Strategic Report Strategic Report
Annual Report and Financial Statements for the year ended 30 November 2022
Polar Capital Global Financials Trust plc
2022 Annual Report and Financial Statements for the year ended 30 November 2022
Designed and printed by Perivan 265042
Contents
Your Company at a Glance 1
Summary of Share Capital Movements 2
Financial Highlights 3
Performance 4
Performance Highlights 5
Chairman’s Statement 6
Chair Elect Q & A 11
Board of Directors 12
Investment Managers 14
Manager’s Report
Investment Manager’s Report 16
Attribution Analysis 23
Top Ten Investments 24
Full Investment Portfolio 25
Portfolio Review 28
Environmental, Social and Governance
Corporate Responsibility 30
Investment Perspective incorporating ESG 32
ESG Dashboard 34
Governance
Strategic Report 36
Section 172 Statement 44
Report of the Directors 48
Report on Corporate Governance 51
Audit Committee Report 60
Directors’ Remuneration Report 67
Statement of Directors’ Responsibilities 73
Independent Auditors’ Report 74
Financial Statements and Notes
Statement of Comprehensive Income 83
Statement of Changes in Equity 84
Balance Sheet 85
Cash Flow Statement 86
Notes to the Financial Statements 87
Shareholder Information
Alternative Performance Measures (APMs) 115
Glossary of Terms 118
Corporate Information – AGM 120
Corporate Information – Other 122
Contact Information IBC
Polar Capital Global Financials Trust plc
(the Company or Trust) is a UK investment
trust launched in July 2013. The Company
initially had a fixed seven-year life but in
April 2020, with Shareholder approval,
moved to five-yearly tender offers with no
fixed end of life.
The Company has appointed Polar Capital as its Investment
Manager. Since its foundation in 2001, Polar Capital has grown
steadily and currently has 14 autonomous investment teams
managing specialist, active and capacity constrained portfolios,
with a collegiate and meritocratic culture where capacity of
investment strategies is managed to enhance and protect
performance.
S
ee more at:
polarcapitalglobalfinancialstrust.com

This document is printed on Galerie Satin,
a paper sourced from well managed,
responsible, FSC® certified forests and
other controlled sources. The pulp used
in this product is bleached using an
elemental chlorine free (ECF) process.
Shareholder Information
Contact Information
Company Registration Number
8534332 (Registered in England)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006.
Directors
Robert Kyprianou, Chairman
Simon Cordery
Cecilia McAnulty
Susie Arnott (appointed 1 December 2022)
Angela Henderson (appointed 1 December 2022)
Katrina Hart (retired 1 December 2022)
Joanne Elliott (retired 7 April 2022)
Registered Office and Contact Address for
Directors
16 Palace Street
London
SW1E 5JD
Investment Manager and AIFM
Polar Capital LLP
16 Palace Street
London
SW1E 5JD
Authorised and regulated by the Financial Conduct Authority.
Telephone: 020 7227 2700
Website: www.polarcapital.co.uk
Co-Fund Managers
Mr Nick Brind
Mr John Yakas
Mr George Barrow
Company Secretary
Polar Capital Secretarial Services Limited
Represented by Tracey Lago, FCG
Depositary, Bankers and Custodian
HSBC Bank Plc
8 Canada Square
London
E14 5HQ
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Solicitors
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2HS
Stockbrokers
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Identification Codes
Ordinary shares
SEDOL: B9XQT11
ISIN: GB00B9XQT119
TICKER: PCFT
GIIN: 8KP5BT.99999.SL.826
LEI: 549300G5SWN8EP2P4U41
Registrar
Shareholders who have their shares registered in their own
name, not through a share savings scheme or ISA, can contact
the registrars with any queries on their holding. Post, telephone
and Internet contact details are given below.
In correspondence you should refer to Polar Capital Global
Financials Trust plc, stating clearly the registered name and
address and, if available, the full account number.
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder helpline: 0800 313 4922
(or +44 121 415 7047 from overseas)
See more at:
polarcapitalglobalfinancialstrust.com
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
1
Your Company at a Glance
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
subsectors. The portfolio is diversified by factors includ-
ing geography, industry sub-sector and stock market
capitalisation. Full details of the investment policy are set out
on page 36 of the Strategic Report.
Benchmark
In April 2020, following the reconstruction of the Company,
the benchmark was changed to the MSCI ACWI Financials
Net Total Return Index in recognition of the Company’s level
of portfolio exposure to emerging market financials equities
and its limited portfolio exposure to real estate equities. Prior
to this, the Company was benchmarked against the MSCI
World Financials + Real Estate Net Total Return Index. See
page 37 for more information.
Life of the Company – Tender Offer/
Reconstruction
The Company was launched in July 2013 with a fixed
seven-year life. Shareholders approved changes to the
Company’s Articles of Association to make a tender offer to
all Shareholders and to extend the Company’s life indefinitely
at the Company’s General Meeting held on 7 April 2020
(“the Reconstruction”). The new Articles of Association
removed the fixed life and now require the Company to
make tender offers at five-yearly intervals, with the first to
commence on or before 30 June 2025.
Management
The Company operates as an investment trust with an
independent Board and third-party Investment Manager.
The Company has appointed Polar Capital LLP (the
“Manager”) as its AIFM and Investment Manager under
the terms of an Investment Management Agreement
(“IMA”). The IMA provides for a broad range of services
including portfolio management. The portfolio has been
jointly managed by Mr Nick Brind and Mr John Yakas since
launch on 1 July 2013. With effect from 1 December 2020,
Mr George Barrow was also appointed as Co-Fund Manager
with Mr Brind and Mr Yakas. Details of the fees payable
to the Manager can be found on pages 8, 38 and 93. The
Management Fee is charged 80% to capital and 20% to
revenue; the Performance Fee, when payable, is charged
100% to capital.
Gearing and use of Derivatives
Under the Articles of Association the Company may utilise an
overall maximum leverage (gearing) limit of 20 per cent. of
NAV at the time at which the relevant borrowing is taken out
or increased.
In July 2022, the Company entered into a new agreement
with Royal Bank of Scotland (“RBS”), for a three-year
revolving credit facility (“RCF”) in the amount of £50m,
and two three-year term loans for £15m and USD $18.4m
respectively. At the period end, the term loans had been fully
drawn down; £25m in sterling and $6m in US dollars had also
been drawn down under the RCF. As at 16 February 2023,
the Company had drawn down a total of £70.3m across the
term loan and RCF, equating to 7.9% net gearing.
Details of how the borrowings may be utilised are given in the
Strategic Report on page 36.
Capital Structure
As at 30 November 2022, the Company had 325,394,000
ordinary shares of 5 pence each in issue of which 6,356,000
shares were held in treasury. Since the year end and up to
16 February 2023 (the latest practicable date), the Company
has bought back a further 790,000 ordinary shares into
treasury.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
2
Summary of Share Capital Movements
Ordinary shares Treasury shares*
As at 1 December 2021 272,980,000 6,350,000
Share capital change during the financial year
Shares issued since 1 December 2021 and up to the
General Meeting held on 1 February 2022:
Reissue out of treasury (1) 6,350,000 (6,350,000)
Issues of new shares out of
2021 AGM authority (2)
15,150,000 -
As at 1 February 2022 294,480,000 -
Shares issued since 1 February 2022 and up to Annual General
Meeting held 7 April 2022:
Issue of new shares
pursuant to Subsequent
Placing 1 in Jan 2022 (3)
16,869,893 -
Issue of new shares
pursuant to Subsequent
Placing 2 in Feb 2022 (3)
9,905,427 -
Issues of new shares out of
2022 GM authority (4)
9,744,680 -
As at 7 April 2022 331,000,000 -
Shares issued since 7 April 2022 and up to the year ended
30 November 2022:
Issues of new shares out of
2022 AGM authority (5)
750,000
Ordinary shares repurchased and held in treasury
Repurchased and held in
treasury
(6,356,000) 6,356,000
As at 30 November 2022 325,394,000 6,356,000
Share capital change subsequent to the financial year end
Ordinary shares repurchased since 1 December 2022 and up to
the date of this Annual Report 16 February 2023:
Repurchased and held in
treasury
(790,000)) 790,000
As at 16 February 2023 324,604,000 7,146,000
The shares above have been issued under the following authorities:
Note 1: General Meeting (“GM”) authority granted by Shareholders on 1 February 2021.
Note 2: AGM authority granted by Shareholders on 30 March 2021. This replaced the authority granted on 28 May 2020.
Note 3: Prospectus following the GM authority granted by Shareholders on 16 June 2021. This was in addition to the authority
granted under (2).
Note 4: GM authority granted by Shareholders on 1 February 2022. This replaced the authority granted under (1).
Note 5: AGM authority granted by Shareholders on 7 April 2022. This replaced the authority granted under (2).
* Treasury shares are held in the name of the Company and do not attract the right to receive dividends or have any other voting rights. Shares held in treasury may be reissued into the market
at a premium to NAV.
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
3
Financial Highlights
Financial Highlights as at and for the year ended 30 November
Net gearing*
Total net assets^ Net asset value per ordinary share
2021
2022
2021
2022
166.3p
167.5p
2021
2022
154.6p
172.0p
£457,247,000
£541,272,000
Ordinary share price Premiun per ordinary share*
2021
2022
2021
2021
2022
6.0%
5.2%
Net gearing*
2021
2022
2022
79,724,900
2021
2022
4.45p
4.40p
net asset value per ordinary share (total return)* Total dividend per ordinary share paid or declared for the year
29.7%
1.9%
27.9%
29.7%
-7.6%
2.7%
-7.0%
Ordinary share price (-10.1%)
Total net assets^ Net asset value per ordinary share
2021
2022
2021
2022
166.3p
167.5p
2021
2022
154.6p
172.0p
£457,247,000
£541,272,000
Ordinary share price Premiun per ordinary share*
2021
2022
2021
2021
2022
6.0%
5.2%
Net gearing*
2021
2022
2022
79,724,900
2021
2022
4.45p
4.40p
net asset value per ordinary share (total return)* Total dividend per ordinary share paid or declared for the year
29.7%
1.9%
27.9%
29.7%
-7.6%
2.7%
-7.0%
(Discount)/premium per ordinary share*
2021
2022
2.7%
-7.0%
Total net assets^ (+18.4%)
Total net assets^ Net asset value per ordinary share
2021
2022
2021
2022
166.3p
167.5p
2021
2022
154.6p
172.0p
£457,247,000
£541,272,000
Ordinary share price Premiun per ordinary share*
2021
2022
2021
2021
2022
6.0%
5.2%
Net gearing*
2021
2022
2022
79,724,900
2021
2022
4.45p
4.40p
net asset value per ordinary share (total return)* Total dividend per ordinary share paid or declared for the year
29.7%
1.9%
27.9%
29.7%
-7.6%
2.7%
-7.0%
NAV per ordinary share (-0.7%)
166.3p
167.5p
Ordinary share price (total return)*
Total net assets^ Net asset value per ordinary share
2021
2022
2021
2022
166.3p
167.5p
2021
2022
154.6p
172.0p
£457,247,000
£541,272,000
Ordinary share price Premiun per ordinary share*
2021
2022
2021
2021
2022
6.0%
5.2%
Net gearing*
2021
2022
2022
79,724,900
2021
2022
4.45p
4.40p
net asset value per ordinary share (total return)* Total dividend per ordinary share paid or declared for the year
29.7%
1.9%
27.9%
29.7%
-7.6%
2.7%
-7.0%
Total dividend per ordinary share paid or declared
for the year
Total net assets^ Net asset value per ordinary share
2021
2022
2021
2022
166.3p
167.5p
2021
2022
154.6p
172.0p
£457,247,000
£541,272,000
Ordinary share price Premiun per ordinary share*
2021
2022
2021
2021
2022
6.0%
5.2%
Net gearing*
2021
2022
2022
79,724,900
2021
2022
4.45p
4.40p
net asset value per ordinary share (total return)* Total dividend per ordinary share paid or declared for the year
29.7%
1.9%
27.9%
29.7%
-7.6%
2.7%
-7.0%
Net asset value (NAV) per ordinary share (total return)*
Total net assets^ Net asset value per ordinary share
2021
2022
2021
2022
166.3p
167.5p
2021
2022
154.6p
172.0p
£457,247,000
£541,272,000
Ordinary share price Premiun per ordinary share*
2021
2022
2021
2021
2022
6.0%
5.2%
Net gearing*
2021
2022
2022
79,724,900
2021
2022
4.45p
4.40p
net asset value per ordinary share (total return)* Total dividend per ordinary share paid or declared for the year
29.7%
1.9%
27.9%
29.7%
-7.6%
2.7%
-7.0%
^ The change in net assets reflects shares reissued from treasury in the year, new shares issued, placing, buybacks, dividend paid and market movements.
* Alternative Performance Measure, see pages 115 to 117 for further explanations.
~ Refer to Note 12 on pages 96 to 97 for more details.
Data sourced by HSBC Securities Services Limited, Polar Capital LLP, MSCI and Lipper.
Dividends
~
The Company has paid or declared the following dividends relating to the financial year ended 30 November 2022:
Pay date
Amount per
Ordinary share
Ordinary Shares
in Issue Record Date Ex-Date Declared Date
First interim: 31 August 2022 2.40p 330,440,000 5 August 2022 4 August 2022 1 July 2022
Second interim: 28 February 2023 2.05p 324,779,000 3 February 2023 2 February 2023 18 January 2023
Total (2021: 4.40p) 4.45p
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
4
Performance since Inception
Rebased to 100 at 1 July 2013
Discrete Performance (%)
For the year ended 30 November
2013~ 2014 2015 2016 2017 2018 2019 2020 2021 2022
NAV per share (TR)* 3.7 9.8 5.3 22.2 16.4 -1.5 10.4 -6.5 27.9 1.9
Ordinary share price (TR)* 5.8 -2.2 6.2 21.4 16.7 -1.7 12.4 -1.6 29.7 -7.6
Benchmark* 6.4 11.0 0.9 24.5 14.2 -0.1 9.9 -6.4 27.0 6.8
MSCI ACWI Financials (TR)^ 7.6 9.8 -2.4 25.9 15.8 -0.4 8.0 -8.2 27.0 6.8
* See page 5 note 1 and note 2 for NAV and share price total return (TR) calculation respectively and note 4 for a definition of the benchmark
~ Performance total return (TR) for the period was from inception date of 1 July 2013 to 30 November 2013.
^ The performance of the MSCI ACWI Financials Net Total Return Index (£) excluding Real Estate prior to August 2016 is shown for illustrative purposes only.
Source: Polar Capital
Performance
Jul
2013
Nov
2013
Nov
2014
Nov
2015
Nov
2016
Nov
2017
Nov
2018
Nov
2019
Nov
2020
Nov
2021
Nov
2022
PCFT NAV per share (TR)* Benchmark* Ordinary share price (TR)* MSCI ACWI Financials (TR)^
50
100
150
200
250
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
5
Performance (Sterling total return) Note
For the year ended
30 November 2022
%
Since
Inception
%
NAV per ordinary share
*
1 1.9 125.9
Ordinary share price
*
2 -7.6 102.8
Ordinary share price including subscription share value
*
3 - 107.3
Benchmark (Sterling total return) 4
For the year ended
30 November 2022
%
Since
Inception
%
MSCI ACWI Financials 6.8 123.4
Chain-linked benchmark 6.8 134.9
Other Indices and peer group (Sterling total return)
MSCI World Index -1.0 184.5
FTSE All Share Index 6.5 73.4
Lipper Financial Sector 5 -0.3 97.6
Performance since Reconstruction on 22 April 2020
(Sterling total return)
Since
Reconstruction
%
NAV per ordinary share
*
6 73.6
Benchmark 4 67.2
Earnings per Ordinary share 7
For the year ended
30 November 2022
For the year ended
30 November 2021
Revenue Return 4.45p 4.42p
Capital Return (2.75p) 24.57p
Total 1.70p 28.99p
Expenses
*
For the year ended
30 November 2022
For the year ended
30 November 2021
Ongoing charges 0.87% 1.02%
Ongoing charges including performance fee 8 0.65% 0.98%
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 2022. Dividends are deemed to be reinvested on the
ex-dividend date as this is the methodology 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 2022.
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 2022.
Note 4 Chain linked benchmark is a combination of 3 benchmarks which have been in operation over the period. From inception until 31 August 2016 the Company’s
benchmark was the MSCI World Financials Index, which included Real Estate as a constituent until its removal that year. From 1 September 2016 to 23 April 2020 the
benchmark was the MSCI World Financials + Real Estate Net Total Return Index. From 23 April 2020, the benchmark changed to MSCI ACWI Financials Net Total Return
Index (in Sterling) due to the Company’s exposure to emerging market equities and its limited exposure to real estate equities.
Note 5 Dynamic average of open ended funds in the Lipper Financial Sector Universe which comprised 43 open ended funds in the year under review.
Note 6 The total return NAV performance since the Reconstruction is calculated by reinvesting the dividends in the assets of the Company from the relevant
ex-dividend date. The new performance fee period runs from the date of the Reconstruction. The opening NAV for the performance fee of 102.8p is the closing NAV
the day before the tender offer was completed.
Note 7 Refer to Note 11 on page 96 for more details.
Note 8 The decrease in ongoing charges including performance fee reflects the write back of the performance fee accrual in the year under review.
* Alternative Performance Measure, see pages 115 to 117 for further explanations.
Data sourced by HSBC Securities Services Limited, Polar Capital LLP, MSCI and Lipper.
Performance Highlights
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
6
Chairman’s
Statement
Robert Kyprianou
Chairman
Dear Shareholders,
In this, my final report as Chairman of your Company, I look
back on a financial year in which Covid-related health concerns
were replaced in the headlines by a war in Europe; post-Covid
supply disruptions; the return of inflation; and, not just the end
of whatever-it-takes quantitative easing (QE), but a 180 degree
policy reversal by major central banks in favour of raising
rates and quantitative tightening (QT). In the broad market
corrections that followed there were few places to hide.
Highly unusually, steep declines in public equity markets were
mirrored in bond markets, private equity strategies and a range
of alternative asset classes, in particular crypto currency.
With this background, I am pleased to report a positive net
asset value (NAV) total return, further growth in the issued
share capital of the Company, and an increase in the dividend.
To adopt a popular sporting cliche, the year under review
became a game of two halves. The financial year began with
continued strong demand for the Company’s shares and a
persistent share price premium to NAV, satisfied by further share
sales from the treasury account and the issuance of new shares.
However, following the Russian invasion of Ukraine and the
reversal of the easy money policy by major central banks, trading
in the Company’s shares could not resist the negative sentiment
that pervaded markets generally. As a result, the Company’s
shares moved from trading at a premium to NAV to a discount.
Throughout the financial year the Company has been
very proactive in, firstly, responding to appetite for the
Company’s shares in the early months of the year, and
subsequently intervening to support trading in the Company’s
shares through buy-backs once sentiment across markets
deteriorated. This extensive activity is described in the share
capital changes section of my report below.
The end of the financial year also saw the completion of the
second stage of our Board succession plan as detailed in my
report last year. On the first day of the 2023 financial year we
said goodbye to Katrina Hart and welcomed to the Board two
new members, Angela Henderson and Susie Arnott. Katrina
had been with the Company as Chair of the Management
Engagement Committee since its launch in 2013. On behalf
of the Board and Shareholders I want to thank Katrina for
her diligent service to the Company. More details on the
execution of our succession plan can be found below.
Investment Performance
2022 was a year of wealth destruction not seen in over
a generation. A wide range of capital markets and alternative
asset classes reeled under the onslaught from an outbreak
of war in Europe, an unexpected surge in inflation and
a monetary policy response that marked the end of an
unprecedented easy money era. It heralded a central bank
race to slam the brakes on with official interest rate rises and
liquidity draining QT programmes.
Despite the geopolitical and economic maelstrom, I can
report that the Company generated a total return of 1.9%
over the financial year helped by a decline in sterling and
the value attributes of much of the financials sector. This
return was behind that of the Company’s benchmark, the
MSCI ACWI Financials Index, which delivered a total return of
6.8%, but ahead of the negative 0.3% return of the Lipper
open-ended peer group of financial equity funds, both in
sterling terms.
Since its launch in 2013 the Company’s total return has been
125.9% compared to 123.4% for the MSCI ACWI Financials
Index and 97.6% for the Lipper open ended peer group. Since
the Company’s restructure in April 2020, it has delivered a total
return of 73.6% compared to a benchmark return of 67.2%.
Over the financial year the Company’s share price did not mirror
the positive NAV total return. Reflecting the sharp deterioration
in market sentiment, the Company’s shares moved from
a premium to NAV of 2.7% at the start of the financial year to
a discount of 7.0%. As a result, the Company’s ordinary share
price fell by 10.1% over the financial year.
Complicating investment management over the year were
significant disparities in the performance of subsectors within
the investment universe. From a share price perspective,
financials did not behave as an homogenous sector. For
example, significant share price declines were experienced in
companies priced for growth such as small cap US banks and
certain FinTech companies, and in capital market sensitive
asset managers, whereas general insurance companies
showed strong share price gains. Similarly, there was little
correlation in share price performance by country where, for
example, commodity producing countries fared better as they
were relative beneficiaries of some of the developments that
hurt the broader markets.
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
7
At the start of the year the portfolio was positioned for further
post-Covid recovery. This made the portfolio vulnerable to the
war in Ukraine and the subsequent inflation and monetary
policy response. The Manager responded by positioning the
portfolio more defensively, principally switching certain bank
exposures in favour of non-life insurers, and into fixed income
securities following the sharp rise in bond yields. Gearing was
also eliminated during the year in response to the poor market
background. However, by the end of the financial year gearing
was restored to around 6% of the portfolio as the Manager
sought to exploit better valuations and specific opportunities
from the sector’s performance disparity. The Manager’s
investment activity is described in detail in the Investment
Manager’s Report.
Share Capital Changes
In April 2020 a Company reconstruction took place in the
form of a 100% tender offer and the replacement of the
fixed end-of-life with a five yearly tender offer. In last year’s
statement I reported on the extraordinary growth in the
Company’s share capital that followed. In the 2021 financial
year the Company responded to a persistent share price
premium to NAV and strong demand for the Company’s shares
by issuing a total of 76,555,000 new ordinary shares following
the conversion of a successful C Share issue. In addition, a
further 73,374,000 shares were re-issued from treasury.
The extraordinary volatility witnessed broadly across capital
markets during the 2022 financial year is reflected in changes
to the Company’s share capital in the latest reporting period.
The year began with continued strong demand for the
Company’s shares which quickly exhausted the remaining
6.35m shares held in treasury. To accommodate further
demand the Company issued new shares under its AGM
authority which by the end of January 2022 was almost
completely depleted. Consequently, the Company sought a
refreshed authority at a GM held on 1 February 2022. The
total number of new ordinary shares issued under these two
authorities during 2022 financial year amounted to 25.645
million shares. At the same time the Company utilised its
ability to place further new shares as per the 2021 C share
Prospectus. Two such placements took place on 1 February and
25 February 2022 for a total of 26.775 million new ordinary
shares.
In total, during the first half of the 2022 financial year, a total
of 58.77 million ordinary shares were issued at an average
price of £1.74 and an average premium to NAV of 1.85%,
with an accretive effect on NAV of 0.23p per share and
adding £102.12m to the Company’s NAV.
The Russian invasion of Ukraine on 24 February 2022 brought
an abrupt end to share issuance as investors withdrew
demand from stock markets.
Coupled with a reversal of monetary policy by major central
banks in the face of a surge in inflation to 50-year highs, market
sentiment deteriorated across the board. The Company’s share
price moved from a premium to NAV to a discount in keeping
with the trend in the investment trust market generally.
At the time of the Company’s reconstruction in April 2020
the Board made a commitment to provide support to the
trading of the Company’s shares if and when required.
Specifically, the Board stated that it would take a proactive
approach to providing liquidity in the Company’s shares with
the intention that, in normal market conditions, the shares
will trade at a discount to NAV of no wider than an average
of 5 per cent over the longer term.
The Board delegated authority to the Manager and our
Corporate Broker to purchase shares in order to support
liquidity under clear parameters consistent with the Board’s
commitment. These parameters are designed to ensure that
the Company does not displace any market demand for
shares, but is available to support liquidity if required once
market demand is satisfied.
The first purchase under this delegated authority was made
on 10 May 2022. During the 2022 financial year the Company
bought back shares on 91 occasions, purchasing in total 6.356
million shares at an average discount of 8.99% and an average
price of £1.44 for a total of £9.2m. These purchases have been
accretive to NAV equivalent to 0.26p per share.
The Board remained in close dialogue with the Manager and
Corporate Broker throughout this period. As a result, the Board
was able to adjust the delegated share buyback parameters
on three occasions during the year to allow more discretion
and capacity to meet its commitment as market conditions
changed. As a result, only on one trading day was it necessary
to request the Board’s special permission to exceed the terms
of the parameters – the permission was granted.
By the end of the financial year, trading in the Company’s shares
steadily improved, narrowing the discount in the share price
to 7.0%. This improvement continued into the early weeks of
the new financial year during which, at the time of writing,
only 205,000 shares have been purchased in the market as the
discount settled close to 5%. All shares purchased under this
delegated authority have been placed in treasury.
For the financial year as a whole, the net effect of this pro-
active approach to share capital management was to increase
the outstanding shares in public hands by 52.414 million with
a further 6.356 million shares held in treasury. The net cash
proceeds raised over the year were £92.95m and the market
cap of the Company rose from £470m at the beginning of
the financial year to £503m at the end of the financial year.
We warmly welcome all our new Shareholders and thank our
existing Shareholders for their continuing support through
this tumultuous time.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
8
Chairman’s Statement continued
Dividends
For the previous two financial years the Company was able to
maintain its total dividend at 4.40p per ordinary share despite
a sharp fall in the income generated by the Company’s
investment portfolio in the face of Covid and the recession
that followed. It had been able to do so by exploiting one of
the advantages of the investment trust structure, drawing on
distributable reserves built up in previous years.
In August 2022 the Company paid an unchanged first interim
dividend for the current financial year of 2.40p per ordinary
share. Although income from investments began to recover
as the world economy opened up following an easing of the
Covid pandemic, distributable reserves were required once
again to support the August 2022 dividend.
On 18 January 2023 the Company announced a second
interim dividend for the 2022 financial year of 2.05p per
ordinary share payable on 28 February 2023, bringing the
total dividend for the financial year to 4.45p, a small increase
on previous years. This second interim dividend was almost
fully covered by earnings in the period, requiring minor
support from distributable reserves.
Looking ahead, the Manager has discretion to invest up
to 10% of the portfolio in fixed income securities and the
recent rise in bond yields presents an opportunity to increase
revenues from this source. The recent trend in distributions
from the underlying equity holdings has been positive as well.
However, looking forward, further growth in the Company’s
dividend distribution remains uncertain given brewing
economic headwinds.
Costs
At the time of the Company’s reconstruction in 2020, the
Manager agreed to a reduction in its base management fee
from 0.85% per annum of the lower of the Company’s market
capitalisation and NAV, to 0.70% per annum of the Company’s
NAV. The Company continues to maintain tight control of other
expenses. For the 2022 financial year the Ongoing Charges Ratio
(“OCR”) fell from 1.02% of the Company’s NAV to 0.87%, the
lowest OCR in the life of the Company.
In addition to a management fee, the Manager can also
earn an investment performance fee. The fee is calculated
on performance since the reconstruction in April 2020 and
is accrued and only paid at the time of the five yearly tender.
The performance fee is calculated as 10% of the excess
performance over the total return of the benchmark plus
a hurdle of 1.5% p.a. Any performance fee accrual can be
reduced by subsequent underperformance of the benchmark
plus hurdle rate measured over the five-year period. The
Strategic Report on page 38 provides further detail.
In the previous two financial years investment performance
generated a performance fee accrual. However, due to
underperformance in the 2022 financial year, the performance
fee accrual has been reduced to nil. As a result, the OCR
including performance fee fell from 0.98% of NAV in financial
year 2021 to 0.65% in financial year 2022. Although NAV
performance since the reconstruction relative to the benchmark
remains positive, there was no performance fee accrual balance
remaining at the end of the 2022 financial year. The Board
continues to believe that the performance fee structure aligns
the interests of Shareholders and the Manager by providing a
performance incentive with safeguards for Shareholders that
rewards only long-term excellent performance.
Board Succession
The Company was launched in June 2013 with three
Directors, Ms Elliot, Ms Hart and me. A fourth Director,
Simon Cordery, joined the Board in July 2019. As the AIC
Code recommended 9-year tenure approached for the
original directors, the Board tabled a succession plan in 2021
that would provide refreshment while ensuring sufficient
retention of Company knowledge and avoiding a cliff-edge of
Director departures in the future.
I have reported on the completion of phase one of this plan
with the appointment in November 2021 of Cecilia McAnulty
replacing Joanne Elliot as Audit Chair. In order to allow an
orderly transition of her role, Joanne stepped down from the
Board following the AGM in April 2022.
I am pleased to report the completion of phase two of
the succession plan. During the second half of 2022 the
Board undertook an extensive and thorough search for a
replacement for Katrina Hart, Chair of the Management
Engagement Committee. The search was sensitive to
maintaining an appropriate diversity and experience mix
among Board members.
I am pleased to report that the search was concluded
successfully. On 1 December 2022 Katrina retired from the
Board and at the same time two new Directors were appointed.
After a career as a buyside analyst and portfolio manager
specialising in global financials, Susie Arnott transitioned into
a number of advisory roles focused on sustainable investing
and social impact. Susie has replaced Katrina as Chair of
the Management Engagement Committee where she will
be able to bring her experience to engaging on portfolio
management and ESG issues with the Manager and other
service providers.
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
9
At the same time Angela Henderson has also joined the
Board. With a career foundation in financial services and
capital markets, Angela now has long experience as a
non-executive director on a variety of boards including asset
management companies and closed-ended investment
vehicles. Angela brings a strong governance record and a
clear understanding of the financials sector.
On behalf of the Board I would like to thank Katrina for her
service to the Company over the past 9 years. The Board has
benefited from Katrina’s industry experience in her role as
Chair of the Management Engagement Committee, ensuring
appropriate oversight of the Manager and other service
providers. As a Board colleague, Katrina has demonstrated
exemplary diligence and a collegiate style that has positively
contributed to the workings of the Board. She leaves with the
very best wishes from those with whom she has shared the
Polar Capitals Global Financials Trust journey.
Following a Board Nominations Committee held on
1 February 2023, I am pleased to confirm that Simon Cordery
has been invited by the Board and has accepted the role of
Chair (subject to re-election by Shareholders at the AGM)
when I retire at the forthcoming AGM on 30 March 2023.
The Board believes that Simon will bring a fresh perspective
to its proceedings and the Board looks forward to seeing the
Company make further progress under his guidance.
Environmental, Social and Governance
(ESG) Considerations
The Board welcomes the growing expectations placed on the
financial community to adopt more sustainable and inclusive
behaviour and business practices. As well as delivering better
outcomes for society as a whole, the Board believes that
ESG factors will increasingly drive successful investment
performance.
The Company outsources all its business operations and
therefore has limited control over environmental and social
deliverables. Instead, it works with and through its suppliers
to better understand their ESG strategy. The Board succession
plan described above specifically included ESG as a key search
parameter, reflecting the importance the Board places on
its ESG oversight responsibilities. The appointment of Susie
Arnott, with her deep social finance background, extends
the Board’s skills mix into this important area. As Chair of the
Management Engagement Committee, Susie has been asked
to review the Committee’s terms of reference to ensure that
ESG factors are fully integrated into the Committee’s and
Board’s work.
During the course of the past year, the Board has continued
to engage with the Manager to monitor progress on its
adoption of ESG principles in both its investment process
and its corporate conduct. During the year the Manager
has worked to refine further external third party ESG rating
methodologies and matrices for use in its investment process.
As a result, the investment team has developed a proprietary
scoring process, assigning its own internal ESG ratings. The
analysis incorporates both quantitative and qualitative factors
derived from company disclosures, management meetings,
regulatory reports and third-party ESG ratings providers. The
Board supports the proprietary approach adopted by the
Manager given the team’s expertise, experience and proximity
to companies in the financials investment universe. The Board
will continue to monitor and input into the implementation
of the Manager’s proprietary ESG ratings in stock selection as
well as their engagement with investee companies.
Further detail is provided in the ESG Report on pages 30 to 34.
Following the appointment of Ms Henderson and Ms Arnott
the Board complies with the FCA Diversity and Inclusion
policy as it relates to minimum participation by women and,
with Cecilia McAnulty as Audit Chair, at least one female
member of the Board holding a senior Board position.
The Board is aware of the FCA policy target concerning ethnic
minority background which the Board currently does not
fulfil. It is a particular challenge for a small Board to meet all
the experience, skills and diversity criteria required to perform
its duties on behalf of Shareholders. Our search process and
recent experience is described in the Corporate Governance
Report on page 57.
Management Team
The portfolio is currently co-managed by Nick Brind, John
Yakas and George Barrow. As referenced in the announcement
released on 14 February 2023, John Yakas will be retiring from
Polar Capital with effect from 30 June 2023 and stepping back
to an advisory role. The Board would like to express its thanks to
John who has been part of the investment team since the launch
of the Company in 2013 and has seen it through some very
difficult and some very rewarding times. John’s expertise and
views on the financials sector along with his affable character
will be missed. The team responsible for the management of the
portfolio has significant experience of investing in the financial
sector having grown both its size, from three to five since the
Company’s inception in 2013, as well as the assets for which
they are responsible. As part of the transition process, George
Barrow, who has been part of the team since 2008, was named
co-manager in 2020. We wish John every happiness in his
retirement.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
10
Outlook
As we look forward in early 2023, the global economy and
investors have a lot to deal with. The long list of headwinds
is well known – war and geopolitics, decades high inflation,
painful monetary tightening, structural labour market
challenges, energy supply shortages, China and its Covid
policy, to name a few. The predicament for policy makers and
investors determining how far, how fast and for how long, will
characterise the outcomes. It is not surprising that the most
common description of the near-term outlook is ‘uncertain’.
Initially not taking the inflation threats seriously, major central
banks ended 2022 trying to restore some severely damaged
credibility. In public statements that echoed the ‘whatever it
takes’ mantra that underlay their previous ‘too-easy-for-too-long’
monetary stance, central bankers insisted they were serious
about dealing with inflation. Even the Bank of Japan threw
in the towel on its particularly long standing easy monetary
policy stance. Despite this noise, concerns remain that inflation
in developed countries will remain above central bank targets
for a while, given stubbornly strong labour markets, and that
fiscal and monetary policy may be at odds with each other. This
concern can be seen in that, for the first time since 2014, the
2023 new year started with no sovereign bonds available at
negative yields. Only 2 years ago more than 4000 such bonds,
worth $18.4 trillion, were in negative yield territory.
Perceived as a cyclical sector with value characteristics,
the prospects of the financials sector are balanced in this
environment, as seen by its performance in 2022. The
largest sub-sector, banks, are typically seen as vulnerable
cyclicals in an economic slowdown. However, this traditional
view requires qualification. In part driven by regulatory and
accounting changes, banks in developed markets have better
quality balance sheets and are better provisioned with greater
capital and liquidity buffers than at any time since the global
financial crisis (GFC). Banks delivered these improvements
despite the huge hurdle of prolonged easy money and zero
interest rates. This hurdle is now firmly in the past, and,
although there are likely to be adjustment headaches for the
broad economy, banks are one of the clear winners from this
return to monetary policy normality.
