	0.9%
54	(32)	Societe Generale	Europe	2,665	3,722	0.9%	1.3%
55	(58)	P2P Global Investments	Fixed Income	2,593	2,310	0.9%	0.8%
56	(46)	Meta Financial Group	North America	2,507	3,074	0.9%	1.0%
57	(57)	International Personal Finance 5.75% Bond	Fixed Income	2,472	2,495	0.9%	0.9%
58	(61)	Pennant Park Floating Rate Capital	North America	2,423	2,167	0.8%	0.7%
59	(60)	Aldermore Group Plc 8.5% Bond	Fixed Income	2,218	2,213	0.8%	0.8%
60	(59)	Sparebank SMN	Europe	2,215	2,270	0.8%	0.8%
Top 60 investments				285,447		98.8%
61	(53)	Indiabulls Housing Finance	Asia (ex-Japan)	2,052	2,758	0.7%	0.9%
62	(63)	Phoenix Life 7.25% Bond	Fixed Income	1,819	1,887	0.6%	0.6%
63	(68)	DNB	Europe	1,417	1,423	0.5%	0.5%
64	(64)	Cielo	Latin America	1,225	1,853	0.4%	0.6%
65	(71)	Alpha Bank	Eastern Europe	1,219	1,089	0.4%	0.4%
66	(70)	Pension Insurance 6.5% Bond	Fixed Income	1,137	1,128	0.4%	0.4%
67	(72)	International Personal Finance 6.125% Bond	Fixed Income	904	886	0.3%	0.3%
68	-	Augmentum Fintech	United Kingdom	758	-	0.3%	-
Total investments				295,978		102.4%
Other net liabilities				(6,802)		(2.4%)
Total assets				289,176		100.0%

Note: Figures in brackets denote comparative rankings as at 30 November 2017.

Geographical Exposure*
	31 May 2018	30 November 2017
North America	44.5%	42.3%
Europe	22.9%	26.7%
Asia (ex-Japan)	13.5%	13.7%
United Kingdom	10.8%	8.9%
Fixed Income	6.1%	7.2%
Japan	3.8%	1.9%
Latin America	0.4%	0.6%
Eastern Europe	0.4%	0.4%
Other net liabilities	(2.4%)	(1.7%)
Total	100.0%	100.0%

Sector Exposure*	31 May 2018	30 November 2017
Banks	68.4%	65.5%
Insurance	11.6%	13.5%
Diversified Financials	10.0%	9.7%
Fixed Income	6.1%	7.2%
Real Estate	3.5%	3.7%
Software & Services	2.8%	2.1%
Other net liabilities	(2.4%)	(1.7%)
Total	100.0%	100.0%

Market Cap*	31 May 2018	30 November 2017
Large (>US$5bn)	82.3%	80.0%
Medium (US$0.5bn - US$5bn)	17.6%	19.6%
Small (<US$0.5bn)	2.5%	2.1%
Other net liabilties	(2.4%)	(1.7%)
Total	100.0%	100.0%

* Based on the net assets as at 31 May 2018 of £289.2m (30 November 2017: £293.3m).

Statement of Directors' Responsibilities

As at 31 May 2018

Directors' Responsibility Statement

The Directors of Polar Capital Global Financials Trust plc, who are listed in the Shareholder Information section, confirm to the best of their knowledge that:

• the condensed set of financial statements have been prepared in accordance with International Accounting Standard 34 as adopted by the European Union; 

• the Interim Management Report (constituting the Investment Manager's report and Corporate Matters) includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R; and 

• in accordance with DTR 4.2.8R there have been no new related party transactions during the six month period to 31 May 2018 and therefore nothing to report on any material effect by such transactions on the financial position or performance of the Company during that period. 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.

The half year financial report for the six months ended 31 May 2018 has not been audited or reviewed by the auditors.

The financial report for the six months ended 31 May 2018 was approved by the Board on 11 July 2018 and the responsibility statement was signed on its behalf by Robert Kyprianou, Chairman of the Board.

