Polar Capital Regulatory News (POLR)

POLAR CAPITAL HOLDINGS plc

Group Audited Results for the year ended 31 March 2017

Highlights

• Assets under Management ('AUM') at 31 March 2017 £9.3bn/$11.6bn (2016: £7.3bn/$10.4bn)

• Core operating profit† excluding performance fees £21.8m (2016*: £23.6m)

• Profit before share-based payments of £24.5m (2016*: £26.9m)

• Pre-tax profit £20.4m (2016*: £23.6m)

• Basic earnings per share 17.8p (2016*: 20.5p) and adjusted† diluted earnings per share 20.4p (2016*: 22.0p)

• Dividends for the year 25.0p per share (2016: 25.0p) including a second interim dividend of 19.5p per ordinary share to be paid on 21 July 2017 to shareholders on the register on 7 July 2017

• Shareholders' funds £70.7m (2016*: £75.7m) including net cash of £58.5m (2016: £48.8m)

• Expanded our fund range with the successful launch, in January 2017, of our UK Value Opportunities UCITS fund which raised over £100m on its launch and with assets over £256m at the end of May

• Since our year-end our Healthcare Investment Trust was successfully restructured resulting in a fund with £289m of AUM

• Current AUM as at 31 May 2017 £9.8bn/$12.6bn

* Comparative amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

† The non-GAAP alternative performance measures shown here are reconciled to IFRS measures in the Financial Review

Tim Woolley, Chief Executive Officer, commented:

"I am excited at the prospect of handing over leadership of the Company to Gavin Rochussen over the coming weeks. There are undoubtedly challenges ahead for us as a Company and the industry in general but I believe there are significant opportunities too, especially if one looks beyond the UK to the global wealth management industry. Gavin's arrival is timely in that respect given his expertise in overseas business development and this will no doubt play a key role in our future growth in the coming years."

Assets Under Management (AUM)

AUM split by strategy

AUM split by Business Unit

(in chronological order)

Chairman's Statement

Our Assets Under Management (AUM) increased 27% over the year in Sterling terms from £7.3bn to £9.3bn and 12% in Dollar terms from $10.4bn to $11.6bn. The increase in AUM was due entirely to market and currency movement as it was another year of net outflows from our funds. The level of net outflows of £230m was however markedly lower than last year and over the second half of the year we returned to net inflows.

Stock markets around the world were surprisingly buoyant over the period although this was not reflected in flows into active equity funds as it was another challenging year for the industry with passive products continuing to take market share. Across Europe active equity funds suffered net outflows of €60bn and in the UK it was the worst year for retail fund flows for over 20 years!

In this context our reducing levels of net outflows provide grounds for encouragement.

Funds and Performance

Despite the very challenging industry conditions eight of our twelve strategies recorded positive net inflows over the financial year. The four strategies that suffered outflows were Japan, GEMS and North America on the long-only side and European Long/Short on the absolute return side.

Although the main Japan UCITS fund experienced further substantial outflows, it is pleasing to see a sharp improvement in the fund's performance over the last twelve months as the team's style has returned to favour.

We again suffered redemptions from our GEMS funds following a sustained period of lacklustre performance although the longer term performance of the GEMS Income fund remains impressive. The outflows on our North America fund were due to short-term client tactical allocation decisions away from the US market rather than relating to fund performance, which continues to be strong and well ahead of benchmark over most periods and since launch.

On the alternatives side we have continued to see redemptions on our European Long/Short products in reaction to several years of below target returns. The team's fundamental bottom up value style has been challenged over recent years and the distortions in the European market as a result of the ECB's extensive QE program have certainly proved unhelpful. However, there are signs that market conditions are 'normalising' and the team's flagship Forager fund has rebounded sharply through the end of May, giving us encouragement that the worst may well be behind the team and their funds.

Of the eight strategies that experienced net inflows we saw particularly good interest in Technology, Healthcare, Financials and European Income (ex UK) on the long-only side and on the alternative side Global Convertibles and UK Absolute had meaningful inflows.

