REG - Polar Cap Tech Tst - Final Results
11/07/2025 07:00
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RNS Number : 6653Q Polar Capital Technology Trust PLC 11 July 2025
POLAR CAPITAL TECHNOLOGY TRUST PLC
AUDITED RESULTS ANNOUNCEMENT FOR THE FINANCIAL YEAR TO 30 APRIL 2025
FINANCIAL SUMMARY Change %
As at As at Year Ended 2025 Year Ended 2024
30 April 2025 30 April 2024
Total net assets £3,804,889,000 £3,804,533,000 0.01% 34.5%
Net Asset Value (NAV) per ordinary share(1) 325.20p 315.41p 3.1% 40.8%
Benchmark(2) 5259.96 5007.08 5.1% 38.9%
Price per ordinary share(1) 288.50p 292.00p (1.2%) 50.5%
Discount of ordinary share price to the NAV per ordinary share(3) (11.3%) (7.4%)
Ordinary shares in issue(1,4) 1,170,007,019 1,206,215,690 (3.0%) (4.5%)
Ordinary shares held in treasury (1,4) 203,142,981 166,934,310 21.7% 51.4%
KEY DATA For the year to 30 April 2025
Local Currency % Sterling Adjusted %
Benchmark(2)
Dow Jones Global Technology Index (TR) 12.06 5.1
Other Indices over the year (total return)
FTSE World 12.30 5.23
FTSE All-Share 7.53
S&P 500 Composite 12.10 5.04
Nikkei 225 -4.33 -1.06
Eurostoxx 600 8.01 7.63
As at 30 April
EXCHANGE RATES 2025 2024
US$ to £ 1.3357 1.2522
Japanese Yen to £ 190.52 197.04
Euro to £ 1.1750 1.1711
For the year to 30 April
EXPENSES 2025 2024
Ongoing charges ratio(3) 0.77% 0.80%
Ongoing charges ratio including performance fee(3) 0.77% 0.80%
Data supplied by Polar Capital LLP and HSBC Securities Services.
1. Prior year was rebased following the sub-division of Ordinary
Shares of 25p each into 10 new Ordinary Shares of 2.5p each, approved at the
AGM held on 11 September 2024 and effective on 13 September 2024.
2. Dow Jones Global Technology Index (total return, Sterling adjusted,
with the removal of relevant withholding taxes). See Annual Report for further
details.
3. Alternative Performance Measure - see Annual Report for further
details.
4. The issued share capital as at close of business 4 July 2025
(latest practicable date) was 1,373,150,000 ordinary shares of which
215,103,569 were held in
treasury.
HISTORIC PERFORMANCE
As at 30 April 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Net Assets (£m) 793.0 801.3 1,252.5 1,551.6 1,935.6 2,308.6 3,408.8 3,051.0 2,828.1 3,804.5 3,804.9
Share price (pence) (#) 59.2 56.6 94.7 114.8 135.4 177.4 236.4 204.0 194.0 292.0 288.5
NAV per share (pence) (#) 59.9 60.6 94.5 116.0 144.6 171.6 249.6 230.5 223.9 315.4 325.2
Indices of Growth(1)
Share price(2) 100.0 95.6 160.0 193.9 228.7 299.7 399.3 344.6 327.7 493.2 487.3
NAV per share(2) 100.0 101.1 157.8 193.5 241.3 286.3 416.6 384.5 373.7 526.3 542.7
Dow Jones Global Technology Index (3) 100.0 99.9 153.2 179.3 217.8 257.2 376.5 373.2 383.8 533.2 560.2
The Company commenced trading on 16 December 1996 and the share price on the
first day was 9.6p(#) per share and the NAV per share was 9.75p(#).
Notes:
1 Rebased to 100 at 30 April 2015
2 Total return assumes reinvestment of dividends.
3 Dow Jones Global Technology Index (total return, Sterling adjusted with the
removal of relevant withholding taxes).
# Prior years were rebased following the sub-division of Ordinary Shares of
25p each into 10 new Ordinary Shares of 2.5p each, approved at the AGM held on
11 September 2024 and effective on 13 September 2024.
All data sourced from Polar Capital LLP.
For further information please contact:
Ben Rogoff Ed Gascoigne-Pees
Polar Capital Technology Trust PLC Camarco
Tel: 020 7227 2700 Tel: 020 3757 4984
CHAIR'S STATEMENT
On behalf of myself and the Board I am pleased to present to you the Annual
Report of the Company for the financial year ended 30 April 2025 (FY25).
With the recent investment trust market challenges and meeting requisitions,
it would be remiss not to reflect that the Board is conscious of the interest
in the investment trust industry of activist Shareholders. The Board has
reflected on and continually monitor the Shareholder register and position of
the Company. While the Board does not feel there are any current concerns, the
Board is mindful of acting in the best interests of Shareholders and
stakeholders at all times and we would like to reassure Shareholders of this.
Performance
The Manager's report is provided in the annual report and gives an overview of
the year past and the outlook for the near future.
The financial year under review has been a challenging period for the Company
with the technology sector experiencing volatility following the arrival of
DeepSeek's potentially low-cost AI Model, President Trump's Administration and
the uncertainty surrounding the introduction of US Tariffs and retaliatory
tariffs as well as other geopolitical and macro-economic factors. During the
year under review, your Company's net asset value (NAV) per share rose from
315.41p to 325.20p, an increase of 3.1%, while the Benchmark increased 5.1% in
Sterling terms over the same period. Underperformance came largely from an
overweight position in the small cap sector and from difficult stock selection
within it. The annualised performance returns of the Company over the past
five and ten years were 13.6% and 18.4% respectively, which compare to total
returns from our benchmark of 16.8% and 18.8%.
While we await the longer-term impact of President Trump's administration, the
Board remains optimistic about the overall outlook for the technology sector.
We continue to believe that there are interesting developments and long-term
opportunities within our sector, particularly with the developments in agentic
Artificial Intelligence (AI); this is discussed further in the Manager's
Report.
Discount Management
The Company's discount widened during the financial year under review, ending
the year at 11.3% compared to 7.4% at the end of FY24. It averaged 10.4% over
the financial year. The Board actively monitors the discount at which the
Company's ordinary shares trade in relation to the Company's underlying NAV
and, whilst the Board does not have a formal discount policy, it will continue
to exercise its discretion to buy back shares at a discount in normal market
conditions. Equally, the Board will also use discretion to issue shares at a
premium.
Utilising this discretion, we repurchased a total of 36,208,671 ordinary
shares (representing 2.6% of the issued share capital) in the year under
review at an average price of 318.19 pence per share and at an average
discount of 10.4% to the prevailing NAV. Following the year end, and up to
close of business 4 July 2025, the Company has bought back a further
11,960,588 shares. While purchase levels have been relatively low on an
individual transaction basis, we should note that this activity does not
preclude the Manager determining that a more significant amount than usual on
any one day should be purchased. Such a decision may be influenced by, in the
Manager's view, there being a particular investment opportunity best accessed
through buying shares in the Company rather than buying individual securities.
Fees
As previously reported in the Company's Half Year results, we concluded our
formal three-yearly review of the management fee arrangements and were very
pleased to have achieved an agreement with the Manager for an overall
reduction to the base management fee as well as the complete removal of the
performance fee. The revised arrangements came into effect on 1 May 2025.
New fee arrangements:
The new base management fee is now structured over two tiers and the
performance fee was removed entirely:
· Tier 1: 0.75% on NAV up to and including £2bn
· Tier 2: 0.60% on NAV above £2bn
Please refer to the Annual Report further information on fees.
Board Composition
As reported in the Half-Year Chair's Statement, a recruitment process was
undertaken in the latter half of 2024 in order to identify and appoint a new
non-executive director following the retirement of Charlotta Ginman who
reached her nine-year tenure in September 2024. We were delighted to welcome
Adiba Ighodaro to the Board with effect from 3 December 2024. Adiba brings a
considerable expertise in legal and investor matters and has various Board
roles already. She will stand for election by Shareholders at the AGM to be
held in September 2025. Further information on the recruitment process
undertaken and Adiba's background and experience is contained in the Annual
Report.
The Board continues to work on longer-term succession planning as each of the
Directors approach their nine year tenure on the Board. The Board is in
early-stage discussions and are working to finalise a managed programme of
recruitment, appointment and retirement which we expect will be carried out
during 2026 and will conclude by Q4 2027. Further information will be shared
when available.
There have been no other changes to the membership of the Board during the
year under review. The Directors' biographical details are available on the
Company's website and are provided in the Annual Report.
Directors' Fees
As detailed further within the Remuneration Committee Report, an annual fee
review was undertaken to ensure that the remuneration paid to Directors
remains attractive, competitive and in line with those of its peers in order
to attract and retain the best candidates. The Board usually favours modest
increases year-on-year (where applicable) and with effect from 1 May 2025, the
Directors' base remuneration increased by 2.8% to £37,000 and the
remuneration of the Chair to £67,200. The supplement for the Audit Committee
Chair was increased to £9,000 to reflect the additional time required in
connection with increased audit regulation and overall responsibility of the
Chair of the Audit Committee, whilst the supplement for the Senior Independent
Director remained unchanged at £4,200.
In aggregate, the Directors fees for FY26 will be £265,400. The maximum level
currently provided for in the Company's Articles of Association is £350,000
which provides headroom for succession planning and appointment overlap should
it be necessary.
Annual General Meeting
We are pleased to confirm that the Company's AGM will be held on 10 September
2025 at 2:30pm at the offices of Herbert Smith Freehills Kramer, Exchange
House, Primrose Street, London, EC2A 2EG. We look forward to welcoming
Shareholders to the meeting, at which they will receive a presentation from
the Investment Manager and his team and Shareholders will also have the
opportunity to ask questions and meet the Board; light refreshments will be
available following the meeting.
The Notice of AGM will shortly be provided to Shareholders and will also be
available on the Company's website. Shareholders are encouraged to read the
detailed explanations on the formal business and the resolutions to be
proposed at the AGM contained within the Shareholder Information section of
the Annual Report as well as the Notice of AGM.
In order to ensure that Shareholders are able to follow the proceedings of the
AGM without attending in person, the Company will also broadcast the meeting
online via zoom videoconferencing. However, please note that Shareholders
joining via zoom will not be able to vote online during the AGM and are
therefore encouraged to submit their votes via proxy, as early as possible.
All formal resolutions will be voted on by way of a poll. In addition to
voting on resolutions proposed at the AGM, we also welcome Shareholder
engagement with the Board and the Investment Manager. As such, the Board
invites Shareholders to not only attend the AGM in person but to submit
questions in writing to which we will respond, as far as possible, ahead of
the AGM date. Please send your questions to cosec@polarcapital.co.uk
(mailto:cosec@polarcapital.co.uk) with the subject heading PCTT AGM.
Continuation Vote
The Company has within its corporate structure the requirement to hold a
continuation vote every five years. The last continuation vote was held in
September 2020, for which 100% of the votes cast were in favour, and the next
continuation vote will be held at the forthcoming AGM on 10 September 2025.
Ahead of the upcoming continuation vote, the Board, Investment Manager and
Corporate Broker have been seeking Shareholder views including any concerns
and an indication of whether they were likely to vote in favour of the
Company's continuation. No comments adverse to the continuation vote have been
received to date and the Shareholders who provided feedback were minded, at
the time of writing, to vote in favour of the resolution for the Company to
continue. Shareholders highlighted the contact between the Investment Manager
and Shareholders, the long term investment horizon of many Shareholders, the
diversification of the Company's register of Shareholders and the Company's
inclusion on many buy lists at private wealth managers and retail platforms.
As such, the Directors are confident that the continuation vote will be passed
at the AGM to be held on 10 September 2025 and therefore that the Company will
continue in existence. As such the Board is supportive of the Company
continuing in its current form and recommends Shareholders vote in favour of
continuation as indeed the Directors propose to do. The Board acknowledge that
there can be no certainty that the continuation vote will be passed although,
at the date of approval of these financial statements, we have no reason to
believe that it will not do so.
Environmental, Social and Governance (ESG)
The Investment Manager incorporates ESG considerations into its investment
process and the Board continues to engage closely with the Manager to monitor
their progress and receives regular updates on the developments on the
corporate side of Polar Capital's business. As at 30 April 2025, based on MSCI
ESG ratings, the portfolio and the benchmark were both A rated.
Please refer to the ESG Report in the Annual Report which incorporates both
the investment and corporate approaches.
Outlook
Whilst the macro-economic uncertainties remain and it is likely that market
volatility will persist, we remain positive on the outlook for the sector with
rapid developments in agentic AI falling into place. We look forward to the
investment opportunities this brings for the sector and our portfolio, which
looks well placed to benefit from these developments in the AI space. It is
important to remember, however, that continuing devaluation of the US dollar
could potentially cause a headwind to the performance of the Company as, in
the near term, the majority of our assets are US dollar based. I encourage you
to read the IM report in the annual report for a flavour of the excitement the
Manager has about various themes developing within our sector.
Catherine Cripps
Chair
10 July 2025
FINANCIAL AND PERFORMANCE REVIEW FOR THE YEAR ENDED 30 APRIL 2025
The NAV per share increased to 325.20p as at 30 April 2025 from 315.41p* at
the start of the year, which represents a 3.1% increase, and the Company
finished the year with total net assets of £3,804.9m. The Investment
Manager's Report in the Annual Report sets out in detail the performance of
the Company for the financial year.
Total Return
The Company generates returns from both capital growth (capital return) and
dividend income received (revenue return). The total return from the portfolio
for the year was a gain of £118.4m (2024: gain of £1,115.4m), of which there
was a £129.7m gain (2024: £1,124.6m gain) from capital and a £11.3m loss
(2024: £9.2m loss) on the income account which offsets all expenses against
dividend income. Full details of the total return can be found in the
Statement of Comprehensive Income in the Annual Report. As a matter of policy,
all expenses are allocated to income with the exception of the performance fee
which is allocated to capital. The Company's allocation of expenses is
described in Note 2(d) in the Annual Report and the allocation methodology is
considered on an annual basis. No change to the policy is recommended (2024:
no change). The earnings per share were 9.97p (2024: earnings per share of
90.42p*). These were made up of 10.92p from capital return and a loss of 0.95p
from revenue return.
Capital Return
The investment portfolio was valued at £3,664.9m (2024: £3,713.8m) at the
year end 30 April 2025. The investment portfolio delivered a total of realised
and unrealised gains of £128.5m (2024: gains of £1,147.9m) for the year
ended 30 April 2025. The Company's valuation approach is described in Note 2
(f) in the Annual Report. The derivative gains of £2.8m (2024: £22.0m
losses) have arisen as a result of the call and put options which are used to
facilitate efficient portfolio management. Full details of the derivatives are
set out in the Investment Managers Report and Note 6 in the Annual Report.
Revenue Return
The total investment income of £19.1m (2024: £15.5m) represents dividend
income derived from listed investments. During the year under review, the
Company received other operating income of £6.3m (2024: £6.4m) which was
derived from bank interest and Money Market Fund (MMF) interest. It should be
noted, however, that the MMF is held primarily as a cash diversification
factor rather than an income generating investment. As stated above, as a
matter of policy, all expenses (excluding the performance fee) are charged to
revenue and as a result, expenses normally exceed the income received in any
given year. As has been the case for many years, the revenue reserve therefore
remains negative. The Company historically has not paid dividends given the
nature of its focus on longer term capital growth. The Directors do not
recommend the payment of a dividend for the financial year under review. The
Board reviews this stance on a periodic basis.
Total Expenses and Finance Costs
The total expenses for the year under review amounted to £32.5m (2024:
£27.3m). These are made up of investment management fees of £30.9m (2024:
£25.9m) and administrative expenses of £1.6m (2024: £1.4m).
In addition, the Company had finance costs of £1.8m (2024: £1.9m). The
Company's operating expenses comprise predominantly variable costs, such as
management, depositary and custody fees which increase and decrease based on
the net asset value. Other expenses remained at a similar level to the last
year. There was no performance fee accrued at the year ended 30 April 2025
(2024: £nil). The Company keeps under close review the costs and expenses
associated with the running of the Company to ensure that they continue to
provide value for money. As reported in the Company's Half Year results, an
agreement was made with Polar Capital for a reduction to the base management
fee and the complete removal of the performance fee. The revised arrangements
came into effect from the new financial year commencing 1 May 2025. Further
details can be found in the Annual Report.
Ongoing Charges
The ongoing Charges Ratio (OCR) is a measure of the ongoing operating costs of
the Company. It is calculated in line with the AIC recommended methodology,
represents the total expenses of the Company, excluding finance costs, and is
expressed as a percentage of the average daily net asset value during the
year. The OCR demonstrates to Shareholders the annual percentage reduction in
NAV as a result of recurring operational expenses, that is, the expected cost
of managing the portfolio. Whilst based on historical information, the OCR
provides an indication of the likely level of costs that will be incurred in
managing the Company in the future. The OCR for the year to 30 April 2025 was
0.77%, a reduction from the previous year of 0.80%. The OCR including the
performance fee for the year to 30 April 2025 was the same as no performance
fee was accrued at the year end. See Alternative Performance Measures in the
Annual Report.
Cash and Cash Equivalents
The Company's absolute level of cash at the year end was £187.9m (2024:
£102.6m), this equates to less than 5% of the Company's NAV as at 30 April
2025. As noted above, as part of the Company's cash diversification strategy,
the Company has taken a cautious approach and has chosen to invest 50% of its
USD cash balance into a USD Treasury Money Market Fund. As at 30 April 2025,
the Company held the BlackRock Institutional Cash Series - US Treasury Fund
with a value at year end of £21.4m (2024: £33.0m).
Portfolio Turnover
Portfolio turnover (purchases and sales divided by two) totalled £4,563.9m
equating to 119.9% for the year to 30 April 2025 (2024: 85.5%) of average net
assets. Details of the investment strategy and portfolio are given in the
Investment Manager's Review in the Annual Report.
Gearing
The Company can use gearing for investment purposes as stated in the Annual
Report. During the year, the Company had two loan facilities with ING Bank NV
of 36m US Dollars and 3.8bn Japanese Yen ("JPY"), both of which were repaid in
September 2024. The JPY loan was replaced with a three year fixed rate term
loan of JPY 15bn from The Bank of Nova Scotia. This loan is due for repayment
in September 2027. The repayment of this loan, totalling approximately £78.7m
would equate to 2% of the Company's NAV as at 30 April 2025.
Foreign Exchange
The majority of the Company's assets and revenue are denominated in currencies
other than Sterling and are impacted by foreign exchange movements. As at the
year ended 30 April 2025, the other currency losses of £1.6m (2024: £1.3m
losses) represents the exchange losses on currency balances of £2.5m (2024:
£4.1m losses) and net gains on currency translation and settlement of loans
of £0.9m (2024: gains of £2.8m). The Company's total return and net assets
can be affected by the currency translation and movements in foreign exchange.
Note 27 (a) (ii) in the Annual Report, analyses the currency risk and the
management of such risks.
