Polar Cap Gbl Regulatory News (PCFT)

POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC

 (the "Company")

Unaudited Results for the half year ended 31 May 2022

Legal Entity Identifier: 549300G5SWN8EP2P4U41

1 July 2022

Financial Highlights for the half year ended 31 May 2022

* The Company declares dividends in respect of a financial year in or around July and January for payment at the end of the following August and February. The first interim dividend for the year ending 30 November 2022 was declared on 1 July 2022 and will be paid on 31 August 2022 to shareholders on the register on 5 August 2022. The shares will go ex-dividend on 4 August 2022. The second interim dividend will be declared in or around December 2022 for payment in February 2023.

Note 1 The total return NAV performance for the period is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Performance since inception has been calculated from the initial NAV of 98p and the NAV on 31 May 2022. Dividends are deemed to be reinvested on the ex-dividend date as this is the protocol used by the Company's benchmark and other indices.

Note 2 The total return share price performance is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date. Performance since inception has been calculated using the launch price of 100p to the closing price on 31 May 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 31 May 2022.

Note 4 The benchmark changed on 23 April 2020 to MSCI ACWI Financials Net Total Return Index (in Sterling) due to the Company's exposure to Emerging market financials equities and its limited exposure to real estate equities. Prior to this the Company's benchmark was MSCI World Financials + Real Estate Net Total Return Index. Preceding 31 August 2016, the Company's benchmark was the MSCI World Financials Index, which included Real Estate as a constituent until its removal that year. The benchmark performance above illustrates linked performance of these benchmarks.

Note 5 Dynamic average of open ended funds in the Lipper Financial Sector Universe which comprised 42 open ended funds in the period 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 3 of the notes to the Financial Statements below for more details.

~See Alternative Performance Measure below.

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

Chairman's Statement

Dear Shareholders,

On behalf of the Board, I am pleased to provide you with the Company's Half Year Report for the six months to 31 May 2022.

For most of the period under review, the environment for the financial sector and the Company's share price continued in the same vein as in the previous financial year. Net Asset Value (NAV) touched all time highs in January and February, the Company's shares continued to trade at a persistent and stable premium to NAV, and strong interest in the sector and demand for the Company's stock was met by regular significant sales of Company stock, both in the form of re-issued shares held in Treasury and new shares issued under various authorities available to the Company.

However, Russia's violation of Ukraine's borders in late February coincided with a growing concern that the era of extraordinary monetary easing and low interest rates was not only coming to an end but would be reversed in the face of inflation rates not seen in more than a generation. As a result, the period ended with poor sentiment in markets generally, which led to the Company's share price trading at a discount to its NAV, such that the Board undertook occasional buybacks of Company stock in order to help balance supply and demand from investors.

Since the tender and reconstruction in April 2020, markets have faced the threat from a global pandemic, a war on Europe's borders, a profound monetary policy U-turn and now a fear of an impending global economic malfunction. Against this unsettling backdrop, the Company has seen its market cap rise from £123 million to £506 million, its investment performance exceed that of its benchmark, and has been able to maintain its dividend.

Performance

For the six-month period to 31 May 2022 the Ordinary Share NAV total return performance was -2.2% compared to an increase of 1.7% in the Company's benchmark (MSCI ACWI Financials Net Total Return Index in sterling) over the same period. Since the Company's reconstruction on 22 April 2020 to the end of the period under review, the NAV total return per Ordinary Share has been 66.6% compared to the benchmark performance of 59.3%.

As described in the Investment Manager's report, the market environment in the first half of the Company's financial year was highly volatile. A background of much higher interest rate rises than expected and a major geo-political conflict is hostile for risk assets generally. Significant market dislocations and indiscriminate selling are typical of such environments, driven by risk reduction rather than value considerations. The outcome on investment performance can therefore be unpredictable and perverse from a longer term perspective. The performance of the portfolio in the first half of the financial year reflected these conditions. Smaller and mid-cap companies typically underperform in a sharp market downturn, and this negatively impacted the portfolio's overweight positioning in previously fast growing small cap US banks. The outbreak of war in Ukraine and the sanctions that followed drove commodity prices sharply higher, but the portfolio's underweight exposure to commodity producing economies meant we did not capture the upside from improving share prices.

