Financial Results for period to 31 May 2018
POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC (the "Company")
Unaudited Results for the half year ended 31 May 2018
Legal Entity Identifier: 549300G5SWN8EP2P4U41
11 July 2018
Financial Highlights for the half year ended 31 May 2018
|
Performance (Sterling total return)
|
For six months ended 31 May 2018 % |
Since Inception % |
||
|
Net asset value (NAV) per ordinary share (1) |
(0.1) |
70.3 |
||
|
Ordinary share price (2) |
(1.1) |
53.9 |
||
|
Ordinary share price including subscription share value (3) |
- |
57.3 |
||
|
Benchmark (4) MSCI World Financials + RE Index |
(0.7) |
67.6 |
||
|
Other Indices and peer group |
|
|
||
|
MSCI World |
3.5 |
82.6 |
||
|
S&P 500 |
4.8 |
112.4 |
||
|
Eurostoxx 600 |
0.7 |
55.6 |
||
|
FTSE All Share |
6.7 |
50.8 |
||
|
Lipper Financial Sector (5) |
(0.3) |
49.8 |
||
|
Financials |
|
As at |
As at 30 November 2017 |
% Change |
|
Net assets per ordinary share (basic and diluted) |
|
142.6p |
144.6p |
(1.4%) |
|
Ordinary Share price |
|
135.0p |
138.2p |
(2.3%) |
|
Ordinary Shares in issue |
|
202,775,000 |
202,775,000 |
- |
|
|
|
Six months to 31 May 2018 |
Year to 30 November 2017 |
|
|
Earnings per ordinary share (basic and diluted): |
|
|
|
|
|
Revenue Return |
|
2.92p |
4.29p |
- |
|
Capital Return |
|
(3.15)p |
16.14p |
- |
|
Total |
|
(0.23)p |
20.43p |
- |
|
Ongoing charges (6) |
|
1.02% |
0.99% |
- |
|
Dividends* |
|
|
|
|
|
First interim |
|
2.25p |
2.10p |
7.1% |
|
Second interim |
|
- |
1.80p |
- |
|
Total |
|
2.25p |
3.90p |
- |
*The Company declares dividends in respect of a financial year in July and January for payment at the end of the following August and February. The first interim dividend for the year ending 30 November 2018 was declared on 4 July 2018 and will be paid on 31 August 2018 to shareholders on the register on 20 July 2018, the shares will go ex-dividend on 19 July 2018. The second interim dividend will be declared in January 2019 for payment in February 2019.
Note 1 The total return NAV performance for the period is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Performance since inception has been calculated from the initial NAV of 98p to 31 May 2018. Dividends are deemed to be reinvested on the ex-dividend date as this is the protocol used by the Company's benchmark and other indices.
Note 2 The total return share price performance is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date. Performance since inception has been calculated using the launch price of 100p to the closing price on 31 May 2018.
Note 3 The total return share price performance since inception includes the value of the subscription shares issued free of payment at launch on the basis of 1 for 5 ordinary shares and assumes such were held throughout the period from launch to the conversion date of 31 July 2017. Performance is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date and uses the launch price of 100p per ordinary share and the closing price per ordinary share on 31 May 2018.
Note 4 The Benchmark was the MSCI World Financials Index to 31 August 2016, and the MSCI World Financials Index + Real Estate, for the period 1 September 2016 to 31 May 2018. See 'Benchmark' within the About Us section.
Note 5 The Lipper Financial Sector comprises 56 open ended funds.
Note 6 Ongoing charges represents the total expenses of the Company, excluding finance costs, expressed as a percentage of the average daily net asset value, calculated in accordance with AIC guidance issued in May 2012. The ongoing charges figure as at 31 May 2018 is for the six-month period from 30 November 2017 and is annualised for comparison with the full year's calculation as at 30 November 2017. From the 3 January 2018, the research cost borne by the Company is included in the ongoing charge calculation.
Data sourced by HSBC Securities Services Limited, Polar Capital LLP, MSCI and Lipper.
|
For further information please contact: |
Tracey Lago, Company Secretary Polar Capital Global Financials Trust Plc |
Tel: 020 7227 2700 |
Chairman's Statement
Performance
The half year financial results of the Company for the period to 31 May 2018 demonstrate a 0.1% fall in the NAV total return performance for the period. This compares to a fall of 0.7% in the benchmark performance over the same period. Further information on investment performance can be found within the Investment Manager's Report.
Dividends
I am pleased to announce that investment performance and income generation have allowed the Board to maintain the Company's record of steadily growing dividends. The Board has declared an interim dividend of 2.25p per share, payable on 31 August 2018 to shareholders on the register on 20 July 2018. This represents an increase of 7.1% over last year's first interim dividend of 2.10p.
The Company aims to pursue a policy of dividend growth, although there is no guarantee that this can be achieved. The Board monitors, with the Investment Manager, the prospects for dividends from its equity holdings, interest income from cash and fixed income securities, and the potential to earn additional revenue from writing options.
Outlook
In my last Interim Statement, I noted that sentiment towards the financial sector was finally improving, albeit from a very low level following the global financial crisis. In discussion with market participants and investors we believe this recovery in sentiment is becoming grounded in improving fundamentals. These include a better outlook for global growth; the prospect of rising bank net interest margins as the interest rate cycle turns; stronger bank balance sheets and regulatory capital; greater operational leverage from digitisation and consolidation, and the passing of the penal cycle of fines on financial services firms. It may have taken longer than we would have liked but a period of rising profitability and greater pay-outs to investors is now underway. Coupled with the fact that the sector has yet to be fully re-rated, these fundamentals present the most favourable medium and long-term outlook for the sector that we have seen since the financial crisis.
Corporate Matters:
Principal Risks and Uncertainties
The Directors consider that the principal risks and uncertainties faced by the Company for the remaining six months of the financial year, which could have a material impact on performance, remain consistent with those outlined in the Annual Report for the year ended 30 November 2017.
