Preliminary Results

RNS Number : 3944U

Polar Capital Holdings PLC

24 June 2009

 



24 June 2009

'Emerging from unprecedented market conditions with a strong balance sheet and a current portfolio of funds with a track record of excellent performance'

Highlights

• Assets under management ('AUM') at 31 March 2009 down 52% to $1.5bn (March 2008: $3.1bn)

• Core operating profit, excluding performance fees, down 78% to £1.3m (March 2008: £6.0m), reflecting the reduction in AUM

• Pre tax profitability down 17% to £12.1m (March 2008:£14.5m)

• Adjusted diluted earnings per share down 32% to 9.9p (March 2008: 14.6p), adjusted to exclude cost of share-based payments

• Second interim dividend of 3.5p per share (March 2008: 7.0p per share) making a total distribution for the year of 4.5p per share (March 2008: 8.5p per share)

• Increase in shareholders funds to £39.6m (March 2008: £37.9m) including cash and investments of £44.2m (March 2008: £44.1m).

• Five of our seven hedge funds produced positive returns over the calendar year 2008

Current AUM 

• Current AUM as at 30 May 2009 up 4.1% to $1.54bn from $1.48bn

Mark Kary, Chief Executive, commented:

'While these are clearly challenging times for Polar Capital and the asset management industry, there are some encouraging signs that industry conditions have stabilized and are beginning to improve. Polar Capital has also experienced a stabilisation of AUM since the year end. Importantly, Polar Capital is fortunate to have a robust balance sheet, a strong track record of fund performance and a willingness to invest in the business at this time of considerable opportunity.'

For further information please contact:
Mark Kary, Chief Executive or John Mansell, Chief Operating Officer   [phone]
Financial Dynamics
Ed Gascoigne-Pees [phone] / Georgina Turner  [phone] Numis Securities Lee Aston (Nominated Adviser) / Charles Farquhar (Corporate Broking) [phone]

About Polar Capital

Polar Capital Holdings plc is a research driven investment management company providing a highly entrepreneurial environment for outstanding portfolio managers within a structure that offers a level of marketing, administrative and operational support normally found in much larger organisations.

Today Polar Capital has a staff of 52 of whom 25 are investment professionals managing 11 funds, five managed accounts and one advisory relationships. These funds, which are aimed at institutional and professional investors, have combined AUM as at 30 May 2009 of $1.54 bn.  

AUM by funds/strategy 

	31 March 2009		31 March 2008
Japan	$306m		$375m#
Technology	$407m		$737m
Europe	$340m		$568m
Global emerging markets	$45m		$251m#
UK	$95m		$124m
Macro	$219m		$70m
Healthcare	$64m		$23m
Closed funds in period	-		$992m
Total*	$1,476m		$3,140m

*Analysis excludes single $4m sub-advisory US equities account (March 2008: $7m)

# Comparative figures adjusted for closures of Japan hedge ($284m) and Columbus ($37m) funds 

Analysis of changes in asset types for the twelve months to 31 March 2009

AUM movement 12 months to 31 March 2009   Long $m Hedge      $m Advisory $m Total $m As at 31 March 2008 $1,016m $2,005m $122m $3,143m Performance and currency movements $(316)m    $(144)m $(24)m $(484)m Net subscriptions / (redemptions) from ongoing businesses $46m $(170)m $(63)m $(187)m Net outflows from closed funds - $(992)m - $(992)m Total AUM at 31 March 2009 $746m  $699m $35m $1,480m

  Chairman's statement

Results

In our last financial year we have operated in the most turbulent global financial markets seen for generations. In this most challenging environment, on which I comment later, I am disappointed to have to report a fall in our AUM from $3.1bn to $1.5bn. Our core profitability for the year also fell materially to £1.3m primarily as a result of declining AUM. Performance fees however were strong, resulting in pretax profits of £12.1m down only 16.5% from the previous year which in the circumstances was a creditable result.

Market background

Since I last reported to you in July 2008, conditions in the world economies and equity markets have deteriorated dramatically with the financial credit crisis bringing into question much of the global financial system. Although some of these conditions were apparent last summer, it was not until September when Lehman Brothers failed and the US and UK Governments moved-in to bail out failing banks that the scale of the systemic damage became clearer. The speed of the collapse in the banking industry was exceptional and took the scale of the problem to the point that investors withdrew from the equity and capital markets, and interbank loans all but ceased. This inevitably became a worldwide recession and hit hardest the developed economies of the US, Japan, UK and Continental Europe.