Catherine Cripps
Chair
10 July 2025
INVESTMENT MANAGER'S REPORT
Market Review
Equity markets delivered modest gains during the Trust's fiscal year to the
end of April 2025 (FY25) following a strong FY24 although this belied
significant geopolitical and market volatility. Global equity markets, as per
the MSCI All Country World Net Total Return Index, returned +4.8% during the
fiscal year, while the US (S&P 500 index) and Europe (DJ Euro Stoxx 600
index) returned +5% and +7.6% respectively. Economic growth remained firm, led
by consumer spending, while labour markets showed only mild signs of
softening. The inflation picture also continued to improve globally, including
in the US, where headline Consumer Price Inflation (CPI) fell from 4.9% in
April 2023 to 2.3% by April 2025, nearing the Federal Reserve (Fed)'s 2% goal.
Progress on inflation changed the balance of risks for many central banks and
shifted policy focus from managing the risk of higher/sticky inflation to
supporting economic growth and labour markets. The Fed duly began its interest
rate-cutting cycle with a 50 basis point (bps) cut at its September meeting,
followed by 25bps cuts at the November and December meetings. The European
Central Bank and Bank of England began their own rate cuts in June and August
respectively.
Equity markets broadly trended higher through 2024 as economic growth
surprised to the upside and major
macroeconomic and political risks appeared to dissipate, supporting higher
equity valuation multiples. 2024 US GDP (gross domestic product) growth ended
the year at +2.9%, up from forecasts of just 1.2% at the start of the year.
Performance for the calendar year was again dominated by the largest
technology companies, with the 'Magnificent Seven' (Mag-7) returning +71% and
continuing to benefit from positive earnings revisions and excitement about
artificial intelligence (AI), accounting for almost 60% of the S&P 500's
2024 return.
From the turn of the calendar year (the final third of the Trust's fiscal
year), markets were no longer led by changes in the Fed's language and CPI
components but buffeted by political developments. The election of Donald
Trump as US President proved the defining event of the fiscal year as markets
were forced to react to sweeping tariff policies, a flurry of Executive Orders
and bilateral dealmaking. Equity markets initially took this political
upheaval in their stride: Trump's pro-growth, pro-business, low-tax agenda
appeared to have ignited animal spirits, and the equity market upgraded its
economic growth expectations. The nomination of Scott Bessent as Treasury
Secretary and Elon Musk's high-profile Department of Government Efficiency
(DOGE) role led investors to be more sanguine about inflationary tariffs,
expanding deficits and geopolitical instability. The decisive election outcome
in the form of a Republican 'clean sweep' and stock market 'Trump bump' added
fuel to the 'US exceptionalism' narrative: US equities saw c$141bn worth of
inflows during the month following Trump's election (the largest monthly
inflows on record), cyclicals outperformed defensives, and the S&P 500
high beta factor reached the 99th percentile by early December.
The reality of the Trump administration's policy agenda and erratic modus
operandi proved more challenging, and the S&P 500 soon gave back all its
post-election gains. The market turned more defensive as investors digested
trade uncertainties, DOGE disruption and even a potential shift in the
geopolitical world order as Trump and Vice-President Vance raised significant
questions about the future viability of NATO and the survival of Pax Americana
(which succeeded in galvanizing Europe - particularly Germany - into
increasing defence spending). Growth and inflation concerns emerged as
consumer and business confidence collapsed and policy uncertainty spiked to
early Covid and global financial crisis (GFC) levels. Against this volatile
backdrop, the arrival of DeepSeek's low-cost AI model shocked the market and
prompted a momentum unwind in small/mid-cap, long-duration and AI
infrastructure stocks and, without mega-cap technology/AI leadership, the
market struggled.
Trump's Liberation Day Executive Order on 2 April unleashed further
volatility; indeed, April was the fifth most volatile month in 85 years. A
baseline 10% tariff was set on imports from all countries from 5 April and
much higher 'reciprocal tariffs' on around 60 'worst offenders' from 9 April.
The size and scope of the Liberation Day announcement surprised the market and
appeared to confirm the administration's commitment to reordering global trade
policy and geopolitics. Equity markets experienced significant volatility in
early April: the VIX (a measure of market volatility) closed above 50, the
S&P 500 registered some of the largest intraday swings in history amid
record trading volumes and fell more than 20% from mid-February highs. The
trade- weighted dollar weakened significantly, closing down more than 10% from
January highs by mid-April.
Fortunately, the sharp correction in the bond and equity market prompted a
softening in the trade tariff negotiations, which led to a rebound in the
market. On 9 April - the deadline for reciprocal tariffs to go into effect and
following unsettling moves in the bond market - Trump paused the higher
reciprocal tariff rates for 90 days on all countries excluding China (where
the cumulative tariff was increased to 125%) to provide an opportunity for
countries to engage in trade talks. In the face of extremely bearish investor
sentiment, the S&P 500 recovered more than 15% from its lows to close
above its Liberation Day level within a month. The rebound included nine
consecutive trading session gains; the first time this has happened since
November 2004. While most countries appeared to be negotiating, China
announced counter-tariffs on US goods. This started a cycle of retaliation
which resulted in a 145% tariff on Chinese imports to the US and the Chinese
restricting rare earth exports, which are critical to various high-tech
industries. In early May, however, China and the US also reached an agreement
to lower tariffs to 10% and 30% respectively for 90 days, leading to a further
move higher in markets following a solid Q1 earnings season.
Technology review
The technology sector (as measured by the Dow Jones Global Technology Index)
returned +5.1% for the Trust's fiscal year through 30 April 2025. The rapid
progress of AI remained the sector's primary focus, but modest positive
headline returns belied significant sector volatility, as well as within the
AI story itself.
Despite cracks appearing in some large companies in 2025, large-cap technology
stocks continued to significantly outpace their small and mid-cap peers over
the fiscal year: the Russell 1000 (large cap) Technology Index and Russell
2000 (small cap) Technology Index delivered returns of +5.9% and -12.3%
respectively. Similarly, the market cap-weighted NASDAQ 100 Index gained +7%
while the equal-weighted NASDAQ 100 (the same stocks held at equal weights)
returned -1.5%. Despite DeepSeek and regulatory headwinds, the Bloomberg
Magnificent 7 Total Return Index still delivered +15.8% during the year. US
exceptionalism driven by AI continued as the dominant investment theme for
much of the year with the continued outperformance of the Mag-7 driving
returns. However, the technology sector had to contend with several growth
scares during the year. These, combined with continued progress on inflation,
prompted the Fed to finally begin its rate-cutting cycle in September. This
helped sector performance, and the Trump victory and Republican 'clean sweep'
as a pro-business, deregulatory and - above all - pro-AI administration was
anticipated to offer an (even more) fertile environment for US AI dominance.
The effective US tariff rate reached c18% by early May, up from 3% at the
start of the year and the highest since 1934. This theoretically translates to
a real GDP growth headwind of -0.7% in 2025 and a 1.7% increase in the price
level.
The tech sector made new highs in early February 2025, returning +29% in local
terms from the start of the Trust's fiscal year. This was led by AI
infrastructure stocks as earlier excitement gave way to AI strength, evidenced
by upwardly revised AI capital expenditure (capex) budgets, rapid adoption and
significant model progress. Microsoft, Amazon and Alphabet were consistently
capacity- constrained against the strong AI demand backdrop. While there were
occasional AI setbacks, the year was defined by a rapidly improving AI story
as new entrants such as Elon Musk's xAI and its 200k GPU (Graphics Processing
Unit) Colossus cluster emerged. Instead of GPT-5 (seemingly delayed), OpenAI
released its o1 model - the first widely available reasoning model that
allocates more time to deliberate to tackle more complex tasks. Reasoning
models (aka 'test time compute') represents a new vector for model improvement
as performance scales predictably with the time spent on inference, and a
significant step on the path to agentic AI. OpenAI also announced its o3
model, which showed better than human performance on the ARC-AGI benchmark
(built to measure progress toward AGI).
AI adoption progressed meaningfully at both individual and corporate levels.
The first nationally representative survey of generative AI adoption indicated
that in August 2024, 39% of the US population aged 18-64 used generative AI.
ChatGPT itself reached 200 million weekly active users (globally) in August
2024, 300 million by December and 500 million by April 2025. AI chatbots
accounted for more than 9% of search activity by this stage, according to
Wells Fargo. Furthermore, FinTech provider Stripe also reported that other AI
startups are growing at a significantly faster rate than the
software-as-a-service (SaaS) companies that came before them. The 100
highest-revenue AI startups on its platform took a median of 20 months to
reach $30m+ in annualised revenue, five times faster than for the equivalent
SaaS companies during the SaaS boom in 2018.
Against this bullish AI backdrop, the arrival of DeepSeek's R1 model in
February 2025 sent shockwaves through the tech industry and prompted a
meaningful correction in AI infrastructure stocks.
However, AI stocks rebounded as deeper evaluation suggested the impact may not
be as stark as first appreciated. While many of DeepSeek's innovations were
hailed as "impressive" by Western counterparts, there was considerable
scepticism related to its training cost claims. Furthermore, DeepSeek R1 is a
'text-only' model with a limited context window in contrast to other natively
multimodal frontier models. Even DeepSeek's disruptive inference pricing soon
came to be better understood as 'just' the acceleration of an existing path of
rapidly declining inference costs. More importantly, the market was reassured
by the fact that all hyperscalers raised capex post-DeepSeek. Sam Altman,
OpenAI's CEO, referenced GPUs "melting" under overwhelming consumer demand for
its new image generation capabilities, as well as broader demand.
Tariffs presented an incremental challenge to a more vulnerable AI narrative
post-DeepSeek as technology production is skewed to Asian countries with high
trade deficits with the US, while sector-specific semiconductor tariffs
brought further uncertainty. The sector faced geopolitical headwinds
throughout the fiscal year from Biden-era export controls (prohibited
customers) and latterly Diffusion Rules (which aimed to limit the amount of AI
compute that can be shipped to specific countries - later abandoned by
President Trump).
Despite strong AI demand, the DeepSeek rout meant the semiconductor sector was
the weakest subsector (SOX -14.3%) during the fiscal year. NVIDIA delivered a
series of outstanding quarters despite reported delays to its next-generation
Blackwell chips resulting in some stock price turbulence. Since January 2023,
NVIDIA's quarterly revenues have risen more than sixfold from $6bn to
>$40bn. Broadcom's custom ASICs proved to a be a worthy alternative source
of AI compute for hyperscalers and Shareholders alike (while Advanced Micro
Devices (AMD) struggled), and its dominant position in high-end merchant
silicon for AI networking benefitted from AI data centre investments. Other
networking stocks also benefited from the power/compute density theme and the
power complex became the first non-tech industry to be 'pulled into' the AI
theme as increased capex and larger compute clusters highlighted potential
future power bottlenecks.
The semiconductor sector also had to contend with weak end demand and
inventory digestion in many mature, cyclical markets including automotive,
industrial, PC and smartphone. Apple's results were uninspiring but were
overshadowed by excitement about a potential AI-driven iPhone upgrade cycle
following the (ultimately disappointing) release of Apple Intelligence, its
suite of AI features integrated into iOS 18 announced in June 2024. Investors
remain concerned about regulatory threats to Apple's services business,
particularly the multibillion-dollar advertising payments it receives from
Google to remain the default search engine on Safari.
TSMC - the world's leading semiconductor foundry - also experienced some
cyclical headwinds and, early in the Trust's fiscal year, reduced its
expectations for 2024 overall semiconductor industry growth (excluding memory)
to just +10% year-on-year (y/y), despite outlining a 50% AI compound annual
growth rate (CAGR) over the next five years. Cyclical weakness and TSMC's
dominance weighed on semiconductor equipment providers, which reversed their
earlier gains following foundry-related capex cuts at both Intel and Samsung
Electronics. Weak Q3 orders at ASML Holding and potentially tighter export
controls to China weighed on the group.
The internet sector performed reasonably well (NASDAQ Internet Index +11.4%),
led by Meta Platforms (Meta) where the AI story strengthened during the year
(Llama models; monetisation via existing businesses; wearables). Streaming
platforms Netflix and Spotify Technology delivered strong returns in a
volatile environment; both expanded their user bases while increasing
monetisation and profitability, solidifying their natural monopoly status.
Alphabet struggled despite further AI progress as investors became
increasingly concerned about its core search business coming under pressure
from AI chatbot competition - albeit in terms of usage rather than revenue at
this stage - as well as a series of more hostile regulatory developments.
Software delivered solid returns (IGV +14.2%) despite potential AI headwinds
with outstanding performances from Palantir Technologies (+405%) and Oracle
(+17%) offsetting challenges elsewhere. Microsoft (-4%) struggled despite
passing $13bn in annualised AI revenue as free cashflow estimates were
frequently revised lower on higher capex, and Azure repeatedly missed growth
expectations. An obviously strained OpenAI relationship and disappointing
CoPilot adoption/monetisation raised further questions.
Application software companies announced AI product enhancements and then
struggled to price for them to deliver the numbers to match the pro-AI
narrative. Others such as Adobe (-24%) suffered under the threat of new
AI-native competition. AI spending 'crowded out' traditional projects and
caused some enterprises to adopt a more considered investment approach given
the potential risk posed by AI to the existing software stack. The same issue
plagued most infrastructure software stocks where a lack of cloud/consumption
reacceleration was worsened by mis-execution and a challenging AI narrative.
Despite the worldwide CrowdStrike outage in July, cybersecurity proved another
relatively bright software spot, as fundamentals proved more durable than
elsewhere in software with AI likely to significantly expand the attack
surface.
Portfolio Performance
The Trust modestly underperformed its benchmark with the net asset value per
share rising +3.1% during the fiscal year versus an increase of +5.1% for its
benchmark, the Dow Jones Global Technology Index. The Trust's share price
declined by -1.2%, reflecting the additional impact of the discount increasing
from 7.4% to 11.3% during the period. Together with the Board, we continue to
monitor the discount and the Trust bought back 36.2 million shares during the
fiscal year, at an average discount of 10.4% to NAV (net asset value). The US
dollar weakened by -6.7% during the fiscal year which was a headwind to
absolute returns given the Trust's significant exposure to US-denominated
assets, although the impact was more modest on a relative basis.
The Trust's relative and absolute performance tracked its pro-AI positioning
with returns to the 23 January highs (+33.6% absolute; +393bps relative)
reflecting strong progress for the AI theme. However, DeepSeek and tariff
developments presaged a sharp correction in AI stocks which offset these gains
through the April fiscal year end. Relative performance was also negatively
impacted by significant large-cap outperformance with the Russell 1000
Technology Index (large cap) and Russell 2000 Technology Index (small cap)
returning +5.9% and -12.3% respectively in sterling terms. The sustained
underperformance of small cap technology stocks has made keeping up with the
(mega-cap dominated) index a longer-term challenge: Over the past three and
five years, small-cap have now trailed large-cap technology stocks by -63% and
-116% respectively. This has represented a considerable relative performance
headwind given our structural underweight exposure to large/mega-cap stocks in
a diversified portfolio, although the Trust's first-quartile performance
versus the Lipper peer group over these longer periods suggests this is widely
felt. On a more positive note, the Trust's NASDAQ (NDX) put options acted as
intended during the Q1 selloff, allowing us to maintain the (pro-AI) shape of
the portfolio, while reducing the downside beta during the sharpest part of
the drawdown. For the year, the puts added 41bps while our cash position
(average 3.4%) detracted by -16bps.
Despite the DeepSeek and tariff-induced selloff, many AI infrastructure stocks
across networking and the power complex still delivered positive relative
contributions during the year and, in many cases, were added to on weakness
including Arista Networks (+20%), Astera Labs (-28%), Celestica (+85%), Elite
Material (+29%), GE Vernova (+126%), Ciena (+36%), F5 Networks (+50%) and
Vertiv Holdings (-14%). However, some of the Trust's most significant relative
detractors were caught in the selloff, including Micron Technology (-36%),
Marvell Technology Group (-50%) and AMD (-42%). NVIDIA (+18%), the Trust's
largest absolute position at slightly over 10%, delivered a modest positive
relative contribution to returns.
Perceived AI leaders were important contributors including Axon Enterprise
(+83%), Cloudflare (+29%) and Tesla (+44%), supported by smaller positions in
some non-tech 'AI adopters' including Intuitive Surgical (+30%), Doximity
(+119%), RELX (+23%) and Cellebrite (+72%). Elsewhere, a handful of FinTech
holdings delivered strong returns, most notably Robinhood Markets (+179%),
Wise (+26%) and Adyen (+25%).
The internet sector was a bright spot, with dominant platforms including
Spotify Technology (+105%), Netflix (+93%), Roblox (+77%) and DoorDash (+40%)
delivering strong returns amid market volatility. These companies proved adept
at growing their user bases at the same time as increasing monetisation and
margin profiles. AppLovin (+258%), Meta (+20%) and Shopify (+26%) were the
strongest of the large-cap internet companies as positive revisions and
'cleaner' AI narratives were well received, although small overweights
rendered them modest relative contributors. Elsewhere, the lack of an Amazon
Web Services (AWS) recovery and volatile margins weighed on Amazon (-1%) while
concerns around AI disruption brought challenges to Alphabet (-9%).
MercadoLibre (+50%) shrugged off Latin American volatility and delivered
strong earnings upgrades, executing against a burgeoning e-commerce and
FinTech opportunity, while Alibaba (+50%) - repurchased during the year -
benefitted from an improved Chinese AI story post-DeepSeek.
The Trust benefitted from its structural underweight in application software
with a positive contribution from underweights in large index constituents
including Adobe Systems (-24%), Microsoft (-5%), Intuit (-6%), Workday (-6%)
in favour of an overweight in ServiceNow (+29%). However, underweight
positions in legacy software assets viewed as defensive or with a potential AI
story were a relative headwind, including IBM (+36%), Oracle (+16%) and SAP
(+52%). Palantir Technologies (+405%) also represented a headwind to relative
performance, although we were pleased to contain the impact with a small
position despite struggling with the valuation. Elsewhere in software, smaller
positions in mid-cap companies - including CommVault Systems (+53%),
Monday.com (+39%), Twilio (+51%), Klaviyo (+27%), Atlassian (+24%) and
DocuSign (+35%) - offset weakness in Braze (-30%) and JFrog (-21%).
Infrastructure software proved more challenging as a lack of recovery in cloud
consumption trends and underwhelming AI stories weighed on Confluent (-21%),
Elastic (-21%), MongoDB (-56%), Datadog (-24%) and Snowflake (-4%).
Cybersecurity was a mixed bag with CyberArk Software (+38%) delivering another
strong year but a poorly timed exit in CrowdStrike Holdings (+37%) following
the global outage was a disappointment. Other 'derivative' AI plays in
semiconductor equipment, where a cyclical slowdown, the threat of regulatory
blocks on (significant) sales to China and company-specific weakness at
Samsung Electronics (-35%) and Intel (-38%) offered a more challenging
backdrop. Headwinds from holdings in Disco (-37%), ASM International (-29%)
and BE Semiconductor Industries (-25%) were somewhat offset by Advantest
(+22%) and underweights in LAM Research (-24%) and Applied Materials (-29%).
First Solar (-33%) was also a significant detractor on the risk of Inflation
Reduction Act (IRA) subsidies being rolled back following Trump's victory.