These principal risks can be summarised as Business risks, including meeting the investment objective of the Company, and market-related risks encompassing factors such as excessive share price discount to NAV, market volatility, stock pricing and liquidity risk, currency and interest rate risk, counterparty risk, gearing and the ability to meet the dividend policy. Other principal risks include Infrastructure risks, including the performance of the operational and accounting systems and processes provided by the Investment Manager, taxation, mis-valuation and legal and regulatory risks; and External risks which focuses on the exposure to the economic cycles of the markets of the underlying investments.
The investment manager's report comments on the performance in the period under review and the outlook for market-related risks.
The Company's risk management framework is a structured process for identifying, assessing and managing the risks associated with the Company's business. The investment portfolio is diversified by geography which mitigates risk, but the portfolio is focused on a single sector, being financials, which means that it may be more sensitive to investor sentiment than a non-sector specific investment portfolio. To further mitigate risk the investments are diversified across a variety of sub-sectors including banking, insurance, property and others.
Going Concern
The Board monitors the financial position of the Company and confirms that there continues to be a reasonable expectation that there are adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial results of the Company.
Related Party Transactions
In accordance with DTR 4.2.8R there have been no new related party transactions during the six-month period to 31 May 2018 and therefore nothing to report on any material effect by such transactions on the financial position or performance of the Company during that period. There have therefore been no changes in any related party transaction described in the last Annual Report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year or to the date of this report.
MiFID II
As detailed in the Chairman's Statement in the Annual Report 2017 we participated in extensive discussions with Polar Capital, our Investment Manager, and have agreed a budget for research in line with the MiFID II regulatory reform which came into force from 3 January 2018. This reform aims to 'unbundle' commission payments in order that all trading is dealt at 'execution only rates'. Payments for research provided by brokers will therefore be transparent and are expected to reduce significantly.
Polar Capital Global Financials Trust plc is a specialist trust. External research is therefore of considerable value to the team and will continue to be utilised. By agreeing a mutual budget arrangement with Polar Capital, we believe we have achieved a fair and reasonable resolution to the cost of research.
We have agreed with Polar Capital that the Company will absorb the cost of specialist and bespoke research while Polar Capital will be responsible for the cost of written research otherwise termed 'Waterfront' research. We believe that this is a fair and equitable approach which will be monitored through the 2018 transitional year and will be considered again before the budget is re-set for 2019.
We have received confirmation from the Company's corporate adviser that contributing to the cost of research is not a new related party transaction and that no further approval stage is required.
Robert Kyprianou
Chairman
11 July 2018
Investment Manager's Report for the half year ended 31 May 2018
Nick Brind & John Yakas
Performance
Equity markets rose over the period covered by this report despite it being an extremely volatile one. The MSCI World Index rose by 3.5% led by US equities, while European and emerging markets lagged, after taking into account currency movements. Financial shares as illustrated by our benchmark index, the MSCI World Financials Index + Real Estate Index, fell by 0.7%. Against this background the Company's net asset value (NAV) total return over the period fell by 0.1%.
Investment performance was strong in the first three months, albeit we gave up some of this performance over the following three months as European financials, where the Company has a higher weighting than our benchmark, sold off in May and conversely real-estate investment trusts (REITs) rallied. The overall outperformance was driven by good stock selection offset by underweight positions in the US and Japan and overweight positioning in Europe as discussed above. Currency was also a small headwind for performance reflecting a lower weighting to the US dollar.
The biggest contributors to performance were the Company's holdings in Mastercard, the payments company, IntegraFin Holdings, which owns Transact, an IFA platform for administering investment portfolios, in the UK and SVB Financial, a Californian bank holding company for Silicon Valley Bank. The biggest detractors were ING Groep, a Dutch bank and one of the largest holdings in the Company's portfolio, Arrow Global a UK listed debt management business and Chubb, the largest quoted property & casualty company globally.
Investment Review
Financials had a strong start to the financial year. The two biggest pieces of news in December were the passing of US tax reform and the announcement of Basel 4 rules on what final capital requirements for banks globally would be, bringing a conclusion to post financial crisis reforms for the banking sector. US tax reform was seen as being very beneficial for earnings and while there has been an upfront hit to capital for some companies, as the value of their deferred tax assets were reduced, it has not affected companies' ability to return capital to shareholders.
The outlook for interest rates is an important driver for the banks sector as it is positively correlated to higher interest rates as that should lead to wider net interest margins and therefore profitability. Positive economic data at the start of 2018 led to an expectation for interest rate rises being pulled forward earlier than expected which helped underpin the performance of the sector, in particular US banking stocks.
Nevertheless, there was a sharp correction in equity markets at the beginning of the February as concerns about rising inflation could prompt the Federal Reserve to accelerate the pace of interest rates hikes. The sell-off was exacerbated by the collapse of a number of structured products that sold volatility derivatives albeit surprisingly, financials outperformed against this background likely reflecting the sector being seen as a beneficiary of higher interest rates which was perceived as the reason behind the correction.
Financials underperformed in March and then gave up more of their relative performance in the remaining two months of the period. Trade tariffs imposed on certain Chinese imports into the US and the departure of Secretary of State, Rex Tillerson, as well as Gary Cohn, Director of National Economic Council, also added to concerns that the direction of policy that the Trump administration would follow would become increasingly protectionist. The consequence of this led to interest rate expectations softening adding to weakening sentiment hit by a fall in leading economic indicators.
In May, equity markets were hit by the political uncertainty in Italy, around the formation of a new government, and to a lesser extent Spain as well as signs of stress within certain emerging markets. The decision by the Italian president not to approve the appointment of an anti-euro finance minister in the proposed cabinet put forward by the leaders of the Five Star Movement and League parties raised concerns that fresh elections would be called which could lead to anti-euro sentiment in Italy rising. European financials and in particular Italian banks were sharply weaker on the back of this.
