Final Results

RNS Number : 9632P

Polar Capital Global Financials Tst

23 February 2021

 

POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC

Legal Entity Identifier: 549300G5SWN8EP2P4U41

AUDITED ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED

30 NOVEMBER 2020

PERFORMANCE HIGHLIGHTS FOR THE YEAR ENDED 30 NOVEMBER 2020

Performance (Sterling total return)		For the year ended 30 November 2020 %	Since Inception %
Net asset value (NAV) per ordinary share (1)*		-6.5	73.4
Ordinary share price (2)*		-1.6	69.3
Ordinary share price including subscription share value (3)*		-	73.0
Benchmark MSCI World Financials + Real Estate / MSCI ACWI Financials (in Sterling) (4)		-6.4	73.3
Other Indices and peer group (in Sterling)
MSCI World Index		10.9	134.4
FTSE All Share Index		-10.3	38.6
Lipper Financial Sector (5)		-2.9	56.4
Performance since Restructuring on 22 April 2020 (Sterling total return)		Since Restructuring %
Net asset value per ordinary share (6)*			33.3
Benchmark (4)			23.3
Financials	As at 30 November 2020	As at 30 November 2019	% Change
Total net assets	£165,743,000	£301,170,000	-45.0
Net asset value per ordinary share	134.7p	148.5p	-9.3
Ordinary share price	136.5p	143.8p	-5.1
Premium/(discount) per ordinary share*	1.3%	-3.2%
Net gearing*	12.7%	4.4%
Ordinary shares in issue (excluding those held in treasury	123,050,100	202,775,000	-39.3
Ordinary shares held in treasury	79,724,900	-	-
Total dividend per ordinary share	4.40p	4.40p	-
Earnings per Ordinary share	For the year ended 30 November 2020	For the year ended 30 November 2019
Revenue Return	3.01p	4.89p
Capital Return	(33.01p)	9.36p
Total	(30.00p)	14.25p
Expenses
Ongoing Charges (7)*	1.09%	1.04%
Ongoing charges including performance fee (7)*	1.74%	1.04%

Dividends

The Company has paid or declared the following dividends relating to the financial year ended 30 November 2020 :

Pay date	Amount per ordinary share	Record date	Ex-date	Declared Date
First interim: 28 August 2020	2.40p	7 August 2020	6 August 2020	30 June 2020
Second interim: 26 February 2021	2.00p	29 January 2021	28 January 2021	20 January 2021
Total (2019: 4.40p)	4.40p

Note 1 

The total return NAV performance for the period is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Performance since inception has been calculated using the initial NAV of 98p and the NAV on 30 November 2020. Dividends are deemed to be reinvested on the ex-dividend date as this is the protocol used by the Company's benchmark and other indices.

Note 2 

The total return share price performance is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date. Performance since inception has been calculated using the launch price of 100p to the closing price on 30 November 2020.

Note 3 

The total return share price performance since inception includes the value of the subscription shares issued free of payment at launch on the basis of one for every five Ordinary shares and assumes such were held throughout the period from launch to the final conversion date of 31 July 2017. Performance is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date and uses the launch price of 100p per Ordinary share and the closing price per Ordinary share on 30 November 2020.

Note 4 

The benchmark changed on 23 April 2020 to MSCI ACWI Financials Net Total Return Index (in Sterling) due to the Company's exposure to emerging market financials equities and its limited exposure to real estate equities. Prior to this the Company's benchmark was MSCI World Financials + Real Estate Net Total Return Index. Preceding 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. The benchmark performance above illustrates linked performance of these benchmarks.

Note 5 

Dynamic average of open ended funds in the Lipper Financial Sector Universe which comprised 51 open ended funds in the year under review.

Note 6 

The total return NAV performance for the year 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 of the Company on 22 April 2020. The opening NAV for the performance fee of 102.8p is the closing NAV the night before the tender offer was completed.

Note 7

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. From 3 January 2018, the date of implementation of the MiFID II regulation, the research cost borne by the Company is included in the ongoing charges calculation.

*See Alternative Performance Measure provided in the Annual Report.

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

Status of Announcement 

The figures and financial information contained in this announcement are extracted from the Audited Annual Report for the year ended 30 November 2020 and do not constitute statutory accounts for the year. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.

The Annual Report and Financial Statements for the year ended 30 November 2020 have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 30 November 2019 are extracted from the published Annual Report and Financial Statements for the year ended 30 November 2019 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements for the year ended 30 November 2019 have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.

The Directors' Remuneration Report and certain other helpful shareholder information has not been included in this announcement but forms part of the Annual Report which will shortly be available on the Company's website and will be sent to shareholders in March 2021.

National Storage Mechanism 

A copy of the Annual Report has been submitted to the National Storage Mechanism ('NSM') and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Neither the contents of the Company's website nor the contents of any website accessible from the hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

 

CHAIRMAN'S STATEMENT

"It would be difficult to exaggerate when I describe the period on which I report as extraordinary."

Dear Shareholders

In the space of a year we have witnessed a lethal viral pandemic take a grip on lives and livelihoods globally; an economic depression on a scale not seen in our lifetimes; unimaginable levels of monetary and fiscal life support from policy makers around the world; the appearance of negative interest rates challenging traditional financial and investment models; a seemingly endless US election drama that has raised the spectre of civil disobedience in a world superpower; and a whole new way of living, working and communicating.

At the time of writing last year's Chairman's Statement these were barely imaginable possibilities. It was in the eye of the subsequent tempest that shareholders were asked to support a restructuring of the Company as its seven-year fixed term life came to an end. Shareholders unanimously approved the Board's proposal to replace the seven-year fixed life of the Company with a rolling five year full tender offer despite the very adverse background for Financials through the spring and summer which significantly impaired sentiment towards the sector. This resulted in a 39.1% take up of the tender offer at the time of the Company's reconstruction and the need for the Company to subsequently support the market in its shares on a number of occasions through share buy backs.

Despite these most severe headwinds, I am pleased to report that the Company has been able to maintain its dividend, partly through the use of revenue reserves. In a very encouraging sign for the future, the end of the financial year witnessed a positive swing in sentiment towards the financials sector. This not only brought about a sharp rise in the Company's NAV, but also a strong rally in the Company's share price to the point that it began to trade at a premium to the underlying NAV. On a positive endnote to an otherwise challenging year under review, demand for the Company's stock at the end of November was such that the Board authorised the reissue of shares from treasury at a premium to NAV. Further reissues have continued into the first three months of the new financial year.

Restructuring of the Company

For the Company the most significant development during the financial year was its reconstruction. With the end of the seven-year fixed life term approaching in May 2020 and following discussions with a number of large shareholders, the Board drew up proposals for a 100% tender offer and the replacement of the fixed end-of-life with five-yearly tender offers that would give shareholders the periodic opportunity to tender their shares at close to net asset value.

Despite the fact that these proposals were put to shareholders at a time of maximum negative sentiment that over shadowed the financials sector following the COVID-19 outbreak, the proposals were passed by 100% of the votes cast at a General Meeting in April 2020. In addition shareholders representing 60.9% of the issued share capital chose to remain invested. The tender closed on 22 April 2020 at a tender share price of 102.02p with 79,159,235 shares, representing 39.1% of the issued share capital, bought and placed into treasury by the Company.

Performance

The investment environment in 2020 presented unique and profound challenges. Not only did investors have to evaluate a black swan event in the form of a global pandemic, they also had to react to radical and fundamental changes in the conduct of public policy and in the very way of life. The hospitality and travel sectors were at times shut down; working from home replaced the daily commute; virtual conferencing replaced handshakes and face-to-face meetings; digital transactions replaced cash, and crypto began to look like a credible alternative to traditional currencies.

Against this background, the overall direction of market indices was no longer a good guide to understanding investment performance. Global equity markets exhibited a schizophrenic response to the impact of COVID-19. What primarily drove absolute returns was whether you held 'COVID winners' or 'COVID losers'.

Much of the financials sector appeared to be placed in the latter category. Sentiment, in particular towards banks - already fragile before the pandemic - quickly sunk to depressed levels. It was feared that the appearance of negative interest rates and the expected impact on the ability to repay loans would tax the earnings and capital buffers of the banks; other sectors, such as asset managers and insurers, would have to deal with the expected impact of a global recession on asset values and claims for losses.

At the time of the restructuring, the Company's performance benchmark was changed from the MSCI World Financials + Real Estate Net Total Return Index to the MSCI ACWI Financials Net Total Return Index. This change was made in order to adopt a benchmark that represented more closely the Company's investment strategy which included exposure to emerging markets, and reflected the fact that real estate presented a tactical not strategic opportunity for the Company. For this reason the performance of the portfolio is measured against a "chain linked" benchmark for the year under review, reflecting both the former and the new

benchmark on a time-weighted basis.

Over the financial year, while the MSCI World Index rose by 10.9% in sterling terms, the Company's chain linked benchmark fell by 6.4%, mirroring the decline in the portfolio's total return NAV. As the Manager's report highlights, this headline number understates the wild swings in sentiment the sector experienced over the year. The Company's former benchmark fell by over 30% from the

start of the financial year to late March, before recovering more than 35% to the end of the financial year, most of which came in the year's last few weeks.

These were indeed treacherous waters to navigate as an investment manager, with potential traps and pitfalls that tested the skills and temperament of the very best. Unsurprisingly, as the black swan event unfolded - by definition difficult to predict and difficult to analyse as they follow no known template - the portfolio underperformed during the initial heavy market sell-off. However, the Manager responded very well, positioning the portfolio to benefit from a recovery in sentiment and to exploit depressed valuations. This has included increasing exposure to Asia, which has been resilient to the pandemic and its economic consequences, and by using the Manager's discretion to leverage the portfolio.

Over the life of the Company the Manager has shown a consistent ability to add value through stock selection and this again contributed positively to this year's performance. Payments companies, stock exchanges and asset managers were some of the portfolio's strongest performers, while holdings of banks and non-life insurers were hit by pandemic concerns over their business models but enjoyed a late rally as the recovery in market sentiment took hold. The Board wishes to thank the Manager for their excellent management of the portfolio through the tender offer, acting in the interests of both departing and remaining shareholders in what was a highly volatile period.

Since the restructuring of the Company, the portfolio's total return had outperformed that of the new benchmark by 10% by the end of the financial year. As a result, and as approved at the General Meeting in April 2020 as part of the reconstruction proposals, the Manager had accrued a performance fee of £1,269,000 by the financial year end. The approved performance fee is calculated at 10% of the excess return over the performance fee hurdle of 1.5% per annum compounded annually. However, performance fees continue to be calculated daily based on cumulative relative performance and are not paid until the next tender offer. Further detail is provided in the Strategic Report.

The sharp improvement in sentiment towards the financial sector late in the year contributed to a strong recovery in the Company's ordinary share price. The Company's persistent share price discount to NAV disappeared by the end of the year, with the Company's shares moving to a small premium to NAV which has continued into the early part of the new financial year. As a result, for the year as a whole the ordinary share price total return fell by only 1.6% compared to a fall of 6.5% in NAV on a total return basis. The actions taken by the Company in response to the changing fortunes of its share price discount to NAV are discussed below.

Finally, as I announced at the very end of the financial year, the Board is pleased to welcome George Barrow as joint fund manager on the Company's portfolio, joining Nick Brind and John Yakas who have worked on the portfolio since the Company's inception. George has been with the Polar Capital Financials team since 2010 and the Board looks forward to George's dedicated focus as joint fund manager on the Trust.

Dividends

Since the launch of the Company seven years ago the Company has been able to grow or maintain dividend pay-outs each year. At the same time the Company has built up income reserves in order to meet its objective of growing dividends even through difficult times. 2020 has certainly been one of those difficult times. The portfolio's ability to generate income from its investments has been impaired by the economic downturn and restrictions placed by regulators on the payment of dividends by certain financial institutions in Europe and the US in particular.

In the financial year under review the income generated by the portfolio fell by 48% from the preceding year following the decision by the regulators to make banks and some investee companies reduce or cancel dividends due to COVID-19. In addition, as part of the response to the dislocation caused by the COVID pandemic, the Manager repositioned the portfolio towards lower yielding stocks.

One of the advantages of the Company's Investment Trust structure is that it is able to smooth out the payment of dividends relative to the underlying portfolios earnings experiences. In July the Board announced a first dividend for the financial year of 2.4p paid on 28 August 2020. The Board has approved a further dividend payment for the financial year of 2.00p to be paid on 26 February 2021 to shareholders on the register as of 29 January 2021. This brings the total dividend for the year to 4.4p, the same level as that paid in the previous financial year, honouring the Board's commitment, made in an announcement on 4 May 2020, to maintain the Company's dividend in the 2020 financial year.

The Company has an income and growth mandate and the Board is aware of the importance of income to some shareholders as part of their total return. The Board will be careful to balance its objective of growing dividends for shareholders with sustainable earnings prospects and the availability of distributable reserves to support dividend payments. At the time of writing the financial and economic outlook remains highly uncertain. The Board, together with the Manager, will continue to assess the likely income

capability of the portfolio in a post COVID environment to determine the appropriate longer-term distribution level.

Share Capital Changes Following the Reconstruction

At the beginning of the financial year the number of ordinary shares in issue was 202,775,000. Following the closure of the tender offer in April 2020, 79,159,235 shares were bought back from shareholders and placed into treasury.

In accordance with the Board's commitment made at the time of the restructuring in April 2020 to provide support to the trading of the Company's shares if and when required, the Board stepped into the market on several occasions during the spring and summer to buy back shares. In total 670,000 shares were bought and placed into treasury between 16 March 2020 and 3 November 2020, at an average discount to the live NAV at the time of transaction of 11.6%. This was a period of poor sentiment towards the financials sector which caused the Company's share price to trade at a persistent discount to NAV, reaching 12.6% at its widest in late August.

The announcement in November of successful vaccine trials against COVID-19 triggered a sharp and dramatic positive change in sentiment towards 'COVID losers'. The financial sector was one of the principal beneficiaries of this change in mood. With many investors underweight in respect of financial stocks, investor interest in the Company's shares at first narrowed the discount sharply and eventually, towards the close of the financial year, a small share price premium to NAV appeared.

I stated at the time of the appointment of Stifel as our corporate broker in April, that together our focus would be on rebuilding the size of the Company and widening the breadth of the investor base by the re-issue of shares held in our treasury account as and when opportunities arise. To do so the Company's shares must be trading at a premium to NAV, such that NAV per share is enhanced.

The first such opportunity came on the very last day of the financial year when, in order to satisfy demand, the Company issued 104,335 ordinary shares from treasury at a premium of 1.3% to NAV. The impact of share buy backs and share issuance throughout the year meant that the Company closed its financial year with 123,050,100 ordinary shares in issue. All of the share buybacks and issuances have been NAV accretive for ordinary shareholders.

Given the recent strong interest in the financials sector and with most institutional and retail investors remaining significantly underweight, the Board was aware that investor appetite for its shares could exceed its remaining authority to allot new shares or reissue shares from treasury on a non-pre-emptive basis. The Board announced on 18 December 2020 it was considering asking shareholders for further issuance authority in view of its objective stated at the time of the restructuring to grow the Company when opportunities arose. Subsequent to this, a shareholder circular was published on 14 January 2021, and a General Meeting was held on 1 February. At the General Meeting, shareholders approved the resolution and the Company was given authority to re-issue all shares held in the treasury account, being 68,100,000 at the date of the meeting, into the market without applying pre-emption rights. Such authority will expire at the conclusion of the AGM to be held in 2022. Any such issues will be at a premium to NAV after costs.