The underlying recovery in the banking sector post the GFC has
yet to be reflected in valuations, especially in Europe. Despite
bumper profits, higher dividends and share buybacks, investors
have not re-rated banks. For now, they choose to focus on the
risk of greater non-performing loans despite evidence that the
system is generally well-provisioned and has capacity to grow
profits and provide further provisions given buoyant net interest
income. The emergence of the “shadow banking” sector since
the GFC which has pursued new lending aggressively, and the
somewhat anaemic loan growth which many established banks
have experienced in recent years are likely to now prove helpful
in mitigating the need for large provisions. On the balance of
risks, investors may be surprised by how well banks perform
through the expected economic slowdown.
Beyond banks, in other sub-sectors there are different
drivers for risk and performance, offering good performance
diversification and opportunity. Asset managers and
investment banks are vulnerable to further market corrections
and depressed capital market activity, while general insurers
have more stable earnings. Although troubled at the
moment, we anticipate that FinTech will respond positively to
any sign that interest rates have reached a peak and growth
is back on the agenda. In addition, the significant rise in
bond yields has re-opened another income opportunity for
the Company given its discretion to invest up to 10% of
its portfolio in fixed income securities. Overall, the breadth,
depth and diversity of the sector offer both risk management
potential and attractive return opportunities as the uncertain
headwinds overhanging the global economy are played out.
While the near-term uncertainty remains high, the portfolio
is balanced between cyclically exposed banks, both small and
large cap, and more defensive sectors such as non-life insurers
and fixed income securities. This puts the Company in a good
position to navigate further economic and political setbacks,
ready to turn more aggressive when the time is right. The
Board believes that once investors look through the current
negative market sentiment, the financials sector will be seen as
an attractive home for capital given its breadth and diversity of
opportunity, its relative valuations and its pro-cyclical correlation.
This year’s AGM, to be held on 30 March 2023 at Polar
Capital’s London offices, will be my last as Chairman and a
Director of your Company.
I was fortunate to join the Board of the Company at its launch
in 2013. Although the financial sector was still recovering from
the fallout from the global financial crisis, sufficient shareholders
saw its potential at launch for further rehabilitation. Many of
them remain shareholders today. At first our journey together
was relatively uneventful, only to become a rollercoaster as
the original fixed term end-of-life coincided with the outbreak
of Covid and the worst economic crisis since the War. Again,
despite it being the most difficult of times, enough shareholders
were willing to look through local difficulties and supported
the continuation of the Trust. Their loyalty and belief were
rewarded as, shortly afterwards, the Company experienced an
extraordinary period of growth in its share capital base with its
market cap quintupling over a two year period.
I step down from the Board as the sector faces a different menu
of headwinds. However, I am confident that the great strides
taken broadly across the sector to strengthen balance sheets,
risk management processes and operational efficiency will be
recognised in performance. I want to express my sincere thanks
to our shareholders who have supported our vision for the sector
at launch and during the Company’s rather eventful life.
Throughout my time as Chairman, I have been highly fortunate
Chairman’s Statement continued
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
11
to receive first class support from the Company’s sponsor,
Polar Capital - from investment management, operational risk
controls, financial reporting, to best-in-class sales and marketing
and company secretarial services. The management of Polar
Capital has consistently engaged constructively with the Board
in dealing with the needs of the Company, always acting in the
best interests of your Company despite any potential or actual
conflicts of interest. I am confident they will continue to do so
and will remain committed to the investment trust sector.
Finally, to my Board colleagues, past and present, I wish to
express my heartfelt gratitude for their collaboration on my tour
of duty. I have seen up close how their wisdom, professionalism
and dedication have benefitted the Company through both
good and bad times.
I am the last of the original three directors whose tenure has
required them to step down from the Board. Having overseen
the transition to a new Board, under the leadership of Simon
I am confident that the Company will continue to receive the
stewardship shareholders should expect during the next phase of
the Company’s life.
Robert Kyprianou
Chairman
20 February 2023
Chair Elect Q&A
What do you enjoy most about being a Non-executive
Director?
Being a NED is a fantastic job because I can utilise the
knowledge, experience and perspectives I have accumulated over
the past 40 years in my executive career to help the Company
seize opportunities and navigate the problems it encounters. I
get to work with a broad range of people, learn new things and
hopefully make a difference.
Was it useful being a Non-executive Director before taking
on the role of the Chair?
Absolutely – it was a baptism of fire! I joined what was a small
Board at a time of great change and quickly thereafter got to
grips with a full reconstruction in the middle of the outbreak
of Covid. Subsequently the Company grew significantly. It was
extremely challenging and a tremendous opportunity to develop
as a NED - I think we dealt with more issues and situations in two
or three years than most investment companies might see in a
decade. The experience was invaluable. Our current Chair, Robert
provided me with a superb role model for what it is to lead a
Board throughout this period; I hope I can take forward all the
lessons I learned from him.
What do you hope to bring to your role as Chair of the
Board?
Much of my executive career has been spent talking to and
understanding investors and I hope to continue to bring this
investor perspective to the role so that quality decisions are made
that are aligned to their interests. We have refreshed the Board
over the past few years and I very much look forward to working
with my new colleagues, hearing their fresh insights and new
ideas. I see my chief role as a listener, to glean the talents of the
Simon, you joined the Board in 2019 as a Non-executive
Director and have recently been appointed as Chair Elect.
Board as a whole and to provide a collegiate environment for
decision-making.
What interests you about the financials sector and the
trust?
The listed financials sector is one of the largest group of companies,
globally. It’s a sector that enables all economic activity and without
it, industry could not function. It also has the ability to evolve,
innovate and create new ways of doing things (FinTech, challenger
banks etc), so there is always something interesting going on. It can
provide great, long term investment opportunities and, as the only
sector specialist trust, the Company is an excellent way for investors
to access this opportunity.
What do you think the key areas of focus will be for the
year ahead?
Currently markets face a number of challenges and headwinds
but these also bring opportunity. We have moved from an era
of zero and negative interest rates and now entered a period
of rising interest rates and inflation, and this will impact how
we position the portfolio to make money for our investors. We
also have the broader considerations of geopolitical risks and
economies struggling to recover post Covid while dealing with
inflationary pressures and supply chain issues. Communication
with shareholders, in good times and bad, is an essential element
of the Board’s work and is a key focus, especially given my
background. The subject of ESG has accelerated in recent years
and our Manager has made significant strides to embed this
thinking into their investment processes and considerations.
As a Board, we will continue to monitor and encourage these
developments in the months and years ahead.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
12
Board of Directors
Robert Kyprianou
Independent Non-executive Chairman
Simon Cordery FCSI
Independent Non-executive Director
and Chair Elect
Cecilia McAnulty
Independent Non-executive Director
Skills and Experience Skills and Experience Skills and Experience
Robert was formerly the CEO of AXA
Framlington until his retirement in
September 2009. Previous appointments
include: independent non-executive director
of Gartmore Group Limited and Aviva
Investors; Global Head of Fixed Income,
and later Deputy CEO and Global Head of
Securities at AXA Investment Managers SA;
Business Head and Global Head of Fixed
Income at ABN AMRO Asset Management
Ltd and Head of Portfolio Management at
Salomon Brothers Asset Management Ltd.
Simon has over 40 years’ experience working
within financial services of which nearly
30 years have been focused on the wealth
management industry. Most recently he was
Head of Investor Relations and Sales at BMO
Global Asset Management, where he spent
almost 25 years in senior roles, and previously
he held roles with Invesco Fund Managers,
Jefferies & Co, Kleinwort Benson Securities
and Rea Bros Merchant Bank. Simon has
considerable and detailed knowledge of the
investment trust industry and remains actively
involved with the AIC.
Cecilia is an experienced non-executive director
and chartered accountant with almost 30 years’
investment and financial services experience. Her
executive career included senior investing roles
with Royal Bank of Scotland, Barclays Capital
and Centaurus Capital and encompassed a
broad range of asset classes including public
and private debt and equity. Her current non-
executive roles include Audit Chair and NED at
Northern 2 VCT PLC, a listed investment trust
investing private equity in early stage companies,
and NED at RIT Capital Partners plc, an
investment trust with a global mandate to invest
across a range of asset classes, both quoted and
unquoted.
Committee Memberships Committee Memberships Committee Memberships
Chairman of the Board, Nomination
and Remuneration Committees.
Member of the Audit and Management
Engagement Committees.
Member of the Audit, Nomination,
Remuneration and Management
Engagement Committees.
Chair of the Audit Committee and Member
of the Nomination, Remuneration and
Management Engagement Committees.
Other Appointments Other Appointments Other Appointments
Robert is a director of Eurobank Cyprus Ltd,
Eurobank Private Bank Luxembourg SA and
senior independent non-executive director of
Pimco Europe Limited.
No other current appointments. Cecilia is a non-executive director of
Northern 2 Venture Capital Trust plc, RIT
Capital Partners plc and a member of the
Industrial Development Advisory Board of the
Department of Business, Energy and Industrial
Strategy.
Board Rationale for supporting re-election Board Rationale for supporting
re-election
In accordance with the Board’s succession plan
and consistent with the AIC Code, Robert will
be stepping down from the Board at the 2023
AGM following nearly ten years of service on
the Board.
Simon has extensive wealth management
and marketing experience and detailed
knowledge of the investment trust market
having previously held the position of
Head of Investor Relations & Sales for BMO
Global’s Investment Trust business. Simon
actively participates in meetings and brings
a new approach to investor and shareholder
engagement with the ability to share
expertise with the sales and marketing team
of Polar Capital. Simon’s re-election as a non-
executive Director is supported by the Board
and the Managers.
Cecilia brings to the Board her experience
of other investing strategies, including debt
markets which are intrinsically linked to the
functioning and health of financial companies
globally. In addition, her qualification as a
Chartered Accountant and her knowledge
and previous experience as Audit Chair of a
UK investment trust is highly relevant. Cecilia’s
re-election as a non-executive Director is
supported by the Board and the Managers.
Date appointed 7 June 2013 Date appointed 1 July 2019 Date appointed 1 November 2021
PCFT Share Interests 113,538 (0.03%
of ISC)
PCFT Share Interests 40,124 (0.01%
of ISC)
PCFT Share Interests 40,000 (0.01% of
ISC)
Annual Remuneration £41,000 Annual Remuneration £29,500 Annual Remuneration £35,000
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
13
Angela Henderson
Independent Non-executive Director
Skills and Experience Skills and Experience
Susie started her career in fund
management over 20 years ago and was
primarily focused on the financial sector;
including periods focused on emerging
markets investments and global financials
portfolios. She also spent a number of years
working in impact investing, combining her
experience and passion for social investment
and impact measurement. In her current
role, Susie continues to focus on investment
with a global impact incorporating ESG as a
mainstream consideration.
Angela is an experienced non-executive director
with more than 25 years experience in the
financial sector. A solicitor who specialised
in corporate law before moving into the
markets divisions of Deutsche Bank and later
Barclays, Angela now has almost 10 years non-
executive experience. Previous appointments
include independent non-executive director
of Credit Suisse Asset Management Limited.
Angela brings experience from a range of
non-executive roles with companies and
organisations in the asset management,
technology, public and not-for-profit sectors.
Committee Memberships
Committee Memberships
Chair of the Management Engagement
Committee and member of the Audit,
Nomination and Remuneration Committees.
Member of the Audit, Nomination,
Remuneration and Management
Engagement Committees.
Other Appointments Other Appointments
Susie is a director of Sableknight Limited and
Lockfold Communications.
Angela is currently a non-executive director
of Macquarie Capital (Europe) Limited,
Hargreave Hale AIM VCT plc, member of the
Defence Audit and Risk Assurance Committee
and a trustee of healthcare charity CW+.
Rationale for appointment Rationale for appointment
The Board elected to appoint Susie as a non-
executive Director following a recruitment
process which took place in the latter half
2022 resulting in her appointment on
1 December 2022. Susie’s election will be
proposed to Shareholders at the upcoming
AGM taking place on 30 March 2023.
Susie’s election is fully supported by the
Managers and the Board.
The Board elected to appoint Angela
as a non-executive Director following a
recruitment process which took place in the
latter half 2022 resulting in her appointment
on 1 December 2022. Angela’s election will
be proposed to Shareholders at the upcoming
AGM taking place on 30 March 2023.
Angela’s election is fully supported by the
Managers and the Board.
Date appointed 1 December 2022 Date appointed 1 December 2022
PCFT Share Interests n/a PCFT Share Interests n/a
Annual
Remuneration
£29,500 Annual
Remuneration
£29,500
Jo Elliott
Joanne Elliott was appointed to the Board
on 7 June 2013 and stepped down from the
Board at the AGM on 7 April 2022 following
nine years continuous service.
Katrina Hart
Katrina Hart was appointed to the Board on
7 June 2013 and stepped down from the
Board on 1 December 2022 following nine
years continuous service.
Susie Arnott
Independent Non-executive Director
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
14
Investment Managers
Date appointed
John joined Polar Capital following the acquisition of HIM Capital in September 2010 and is due to retire
at the end of June 2023; John will continue in an advisory role with the team following his retirement.
Skills and Experience
John has over 30 years’ experience in the financial services industry having worked for HSBC as a
commercial banker in Hong Kong and Fitch IBCA in London covering European Financials. He was
head of Asian research at FoxPitt, Kelton establishing their office in Hong Kong. In 2003 he joined
Hiscox Investment Management which later became HIM Capital. He has an MBA from London
Business School and studied at the London School of Economics (BSc Econ).
John has co-managed the Company’s investments since launch in 2013 and is also the manager of the
Polar Capital Financial Opportunities Fund.
Date appointed
George joined Polar Capital following the acquisition of HIM Capital in September 2010.
Skills and Experience
George has over 15 years’ experience analysing Europe, Asia and emerging markets. Prior to joining Polar
Capital, he was an analyst at HIM Capital from 2008 where he completed his IMC.
George joined Nick and John as co-manager of the Company in December 2020. He is also a co-manager
on the Polar Capital Financial Opportunities Fund with John Yakas.
Date appointed
Nick joined Polar Capital following the acquisition of HIM Capital in September 2010.
Skills and Experience
Nick has 28 years’ investment experience across a wide range of asset classes. Prior to joining HIM
Capital, Nick worked at New Star Asset Management. While there, he managed the New Star Financial
Opportunities Fund, a high-income financials fund investing in the equity and fixed-income securities
of European financial companies. Previously he worked at Exeter Asset Management and Capel-Cure
Myers. Nick has a Masters in Finance from London Business School.
Nick has co-managed the Company’s investments since launch in 2013 and is also the manager of the
Polar Capital Income Opportunities Fund.
Nick Brind Co-Fund Manager
John Yakas Co-Fund Manager
George Barrow Co-Fund Manager
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
15
Manager’s
Report
15
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
16
Investment Manager’s
Report
Notwithstanding the good performance of the sector and
that the Trust’s net asset value outperformed its peers and
wider equity markets, relative performance was disappointing.
The Trust’s outperformance versus its peers, we believe,
was probably due to the Trust’s lower exposure to FinTech
companies which performed poorly, and higher exposure to
insurance companies, which performed extremely strongly over
the period.
While we had strong performance from our holdings in the
insurance sector – Arch Capital and Beazley both benefited
from large rises in their share prices – the Trust’s large
overweight holding in faster-growing, smaller US banks
more than offset this and was the most significant drag on
performance relative to benchmark, along with a holding in
PayPal Holdings.
Underweight exposure to commodity-exporting countries
such as Australia, Saudi Arabia, Brazil and South Africa, but
also Japan, impacted performance and more than offset
positive contributions from the positioning in the likes of
the UK, Indonesia and Ireland. Gearing was a small positive
contributor to performance while currency and fixed income
were small negative contributors, with exposure to fixed
income having been reduced materially in recent years.
Market review
In what was one of the worst years for financial markets,
with bond markets suffering sharp falls, markets finished the
year where they started, namely at odds with Federal Reserve
guidance on the outlook for interest rates. As central banks
turned more hawkish at the beginning of the financial year,
there was a steep rise in bond yields which also led to a sharp
sell-off in equity markets. This led initially to a rally in stocks
tagged as value and a decline in growth stocks, albeit against
a background of falling equity markets.
John Yakas
Co-Fund Manager
George Barrow
Co-Fund Manager
Investment Review
Performance
Equity markets fell over the period under review
(1 December 2021 to 30 November 2022) as the impact of
rising interest rates, further lockdowns in China, Russia’s
invasion of Ukraine and the resulting impact on energy prices,
and volatility in the UK gilts market hit sentiment and more
than offset better corporate earnings. The strength of the
US dollar cushioned falls for sterling investors, as did a late
rally in equity markets in October and November.
Government bonds fell sharply over the year as the US Federal
Reserve, European and other central banks raised interest
rates at a faster pace than previously expected. However,
concern about the impact on the outlook for growth resulted
in the US yield curve inverting (when the interest rate on
long term bonds is lower than that on shorter dated bonds),
to levels not seen since the early 1980s, a historically good
predictor of recessions.
Against this background, financials outperformed wider
equity markets. During the 12 months, the Trust’s net asset
value total return rose 1.9%, while its benchmark index, the
MSCI All Country World Financials Net Total Return Index,
rose 6.8%. In contrast, global equity markets, as illustrated by
the MSCI All Country World Total Return Index, fell 1.4% and
the Lipper open-ended peer group of financial equity sector
funds fell 0.3%. Since launch, the Trust’s net asset value
has returned 125.9% against the MSCI All Country World
Financials Net Total Return Index return of 123.4%
1
and the
Lipper open-ended peer group return of 97.6%.
Nick Brind
Co-Fund Manager
1 MSCI ACWI Financials Index (£) excluding real estate prior to August 2016
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
17
Financials is primarily a value sector due to its low valuation
metrics and, in the main, benefited from rising interest rates
and bond yields. However, there are a number of companies
within the sector that are deemed growth stocks and
consequently trade at high valuations – these fell sharply.
While highly-rated stocks did see further pressure over the
year, it would be an oversimplification to say value stocks
outperformed while growth stocks underperformed.
Russia’s invasion of Ukraine in February 2022 coupled
with a stronger than anticipated international response
understandably overshadowed other news. There was a
significant impact on commodities, especially energy markets
in Europe, exacerbated by the strength in the US dollar,
albeit the prices of many commodities fell over the second
half of the year. The impact of China’s zero-Covid policy
and political ructions in the UK also impacted markets to
dampen sentiment.
Sector review
At the beginning of the period, financials saw significant
outperformance. This was led by banks, but also insurance
companies due to the positive correlation they have with
higher bond yields, in anticipation that it would boost the
earnings of banks as yields on their loans rise faster than
what they had to pay out on deposits. However, banks
gave up that outperformance as investors pulled back from
the subsector with concerns about the outlook for growth,
following the invasion of Ukraine, and therefore the increased
risk of higher loan losses which would act as a headwind
to earnings.
Financial sub-sector performance
Banks +6.8%
Insurance +20.8%
Diversified financials 0.0%
FinTech -23.5%
Source: Bloomberg; MSCI/Factset
Equally, diversified financials, where we are underweight
the benchmark, also struggled to perform against this
background. While the subsector covers a broad spectrum
of companies, from stock exchanges, asset managers and
investment banks to information service companies, those
that are more sensitive to the level of financial markets – in
particular asset managers – suffered sharp share price falls as
fund flows turned negative and expectations for performance
fees and future fund raises fell. Investment banks were also
weak in anticipation of lower activity in capital markets.
Conversely, non-life insurance companies proved far
more resilient. First, they are more defensive, being less
economically sensitive as insurance losses are for the most
part driven by weather-related losses and accidents. Second,
insurance rates continued to increase faster than claims costs,
albeit with exceptions including UK motor insurance. Third,
like banks, they are a beneficiary of rising interest rates and
bond yields as this increases their investment income.
FinTech companies were extremely weak over the period,
primarily due to very high valuations coming under significant
pressure as discount rates increased and disappointment
around earnings, while regulatory concerns impacted the ‘buy
now/pay later’ sector. This also reflected broader weakness in
the technology sector, with unprofitable companies the worst
affected and some large, well-known unquoted FinTech
businesses seeing significant falls in their valuations, while
others saw their business models questioned.
Investment activity
At the beginning of the reporting period, the Trust’s
investment portfolio was positioned in the expectation that
growth would remain respectable, as economies continued to
open up post-Covid and rising interest rates and bond yields
would be a boost for banks’ earnings and therefore share
prices. Consequently, the portfolio was overweight banking
stocks, notably faster-growing, smaller regional banks in the
US which we saw as the biggest beneficiary of this trend.
Gearing had already been reduced to 5.2% at the end of
November 2021 from a high of 12.7% in November 2020,
reflecting the fact that valuations had risen sharply over the
preceding 12 months. However, with the onset of war in
Ukraine, rises in commodity prices and concerns around the
impact on growth of rising interest rates, we positioned the
portfolio more defensively. As a result, the proportion of the
portfolio in banks was reduced by close to seven percentage
points, largely through a reduction in our holdings in US and
European banks, while exposure to more defensive companies
within the sector, such as non-life insurers, was increased.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
18
The shift to a more defensive portfolio was also reflected
in individual stock positioning. For example, new holdings
were purchased in, among others, Visa, Intact Financial
Corporation, Marsh McLennan and Royal Bank of Canada,
while we added to holdings in Berkshire Hathaway, Chubb
and Wells Fargo. All of these are seen as more defensive,
with insurance companies and Visa being less economically
sensitive while the two banks are seen as more defensive
when compared to their peers, the former in part due to
the resilience of the Canadian economy. We also added
to holdings in other commodity-driven economies such as
Norway and Indonesia for the same reasons.
Conversely, holdings in JPMorgan, Citizens Financial Group,
UBS Group, SVB Financial Group and Signature Bank – all
seen as more sensitive to volatility in financial markets – were
reduced, and the residual holdings in the latter two were
sold later in the period. Holdings in Intesa Sanpaolo and ING
Groep, both European banks, were sold as the proximity
of the war to Europe led us to reduce our European bank
exposure in the expectation it would have a significant impact
on the region, albeit the banks have performed much better
than we expected at the time of the invasion.
With equity markets suffering significant weakness at the
end of September, we started to reverse some of the more
defensive positioning as we felt financial markets were
discounting a much deeper downturn than was justified. This
was done through a combination of; adding to our holdings
in JPMorgan, HSBC and Toronto-Dominion; starting new
holdings in, among others, AIB Group and BOC Hong Kong;
selling holdings in Baloise Holding, First Republic Bank and
Shinhan Financial Group: reducing holdings such as Arch
Capital, Berkshire Hathaway and Western Alliance.
We remained underweight asset managers and reduced
our holding in Blackstone, the US alternative asset manager
which suffered from having to cap redemptions from its listed
property fund. We sold the remaining position later in the
year in preference for a holding in Ares Management, which
we perceived as more defensive. Alternative asset managers
are an area we like for the long term due to the locked-up
capital on which they earn fees and demand for underlying
asset classes. In the short term, we saw risks around their
ability to continue to grow at the pace they have in recent
years.
In Asia, we continue to have a large overweight to Indian
private sector banks which continue to see attractive growth.
We do not invest in state banks as we do not believe they
are good underwriters of risk. We made small changes to
our holdings in AIA Group and Hong Kong Exchanges and
Clearing which we saw as beneficiaries of China relaxing its
zero-Covid policy, while adding to our holding in Prudential
which should also be a beneficiary.
In Indonesia and Malaysia, both commodity-boosted
economies, we added to holdings in Bank Central Asia and
Bank Rakyat Indonesia Persero and started a new position in
Hong Leong Bank. This was partially offset by reductions in
our exposure to Thailand, an economy which has struggled
as tourism and domestic consumption has been impacted by
the delayed reopening of China and less government support
during Covid.
The reinsurance sector has had a difficult few years, as
a succession of natural disasters and other losses led
to disappointing returns. During the year, a number of
companies in the sector reduced the amount of capital
allocated to reinsurance. Consequently, as reinsurance rates
were expected to rise sharply, reflecting continued increase in
demand for reinsurance due to climate change and inflation,
for the first time since the launch of the Trust we also took
a small position in Hannover Rueck, a reinsurance company
– albeit other holdings in the portfolio with exposure to
reinsurance would also benefit.
At inception close to 10% of the Company’s portfolio was
invested in fixed income securities, primarily to generate
extra income. These holdings were for the most part sold in
recent years as the yields on offer fell and became much less
attractive. However, with the back-up in yields in 2022, we
significantly increased exposure in October and November
acquiring new holdings in bonds issued by, for example, AIB
Group, IG Group Holdings, Nationwide Building Society, Legal
& General Group, Rothesay Life and BNP Paribas at yields of
between 8% and 12%.
We have been cautious of investing in unquoted companies
in the past few years, in part as valuations appeared very
unattractive but also as we saw better value in listed
companies, especially with the fall in equity markets during
the pandemic. Nevertheless, we did participate in a fund
raising for Moneybox, a UK wealth and savings platform, in
February 2022 which we believe has exciting potential.
Gearing, which dropped at one point during the middle of
the year to a position where we had net cash available, ended
the period at 6%.
Investment Manager’s Report continued
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
19
Active Share
Active share - a measure of how actively a portfolio is
managed with 0% reflecting a fund that replicates its
benchmark and 100% where none of the securities overlap
with the underlying benchmark- fell again this year to
69.6% at the end of the period under review from 76.5%.
A higher number increases the probability that a fund will
outperform or underperform its benchmark. The fall over
the year reflects the changes highlighted above where the
portfolio was positioned more defensively albeit that there
remain significant differences between the portfolio and the
benchmark.
Active Share Percentage by Year
Nov-20Nov-19Nov-17
60%
65%
70%
75%
80%
85%
2022202120202019201820172016201520142013
The high active share in part reflects companies which
we consider part of the wider universe but which are not
included in the Trust’s benchmark, such as Mastercard, or
in the case of HDFC Bank, India’s largest private bank, that,
due to restrictions on foreign ownership, does not meet the
threshold required by MSCI for index inclusion. However
as indicated by the chart on page 23, which lists the active
positions, there are also many companies where we have
a much larger or smaller position than the benchmark. For
example, the portfolio has a smaller holding in Berkshire
Hathaway than the benchmark and no holdings at all in
Commonwealth Bank of Australia or Goldman Sachs.
Outlook
Looking forward, we remain very constructive on the outlook
for financials, despite the shorter-term uncertainties which
would argue for caution in a sector that is cyclical. Today,
banks are more robust with significantly greater levels of
capital and liquidity than before the global financial crisis.
Importantly, their risk appetite coming into this downturn is
at a level which would suggest much lower loan losses. In
plain English, banks have made far fewer bad loans than they
have in previous cycles.
Furthermore, banks have been benefiting from the rise in
interest rates which has led to their net interest margins
widening, that is to say the interest income they earn on
loans has increased faster than the increase in what they
have to pay out on savings accounts. Despite inflationary
pressures, costs have been contained at a manageable
level. Consequently bank earnings have risen over the year
as analysts have had to factor in the changing interest rate
environment. For some banks this has been significant,
albeit not enough in many cases to offset weaker sentiment
resulting in bank stocks derating.
The unknowns looking forward for bank investors will be
the degree and duration of the downturn and therefore the
cost to bank profitability. There are good reasons to believe
loan losses will be modest, but this is complicated by the fact
that the amount of loan loss provisions banks will have to
set aside is likely to be larger than the actual losses due to
accounting rules. As we saw during the pandemic, this led to
banks taking significantly more loan loss provisions than they
needed as the majority were written back when bad debts
did not increase to the extent expected.
A cautious investor may look at the rise in interest rates and
inflation, anecdotal stories of individuals and small businesses
struggling with bills, the inversion of the yield curve, swill the
tea leaves and quite reasonably assume that the downturn will
be severe. Conversely, the evidence so far shows that savings
built up during the pandemic and more robust corporate
balance sheets, plus help from governments to offset increased
energy costs, has allowed consumers and corporates to
withstand the slowdown which explains why delinquencies
have not yet risen meaningfully. The increase in loan loss
provisions seen in recent results announcements does not
undermine this view as it is driven by accounting rules.
The uncertainty is whether the banking sector will see further
weakness along with wider equity markets, in anticipation
that the downturn will be more severe than that priced in by
financial markets, before recovering as investors realise this
is not a repeat of the global financial crisis or the early 1990s
downturn. Or do investors start to see through the shorter-
term weakness and see the value in buying banking shares
and bid up share prices to reflect their longer-term value and
earnings potential?
Unlike the banking sector, where investors have
understandably stepped back as they see risks of a recession
impacting short-term earnings and have for the most part
ignored the longer-term improvement in their earnings
from higher interest rates, for non-life insurance companies,
investors are willing to look through the shorter-term impact
to their earnings. We have been very constructive on the
non-life insurance sector and continue to be, though we are
conscious that its performance as described above was in part
due to its defensive characteristics.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
20
However, with non-life insurance companies there has also
been a material improvement in underlying earnings, from
better underwriting returns, due to higher insurance premiums
relative to claims costs as well as higher investment income.
Understandably, investors have willingly paid a higher multiple
for that stream of earnings. Reinsurance companies that write
property-catastrophe insurance and other risks have equally
performed well despite 2022 being a poor year for returns, as
reinsurance premium rates have risen sharply.
We continue to remain cautious on asset managers and
investment banks, the former as, notwithstanding the recent
rally in financial markets, we believe flows will likely continue
to remain weak, and in the latter as they rely on activity in
capital markets which we believe will be slow to recover. We
own shares in MSCI and S&P Global as beneficiaries of the
continued demand for ETFs and demand for data and services
across their product areas, in the latter instance as a credit
rating agency.
As highlighted in the interim report to the end of May 2022,
S&P and MSCI, which compile many US and global indices,
include FinTech companies within the technology sector not
the financial sector. Any investments in this area continue
to be off-benchmark and effectively result in us having an
overweight position. However, they have announced that
they will be moving certain payment companies, notably
PayPal Holdings, Visa and Mastercard, into the financial sector
indices in March this year.
The portfolio remains overweight banking stocks, albeit by
not as much as this time last year, where we see material
upside in share prices. Otherwise, broadly the portfolio
remains positioned in more defensive areas of the sector,
notably non-life insurance, payments, fixed
income securities and information services
companies. Nevertheless, we have increased
our exposure to Asia to benefit from the
recovery of China’s self-imposed zero-Covid
policies as well as Europe, at the expense of
the US. Gearing has also increased by a
couple of percentage points.
The rally in financial markets over the last
few months on the back of lower energy
prices, in particular, in Europe, and softer
inflation data has increased the probability
of a shallower downturn and led to hopes
of a “soft landing”. Financials outperformed wider equity
markets in both 2021 and 2022 and if this proves to be
correct we would expect them to extend this outperformance
for a third consecutive year. However, much will depend
on how central banks react to the more positive data on
inflation. Furthermore, will inflation come down quickly,
as implied by financial markets, or will it prove to be more
stubborn as history would suggest, albeit history is largely
from the 1970s and 1980s when unions had greater power?
Either way, we believe the next 10 years will be far better for
the financials sector now the era of cheap money has ended.
Nick Brind, John Yakas & George Barrow
20 February 2023
We would draw
Shareholders attention to
www.polarcapitalglobalfinancials
trust.com
for monthly factsheets, regular
investment commentary and
portfolio updates.
Investment Manager’s Report continued
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
21
The failure of Penn Square Bank, an Oklahoma City-based
lender with only one branch, in 1982 should never have
been more than a footnote in some banking regulator’s
report. However, in the process of growing its balance sheet
over 10 times in the preceding five years, predominantly
to the energy sector, it had also sold participations in the
loans it was originating to larger banks. In particular, it had
sold $1bn of these loans to Continental Illinois, at the time
the seventh largest commercial bank in the US with around
$40bn in assets.
The losses Continental Illinois took on these loans, with over
50% becoming bad, were a key reason for its failure two
years later, but it was not alone as Chase Manhattan and a
number of other banks had to take large losses on loans they
had bought from Penn Square too. Its failure is recounted,
in Belly Up by Philip Zweig, and all the blame is landed on
the bank’s management, in particular Bill Patterson, a senior
executive there.
Penn Square’s failure was due to its voracious appetite
to grow in a highly cyclical sector which then turned
downwards with understandable consequences. It was
facilitated by weak underwriting controls with limited
collateral to back the loans it was making. To fund the
growth, Penn Square also relied on wholesale funding which
was the catalyst for calling an end to the satire as there was
a deposit flight when concerns started to filter out as well
as it being the catalyst for Continental Illinois’s collapse not
long after.
Equally telling when we looked at the experience of the
UK in the early 1990s was an email response we received
from Nationwide Building Society, today seen as a very
conservative lender, about their experience. “The Society
was the market leader in all housing initiatives at this
time; shared ownership; shared equity, key worker loans,
100% loans; self-build, etc... Any initiative that encouraged
marginal owner occupiers into the market was led by
the Society.”
The response went further: “Unfortunately, at the peak
of the market is the point at which your lending criteria
should be its most stringent, not its most lax. So the Society
rapidly became the market leader in arrears, possessions
and losses. Some 44% of our arrears in this period came
from 95%-100% lending and 45% from 100% lending.
The Society learnt its lesson about high LTV (loan to value)
lending which has stayed with us for a long period.”
Conversely, Northern Rock grew its profits every single
year during the early 1990s’ recession and housing market
downturn, unlike larger banks such as Bank of Scotland
and Barclays. By 2006, however, it somehow came to
believe that lending up to 125% of the value of a house
to borrowers was prudent lending with understandable
consequences as it was overly reliant on wholesale funding.
It remains one of the oddest meetings we have ever had
with the CFO of a bank, as he tried to justify its strategy,
albeit it was in close competition with a number of other
banks at the time with their incontinent view of lending.
Case Study: Why this time should
be different
“As bank investors, we draw comfort that
banks’ exposure to residential and commercial
real estate is at much lower loans-to-value than
in 2008 or 1990, and that their exposure to
riskier areas such as real estate development
loans, construction or energy loans is similarly
much lower.”
Nick Brind
Co-Fund Manager
Below is an extract from an article published on the Polar Capital Global Financials Trust
website on 18 October 2022.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
22
Nevertheless, none of our meetings with bank management
have yet to match that of a bank examiner’s meeting at
Penn Square with Patterson. He had shelves lined with caps
bearing the logos of different customers of the bank. When
the examiner asked about a particular loan, Patterson would
reach back, pull the relevant cap from the shelf, put it on
his head and turn back to the examiner before answering
a question. “The examiner then named a company that
Patterson had no hat for. Instead he pulled his wild card,
a Mickey Mouse cap with strings dangling down from the
ears. Patterson once again turned to the national bank
examiner, jiggled the strings to make the ears flap. Smiled
and said: “Well, what about it?”.”
Today, thankfully, meetings with banks are not like that.