We sold the Company's holding in Validus, a US property & casualty insurance business, following the announcement it had agreed to be taken over by AIG. We also sold holdings in Axa, the French insurer, Yes Bank, an Indian bank, Sbanken, a Norwegian digital bank and Main Street Capital, which is a business development company. Against these we increased our exposure to Spain by adding to our holding in Banco Santander and Caixabank. We also took the opportunity to add to a number of our other largest holdings in the Company, but the net effect was to reduce the number of holdings from 74 to 69. Gearing at the end of May at 2.8% was only marginally higher than it had been at the beginning of the financial year.
Outlook
Unsurprisingly the sector's performance remains linked to the outlook for economic growth and interest rates with share prices of banks and life assurance companies positively correlated to the movement in bond yields. Meanwhile nonlife insurance stocks, while beneficiaries from rising interest rates, have lagged probably in part due to their defensive qualities, as cyclical companies have been outperforming reflecting their greater economic sensitivity, but also negative sentiment around reinsurance pricing.
US and European banks, where the largest percentage of the portfolio resides, have failed to provide any fresh impetus to the sector post results, although US banks have seen a big boost to their earnings from the fall in corporate tax rates. Nevertheless, the underlying trend of banks continuing to return capital to shareholders through buybacks and dividends has continued and with significantly more clarity on the outlook for capital requirements, this should help to underpin sentiment towards the banking sector.
While US banks have seen better underlying operating trends, benefiting from an increase in net interest margins and loan growth, than their European peers, it was only rising concerns around Italian political risk that resulted in the sell-off in European bank shares during May. The biggest risk in the short-term in Europe is if the new Italian government heads down a path of confrontation with other Eurozone governments.
In the US, after receiving Senate approval, the House of Representatives, in May, approved a series of banking reforms which rolls back part of the Dodd-Frank post financial crisis legislation and continues a trend of a gradual easing in financial regulation. One of the key aspects of the bill is a reform to increase the threshold for a bank to qualify as systemically important (raised to US$250bn in assets from US$50bn previously) which will materially reduce the cost of regulation for smaller banks. Furthermore, other proposed changes give US banks greater flexibility to return more capital via buyback and dividends to shareholders going forward. The clarity now provided on Basel 4 should also allow European banks to have more confidence on what sustainable level of dividends they can pay to shareholders as some banks had held back on returning surplus capital to shareholders until the rules on capital requirements were finalised.
We have continued to see M&A activity. In the insurance sector, other than the acquisition of Validus mentioned above, Axa announced the acquisition of XL Group, another property & casualty insurance business. In the banking sector we have seen a small pick-up in activity in the US and similarly in the UK, CYBG, the owner of Clysdale and Yorkshire Banks approached Virgin Money about a tie up. There have also been a number of acquisitions in the REIT sector.
Over the next couple of years, we would expect to see a significant increase in M&A activity in the US. There are still around 5,000 banks in the US as it was not until the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, when there were over 12,000 banks in existence, which lifted the restrictions on banks operating across state borders. One of the key drivers for increased activity will be the need for smaller banks to compete with their much larger peers where they are being outspent on technology.
We continue to see a lot of value in the sector, as at the time of writing, the financials sector, in particular banks, has pulled back relative to equity markets and, as highlighted above, European banks have been particularly weak. Against the background of rising interest rates this looks surprising and anomalous, unless economic indicators turn down sharply in due course. Therefore, notwithstanding short-term volatility in financial markets we remain very constructive on the outlook for the sector.