Further information on investment performance can be found within the Financial Highlights and the Investment Manager's Report.

Share Issuance and Buybacks

For most of the period under review the Company continued to experience strong demand for its shares, which traded at a stable and persistent premium to the Company's NAV. These trading conditions endured for a while following Russia's invasion of Ukraine in late February. From the end of November 2021 to 14 April 2022, the Company issued a total of 31,994,680 ordinary shares from its treasury account as well as new shares at an average premium to NAV of 1.85%, raising net cash of £56.1m. In addition, 26,775,320 new shares were issued on 1 February 2022 and 25 February 2022 as part of two placings under the Prospectus issued on 12 May 2021, raising an additional £46.0m.

However, by the end of April trading in the Company's shares began to reflect the wider market concerns over high and rising inflation, the reversal of monetary easing and the broader knock-on effects of the war in Ukraine on commodity markets. This general decline in sentiment and risk appetite impacted the Company's shares, and during May these began trading at a discount to NAV. In accordance with the Board's commitment to provide liquidity in the Company's shares, the Board stepped into the market during the month of May 2022 on five occasions to buy back shares. By 31 May 2022, a total of 225,000 shares had been bought at an average discount to the live NAV at the time of transaction of 6.8%. These shares were placed into treasury for re-issuance at a later date.

Since the period end to 29 June 2022, the latest practicable date, the Company has bought back a further 230,000 shares at an average discount to the live NAV at the time of transaction of 8.7%. These have also been placed into treasury.

Board Succession

As reported in the last Annual Report, phase one of our succession plans to refresh the Board concluded in November 2021 with the appointment of Cecilia McAnulty as Audit Committee Chair to replace Joanne Elliot when she came to the end of her nine-year tenure on the Board in April 2022. The Board is now progressing with phase two of its succession plans to appoint a non-executive director to replace Katrina Hart, who has also reached her nine-year tenure on the Board. It is anticipated that this recruitment process will be concluded in Q4 2022.

Dividends

The Company has an income and growth mandate and the Board continues to be aware of the importance of income to some shareholders as part of their total return. The Company's dividend policy and aim with respect to the Ordinary Shares is to pay two interim dividends each year, in February and August. These interim dividends will not necessarily be of equal amounts. The ability to continue the Company's dividend policy may be compromised due to lower income receipts from our Portfolio, either as a result of changes in the policies of investee companies, changes in the composition of the Portfolio, regulatory intervention, or as a result of the currency exposure underlying the Portfolio, all of which could result in a lower level of dividend being paid than intended or previously paid.

While the Board recognises that the economic outlook has recently deteriorated, the Board has declared a first interim dividend for the current financial year of 2.4p per share, the same level as in the previous financial year. The first interim dividend will be payable on 31 August 2022 to shareholders on the register on 5 August 2022. The Board is able to maintain the dividend level following careful management of distributable reserves and the improvement in the income generation of the underlying portfolio following the economic recovery from the COVID slowdown.

As explained in my statement within the last Annual Report, where income has been received into the capital account as a result of shares re-issued from the treasury account or from new share issuance, the Board may choose to apply this bought income in the capital reserves to fund all or part of the dividend. In this regard, £162,000 of the capital reserves will be utilised to part-fund the first interim dividend of the financial year ended 30 November 2022.

Gearing

Under the Articles of Association the Company may utilise an overall maximum leverage limit of 20 per cent. of NAV at the time at which the relevant borrowing is taken out or increased. We are therefore taking the opportunity to increase our borrowings to ensure the gearing level is maintained across the full portfolio. It is therefore anticipated that on expiry of the current facilities (£60m in aggregate) in July 2022, new facilities will be put in place for up to £80m of borrowings in aggregate. As at 29 June 2022, the latest practicable date, the portfolio was 2.76% geared.

Outlook

The difficulties policy makers will face in containing acute inflationary pressures, aggravated by the geopolitical fallout of the war in Ukraine, will overhang sentiment in capital markets into the second half of the Company's financial year.

