POLAR CAPITAL HOLDINGS PLC Results Presentation June 2007 Contents - - PowerPoint PPT Presentation

POLAR CAPITAL HOLDINGS PLC

Results Presentation June 2007

POLAR CAPITAL HOLDINGS PLC

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Contents

• Overview of Polar Capital
• Asset flows and Performance
• Summary of Financial Information
• Strategy for Growth
• Appendix

POLAR CAPITAL HOLDINGS PLC

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Introduction

Mark joined Polar Capital in April 2005 as Chief Executive Officer. He began his career in finance at Chemical Bank in 1982 before joining Morgan Stanley’s UHNW Private Wealth Management Group in 1986 where he advised UK and European family offices, charities and endowments on asset allocation and investments. From 2002, he was the Managing Director in charge of Morgan Stanley’s Northern European UHNW business. Mark was educated at Oxford.

Mark Kary – Chief Executive

John joined Polar Capital in December 2000 as a director. He is responsible for the Operations, Compliance, Finance, IT and Human Resource functions within the company. Before joining Polar Capital he spent eleven years at Lazard Asset Management where he ran the custody operation and fund management back office. He is a chartered accountant. Prior to his conversion to the world of finance he gained his engineering degree from Nottingham University and spent five years as a commissioned officer in the military.

John Mansell – Chief Operating Officer

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Polar Capital

• Founded in December 2000
• Specialist asset management group, building a broad family of funds diversified by asset

class, geography and sector specialisation and structure

• Backed by Caledonia Investments and XL Capital

Platform for growth

• Significant recent investment in central platform and new investment teams
• Approximately $4.5bn of spare capacity in existing strategies
• Attractive platform to recruit further fund manager talent and business units

Philosophy

• Aim to combine the best of the institutional and boutique fund manager models
• Primacy given to investment performance over asset gathering
• Diversified yet complimentary set of funds with a focus on research-driven strategies.

Impressive financial track record

• AuM at 31 May 2007 $3.8bn, up 58% in the previous 14 months
• Net operating profit (before IPO costs) for the year ended 31 March 2007 of £11.7m (2006:

£11.9m)

Overview of Polar Capital

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Overview of Polar Capital

Technology 28% Japan 30% UK 3% European 13% Global Opportunities 14% Emerging Markets 10% Utilities 1% Macro 1%

AuM split by strategy (15 June 2007)

AuM split by business unit (15 June 2007)

Long Only 20% Hedge Funds 54% Investment Trust 18% Managed and Advisory 8%

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Growth in assets under management

CAGR of 27%

500 1000 1500 2000 2500 3000 3500 4000 31 Mar 02 31 Mar 03 31 Mar 04 31 Mar 05 31 Mar 06 31 Mar 07 31 May 07 $ millions

Technology Japan UK Europe Development Funds Advisory

$811 $2,269 $922 $2,037 $2,458 $3,406 $3,803

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Gross inflows and outflows

Analysis by generation of assets Long Hedge Managed & Total Advisory

Brought forward 31.3.2006 $1,470 $685 $303 $2,458 Performance and Currency Movements $50 $207 ($37) $220 Net subscriptions redemptions $43 $661 $25 $729 Total AUM at 31.03.2007 $1,563 $1,553 $291 $3,407

Analysis by generation of assets Long Hedge Managed & Total Advisory

Brought forward 31.3.2007 $1,563 $1,553 $291 $3,407 Long only transferred to Hedge Funds ($95) $95

• Performance and Currency Movements

$44 $119 $4 $167 Net subscriptions redemptions ($44) $273

• $229

Total AUM at 31.05.2007 $1,468 $2,040 $295 $3,803

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Investment performance

Note: Fund performance for 2007 is until 15 June 2007 The volatility calculations for 2007 are based on weekly returns whereas 2006 are based on monthly returns

Hedge Funds Long Only Hedge Funds

Tech ARF Japan ARF UK ARF Paragon Forager PCT Tech UCITS Japan UCITS Asia ex Japan UCITS Conviction Utilities Discovery Latam Lotus Elbrus Columbus

2006 Calendar 2007 Year to Date

Fund Size ($ millions) Potential Capacity Target Index Return Volatility Index Return Volatility

Longer Established Strategies Newer Strategies

Oct 2001 692 700

• 1.5%
• 3.4

14.8% 4.5% 7.1% 12.5% Oct 2001 131 400 11.6% 13.3% 18.4% 6.1% 10.7% 14.6% Oct 2001 487 800

• 2.5%

1.0% 10.2% 0.8%

• 0.8%

12.5% Oct 2004 156 400 17.5% 21.2% 12.5% 26.9% 13.6% 15.0% Jul 2001 73 150 21.3% n/a 15.6%