On behalf of the Board

Robert Kyprianou

Chairman

11 July 2018

Statement of Comprehensive Income for the half year ended 31 May 2018

		(Unaudited)			(Unaudited)			(Audited)
Notes		Half year ended 31 May 2018			Half year ended 31 May 2017			Year ended 30 November 2017
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
		return	Return	Return	return	return	return	Return	return	Return
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	2	6,998	-	6,998	5,546	-	5,546	9,757	8	9,765
Other operating income	2	7	-	7	2	-	2	6	-	6
(Losses)/gains on investments held at fair value		-	(5,227)	(5,227)	-	18,214	18,214	-	30,771	30,771
Gains on derivatives		-	-	-	-	310	310	-	309	309
Other currency (losses)/gains		-	(72)	(72)	-	(27)	(27)	-	25	25
Total income		7,005	(5,299)	1,706	5,548	18,497	24,045	9,763	31,113	40,876
Expenses
Investment management fee		(242)	(966)	(1,208)	(194)	(775)	(969)	(416)	(1,665)	(2,081)
Other administrative expenses		(271)	(29)	(300)	(264)	-	(264)	(520)	-	(520)
Total expenses		(513)	(995)	(1,508)	(458)	(775)	(1,233)	(936)	(1,665)	(2,601)
Profit/(loss) before finance costs and tax		6,492	(6,294)	198	5,090	17,722	22,812	8,827	29,448	38,275
Finance costs		(34)	(134)	(168)	(26)	(102)	(128)	(53)	(212)	(265)
Profit/(loss) before tax		6,458	(6,428)	30	5,064	17,620	22,684	8,774	29,236	38,010
Tax		(546)	48	(498)	(501)	140	(361)	(950)	185	(765)
Net profit/(loss) for the period and total comprehensive income		5,912	(6,380)	(468)	4,563	17,760	22,323	7,824	29,421	37,245
Earnings per ordinary share (basic) (pence)	3	2.92	(3.15)	(0.23)	2.65	10.32	12.97	4.29	16.14	20.43
Earnings per ordinary share (diluted) (pence)	3	2.92	(3.15)	(0.23)	2.59	10.10	12.69	4.29	16.14	20.43

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The notes to follow form part of these financial statements.

Statement of Changes in Equity for the half year ended 31 May 2018

			(Unaudited) Half year ended 31 May 2018
	Called up share capital £'000	Capital Redemption Reserve £'000		Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 December 2017	10,139	251		55,852	139,235	81,124	6,691	293,292
Total comprehensive income:
(Loss)/profit for the half year ended 31 May 2018	-	-		-	-	(6,380)	5,912	(468)
Transactions with owners, recorded directly to equity:
Conversion of subscription shares - prior year adjustment	-	-		2	-	-	-	2
Equity dividends paid	-	-		-	-	-	(3,650)	(3,650)
Total equity at 31 May 2018	10,139	251		55,854	139,235	74,744	8,953	289,176
			(Unaudited) Half year ended 31 May 2017
	Called up share capital £'000	Capital Redemption Reserve £'000		Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 December 2016	8,915	251		21,946	139,235	51,703	5,238	227,288
Total comprehensive income:
Profit for the half year ended 31 May 2017	-	-		-	-	17,760	4,563	22,323
Transactions with owners, recorded directly to equity:
Equity dividends paid	-	-		-	-	-	(2,755)	(2,755)
Total equity at 31 May 2017	8,915	251		21,946	139,235	69,463	7,046	246,856
			(Audited) Year ended 30 November 2017
	Called up share capital £'000	Capital Redemption Reserve £'000		Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 December 2016	8,915	251		21,946	139,235	51,703	5,238	227,288
Total comprehensive income:
Profit for the year ended 30 November 2017	-	-		-	-	29,421	7,824	37,245
Transactions with owners, recorded directly to equity:
Conversion of subscription shares	1,224	-		33,906	-	-	-	35,130
Equity dividends paid	-	-		-	-	-	(6,371)	(6,371)
Total equity at 30 November 2017	10,139	251		55,852	139,235	81,124	6,691	293,292

The notes to follow form part of these financial statements

Balance Sheet as at 31 May 2018

	Notes	(Unaudited) 31 May 2018 £'000	(Unaudited) 31 May 2017 £'000	(Audited) 30 November 2017 £'000
Non-current assets
Investments held at fair value through profit or loss		295,978	253,656	298,375
Current assets
Receivables		1,525	1,212	766
Corporation tax receivable		30	-	20
Overseas tax recoverable		125	85	98
Cash and cash equivalents		14,504	9,874	7,231
		16,184	11,171	8,115
Total assets		312,162	264,827	306,490
Current liabilities
Payables		(486)	(471)	(3,198)
Bank loan		(22,500)	(17,500)	(10,000)
		(22,986)	(17,971)	(13,198)
Net assets		289,176	246,856	293,292
Equity attributable to equity shareholders
Called up share capital		10,139	8,915	10,139
Capital redemption reserve		251	251	251
Share premium reserve		55,854	21,946	55,852
Special distributable reserve		139,235	139,235	139,235
Capital reserves		74,744	69,463	81,124
Revenue reserve		8,953	7,046	6,691
Total equity		289,176	246,856	293,292
Net asset value per ordinary share (basic) (pence)	4	142.61	143.38	144.64
Net asset value per ordinary share (diluted) (pence)	4	142.61	139.09	144.64

The notes to follow form part of these financial statements.