A growing consensus has emerged, even among central bankers themselves, that the major central banks have been caught out by keeping easy money too excessive for too long. Now they must race to catch up, restoring financial conditions to 'equilibrium' to contain demand-driven inflation at the same time as supply shocks are driving global prices inexorably higher across a wide range of commodity and goods markets.

At the time of writing markets are adjusting from the 'inflation is transitory' mantra first touted by central bankers to the rude awakening that not only is the two decades-long era of limitless cheap liquidity over, but that it will be reversed. These are challenging waters for policymakers to navigate as market participants debate whether the result will be a significant slowdown in activity at best or stagflation/global recession at worst. As QE evolves into QT (Quantitative Tightening), the shape of major market yield curves suggests that the risk of recession is beginning to be priced into asset values.

At the heart of the economic system, the financial sector is not immune to the deterioration in sentiment and the remarking of asset values. However, in contrast to the global financial crisis, this time banks, and financials more generally, are not leading but following the broader trends in capital markets.

Banks specifically are in a much stronger position to withstand financial and economic headwinds than at any time since the global financial crisis. They have deleveraged significantly, cleaned up balance sheets, strengthened capital resources and improved operational efficiency. Furthermore, given the low/negative interest rate environment of the past few years, banks stand to see the benefit of higher official interest rates flow straight through to the bottom line.

In the meantime, financials, traditionally placed in the 'cyclical' group of sectors, will not be immune to the negative sentiment around the deterioration in the economic outlook. However, when the dust settles on this market adjustment and the resilience of banks in particular to the latest economic disruption becomes apparent, the lower valuations currently being experienced will become, in the view of the Board, very attractive once again. The Manager, having taken defensive measures by reducing gearing and switching to more defensive stocks such as insurance companies, is well positioned to exploit the opportunities that significant market dislocations present.

Robert Kyprianou

Chairman

30 June 2022

Investment Manager's Report for the half year ended 31 May 2022

Investment Review

Performance

Financial markets fell sharply over the period under review as the impact of rising interest rates, further lockdowns in China and Russia's invasion of Ukraine hit sentiment and more than offset improving corporate earnings.

Of major markets, the Australian and Canadian equity markets saw the strongest performance helped by the strength in their currencies while European equity markets also performed well despite their proximity to the war. In contrast the US equity market was very weak before taking into account the impact of US dollar strength, which benefited sterling investors.

Government bonds fell as the Federal Reserve, European Central Bank and other central banks indicated that interest rates would rise more quickly than previously expected. However, concern about the impact on the outlook for growth resulted in the US 2 -10 year yield curve (which has been a good but imperfect indicator of recessions) briefly inverting.

Against this background the Trust's net asset value fell 2.2%, while our benchmark index rose 1.7%; our preference for higher quality companies, offering good growth at attractive valuations, lagged the wider sector's performance In comparison, global equity markets as illustrated by the MSCI ACWI Index fell 4.6% while the Lipper open-ended peer group of financial equity sector funds fell 3.1%.

The Trust's large overweight holding in faster-growing, smaller US banks was a big headwind to performance. For example, the value of our holdings in both SVB Financial Group and Signature Bank fell more than 25% over the period. PayPal Holdings was also a big drag on performance. Underweight exposure to commodity exporting countries such as Australia, Canada, Saudi Arabia, Brazil and South Africa, which benefited from the jump in energy prices, also impacted performance.

Markets

While markets initially rallied in December 2021 (despite concerns around the Omicron variant and growth expectations), the remainder of the period covered by this report was a brutal one for financial markets with 2022 so far proving to be one of the worst ever for both equity and bond markets.

In January, the steep rise in bond yields led initially to a sharp rally in stocks tagged as value and a decline in growth stocks, albeit against a background of falling equity markets. The Financials sector is primarily a value sector, due to low valuation metrics, and therefore, in the main, benefited. However, there are a number of companies within the Financials sector that are deemed growth and consequently trade at high valuations, and these fell sharply.

Against this backdrop, US bank stocks rose sharply before suffering from profit taking. This was despite earnings beating expectations due to stronger loan growth and lower provisioning, partially offset by higher costs. JP Morgan's guidance for increased costs seemed to spook investors, albeit driven primarily by a $3.5bn increase in its technology spend to $15bn for 2022 and weighed on sentiment for the sector, although most banks reiterated unchanged cost guidance.