In the weeks since the close of the financial year a total of 14,074,900 shares have been issued from treasury at a premium to NAV in order to satisfy demand for the Company's stock. Following these issuances 65,650,000 ordinary shares remain in treasury as at 22 February 2021.

Costs

The fixed implementation costs associated with the corporate action were absorbed by both the exiting and continuing shareholders with exit-only expenses being borne by the former. As a result of the corporate action the overall size of the Company is smaller. However, certain ongoing fixed expenses of the Company remain unchanged.

These expenses have been partly offset by the Manager agreeing to a reduction in their base fee from 0.85% per annum of the lower of the Company's market capitalisation and NAV to 0.70% per annum of Company's NAV. The Board has also worked with the Manager to ensure that any discretionary spending represents value for money for shareholders and the Board seeks to minimise ongoing expenses wherever possible.

Despite the management of expenses, the smaller size of the Company following the tender has led to a small rise in the ongoing charges ratio (OCR) from 1.04% in the 2018-19 financial year to 1.09% in 2019-20. This is the same level of costs incurred in the Company's first full financial year, 2013-14. It should be noted that the 2013-14 OCR did not include research costs charged through transaction commissions. These research costs are now charged separately and are fully reflected in the 2019-20 OCR and the charges to the capital account reduced accordingly through lower commission rates on transactions.

Given strong investment performance subsequent to the restructuring in April 2020 the Manager had accrued a performance fee by the financial year end which was reflected in the Net Asset Value. As a result the OCR including the accrued performance fee for the 2019-20 financial year was 1.74%. Any performance fee accrual can be reduced by any subsequent underperformance of the benchmark plus hurdle rate.

Environmental, Social and Governance (ESG)

The Board recognises that sustainability and good governance are now not only priorities for successful societies going forward, but are also drivers of successful investing. The Board has been working with the Manager to ensure that it incorporates ESG considerations in the way the Company behaves and operates. The Manager incorporates ESG factors into its investment process which is described in greater detail in the Manager's Report.

Board succession

The Board continues to believe that retaining Directors with sufficient experience of the Company, industry and financial markets is of benefit to shareholders while recognising that regular refreshment is equally of benefit and importance. Following shareholder approval to extend the Company's life indefinitely (subject to regular tender offers), the Board adopted a succession plan to refresh the Board. A managed programme of recruitment, appointment and retirement, including my role as Chairman, will be carried out from Spring 2021 with the expectation that such process will conclude by early 2023. Phase one of the refresh will begin with the appointment of a new Audit Committee Chair to replace Joanne Elliot as she comes to the end of her nine-year tenure on the Board. It is anticipated that the Audit Chair elect will be in place by November 2021, ahead of the Company's next audit to allow for an orderly and efficient handover process with the current Audit Chair.

Outlook

As the global pandemic unfolded, markets at times feared the worst. For much of 2020 this was reflected in poor sentiment towards the financials sector, and in particular in the absolute and relative valuations of banks which reached levels last seen following the 2008 financial crisis.

The actual impact on the sector appears to be significantly less than these initial dire expectations. In addition certain sub-sectors and regions have benefitted from structural factors, for example the impact of the accelerated move to the digital economy on Fintech and payments services; or the economic resilience to, and recovery from the pandemic demonstrated by Asian economies.

The extraordinary global support response from monetary and fiscal policy makers to the pandemic has undoubtedly helped mitigate the impact on economies in general. Questions remain over the true underlying economic and financial damage that will be revealed once policy support is scaled back. However, for the key banking sector this support has also distracted attention from the significant and sustained underlying improvements made in balance sheet resilience and business models since the 2008 financial crisis.

The tightening of regulation on banks following the 2008 financial crisis has been a long term one-way trend that has helped strengthen balance sheets if not bottom lines. Capital resources and the quality of assets in banking systems in general are now in far better shape to withstand the impact of adverse scenarios than for many decades. 2020 presented a far worse adverse scenario than run in any stress tests and recovery plans. At first the market anticipated the worst in terms of the impact on loan losses, profitability and the adequacy of provisions.

However, pragmatic regulators have cushioned the impact by relaxing capital requirements and supporting profitability through, for example, Targeted Longer-term Refinancing Operations ("TLTROs"). In addition, the performance of loans themselves has been helped by targeted stimulus measures from policy makers. Restricted from paying dividends in many cases, banks have taken the opportunity to boost very significantly protection from loan losses by diverting profits to loan loss provisions. More recently regulators themselves have been sufficiently impressed by the resilience of their banking communities to the downturn and to further stress testing of balance sheets, to begin removing restrictions on dividend payments and share buybacks.

The near-term outlook for the financials sector is in large part a banking story. The release of excess capital trapped by regulators; long term improvements in asset quality temporarily hidden by loan deferrals and other government lending support programmes; very conservative loan loss provisioning that will turn into profits and dividends in better times; and the shift in business models from risk-based activities to more fee based and transaction services are yet to be recognised in valuations. The structural factors which support other financial sub-sectors are likely to persist on a return to normality, providing further opportunities for the Company's investment team to add value.

The scale of the policy response to the pandemic has been and continues to be extraordinary. The rule books on governmental fiscal discipline and monetary responsibility have been torn up, buoying equity prices and 'COVID winners' as well as all fixed income markets. Commentators and analysts speculate about the long term consequences but the way the financials sector responded to the announcement in November of the first successful vaccine trials clearly indicates that a return to some kind of normality will benefit sentiment towards an undervalued and largely ignored sector in general, and banks in particular.

As shareholders will be aware the government restrictions in relation to COVID-19 continue and, at the time of writing, we are unsure of how the situation will change over the coming months. For this reason we are again considering the safety of our shareholders as the primary concern and will be holding a closed-door AGM. The AGM will be held at 11am on Tuesday, 30 March 2021. Shareholders will not be permitted entry to the meeting. However, should the restrictions be lifted and we are able to hold an open-door meeting we will release a regulatory announcement and add details to the website.

We are conscious of the importance of shareholder engagement and would like to encourage shareholders to engage with the Board and the Investment Manager. As such, the Board invites shareholders to submit questions in writing to which we will respond, as far as possible, ahead of the AGM date. Please send your questions to cosec@ polarcapital.co.uk with the subject heading PCFT AGM. Ahead of the AGM we will also be uploading a short video from myself addressing the circumstances that have faced the Company over the year, how we managed the Company through the reconstruction and a note on performance and status up to the present day; the video will also encompass a presentation from the Investment Manager on the year under review and the outlook for the future. We will release an RNS announcement once the video is available.

Finally, on a personal note, I would l like to thank my fellow Directors and the many at Polar Capital who support the Company for their unwavering energy, commitment and dedication in rising to a set of challenges that none of us could have imagined or planned for. And to our shareholders I would like to extend the Board's appreciation for their support during a period in which the Company was tried and tested to the extreme, and extend our hopes that you may enjoy a healthy and rewarding year ahead. 

Robert Kyprianou

Chairman

22 February 2021

 

INVESTMENT MANAGER'S REPORT

Performance

The period covered by this report was an extraordinary one for financial markets and the sector, reflecting the onset of COVID-19 and the response by governments and central banks to counteract its effects. Furthermore, the Company undertook a meaningful corporate action during the height of stock market turmoil. Against this background the Company's net asset value total return for the period was a loss of 6.5%, against a loss of 6.4% for the chain-linked benchmark. For comparison, our new benchmark index, the MSCI ACWI Financials Index fell by 8.2% while our old benchmark index, the MSCI World Financials Index + Real Estate Index fell by 8.0% over the financial year.

Following the reconstruction in April 2020, the benchmark index was changed to the MSCI ACWI Financials Index, to more closely reflect the strategy since IPO in 2013 of investing in emerging market financials, (which were not included in the old benchmark index), and the very limited exposure to real-estate securities, (which comprised 20% of the old benchmark index). The chain linked benchmark outperformed both the new and old benchmark indices and although the out turns for the year for both indices are very similar the underlying performance does not align over the period. The old benchmark index performed better in the run up to the corporate action, reflecting its lower weighting in banks. From the date of change, the new benchmark performed more strongly up to the end of November 2020, due to its higher weighting in banks. The investment review which follows explains how we positioned the portfolio to produce the outperformance in the latter period.

Performance of the Company vs benchmark indices over the year and since inception

	22 April 2020 to 30 November 2020*	30 November 2019 to 22 April 2020**	1 year	Since inception
NAV Total Return	33.3%	-29.8%	-6.5%	73.4%
Chain-linked benchmark TR	23.3%	-24.1%	-6.4%	73.3%
MSCI ACWI Financials Index TR	23.3%	-25.6%	-8.2%	64.8%
MSCI World Financials + Real Estate Index TR	21.2%	-24.1%	-8.0%	70.3%

* Restructuring to year end

** Prior year end to corporate action

Figures are sterling total return calculated with dividends reinvested on ex-dividend dates. MSCI ACWI Financials Index is adjusted to exclude real estate securities prior to August 2016.

As illustrated by our new benchmark, Financials fell 32.3% from the end of November 2019 to their lowest level on 23 March 2020 before rallying 35.9% over the remainder of the financial year. The portfolio underperformed during the sell-off, but outperformed as equity markets and the sector recovered due in large part to the higher weighting in bank shares relative to our benchmark index but also the decision to reposition the portfolio. As in previous years, performance benefited from strong positive stock selection, partly offset by negative sector allocation. However, this year, regional allocation was a small positive contributor to performance as well.

Attribution analysis for year ended 30 November 2020

	Allocation effect	Stock Selection effect	Currency effect	Total attribution effect
Subsector	-1.00%	4.03%	-1.28%	1.75%
Geographical	0.21%	2.82%	-1.28%	1.75%

Analysis is compared to the chain-linked benchmark index.

Our bank holdings were the biggest drag on both the absolute and relative performance of the Company, with US and European banks being the hardest hit initially, as lockdowns were expected to have a significant impact on their earnings. The non-life insurance sector was also surprisingly weak despite its perceived defensive qualities. In particular, concerns around its exposure to business interruption and event cancellation insurance policies resulted in shares in the sector falling quite sharply.

Conversely stock exchanges, payment companies and some asset managers performed well as the former have been a beneficiary of the volatility in financial markets while lockdowns have benefited payments companies on the back of an acceleration of the growth in e-commerce. On a relative basis the biggest positive contributors to performance were all payments companies (Adyen, MasterCard and PayPal Holdings), while the biggest negative contributors to performance were American Tower Group (which was not held at year end), ING Groep and Arch Capital.

Investment Review

Markets

Despite the promising start to the financial year with equity markets rising in December 2019 on the back of optimism around trade talks between the US and China, financial markets fell in January 2020. The fall was initially due to rising tensions in the Middle East, following the assassination of Qasem Soleimani, the head of Iran's Revolutionary Guard. However, the assassination was quickly overshadowed by concern that the rapid spread of COVID-19 in China could have a significant impact on global growth.

While containment policies in China and elsewhere in Asia quickly appeared to be containing the virus, its spread to other countries led to a domino of lockdowns globally as governments tried to reduce the impact of COVID-19 on healthcare systems. As a result, financial markets suffered a brutal sell-off towards the end of February 2020 into the middle of March 2020, exacerbated by a sharp fall in the oil price following the breakdown of talks between Saudi Arabia and Russia which also knocked sentiment.

The response by central banks was very swift in cutting interest rates and injecting significant amounts of liquidity into financial markets. Governments also acted with surprising speed and announced various stimulus programmes of unprecedented sizes including providing guaranteed loans to companies, payments to cover employees on furlough, direct payments to unemployed

workers etc. all to dampen the impact of lockdowns on businesses and individuals.

Against this background equity markets bounced sharply, led initially by the US and technology shares, which hit all-time highs. Credit markets recovered even more swiftly, benefiting from the Federal Reserve announcement that it would buy Exchange Traded Funds ("ETFs") that invested in corporate bonds, with investment grade bonds recovering all their losses by the end of May. High yield bonds also saw a strong recovery and ended the financial year almost unchanged overall.

While US equity markets led the recovery, the performance of Asia ex Japan markets were stronger over the financial year reflecting their better handling of the crisis and therefore stronger recovery. Conversely European and Japanese equity markets lagged the rally, albeit driven more by their lower weightings in those sectors, such as technology, that have been the biggest beneficiaries of the crisis.

In November, equity markets posted further significant gains on the back of the positive news on the efficacy of Pfizer's coronavirus vaccine, in collaboration with BioNTech, as well as those being developed by others. Furthermore, the result of the US election, with Joe Biden winning the White House, was seen as decisive enough to remove the risks of months of legal wrangling over the outcome and helped to underpin the rally in equity markets.

Sector

Despite the discount at which the sector was trading relative to underlying equity markets at the beginning of the year, the onset of COVID-19 led to material underperformance. Banks initially suffered very large falls in share prices as the combination of falling interest rates, which for most banks reduces net interest margins, rising provisions for loan losses brought on by lockdowns and behavioural changes around spending, had a significant impact on profitability.

Globally banks raised loan loss reserves against future losses significantly, particularly in the US and Asia, but to a smaller extent in Europe, in part driven by a change in accounting rules that means banks have to recognise potential losses earlier in a downturn than they would have previously. These estimates assumed significant falls in GDP and real estate prices as well as a sharp rise in unemployment.

There was a strong pick up in loan growth at the start of the crisis as corporate customers drew down on facilities, which offset some of the headwind of falling net interest margins, although the vast majority was quickly repaid over the ensuing months as companies were able to tap capital markets. Larger banks benefited from strong trading and investment banking revenues, resulting from the volatility in financial markets, which was a significant offset to weaker retail and commercial banking revenues.

Regulators in the UK and Europe were quick to react to the crisis, telling banks to suspend dividend payments and buybacks. Regulators elsewhere took a more pragmatic approach. In the US restrictions were limited to a ban on buybacks and a cap on dividends not to exceed earnings over the previous four quarters while in other markets regulators put some limited restrictions on the level of dividends banks could pay.

Conversely, regulators also lowered capital requirements, reducing counter-cyclical buffers to zero while also reducing other buffers, giving banks more flexibility to take loan losses but still support borrowers. They also told banks to not automatically treat borrowers who asked for loan payment holidays as likely to default as they would have had to do under the new accounting rules.

Insurance companies also suffered large falls in share prices. Life assurance companies, which are highly geared to credit markets and to a lesser extent equity markets, corrected sharply. Counterintuitively, non-life insurance companies, which historically have acted very defensively in market corrections as earnings are driven by claims which are largely accident or weather related, also suffered large share price falls, driven by concerns over their exposure to COVID-19 insured losses due in part to poor policy wording.

Consequently, a number of insurance companies raised capital to either repair their weaker balance sheets and/or to take advantage of the more positive pricing environment going forward. The one exception has been those insurers primarily focused on auto or home insurance which have benefited from lower frequency of claims brought on by the significant increase in people working from home and thus much reduced road traffic. Some of these savings were returned to policyholders as rebates but the lower claims have also resulted in a fall in car insurance rates.

The share prices of payment companies were very resilient over the financial year and hit all-time highs. While not immune to the downturn which has reduced revenues from the travel industry, their business models have remained resilient as they have little or no balance sheet risk. They have also been seen as beneficiaries of lockdowns, as it has accelerated the shift of consumers using cash to cards and led to faster growth of e-commerce.