Robert Kyprianou

Chairman

11 July 2018

Cash Flow Statement for the half year ended 31 May 2018

	(Unaudited) Half year ended 31 May 2018 £'000	(Unaudited) Half year ended 31 May 2017 £'000	(Audited) Year ended 30 November 2017 £'000
Cash flows from operating activities
Profit before tax	30	22,684	38,010
Adjustment for non-cash items:
(Losses)/gains on investments held at fair value through profit or loss	5,227	(18,214)	(30,771)
Scrip dividends received	-	-	(126)
Amortisation on fixed interest securities	(36)	2	(30)
Adjusted profit before tax	5,221	4,472	7,083
Adjustments for:
Purchases of investments, including transaction costs	(33,368)	(21,890)	(79,835)
Sales of investments, including transaction costs	27,769	25,809	54,566
(Increase)/decrease in receivables	(769)	2,325	137
Increase/(decrease) in payables	93	(2,944)	(346)
Overseas tax	(525)	(383)	(873)
Net cash (used in)/generated from operating activities	(1,579)	7,389	(19,268)
Cash flows from financing activities
Cost of subscription shares conversion	2	-	35,130
Loan repaid	-	-	(7,500)
Loan drawn	12,500	-	-
Equity dividends paid	(3,650)	(2,755)	(6,371)
Net cash generated from/(used in) financing activities	8,852	(2,755)	21,259
Net increase in cash and cash equivalents	7,273	4,634	1,991
Cash and cash equivalents at the beginning of the period	7,231	5,240	5,240
Cash and cash equivalents at the end of the period	14,504	9,874	7,231

The notes to follow form part of these financial statements.

Notes to the Financial Statements for the half year ended 31 May 2018

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 2018.

The unaudited financial statements to 31 May 2018 have been prepared using the accounting policies used in the Company's financial statements to 30 November 2017. These accounting policies are based on International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Accounting Standards Committee ("IASC"), as adopted by the European Union.

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 2018 and 31 May 2017 have not been audited. The figures and financial information for the year ended 30 November 2017 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 2017, prepared under IFRS, 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 2017.

The financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (£'000), except where otherwise stated.

2    Dividends and Other Income        

	(Unaudited) For the half year ended 31 May  2018 £'000	(Unaudited) For the half year ended 31 May 2017 £'000	(Audited) For the year ended 30 November 2017 £'000
Investment income
Revenue:
UK dividends	1,078	518	1,271
Overseas dividends	5,472	4,389	7,144
Scrip dividends	-	-	126
Interest on debt securities	448	561	1,138
Dividends on contracts for difference	-	78	78
Total investment income allocated to revenue	6,998	5,546	9,757
Capital:
Special dividends allocated to capital	-	-	8
Total investment income allocated to capital	-	-	8
Other operating income
Bank interest	7	2	6
Total other operating income	7	2	6

3    Earnings per ordinary share         

	(Unaudited) For the half year ended 31 May  2018 £'000	(Unaudited) For the half year ended 31 May  2017 £'000		(Audited) For the year ended 30 November 2017 £'000
Basic earnings per share
Net profit/(loss) for the period:
Revenue	5,912	4,563		7,824
Capital	(6,380)	17,760		29,421
Total	(468)	22,323		37,245
Weighted average number of shares in issue during the period	202,775,000	172,175,000		182,294,641
Undiluted:
Revenue	2.92p	2.65p		4.29p
Capital	(3.15)p	10.32p		16.14p
Total	(0.23)p	12.97p		20.43p
Diluted:
Revenue	2.92p	2.59p	4.29p
Capital	(3.15)p	10.10p	16.14p
Total	(0.23)p	12.69p	20.43p

There is no dilutive effect on the earnings per ordinary share in the period under review as the subscription shares were converted into ordinary shares at the conversion date of 31 July 2017 (31 May 2017: dilutive effect as the conversion price was lower than the average ordinary share price).