Market outlook
The market backdrop is still likely to be driven by geopolitical developments
in the near term, specifically the effective tariff level. Our base case is
that the 'tariff episode' represents a recalibration rather than a full reset
of the status quo. Our view remains that it is not in global policymakers'
interests to provoke a deep global recession and is within their capacity to
avoid it. Recent political developments have led to an inherently more
volatile market outlook, but not necessarily an unattractive one for investors
with the capacity to absorb it. The growth outlook is now tepid but still
positive, and the consumer and labour markets are broadly resilient for now.
Deregulation and innovation (in the form of AI) offer significant upside
potential, while stagflationary risks from disappointing tariff outcomes,
immigration reform, geopolitical upheaval and growing public debt remain
causes of concern.
The market impact of political change is perhaps unsurprising in the context
of the widespread rejection of incumbent parties (and their policies) recorded
in the 'year of democracy' across the globe in 2024. Every single incumbent
party lost vote share in the 12 developed Western countries that went to the
polls in 2024. The causes of this shift have been variously attributed to the
impactof inflation, pressures arising from unchecked immigration and
diminishing state capacity amid growing public debt burdens. The result is
that equity markets have become more sensitive to political developments
addressing these issues; inflation, labour market and economic growth trends
are more exposed to trade and immigration policy dynamics than they have been
in recent years.
In terms of economic growth, the International Monetary Fund's April 2025
update noted that forecasts for global growth have been "revised markedly
down" so far this year due to tariffs and global inflation is expected to
decline at a slower pace. "Intensifying downside risks" dominate the outlook
amid a "highly unpredictable environment". A softer US outlook is the
consensus view, although not a recession which is likely if there is limited
progress on tariff negotiations: Bloomberg consensus in mid-May suggests 1.4%
US real GDP growth in 2025 and a 40% chance of a recession within 12 months,
although this number should fall as more trade deals are announced. The speed
and quantum of change in the effective US tariff rate will likely be the
largest swing factor in determining near-term growth.
On the inflation front, US core PCE (personal consumer expenditure) Price
Index is sitting at 2.6% and has been broadly stable over the past six months,
which should be a supportive backdrop for risk assets. Under the surface,
while goods inflation is near zero, services PCE ex-energy and housing (3.25%)
is holding up the stubborn 'last mile' to reach the 2% inflation target and
appears to be due to lagged inflation in areas such as housing, healthcare and
car insurance. Measures of long-term inflation expectations are generally
benign, with the 5yr5yr (the market-implied average inflation rate for the
five-year period that begins five years from today) remaining rangebound
between 2.1% and 2.4%, although the University of Michigan's 5-10-year
inflation expectations outlook staying above 4% is more concerning as tariffs
start to show up in expectations. This will get the Fed's attention given the
importance of maintaining well-anchored inflation expectations, but 5yr5yr and
breakevens are not yet signalling anything too concerning.
Financial conditions more broadly have loosened after tightening sharply in
early April and consumer spending remains "resilient, even with macroeconomic
uncertainty", according to Visa. Ten-year Treasury yields have been volatile
but have not broken out in either direction and credit spreads tightened to
below 2 April levels after blowing out during the Liberation Day disruption.
Against this backdrop, we expect the Fed to remain vigilant on inflation but
not in a hurry to cut rates until it has a better idea of the impact of
Trump's policies on the inflation and the labour market outlook. The
disinflation trend has been occurring for a while which gives conviction in
the overall process and, given most of the Federal Open Market Committee
believe the neutral rate is below current Fed funds (4.25-4.50%), the bias
will be to cut, should the inflation data allow it or the labour market data
require it. We will continue to monitor US yields, particularly the dollar,
for signs of a significant shift in the risk environment, as well as the
realisation of Trump's threats to curtail Fed independence.
Valuations appear extended given the geopolitical backdrop. High company
valuations present a challenging starting point for long-term future returns
but are poor predictors of near-term returns. We do not see valuations as so
high that they preclude further expansion, although the high starting point
does represent a long way to fall should the market environment deteriorate.
We are also aware of other market and economic measures that appear extended.
The rebound in the S&P 500 has been one of the strongest since 1928. US
households' allocation to equities has touched a record high and high levels
of retail participation in financial markets leaves them vulnerable to a
change in sentiment. The wealth effect also cuts both ways and a sharp
drawdown in asset prices could lead to a loss of consumer confidence and a
slowdown in spending.
The bull case centres on Trump's deregulatory and pro- business agenda taking
over as tariff headwinds fade and AI adoption supports an accelerating
economic and earnings growth picture. Negative investor sentiment and light
positioning also provide a more encouraging backdrop for forward returns.
The S&P 500 has registered two 20%+ years in a row, something which has
only occurred 10 times since 1871. Only during the 1990s bull market and the
Roaring Twenties did strong returns continue for another two years. On both
occasions, technology-led productivity booms were taking hold. This remains
central to the bull case for the market in our view. Productivity is
notoriously hard to measure - let alone forecast - and is subject to frequent
and material revisions. Technology plays a critical role but tends to appear
in aggregate macroeconomic data much later than its visibility would suggest:
"You can see the computer age everywhere but in the productivity statistics",
wrote economist Robert Solow in 1987.
Our base case is productivity gains from AI do not start to show up
meaningfully in aggregate statistics (which has historically required >50%
adoption), although at lower penetration levels there could be efficiency
gains and economic impacts on the labour market and certain industries. AI
adoption by end users has been faster than previous technology cycles. As per
the Real-Time Population Survey, 40% of the US population (18-64) reported
using generative AI to some degree in August 2024 and 28% used it at work.
This 40% adoption point took 12 years to reach following the introduction of
the PC and four years after the public launch of the internet. We are also
hopeful that Trump's deregulation agenda can enable faster adoption of AI
technologies than would otherwise have been possible.
We also must consider the risk of an AI bubble forming. As BoA puts it: "We
are far enough into the AI boom that equities will likely either accelerate
towards a more bubble- like state or unwind their already significant gains".
Volatility and prices rising together signal a bubble (as opposed to a mere
bull market), although these suggest we are closer to 1996-97 than 1998-99.
The combination of a potential asset bubble in AI and public policy
experimentation (tariffs; deregulation; tax cuts; immigration) could drive a
boom/bust cycle at odds with the low-risk, low-return, low-rate era that has
been in place since the GFC.
Market risks
The main risks to our market outlook are political and include tariff policies
weighing on growth and stoking inflation (stagflation), immigration reform
weakening the labour market and the looming threat of rising Federal debt.
Political instability and upward pressure on US fiscal deficits and national
debt have placed significant downward pressure on the US Dollar, which
weakened by -6.4% on a trade-weighted basis and by -6.3% versus GBP during the
Trust's fiscal year. Having benefited from USD strength over many years, the
Trust was - and could continue to be - negatively impacted by GBP strength /
USD weakness given the significant weighting of dollar-based assets in both
the Trust portfolio and the Dow Jones Global Technology Index around which it
is built. As a reminder, the Manager does not look to hedge this risk but does
actively manage FX exposure relative to the benchmark.
There is also the potential for further setbacks to the AI story which has led
markets higher, especially as it becomes more complex amid the frenetic pace
of innovation. We expect volatility will become more elevated and the market
environment more 'fat tailed'; 2025 so far has not disappointed in this
regard. Given the high valuation starting point, we expect - all else equal -
more frequent significant drawdowns to be a feature of this equity bull market
as policy uncertainty remains elevated.
The greatest risk to the market outlook near term is further arbitrary policy
actions from the Trump administration which hurt the economy and undermine the
institutions and behavioural norms which have underpinned political and market
stability. This may include a failure to reduce effective tariff rates (or
even a re-escalation), attempts to undermine central bank independence and/or
a strategic miscalculation which provokes an unintended negative consequence.
Growing deficits and debt burdens are perhaps the biggest issue for the
longer-term risk asset outlook. According to the Congressional Budget Office,
the federal deficit is projected to increase to $1.93trn in 2025, up 5.5% from
$1.83trn in 2024 and reaching 6.2% of GDP. Extending the 2017 tax cuts would
leave the total and primary deficit at 6.4% and 3.1% of GDP in 2024, at
uncomfortably high levels given that US debt-to-GDP is roughly 100% and could
reach 130% within a decade. While this may support higher nominal growth near
term, the risk of a rebound in inflation as well as the lurking threat of debt
markets being unwilling to finance such fiscal largesse at prevailing rates
could jeopardise the path of future interest rate cuts. Large government
deficits can also crowd out private investment and slow the creation of jobs,
thus driving further deficit spending to boost the economy and labour market.
If we were to look for imbalances in the economy that may need to be unwound,
the fact that US government debt is up $12.7trn since the depths of Covid
while nominal GDP is only up $9.7trn is sometimes cited as evidence that
fiscal largesse has caused distortions. Yet there appears to be no public
appetite for fiscal conservatism and public debt is set to rise above $100trn
in 2024, or about 93% of global GDP, and is projected to reach 100% of global
GDP by 2030, 10 points higher than in 2019. There are significant structural
drivers of the growing public debt burden, including the costs of an aging
population, increasing healthcare and climate adaptation costs and a step up
in defence and energy security spending due to growing geopolitical tensions.
This is not necessarily a problem for the market or the economy in the near
term ("It's a myth that expansions die of old age", according to former Fed
chair Janet Yellen), but rising debt-to-GDP should lead to higher interest
rates which could crowd out private investment and raises the risk of fiscal
dominance, constraining central banks' freedom of manoeuvre.
Changes to immigration policy may also bring market headwinds, although this
is by no means certain. Lower net immigration could put downward pressure on
both the supply and demand sides of the economy. In industries that employ a
high share of immigrant labour (e.g. food production; construction), sharply
lower net migration might put upward pressure on domestic worker wages. The US
economy has been able to grow faster than potential GDP growth over the past
two years in part due to the immigration surge boosting labour force growth,
so a reversal in that trend could prove a headwind - although this may be
offset by higher productivity from technology adoption and workers remaining
in jobs longer.
The Trump administration's early geopolitical moves have provoked significant
market volatility well beyond its tariff actions and have contained some
shocking elements - not least the party of Ronald Reagan openly siding with
the Russians in a war. The disastrous meeting between Zelensky, Trump and
Vance raised significant questions about the future viability of NATO and the
survival of Pax Americana. In terms of the impact on our outlook, we assume
that Trump's own instincts and preferences play an outsized role in
historically strategic policy, resulting in leadership that is unpredictable
and likely to further test the boundaries of executive authority.
The Middle East also remains in a fragile state with the potential for further
conflict between Israel and Iran. Of most concern is Taiwan, where the
potential risks associated with a miscalculation or accidental escalation are
significant, as Taiwan accounts for 60% of global semiconductor shipments and
more than 90% of leading- edge semiconductor manufacturing capacity. A war
game simulation estimated the potential impact on the global economy of a war
in the Taiwan Strait at c$10trn or 10% of global GDP, significantly larger
than the GFC or the pandemic. Taiwanese and Chinese stocks represented 10.7 of
PCT's NAV at fiscal year end as opposed to 7.9% of the Dow Jones Global
Technology Index. The potential impact of a deterioration in the political
situation would likely be felt far more widely across the PCT portfolio,
however, given Taiwan's centrality to the AI story, as well as the size of the
Chinese market as a source of end demand.
Despite overall constructive economic and company trends, the market outlook
is more complex than a year ago and appears more vulnerable to setbacks. The
nature of the US administration being both radical and mercurial has elevated
the risk profile. As one analyst put it: "One should keep extremely wide
confidence intervals in place when forecasting the administration's actions
and the downstream macroeconomic impacts". We do not see meaningful imbalances
in the economy that will require a sharp downturn to unwind, although we are
of course watching tariff impacts, labour market and inflation trends very
closely for signs of weakness that we can respond quickly to if required. We
expect higher volatility to become a more embedded feature of the equity
market.
We are also open to the potential that the move to a multi-polar world might
presage a more structural market regime shift under the surface where the US
moves from a disinflationary posture with secular stagnation headwinds
(dominated by demand-side shocks) to a more inflationary regime more exposed
to supply-side shocks. A higher- inflation/higher-growth/higher-volatility
environment could also see sustained rebuilding of term premia, which was
estimated to be negative for much of the past decade and would have
significant investment implications. It is too early to call a new regime (and
we will at best be fast followers in doing so), but we are alive to the idea
that the conditions for such a regime shift are increasingly apparent.
However, our overall outlook is positive because the AI story - albeit more
complex - remains the most exciting market (and perhaps even macro) story we
have come across, and it feels a high hurdle for investors to move
structurally away from equities when the optionality embedded in AI is
material in size and likely to play out over the next five years.
Technology Outlook
Earnings outlook
Increased spending on AI infrastructure meant 2024 proved one of the best
years for IT spending since the pandemic with growth of 7.7%, exceeding
earlier expectations (+6.8%) and well ahead of the 3.5% recorded in 2023. For
2025, worldwide IT spending is expected to further accelerate to +9.8% y/y.
While data centre systems spending is expected to decelerate to +23.2% y/y
from 39.4%, this still represents remarkable growth, driven by AI-optimised
servers where spending is forecast to exceed twice that spent on traditional
servers next year. In addition, all other spending categories are expected to
accelerate in 2025, led by software (+14.2%), devices (+10.4%) and IT services
(+9%). While these forecasts might be subject to some tariff-related
headwinds, 2025 was recently expected to be the best year for IT spending
since 2021 while 2024-25 may still represent the best back-to-back growth
since 1995-96.
For 2025, the technology sector is expected to deliver revenue growth of
11.7%, while earnings are expected to increase by 18%, the highest of any US
sector on both metrics. These forecasts are well in excess of anticipated
S&P 500 market growth, where revenues and earnings are pegged at 4.9% and
9% respectively. The technology sector's outperformance is expected to
continue in 2026 with early forecasts for 10.6%/16.6% comfortably ahead of
market expectations (6.2%/13.4%). While these forecasts may appear at odds
with tariff-related developments, corporate earnings have thus far proved more
resilient than feared. First-quarter earnings season has been supportive, as
(at the time of writing) 74% of S&P 500 companies have beaten on earnings
per share (EPS, with the median earnings surprise of 8.5% while Q1 earnings
growth is tracking at +12% versus the +6% consensus estimate at the start of
the year. Tariff concerns have been flagged in virtually every earnings call,
but the impacts have been largely contained so far. However, while
macroeconomic conditions may create more significant crosscurrents, we believe
technology fortunes this year will once again be determined by the path of AI
progress.
Valuation
The forward P/E of the technology sector contracted modestly over the past
year. Twelve months ago, valuations had rebounded to approximately 26x forward
P/E, up from c24x at the end of FY23. This marked a full recovery from the
post-pandemic compression, with valuations continuing to expand and reaching a
peak
of around 31x in the summer, before easing ahead of 2025. However, pronounced
market weakness during 1Q25 caused a sharp correction, with valuations falling
significantly before rebounding to 26x by fiscal year-end. Continued market
strength post-period has driven valuations higher still, with technology
stocks now trading at a forward P/E of 27.5x, above both the five-year (25.6x)
and 10-year (21.7x) averages. This reflects elevated broader market valuations
and the sustained momentum of AI as a central investment theme.
The relative P/E of the technology sector, having recovered to post-bubble
highs (1.4x) in 2023, ended 2024 broadly flat. However, this stability was
interrupted by the DeepSeek-led market selloff in 1Q25 which saw the sector's
premium compress to just 1.1x, its lowest relative level since the pandemic.
The recent market recovery has helped lift this back to 1.35x. While this may
suggest more limited near-term valuation upside, we believe that continued AI
progress could support a structural re-rating of the sector, mirroring the
upward valuation drift seen during the internet cycle of the mid-1990s.
Mag-7 update
Of course, the valuation question remains significantly influenced by a select
group of mega-cap technology stocks that as well as substantially driving
returns last year, also dominate indices. Despite this, many of our earlier
Mag-7 observations remain unchanged - they are unique, non-fungible assets
trading at extended, but not excessive valuations. This reflects the fact that
Mag-7 outperformance has largely tracked the group's relative earnings
progress, with valuation expansion playing a secondary role - recently, the
Mag-7 accounted for 33.4% of the S&P 500's market cap and 25.3% of its
earnings - a similar ratio to this time last year, when these companies
comprised about 29% and 22% of market cap and earnings, respectively.
Following recent weakness in several of the Mag-7, the group is, at the time
of writing, trading at the lowest valuation premium to the S&P 493 since
2019.
However, this year we are more focused on the sustainability of the mega-cap
group's growth profile, rather than valuation. Earlier gains together with
aggressive AI investment suggest future margin gains may become more difficult
to deliver. At the same time, rising capital intensity has impacted free
cashflow with estimates for this year at Alphabet, Amazon and Meta having
fallen 20-25% year-to-date, according to Morgan Stanley.
Given the strong correlation between earnings revisions and recent Mag-7
performance, negative revisions are unlikely to be well received by the
market, nor is the evolution to more capital-intensive business models likely
to be straightforward. Investors may also interpret the direction of earnings
revisions as indicative of whether AI-related spending is offensive or
defensive, driven by the pursuit of new opportunities or aimed at protecting
existing markets. As investors we cannot know the answer to this critical
question (until it is too late) because companies never admit to being on the
wrong side of technology change. However, new technologies often begin as
complements and end as substitutes, which explains why previous technology
cycles have rarely been kind to incumbents, with nearly 50% dropping out of
the top ranks every decade.
The good news is that today's market leaders are hyperaware of obsolescence
risk, as reflected in their massive R&D investments. In 2023 alone, the
top five tech companies spent $223bn on R&D, an amount 1.6x greater than
total US venture capital (VC) spending. As such, we are not yet concerned
about the near-term risk posed to Mag-7 by AI. Rather, we wonder if the
negative reception to sharply higher hyperscale capex (from Alphabet, Amazon
and Microsoft) signals the beginning of a new phase where these companies
become less effective AI conduits. Of course, we will continue to evaluate
each company on its individual merits and are willing to maintain large
absolute weightings in these unique, category-defining assets. However, our
null hypothesis has shifted from 'half-full' to 'half-empty,' as AI-driven
risks to existing profit pools and the diminishing value of incumbency become
more apparent. As a result, we have increased our relative underweight
positioning in long-term holdings we find less compelling at current levels
such as Alphabet, Apple and Microsoft.
Disruption ahead
The idea of previous winners becoming less effective conduits for AI appears
to be already playing out within the software sector, evidenced by slowing
industry growth, widening disparities in company performance and an
increasingly uphill AI narrative battle. Earlier hopes that leading SaaS
companies could monetise AI through premium-priced products have largely gone
unrealised. Adobe struggled to drive the adoption of Firefly, a task
complicated by rapid AI advancements elsewhere, such as Google's remarkable
video-generation model Veo2 as well as OpenAI's Sora. Microsoft, despite its
deep AI investments, has failed to show meaningful revenue acceleration from
Copilot, even as Azure benefited from AI-driven workloads. Meanwhile, Workday
recently lowered its medium-term revenue growth expectations, reinforcing
broader concerns about industry deceleration.
Consumption-based software alternatives have fared little better - despite
easing headwinds from cloud optimisation, growth has failed to reaccelerate.