In the March quarter of the year inflows were helped further by the successful launch of our long-only UK Value Opportunities UCITS fund managed by Georgina Hamilton which raised over £100m at launch. George Godber was able to join us in April and be reunited with Georgina as co-manager on the fund and momentum has continued to be strong with assets at the end of May over £256m.

The poor performance of active managers in general against their benchmarks in 2016 and that of many of our own managers too, is reflected in the low level of performance fees we received last year which came in well below our expectations. This was though the 16th successive year of earning performance fees.

Results

Pre-tax profits fell to £20.4m from £23.6m in the prior year. Core pre-tax profits fell from £23.6m to £21.8m and net performance fees decreased from £3.0m to £1.2m.

Adjusted diluted earnings per ordinary share fell from 22.0p to 20.4p.

Our balance sheet remains strong with net assets of £70.7m (2016: £75.7m) including net cash of £58.5m (2016: £48.8m).

Market Background

'Markets climb a wall of worry' goes the old adage and surely that has never been truer than last year. First we had the run up to the Brexit vote in June which created a degree of uncertainty in the UK and then the vote itself which proved a surprise to many and certainly to most stock market investors. Worries over the implications for the UK economy were quickly followed by worries over the US presidential election which produced another result to confound the pollsters, political commentators and most investors.

The European political situation has been another area of constant worry as has been North Korea, the Middle East and the South China Sea where tensions between China and many of its neighbours over rights and claims continue to simmer. Investors even had to contend with a rise in US interest rates - the first increase since the financial crisis of 2008. Despite all these worries returns on major stock markets around the world proved remarkably strong and particularly so for the sterling based investor.

The global economy proved itself oblivious to all the political turmoil growing steadily through calendar 2016 and through the opening months of 2017. Even Europe is showing signs of a broad based improvement in economic activity. Earnings at many companies have thus proved remarkably resilient in the face of all the political drama and with many corporates awash with cash, corporate takeover activity has continued at a high level.

The overall earnings outlook has been further boosted by improvement in the outlook for financials, commodities and energy - all important sectors that have experienced their challenges over recent years.

In the UK, the FTSE 100 Index returned 23.3% over the year with many of the large companies in the Index benefitting from a weak pound boosting their overseas earnings. The broader based FTSE All Share Index still managed a healthy return of 22% even though many of the smaller companies within the Index were initially most impacted by the Brexit vote and the implications for the UK economy.

The strong consensus of economists and politicians and indeed many investors post the Brexit result was for an immediate and sharp slowdown in the domestic economy. The reality so far has rather confounded the consensus. Nevertheless the Brexit negotiations are an immense challenge and will create much uncertainty in the coming months and years.

Outside of the UK, returns around the world were also strong with the S&P500 Index in the US up 17% and the NASDAQ up 23% - for the Sterling investor these translated into even greater returns of 34% and 41% respectively.

The EURO STOXX 50 posted a 21% return in Euros but in sterling this was nearly 31% and whilst the Japanese Topix returned a rather pedestrian 15% by comparison, translated into sterling this became a heady 33%.

Awards

A good number of our funds and fund managers received awards again this year with the Insurance fund, part of our Financials team, receiving a total of six awards. There were multiple awards also for our Technology and Healthcare teams as well awards for the Japan and North America teams.

At a company level we received awards from Investment Week at their Specialist Awards 2016 and from International Adviser for product and service.

Dividend

As previously stated the Board believes that the level of dividend should reflect the Company's trading results, its cash resources and also its future prospects.

With the outlook improving as we enter the new financial year and supported by our very strong balance sheet, the Board has decided to once again pay an uncovered dividend and to maintain the second interim dividend at 19.5p.

Leadership changes

On behalf of the other Board members and the entire staff at Polar, I would like to thank Tim Woolley, co-founder of the business, who will be standing down as Chief Executive in July, for his leadership in so successfully guiding us through many challenges over the past seven and a half years. Since Tim has been CEO, the Group has added eight new investment teams, head count has increased from 52 to 114, and AUM has increased from $1.9bn to $12.6bn. This has been a tremendous achievement not only when considered against the back drop of seismic changes in geopolitics and regulation, market crises, and shifting trends in the asset management industry that have occurred during his tenure, but also when one considers that growth and success have come whilst retaining the entrepreneurial, collegiate and transparent environment that Polar offers its fund managers and staff. Fortunately our association will continue as Tim will be staying on as a non-executive member of the Board.