Nevertheless, in February equity markets took a further fall as the shocking events of Russia's invasion of Ukraine unfolded and a stronger than anticipated international response understandably overshadowed other news., European financials, which had rallied to levels not seen since 2007, were very weak, given the proximity to the war and exposure some banks have to Russia. While European banks have reduced exposure to Russia since the Crimean crisis in 2014 and now have limited direct exposure, selling was fairly indiscriminate across the sector.

As a consequence of sanctions put in place by the US, UK, European and other governments, impacting sentiment as well as the war having a significant impact on commodity prices, the US 2-10 year yield curve inverted in March. However, equity markets bounced sharply to a level above where they had been trading prior to Russia's invasion of Ukraine. This proved short-lived as increasingly hawkish commentary from central banks saw financial markets roll-over again and fall sharply in April, although there was some recovery in May.

Despite Europe's proximity to the war and the greater impact from the rise in energy prices, European financials outperformed US financials over this period. Asian financials also proved to be relatively robust even though China's zero-COVID policy impacted growth in the region. Earnings remained resilient and banks in the region saw the benefit of relaxation in COVID restrictions while commodity exporting countries such as Australia benefited from strength in its currency on top of good share price performance.

Banks and, to a lesser extent, insurance companies, drove the initial strong performance of the sector up until the outbreak of war. But with concerns mounting around the deterioration in the outlook for growth, bank shares started to underperform while insurance companies held up well due to their more defensive characteristics. In addition, this sub-sector benefited from the continued rise in insurance premium rates, as well as a $12bn bid for Alleghany, a US property and casualty insurance company, by Berkshire Hathaway, which lifted share prices.

Diversified financials, where we are underweight the benchmark, covers a broad spectrum of companies from stock exchanges, asset managers and investment banks to information service companies. The subsector performed poorly due to high valuation multiples coming under pressure as well as a number of negative earnings revisions. In particular, asset managers, which had performed extremely well over the last couple of years on the back of rising equity markets and a pick-up in fund flows, suffered some of the sharpest share price falls.

FinTech companies were also extremely weak over the period, primarily due to very high valuations coming under significant pressure 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.

S&P and MSCI, which compile many US and global indices, include FinTech companies within the technology sector, not the financial sector, so any investments in this area are currently 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 to the financial sector from the technology sector in 2023. This technical event that could lead to various investors rebalancing their portfolio which may impact these share prices.

Investment Activity

At the beginning of the six-month period under review, 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. 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 from 66.7% to 59.7%, largely through a reduction in our holdings in US and European banks, while exposure to more defensive companies within the sector such as insurance was increased. Gearing over the period was reduced further to 3.7%. 

The shift to position the portfolio more defensively was also reflected in individual stock positioning. New holdings were purchased in among others, Visa, Baloise Holding, Intact Financial Corp, Marsh & McLennan and Royal Bank of Canada, while adding 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, Australia, Indonesia and Malaysia for the same reasons.

Conversely, holdings in JP Morgan, Citizens Financial, UBS Group, Allfunds Group, SVB Financial Group and Signature Bank, all seen as more sensitive to volatility in financial markets, were reduced. Holdings in Intesa Sanpaolo and ING Group, both European banks were sold as the proximity of the war to Europe led us to reduce our European bank exposure in expectation it will have a significant impact on the region. A small holding in TCS Group, a Russian bank, was also sold prior to Russia's invasion of Ukraine.

We have been cautious of investing in unquoted companies in the last few years, in part as valuations appeared very unattractive, but as we also 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 saving platform, in February which we believe has exciting potential. Finally, towards the end of the period under review, the back-up in bond yields led us to start making selective purchases of a number of insurance company bonds, albeit our exposure remains extremely low.

Outlook

The performance of equity markets and the sector over the short to medium term will most likely be decided by the outlook for inflation and how central banks react to it. Will their response result in a recession, and if so, how deep will it be? What will its impact be on unemployment and businesses and to what extent will governments provide fiscal stimulus to mitigate the effects?