Fifteen years on from the global financial crisis more of the
risk has shifted off bank balance sheets into capital markets
and to non-bank investors
1
with sub-prime lending, where
it exists, shifting to FinTech lenders. Furthermore, banks
have significantly more capital and liquidity today, making
a repeat of the runs we saw in 2007-08 highly unlikely.
As bank investors, we draw comfort that banks’ exposure
to residential and commercial real estate is at much lower
loans-to-value than in 2008 or 1990, in part driven by
regulation, and that their exposure to riskier areas such as
real estate development loans, construction or energy loans
is similarly much lower.
Case Study: Why this time should be different continued
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
23
Attribution Analysis
The top ten relative contributors to, and
the bottom ten relative detractors from
performance versus the benchmark
For the year ended 30 November 2022
Since Inception to 30 November 2022
Active positions – top ten and bottom ten
active positions
For the year ended 30 November 2022
Chrysalis Investments
Manappuram Finance
Progressive Corporation
Bank for Foreign Trade
Berkshire Hathaway
PacWest Bancorp
Signature Bank
Western Alliance
SVB Financial
PayPal Holdings
Arch Capital
Beazley
CHUBB
Standard Chartered
Sberbank of Russia
Mastercard
Bank Central Asia
Citigroup
BlackRock
Marsh & McLennan
-1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2
1.01
0.73
0.66
0.52
0.43
0.39
0.28
0.26
0.25
0.22
-0.27
-0.30
-0.30
-0.34
-0.42
-0.51
-0.61
-0.63
-0.91
-1.07
%
Charles Schwab
CME Group
Bank of Nova Scotia
Royal Bank of Canada
Citigroup
American Express
BlackRock
Goldman Sachs
Commonwealth Bank of Australia
Berkshire Hathaway
HDFC Bank
CHUBB
Arch Capital
Mastercard
East West Bancorp
Citizens Financial Group
Sumitomo Mitsui Financial
PNC Financial Services
Beazley
Nordea Bank
-2 -1 0 1 2 3 4
3.40
2.68
2.60
2.17
1.88
1.78
1.71
1.60
1.57
1.56
-0.84
-0.85
-0.85
-0.98
-1.19
-1.20
-1.21
-1.30
-1.36
-1.46
%
Nov
2013
Nov
2014
Nov
2015
Nov
2016
Nov
2017
Nov
2018
Nov
2019
Nov
2020
Nov
2021
Nov
2022
Since
Inception
Allocation Effect
Selection Effect (Incl. Interaction) Currency Effect Total Attribution Effect
%
-15
-20
-25
-5
5
0
10
20
30
-10
15
25
35
Note: This represents the gross return of the Company’s portfolio minus the benchmark return. This reflects the attribution effect where the Company’s gross return is compared to the
benchmark return. Total Attribution Effect is derived from the Relative Attribution Analysis, which decomposes the Excess Return (Gross) into the Allocation Effect and stock Selection Effect
(Inc. Interaction). Allocation Effect refers to the portion of the Company’s overall performance attributable to the Manager’s decision on taking different asset categories weights. Stock
Selection Effect refers to the portion of the Company’s overall performance attributable to the Manager’s decision on selecting individual securities.
Note: The Attribution Analysis of the relative and active positions represents the gross return of the Company’s portfolio minus the benchmark return.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
24
Top Ten Investments
As at 30 November 2022
Ranking Market Value £'000 % of total net assets
2022 2021 Stock Sector Country 2022 2021 2022 2021
1 (1) Banks North America 30,627 26,539 5.7% 5.8%
JP Morgan Chase is the largest bank in the US, with a market capitalisation of US$393bn, and a presence in over 100 markets. It is the result of a combination of
several banks including JP Morgan, Chase Manhattan, Bank One, Chemical Bank and Manufacturers Hanover. During the financial crisis the company also acquired
Bear Stearns, one of the largest investment banks in the US and Washington Mutual, which at the time was the largest savings and loans bank in the US.
2 (2) Bank of America Banks North America 25,887 18,455 4.8% 4.0%
Bank of America is the 2nd largest bank in the US with a market capitalisation of US$275bn. The bank’s history dates to 1904 when it was founded as the Bank
of Italy to service Italian immigrants in California. It was acquired by Nations Bank in 1998 and its name changed to Bank of America. During the financial crisis the
bank acquired Merrill Lynch, one of the largest investment banks in the US.
3 (6) Insurance Europe 22,493 11,340 4.2% 2.5%
CHUBB, incorporated in Switzerland, has a market capitalisation of US$91bn and is the largest commercial insurer in the United States and the world’s largest
publicly traded property and casualty insurer. It operates in 54 countries as a global provider of insurance products which also include accident and health,
reinsurance and life insurance. It was formed from the acquisition of CHUBB by ACE in 2016 which then adopted the CHUBB name.
The Chubb Logo is a registered trademark of Chubb Limited.
4 (-) Berkshire Hathaway Diversified Financials North America 21,302 - 3.9% -
Berkshire Hathaway, is the largest financial company globally with a market capitalisation of US$681bn. It owns US auto insurer GEICO and General Re, a reinsurance
company and has operations in a diverse range of industries from railroads to confectionary. It also has large investments in American Express, Bank of America, the
Coca-Cola company and Apple. It has been managed by Warren Buffett since 1964.
5 (3) HDFC Bank Banks Asia (ex-Japan) 21,022 13,111 3.9% 2.9%
HDFC Bank is the largest private sector bank in India with a market capitalisation of US$111bn. It was incorporated in 1994 in Mumbai before commencing
operations the following year. It has a banking network of 5,430 branches and 15,292 ATMs spread across 2,848 cities and towns. In 2022 HDFC Bank and Housing
Development Finance Company announced a merger which will become effective 2023.
6 (37) Banks North America 20,754 5,957 3.8% 1.3%
Wells Fargo is the 3rd largest bank in the US with a market capitalisation of US$157bn, and branches across the whole country. It was founded in 1852 by Henry
Wells and William G Fargo, two of the founders of American Express, to provide banking and express services to California by stagecoach. Wells Fargo acquired
Wachovia in 2008, which at the time was the fourth largest bank in the US based on total assets.
7 (23) Banks
United
Kingdom 14,656 8,153 2.7% 1.8%
HSBC Holdings which has a market capitalisation of US$103bn is a diversified global banking and financial services business. It was founded in 1865 in Hong Kong,
buying a significant stake in Hang Seng bank in 1965 before it became incorporated in the UK following its purchase of Midland Bank in 1992. Today it has operations
in 63 countries but with the majority of revenue being generated in Asia and Europe.
8 (26) Insurance Asia (ex-Japan) 13,874 7,833 2.6% 1.7%
AIA Group has a market capitalisation of US$131bn and is the largest independent publicly listed pan-Asian life insurance group with a presence in 18 markets
across the Asia-Pacific region. The company principally engages in the provision of life insurance, accident and health insurance and savings plans, as well as
employee benefits, credit insurance and pension services to corporate clients.
9 (-) DBS Group Banks Asia (ex-Japan) 13,200 - 2.4% -
DBS is one of the largest banks in Asia with a market capitalisation of US$66bn. Previously known as Development Bank of Singapore it was founded in 1968 and
today has 12 million customers in 18 countries including China, Hong Kong, Taiwan, Indonesia as well as Singapore.
10 (8) Banks North America 13,112 11,112 2.4% 2.4%
PNC Bank is the 7th largest bank in the United States with a market capitalisation of US$63bn and operations in 19 states. The name originates from two of its
predecessor banks, Pittsburgh National Corporation and Provident National Corporation which merged in 1983. In November 2020 it announced the acquisition of
BBVA USA for $11.6bn acquiring a network of 637 branches across Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico.
Total - 10 Largest Investments 196,927 36.4%
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
25
Full Investment Portfolio
As at 30 November 2022
Ranking
Market Value
£’000
% of total net
assets
2022 2021 Stock Sector Country 2022 2021 2022 2021
1 (1) JP Morgan Chase Banks North America 30,627 26,539 5.7% 5.8%
2 (2) Bank of America Banks North America 25,887 18,455 4.8% 4.0%
3 (6) CHUBB Insurance Europe 22,493 11,340 4.2% 2.5%
4 (-) Berkshire Hathaway Diversified Financials North America 21,302 - 3.9% -
5 (3) HDFC Bank Banks Asia (ex-Japan) 21,022 13,111 3.9% 2.9%
6 (37) Wells Fargo Banks North America 20,754 5,957 3.8% 1.3%
7 (23) HSBC Holdings Banks United Kingdom 14,656 8,153 2.7% 1.8%
8 (26) AIA Group Insurance Asia (ex-Japan) 13,874 7,833 2.6% 1.7%
9 (-) DBS Group Banks Asia (ex-Japan) 13,200 - 2.4% -
10 (8) PNC Financial Services Banks North America 13,112 11,112 2.4% 2.4%
Top 10 investments 196,927 36.4%
11 (7) Toronto-Dominion Bank Banks North America 12,439 11,305 2.3% 2.4%
12 (15) Sumitomo Mitsui Financial Banks Japan 11,789 9,264 2.2% 2.0%
13 (-) Visa Software & Services North America 11,108 - 2.1% -
14 (5) Arch Capital Insurance North America 10,533 12,572 1.9% 2.7%
15 (-) Marsh & McLennan Insurance North America 10,041 - 1.8% -
16 (-) DNB Bank Banks Europe 9,896 - 1.8% -
17 (22) Bank Central Asia Indonesia Banks Asia (ex-Japan) 9,890 8,204 1.8% 1.8%
18 (12) Mastercard Software & Services North America 9,805 9,466 1.8% 2.1%
19 (49) Bank Rakyat Banks Asia (ex-Japan) 9,183 4,235 1.7% 1.0%
20 (-) U.S. Bancorp Banks North America 8,972 - 1.7% -
Top 20 investments 300,583 55.5%
21 (-) AIB Group Banks Europe 8,949 - 1.7% -
22 (35) Beazley Insurance United Kingdom 8,909 6,767 1.6% 1.5%
23 (4) Citizens Financial Group Banks North America 8,570 13,086 1.6% 2.9%
24 (10) UBS Group Banks Europe 8,488 10,279 1.6% 2.3%
25 (-) Charles Schwab Diversified Financials North America 7,967 - 1.5% -
26 (32) Sampo Insurance Europe 7,909 6,858 1.4% 1.5%
27 (16) Morgan Stanley Diversified Financials North America 7,558 9,083 1.4% 2.0%
28 (-) IndusInd Bank Banks Asia (ex-Japan) 6,898 - 1.3% -
29 (-) Intact Financial Corporation Insurance North America 6,836 - 1.3% -
30 (44) Standard Chartered Banks United Kingdom 6,552 5,129 1.2% 1.1%
Top 30 investments 379,219 70.1%
31 (-) The Travelers Companies Insurance North America 6,484 - 1.2% -
32 (-) Prudential Insurance United Kingdom 6,402 - 1.2% -
33 (43) Bank of NT Butterfield Banks North America 6,310 5,240 1.2% 1.1%
34 (-) Royal Bank of Canada Banks North America 5,858 - 1.1% -
35 (36) Tisco Financial Banks Asia (ex-Japan) 5,805 5,999 1.1% 1.3%
36 (53) Hong Kong Exchanges and Clearing Diversified Financials Asia (ex-Japan) 5,746 4,081 1.1% 0.9%
37 (19) Enterprise Financial Services Banks North America 5,685 8,424 1.0% 1.8%
38 (13) East West Bancorp Banks North America 5,660 9,452 1.0% 2.1%
39 (-) Mitsubishi UFJ Financial Group Banks Japan 5,629 - 1.0% -
40 (9) Nordea Bank Banks Europe 5,502 10,907 1.0% 2.4%
Top 40 investments 438,300 81.0%
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
26
Full Investment Portfolio continued
As at 30 November 2022
Ranking
Market Value
£’000
% of total net
assets
2022 2021 Stock Sector Country 2022 2021 2022 2021
41 (-) MSCI Diversified Financials North America 5,497 - 1.0% -
42 (-) Hannover Rueck Insurance Europe 5,456 - 1.0% -
43 (60) FinecoBank Banca Fineco Banks Europe 5,293 2,781 1.0% 0.6%
44 (-) Cullen Frost Bankers Banks North America 5,263 - 1.0% -
45 (31) Allianz Insurance Europe 5,078 7,079 0.9% 1.6%
46 (41) Lancashire Insurance United Kingdom 5,024 5,485 0.9% 1.2%
47 (33) S&P Global Diversified Financials North America 4,923 6,826 0.9% 1.5%
48 (-) Comerica Banks North America 4,914 - 0.9% -
49 (-) CaixaBank Banks Europe 4,851 - 0.9% -
50 (-) Hong Leong Bank Banks Asia (ex-Japan) 4,775 - 0.9% -
Top 50 investments 489,374 90.4%
51 (-) Regions Financial Banks North America 4,710 - 0.9% -
52 (-) Macquarie Diversified Financials Asia (ex-Japan) 4,644 - 0.9% -
53 (-) Bank of China (Hong Kong) Banks Asia (ex-Japan) 4,634 - 0.9% -
54 (-) Ares Management Diversified Financials North America 4,236 - 0.8% -
55 (47) Direct Line Insurance Insurance United Kingdom 4,091 4,763 0.7% 1.0%
56 (-) Axis Bank Banks Asia (ex-Japan) 3,789 - 0.7% -
57 (58) Ares Capital Diversified Financials North America 3,393 2,998 0.6% 0.7%
58 (21) Housing Development Finance Banks Asia (ex-Japan) 3,206 8,209 0.5% 1.8%
59 (-) Pension Insurance 7.375% Perp Bond Fixed Income Fixed Income 2,576 - 0.5% -
60 (73)
International Personal Finance 9.75% 2025
Bond
Fixed Income Fixed Income 2,563 1,357 0.5% 0.3%
Top 60 investments 527,216 97.4%
61 (-) Rothesay Life 4.875% Perp Bond Fixed Income Fixed Income 2,548 - 0.5% -
62 (-) Legal General Group 5.625% Perp Bond Fixed Income Fixed Income 2,542 - 0.5% -
63 (-) Golub Capital Diversified Financials North America 2,465 - 0.5% -
64 (61) VPC Specialty Lending Investments Fixed Income Fixed Income 2,428 2,392 0.4% 0.5%
65 (-) Lancashire 5.625% 2041 Bond Fixed Income Fixed Income 2,348 - 0.4% -
66 (-) Moneybox (unquoted) Diversified Financials United Kingdom 2,310 - 0.4% -
67 (-) IG Group 3.125% 2028 Bond Fixed Income Fixed Income 2,284 - 0.4% -
68 (65) Atom Bank (unquoted) Banks United Kingdom 2,241 1,921 0.4% 0.4%
69 (-) AIB Group 6.25% Perp Bond Fixed Income Fixed Income 2,056 - 0.4% -
70 (-) Aviva 6.875% Perp Bond Fixed Income Fixed Income 2,030 - 0.4% -
Top 70 investments 550,468 101.7%
71 (74) Riverstone Credit Opportunities Fixed Income Fixed Income 2,026 1,325 0.4% 0.3%
72 (-) Barclays 8.875% Perp Bond Fixed Income Fixed Income 1,978 - 0.4% -
73 (-) Societe Generale 5.375% Perp Bond Fixed Income Fixed Income 1,978 - 0.4% -
74 (-) Phoenix Group 5.625% 2031 Bond Fixed Income Fixed Income 1,919 - 0.4% -
75 (-) BNP Paribas 7% Perp Bond Fixed Income Fixed Income 1,867 - 0.3% -
76 (-)
Nationwide Building Society 5.75% Perp
Bond
Fixed Income Fixed Income 1,785 - 0.3% -
77 (-) CaixaBank 5.875% Perp Bond Fixed Income Fixed Income 1,771 -
0.3% -
78 (-) Rothesay Life 6.875%
Perp Bond Fixed Income Fixed Income 1,675 - 0.3% -
79 (-) Natwest Group 2.105% 2031 Bond Fixed Income Fixed Income 1,646 - 0.3% -
80 (66) Gresham House Diversified Financials United Kingdom 1,625 1,803 0.3% 0.4%
Top 80 investments 568,738 105.1%
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
27
Ranking
Market Value
£’000
% of total net
assets
2022 2021 Stock Sector Country 2022 2021 2022 2021
81 (70) Provident Financial 8.875% 2032 Bond Fixed Income Fixed Income 1,593 1,706 0.3% 0.4%
82 (-) Chesnara 4.75% 2032 Bond Fixed Income Fixed Income 1,275 - 0.2% -
83 (-) Shawbrook Group 9% 2030 Bond Fixed Income Fixed Income 480 - 0.1% -
84 (77) Jupiter 8.875% 2030 Bond Fixed Income Fixed Income 456 528 0.1% 0.1%
85 (-) Rothesay Life 5% Perp Bond Fixed Income Fixed Income 206 - 0.0% -
Total investments 572,748 105.8%
Other net liabilities (31,476) (5.8%)
Total net assets 541,272 100.0%
Note: Figures in brackets denote comparative rankings as at 30 November 2021.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
28
Portfolio Review
As at 30 November 2022
Geographical Exposure*
Benchmark weighting
as at 30 November
2022**
30 November
2022
30 November
2021
North America 53.0% 50.1% 47.6%
Asia (ex-Japan) 18.0% 19.8% 19.9%
Europe 14.5% 15.5% 19.2%
United Kingdom 4.6% 9.4% 11.7%
Fixed Income - 7.8% 2.2%
Japan 3.8% 3.2% 2.0%
Latin America - - 1.7%
Eastern Europe - - 1.1%
Other net liabilities - (5.8%) (5.4%)
Total 100.0% 100.0%
Sector Exposure*
Benchmark weighting
as at 30 November
2022**
30 November
2022
30 November
2021
Banks 48.3% 60.1% 70.2%
Insurance 22.0%
20.7% 13.7%
Diversified Financials
29.6% 13.3% 14.9%
Fixed Income
-
7.8% 2.2%
Software & Services -
3.9%
4.4%
Other net liabilities
-
(5.8%) (5.4%)
Total 100.0% 100.0%
Market Capitalisation*
Benchmark weighting
as at 30 November
2022**
30 November
2022
30 November
2021
Large (>US$5bn) 98.6% 98.7% 85.6%
Medium (US$0.5bn - US$5bn) 1.4% 5.9% 18.2%
Small (<US$0.5bn) - 1.2% 1.6%
Other net liabilities - (5.8%) (5.4%)
Total 100.0% 100.0%
* Based on the net assets as at 30 November 2022 of £541.3m (2021: £457.2m)
** The classifications are derived from the Benchmark as far as possible. Not all geographical areas or sectors of the Benchmark are shown, only those in which the Company had an investment
at the year end.
Environmental,
Social and
Governance
Matters
29
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
30
Corporate Responsibility incorporating
ESG considerations
As an investment trust with a wholly non-executive,
independent Board of Directors we delegate the operational
aspects of running the Company to third parties, primarily the
Manager. However, the ultimate responsibility to Shareholders
lies with the Board. We recognise that this includes ESG and
over recent years ESG has become ever-more important from
an impact, risk and cost perspective across all aspects of the
Company.
Despite investment trusts currently having relatively few
regulatory reporting requirements, ESG is very important
to the Board and the Manager reports to the Board their
detailed assessment of the portfolio in ESG terms and the
associated operations of the management house, Polar
Capital. Over recent months the ESG dialogue with the
Portfolio Managers and third-party providers has accelerated,
with increasingly detailed assessment and measurement of
key areas along with how it is integrated and how it impacts
all elements of the business. The Board recognises however
that this is an evolving area, and intends to increase its
analysis and reporting. ESG is separated into those areas on
which the Board can have a direct impact, and those areas
where it is reliant on others.
ESG and Third-Party Service Providers
The Manager receives assurance on an annual basis that,
where required, third party service providers comply with
the requirements of the Modern Slavery Act and adhere to
a zero-tolerance policy to bribery and corruption. In light of
the growing requirements surrounding ESG, including the
Taskforce for Climate-Related Financial Disclosures (“TCFD”),
third party service providers have been engaged in providing
copies of their ESG, Diversity and Inclusion, Stewardship
and other related policies to the Company. The Board will
continue to monitor the practices of service providers and
seek to assure Shareholders where appropriate that suitable
policies and procedures are in place to effect positive change.
Corporate Responsibility
The Company’s core investment and administrative activities
are undertaken by the Manager which seeks to limit the
use of non-renewable resources and reduce waste where
possible. The Manager has a corporate ESG policy, which is
available in the document library of the Company’s website,
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 below, the Portfolio Managers are
required to have consideration of ESG factors when reviewing
new, continuing or exiting investments but they are not
required to take an investment decision solely on the basis
of ESG factors. The Manager utilises a number of third-party
data sources and reference points to build an ESG rating of
each stock. It is recognised however that these ratings may
deviate from the ratings determined by the investment team
as a result of direct market intelligence and contact with the
companies involved.
The Board monitors the Manager’s approach to ESG including
policies for improvements in environmental impact, and
takes 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 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 to report from its
operations nor does it have responsibility for any other
emissions. Information on the GHG emissions of the Manager
can be found within the ESG and Sustainability area of their
website www.polarcapital.co.uk.
Taskforce for Climate-Related Financial
Disclosures (“TCFD”)
The Company notes the TCFD recommendations on climate-
related financial disclosures. As stated above, the Company
is an investment trust with no employees, internal operations
or property. However, it is an asset owner and therefore
the Manager is working to develop appropriate disclosures
about its portfolio. Information sources are developing and
consultations on reporting requirements are underway. The
Board will continue to work alongside its Manager to provide
more information as it becomes available. Polar Capital
supports TCFD’s recommendations and is in the process of
applying the guidance to ensure compliance going forward.
Diversity and Gender Reporting
The Board notes the targets published within the FCA policy,
Diversity and Inclusion on Company Boards and Executive
Committees (PS22/3), issued in April 2022. For financial years
commencing on or after 1 April 2022, the policy requires
under new Listing Rules 9.8.6R(9) and 14.3.33R(1), all UK
listed companies, on a comply or explain basis, to meet the
following targets:
• At least 40% of the Board are women;
• At least one senior board position is held by a woman;
• At least one member of the Board is from a minority
ethnic background.
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
31
As a fully independent non-executive Board of Directors,
there are limited senior roles available in terms of the FCA’s
Diversity and Inclusion targets. The Board considers the
following roles are appropriate and sufficient for a Company
and Board of their size, Chair of the Board and Chair of the
Audit Committee. There are no executive positions within the
Company and as such no roles from which to appoint senior
roles on the Board.
The Company has no employees and, as at February 2023
the Board is comprised of two male* and three female
Independent non-executive Directors. Cecilia McAnulty
is Chair of the Audit Committee, therefore the Company
currently meets two of the criteria outlined above. The
composition of the Board is considered regularly to determine
whether the needs of the Company in terms of experience
and areas of expertise are met by the directors in office. The
Board will certainly take into account the FCA’s policy on
Diversity and Inclusion in any future recruitment process,
but, with the exception of the forthcoming retirement of the
Chairman, it does not currently have any plans to change the
composition of the Board.
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, the Company does not
consider that it falls within the scope of the Modern Slavery
Act 2015 and therefore does not meet the criteria requiring
it to produce a statement under such Act. The Company
considers its supply chains to be of low risk as its suppliers are
typically professional advisers. A statement by the Manager
under the Act has been published on the Managers’ website
at www.polarcapital.co.uk. The Company has not adopted a
policy on human rights as it has no employees or operational
control of its assets.
Anti-Bribery, Corruption and Tax Evasion
The Board has adopted a zero-tolerance policy (which is
available on the Company’s website) to bribery, corruption
and the facilitation of tax evasion in its business activities.
The Board uses the principles of the policies formulated
and implemented by the 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 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 Shareholders at all times.
Risk and Responsibility
The Board has a schedule of principal risks and uncertainties
and addresses how these are mitigated on pages 40 to 43;
additionally how the directors have undertaken their duties in
compliance with s172 of the Companies Act 2006 is provided
on pages 44 to 47.
Robert Kyprianou
Chairman
20 February 2023
*On the retirement of the Chairman, the Board will comprise one male and three female
independent non-executive directors.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
32
Polar Financials ESG Scoring Factors
Governance
Independent Directors
Director Attendance at Board Meetings
Percentage of Women on Management Board
Board Age Range
Governance Disclosure Score
Director Remuneration
Shareholder Alignment
Tax Gap
Qualitative Factor accounting for Risk Management, Engagement,
Legal Risks and Strategy
Total Governance Score
Environmental
GHG/Revenue (Scope 1 & 2)
GHG absolute
Net Zero Target Year (i.e. years vs 2022)
Environment Disclosure Score
MSCI Environmental Score
Qualitative Factor accounting for Fossil Fuel Exposure and
Engagement
Total Environmental Score
Social
Percentage of Women in Workforce
Employee Reviews
Human Capital Development
Social Disclosure Score
Data Privacy
Business Ethics / Sales Practices
Total Social Score
Total ESG Score = Governance + Environmental + Social
Norms Based Factors including:
United Nations Global Compact Principles
United Nations Guiding Principles on Human Rights
International Labour Organisation Fundamental Principles
MSCI Controversies Flag
Investment Perspective incorporating
ESG considerations
Process
During the year, the Manager further developed its ESG
process which leverages the team’s industry experience and
incorporates both quantitative and qualitative factors to
create a framework for ongoing analysis.
The ESG approach involves:
• Screening
• Integration (as each new investment is assigned an
internal ESG rating)
• Ongoing monitoring and engagement
Exclusionary Screening
The team first applies a norms-based exclusion screen to the
Trust’s investment universe to ensure that potential holdings
that are involved in controversial practices from an ESG
perspective are excluded.
This involves screening the portfolio for alignment with the
UN’s Global Compact, The UN’s Guiding Principles on Business
and Human Rights, the International Labour Organisation’s
conventions and the Organisation for Economic Co-Operation
and Development’s (OECD) Guidelines for Multinational
Enterprises. Further to this, we exclude companies which
derive more than 5% of their revenues from financing the
production of tobacco, thermal coal or adult entertainment.
Proprietary ESG Scoring Process
Through the use of a proprietary ESG scoring process,
current and prospective companies are assessed against a
variety of ESG factors (as detailed in the table). The team
incorporates data from company disclosures, management
meetings, regulatory reports and third-party ESG providers.
In addition, the analysis includes a qualitative ESG overlay
for each company which focuses on specific governance
(risk management, engagement, litigation, strategy)
and environmental factors (exposure to fossil fuels,
communication, and engagement).
Any company which receives a proprietary ESG rating of
‘CCC’ (the lowest of seven rating categories) is excluded from
the investment universe. Furthermore, the team excludes
companies rated ‘CCC’ for governance. A rating of ‘B’ acts as
an automatic threshold for advanced due diligence with the
team engaging with the company directly to assess whether
the shortfall is being addressed.
Ongoing Engagement
Ongoing monitoring and engagement of companies is central
to the team’s approach. This is often particularly important in
the case of smaller companies where ESG disclosure can be
limited (leading to low ratings by third-party ESG providers)
and does not give a fair reflection of their approach to ESG
issues. All company interactions by the team on ESG related
issues are logged and graded (green, orange or red flags).
A red flag would result in any holdings in that company being
automatically sold.
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
33
East West Bancorp – Case Study
Our proprietary ESG scoring system assigned East West Bancorp an A rating, two notches higher than the BB rating assigned by
MSCI in 2021. The key differential between ratings was our proprietary scoring system assigning a higher Governance score and
a higher Social score to East West Bancorp.
On our proprietary ESG scoring, East West Bancorp’s strong governance score is driven by having a high number of independent
board directors (88%), a relatively low proportion of director remuneration as percentage of net income and a strong director
meeting attendance record. In particular, we rate East West Bancorp highly based on their shareholder engagement record
assessed over nine years as shareholders, a well-defined consistent strategy and limited management turnover. In August 2022,
MSCI raised the rating of East West Bancorp to BBB and highlighted East West Bancorp’s peer leading corporate governance.
While MSCI continues to penalize East West Bancorp’s Social score on Privacy and Data security, our interactions with the
company have highlighted:
• SOC2 type II certification - external certification of data security controls.
• Audit and assessment of the information security program by regulators as well as external auditors.
• Oversight of information security is led by the Risk Committee, which is all comprised of independent board members of
which one is deemed an information security expert.
• Every employee is subject to annual cybersecurity/information security training in addition to information privacy training.
Lastly, management is cognizant of the fact that their disclosures lag their larger peers and are committed to allocating resources
to address this.
Following engagement and analysis, we concluded that the MSCI’s lower score is driven by a lack of disclosure and are satisfied
with management’s focus on addressing this.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
34
Top 5 Rated Holdings
Security
Polar
Rating
MSCI
Rating
Sampo AAA AA
Riverstone Credit Opportunities AAA N/A
DNB Bank AAA AAA
MSCI AAA N/A
Hannover Re Rueck SE AAA A
Source: MSCI
How the MSCI ESG Rating is calculated
Portfolio Benchmark
Weighted Avg ESG Score 6.80 6.74
Adjustment
+ ESG Trend Positive 31.74% 37.01%
- ESG Trend Negative -10.29% -9.02%
- ESG Laggards -0.92% -1.78%
Adjustment Total 20.54% 26.21%
Score Adjustment 1.40 1.77
ESG Quality Score 8.19 8.50
ESG Rating AA AA
Bottom 5 Rated Holdings
Security Polar
Rating
MSCI
Rating
VPC Specialty Lending Investments BB N/A
Axis Bank BB A
Cullen Frost Bankers BB B
Bank Rakyat BB A
Shawbrook BB N/A
Source: MSCI
Vote cast statistics
Votes for 87.90%
Votes against 6.00%
Votes management say on pay 5.52%
Votes withheld 0.48%
Votes abstain 0.10%
Source: MSCI, ISS
Voting Record
Category Number Percentage
Number of votable meetings 74
Number of meetings voted 73 98.65
Number of meetings with at least 1 vote
against, withheld or abstain
26 35.14
Source: MSCI, ISS
Weighted average carbon intensity
(tCO2e / $m sales)
The Trust’s holdings have very low carbon intensity, based on the
weighted average carbon emissions per USD million sales.
15.5
VERY HIGH HIGH MODERATE LOW VERY LOW
ESG Rating distribution of fund holdings
44% of the Trust’s holdings receive an MSCI ESG Rating of AAA
or AA (ESG Leaders) while only 0.9% receive an MSCI ESG Rating of
B or CCC (ESG Laggards).
Polar MSCI
UnratedCCCB
BBBBBA
AA
AAA
7.6%
0%0% 0%
0.9%
0%
10.4%
9.7%
11.4%
18.4%
10.5%
3.4%
41.0%
24.2%
25.3%
37.2%
Corporate governance
The weighted average percentage of independent board of directors
in the portfolio’s investee companies is 88.0%, and the weighted
average percentage of women on boards is 34.7%.
Board DiversityBoard Independence
88.0%
34.7%
MSCI
ESG Fund Rating
for PCFT
CCC B BB BBB A AA AAA
AA
The MSCI ESG Rating for funds is designed to measure the
resiliency of portfolios to long-term ESG risks and opportunities.
The most highly rated funds consist of issuers with leading or
improving management of key ESG risks. The ESG Rating is
calculated as a direct mapping of ESG Quality Scores to letter
rating categories (e.g. AAA = 8.6-10). The ESG Ratings range
from leader (AAA, AA), average (A, BBB, BB) to laggard (B,
CCC). All charts provided below are in respect of the portfolio as
at 30 November 2022.
ESG Dashboard
Governance
Governance
A system of rules,
processes and practices by
which the Company
is governed.
35
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
36
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 this strategy to succeed, including a
fair review of the Company’s performance during the year
ended 30 November 2022, 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 providing Shareholders with
access to a portfolio of listed or quoted securities issued by
companies in the financials sector. 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, gearing, 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. Statements from the Depositary and
the AIFM can be found on the Company’s website.
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 in a global portfolio primarily 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% (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 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, processes and ESG. The Board also considers
the Company’s structure and growth ensuring Shareholders’
interests are at the forefront of any structural or capital
change. In addition, the management and provision of
services received from third-party service providers and the
risks inherent in the various matters are regularly reviewed
and discussed. Further information on the composition of the
Board can be found on pages 30, 31 and 56.
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
37
Strategy and Investment Approach
The 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 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 to 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 possible,
the portfolio Managers undertake 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
Manager’s team of five fund managers and analysts who
focus on the global financials sector.
There are no limits on the exposure of the investment portfolio
to either small or mid-cap companies but the majority of the
portfolio is invested in companies with a market capitalisation
greater than US$5bn. The 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. 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;
• Camarco as PR advisors;
• Perivan as Designers and Printers for Shareholder
communications; and
• Huguenot Limited as Website Designers and internet
hosting services.
Under the terms of the Investment Management Agreement
(“IMA“) the Manager is also responsible for monitoring
third-party suppliers which are directly appointed by the
Company. The 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. The Board believes that the benefits
gained by utilising the services of a Company Secretary provided
by the Manager significantly outweigh the potential for a
conflict of interest perceived by PIRC. Further information is
contained in the Corporate Governance Report on page 55.
Benchmark
The Company measures the Manager’s performance against the
MSCI ACWI Financials Net Total Return Index (‘the Benchmark’).
This has been used to measure the performance of the
Company since 23 April 2020, although the Manager does
not seek to replicate the index in constructing the Company’s
portfolio. The portfolio may, therefore, diverge substantially
from the constituents of this Benchmark.
Although the Company evaluates its performance against
the 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 Manager earns a
performance fee.
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 Manager will achieve the optimum return
for Shareholders. As such, the Board and Manager operate in a
supportive, co-operative and open environment.
The Investment Manager is Polar Capital LLP (“Polar Capital”)
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
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
38
Strategic Report continued
cash) and sole responsibility for decisions as to the purchase
and sale of individual investments. The 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.
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
Manager at each Board meeting and may ask representatives
of the 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 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 Manager and other
suppliers’ performance during the year.
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 Manager has other investment
resources which support the investment team and has
experience in administering and managing other investment
companies.
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 Manager; (ii) if the 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 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 Manager is entitled to a
management fee together with reimbursement of reasonable
expenses incurred by it in the performance of its duties. The
Management fee is payable monthly in arrears and, with effect
from 7 April 2020, is charged at a rate of 0.70% per annum
of the Company’s NAV based on 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 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 reported last year, the
significant growth of the Company’s share capital since
reconstruction in April 2020 created an unintended outcome
from the performance fee calculation methodology. The
methodology was amended to reflect the increase in the NAV
per share and the performance fee accrual recalculated from the
date of the reconstruction. No performance fee has been paid
or accrued as at 30 November 2022. Where a performance fee
becomes payable it will be charged 100% to capital.
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
39
Performance and Key Performance Objectives
The Board appraises the performance of the Company and the 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.
These KPIs have not differed from the prior year.
KPI Control Process 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
Manager and the value delivered to Shareholders
through NAV growth and dividends paid.
The Company’s NAV total return, over the year ended 30 November
2022, was 1.9%* while the Benchmark delivered 6.8% over the
same period. Since inception the NAV total return was 125.9%*
compared to 134.9% for the Benchmark and 97.6% for a
comparator group.
The Board also receives monthly reports on
performance against both the Benchmark and a
comparator group of open-ended investment funds.