Stock exchanges have also proved very resilient, benefiting from their reliance on data revenues but also higher trading volumes on the back of volatility in financial markets. A number similarly hit all-time highs during the year. The share prices of asset managers, not surprisingly, also fell sharply but rallied along with financial markets, with alternative asset managers and those traditional asset managers with large passive fund businesses continuing to outperform their peers focused primarily on actively managed fund mandates.

Investment Activity

Reflecting the volatility in financial markets there was significant investment activity over the 12 months. Following the fall in equity markets we reduced some of our European bank exposure and holdings in smaller US regional banks which we saw as more vulnerable to a deep recession. These included selling holdings in Banco Santander, BNP Paribas, Comerica, ING Groep, KeyCorp and Lloyds Bank while decreasing a number of others.

New holdings purchased include Adyen, American Express, Berkshire Hathaway, Hong Kong Exchanges & Clearing Limited, Hiscox, Prosperity Bancshares and Ping An Insurance, all businesses which we saw as more resilient to the fallout of the COVID-19 crisis. We also purchased bonds issued by Pension Insurance Corporation, ING Groep, Natwest and Jupiter Fund Management, the latter which were issued to facilitate its purchase of Merian Global Investors.

As a result of the corporate action, we raised the cash needed to meet the tender offer on the day it was effective with no impact on performance. The portfolio was reduced pro-rata with the sole exception of our holding in Atom Bank. Atom Bank is unquoted and therefore not readily realisable. The carrying value already reflected the illiquidity plus the sharp fall in valuations of its listed UK bank peers.

In the second half of the financial year we took advantage of the strength in share prices of payment companies to reduce holdings in Adyen, MasterCard and PayPal Holdings as well as some our non-life insurance holdings, for example Marsh & McLennan, Chubb and Progressive. Other holdings that were reduced included Toronto Dominion, SVB Financial and E. Sun Financial Holding which had all performed relatively well. A holding in Alternative Credit Investments was also sold.

Against these the opportunity was taken to increase our bank holdings which had lagged the recovery in equity markets including EastWest Bancorp, Signature Bank, Tisco Financial and Wells Fargo while starting new holdings in Chailease Holding, China Merchant Bank, Kasikorn Bank and Webster Financial. A new holding was also purchased in Riverstone Credit Opportunities which had fallen to a significant discount to its net asset value.

Over the year, exposure to emerging markets was increased significantly, in particular to India, adding to our holding in HDFC Bank while starting a new holding in HDFC Corp and Axis Bank among others. We also increased our exposure to China through the purchase of China Merchant Bank, mentioned above, but also Ping An Insurance Group. Gearing started the financial year at 4.4% and over the summer months this was increased to take advantage of depressed valuations, ending the year at 12.7%.

Dividends

The decision by UK and European regulators to make banks and some insurance companies under their jurisdiction suspend dividend payments at the onset of the crisis has reduced dividend payments in the short-term and as such the revenue generated from the portfolio. We have also reduced the Company's exposure to some of the higher-yielding stocks in the sector over the last year, which has had an impact on income, countered by positive capital performance.

There had been some expectation that regulators would push back the decision to reinstate dividends until March or April 2021 when there would be more visibility about the outlook for economic growth. However, in November 2020, the Bank of Thailand lifted restrictions on banks under its jurisdiction paying dividends and this was followed in December by regulators in Europe, the UK and the US similarly reducing restrictions on the banks under their jurisdiction returning capital to shareholders.

Regulators in the US have taken a more pragmatic approach and have allowed buybacks to restart in January 2021, albeit the combination of buybacks and dividends cannot exceed the last four quarters of net income. This will mean the potential for higher capital returns in the second half of 2021 as weaker first-half 2020 earnings drop out of the calculation. In the UK and Europe regulators have made it unnecessarily complicated by limiting capital return to the higher of 25% of earnings or 20bps of risk-weighted capital in the UK, while in the Eurozone to the lower of 15% of earnings or 20bps of risk-weighted capital.

Looking forward, assuming global growth picks up as expected over the course of 2021 and 2022 we would expect dividend growth to be in the order of high single-digit to low double-digit per cent annually. Nevertheless, on its own, this will be insufficient to cover the Company's current level of dividend without positioning the portfolio back towards holding more higher income stocks. We aim to maximise the portfolio's total return while balancing the need to provide a reasonable level of income, so this will be borne in mind.

Environmental, Social and Governance (ESG)

In the last couple of years ESG factors have become an important yardstick in measuring how an individual company approaches its responsibilities to its different stakeholders. The global financials sector was already a very highly regulated sector due to its importance for financial stability, payments, providing credit, savings products etc. and it has rightly become even more so over the past 10 or so years.

Historically our focus has been almost exclusively on governance and risk management. For example, failures to underwrite risk adequately rarely ends well and can indicate weak controls and/or poor incentives. Meeting management teams is an important part of the investment process in understanding how risk is managed. We like businesses that have competitive advantages, are good underwriters of risk and have higher profitability so that they are more resilient over an economic cycle and therefore more likely to outperform their peers.

Going forward we expect the focus on financial inclusion during a period of rapid technological change will become increasingly important especially where it potentially excludes certain demographics. Longer-term environmental factors will also become increasingly important given the societal benefits and governments' focus on the transition to a sustainable economy. The financial sector will be an important vehicle for facilitating these changes.

We source data from third-party providers such as MSCI on ESG scores and Institutional Shareholder Services ("ISS") for voting at general meetings. While we have used both to highlight any issues around individual portfolio holdings in the past, we now also blend the MSCI data we receive with our own internal risk assessment, which takes into account a forward-looking view, to produce an ESG score for an individual company which is integrated into our quantitative scoring system.

We expect the process to continue to evolve but we believe qualitative inputs will always remain important as well. For example, we see an opportunity in some smaller or mid-cap companies that are often scored poorly by ESG data providers due to poor disclosure or where ratings are backward looking. Over time as greater resources are put to meeting disclosure requirements or companies make the changes necessary to meet the higher bar expected of them their ratings will increase and that should support share prices.

Outlook

The significant underperformance of the financial sector over the past year has been exacerbated by the difficulty investors have found in quantifying the impact on it, given the size of the exogenous shock to economic activity and lack of historical comparisons. We consistently believed that the downturn brought on by COVID-19 would be an earnings event for the sector given its underlying profitability and capital buffers, not a capital one, and therefore the fall in valuations was not justified by the fundamentals.

We continue to hold sizeable investments in a number of payment companies and emerging market financials among others, which continue to exhibit good earnings growth, as they are benefiting from structural growth trends, which we expect to remain resilient even if there is further volatility in financial markets. While valuations for some of these companies are very high by historical standards, along with some of our fixed-income and other more defensive holdings they counterbalance the more cyclical parts of the Company's portfolio.

Nevertheless, the majority of the Company's assets are invested in banks and non-life insurance stocks. The valuation of non-life insurance stocks has fallen quite sharply over concerns that the sector will suffer a significant hit to earnings. However, banks have seen the sharpest falls in share prices, taking their valuations, earlier in the year, down to levels only previously seen during the global financial crisis when, unlike today, the solvency of the banking sector was in question.

While the sector rallied from the lows in March it was not until November 2020, on the back of the announcement of positive test results for a number of vaccines that markets saw a very sharp rotation back into financials, in particular bank stocks. Despite the rally, the underperformance of the sector versus underlying equity markets since the onset of COVID-19 remains material at close to 20% for the 2020 calendar year. However, if the distribution of vaccines allows governments to pivot and reduce restrictions more quickly, it is likely that growth will surprise in 2021 and 2022 and the sector will continue its recent outperformance.

Certainty about loan losses will be critical to the performance of bank stocks and therefore the sector. Evidence so far is that companies and individuals who have taken up payment holidays have by a significant majority returned to paying interest and principal as normal. The reality is that the size of loan losses will not be known until the second half of 2021 and by then the sector will have rallied further if economic growth is as strong as currently forecast. The recent pickup in M&A activity would suggest management teams are increasingly confident about the outlook and therefore balance sheet risks.

Governments and central banks continue to provide significant fiscal and monetary stimulus. Against this background banks have taken provisions for a deeper downturn, for higher unemployment and for a fall in house prices that is yet to be borne out. As a result, it is likely that some of the loan loss reserves they have taken will have to be written back which will boost earnings. Any pick-up in loan growth and fee income growth where expectations are muted will further boost earnings.

In that vein one of the biggest headwinds for the banking sector in recent years has been the decline in interest rates. Part of the reason for this is that central banks have had to do most of the heavy lifting in stimulating demand by keeping interest rates low as governments have run tight fiscal budgets. The steps that governments have taken this year, as a consequence of COVID-19 induced lockdowns, has led to broad money growth in the OECD hitting at a 30-year high and its highest in the US since the Second World War. The implications of this are unclear but may well lead to a less disinflationary/more inflationary environment looking forward which should materially benefit the sector.

The financial sector operationally has performed well during the crisis, and unexpectedly incumbents have for the most part been a bigger beneficiary of lockdowns than some of their smaller digital competitors. It has also facilitated government guaranteed lending to businesses through the likes of the Coronavirus Business Interruption Loan Scheme in the UK and Paycheck Protection Programme in the US. Balance sheets remain robust, earnings will recover sharply over the next few years and capital trapped by regulators will inevitably be released. While the discount at which the sector trades relative to the underlying equity markets has narrowed from the lows of March, it remains high historically, offering significant further upside.

Nick Brind, John Yakas & George Barrow

22 February 2021

Note

We would draw shareholders attention to http://www.polarcapitalglobalfinancialstrust.com/ for regular monthly portfolio updates and commentary.

*index performance figures are total return in Sterling

Portfolio Review

As at 30 November 2020

Geographical Exposure*	New Benchmark: MSCI ACWI Financials weighting as at 30 November 2020**	30 November 2020	Old Benchmark: MSCI World Financials + Real Estate weighting as at 30 November 2019**	30 November 2019
North America	48.3%	49.3%	60.0%	52.2%
Asia (ex-Japan)	20.1%	29.4%	10.4%	16.8%
Europe	16.4%	17.3%	15.9%	16.3%
United Kingdom	6.0%	8.6%	6.9%	8.3%
Fixed Income	-	6.6%	-	7.2%
Latin America	1.9%	2.2%	-	1.6%
Japan	4.3%	-	6.5%	1.5%
Eastern Europe	-	-	-	0.2%
Other net liabilities	-	(13.4%)	-	(4.1%)
Total		100.0%		100.0%

Sector Exposure*	New Benchmark: MSCI ACWI Financials weighting as at 30 November 2020**	30 November 2020	Old Benchmark: MSCI World Financials + Real Estate weighting as at 30 November 2019**	30 November 2019
Banks	47.8%	62.1%	40.1%	64.6%
Insurance	23.0%	20.4%	19.9%	16.6%
Diversified Financials	29.1%	15.2%	22.7%	7.1%
Software & Services	-	7.8%	-	4.6%
Fixed Income	-	6.6%	-	7.2%
Real Estate	-	1.3%	17.4%	4.0%
Other net liabilities	-	(13.4%)	-	(4.1%)
Total		100.0%		100.0%

Market Cap*	New Benchmark: MSCI ACWI Financials weighting as at 30 November 2020**	30 November 2020	Old Benchmark: MSCI World Financials + Real Estate weighting as at 30 November 2019**	30 November 2019
Large (>US$5bn)	98.0%	97.6%	99.1%	90.1%
Medium (US$0.5bn - US$5bn)	2.0%	12.8%	0.9%	10.7%
Small (<US$0.5bn)	-	3.0%	-	3.3%
Other net liabilities	-	(13.4%)	-	(4.1%)
Total		100.0%		100.0%

* Based on the net assets as at 30 November 2020 of £165.7m (2019: £301.2m)

**The benchmark changed on 23 April 2020 to MSCI ACWI Financials Net Total Return Index (in Sterling with dividends reinvested), prior to this the Company's benchmark was MSCI World Financials + Real Estate Net Total Return Index. Classifications derived from the Benchmark Index as far as possible. Not all geographical areas or sectors of the Benchmark are shown, only those in which the Company had an investment at the year end.

 