• 6.4%

n/a 13.5% Dec 2001 519 700 8.8% n/a 3.8% 5.6% n/a 6.1% Nov 2001 105 500 6.3% n/a 4.3% 7.4% n/a 4.5% Mar 2004 539 700 37.6% n/a 12.0% 8.4% n/a 16.9% Aug 2003 251 400 21.8% n/a 5.0% 14.3% n/a 4.1% Mar 2006 240 800 5.5% n/a n/a 0.8% n/a 4.6% Oct 2005 43 500 5.0% n/a 3.6% 7.1% n/a 5.7% Apr 2006 50 700

• 2.5%

n/a n/a 2.2% n/a 5.4% May 2006 16 200 13.0% n/a n/a 12.2% n/a 7.1% Jun 2006 34 350 9.0% n/a n/a 11.3% n/a 14.9% Apr 2006 134 300 20.3% n/a n/a 7.7% n/a 12.7% Jan 2007 38 500 n/a n/a n/a 0.0% n/a n/a

Launch

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• 2006 – 2007 management fee

revenues: 84% increase in hedge funds and 14% increase in long only.

• Increase in hedge fund

performance fee revenues correlates to increase in hedge fund revenues.

• Performance fees earned

across all products and most arrive in second half.

Revenues

Gross Management Fees Performance Fees Total Distribution cost Net core rev.

Hedge funds Long only Managed accounts & Advisory fees Hedge funds Long only Managed accounts Sub Total

Year to 31 March 2006 2007 £’000 £’000

5,154 9,505 9,033 10,358 978 811 (1,766) (2,160) 13,398 18,514 16,038 19,568 8,966 1,027 795

• 25,799

20,595 39,197 39,109

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Summary financial information

(5,932) Financial Year AuM at period end ($m) Net Core Revenues Salary costs and other staff benefits Bonuses Distributions from core revenues Other operating costs Total Operating Expenses Core Operating Profit Performance Fees Performance Fee distributions / bonuses Performance Related Profitability Net Operating Profit Net Interest Profit before tax and exceptional items Exceptional item – HMRC Scotland Profit before tax before IPO Costs Year to 31 March 2006 £'000 2,458 13,398 (4,181) (1,070) (908) (5,336) (11,495) 1,903 25,799 (15,434) 10,365 12,268 347 12,615 (705) 2,762 2007 £’000 3,406 18,514 (2,528) (2,276) (5,016) (15,752) 20,595 8,041 10,803 914 11,717 11,910 11,717 Other operating data Core operating margin Operating margin 14.2% 31.3% 14.9% 27.6% (12,554)

• Reminder of existence and

effect of Minority Interest.

• Pre tax core profitability up

42%.

• Costs: as other operating

costs stabilised in 2007, remaining expected to stabilise in 2008.

• Performance fee profitability

£8m (2006: £10.3m)

• Pre tax profit before IPO costs

£11.7m (2006: £11.9m).

(210) 11,700 10,687 (1,030) Profit before tax 11,700 10,687 IPO Costs

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• PBT of £11.7m above market

expectations of April 2007 (£11.45m).

• Tax charge distorted by IPO non

deductibility and EMI options deductibility.

• PAT increase to £8.15m (2006:

£7.7m)

• Diluted EPS 12.81p (2006: 14.67p)
• IPO costs adjusted diluted EPS

14.43p (2006: 15.06p)

• Final dividend of 5.5p making

dividend for year 7.75p (2006: 10.87p).

Earnings

Year Ending 31 March 2006 2007 £’000 £’000 Profit before tax 11,700 10,687 Taxation (3,977) (2,537) Profit after tax 7,723 8,150 Dividends 1st Interim 10.87p 2.25p 2nd Interim

• 5.50p

Number of Shares Weighted average undiluted 45,705,661 55,584,586 Weighted average diluted 52,630,270 63,634,996 Earnings per share – basic 16.90p 14.66p Earnings per share – diluted 14.67p 12.81p Earnings per share – diluted pre IPO costs 15.07p 14.43p Total 10.87p 7.75p

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Balance Sheet

As at As at 31 March 2006 31 March 2007 £’000 £’000

Fixed assets Tangible assets 595 537 Investments 1,001 3,709 1,596 4,246 Current assets Debtors 4,780 4,230 Cash and short-term deposits 19,403 31,403 24,183 35,633 Total assets 25,779 39,879 Creditors – amounts falling due within one year (11,109) (8,291) Total assets less current liabilities 14,670 31,588 Minority interests (56) (64) Net assets and Shareholders Funds 14,614 31,524