The Company ranks 9 out of a comparator group of 33 open ended
funds within the Lipper Financial Sector universe since inception and
1 out of 6 within a smaller comparable group of funds regularly
considered by the Board as at 30 November 2022.
The achievement of a
progressive dividend
policy.
Financial forecasts are reviewed to track income and
distributions.
A total of two interim dividends amounting to 4.45p (2021: 4.40p)
per ordinary share have been paid or declared in respect of the
financial year ended 30 November 2022.
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 discount of the ordinary share price to the NAV per ordinary
share at the year end was 7.0%* compared with a premium of
2.7% at the year ended 30 November 2021. The discount for the
investment trust sector at 30 November 2022 was 13.5%.
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 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.
During the year under review, the Company issued a total of
31,944,680 ordinary shares. In addition, the Company executed
two Subsequent Placings under the terms of the Prospectus issued
on 12 May 2021, resulting in the issue of a further 26,775,320 new
ordinary shares.
In the year ended 30 November 2022, the Company bought
back 6,356,000 ordinary shares at an average discount of 9.0%.
Subsequent to the year end and to 16 February 2023, the Company
bought back a further 790,000 shares. All shares bought back
have been placed into treasury for reissue to the market under the
appropriate conditions.
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. Please refer to the
Directors Report on page 48 for further information.
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 2022 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 Manager, both investment and administrative,
and reviews on a cycle the provision of services from
third parties including the costs of their services.
The Board, through the Audit Committee has received and
considered satisfactory the internal controls report of the 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 annual operating expenses are reviewed and any
non-recurring project related expenditure approved
by the Board.
The ongoing charges for the year ended 30 November 2022
excluding the performance fee were 0.87% of net assets
(2021: 1.02%)*. The ongoing charges including the performance
fee payable were 0.65% (2021: 0.98%)*. The decrease in ongoing
charges including performance fee reflects the write back of the
performance fee accrual in the year under review.
*See Alternative Performance Measures
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
40
Strategic Report continued
Principal Risks and Uncertainties
The Board is responsible for the management of risks faced
by the Company and, through delegation to the Audit
Committee, 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 established risk management process the Company
follows identifies and assesses various risks, their likelihood,
and possible severity of impact, considering both internal and
external controls and factors that could provide mitigation.
A post mitigation risk impact score is then determined for
each principal risk.
The Audit Committee carries out, at least annually, a robust
assessment of the principal risks and uncertainties with the
assistance of the Manager, continually monitors identified
risks and meets to discuss both long-term and emerging risks
outside of the normal cycle of Audit Committee meetings.
During the year the Audit Committee, in conjunction with
the Board and the Manager, undertook a full review of the
Company’s Risk Map including the mitigating factors and
controls to reduce the impact of the risks. The Committee
continues to closely monitor these risks along with any other
emerging risks as they develop and implements mitigating
actions as necessary.
The Committee is mindful of the uncertainty surrounding
inflation, recession and rising interest rates coupled with the
invasion of Ukraine by Russia and the longer term impact this
may have on the market and global economy. The impact
of this is discussed further in the Chairman’s Statement and
Manager’s Report. Further information on how the Committee
has assessed the Company’s ability to operate as a going
concern and the Company’s longer-term viability can be found
on pages 64 and 66 of the Report of the Audit Committee.
The principal risks are detailed on the following pages along
with a high-level summary of their management through
mitigation over the past financial year.
Risk Cycle
Monitor
and Review
Identify Risk
Analyse Risk
Build Risk
Strategy
Manage
Risks
Governance
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41
Principal Risks and Uncertainties continued
Business
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
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
Manager. The Board also receives a monthly commentary from
the 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 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 Manager on the basis of performance and other
services provided.
Loss of portfolio manager or other key staff. The strength and depth of investment team provides comfort
that there is not over-reliance on one person with alternative
portfolio managers available to act if needed. For each key
business process roles, responsibilities and reporting lines are
clear and unambiguous. Key personnel are incentivised by equity
participation in the investment management company.
Persistent excessive share price premium/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.
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
42
Strategic Report continued
Principal Risks and Uncertainties continued
Portfolio Management
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
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 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 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 against which it
monitors the position of the portfolio. They include guidelines on
exposures to certain investment markets and sectors. The Board
discusses with the 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 Manager as well as
the 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 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 27 to the financial statements.
Shareholders 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 Manager’s assessment of risk and
reward. At 30 November 2022 the Company was 6.0% geared
(2021: 5.2%).
The ability to continue the dividend policy may be
compromised due to lower income as a result of changes in
underlying companies’ policies, or changes in the portfolio
construction, regulatory intervention, local taxes 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.
See notes 22 to 24 on pages 104 and 105.
The Board and the Manager will continue to assess the income
capability of the portfolio and determine the appropriate
longer-term dividend level based on how economies and
businesses perform.
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
43
Infrastructure
Principal Business Risks and Uncertainties Management of Risks through Mitigation & Controls
There are risks from the failure of, or disruption to,
operational and accounting systems and processes provided
by the Manager including any subcontractors to which the
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 receives 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 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 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 Risks and Uncertainties continued
External
Principal Business Risks and Uncertainties Management of risks through Mitigation & Controls
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 global geopolitical issues and
general economic conditions and developments.
The impact on the portfolio from other geopolitical changes
are monitored through existing control systems and discussed
regularly by the Board. While it is difficult to quantify the
impact of such changes, it is not anticipated that they will
fundamentally affect the business of the Company or make
investing in the financials sector any less desirable. The longer
term effects of inflation, recession and the war in Ukraine
will continue to be assessed by the Audit Committee in light
of how they will impact the Company’s portfolio and the
overall economic and geopolitical environment in which the
Company operates.
Note 27 describes the risks posed by changes in foreign
exchange rates. The Manager has the ability to hedge foreign
currency if it is thought appropriate at the time.
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
44
Governance
Section 172 Statement
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 when they
first join the Board; the induction includes both functional, operational and support arrangements for the Company
and also relevant regulatory and legal duties of a director. The Directors continue to receive regular and ongoing
updates on relevant legislative and regulatory developments and have 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 discussions and as part of the decision-making process. 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 the strategic decisions during the year that affect
Shareholders, including the continued appointment of the Manager and the recommendation that
Shareholders vote in favour of the resolutions proposed at both the General Meeting held on 1 February
2022 and the Annual General Meeting held on 7 April 2022 at which Shareholder authorities were renewed.
In response to positive market sentiment, the Company continued issuing the ordinary shares held in treasury
until the account was reduced to nil and thereafter, new ordinary shares, into the market and completed two
subsequent placing processes in accordance with the terms of the Prospectus issued in May 2021. In total,
within the financial year ending 30 November 2022, 58,770,000 ordinary shares were issued into the market.
In contrast to the positive share issues, market sentiment turned markedly negative in February 2022
following the instigation of war by Russia on Ukraine and the economic fallout thereafter; no further shares
have been issued to date. The Directors monitored the market carefully, noting the change in sentiment
across all sectors. When deemed appropriate, the positive issue status reversed with the Company
becoming active buyers in the market utilising the Shareholder authority to buy back shares when the
discount widened outside of an acceptable range for what had become normal market conditions. Within
the financial year, the Company bought back a total of 6,356,000 shares and these were placed into
treasury. Since the financial year end to 16 February 2023, a further 790,000 shares have been bought
back. The Directors will continue to monitor the market and take the appropriate action when deemed
necessary.
The Company’s AGM will be held at 11:30am on Thursday 30 March 2023 at the offices of Polar Capital,
16 Palace Street, London SW1E 5JD and the Board is keen to ensure that Shareholders are able to
exercise their right to vote and participate. All resolutions will be voted on by a poll and Shareholders are
encouraged to submit their proxy votes ahead of the deadline.
The Board believes that Shareholder engagement remains important, especially in the current market
conditions and is keen that the AGM be a participative event for all. To enable all Shareholders to hear the
Managers’ presentation, this year a pre-recorded presentation reviewing the year past and the outlook for
2022-2023 will be uploaded to the Company’s website ahead of the AGM. The AGM in-person meeting
will comprise the formal business and questions only. Shareholders are encouraged to send any questions
ahead of the AGM to the Board via the Company Secretary at cosec@polarcapital.co.uk stating the subject
matter as PCFT AGM. We ask that any questions are received by close of business on Tuesday 28 March
2023. The Chairs of the Board and of the Committees, along with the Manager, will attend and be available
to respond to questions and concerns from Shareholders.
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.
Strategic Report continued
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
45
Governance
Stakeholder Group How we engage with them
Shareholders
continued
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 kept informed by the publication of annual and half year reports, monthly fact sheets,
access to commentary from the Manager via the Company’s website and attendance at events at which
the Manager presents.
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 or by emailing Chair.PCFT@polarcapital.co.uk.
The Company, through the sales and marketing efforts of the 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 encourages 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.
Outcomes and strategic decisions during the year
Over the financial year, the share capital has seen a net increase of 19% as a direct result of investor demand.
Such demand has been addressed by treasury and new share issuance and completion of the two subsequent
placing processes under the terms of the Prospectus dated May 2021. When considering share issues and
share buy backs, the Board has remained mindful of existing Shareholders by ensuring any issuance was not
dilutive of NAV per share. In all cases, costs associated with the processes were controlled and absorbed by
incoming Shareholders and were therefore not damaging to the value of the existing Shareholders. Where
received, the views of Shareholders were taken into account in any actions undertaken.
Manager
Through the Board meeting cycle, regular updates and the work of the Management Engagement Committee
in reviewing the services of the 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 Agreement and reviewing the agreed management
and performance fees;
• Ensuring the Manager develops a suitable approach and activity level in relation to matters of an ESG
nature; and
• Reviewing the 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
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 Manager,
ensuring that the interests of Shareholders and the Manager are aligned, providing constructive challenge and
making Directors’ experience available to support the 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 Manager on the terms agreed within the Investment Management Agreement.
During the year under review, the Board continued to develop its approach to ESG and engages with the
Manager to better understand how ESG has been further integrated by Polar Capital across the business and
the financials team in particular. Please see pages 30 to 34 for further information.
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
46
Section 172 Statement continued
Stakeholder Group How we engage with them
Investee
Companies
The Board has instructed the Manager to take into account the published corporate governance policies
of the companies in which they invest.
The Board has also considered the Manager’s Stewardship Code and Proxy Voting Policy. The Proxy
Voting Policy directs the Manager to vote at all general meetings of companies in line with Institutional
Shareholder Services (“ISS”) policy. However, in exceptional cases, where the 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.
The Manager voted at 73 company meetings over the year ended 30 November 2022, with 5.7% of all
votes being against management and 35% of meetings having at least one vote against, withheld or
abstained. The Manager reports to the Board, when requested, on the application of the Stewardship
Code and Voting Policy. The Manager’s Stewardship Code and Voting Policy can be found on the
Manager’s website in the Corporate Governance section (www.polarcapital.co.uk). Further information
on how the Manager considers ESG in its engagement with investee companies can be found in the ESG
Report on pages 30 and 34.
Outcomes and strategic decisions during the year
During the year, the Board discussed the impact of ESG and how the Manager incorporated ESG factors
into its strategy and investment and decision-making processes. The Board receives information on how
ESG factors affect the portfolio and receives feedback from the Manager on the development of its ESG
processes; the Board has separately engaged with third party suppliers to review their ESG policies and
ascertain how they also integrate ESG into their organisations.
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 by the Manager. 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.
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 continues to conduct due diligence service
reviews in conjunction with the Company Secretary and is satisfied that the services received continue to
be of a high standard.
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 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.
Strategic Report continued
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
47
Stakeholder Group How we engage with them
The AIC
The Company is a member of the AIC and has supported lobbying activities such as the consultation on
the 2019 AIC Code, the 2021 BEIS Restoring Trust in Audit and Corporate Governance and the FCA’s
2021 consultation on Diversity and Inclusion on Company Boards. The Directors may cast votes in the
AIC Board Elections each year and regularly attend AIC events.
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 fulfil their duties, including those listed in s172 of the
Companies Act. Accordingly, all Directors are standing for election or re-election at the Company’s AGM.
Approved by the Board on 20 February 2023
By order of the Board
Tracey Lago, FCG
Polar Capital Secretarial Services Limited
Company Secretary
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
48
Report of the Directors
Report of the Directors
The Directors, who are listed on page 12 and 13, present
their annual report, together with their Report on Corporate
Governance and the Audited Financial Statements for the
year ended 30 November 2022. In addition, the attention
of Shareholders is drawn to the Strategic Report Section
(Chairman’s Statement, the Investment Manager’s Report,
Strategic Report, ESG and Section 172 Statements) which
provide further commentary on the activities and outlook for
the Company.
Introduction and Status
The Company is incorporated in England and Wales
as a public limited company and is domiciled in the
United Kingdom. It is an investment company as defined in
section 833 of the Companies Act 2006 (the ‘Act’) and its
ordinary shares are listed and traded on the main market of
the London Stock Exchange.
The Company seeks to continue to operate as an investment
trust in accordance with sections 1158 and 1159 of the
Corporation Tax Act 2010 (as amended by section 42(2) of
the Finance Act 2011). As an approved investment trust the
close company provisions do not apply. The Directors, under
advice, expect the affairs of the Company to continue to
satisfy the conditions of an investment trust. As an investment
trust the Company’s ordinary shares are excluded from the
FCA’s restrictions which apply to non-mainstream investment
products. The Company conducts its affairs and intends to do
so for the foreseeable future so that the exclusion continues
to apply. The Company’s ordinary shares are eligible for
inclusion in a stocks and shares ISA.
The Audited Financial Statements are prepared in accordance
with UK-adopted international accounting standards
(“UK-adopted IAS”).
Purpose and Objective
The purpose and objective of the Company is unchanged
and is to generate for Shareholders a growing dividend
income and capital appreciation. The Investment Policy seeks
to achieve the Company’s objective through accessing a
discretionary managed, diversified, global portfolio consisting
primarily of listed or quoted equities issued by companies
in the financials sector operating in the banking, insurance,
property and other subsectors. The portfolio is diversified by
factors including geography, industry sub-sector and stock
market capitalisation of the investee companies.
The portfolio is managed within a framework of investment
limits, restrictions and guidelines determined by the Board,
which seek to meet the investment objective while spreading
and mitigating risk.
Life of the Company
The Company was launched in July 2013 with a fixed
seven-year life. Shareholders approved changes to the
Company’s Articles of Association to make a tender offer
to all Shareholders and to extend the Company’s life
indefinitely at a General Meeting held on 7 April 2020
(the ‘Reconstruction’). The new Articles of Association
removed the fixed life and instead require the Company to
make tender offers at five-yearly intervals, with the first to
commence on or before 30 June 2025.
Annual General Meeting
The Company’s AGM will be held at 11:30am on Thursday
30 March 2023. Please see pages 120 and 121 for further
information on the resolutions to be proposed.
Dividends
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. Shareholders should be aware that circumstances
may arise when it is necessary to reduce the level of dividend
payment or equally there may be instances when the level of
dividend must be increased in order to comply with Sections
1158 and 1159 of the Corporation Tax Act 2010. Where this
would result in paying a dividend beyond the Board’s policy,
a ‘special dividend’ may be declared and paid.
The Company’s Articles of Association allow the Company
to make distributions from all its distributable profits. The
Company can therefore choose to pay dividends out of
Distributable Reserves, the Special Distributable Reserve
and the Capital Reserves should it be deemed appropriate.
Through calendar years 2020, 2021 and the early part
of 2022, the Company continued a strong level of share
issuance which resulted in an increase in the capital received
from the re-issue of shares out of the Company’s treasury
account and block listing into the Capital account. The
Company therefore determined that it was appropriate to
use part of its Capital Reserves to support the payments of
the second interim dividend of the 2021 financial year, paid
in February 2022, in the amount of £831,000 and the first
interim dividend of the 2022 financial year, paid in August
2022, in the amount of £162,000.
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
49
The Company’s dividend policy is to, where possible, pay two
interim dividends each year, in February and August. These
interim dividends will not necessarily be of equal amounts.
The Directors do not recommend, and the Company does
not pay, a final dividend. Details of the dividends paid
and declared are set out on pages 3 and 8 and in Note
12 on pages 96 and 97. In accordance with best practice,
the Directors will be proposing a resolution to approve
the Company’s dividend policy at the AGM to be held on
30 March 2023.
Independent Auditors
The Company conducted a competitive audit tender process
in December 2021 following which PricewaterhouseCoopers
LLP (PwC) continued to act as the Company’s independent
external auditors and were reappointed at the AGM in April
2022. PwC have subsequently expressed their willingness to
continue in office as the Company’s independent auditors.
A resolution to re-appoint PwC as independent auditors to
the Company will therefore be proposed at the forthcoming
AGM in March 2023.
The fee agreed in respect of the audit of the 2022 annual
financial statements was £44,000 (2021: £37,800 plus an
overrun fee of £6,000 for the 2021 financial year audit which
was recognised in the year under review). During the year
under review, PwC were appointed as Reporting Accountant
to the Company in connection with the placing programme,
such service was deemed to be a non-audit service for which
a fee of £24,000 was paid. See pages 63 and 64 of the Audit
Committee Report for further details.
Share Capital History and Voting Interests
The Summary of Share Capital Movements is provided on
page 2. Further information in relation to the Company’s
share capital history and transactional arrangements are
provided in the Shareholder Information section on pages 122
and 123.
Powers to issue shares and make market
purchases of ordinary shares
At the AGM held in 2022, the Board was granted by
Shareholders the power to allot equity securities for cash
without first offering those shares to Shareholders in
accordance with their statutory pre-emption rights, up to
a nominal value of £1,644,027, equivalent to 10% of the
Company’s issued ordinary share capital.
The Board was also granted authority by Shareholders to
make market purchases of up to 49,287,933 ordinary shares
of the Company, equivalent to 14.99% of the issued share
capital in accordance with the terms and conditions set out in
the Shareholder resolution.
In the financial year under review, a total of 31,994,680
shares were issued and 6,356,000 shares were repurchased
under the above authorities. In addition, the Company
undertook two subsequent Placings under the terms of the
Prospectus issued on 12 May 2021, resulting in the issue of
a further 26,775,320 new ordinary shares in February 2022.
Subsequent to the year end up to 16 February 2023, the
latest practicable date, no further shares have been issued
and a further 790,000 shares have been repurchased.
These authorities will expire at the 2023 AGM and renewal
of these authorities will be sought at that AGM. Details of
the resolutions and the Directors’ policies for the issue and
purchase of shares will be set out in the separate Notice
of Annual General Meeting which will be distributed to
Shareholders in February 2023. New ordinary shares will only
be allotted and issued at or above the prevailing net asset
value per share after taking into account the costs of issue.
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
50
Major Interests in Ordinary Shares
As at the year end of 30 November 2022, the Company had received notifications from the following Shareholders in respect of
their own and their clients’ interests in the voting rights of the Company:
Shareholder Type of Holding Number of Shares
% of Voting
Rights*
Investec Wealth & Investment Ltd Direct 42,891,407 13.18%
Rathbone Brothers plc Indirect 39,634,967 12.18%
RBC Brewin Dolphin Ltd Indirect 21,781,666 6.69%
City of London Investment Management Indirect 17,923,619 5.51%
Charles Stanley Indirect 16,408,405 5.04%
Canaccord Genuity Indirect 10,091,107 3.10%
Quilter Cheviot Investment Management Indirect 9,093,979 2.79%
JM Finn & Company Ltd Direct 8,774,569 2.70%
* The above percentages are calculated by applying the ordinary shareholdings as notified, to the Total Voting Rights of the issued ordinary share capital as at 30 November 2022 of
325,394,000 being all the issued ordinary shares.
Listing Rule 9.8.4
Listing Rule 9.8.4 requires the Company to include certain further information in relation to the Company which is not otherwise
disclosed. The only disclosure to be made is with regard to the amount of interest capitalised and can be found in Note 9 on
page 95.
By order of the Board
Tracey Lago, FCG
Polar Capital Secretarial Services Limited
20 February 2023
Report of the Directors continued
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
51
Corporate Governance Framework
The following diagram illustrates the governance framework within which the Company is managed. The Directors are
ultimately accountable to Shareholders for the governance of the Company’s affairs and are therefore responsible for the good
governance of the Company. The Company has no employees and relies on third parties to administer the Company and to
provide investment management services.
Shareholders
Board of Directors
Chairman: Robert Kyprianou
Audit
Committee
Management
Engagement Committee
Nomination
Committee
Remuneration
Committee
Third Party
Service Providers
Investment Manager
and AIFM
Chair: Cecilia McAnulty
Members: all independent
NEDs.
Chair: Susie Arnott
Members: all independent
NEDs.
Functions carried
out by the
Board as a whole.
Functions carried
out by the
Board as a whole.
The Financial Reporting Council (FRC) has endorsed the 2019 Association of Investment Companies (‘AIC’) Code of Corporate
Governance (the ‘AIC Code’) for AIC Member Companies to report against in relation to their corporate governance
provisions. The AIC Code addresses the relevant principles set out in the FRC UK Code as well as additional principles and
recommendations on issues that are specific to investment companies.
The FRC has confirmed that by following the AIC Code, boards of investment companies will meet their obligations under FCA
Listing Rule 9.8.6. As an externally managed investment company many provisions of the FRC UK Code are not relevant to the
Company, including those relating to the roles of chief executive, executive directors’ remuneration, statement of gas emissions
and the requirement to have an internal audit function.
In addition, there are provisions within the FRC UK Code which the Board has chosen to depart from in favour of following the
AIC Code, such as the Company’s formal Chair Tenure Policy which allows the Chair to continue in role in excess of nine years.
See page 57 for more information.
Statement of Compliance and Application of the AIC Code’s Principles
The Board has considered the Principles and Provisions of the AIC Code. The Board considers that reporting against the
Principles and Provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to
Shareholders.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them relevant for investment companies.
Report on Corporate Governance
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
52
Report on Corporate Governance continued
The Board believes that the Company’s current practices are consistent in all material respects in applying the principles and
complying with the provisions of the AIC Code. The Board will continue to observe the principles and recommendations set out
in the AIC Code.
The AIC Code’s principles and provisions are structured into five sections: Board leadership and purpose; division of
responsibilities; composition, succession and evaluation; audit, risk and internal control; and remuneration. The Company’s
application of the principles and compliance with the provisions of each section is detailed on the following pages.
BOARD LEADERSHIP AND PURPOSE (Principles A-E, Provisions 1-7)
Board Leadership and Purpose
The Company’s purpose is to provide a vehicle for investment in which assets are invested across a global portfolio of listed or
quoted securities issued by companies in the financials sector operating in the banking, insurance, property and other subsectors
which generate for investors a growing dividend income together with capital appreciation. The purpose is achieved through
the Investment Objective and Policy incorporating parameters to ensure excessive risk is not taken.
The portfolio is diversified by factors including geography, industry sub-sector and stock market capitalisation. As an externally
managed investment trust, the culture of the Company is a consequence of the Board’s composition, decisions and behaviours
which are aligned with the values and behaviours of the Manager, interaction between the two and engagement with the
Company’s stakeholders. The Board monitors this culture, including the policies and practices it implements to maintain it.
In promoting the long-term sustainable success of the Company, the performance of the Company’s portfolio is constantly
reviewed in pursuit of value generation for Shareholders by achievement of the investment objective. Investment management
fees are reviewed periodically, with the last change occurring in April 2020 following the reconstruction of the Company and
the introduction of the current fee structure. The Investment is entitled to a management fee at the rate of 0.70% (previously
0.85%) per annum based on the Company’s net asset value. The Company’s performance since launch in July 2013 can be
found on page 4 and how the Board views its contribution to wider society is considered in the s172 statement on pages 44
to 47. The Board’s engagement with Shareholders and other stakeholders and how it contributes to strategic decision making
is also discussed within the s172 statement. Participation from all stakeholders is encouraged and the Board can be contacted
through the Company Secretary. The Company’s service providers are subject to periodic site visits and attend service reviews
and other meetings throughout the year, ensuring effective engagement. Fulfilling the Investment Objective and monitoring the
Company’s performance is the primary focus of the Board’s discussions.
The Board’s effectiveness, including how it promotes the long-term sustainable success of the Company, is reviewed annually.
The process and outcomes of the Board evaluation are detailed on page 58.
Role, Responsibilities and Committees of the Board
The Board has delegated to the Audit and Management Engagement Committees specific remits for consideration and
recommendation but the final responsibility in these areas remains with the Board. The Board has determined that, due to its
size and the fact that all the Directors are non-executive and independent, the functions of the nomination committee and
remuneration committee would be carried out by the full Board. The Board creates ad hoc committees from time to time to
enact policies or actions agreed in principle by the whole Board.
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
53
The number of formal meetings of the Board and its Committees held during the year ended 30 November 2022 and the
attendance of individual Directors are shown below:
Board
Audit
Committee
Management
Engagement
Committee
2022
Annual General
Meeting
2022
General
Meeting
Number of Formal Meetings
5 3 1 1 1
Robert Kyprianou 5 3 1 1 1
Simon Cordery 5 3 1 1 1
Katrina Hart 5 3 1 1 1
Cecilia McAnulty 5 3 1 1 1
Joanne Elliott~ 3 2 1 1 1
~ Retired from the Board on 7 April 2022.
In addition to the 11 formal meetings noted above, the Board met on an informal ad-hoc basis 3 times when deemed necessary,
to discuss inter alia, the placing programme under the terms of the Prospectus issued in May 2021 further share issues and thereafter
share buy backs and other matters in connection with the Company’s progression to ensure such was to the benefit of Shareholders.
Service Provider Performance Evaluation Process
Investment Manager
The Board has contractually delegated the management of the portfolio to the Manager. It is the Manager’s sole responsibility
to take decisions as to the purchase and sale of individual investments subject to the Investment Management Agreement. The
Manager has responsibility for asset allocation and stock selection within the limits established and regularly reviewed by the Board.
The Manager is responsible for providing or procuring accountancy services, company secretarial, marketing and administrative
services including the monitoring of third-party suppliers who are directly appointed by the Company. The Manager also ensures
that all Directors receive in a timely manner all relevant management, regulatory and financial information. Representatives
of the Manager attend all Board meetings in a variety of capacities including investment management, compliance, risk and
marketing, enabling the Directors to probe further on matters of concern or seek clarification on certain issues.
The whole Board reviews the performance of the Manager and, at each Board meeting, the Company’s investment performance
against the market and a peer group of funds with similar investment objectives is reviewed. The investment team provided by
the Manager has long experience of investment in the financial sector. In addition, the Manager has other investment resources
that support the investment team and have experience in managing and administering other investment companies.
The Board and Manager work in a collaborative manner and the Chairman encourages open discussion and debate.
Report of the Management Engagement Committee
The Management Engagement Committee comprises all the non-executive Directors under the chairmanship of Katrina Hart,
and meets at least once a year and at such other times as may be necessary. Following the retirement of Ms Hart from the Board
on 1 December 2022, Ms Arnott was appointed as Chair of the Committee. The Committee has formal Terms of Reference
which clearly define its responsibilities and duties. The Committee’s Terms of Reference were reviewed and expanded under
the delegation of the Board to incorporate ESG matters given its increasing importance. As well as the responsibilities outlined
above, the Committee is also responsible for monitoring the integrity and quality of the Manager’s ESG strategy and ensuring
that ESG is appropriately integrated into investment processes.
The Management Engagement Committee reviews the performance and activities of the Manager and considers the terms
of the investment management agreement and other services and resources supplied by the Manager prior to making its
recommendation to the Board on whether the retention of the Manager is in the best interests of Shareholders.
Following the year ended 30 November 2022 the Management Engagement Committee met once to carry out the review of the
Manager and consider its continued appointment for the next financial year ending 30 November 2023. During the year, the
Board reviewed its fee arrangements with the Manager, taking into consideration the performance of the Manager in managing
the assets of the Company, both in absolute and relative terms over various timescales. It also considered trends in fees across
the broader UK market. No changes were proposed in the year to the Investment Management fees or the Agreement terms.
The review of the Manager also considered the overall performance by and strength of the investment team, depth of other
Governance
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54
Report on Corporate Governance continued
resources provided by the Manager and quality of the services provided or procured by the Manager, including Shareholder
communications. The Board, through the work of the Management Engagement Committee, concluded that it is in the best
interests of Shareholders as a whole that the appointment of Polar Capital LLP as Manager is continued.
The Company uses a variety of performance measures when monitoring the performance of the portfolio managed by the
Manager. These measures are considered to be alternative performance measures under the ESMA guidelines and are described
further on pages 115 to 117.
Other Suppliers
The Board also monitors directly or through the Manager the performance of its other key service providers.
• The Board has directly appointed HSBC Bank Plc as Depositary and Stifel Nicolaus as Corporate Broker. The Depositary
reports quarterly and makes an annual presentation to the Board. The Corporate Broker provides written reports to the
Board and joins the Board on request, and at least every six months, to discuss markets and other issues.
• The Board has also directly appointed Marten & Co for third party research and Camarco for PR services. Each reports to the
Board on at least an annual basis and at such other times with the Sales and Marketing team of the Manager.
• The Registrars, Equiniti Limited, are directly appointed by the Board and the performance of their duties is monitored and
reported on by the Company Secretary.
• Other suppliers such as printers, website services, insurers and others are monitored by the Company Secretary and each
supplier reports to the Board as and when deemed necessary.
Report of the Audit Committee
The Audit Committee comprises all the non-executive Directors and, until 7 April 2022, was under the chairmanship of Joanne
Elliot. At the AGM held on 7 April 2022, Joanne Elliott completed her nine-year tenure and stepped down as a non-executive
director. Cecilia McAnulty succeeded Joanne as Chair of the Audit Committee. The Committee has formal terms of reference
which clearly define its responsibilities and duties. A separate report of the work of the Audit Committee over the year under
review is set out on pages 60 to 66.
Report of the Remuneration Committee
As mentioned above, the role of the Remuneration Committee is undertaken by the full Board. The Directors’ Remuneration
Report, including a description of the processes undertaken when reviewing remuneration can be found on pages 67 to 72.
Report of the Nomination Committee
As mentioned above, the role of the Nomination Committee is undertaken by the full Board. The Board acting as the Nomination
Committee will, when considering new or further appointments of Directors, consider the balance of skills, knowledge and experience
as well as diversity of the whole Board and will also consider the use of external consultants when drawing up a list of candidates.
See page 57 for a description of the most recent recruitment process undertaken.
DIVISION OF RESPONSIBILITIES (PRINCIPLES F-I, PROVISIONS 8-21)
Chairman
The Chairman is responsible for the leadership of the Board and works with the Company Secretary to set the Board’s meeting
agendas and balance the issues presented to each meeting. Open and honest debate is encouraged at each Board meeting and
the Chairman keeps in touch with both the Company Secretary and other Directors between Board meetings. Robert Kyprianou
was appointed to the Board in June 2013 and was independent on appointment and continues to meet the criteria for
independence. The Board considers the competence and independence of the Directors on an annual basis. As referenced in the
Chairman’s Statement on page 9, having reached his tenure, Robert Kyprianou will step down from the Board as non-executive
director and Chairman at the AGM to be held on 30 March 2023; he will be succeeded by Simon Cordery who was appointed
to the Board in 2019. See page 11 for an introduction to the new Chair.
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Senior Independent Director
Due to the size and structure of the Board it is considered unnecessary to identify a senior independent non-executive director.
The Board considers that all Directors have different qualities and areas of expertise on which they may lead where issues arise
and to whom concerns may be conveyed.
Board Responsibilities
The Board currently comprises five non-executive Directors who are all considered to be independent in character and
judgement. On the retirement of the Chairman, the Board will comprise one male and three female independent non-executive
directors. No Director has any former or current connection with the Manager. A formal schedule of matters specifically
reserved for decision by the full Board has been defined and a procedure has been adopted for Directors, in the furtherance of
their duties, to take independent professional advice at the expense of the Company. No such advice has been sought during
the year.
Company Secretary
The Directors have access to the advice and services of the Company Secretary which is provided in compliance with the IMA
through Polar Capital Secretarial Services Limited. An appointed representative, Tracey Lago, FCG, is responsible to the Board
for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board and
Manager operate in a supportive, cooperative and open environment. The Board acknowledges that PIRC (Pensions and
Investment Research Consultants Limited, an independent corporate governance and Shareholder advisory consultancy) has
recently changed its voting guidelines to recommend voting against the laying of the Annual Report at an AGM where the
Manager provides company secretarial services to the Company. However, the Board believes that the benefits gained by
utilising the services of a Company Secretary provided by the Manager significantly outweigh the potential for a conflict of
interest perceived by PIRC. The Company Secretary is provided to the Company as an independent service and the appointed
representative acts as an officer of the Company and not an employee of the Manager when working with the Board and
the Company.
Meetings
The Board has a schedule of regular meetings throughout the year and meets at additional times as required. During the year,
Board and Committee meetings were held to deal with the ongoing stewardship of the Company and other matters, including
the share issuance programme, the setting and monitoring of investment strategy and performance, review of financial
statements and Shareholder issues including investor relations. The level of share price discount or premium to the net asset
value together with policies for issuance or re-purchase of ordinary shares are kept under review along with matters affecting
the industry and the evaluation of third-party service providers. The Board is also responsible for considering, reviewing and
implementing appropriate policies in respect of regulatory changes that impact the Company.
The Company’s investment strategy was reviewed during the reconstruction undertaken in early 2020. The Board continues
to consider the Company’s strategy and its relevance to the market and Shareholders as a whole at each Board meeting and
at least one Board meeting per year includes an in-depth focus on strategy. Through this process the Board supervises the
management of the investment portfolio, the risks to which the Company is exposed and their mitigation, and the quality of
services received by the Company.
The schedule of formal Board and other meetings is provided on page 53, along with details of additional meetings held.
Delegated Responsibilities
The Board has delegated to each of the Audit and Management Engagement Committees specific remits for consideration
and recommendation, as detailed within the terms of reference which are available on the Company’s website, but the final
responsibility in these areas remains with the Board. The Chair of the Audit Committee is available at the AGM to deal with
questions relating to the Annual Report and Financial Statements. Attendance at each of these Committee meetings is disclosed
in the table on page 53.
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Report on Corporate Governance continued
Directors’ Professional Development
When new Directors are appointed, they are offered an induction provided by the Manager. Directors are welcome to visit
the Manager at any time to receive an update on any aspect of interest or a refresher on the Manager’s operations both
generally and those which are specific to the Company. Directors are also provided on a regular basis with key information on
the Company’s policies, regulatory and statutory obligations and internal controls. Changes affecting Directors’ responsibilities
are advised to the Board as they arise. Directors may also participate in professional and industry seminars and may use the
Manager’s online compliance training resources to ensure they maintain their knowledge.
Conflicts of Interest
Directors have a duty to avoid a situation in which they have a conflict of interest or a possible conflict with the interest of the
Company. The Company’s Articles contain provisions to permit the Board to authorise conflicts or potential conflicts.
The Board has in place a policy to govern situations where a potential conflict of interest may arise, for example where a
Director is also a Director of a company in which the Company invests or may invest. Where a conflict situation arises, the
conflicted Director is excluded from any discussions or decisions relating to the matter of conflict. No such conflicts arose during
the year under review.