Against such a backdrop global equity markets went into free-fall with one financial shock after another and investor sentiment turning to 'cash as the best investment'. Over our financial year the FTSE World Index was down over 22.4% and the S&P 500 Composite Index showed a dollar fall of 31.8%. Over the same period the UK has seen Sterling fall by 28% against both the US Dollar and the Japanese Yen. The determination of governments and regulators around the world to stem the financial problems has been widely reported in the press and shareholders should be familiar with the chain of events. After providing rescue packages for the banks, governments are having to address the real economy which is reeling from the aftershocks of the financial damage and companies large and small are finding that they have unsustainable business models.

While equity markets have recovered from their lows in March, the jury is still out on whether we will see the recovery being a sustained recovery or a simple bear market rally. It is impossible to estimate the full depth or length of the current recession but experience suggests that it will take years before a full recovery is made. While some investors believe that there are green shoots, others point to the mountains of toxic debt that need to be washed out of the system to allow even modest economic growth. The cost of the unprecedented financial support from many governments to their financial systems will have to be paid for in due course by lower public sector spending and higher taxation. This is likely to slow down any recovery in the economy and prolong the effects of the current recession.

Funds and performance

Our open-ended funds have had a mixed year with good relative performance but still suffering indiscriminate redemption pressure from investors seeking to obtain cash from any funds open to withdrawals. Such redemption pressures were exacerbated by investors also having to raise funds to recover losses caused by the fraudulent activities of some investment managers. These pressures now appear to have stopped.

While we have lost some AUM due to market and currency movements, and some from redemptions from strongly performing funds, we also decided to close certain funds in line with the Company's focus of achieving the best possible returns for investors by ensuring that our managers deliver strong and consistent risk adjusted investment performance. In addition, the most significant loss of AUM arose from the closure of the successful Paragon fund, our global opportunities fund, in the last quarter of the financial year following the decision of the investment manager to resign to take some time away from the industry. This resulted in over $540m being returned to investors. 

Investment performance over the last year has been good with  five of our seven hedge funds producing positive returns in 2008 and our long strategies, notably Japan, showing strong relative returns. If investor sentiment reappears in the way we expect with a greater emphasis on transparency in the fund management process coupled with a demand for strong risk controls, all set against a heightened regulatory environment, we should be able to win business by offering the right combination of investment performance and operational integrity.

Dividend

It is the Group's policy on dividends to pay out a material proportion of net profits before performance fees, together with the majority of the net performance fees. The Company enjoyed relatively good net profit performance in the last financial year but the Board is mindful of the fall in core operating profits and of the current trading outlook being more challenging and consequently of revenues being less predictable. While the Board is hopeful of attracting new investment flows in the current financial year it  has deemed it prudent this year to reduce the dividend by more than the policy would normally dictate.

The Board has declared a second interim dividend of 3.5p per share to shareholders on the register on 17 July 2009. The dividend will be paid on 7August 2009. This will bring the total for the year to 4.5p per share, which is a decrease of 47% over last year's dividend total of 8.5p.

Outlook

We expect the economic and financial environment to remain challenging in our current financial year, which makes forecasting difficult. The significant reduction in our AUM in the second half of last year will reduce the level of fund management fees and impact performance fees. Our challenge is both to retain and increase our AUM. In this we will be helped by our strong balance sheet with its high cash reserves, our robust operating platform with increased resource in risk management and compliance and the strong performance of our funds. These factors support our belief that we should be well placed to be a beneficiary of new investment inflows when money starts flowing back into the market.

Board changes

It was with great sadness that we learned of Peter Buckley's death on 2 December 2008. Peter had been involved with the establishment of Polar Capital and served on its Board from the date of its establishment in 2001. He made a major contribution to the Board and his wise counsel will be sorely missed.

Annual General Meeting

The Annual General Meeting this year will be held on 10 September and I encourage all shareholders to attend as this will be an opportunity to meet the Directors. A separate notice detailing the business of the meeting will be sent to shareholders in due course.

Tom Bartlam

Chairman

23 June 2009

  CHIEF EXECUTIVE'S STATEMENT FOR THE YEAR ENDED 31 MARCH 2009

Review of the year - investment industry

We have witnessed, as described in the Chairman's statement, an extraordinary 12 month fiscal period with global equity markets materially down, and the global hedge fund industry having contracted from over $2,000bn in assets to an estimated current range of $750bn to $1,000bn. Investors in hedge funds sought to raise cash in their portfolios only to find that anything between 10% and 50% of the funds in which they were invested did not have the liquidity in their underlying portfolios to meet such requests. This resulted in a very large number of hedge funds restricting redemptions either by applying gates or fully suspending redemptions for a more significant period of time. Investors therefore had little choice other than to raise cash from the more liquid and typically better performing funds that were still open for business. The impact of such behaviour and liquidity mismatches on the industry's reputation was compounded when in December 2008 the Securities and Exchange Commission announced the $50bn Madoff fraud.