Nick Brind & John Yakas
11 July 2018
Note
We would draw shareholder's attention to www.polarcapitalglobalfinancialstrust.co.uk for regular monthly portfolio updates and commentary.
*index performance figures are total return in sterling
Portfolio as at 31 May 2018
|
|
|
|
|
Market Value (£'000) |
% of total net assets |
||
|
|
|
|
|
31 May |
30 November |
31 May |
30 November |
|
|
|
Stock |
Country |
2018 |
2017 |
2018 |
2017 |
|
1 |
(1) |
JP Morgan Chase |
North America |
15,502 |
14,315 |
5.4% |
4.9% |
|
2 |
(2) |
Bank Of America |
North America |
12,834 |
11,209 |
4.4% |
3.8% |
|
3 |
(4) |
Wells Fargo |
North America |
10,022 |
9,351 |
3.5% |
3.2% |
|
4 |
(3) |
ING Groep |
Europe |
8,280 |
9,958 |
2.9% |
3.4% |
|
5 |
(5) |
Chubb |
Europe |
8,121 |
8,939 |
2.8% |
3.0% |
|
6 |
(10) |
Mastercard |
North America |
8,097 |
6,050 |
2.8% |
2.1% |
|
7 |
(6) |
Citigroup |
North America |
7,852 |
8,404 |
2.7% |
2.9% |
|
8 |
(14) |
Sumitomo Mitsui Financial |
Japan |
7,715 |
5,630 |
2.7% |
1.9% |
|
9 |
(7) |
BNP Paribas |
Europe |
6,578 |
8,350 |
2.3% |
2.8% |
|
10 |
(11) |
Toronto-Dominion Bank |
North America |
6,492 |
5,965 |
2.2% |
2.0% |
|
Top 10 investments |
|
91,493 |
|
31.7% |
|
||
|
11 |
(13) |
KBC Groep |
Europe |
6,449 |
5,898 |
2.2% |
2.0% |
|
12 |
(9) |
Marsh & McLennan |
North America |
6,420 |
6,340 |
2.2% |
2.2% |
|
13 |
(8) |
PNC Financial Services |
North America |
6,143 |
6,369 |
2.1% |
2.2% |
|
14 |
(12) |
Sampo |
Europe |
5,795 |
5,945 |
2.0% |
2.0% |
|
15 |
(19) |
Oversea-China Banking Corp |
Asia (ex-Japan) |
5,760 |
5,074 |
2.0% |
1.7% |
|
16 |
(17) |
US Bancorp |
North America |
5,611 |
5,092 |
1.9% |
1.7% |
|
17 |
(16) |
Keycorp |
North America |
5,588 |
5,400 |
1.9% |
1.9% |
|
18 |
(20) |
Pacific Premier Bancorp |
North America |
5,376 |
5,067 |
1.9% |
1.7% |
|
19 |
(15) |
First Republic Bank |
North America |
5,340 |
5,431 |
1.8% |
1.9% |
|
20 |
(50) |
Arch Capital |
North America |
4,850 |
2,914 |
1.7% |
1.0% |
|
Top 20 investments |
|
148,825 |
|
51.4% |
|
||
|
21 |
(21) |
Banco Santander |
Europe |
4,707 |
4,926 |
1.6% |
1.7% |
|
22 |
(23) |
Allianz |
Europe |
4,683 |
4,517 |
1.6% |
1.5% |
|
23 |
(18) |
Swedbank |
Europe |
4,625 |
5,077 |
1.6% |
1.7% |
|
24 |
(30) |
SVB Financial |
North America |
4,613 |
3,899 |
1.6% |
1.3% |
|
25 |
(25) |
Commonwealth Bank of Australia |
Asia (ex-Japan) |
4,455 |
4,397 |
1.5% |
1.5% |
|
26 |
(26) |
Solar Capital |
North America |
4,266 |
4,151 |
1.5% |
1.4% |
|
27 |
(29) |
Blackstone |
North America |
4,101 |
4,008 |
1.4% |
1.4% |
|
28 |
(24) |
Intesa Sanpaolo |
Europe |
3,985 |
4,488 |
1.4% |
1.5% |
|
29 |
(36) |
Lloyds Banking Group |
United Kingdom |
3,931 |
3,537 |
1.4% |
1.2% |
|
30 |
(34) |
Ares Capital |
North America |
3,889 |
3,673 |
1.3% |
1.3% |
|
Top 30 investments |
|
192,080 |
|
66.3% |
|
||
|
31 |
(39) |
E Sun Financial |
Asia (ex-Japan) |
3,826 |
3,335 |
1.3% |
1.1% |
|
32 |
(33) |
Mapletree Commercial |
Asia (ex-Japan) |
3,763 |
3,719 |
1.3% |
1.3% |
|
33 |
(31) |
Direct Line Insurance |
United Kingdom |
3,649 |
3,734 |
1.3% |
1.3% |
|
34 |
(41) |
East West Bancorp |
North America |
3,632 |
3,229 |
1.3% |
1.1% |
|
35 |
(28) |
UBS Group |
Europe |
3,629 |
4,085 |
1.3% |
1.4% |
|
36 |
(49) |
Citizens Financial Group |
North America |
3,602 |
2,930 |
1.2% |
1.0% |
|
37 |
(45) |
OneSavings Bank |
United Kingdom |
3,527 |
3,132 |
1.2% |
1.1% |
|
38 |
(27) |
Fortune REIT |
Asia (ex-Japan) |
3,488 |
4,137 |
1.2% |
1.4% |
|
39 |
(56) |
Charter Court Financial Services |
United Kingdom |
3,448 |
2,522 |
1.2% |
0.9% |
|
40 |
(37) |
Tisco Financial |
Asia (ex-Japan) |
3,408 |
3,479 |
1.2% |
1.2% |
|
Top 40 investments |
|
228,052 |
|
78.8% |
|
||
|
41 |
- |
IntegraFin |
United Kingdom |
3,360 |
- |
1.2% |
- |
|
42 |
(40) |
BOC Hong Kong |
Asia (ex-Japan) |
3,333 |
3,295 |
1.2% |
1.1% |
|
43 |
(43) |
TBC Bank |
United Kingdom |
3,330 |
3,177 |
1.2% |
1.1% |
|
44 |
(38) |
HSBC Holdings |
Asia (ex-Japan) |
3,306 |
3,352 |
1.1% |
1.1% |
|
45 |
- |
Mitsubishi UFJ |
Japan |
3,291 |
- |
1.1% |
- |
|
46 |
(47) |
VPC Specialty Lending Investments |
Fixed Income |
3,198 |
3,044 |
1.1% |
1.0% |
|
47 |
(42) |
Atom Bank (unquoted) |
United Kingdom |
3,191 |
3,191 |