Weak execution, often symptomatic of a slowing growth environment, has further
weighed on infrastructure stocks that were initially seen as better positioned
to capture AI-driven workload growth. Additional negative developments include
elevated executive turnover, further headcount reductions and limited
strategic M&A beyond the industrial software subsector. Against this
backdrop, the latest phase of post-pandemic pivot from growth to profitability
(the private equity playbook) has gone unrewarded by a market increasingly
concerned about terminal growth rates and obsolescence risk.
This concern appears well placed, as we believe AI represents a greater
existential threat than an opportunity for many incumbent software providers -
a view we outlined last year. Today, AI-assisted code generation is
increasingly challenging the notion of 'code as a barrier' and every
improvement in near zero-cost AI-written code further diminishes the
standalone value of existing proprietary platforms. Looking ahead, AI is
likely to automate many tasks currently performed by knowledge workers,
reducing reliance on the very software tools designed to support them.
Limited strategic M&A
We believe potential disruption to pre-AI-vintage companies has played a large
part in the dearth of strategic software M&A in recent years. Last year,
deal value increased by 23% y/y (following a dire 2023) helped by private
equity activity, which saw Everbridge, Instructure, Smartsheet and Zuora put
out of their public market misery. There were also several strategic
acquisitions, including IBM's acquisition of HashiCorp, alongside a notable
wave of consolidation in design and industrial software. Synopsys' $35bn
acquisition of Ansys was the largest deal of the year, while Emerson acquired
AspenTech for $15bn and Siemens snapped up Altair for $10.3bn. Given NVIDIA's
aspirations in this domain including Omniverse - a 3D collaboration platform -
and its newly introduced Cosmos for accelerating physical AI systems, these
high-multiple exits in simulation software may soon look inspired.
Looking ahead, expectations are for a further recovery in M&A activity
this year, bolstered by a more accommodative regulatory environment under the
new administration and over $2trn in private equity and venture capital dry
powder. AI could serve as an additional catalyst, with subscale public and
private companies likely seeking stronger partners just as some
well-capitalised large-cap companies look for acquisitions to offset slowing
organic growth.
Cloud update: darker clouds ahead?
As expected, the easing of cloud optimisation headwinds and a surge in
AI-driven demand propelled revenue growth of over 20% among the three leading
public cloud providers in 2024. AWS ended the year with an estimated 52%
market share, down from 55% in 2023, as Microsoft Azure (now at 31%) captured
most of these share gains, helped by its strategic relationship with OpenAI.
Google Cloud maintained strong double-digit growth, holding a 13% share,
though it remains a distant third. Meanwhile, Oracle Cloud Infrastructure (4%)
has emerged as a fast- growing challenger, driven by competitively priced GPU
offerings and its role in powering OpenAI's model training.
All cloud platforms continue to benefit from AI-related demand. In Q4,
Microsoft attributed 1300bps of Azure's +31% revenue growth to AI up from
600bps of +28% Azure growth this time last year. In addition, Microsoft's
overall AI revenues exceeded a $13bn run rate in 4Q24. While Amazon does not
quantify AWS's AI-specific revenue, it called it "a multi-billion-dollar
annualised revenue run-rate business". Likewise, Google Compute Platform (GCP)
reported "very strong" AI demand. We continue to believe that public cloud
will remain the default choice for compute and storage - Gartner estimates
that 70-75% of new enterprise AI applications will be built and/or deployed
primarily in cloud environments.
However, the primary challenge for the cloud incumbents is how to reaccelerate
growth in a market already worth more than $320bn and where penetration has
risen sharply. A recent Morgan Stanley CIO survey suggests that 42% of
workloads were already in the public cloud in 4Q24, which is set to increase
to 58% within three years. All things being equal, higher cloud penetration
rates should equate to lower future growth and greater economic sensitivity.
This may have been apparent in 4Q24 with all three public cloud vendors
experiencing sequential deceleration and aggregate year-on-year growth falling
to 20.7%, down from 22.2% in the previous quarter.
AI to the rescue? Maybe.
The hope is that cloud infrastructure and SaaS growth reaccelerate as
enterprise AI adoption increases from just 3% of workloads today to an
estimated 10% by 2027. This is one of the key debates for 2025 and beyond.
However, history suggests that AI monetisation may prove less straightforward
than many incumbents expect as others take the opportunity to challenge in
adjacent markets, competing away the upside and potentially more. Early signs
of substitution risk are already visible, with IT budgets increasingly
favouring AI-related initiatives at the expense of traditional compute and
storage. Likewise, cloud optimisation could prove a permanent feature, rather
than a limited post-pandemic adjustment as AI excels at uncovering
inefficiencies.
The shift to accelerated compute - the foundational architecture of AI - may
also be ushering in a new era of competition for the public cloud giants. This
could come in the form of hybrid compute which may be better positioned than
it was pre-AI, able to optimise data pipelines by running different workloads
in the most suitable locations. Gartner predicts that 90% of organisations
will adopt a hybrid cloud approach by 2027. At the same time, established
hyperscalers will also have to contend with so-called neo-clouds - new
industry entrants (often former crypto miners) offering low-cost GPU rentals.
Their advantage lies in ready-available to power and preferential access to
NVIDIA GPUs. Over the past year, $20bn has been invested across 25 neo-cloud
providers with CoreWeave leading the pack and doubling its data centre
footprint. While the long-term viability of these neo-clouds remains
uncertain, they are currently gaining share, pressuring GPU pricing and
challenging industry assumptions, reinforcing the idea that Amazon is not the
Walmart of cloud computing, but rather its Neiman Marcus.
In addition, there are other vast AI clusters being built outside traditional
public cloud platforms. In October 2024, Meta CEO Mark Zuckerberg revealed
that Llama 4 models were being trained on 100,000+ Nvidia H100 GPUs, while
xAI's Colossus (used to train Grok 3) has 200,000 GPUs, making it the largest
known AI compute cluster. Others have been built by TikTok owner ByteDance,
while Tesla runs 35,000 H100 GPUs, alongside its in-house Dojo supercomputer.
While these clusters are for internal use (to train models) today, history
says this could change; after all, AWS began as Amazon's internal compute
platform before it launched EC2 and S3 to external customers in 2006. Today,
xAI uses Colossus to both train and run inference workloads for Grok. Other AI
leaders are also becoming more self-sufficient, with many choosing to design
their own silicon to reduce dependence on NVIDIA. At best, this may reduce
their overall reliance on cloud providers. At worst, they might become direct
competitors, scaling their infrastructure just as AWS did when it redefined
the cloud industry.
The hyperscalers (and leading SaaS vendors) may also have to contend with
future competition from AI Labs such as OpenAI and Anthropic. Historically,
OpenAI relied entirely on Microsoft Azure for its infrastructure. However,
this relationship is evolving, as evident from the $500bn Stargate
announcement in January 2025 that saw Microsoft transition from OpenAI's
exclusive infrastructure provider to a right of first refusal (RoFR) partner.
This change likely reflects the differing priorities of a public company
accountable to Shareholders and a private company aiming squarely for
artificial general intelligence (AGI. OpenAI is also in flux, with CEO Sam
Altman attempting to transition the company into a for-profit public benefit
corporation (PBC) able to attract necessary investment. For now, Microsoft and
OpenAI have reaffirmed their core partnership, which is set to remain in place
through 2030. However, OpenAI has launched several applications that compete
(or might compete) with Microsoft including SearchGPT and Operator, an agentic
offering. More recently, OpenAI hired the CEO of Instacart as its CEO of
Applications, to oversee its efforts to develop and scale customer-facing
products.
AI Cycle Update
Rapid adoption
Last year we argued that AI diffusion was likely to proceed rapidly, informed
by the presence of essential AI building blocks - six billion smartphones,
vast datasets and cloud infrastructure - and by historical adoption trends
showing that implementation lags halved with each major general purpose
technology (GPT): c80 years for steam, c40 years for electricity, and c20
years for ICT (Information and Communication Technologies). Today, it is clear
that AI adoption is significantly outpacing historical trends with OpenAI
recently announcing 500 million weekly active users, up from more than 100
million from February and adding more than a million users in a single hour.
Similarly, Meta revealed in January that its AI assistant (Meta AI) had
reached 700 million MAU (Monthly Active Users). More recently, Microsoft
processed over 100 trillion tokens in its most recent quarter, up 5x y/y with
a record 50 trillion tokens processed in March alone.
Although the pace of enterprise adoption has trailed consumer adoption, AI has
become a strategic imperative. A recent McKinsey survey revealed that 72% of
companies now actively use AI, up from 50% observed consistently over the past
six years. Echoing this, half the S&P 500 constituents referenced AI on
their Q4 2024 earnings calls - marking an all-time high. CIO surveys also
consistently reveal that AI is the highest IT spending priority for 2025,
followed by cybersecurity and digital transformation, both of which are likely
being pulled into the AI conversation. Meta's open-source Llama model, along
with its derivatives, has already been downloaded 650 million times while
corporate use cases continue to extend well beyond software copilots. Walmart
recently announced it had used GenAI to create or improve over 850 million
pieces of data in its product catalogue, work that would have required "nearly
100 times the current headcount to complete in the same amount of time".
Economist Erik Brynjolfsson (who expects AI to drive "at least 3%" average US
productivity over the coming decade) believes we are "near the bottom of the
productivity J-curve for AI". If so, corporate AI adoption should accelerate
before long, although many companies are likely to remain guarded about
disclosing the specifics of their AI "secret sauce."
Model progress
AI models made significant gains during a frenetic 2024. Frontier models made
continued progress, led by OpenAI's GPT-4o, Google's Gemini 2.0, and Meta's
Llama 3. While architectural advances and data curation improvements played a
role, most of these gains came from post-training techniques and test-time
scaling. Post-training model optimisation helped GPT-4o and Gemini 2.0 easily
surpass previous benchmarks set by GPT-4 in code generation and multimodal
understanding. GPT-4o also introduced a (remarkable) voice mode, enabling
real-time, voice-based conversations, with the model also able to interpret
non-verbal cues. Open-source models also continued to make strong progress,
particularly in terms of cost efficiency with Llama 3 said to have achieved
performance comparable to GPT-4 at just 1/50th of the cost. While OpenAI's
GPT-5 was delayed, xAI released Grok 3 - the first Gen3 model (between 10 and
10 FLOPs of compute), an order of magnitude (OOM) greater than existing Gen2
models. Achieving the highest benchmark scores of any base model to date, Grok
3 suggests that pre-training scaling laws continue to hold for a new
generation of AI.
A new scaling vector: test-time compute
However, the most significant gains last year were generated beyond scaling
pretrained models. In September, OpenAI released its o1 models. Unlike most
LLMs (large language models) which are zero-shot (processing inputs and
generate outputs rapidly, relying only on the knowledge learned during
training), o1 introduced the world to reasoning models which can generate
internal chains of thought (CoT) at run-time. This enables the model to
perform human-like multi- step reasoning; by breaking down complex tasks into
manageable steps (thinking' about the question) o1 significantly outperforms
GPT-4o on most reasoning-heavy tasks and exceeds human PhD-level performance
on a benchmark of physics, biology and chemistry problems.
Reasoning models perform predictably better the longer they are allowed to
'think' at test time (inference). As such, so-called test-time compute
represents a powerful new approach for advancing AI capabilities,
complementary to traditional 'brute force' model scaling. There has already
been a rush of new reasoning models (including OpenAI o3, Anthropic's Claud
3.7 and DeepSeekR1). In addition, both OpenAI and Google have introduced
advanced reasoning capabilities (branded 'Deep Research') to their flagship
consumer offerings. These allow the models even longer to complete tasks, with
OpenAI's Deep Research Mode taking between 5-30 minutes, depending on the
complexity of the query.
Running out of benchmarks
Less than three years after the introduction of ChatGPT, OpenAI's o3 can solve
25% of problems on a Frontier Maths benchmark, where no other model has
exceeded 2% previously. Even more remarkably, o3 achieved
76-88% on the ARC-AGI benchmark (built to measure progress toward AGI) as
compared to 5% with GPT-4o in early 2024. If "GPT-4 offered us a glimpse of
the future", reasoning models are surely early evidence of superhuman AI. They
also represent a critical step towards agentic AI while accelerating the
timeline towards AGI.
Capex strength set to continue
Model progress, intense competition and AGI aspirations resulted in a
remarkable year for capex with the big four hyperscalers spending $226bn (+70%
y/y) during 2024. Earlier concerns about a potential slowdown were lost in a
blaze of upward capex revisions with estimates for 2024 rising 34% and 48%
respectively during the year. This momentum continued into 2025 as each of the
hyperscalers raised their expected capex budgets for the year during their Q4
reports.
Strong AI venture funding should also remain supportive for training and
inference spending with $110bn (+62% y/y) raised in 2024. In October, OpenAI's
$6.6bn raise took its valuation beyond any VC-backed technology company in
history at the time of its IPO (initial public offering) while Anthropic
raised an additional $4bn from Amazon last year. AI VC funding has accelerated
into 2025 with AI companies raising $67bn in 1Q25 (+246% y/y) even though
overall VC spending has only just recovered to 2021 levels.
The pursuit of Gen-4 models (GPT-6 and beyond) is expected to further drive AI
capex as they are likely to require more than one million H100s equivalent
costing tens of billions. However, these mega-clusters
are significantly more power hungry as they move from Gen-3 (100MW) to Gen-4
(1GW). For reference, 1GW of power is equivalent to half the estimated output
of the Hoover Dam or the amount required annually to supply 3.2 million UK
homes. Current estimates suggest that by 2028, data centres could consume up
to 12% of projected US electricity use. This power imperative explains why
power-related stocks have been 'pulled in' to the AI trade as hyperscalers
scramble to acquire DC sites with readily available power and sign long-term
Power Purchase Agreements (PPAs). The totemic deal between Microsoft and
Constellation Energy signed in September which will see the infamous nuclear
power facilities reopened on Three Mile Island, captured the zeitgeist
perfectly.
Capex trade, interrupted
However, capex-related stocks were severely challenged by the release of
DeepSeek R1 model in January as a small Chinese AI lab had seemingly closed
the performance gap with US models at a fraction of the cost ($6m versus $100m
spent on GPT-4). This sent shockwaves through the technology market, wiping
out $1trn of market capitalisation as investors questioned the sustainability
and necessity of current AI capex.
While it may still be too soon to fully assess the implications of DeepSeek's
impressive innovations, the "just $6m" training costs have been widely
debunked; reports indicate the company deployed tens of thousands of GPUs
costing over $1bn. Likewise, cheap inference pricing is perhaps best viewed as
another example of the ongoing, rapid decline in inference costs. As Anthropic
CEO Dario Amodei noted, DeepSeek models are "roughly on the expected cost
reduction curve that has always been factored into… calculations". For
instance, input token cost price declines between OpenAI's o1-mini (September
2024) and the o3-mini (January 2025) represent an annualised price reduction
of approximately 75%. These price reductions are possible because of 2x cost
improvements coming from new hardware, as well as 4-10x improvement from
algorithmic progress per year. As such, collapsing inference costs have been
described as a "hallmark of AI improvement".
Indeed, collapsing inference costs have not prevented Microsoft growing its
Azure AI revenues to a $13bn run rate nor have they derailed OpenAI's own
revenue projections which are reportedly now forecast at $13bn in 2025 rising
to $125bn in 2029, up from expectations of $12bn/$100bn last autumn. This
points to a volume explosion in token usage already with lower inference
pricing likely driving significantly higher revenues via higher usage (more
users, more use-cases, more advanced models etc.). Reasoning models consume
significantly more tokens than traditional frontier models because they only
'think' when generating tokens; deep research-type queries on OpenAI's o3 are
said to require 2,000x more compute than o1 preview.
Reasoning models are also the foundation of agentic AI, enabling multi-step
problem-solving and autonomous decision-making without human intervention. Not
only do AI agents likely require 50-100x more tokens than single- shot
requests, but we also expect agentic AI to act as a force multiplier in the
coming years, scaling far beyond human-driven usage and current comprehension.
NVIDIA CEO Jensen Huang has suggested that inference demand could increase by
a factor of one million, or even one billion.
In time, these projections may even prove conservative should more efficient
AI lead to far higher usage. The idea that greater efficiency can
paradoxically lead to increased rather than decreased overall consumption of a
resource was first articulated by William Jevons in 1865. Jevons observed that
improved efficiency in coal usage actually drove up coal demand instead of
reducing it by unlocking new, previously non-existent (invisible) markets at
previous (higher) price points. History is littered with examples of Jevons
paradox, including the steel industry transformed by the Bessemer process, the
transition from DC to AC electricity and of course, Moore's Law. In the
immediate DeepSeek aftermath, Microsoft CEO Satya Nadella exclaimed: "Jevons
paradox strikes again! As AI get more efficient and accessible, we will see
its use skyrocket". While this came as little immediate comfort to AI
infrastructure-related stocks, we expect "any published DeepSeek improvement
(to) be copied by Western labs almost immediately". As such, all future AI
models should enjoy better performances at a lower cost which is likely to
accelerate both AI adoption and model progress.
A less straightforward capex story
While most infrastructure-related stocks have rebounded strongly following the
DeepSeek-related selloff, we remain bullish on the sustainability of AI capex
growth. In part, this reflects that despite DeepSeek uncertainty, aggregate AI
capex at the US hyperscalers accelerated in 1Q25 reaching $81bn (+71% y/y)
while FY25 capex growth estimates increased to +44% y/y from +38% earlier.
That said, the advent of new scaling vectors means that the capex story has
become more nuanced. Today, reasoning (or test-time compute) is "early on the
scaling curve and therefore can make big gains quickly". However, once it and
other optimisations have been more fully exploited, we still expect the path
to maximum capability will be to train the largest, most dense model feasible.
This assumes scaling laws continue to hold as they provide a high degree of
the predictability for the returns on incremental investments in the (costly)
pretraining process.
For now, scaling laws appear intact. In November 2024, Jensen Huang said
"foundation model pre-training scaling is intact and is continuing" while Sam
Altman posted "there is no (scaling) wall". However, scaling laws are likely
to plateau naturally over time as the rate of AI model improvement follows an
exponential decay. What this means is that the industry "will have to work
harder over time to get further performance improvements.
In today's AI race, some of the contenders may decide that the diminishing
returns and escalating costs are no longer justifiable, leading them to
withdraw. This dynamic could explain the changing nature of the
Microsoft/OpenAI relationship. Others may consider the performance of recent
'fast follower' models like DeepSeek and conclude the race is in fact, over.
Looking at the number of active models above 10 FLOPs suggests that the field
has already significantly thinned.
However, and continuing with the parallel, it is well understood that marginal
improvements in sport yield outsized gains, with fractions of a second
separating champions from the rest of the field. In elite sprinting, every
0.01 second improvement is the result of months, if not years of optimisation.
Usain Bolt's world record 9.58 second 100 metre sprint in 2009 was only 1.6%
faster than the record set by Asafa Powell in 2007, but that difference
cemented his status as the fastest person in history. In endurance sports, the
same principle applies; Eliud Kipchoge's sub-two-hour marathon in 2019
required breakthroughs in shoe technology, drafting strategies and meticulous
pacing. At the cutting edge of performance, the compounding effect of marginal
gains determines greatness.