I am looking forward to welcoming Gavin Rochussen on board as our new Chief Executive in July. Gavin has an exceptional record as a CEO in the asset management industry and has a proven record in developing an institutional business and building a significant presence in North America.

We look forward to a bright future under his proven and dynamic leadership.

Annual General Meeting

Once again our AGM will be held at our offices at 16 Palace Street, London, SW1E 5JD. The meeting will be on the 26 July 2017 commencing at 2:30pm. Although we do not give a trading update at the meeting, I encourage shareholders to attend so that they can meet the Directors after the meeting.

Outlook

Whilst political uncertainty and market-volatility appear to be our constant travelling companions these days, we enter the new fiscal year with a good degree of momentum in terms of fund performance, fund flows and asset growth.

Despite ongoing regulatory headwinds within the industry, we believe we are well positioned to return to earnings growth in the new financial year subject to there being no major correction in markets.

Tom Bartlam

Chairman

26 June 2017

Chief Executive's Report

Our Chairman referred in his Statement to the fact that last year was a disappointing year for active managers and that indeed many of our funds failed to beat their benchmarks. Whilst disappointing one should never read too much into a single year - our history has shown that backing a good active manager over the long term delivers better returns net of all costs than betting on a passive benchmark product.

Many clients would agree that the US market is regarded as the most efficient and most difficult in which to beat the benchmark, yet if you had invested $10,000 in our North America UCITS fund over 1, 3, 5 years or since launch, your returns would be comfortably ahead of the benchmark return net of all costs in every one of those periods, as indicated below.

The North America fund is not an isolated example of the value we can bring to a client's portfolio as the table of performance against benchmark for our UCITS funds since inception shows:

(Figures as at 28 April 2017 - source fact sheets)

On the absolute return side we have also achieved some impressive returns particularly on our two absolute UCITS products GCB and UK Absolute over recent years. The GCB fund was launched in September 2013 and has delivered a return of 19.50% against an index return of 11.49% and carries an attractive ongoing yield for clients, 4.2% as at the end of April 2017.

The UK Absolute fund is turning into a star performer up 58% since the launch in September 2014 and one of the very few UK funds to be up over Brexit. The performance has not gone unnoticed and the fund size is now over £150m which should increase further once the crucial three year anniversary is reached, assuming performance is maintained.

We are justifiably proud of the above record and it demonstrates our commitment to being investment rather than marketing led in the teams we attract and the funds we launch. The simple lesson would seem to be that clients should back all our funds at launch and sit back and enjoy the long term ride!

I am excited at the prospect of handing over leadership of the Company to Gavin Rochussen over the coming weeks. His record of success at J O Hambro was exceptional and we are delighted that he has chosen Polar for the next chapter in his career.

Gavin's success at J O Hambro was built around the same philosophy and values that we have at Polar and this together with his record of execution gives me great encouragement for the future of the Company. The focus will continue to be investment led with high alpha differentiated active product serving the needs of our clients, with capacity limits on funds appropriate to the underlying liquidity of the strategy.

There are undoubtedly challenges ahead for us as a Company and the industry in general but I believe significant opportunities too especially if one looks beyond the UK to the global wealth management industry. Gavin's arrival is timely in that respect given his expertise in overseas business development and this will no doubt play a key role in our future growth in the coming years.

I would like to thank our many loyal clients and shareholders for their support during my tenure as CEO and to thank all our talented and dedicated employees who have delivered so much during the last seven and half of years.

Whilst my involvement in the day-to-day operations of Polar is coming to an end I am very much looking forward to my continued association with the Company as non-executive Board member and major shareholder.