Full Investment Portfolio

As at 30 November 2020

Ranking					Market Value £'000		% of total net assets
2020	(2019)	Stock	Sector	Country	2020	2019	2020	2019
1	(1)	JP Morgan Chase	Banks	North America	9,190	19,842	5.5%	6.6%
2	(2)	Bank of America	Banks	North America	5,658	13,844	3.4%	4.6%
3	(3)	Mastercard	Software & Services	North America	5,657	10,847	3.4%	3.6%
4	(13)	HDFC Bank	Banks	Asia (ex-Japan)	5,317	7,013	3.2%	2.3%
5	(4)	CHUBB	Insurance	Europe	4,629	9,966	2.8%	3.3%
6	(11)	AIA Group	Insurance	Asia (ex-Japan)	4,425	7,198	2.7%	2.4%
7	(45)	PayPal	Software & Services	North America	4,205	3,023	2.5%	1.0%
8	(22)	Bank Central Asia	Banks	Asia (ex-Japan)	3,846	5,134	2.3%	1.7%
9	(14)	KBC Groep	Banks	Europe	3,795	6,868	2.3%	2.3%
10	(9)	PNC Financial Services	Banks	North America	3,717	7,728	2.3%	2.6%
Top 10 investments					50,439		30.4%
11	(5)	Arch Capital	Insurance	North America	3,489	9,576	2.1%	3.2%
12	(12)	Toronto-Dominion Bank	Banks	North America	3,422	7,178	2.1%	2.4%
13	(6)	Citizens Financial Group	Banks	North America	3,421	8,349	2.1%	2.8%
14	(-)	Housing Development Finance	Banks	Asia (ex-Japan)	3,414	-	2.1%	-
15	(-)	Ping An Insurance	Insurance	Asia (ex-Japan)	3,406	-	2.1%	-
16	(20)	Blackstone	Diversified Financials	North America	3,171	5,453	1.9%	1.8%
17	(27)	SVB Financial	Banks	North America	3,152	4,936	1.9%	1.6%
18	(-)	Hong Kong Exchange	Diversified Financials	Asia (ex-Japan)	3,148	-	1.9%	-
19	(18)	DNB	Banks	Europe	3,050	5,582	1.8%	1.9%
20	(33)	BNP Paribas	Banks	Europe	2,982	3,923	1.8%	1.3%
Top 20 investments					83,094		50.2%
21	(30)	OSB Group	Banks	United Kingdom	2,961	4,276	1.8%	1.4%
22	(-)	Signature Bank	Banks	North America	2,922	-	1.8%	-
23	(-)	American Express	Diversified Financials	North America	2,888	-	1.7%	-
24	(7)	US Bancorp	Banks	North America	2,886	7,801	1.7%	2.6%
25	(52)	UBS Group	Banks	Europe	2,849	2,421	1.7%	0.8%
26	(-)	Berkshire Hathaway	Diversified Financials	North America	2,673	-	1.6%	-
27	(-)	Prosperity Bancshares	Banks	North America	2,632	-	1.6%	-
28	(8)	Wells Fargo	Banks	North America	2,480	7,786	1.5%	2.6%
29	(-)	China Merchants Bank	Banks	Asia (ex-Japan)	2,476	-	1.5%	-
30	(-)	Axis Bank	Banks	Asia (ex-Japan)	2,446	-	1.5%	-
Top 30 investments					110,307		66.6%
31	(23)	East West Bancorp	Banks	North America	2,411	5,102	1.5%	1.7%
32	(16)	First Republic Bank	Banks	North America	2,392	5,660	1.4%	1.9%
33	(29)	Sampo	Insurance	Europe	2,371	4,347	1.4%	1.4%
34	(17)	Allianz	Insurance	Europe	2,370	5,590	1.4%	1.9%
35	(42)	Tisco Financial	Banks	Asia (ex-Japan)	2,300	3,113	1.4%	1.0%
36	(25)	E. Sun Financial	Banks	Asia (ex-Japan)	2,283	4,994	1.4%	1.7%
37	(-)	Prudential	Insurance	United Kingdom	2,274	-	1.4%	-
38	(-)	Chailease	Diversified Financials	Asia (ex-Japan)	2,270	-	1.4%	-
39	(-)	Webster Financial	Banks	North America	2,211	-	1.3%	-
40	(24)	Enterprise Financial Services	Banks	North America	2,209	5,081	1.3%	1.7%
Top 40 investments					133,398		80.5%
41	(10)	Marsh & McLennan	Insurance	North America	2,182	7,487	1.3%	2.4%
42	(-)	Hiscox	Insurance	North America	2,173	-	1.3%	-
43	(-)	Keppel DC REIT	Real Estate	Asia (ex-Japan)	2,134	-	1.3%	-
44	(41)	Atom Bank (unquoted)	Banks	United Kingdom	2,120	3,191	1.3%	1.1%
45	(36)	VPC Specialty Lending Investments	Fixed Income	Fixed Income	2,103	3,737	1.3%	1.2%
46	(43)	Intact Financial Corporation	Insurance	North America	2,070	3,041	1.3%	1.0%
47	(-)	Bajaj Finance	Diversified Financials	Asia (ex-Japan)	2,020	-	1.2%	-
48	(37)	Bank of the Philippine Islands	Banks	Asia (ex-Japan)	2,010	3,555	1.2%	1.2%
49	(39)	Oversea-Chinese Banking	Banks	Asia (ex-Japan)	1,985	3,441	1.2%	1.2%
50	(-)	Manappuram Finance	Diversified Financials	Asia (ex-Japan)	1,946	-	1.2%	-
Top 50 investments					154,141		93.1%
51	(-)	Adyen	Software & Services	Europe	1,846	-	1.1%	-
52	(34)	Solar Capital	Diversified Financials	North America	1,841	3,793	1.1%	1.2%
53	(48)	Itaú Unibanco	Banks	Latin America	1,769	2,775	1.1%	0.9%
54	(56)	Grupo Financiero Banorte	Banks	Latin America	1,758	2,206	1.1%	0.7%
55	(31)	Ares Capital	Diversified Financials	North America	1,728	4,127	1.0%	1.4%
56	(46)	Direct Line Insurance	Insurance	United Kingdom	1,688	2,858	1.0%	1.0%
57	(51)	Sparebank SMN	Banks	Europe	1,667	2,470	1.0%	0.8%
58	(-)	Kasikornbank	Banks	Asia (ex-Japan)	1,656	-	1.0%	-
59	(-)	International Personal Finance 9.75% Bond	Fixed Income	Fixed Income	1,546	-	0.9%	-
60	(40)	Nationwide Building Society 10.25% CCDS	Fixed Income	Fixed Income	1,542	3,267	0.9%	1.1%
Top 60 investments					171,182		103.3%
61	(-)	Intesa Sanpaolo	Banks	Europe	1,520	-	0.9%	-
62	(-)	Lancashire	Insurance	United Kingdom	1,490	-	0.9%	-
63	(49)	City of London Investment Group	Diversified Financials	United Kingdom	1,486	2,622	0.9%	0.9%
64	(-)	Alibaba	Software & Services	Asia (ex-Japan)	1,371	-	0.8%	-
65	(-)	Banca Generali	Diversified Financials	Europe	1,174	-	0.7%	-
66	(26)	Lloyds Banking Group	Banks	United Kingdom	1,157	4,952	0.7%	1.6%
67	(-)	Progressive Corporation	Insurance	North America	1,117	-	0.7%	-
68	(67)	Augmentum Fintech	Diversified Financials	United Kingdom	1,043	1,050	0.6%	0.3%
69	(57)	Aldermore Group 8.5% Bond	Fixed Income	Fixed Income	979	2,151	0.6%	0.7%
70	(63)	International Personal Finance 7.75% Bond	Fixed Income	Fixed Income	940	1,626	0.6%	0.5%
Top 70 Investments					183,459		110.7%
71	(-)	Riverstone Credit Opportunities	Fixed Income	Fixed Income	781	-	0.5%	-
72	(-)	Finecobank Banca Fineco	Banks	Europe	726	-	0.4%	-
73	(-)	National Westminster Bank Floating Rate Bond	Fixed Income	Fixed Income	693	-	0.4%	-
74	(-)	National Westminster Bank Floating Rate Bond	Fixed Income	Fixed Income	688	-	0.4%	-
75	(-)	Stichting AK Rabobank 6.5% Bond	Fixed Income	Fixed Income	596	-	0.4%	-
76	(-)	ING Groep Floating Rate Bond	Fixed Income	Fixed Income	582	-	0.3%	-
77	(-)	Jupiter 8.875% Bond	Fixed Income	Fixed Income	486	-	0.3%	-
Total Investments					188,011		113.4%
Other net liabilities					(22,268)		(13.4%)
Total net assets					165,743		100.0%

Note: Figures in brackets denote comparative rankings as at 30 November 2019.

 

STRATEGIC REPORT

The Strategic Report section of this Annual Report comprises the Chairman's Statement, the Investment Manager's Report, including information on the portfolio, and this Strategic Report.

This Report has been prepared to provide information to shareholders on the Company's strategy and the potential for those strategies to succeed, including a fair review of the Company's performance during the year ended 30 November 2020, the position of the Company at the year end and a description of the principal risks and uncertainties. Throughout the Strategic Report there are certain forward-looking statements made by the Directors in good faith based on the information available to them at the time of their approval of this Report. Such statements should be treated with caution due to inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Business Model and Regulatory Arrangements

The Company's business model follows that of an externally managed investment trust, and its investment objective is set out below. Its shares are listed on the main market of the London Stock Exchange.

The Company is designated an Alternative Investment Fund ('AIF') under the Alternative Investment Fund Management Directive ('AIFMD') and, as required by the Directive, has contracted with Polar Capital LLP to act as the Alternative Investment Fund Manager ('AIFM') and HSBC Bank Plc to act as the Depositary.

Both the AIFM and the Depositary have responsibilities under AIFMD for ensuring that the assets of the Company are managed in accordance with the investment policy and are held in safe custody. The Board remains responsible for setting the investment strategy and operational guidelines as well as meeting the requirements of the Financial Conduct Authority ('FCA') Listing Rules and the Companies Act 2006.

The AIFMD requires certain information to be made available to investors in AIFs before they invest and requires that material changes to this information be disclosed in the Annual Report of each AIF. Investor Disclosure Documents, which set out information on the Company's investment strategy and policies, leverage, risk, liquidity, administration, management, fees, conflicts of interest and other shareholder information are available on the Company's website.

There have been no material changes to the information requiring disclosure. Any information requiring immediate disclosure pursuant to the AIFMD will be disclosed to the London Stock Exchange through a primary information provider. Statements from the Depositary and the AIFM can be found on the Company's website.

The Company seeks to manage its portfolio in such a way as to meet the tests in Section 1158 and 1159 of the Corporation Tax Act 2010 (as amended by Section 49(2) of the Finance Act 2011) and continue to qualify as an investment trust. This qualification permits the accumulation of capital within the portfolio without any liability to UK Capital Gains Tax. Further information is provided in the Directors' Report. The Company has no employees or premises and the Board is comprised of Non-executive Directors. The day to day operations and functions have all been delegated to third parties.

Investment Objective and Policy

The Company's investment objective is to generate for investors a growing dividend income together with capital appreciation. The Company seeks to achieve its objective by investing primarily in a global portfolio consisting of listed or quoted securities issued by companies in the financials sector operating in banking, insurance, property and other sub-sectors. The portfolio is diversified by geography, industry sub-sector and stock market capitalisation.

The Company may have a small exposure to unlisted and unquoted companies, but in aggregate, this is not expected to exceed 10% of total assets at the time of investment. The Company will not invest more than 10% of total assets, at the time of investment, in other listed closed-ended investment companies and no single investment will normally account for more than 10% of the portfolio at the time of investment.

The Company may employ levels of borrowing from time to time with the aim of enhancing returns, currently subject to an overall maximum of 20% (maximum level was increased from 15% at the time of the reconstruction in April 2020) of net assets at the time the relevant borrowing is taken out. Actual levels of borrowing may change from time to time based on the Investment Manager's assessment of risk and reward.

The Company may invest through equities, index-linked and other debt securities, cash deposits, money market instruments, foreign currency exchange transactions, forward transactions, index options and other instruments including derivatives. Forward transactions, derivatives (including put and call options on individual positions or indices) and participation notes may be used to gain exposure to the securities of companies falling within the Company's investment policy or to seek to generate income from the Company's position in such securities, as well as for efficient portfolio management. Any use of derivatives for investment purposes is made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments. The Company may hedge exposure to foreign currencies if considered appropriate for efficient portfolio management.

The Board

As the day to day management of the Company is outsourced to service providers the Board's focus at each meeting is on investment performance, including the outlook and strategy. The Board also considers the management and provision of services received from third-party service providers and the risks inherent in the various matters reviewed and discussed.

Life of the Company - Tender Offer/ Reconstruction

The Company was originally launched with a fixed life of seven-years ending in April 2020; proposals were made to shareholders for a 100% tender offer and replacement of the fixed life with subsequent five-yearly tender offers. Such proposals were passed at the General Meeting held on 7 April 2020; the first tender offer as a result of the proposals will be made to shareholders on or before 30 June 2025.

Strategy and Investment Approach

The Investment Manager's investment process is a six-stage process primarily driven by a bottom-up fundamental analysis of individual companies, albeit with macroeconomic inputs. The Investment Manager regularly uses both quantitative and qualitative screens to rank companies on a risk-adjusted basis, since the fundamental view is that long-term returns in most financial stocks are driven by their success in writing risk, rather than short-term growth trends. The approach involves undertaking a detailed income statement and balance sheet analysis and values a company based on the Capital Asset Pricing Model that compares a company's return on equity versus its cost of capital (the latter taking account of both stock and country risk) to provide a fair price/book valuation. This valuation (coupled with other more standard valuation systems) is then ranked across the global universe and added to scores focused on other variables such as profitability, risk, ESG and growth metrics to provide a model portfolio and so a focus for additional stock-specific research. When permitted, the Investment Manager undertakes regular trips to the US, Europe and Asia to meet companies as well as those they meet in London, leveraging off the combined experience of the Investment Manager's team of seven fund managers and analysts who focus on the global financials sector.

There are no limits on the exposure of the investment portfolio to either smaller or mid-cap companies but the majority of the portfolio is invested in companies with a market capitalisation of above US$5bn. The Investment Manager has discretion to invest up to 10% of the portfolio in debt securities.

The vast majority of the investment portfolio is invested in companies that not only offer capital appreciation but pay dividends, which are expected to rise over time, so as to meet the necessary income required to facilitate the payment of a rising level of dividends to shareholders. However, as a result of COVID-19, a number of regulators restricted or limited dividends reducing the earnings capability of the portfolio.

Although some of these restrictions are now being relaxed, at the time of writing the financial and economic outlook remains highly uncertain. The Board, together with the Manager will continue to assess the likely income capability of the portfolio in a post COVID environment to determine the appropriate longer-term distribution level.

Service Providers

Polar Capital LLP has been appointed to act as the Investment Manager and AIFM as well as to provide or procure company secretarial, marketing and administrative services, including accounting, portfolio valuation and trade settlement which it has arranged to deliver through HSBC Securities Services.

The Company also contracts directly, on terms agreed periodically, with a number of third parties for the provision of specialist services:

· HSBC Securities Services as Custodian and Depositary;

· Stifel Nicolaus Europe Limited* as Corporate Broker;

· Equiniti Limited as Share Registrars;

· PricewaterhouseCoopers LLP as Independent Auditors;

· RD:IR for investor relations and shareholder analysis;

· Marten & Co as third-party research providers.

· Perivan as Designers and Printers for shareholder communications; and

· Huguenot Limited as Website Designers and internet hosting services.

* Investec Bank plc resigned as the Company's corporate broker and the Board appointed Stifel Nicolaus Europe Limited as sole corporate broker to the Company on 29 April 2020.

Benchmark

The Company will measure the Investment Manager's performance against the MSCI ACWI Financials Net Total Return Index, in Sterling with dividends reinvested ('the Benchmark'). This is used to measure the performance of the Company from 23 April 2020, which does not seek to replicate the index in constructing its portfolio. The portfolio may, therefore, diverge substantially from the constituents of this Benchmark. Prior to the proposals made to shareholders in April 2020, the Company measured performance against the MSCI World Financials + Real Estate Net Total Return Index, in Sterling with dividends reinvested. The utilisation of the adopted benchmarks before and after the April 2020 change is detailed within the Manager's Report.

Although the Company has a Benchmark, this is neither a target nor a determinant of investment strategy. The purpose of the Benchmark is to set out a reasonable measure of performance for shareholders and an appropriate base which, together with an additional hurdle, forms the level above which the Investment Manager earns a share of any outperformance it has delivered.

Performance and Key Performance Objectives

The Board appraises the performance of the Company and the Investment Manager as the key supplier of services to the Company against key performance indicators ('KPIs'). The objectives of the KPIs comprise both specific financial and shareholder related measures.