Inflation has exceeded expectations, fuelled in part by commodity prices. Commodities have continued to rise, exacerbated by the war in Ukraine but also due to persistent supply chain issues with lockdowns in China and staff shortages. If commodity price rises are not tempered by demand or supply responses or if inflation becomes more broad-based and feeds into wage demands, central banks will be forced to respond.

The argument that inflation will subside relatively quickly in 2023 is severalfold. Recent sharp rises in commodity prices are unlikely to continue at the rate they have, supply chain issues are being resolved as economies continue to open up, and rising food and energy prices as well as interest rates rises and withdrawal of liquidity by central banks should quickly dampen demand.

However, if inflation results in higher interest rates, this is a positive for the sector as it leads to wider net interest margins and therefore higher profitability for banks and higher investment income for insurance and life assurance companies. Higher inflation should also mean that loan growth is stronger as businesses have to borrow more money to cover the increased costs of their working capital or capital expenditure. Equally, it should lead to higher insurance premiums to cover the increased cost to repair insured risks.

Higher interest rates are a positive driver of earnings revisions and should underpin the sector going forward. But if inflation continues to prove more durable than current forecasts, we would see this as bad news for financial markets and for the sector. Central banks would have to raise interest rates significantly and potentially hold them at a higher level for longer. Equity markets would likely derate further and, while bank shares outperformed wider equity markets during the 1970s (arguably the most relevant period for comparison), they would not be immune to concerns around the impact on economic growth.

In this vein, the inversion of the US 2-10 year yield curve is a concern as it has been a reasonable predictor of recessions over the last 30 years with a lead time of around 18 months. However, prior to that it had given a number of false signals. Historical data also shows that equity markets on average continue to rise for some time after it inverts, nullifying some of its predictive power. Furthermore, the US 3 month-10 year yield curve has been a much better predictor of recessions. By contrast, it has steepened markedly this year, suggesting that the next recession, when there is one, will be much further out than markets fear.

Nevertheless, the fall in bank and other cyclical stocks reflects the market concern that there will be a recession at some point over the next year. Consequently, the expectation is that banks will have to increase their provisions for potential loan losses, as the outlook for growth worsens, a scenario which is yet to be reflected in analyst forecasts. This view is supported by very weak consumer confidence surveys, as well as anecdotal evidence that lower income households are struggling with rising inflation, which would explain the sharp jump in credit card balances despite strong employment data.

However, so far this is at odds with what banks are seeing from customers. Bank of America highlighted in its first quarter earnings call that average customer deposits were significantly higher than they were pre-pandemic. For example, those Bank of America customers who had between $1,000 and $2,000 in their bank accounts in 2019 today have an average cleared balance of $7,400 and even higher for those with higher balances pre-pandemic.

Other banks have given similarly upbeat prognoses both on their retail and corporate customers who are also holding much higher levels of cash than they did two years ago. For example, Jamie Dimon, CEO and Chairman of JP Morgan, stated at their investor day, "Credit looks really good. We've never seen it this good," before being quoted a few weeks later saying, "You know, I said there's storm clouds but I'm going to change it…it's a hurricane."

Against this conflicting background, banks remain in rude health with strong levels of capital and liquidity, good profitability and a conservative risk appetite where more risk has shifted to capital markets and private credit over the last 10 years. Property & casualty insurers have also benefited from strong rises in insurance premia ahead of claims cost inflation over recent years and are much less economically sensitive due to claims being driven by weather and accident driven events.

While banks and insurance companies remain firmly in the value camp, diversified financials and FinTech companies which can be generalised as growth stocks, have seen a significant derating in their shares and consequently are looking much more attractive. Furthermore, many of these generate very high returns on capital, have extremely durable franchises and long-term structural tailwinds.

Looking forward as to how the sector will perform with these two competing drivers, it is instructive to look at how the sector has performed in the past. Taking data on US banks, which is the largest component of the Trust's portfolio, their relative performance has been highly correlated to US 10-year government bonds since the global financial crisis i.e. banks have outperformed when bond yields have risen, reflecting market expectations for higher growth and/or inflation, and vice versa.