T Woolley

Chief Executive Officer

26 June 2017

Financial Review

Introduction

Commentary on the results for the year follows in the sections below. Adjustments have been made to the 2016 comparatives following reclassification of the seed capital investments and are explained under the heading 'Prior year restatement' later in this report. The net effect to the current year results has been that £0.5m of unrealised foreign exchange translation gains have been posted to other comprehensive income rather than profit and loss.

Results for the year - Revenues

The quantum of management fees earned by the Group is a function of the AUM managed by the firm and the fee rate charged. This year there was an exceptional third material factor, the devaluation of Sterling. While the firm's revenues are all recorded in Sterling the majority of the firm's AUM are not sterling denominated, with dollar assets being the dominant constituent.

At 31 March 2017 the value of the firm's AUM was, in both Dollar and Sterling terms, higher than 12 months earlier. But the average AUM over the past 12 months was in Dollar terms lower compared to the previous year, in fact 10% lower. The fact that management fee revenues only fell 3.4% compared to last year was a product of Sterling's weakness post the BREXIT referendum.

The firm has a policy to hedge 50% of its non-Sterling revenues which has resulted in an overall dampening of the benefit of Sterling's weakness and accounts for the £2.4m loss on forward currency hedging contracts.

The largest swing factor in the Group's revenues was the year on year reduction in the performance fees generated, from £7.2m to £2.7m. The fall was a product of the generally disappointing performance delivered by our funds in calendar year 2016, a phenomenon that affected many active managers in the year.

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Results for the year - Costs

Total operating costs fell to £45.2m from £49.9m last year. The small increase in salaries, bonuses and other staff costs was a product of a small increase in head count in the firm as average staff numbers increased from 110 to 114.

The decrease in core distributions was a function of the fall in management fee revenues and the management fee profitability of the firm as well as the impact of implementing the Group's Deferred Remuneration Plan (DRP) which came into effect during the year. For the year ending 31 March 2017 bonuses amounting to £1.7m have been deferred over a period of 3 years.

The National Insurance cost on share options is a product of and varies accordingly to the Company's share price.

The reduction in the provision is a product of the fall in the Company's share price over the year.

The increase in other operating costs is a product of mainly two factors. The first is an increase, in Sterling terms, in Bloomberg cost which is US dollar based as the value of Sterling fell over the year. The second component is an increase in irrecoverable VAT costs as a result of the change in product mix impacting the Group's recovery rate.

The fall in performance fee interests to £1.5m from £4.2m last year is directly correlated to the reduction in performance fee revenues.

Results for the year - Profits

The headline profit before tax for the year has decreased to £20.4m from last year's £23.6m (Restated - See notes).

The Group believes that the best measure of the Group's profitability is the profit before share-based payments and tax. The reason for excluding the share based payments charge is that the cost is dominated by the existence of the Group's preference shares which as an instrument deliver, when they vest, an uplift to EPS and are not a detractor.

On this basis the Group has delivered a fall in profits to £24.5m compared to last year's £26.9m. The analysis of the different components of profits shows that:

• Core operating profits

the decrease in profits reflects the reduction in management fee revenues driven by the decrease in average value of assets managed over the year.

• Performance fee profits

weaker performance across the product range compared to last year has resulted in the reduction in performance fee profits.

• Other income

the increase in contribution is a product of the good performance of the seed investments held on the balance sheet.

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Share-based payments

The face of the consolidated income statement includes a line titled 'share-based payments' which accounts for a charge of £4.1m (2016: £3.3m). The figures are broken down as follows:

The increase in this charge is dominated by the increase in the charge associated with the group's preference shares (see below).

Earnings per share

The effect that the charge for share-based payments has on the EPS figures of the Group is as follows:

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Preference shares

A separate class of preference share can be issued by Polar Capital Partners Limited for purchase by each new team of fund managers on their arrival at the firm.

These shares provide each manager with an economic interest in the funds that they run and ultimately enable the manager to convert their interest in the revenues generated from their funds into equity in Polar Capital Holdings plc. The equity is awarded in return for the forfeiture of their current core economic interest and vests over three years with the full quantum of the dilution being reflected in the diluted share count (and so diluted EPS) from the point of conversion. The event has been designed to be, at both the actual and the diluted levels, earnings enhancing to shareholders.