Objective	Control process	KPI / Outcome
The provision of investment returns to shareholders measured by long-term NAV total return relative to the Benchmark and a comparator group.	The Board reviews at each meeting the performance of the portfolio and considers the views of the Investment Manager and the value delivered to shareholders through NAV growth and dividends paid. The Board also receives monthly reports on performance against both the Benchmark and a comparator group of open-ended investment funds.	The Company's NAV total return, over the year ended 30 November 2020, was -6.5%* while the Benchmark delivered  -6.4% over the same period. The Company ranked 16 out of 40 open ended funds within the Lipper Financial Sector universe since inception and 5 out of 7 within the short comparator group of funds regularly considered by the Board as at the year ended 30 November 2020.
The achievement of a progressive dividend policy.	Financial forecasts are reviewed to track income and distributions.	A total of two interim dividends amounting to 4.40p (2019: 4.40p) per ordinary share have been paid or declared in respect of the financial year ended 30 November 2020. As referenced within the Chairman's Statement, due to the highly uncertain financial and economic outlook the Company has maintained the dividend at the level paid in 2019. While the aim to achieve dividend growth remains there is no guarantee that this can be achieved.
Monitoring and reacting to issues created by the discount or premium of the ordinary share price to the NAV per ordinary share with the aim of reducing volatility for shareholders.	The Board receives regular information on the composition of the share register including trading patterns and discount/premium levels of the Company's ordinary shares. The Board discusses and authorises the issue or buy back of shares when appropriate. The Board is aware of the vulnerability of a sector specialist investment trust to a change in investor sentiment towards that sector. While there is no formal discount policy the Board discusses the market factors giving rise to any discount or premium, the long or short-term nature of those factors and the overall benefit to shareholders of any mitigating actions. The market liquidity is also considered when authorising the issue or buy back of shares when appropriate market conditions prevail. A daily NAV per share, calculated in accordance with the AIC guidelines is issued to the London Stock Exchange.	The premium of the ordinary share price to the NAV per ordinary share at the year end was 1.3%* compared with the widest discount over the year ended 30 November 2020 of 12.6%, reached on 24 August 2020. In the year ended 30 November 2020, the Company bought back 79,159,235 ordinary shares as part of the tender offer to shareholders in April 2020 and 670,000 ordinary shares in a series of small purchases. The Company also issued 104,335 ordinary shares during the year under review. All shares bought back in the year under review and as part of the tender offer were placed into treasury for reissue when suitable market conditions prevailed.
To qualify and continue to meet the requirements for Sections 1158 and 1159 of the Corporation Tax Act 2010 ('investment trust status').	The Board receives regular financial information which discloses the current and projected financial position of the Company against each of the tests set out in Sections 1158 and 1159.	The Company has been granted investment trust status annually since its launch on 1 July 2013 and is deemed to be granted such status for each subsequent year subject to the Company continuing to satisfy the conditions of Section 1158 of the Corporation Tax Act 2010 and other associated ongoing requirements. The Directors believe that the tests have been met in the financial year ended 30 November 2020 and will continue to be met.
Efficient operation of the Company with appropriate investment management resources and services from third party suppliers within a stable and risk controlled environment.	The Board considers annually the services provided by the Investment Manager, both investment and administrative, and reviews on a cycle the provision of services from third parties including the costs of their services. The annual operating expenses are reviewed and any non-recurring project related expenditure approved by the Board.	The Board, through the Audit Committee has received and considered satisfactory the internal controls report of the Investment Manager and other key suppliers including contingency arrangements to facilitate the ongoing operations of the Company in the event of withdrawal or failure of services. The Committee has also reviewed the operational resilience of its various service providers in connection with mitigation of the business risks posed by COVID-19. The external service providers have, without exception, demonstrated their ability to continue to provide services to the expected level, whilst doing so remotely. The ongoing charges for the year ended 30 November 2020 excluding the performance fee were 1.09% of net assets (2019: 1.04%)*. The ongoing charges including the performance fee payable were 1.74% (2019: 1.04%)*.

*See Alternative Performance Measures contained in the Annual Report

Principal Risks and Uncertainties

The Board is responsible for the management of risks faced by the Company in delivering long-term returns to shareholders. The Board believes identification, monitoring and appraisal of the risks, any mitigating factors and control systems is crucial. Through delegation to the Audit Committee, it has established procedures to manage risk, oversee the internal control framework and determine the nature and extent of the principal risks the Company is willing to take in order to achieve its long-term strategic objectives.

The Board through the Audit Committee carries out, at least annually, a robust assessment of the principal risks and uncertainties with the assistance of the Investment Manager, continually monitors identified risks and meets to discuss both long-term and emerging risks outside of the normal cycle of Audit Committee meetings. A Risk Map is maintained which seeks to identify and allocate risks to four main risk categories: Business, Portfolio Management, Infrastructure and External.

A risk management process has been established to identify and assess various risks, their likelihood and the possible severity of impact. After considering both internal and external controls and factors that could provide mitigation, a post mitigation risk impact score is determined. The Board, with the assistance of the Audit Committee, believes it has identified the key risks faced by the Company.

The Audit Committee, in conjunction with the Board and the Investment Manager, has undertaken a full review of the Company's Risk Map including the mitigating factors and controls to reduce the impact of the risks identified. A number of amendments have been made including the introduction of a Heat Map providing a visual reflection of the Company's identified risks.

The key risks, being those classified as having the highest risk impact score post mitigation, are detailed below with a high-level summary of the management through mitigation any change in assessment over the past financial year. Within the categories, the risk level of some items has been elevated in the financial year to reflect the impact of various market conditions.

The Audit Committee has also considered the risks posed by COVID-19, which has been considered as a Black Swan event. Further information on how the Committee has considered COVID-19 when assessing its effect on the Company's ability to operate as a going concern and the Company's longer-term viability can be found in the Report of the Audit Committee.

Principal Business Risks and Uncertainties	Management of Risks through Mitigation & Controls
Business	^ Increase*
Failure to achieve investment objective, investment performance below agreed benchmark objective or market/industry average.	The Board seeks to manage the impact of such risks through regular reporting and monitoring of investment performance against a comparator group of open-ended funds, the Benchmark and other agreed indicators of relative performance. In months when the Board is not scheduled to meet, it receives a monthly report containing financial information on the Company including gearing and cash balances. Performance and strategy are reviewed throughout the year at regular Board meetings where the Board can challenge the Investment Manager. The Board also receives a monthly commentary from the Investment Manager in the form of factsheets for all the specialist financial sector funds managed by Polar Capital. The Board is committed to a clear communication programme to ensure shareholders understand the investment strategy. This is maintained through the use of monthly factsheets which have a market commentary from the Investment Manager as well as portfolio data, an informative website as well as annual and half year reports. The Management Engagement Committee considers the suitability of the Investment Manager on the basis of performance and other services provided.
Loss of portfolio manager or other key staff.	Key personnel are incentivised by equity participation in the investment management company. The team directly responsible for managing the portfolio of the Company was increased from two to three in December 2020.
*Persistent excessive share price discount to NAV.	In consultation with its advisors, including the corporate broker, the Board regularly considers the level of the share price premium/discount to the NAV and the Board reviews ways to enhance shareholder value including share issuance and buy backs.
Principal Business Risks and Uncertainties PORTFOLIO MANAGEMENT	Management of Risks through Mitigation & Controls ^ Increase*
While the portfolio is diversified across a number of stock markets worldwide, the investment mandate is focused on financials and thus the portfolio is more sensitive to investor sentiment and the commercial acceptance of the sector than a general investment portfolio. The Company's portfolio is exposed to risks such as market price, credit, liquidity, foreign currency and interest rates. The portfolio is actively managed. The Investment Manager's style focuses primarily on the investment opportunity of individual stocks and, accordingly, may not follow the makeup of the Benchmark. This may result in returns which are not in line with the Benchmark. The degree of risk which the Investment Manager incurs in order to generate the investment returns and the effect of gearing on the portfolio by borrowed funds can magnify the portfolio returns per share positively or negatively.	The Board has set appropriate investment limits and monitors the position of the portfolio against such. These include guidelines on exposures to certain investment markets and sectors. The Board discusses with the Investment Manager at each Board meeting its views on the sector. At each Board meeting the composition and diversification of the portfolio by geographies, sectors and capitalisations are considered along with sales and purchases of investments. Individual investments are discussed with the Investment Manager as well as the Investment Manager's general views on the various investment markets and the financials sector in particular. Analytical performance data and attribution analysis is presented by the Investment Manager. The policies for managing the risks posed by exposure to market prices, interest rates, foreign currency exchange rates, credit and liquidity are set out in Note 26 to the financial statements. Investors have sight of the entire portfolio and geographic exposure of investments.
Gearing, either through bank debt or the use of derivatives may be utilised from time to time. Whilst the use of gearing is intended to enhance the NAV total return, it will have the opposite effect when the return on the Company's investment portfolio is negative.	The arrangement of any new banking facilities and gearing limits under such arrangements are controlled by the Board. Derivatives are considered as being a form of gearing and their use has been agreed by the Board. The deployment of borrowed funds (if any) is based on the Investment Manager's assessment of risk and reward. At 30 November 2020 the Company was 12.7% geared (2019:4.4%).
*The ability to continue the dividend policy may be compromised due to lower income, either as a result of changes in underlying companies policies or changes in the portfolio construction, 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.	The Board monitors income and currency exposure through monthly management accounts and discussion. In the event of there being insufficient income during the financial year the Company has built up revenue reserves on which to draw to pay dividends. Equally, in the event of the revenue reserves being fully utilised the Company may use other distributable reserves.
Infrastructure	Management of Risks through Mitigation & Controls - Unchanged
There are risks from the failure of, or disruption to, operational and accounting systems and processes provided by the Investment Manager including any subcontractors to which the Investment Manager has delegated a task as well as directly appointed suppliers. The mis-valuation of investments or the loss of assets from the custodian or sub custodians could affect the NAV per share or lead to a loss of shareholder value. There is taxation risk that the Company may fail to continue as an investment trust and suffer capital gains tax or fail to recover as fully as possible withholding taxes on overseas investments. The legal and regulatory risks include failure to comply with the FCA's Prospectus Rules, Listing Rules and Disclosure Guidance and Transparency Rules; not meeting the provisions of the Companies Act 2006 and other UK and overseas legislation affecting UK companies and not complying with accounting standards. Further risks arise from not keeping abreast of changes in legislation and regulations which have in recent years been substantial.	At each Board meeting the Board receive an administration report that provides details on general corporate matters including legislative and regulatory developments and changes. The Board conducts an annual review of suppliers and their internal control reports, which includes the disaster recovery procedures of the Investment Manager. Regular reporting from the Depositary on the safe custody of the Company's assets and the operation of control systems related to the portfolio reconciliation is monitored. Specialist advice is sought on taxation issues as and when required. The Audit Committee has oversight of such work. Information and guidance on legal and regulatory risks is managed by using the Investment Manager or professional advisers where necessary and the submission of reports to the Board for discussion and, if required, any remedial action or changes considered necessary. The Board monitors new developments and changes in the regulatory environment. Whilst it has no control over such changes, the Board seeks to ensure that their impact on the Company is understood and complied with.
Principal Business Risks and Uncertainties External	Management of Risks through Mitigation & Controls ^ Increase*
*There is significant exposure to the economic cycles of the markets in which the underlying investments conduct their business operations as well as the economic impact on investment markets where such investments are listed. *The fluctuations of exchange rates can also have a material impact on shareholder returns.	The Board regularly discusses general economic conditions and developments. The effect on the portfolio from Brexit continues to be considered. Whilst it is difficult to quantify the impact of such a change, it is not believed to fundamentally impact the business of the Company or to make the financials sector any less attractive as an investment. At the year-end over 80.9% of the portfolio was invested outside of the EEA. In early 2020, the COVID-19 pandemic affected economies and businesses globally and prompted regulator intervention. The Board acknowledge the short-term impact this has had on underlying companies' ability to pay dividends and share price volatility. The Board continue to monitor the effects of COVID-19 in order to establish any potential longer-term impact which is yet to occur. Note 26 in the Annual Report describes the risks posed by changes in foreign exchange rates. The Investment Manager has the ability to hedge foreign currency if it is thought appropriate at the time.

Investment Management Company and Management of the Portfolio

As the Company is an investment vehicle for shareholders, the Directors have sought to ensure that the business of the Company is managed by a leading specialist investment management team and that the investment strategy is attractive to shareholders. The Directors believe that a strong working relationship with the Investment Manager will achieve the optimum return for shareholders. As such, the Board and the Investment Manager operate in a supportive, co-operative and open environment.

The Company has an Investment Management Agreement (IMA) with Polar Capital LLP (the Investment Manager), which is authorised and regulated by the Financial Conduct Authority, to act as Investment Manager and AIFM of the Company with sole responsibility for the discretionary management of the Company's assets (including uninvested cash) and sole responsibility to take decisions as to the purchase and sale of individual investments. The Investment Manager also has responsibility for asset allocation within the limits of the investment policy and guidelines established and regularly reviewed by the Board, all subject to the overall control and supervision of the Board.

Polar Capital provides a team of financial specialists and the portfolio is jointly managed by Mr Nick Brind, Mr John Yakas and Mr George Barrow, supported by other financials specialists within the team.

The Investment Manager has other investment resources which support the investment team and has experience in administering and managing other investment companies.

The Investment Manager also procures or provides accountancy services, company secretarial, marketing and day to day administrative services, including the monitoring of third-party suppliers, which are directly appointed by the Company. The Investment Manager has, with the consent of the Directors, delegated the provision of certain of these administrative functions to HSBC Securities Services and to Polar Capital Secretarial Services Limited. The fees of HSBC Securities Services are paid by the Company.

Information is provided to the Directors on a timely basis, covering all aspects of relevant management, regulatory and financial information. The Board receives a report from the Investment Manager at each Board meeting and may ask representatives of the Investment Manager to attend Board meetings enabling Directors to probe further on matters of concern or seek clarification as appropriate.

While the Board reviews the performance of the Investment Manager at each Board meeting, and the Company's performance against Benchmark and a peer group of funds with similar objectives, the Management Engagement Committee formally carries out an annual review of the Investment Manager's and other suppliers' performance during the year.

Termination Arrangements

The IMA may be terminated by either party giving 12 months' notice. The IMA may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including: (i) if an order has been made or an effective resolution passed for the liquidation of the Investment Manager; (ii) if the Investment Manager ceases or threatens to cease to carry on its business; (iii) where the Company is required to do so by a relevant regulatory authority; (iv) on the liquidation of the Company; or (v) subject to certain conditions, where the Investment Manager commits a material breach of the IMA.

In the event the IMA is terminated by the Company, except in the event of termination by the Company for certain specified causes, the base fee and the performance fee will be calculated pro rata for the period up to and including the date of termination.

Fee Arrangements

Management Fee

Under the terms of the IMA, the Investment Manager will be entitled to a management fee together with reimbursement of reasonable expenses incurred by it in the performance of its duties. Following shareholder approval of the Amended and Restated IMA, effective from 7 April 2020, the Investment Manager is entitled to a reduced base fee rate of 0.70% per annum of the Company's NAV (previously 0.85% per annum of the lower of the Company's market capitalisation and NAV).

In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 80% of the management fee payable is charged to capital and the remaining 20% to revenue.

Performance Fee

The Investment Manager may be entitled to a performance fee equal to 10% of the excess of the performance fee hurdle and payable at the end of each five-year period, the first period being from 23 April 2020 to 30 June 2025 and at five-yearly intervals thereafter.

For the purposes of calculating the performance fee, the Company's NAV (adjusted to reflect dividends paid, and any performance impact caused by the issue or buyback of ordinary shares) at 30 June 2025, being the end of the relevant Performance Period, will be used. As at 30 November 2020, a £1,269,000 performance fee had been accrued. Where a performance fee becomes payable it will be charged 100% to capital.

Corporate Responsibility

Environment, Social and Governance (ESG)

The Company's core activities are undertaken by its Investment Manager which seeks to limit the use of nonrenewable resources and reduce waste where possible. The Investment Manager has a corporate ESG policy and wherever possible and appropriate the parameters of such are considered and adopted by the investment team in relation to the Company's management and portfolio construction. As detailed further within the Investment Manager's Report, the Investment Managers consider ESG factors when reviewing new, continuing or exiting investments but they do not make an investment decision solely on the basis of ESG factors. The Board monitors the Investment Manager's approach to ESG and they themselves take into account ESG factors in the management of the Company.

The Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 require companies listed on the Main Market of the London Stock Exchange to report on the greenhouse gas ('GHG') emissions and the Task Force on Climate-related Financial Disclosures for which they are responsible. The Company is an investment trust, with neither employees nor premises, nor has it any financial or operational control of the assets which it owns. Consequently, it has no GHG emissions or climate disclosures to report from its operations nor does it have responsibility for any other emissions.

Diversity and gender reporting

The Company has no employees and the Board comprises two female and two male Non-executive Directors.

The Board has adopted a succession plan based on the recommended nine-year tenure of Directors with allowance for an extended period for the role of the Chairman should it be needed to undertake recruitment or practical handover period. The Board will continue to have regard to the benefits of diversity throughout any recruitment process, especially during compiling a shortlist of candidates and selecting individuals for interview, but will ultimately seek to ensure directors appointed to the Board are chosen on merit.