However, in the past few months this relationship has significantly broken down. The only time there was any serious divergence in the past 12 years was at the end of 2018, but on that brief occasion the relative underperformance of bank shares was a better leading indicator than the bond market, as the Federal Reserve had to rein back on raising interest rates and bond yields consequently fell. This time is different.

Going back to before the global financial crisis , the relationship between the relative performance of US bank stocks and bond yields broke down significantly on three occasions namely in 1994, 1999 and 2007. While in 2007 history speaks for itself, on the two other occasions banks went on to significantly outperform over the following three years. In 1995 , despite a sharp increase in interest rates in the preceding year, there was a soft landing, while in 2000 it led to the bursting of the TMT bubble and the outperformance of value stocks.

An alternative view is to look at the performance of US banks around recessions. Autonomous, a research firm, calculated pre-pandemic that in the 12 preceding recessions in the US bank stocks had underperformed in the year prior to the recession in eight of the 12 occasions, going on to outperform in the year that a recession started. This makes logical sense as investors sell cyclical companies such as banks in a lead up to a recession and shift their assets into more defensive companies, shifting back once there is greater clarity on the outlook and central banks start to cut interest rates to soften an economic downturn.

In summary, while we remain very constructive on the outlook for the sector and the prospects of the companies in which we are invested, market perceptions have recently deteriorated markedly. It is likely we will have a much clearer view over the next six months. Even though share prices already factor in lower earnings, a sustained recovery is only possible when the outlook improves or if earnings continue to surprise in their resilience and the market gives credit for the improved longer-term profitability outlook. Until such time we will remain patient about taking on risk.

Nick Brind, John Yakas & George Barrow

30 June 2022

Note

We would draw shareholders attention to http://www.polarcapitalglobalfinancialstrust.co.uk/ for regular monthly portfolio updates and commentary. *index performance figures are total return in Sterling.

Full Portfolio

Note: Figures in brackets denote comparative rankings as at 30 November 2021.

Portfolio Analysis

* Based on the net assets as at 31 May 2022 of £536.4m (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 period end.

Corporate Matters

Principal Risks and Uncertainties

A detailed explanation of the Company's principal risks and uncertainties, and how they are managed through mitigation and controls, can be found on pages 35 to 38 of the Annual Report for the year ended 30 November 2021. These principal risks can be summarised as business risks, including meeting the investment objective of the Company, and market-related risks encompassing factors such as excessive share price discount to NAV, market volatility, stock pricing and liquidity risk, currency and interest rate risk, counterparty risk, gearing and the ability to meet the dividend policy. Other principal risks include infrastructure risks, including the performance of the operational and accounting systems and processes provided by the Investment Manager, taxation, mis-valuation and legal and regulatory risks; and external risks which focuses on the exposure to the economic cycles of the markets of the underlying investments.

The Directors consider that, overall, the principal risks and uncertainties faced by the Company for the remaining six months of the financial year have not changed from those outlined within the Annual Report. The Board continues to carefully monitor the impact of the Russian invasion of Ukraine and whilst this worsens the macroeconomic outlook, there is no direct impact to the Company's portfolio or the financials sector. 

Further detail on the Company's performance and portfolio can be found in the Investment Managers' Report.

Going Concern

As detailed in the notes to the financial statements, the Board continually monitors the financial position of the Company and has undertaken additional stress-testing and analysis in determining the appropriateness of preparing the Financial Statements on a going concern basis. Having carried out the additional testing, the Directors are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial results of the Company. In reaching this conclusion, the Board also considered the Company's performance and its assessment of any material uncertainties and events that might cast significant doubt upon the Company's ability to continue as a going concern.

Related Party Transactions

In accordance with DTR 4.2.8R, there have been no new related party transactions during the six month period to 31 May 2022. There have been no changes in any related party transaction described in the last Annual Report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year or to the date of this report.

Statement of Directors' Responsibilities

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

· The condensed set of financial statements has been prepared in accordance with the UK-adopted International Accounting Standard 34 and in conformity with the requirements of the Companies Act 2006 and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at 31 May 2022; and

· The Interim Management Report includes a fair review of the information required by the Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.