Each Director has provided the Company with a statement of all conflicts of interest and potential conflicts of interest, which
have been approved by the Board and recorded in a register. The Conflicts Register is reviewed at every Board meeting and
the Directors are reminded of their obligations for disclosure. No Director has declared receipt of any benefits other than their
emoluments in their capacity as a Director of the Company.
The Board as part of its year-end review has considered the register of conflicts, any conditions imposed on such conflicts or
potential conflicts and the operation of the notification and authorisation process. It concluded that the process has operated
effectively since its introduction. There were no contracts subsisting during or at the end of the year in which a Director is or
was interested and which is or was significant in relation to the Company’s business or the Director.
The Directors’ interests in the ordinary shares of the Company are set out on page 71 of the Directors’ Remuneration Report.
COMPOSITION, SUCCESSION AND EVALUATION (Principles J-L, Provisions 22-28)
Composition and Diversity
The Board is responsible to Shareholders for the overall management of the Company’s affairs. In the year under review, there
were five non-executive Directors, reducing to four with the retirement of Joanne Elliott on 7 April 2022. With effect from
1 December 2022, Susie Arnott and Angela Henderson were appointed to the Board as non-executive Directors and Katrina
Hart retired from the Board following completion of her nine year tenure. Each Director has different qualities and areas of
expertise on which they may lead when issues arise.
The Board as the Nomination Committee considered the contribution and performance of each Director as part of the annual
Director and Board performance evaluation. The Board believes that the Directors demonstrate a breadth of experience
across the investment and financial services industry. Each Director effectively contributes to the operation of the Board and
demonstrates independent views on a range of subjects.
All the Directors were considered independent of the Manager and had no relationship or conflicts which were likely to affect
their judgement.
The Board has a policy to consider diversity and seeks to ensure that the broadest range of candidates are found when
recruiting new directors. The Board will have regard to the diversity recommendations of the Hampton-Alexander and Parker
Reviews, amongst other factors; consideration is given to all forms of diversity in order to balance both the expertise on, and
the structure of, the Board as a whole. The Board notes the requirements of the FCA Diversity and Inclusion Policy published in
April 2022, reportable for financial years commencing on or after 1 April 2022, the Company's first full reporting requirement
will be for the year ending November 2023. Whilst the Board does meet the gender requirements (being a minimum of
40% female Board members) including the appointment of at least one senior female, who is currently Chair of the Audit
Committee, it recognises that it does not meet the ethnicity requirements (at least one non-white ethnic minority Board
member).
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Recruitment
A recruitment process was undertaken in the latter half of 2022 in order to find and appoint a new non-executive director
to succeed Katrina Hart who reached her nine-year tenure in mid-2022. A number of recruitment firms were considered and
the role was thereafter placed with Sapphire Partners. Sapphire Partners were seen to have a wide range of resources at their
disposal to find suitable candidates and have built a solid reputation in non-executive director search processes. The brief for
the new candidate included considerations of gender, ethnic and socio diversity and a number of areas of expertise which have
been successfully led by Katrina Hart since launch of the Company in 2013.
Following the advertising and search process, over twenty candidates were approached by Sapphire Partners to consider the
role. The candidates reflected a range of ages and ethnic backgrounds, as well as a mix of genders. From the candidates
approached, after interview with Sapphire Partners, twelve were considered either not suitable based on expertise or they
declined to proceed with the process. Of the final eight candidates, four were selected by the Board for interview. Each
candidate sat two interviews with two current directors attending each. The Board found all candidates to be of a high calibre
and as a result opted to appoint two new non-executive directors with the anticipation that at the next stage of the succession
plan there would not likely be a requirement to undertake a further recruitment process. Following the recruitment process,
Susie Arnott and Angela Henderson were appointed to the Board as non-executive Directors with effect from 1 December 2022.
The Board is conscious that following the recruitment process, they still do not meet the FCA’s ethnicity recommendations;
however they believe they have followed a stringent process and have ultimately appointed the appropriate candidates with the
requisite skillsets required of the wider Board. More information on the candidates subsequently appointed can be found on
page 12 and 13.
Succession
The Board believes that retaining Directors with sufficient experience of the Company, investment industry and financial markets
is of benefit to Shareholders while recognising that regular refreshment of approach is equally of benefit and importance.
Following the reconstruction of the Company, the Board formulated a succession plan which gave due regard to the
recommended maximum of nine years’ tenure for a non-executive director and a formal tenure policy, allowing for a reasonable
extension to the nine years for the role of Chairman.
During the year under review, a formal recruitment process was undertaken as detailed above to seek a suitable candidate to
replace Katrina Hart who reached her nine-year tenure in mid-2022 and agreed to remain on the Board until a replacement was
appointed.
As referenced in the Chairman’s Statement on page 9, Robert Kyprianou will step down as Chairman of the Company at the
AGM on 30 March 2023 having exceeded nine-years tenure. While the Company’s policy, as below, is to allow a Chair to remain
in post for up to 12-years, having completed the recruitment process to replace Katrina Hart, the Board were successful in
appointing two new non-executive directors and all board members were therefore invited to consider the role of Chair or to
undertake a further recruitment process.
At the Nomination Committee meeting held on 1 February 2023, the Committee and subsequently the Board, approved the
appointment of Simon Cordery as the Chair Elect to replace Robert Kyprianou when he steps down at the AGM. This will reduce
the Board to four members which is felt appropriate for a company of its size and complexity.
Chair Tenure Policy
The Board considers that in the specific circumstances of an investment company, where corporate knowledge and continuity
can add value, there may be merit in appointing one of its members to the Chair. In addition, there may be situations where
succession plans are disrupted such that an internal candidate with some years’ existing experience is the most appropriate
candidate for the Chair. In other circumstances an external candidate may be more appropriate.
As per provision 24 of the AIC Code, the Board’s policy is that the maximum Board tenure for its Chair is up to twelve years (of
which nine years could be served as a non-executive Director). The Board believes the additional time provided for within the
maximum 12-year tenure policy will enable a smooth Board recruitment transition process; and will also ensure future transitions
are staggered.
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Report on Corporate Governance continued
Performance and Re-Election
The Board formally reviews the performance of the Directors each year as part of the annual evaluation process. Directors are
required to stand for election by Shareholders at the first AGM following their appointment to the Board and, in line with
recommended practice, each Director stands for re-election annually. The rationale for re-election of each Director is included
in the Board of Directors information on pages 12 and 13 and the Chairman’s letter which accompanies the Notice of Annual
General Meeting at which the re-election resolutions are being put to Shareholders.
Evaluation
The evaluation of the Board, its Committees and individual Directors is carried out annually. The process involves the use of
a written questionnaire to assess the balance of skills, experience, knowledge, independence and effectiveness of the Board,
including how the Directors interact as a unit on the Board. The responses to the questionnaire are reviewed and discussed
by the full Board and, should it be deemed necessary, additional reporting measures or operations would be put in place. The
review of the Chairman’s performance is conducted by the Board led by the Chairman of the Audit Committee. The Chairman
of the Board does not participate in this discussion.
In carrying out these evaluations, each Director is assessed on their relevant experience, their strengths and weaknesses in
relation to the overall requirements of the Board and their commitment to the Company in terms of time by regular attendance
and participation at Board meetings. The process is constructed to assess the contribution of individual Directors to the overall
operation of the Board and its Committees. The Board, through the work of the Nomination Committee, has determined that
each Director standing for re-election continues to offer relevant experience, effectively contributes to the operation of the
Board and has demonstrated independent views on a range of subjects. The Committee is satisfied that the structure, mix of
skills and operation of the Board continue to be effective and relevant for the Company.
AUDIT, RISK AND INTERNAL CONTROL (Principles M-O, Provisions 29-36)
Internal Controls
The Board has overall responsibility for the Company’s system of internal control, for reviewing its effectiveness and ensuring
that risk management and control processes are embedded in the Company’s day-to-day operations.
The Manager has an internal control framework to provide assurance on the effectiveness of the internal controls operated on
behalf of its clients. The Manager is authorised and regulated by the Financial Conduct Authority and its compliance department
monitors the Company’s compliance with the various rules and regulations applicable to it, including the FCA’s rules, AIFMD,
MiFID II and GDPR, for example.
The Board, through the Audit Committee, has established a process for identifying, evaluating, monitoring and managing any
major risks faced by the Company. This is documented through the use of a Risk Map which is subject to regular review by the
Audit Committee and accords with the Guidance on Risk Management, Internal Control and Related Financial and Business
Reporting issued in September 2014 by the Financial Reporting Council. The controls are embedded within the business and aim
to ensure that identified risks are managed and systems are in place to report on such risks. The internal controls seek to ensure
the assets of the Company are safeguarded, proper accounting records are maintained, and the financial information used by
the Company and for publication is reliable. Controls covering the risks identified, including financial, operational, compliance
and risk management controls, are monitored by a series of regular reports covering investment performance, attribution
analysis, reports from various third parties and from the Manager.
As the Company has no employees and its operational functions are carried out by third parties, the Audit Committee does not
consider it necessary for the Company to establish its own internal audit function.
Contracts with suppliers are entered into after full and proper consideration by the Board of the quality and cost of the services
offered, including the control systems in operation in so far as they relate to the affairs of the Company.
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Operation of Internal Controls
The internal controls process was active throughout the year under review and up to the date of approval of this Annual Report.
However, such an internal controls system is designed to manage rather than eliminate risks of failure to achieve the Company’s
objective and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board will
continue to monitor the system of internal controls in order to provide assurance that they operate as intended.
The Board, in assessing the effectiveness of the Company’s internal controls has, through the Audit Committee, received formal
reports on the policies and procedures in operation. These reports from the Manager include results of tests on the policies
and procedures in operation during the year under review, with details of any known internal control failures. The Manager
has subsequently provided confirmation that there has been no material change to the control environment up to the date of
signing these Financial Statements.
The Board also considers ad hoc reports from the Manager and third-party suppliers and information is supplied to the Board
as required. In addition to the regular internal controls reports provided by the Manager and various third-party suppliers, when
required, the Board receives assurances on the status of the business and operational functions.
The Manager has delegated the provision of accounting, portfolio valuation and trade processing to HSBC Securities Services
but remains responsible to the Company for these functions and provides the Board with information on these services.
The principal risks and uncertainties to which the Company is subject are detailed in the Strategic Report.
Based on the work of the Audit Committee and the reviews of the reports received by the Audit Committee on behalf of the
Board, the Board has concluded that there were no material control failures during the year under review and up to the date of
this report.
REMUNERATION (Principles P-R, Provisions 37 – 42)
Due to the fully independent non-executive Board comprising five, and thereafter four, Directors, the Board has deemed it
appropriate for the full Board to fulfil the role of the Remuneration Committee. The Board, acting as the Committee, meets
at least annually and is responsible for consideration and recommendations in relation to Directors’ remuneration. This review
will not necessarily lead to a change in the remuneration awarded. Industry guidance, comparable investment companies’
remuneration, the work undertaken by the Board in the prior year along with plans for the current year and the overall
regulatory environment are all considered when reviewing remuneration.
Remuneration levels are set to attract candidates of high calibre to the Board. The Company’s remuneration policy will
be put to shareholders for approval once again at the AGM in March 2023, the policy is detailed within the Directors’
Remuneration Report on pages 67 and 68 and explains how the policy is designed to support strategy and promote long-term
sustainable success.
Tracey Lago, FCG
Polar Capital Secretarial Services Limited
Company Secretary
20 February 2023
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I am pleased to present my first report to you as Chair of the Audit Committee
(the ‘Committee’) having taken on the role from Joanne Elliott who retired from
the Board on 7 April 2022. We also welcome Susie Arnott and Angela Henderson
as members of the Committee following their appointment to the Board as a
non-executive Directors on 1 December 2022.
The Committee comprises all the Directors and the Board
is satisfied that the Committee has sufficient recent and
relevant financial experience and, as a whole, has competence
relevant to the sector in which the Company operates for the
Committee to discharge its functions effectively. The experience
of the members of the Committee can be assessed from the
Directors’ biographies on pages 12 and 13. The Committee has
written terms of reference which are available to view on the
Company’s website www.polarcapitalglobalfinancialstrust.com
During the year ending 30 November 2022, the Audit
Committee met three times, with all members of the
Committee attending each meeting.
Matters Considered in Connection with the
Financial Year Ended 30 November 2022:
During the year the Committee considered the following:
New regulation and guidance
• While the Committee has not had to consider any
new material regulations in the year under review, it
does regularly review guidance and determine how to
apply any relevant best practice to the Company. The
Committee continues to review the outcomes of the FRC’s
annual Audit Quality Reviews and discusses the findings
with the Auditors.
• As reported last year, the Committee is aware of the
extensive proposals outlined by the Department of
Business, Enterprise, Industry and Skills consultation
(“BEIS”) which seek to strengthen the UK’s audit and
corporate governance framework. The outcomes of the
consultation process were published on 31 May 2022 and
are expected to progress through primary and secondary
legislation from early 2023. The Committee will continue
to monitor the detail of and implement any primary
legislation arising from the reforms and will consider
any suggested guidance from BEIS for good practice.
The Committee will report on any changes made in the
respective Annual Report following any such changes.
Annual External Audit, including:
• The appointment of the Auditors;
• The scope of the annual audit and agreement with the
Auditors of the key areas of focus;
• The reports from the Auditors concerning their audit of
the annual Financial Statements of the Company;
• The performance of the Auditors and the level of fees
charged for their services;
• The independence and objectivity of the Auditors;
• The financial disclosures in the annual and interim reports
to Shareholders;
• The policy and extent of any non-audit services (including
fees paid) in line with the FRC guidance;
• The going concern statement, longer-term viability
statement, including the impact of the future tender
offers to be made to Shareholders at five-yearly intervals;
and
• The requirement to confirm that the Annual Report and
Financial Statements when taken as a whole are fair,
balanced and understandable.
Internal Audit
The potential need for an internal audit function, which we
continue to conclude is unnecessary for the Company as an
externally managed investment trust.
Accounting Policies and related matters
• The appropriateness and any changes to the accounting
policies of the Company including any judgements
required by such policies and the reasonableness of
such. During the year the Committee ensured that the
accounting policies as set out on pages 87 to 113 were
applied consistently throughout the year. The Committee
Audit Committee
Report
Cecilia McAnulty
Audit Committee Chair
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confirmed there have been no changes to currently
adopted policies and no new UK-adopted international
accounting standards (“UK-adopted IAS”) or amendments
to UK-adopted IAS which had any significant impact on
the Company’s Financial Statements.
• The financial disclosures contained in the Annual Report
and Half Year Report to Shareholders.
Investment Matters
• The investment management process, including
confirmation of the existence and ownership of
investments through the review of quarterly Depositary
Reports and meeting with the Depositary in relation to the
safeguarding of the Company’s assets; and
• The valuation of unquoted investments and the provision
of associated recommendations to the Board.
Internal Controls and Risk
• The risk map covering the identification of new and
emerging risks, adjustments to existing risks and the
mitigation and controls in place to manage those risks;
and
• Reports from the Manager and its external Auditors
on the effectiveness of the system of internal financial
controls including the risk map.
Dividend Policy
• The Committee considered the Company’s Dividend
Policy as approved by Shareholders at the AGM held
in April 2022 and recommended to the Board that it
should continue. Shareholders should be reminded that
the dividend policy is an objective and not an absolute
guarantee. The Dividend Policy will be proposed for
approval by Shareholders at the AGM to be held in
March 2023. Capital reserves were used to support the
second interim dividend for the financial year ended
30 November 2021 and the first interim dividend of the
financial year under review. As explained last year, shares
are issued by the Company to investors at Net Asset
Value (NAV). NAV comprises both the capital value of
the underlying portfolio and accrued income (dividend
and interest) on the portfolio up to the date of issue.
The Board believes this accrued income element of the
NAV, which is ordinarily accounted for through revenue
reserves, should, in the case of share issues, be separately
identified and accounted for through capital reserves,
which is where the accounting of share issues takes
place. This treatment acknowledges that Shareholders are
purchasing both the capital value of the portfolio and an
element of income accrued to date. The Board believes
this treatment more accurately reflects the financial reality
and mitigates dilution to revenue reserves which would
otherwise occur as a result of the accounting treatment
of capital raised through share issuance. The Board will
be careful to balance its objective of growing dividends
for Shareholders with future earnings prospects and the
availability of revenue reserves.
Consideration of the Half-Year Report and
Financial Statements
• Prior to publication, the Committee considered,
reviewed and confirmed the half year report and
financial statements, which are not audited or reviewed
by the Auditors, were prepared on a basis consistent
with the accounting policies used in the Annual
Report and Financial Statements for the year ended
30 November 2021.
Consideration of the Annual Report and
Financial Statements
• The Committee performed this role through monitoring
the integrity of the financial statements of the Company
and the system of accounting to ensure compliance with
relevant and appropriate accounting standards. The scope
of the audit was agreed in advance, with a focus on areas
of audit risk and the appropriate level of audit materiality.
The Auditors reported on the results of the audit work to
the Committee and highlighted any issues which the audit
work had discovered, or the Committee had previously
identified as significant or material in the context of the
financial statements. Following a comprehensive review
process the Committee presented its conclusions to
the Board.
Tax matters
• The Committee is responsible for reviewing the
outstanding tax reclaims and where necessary the
payment or receipt of overseas tax. In the year under
review, £113,000 was received by the Company from
overseas tax reclaims and there remained £1,184,000
(2021:£597,000) of outstanding reclaims at the year
end. This increase in the tax receivable balance reflected
the increase the size of the portfolio over the year and
delays experienced in processing tax reclaims due to
the impact of COVID-19 and some markets suspending
the processing of reclaims resulting in a backlog. As at
the year ended 30 November 2022, the outstanding
tax reclaims were aged between 0.5 to 4.6 years and
have been filed with the relevant tax authorities. The
outstanding reclaims at the year end are within the
statute of limitations and we anticipate these will be
received in the near future. In addition, the Committee
reviewed the provision for the Indian capital gains tax.
The Indian capital gains tax provision represents an
estimate of the amount of tax payable by the Company.
This additional tax only becomes payable at the point at
which the underlying investments are sold and any profit
crystallised. Further details of the Indian capital gains tax
can be found on pages 89 and 96.
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Conclusions in Respect of the Annual Report
and Financial Statements
In order to reach the conclusion that the Annual Report
and Financial Statements when taken as a whole are fair,
balanced and understandable, the Board has requested that
the Committee advise on whether it considers these criteria
satisfied. In so doing the Committee has considered the
following:
• The ongoing comprehensive control framework over
the production of the Annual Report, including the
verification processes in place to deal with the factual
content;
• The extensive levels of review undertaken in the
production process by the Manager and the Committee;
• The internal control environment as operated by the
Manager and other suppliers including any checks and
balances within those systems; and
• The unqualified audit report from the Auditors confirming
their work based on substantive testing on the Financial
Statements.
As a result of the work performed, the Committee has
concluded that the Annual Report for the year ended
30 November 2022, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
Shareholders to assess the Company’s position, performance,
business model and strategy, and it has reported on these
findings to the Board.
Significant Matters in Relation to the Financial Statements for the Year Ended 30 November
2022
In addition to the matters considered by the Committee in forming its opinions on the Going Concern and longer-term viability
statements described below, and in concluding that the Annual Report is fair, balanced and understandable, the Committee
also considered the following matters in relation to the financial statements:
Significant matter How the issue was addressed
Valuation, existence, ownership of investments and the
income received from such
The valuation is carried out in accordance with the accounting
policy described in note 2(g). The Depositary has reported
on its work and safe keeping of the Company’s investments.
Such report is provided on the Company’s website.
Compliance with S1158 of the Corporation Tax Act 2010 Consideration of compliance with the requirements of
investment trust status is carried out at each Board meeting
throughout the year.
There were no adverse matters brought to the Committee’s attention in respect of the 2022 audit which were material or
significant or which should be brought to Shareholders’ attention.
Audit Committee Report continued
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External Audit – Year Ended 30 November
2022
Appointment of Auditors, Tenure and Fees
The Committee considers by way of meetings and reports,
the appointment, remuneration and work of the Auditors.
PricewaterhouseCoopers LLP (PwC or the ‘Auditors’) have
provided audit services to the Company from its incorporation
in 2013 to date and the audit partner who led our statutory
audit for the year under review was Kevin Rollo. There are no
contractual obligations restricting the choice of external auditor.
In accordance with current legislation, the Company is
required to instigate an audit tender process at least every
10 years and will have to change its auditor after a maximum
of 20 years’ engagement. The Company’s last audit tender
was completed in December 2021 ahead of PwC’s ten-year
anniversary as Auditors of the Company. Following the
tender process which included an assessment of a number
of providers on a range of criteria including independence,
proposed audit approach, sector experience, fee level, depth
and quality of team, and the result of any FRC quality control
reviews, the incumbent auditors PwC were re-appointed
as the Company’s Auditors. PwC have confirmed their
continued independence and have expressed their willingness
to be appointed, in accordance with s487 of the Companies
Act 2006. A resolution proposing their re-appointment and to
authorise the Directors to determine their remuneration will
therefore be proposed at the AGM.
As part of the year end process, the Committee considered
the level of fees paid to the auditors, bearing in mind the
nature of the audit and the quality of services previously
received. The fees paid to PwC in respect of the audit of the
annual Financial Statements amounted to £44,000 (2021:
£37,800 plus an overrun fee of £6,000 for the 2021 financial
year audit which was recognised in the year under review. See
note 8 on page 94 for further details). The increase continues
to be in line with those experienced across the investment
trust sector in recent years and reflects the increased level of
work audit firms are required to perform, and the increased
risk that they perceive, in the context of more rigorous levels
of audit scrutiny and regulation. The Audit Committee will
continue to keep fee levels under close review and considers
that any fee increases must be justified.
Effectiveness of Audit Process
The Committee, on behalf of the Board, is responsible
for overseeing the relationship with the external Auditors
including ensuring the quality and effectiveness of the audit.
The Committee monitored and evaluated the effectiveness
of the Auditors and any changes in the terms of their
appointment, based on an assessment of their performance,
qualification, knowledge, expertise and resources. The
Auditors’ independence was also considered, along with
other factors such as audit planning and interpretations
of accounting standards. This evaluation was carried out
throughout the year by meetings held with the Auditors,
by review of the audit process and by comments from the
Manager and others involved in the audit process. Based on
its review the Audit Committee concluded that the Auditors
remained independent and continued to act in an independent
manner. The Auditors are provided with an opportunity to
address the Committee without the Manager present, to raise
any concerns or discuss any matters relating to the audit work
and the co-operation of the Manager and others in providing
any information, and the quality of that information including
the timeliness in responding to audit requests.
Non-Audit Work
The Committee’s policy on the provision of non-audit services by
the Auditors is to ensure that there is a clear separation of audit
work and non-audit work and that the cost of any non-audit
work is justified and is not disproportionate to the audit fees,
to the extent that the independence of the Auditors would
be compromised. The Company’s policy on the provision of
non-audit services by the Auditors is available on the Company’s
website. The policy is produced in line with the FRC Ethical
Standards (updated in March 2020) and any non-audit services
are required to be pre-approved by the Audit Committee. The
FRC revised the ethical standards, with effect from 15 March
2020, to contain a more concise list of non-audit services that
the Company’s statutory Auditors are permitted to complete,
replacing the long list of excluded services which had been
introduced with the EU Audit Directive in 2016.
In the event of non-audit services being proposed, the
Committee undertakes a review of the services to satisfy itself
that these are proposed within the terms of the policy and in
an efficient and cost-effective way. In the financial year ended
30 November 2021, PwC were appointed in May 2021 as
Reporting Accountant to the Company in connection with
the issue of the Prospectus relating to the C Share Issuance
programme which was undertaken during the year. Whilst
such service would ordinarily constitute a non-audit service
under the FRC Ethical Standards, PwC’s appointment was
considered an efficient appointment given their background,
understanding and knowledge to carry out the agreed
procedures and provide further comfort to the Company
service providers and sponsors. PwC obtained a derogation
from the FRC in advance of undertaking the role, on the basis
that all other invited firms had declined the role primarily with
the reasoning that it would most effectively be carried out by
the incumbent audit firm. A charge of £50,000 was levied for
this service.
During the year under review, PwC were appointed as
Reporting Accountant to the Company in connection with
the placing programme, such service was deemed to be a
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non-audit service for which a fee of £24,000 was paid. The
amount has been charged to capital reserves as defined
under IAS 32.
By its nature the non-audit services undertaken by PwC are
exceptional and one-off in relation to the Prospectus issuance
and placing programme, therefore the audit committee are
satisfied as to the continued independence of PwC. Both these
non-audit services equate to 179% of the average of the prior
three years audit fee (2020-2022 average fee being £41,000).
Overview of Risk and Internal Controls
The Board has ultimate responsibility for the management of
risk throughout the Company and has asked the Committee to
assist in maintaining an effective internal control environment.
The Company maintains a Risk Map which seeks to identify,
monitor and control principal risks as well as identifying
emerging risks. The Committee has continued to review
the Risk Map to identify the principal and emerging risks
facing the business including those that might threaten its
business model, future performance, liquidity and reputation.
Alongside this, the Committee considered the likelihood,
impact, mitigating factors and controls to reduce the impact of
such risks as described on pages 40 and 43. This process was
carried out throughout the year and is the means by which
the Risk Map is monitored and kept relevant by reflecting any
changes to the source and level of risks facing the Company.
The Committee will actively continue to monitor the system
of internal controls through the regular review of the Risk
Map and the internal control environment in order to provide
assurance that they continue to operate as intended.
As part of the year end processes the Committee also
undertook a review of the effectiveness of the system of
internal controls considering any issues that had arisen during
the course of the year. The Committee acknowledges that
the Company is reliant on the systems utilised by external
suppliers. Representatives of the Manager reported to the
Committee on the system of internal controls that is in place
for the performance of the Manager’s duties under the IMA.
The Committee and the Manager also received presentations
and internal control reports from other key suppliers on
the quality and effectiveness of the services provided to the
Company. In addition, the Manager also conducted a due
diligence site visit with HSBC where they received thorough
presentations from representatives covering the work of the
Operations, Risk Administration and Accounting Teams, in
addition to the Custodian and Depositary. No matters of
concern with any areas of service were raised at any of the
meetings or on reviewing the internal controls reports.
The Committee has also discussed with the Investment their
policies on whistleblowing, cyber security, anti-bribery and
the Modern Slavery Act and is satisfied that the Manager
has controls and monitoring processes to implement their
policies across the main contractors which supply goods and
services to the Manager and to the Company. The Company
has adopted an Anti-Corruption policy which incorporates
Anti-Bribery, Anti-Slavery and the Corporate Criminal Offence
of Tax Evasion. In addition to this the Company has issued a
data privacy notice in relation to the General Data Protection
Regulation. All such policies can be found on the Company’s
website.
The Committee further considered the policy and controls
used by the Manager surrounding the use of brokerage
commissions generated from transactions in the Company’s
portfolio and the obtaining of best execution on all
transactions. There were no issues of concern arising from
the reviews of or within the internal controls environment the
Company relied upon during the course of the year ended
30 November 2022 and up to the date of this report.
Other Significant Issues Considered by
the Audit Committee During the Year
Geopolitical Events
This time last year we were reporting on the effect of the
COVID-19 pandemic on the portfolio and market disruption
in general. Focus shifted through the year as we watched
the impact of the Ukraine war, escalating energy prices,
supply chain shortages, rising interest rates and inflation.
The consequences of these events can be seen globally and
the associated market volatility has had an impact on the
Company’s portfolio performance. Further details can be found
in the Investment Manager’s Report on pages 16 to 20. The
Committee will continue to monitor the impact of these and
other events which appear in our assessment of risk and the
ability of the Company to achieve its investment objective.
The Committee has once again reviewed the operational
resilience of its various service providers in connection with
the mitigation of the business risks posed by geopolitical
events. Many of the external service providers have continued
to utilise the hybrid working model after such a successful
business transition to fully remote working during the
pandemic. The Committee is pleased to confirm that all
service providers have continued to demonstrate their ability
to provide services to the expected level, with no breaks in
the services provided or significant operational failures.
Going Concern and Longer-term Viability
The Company was launched in July 2013 with a fixed
seven-year life. Shareholders approved changes to the
Company’s Articles of Association to make a tender offer to
all Shareholders and to extend the Company’s life indefinitely
at the Company’s General Meeting held on 7 April 2020 (the
Reconstruction). The new Articles of Association removed
the fixed life and replaced it with the requirement for the
Audit Committee Report continued
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Company to make tender offers at five-yearly intervals, the
first of which will be made in mid-2025.
Going Concern
At the request of the Board the Committee has considered
the ability of the Company to adopt the going concern
basis for the preparation of the Financial Statements. The
Committee has considered the performance of the Company,
its financial position, cash flows and liquidity in addition to
the support received from Shareholders to extend the life of
the Company in 2020 and to undertake a C Share issuance
programme in May 2021, followed by the tap issuance of
shares into the market in February 2022. The Committee has
also considered any material uncertainties and events that
might cast significant doubt upon the Company’s ability to
continue as a going concern including:
• The Company’s ability to liquidate its portfolio and meet
its expenses as they fall due, together with its exposure to
currency and credit risk; and
• The Company’s net current liabilities position in
connection with the bank loans being due for repayment
in July 2025; and
• The factors impacting the forthcoming year as set out in
the Strategic Report section, comprising the Chairman’s
Statement, the Investment Manager’s Report and the
Strategic Review. The financial position of the Company
and its cash flows and liquidity position are described in
the Strategic Report and the Financial Statements. Note
27 to the Financial Statements includes the Company’s
policies and process for managing its capital; its
financial risk management objectives; details of financial
instruments and hedging activities. Exposure to credit risk
and liquidity risk are also disclosed.
The Committee is mindful of the uncertainties detailed above
and the longer-term impact these factors may have on the
market and global economy and will continue to keep this
under review. Based on the information provided to the
Committee and its assessment of the financial position of
the Company, the Committee has recommended that a
going concern basis should be adopted by the Board for
the preparation of the Financial Statements for the year
ended 30 November 2022. The Financial Statements have
been prepared on the going concern basis, as explained in
Note 2(a) to the Financial Statements.
Longer-Term Viability
The Board has also asked the Committee to address the
requirement that a longer-term viability statement be
provided to Shareholders. This statement should take account
of the Company’s current position and principal risks as set
out on pages 40 to 43 together with the mitigating factors
which are assumed to operate appropriately so that the Board
may state that they have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment.
The Committee considered the Company’s longer-term
viability, with reference to the FRC’s Guidance on Risk
Management, Internal Control and Related Financial and
Business Reporting, and concluded that the Board may state
its reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment.
The Board has selected five years from the year end
30 November 2022 as an appropriate period of assessment.
The assessment period is selected as the period post the
Company’s reconstruction in 2020 through and post the
first of the tender offers to be made to Shareholders in
accordance with the Articles of Association, such tender offer
will commence on or before 30 June 2025.
To provide this assessment the Committee has considered the
Company’s financial position as described above to liquidate
its portfolio and meet its expenses as they fall due:
• The portfolio comprises investments traded on major
international stock exchanges. There is a spread of
investments by size of company. In current market
conditions 99% of the portfolio could be liquidated
within seven trading days, and there is no expectation
that the nature of the investments held within the
portfolio will be materially different in future. The
Company has two unquoted investments, Atom Bank and
Moneybox, which at the year-end equated to 0.8% of
total net assets;
• The expenses of the Company are predictable and modest
in comparison with the assets of the Company and there
are no capital commitments foreseen which would alter
that position; and
• The Company has five Non-executive Directors and no
employees and consequently does not have redundancy
or other employment related liabilities or responsibilities.
The Committee has also had regard to the following
assumptions in considering the Company’s longer-term viability.
• Financials will continue to be an investable sector of the
international stock markets and that investors will still
wish to have an exposure to such investments;
• Closed end investment trusts will continue to be attractive
to investors;
• Regulation will not increase to a level that makes the
running of the Company uneconomical in comparison
with other competitive products;
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• There will be no material or significant changes in the
principal risks and uncertainties; and
• The performance of the Company will continue to be
satisfactory. Should the performance be weaker than the
Board deems acceptable, it has appropriate powers to
replace the Manager.
Stress Testing
In addition to the above, stress testing was undertaken in
determining the Company’s longer-term viability and the
appropriateness of preparing the Financial Statements on
a going concern basis. In conducting the stress tests, the
Company’s principal risks were grouped into three buckets
according to their post mitigation scores and, where possible,
material values were attached to the key risks materialising
and evaluated to assess the effect of this on the Company’s
ability to continue as a going concern and its viability over a
five-year period.
The stress tests also used a variety of falling parameters to
demonstrate the impact on the Company’s share price and
NAV. The results of the testing demonstrated the impact on
the NAV and confirmed the Company’s ability to meet its
liabilities as they fall due.
In light of these considerations, the Committee has
recommended to the Board that a statement may be made
on the Company’s longer-term prospects to continue its
operations and meet its expenses and liabilities as they
fall due. Accordingly, the Committee recommends a
positive statement in relation to the longer-term viability
of the Company. In support of such recommendation the
Committee considered the financial position, the cash flow
forecast including expenses and the portfolio liquidity position
covering the period of five years and beyond.
Effectiveness of the Audit Committee
The services provided to the Board by the Committee are
reviewed within the Annual Board Evaluation, including
consideration of actions undertaken by the Committee with
the Manager and Auditors to ensure an appropriate audit
process is undertaken.
I am pleased to confirm that the evaluation result was positive
and no matters of concern or requirements for change were
highlighted. The Committee continually seeks to improve its
effectiveness and follow best practice guidance from the FRC
and other bodies.
Cecilia McAnulty
Chair of the Audit Committee
20 February 2023
Audit Committee Report continued
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Directors’ Remuneration Report
Introduction
This report is submitted in accordance with the Large and Medium-Sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended) (the ‘Regulations’) and the Listing Rules of the Financial Conduct Authority in respect of the year
ended 30 November 2022. It has been audited where indicated.
Chairman’s Report
The Board has determined that due to its size and the fact that all the Directors are non-executive and independent, the
functions normally carried out by a remuneration committee will be performed by the full Board.
Shareholders approved the current Directors’ Remuneration Policy by way of an ordinary resolution passed at the AGM on
28 May 2020. Such policy came into effect on 1 December 2020 and shall remain in force until 30 November 2023.
Company’s Policy on Directors’ Remuneration effective 1 December 2020
How policy supports strategy and promotes
long-term sustainable success Operation
The Board consists entirely of independent Non-executive
Directors, who meet regularly to deal with the Company’s
affairs.
Non-executive Directors have formal letters of appointment
which contain the responsibilities and obligations of the
Directors in relation to undertaking their role and managing
conflicts of interest; their remuneration is determined by the
Board within the limits set by the Articles of Association.
The intention is that fees payable reflect the time spent by
them individually and collectively, be of a level appropriate
to their responsibilities and be in line with market practice,
sufficient to enable candidates of high calibre to be recruited
and retained.
Directors are not entitled to payment for loss of office and
do not receive any bonus, nor do they participate in any
long-term incentive schemes or pension schemes. All fees are
paid in cash, monthly or quarterly in arrears, to the Director
concerned or a nominated third party.