Whilst the Company has not adopted formal policies on human rights or diversity as it has no employees or operational control of its assets, the Board will always give regard to diversity when recruiting.

Modern Slavery Act

As an investment company, the Company does not provide goods or services in the normal course of business and does not have any customers. Accordingly, it is considered that the Company is not required to make any slavery or human trafficking statements under the Modern Slavery Act 2015.

Anti-bribery, Corruption and Tax Evasion

The Board has adopted a zero-tolerance policy (available on the Company's website) to bribery, corruption and the facilitation of tax evasion in its business activities. The Board uses the principles formulated and implemented by the Investment Manager and expects the same standard of zero-tolerance to be adopted by third party service providers.

The Company has implemented a Conflicts of Interest policy to which the Directors must adhere. In the event of divergence between the Investment Manager's policy and the Company's policy the Company's policy shall prevail. The Company is committed to acting with integrity and in the interests of all stakeholders.

Section 172 of the Companies Act 2006

The statutory duties of the Directors are listed in s171-177 of the Companies Act 2006. Under s172, Directors have a duty to promote the success of the Company for the benefit of its members (our shareholders) as a whole and in doing so have regard to the consequences of any decision in the long term, as well as having regard to the Company's stakeholders amongst other considerations. The fulfilment of this duty not only helps the Company achieve its Investment Objective but ensures decisions are made in a responsible and sustainable way for shareholders.

To ensure that the Directors are aware of, and understand, their duties, they are provided with an induction, including details of all relevant regulatory and legal duties as a Director when they first join the Board, and continue to receive regular updates on relevant legislative and regulatory developments. They also have ongoing access to the advice and services of the Company Secretary and, when deemed necessary, the Directors can seek independent professional advice. The Schedule of Matters Reserved for the Board, as well as the Terms of Reference of its committees are reviewed annually and further describe Directors' responsibilities and obligations and include any statutory and regulatory duties.

The Board seeks to understand the needs and priorities of the Company's stakeholders and these are taken into account during all of its discussions and as part of its decision-making. As an externally managed investment company, the Company does not have any employees or customers, however the key stakeholders and a summary of the Board's consideration and actions where possible in relation to each group of stakeholders are described in the table below.

Stakeholder Group	How we engage with them
Shareholders	The Directors have considered this duty when making strategic decisions during the year that affect shareholders. Most notably, the proposals made to shareholders in April 2020 in relation to the tender offer and removal of the fixed seven-year end of life in favour of five-yearly tender offers. The proposals were approved by representation of over 60% of the total issued share capital and 100% of the votes cast at the General Meeting on 7 April 2020. The Directors have also taken account of shareholders' interests during the year when considering the continued appointment of the Investment Manager and the recommendation that shareholders vote in favour of the resolutions for the Company to continue and to renew the allotment and buy back authorities at the AGM. Shortly before the year end, market sentiment towards the financials sector improved and the Company's shares started trading at a small premium to NAV. As a result, regular share issues out of the shares held in treasury were conducted. To enable the Company to continue issuing shares expeditiously, shareholder soundings were taken and a shareholder circular was sent out on 14 January 2021 to put forward a proposal to disapply pre-emption rights over all shares within the treasury account at the date of the meeting. A General Meeting was held on 1 February 2021, 65.3% of the issued share capital was voted on the resolution to disapply pre-emption rights over the shares held in treasury, 68.1m shares at the date of the meeting, of those votes cast, 96.9% were cast on favour. Given the continued measures in place in relation to social distancing and COVID-19, the Directors have carefully considered the viability of an open forum AGM. The safety and wellbeing of shareholders is of the highest priority and it has therefore been decided that a closed AGM will be held again this year. In the event that restrictions are lifted the Company will make a regulatory announcement detailing any changes to the arrangements for the meeting. The Board believes that shareholder engagement remains important, especially in the current market conditions, and to facilitate shareholder engagement, shareholders are encouraged to submit any specific questions on the business of the AGM and Resolutions being proposed by e-mail in advance of the Meeting to [e-mail] (subject marked 'PCFT AGM'). Questions deemed appropriate and relevant will be responded to by email as soon as possible following receipt and where possible ahead of the AGM. Should any significant votes be cast against a resolution, the Board will engage with shareholders and explain in its announcement of the results of the AGM the actions it intends to take to consult shareholders in order to understand the reasons behind the votes against. Following the consultation, an update will be published no later than six months after the AGM and the Annual Report will detail the impact the Shareholder feedback has had on any decisions the Board has taken and any actions or resolutions proposed. Relations with shareholders The Board and the Manager consider maintaining good communications and engaging with shareholders through meetings and presentations a key priority. The Board regularly considers the share register of the Company and receives regular reports from the Manager and the Corporate Broker on meetings attended with shareholders and any concerns that are raised in those meetings. The Board also reviews any correspondence from shareholders and may attend investor presentations. Shareholders are able to raise any concerns directly with the Board without using the Manager or Company Secretary as a conduit. The Chairman or other Directors are available to shareholders who wish to raise matters either in person or in writing. The Chairman and Directors may be contacted through the registered office of the Company. Shareholders are kept informed by the publication of annual and half year reports, monthly fact sheets, access to commentary from the Investment Manager published on the Company's website and attendance at events at which the Investment Manager presents. The Company, through the sales and marketing efforts of the Investment Manager, encourages retail investment platforms to engage with underlying shareholders in relation to Company communications and enable those shareholders to cast their votes on Shareholder resolutions; the Company however has no responsibility over such platforms. The Board therefore encourage shareholders invested via platforms to regularly visit the Company's website or to make contact with the Company directly to obtain copies of Shareholder communications. The Company has also made arrangements with its registrar for shareholders, who own their shares directly rather than through a nominee or share scheme, to view their account online at www.shareview.co.uk. Other services are also available via this website.
Investment Manager	Through the Board meeting cycle, regular updates and the work of the Management Engagement Committee in reviewing the services of the Investment Manager annually, the Board is able to safeguard Shareholder interests by: · Ensuring adherence to the Investment Policy; · Ensuring excessive risk is not undertaken in the pursuit of investment performance; · Ensuring adherence to the Investment Management Policy and reviewing the agreed management and performance fees; and · Reviewing the Investment Manager's decision making and consistency of its investment process. Maintaining a close and constructive working relationship with the Manager is crucial as the Board and the Investment Manager both aim to continue to deliver consistent, long-term returns in line with the Investment Objective. The culture which the Board maintains to achieve this involves encouraging open discussion with the Investment Manager, ensuring that the interests of shareholders and the Investment Manager are aligned, providing constructive challenge and making Directors' experience available to support the Investment Manager. This culture is aligned with the collegiate and meritocratic culture which Polar Capital has developed and maintains. Outcomes and strategic decisions during the year The Board in its capacity as the Management Engagement Committee has recommended the continued appointment of the Investment Manager on the terms agreed within the Investment Management Agreement. The proposals put forward in April 2020, to continue the Company and remove the fixed life element, were made with and in support of the Investment Manager continuing to manage the assets of the Company.
Investee Companies	The Board has instructed the Investment Manager to take into account the published corporate governance policies of the companies in which they invest. The Board has also considered the Investment Manager's Stewardship Code and Proxy Voting Policy. The Proxy Voting Policy directs the Investment Manager to vote at all general meetings of companies in line with Institutional Shareholder Services ("ISS") policy. However, in exceptional cases, where the Investment Manager believes that a resolution would be detrimental to the interests of shareholders or the financial performance of the Company, appropriate notification will be given and abstentions or a vote against will be lodged. This Policy changed during the financial year, as the prior default instruction had been for the Investment Manager to vote at all general meetings of companies in favour of management's recommendation. The Investment Manager voted at 67 company meetings over the year ended November 2020, with 4% of all votes being against management and 28% of meetings having at least one against or withheld vote. The Investment Manager reports to the Board, when requested, on the application of the Stewardship Code and Voting Policy. The Investment Manager's Stewardship Code and Voting Policy can be found on the Investment Manager's website in the Corporate Governance section (www.polarcapital.co.uk). Further information on how the Investment Manager considers ESG in its engagement with investee companies can be found in the Investment Manager's report. Outcomes and strategic decisions during the year During the year, the Board discussed the impact of ESG and how the Investment Manager incorporated ESG into their strategy and investment process.
Service Providers	The Directors have frequent engagement with the Company's service providers through the annual cycle of reporting and due diligence meetings or site visits. This engagement is undertaken with the aim of having effective oversight of delegated services, seeking to improve the processes for the benefit of the Company and to understand the needs and views of the Company's service providers, as stakeholders in the Company. Further information on the Board's engagement with service providers is included in the Corporate Governance Statement and the Report of the Audit Committee. Due to the ongoing restrictions in connection with COVID-19, due diligence meetings have, in the year under review, been undertaken by the Investment Manager in a virtual fashion and where possible, service providers have joined video conference meetings to present their reports directly to the Board or the Audit Committee as appropriate. Outcomes and strategic decisions during the year The reviews of the Company's service providers have been positive and the Directors believe their continued appointment is in the best interests of shareholders. The accounting and administration services of HSBC Securities Services (HSS) are contracted through Polar Capital and provided to the Company under the terms of the IMA. However, the Board continue to conduct due diligence service reviews in conjunction with the Company Secretary and is satisfied that the service received continues to be of a high standard. The contractual relationship with the corporate broker was changed during the year under review, Investec Bank plc resigned and Stifel Nicolaus Europe were appointed as sole corporate broker to the Company.
Proxy Advisors	The support of the major institutional investors and proxy adviser agencies is important to the Directors, as the Company seeks to retain a reputation for high standards of corporate governance, which the Directors believe contributes to the long-term sustainable success of the Company. The Directors consider the recommendations of these various proxy voting agencies when contemplating decisions that will affect shareholders and also when reporting to shareholders through the Half Year and Annual Reports. Recognising the principles of stewardship, as promoted by the UK Stewardship Code, the Board welcomes engagement with all of its investors. The Board recognises that the questions from and the views and recommendations of many institutional investors and proxy adviser agencies provide a valuable feedback mechanism and play a part in highlighting evolving shareholder expectations and concerns. Prior to AGMs, the Company engages with these agencies to fact check their advisory reports and clarify any areas or topics that the agency requests. This ensures that whilst the proxy advisory reports provided to shareholders are objective and independent, the Company's actions and intentions are represented as clearly as possible to assist with shareholders' decision making when considering the resolutions proposed at the AGM. Outcomes and strategic decisions during the year The Nomination Committee considers the time commitment required of Directors and the Board considers each Director's independence on an ongoing basis. The Board has confirmed that all Directors remain independent and able to commit sufficient time to fulfilling their duties, including those listed on s172 of the Companies Act. Accordingly, all Directors are standing for re-election at the Company's AGM. When undertaking recruitment, the Board will have regard to all forms of diversity, although the aim will always be to ensure there are appropriately qualified individuals to manage the Company in the interests of shareholders.
AIC	The Company is a member of the AIC and has supported lobbying activities such as the consultation on the 2019 AIC Code. The Directors also cast votes in the AIC Board Elections each year and regularly attend AIC events.

Approved by the Board on 22 February 2021.

By order of the Board

Tracey Lago FCG

Polar Capital Secretarial Services Limited

Company Secretary

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and prudent; and

• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

The Directors consider that the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Strategic Report confirm that, to the best of their knowledge:

•the Company financial statements, which have been prepared in accordance applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

•the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors' Report is approved:

• so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

• they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Robert Kyprianou

Chairman

22 February 2021

Statement of Comprehensive Income

For the year ended 30 November 2020

	Notes	Year ended 30 November 2020			Year ended 30 November 2019
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	6,297	-	6,297	12,021	-	12,021
Other operating income	4	7	-	7	36	-	36
(Losses)/gains on investments held at fair value	5	-	(47,908)	(47,908)	-	20,925	20,925
Other currency losses	6	-	(506)	(506)	-	(76)	(76)
Total income		6,304	(48,414)	(42,110)	12,057	20,849	32,906
Expenses
Investment management fee	7	(299)	(1,195)	(1,494)	(461)	(1,846)	(2,307)
Performance Fee	7	-	(1,269)	(1,269)	-	-	-
Other administrative expenses	8	(629)	(11)	(640)	(646)	(15)	(661)
Total expenses		(928)	(2,475)	(3,403)	(1,107)	(1,861)	(2,968)
(Loss)/profit before finance costs and tax		5,376	(50,889)	(45,513)	10,950	18,988	29,938
Finance costs	9	(61)	(241)	(302)	(60)	(242)	(302)
(Loss)/profit before tax		5,315	(51,130)	(45,815)	10,890	18,746	29,636
Tax	10	(661)	147	(514)	(967)	237	(730)
Net (loss)/profit for the year and total comprehensive (expense)/income		4,654	(50,983)	(46,329)	9,923	18,983	28,906
(Losses)/earnings per ordinary share (pence)	11	3.01	(33.01)	(30.00)	4.89	9.36	14.25

The total return column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS.

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

The amounts dealt with in the Statement of Comprehensive Income are all derived from continuing activities.

The notes to follow form part of these financial statements.

 

Statement of Changes in Equity

For the year ended 30 November 2020

	Notes	Year ended 30 November 2020
		Called up share capital £'000	Capital redemption reserve £'000	Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total equity £'000
Total equity at 1 December 2019		10,139	251	55,854	139,235	86,452	9,239	301,170
Total comprehensive (expense)/ income: (Loss)/profit for the year ended 30 November 2020		-	-	-	-	(50,983)	4,654	(46,329)
Transactions with owners, recorded directly to equity:
Issues of shares out of treasury	15	-	-	36	106	-	-	142
Shares bought back into treasury pursuant to tender offer (including costs)	15	-	-	-	(81,568)	-	-	(81,568)
Shares bought back and held in treasury	15	-	-	-	(662)	-	-	(662)
Equity dividends paid	12	-	-	-	-	-	(7,010)	(7,010)
Total equity at 30 November 2020		10,139	251	55,890	57,111	35,469	6,883	165,743

	Notes	Year ended 30 November 2019
		Called up share capital £'000	Capital redemption reserve £'000	Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total equity £'000
Total equity at 1 December 2018		10,139	251	55,854	139,235	67,469	8,036	280,984
Total comprehensive income:
Profit for the year ended 30 November 2019		-	-	-	-	18,983	9,923	28,906
Transactions with owners, recorded directly to equity:
Equity dividends paid		-	-	-	-	-	(8,720)	(8,720)
Total equity at 30 November 2019		10,139	251	55,854	139,235	86,452	9,239	301,170

 The notes to follow form part of these financial statements.

Balance Sheet

As at 30 November 2020

	Notes	30 November 2020 £'000	30 November 2019 £'000
Non-current assets
Investments held at fair value through profit or loss	13	188,011	313,605
Current assets
Receivables		416	807
Overseas tax recoverable		273	316
Cash and cash equivalents	14	140	4,175
		829	5,298
Total assets		188,840	318,903
Current liabilities
Payables		(2,814)	(2,858)
Bank overdraft		(383)	(4,875)
Bank loan		(19,900)	(10,000)
		(23,097)	(17,733)
Net assets		165,743	301,170
Equity attributable to equity shareholders
Called up share capital	15	10,139	10,139
Capital redemption reserve		251	251
Share premium reserve		55,890	55,854
Special distributable reserve		57,111	139,235
Capital reserves		35,469	86,452
Revenue reserve		6,883	9,239
Total equity		165,743	301,170
Net asset value per ordinary share (pence)	16	134.70	148.52

 The financial statements, including the associated notes, were approved and authorised for issue by the Board of Directors

on 22 February 2021 and signed on its behalf by:

Robert Kyprianou

Chairman

The notes to follow form part of these financial statements.

