Interim Results

10 December 2010

POLAR CAPITAL HOLDINGS plc ("Polar Capital" or "the Company")

Interim results for the six months ended 30 September 2010

Financial Highlights

·; Assets under management ("AUM") at 30 September 2010 up over 20% at US$3.1bn compared to US$2.5bn at 31 March 2010 (30 September 2009: US$1.9b

·; Profit before tax and share-based payments of £2.3m (30 September 2009: loss of £0.4m)

·; Basic earnings per share of 1.89p (30 September 2009: loss per share of 0.62p) and adjusted* diluted earnings per share of 2.17p (30 September 2009: loss per share of 0.34p) *Adjusted to exclude cost of share-based payments

·; First interim dividend per ordinary share of 1.5p declared (2009: 1.0p) to be paid in January 2011

·; Well capitalised, with a strong balance sheet comprising cash and investments of £37.6m.

Corporate Highlights

·; New Global Healthcare Investment Trust launched in June 2010, raising £89m

·; Acquisition of HIM Capital Limited in September 2010, establishing a financials sector franchise

·; Formation of Global Emerging Markets and Global Convertibles teams in October 2010

Current AUM

·; Current AUM as at 30 November 2010 up over 6% from 30 September 2010 to US$3.3bn

Tim Woolley, Chief Executive Officer, commented:

"The last six months has seen significant development and growth at Polar Capital and we are delighted to have established three new teams and to have attracted such talented fund managers. This is as a result of our focus on investment performance, our culture of maintaining an entrepreneurial environment and our strong balance sheet. We look forward to the second half of our financial year and continuing to grow our assets under management."

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 hedge funds in its product range.

Founded in 2001, Polar currently has 57 employees of whom 28 are investment professionals managing 14 funds, and 7 managed accounts. These funds have combined assets under management of US$3.1bn as at 30 September 2010.

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, 50% of the equity is currently held by Directors, founders and employees.

Assets by fund / strategy 

Analysis of changes in asset types for the six months to 30 September 2010

Analysis of AUM by business unit and type of funds as at 30 September 2010

Chief Executive's statement

I am pleased to report a further increase in our Assets under Management (AUM) to US$3.1bn at the end of September 2010. This is an increase of over 20% since the March year end AUM and an increase of more than 60% from the AUM level at the interim stage last year. The results are all the more encouraging given that they have been achieved against a highly uncertain background in markets and the global economy.

When I wrote to you in the Annual Report at the March year end I outlined three major avenues of growth for Polar Capital over the coming years:

- Increase the assets in our existing products

- Increase the range of products offered by existing teams

- Acquire and recruit additional investment teams.

I am now able to report progress on all three fronts.

Over the period we were able to increase assets in nearly all our strategies. We have seen particularly good growth in our Technology, Japanese and Healthcare long only strategies and our European and UK hedge fund strategies.

In addition to increasing the assets in our existing products we also increased our range of products offered by existing teams with the successful launch of our Global Healthcare Growth and Income Trust in June. We managed to raise £89m which was an excellent achievement given the appalling market background at the time as a result of the Greek debt crisis.

Finally we are also able to report significant progress in the acquisition and recruitment of additional investment teams.

In September we announced the acquisition of HIM Capital, a specialist financials long only boutique. This is an exciting development for Polar as it opens up another specialist sector for us with a highly experienced team with an excellent track record. The acquisition brought us four funds with total assets of around US$245m, five investment professionals and two support people. We see significant opportunity over the medium term in marketing the four funds to our client base both in the UK and overseas and also expanding the fund range further over the coming months.

In addition to the HIM Capital acquisition we have added two further teams which are equally as exciting. In the long only space we have hired a Global Emerging Markets team led by William Calvert, a highly experienced manager with a long track record of out performance against his peers. We are in the process of launching two funds with the team, a global emerging markets growth fund and a global emerging markets income fund. The latter is one of the first funds in the London market to offer clients an income focus relating to Emerging Markets and is consistent with our desire to launch investment led products tailored to suit the needs of our clients.

The third team we have added is Global Convertibles which is an absolute return strategy where we see significant potential over the next few years. The Polar Alva Convertibles fund launched on the 1 November and will be run jointly by two very experienced hedge fund managers David Keetley and Steve McCormick. David and Steve previously had a very successful record managing several billion dollars of convertibles within a US based multi-strategy fund.

We are delighted to have all three teams on board and it is testament to our improving market position that we have been able to attract such good and experienced talent. The addition of the teams significantly expands our market opportunity with existing clients as well as potentially new clients and will help us to achieve the diversification in our business that is central to our strategy.

Financial Review

The AUM at the end of the period closed at US$3.1bn up 24% from the position at 31 March 2010. The growth was primarily a function of the increase in long only assets managed as a product of both healthy net subscriptions and also the acquisition of HIM Capital.

The profitability of the business in the period has been set out below:

The core operating profit of the business is directly correlated to the value of AUM managed by the Company. It is pleasing to note the improved trend as the loss of £0.9m in the equivalent period last year, that rose to a £0.9m core profit in the six months to March 2010 has now grown to a profit of £1.7m in this six month period.

The calculation and payment of performance fees falls mainly in the second half of the Company's financial year. It is encouraging that as at the end of September 2010 there existed on a mark to market basis fees in excess of the quantum of such fees received in the whole of last year, albeit that the actual receipt of such amounts in the second half is susceptible to both market and fund performance.

Looking forward the trading conditions for the Company cannot be taken for granted. There are many positive factors that provide confidence, particularly the performance of the firm's funds, the flows received over the past quarters and also the arrival of new investment talent to enable the launching of new products. But adverse market conditions could dampen this short term optimism.