In the year to 31 March 2017 (as was also the case in the year to March 2016) there were no new conversions of preference shares into Polar Capital Holdings equity.

As at 31 March 2017 three sets of preference shares have the ability to call for a conversion. The call has to be made on or before 30 November 2017 if any conversion is to take place with effect from 31 March 2017. It is the relative success and profitability of the funds represented by these three sets of preference share that accounts for the increased cost attributed to preference shares that has been identified above (2017: £3.2m versus 2016: £2.4m).

Balance sheet and cash

At the year end the cash balances of the Group were £58.5m (2016: £48.9m). The increase was mainly a product of the reduction, over the year, in the Group's portfolio of seed investments. At the balance sheet date the Group held £22.1m of investments in its funds (2016: £40.1m).

Capital management

The Group believes in retaining a strong balance sheet. The capital that is retained in the business is used to either seed new investment products or if not so required is invested into the Group's absolute return funds as investment capital. As at March 2017 there were £9.5m of investments and £12.6m of the Group's balance sheet was invested to seed fledgling funds. The Group's dividend policy is to distribute the majority of its earnings.

Prior Year Restatement

The most significant accounting change has been the reclassification of our seed capital investment in the European Income Fund. On initial seeding in 2015 the Group planned to actively reduce its investment in this fund and it was expected that control would be relinquished within 12 months. Therefore the investment was initially classified as an asset held-for-sale. In 2016 it was determined that the investment met the relevant criteria for continued classification as held-for-sale because the period to complete the loss of control had been delayed by events beyond the Group's control and the Group remained committed to the original plan.

During 2017 the seed investment in the European Income fund was still controlled by the Group and therefore ceased to meet the criteria for it to be continued to be accounted for as held-for-sale.

In accordance with the requirements of IFRS 5 the holding has been reclassified retrospectively and accounted for as a subsidiary consolidated on a line-by-line basis.

Although the impact of the restatement, on a net basis, is immaterial to the face of the balance sheet (see notes), the change from reporting the holding under the single line item of assets held-for-sale to line-by-line consolidation has necessitated some restatement of prior year numbers whereby the gross assets of the fund are now included in current assets as investment securities and the interest held by third parties are included in current liabilities as liabilities at fair value through profit or loss.

The primary impact on the consolidated profit and loss account of restating the investment in the European Income fund, as a subsidiary, has been that foreign currency gains and losses on retranslating the Group's investment in this Euro denominated fund are now recorded in equity, until such time as the investment is disposed. This has resulted in £0.5m of unrealised foreign currency translation gains in 2017 (2016: £0.6m) having to be excluded from the consolidated profit and loss account and posted to other comprehensive income (see notes).

Business risk

There are a range of risks and uncertainties faced by the Group which are more fully described in the Strategic Report. Amongst the major risks to the business strategy is the loss of Assets Under Management due to markets falling, poor investment performance or the loss of key investment personnel. These events will not only have an immediate impact on the management fees earned by the Group but also deprive the Group of possible performance fees.

The Board having considered the impact on the business of the UK's withdrawal from the European Union believe that Brexit should have little impact on the operations of the Group. The biggest unknown will be the impact on the US Dollar/Sterling exchange rates as the negotiations progress.

Going concern

The Financial Reporting Council has determined that all companies should carry out a rigorous assessment of all the factors affecting the business in deciding to adopt a going concern basis for the preparation of the accounts.

The Directors have reviewed and examined the financial and other processes embedded in the business, in particular the annual budget process and the financial stress testing inherent in the Internal Capital Adequacy Assessment Process ("ICAAP"). On the basis of such review and the significant liquid assets underpinning the balance sheet relative to the Group's predictable operating cost profile, the Directors consider that the adoption of a going concern basis, covering a period of at least 12 months from the date of this report, is appropriate.