Registered number: 8534332

Cash Flow Statement

For the year ended 30 November 2020

	Notes	Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
Cash flows from operating activities
(Loss)/profit before tax		(45,815)	29,636
Adjustment for non-cash items:
Losses/(gains) on investments held at fair value through profit or loss		47,908	(20,925)
Scrip dividends received		(92)	(125)
Amortisation on fixed interest securities		(122)	(110)
Adjusted profit before tax		1,879	8,476
Adjustments for:
Purchases of investments, including transaction costs		(111,398)	(76,222)
Sales of investments, including transaction costs		187,901	73,210
Decrease in receivables		533	65
Increase/(decrease) in payables		1,353	(10)
Overseas taxation deducted at source		(471)	(862)
Net cash generated from operating activities		79,797	4,657
Cash flows from financing activities
Shares repurchased from tender offer into treasury (including costs)		(81,568)	-
Shares repurchased into treasury		(662)	-
Loan repaid*		(7,500)	(5,000)
Loan drawn*		17,400	-
Equity dividends paid	12	(7,010)	(8,720)
Net cash used in financing activities		(79,340)	(13,720)
Net increase/(decrease) in cash and cash equivalents		457	(9,063)
Cash and cash equivalents at the beginning of the year		(700)	8,363
Cash and cash equivalents at the end of the year	14	(243)	(700)

* 2019 re-presented to exclude non-cash items, see details in note 17 in the Annual Report.

The notes to follow form part of these financial statements.

Notes to the Financial Statements

For the year ended 30 November 2020

1  General Information

The financial statements have been prepared in accordance with international accounting standards in conformity with the

requirements, including the applicable legal requirements, of the Companies Act 2006 which, post the Brexit transition period

which ended on 31 December 2020, encompasses IFRS.

The Board has determined that sterling is the Company's functional currency and the presentational currency of the financial statements because it is the currency which is most relevant to the majority of the Company's shareholders and creditors and is the currency in which the majority of the Company's operating expenses are paid. All figures are rounded to the nearest thousand pounds (£'000) except as otherwise stated.

2  Accounting Policies

The principal accounting policies, which have been applied consistently for all years presented, are set out below:

(a)  Basis of Preparation

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and derivative financial instruments at fair value through profit or loss.

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in October 2019, is consistent with the requirements of IFRS, in so far as those requirements are applicable to the financial statements, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The financial position of the Company as at 30 November 2020 is shown in the balance sheet. As at 30 November 2020 the Company's total assets exceeded its total liabilities by a multiple of over 8. The assets of the Company consist mainly of securities that are held in accordance with the Company's investment Policy, as set out above and these securities are readily realisable. The Directors have considered a detailed assessment of the Company's ability to meets its liabilities as they fall due including assessing the implications of the Company's net current liabilities position as at 30 November 2020.

The assessment took account of the Company's current financial position, its cash flows and its liquidity position. In the unlikely event that the loan facilities are not renewed in or before July 2021, the Board is satisfied that the Company could fund the repayment and ongoing cash flow requirements through the sale of a portion of the portfolio of listed securities. In addition to the assessment, the Company carried out stress testing, including for the impact of COVID-19, which used a variety of falling parameters to demonstrate the effects on the Company's share price and net asset value. In light of the results of these tests, the Company's cash balances, and the liquidity position, the Directors consider that the Company has adequate financial resources to enable it to continue in operational existence. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Company's financial statements.

(b)  Presentation of the Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with the guidance set out by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. The result presented in the revenue return column is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 1158 of the Corporation Tax Act 2010.

(c)  Income

Dividends receivable from equity shares are taken to the revenue return column of the Statement of Comprehensive Income on an ex-dividend basis.

Special dividends are recognised on an ex-dividend basis and may be considered to be either revenue or capital items. The facts and circumstances are considered on a case-by-case basis before a conclusion on appropriate allocation is reached.

Where the Company has received dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in the revenue return column of the Statement of Comprehensive Income. Any excess in value of shares received over the amount of cash dividend foregone is recognised in the capital return column of the Statement of Comprehensive Income.

The fixed returns on debt securities and non-equity shares are recognised under the effective interest rate method.

Bank interest is accounted for on an accrual basis. Interest outstanding at the year end is calculated on a time apportionment basis using market rates of interest.

(d)  Written Options

The Company may write exchange-traded options with a view to generating income. This involves writing short-dated covered call options and put options. The use of financial derivatives is governed by the Company's policies, as approved by the Board.

These options are recorded initially at fair value, based on the premium income received, and are then measured at subsequent reporting dates at fair value. Changes in the fair value of the options are recognised in the capital return for the year.

The option premiums are recognised evenly over the life of the option and shown in the revenue return, with an appropriate amount shown in the capital return to ensure the total return reflects the overall change in the fair value of the options.

Where an option is exercised, any balance of the premium is recognised immediately in the revenue return with a corresponding adjustment in the capital return based on the amount of the loss arising on exercise of the option.

(e)  Expenses and Finance Costs

All expenses, including the management fee, are accounted for on an accrual basis.

Expenses are allocated wholly to the revenue column of the Statement of Comprehensive Income except as follows:

Expenses are charged to the capital column of the Statement of Comprehensive Income where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect the investment management fees have been charged to the Statement of Comprehensive Income in line with the Board's expected long-term split of returns, in the form of capital gains and income from the Company's portfolio. As a result, 20% of the investment management fees are charged to the revenue account and 80% charged to the capital account of the Statement of Comprehensive Income.

Finance costs are calculated using the effective interest rate method and are accounted for on an accruals basis and, in line with the management fee expense, are charged 20% to the revenue account and 80% to the capital account of the Statement of Comprehensive Income.

Any performance fee accrued is charged entirely to capital as the fee is based on the outperformance of the Benchmark and is expected to be attributable largely, if not wholly, to capital performance. A provision will be recognised when outperformance has been achieved in accordance with the calculations detailed above and in the Annual Report.

The research costs relate solely to specialist financial research and are accounted for on an accrual basis. They are allocated 20% to revenue and 80% to capital in line with the expected long-term split of revenue and capital return from the Company's investment portfolio.

(f)  Taxation

The tax expense represents the sum of the overseas withholding tax deducted from investment income, tax currently payable and deferred tax.

The tax currently payable is based on the taxable profits for the year ended 30 November 2020. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Investment trusts which have approval as such under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or when the asset is realised based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

(g)  Investments Held at Fair Value Through Profit or Loss

When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date and are initially measured at fair value.

On initial recognition the Company has designated all of its investments as held at fair value through profit or loss as defined by IFRS. All investments are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

Written options are valued at fair value using quoted bid prices.

All investments, classified as fair value through profit or loss, are further categorised into the fair value hierarchy detailed below.

Changes in fair value of all investments and derivatives held at fair value and realised gains and losses on disposal are recognised in the capital return column of the Statement of Comprehensive Income.

In respect of unquoted investments, or where the market for a financial instrument is not active, fair value is established by using various valuation techniques, in accordance with the International Private Equity and Venture Capital ("IPEVC") Valuation Guidelines - Edition December 2018. These may include using reference to recent arm's length market transactions between knowledgeable, willing parties, if available, reference to recent rounds of re-financing undertaken by investee companies involving knowledgeable parties, reference to the current fair value of another instrument that is substantially the same or an earnings multiple.

(h)  Receivables

Receivables are initially recognised at fair value and subsequently measured at amortised cost. Receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value (amortised cost) as reduced by appropriate allowances for estimated irrecoverable amounts.

(i)  Cash and Cash Equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, maturity of three months or less, highly liquid investments that are readily convertible to known amounts of cash.

(j)  Dividends Payable

Dividends payable to shareholders are recognised in the financial statements when they are paid, or in the case of final dividends, when they are approved by the shareholders.

(k)  Payables

Payables are not interest-bearing and are initially valued at fair value and subsequently stated at their nominal value (amortised cost).

(l)  Bank Loans

Interest-bearing bank loans are initially recognised at cost, being the proceeds received net of direct issue costs, and subsequently at amortised cost. The amounts falling due for repayment within one year are included under current liabilities in the balance sheet.

(m)  Foreign Currency Translation

Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling on the date of each transaction. Monetary assets, monetary liabilities and equity investments in foreign currencies at the balance sheet date are translated into Sterling at the rates of exchange ruling on that date.

Realised profits or losses on exchange, together with differences arising on the translation of foreign currency assets or liabilities, are taken to the capital return column of the Statement of Comprehensive Income.

Foreign exchange gains and losses arising on investments held at fair value are included within changes in fair value.

(n)  Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity, as a deduction, net of tax, from the proceeds.

(o)  Capital Reserves

Capital reserve arising on investments sold includes:

-  gains/losses on disposal of investments;

-  exchange differences on currency balances; and

-  other capital charges and credits charged to this account in accordance with the accounting policies above.

Capital reserve arising on investments held includes:

-  increases and decreases in the valuation of investments held at the balance sheet date.

All of the above are accounted for in the Statement of Comprehensive Income.

(p)  Repurchase of Ordinary Shares (including those held in treasury)

Where applicable, the costs of repurchasing ordinary shares including related stamp duty and transaction costs are taken directly to equity and reported through the Statement of Changes in Equity as a charge on the special distributable reserve. Share repurchase transactions are accounted for on a trade date basis.

The nominal value of ordinary share capital repurchased and cancelled is transferred out of called up share capital and into the capital redemption reserve.

Where shares are repurchased and held in treasury, the transfer to capital redemption reserve is made if and when such shares

are subsequently cancelled.

(q)  Share Issue Costs

Where applicable, costs incurred directly in relation to the issue of new shares together with additional share listing costs have been deducted from the share premium reserve.

(r)  New and Revised Accounting Standards

There were no new IFRSs or amendments to IFRSs applicable to the current year which had any significant impact on the Company's financial statements.

The following standards became effective on 1 January 2019 and the adoption of the standards and interpretations have not had a material impact on the financial statements of the Company.

IFRS 16 Leases

As the Company neither holds, trades or has any lease obligations of any type, the provisions of this standard are not expected to have a material impact on the financial statements.

IFRS 9 (Amended) Prepayment Features with Negative Compensation

Negative compensation arises where the contractual terms permit a borrower to prepay the instrument before its contractual maturity, but the prepayment amount could be less than unpaid amounts of principal and interest. The Company has no such terms in any of its loan agreements in place and the amendment are not expected to have any impact on the financial statements.

IFRIC 23 Uncertainty over Income Tax Treatments

The interpretation provides guidance on considering uncertain tax treatments in relation to taxable profit or loss and does not add any new disclosures. The Company complies with all relevant tax laws where applicable and the provisions of this interpretation are not expected to have a material impact on the financial statements.

IAS 19 (amended) Employee Benefits

As the Company has no employees, the amendment to this standard are not expected to have any impact on the financial statements.

IAS 28 (amended) Investments in Associates and Joint Ventures

As the Company has no investment in associates or joint ventures, the amendment to this standard are not expected to have any impact on the financial statements.

Annual Improvement Cycles 2015-2017 (Amendments)

This makes narrow-scope amendments to four IFRS Standards: IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Incomes Taxes and IAS 23 Borrowing costs. These limited amendments are not expected to have any impact on the financial statements.

At the date of authorisation of the Company's financial statements, the following new IFRSs that potentially impact the Company are in issue but are not yet effective and have not been applied in the financial statements:

Effective for periods commencing on or after 1 January 2020:

IFRS 3 Business Combinations (amended)

The IASB has made narrow-scope amendments to improve the definition of a business in order to help companies determine whether an acquisition made is of a business or a group of assets. These amendments are not expected to have any impact on the financial statements.

IFRS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform (amended)

The IASB has issued amendments to IFRS 9, IAS 39 and IFRS 7 that provide certain reliefs in connection with interest rate benchmark reform. The reliefs relate to hedge accounting and have the effect that IBOR reform should not generally cause hedge accounting to terminate. These amendments are not expected to have any impact on the financial statements.

IAS 1 and IAS 8 Definition of Material (amended)

The definition of material has been amended to state that "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity". This new definition is not expected to change how materiality judgements are currently made by the Company nor have any impact to the material information inclusive in the Annual Report.

References to the Conceptual Framework in IFRS Standards (amended)

The Amendments to References to the Conceptual Framework in IFRS Standards was issued to support transition to the revised Conceptual Framework for companies that develop accounting policies using the Conceptual framework when no IFRS Standard applies to a particular transaction. This amendment is not expected to have any impact to the financial statements.

Effective for periods commencing on or after 1 January 2021:

IFRS 4 Insurance Contracts - temporary exemption from IFRS 9 (amended)

The temporary exemption permits companies whose activities are predominantly connected with insurance to defer the application of IFRS 9.

IFRS 9, IAS 39, IFRS 7, IFRS 16 and IFRS 4: Interest Rate Benchmark Reform - phase 2 (amended)

Interest Rate Benchmark Reform-Phase 2, address issues that might affect financial reporting during the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate.

Effective for periods commencing on or after 1 January 2023:

IFRS 17 Insurance Contracts

The standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. This information gives a basis for users of financial statements to assess the effect that contracts have on the financial position, financial performance and cash flows of a company.

The Directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be material on the financial statements of the Company in future periods.

(s)  Segmental Reporting

Under IFRS 8 Operating Segments, operating segments are considered to be the components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker has been identified as the Investment Manager (with oversight from the Board).

The Directors are of the opinion that the Company has only one operating segment and as such no distinct segmental reporting is required.

(t)  Critical Accounting Estimates and Judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Estimates and assumptions used in preparing the financial statements are reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The results of these estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

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

Valuation of Level 3 Investments

Investments valued using valuation techniques include unlisted financial investments, which by their nature, do not have an externally quoted price based on regular trades.

The valuation techniques used may include the techniques described in note 2(g). When determining the inputs into the valuation techniques used, priority is given to publicly available prices from independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market participants at the balance sheet date.

3   Investment Income

	Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
UK dividends	717	1,763
Overseas dividends	4,775	9,028
Scrip dividends	92	125
Interest on debt securities	713	1,105
Total investment income	6,297	12,021

4   Other Operating Income

	Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
Bank interest	7	35
Interest on tax receivable	-	1
Total other operating income	7	36

5   (Losses)/Gains on Investments Held at Fair Value

	Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
Net (losses)/gains on disposal of investments at historic cost	(9,309)	767
Less fair value adjustments in earlier years	(43,289)	(3,870)
Losses based on carrying value at previous balance sheet date	(52,598)	(3,103)
Valuation gains on investments held during the year	4,690	24,028
	(47,908)	20,925

6   Other Currency Losses 

	Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
Exchange losses on currency balances	(588)	(76)
Exchange gains on the loan facility	82	-
	(506)	(76)

7   Investment Management and Performance Fee

	Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
Management fee
- charged to revenue	299	461
- charged to capital	1,195	1,846
Investment management fee payable to Polar Capital LLP	1,494	2,307
Performance fee payable to Polar Capital (charged wholly to capital)	1,269	-

As part of the reconstruction process, the management fee was reduced to 0.70% of NAV (previously 0.85% of the lower of market capitalisation and NAV) with effect from 7 April 2020. The performance fee was renewed and rebased following the tender offer and is calculated as 10% of the excess return over the performance fee hurdle; the first performance period opened on 23 April 2020 and will close on the tender offer to be made to shareholders on or before 30 June 2025. Details of the investment management and performance fees are set out in the Strategic Report above. Management fees are allocated 20% to revenue and 80% to capital.