1.1% |
1.1% |
|
48 |
(44) |
Nationwide Building Society 10.25% CCDS |
Fixed Income |
3,090 |
3,140 |
1.1% |
1.1% |
|
49 |
(52) |
HDFC Bank |
Asia (ex-Japan) |
2,958 |
2,782 |
1.0% |
0.9% |
|
50 |
(35) |
Arrow Global Group |
United Kingdom |
2,860 |
3,663 |
1.0% |
1.3% |
|
Top 50 investments |
|
259,969 |
|
89.9% |
|
||
|
51 |
(51) |
Frasers Centrepoint Trust |
Asia (ex-Japan) |
2,837 |
2,808 |
1.0% |
1.0% |
|
52 |
- |
CaxiaBank |
Europe |
2,826 |
- |
1.0% |
- |
|
53 |
(55) |
City of London Investment Group |
United Kingdom |
2,722 |
2,645 |
0.9% |
0.9% |
|
54 |
(32) |
Societe Generale |
Europe |
2,665 |
3,722 |
0.9% |
1.3% |
|
55 |
(58) |
P2P Global Investments |
Fixed Income |
2,593 |
2,310 |
0.9% |
0.8% |
|
56 |
(46) |
Meta Financial Group |
North America |
2,507 |
3,074 |
0.9% |
1.0% |
|
57 |
(57) |
International Personal Finance 5.75% Bond |
Fixed Income |
2,472 |
2,495 |
0.9% |
0.9% |
|
58 |
(61) |
Pennant Park Floating Rate Capital |
North America |
2,423 |
2,167 |
0.8% |
0.7% |
|
59 |
(60) |
Aldermore Group Plc 8.5% Bond |
Fixed Income |
2,218 |
2,213 |
0.8% |
0.8% |
|
60 |
(59) |
Sparebank SMN |
Europe |
2,215 |
2,270 |
0.8% |
0.8% |
|
Top 60 investments |
|
285,447 |
|
98.8% |
|
||
|
61 |
(53) |
Indiabulls Housing Finance |
Asia (ex-Japan) |
2,052 |
2,758 |
0.7% |
0.9% |
|
62 |
(63) |
Phoenix Life 7.25% Bond |
Fixed Income |
1,819 |
1,887 |
0.6% |
0.6% |
|
63 |
(68) |
DNB |
Europe |
1,417 |
1,423 |
0.5% |
0.5% |
|
64 |
(64) |
Cielo |
Latin America |
1,225 |
1,853 |
0.4% |
0.6% |
|
65 |
(71) |
Alpha Bank |
Eastern Europe |
1,219 |
1,089 |
0.4% |
0.4% |
|
66 |
(70) |
Pension Insurance 6.5% Bond |
Fixed Income |
1,137 |
1,128 |
0.4% |
0.4% |
|
67 |
(72) |
International Personal Finance 6.125% Bond |
Fixed Income |
904 |
886 |
0.3% |
0.3% |
|
68 |
- |
Augmentum Fintech |
United Kingdom |
758 |
- |
0.3% |
- |
|
Total investments |
|
295,978 |
|
102.4% |
|
||
|
Other net liabilities |
|
(6,802) |
|
(2.4%) |
|
||
|
Total assets |
|
289,176 |
|
100.0% |
|
||
Note: Figures in brackets denote comparative rankings as at 30 November 2017.
|
Geographical Exposure* |
|
|
|
|
31 May 2018 |
30 November 2017 |
|
North America |
44.5% |
42.3% |
|
Europe |
22.9% |
26.7% |
|
Asia (ex-Japan) |
13.5% |
13.7% |
|
United Kingdom |
10.8% |
8.9% |
|
Fixed Income |
6.1% |
7.2% |
|
Japan |
3.8% |
1.9% |
|
Latin America |
0.4% |
0.6% |
|
Eastern Europe |
0.4% |
0.4% |
|
Other net liabilities |
(2.4%) |
(1.7%) |
|
Total |
100.0% |
100.0% |
|
Sector Exposure* |
31 May 2018 |
30 November 2017 |
|
Banks |
68.4% |
65.5% |
|
Insurance |
11.6% |
13.5% |
|
Diversified Financials |
10.0% |
9.7% |
|
Fixed Income |
6.1% |
7.2% |
|
Real Estate |
3.5% |
3.7% |
|
Software & Services |
2.8% |
2.1% |
|
Other net liabilities |
(2.4%) |
(1.7%) |
|
Total |
100.0% |
100.0% |
|
Market Cap* |
31 May 2018 |
30 November 2017 |
|
Large (>US$5bn) |
82.3% |
80.0% |
|
Medium (US$0.5bn - US$5bn) |
17.6% |
19.6% |
|
Small (<US$0.5bn) |
2.5% |
2.1% |
|
Other net liabilties |
(2.4%) |
(1.7%) |
|
Total |
100.0% |
100.0% |
* Based on the net assets as at 31 May 2018 of £289.2m (30 November 2017: £293.3m).
Statement of Directors' Responsibilities
As at 31 May 2018
Directors' Responsibility Statement
The Directors of Polar Capital Global Financials Trust plc, who are listed in the Shareholder Information section, confirm to the best of their knowledge that:
• the condensed set of financial statements have been prepared in accordance with International Accounting Standard 34 as adopted by the European Union;
• the Interim Management Report (constituting the Investment Manager's report and Corporate Matters) includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R; and
• in accordance with DTR 4.2.8R there have been no new related party transactions during the six month period to 31 May 2018 and therefore nothing to report on any material effect by such transactions on the financial position or performance of the Company during that period. There have been no changes in any related party transaction described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.
The half year financial report for the six months ended 31 May 2018 has not been audited or reviewed by the auditors.
The financial report for the six months ended 31 May 2018 was approved by the Board on 11 July 2018 and the responsibility statement was signed on its behalf by Robert Kyprianou, Chairman of the Board.
