Polar Capital Regulatory News (POLR)

POLAR CAPITAL HOLDINGS plc

Unaudited Preliminary Group Results for the year ended 31 March 2011

14 June 2011

Financial highlights

• Assets under management ("AUM") at 31 March 2011 up 53% at US$3.87bn (2010:US$2.53bn)

• Profit before share based payments and intangible asset amortisation/impairment £10.2m (2010:£3.7m)

• Pre-tax profit £9.2m (2010:£3.1m)

• Basic earnings per share up to 8.6p (2010:3.1p); diluted earnings per share up to 8.2p (2010:3.0p) and adjusted* diluted earnings per share up to 9.5p (2010:3.8p)

• Dividends for the year up to 7.5p per share (2010:4.5p)

• Shareholders' funds £43.3m (2010: £36.1m) including cash and investments of £48.6m (2010: £39.4m)

* Adjusted to exclude cost of share-based payments and intangible asset amortisation/impairment

Outlook

·; AUM as at the end of May 2011 was $4.3bn and net performance fees of £1.5m have already been recorded for the current financial year

Tim Woolley, Chief Executive, commented:

"We enter the current year with confidence. Our fund performance continues to be good and we have good momentum with inflows into a broader range of products. Our competitive position has further improved giving us greater financial strength to invest and support our plans for growth in the years ahead."

Dividend

The Board has declared a second interim dividend of 6.0p per ordinary share to be paid on 5 August 2011 to shareholders on the register on 15 July 2011. The shares will trade ex-dividend from 13 July 2011.

About Polar Capital

Polar Capital Holdings plc is a specialist investment management company offering professional and institutional investors a range of geographical and sector funds. The Company's investment strategies have a fundamental research driven approach. The Company has long only and absolute return funds in its product range.

Founded in 2001, Polar Capital currently has 66 employees of whom 34 are investment professionals managing 16 funds and 4 managed accounts. These funds have combined assets under management of $3.9bn as at 31st March 2011.

The Company is AIM quoted following its IPO in February 2007. Consistent with the Company's founding strategy of fostering an equity culture amongst its employees and providing high levels of transparency to clients, 45% of the equity is currently held by Directors, founders and employees.

AUM by funds/strategy

*HIM Capital was acquired in September 2010

**Global Emerging Markets was launched in December 2010

***ALVA Global Convertibles was launched in November 2010

Analysis of changes in asset types for the 12 months to 31 March 2011

CHAIRMAN'S STATEMENT

I am pleased to report an increase in our AUM to $3.9 billion at 31 March 2011, up 53% from the previous year end and up 26% from the level reported in our interim results at the end of September. The growth in assets has been through a combination of absolute performance from our funds, continued client inflows across a number of our products and through the assets acquired in the purchase of HIM Capital in September.

Results

The significantly higher level of AUM for the year allowed us to increase pre-tax profits before share based payments and intangible asset amortisation/impairment from £3.7m to £10.2m. We were able to generate a core pre-tax profit of £3.6m and net performance fees were £5.7m which is more than double last year's figure.

Our balance sheet remains strong with gross cash and investments of £48.6m.

Market Background

In my statement last year I said we could expect the external environment to remain challenging and indeed that proved the case!

The opening months of our fiscal year were marked by the Greek debt crisis which caused considerable volatility and downward pressure on markets. The European Union responded to worries over Greece and other heavily indebted nations such as Ireland and Portugal with the creation of the European Financial Stability Facility (EFSF), a vehicle designed to provide emergency funding for the troubled states as their access to the capital markets dried up and became increasingly expensive.

Whilst it is difficult to believe that adding more debt to an economy already buckling under its debt load is a sensible long term solution, the EFSF did have the desired effect of stabilising markets over the summer months. Investors returned their interest to the global economy which in spite of the turmoil in Europe had continued its recovery. Particularly strong growth was seen out of China and other parts of Asia but even in the developed economies the pace of economic activity improved notably in the United States and Germany. Consequently the results coming out of the corporate sector generally remained positive and with valuations still reasonable, global stock markets began to recover and move back into positive territory. This trend continued until the closing weeks of our fiscal year and the unfolding of the tragedy surrounding the Japanese earthquake and tsunami.

Over the year most major markets did in fact produce positive returns despite the considerable volatility. The MSCI World Index was up 14.3% over the period whilst in the UK, the FTSE All Share Index was up a more modest 9.34%. The Japanese market, for understandable reasons, was one of the few major markets to be down over the period with the Nikkei 225 falling 10.4%.

Funds and Performance

This was another very good year for performance on our long only funds and this is well summarised in the table below. All our long only funds open at the start of the fiscal year outperformed their benchmarks. Five out of seven funds were ranked top quartile in their peer group (over 12 months) and the other two were a creditable second quartile (source Lipper).