4    Net Asset Value per ordinary share          

	(Unaudited) For the half year ended 31 May 2018	(Unaudited) For the half year ended 31 May 2017	(Audited) For the year ended 30 November 2017
Undiluted: Net assets attributable to ordinary shareholders (£'000)	289,176	246,856	293,292
Ordinary shares in issue at end of period	202,775,000	172,175,000	202,775,000
Net asset value per ordinary share (pence)	142.61	143.38	144.64

Diluted: Net assets attributable to ordinary shareholders (£'000)	289,176	282,046	293,292
Ordinary shares in issue at end of period if Subscription Shares converted	202,775,000	202,775,000	202,775,000
Net asset value per ordinary share (pence)	142.61	139.09	144.64

There is no dilutive effect on the net asset value per ordinary share as no potentially dilutive shares were in issue as at 31 May 2018 (31 May 2017: The diluted NAV per ordinary share was calculated on the assumption that 30,600,000 subscription shares in issue were fully converted at 115 pence per share).

5    Share capital

There has been no ordinary share activity during the six-month period to 31 May 2018.

6    Dividends

The first interim dividend for the year ending 30 November 2018 will be declared in July 2018 and will be paid on  31 August 2018; it is anticipated that the second interim dividend for the year ending 30 November 2018  will be declared in or around December 2018 and will be paid on 28 February 2019.

7    Related party transactions

There have been no related party transactions that have materially affected the financial position or the performance of the Company during the six month period to 31 May 2018.

8    Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements. The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

About Us

History

The Company was incorporated on 17 May 2013. On 1 July 2013 it issued 153,000,000 ordinary shares plus one subscription share for every five ordinary shares which were admitted to trading on the Main Market of the London Stock Exchange. The original subscription price for each ordinary share was £1 and the Net Asset Value (NAV) per share on 1 July 2013 was 98p (after launch costs).

In accordance with the Company's original prospectus, on 31 July 2017 the subscription shares matured and were exercised at 115p per subscription share.

Investors may purchase ordinary shares through their stockbroker, bank or other financial intermediary.

Capital Structure

At 31 May 2018, the Company had in issue 202,775,000 (2017: 172,175,000) ordinary shares of 5p each and no (2017: 30,600,000) subscription shares of 1p each.

Life of the Company

The Articles of Association require the Directors to put forward at the seventh Annual General Meeting a resolution to place the Company into liquidation. The voting on that resolution will be enhanced such that, provided any single vote is cast in favour, the resolution will be passed. The seventh AGM is expected to be held in April 2020, but in any event, no later than 31 May 2020.

Investment Objective

The Company's investment objective is to generate for investors a growing dividend income together with capital appreciation.

Investment Policy

The Company seeks to achieve its objective by investing primarily in a global portfolio consisting of listed or quoted securities issued by companies in the financials sector operating in the banking, insurance, property and other sub-sectors.  The portfolio is diversified by factors including geography, industry sub-sector and stock market capitalisation.

Full details of the investment policy are set out in the Annual Report.

Benchmark

The Company's Benchmark is the MSCI World Financials + Real Estate (RE) Index, total return in Sterling (with dividends reinvested). From inception to 31 August 2016 the benchmark was the MSCI World Financials Index (in sterling with dividends reinvested). On 1 September 2016, the constituents of this index changed to exclude real estate. Consequently, from this date the Company adopted a revised Benchmark with real estate added back. MSCI has provided a bespoke index of the World Financials + RE Index (in Sterling with dividends reinvested).

Gearing and Use of Derivatives

In line with the Articles of Association, the Company may employ borrowing from time to time with the aim of enhancing returns, subject to a maximum of 15% of net assets at the time the relevant borrowing is taken out. During the period under review, the Company had an arrangement with ING Bank NV for bank loans of £25m to be made available, of which £22.5m had been drawn down at the period end. Since the period end, the Company has entered into a replacement arrangement with ING Bank NV for a one year revolving credit facility in the amount of £15m, and a one year term loan for £15m. The Company may invest through equities, index-linked, equity-linked and other debt securities, cash deposits, money market instruments, foreign currency exchange transactions, forward transactions, index options and other interests including derivative instruments. Forward transactions, derivatives (including put and call options on individual positions and 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.

Management

The Investment Manager and AIFM is Polar Capital LLP and Mr Nick Brind and Mr John Yakas have managed the portfolio since launch.

The Investment Manager is entitled to a fee at the rate of 0.85% per annum of the lower of the Company's market capitalisation and the Company's net asset value. 80% of the management fee is charged to the capital account and the remaining 20% to income.

The Investment Manager may also be entitled to a performance fee paid in cash. The fee is equal to 10% of the excess return over the performance fee hurdle. The hurdle is 100p increased or decreased by reference to the return on the Benchmark plus 1.25p per annum. The performance is adjusted for these purposes to take into account the dividends paid by the Company. The fee is calculated and payable at the liquidation of the Company. No performance fee is currently due and no accrual has been made.

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 2017. 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.co.uk

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.

End

 

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