On behalf of the Board
Robert Kyprianou
Chairman
11 July 2018
Statement of Comprehensive Income for the half year ended 31 May 2018
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
|||||||
|
Notes |
Half year ended 31 May 2018 |
Half year ended 31 May 2017 |
Year ended 30 November 2017 |
|||||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
return |
Return |
Return |
return |
return |
return |
Return |
return |
Return |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment income |
2 |
6,998 |
- |
6,998 |
5,546 |
- |
5,546 |
9,757 |
8 |
9,765 |
|
Other operating income |
2 |
7 |
- |
7 |
2 |
- |
2 |
6 |
- |
6 |
|
(Losses)/gains on investments held at fair value |
|
- |
(5,227) |
(5,227) |
- |
18,214 |
18,214 |
- |
30,771 |
30,771 |
|
Gains on derivatives |
|
- |
- |
- |
- |
310 |
310 |
- |
309 |
309 |
|
Other currency (losses)/gains |
|
- |
(72) |
(72) |
- |
(27) |
(27) |
- |
25 |
25 |
|
Total income |
7,005 |
(5,299) |
1,706 |
5,548 |
18,497 |
24,045 |
9,763 |
31,113 |
40,876 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
Investment management fee |
(242) |
(966) |
(1,208) |
(194) |
(775) |
(969) |
(416) |
(1,665) |
(2,081) |
|
|
Other administrative expenses |
(271) |
(29) |
(300) |
(264) |
- |
(264) |
(520) |
- |
(520) |
|
|
Total expenses |
(513) |
(995) |
(1,508) |
(458) |
(775) |
(1,233) |
(936) |
(1,665) |
(2,601) |
|
|
Profit/(loss) before finance costs and tax |
6,492 |
(6,294) |
198 |
5,090 |
17,722 |
22,812 |
8,827 |
29,448 |
38,275 |
|
|
Finance costs |
(34) |
(134) |
(168) |
(26) |
(102) |
(128) |
(53) |
(212) |
(265) |
|
|
Profit/(loss) before tax |
6,458 |
(6,428) |
30 |
5,064 |
17,620 |
22,684 |
8,774 |
29,236 |
38,010 |
|
|
Tax |
(546) |
48 |
(498) |
(501) |
140 |
(361) |
(950) |
185 |
(765) |
|
|
Net profit/(loss) for the period and total comprehensive income |
5,912 |
(6,380) |
(468) |
4,563 |
17,760 |
22,323 |
7,824 |
29,421 |
37,245 |
|
|
Earnings per ordinary share (basic) (pence) |
3 |
2.92 |
(3.15) |
(0.23) |
2.65 |
10.32 |
12.97 |
4.29 |
16.14 |
20.43 |
|
Earnings per ordinary share (diluted) (pence) |
3 |
2.92 |
(3.15) |
(0.23) |
2.59 |
10.10 |
12.69 |
4.29 |
16.14 |
20.43 |
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The notes to follow form part of these financial statements.
Statement of Changes in Equity for the half year ended 31 May 2018
|
|
|
(Unaudited) Half year ended 31 May 2018 |
||||||
|
Called up share capital £'000 |
Capital Redemption Reserve £'000 |
Share premium reserve £'000 |
Special distributable reserve £'000 |
Capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
||
|
Total equity at 1 December 2017 |
10,139 |
251 |
55,852 |
139,235 |
81,124 |
6,691 |
293,292 |
|
|
Total comprehensive income: |
|
|
|
|
|
|
|
|
|
(Loss)/profit for the half year ended 31 May 2018 |
- |
- |
- |
- |
(6,380) |
5,912 |
(468) |
|
|
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
|
Conversion of subscription shares - prior year adjustment |
- |
- |
2 |
- |
- |
- |
2 |
|
|
Equity dividends paid |
- |
- |
- |
- |
- |
(3,650) |
(3,650) |
|
|
Total equity at 31 May 2018 |
10,139 |
251 |
55,854 |
139,235 |
74,744 |
8,953 |
289,176 |
|
|
|
|
(Unaudited) Half year ended 31 May 2017 |
||||||
|
Called up share capital £'000 |
Capital Redemption Reserve £'000 |
Share premium reserve £'000 |
Special distributable reserve £'000 |
Capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
||
|
Total equity at 1 December 2016 |
8,915 |
251 |
21,946 |
139,235 |
51,703 |
5,238 |
227,288 |
|
|
Total comprehensive income: |
|
|
|
|
|
|
|
|
|
Profit for the half year ended 31 May 2017 |
- |
- |
- |
- |
17,760 |
4,563 |
22,323 |
|
|
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
|
Equity dividends paid |
- |
- |
- |
- |
- |
(2,755) |
(2,755) |
|
|
Total equity at 31 May 2017 |
8,915 |
251 |
21,946 |
139,235 |
69,463 |
7,046 |
246,856 |
|
|
|
|
(Audited) Year ended 30 November 2017 |
||||||
|
Called up share capital £'000 |
Capital Redemption Reserve £'000 |
Share premium reserve £'000 |
Special distributable reserve £'000 |
Capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
||
|
Total equity at 1 December 2016 |
8,915 |
251 |
21,946 |
139,235 |
51,703 |
5,238 |
227,288 |
|
|
Total comprehensive income: |
|
|
|
|
|
|
|
|
|
Profit for the year ended 30 November 2017 |
- |
- |
- |
- |
29,421 |
7,824 |
37,245 |
|
|
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
|
Conversion of subscription shares |
1,224 |
- |
33,906 |
- |
- |
- |
35,130 |
|
|
Equity dividends paid |
- |
- |
- |
- |
- |
(6,371) |
(6,371) |
|
|
Total equity at 30 November 2017 |
10,139 |
251 |
55,852 |
139,235 |
81,124 |
6,691 |
293,292 |
|
The notes to follow form part of these financial statements
Balance Sheet as at 31 May 2018
|
|
Notes |
(Unaudited) 31 May 2018 £'000 |
(Unaudited) 31 May 2017 £'000 |
(Audited) 30 November 2017 £'000 |
|
Non-current assets |
|
|
|
|
|
Investments held at fair value through profit or loss |
|
295,978 |
253,656 |
298,375 |
|
Current assets |
|
|
|
|
|
Receivables |
|
1,525 |
1,212 |
766 |
|
Corporation tax receivable |
|
30 |
- |
20 |
|
Overseas tax recoverable |
|
125 |
85 |
98 |
|
Cash and cash equivalents |
|
14,504 |
9,874 |
7,231 |
|
|
|
16,184 |
11,171 |
8,115 |
|
Total assets |
|
312,162 |
264,827 |
306,490 |
|
Current liabilities |
|
|
|
|
|
Payables |
|
(486) |
(471) |
(3,198) |
|
Bank loan |
|
(22,500) |
(17,500) |
(10,000) |
|
|
|
(22,986) |
(17,971) |
(13,198) |
|
Net assets |
|
289,176 |
246,856 |
293,292 |
|
Equity attributable to equity shareholders |
|
|
|
|
|
Called up share capital |
|
10,139 |
8,915 |
10,139 |
|
Capital redemption reserve |
|
251 |
251 |
251 |
|
Share premium reserve |
|
55,854 |
21,946 |
55,852 |
|
Special distributable reserve |
|
139,235 |
139,235 |
139,235 |
|
Capital reserves |
|
74,744 |
69,463 |
81,124 |
|
Revenue reserve |
|
8,953 |
7,046 |
6,691 |
|
Total equity |
|
289,176 |
246,856 |
293,292 |
|
Net asset value per ordinary share (basic) (pence) |
4 |
142.61 |
143.38 |
144.64 |
|
Net asset value per ordinary share (diluted) (pence) |
4 |
142.61 |
139.09 |
144.64 |
The notes to follow form part of these financial statements.