The Company’s policy in relation to fees is to offer only
a fixed basic fee in line with equivalent roles within the
sector with additional fees for the roles of Chairman of the
Company and Chairman of the Audit Committee. As the
Company is an investment trust and all the Directors are
Non-executive, it is considered inappropriate to have any
long-term incentive schemes or benefits.
Rates are reviewed and benchmarked annually but the
review will not necessarily result in any change to rates.
Non-executive Directors are subject to annual re-election by
Shareholders.
In accordance with the Company’s Articles of Association,
any Director who performs, or undertakes to perform,
services which the Directors consider go beyond the
ordinary duties of a Director may be paid such additional
remuneration (whether by way of fixed sum, bonus,
commission, participation in profits or otherwise) as the
Directors may determine.
There are no performance conditions relating to
non-executive Directors’ fees.
As the current Remuneration Policy will expire on 30 November 2023, the Company is required to seek Shareholder approval
for a Remuneration Policy that can remain in operation for the next three-year period (unless proposed for change within such
period). The Policy being proposed is unchanged from that which was approved in 2020 and if approved by Shareholders, the
Remuneration Policy will remain in force until 30 November 2026.
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Directors’ Remuneration Report continued
Company’s Policy on Directors’ Remuneration effective 1 December 2023
How policy supports strategy and promotes
long-term sustainable success Operation
The Board consists entirely of independent Non-executive
Directors, who meet regularly to deal with the Company’s
affairs.
Non-executive Directors have formal letters of appointment
which contain the responsibilities and obligations of the
Directors in relation to undertaking their role and managing
conflicts of interest; their remuneration is determined by the
Board within the limits set by the Articles of Association.
The intention is that fees payable reflect the time spent by
them individually and collectively, be of a level appropriate
to their responsibilities and be in line with market practice,
sufficient to enable candidates of high calibre to be recruited
and retained.
Directors are not entitled to payment for loss of office and
do not receive any bonus, nor do they participate in any
long-term incentive schemes or pension schemes. All fees are
paid in cash, monthly or quarterly in arrears, to the Director
concerned or a nominated third party.
The Company’s policy in relation to fees is to offer only
a fixed basic fee in line with equivalent roles within the
sector with additional fees for the roles of Chairman of the
Company and Chairman of the Audit Committee. As the
Company is an investment trust and all the Directors are
Non-executive, it is considered inappropriate to have any
long-term incentive schemes or benefits.
Rates are reviewed and benchmarked annually but the
review will not necessarily result in any change to rates.
Non-executive Directors are subject to annual re-election by
Shareholders.
In accordance with the Company’s Articles of Association,
any Director who performs, or undertakes to perform,
services which the Directors consider go beyond the
ordinary duties of a Director may be paid such additional
remuneration (whether by way of fixed sum, bonus,
commission, participation in profits or otherwise) as the
Directors may determine.
There are no performance conditions relating to
non-executive Directors’ fees.
As per previous AGM resolutions, Shareholders will be asked to consider a non-binding vote for the approval of the following
Directors’ Remuneration Implementation Report, which reports on how the current Remuneration Policy has operated during
the year ended 30 November 2022.
The result of the Shareholder votes on the Directors’ Remuneration Policy and the latest Implementation Report were as follows:
Implementation Report
for the Year ended
30 November 2021
Remuneration Policy
for the three years
ending on
30 November 2023
Approved at the AGM
on 7 April 2022
Approved at the AGM
on 28 May 2020
Votes for 99.96% of votes cast 99.32% of votes cast
Votes against 0.02% of votes cast 0.68% of votes cast
Votes withheld 0.02% of votes cast 0%
The Board considers this level of support from Shareholders a positive endorsement of both its Remuneration Policy and the policy
implementation. There has been no communication from Shareholders regarding any aspect of the Directors’ remuneration.
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Implementation Report
Directors’ Remuneration for the Year Ended 30 November 2022
Fees and Expenses – Annual Review
The review of Directors’ fees is carried out on an annual basis and involves consideration of the time and commitment required
of the Directors, including any significant increase in requirements due to regulatory or other changes. For comparative purposes
the remuneration awarded to directors of similar companies and general market data is also considered. While such a review
will not necessarily result in any change to the rates, the Committee believes it is important that these reviews happen annually.
The appointment of an external remuneration consultant was considered unnecessary. No Director is involved in deciding their
own remuneration and all Directors exercise independent judgement and discretion when considering fees.
Directors’ fees were last increased with effect from 1 December 2021, when an inflationary increase was awarded. The Board
undertook the annual review of fees paid to the Directors in September 2022 which included a selection of peer comparisons
and external reports including the Nurole Compensation Report and the Trust Associates 2022 Fee Review. Consideration was
also given to the rise in inflation and the retail price index since the last change in Directors’ fees, along with the increased level
of input and responsibility the members of the Board have in relation to enhanced regulations and requirements. Irrespective of
these changes, the Committee decided not to implement a change and confirmed that the fee rates would remain as approved
with effect from 1 December 2021:
• Non-executive Director £29,500pa;
• Chairman £41,000pa; and
• Supplement for performing the role of Chair of the Audit Committee £5,500.
Article 105, of the Company’s Articles of Association stipulates the aggregate amount available for Directors’ Remuneration as
£250,000; at the rates agreed the Board falls within the aggregate limit with remaining allowance to accommodate overlapping
transition periods for new directors. In accordance with the Shareholder Rights Directive, the Board confirms that there were no
variable pay awards made to the Directors and there were no deferral periods or share based pay equivalents. The percentage
change in remuneration in respect of the five financial years prior to the current year in respect of each Director role is as
follows:
Financial year to:
30 November
2017
30 November
2018
30 November
2019
30 November
2020
30 November
2021
30 November
2022
Chairman – +5.7% – – – +10.8%
Non-Executive Director – +6.0% – – – +11.3%
Chair of the Audit Committee – +5.0% – – – +10.0%
Expenses
The Directors are entitled to be reimbursed for reasonable expenses incurred by them in connection with the performance of
their duties and attendance at Board and General Meetings. In certain circumstances, under HMRC rules, travel and other out
of pocket expenses reimbursed to the Directors may be considered as taxable benefits. Where expenses are classified as taxable
under HMRC guidance, they are paid gross and shown in the taxable column of the Directors’ remuneration table. There were
no such expenses claimed by the Directors in the year under review (2021: nil). The policy for claiming such expenses was not
changed during the year.
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Directors’ Remuneration Report continued
Letters of Appointment
In accordance with recommended practice, each Director has received a letter setting out the terms of their appointment.
None of the Directors has a contract of service or a contract for services and a Director may resign by giving notice in writing to
the Board at any time. The Directors are not entitled to payment for loss of office. A sample equivalent to the Directors’ Letter of
Appointment is available on the Company’s website.
New Directors are appointed and elected with the expectation that they will serve for a period of at least three years.
In accordance with the Articles of Association any new Director is required to stand for election at the first AGM following
their appointment and, in accordance with good corporate governance practice, all Directors stand for re-election every year
following their first election by Shareholders.
Directors’ and Officers’ Liability Insurance
Directors’ and Officers’ liability insurance cover is held by the Company in respect of the Directors. The Company has, to the
extent permitted by law and the Company’s Articles of Association, provided each Director with a Deed of Indemnity which,
subject to the provisions of the Articles of Association and s234 of the Companies Act 2006 qualifying third party indemnity
provisions, indemnifies the Directors in respect of costs which they may incur relating to the defence of any proceedings brought
against them arising out of their position as Directors (excluding criminal and regulatory penalties). Directors’ legal costs may be
funded up-front provided they reimburse the Company if the individual is convicted or, in an action brought by the Company,
judgment is given against them. These provisions were in force during the year and remain in force at the date of this report.
Remuneration (Audited)
In the year under review, the Directors’ fees were paid at the following fixed annual rates: the Chairman £41,000; other
Directors £29,500 with the Chair of the Audit Committee receiving an extra £5,500 for performing that additional role.
The fees payable in respect of each of the Directors were as follows:
Date of Appointment
Year ended
30 November
2022
£
Year ended
30 November
2021
£
Robert Kyprianou (Chairman) 7 June 2013 41,000 37,000
Cecilia McAnulty (Chair of the Audit Committee)~ 1 November 2021 33,096 2,208
Katrina Hart (Chair of the Management Engagement Committee) 7 June 2013 29,500 26,500
Simon Cordery 1 July 2019 29,500 26,500
Joanne Elliott (Chair of the Audit Committee)~* 7 June 2013 11,046 31,500
Total 144,142 123,708
~ Cecilia McAnulty assumed the role of Chair of the Audit Committee with effect from 7 April 2022.
~* Joanne Elliott was Chair of the Audit Committee until her retirement from the Board on 7 April 2022; Joanne Elliott is currently CFO of the property team at Thames River Capital LLP and
payment in respect her services as a director was made to Thames River Capital LLP.
No pension or other contributions were paid by the Company during the year to any of the Directors. Consequently, the figures
shown above comprise the single total remuneration figure for each Director.
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Directors’ Share Interests (Audited)
The interests of Directors in the ordinary shares of the Company on 30 November 2022 and 30 November 2021 were as follows:
30 November
2022
30 November
2021
Robert Kyprianou 113,538 93,368
Katrina Hart 51,595 51,700
Simon Cordery 40,124 39,003
Cecilia McAnulty 40,000 –
Joanne Elliott
#
n/a 30,000
Total 245,257 214,071
# retired from the Board on 7 April 2022.
All holdings are beneficially held. There have been no other changes to Directors’ Share Interests.
While it is no longer a requirement, Directors are actively encouraged to maintain a holding of ordinary shares in the Company.
Performance
The Regulations require a performance comparison line graph to be included in the Directors’ Remuneration Report showing
the total Shareholder return for each of the financial years in the relevant period. As the Company was incorporated on
17 May 2013 and commenced trading on 1 July 2013, the performance comparison is shown for the period from 1 July 2013.
Each subsequent annual graph is required to increase by one year until the maximum relevant period of ten years is reached;
thereafter the relevant period will continue to be ten years.
Total return per ordinary share
80
100
120
140
160
180
200
220
240
Ordinary share price (TR)
Rebased to 100
* For information purposes.
NAV per share (TR)* Benchmark
Jul
2013
Nov
2013
Nov
2014
Nov
2015
Nov
2016
Nov
2017
Nov
2018
Nov
2019
Nov
2020
Nov
2021
Nov
2022
The chart above, in accordance with legislation, shows the total return per ordinary share, and does not take into account the
value ordinary Shareholders would have received from the subscription shares they were given at launch and were able to sell or
exercise on the single conversion date of 31 July 2017.
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The Company’s Benchmark for the period to 31 August 2016 was the MSCI World Financials Index. On 1 September 2016 the
constituents of the MSCI World Financials Index changed to exclude real estate. MSCI therefore provided a revised index, the
MSCI World Financials + Real Estate Net Total Return Index which was adopted for all periods from 1 September 2016 until the
General Meeting of the Company held on 7 April 2020 at which time a new index was adopted following the reconstruction of
the Company on 23 April 2020, being the MSCI ACWI Financials Net Total Return Index.
Relative Importance of Spend on Pay
Under the Regulations (Schedule 8, Part 3 (20)), the Directors’ Remuneration Report must show a comparison of all
remuneration paid to employees* to all distributions (including dividends and share buy backs) paid to Shareholders for the
current year, preceding year and the difference between those years. This is to assist the Directors in understanding the relative
importance of spend on pay.
*The Company does not have any employees therefore for the purposes of comparison the remuneration paid to the non-
executive directors is included.
Change
2022
£’000
2021
£’000 £’000 %
Directors’ total remuneration 144 124 20 16%
Dividends paid or declared in respect of the financial year* 14,588 10,014 4,574 46%
Profit on ordinary activities after tax 5,450 54,910 (49,460) (90%)
Issue of ordinary shares out of treasury 10,960 117,187 (106,227) (91%)
Issue of new ordinary shares 45,047 – 45,047 100%
Issue of new ordinary shares pursuant to placing 45,308 – 45,308 100%
Issue of C shares (gross proceeds) – 122,000 (122,000) (100%)
Ordinary shares repurchased into treasury 9,175 – 9,175 100%
*The total dividends paid or declared is based on the number of shares in issue on the ex-dividend date. The first interim dividend of 2022, was paid on 31 August 2022 on 330,440,000 shares
(2021: 182,475,000 shares), the second interim dividend of 2022 will be paid on 28 February 2023 on 324,779,000 shares (2021: 281,730,000 shares). No payments were made in the period
to any past Directors (2021: £nil).
Approved by the Board and confirmed as a true reflection of the major decisions made by the Board acting in the capacity of a
Remuneration Committee, in relation to the remuneration of the Directors on 20 February 2023.
Robert Kyprianou
Chairman
Directors’ Remuneration Report continued
Governance
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
73
Statement of Directors’ Responsibilities
in respect of the Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
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 the
UK-adopted International Accounting Standards (UK-adopted
IAS) and applicable law. Additionally, the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules
require the directors to prepare the Financial Statements in
accordance with UK-adopted IAS.
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 they have been prepared in accordance
with UK-adopted IAS, 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 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. They are responsible for such
internal controls as they determine is necessary to enable
the preparation of Financial Statements that are free from
material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of
the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report and Corporate
Governance Statement that comply with that law and those
regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK 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’s Financial Statements, which have been
prepared in accordance with applicable accounting
standards give a true and fair view of the assets, liabilities,
financial position and profit/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
20 February 2023
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
74
Report on the audit of the financial statements
Opinion
In our opinion, Polar Capital Global Financials Trust plc’s financial statements:
• give a true and fair view of the state of the company’s affairs as at 30 November 2022 and of its profit and cash flows for
the year then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”),
which comprise: the Balance Sheet as at 30 November 2022; the Statement of Comprehensive Income, the Statement of
Changes in Equity, and the Cash Flow Statement for the year then ended; and the Notes to the Financial Statements, which
include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided.
Other than those disclosed in Report of the Directors, we have provided no non-audit services to the company in the period
under audit.
Independent auditors’ report
to the members of Polar Capital
Global Financials Trust plc
Governance
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75
Our audit approach
Overview
Audit scope
• The Company is an Investment Trust Company and engages Polar Capital LLP (the “Manager”) to manage its assets.
The Company engages Polar Capital LLP (the “Manager”) to manage its day to day operations.
• We conducted our audit of the financial statements using information from HSBC Securities Services (the “Administrator”)
to whom the Manager has, with the consent of the Directors, delegated the provision of certain administrative functions.
• We tailored the scope of our audit taking into account the types of investments within the Company, the involvement of the
third parties referred to above, the accounting processes and controls, and the industry in which the Company operates.
• We obtained an understanding of the control environment in place at both the Manager and the Administrator and adopted
a fully substantive testing approach using reports obtained from the Administrator.
Key audit matters
• Valuation and existence of investments
• Income from investments
Materiality
• Overall materiality: £5,412,000 (2021: £4,564,000) based on approximately 1% of net assets.
• Performance materiality: £4,059,000 (2021: £3,423,000).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation and existence of investments
Refer to the Audit Committee Report, the Accounting Policies
and the Notes to the Financial Statements.
The investment portfolio at the year-end comprised of listed
investments valued at £568.2 million and two unlisted
investments collectively valued at £4.5 million.
We focused on the valuation and existence of investments
because investments represent the principal element of
the net asset value as disclosed in the Balance Sheet in the
financial statements.
We tested the valuation of the listed equity investments by
agreeing the prices used in the valuation to independent third
party sources.
We tested the valuation of the unlisted investments in Atom
Bank and Moneybox by comparing the price used by the
Company to the most recent funding rounds while considering
the effects of subsequent or other Company specific trading
data and comparable quoted market movements.
We tested the existence of the listed investment portfolio by
agreeing investment holdings to an independent confirmation
obtained from the custodian, HSBC Bank plc. For unlisted
investments, we confirmed existence directly with the Company.
Governance
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76
Independent Auditors’ Report continued
Key audit matter How our audit addressed the key audit matter
We also focussed on the accounting policy for the valuation
of investments held at fair value through profit or loss as
incorrect application could result in a misstatement in the
valuation of investments.
We assessed the accounting policy for investments held at fair
value through profit or loss for compliance with accounting
standards and performed testing to check that investments
were accounted for in accordance with the stated accounting
policy.
We did not identify any material matters to report.
Income from investments
Refer to the Audit Committee Report, the Accounting Policies
and the Notes to the Financial Statements.
ISAs (UK) presume there is a risk of fraud in income
recognition because of the pressure management may feel
to achieve a certain objective. In this instance, we consider
that ‘income’ refers to all the Company’s income streams,
both revenue and capital (including gains and losses on
investments).
We focused this risk on the accuracy and occurrence of
gains/losses on investments and occurrence, accuracy and
completeness of dividend income and its presentation in
the Income Statement as set out in the requirements of
The Association of Investment Companies’ Statement of
Recommended Practice (the “AIC SORP”).
We understood and assessed the design and implementation
of key controls surrounding income recognition.
We assessed the accounting policy for income recognition for
compliance with accounting standards and the AIC SORP, and
perform testing to confirm that the income from investments
has been accounted for in accordance with the stated
accounting policy and did not identify any issues.
Capital gains and losses on investments
The gains and losses on investments held at fair value
comprise of realised and unrealised gains and losses.
For unrealised gains and losses, we have tested the existence
valuation of the portfolio at the year-end (see above),
together with testing the reconciliation of opening and
closing investments, thereby we have assessed the accuracy
and occurrence of the unrealised gains and losses recorded.
For realised gains and losses, we tested a sample of disposal
proceeds by agreeing the proceeds to bank statements, in order
to verify the occurrence of the gain and loss. We re-performed
the calculation of a sample of realised gains and losses in order
to assess the accuracy of the gains and losses recorded.
No material misstatements were identified from this testing.
Dividend income
To test the accuracy of dividend income, we agreed the
dividend rates from all investments to independent third party
sources.
To test for completeness, we tested that the appropriate
dividends had been received in the year by reference
to independent data of dividends declared for all listed
investments during the year.
We tested the occurrence assertion by testing that all
dividends recorded in the year had been declared in the
market by investment holdings, and we traced a sample of
dividends received to bank statements.
We also tested the allocation and presentation of dividend
income between the revenue and capital return columns of
the Statement of Comprehensive Income in line with the
requirements set out in the AIC SORP by determining reasons
behind dividend distributions.
No material misstatements were identified from this testing.
Governance
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77
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the
industry in which it operates.
The Company’s accounting is delegated to the Administrator who maintains the Company’s accounting records and who has
implemented controls over those accounting records. We obtained our audit evidence from substantive tests. However, as part
of our risk assessment, we understood and assessed the internal controls in place at both the Manager and the Administrator
to the extent relevant to our audit. This assessment of the operating and accounting structure in place at both organisations
involved obtaining and analysing the relevant control reports issued by the independent service auditor of the Manager and the
Administrator in accordance with generally accepted assurance standards for such work. Following this assessment, we applied
professional judgement to determine the extent of testing required over each balance in the financial statements.
In planning our audit, we made enquiries of the Directors to understand the extent of the potential impact of climate change
risk on the Company’s financial statements.
The Directors concluded that the impact on the measurement and disclosures within the financial statements is not material
because the Company’s investment portfolio is primarily made up of level 1 quoted securities which are valued at fair value
based on market prices. We found this to be consistent with our understanding of the Company’s investment activities.
We also considered the consistency of the Climate change disclosures included in the Strategic Report with the financial
statements and our knowledge from our audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall company materiality £5,412,000 (2021: £4,564,000).
How we determined it approximately 1% of net assets
Rationale for benchmark applied We believe that net assets is the primary measure used by the shareholders in
assessing the performance of the entity, and is a generally accepted auditing
benchmark. This benchmark provides an appropriate and consistent year on year
basis for our audit.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £4,059,000
(2021: £3,423,000) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £270,000
(2021: £228,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Governance
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78
Independent Auditors’ Report continued
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting
included:
• evaluating the Directors’ updated risk assessment and considering whether it addressed relevant threats, including the
ongoing impact of COVID-19, rising inflation, Russia’s Invasion of Ukraine, and the subsequent economic uncertainty;
• evaluating the Directors’ assessment of potential operational impacts, considering their consistency with other available
information and our understanding of the business and assessed the potential impact on the financial statements
• reviewing the Directors’ assessment of the Company’s financial position in the context of its ability to meet future expected
operating expenses, their assessment of liquidity as well as their review of the operational resilience of the Company and
oversight of key third-party service providers;
• assessing the premium/discount at which the Company’s share price trades compared to the net asset value per share; and
• assessing the implication of significant reductions in net assets as a result of market performance on the ongoing ability of
the Company to operate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Report of the Directors, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Governance
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79
Strategic report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Report of the Directors for the year ended 30 November 2022 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic report and Report of the Directors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that
part of the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as
other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the company’s ability
to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and why the
period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in scope than
an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether
the statement is consistent with the financial statements and our knowledge and understanding of the company and its
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the
audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the company’s position, performance, business model and
strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems;
and
• The section of the Annual Report describing the work of the Audit Committee.
Governance
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
80
Independent Auditors’ Report continued
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws
and regulations related to breaches of section 1158 of the Corporation Tax Act 2010, and we considered the extent to which
non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined
that the principal risks were related to posting inappropriate journal entries to increase revenue (investment income and capital
gains) or to increase net asset value, and management bias in accounting estimates. Audit procedures performed by the
engagement team included:
• discussions with the Manager and Audit Committee, including consideration of known or suspected instances of non-
compliance with laws and regulation and fraud where applicable;
• reviewing relevant committee meeting minutes, including those of the Board and Audit Committee;
• assessment of the Company’s compliance with the requirements of section 1158 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility conditions;
• review of financial statement disclosures to underlying supporting documentation;
• designing audit identifying and testing manual journal entries during the preparation of the financial statements; and to
incorporate unpredictability around the nature, timing or extent of our testing.
• designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion.
Governance
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81
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received
from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 17 May 2013 to audit the
financial statements for the year ended 30 November 2013 and subsequent financial periods. The period of total uninterrupted
engagement is 10 years, covering the years ended 30 November 2013 to 30 November 2022.
Kevin Rollo (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
20 February 2023
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
82
Financial
Statements
and Notes
82
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
83
Statement of Comprehensive Income
For the year ended 30 November 2022
Year ended 30 November 2022 Year ended 30 November 2021
Notes
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Investment income 3 17,473 – 17,473 10,640 – 10,640
Other operating income 4 146 – 146 – – –
(Losses)/gains on investments held at fair value 5 – (5,540) (5,540) – 56,942 56,942
Losses on derivatives – (103) (103) – (115) (115)
Other currency losses 6 – (819) (819) – (1,337) (1,337)
Total income/(expense) 17,619 (6,462) 11,157 10,640 55,490 66,130
Expenses
Investment management fee 7 (727) (2,907) (3,634) (449) (1,795) (2,244)
Performance fee 7 – 1,164 1,164 – 105 105
Other administrative expenses 8 (870) (19) (889) (865) (10) (875)
Total expenses (1,597) (1,762) (3,359) (1,314) (1,700) (3,014)
Profit/(loss) before finance costs and tax 16,022 (8,224) 7,798 9,326 53,790 63,116
Finance costs 9 (249) (996) (1,245) (91) (6,575) (6,666)
Profit/(loss) before tax 15,773 (9,220) 6,553 9,235 47,215 56,450
Tax 10 (1,484) 381 (1,103) (870) (670) (1,540)
Net profit/(loss) for the year and total
comprehensive income/(expense) 14,289 (8,839) 5,450 8,365 46,545 54,910
Earnings/(losses) per ordinary share (pence) 11 4.45 (2.75) 1.70 4.42 24.57 28.99
The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance
with UK-adopted International Accounting Standards.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the
Association of Investment Companies.
The amounts dealt with in the Statement of Comprehensive Income are all derived from continuing activities.
The notes on pages 87 to 113 form part of these Financial Statements.
Financial Statements and Notes
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
84
Statement of Changes in Equity
For the year ended 30 November 2022
Year ended 30 November 2022
Notes
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 2021 13,967 251 219,163 131,947 83,744 8,175 457,247
Total comprehensive
(expense)/income:
(Loss)/profit for the year ended
30 November 2022 – – – – (8,839) 14,289 5,450
Transactions with owners,
recorded directly to equity:
Issue of shares out of treasury 21, 22 – – 4,483 6,477 – – 10,960
Issue of new ordinary shares
(including costs)
19, 21
1,282 – 43,765 – – – 45,047
Issue of new ordinary shares
pursuant to placings
(including costs)
19, 21
1,339 – 43,969 – – – 45,308
Shares bought back and held in
treasury
22
– – – (9,175) – – (9,175)
Equity dividends paid 12, 22 – – – (993) – (12,572) (13,565)
Total equity at
30 November 2022 16,588 251 311,380 128,256 74,905 9,892 541,272
Year ended 30 November 2021
Notes
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 2020 10,139 251 55,890 57,111 35,469 6,883 165,743
Total comprehensive
income:
Profit for the year ended
30 November 2021 – – – – 46,545 8,365 54,910
Transactions with owners,
recorded directly to equity:
Issue of shares out of treasury 21, 22
– – 42,351 74,836 – – 117,187
Issue of ordinary shares from
C share conversion
19, 21
3,828 – 120,971 – 1,730 – 126,529
Issue cost 21
– – (49) – – – (49)
Equity dividends paid 12 – – – – – (7,073) (7,073)
Total equity at
30 November 2021 13,967 251 219,163 131,947 83,744 8,175 457,247
The notes on pages 87 to 113 form part of these Financial Statements.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
85
Notes
30 November 2022
£’000
30 November 2021
£’000
Non current assets
Investments held at fair value through profit or loss
13
572,748 482,100
Current assets
Receivables
14
1,977 959
Overseas tax recoverable 1,184 597
Cash and cash equivalents
15
29,793 26,388
Fair value of open derivative contracts
13
6 –
32,960 27,944
Total assets 605,708 510,044
Current liabilities
Payables
16
(3,778) (659)
Bank loan
17
– (50,418)
(3,778) (51,077)
Non-current liabilities
Performance fee provision
18
– (1,164)
Indian capital gains tax provision
18
(151) (556)
Bank loan
17, 18
(60,507) –
(60,658) (1,720)
Net assets 541,272 457,247
Equity attributable to equity Shareholders
Called up share capital
19
16,588 13,967
Capital redemption reserve
20
251 251
Share premium reserve
21
311,380 219,163
Special distributable reserve
22
128,256 131,947
Capital reserves
23
74,905 83,744
Revenue reserve
24
9,892 8,175
Total equity 541,272 457,247
Net asset value per ordinary share (pence)
25
166.34 167.50
The Financial Statements on pages 83 to 113, including the associated notes, were approved and authorised for issue by the
Board of Directors on 20 February 2023 and signed on its behalf by:
Robert Kyprianou
Chairman
The notes on pages 87 to 113 form part of these Financial Statements.
Registered number: 8534332
Balance Sheet
As at 30 November 2022
Financial Statements and Notes
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
86
Notes
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Cash flows from operating activities
Profit before tax 6,553 56,450
Adjustments for non-cash items:
Losses/(gains) on investments held at fair value through profit or loss 5,540 (56,942)
Scrip dividends received (11) (115)
Amortisation on fixed interest securities (3) (5)
Finance cost relating to C shares – 6,210
Adjusted profit before tax 12,079 5,598
Adjustments for:
Purchases of investments, including transaction costs (508,484) (454,569)
Sales of investments, including transaction costs 414,210 216,527
Increase in receivables (838) (229)
(Decrease)/increase in payables (510) 9
Indian capital gains tax (18) (114)
Greek sales tax (6) –
Overseas tax deducted at source (2,071) (1,194)
Exchange losses on the loan facility 1,642 452
Net cash used in operating activities (83,996) (233,520)
Cash flows from financing activities
Net proceeds from issue of shares out of treasury 11,301 116,988
Net proceeds from issue of new ordinary shares 45,140 –
Net proceeds from share placings 45,308 –
Shares repurchased into treasury (9,137) –
Issue cost paid (93) (57)
Gross proceeds from issue of C shares – 122,000
C share issue costs paid – (1,773)
Loan repaid
17
(1,647) –
Loan drawn
17
10,094 30,066
Equity dividends paid
12
(13,565) (7,073)
Net cash generated from financing activities 87,401 260,151
Net increase in cash and cash equivalents 3,405 26,631
Cash and cash equivalents at the beginning of the year 26,388 (243)
Cash and cash equivalents at the end of the year
15
29,793 26,388
The notes on pages 87 to 113 form part of these financial statements.
Cash Flow Statement
For the year ended 30 November 2022
Financial Statements and Notes
Notes to the Financial Statements
For the year ended 30 November 2022
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
87
1. General Information
Polar Capital Global Financial Trust plc is a public limited company registered in England and Wales whose shares are traded on
the London Stock Exchange.
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158/1159 of the
Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.
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 Company’s financial statements have been prepared and approved by the Directors in accordance with UK-adopted
international accounting standards (“UK-adopted IAS”).
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 July 2022 is consistent with the requirements of UK-adopted IAS, 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 2022 is shown in the balance sheet on page 85. As at 30 November 2022
the Company’s total assets exceeded its total liabilities by a multiple of over 9.4. The assets of the Company consist mainly of securities
that are held in accordance with the Company’s Investment Policy, as set out on page 36 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. The assessment
took account of the Company’s current financial position, its cash flows and its liquidity position. In addition to the assessment the
Company carried out stress testing, 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 for at least 12 months.
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.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
88
2. Accounting Policies continued
(c) Income (continued)
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 of the C shares issued by the Company, which were classified as a liability, are recognised as an expense in the
capital column of the Statement of Comprehensive Income.
Finance costs, other than those relating to the C shares, 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 on page 38.
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 2022. 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.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
89
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 UK capital gains.
The company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Tax Act 1961. The Indian capital
gains tax provision represents an estimate of the amount of tax payable by the Company. Tax amounts payable may differ from
this provision depending on when the Company disposes of its investments. The current provision for Indian capital gains tax is
calculated based on the long term (securities held more than one year) or short term (securities held less than one year) nature
of the investments and the applicable tax rate at the year end. Currently, the short-term tax rate is 15% and the long-term tax
rate is 10%. The estimated tax charge is subject to regular review including a consideration of the likely period of ownership, tax
rates and market valuation movements. The provision at the year end is recognised in the Balance Sheet and the year-on-year
movement in the provision is recognised in the Statement of Comprehensive Income.
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
UK-adopted IAS. 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.
Index futures are valued at the difference between exchange settlement prices and inception prices.
All investments, classified as fair value through profit or loss, are further categorised into the fair value hierarchy detailed on page 98.
Changes in fair value of all investments and derivatives held at fair value are recognised in the capital return column of the
Statement of Comprehensive Income. Gains or losses on derivative financial instruments are treated as capital or revenue
depending on the motive and circumstances of the transaction. Where positions are undertaken to protect or enhance capital,
the returns are capital and where they are generating or protecting revenue, the returns are revenue.
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 a
relevant comparable.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
90
2. Accounting Policies continued
(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 and
more than one year under non-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.
When making a distribution to Shareholders, the Directors determine the profits available for distribution by reference to the
‘Guidance on realised and distributable profits under the Companies Act 2006’ issued by the Institute of Chartered Accountants
in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The availability of distributable
reserves in the Company is dependent on those dividends meeting the definition of qualifying consideration within the guidance
and on the available cash resources of the Company and other accessible sources of funds. The distributable reserves are
therefore subject to any future restrictions or limitations at the time such distribution is made.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
91
(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.
Where the shares held in treasury are reissued, the amount of the sales proceed up to the repurchased cost of those shares is
transferred back into special distributable reserve, the excess of the sales proceeds over the repurchased cost is transferred to
share premium.
(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) Accounting for C Shares
While the C Shares were in issue, the assets and liabilities attributable to the C Shares were accounted in a separate ring-fenced
pool distinct from the net assets attributable to the Ordinary Shares. A proportion of the management fee, other administrative
expenses and finance costs were also allocated to the C Share pool.
The C Shares issued represented contracts for conversion into a variable number of Ordinary Shares and therefore are classified
as a liability of the Company. The income, expenses and capital gains and losses generated by the C Shares pool of assets during
the period these shares were in existence, are included in the Statement of Comprehensive Income in their respective categories
and the total is charged or credited back within finance costs in the capital column. The issue costs of the C shares are also
recognised as a finance cost and charged to the capital column of the Statement of Comprehensive Income.
(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 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) Accounting Estimates and Judgements
The preparation of financial statements in conformity with UK-adopted IAS 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:
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
92
2. Accounting Policies continued
(t) Accounting Estimates and Judgements (continued)
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.
(u) New and Revised Accounting Standards
There were no new UK-adopted IAS or amendments to UK-adopted IAS applicable to the current year which had any significant
impact on the Company’s financial statements.
i) The following new or amended standards became effective for the current annual reporting period and the adoption of the
standards and interpretations have not had a material impact on the financial statements of the Company.
Standards &
Interpretations
Effective for periods
commencing on or after
IFRS 9, IAS 39, IFRS 7, IFRS
16 and IFRS 4: Interest
Rate Benchmark Reform –
phase 2 (amended)
IBOR Reform - Phase 2 addresses 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.
The Phase 2 amendments apply only to changes required by the
interest rate benchmark reform to financial instruments and hedging
relationships.
1 January 2021
ii) At the date of authorisation of the Company’s financial statements, there were no relevant standards that potentially impact
the Company are in issue but are not yet effective and have not been applied in the financial statements.
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.
3. Investment Income
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Revenue:
UK dividends 2,660 1,108
Overseas dividends 13,812 8,962
Scrip dividends 11 115
Interest on debt securities 990 455
Total Investment Income 17,473 10,640
Included within income from investments is £748,000 (2021: £502,000) of special dividends classified as revenue in nature in
accordance with note 2 (c). No special dividends have been recognised in capital (2021:nil).
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
93
4. Other Operating Income
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Bank interest 146 –
Total other operating income 146 –
5. (Losses)/Gains on Investments Held at Fair Value
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Net (losses)/gains on disposal of investments at historic cost (11,901) 32,893
Less fair value adjustments in earlier years (32,737) (17,736)
(Losses)/gains based on carrying value at previous balance sheet date (44,638) 15,157
Valuation gains on investments held during the year 39,098 41,785
(5,540) 56,942
6. Other Currency Losses
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Exchange gains/(losses) on currency balances 823 (885)
Exchange losses on the loan facility (1,642) (452)
(819) (1,337)
7. Investment Management and Performance Fee
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Management fee
– charged to revenue 727 449
– charged to capital 2,907 1,795
Investment management fee payable to Polar Capital LLP 3,634 2,244
Performance fee payable to Polar Capital (charged wholly to capital)* (1,164) (105)
Management fees are allocated 20% to revenue and 80% to capital. Details of the investment management and performance
fees are set out in the Strategic Report on page 38.