Fund Peer Group Ranking Quartile Ranking

Global Technology 2/18 1

Japan 12/77 1

Healthcare Opportunities 48/122 2

Insurance 19/107 1

European Financials 30/107 2

Asian Financials 12/107 1

Financials Income 15/107 1

This continued good performance resulted in good inflows across most of our long only funds with particularly strong flows coming into our award winning Global Technology and Japanese UCITS Funds.

On the hedge fund side the performance was more mixed although the European Forager Fund again had a good year adding to its excellent long term track record. The Fund was again nominated in its category at the Eurohedge Annual Awards - the 5th time it has been nominated and a testament to the team's consistency of returns. The European team's second fund Conviction, after a dull spell, has also started to perform well during the testing conditions experienced over the opening months of 2011 and we are hopeful therefore of seeing good inflows into the Conviction fund as we progress through the year.

The UK funds have disappointed. After an encouraging 2008 and 2009 they had a frustrating 2010 and the strategy's performance so far in 2011 has been weak. Our macro strategy continued to struggle and the Discovery Fund was eventually closed in January which was a disappointment to all concerned.

Encouragingly though our recently launched ALVA Global Convertibles Fund has started well.

Developments

As well as showing strong growth in our existing long only funds we have over the course of the last year further added to our capabilities. We acquired in September 2010 HIM Capital, which brought three experienced fund managers and four existing funds in the financials sector. We also recruited in the second half of the year two teams, led by highly regarded fund managers, offering expertise in the Global Emerging Markets and Global Convertibles sectors. I would like to warmly welcome all the fund managers and their teams and wish their funds success.

Dividend

The Board has declared a second Interim dividend of 6.0p (2010: 3.5p) to be paid in August 2011 (2010 in March). Together with the interim dividend of 1.5p paid in January 2011 the total dividend for the year amounts to 7.5p. This is a significant increase on the total dividend of 4.5p paid last year and reflects the Company's improved profitability, the health of the balance sheet and our quiet optimism on the outlook for the business in the coming financial year.

Outlook

Your Company made good progress last year on a number of fronts. AUM increased, core profitability and overall profitability improved, new investment teams were added, new products were launched and our financial position strengthened. We therefore enter the current fiscal year with a degree of optimism and feel we are well placed to grow the business further in the year ahead.

We are though mindful of the external environment which will have a significant influence on our progress and which continues to offer no shortage of causes for concern. Turmoil in the Middle East, rising inflation in the developed and developing economies and a resurfacing of concerns over Southern Europe's debt situation are but some of the factors combining to create a very febrile and uncertain outlook. Notwithstanding this, we remain confident in our strategy for growth and in our ability to capitalise on the substantial opportunity we see ahead.

Annual General Meeting

The Annual General Meeting will again be held at Cayzer House, 30 Buckingham Gate, London SW1E 6NN at 12.30pm on 8 September and I encourage shareholders to attend and meet the Board. Full details of the meeting and the resolutions are set out in the separate notice of meeting.

I would like to conclude by acknowledging the contribution of the executive management team who have played a major role in delivering the marked improvement in the business in the last financial year.

Tom Bartlam

Chairman

14 June 2011

CHIEF EXECUTIVE'S STATEMENT

When I wrote to you last year I saw three major avenues of growth for Polar Capital in the coming year:

 - Increase the assets in our existing products

 - Increase the range of products offered by our existing teams

 - Acquire and recruit additional investment teams

It is pleasing to report that we made progress in all three areas. The inflows into our existing products were outlined in the Chairman's Statement and I will therefore confine myself to addressing the second and third areas.

We have just celebrated the first year anniversary of our Global Healthcare Growth and Income Trust. The Trust was launched with an initial £89m despite the appalling market conditions at the time caused by the Greek and Irish debt crisis. The successful launch, despite the unhelpful market backdrop, reflected the strong underlying investment rationale for the product and Polar Capital's growing profile within the UK wealth management industry. Our optimism on the product and the sector has proved well founded with the Trust delivering on both its income and capital appreciation objectives in its opening year.

We remain mindful of not overstretching the investment resource of a team but where there is capacity and the product has a strong investment rationale then we will continue to create further interesting product along the lines of the Global Healthcare Growth and Income Trust.

As to the addition of new investment teams we had considerable success here with the arrival of three new teams during the year.

In September we completed the acquisition of HIM Capital, a small specialist investment boutique managing long only funds in the financials sector. This brought us a team of three highly experienced fund managers in Alec Foster, John Yakas and Nick Brind whose combined experience of the sector amounts to in excess of 75 years. The team manage a total of four funds, all with excellent track records and with a combined AUM of $245m at the time of the acquisition. This figure had increased to $296m at the end of our financial year as the team benefited from the sales and marketing resource of Polar Capital and being exposed to a wider client base than before the acquisition.