The biggest opportunity
While these factors (accuracy; emergent behaviour; multimodality) explain our
continued excitement around training-related AI capex, the most significant
driver of today's AI spending remains the size of the prize. According to
Bernstein, information workers represent 34% of the global labour force and
contribute $20trn to GDP. A 20% productivity uplift could represent a $4trn
opportunity and a potential $800bn in annual willingness to spend. If a 20%
uplift appears optimistic, consider that McKinsey believes AI could automate
30-50% of tasks in about 60% of occupations by 2030. In the longer term, the
opportunity is likely to be significantly greater should AI begin to
substitute rather than augment human labour.
Much more than Moore
Unlocking this vast opportunity rests on continued advancement in model
capabilities which, as outlined above, are progressing rapidly. As we have
previously argued, humans struggle with non-linear change particularly when
compounding over many years. The exponential scaling of semiconductors (as
predicted by Moore's Law) was driven by an improvement of 1-1.5 orders of
magnitude (OOMs) per decade. In contrast, AI scaling has been progressing at
one OOM per year or 5-6x faster than Moore's Law. As a reminder, one OOM is a
10x difference, whereas 3 OOMs is equivalent to 1,000x. This exponential
scaling is evident in the cost of AI, which - for a constant level of
intelligence - has been declining by approximately 10× every 12 months,
compared to Moore's Law, where the cost of silicon per square inch
historically fell by around 2× every 18 months. This explains why leading
models today are said to be "running out of benchmarks" where their
predecessors just a decade ago "could barely identify simple images of cats
and dogs". As one AI commentator argues, "we are racing through the OOMs, and
it requires no esoteric beliefs, merely trend extrapolation of straight lines,
to take the possibility of AGI…by 2027 extremely seriously".
AGI coming into view
When we first referenced AGI in last year's Annual Report, we were careful to
downplay the likely timeline of so-called 'superintelligence'. Today, it feels
increasingly possible that within a few years AI might be "able to understand,
learn and apply knowledge across a range of cognitive tasks at a human-like
level". Sam Altman has said that "systems that start to point to AGI are
coming into view" with superintelligence possible "in a few thousand days".
Elon Musk believes "AI will supersede the intelligence of any single human
being by the end of 2025". Perhaps more importantly, Musk has suggested that
the "probability that AI exceeds the intelligence of all humans combined by
2030 is 100%". Metaculus (a community-driven forecasting platform) anticipates
the first general AI system by 2030, a year ahead of its forecast last year.
Agentic AI first
While there are still many dissenting voices around the AGI timeline, most AI
commentators believe the next step on that journey is agentic AI with 2025
billed as the "year of agents". Like AGI, agentic definitions vary, reflecting
a spectrum of agentic capabilities not dissimilar to differing levels of
autonomy in vehicles.
Agentic AI comprises compound AI systems that chain together multiple
task-specific models where the LLM decides the control flow of an application.
The remarkable gains in reasoning models have paved the way for a new wave of
AI agents designed to bridge the gap between LLM-based assistants (tools) and
human agency. There has already been a flurry of agentic announcements from
software companies such as Salesforce and ServiceNow. However, we are more
focused on product previews such as OpenAI's Operator - "an agent that can use
its own browser to perform tasks for you" - and Google's Project Mariner an
experimental AI agent that can "think multiple steps ahead". Multiple Chinese
AI labs have also launched agents, such as UI-TARS from ByteDance and Manus
from Chinese startup Monica. Gartner predicts that by 2028, one-third of all
GenAI interactions will use agents like these. Over time, these agents are
likely to gain increasing autonomy, shifting decision-making authority away
from the human in the loop toward the underlying LLM itself. At that point,
they might more closely resemble the programs depicted in the movie Tron
(1982), which independently operate and compete on behalf of their users,
marking a significant evolution from today's human-guided 'copilot' systems.
Today, agentic AI remains nascent, with hallucination (error) rates still
incompatible with agency. However, Operator provides our first real glimpse
into a world where AI is no longer a tool used by humans, but instead performs
tasks previously done by humans. Today, basic AI agents are already creating
Neon (serverless) databases at four times the rate of human developers. End
users simply describe what they want to build and AI agents autonomously
initiate database operations, manage data workflows and scale infrastructure
effortlessly.
Technology/AI risks
Given its centrality to sector fortunes, the key risk posed to technology
stocks relate to AI. The Trust's significant exposure to AI means any setbacks
to AI fundamentals or investment narrative could be magnified in the
portfolio. These risks may include a slowdown in the pace of AI model
improvement (including a tapering of the 'scaling laws' observed so far),
production challenges presented by the rapid development cadence of each
generation of leading-edge semiconductors (as we saw with NVIDIA's Blackwell
delay) and other bottlenecks in scaling AI such as sourcing sufficient power
for data centres and ever-larger datasets to train models. Other AI risks
include the advent of 'cheaper' models like those introduced by DeepSeek that
challenge capital intensity and negatively impact hyperscaler capex.
Disappointing AI adoption (undermining investor confidence) or very rapid
adoption (provoking public or political backlash) could also present
challenges, although neither is likely to derail the technology's progress in
the longer -term. There is also the risk that despite improvement, AI model
hallucination rates remain incompatible with agentic AI, potentially delaying
or preventing AGI.
Regulation also poses a significant threat to AI progress should it escalate
sharply. While export controls aimed at slowing China's AI progress may become
more effective as scaling continues, additional restrictions could stifle
innovation while insufficient oversight could accelerate AI proliferation.
Given that DeepSeek was heralded as AI's 'Sputnik moment', greater AI
competition between the US and China could presage a new AI 'space race'. The
original Sputnik moment led to the creation of NASA in 1958, with US space
spending soaring from 0.1% of GDP in 1958 to over 4.4% by 1966 , culminating
in the 1969 moon landing. A similar trajectory may now unfold in AI, as
sovereign investments surge. However, AI competition, particularly if the
industry continues to make rapid progress towards AGI, could increase the
likelihood of Manhattan Project-type regulatory intervention. However, this
might simply slow US progress while shifting leadership to more permissive
nations, rather than mitigating risks.
On a more prosaic level, regulation also presents a significant risk to the
sector should behavioural remedies challenge the natural monopoly status of
some of today's mega-caps. We are hopeful the worst-case scenarios will be
avoided given the critical role mega-cap US technology companies will play in
counterbalancing the AI threat from China. Indeed, a further deterioration in
US/Sino relations may present a greater risk and any escalation in tensions
around Taiwan would likely put pressure on the semiconductor industry.
Other risks include tariffs which are impossible to fully assess other than at
a very high level due to moving targets and the inherent lack of clarity (e.g.
the semiconductor sector is still undergoing a Section 232 investigation).
Even as these waypoints are reached, there is significant scope for exemptions
and/or phased implementations given the need to deliver US AI supremacy.
Valuation also remains a key risk, particularly following the absolute and
relative rerating in the technology sector as well as the broader market.
While we believe the rerating is appropriate given AI progress, it does leave
valuations more exposed to disappointment, both within and beyond the
technology sector. However, we remain dismissive of the notion that AI stocks
are in a bubble, akin to the dot.com period in the late 1990s. While there are
features of today's market that rhyme with that earlier period, we do not
believe investors are really considering trillion-dollar market opportunities,
scaling laws and an accelerated path to AGI. Factors that would challenge this
view include much higher valuations (technology traded above 2x the market
multiple in 2000), a 'hot' IPO market dominated by immature AI companies and
the application of new valuation metrics necessary to justify elevated
valuations. None of these conditions exist today.
Concentration risk
For several years, we have consistently reminded Shareholders of the
concentration risk embedded both within the Trust and in the market
cap-weighted benchmark around which the portfolio is constructed.
Following another period of pronounced large-cap outperformance, this risk
remains elevated. At year-end, our three largest holdings - NVIDIA, Apple and
Microsoft - accounted for approximately 23% of NAV and 31% of the benchmark.
Our top five holdings, which also include Meta and Broadcom, represented
around 34% of NAV and 50% of the benchmark.
As a large team with a growth-centric investment approach, we would welcome
the opportunity to move materially underweight positions in the largest index
constituents should we become concerned about their growth prospects, their
positioning in an AI-first world or if we believe there are more attractive
risk/reward profiles elsewhere. That said, large-caps continue to dominate
small-caps, and the strong performance of the Mag-7 during 2024 serves as a
reminder of the opportunity cost associated with a premature move away from
unique assets, many of which still capture the zeitgeist of this technology
cycle.
However, as previously discussed, there may be some early evidence of AI
disruption beginning to challenge the investment narratives at certain
mega-caps, including Alphabet and Apple. We have held both positions for close
to 20 years but have meaningfully reduced them over the past 12 months. We
remain unafraid and prepared to materially underweight or exit large index
constituents should we become concerned about their growth or return
prospects, or AI positioning. We will continue to communicate our thoughts and
positioning as they evolve, just as we did when we pivoted the portfolio
towards AI. For now, Shareholders should expect lower equity exposures to
these stocks (potentially augmented by call options to mitigate upside risk)
and greater daily variance in terms of our relative performance.
Conversely, while the Trust can hold up to a full benchmark weight subject to
a maximum limit of 15%, we remain unlikely to do so; we struggle with the idea
that we are reducing risk by making the portfolio ever more concentrated.
Instead, our intention remains to construct a diversified portfolio comprising
the best of what the benchmark has to offer, plus a selection of growth
technology companies which investors may lack the resources or expertise to
discover, analyse and monitor for themselves. We continue to believe that a
diversified portfolio of growth stocks and themes capable of outperformance
and constructed to withstand investment setbacks, should deliver superior
returns over the medium term, particularly on a risk-adjusted basis.
Conclusion
The Trust has fully participated in the recent market rebound as we maintained
our constructive positioning. This reflects our conviction in the significant
AI progress and strong company results under the surface, even amid market and
geopolitical volatility, and our belief that it remains within policymakers'
interests and capacity to avert a severe global recession. NASDAQ puts helped
to soften the Trust's beta during the sharpest phase of the market drawdown,
as intended, and we have retained some protection given the timeline for
progress on tariffs is short and there may well be temporary pauses or supply
constraints even as things improve.
Setting aside current macroeconomic uncertainties, we believe recent
volatility is best understood as a persistent feature of new technology
cycles, when the innovation curve is at its steepest and both the pace of
progress and scale of the opportunity are hard to define. The recent DeepSeek
episode underscores this point, proving an important, if unwanted, reminder of
this. In many ways, the current period feels highly analogous to the mid-
1990s when people were excited about the potential of what Fed Chair Alan
Greenspan would go on to call the "new economy" (in late 1997) but had not
moved into the self-reflexive euphoria of the full dot.com bubble.
Interestingly, between 1995 and 1998 - the internet years prior to the dot.com
'melt up' - there were nine NASDAQ Index corrections of -10% or more, seven of
which were drawdowns of -15% or greater. However, during this volatile period,
the Index rose by 350% (in US dollar terms). While history is an imperfect
guide, investors should anticipate elevated volatility and bouts of AI-related
risk aversion, even against a backdrop of continued AI progress.
To date, that progress has been remarkable - the product of rapid, non-linear
scaling. Together with the advent of reasoning models, many of the building
blocks necessary for agentic AI are falling into place. The promise of these
agents is that they transform AI from a passive tool to an active participant
in the digital ecosystem with infinite scalability. AI-enabled non-human
scaling could change the world as we know it, just as agricultural
mechanisation did in the 19th century (when labour force participation in
agriculture declined from 58% in 1860 to 27% by 1920). However, before that,
McCormick's horse-pulled reaper (1831) had already transformed the grain
harvest by six-fold, increasing the amount of wheat that each person (and
horse) could harvest in a day to 12-15 acres compared to two acres previously
possible using tools like scythes. This not only helped the US wheat crop
quadruple between the 1830s and the 1860s, but mechanised agriculture, and the
surpluses it produced led to higher living standards and greatly improved food
security. While the Great Irish Famine (1845-49) proved a tragic exception,
peacetime famines had largely been eradicated in the US and Europe by the late
19th century.
We expect AI to unlock similar productivity gains and unknowable positive
externalities while enabling individuals and businesses to reduce their
dependency on human scaling, allowing them to "reap as much as they can sow".
Ben Rogoff & Ali Unwin
10 July 2025*
*Data and statistics referenced within the Investment Manager's report may
have changed between the financial year end and the date of publication.
PORTFOLIO POSITIONING
By Market Capitalisation Benchmark weighting % of invested assets % of invested assets
30 April 2025 30 April 2025 30 April 2024
Large Cap (>$10bn) 95.8 89.4 89.3
Mid Cap (>$1bn-$10bn) 3.8 10.1 10.0
Small Cap (<$1bn) 0.4 0.5 0.7
Total 100.0 100.0
By Region Benchmark weighting % of total net assets % of total net assets
30 April 2025 30 April 2025 30 April 2024
US & Canada 81.6 71.9 72.6
Asia Pacific (ex-Japan) 10.9 12.1 10.0
Europe (inc - UK) 5.1 6.2 6.6
Other Net Assets - 3.7 2.4
Middle East & Africa 0.3 3.1 3.0
Japan 2.1 2.1 5.1
Latin America - 0.9 0.3
Total 100.0 100.0
All data sourced from Polar Capital LLP.
CLASSIFICATION OF INVESTMENTS*
as at 30 April 2025
North Europe Asia Pacific (inc. Middle East) Total Total Benchmark Weightings as at 30 April 2025
America (inc. Latin America) % % % 30 April 30 April %
2025 2024
% %
Semiconductors & Semiconductor Equipment 19.2 1.6 8.0 28.8 35.2 29.8
Software 14.8 1.4 3.0 19.2 22.8 27.2
Interactive Media & Services 10.3 0.1 1.2 11.6 13.4 15.8
Technology Hardware, Storage & Peripherals 5.6 - 0.8 6.4 8.2 17.9
IT Services 5.2 0.2 0.1 5.5 3.0 4.8
Electronic Equipment, Instruments & Components 3.7 - 1.8 5.5 3.8 0.3
Entertainment 2.0 2.1 - 4.1 2.5 0.6
Broadline Retail 2.2 - 1.5 3.7 2.2 -
Communications Equipment 2.7 - 0.1 2.8 1.6 2.4
Electrical Equipment 2.1 - - 2.1 - -
Aerospace & Defence 1.1 - 0.1 1.2 0.8 -
Capital Markets 0.9 - - 0.9 - -
Automobiles 0.8 - - 0.8 0.8 -
Hotels, Restaurants & Leisure 0.7 - - 0.7 0.5 0.2
Financial Services 0.3 0.4 - 0.7 0.2 -
Healthcare Equipment & Supplies 0.4 - 0.3 0.7 0.4 -
Healthcare Technology 0.4 - - 0.4 - -
Professional Services - 0.3 - 0.3 - -
Real Estate Management & Development 0.3 - - 0.3 - -
Building Products - - 0.2 0.2 0.4 -
Specialty Retail - 0.1 - 0.1 - -
Machinery - - 0.1 0.1 0.8 -
Trading Companies & Distributors 0.1 - - 0.1 - -
Chemicals - - 0.1 0.1 0.1 -
Media - - - - 0.5 -
Ground Transportation - - - - 0.3 -
Life Sciences Tools & Services - - - - 0.1 -
Total investments (£3,664,891,000) 72.8 6.2 17.3 96.3 97.6
Other net assets (excluding loans) 2.0 0.4 3.4 5.8 3.7
Loans - - (2.1) (2.1) (1.3)
Grand total (net assets of £3,804,889,000) 74.8 6.6 18.6 100.0 -
At 30 April 2024 (net assets of £3,804,533,000) 74.9 6.8 18.3 - 100.0
* The classifications are derived from the Benchmark as far as possible. The
categorisation of each investment is shown in the portfolio available on the
Company's website. Where a dash is shown for the Benchmark it means that the
sector is not represented in the Benchmark. Not all sectors of the Benchmark
are shown, only those in which the Company has an investment at the financial
year end.