Review of the year - Polar Capital

With such an industry backdrop, there is no doubt that Polar Capital has had to operate in a very challenging environment where the majority of our funds have contracted as a result either of underlying markets or of investor redemptions. Across the business assets under management have fallen from $3.1bn at the beginning of the fiscal year to $1.5bn at 31 March 2009. This fall includes our decision a year ago to close a number of funds (Asia long only and hedge, Japan hedge, Global Utilities and Columbus) whose performance we felt was not of the quality needed to build a long term and compelling proposition. It also reflected the closure of the Paragon Fund at the end of March 2009 as a result of the decision of the manager to resign. The fall also includes the impact on our equity long only business of the fall in global stock markets, and on our hedge fund business from the extreme industry redemption phenomena.

However we are very encouraged by the investment performance of nearly all our funds over this period. In our long only business the Japanese funds enjoyed another impressive performance year outperforming the TOPIX benchmark by some 14% and creating one of the most impressive 5 year records amongst its peer group. Our Healthcare business completed a very solid first full year in an asset class well suited to these difficult market and economic conditions. And importantly our long established Technology business has seen the new leadership team bed down well and deliver some impressive performance.

Despite all the background noise surrounding the hedge fund industry five of Polar Capital's seven hedge funds produced positive returns in calendar 2008 and delivered the type of consistent and absolute returns that the industry has always promoted. That impressive performance has continued into 2009 and we are encouraged by the prospects for our Forager and Conviction funds (European), our Discovery fund (Macro) and the UK funds (both in hedge fund and UCITS3 structures).

While our business flows have been negatively impacted by investor sentiment and the very specific liquidity problems surrounding the hedge fund industry, we draw some comfort that by fiscal year end industry redemptions were abating, and from an increase in Polar Capital's new business pitches across the broad range of our funds. This suggests that pipelines and visibility are slowly being restored.

Current business outlook

The current operating environment in the asset management industry is challenging and many investors are still reeling from the impact of 2008 events and performance. Furthermore while it is clearly difficult to predict the outcome for financial markets, we expect a multi-year global deleveraging cycle, with the banking system only slowly getting recapitalised. This is likely to lead to several years of sub trend economic growth with a corresponding period of volatile and difficult financial market performance.

In spite of this backdrop there are a number of important and positive trends developing for Polar. Firstly, as we have written before, the secular environment for financial markets may have changed and with it the era of unrestricted access to deep and plentiful finance with investors adopting a more discerning and conservative approach to asset allocation. Certainly across the hedge fund industry this should see increased allocations to less aggressive, directional and correlated funds, and towards more fundamentally driven, understandable, liquid and consistent ones. Given Polar Capital's focus on fundamental research based strategies with a real emphasis on absolute return, such an industry trend should be to our advantage.

The second theme involves the boutique business model. Inevitably at times of stress, a natural conservatism will favour the longer established and better branded institutions. However in an investment environment where performance, differentiated product, and absolute return are arguably going to be a lot more important, the more entrepreneurial performance driven boutique model still has a critical role. The challenge for the boutique industry will be that investors will be more demanding in their due diligence process due to tighter regulations. Over the last several years Polar Capital has made significant investments in its operational infrastructure, particularly in risk management, compliance and distribution. We feel comfortable that such institutional robustness will be a significant competitive advantage as the boutique/specialist asset management industry rebuilds its credibility.

The third important trend relates to future asset flows. 2008 served as the first real test of the hedge fund industry's ability to generate absolute returns and the first test of how industry players would conduct themselves at a time of pressure. Many players failed the tests, but the shrinkage in the industry should create an opportunity rather than be seen as the start of a longer-term decline. We expect a number of weaker players to drop out of the industry leaving a smaller group of players with stronger business propositions to prosper. Polar Capital's investment performance and the integrity with which we conducted ourselves during the period of stress should stand us in good stead.