John Mansell

Finance Director

26 June 2017

Consolidated Statement of Profit or Loss For the year ended 31 March 2017

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Consolidated Statement of Other Comprehensive Income For the year ended 31 March 2017

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

All of the items in the above statements are derived from continuing operations.

Consolidated Balance Sheet as at 31 March 2017

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Consolidated Statement of Changes in Equity For the year ended 31 March 2017

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Consolidated Cash Flow Statement For the year ended 31 March 2017

* Certain amounts shown here do not correspond to the 2016 annual financial statements and reflect adjustments made as described in the notes

Selected notes to the Financial Statements for the year ended 31 March 2017

Principal Accounting Policies

Corporate information

Polar Capital Holdings plc (the 'Company') is a public limited company registered in England and Wales whose shares are traded on the Alternative Investment Market ("AIM") of the London Stock Exchange.

Group information

The consolidated financial statements of the Group include the operating subsidiaries listed below. All operating subsidiaries, other than Polar Capital Partners Limited, were indirectly held. All operating subsidiaries are wholly owned, except for Polar Capital LLP in which Polar Capital Partners Limited has contributed 99.5% of the capital.

The consolidated financial statements of the Group also include the following seed capital investments which were judged to be subsidiaries or associates of the Group as at 31 March 2017:

Basis of preparation

The consolidated Group financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the provisions of the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention, modified by the measurement at fair value of certain financial assets and liabilities and derivative financial instruments. The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand (£'000), except when otherwise stated.

The Company financial statements have been prepared in accordance with FRS 102.

Basis of consolidation

The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries as at 31 March 2017. Subsidiaries are those entities over which the Group has control. The Group controls an investee if, and only if, the Group has:

• Power over the investee;

• Exposure, or rights, to variable returns from its involvement with the investee;

• The ability to use its power over the investee to affect returns.

The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including the purpose and design of an investee, relevant activities, substantive and protective rights, voting rights and potential voting rights.

Seed capital investments in funds that the Group manages are accounted for as subsidiaries, associates or financial assets at fair value through profit or loss (FVTPL) depending on the holdings of the Group, on the level of influence and control that the Group is judged to have and whether the Group assesses it is acting as an agent or principal for its holdings in the seed capital investments. There is no fixed minimum percentage at which the Group consolidates, and each exposure is reviewed individually.

Where the Group concludes it is acting as a principal the entity is consolidated. This assessment is based on the Group's total exposure. This incorporates direct holdings, income earned from management and performance fees and the assessed strength of third-party kick-out rights.

The Group concludes that it acts as an agent when the power it has over the fund is deemed to be exercised for the benefit of third-party investors. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company and where necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting policies in line with those of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Where external investors hold redeemable shares in funds controlled by the Group, the portion of profit or loss and net assets held by these third-party interests is included within other income in the consolidated statement of profit or loss and as financial liabilities at FVTPL in the consolidated balance sheet respectively.

When the Group loses control over a subsidiary, it derecognises the related assets, liabilities, third-party interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

Net cashflows on initial consolidation or deconsolidation are presented as investing activities within the consolidated cashflow statement. Cashflows from third-party interests into consolidated funds are presented as financing activities.

Investment securities

Investment securities represent securities, other than derivatives, held by consolidated funds. These securities are designated as FVTPL and are measured at fair value with gains and losses recognised through the consolidated statement of profit or loss.

Financial liabilities at fair value through profit or loss

Financial liabilities at FVTPL are carried at fair value, with gains and losses recognised in the consolidated income statement within other income in the period in which they arise. Financial liabilities at FVTPL relate to third-party interests in consolidated funds which are designated as at FVTPL.

Restatement of comparatives

a) During the year the Group ceased to classify its seed capital investment in the European Income fund as held for sale as the criteria for such recognition were no longer met. The Group has determined that it controls the fund under IFRS 10 and it is deemed to be a subsidiary of the Group. As a result, the comparatives have been amended retrospectively as though the fund had never qualified as held for sale, as required by IFRS 5, and if the Group had consolidated the fund on a line by line basis from inception.

b) During the year the group has determined that it controls the Group Employee Benefit Trust (EBT) and it is deemed to be a subsidiary. As a result, the consolidated financial statements have been restated at 1 April 2015 to reflect cash held by the EBT of £114,000, expenses of £19,000 and a corresponding credit to reserves of £132,000.