FULL PORTFOLIO as at 30 April 2025
Value of holding % of net assets
Ranking 30 30 30 April 2025 30 April 2024
April April
2025 2024
2025 2024 Stock Sector Region £'000 £'000 % %
1 (1) Nvidia Semiconductors & Semiconductor Equipment North America 342,219 395,876 9.0 10.4
2 (2) Microsoft Software North America 258,174 335,337 6.8 8.8
3 (4) Meta Platforms Interactive Media & Services North America 240,661 188,666 6.3 5.0
4 (5) Apple Technology Hardware, Storage & Peripherals North America 185,568 163,959 4.9 4.3
5 (8) Broadcom Semiconductors & Semiconductor Equipment North America 162,907 96,108 4.3 2.5
6 (6) Taiwan Semiconductor Semiconductors & Semiconductor Equipment Asia Pacific 153,370 139,427 4.0 3.7
7 (3) Alphabet Interactive Media & Services North America 151,504 278,153 4.0 7.3
8 (21) Spotify Technology Entertainment Europe 79,947 40,702 2.1 1.1
9 (14) Cloudflare IT Services North America 79,538 60,421 2.1 1.6
10 (13) Arista Networks Communications Equipment North America 69,589 62,166 1.8 1.6
Top 10 investments 1,723,477 45.3
11 (16) CyberArk Software Software Asia Pacific 66,724 56,882 1.8 1.5
12 (44) Shopify IT Services North America 60,224 21,874 1.5 0.6
13 (-) Alibaba Broadline Retail Asia Pacific 58,628 - 1.5 -
14 (18) KLA Semiconductors & Semiconductor Equipment North America 55,399 47,574 1.5 1.3
15 (32) Netflix Entertainment North America 51,682 28,412 1.4 0.7
16 (36) SAP Software Europe 51,502 26,651 1.4 0.7
17 (12) Amazon.com Broadline Retail North America 49,473 73,038 1.3 1.9
18 (38) Tencent Interactive Media & Services Asia Pacific 47,580 26,331 1.2 0.7
19 (26) Axon Enterprise Aerospace & Defence North America 43,403 31,277 1.1 0.8
20 (-) Corning Electronic Equipment, Instruments & Components North America 42,451 - 1.1 -
Top 20 investments 2,250,543 59.1
21 (-) Vertiv Electrical Equipment North America 41,332 - 1.1 -
22 (7) Advanced Micro Devices Semiconductors & Semiconductor Equipment North America 38,698 134,752 1.0 3.5
23 (19) ServiceNow Software North America 38,637 43,916 1.0 1.2
24 (-) GE Vernova Electrical Equipment North America 38,540 - 1.0 -
25 (-) MediaTek Semiconductors & Semiconductor Equipment Asia Pacific 37,690 - 1.0 -
26 (-) Oracle Software North America 37,523 - 1.0 -
27 (89) Palo Alto Networks Software North America 37,072 4,101 1.0 0.1
28 (41) eMemory Technology Semiconductors & Semiconductor Equipment Asia Pacific 36,688 25,127 1.0 0.7
29 (-) SK Hynix Semiconductors & Semiconductor Equipment Asia Pacific 35,455 - 0.9 -
30 (69) MercadoLibre Broadline Retail North America 35,022 10,587 0.9 0.3
Top 30 investments 2,627,200 69.0
31 (-) Robinhood Markets Capital Markets North America 34,817 - 0.9 -
32 (-) Ciena Communications Equipment North America 34,743 - 0.9 -
33 (11) CrowdStrike Software North America 34,179 74,376 0.9 2.0
34 (-) Snowflake IT Services North America 33,248 - 0.9 -
35 (28) Tesla Automobiles North America 31,138 30,877 0.8 0.8
36 (-) Celestica Electronic Equipment, Instruments & Components North America 31,122 - 0.8 -
37 (-) Xiaomi Technology Hardware, Storage & Peripherals Asia Pacific 30,418 - 0.8 -
38 (-) Palantir Technologies Software North America 29,576 - 0.8 -
39 (-) Credo Technology Group Semiconductors & Semiconductor Equipment North America 29,099 - 0.8 -
40 (35) Elastic Software North America 28,732 26,879 0.8 0.7
Top 40 investments 2,944,272 77.4
41 (10) Micron Technology Semiconductors & Semiconductor Equipment North America 28,327 85,513 0.7 2.2
42 (64) CommVault Software North America 28,281 12,120 0.7 0.3
Systems
43 (15) Pure Storage Technology Hardware, Storage & Peripherals North America 28,091 57,835 0.7 1.5
44 (51) DoorDash Hotels, Restaurants & Leisure North America 27,460 19,289 0.7 0.4
45 (59) Elite Material Electronic Equipment, Instruments & Components Asia Pacific 26,580 13,469 0.7 0.4
46 (-) Astera Labs Semiconductors & Semiconductor Equipment North America 23,532 - 0.7 -
47 (-) TDK Electronic Equipment, Instruments & Components Asia Pacific 22,911 - 0.6 -
48 (34) HubSpot Software North America 22,426 26,899 0.6 0.7
49 (-) Flex Electronic Equipment, Instruments & Components North America 21,733 - 0.6 -
50 (48) Monday.com Software Asia Pacific 20,736 19,936 0.6 0.5
Top 50 investments 3,194,349 84.0
51 (46) Coherent Electronic Equipment, Instruments & Components North America 20,150 20,575 0.6 0.6
52 (9) ASML Semiconductors & Semiconductor Equipment Europe 19,613 86,304 0.5 2.3
53 (77) Nutanix Software North America 19,396 7,726 0.5 0.2
54 (25) ASM International Semiconductors & Semiconductor Equipment Europe 19,313 31,519 0.5 0.9
55 (43) Amphenol Electronic Equipment, Instruments & Components North America 19,061 23,267 0.5 0.6
56 (81) Nova Semiconductors & Semiconductor Equipment Asia Pacific 17,053 7,111 0.5 0.2
57 (54) Tokyo Electron Semiconductors & Semiconductor Equipment Asia Pacific 16,825 16,318 0.4 0.4
58 (-) Atlassian Software Asia Pacific 16,680 - 0.4 -
59 (-) MACOM Technology Solutions Semiconductors & Semiconductor Equipment North America 15,748 - 0.4 -
60 (-) Adyen Financial Services Europe 15,304 - 0.4 -
Top 60 investments 3,373,492 88.7
61 (82) Intuitive Surgical Healthcare Equipment & Supplies North America 14,850 6,821 0.4 0.2
62 (-) Doximity Healthcare Technology North America 14,404 - 0.4 -
63 (50) E Ink Electronic Equipment, Instruments & Components Asia Pacific 14,352 19,435 0.4 0.5
64 (-) Twilio IT Services North America 13,980 - 0.4 -
65 (61) Roblox Entertainment North America 13,934 13,212 0.3 0.4
66 (-) Unity Software Software North America 13,536 - 0.3 -
67 (58) BE Semiconductor Industries Semiconductors & Semiconductor Equipment Europe 12,153 13,834 0.3 0.4
68 (-) RELX Professional Services Europe 11,742 - 0.3 -
69 (55) ARM Semiconductors & Semiconductor Equipment Europe 11,691 14,683 0.3 0.4
70 (74) Hoya Healthcare Equipment & Supplies Asia Pacific 11,409 8,276 0.3 0.2
Top 70 investments 3,505,543 92.1
71 (-) Toast Financial Services North America 10,990 - 0.3 -
72 (-) Affirm IT Services North America 10,534 - 0.3 -
73 (-) Take-Two Interactive Software Entertainment North America 9,659 - 0.3 -
74 (-) Zillow Real Estate Management & Development North America 9,494 - 0.3 -
75 (-) SiTime Semiconductors & Semiconductor Equipment North America 8,908 - 0.2 -
76 (-) Cellebrite Software Asia Pacific 8,670 - 0.2 -
77 (91) Klaviyo Software North America 8,567 2,841 0.2 0.1
78 (53) Nitto Boseki Building Products Asia Pacific 8,231 16,690 0.2 0.4
79 (52) Marvell Technology Semiconductors & Semiconductor Equipment North America 7,951 16,984 0.2 0.4
80 (37) Advantest Semiconductors & Semiconductor Equipment Asia Pacific 7,866 26,645 0.2 0.7
Top 80 investments 3,596,413 94.5
81 (-) First Solar Semiconductors & Semiconductor Equipment North America 7,861 - 0.2 -
82 (-) Wise IT Services Europe 7,571 - 0.2 -
83 (-) Impinj Semiconductors & Semiconductor Equipment North America 5,800 - 0.2 -
84 (-) SCOUT24 Interactive Media & Services Europe 5,685 - 0.1 -
85 (63) Fabrinet Electronic Equipment, Instruments & Components Asia Pacific 5,550 12,655 0.1 0.3
86 (-) DocuSign Software North America 5,433 - 0.1 -
87 (-) Zalando SE Specialty Retail Europe 5,170 - 0.1 -
88 (67) Braze Software North America 4,767 11,516 0.1 0.3
89 (45) Harmonic Drive Systems Machinery Asia Pacific 4,514 20,982 0.1 0.6
90 (-) Xometry Trading Companies & Distributors North America 4,442 - 0.1 -
Top 90 investments 3,653,206 95.8
91 (-) FOCI Fiber Optic Communications Communications Equipment Asia Pacific 2,888 - 0.1 -
92 (85) MEC Chemicals Asia Pacific 2,871 4,692 0.1 0.1
93 (92) Zuken IT Services Asia Pacific 2,595 2,748 0.1 0.1
94 (-) Astroscale Aerospace & Defence Asia Pacific 2,327 - 0.1 -
95 (-) Nlight Electronic Equipment, Instruments & Components North America 1,003 - 0.1 -
96 (96) Cermetek Microelectronics Electronic Equipment, Instruments & Components North America 1 1 - -
Total equities 3,664,891 96.3
Other net assets 139,998 3.7
Total net assets 3,804,889 100.0
Note: Asia Pacific includes Middle East and North America includes Latin
America.
STRATEGIC REPORT
This report has been provided in accordance with The Companies Act 2006
(Strategic Report and Directors' Report) Regulations 2013. The aim of this
report is to provide information to Shareholders on the Company's strategy and
the potential for such to succeed, including a fair review of the Company's
performance during the year ended 30 April 2025, the position of the Company
at the year end and a description of the principal risks and uncertainties,
including both economic and business risk factors underlying any such
forward-looking information.
Business Model and Regulatory Requirements
The Company's business model follows that of an externally managed investment
trust providing Shareholders with access to an actively managed portfolio of
technology shares selected on a worldwide basis.
The Company is designated as an Alternative Investment Fund (AIF) under the
Alternative Investment Fund Management Directive (AIFMD) and, as required by
the Directive, has contracted with Polar Capital LLP to act as the Alternative
Investment Fund Manager (AIFM) and Investment Manager (or Manager) and HSBC
Bank Plc to act as the Depositary.
Both the AIFM and the Depositary have responsibilities under AIFMD for
ensuring that the assets of the Company are managed in accordance with the
Investment Policy and are held in safe custody. The Board remains responsible
for setting the investment strategy and operational guidelines as well as
meeting the requirements of the FCA's UK Listing Rules and the Companies Act
2006.
The AIFMD requires certain information to be made available to investors in
AIFs before they invest and requires that material changes to this information
be disclosed in the Annual Report of each AIF. Investor Disclosure Documents,
which set out information on the Company's investment strategy and policies,
leverage, risk, liquidity, administration, management, fees, conflicts of
interest and other shareholder information are available on the Company's
website.
There have been no material changes to the information requiring disclosure.
Any information requiring immediate disclosure pursuant to the AIFMD will be
disclosed to the London Stock Exchange. Statements from the Depositary and the
AIFM can be found on the Company's website.
Investment Objective and Policy
While observing the Dow Jones Global Technology Index (total return, Sterling
adjusted, with the removal of relevant withholding taxes) as the Benchmark
against which NAV performance is measured, Shareholders should be aware that
the portfolio is actively managed and is not designed to track any particular
benchmark index or market. The performance of the portfolio can vary from the
Benchmark performance, at times considerably.
Over recent decades the technology industry has been one of the most vibrant,
dynamic and rapidly growing segments of the global economy. Technology
companies offer the potential for substantially faster earnings growth than
the broader market.
Investments are selected for their potential shareholder returns, not on the
basis of technology for its own sake. The Investment Manager believes in
rigorous fundamental analysis and focuses on:
· management quality;
· the identification of new growth markets;
· the globalisation of major technology trends; and
· exploiting international valuation anomalies and sector
volatility.
Changes to Investment Policy
Any material change to the Investment Policy will require the approval of the
Shareholders by way of an ordinary resolution at a general meeting. The
Company will promptly issue an announcement to inform Shareholders and the
public of any change to its Investment Policy. No changes to the Investment
Policy are presently anticipated.
Investment Strategy Guidelines and Board Limits
The Board has established guidelines for the Investment Manager in pursuing
the Investment Policy. The Board uses these guidelines to monitor the
portfolio's exposure to different geographical markets, sub-sectors within
technology and the spread of investments across different market
capitalisations.
These guidelines are kept under review as cyclical changes in markets and new
technologies will bring certain
sub-sectors or companies of a particular size or market capitalisation into or
out of favour.
Asset Allocation
Technology may be defined as the application of scientific knowledge for
practical purposes and technology companies are defined accordingly. While
this offers a very broad and dynamic investing universe and covers many
different companies, the portfolio of the Company (the 'Portfolio') is focused
on companies which use technology or which develop and supply technological
solutions as a core part of their business models. This includes areas as
diverse as information, media, communications, environmental, healthcare,
finance, e-commerce and renewable energy, as well as the more obvious
applications such as computing and associated industries.
The Board has agreed a set of parameters which seek to ensure that investment
risk is spread and diversified. The Board believes that this provides the
necessary flexibility for the Investment Manager to pursue the Investment
Objective, given the dynamic and rapid changes in the field of technology,
while maintaining a spread of investments.
Market Parameters
With current and foreseeable investment conditions, the Portfolio will be
invested in accordance with the Investment Objective and Policy across
worldwide markets, generally within the following ranges:
· North America up to 85%.
· Europe up to 40%.
· Japan and Asia up to 55%.
· Rest of the world up to 10%.
The Board has set specific upper exposure limits for certain countries where
they believe there may be an elevated risk.
The Company will at all times invest and manage its assets in a manner that is
consistent with spreading investment risk and invests in a Portfolio comprised
primarily of international quoted equities which is diversified across both
regions and sectors.
Investment Limits
In applying the Policy, the Company will satisfy the following investment
restrictions:
· The Company's interest in any one company will not exceed 10% of
the gross assets of the Company, save where the Benchmark weighting of any
investee company in the Company's portfolio exceeds this level, in which case
the Company will be permitted to increase its exposure to such investee
company up to the Benchmark 'neutral' weighting of that company or, if lower,
15% of the Company's gross assets.
· The Company will have a maximum exposure to companies listed in
emerging markets (as defined by the MSCI Emerging Markets Index) of 25% of its
net assets.
· The Company may invest in unquoted companies from time to time,
subject to prior Board approval. Investments in unquoted companies in
aggregate will not exceed 10% of the gross assets of the Company.
Such limits are measured at the time of acquisition of the relevant investment
and whenever the Company increases the relevant holding.
In addition to the restrictions set out above, the Company is subject to
Chapter 11 of the FCA's UK Listing Rules (UKLR) which apply to closed ended
investment companies with a listing on the London Stock Exchange.
In order to comply with the current UKLR's, the Company will not invest more
than 10% of its total assets at the time of acquisition in other listed closed
ended investment funds, whether managed by the Investment Manager or not. This
restriction does not apply to investments in closed ended investment funds
which themselves have published investment policies to invest no more than 15%
of their total assets in other listed closed ended investment funds. However,
the Company will not in any case invest more than 15% of its total assets in
other closed ended investment funds.
Cash, Borrowings (Gearing) and Derivatives
The Company may borrow money to invest in the Portfolio over both the long and
short-term. Any commitment to borrow funds is agreed by the Board and the
AIFM.
The Investment Manager may also use from time-to-time derivative instruments,
as approved by the Board, such as financial futures, options,
contracts-for-difference and currency hedges. These are used for the purpose
of efficient portfolio management. Any such use of derivatives will be made in
accordance with the Company's policies on spreading investment risk as set out
in this investment policy and any leverage resulting from the use of such
derivatives will be subject to the restrictions on borrowings.
Cash
The Company may hold cash or cash equivalents if the Investment Manager feels
that these will, at a particular time or over a period, enhance the
performance of the Portfolio. The Board has agreed that management of cash may
be achieved through the purchase of appropriate government bonds, money market
funds or bank deposits depending on the Investment Manager's view of the
investment opportunities and the benefits of diversification.
Gearing and Derivatives
The Company's Articles of Association permit borrowings up to the amount of
its paid-up share capital plus capital and revenue reserves. The Company may
use gearing in the form of bank loans which are used on a tactical basis by
the Investment Manager, when considered appropriate. The Board monitors the
level of gearing available to the Portfolio Manager and agrees, in conjunction
with the AIFM, all bank facilities in accordance with the Investment Policy.
The Board approves and controls all bank facilities and any net borrowings
over 20% of the Company's net assets at the time of draw down will only be
made after approval by the Board.
During the year, the Company had two loan facilities with ING Bank NV of 36m
US Dollars and 3.8bn Japanese Yen (JPY), both of which were repaid in
September 2024. The JPY loan was replaced with a three year fixed rate term
loan of JPY 15bn from The Bank of Nova Scotia. The JPY loan has been fixed at
an all-in rate of 2.106% pa. This loan is due to be repaid in September 2027.
Details of the loans are set out in Note 17 to the Financial Statements.
The Investment Manager's use of derivatives is monitored by the Board in
accordance with the Company's investment policy and any leverage from the use
of such derivatives will be subject to the restriction on gearing.
Future Developments
The Board remains positive on the longer-term outlook for technology and the
Company will continue to pursue its Investment Objective. The outlook for
future performance is dependent to a significant degree on the world's
financial markets and their reactions to economic events and other
geopolitical forces. In accordance with the Articles of Association, the Board
will be proposing the five-yearly continuation vote of the Company at the
Annual General Meeting to be held in September 2025; as discussed in more
detail in the Chair's Statement, the Board is supportive of the Company
continuing in its current form and will be recommending that Shareholders vote
in favour of the resolution. The Chair's Statement and the Investment
Manager's Report comment on the outlook.
Dividends
The Company's revenue varies from year to year and the Board considers the
dividend position each year in order to maintain the Company's status as an
investment trust. The revenue reserve remains in deficit and historically the
Company has not paid dividends given its focus on capital growth. The
Directors do not recommend, for the year under review, the payment of a
dividend (2024: no dividend recommendation).
Service Providers
Polar Capital LLP has been appointed to act as the Investment Manager and AIFM
as well as to provide or procure company secretarial services, marketing and
website services which it arranges through Huguenot Limited, and
administrative services, including accounting, portfolio valuation and trade
settlement which it has arranged to deliver through HSBC Securities Services
(HSS or the Administrator).
The Company also contracts directly, on terms agreed periodically, with a
number of third parties for the provision of specialist services. The cost of
the services outlined below are paid for directly by the Company and are
separate from the Investment Management Fee payable to Polar Capital:
• Stifel Nicolaus Europe Limited as Corporate
Broker;
• Equiniti Limited as Share Registrars;
• HSBC Securities Services as Custodian and
Depositary;
• RD:IR for Investor Relations and Shareholder
Analysis;
• Camarco as PR advisors; and
• Perivan Limited as designers and printers for
shareholder communications.
Investment Management Company and Management of the Portfolio
As the Company is an investment vehicle for Shareholders, the Directors have
sought to ensure that the business of the Company is managed by a leading
specialist investment management team and that the investment strategy remains
attractive to Shareholders. The Directors believe that a strong working
relationship with the investment management team will help to achieve the
optimum return for Shareholders. As such, the Board and the Investment Manager
operate in a supportive, co-operative and open environment.
The Investment Manager is Polar Capital LLP (Polar Capital), which is
authorised and regulated by the Financial Conduct Authority, to act as
Investment Manager and AIFM of the Company with sole responsibility for the
discretionary management of the Company's assets (including uninvested cash)
and sole responsibility to take decisions as to the purchase and sale of
individual investments. The Investment Manager also has responsibility for
asset allocation within the limits of the investment policy and guidelines
established and regularly reviewed by the Board, all subject to the overall
control and supervision of the Board.
Polar Capital provides a team of technology specialists led by Ben Rogoff.
Each team member focuses on specific areas while Ben Rogoff, with Alastair
Unwin as Deputy, has overall responsibility for the portfolio. Polar Capital
also has other specialist and geographically focused investment teams which
may contribute to idea generation. The technology investment team's
biographies can be found in the Annual Report. The Investment Manager has
other investment resources which support the investment team and has
experience in administering and managing other investment companies.
Management fee
As reported within the Chair's Statement, the Company announced that it had
concluded its three-yearly review of the base management fee arrangements with
the Investment Manager, Polar Capital. The new base management fee is
structured over two tiers, and the performance fee has been removed entirely.
With effect from 1 May 2025, the base management fee paid by the Company
monthly in arrears to the Manager is calculated on the daily Net Asset Value
('NAV') as follows:
• Tier 1: 0.75 per cent. for
such of the NAV up to and including £2bn.
• Tier 2: 0.60 per cent. for
such of the NAV above £2bn.
Prior to 1 May 2025, the fee basis for the financial year ended 30 April 2025
was as follows:
• Tier 1: 0.80 per cent. for
such of the NAV up to and including £2bn;
• Tier 2: 0.70 per cent. for
such of the NAV between £2bn and £3.5bn; and
• Tier 3: 0.60 per cent. for
such of the NAV above £3.5bn.
Any investment in funds managed by Polar Capital are wholly excluded from the
base management fee calculation. Management fees of £30,854,000 (2024:
£25,919,000) have been paid for the year to 30 April 2025 of which
£2,246,000 (2024: £2,386,000) was outstanding at the year end and accrued
within the financial statements.
Under the terms of the IMA, the Board may undertake a three-yearly review of
the fee arrangements, the next of which will be undertaken in the financial
year ending 30 April 2028, with the anticipation that any changes proposed and
subsequently agreed will take effect from the start of the following financial
year. The Board is however at liberty to review the fees at any time should
they deem it appropriate and in the best interests of Shareholders to do so.
Longer-Term Viability
In accordance with the AIC Code of Corporate Governance (AIC Code), the
Company is required to make a forward-looking longer-term viability statement.