* In the previous two years the Company generated a performance fee accrual. In 2022, the company underperformed and the prior year provisions have been written back resulting in a credit
to the Statement of Comprehensive Income.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
94
8. Other Administrative Expenses (including VAT where appropriate)
Year ended
30 November 2022
£’000
Year ended
30 November 2021
£’000
Directors' fees
1
144 124
Directors' NIC 13 9
Auditors' remuneration - for audit of the Financial Statements
2
50 38
Depositary fee
3
35 29
Registrar fee 31 33
Custody and other bank charges
4
114 84
UKLA and LSE listing fees 36 26
Legal & professional fees 36 102
AIC fees 19 15
Directors' and officers' liability insurance 16 13
Corporate broker's fee 43 43
Marketing expenses
5
88 105
Research costs - allocated to revenue
6
5 3
Shareholder communications 24 23
HSBC administration fee
3
171 180
Other expenses
7
45 38
Total other administrative expenses allocated to revenue 870 865
Research costs - allocated to capital
6
19 10
Total other administrative expenses 889 875
1 Full disclosure is given in the Directors’ Remuneration Report on page 70.
2 The base audit fee for the statutory audit was £44,000. Overrun fee of £6,000 incurred in the completion of the 2021 audit due to the change in performance fee methodology. In addition,
PwC were appointed as Reporting Accountant to the Company in connection with the placing programme, such service was deemed to be a non-audit service for which a fee of £24,000
was paid. The amount has been charged to capital reserves as defined under IAS 32.
3 Fees are determined on the pre-approved rate card with HSBC.
4 Fee is based on the value of the assets and geographical activity and determined on the pre-approved rate card with HSBC.
5 Includes marketing bespoke expenses payable to Polar Capital LLP of £50,000 (2021: £54,000).
6 Research costs (which applied from 3 January 2018) payable by the Company relate solely to specialist financial research.
7 Includes non-executive Director search costs in the current and prior year.
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 excluding performance fees for the year ended 30 November 2022 was 0.87% (2021: 1.02%). The
ongoing charges ratio including the performance fee was 0.65% (2021: 0.98%). See Alternative Performance Measures on
pages 115 to 117.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
95
9. Finance Costs
Year ended 30 November 2022 Year ended 30 November 2021
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Interest on loans and overdrafts 201 804 1,005 68 272 340
Loan arrangement fees 48 192 240 23 93 116
Net gains attributable to C shares – – – – 4,529 4,529
C share issues costs – – – – 1,681 1,681
249 996 1,245 91 6,575 6,666
Finance costs are allocated 20% to revenue and 80% to capital with the exception of the costs related to C shares charged
100% to capital.
10. Taxation
a) Analysis of tax charge/(credit) for the year:
Year ended 30 November 2022 Year ended 30 November 2021
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Overseas tax 1,465 – 1,465 896 – 896
Tax relief in capital 19 (19) – – – –
Withholding tax recovered – – – (26) – (26)
Indian capital gains tax – (368) (368) – 670 670
Greek sales tax – 6 6 – – –
Total tax charge/(credit) for the year (see note 10b) 1,484 (381) 1,103 870 670 1,540
b) Factors affecting tax charge/(credit) for the year:
The charge/(credit) for the year can be reconciled to the profit/(loss) per the Statement of Comprehensive Income as follows:
Year ended 30 November 2022 Year ended 30 November 2021
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Profit/(loss) before tax 15,773 (9,220) 6,553 9,235 47,215 56,450
Tax at the UK corporation tax rate of 19% (2021: 19%) 2,997 (1,751) 1,246 1,755 8,971 10,726
Tax effect of non-taxable dividends (2,940) – (2,940) (1,773) – (1,773)
Losses/(gains) on investments that are not taxable – 1,228 1,228 – (10,543) (10,543)
Overseas tax suffered 1,465 – 1,465 896 – 896
Indian capital gains tax – (368) (368) – 670 670
Greek sales tax – 6 6 – – –
Current period expenses not tax deductible – – – – 1,180 1,180
Unrelieved current period expenses and deficits – 504 504 25 392 417
Withholding tax recovered – – – (26) – (26)
Tax relief on overseas tax suffered (38) – (38) (7) – (7)
Total tax charge/(credit) for the year (see note 10a) 1,484 (381) 1,103 870 670 1,540
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
96
10. Taxation continued
c) Factors that may affect future tax charges:
The Company has an unrecognised deferred tax asset of £1,968,000 (2021: £1,345,000). The deferred tax asset is based on a
prospective corporation tax rate of 25% (2021: 25%). The Finance Act 2021 received Royal Assent on 10 June 2021 and the
rate of Corporation Tax of 25% effective from 1 April 2023 has been used to calculate the potential deferred tax asset.
It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and deficits and
therefore no deferred tax asset has been recognised.
Due to the Company’s tax status as an investment trust and the intention to continue meeting the conditions required to obtain
approval of such status in the foreseeable future, the Company has not provided UK tax on any capital gains arising on the
revaluation or disposal of investments held by the Company.
The Company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Tax Act 1961. A tax provision on
Indian capital gains is calculated based on the long term (securities held more than one year) or short term (securities held less
than one year) nature of the investments and the applicable tax rate at the year end. The current rates of short-term tax rates
are 15% and the long term tax rates are 10% respectively. At the year ended 30 November 2022, the Company has a deferred
tax liability of £151,000 (2021: £556,000) on capital gains which may arise if Indian investments are sold.
11. Earnings/(Losses) Per Ordinary Share
Year ended 30 November 2022 Year ended 30 November 2021
Revenue
return
Capital
return
Total
return
Revenue
return
Capital
return
Total
return
The calculation of basic earnings/(losses) per share is
based on the following data:
Net profit/(loss) for the year (£’000) 14,289 (8,839) 5,450 8,365 46,545 54,910
Weighted average ordinary
shares in issue during the year 320,762,691 320,762,691 320,762,691 189,457,425 189,457,425 189,457,425
From continuing operations
Basic - ordinary shares (pence) 4.45 (2.75) 1.70 4.42 24.57 28.99
As at 30 November 2022 there were no potentially dilutive shares in issue (2021: nil).
12. Amounts Recognised as Distributions to Ordinary Shareholders in the Year
Dividends paid in the year ended 30 November 2022
Payment date
No. of shares Amount per share
Year ended
30 November 2022
£’000
28 February 2022
281,730,000 2.00p 5,635
31 August 2022
330,440,000 2.40p 7,930
13,565
The revenue available for distribution by way of dividend for the year is £14,289,000 (2021: £8,365,000).
The total dividends payable in respect of the financial year ended 30 November 2022, which is the basis on which the
requirements of section 1158 Corporation Tax Act 2010 are considered, are set out below:
Payment date
No. of shares Amount per share
Year ended
30 November 2022
£’000
31 August 2022
330,440,000 2.40p 7,930
28 February 2023
324,779,000 2.05p
6,658
14,588
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
97
The total dividends payable in respect of the financial year ended 30 November 2021, which is the basis on which the
requirements of section 1158 Corporation Tax Act 2010 are considered, are set out below:
Payment date
No. of shares Amount per share
Year ended
30 November 2021
£’000
31 August 2021
182,475,000 2.40p 4,379
28 February 2022
281,730,000 2.00p 5,635
10,014
All dividends are paid as interim dividends, and all have been charged to revenue, where necessary utilising the revenue reserve
and in exceptional circumstances utilising the special distributable reserve. £831,000 for the dividend paid on 28 February 2022
and £162,000 for the dividend paid on 31 August 2022 were partially paid from the special distributable reserve. See Directors
Report on pages 48 and 49 for further details.
13. Investments Held at Fair Value Through Profit or Loss
(a) Investments held at fair value through profit or loss
30 November 2022
£’000
30 November 2021
£’000
Opening book cost 422,479 152,439
Opening investment holding gains 59,621 35,572
Opening fair value 482,100 188,011
Analysis of transactions made during the year
Purchases at cost 510,922 453,669
Sales proceeds received (414,737) (216,527)
(Losses)/gains on investments held at fair value (5,540) 56,942
Amortisation on fixed interest securities 3 5
Closing fair value 572,748 482,100
Closing book cost 506,766 422,479
Closing investment holding gains 65,982 59,621
Closing fair value 572,748 482,100
The Company received £414,737,000 (2021: £216,527,000) from disposal of investments in the year. The book cost of these
investments when they were purchased were £426,638,000 (2021: £183,634,000). 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 transactions costs, including stamp duty and broker commissions were incurred during the year:
30 November 2022
£’000
30 November 2021
£’000
On acquisitions 565 570
On disposals 327 205
892 775
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
98
13. Investments Held at Fair Value Through Profit or Loss continued
(b) Changes in Derivative Financial Instruments
(i) Index Futures
30 November 2022
£’000
30 November 2021
£’000
Valuation at 1 December 2021 – –
Additions at cost 109 –
Proceeds of disposal – –
Losses on disposal (109) –
Valuation gains 6 –
Valuation at 30 November 2022 6 –
The company invested in index futures during the year for the purposes of efficient portfolio management. There was 15 ICF
Long Gilt March 2023 contracts held at year ended 30 November 2022 (2021: nil).
(ii) Contract for Difference
30 November 2022
£’000
30 November 2021
£’000
Valuation at 1 December 2021 – –
Additions at cost – 1,598
Proceeds of disposal – (1,483)
Losses on disposal – (115)
Valuation gains – –
Valuation at 30 November 2022 – –
The contract for difference was utilised in the prior year for the purpose of efficient portfolio management. There was no
contract for difference held at year ended 30 November 2022 (2021: same).
(c) Fair Value of Open Derivative Contracts
30 November 2022
£’000
30 November 2021
£’000
ICF Long Gilt March 2023 Futures 6 –
Total 6 –
(d) 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) on page 89.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
99
The following tables set out the fair value measurements using the IFRS 7 hierarchy at 30 November 2022 and 2021:
30 November 2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity Investments and derivative financial
instruments 526,173 – 4,551 530,724
Interest bearing securities 42,030 – – 42,030
Total 568,203 – 4,551 572,754
The Level 3 investment relates to the shares in Atom Bank and Moneybox.
30 November 2021
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity Investments 470,165 – 1,921 472,086
Interest bearing securities 10,014 – – 10,014
Total 480,179 – 1,921 482,100
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 2022
£’000
30 November 2021
£’000
Opening balance 1,921 2,120
Additions at cost 3,000 256
Total loss included in the Statement of Comprehensive
Income - on assets held at the year end (370) (455)
Closing balance 4,551 1,921
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) on page 89.
A +/- 10% change in the price used to value the investment in the level 3 investments at the year end would result in
a +/- £455,000 (2021: £192,000) impact on the gains or losses on investments held at fair value in the Statement of
Comprehensive Income.
(e) Unquoted investments
The value of the unquoted investments as at 30 November 2022 was £4,551,000 (2021: £1,921,000) and the portfolio
comprised the following holdings:
30 November 2022
£’000
30 November 2021
£’000
Atom Bank 2,241 1,921
Moneybox 2,310 –
4,551 1,921
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
100
13. Investments Held at Fair Value Through Profit or Loss continued
(e) Unquoted investments (continued)
Atom Bank is a UK digital bank founded in 2014 and based in Durham. It currently offers fixed rate and instant access savings
products, business banking loans and retail mortgages.
At 31 March 2022 (Atom Bank’s financial year end), Atom Bank announced that it had made pre-tax losses of £11,927,000
(2021: £62,379,000) and had net assets attributable to Shareholders of £251,094,000 (2021: £141,330,000).
The valuation of Atom Bank was reviewed by the Manager and the Board during both the half year and full year financial results
process. In February, the investment of Atom Bank was increased to the price at which the bank raised £70m of capital. In
November the bank announced a further capital raise at the same valuation.
Moneybox is an on-line UK savings and wealth platform and provides mobile applications which enable customers to make
regular savings into tax efficient products, such as ISAs, or a personal pension, as well as various savings accounts.
At 31 May 2021 (Moneybox’s financial year end), Moneybox announced that it had made pre-tax losses of £10,198,000 and
had net assets attributable to Shareholders of £31,917,000.
The valuation of Moneybox was reviewed by the Investment Manager and the Board during both the half year and full year
financial results process. During the year, the valuation of Moneybox was reduced following a sharp fall in the valuations of
listed comparators.
14. Receivables
30 November 2022
£’000
30 November 2021
£’000
Securities sold awaiting settlement 527 –
Net proceeds due from issue of treasury shares – 341
VAT recoverable 25 123
Dividends and interest receivable 1,395 473
Prepayments 30 22
1,977 959
15. Cash and Cash Equivalents
30 November 2022
£’000
30 November 2021
£’000
Cash at bank 29,652 26,383
Cash held at derivative clearing houses 141 5
29,793 26,388
16. Payables
30 November 2022
£’000
30 November 2021
£’000
Securities purchased awaiting settlement 2,427 –
Repurchase of treasury shares awaiting settlement 38 –
Accruals 1,313 659
3,778 659
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
101
17. Bank Loans
i) Bank loans
30 November 2022
£’000
30 November 2021
£’000
The Company has the following unsecured term loans:
£20m at 0.939% repayable 8 July 2022 – 20,000
£15m at 3.921% repayable 8 July 2025 15,000 –
US$18.4m at 4.208% repayable 8 July 2025 15,469 –
30,469 20,000
The Company made the following drawdowns from the RBS revolving credit facility of
£50m as at year ended 30 November 2022 (30 November 2021: RBS revolving credit facility
of £40m):
US$20.4m repayable 8 July 2022 – 15,418
£10m repayable 8 July 2022 – 10,000
£5m repayable 8 July 2022 – 5,000
£20m repayable 8 July 2025 20,000 –
£5m repayable 8 July 2025 5,000 –
US$6m repayable 8 July 2025 5,038 –
60,507 50,418
During the year, the Company repaid the one-year term loan of £20m, and the £40m revolving credit facility (of which £15m
and US$20.4m were drawn at expiry) from RBS on their expiry on 8 July 2022. The Company entered into replacement
arrangements with RBS for two three-year term loans of £15m and US$18.4m and a three-year £50m revolving credit facility,
all expiring on 8 July 2025.
As at 30 November 2022, the Company had drawn down £25m and US$6m (£5m) respectively from the revolving credit facility,
with £20m remaining available.
The term loans of £15 million and USD$18.4 (£15.5m) held at the year end is due for settlement within 3 years and is stated at
its fair value, which equates to amortised cost.
Both of the term loan and credit facility are unsecured but subject to certain covenants and restrictions, all of which have been
complied with during the year. The main covenants relating to the term loan and credit facility are:
(i) Consolidated Gross Borrowing not to exceed 30% of the Adjusted Portfolio Value at any time.
(ii) The number of Eligible Investments shall not be less than 50 at any time.
(iii) The Adjusted Portfolio Value shall at all times be equal to or more than £240,000,000.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
102
17. Bank Loans continued
ii) Reconciliation of bank loans
30 November 2022
£’000
30 November 2021
£’000
Bank loans held as at 1 December 2021 50,418 19,900
RCF drawn under ING facility – 12,566
Term loan of £10m and RCF of £7.5m & US$20.4m under ING facility expired in July 2021 – (32,245)
Term loan of £20m and RCF of US$20.4m under RBS facility due to expire in July 2022 – 34,745
Prior year RCF drawn under RBS facility – 15,000
Term loan of £20m and RCF of £15m & US$20.4m under RBS facility expired in July 2022 (52,000) –
Term loans of £15m & US$18.4m and RCF of £20m under RBS facility due to expire in July
2025
50,353 –
RCF drawn under RBS facility due to expire in July 2025 10,094 –
Exchange losses/(gains) on settlement of RCF balances 2,254 (302)
Effect of changes in foreign exchange rates on Term loan and RCF (612) 754
Bank loans held as at 30 November 2022 60,507 50,418
The movement in the liability arising from the bank loans due to changes in foreign exchange rates is a non-cash movement and
is included in the Statement of Comprehensive Income within ‘Other currency losses’.
18. Non-current Liabilities
30 November 2022
£’000
30 November 2021
£’000
Performance fee provision – 1,164
Indian capital gains tax provision 151 556
Bank loan 60,507 –
60,658 1,720
The performance fee is payable at the end of each five-year tender period, the next being in year 2025.
19. Called Up Share Capital
30 November 2022
£’000
30 November 2021
£’000
Allotted, Called up and Fully paid:
Ordinary shares of 5p each:
Opening balance of 272,980,000* (30 November 2021: 123,050,100) 13,649 6,153
Issue of 25,644,680 (2021: nil) new ordinary shares 1,282 –
Issue of 26,775,320 (2021: nil) new ordinary shares pursuant to placings 1,339 –
Issue of 6,350,000 (2021: 73,374,900) ordinary shares out of treasury 318 3,668
Issue of nil ordinary shares (2021: 76,555,000) from conversion of C shares – 3,828
Repurchase of 6,356,000 (2021: nil) ordinary shares into treasury (318) –
Allotted, Called up and Fully paid: 325,394,000 (30 November 2021: 272,980,000)
ordinary shares of 5p
16,270 13,649
6,356,000 (2021: 6,350,000) ordinary shares held in treasury 318 318
At 30 November 2022 16,588 13,967
* Excluding shares held in Treasury.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
103
This reserve is not distributable
During the year, there were 6,356,000 ordinary shares repurchased into treasury for a total net consideration of £9,175,000
(2021: nil). A total of 6,350,000 (2021: 73,374,900) ordinary shares were issued out of treasury for a total net consideration of
£10,960,000 (2021: £117,187,000).
The Company also issued 25,644,680 new ordinary shares from the block listing facility (2021: nil) for a total consideration of
£45,140,000 less expenses of £93,000 (2021: £nil).
The Company also undertook a share placing programme, the first placing at the end of January 2022 and second placing at
the end of February 2022 under the Prospectus issued on 12 May 2021. This resulted in a total allotment of 26,775,320 new
ordinary shares for a total consideration of £46,022,000 less expenses of £714,000.
In the prior year the Company issued 122,000,000 C Shares for gross proceeds of £122,000,000. On admission, the
C Shareholders held rights over a ring-fenced portfolio attributable to the C shares and this portfolio was invested in accordance
with the Company’s Investment Policy. These were duly converted into 76,555,000 ordinary shares on 13 August 2021, based
on a conversion ratio as calculated in accordance with the terms and conditions of the Company’s Articles which was approved
at the General Meeting on 16 June 2021 and as summarised in the Prospectus.
Subsequent to the year end to 16 February 2023, the Company has purchased a further 790,000 shares out of treasury for a
total net consideration of £1,247,000 into treasury.
The ordinary shares held in treasury have no voting rights and are not entitled to dividends.
20. Capital Redemption Reserve
30 November 2022
£’000
30 November 2021
£’000
At 1 December 2021 251 251
At 30 November 2022 251 251
The capital redemption reserve represents the nominal value of shares repurchased and cancelled.
This reserve is not distributable
21. Share Premium Reserve
30 November 2022
£’000
30 November 2021
£’000
At 1 December 2021 219,163 55,890
Issue of 25,644,680 (2021: nil) new ordinary shares 43,858 –
Issue of 26,775,320 (2021: nil) new ordinary shares pursuant to placings 43,969 –
Issue of 6,350,000 (2021: 73,374,900) ordinary shares out of treasury 4,483 42,351
Issue cost (93) (49)
Issue of nil (2021: 76,555,000) ordinary shares from C share conversion – 120,971
At 30 November 2022 311,380 219,163
The cost to the block listing application of £93,000 (2021: £49,000) has been accounted as an issue cost as defined under IAS 32.
The share premium from the C share conversion in 2021 is calculated as the net assets attributable to the C shares on
conversion of £124,799,000 (note 23) less the nominal value of converted shares of £3,828,000 (note 19).
The share premium arises from excess of consideration received on the issue of the shares over the nominal value.
This reserve is not distributable
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
104
22. Special Distributable Reserve
30 November 2022
£’000
30 November 2021
£’000
At 1 December 2021 131,947 57,111
Issue of 6,350,000 (2021: 73,374,900) ordinary shares out of treasury 6,477 74,836
Repurchase of 6,356,000 (2021: nil) ordinary shares into treasury (9,175) –
Interim dividends paid* (993) –
At 30 November 2022 128,256 131,947
* The second interim dividend of 2.00p per share for the year ended 30 November 2021 was paid on 28 February 2022. Part of this dividend, amounting to £831,000 was paid out of the
special distributable reserve. In addition, the first interim dividend of 2.40p per share for the year ended 30 November 2022 was a paid on 31 August 2022. Part of this dividend amounting to
£162,000 was paid out of the special distributable reserve.
The special distributable reserve was created following approval from the Court, received on 4 September 2013, to cancel the
share premium account from initial share offering.
Surpluses to the credit of the special distributable reserve can be used to purchase the Company’s own shares. In addition, the
Company may use this reserve for the payment of dividends.
23. Capital Reserves
30 November 2022
£’000
30 November 2021
£’000
At 1 December 2021 83,744 35,469
Net (losses)/gains on disposal of investments (44,638) 15,157
Valuation gains on investments held during the year 39,098 41,785
Net losses on derivative contracts (103) (115)
Exchange gains/(losses) on currency balances 823 (885)
Exchange losses on the loan facility (1,642) (452)
Investment management fee charged to capital (2,907) (1,795)
Performance fee credited to capital 1,164 105
Research costs charged to capital (19) (10)
Finance costs charged to capital (996) (365)
Finance costs relating to C shares – (4,480)
Indian capital gains tax 368 (670)
Greek sales tax (6) –
Tax relief due from revenue 19 –
At 30 November 2022 74,905 83,744
The balance on the capital reserve represents a profit of £65,778,000 (2021: profit of £58,403,000) on investments held and a
gain of £9,127,000 (2021: gain of £25,341,000) on investments sold.
The balance on investments held comprises holding gains on investments (which may become realised) and other amounts,
which are unrealised. An analysis has not been made between the amounts that are realised (and may be distributed or used to
repurchase the Company’s shares) and those that are unrealised.
The balance on investments sold are realised distributable capital reserves which may be used to repurchase Company’s shares
or be distributed as dividends subject to meeting the definition of qualifying consideration as noted in Note 2(o).
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
105
24. Revenue Reserve
30 November 2022
£’000
30 November 2021
£’000
At 1 December 2021 8,175 6,883
Revenue profit 14,289 8,365
Interim dividends paid* (12,572) (7,073)
At 30 November 2022 9,892 8,175
* Part of the dividends for the year ending November 2022 were paid from the special distribution reserve as noted in Note 22.
The revenue reserve may be distributed or used to repurchase the Company’s shares (subject to being a positive balance).
25. Net Asset Value Per Ordinary Share
30 November 2022 30 November 2021
Net assets attributable to ordinary Shareholders (£'000) 541,272 457,247
Ordinary shares in issue at end of year 325,394,000 272,980,000
Net asset value per ordinary share (pence) 166.34 167.50
As at 30 November 2022, there were no potentially dilutive shares in issue (2021: nil).
26. 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 has 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 2022 were £3,634,000 (2021: £2,244,000) of which £305,000 (2021: £272,000) was outstanding at the
year end.
A performance fee based on cumulative relative performance since 23 April 2020, amounting to £nil (2021: £1,164,000)
has been accrued at the year end, of which £1,164,000 (2021: £105,000) was written back in the current year. Any accrued
performance fee is payable at the end of each five-year tender period, the next being in 2025. See Strategic Report on page 38
for more details.
In addition, the total research costs in respect of the period from 1 January 2022 to the year ended 30 November 2022 were
£24,000 (2021: £13,000) of which £11,000 (2021: £7,000) 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 £144,000 (2021: £124,000) to the Directors of which £47,000 (2021: £33,000) was outstanding at the year end.
The Remuneration Report is set out on pages 67 to 72. When dividends are paid by the Company these are received by the
Directors who own shares at the same rates and terms as by all other Shareholders.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
106
27. Derivatives and Other Financial Instruments
Risk management policies and procedures for the Company
The Company invests in equities, debt securities and other financial instruments for the long-term to further the investment
objective set out on page 36.
This exposes the Company to a range of financial risks that could impact on the assets or performance of the Company.
The main risks arising from the Company’s pursuit of its investment objective are market risk, liquidity risk and credit risk and
the Directors’ approach to the management of them is set out below.
The Company’s exposure to financial instruments can comprise:
– Equity and non-equity shares and fixed interest securities which may be held in the investment portfolio in accordance with
the investment objective.
– Borrowings, the main purpose of which is to enhance returns.
– Cash, liquid resources and short-term debtors and creditors that arise directly from the Company’s operations.
– Derivative transactions which the Company enters into may include equity or index options, contracts for difference, index
futures contracts and forward foreign exchange contracts. The purpose of these is to manage the market price risks and
foreign exchange risks arising from the Company’s investment activities.
The overall management of the risks is determined by the Board and its approach to each risk identified is set out below. The
Board and the Manager co-ordinate the risk management and the Manager assesses the exposure to market risk when making
each investment decision.
(a) Market Risk
Market risk comprises three types of risk: market price risk (see note 27(a)(i)), currency risk (see note 27(a)(ii)), and interest rate
risk (see note 27(a)(iii)). Further details are included in the Strategic Report on page 42.
(i) Market Price Risk
The Company is an investment company and as such its performance is dependent on its valuation of its investments.
Consequently, market price risk is the most significant risk that the Company faces.
Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s operations.
It represents the potential loss the Company might suffer through holding market positions in the face of price movements.
A detailed breakdown of the investment portfolio is given on pages 25 to 27. Investments are valued in accordance with the
accounting policies as stated in note 2(g).
At the year end, the Company’s portfolio included index futures contracts to the value of £6,000 (2021: nil).
Management of the risk
In order to manage this risk it is the Board’s policy to hold an appropriate spread of investments in the portfolio in order to
reduce both the statistical risk and the risk arising from factors specific to a particular financial sub-sector. The allocation of
assets to international markets, together with stock selection covering small, medium and large companies, and the use of
options, are additional factors which act to reduce price risk. The Manager actively monitors market prices and reports to the
Board, which meets regularly in order to consider investment strategy.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
107
Market price risks exposure
The Company’s exposure to changes in market prices at 30 November on its investments was as follows:
30 November 2022
£’000
30 November 2021
£’000
Investments held at fair value through profit or loss 572,748 482,100
Derivative financial instruments held at fair value through profit or loss 6 –
572,754 482,100
Market price risk sensitivity
The following table illustrates the sensitivity of the return after taxation for the year and the value of Shareholders’ funds to an
increase or decrease of 15% (2021: 15%) in the fair values of the Company’s investments. This level of change is considered to
be reasonably possible based on observation of current market conditions and historic trends. The sensitivity analysis is based
on the Company’s investments at each balance sheet date, adjusting for a change in management fee, with all other variables
held constant.
30 November 2022 30 November 2021
Increase in fair value
£’000
Decrease in fair value
£’000
Increase in fair value
£’000
Decrease in fair value
£’000
Statement of Comprehensive
Income - profit after tax
Revenue return (120) 120 (101) 101
Capital return 85,432 (85,432) 71,910 (71,910)
Change to the profit after tax for the
year 85,312 (85,312) 71,809 (71,809)
Change to equity attributable to
Shareholders 85,312 (85,312) 71,809 (71,809)
(ii) Currency Risk
The Company’s total return and net assets can be significantly affected by currency translation movements as the majority of the
Company’s assets and revenue are denominated in currencies other than Sterling.
Management of the risk
The Manager mitigates risks through an international spread of investments.
Derivative contracts may be used to hedge against the exposure to currency risk at the Manager’s discretion.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
108
27. Derivatives and Other Financial Instruments continued
(a) Market Risk continued
(ii) Currency Risk continued
Foreign currency exposure
The table below (as continued) with non-monetary items on page 109, shows, by currency, the split of the Company’s monetary
assets, liabilities and investments that are priced in currencies other than Sterling.
30 November 2022
£’000
30 November 2021
£’000
Monetary Assets:
Cash and short term receivables
Australian dollars 10,373 –
Canadian dollars 7,654 17
US dollars 6,934 7,713
Japanese yen 4,267 189
Euros 1,104 511
Hong Kong dollars 1,064 –
Vietnam dong 530 950
Indian rupee 470 2,586
Taiwan dollars 112 112
Norwegian krona 103 102
Swiss francs 90 18
Indonesian rupiah – 23
Monetary Liabilities:
Payables
US dollar (21,314) (15,477)
Indian rupee (1,154) (556)
Hong Kong dollars (1,064) –
Euros (360) –
Foreign currency exposure on net monetary items 8,809 (3,812)
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
109
30 November 2022
£’000
30 November 2021
£’000
Non-Monetary Items:
Investments held at fair value through profit or loss
US dollars 279,038 232,205
Euros 43,925 52,734
Indian rupee 34,915 32,181
Canadian dollars 25,133 11,305
Hong Kong dollars 24,254 13,979
Indonesian rupiah 19,073 12,439
Japanese yen 17,418 9,264
Singapore dollars 13,200 8,269
Norwegian krona 9,896 –
Swiss francs 8,488 10,279
Thai baht 5,805 11,500
Swedish krona 5,502 11,718
Malaysian ringgit 4,775 –
Australian dollars 4,644 –
Vietnam dong – 5,475
Taiwan dollars – 4,994
Mexican peso – 4,232
Korean won – 2,199
Total net foreign currency exposure
504,875 418,961
Foreign currency sensitivity
The following tables illustrate the sensitivity of net profit for the year and net assets with regard to the Company’s monetary
financial assets and liabilities and exchange rates. The sensitivity analysis is based on the Company’s monetary currency financial
instruments held at the balance sheet date and assumes a 20% (2021: 15%) appreciation or depreciation in Sterling against
the currencies to which the Company is exposed, which is considered to be a reasonable illustration based on the volatility of
exchange rates during the year.
If Sterling had weakened by 20% (2021: 15%) this would have had the following effect:
30 November 2022
£’000
30 November 2021
£’000
Statement of Comprehensive Income - profit after tax
Revenue return 2,616 1,279
Capital return (692) (711)
Change to the profit after tax for the year 1,924 568
Change to equity attributable to Shareholders 1,924 568
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
110
27. Derivatives and Other Financial Instruments continued
(a) Market Risk continued
(ii) Currency Risk continued
Conversely if Sterling had strengthened by 20% (2021: 15%) this would have had the following effect:
30 November 2022
£’000
30 November 2021
£’000
Statement of Comprehensive Income - profit after tax
Revenue return (2,616) (1,279)
Capital return 692 711
Change to the profit after tax for the year (1,924) (568)
Change to equity attributable to Shareholders (1,924) (568)
In the opinion of the Directors, while these are regarded as reasonable estimates, neither of the above sensitivity analysis are
representative of the year as a whole since the level of exposure changes frequently as part of the currency risk management
process used to meet the Company’s objectives.
(iii) Interest Rate Risk
The Company will be affected by interest rate changes as it holds interest-bearing financial assets. Interest rate changes will also
have an impact on the valuation of investments, although this forms part of price risk, which is considered separately above.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account
when making investment decisions.
Derivative contracts may be used to hedge against the exposure to currency risk at the Manager’s discretion.
Interest rate exposure
The exposure, at 30 November 2022, of financial assets and liabilities to interest rate risk is shown by reference to:
– Floating interest rates (i.e. giving cash flow interest rate risk) - when the rate is due to be re-set; and
– Fixed interest rates (i.e. giving fair value interest rate risk) - when the financial instrument is due for repayment.
30 November 2022
Within one year
£’000
More than one year
£’000
Total
£’000
Exposure to floating interest rates:
Cash and cash equivalents 29,793 – 29,793
Bank loans – (30,038) (30,038)
Non-current asset investments held at fair value through
profit or loss
– 33,989 33,989
Exposure to fixed interest rates:
Non-current asset investments held at fair value through
profit or loss
– 8,041 8,041
Bank loans – (30,469) (30,469)
Total exposure to interest rates 29,793 (18,477) 11,316
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
111
30 November 2021
Within one year
£’000
More than one year
£’000
Total
£’000
Exposure to floating interest rates:
Cash and cash equivalents 26,388 – 26,388
Bank loans (30,418) – (30,418)
Non-current asset investments held at fair value through
profit or loss
– 7,627 7,627
Exposure to fixed interest rates:
Non-current asset investments held at fair value through
profit or loss
– 2,387 2,387
Bank loans (20,000) – (20,000)
Total exposure to interest rates (24,030) 10,014 (14,016)
The weighted average interest rate for the fixed rate financial assets was 12.1% (30 November 2021: 7.1%) and the effective
period for which the rate was fixed was 6.2 years (30 November 2021: 3.1 years).
During the year, the Company entered into a £15 million and USD$18.4m term loan with The Royal Bank of Scotland
International Ltd (2021: £20 million), interest is payable at fixed rates of 3.921% and 4.208%. The loan will be expiring on
8 July 2025. Details of the amounts drawn on the term loan are given in note 17.
The Company also agreed a three-year revolving credit facility for the amount of £50 million with The Royal Bank of Scotland
International Ltd (30 November 2021: £40 million). Interest is payable at the Compounded Reference Rate based on the secured
overnight financing rate (SOFR) as quoted in the market for the relevant currency and period, plus a margin of 1.30%, plus
mandatory costs, which are the lender’s costs of complying with certain regulatory requirements of the Bank of England. At the
year end, the Company had drawn down £25m and US$6m (£5m) respectively from the revolving credit facility.
The above amounts are not necessarily representative of the exposure to interest rates in the year ahead, as the level of cash
and investment in fixed interest securities varies during the year according to the performance of the stock market, events
within the wider economy and the Manager’s decisions on the best use of cash or borrowings over the year.
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease of
100 basis points (2021: 25 basis points) in interest rates in regard to the Company’s monetary financial assets, which are subject to
interest rate risk. This level of change is considered to be reasonably possible based on observation of current market conditions.
The sensitivity analysis is based on the Company’s monetary financial instruments held at each balance sheet date, with all other
variables held constant.
30 November 2022 30 November 2021
Increase
in rate
£’000
Decrease
in rate
£’000
Increase
in rate
£’000
Decrease
in rate
£’000
Effect on revenue return 238 (238) 51 (51)
Effect on capital return (240) 240 (61) 61
Effect on net profit and on equity
attributable to Shareholders (2) 2 (10) 10
In the opinion of the Directors, the above sensitivity analysis may not be representative of the year as a whole, since the level of
exposure may change.
Financial Statements and Notes
Notes to the Financial Statements continued
For the year ended 30 November 2022
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
112
27. Derivatives and Other Financial Instruments continued
(b) Liquidity Risk
Liquidity risk is the possibility of failure of the Company to realise sufficient assets to meet its financial liabilities.
Management of the risk
The Company’s assets mainly comprise readily realisable securities which may be sold to meet funding requirements as necessary.
Liquidity risk exposure
At 30 November the financial liabilities comprised of:
30 November 2022
£’000
30 November 2021
£’000
Due within 1 month:
Balances due to brokers 2,465 –
Accruals 1,313 659
Due after 3 months and within 1 year:
Bank loan – 50,418
Due after 1 year:
Indian capital gains tax provision 151 556
Performance fee provision – 1,164
Bank loan 60,507 –
64,436 52,797
The performance fee is payable at the end of each five-year tender period, the next being in year 2025.
(c) Credit Risk
Credit risk is the exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposal of
investments or to repay deposits.
Management of the risk
The Company manages credit risk by using brokers from a database of approved brokers and by dealing through Polar Capital.