Robert Kyprianou
Chairman
11 July 2018
Cash Flow Statement for the half year ended 31 May 2018
|
|
(Unaudited) Half year ended 31 May 2018 £'000 |
(Unaudited) Half year ended 31 May 2017 £'000 |
(Audited) Year ended 30 November 2017 £'000 |
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
30 |
22,684 |
38,010 |
|
Adjustment for non-cash items: |
|
|
|
|
(Losses)/gains on investments held at fair value through profit or loss |
5,227 |
(18,214) |
(30,771) |
|
Scrip dividends received |
- |
- |
(126) |
|
Amortisation on fixed interest securities |
(36) |
2 |
(30) |
|
Adjusted profit before tax |
5,221 |
4,472 |
7,083 |
|
Adjustments for: |
|
|
|
|
Purchases of investments, including transaction costs |
(33,368) |
(21,890) |
(79,835) |
|
Sales of investments, including transaction costs |
27,769 |
25,809 |
54,566 |
|
(Increase)/decrease in receivables |
(769) |
2,325 |
137 |
|
Increase/(decrease) in payables |
93 |
(2,944) |
(346) |
|
Overseas tax |
(525) |
(383) |
(873) |
|
Net cash (used in)/generated from operating activities |
(1,579) |
7,389 |
(19,268) |
|
Cash flows from financing activities |
|
|
|
|
Cost of subscription shares conversion |
2 |
- |
35,130 |
|
Loan repaid |
- |
- |
(7,500) |
|
Loan drawn |
12,500 |
- |
- |
|
Equity dividends paid |
(3,650) |
(2,755) |
(6,371) |
|
Net cash generated from/(used in) financing activities |
8,852 |
(2,755) |
21,259 |
|
Net increase in cash and cash equivalents |
7,273 |
4,634 |
1,991 |
|
Cash and cash equivalents at the beginning of the period |
7,231 |
5,240 |
5,240 |
|
Cash and cash equivalents at the end of the period |
14,504 |
9,874 |
7,231 |
The notes to follow form part of these financial statements.
Notes to the Financial Statements for the half year ended 31 May 2018
1 General Information The financial statements comprise the unaudited results for Polar Capital Global Financials Trust Plc for the six-month period to 31 May 2018.
The unaudited financial statements to 31 May 2018 have been prepared using the accounting policies used in the Company's financial statements to 30 November 2017. These accounting policies are based on International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Accounting Standards Committee ("IASC"), as adopted by the European Union.
The financial information in this half year Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.
The financial information for the periods ended 31 May 2018 and 31 May 2017 have not been audited. The figures and financial information for the year ended 30 November 2017 are an extract from the latest published accounts and do not constitute statutory accounts for that year. Full statutory accounts for the year ended 30 November 2017, prepared under IFRS, including the report of the auditors which was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies.
The Company's accounting policies have not varied from those described in the financial statements for the year ended 30 November 2017.
The financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (£'000), except where otherwise stated.
2 Dividends and Other Income
|
|
(Unaudited) For the half year ended 31 May £'000 |
(Unaudited) For the half year ended 31 May £'000 |
(Audited) For the year ended 30 November 2017 £'000 |
|
Investment income |
|
|
|
|
Revenue: |
|
|
|
|
UK dividends |
1,078 |
518 |
1,271 |
|
Overseas dividends |
5,472 |
4,389 |
7,144 |
|
Scrip dividends |
- |
- |
126 |
|
Interest on debt securities |
448 |
561 |
1,138 |
|
Dividends on contracts for difference |
- |
78 |
78 |
|
Total investment income allocated to revenue |
6,998 |
5,546 |
9,757 |
|
Capital: |
|
|
|
|
Special dividends allocated to capital |
- |
- |
8 |
|
Total investment income allocated to capital |
- |
- |
8 |
|
Other operating income |
|
|
|
|
Bank interest |
7 |
2 |
6 |
|
Total other operating income |
7 |
2 |
6 |
3 Earnings per ordinary share
|
|
(Unaudited) For the half year ended 31 May £'000 |
(Unaudited) For the half year ended 31 May £'000 |
(Audited) For the year ended 30 November 2017 £'000 |
||
|
Basic earnings per share |
|
|
|
||
|
Net profit/(loss) for the period: |
|
|
|
||
|
Revenue |
5,912 |
4,563 |
7,824 |
||
|
Capital |
(6,380) |
17,760 |
29,421 |
||
|
Total |
(468) |
22,323 |
37,245 |
||
|
Weighted average number of shares in issue during the period |
202,775,000 |
172,175,000 |
182,294,641 |
||
|
Undiluted: |
|
|
|
||
|
Revenue |
2.92p |
2.65p |
4.29p |
||
|
Capital |
(3.15)p |
10.32p |
16.14p |
||
|
Total |
(0.23)p |
12.97p |
20.43p |
||
|
Diluted: |
|
|
|
|
|
|
Revenue |
2.92p |
2.59p |
4.29p |
|
|
|
Capital |
(3.15)p |
10.10p |
16.14p |
|
|
|
Total |
(0.23)p |
12.69p |
20.43p |
|
|
There is no dilutive effect on the earnings per ordinary share in the period under review as the subscription shares were converted into ordinary shares at the conversion date of 31 July 2017 (31 May 2017: dilutive effect as the conversion price was lower than the average ordinary share price).