The half-year financial report for the six-month period to 31 May 2022 has not been audited or reviewed by the Auditors. The half-year financial report was approved by the Board on 30 June 2022.

On behalf of the Board

Robert Kyprianou

Chairman

Statement of Comprehensive Income for the half year ended 31 May 2022

The total return column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with 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 to follow form part of these financial statements.

Statement of Changes in Equity for the half year ended 31 May 2022

The notes to follow form part of these financial statements.

Balance Sheet as at 31 May 2022

The notes to follow form part of these financial statements.

Robert Kyprianou

Chairman

30 June 2022

Cash Flow Statement for the half year ended 31 May 2022

The notes to follow form part of these financial statements.

Notes to the Financial Statements for the half year ended 31 May 2022

1 General Information

The financial statements comprise the unaudited results for Polar Capital Global Financials Trust Plc for the six-month period to 31 May 2022.

The unaudited financial statements to 31 May 2022 have been prepared using the accounting policies used in the Company's financial statements to 30 November 2021. These accounting policies are based on UK-adopted International Accounting Standards (IAS) and International Financial Reporting Standards ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB").

The financial information in this half year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. 

The financial information for the periods ended 31 May 2022 and 31 May 2021 have not been audited. The figures and financial information for the year ended 30 November 2021 are an extract from the latest published accounts and do not constitute statutory accounts for that year. Full statutory accounts for the year ended 30 November 2021, prepared under IFRS, including the report of the auditors which was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies.

The Company's accounting policies have not varied from those described in the financial statements for the year ended 30 November 2021.

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

The Directors believe it is appropriate to adopt the going concern basis in preparing the financial statements. The Board continually monitors the financial position of the Company. 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 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 them to continue in operational existence. Accordingly, the Directors are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial results of the Company.

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

2 Dividends and Other Income

3 Earnings/(loss) per ordinary share

As at 31 May 2022 there were no potentially dilutive shares in issues (31 May 2021 and 30 November 2021: same).

4 Net Asset Value per Ordinary Share

As at 31 May 2022 there were no potentially dilutive shares in issues (31 May 2021 and 30 November 2021: same).

5 Share Capital

During the six months ended 31 May 2022, the Company issued 6,350,000 ordinary shares out of treasury (31 May 2021: 51,799,900; 30 November 2021: 73,374,900) for a total consideration of £10,960,000 (31 May 2021: £80,318,000; 30 November 2020: £117,187,000).

The Company also issued 25,644,680 new ordinary shares from the blocklisting facility (31 May 2021: nil; 30 November 2021: nil) for a total consideration of £45,140,000 less expenses of £93,000 (31 May 2021: £nil; 30 November 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 £699,000.

In addition, the Company also repurchased 225,000 ordinary shares into treasury (31 May 2021: nil; 30 November 2021: nil) for a total consideration of £330,000 (31 May 2021: £nil; 30 November 2021: £nil). Following this, the company's issued share capital consists of 331,525,000 ordinary shares and an additional 225,000 ordinary shares held in treasury.

6 Dividends

The first interim dividend for the year ending 30 November 2022 was declared on 1 July 2022 and will be paid on 31 August 2022; it is anticipated that the second interim dividend for the year ending 30 November 2022 will be declared on or around December 2022 and will be paid on 28 February 2023.

7 Related Party Transactions

There have been no related party transactions that have materially affected the financial positions or the performance of the Company during the six month period to 31 May 2022.

8 Post Balance Sheet Events

After the period end, a further 230,000 ordinary shares were repurchased into treasury. Following these share repurchases, the total number of ordinary shares in issue was 331,295,000 and 455,000 shares were held in treasury as at 29June 2022.

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.

Forward-looking Statements

Certain statements included in this half year Report contain forward-looking information concerning the Company's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the principal risks and uncertainties included in the Annual Report for the financial year ended 30 November 2021. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Global Financials Trust plc or any other entity and must not be relied upon in any way in connection with any investment decision. The Company undertakes no obligation to update any forward-looking statements.

Company Website

www.polarcapitalglobalfinancialstrust.com

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

Alternative Performance Measures (APM's)

In assessing the performance of the Company, the Investment 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 4 above 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.

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.

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 day 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.