All cash balances are held with approved counterparties.
HSBC Bank plc is the custodian of the Company’s assets. The Company’s assets are segregated from HSBC’s own trading assets
and are therefore protected in the event that HSBC were to cease trading.
These arrangements were in place throughout the current and prior year.
Credit risk exposure
The maximum exposure to credit risk at 30 November 2022 was £31,715,000 (2021: £27,202,000) comprising:
30 November 2022
£’000
30 November 2021
£’000
Balances due from brokers 527 341
Accrued Income 1,395 473
Cash and cash equivalents 29,793 26,388
31,715 27,202
All of the above financial assets are current, their fair values are considered to be the same as the values shown and the
likelihood of a material credit default is considered low. None of the Company’s financial assets are past due or impaired.
All deposits were placed with banks that had ratings of A or higher.
Financial Statements and Notes
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
113
(d) Gearing Risk
The Company’s policy is to increase its exposure to markets through the judicious use of borrowings. When borrowings are invested,
the impact is to magnify the impact on Shareholder’s funds of changes, both positive and negative, in the value of the portfolio.
Management of the risk
The Company uses short-term loans to manage gearing risk, details of which can be found in note 17.
Gearing risk exposure
The loans are valued at amortised cost, using the effective interest rate method in the Financial Statements.
(e) Capital Management Policies and Procedures
The Company’s capital, or equity, is represented by its net assets which amounted to £541,272,000 as at 30 November 2022
(2021: £457,247,000), which are managed to achieve the Company’s investment objective set out on page 36.
The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis.
This review includes:
(i) the need to issue or buy back equity shares for cancellation, which takes account of the difference between the net asset
value per share and the share price (i.e. the level of share price discount or premium);
(ii) the determination of dividend payments; and
(iii) the planned level of gearing through the Company’s fixed and variable rate revolving credit facility.
The Company is subject to externally imposed capital requirements through the Companies Act with respect to its status as a
public company. In addition, in order to pay dividends out of profits available for distribution by way of dividend, the Company
has to be able to meet one of the two capital restriction tests imposed on investment companies by company law.
28. Capital Commitments, Contingent Assets and Liabilities
Capital Commitments
The Company has no commitments to further investment in Atom Bank, Moneybox or any other investee companies (2021: £nil).
29. Post Balance Sheet Events
Subsequent to the year end, a further 790,000 ordinary shares were bought back and held in treasury. Following these buy
backs, the total number of ordinary shares in issue was 324,604,000 and the share held in treasury was 7,146,000.
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.
Shareholder
Information
Shareholder Information
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
115
Alternative Performance Measures
(APMs)
In assessing the performance of the Company, the Manager and the Directors use the following APMs which are not defined in
accounting standards or law but are considered to be known industry metrics:
Net Asset Value (NAV)
The NAV is the value attributed to the underlying assets of the Company less the liabilities, presented either on a per share or
total basis.
The NAV is often expressed in pence per share after being divided by the number of shares which have been issued. The NAV
per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold
by an investor. See Note 25 on page 105 for detailed calculations. The NAV per ordinary share is published daily.
NAV Total Return (APM)
The NAV total return shows how the net asset value per share has performed over a period of time taking into account both
capital returns and dividends paid to Shareholders. The NAV total return performance for the period is calculated by reinvesting
the dividends in the assets of the Company from the relevant ex-dividend date.
Year ended
30 November 2022
Year ended
30 November 2021
Opening NAV per share
a
167.5p 134.7p
Closing NAV per share
b
166.3p 167.5p
Dividend reinvestment factor
c
1.026183 1.028548
Adjusted closing NAV per share
d = b*c
170.7p 172.3p
NAV total return for the year
(d/a)-1
1.9% 27.9%
NAV Total Return Since Inception (APM)
NAV total return since inception is calculated as the change in NAV from the initial NAV of 98p, assuming that dividends paid to
Shareholders are reinvested on the ex-dividend date in ordinary shares at their net asset value.
Year ended
30 November 2022
Year ended
30 November 2021
NAV per share at inception
a
98.0p 98.0p
Closing NAV per share
b
166.3p 167.5p
Dividend reinvestment factor
c
1.331251 1.297759
Adjusted closing NAV per share
d = b*c
221.4p 217.4p
NAV total return since inception
(d/a)-1
125.9% 121.8%
NAV Total Return Since Reconstruction (APM)
NAV total return since reconstruction is calculated as the change in NAV from the NAV of 102.8p, which was the closing
NAV the night before the tender offer on 22 April 2020, assuming that dividends paid to Shareholders are reinvested on the
ex-dividend date in ordinary shares at their net asset value.
Year ended
30 November 2022
Year ended
30 November 2021
Rebased NAV per share at reconstruction
a
102.8p 102.8p
Closing NAV per share
b
166.3p 167.5p
Dividend reinvestment factor
c
1.073252 1.045722
Adjusted closing NAV per share
d = b*c
178.5p 175.2p
NAV total return since reconstruction
(d/a)-1
73.6% 70.4%
Shareholder Information
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
116
Share Price Total Return (APM)
Share price total return shows how the share price has performed over a period of time. It assumes that dividends paid to
Shareholders are reinvested in the shares at the time the shares are quoted ex-dividend.
Year ended
30 November 2022
Year ended
30 November 2021
Opening share price
a
172.0p 136.5p
Closing share price
b
154.6p 172.0p
Dividend reinvestment factor
c
1.028037 1.029365
Adjusted closing share price
d = b*c
158.9p 177.1p
Share price total return for the year
(d/a)-1
-7.6% 29.7%
Share Price Total Return Since Inception (APM)
Share price total return since inception is calculated as the change in share price from the launch price of 100p, assuming that
dividends paid to Shareholders are reinvested on the ex-dividend date.
Year ended
30 November 2022
Year ended
30 November 2021
Share price at inception
a
100.0p 100.0p
Closing share price
b
154.6p 172.0p
Dividend reinvestment factor
c
1.311772 1.276163
Adjusted closing share price
d = b*c
202.8p 219.5p
Share price total return since inception
(d/a)-1
102.8% 119.5%
Share Price Total Return Including Subscription Share Value (APM)
The share price total return including subscription share value performance since inception includes the value of the subscription
shares issued free of payment at launch on the basis of one-for-five ordinary shares and assumes such were held throughout the
period from launch to the conversion date of 31 July 2017. Performance is calculated by reinvesting the dividends in the shares
of the Company from the relevant ex-dividend date and uses the launch price of 100p per ordinary share.
Year ended
30 November 2022
Year ended
30 November 2021
Share price at inception
a
100.0p 100.0p
Closing share price
b
154.6p 172.0p
Dividend reinvestment factor
c
1.340750 1.304651
Adjusted closing share price
d = b*c
207.3p 224.4p
Share price total return including subscription share value
since inception
(d/a)-1
107.3% 124.4%
Alternative Performance Measures (APMs) continued
Shareholder Information
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
117
(Discount)/Premium (APM)
A description of the difference between the share price and the net asset value per share usually expressed as a percentage (%)
of the net asset value per share. If the share price is higher than the NAV per share the result is a premium. If the share price is
lower than the NAV per share, the shares are trading at a discount.
30 November 2022 30 November 2021
Closing share price
a
154.6p 172.0p
Closing NAV per share
b
166.3p 167.5p
(Discount)/premium per ordinary share
(a/b)-1
-7.0% 2.7%
Ongoing Charges (APM)
Ongoing charges are calculated in accordance with AIC guidance by taking the Company’s annual ongoing charges, excluding
performance fees and exceptional items, if any, and expressing them as a percentage of the average daily net asset value of the
Company over the year.
Ongoing charges include all regular operating expenses of the Company. Transaction costs, interest payments, tax and
nonrecurring expenses are excluded from the calculation as are the costs incurred in relation to share issues and share buybacks.
Where a performance fee is paid or is payable, a second ongoing charge is provided, calculated on the same basis as the above
but incorporating the movement in the performance fee provision
Year ended
30 November 2022
Year ended
30 November 2021
Investment Management Fee (Note 7 on page 93) £3,634,000 £2,244,000
Other Administrative Expenses (Note 8 on page 94) £889,000 £875,000
a
£4,523,000 £3,119,000
Average daily net assets value
b
£519,515,000 £306,287,000
Ongoing Charges excluding performance fee
a/b
0.87% 1.02%
Performance fee (Note 7 on page 93)
c
(£1,164,000) (£105,000)
d = a+c
£3,359,000 £3,014,000
Ongoing charges including performance fee
d/b
0.65% 0.98%
Net Gearing (APM)
Gearing is calculated in line with AIC guidelines and represents net gearing. This is defined as total assets less cash and cash
equivalents divided by net assets. The total assets are calculated by adding back the bank loan. Cash and cash equivalents are
cash and purchases and sales for future settlement outstanding at the year end.
30 November 2022 30 November 2021
Net assets
a
£541,272,000 £457,247,000
Bank loan
b
£60,507,000 £50,418,000
Total assets
c = (a+b)
£601,779,000 £507,665,000
Cash and cash equivalents (including amounts awaiting settlement)
d
£27,855,000 £26,729,000
Net gearing
(c-d)/a-1
6.0% 5.2%
Shareholder Information
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
118
Glossary of Terms
AAF Report A report prepared in accordance with Audit and Assurance Faculty guidance issued by the Institute of
Chartered Accountants in England and Wales. Utilised within the review of internal controls.
AGM The Annual General Meeting, to be held at 11:30am on Thursday 30 March 2023 at the office of the
manager, Polar Capital, 16 Palace Street, London SW1E 5JD.
AIC Association of Investment Companies, the industry body for closed ended investment companies.
AIFM Alternative Investment Fund Manager – Polar Capital LLP.
AIFMD Alternative Investment Fund Managers Directive. Issued by the European Parliament in 2012 and 2013,
the Directive requires that, while the Board of Directors of an Investment Trust remains fully responsible
for all aspects of the Company’s strategy, operations and compliance with regulations, all alternative
investment Funds (‘AIFs’) in the European Union, must appoint a Depositary and an Alternative
Investment Fund Manager (‘AIFM’). The Company’s AIFM is Polar Capital LLP.
Benchmark The Benchmark is the MSCI World Financials Net Total Return Index (in Sterling with dividends
reinvested).
Closed-ended
Investment
Company
An Investment Company with a fixed issued ordinary share capital, the shares of which are traded on an
exchange at a price not necessarily related to the net asset value of the company and which can only be
issued or bought back by the company in certain circumstances.
Custodian The Custodian is HSBC Bank plc, a financial institution responsible for safeguarding, worldwide, the
listed securities and certain cash assets of the Group and Company, as well as the income arising
therefrom, through provision of custodial, settlement and associated services.
Depositary The Depositary is also HSBC Bank plc. Under AIFMD rules the Company must appoint a Depositary
whose duties in respect of investments, cash and similar assets include: safekeeping; verification of
ownership and valuation; and cash monitoring. Under the AIFMD rules, the Depositary has strict
liability for the loss of the Company’s financial assets in respect of which it has safe-keeping duties.
The Depositary’s oversight duties will include but are not limited to share buybacks, dividend payments
and adherence to investment limits.
Derivative A contract between two or more parties, the value of which fluctuates in accordance with the value of
an underlying security. Examples of derivatives are Put and Call Options, Swap contracts, Futures and
Contracts for Difference. A derivative can be an asset or a liability and is a form of gearing because it can
increase the economic exposure to Shareholders.
ESEF European Single Electronic Format is the requirement whereby reports are prepared and filed in XHTML
format, such requirement applies with effect from 1 January 2021 to all annual reports and accounts
issuers on UK (or EU) regulated markets. In addition, for issuers preparing consolidated annual accounts
in accordance with IFRS, the XHTML file will require tagging under the IFRS taxonomy.
ESMA The European Securities and Markets Authority is an independent EU authority whose purpose is to
improve investor protection and promote stable, orderly financial markets.
FCA The Financial Conduct Authority regulates the financial services industry in the UK. Its role includes
protecting consumers, keeping the industry stable, and promoting healthy competition between financial
service providers.
Shareholder Information
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
119
IFRS International Financial Reporting Standards; comprised of standards and interpretations approved by the
International Accounting Standards Board (IASB) and the International Financial Reporting Committee
(IFRC), including interpretations issued by the IFRS Interpretations Committee.
Investment
Company
Section 833 of the Companies Act 2006. An Investment Company is defined as a company which invests
its funds in shares, land or other assets with the aim of spreading investment risk.
Investment
Manager/Manager
Polar Capital LLP is the Investment Manager. Nick Brind, John Yakas and George Barrow have delegated
responsibility for the creation of the portfolio of investments subject to various parameters set by the
Board of Directors. The responsibilities of the Investment Manager and the fees payable are set out in the
Directors’ Report.
Investment Trust
taxation status
Section 1158 of the Corporation Tax Act 2010. UK Corporation Tax law allows an Investment Company
(referred to in Tax law as an Investment Trust) to be exempted from tax on its profits realised on
investment transactions, provided it complies with certain rules. These are similar to Section 833
above but further require that the Company must be listed on a regulated stock exchange and that it
cannot retain more than 15% of income received. The Directors’ Report contains confirmation of the
Company’s compliance with this law and its consequent exemption from taxation on capital gains.
Non-executive
Director
The Company is managed by a Board of Directors who are appointed by letter rather than a contract
of employment. Neither the Group nor Company has any executive Directors. Remuneration of the
nonexecutive Directors is set out in the Directors’ Remuneration Report while the duties of the Board and
the various Committees are set out in the Corporate Governance Statement. An example of the letter of
appointment is available on the Company’s website.
PwC The Company’s Auditors are PricewaterhouseCoopers LLP, represented by Kevin Rollo, Partner.
PRIIPS The Packaged Retail and Insurance-based Investment Products regulations which came into force on
1 January 2018 in the UK and EU. The regulations require generic pre-sale disclosure of investment
‘product’ costs, risks and certain other matters.
SORP The Statement of Recommended Practice. The financial statements of the Company are drawn up in
accordance with the Investment Trust SORP issued by the AIC.
Shareholder Information
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
120
Corporate Information – AGM
2023 Annual General Meeting (“AGM”)
The Company’s AGM will be held at 11:30am on Thursday 30 March 2023 at 16 Palace Street, London, SW1E 5JD. Further
information including the full text of the resolutions to be proposed at the AGM and an explanation of each resolution is contained
in the Notice of AGM which has been posted to Shareholders and is available on the Company’s website.
This year, we will provide a recording of the Investment Managers’ presentation on the Company’s website ahead of the AGM as
we are aware that many Shareholders are particularly interested in the Company’s portfolio and its performance. We estimate that
the Managers’ presentation will be uploaded to the website mid-March 2023 to give Shareholders time to consider the content
ahead of the deadline to submit their proxy votes on the formal business.
Given that the AGM will only cover formal business, please note that there will be no live presentation from the Manager and
refreshments will be limited to tea/coffee and biscuits only.
Shareholders will have the option to ask questions at the meeting but are also encouraged to send any questions ahead of the
AGM to the Board via the Company Secretary at cosec@polarcapital.co.uk stating the subject matter as PCFT-AGM. We will
endeavour to answer relevant questions at the meeting or on the Company’s website as appropriate.
For ease of reference and understanding a brief explanation of the resolutions is given below.
Resolution 1 relates to the statutory requirement of every company to lay before Shareholders the Annual Report and Financial Statements, i.e.
this document. The Annual Report has been prepared and approved by the Board of Directors and audited by the externally appointed auditors.
The document will be filed at Companies House once published to Shareholders. The Annual Report sets out the Company’s business strategy,
governance structure and procedures as well as the financial accounts for the financial year under review.
Resolutions 2 and 3, in compliance with the Large and Medium-Sized Companies and Groups (Accounts and Reports)
(Amendment) Regulation 2013 (the ‘Regulations’), The Companies (Directors’ Remuneration Policy and Directors’ Remuneration
Report) Regulations 2019 and the Listing Rules of the Financial Conduct Authority, the Company is required on a three-yearly
basis to provide Shareholders with the opportunity to vote on the Company’s Directors’ Remuneration Policy. Resolution 2 seeks
Shareholder approval to renew the forward-looking Remuneration Policy which lasts for up to three years. The current Policy was
approved by Shareholders at the 2020 AGM and will expire on 30 November 2023 unless renewed. The Policy being presented for
renewal is unchanged from the current Policy and will expire on 30 November 2026.
In addition to this, on an annual basis, Shareholders are presented with the Directors’ Remuneration Implementation Report which
looks back at the year under review and advises how the Remuneration Policy was applied. Resolution 3 therefore, is the annual
advisory vote of Shareholders on the Remuneration Implementation Report. The Directors’ Remuneration Report is presented on
pages 67 to 72.
Shareholder Information
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
121
Resolutions 4 to 7 relate to the annual election and re-election of directors. In line with good corporate governance the tenure
policy of directors is nine years, with the exception of the Board’s Chair tenure policy which allows the Chair to remain in role for
up to twelve years in certain circumstances. It is recommended that directors stand for re-election on an annual basis in order to
give Shareholders the opportunity to vote on each Director. Susie Arnott and Angela Henderson will be standing for election, with
the AGM being the first since their appointments as Directors on 1 December 2022. Having undergone a Board Evaluation process,
as described on page 58, the Directors have provided a rationale for their support for the reappointment of each director on
pages 12 and 13 and within the Notice of AGM.
Resolutions 8 and 9 relate to the statutory appointment or reappointment of the Company’s external auditors and the Directors’
authority to determine their remuneration. Further information is provided in the Audit Committee Report on page 63.
Resolution 10 relates to the Company’s dividend policy. The Company will aim to pay two interim dividends in respect of each full
financial year. Despite the extraordinary volatility in the Company’s fortunes over the past two years, the Board has been able to
maintain a steady dividend through the careful management of distributable reserves. It continues to be the aim of the Company
to maintain an income and growth mandate and the Board will utilise reserves to support the dividend where necessary. The
interim dividends will not necessarily be of equal amounts because the dividends from the Company’s underlying investments are
expected to arrive irregularly throughout the financial year.
Resolutions 11 to 13 relate to potential changes in the share capital. Resolution 11 authorises the Directors to allot (i.e. sell)
ordinary shares, whether these be newly created shares or shares held in the Company’s treasury account which have been
previously bought back in the market. Once allotted the shares are listed on the London Stock Exchange and have the same rights
as any other ordinary shares of the Company. Resolution 12 is proposed in connection with 11 and allows the Directors to allot
the shares without pre-emption rights. Under the Companies Act, all Shareholders have the right of pre-emption which means
that the Company must offer existing Shareholders an opportunity to buy the company’s shares before they are offered to third
parties; being a listed company with many Shareholders, the Directors ask to disapply the pre-emption rights which means they
are able to offer and allot the shares to specific Shareholders or in specific ways to the market, noting that such allotments would
be at a premium to the net asset value (NAV) per share and therefore accretive (i.e. positive) to overall Shareholder value. While all
Shareholders can trade the ordinary shares of the Company on the open market there are times when a Shareholder would like
to acquire greater amounts of shares than are available in the market and might approach the Company through the corporate
broker to obtain shares. In a similar but opposite scenario, Resolution 13 provides the Directors’ the ability to buy back (i.e.
purchase) shares of the Company in the market. Depending on the market environment, and various other factors, the shares of
the Company may trade at a discount to NAV. When this is the case the Company may step in and buy back shares in an effort to
reduce the discount. Each of these authorities require Shareholder approval and are regular resolutions proposed to each AGM.
Each authority remains in place for 12 months or until the limits have been reached.
Shareholder Information
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
122
Share Capital, Voting Rights and Transferability
The Company’s share capital is divided into ordinary shares of 5p each. At the year end, there were 325,394,000 ordinary shares
in issue (2021: 279,980,000 ordinary shares), of which 6,356,000 (2021: 6,350,000) were non-voting shares held in treasury by
the Company. In the year under review the Company issued a total of 58,770,000 shares (2021: 149,929,900). Subsequent to the
year end and up to 16 February 2023 (the latest practicable date), the Company bought back a further 790,000ordinary shares
remaining into treasury.
Ordinary shares carry voting rights which are exercised on a show of hands at a meeting, where each Shareholder has one vote, or
on a poll, where each share has one vote. Ordinary shares held in treasury carry no voting rights. Arrangements for the casting of
proxy votes are provided when a notice of meeting is issued.
Any shares in the Company may be held in uncertificated form and, subject to the Articles, title to uncertificated shares may
be transferred by means of a relevant system. Further information can be found in the Articles of Association available on the
Company’s website www.polarcapitalglobalfinancialstrust.com
The Company is not aware of arrangements to restrict the votes or transferability of its shares.
The Company is registered under the United States’ FATCA legislation and its Global Intermediary Identification Number (GIIN) is
8KP5BT.99999.SL.826. The Company’s Legal Entity Identifier (LEI) code is 549300G5SWN8EP2P4U41.
History and Structure
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. In
accordance with the Company’s original prospectus, on 31 July 2017, the subscription Shareholders had the opportunity to
exercise their rights to subscribe for one ordinary share per subscription share at a price of 115p per ordinary share, following
which all subscription rights lapsed and the subscription shares were cancelled. As a result of the subscription exercise the
Company issued 30,600,000 new ordinary shares.
In substitution of the fixed seven-year life, Shareholders approved changes to the Company’s Articles of Association to extend the
Company’s life indefinitely, subject to further regular tender offers at the Company’s Annual General Meeting held on 7 April 2020.
The Articles of Association require the Board to make tender offers at five-yearly intervals, with the first to commence on or before
30 June 2025. The Company continues to operate as an investment trust with an independent Board and third party investment
manager.
Company Website
www.polarcapitalglobalfinancialstrust.com
The Manager maintains a website on behalf of the Company which provides a wide range of information on the Company,
monthly factsheets issued by the Manager and copies of announcements, including the annual and half year reports when issued.
Information on the Company can also be obtained from various different sources including:
• www.theaic.co.uk
• www.ft.com/markets
• www.londonstockexchange.co.uk
Corporate Information – Other
Shareholder Information
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
123
Capital Gains Tax
Information on Capital Gains Tax (‘CGT’) is available on the HM Revenue & Customs website www.hmrc.gov.uk/cgt/index.
When shares are disposed of a capital gain may result if the disposal proceeds exceed the sum of the base cost of the shares sold
and any other allowable deductions such as share dealing costs. The exercise of subscription shares into ordinary shares should not
have given rise to a capital gain, however a capital gain may arise on the eventual disposal of those shares.
The calculations required to compute capital gains may be complex and depend on personal circumstances. Shareholders are
advised to consult their personal financial advisor for further information regarding a possible tax liability in respect of their
shareholdings.
The Company was launched on 1 July 2013 with the issue of ordinary shares at 100 pence per share with subscription shares
attached (on a one-for-five basis). The Subscription Shares section provides further information regarding the calculation of the
base cost of subscription shares for Capital Gains Tax purposes.
Subscription Shares Tax Implications
The base ‘cost’ for UK tax purposes of the subscription shares is a proportion of the issue price paid for the ordinary shares to
which the subscription shares were attached. The apportionment is made by reference to the respective market values of the
ordinary shares and subscription shares at the close of business on 1 July 2013, the day the ordinary and subscription shares were
admitted to trading. The market value for UK tax purposes of the Company’s ordinary shares and subscription shares on such date
were as follows:
Ordinary Shares 103.625p Subscription Shares 11.75p
If you have exercised the subscription rights attaching to your subscription shares, the resulting ordinary shares are treated for UK
tax purposes as the ‘same’ asset as the subscription shares in respect of which the subscription rights are exercised. The base ‘cost’
for UK tax purposes of the resulting ordinary shares will be the base cost attributed to the exercised subscription shares, increased
by the amount of subscription monies paid.
Statement by the Depositary
The statement of the Depositary’s responsibilities in respect of the Company and its report to Shareholders for the year ended
30 November 2022 are available on the Company’s website. The Depositary, having carried out such procedures as it considered
necessary, was satisfied that in all material respects the Company was managed in accordance with the applicable FCA rules and
AIFMD.
Statement by the AIFM
The statement by the AIFM in respect of matters to be disclosed to investors for the year ended 30 November 2022 is available on
the Company’s website.
Share Prices and Net Asset Value
The Company’s Net Asset Value (NAV) is normally released daily, on the next working day, following the calculation date, to the
London Stock Exchange. The mid-market price of the ordinary shares is published daily in the Financial Times in the Companies
and Markets section under the heading ‘Investment Companies’. Share price information is also available from The London Stock
Exchange website: www.londonstockexchange.co.uk
Electronic Communications
If you hold your shares in your own name you can choose to receive communications from the Company in electronic format. This
method reduces cost, is environmentally friendly and, for many, is convenient.
If you would like to take advantage of Electronic Communications, please visit our registrar’s website at www.shareview.co.uk.
You will need your Shareholder Reference Number. If you agree to the terms and conditions, in future, on the day that documents
are sent to Shareholders by post you will receive an e-mail providing the website address where the documents can be viewed and
downloaded. Paper copies will still be available on request.
Shareholder Information
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
124
Corporate Information – Other continued
Nominee Shareholders
Where notification has been provided in advance the Company will arrange for copies of Shareholder communications to be
provided to the operators of nominee accounts. Nominee service providers are encouraged to advise investors that they may attend
general meetings when invited by the Chair.
Disability Act
Copies of this Annual Report and Financial Statements or other documents issued by the Company are available from the
Company Secretary. If needed, copies can be made available in a variety of formats, either Braille or on audio tape or larger type as
appropriate.
Investing
The ordinary shares of the Company are listed and traded on the London Stock Exchange. Investors may purchase shares through
their stockbroker, bank or other financial intermediary. There are a variety of ways to invest in the Company. However, this will
largely depend upon whether you would like financial advice or are happy to make your own investment decisions.
Investing Risks
Investors should be aware of the following risks when considering investing in the shares of Polar Capital Global Financials Trust plc:
Past performance is not a guide to future performance.
Please remember that any investment in the shares of Polar Capital Global Financials Trust plc either directly or through a savings
scheme or ISA carries the risk that the value of your investment and any income from them may go down as well as up due to
the fluctuations of the share price, the market and interest rates. This risk may result in an investor not getting back their original
amount invested.
As the shares in an investment trust are traded on a stock market, the share price will fluctuate in accordance with supply and
demand and may not reflect the underlying net asset value of the shares. Where the share price is less than the underlying value of
the assets, the difference is known as the ‘discount’. For these reasons, investors may not get back the original amount invested.
Although the Company’s Financial Statements are denominated in sterling, it may invest in stocks and shares that are denominated
in currencies other than sterling. To the extent that it does so, asset values may be affected by movements in exchange rates. As a
result, the value of your investment may rise or fall with movements in exchange rates.
Polar Capital Global Financials Trust plc is allowed to borrow against its assets and this may increase losses triggered by a falling
market. The Company may increase or decrease its borrowing levels to suit market conditions. If you are in any doubt as to the
suitability of a plan or any investment available within a plan, please take professional advice.
Polar Capital Global Financials Trust plc is an investment trust and as such its ordinary shares are excluded from the FCA’s restrictions
which apply to non-mainstream investment products. The Company conducts its affairs and intends to continue to do so for the
foreseeable future so that the exclusion continues to apply.
If you are investing through a savings plan, ISA or other investment arrangement it is important that you read the key features
documents and understand the risks associated with investing in the shares of the Company. If you are in any doubt as to the
suitability of a plan or any investment available within a plan, please take professional advice.
Tax rates and reliefs change from time to time and may affect the value of your investment.
Shareholder Information
Annual Report and Financial Statements 2022 • Polar Capital Global Financials Trust plc
125
For those investors who would like advice:
Private Client Stockbrokers – Investors with a large lump sum to invest may want to contact a private client stockbroker.
They will manage a portfolio of shares on behalf of a private investor and will offer a personalised service to meet an individual’s
particular needs. A list of private client stockbrokers is available from The Personal Investment Management & Financial Advice
Association (PIMFA) at www.pimfa.co.uk
Financial Advisers – Financial Advisers who wish to purchase shares for their clients can also do so via a growing number of
platforms that offer investment trusts including AJ Bell, Interactive Investor, Ascentric, Embark, Nucleus, Raymond James, Seven IM
and Transact. For investors looking to find a financial adviser, please visit www.unbiased.co.uk
For those investors who are happy to make their own investment decisions:
Online Stockbroking Services – There are a number of real time execution only stockbroker services which allow private investors
to trade online for themselves, manage a portfolio and buy UK listed shares. Online stockbroking services include AJ Bell, Barclays
Stockbrokers, Charles Stanley, Fidelity, Halifax Share Dealing, interactive investor and Hargreaves Lansdown.
As an investor holding shares through one of these platforms, you are entitled to attend and vote at company general meetings.
For example, interactive investor allow you to vote your shares at no extra cost through your account and new customers are
automatically signed up to the voting and information service, which enables you to receive Shareholder materials and vote on
decisions directly affecting your UK registered shareholdings. Please visit the AIC’s pages below for further information:
https://www.theaic.co.uk/how-to-attend-an-AGM
https://www.theaic.co.uk/availability-on-platforms/how-tovote-your-shares
Share Dealing Services
The Company has also made arrangements with its share registrars, Equiniti Limited, for investors to buy and sell shares through
the Shareview.co.uk service.
For telephone sales call 0345 603 7037 (or +44 121 415 7560) between 8.30am and 4.30pm for dealing and up to 6.00pm for
enquiries, Monday to Friday. For Internet sales log on to www.shareview.co.uk/dealing
Boiler Room Scams
Shareholders of Polar Capital Global Financials Trust plc may receive unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas based ‘brokers’ who target UK Shareholders, offering to sell them what often
turn out to be worthless or high risk shares in U.S. or UK investments or offering to act on the Shareholder’s behalf on the payment
of a retainer or similar in a spurious corporate event. These operations are commonly known as ‘boiler rooms’. These ‘brokers’ can
be very persistent and extremely persuasive.
It is not just the novice investor that has been duped in this way; many of the victims had been successfully investing for several
years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free
company reports.
If you have been contacted by an unauthorised firm regarding your shares the FCA would like to hear from you. You can report an
unauthorised firm using the FCA helpline on 0845 606 1234 or 0800 111 6768 or by visiting their website, which also has other
useful information, at www.fca.org.uk
If you receive any unsolicited investment advice:
• Make sure you get the correct name of the person and organisation
• If the calls persist, hang up
If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation
Scheme. More detailed information on this or similar activity can be found on the FCA website.
Shareholder Information
Polar Capital Global Financials Trust plc • Annual Report and Financial Statements 2022
126
Forward-Looking Statements
Certain statements included in this 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, you should have regard to the principal risks and
uncertainties included in the Strategic Report within this Annual Report.
No part of this Annual Report 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.
How to avoid investment and pension scams

Y
contacting our Consumer Helpline on
0800 111 6768 or using our reporting form
using the link below.
If you’ve lost money in a scam, contact
Action Fraud on 0300 123 2040 or
www.actionfraud.police.uk

Scammers usually cold call, but contact
can also come by email, post, word of mouth

investment out of the blue, chances are it’s
a high risk investment or a scam.
Check the FCA Warning List
Use the FCA Warning List to check the risks
of a potential investment – you can also search

our authorisation.

Get impartial advice before investing – don’t use

Be ScamSmart and visit

1
2
3
Corporate Information – Other continued
Designed and printed by Perivan 265042
Contents
Your Company at a Glance 1
Summary of Share Capital Movements 2
Financial Highlights 3
Performance 4
Performance Highlights 5
Chairman’s Statement 6
Chair Elect Q & A 11
Board of Directors 12
Investment Managers 14
Manager’s Report
Investment Manager’s Report 16
Attribution Analysis 23
Top Ten Investments 24
Full Investment Portfolio 25
Portfolio Review 28
Environmental, Social and Governance
Corporate Responsibility 30
Investment Perspective incorporating ESG 32
ESG Dashboard 34
Governance
Strategic Report 36
Section 172 Statement 44
Report of the Directors 48
Report on Corporate Governance 51
Audit Committee Report 60
Directors’ Remuneration Report 67
Statement of Directors’ Responsibilities 73
Independent Auditors’ Report 74
Financial Statements and Notes
Statement of Comprehensive Income 83
Statement of Changes in Equity 84
Balance Sheet 85
Cash Flow Statement 86
Notes to the Financial Statements 87
Shareholder Information
Alternative Performance Measures (APMs) 115
Glossary of Terms 118
Corporate Information – AGM 120
Corporate Information – Other 122
Contact Information IBC
Polar Capital Global Financials Trust plc
(the Company or Trust) is a UK investment
trust launched in July 2013. The Company
initially had a fixed seven-year life but in
April 2020, with Shareholder approval,
moved to five-yearly tender offers with no
fixed end of life.
The Company has appointed Polar Capital as its Investment
Manager. Since its foundation in 2001, Polar Capital has grown
steadily and currently has 14 autonomous investment teams
managing specialist, active and capacity constrained portfolios,
with a collegiate and meritocratic culture where capacity of
investment strategies is managed to enhance and protect
performance.
S
ee more at:
polarcapitalglobalfinancialstrust.com

This document is printed on Galerie Satin,
a paper sourced from well managed,
responsible, FSC® certified forests and
other controlled sources. The pulp used
in this product is bleached using an
elemental chlorine free (ECF) process.
Shareholder Information
Contact Information
Company Registration Number
8534332 (Registered in England)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006.
Directors
Robert Kyprianou, Chairman
Simon Cordery
Cecilia McAnulty
Susie Arnott (appointed 1 December 2022)
Angela Henderson (appointed 1 December 2022)
Katrina Hart (retired 1 December 2022)
Joanne Elliott (retired 7 April 2022)
Registered Office and Contact Address for
Directors
16 Palace Street
London
SW1E 5JD
Investment Manager and AIFM
Polar Capital LLP
16 Palace Street
London
SW1E 5JD
Authorised and regulated by the Financial Conduct Authority.
Telephone: 020 7227 2700
Website: www.polarcapital.co.uk
Co-Fund Managers
Mr Nick Brind
Mr John Yakas
Mr George Barrow
Company Secretary
Polar Capital Secretarial Services Limited
Represented by Tracey Lago, FCG
Depositary, Bankers and Custodian
HSBC Bank Plc
8 Canada Square
London
E14 5HQ
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Solicitors
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2HS
Stockbrokers
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Identification Codes
Ordinary shares
SEDOL: B9XQT11
ISIN: GB00B9XQT119
TICKER: PCFT
GIIN: 8KP5BT.99999.SL.826
LEI: 549300G5SWN8EP2P4U41
Registrar
Shareholders who have their shares registered in their own
name, not through a share savings scheme or ISA, can contact
the registrars with any queries on their holding. Post, telephone
and Internet contact details are given below.
In correspondence you should refer to Polar Capital Global
Financials Trust plc, stating clearly the registered name and
address and, if available, the full account number.
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder helpline: 0800 313 4922
(or +44 121 415 7047 from overseas)
See more at:
polarcapitalglobalfinancialstrust.com
Strategic Report Strategic Report
Annual Report and Financial Statements for the year ended 30 November 2022
Polar Capital Global Financials Trust plc
2022 Annual Report and Financial Statements for the year ended 30 November 2022