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Cash Flow Statement

Year Ended Year Ended 31 March 2006 31 March 2007 £’000 £’000

Operating activities Operating profit for the year 26,547 25,224 Depreciation charge 160 228 (Increase)/decrease in trade and other receivables (2,524) 554 Increase/(decrease) in trade and other payables (174) (160) Share based payment 38 52 Other non-cash reserve movements (79) (55) Net cash flow from operating activities 23,968 25,843 Net cash inflow from returns on investments and servicing of finance (8,318) (16,158) Taxation Paid (2,633) (3,563) Capital expenditure and financial investment (1,713) (2,678) Dividend paid (1,200) (5,880) Net cash inflow before financing 10,104 (2,436) Issue of share capital 1,020 14,436 Increase in cash and cash equivalents 11,124 12,000 Cash and cash equivalents at the beginning of the year 8,279 19,403 Cash and cash equivalents at the end of the year 19,403 31,403

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Cash and Dividend

• The group has £31m of cash and £4m of investments on its balance sheet
• Commitment at the IPO relating to the dividend policy; to distribute “ …….a material proportion
• f net profits before performance fees together with the majority of net performance fees”

Post tax core profits £2.5m distribution rate 50% £1.26m Post tax net performance fee profits £5.6m distribution rate 62% £3.47m Total £ 4.73m Already distributed in Oct 06 £1.05m Distribution at year end £3.68m Corresponding to Oct ‘06 2.25p Aug’07 5.50p Total distribution 7.75p

• Next dividend, after the August distribution, expected to be paid in December/January to reflect

the performance of the six months to 30 September 2007.

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Growth strategy

Achievements against strategy

• XL seeding agreement of $175mm to enhance capacity to launch new funds.
• Successful IPO in February 2007 to provide visibility to value of shares, enhance profile and attract

investment teams. Three cornerstones to the growth strategy

• Investment performance; 2007/8 has started well.
• Organic growth: $4.5bn of spare capacity in existing strategies (see Investment Performance slide).
• Recruitment and acquisition of new investment teams: plan is to launch 1 or 2 new investment strategies

annually and a number of recruitment initiatives are currently in place.

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Appendix

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Overview of Polar Capital

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Charles Hale

Non-Executive Chairman

Mark Kary

Chief Executive Officer

John Mansell

Chief Operating Officer

Robert Blaxland

Business Development Director

Brian Ashford-Russell

Co-founder

Tim Woolley

Co-founder

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Polar Capital's Positioning in the Industry

• Growing polarisation between alpha and beta strategies
• Trend to seek smarter risk return strategies around a lower tracking error core portfolio

Source: Morgan Stanley

• Active

Equities Structured products Hedge Funds Private Equity Quantitative products Real Estate ETF Money Market Index Funds Market Growth Revenue Margins Active Bonds

Growth in innovative, niche and alternative investment products. Polar positioned in this space.

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Business unit ownership structure

• Business unit structure designed to provide entrepreneurial environment for fund managers whilst

aligning interests of all Polar Capital’s stakeholders.

• Fund management teams organised in separate business units with access to central platform for Sales

and Marketing, Operations, IT, Finance, Compliance and Risk Management.

• Manager Preference Shares provide a distinct recruitment and retention mechanism:

– Provides the holder with a minority interest in core operating profit, paid as a bonus. – Convertible after 3 years for cash or, at Company’s option, Ordinary Shares, enabling managers to capitalise the value of their business unit. Conversion terms are intended to be earnings enhancing for the Group. – Conversion into Ordinary Shares staggered over 3 years in 4 tranches (10%, 30%, 30%, 30%).

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Illustration of crystallisation calculation

• Percentage of new equity issued = [ A * B * 0.66 / C ] * D

(please see below for details)

• The following table illustrates how the calculation is performed and its impact on the number of shares in issue and

Group earnings

KEY A = Lower of i) average of last 3 years Core operating profits of business unit pre-distributions; or ii) business unit’s most recent year’s Core operating profits pre-distributions B = Minority interest of a manager in their business unit C = Average of last 3 years Group Core operating profit pre-distributions D = Diluted share capital of the group.

Year 1 Year 2 Year 3 Year 4 £m £m £m £m Core operating profit pre distributions Group 1.00 2.00 3.00 4.00 Business unit 0.25 0.50 0.75 1.00 Assuming crystallisation takes place at the end of Year 3 A= 0.50 B= 45% C= 2.00 D= 1,000,000 Therefore number of new Ordinary shares issued = 74,250

Increase in issued share capital 7.4% Increase in Year 4 Core operating profit (£4.00m/£3.55m) 12.7%

POLAR CAPITAL HOLDINGS PLC

20 IMPORTANT INFORMATION This document does not constitute an offer to sell or an invitation to buy shares in Polar Capital Holdings plc or any other invitation or inducement to engage in investment activities. Certain statements, beliefs and opinions in this document are forward-looking, which reflect the Company's current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The value of investments, and the income from them, may go down as well as up, and is not guaranteed. Past performance cannot be relied on as a guide to future performance. Exchange rate changes may cause the value of overseas investments or investments denominated in different currencies to rise and fall. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any forward-looking statements, which speak only as of the date of this document.

Disclaimer