4 Net Asset Value per ordinary share
|
|
(Unaudited) For the half year ended 31 May
|
(Unaudited) For the half year ended 31 May
|
(Audited) For the year ended 30 November 2017
|
|
Undiluted: Net assets attributable to ordinary shareholders (£'000) |
289,176 |
246,856 |
293,292 |
|
Ordinary shares in issue at end of period |
202,775,000 |
172,175,000 |
202,775,000 |
|
Net asset value per ordinary share (pence) |
142.61 |
143.38 |
144.64 |
|
Diluted: Net assets attributable to ordinary shareholders (£'000) |
289,176 |
282,046 |
293,292 |
|
Ordinary shares in issue at end of period if Subscription Shares converted |
202,775,000 |
202,775,000 |
202,775,000 |
|
Net asset value per ordinary share (pence) |
142.61 |
139.09 |
144.64 |
There is no dilutive effect on the net asset value per ordinary share as no potentially dilutive shares were in issue as at 31 May 2018 (31 May 2017: The diluted NAV per ordinary share was calculated on the assumption that 30,600,000 subscription shares in issue were fully converted at 115 pence per share).
5 Share capital
There has been no ordinary share activity during the six-month period to 31 May 2018.
6 Dividends
The first interim dividend for the year ending 30 November 2018 will be declared in July 2018 and will be paid on 31 August 2018; it is anticipated that the second interim dividend for the year ending 30 November 2018 will be declared in or around December 2018 and will be paid on 28 February 2019.
7 Related party transactions
There have been no related party transactions that have materially affected the financial position or the performance of the Company during the six month period to 31 May 2018.
8 Going Concern
The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements. The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.
About Us
History
The Company was incorporated on 17 May 2013. On 1 July 2013 it issued 153,000,000 ordinary shares plus one subscription share for every five ordinary shares which were admitted to trading on the Main Market of the London Stock Exchange. The original subscription price for each ordinary share was £1 and the Net Asset Value (NAV) per share on 1 July 2013 was 98p (after launch costs).
In accordance with the Company's original prospectus, on 31 July 2017 the subscription shares matured and were exercised at 115p per subscription share.
Investors may purchase ordinary shares through their stockbroker, bank or other financial intermediary.
Capital Structure
At 31 May 2018, the Company had in issue 202,775,000 (2017: 172,175,000) ordinary shares of 5p each and no (2017: 30,600,000) subscription shares of 1p each.
Life of the Company
The Articles of Association require the Directors to put forward at the seventh Annual General Meeting a resolution to place the Company into liquidation. The voting on that resolution will be enhanced such that, provided any single vote is cast in favour, the resolution will be passed. The seventh AGM is expected to be held in April 2020, but in any event, no later than 31 May 2020.
Investment Objective
The Company's investment objective is to generate for investors a growing dividend income together with capital appreciation.
Investment Policy
The Company seeks to achieve its objective by investing primarily in a global portfolio consisting of listed or quoted securities issued by companies in the financials sector operating in the banking, insurance, property and other sub-sectors. The portfolio is diversified by factors including geography, industry sub-sector and stock market capitalisation.
Full details of the investment policy are set out in the Annual Report.
Benchmark
The Company's Benchmark is the MSCI World Financials + Real Estate (RE) Index, total return in Sterling (with dividends reinvested). From inception to 31 August 2016 the benchmark was the MSCI World Financials Index (in sterling with dividends reinvested). On 1 September 2016, the constituents of this index changed to exclude real estate. Consequently, from this date the Company adopted a revised Benchmark with real estate added back. MSCI has provided a bespoke index of the World Financials + RE Index (in Sterling with dividends reinvested).
Gearing and Use of Derivatives
In line with the Articles of Association, the Company may employ borrowing from time to time with the aim of enhancing returns, subject to a maximum of 15% of net assets at the time the relevant borrowing is taken out. During the period under review, the Company had an arrangement with ING Bank NV for bank loans of £25m to be made available, of which £22.5m had been drawn down at the period end. Since the period end, the Company has entered into a replacement arrangement with ING Bank NV for a one year revolving credit facility in the amount of £15m, and a one year term loan for £15m. The Company may invest through equities, index-linked, equity-linked and other debt securities, cash deposits, money market instruments, foreign currency exchange transactions, forward transactions, index options and other interests including derivative instruments. Forward transactions, derivatives (including put and call options on individual positions and indices) and participation notes may be used to gain exposure to the securities of companies falling within the Company's investment policy or to seek to generate income from the Company's position in such securities, as well as for efficient portfolio management.
Management
The Investment Manager and AIFM is Polar Capital LLP and Mr Nick Brind and Mr John Yakas have managed the portfolio since launch.
The Investment Manager is entitled to a fee at the rate of 0.85% per annum of the lower of the Company's market capitalisation and the Company's net asset value. 80% of the management fee is charged to the capital account and the remaining 20% to income.
The Investment Manager may also be entitled to a performance fee paid in cash. The fee is equal to 10% of the excess return over the performance fee hurdle. The hurdle is 100p increased or decreased by reference to the return on the Benchmark plus 1.25p per annum. The performance is adjusted for these purposes to take into account the dividends paid by the Company. The fee is calculated and payable at the liquidation of the Company. No performance fee is currently due and no accrual has been made.
Forward-looking Statements
Certain statements included in this half year Report contain forward-looking information concerning the Company's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the principal risks and uncertainties included in the Annual Report for the financial year ended 30 November 2017. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Global Financials Trust plc or any other entity, and must not be relied upon in any way in connection with any investment decision. The Company undertakes no obligation to update any forward-looking statements.
Company Website
www.polarcapitalglobalfinancialstrust.co.uk
Neither the contents of the Company's website nor the contents of any website accessible from the hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.
End
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