8   Other Administrative Expenses (including VAT where appropriate)

		Year ended 30 November 2020 £'000	Year ended 30 November 2019 £'000
Directors' fees1		122	106
Directors' NIC		9	6
Auditors' remuneration - for audit of the financial statements2		36	33
Depositary fee3		22	25
Registrar fee		26	26
Custody and other bank charges3		40	42
UKLA and LSE listing fees		27	27
Legal and professional fees		3	22
AIC fees		20	21
Directors' and officers' liability insurance		9	8
Corporate broker's fee		47	54
Marketing expenses4		80	87
Research costs - allocated to revenue5		3	4
Shareholder communications		23	26
HSBC administration fee		140	133
Other expenses6		22	26
Total other administrative expenses allocated to revenue		629	646
Research costs - allocated to capital5		11	15
Total other administrative expenses		640	661

1  Full disclosure is given in the Directors' Remuneration Report in the Annual Report.

2  In April 2020, the Company engaged PwC to perform agreed upon procedures on the tender price for the reconstruction, such service was deemed to be a non-audit service for which a fee of £10,000 was paid.

The amount has been charged to special distributable reserve as defined under IAS 32.

3  Fees determined on the pre-approved rate card with HSBC.

4  Includes bespoke marketing expenses payable to Polar Capital LLP of £27,000 (2019: £60,000) and £28,000 relating to the reconstruction of the Company.

5  Research costs (which applied from 3 January 2018) payable by the Company relate solely to specialist financial research. The estimated spend for the year under review was US $20,000

(£14,000) (2019: US $24,476 (£19,000)), the cost of general non-specialist research and any amounts exceeding the agreed cap are absorbed by Polar Capital. Any adjustments to the

prior year's budget versus actual spend is included in the current period. These costs are allocated 20% to revenue and 80% to capital and are included in the ongoing charges calculation.

6  2020 includes costs in relation to dividend collection

Ongoing charges represents the total expenses of the Company, excluding finance costs and tax, expressed as a percentage of the average daily net asset value, in accordance with AIC guidance issued in May 2012.

The ongoing charges ratio for the year ended 30 November 2020 was 1.09% (2019: 1.04%). The ongoing charges ratio including the performance fee accrued was 1.74% (2019: 1.04%).  See Alternative Performance Measures provided in the Annual Report.

9  Finance Costs

	Year ended 30 November 2020			Year ended 30 November 2019
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest on loans and overdrafts	54	215	269	49	197	246
Loan arrangement fees	7	26	33	11	45	56
	61	241	302	60	242	302

Finance costs are allocated 20% to revenue and 80% to capital.

10   Taxation 

a) Analysis of tax charge/(credit) for the year:

	Year ended 30 November 2020			Year ended 30 November 2019
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Overseas tax	520	-	520	841	-	841
Tax relief in capital	147	(147)	-	237	(237)	-
Withholding tax recovered	(6)	-	(6)	(111)	-	(111)
Total tax charge/(credit) for the year (see note 10b)	661	(147)	514	967	(237)	730

b) Factors affecting tax charge/(credit) for the year:

The charge/(credit) for the year can be reconciled to the loss per the Statement of Comprehensive Income as follows:
	Year ended 30 November 2020			Year ended 30 November 2019
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
(Loss)/profit  before tax	5,315	(51,130)	(45,815)	10,890	18,746	29,636
Tax at the UK corporation tax rate of 19% (2019: 19%)	1,010	(9,715)	(8,705)	2,069	3,562	5,631
Tax effect of non-taxable dividends	(839)	-	(839)	(1,727)	-	(1,727)
Losses/(gains) on investments that are not taxable	-	9,199	9,199	-	(3,961)	(3,961)
Overseas tax suffered	520	-	520	841	-	841
Unrelieved current period expenses and deficits	-	349	349	-	77	77
Withholding tax recovered	(6)	-	(6)	(111)	-	(111)
Tax relief on overseas tax suffered	(24)	20	(4)	(105)	85	(20)
Total tax charge/(credit)for the year (see note 10a)	661	(147)	514	967	(237)	730

c) Factors that may affect future tax charges: 

The Company has an unrecognised deferred tax asset of £605,000 (2019: £222,000) based on a prospective corporation tax rate of 19% (2019: 17%). At the 2020 budget, the government announced that the main rate of corporation tax would remain at 19% for fiscal years beginning on 1 April 2020 and 2021.

The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised in the financial statements.

Given the Company's intention to continue to meet the conditions required to retain its status as an Investment Trust Company, no provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

11   (Losses)/Earnings Per Ordinary Share 

	Year ended 30 November 2020			Year ended 30 November 2019
	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return
The calculation of basic (losses)/earnings per share is based on the following data:
Net (loss)/profit for the year (£'000)	4,654	(50,983)	(46,329)	9,923	18,983	28,906
Weighted average number of ordinary shares in issue during the year	154,433,083	154,433,083	154,433,083	202,775,000	202,775,000	202,775,000
From continuing operations
Basic - ordinary shares (pence)	3.01	(33.01)	(30.00)	4.89	9.36	14.25

As at 30 November 2020 there were no potentially dilutive shares in issue (2019: nil).

12   Amounts Recognised as Distributions to Ordinary Shareholders in the Year

  Dividends paid in the year ended 30 November 2020

Payment date	No. of shares	Amount per share	Year ended 30 November 2020 £'000
28 February 2020	202,775,000	2.00p	4,055
28 August 2020	123,145,765	2.40p	2,955
			7,010

The revenue available for distribution by way of dividend for the year is £4,654,000 (2019: £9,923,000).

The total dividends payable in respect of the financial year ended 30 November 2020, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered, are set out below:

Payment date	No. of shares	Amount per share	Year ended 30 November 2020 £'000
28 August 2020	123,145,765	2.40p	2,955
26 February 2021	134,675,000	2.00p	2,694
			5,649

The total dividends payable in respect of the financial year ended 30 November 2019, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered, are set out below: 

Payment date	No. of shares	Amount per share	Year ended 30 November 2019 £'000
30 August 2019	202,775,000	2.40p	4,867
28 February 2020	202,775,000	2.00p	4,055
			8,922

All dividends are paid as interim dividends, and all have been charged to revenue, where necessary utilising the revenue reserves.

13   Investments Held at Fair Value Through Profit or Loss

a) Investments held at fair value through profit or loss

	30 November 2020 £'000	30 November 2019 £'000
Opening book cost	239,434	232,411
Opening investment holding gains	74,171	54,013
Opening fair value	313,605	286,424
Analysis of transactions made during the year
Purchases at cost	110,093	78,759
Sales proceeds received	(187,901)	(72,613)
(Losses)/gains on investments held at fair value	(47,908)	20,925
Amortisation on fixed interest securities	122	110
Closing fair value	188,011	313,605
Closing book cost	152,439	239,434
Closing investment holding gains	35,572	74,171
Closing fair value	188,011	313,605

The Company received £187,901,000 (2019: £72,613,000) from disposal of investments in the year. The book cost of these investments when they were purchased was £197,210,000 (2019: £71,846,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

The following transaction costs, including stamp duty and broker commissions, were incurred during the year:

	30 November 2020 £'000	30 November 2019 £'000
On acquisitions	151	102
On disposals	147	47
	298	149

b) Fair value hierarchy 

The Company's financial instruments within the scope of IFRS 7 that are held at fair value comprise its investment portfolio and derivative financial instruments.

They are categorised into a hierarchy consisting of the following three levels:

Level 1 - valued using quoted prices in active markets for identical assets or liabilities.

Level 2 - valued by reference to valuation techniques using observable inputs other than quoted market prices included within Level 1.

Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to 'the fair value measurement of the relevant asset'.

Details of the valuation techniques used by the Company are given in note 2(g) above.

The following tables set out the fair value measurements using the IFRS 7 hierarchy at 30 November 2020 and 2019:

	As at 30 November 2020
	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Equity Investments	174,955	-	2,120	177,075
Interest bearing securities	10,936	-	-	10,936
Total	185,891	-	2,120	188,011
The Level 3 investment relates to the shares in Atom Bank.
	As at 30 November 2019
	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Equity Investments	288,954	-	3,191	292,145
Interest bearing securities	21,460	-	-	21,460
Total	310,414	-	3,191	313,605

The Level 3 investment relates to the shares in Atom Bank.

There have been no transfers during the year between Levels 1 and 2. A reconciliation of fair value measurements in Level 3 is set out below.

Level 3 investments at fair value through profit or loss	30 November 2020 £'000	30 November 2019 £'000
Opening balance	3,191	3,191
Total loss included in the statement of Comprehensive -on assets held at the year end	(1,071)	-
Closing balance	2,120	3,191

Level 3 Investments are recognised at fair value through profit or loss on a recurring basis.

Level 3 investments are valued in accordance with the accounting policy in Note 2(g)above. The valuation of the investment in Atom Bank was arrived at taking into account the operating performance of the bank and the market movements in share prices of UK bank peers. As a result, the valuation was discounted by 34%.

A +/- 10% change in the market value of UK bank peers used to value the investment in Atom Bank as at the year end would result in a +/- £212,000 (2019: £319,000) impact on the gains or losses on investments held at fair value in the Statement of Comprehensive Income.

c)  Unquoted investments 

The value of the unquoted investments as at 30 November 2020 was £2,120,000 (2018: £3,191,000) and the portfolio comprised the following holdings:

	30 November 2020 £'000	30 November 2019 £'000
Atom Bank	2,120	3,191
	2,120	3,191

At 30 November 2020, the Company owned 0.64% (2019: 0.64%) of Atom Bank's issued share capital. Atom Bank was granted a full banking licence on 4 April 2016 and started to accept savings and loan business from this date.

At 31 March 2020 (Atom Bank's financial year end), Atom Bank announced that it had made pre-tax losses of £63,945,000

(2019: £79,857,000) and had net assets attributable to shareholders of £200,503,000 (2019: £212,704,000).

The valuation of Atom Bank was reviewed by the Investment Manager and the Board during both the half year and full year

financial results process. On a longer-term basis the Investment Manager believes the business can generate attractive returns

by leveraging an efficient cost base, capital efficiency (IRB approval) and diversifying the loan book into higher margin products.

The Investment Manager has also been encouraged by the progress made recently with an improved UK mortgage pricing

environment leading to a wider net interest margin, growth of its SME business (benefiting from its approval as a CBILS lender)

and the transition of its core banking system onto Google's Cloud Platform.

14   Cash and Cash Equivalents 

	30 November 2020 £'000	30 November 2019 £'000
Cash at bank	140	1,780
Cash held at derivative clearing houses	-	2,395
Cash and Cash Equivalents	140	4,175
Bank overdraft	(383)	(4,875)
	(243)	(700)

15   Called Up Share Capital 

	30 November 2020 £'000	30 November 2019 £'000
Allotted, Called up and Fully paid:
Ordinary shares of 5p each:
Opening balance of 202,775,000 (30 November 2019: 202,775,000)	10,139	10,139
Issue of 104,335 (2019: nil) ordinary shares out of treasury	5	-
Repurchase of 79,159,235 (2019: nil) ordinary shares into treasury pursuant to tender offer	(3,958)	-
Repurchase of 670,000 (2019: nil) ordinary shares into treasury	(33)	-
Allotted, Called up and Fully paid: 123,050,100 (30 November 2019: 202,775,000) ordinary shares of 5p	6,153	10,139
79,724,900 (2019: nil) ordinary shares held in treasury	3,986	-
At 30 November 2020	10,139	10,139

This reserve is not distributable.

A total of 79,829,235 ordinary shares were repurchased into treasury for a total consideration of £81,423,000 (2019: £nil) plus expenses of £807,000, of which £10,000 relates to non-audit services, as defined under IAS 32. On 30 November 2020, 104,335 ordinary shares were issued out of treasury at a cost of £142,000 (2019: £nil).

Subsequent to the year end 14,074,900 ordinary shares were issued out of treasury at an average price of 147.0p per share.

The ordinary shares held in treasury have no voting rights and are not entitled to dividends.

16   Net Asset Value Per Ordinary Share 

	30 November 2020	30 November 2019
Net assets attributable to ordinary shareholders (£'000)	165,743	301,170
Ordinary shares in issue at end of year	123,050,100	202,775,000
Net asset value per ordinary share (pence)	134.70	148.52

As at 30 November 2020, there were no potentially dilutive shares in issue (2019: nil).

17   Transactions with the Investment Manager and Related Party Transactions

a) Transactions with the manager 

Under the terms of an agreement dated 11 June 2013 the Company appointed Polar Capital LLP ("Polar Capital") to provide investment management, accounting, secretarial and administrative services. Details of the fee arrangement for these services are given in the Strategic Report. The total fees paid under this agreement to Polar Capital in respect of the year ended 30 November 2020 were £1,494,000 (2019: £2,307,000) of which £179,000 (2019: £201,000) was outstanding at the year end.

A performance fee of £1,269,000 (2019: £nil) accrued in respect of the year, and the whole of this amount was outstanding at the year end. Any accrued performance fee is payable at the end of each five-year tender period, the next being in 2025. See Strategic Report above for more details.

In addition, the total research costs in respect of the period from 1 January 2020 to the year ended 30 November 2020 were £14,000 (2019: £19,000) of which £7,000 (2019: £9,000) was outstanding at the year-end.

b) Related party transactions 

The Company has no employees and therefore no key management personnel other than the Directors. The Company paid £122,000 (2019: £106,000) to the Directors of which £79,000 (2019: £34,000) are outstanding at the year end and the Remuneration Report is provided in the Annual Report. When dividends are paid by the Company these are received by the Directors at the same rates and terms as by all other shareholders.

18.  Post Balance Sheet Events

After the year end, a further 14,074,900 ordinary shares were issued out of treasury. Following these share issues, the total number of ordinary shares in issue was 137,125,000 and 65,650,000 shares were held in treasury as at 22 February 2021.

Since the year end, the Company has increased the size of the revolving credit facility with ING Luxembourg SA by an additional £10m taking the aggregate funds available under the 2020 revolving credit facility to £22.5m, expiring on 12 July 2021. The Company has drawn down a further USD$6.7m (£5m) from the revolving credit facility since the year end, see Note 17 in the Annual Report for further details.

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.

AGM 

The Annual Report and separate Notice of Annual General Meeting will be posted to Shareholders in March 2021 and is available from the Company Secretary at the Company's Registered Office, (16 Palace Street London SW1E 5JD) or from the Company's website. The AGM will be held at the Company's Registered Office at 11am on 30 March 2021. Due to the social distancing measures and restrictions currently in place prohibiting public gatherings as a result of COVID-19, the AGM will be held as a closed-door meeting with only the necessary quorum present to conduct the formal business.

Forward Looking Statements

Certain statements included in the Annual Report and Financial Statements contain forward-looking information concerning the Company's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the principal risks and uncertainties included in the Strategic Report Section of the Annual Report and Financial Statements.

No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Global Financials Trust plc or any other entity and must not be relied upon in any way in connection with any investment decision. The Company undertakes no obligation to update any forward-looking statements. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

FR SEDEFEEFSELE