Summary

Polar Capital operates in an industry that has been stress tested by enormous challenges over the last two years and whose credibility and reputation has suffered accordingly. It will take investors time to rebuild their own businesses and to re-establish confidence in the broader investment industry. However this should be balanced against the opportunities created by fundamental changes that the industry is undergoing and the increased moves to more defensive allocations within the typical investor asset allocation. Polar Capital's historic investment performance, the differentiated nature of its products, its integrity, its strong balance sheet, the proximity of its funds to their respective high water marks, and its robust infrastructure platform all suggest the Company's competitive positioning has improved over this period. The key will be to ensure that we can deliver the new asset flows to take advantage of this opportunity.

Prospects

The fall in AUM in the period to $1.5bn at the year end implies a material reduction in our core revenues. Consequently the results of the Group for the 12 months ending March 2010 will be dependant on performance fees generated and/or by a net inflow of funds into our products in the year ahead. While these are clearly challenging times for Polar and the asset management industry, there are some encouraging signs that industry conditions have stabilised and are beginning to improve. Polar Capital has experienced a stabilisation of AUM since the year end. Importantly Polar is fortunate to have a robust balance sheet, a strong track record of fund performance and a willingness to invest  in the business at this time of considerable  opportunity.

It has been an exceptional period with times of huge stress and uncertainty. I would like to thank our shareholders and clients for their support through this difficult time and all the staff for their tremendous loyalty, teamwork and work ethic over the last year.

Mark Kary

Chief Executive

23 June 2009

Consolidated Income Statement
for the year ended 31 March 2009
	Unaudited
	Year ended		Year ended
	31 March 2009		31 March 2008
	£'000		£'000
Revenue	51,056		47,689
Interest receivable and similar income	888		1,715
Gross income	51,944		49,404
Cost of sales	(852)		(1,896)
Net fees	51,092		47,508
Operating costs	(39,989)		(31,809)
Profit on ordinary activities before share based payments	11,103		15,699
Share based payments	1,008		(1,204)
Profit on ordinary activities before taxation	12,111		14,495
Taxation	(3,740)		(4,860)
Profit on ordinary activities after taxation	8,371		9,635
Basic earnings per ordinary share	12.06p		14.57p
Diluted earnings per ordinary share	11.31p		13.00p
Adjusted diluted earnings per ordinary share	9.95p		14.63p
All the above revenue and expense items arose from continuing operations

Consolidated Statement of Recognised Income and Expense
for the year ended 31 March 2009
	Unaudited
	Year ended		Year ended
	31 March 2009		31 March 2008
	£'000		£'000
Profit for the financial period	8,371		9,635
(Loss)/gain on the revaluation of available-for-sale financial assets	670		(332)
Gain on the fair valuation of hedging contracts	(47)		(42)
Deferred tax in respect of employee share options	(95)		(759)
Deferred tax in respect of available-for-sale financial assets	(188)		97
Total recognised gains and losses	8,711		8,599

Consolidated Balance Sheet
at 31 March 2009	Unaudited
	As at		As at
	31 March 2009		31 March 2008
	£'000		£'000
Fixed assets	162		396
Available-for-sale financial assets	11,655		12,779
Deferred tax assets	3		214
Total non-current assets	11,820		13,389
Current assets
Other financial assets	-		47
Receivables	7,184		8,162
Cash at bank and in hand	32,566		31,326
Total current assets	39,750		39,535
Total assets	51,570		52,924
Non-current liabilities
Deferred tax liabilities	162		-
Current liabilities
Trade and other payables	9,809		12,555
Current tax liabilities	1,981		2,509
Total current liabilities	11,790		15,064
Total Liabilities	11,952		15,064
Net assets	39,618		37,860
Capital and Reserves
Called up share capital	1,827		1,786
Share premium account	15,097		15,097
Investments in own shares	(871)		(558)
Other reserves	820		523
Retained earnings	22,745		21,012
Total Shareholders' funds - equity interests	39,618		37,860

Consolidated Cash Flow Statement
for the year ended 31 March 2009
	Unaudited
	Year to  31 March 2009		Year to 31March 2008
	£'000		£'000
Cash generated from operating activities
Cash generated from operations	9,482		15,502
Tax paid	(4,179)		(3,433)
Net cash inflow generated from operating activities	5,303		12,069
Financing activities
Equity dividends paid	(5,630)		(4,616)
Issue of share capital	-		50
Issue of preference shares by subsidiary undertaking	-		2
Payments in relation to investment in own shares	(463)		-
Receipts in relation to disposal of own shares	150		-
Net cash (outflow) from financing activities	(5,943)		(4,564)
Investing activities
Interest received and similar income	888		1,681
Purchase of property, plant and equipment	(29)		(115)
Proceeds from sale of available-for-sale financial assets	3,177		11,828
Purchase of available-for-sale financial assets	(2,156)		(20,976)
Net cash outflow used in investing activities	1,880		(7,582)
Net increase \ (decrease) in cash and cash equivalents	1,240		(77)
Cash and cash equivalents at start of period	31,326		31,403
Cash and cash equivalents at end of period	32,566		31,326

NOTES

Principal accounting policies

Polar Capital Holdings plc is a public limited company registered in England and Wales. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

Basis of preparation

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union and the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets.