The Board has considered and addressed the ability of the Company to continue
to operate over a period significantly beyond the twelve-month period required
for the going concern statement. The Board has considered the industry and
market in which the Company operates and believes that despite the market
volatility and geopolitical events experienced during the financial year under
review, there continues to be a strong appetite for technology investment. The
Board continues to use five years as a reasonable term over which the
viability of the Company should be viewed; Shareholders have the opportunity
to vote on the continuation of the Company every five years, therefore the
outlook for the next five-year period incorporates the continuation vote which
will be put to Shareholders at the forthcoming AGM in September 2025.
The process and matters considered in establishing the longer-term viability
are detailed within the Audit Committee Report in the annual report. In
establishing the positive outlook for the Company over the next five years to
30 April 2030 the Board has taken into account:
The ability of the Company to meet its liabilities as they fall due The assessment took account of the Company's current financial position, its
cash flows and its liquidity position, the principal risks as set out in the
Annual Report and the Committee's assessment of any material uncertainties and
events that might cast significant doubt upon the Company's ability to
continue as a going concern. The assessment was then subject to a sensitivity
analysis over a five-year period, which stress tested a number of the key
assumptions underlying the forecasts both individually and in aggregate for
normal, favourable and stressed conditions and considered whether financing
facilities will be renewed.
The portfolio comprises a spread of investments by size of company, traded on
major international stock exchanges.
99.9% of the current portfolio could be liquidated within four trading days
and there is no expectation that the nature of the investments held within the
portfolio will be materially different in future.
The expenses of the Company are predictable and modest in comparison with the
assets and there are no capital commitments foreseen which would alter that
position. The ongoing charges of the Company for the year ended 30 April 2025
(excluding performance fees) were 0.77% (2024: 0.80%).
Repayment of the bank facility, drawn down at the year end, and due in
September 2027, would equate to approximately 42% of the cash or cash
equivalents available to the Company at 30 April 2025, without having to
liquidate the portfolio of investments.
The Company has no employees and consequently does not have redundancy or
other employment related liabilities or responsibilities.
The Company will propose a resolution on the continuation of the Company at The Company has within its corporate structure the requirement to hold a
the AGM in September 2025 continuation vote every five years. The last continuation vote was passed at
the AGM held in September 2020 with 100% of the votes in favour.
Ahead of the upcoming continuation vote, the Board, Investment Manager and
Corporate Broker have been seeking Shareholder views including any concerns
and an indication of whether they were likely to vote in favour of the
Company's continuation. No comments adverse to the continuation vote have been
received to date and the Shareholders who provided feedback were minded, at
the time of writing, to vote in favour of the resolution for the Company to
continue. Shareholders highlighted the contact between the Investment Manager
and Shareholders, the long term investment horizon of many Shareholders, the
diversification of the Company's register of Shareholders and the Company's
inclusion on many buy lists at private wealth managers and retail platforms.
As such, the Directors are confident that the continuation vote will be passed
at the AGM to be held on 10 September 2025 and therefore that the Company will
continue in existence. The Directors acknowledge that there can be no
certainty that the continuation vote will be passed although, at the date of
approval of these financial statements, they have no reason to believe that it
will not do so.
Factors impacting the forthcoming years The Investment Manager's Report and the Strategic Report provide a
comprehensive review of factors which may impact the Company in forthcoming
years. In making its assessment, the Board considered these factors alongside
the Principal Risks and Uncertainties, and their corresponding mitigation and
controls, in the Annual Report.
Regulatory changes Despite the increased level of regulation and the unpredictability of future
requirements it is considered that regulation will not increase to a level
that makes the running of the Company uneconomical or untenable in comparison
to other competitive products. The Board is aware of the FCA's proposal to
include the closed ended sector within scope of the Consumer Composite
Investments (CCI) regime. The Board has contributed to the consultation
process and supports the AIC's stance against the inclusion of investment
trusts within this regime given the potential negative consequences for the
sector.
Closed-ended Investment Funds Despite high discounts across the sector, it is believed that the business
model of being a closed ended investment fund will continue to be wanted by
investors and the Company's Investment Objective will continue to be desired
and achievable. Notwithstanding this, the Board regularly discusses the risks
to the sector given the rise in shareholder activism and consolidation across
the wealth management industry and has engaged in an active share buy back
process to help address the discount to NAV that the Company's shares have
traded at.
Further, the Board recognises that there has been significant progress made in
the technology sector and immense change in what is deemed to be a technology
company which broadens the universe for potential investment. Technology
remains a specialist sector for which there continues to be a need for
independent specialist sector investment expertise. The Board therefore have a
reasonable expectation that the company will be able to continue in operation
and meet its liabilities as they fall due over the five years to 30 April
2030.
GOING CONCERN
The Board has also considered the ability of the Company to adopt the Going
Concern basis for the preparation of the Financial Statements.
Consideration included the forthcoming continuation vote as well as the
Company's current financial position, its liquidity position and its
assessment. In addition, the Company's cash flows were stressed tested for
base case and reasonable worse case scenarios. Further detail on the
assessment for going concern is provided in the Report of the Audit Committee
in the annual report in Note 2(a) of the Financial Statements.
KEY PERFORMANCE INDICATORS
The Board appraises the performance of the Company and the Investment Manager
as the key supplier of services to the Company against Key Performance
Indicators ('KPIs'). The objectives of the KPIs comprise both specific
financial and shareholder related measures and these KPIs have not differed
from the prior year.
KPI Control process Outcome
The provision of investment returns to shareholders measured by long-term NAV The Board reviews the performance of the portfolio in detail and hears the At 30 April 2025 the total net assets of the Company amounted to
growth and relative performance against the Benchmark. views of the Investment Manager at each meeting. £3,804,889,000 (2024: £3,804,533,000). The Company's NAV over the year to 30
April 2025, underperformed the Benchmark by 2.0%. The NAV per share rose by
3.1% from 315.41p to 325.20p while the Benchmark increased 5.1% in Sterling
terms over the same period. As at 30 April 2025 the portfolio comprised 96
The Board is aware of the vulnerability of a sector specialist investment The Board discusses the market factors giving rise to any discount or premium, (2024: 96) investments.
trust to a change in investor sentiment to that sector. the long or short-term nature of those factors and the overall benefit to
Shareholders of any actions. The market liquidity is also considered when
authorising the issue or buy back of shares when appropriate market conditions
prevail. Investment performance is explained in the Chair's Statement and the
Investment Manager's Report. The performance of the Company over the
longer-term is shown by the ten year historic performance chart in the Annual
Report.
Monitoring and reacting to issues created by the discount or premium of the The Board receives regular information on the composition of the share The discount/premium of the ordinary share price to NAV per ordinary share
ordinary share price to the NAV per ordinary share with the aim of reduced register including trading (diluted when appropriate) has been as follows:
discount volatility for Shareholders.
patterns and discount/premium levels of the Company's ordinary shares. Financial year to 30 April 2025:
• Minimum discount over year: 5.63%
A daily NAV per share, diluted when appropriate, calculated in accordance with • Maximum discount over year: 19.42%
the AIC guidelines, is issued to the London
• Average discount over year: 10.23%
Stock Exchange.
In the year ended 30 April 2025, the Company bought back 36,208,671 ordinary
shares (representing 2.6% of the issued share capital) at an average discount
of 10.4%. Subsequent to the year end and to close of business 4 July 2025, the
The Company does not have an absolute target discount level at which it buys Company bought back a further 11,960,588 shares. The discount at close of
back shares but has historically bought back significant amounts of the business on 4 July 2025 was 9.9%.
outstanding share capital when deemed appropriate and will continue to do so.
This approach does not preclude a more active approach as discounts widen and
the Investment Manager may consider that a single purchase or a series of
purchases of shares in current or greater volumes, which would enhance the Over the previous five financial years ended 30 April 2025:
Company's NAV per share, would be an attractive investment of the Company's
cash resources, given the positive long-term prospects for the Company's • Maximum premium over period: 6.06%
portfolio. As always, the Board keeps the level of discount under careful
review and has been buying back shares actively at levels set out in the • Maximum discount over period: 19.42%
adjacent column.
• Average discount over period: 9.38%
Over the previous five financial years ended 30 April 2025 the Company has
bought back a total of 203,142,981* Ordinary shares and issued 27,490,000* as
a result of market demand.
To qualify and continue to meet the requirements for Sections 1158 and 1159 of The Board receives regular financial information which discloses the current This has been achieved for every year since launch in 1996.
the Corporation Tax Act 2010 ('investment trust status'). and projected financial position of the Company against each of the tests set
out in Sections 1158 and 1159.
HMRC has approved the investment trust status subject to the Company
continuing to meet the relevant eligibility conditions and ongoing
requirements.
The Directors believe that the tests have been met in the financial year ended
30 April 2025 and will continue to be met.
Efficient operation of the Company with appropriate investment management The Board considers annually the services provided by the Investment Manager, The Board has received and considered satisfactory the internal controls
resources and services from third party suppliers within a stable and both investment and administrative, and reviews on a cycle the provision and report of the Investment Manager and other key suppliers including contingency
risk-controlled environment. costs of services provided by third parties. arrangements to facilitate the ongoing operations of the Company in the event
of withdrawal or failure of services.
The annual operating expenses are reviewed and any non-recurring project
related expenditure is approved separately by the Board. The ongoing charges of the Company for the year ended 30 April 2025 was 0.77%
of the average daily net assets (2024: 0.80%). There was no performance fee
payable for the year ended 30 April 2025 (2024: nil).
* The figures have been rebased following the ten for one share split on 13
September 2024.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board is responsible for the management of risks faced by the Company and
through delegation to the Audit Committee, has established procedures to
manage risk, oversee the internal control framework and determine the nature
and extent of the principal risks the Company is willing to take in order to
achieve its long-term strategic objectives.
The established risk management process the Company follows, identifies and
assesses various risks, their likelihood, and possible severity of impact,
considering both internal and external controls and factors that could provide
mitigation. A post mitigation risk impact score as well as a risk appetite
rating is then determined for each principal risk.
At each Audit Committee, identified principal risks are reviewed and
reassessed against the backdrop of the dynamic external environment the
Company is operating in. The Audit Committee carries out a robust assessment
of overall risks and uncertainties faced by the Company with the assistance of
the Investment Manager.
The Committee also identifies any emerging risks during its review process and
continues to closely monitor these risks as they develop, implementing
mitigating actions as necessary. Emerging risks during the financial year
under review included the geopolitical landscape, in particular, the
unravelling of the previous world order regarding security and trade which has
resulted in a more inflationary and volatile environment. In addition,
consideration was given to the impact on the Company's portfolio of the
uncertainty around trade tariffs and the ongoing tension between China and
Taiwan, using a detailed horizon analysis compiled by the investment
management team.
The Principal Risks post mitigation are detailed on the following pages along
with a high-level summary of their management through mitigation and status
arrows to indicate any change in assessment over the past financial yearyear
under review included the geopolitical landscape, consolidation of wealth
managers and the rise of post truth politics, the latter having the potential
to ensnare Big Tech in the ensuing political fallout. In addition, further
consideration was given to the deterioration of relations between China and
Taiwan, using a detailed horizon analysis to assess the medium and longer term
impacts on the Company's portfolio.
Management of risks through Mitigation & Controls
PORTFOLIO RISK Trend year on year
Failure to achieve investment objective on an absolute or relative basis
Regular reporting and monitoring of the Company's investment performance
against peer group, benchmark and detailed annual review of investment
strategy with Investment Manager.
Clear communication with Shareholders on the investment strategy through
annual, half year reports and monthly factsheets. The Investment Manager also
visits large shareholders and has regular interaction with clients.
Portfolio management errors including breach of investment policy
Investment limits and restrictions are encoded into dealing and operations
systems of the Manager to ensure there is early warning of any potential issue
of compliance or regulatory matters. HSBC Depositary oversees all trades and
monitoring against investment limits. The Board monitors the investment limits
and restrictions and would investigate any breaches.
OPERATIONAL RISK
Failure in services provided by Investment Manager (Polar Capital LLP)
Compliance, trading and risk oversight by fully resourced and expert Polar
Capital compliance, operations and risk functions. Periodic updates are
received from Polar's operational risk team in respect of the key operational
risks and the associated controls in place.
Accounting / Financial and/or Custody Errors
Management accounts are produced and reviewed monthly, statutory reporting and
daily NAV calculations are produced by the external Administrator and verified
by the Investment Manager. Accounting records are tested, and valuations
verified independently as part of the year-end financial reporting process.
Failure of Depositary, Custodian, Sub-Custodian or Deposit taker
Due diligence and service reviews are undertaken with third-party service
providers including the Custodian and Depositary with any exceptions
highlighted to the Board.
Unforeseeable natural disaster or other unpredictable event ("Black
Swan").
The Company has a disaster recovery plan in place along with a Black Swan
Committee comprised of any two directors, who are able to provide a response
to such events as necessary.
IT Failure, Fraud and Cyber Risk
Annual review of internal control reports from suppliers including cyber
protocols and disaster recovery procedures.
The Board proactively seeks to keep abreast of developments through updates
with representatives of
the Investment Manager (Polar's Chief Technology Officer). Polar Capital has
controls in place and has
continued to evolve its cyber defence capabilities during 2024 and Q1 2025
amid a persistently hostile
threat landscape.
REGULATORY RISKS
Breach of Statutes and Regulations
Polar Capital Compliance & Operations ensure a strong compliance
environment and report to Board on an annual basis.
There is an independent risk function at Polar Capital. AIFMD limits are
hardcoded into Bloomberg and monitored by the Operations and Compliance teams.
The Depositary also monitors AIFMD limits and reports exceptions to the Board.
In addition, the Fund Accounting Manager reports to the Board on a monthly
basis through the Investment Limits schedule.
The Board receives regulatory reports for discussion and, if required,
considers the need for any remedial action. In addition, as an investment
company, the Company is required to comply with a framework of tax laws,
regulation and company law.
The Board monitors regulatory change with the assistance of the Investment
Manager, Company Secretary and external professional suppliers and implements
necessary changes should they be required.
Failure to effectively communicate significant events to the shareholder and
investor base
Polar Capital Sales Team and the Corporate Broker provide periodic reports to
the Board on communications with shareholders and feedback received.
Experienced sales and client services team maintain the Company's website and
ensure it contains documents holding relevant information and presentations
from the Manager.
Annual, half year reports and monthly factsheets are prepared by experienced
company secretaries or specialist advisors. Statutory/regulatory documentation
is compiled and checked by legal advisors, auditors or brokers (when
necessary) and the Board undertakes a review prior to publication. Once
published, the Chair offers annual meetings with shareholders.
ECONOMIC AND MARKET RISK
Global geopolitical risk affecting changes in policy regarding taxes/assets,
tariffs, trade agreements (NAFTA, China, Mexico), immigration and political
tensions
The impact on the portfolio from geopolitical changes is monitored through
existing control systems such as the monthly investment limits schedule.
The Investment Manager regularly reports to the Board on geographic
influences, the macro economic outlook and matters of interest in relation to
the portfolio and utilises horizon scanning where appropriate
Uncertainty in regulatory environment
Potential regulatory change as a result of the changing political environment
is closely monitored by the board with the help of the company secretary.
The Investment Manager's Operations team monitors FX and interest rate
exposure of portfolio. Note 27 in the Annual Report describes the impact of
changes in foreign exchange rates.
KEY STAFF RISK
Loss of Portfolio Manager or other key professionals by the Investment Manager
through
resignation, redundancy or change of control
The strength and depth of investment team provides comfort that there is not
over-reliance on one person with alternative senior technology portfolio
managers available to act if needed. For each key business process roles,
responsibilities and reporting lines are clear and unambiguous.
Key personnel are incentivised by equity participation in the investment
management company. Ali Unwin was appointed as Deputy Fund Manager and is
responsible for managing the portfolio of the Company alongside Ben Rogoff,
Lead Manager since 1 May 2006.
The Board has insufficient resource and breadth of experience to oversee its
operations
Respected industry recruiters are used to source suitably experienced
candidates for non-executive directorships with detailed succession planning
and skills analysis driving the recruitment process at Board level. A Board,
Committee and Individual evaluation process is carried out annually and
justification for re-election of Directors is provided in Annual Report to
Shareholders.
Increase
Decrease
Unchanged
SECTION 172 OF THE COMPANIES ACT 2006
The statutory duties of the Directors are detailed in s171-177 of the
Companies Act 2006. The Board recognises that under s172, Directors have a
duty to promote the success of the Company for the benefit of its Shareholders
as a whole and in doing so have regard to the consequences of any decision in
the long term, as well as having regard to the Company's wider stakeholders
amongst other considerations. The fulfilment of this duty not only helps the
Company achieve its Investment Objective but ensures decisions are made in a
responsible and sustainable way for Shareholders.
To ensure that the Directors are aware of, and understand, their duties, they
are provided with an induction, including details of all relevant regulatory
and legal duties as a Director when they first join the Board, and continue to
receive regular and ongoing updates on relevant good practice, legislative and
regulatory developments. They also have continued access to the advice and
services of the Company Secretary and, where deemed necessary, the Directors
may seek independent professional advice. The Schedule of Matters Reserved for
the Board, as well as the Terms of Reference of its committees are reviewed
annually and further describe Directors' responsibilities and obligations and
include any statutory and regulatory duties.
The Board seeks to understand the needs and priorities of the Company's
Shareholders and stakeholders and these are taken into account during all of
its discussions and as part of its decision-making process. As an externally
managed investment company, the Company does not have any employees or
customers, however the key stakeholders and a summary of the Board's
consideration and actions where possible in relation to each group of
stakeholders are described below.
SHAREHOLDERS
Engagement
The Directors have considered shareholder engagement when making the strategic
decisions during the year that affect shareholders, the confirmation of the
continued appointment of the Investment Manager and the recommendation that
shareholders vote in favour of the resolutions to be proposed at the AGM. The
Directors have also engaged with and taken account of shareholders' interests
during the year.
The Portfolio Manager has held numerous face to face meetings and interacted
with a number of shareholders and institutions in addition to presenting at a
number of conferences during the year. Where appropriate, directors are
invited to attend these conferences to meet with shareholders and prospective
investors; in addition, the annual Investor Relations dinner was again held in
October 2023. Positive feedback was received from all attendees of the dinner
who welcomed the opportunity to interact with the Board and Manager.
The Chair will write to the Company's largest shareholders following the
publication of the Annual Report and Financial Statements offering the
opportunity to meet to discuss any matters of interest or concern.
The Company's next AGM will be held at 2:30pm on Wednesday 10 September 2025
at the offices of Herbert Smith Freehills Kramer, Exchange House, Primrose
Street, London, EC2A 2EG. The Board recognises that the AGM is an important
event for Shareholders and the Company and is keen to ensure that Shareholders
are able to exercise their right to attend, vote and participate. Shareholders
will also be able to watch the proceedings of the AGM live via Zoom
Conference. Details of how to access the online link are provided in the
Notice of AGM. Once again, we will be inviting feedback from Shareholders and
will take this into account when planning the 2026 meeting.
The Board believes that shareholder engagement remains important and is keen
that the AGM be a participative event for all shareholders who attend.