The second team that arrived was on the hedge fund side and comprises of two senior managers and two assistants who specialise in global convertibles. The two lead managers, David Keetley and Steve McCormick, have extensive experience and are widely recognised as experts in the convertibles area. The team arrived at the end of September with David being based in our London office and Steve being based at our newly created Connecticut office.

Their first product, the ALVA Global Convertibles Fund, has had an excellent start gaining 8.35% in US dollars over the five months to the end of March and we are hopeful that the Fund will start to attract inflows as we progress through the new financial year. The team undoubtedly have the expertise and capacity to launch additional product in due course.

The third and final team to join us was the Global Emerging Markets (GEM) team led by William Calvert, an experienced and well recognised manager with an excellent track record of outperformance against his benchmark and his peer group. William is supported by two experienced assistant managers covering Asia and Latin America respectively.

In addition to a significant third party mandate that arrived with this team, we launched the Global Emerging Markets Growth Fund at the start of December 2010 and the Global Emerging Markets Income Fund in January 2011. Although the initial sums are modest, there is considerable investor interest in both funds. As sentiment towards the sector improves we expect the funds to grow significantly over the coming years given the strong secular investment case underpinning the two funds combined with the team's experience and record.

For the year ahead our strategy remains unchanged. We continue to see considerable scope to increase the AUM in our existing product range without compromising performance. It is encouraging that the momentum we saw at the end of our fiscal year has continued into the opening months of the current year.

We will continue to expand the product range offered by our existing teams where there is a strong investment rationale to do so. Indeed, we have already added to our product range in the new fiscal year with the launch of the Financial Opportunities Fund at the beginning of May 2011.

We will continue to look for exceptional investment talent although it is unlikely we will add teams at the pace we did in the previous year. I would though hope to add one or two more proven teams by the end of our fiscal year. Our original vision when we established Polar was to have ten to twelve investment teams and that still feels a sensible number for which to aim.

We will continue to invest in the support infrastructure of the Group to ensure we meet our traditionally high standards as our AUM increases, but given the investments we have made over the years, we would not expect to add additional resource at the same rate as our expected AUM growth. We have made important hires in our sales and marketing function over recent months including a marketing manager and a senior international sales person. Furthermore, we expect another experienced individual on the client support side will be joining us during the summer. All three hires will help ensure we continue to give our expanding client base the level of service they expect.

As we look to the new fiscal year our Chairman has highlighted the uncertainty in the outlook for markets and the global economy. Notwithstanding this, we continue to see a great opportunity for us to expand our presence in the global wealth management industry. We believe our strategy of focusing on active management and providing clients with differentiated products that have strong performance supported by quality service, operational integrity, corporate transparency and financial strength is the right one for our Group and for the much changed environment post the 2008 financial crisis.

We enter the current year with confidence. Our fund performance continues to be good and we have good momentum with inflows into a broader range of products. Our competitive position has further improved giving us greater financial strength to invest and support our plans for growth in the years ahead.

I would like to conclude with thanking all our staff for their excellent work over the year, our shareholders for their loyal support and our clients for their continued interest and ongoing support of our products.

Tim Woolley

Chief Executive

14 June 2011

FINANCIAL REVIEW

Profit and Loss account

The Group made a profit (pre tax, pre share-based payments and pre intangible asset amortisation/impairment) for the year of £10.2m (2010: £3.7m). The table below summarises the break down of the source of the profits:

The rise in core operating profitability, by and to £3.6m, was simply a product of the increase in AUM. The Group's AUM at the start of the year was $2.53bn compared to $1.48bn at March the previous year and the average AUM over the year was $3.20bn compared to $1.93bn the year before. The year saw net core revenues rise by £7.8m and costs only rise by £4.2m.

The rise in total core operating costs by £4.2m to £18.5m from £14.3m in 2010 is explained by a number of factors that are tabulated below. Total operating costs include the interests that staff have in the Group's gross performance fee receipts of £9.0m (2010: £3.7m) which explains how total operating costs have risen to £27.5m (2010: £18.0m).

The table below summarises the break down of the make up of costs as referred to above:

Share-based payments

The face of the consolidated income statement includes a line titled "share-based payments" which accounts for a charge of £0.5m (2010: £0.6m). The figures can be broken down as follows:

Analysis of the cost of share-based payments:

The preference shares, in the event that a manager is successful, deliver to their holder equity in the Group and are designed to deliver simultaneously to the Group an increase in profitability due to the sacrifice that a manager makes as they give up their interest in the revenues generated from their funds.