The Company financial statements have been prepared in accordance with UK GAAP and under the historical cost convention.

At the date of authorisation of these financial statements, IASI (Revised 2007)' Presentation of financial statements, IFRS 8 'Operating Segments' and certain elements of IFRS 2 'Group & Treasury Share Transactions' were in issue but not yet effective. The Group has not adopted these standards and does not anticipate they will have any material impact on these financial statements when they come into effect.

Basis of consolidation

The consolidated financial statements incorporated the financial statements of the Company and entities controlled by the Company (its subsidiary undertakings). Where necessary adjustments are made to the financial statements of the subsidiaries to bring their accounting policies in line with the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Fixed assets

Fixed assets are stated at cost, less depreciation and accumulated impairment provisions. Depreciation is provided at rates calculated to write off the cost of each asset over its expected useful economic life. The carrying value of property, plant and equipment is assessed annually and any impairment is charged to the income statement.

Depreciation is charged on a straight line basis as follows:

Leasehold improvements 25%

Computer equipment 33%

Office furniture 33%

Financial assets and liabilities

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

Financial assets are initially recognised at fair value, being the consideration given, together with any acquisition costs associated with the asset. The Group's investments in the funds that it manages are designated as 'available-for-sale' financial assets and are included in non-current assets. Such assets are subsequently carried at fair value, with any gains or losses arising from changes in fair value being recognised in equity. Available-for-sale financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. When derecognition occurs, a realised gain or loss is recognised in the income statement, calculated as the difference between the net sales proceeds and the original cost of the financial asset. Any fair value gains or losses previously recognised directly in equity are recycled into the income statement as part of this calculation of the gain or loss arising on derecognition.

The Group assesses at each reporting date whether there is objective evidence that an investment is impaired. In the case of a financial asset classified as available-for-sale, a significant or prolonged decline in the fair value of the financial asset below its cost is considered as objective evidence that the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in the income statement - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement, if subsequently reversed, are taken through equity and not the income statement.

Derivative financial instruments

Forward currency contracts are used to hedge the risks associated with foreign currency fluctuations. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

Forward contracts used for currency hedging purposes are treated as cash flow hedges and the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is taken to the income statement. Amounts taken to equity are transferred to the income statement when the hedged items affect profit or loss.

Gains or losses realised on hedging contracts are recognised against revenue in the income statement.

Trade receivables

Trade receivables are initially recognised at fair value, and are subsequently carried at the lower of original fair value and their recoverable amount.

Pensions

The Group operates a defined contribution money purchase pension scheme covering the majority of its employees. The costs of the pension scheme are charged to the profit and loss account in the period in which they are incurred.

Cash and cash equivalents

Cash and cash equivalents comprise cash at banks and in hand, deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

Trade payables

Trade payables are initially recognised at fair value and subsequently at amortised cost.

Income recognition

Revenue

Revenue represents fees receivable (excluding value added tax) during the period for discretionary investment management and advisory services. Management fees and performance fees are recognised when receivable. Performance fees, which are based on the investment performance achieved for certain client portfolios relative to predefined benchmarks, are recognised as revenue at the end of the period over which the performance is measured.

Interest receivable and similar income

Interest receivable is recognised on an accruals basis using effective interest methods. Dividend income from investments is recognised on the date that the right to receive payment has been established.

Cost of sales

Cost of sales includes fees and commissions payable to third parties in respect of the management of investment management contracts. Commissions and distribution fees payable to third parties are recognised over the period for which the service is provided.

Operating leases

Amounts payable under operating leases are charged to the income statement on a straight-line basis over the lease term.

Taxation

The income tax expense represents the sum of the tax currently payable and deferred tax. 

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Income tax relating to items charged or credited directly to equity is also dealt with through equity.

Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available, against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Share-based payments

Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based instrument is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Segmental reporting and functional currency

The Directors are of the opinion that the Group is engaged in a single, unified, business of managing investments. No segmental reporting is therefore provided. The functional currency of each company in the Group is pounds sterling.

Judgements and key sources of estimation uncertainty

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are as follows:

Impairment of available for sale financial assets

The Group reviews any diminution in value to available for sale financial assets, and determines if this is an impairment of the asset

Deferred tax

Deferred tax is recognised based on differences between the carrying value of assets and liabilities and the tax value of assets and liabilities. Deferred tax assets are only recognised to the extent that the Group estimates that taxable profits will be available.

Share-based payments

The estimation of share-based payment cost requires the selection of an appropriate valuation model, consideration on appropriate input criteria for the model and an estimation as to the number of awards that will vest.

Foreign currency/monetary balances

The individual financial statements of each subsidiary are presented in the functional currency of the Group. Balances are therefore reported in Sterling, which is the functional currency of all Group companies, and has been used as the presentation currency for the consolidated financial statements.

Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated into sterling at the rate ruling at the balance sheet date. Foreign exchange differences are recognised in the consolidated income statement.

Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on the profit for the year of £8,371,134 (2008: £9,634,665) and on 69,411,145 (2008: 66,139,295) ordinary shares, being the weighted number of ordinary shares.

The calculation of diluted earnings per ordinary share is based on the profit of the year of £8,371,134 (2008: £9,634,665) and 73,996,814 (2008:74,101,201) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 4,479,608 (2008:4,301,105) which are dilutive and shares issued on the last day of the year and not yet issued under a crystallised event of 3,259,178 (2008:3,365,190).

The calculation of adjusted earnings per ordinary share is based on profit for the year of £8,371,134 but adjusted for the credit of share-based payments of £1,008,583 (2008: profit of £9,634,665 adjusted for the cost of share-based payments of £1,204,271) and 73,996,814 (2008: 74,101,201) ordinary shares being the weighted average number of ordinary shares allowing for all dilutive options and shares not yet issued under a crystallisation event.

As at 31 March 2009, the fully diluted number of ordinary shares which would be in issue is 77,249,931 shares, if all outstanding options were exercised and all shares that are due as the result of a crystallisation event were issued.

Geographical analysis (based on the residency of the source) 

The Group's assets under management are managed as seven business units but the Group only has one class of business, being the provision of investment management and advisory services. The Group's operations are in London, with small offices in Tokyo and Kiev, and it therefore has only one geographic location.

The analysis of turnover is as follows:

Geographical analysis (based on the residency of the source)
			Unaudited Year ended 31 March 2009 £’000	Year ended  31 March 2008 £’000
UK Ireland Cayman USA Canada  Other  (Loss)/profit on hedging			3,008 3,339 44,859 1,074 211 393  (1,828)	3,617 5,042 38,193 - 318 399 120
			51,056	47,689
The analysis of turnover is as follows:
Investment management fees Investment advisory fees  Investment performance fees (Loss)/profit on hedging			22,350 216 30,318  (1,828)	26,122 354 21,093 120
			51,056	47,689

Dividend

A second interim dividend of 3.5p per share has been declared will be paid on 7 August 2009 to shareholders on the register on 17 July 2009. The shares will be quoted ex-dividend on 15 July 2009.

Status of preliminary announcement

The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 March 2009 or 2008. It is prepared on the same basis as the Company's statutory accounts for the year ended 31 March 2008. The statutory accounts for the year ended 31 March 2009 have not been delivered to the Registrar of Companies, nor have the auditors yet reported on them. The statutory accounts for the year ended 31 March 2009 will be finalised on the basis of the information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies. 

The statutory accounts for the year ended 31 March 2008 have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985.

Copies of Report and Accounts

The full annual report and accounts will be posted to shareholders in July 2009 and copies will be available thereafter from the Company Secretary at the Company's Registered Office, 4 Matthew Parker Street, London SW1H 9NP (020 7227 2700) or from the company's website at www.polarcapital.co.uk

Annual General Meeting 

The Annual General Meeting will be held at 12.30pm on 10 September 2009 at Cayzer House, 30 Buckingham Gate, London SW1E 6NN

Forward looking statements

This preliminary announcement contains certain forward looking statements with respect to the financial condition, results of operations and businesses and plans for Polar Capital Holdings plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that have not yet occurred. There are a number of different factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements. Nothing in this statement should be construed as a profit forecast.

The release, publication, transmission or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published, transmitted or distributed should inform themselves about and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction. 

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