The restatements have been made to each of the affected financial statement line items for prior periods, as follows:

Impact on equity (increase/ (decrease) in equity):

Impact on consolidated statement of profit or loss (increase/ (decrease) in profit):

Attributable to:

Impact on consolidated statement of other comprehensive income (increase/ (decrease) in other comprehensive income):

Impact on earnings per share (EPS) (increase/(decrease) in EPS):

c) The Company accounts have been restated to record share based payments for awards granted to employees of subsidiary entities where the Company is the grantor of the awards or settles them with its own equity. FRS 102.26 1A requires the Company to recognise the arrangement as an equity-settled share-based payment when it has an obligation to settle a share-based payment transaction where another entity in the same group receives goods or services.

Intra-group recharges for share awards have also been restated and accounted for as a return of capital contribution. Amounts paid in excess of the original contribution recorded by the Company is treated as a distribution. The net impact of this restatement on the Group financial statements is that capital reserves of £562,000 have been transferred to retained earnings.

Operating Segments

The Group is a specialist investment management group offering professional and institutional investors a range of geographical and sector investment opportunities. The Group's assets under management are separated into products and services but as the strategic and financial management decisions are determined centrally, by the Board, the Group only has one class of business, being the provision of investment management and advisory services. The Group's revenue generating operations are in London, with small offices in Tokyo, Jersey, Connecticut and Geneva that do not generate any revenue.

Geographical analysis of income (based on the residency of source)

Analysis of income by type of fees

Earnings per Share

The calculation of basic earnings per ordinary share is based on the profit for the year of £16,043,000 (2016: £18,204,000) and on 90,136,239 (2016: 88,685,262) ordinary shares, being the weighted average number of ordinary shares.

The calculation of diluted earnings per ordinary share is based on the profit of the year of £16,043,000 (2016: £18,204,000) and 94,426,045 (2016: 93,493,781) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 4,289,806 (2016: 4,808,519) which are dilutive.

The calculation of adjusted basic earnings per ordinary share is based on profit for the year of £16,043,000 but adjusted for the cost of share-based payments on preference shares of £3,205,900 (2016: profit of £18,204,000 adjusted for the cost of share-based payments on preference shares of £2,370,800) and 90,136,239 (2016: 88,685,262) ordinary shares, being the weighted average number of ordinary shares.

The calculation of adjusted diluted earnings per ordinary share is based on profit for the year of £16,043,000 but adjusted for the cost of share-based payments on preference shares of £3,205,900 (2015: profit of £18,204,000 adjusted for the cost of share-based payments on preference shares of £2,370,800) and 94,426,045 (2016: 93,493,781) ordinary shares being the weighted average number of ordinary shares allowing for all dilutive options.

As at 31 March 2017, the fully diluted number of ordinary shares which would be in issue, if all outstanding options were exercised, is 93,833,128 (2016: 94,948,510) shares.

Status of results announcement

The Board of Directors approved this results announcement on 26 June 2017. Whilst the financial information included in this announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Group for the years ended 31 March 2017 or 31 March 2016.

The financial information has been extracted from the statutory accounts of the Group for the years ended 31 March 2017 and 31 March 2016. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

The statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies and those for the year ended 31 March 2017 will be delivered to the Registrar of Companies in due course.

Copies of Report and Accounts

The full annual report and accounts will be posted to shareholders in June 2017 and copies will be available thereafter from the Company Secretary at the Company's Registered Office, 16 Palace Street, London SW1E 5JD (020 7227 2700) or from the Company's website at www.polarcapital.co.uk

Annual General Meeting

The Annual General Meeting will be held at 2:30pm on 26 July 2017 at the offices of the Company at 16 Palace Street, London SW1E 5JD

Directors

Forward looking statements

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

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

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.