The Company has historically paid two dividends a year, an initial small dividend in January and a second that follows later in the year whose quantum is a function of the results for the year as a whole. The Board has decided to pay a first interim dividend of 1.5p (2009: 1.0p) to reflect the confidence that the Board has in the Company's affairs and in the knowledge that the quantum of any balancing dividend later in the year will be predicated on the performance of the Company over the entire twelve months. The 1.5p dividend will be paid on 21 January 2011 to shareholders on the register at 7 January 2011 and the shares will trade ex dividend from 5 January 2011.

Outlook

The next six months should be a period of consolidation for us as we focus on 'bedding in' the new teams, complete our series of planned fund launches and continue to focus on fulfilling the potential of our more established teams. We will though remain alert for opportunities as these are exciting times in our industry.

I would like to thank all our staff for their tremendous efforts over the last six months, our clients for their continuing interest and support of our products and our shareholders for their ongoing support and enthusiasm.

Tim Woolley

Chief Executive

9 December 2010

Interim consolidated income statement for the six months to 30 September 2010

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

Interim consolidated statement of comprehensive income for the six months to 30 September 2010

Interim consolidated balance sheet as at 30 September 2010

Interim consolidated statement of changes in equity for the six months to 30 September 2010

Interim consolidated statement of cash flows for the six months to 30 September 2010

Notes to the unaudited interim condensed consolidated financial statements for the six months to 30 September 2010

1. General Information, basis of preparation and accounting policies

Polar Capital Holdings plc ("the Company") is a public limited Company registered in England and Wales.

The unaudited interim condensed consolidated financial statements to 30 September 2010 have been prepared in accordance with IAS 34: Interim Financial Reporting.

The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2010 which 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 accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those used in the preparation of the Group's annual financial statements for the year ended 31 March 2010, except as noted below.

Business acquisitions:

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 and the amount of any non-controlling interest in the acquiree. 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 to the Group's 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.

2. Revenue

3. Profit on ordinary activities before taxation

4. Dividends

5. Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on the profit for the period of £1,380,697 (September 2009: loss £443,579) and on 72,981,606 ordinary shares (September 2009: 71,040,734), being the weighted number of ordinary shares.

The calculation of diluted earnings per ordinary share is based on the profit for the period of £1,380,697 (September 2009: loss of £443,579) and 80,760,728 ordinary shares (September 2009: 75,438,132), being the weighted average number of ordinary shares allowing for all options of 7,779,122 (September 2009: 5,184,742) which are dilutive.

The calculation of adjusted earnings per ordinary share is based on a profit for the period of £1,380,697 but adjusted for the share-based payments charge of £368,200 (September 2009: loss of £443,579 adjusted for the cost of share-based payments of £188,500) and 80,760,728 ordinary shares (September 2009: 75,438,132), being the weighted average number of ordinary shares allowing for all dilutive options.

As shown in note 20 of the Group's annual financial statements to 31 March 2010 the Group's total share-based payment charge is made up of a charge under a preference share scheme and a further charge for employee share options. For the period ended 30 September 2010 the charge for the preference share scheme amounted to £208,500 (September 2009: £98,500) and the charge for the employee share options amounted to £159,700 (September 2009: £90,000).

6. Available-for-sale financial assets

7. 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 interim condensed 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 goodwill recognised above is attributed to the expected benefits from combining the assets and activities of HIM with those of the Group.

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.

8. Notes to the cash flow statement

Reconciliation of profit before taxation to cash generated from operations

9. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not included in this note.

B J D Ashford-Russell is a member of Polar Capital LLP and a director of the Polar Capital Technology Trust PLC (the "Trust"). Polar Capital LLP is the appointed investment manager of the Trust. The total fees received by the Group as investment manager of the Trust were £2,831,430 (September 2009: £1,767,383). The amounts receivable at the period end in this respect were £674,460 (March 2010: £603,400).

At the end of the period, the Group had an outstanding loan due of £1,331,992 (March 2010: £1,391,992) from the Polar Capital Employee Benefit Trust, which was set up in 2002 to hold ordinary shares in the Company for the benefit of employees.

10. The publication of non-statutory accounts

The financial information contained in this Half Year report does not constitute statutory accounts as defined in S434 of the Companies Act 2006. The financial information for the six months ended 30 September 2010 and 2009 has not been audited. The information for the year ended 31 March 2010 has been extracted from the latest published audited accounts, which have been filed with the Registrar of Companies. The audited accounts filed with the Registrar of Companies contain a report of the independent auditor dated 29 June 2010. The report of the independent auditor on those financialstatements contained no qualification or statement under S498 of the Companies Act 2006.

Shareholder Information

Directors

T H Bartlam Non executive Chairman

T J Woolley Chief Executive Officer

J B Mansell Chief Operating Officer

H G C Aldous Non executive director, Chairman of Audit Committee

B J D Ashford-Russell Non executive director

J M B Cayzer-Colvin Non executive director, Chairman of Remuneration Committee

Ms. S E Street Non executive director

M Thomas Non executive director

Dividend

A first interim dividend of 1.5p per share has been declared for the year to 31 March 2011. This will be paid on 21 January 2011 to shareholders on the register on 7 January 2011. The shares will trade ex-dividend from 5 January 2011. 

Half Year Report 

The Half Year report will be posted to shareholders in January 2011. Copies of this announcement and of the Half Year report will be available from the Secretary at the Registered Office, 4 Matthew Parker Street, London SW1H 9NP.

Nominated Advisorand Corporate Broker to the Company

Numis Securities Limited

ENDS

The Half Year report will be published on the Company's website at www.polarcapital.co.uk.

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