The effect that the charge for share-based payments and the charge for amortisation of intangible assets (see below) has on the EPS figures of the Group are as follows:

Preference shares

A separate class of preference shares is issued by Polar Capital Partners Limited to each of the leading fund managers. 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 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 2011 (as well as 2010) no preference shares converted. As at 31 March 2011 two sets have the ability to call for a conversion where the call has to be made on or before 30 November 2011 if conversion is to take place from 31 March 2011.

Amortisation/impairment of intangible assets

On 21 September 2010, the Group acquired 100% of the voting shares of HIM Capital Holdings Limited ("HIM"), a specialist fund manager with an established track record of managing financial funds and with approximately $245m of assets under management, thereby establishing a strong financials sector franchise for the Group. The acquisition generated intangible assets of £1.7m representing the acquired investment management contracts taken onto the Group's balance sheet (i.e. the consideration above the value of tangible assets purchased). These intangible assets and the associated deferred tax liability of £0.4m are being amortised/impaired over a period of approximately two years. This resulted in a charge of £0.5m for the year ended March 2011, leaving £1.6m of intangible assets in the year end balance sheet.

Balance Sheet and cash

The Group generated £12.7m of cash in the year from its operating activities (2010: £2.3m). The cash flow statement shows that less dividends were paid in the year (£1.1m in 2011, £5.7m in 2010). The reason for this was the acceleration of the payment of last year's second interim dividend into March 2010 (it would conventionally have been paid in July 2010) resulted in the recording in 2010 of all dividends declared in respect of the 2010 financial year.

During the year the Group redeemed £33.2m of investments in its funds and made £42.3m of subscriptions into its funds, raising its investment in its own managed funds at the year end to £29.4m (2010: 19.7m). At the year end the sum of available-for-sale financial assets plus cash was £48.6m.

Business Risk

There are a range of risks and uncertainties faced by the Group which are more fully described in the Directors' 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.

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 ICAAP process. On the basis of such review and the significant liquid assets underpinning the balance sheet 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

Chief Operating Officer and Chief Financial Officer

14 June 2011

SELECTED NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2011

1. Accounting policies

General

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.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and derivative financial instruments. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value. Acquisition costs incurred are expensed.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with contractual terms and economic circumstances as at the acquisition date.

Goodwill is initially measured at cost being the excess of the consideration transferred over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Intangible assets

The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

Intangible assets are amortised over the useful economic life of the assets, currently estimated as being approximately two years, and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation expense on intangible assets is recognised in the income statement.

2. 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 managed as eight business units based on its products and services but as the strategic and financial management decisions are determined centrally, by the Chief Executive, 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 and Connecticut that do not generate any revenue.

3. Business combinations

Acquisition of HIM Capital Holdings Limited

On 21 September 2010, the Group acquired 100% of the voting shares of HIM Capital Holdings Limited ("HIM"), a specialist fund manager with an established track record of managing financial funds and with approximately US$245 million of assets under management, thereby establishing a strong financials sector franchise for the Group.

The acquisition has been accounted for using the acquisition method. The Group consolidated financial statements include the results of HIM for the period from acquisition date. The fair values of the identifiable assets and liabilities of HIM as at the date of acquisition were:

The vendors committed to reinvest £655,000 of the £2m consideration into the share capital of the Group as indicated by the investing activities section of the cash flow statement and the statement of changes in equity.

The goodwill of £446,000 relates to deferred tax liabilities recognised on intangible assets acquired as part of the HIM acquisition.

4. Intangible assets

The Group's intangible assets comprise investment management contracts that have been identified as separately identifiable intangible assets arising on the acquisition of HIM Capital Holdings Limited, as well as goodwill attributable to the recording of deferred tax liabilities under IAS 12 against the initial recognition, on acquisition date, of the investment management contracts at fair value.

The investment management contracts are being amortised over a period of approximately two years from the date of acquisition. Goodwill is allocated fully to the investment management contracts acquired and is reviewed for impairment on an annual basis. For the year ended 31 March 2011 an impairment has arisen as a consequence of the amortisation of the investment management contracts and the release of the corresponding deferred tax liability.

Amortisation and impairment

Net book value

Status of preliminary announcement

The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 March 2011 or 2010. Subject to the additional policies described in Note 1 the preliminary announcement is prepared on the same basis as the Company's statutory accounts for the year ended 31 March 2010. The statutory accounts for the year ended 31 March 2011 have not been delivered to the Registrar of Companies, nor have the auditors yet reported on them.

The statutory accounts for the year ended 31 March 2011 will be finalised on the basis of the information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies.

The statutory accounts for the year ended 31 March 2010 have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Copies of Report and Accounts

The full annual report and accounts will be posted to shareholders in early July 2011 and copies will be available thereafter from the Company Secretary at the Company's Registered Office, 4 Matthew Parker Street, London SW1H 9NP (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 12.30pm on 8 September 2011 at Cayzer House, 30 Buckingham Gate, London SW1E 6NN

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.