Shareholders are encouraged to send any questions ahead of the AGM to the
Board via the Company Secretary at cosec@polarcapital.co.uk stating the
subject matter as PCTT-AGM. The investment manager will give an in-person
presentation and the Chair of the Board and all members of the Board will be
in attendance and will be available to respond to questions and concerns from
shareholders.
Should any significant votes be cast against a resolution, the Board will
engage with shareholders. Should this situation occur, the Board will explain
in its announcement of the results of the AGM the actions it intends to take
to consult shareholders in order to understand the reasons behind the votes
against. Following the consultation, an update will be published no later than
six months after the AGM and the next Annual Report will detail the impact the
shareholder feedback has had on any decisions the Board has taken and any
actions or resolutions proposed.
Relations with Shareholders
The Board and the Manager consider maintaining good communications and
engaging with shareholders through meetings and presentations a key priority.
The Board regularly considers the share register of the Company and receives
regular reports from the Manager and the Corporate Broker on shareholder
meetings attended and any concerns that have been raised in those meetings.
The Board also reviews correspondence from shareholders and may attend
investor presentations.
The Chair has met with shareholders during the year and responded to comments
raised both at the AGM and via email.
Shareholders are able to raise any concerns directly with the Chair or the
Board without intervention of the Manager or Company Secretary, they may do
this either in person at the AGM or at other events, or in writing either via
the registered office of the Company or to the Chair's specific email address
Chair.pctt@polarcapital.co.uk (mailto:Chair.pctt@polarcapital.co.uk) .
Shareholders are kept informed by the publication of annual and half year
reports, monthly fact sheets, access to commentary from the Investment Manager
via the Company's website and attendance at events in which the Investment
Manager presents.
The Company, through the sales and marketing efforts of the Investment
Manager, encourages retail investment platforms to engage with underlying
Shareholders in relation to Company communications and enable those
Shareholders to cast their votes on shareholder resolutions; the Company
however has no responsibility over such platforms. Shareholders who hold
shares via an online stockbroker or platform are encouraged to exercise their
vote through their respective platforms and where possible attend the AGM
proceedings. Further information on how to vote through the platforms can be
found on the AIC's website (www.theaic.co.uk) (http://www.theaic.co.uk/) and
in the Shareholder information section in the Annual Report.
The Company has also made arrangements with its registrar for shareholders,
who own their shares directly rather than through a nominee or share scheme,
to view their account online at www.shareview.co.uk. Other services are also
available via this service.
Outcomes and strategic decisions during the year
AGM
This year the Board will hold a physical AGM. However, in order to provide
those shareholders who are unable to attend the AGM physically with an
opportunity to view the AGM, the Board will make a zoom link available to
enable shareholders to watch the proceedings of the AGM live via Zoom
Conference. Details of how to access the online link are provided in the
Notice of AGM. Further details can be found in the shareholder information
section of the Annual Report.
Buybacks
Further to shareholder authority being granted, the Company has the facility
to conduct share buy backs when, in normal market conditions, it is in the
best interests of Shareholders to do so. The Company bought back a total of
36,208,671 shares during the year under review. Subsequent to the year end and
to close of business 4 July 2025, the Company bought back a further
11,960,588.
Gearing
The Company is aware of the positive effect that leverage can have in
increasing the return to Shareholders when utilised. The Company has a term
loan in place with The Bank of Nova Scotia, which expires in September 2027.
Consideration will be given to the renewal of or the replacement of the term
loan if it is deemed to be in the best interests of the Company's Shareholders
in maximising returns.
Continuation Vote
The Company has within its corporate structure the requirement to hold a
continuation vote every five years; ahead of each vote the Board, Investment
Manager and Corporate Broker seek the feedback of shareholders including any
concerns, and an indication of whether they were likely to vote in favour of
the Company's continuation. The last continuation vote was held in September
2020, for which 100% of the votes cast were in favour, and the next
continuation vote will be held at the AGM on 10 September 2025.
Ahead of the upcoming continuation vote, the Board, Investment Manager and
Corporate Broker have been seeking shareholder views including any concerns,
and an indication of whether they were likely to vote in favour of the
Company's continuation. No comments adverse to the continuation vote have been
received to date and the Shareholders who provided feedback were minded, at
the time of writing, to vote in favour of the resolution for the Company to
continue. Shareholders highlighted the contact between the Investment Manager
and Shareholders, the long term investment horizon of many Shareholders, the
diversification of the Company's register of Shareholders and the Company's
inclusion on many buy lists at private wealth managers and retail platforms.
As such, the Directors are confident that the continuation vote will be passed
at the AGM to be held on 10 September 2025 and therefore that the Company will
continue in existence. The Directors acknowledge that there can be no
certainty that the continuation vote will be passed although, at the date of
approval of these financial statements, the have no reason to believe that it
will not do so.
Directors Remuneration
The remuneration of Directors is reviewed regularly and was increased with
effect from 1 May 2024 and again from 1 May 2025, to reflect the rise in
inflation and bring the fees of the Directors more in line with the wider
market. Further details are provided in the Report of the Remuneration
Committee in the Annual Report.
THE INVESTMENT MANAGER
Engagement
Through the Board meeting cycle, regular updates and the work of the
Management Engagement Committee reviewing the services of the Investment
Manager twice yearly, the Board is able to safeguard shareholder interests by:
· Ensuring adherence to the Investment Management Policy and
reviewing the agreed management and performance fees;
· Ensuring excessive risk is not undertaken in the pursuit of
investment performance;
· Reviewing the Investment Manager's decision making and
consistency in investment process;
· Ensuring compliance with statutory legal requirements,
regulations and other advisory guidance such as consumer duty and aspects of
operational resilience; and
· Considering the succession plans for the Technology Team in
ensuring the continued provision of portfolio management services.
Maintaining a close and constructive working relationship with the Manager is
crucial as the Board and the Investment Manager both aim to continue to
achieve consistent, long-term returns in line with the Investment Objective.
The culture which the Board maintains to ensure this involves encouraging open
discussion with the Investment Manager; recognising that the interests of
shareholders and the Investment Manager are aligned, providing constructive
challenge and making Directors' experience available to support the Investment
Manager. This culture is aligned with the collegiate and meritocratic culture
which Polar Capital has developed and maintains.
Outcomes and strategic decisions during the year
ESG
The Board continued to engage with the Investment manager to understand how
ESG has been integrated into the overall house style, the technology team
investment approach and decision making as well as the methodology behind
this. The Board also receives information on how ESG affects Polar Capital as
a business and the technology team in particular.
Consumer Duty
The Board has worked with the Investment Manager to ensure the obligations of
the new Consumer Duty regulations are appropriately applied to the Company.
All communications including the website, fact sheets and other published
documentation, have been reviewed to ensure they are appropriate for all end
users.
Management
The Management Engagement Committee has recommended the continued appointment
of the Investment Manager on the terms agreed within the Investment Management
Agreement.
INVESTEE COMPANIES
Stewardship
The Board has instructed the Investment Manager to take into account the
published corporate governance policies of the companies in which it invests.
The Board has also considered the Investment Manager's Stewardship Code and
Proxy Voting Policy. The voting policy is for the Investment Manager to vote
at all general meetings of companies in favour of resolutions proposed by the
management where it believes that the proposals are in the interests of
shareholders. However, in exceptional cases, where it believes that a
resolution could be detrimental to the interests of shareholders or the
financial performance of the Company, appropriate notification will be given
and abstentions or a vote against will be lodged.
The Investment Manager reports to the Board, when requested, on the
application of the Stewardship Code and Voting Policy. The Investment
Manager's Stewardship Code and Voting Policy can be found on the Investment
Manager's website in the Corporate Governance section (www.polarcapital.co.uk
(http://www.polarcapital.co.uk) ).
The Technology Investment Team also use the services of ISS to assist with
their own evaluation of companies' proposals or reporting ahead of casting
votes on behalf of the Company at their general meetings. In the event that an
investee company has share blocking in place, the default position is to
refrain from voting to ensure the ability to trade these stocks if required.
During the year ended 30 April 2025, votes were cast at 100% of investee
company general meetings held. At 50% of those meetings a vote was either cast
against management recommendation, withheld or abstained from. Further
information on how the Investment Manager considers ESG in its engagement with
investee companies can be found in the ESG Report within the Annual Report.
Outcomes and strategic decisions during the year
During the year the Board discussed the impact of ESG and other market factors
and how the Investment Manager factors these into its strategy, investment and
decision-making process. The Board receives information on the ratings of
investee companies and is able to use this as tool to inform discussions with
the Manager during Board meetings.
SERVICE PROVIDERS
Engagement
The Directors have frequent engagement with the Company's other key service
providers through the annual cycle of reporting, site visits and due diligence
meetings. This engagement is completed with the aim of having effective
oversight of delegated services, seeking to improve the processes for the
benefit of the Company and to understand the needs and views of the Company's
service providers, as stakeholders in the Company. Further information on the
Board's engagement with service providers is included in the Corporate
Governance Statement and the Report of the Audit Committee. During the year
under review, due diligence meetings have been undertaken by the Investment
Manager and where possible, service providers have joined meetings to present
their reports directly to the Board or the Audit Committee as appropriate.
Outcomes and strategic decisions during the year
The reviews of the Company's service providers have been positive and the
Directors believe their continued appointment is in the best interests of the
shareholders and the Company as a whole. The accounting and administration
services of HSBC Securities Services (HSS) are contracted through Polar
Capital and provided to the Company under the terms of the IMA. The Board,
through due diligence undertaken by the Company Secretary and the Polar
Capital Compliance team, is satisfied that the service received continues to
be of a high standard.
PROXY ADVISORS
Engagement
The support of proxy adviser agencies is important to the Directors, as the
Company seeks to retain a reputation for high standards of corporate
governance, which the Directors believe contributes to the long-term
sustainable success of the Company. The Directors consider the recommendations
of these various proxy voting agencies when contemplating decisions that will
affect shareholders and also when reporting to shareholders through the Half
Year and Annual Reports.
Recognising the principles of stewardship, as promoted by the UK Stewardship
Code, the Board welcomes engagement with all of its investors. The Board
recognises that the views, questions from, and recommendations of many
institutional investors and proxy adviser agencies provide a valuable feedback
mechanism and play a part in highlighting evolving shareholders' expectations
and concerns.
Outcomes and strategic decisions during this year
Where possible the Chair and other representatives of the Company have engaged
with the stewardship teams of some larger investors to understand and address
their expectations in terms of board governance, recruitment and diversity.
Prior to the Company's AGMs, the Company engages with agencies including PIRC
and ISS to fact check their advisory reports and clarify any areas or topics
contained within the report. This ensures that whilst the proxy advisory
reports provided to shareholders are objective and independent, the Company's
actions and intentions are represented as clearly as possible to assist with
shareholders' decision making when considering the resolutions proposed at the
AGM.
THE AIC
Engagement
The Company is a member of the AIC and has supported lobbying activities.
Representatives of the Manager sit on a variety of forums run by the AIC which
aids development and understanding of new policies and procedures. The
Directors may cast votes in the AIC Board Elections each year and regularly
attend AIC events.
The Board supports the AIC's 'My share, my vote' campaign and encourages all
Shareholders to do the same by signing the petition on the AIC's website; the
AIC are lobbying government to make a change in company law to require
nominees, which includes retail platforms, to automatically and without
charge, pass on voting rights and information to the underlying Shareholders
which at present is optional. We encourage this action as we believe
shareholder engagement is important.
Approved by the Board on 10 July 2025
By order of the Board
Jumoke Kupoluyi, ACG
Polar Capital Secretarial Services Limited
Company Secretary
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with UK-adopted international accounting standards
and applicable law.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that period. In preparing
these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant and
reliable;
· state whether they have been prepared in accordance with
UK-adopted international accounting standards;
· assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company; and
· the Strategic Report includes a fair review of the development
and performance of the business and the position of the issuer, together with
a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Catherine Cripps
Chair
10 July 2025
Status of announcement
The figures and financial information contained in this announcement are
extracted from the Audited Annual Report for the year ended 30 April 2025 and
do not constitute statutory accounts for the year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
Section 498(3) of the Companies Act 2006.
The Annual Report and Financial Statements for the year ended 30 April 2025
have not yet been delivered to the Registrar of Companies. The figures and
financial information for the year ended 30 April 2024 are extracted from the
published Annual Report and Financial Statements for the year ended 30 April
2024 and do not constitute the statutory accounts for that year. The Annual
Report and Financial Statements for the year ended 30 April 2024 have been
delivered to the Registrar of Companies and included the Report of the
Independent Auditors which was unqualified and did not contain a statement
under either section 498(2) or Section 498(3) of the Companies Act 2006.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 April 2025
Notes Year ended 30 April 2025 Year ended 30 April 2024
Revenue return Capital return Total return Revenue return Capital return Total return
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 3 19,055 - 19,055 15,471 - 15,471
Other operating income 4 6,309 - 6,309 6,438 - 6,438
Gains on investments held at fair value 5 - 128,523 128,523 - 1,147,978 1,147,978
Gains/(losses) on derivatives 6 - 2,767 2,767 - (22,030) (22,030)
Other currency losses 7 - (1,649) (1,649) - (1,292) (1,292)
Total income 25,364 129,641 155,005 21,909 1,124,656 1,146,565
Expenses
Investment management fee 8 (30,854) - (30,854) (25,919) - (25,919)
Other administrative expenses 9 (1,644) - (1,644) (1,393) - (1,393)
Total expenses (32,498) - (32,498) (27,312) - (27,312)
Gains before finance costs and tax (7,134) 129,641 122,507 (5,403) 1,124,656 1,119,253
Finance costs 10 (1,786) - (1,786) (1,874) - (1,874)
Profit before tax (8,920) 129,641 120,721 (7,277) 1,124,656 1,117,379
Tax 11 (2,366) - (2,366) (1,942) - (1,942)
Net profit for the year and total comprehensive income (11,286) 129,641 118,355 (9,219) 1,124,656 1,115,437
Earnings per share (basic and diluted) (pence)* 12 (0.95) 10.92 9.97 (0.75) 91.17 90.42
*The comparative figures have been rebased following the ten for one share
split on 13 September 2024.
The total column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the AIC.
All items in the above statement derive from continuing operations.
The Company does not have any other comprehensive income.
The notes below form part of these Financial Statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 April 2025
Share capital Capital redemption reserve Share premium Special non- distributable reserve Capital reserves Revenue reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total equity at 30 April 2023 34,329 12,802 223,374 7,536 2,683,759 (133,659) 2,828,141
Total comprehensive income/(expense):
Profit/(loss) for the year to 30 April 2024 - - - - 1,124,656 (9,219) 1,115,437
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 15 - - - - (139,045) - (139,045)
Total equity at 30 April 2024 34,329 12,802 223,374 7,536 3,669,370 (142,878) 3,804,533
Total comprehensive income/(expense):
Profit/(loss) for the year to 30 April 2025 - - - - 129,641 (11,286) 118,355
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 15 - - - - (117,935) - (117,935)
Share split costs - - - - (64) - (64)
Total equity at 30 April 2024 34,329 12,802 223,374 7,536 3,681,012 (154,164) 3,804,889
The notes below form part of these Financial Statements.
BALANCE SHEET
as at 30 April 2025
Notes 30 April 2025 30 April 2024
£'000 £'000
Non current assets
Investments held at fair value through profit or loss 13 3,664,891 3,713,758
Current assets
Receivables 39,801 37,607
Overseas tax recoverable 441 346
Cash and cash equivalents 14 188,911 103,033
Derivative financial instruments 13 12,958 9,557
242,111 150,543
Total assets 3,907,002 3,864,301
Current liabilities
Payables (22,337) (11,295)
Bank loans - (48,036)
Overdraft at bank and derivative clearing houses 14 (1,046) (437)
(23,383) (59,768)
Non current liabilities
Bank loans (78,730) -
Net assets 3,804,889 3,804,533
Equity attributable to equity Shareholders
Share capital 15 34,329 34,329
Capital redemption reserve 12,802 12,802
Share premium 223,374 223,374
Special non-distributable reserve 7,536 7,536
Capital reserves 3,681,012 3,669,370
Revenue reserve (154,164) (142,878)
Total equity 3,804,889 3,804,533 3,804,533
Net asset value per ordinary share (pence)* 325.20 315.41
* The comparative figure has been rebased following the ten for one share
split on 13 September 2024.
The Financial Statements, were approved and authorised for issue by the Board
of Directors on 10 July 2025 and signed on its behalf by:
Catherine Cripps
Chair
The notes below form part of these Financial Statements.
Registered number 3224867
CASH FLOW STATEMENT
for the year ended 30 April 2025
2025 2024
Notes £'000 £'000
Cash flows from operating activities
Profit before tax 120,721 1,117,379
Adjustments
Gains on investments held at fair value through profit or loss 5 (128,523) (1,147,978)
(Gains)/losses on derivative financial instruments 6 (2,767) 22,030
Proceeds of disposal on investments 4,648,853 2,857,451
Purchases of investments (4,464,412) (2,811,714)
Proceeds on disposal of derivative financial instruments 13 99,136 21,743
Purchases of derivative financial instruments 13 (99,770) (50,759)
Decrease/(increase) in receivables 1,550 (742)
(Decrease)/increase in payables (9) 641
Finance costs 1,786 1,874
Overseas tax (2,461) (1,909)
Foreign exchange losses 7 1,649 1,292
Net cash generated from operating activities 175,753 9,308
Cash flows from financing activities
Finance costs paid (1,776) (1,871)
Ordinary shares repurchased into treasury (117,689) (139,836)
Share split costs (64) -
Loan repaid (46,689) -
Loan drawn 78,307 -
Net cash used in financing activities (87,911) (141,707)
Net increase/(decrease) in cash and cash equivalents 87,842 (132,399)
Cash and cash equivalents at the beginning of the year 102,596 239,096
Effect of movement in foreign exchange rates on cash held 7 (2,573) (4,101)
Cash and cash equivalents at the end of the year 14 187,865 102,596
2025 2024
Notes £'000 £'000
Reconciliation of cash and cash equivalents
to the Balance Sheet is as follows:
Cash held at bank, overdraft and derivative clearing houses 14 166,498 69,581
BlackRock's Institutional Cash Series plc 14 21,367 33,015
(US Treasury Fund), money market fund
Cash and cash equivalents at the end of the year 14 187,865 102,596
The notes below form part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 April 2025
1. GENERAL INFORMATION
Polar Capital Technology Trust plc is a public limited company registered in
England and Wales whose shares are traded on the London Stock Exchange.
The principal activity of the Company is that of an investment trust company
within the meaning of Section 1158/1159 of the Corporation Tax Act 2010 and
its investment approach is detailed in the Strategic Report.
The Company financial statements have been prepared and approved by the
Directors in accordance with international accounting standards in accordance
with UK-adopted international accounting standards ("UK-adopted IAS").
The Company's presentational currency is Pounds Sterling. All figures are
rounded to the nearest thousand pounds (£'000) except as otherwise stated.
2. ACCOUNTING POLICIES
The material accounting policy information and other explanatory information
have been applied consistently for all years presented are set out
below:
(A) BASIS OF PREPARATION
The Financial Statements have been prepared on a going concern basis under the
historical cost convention, as modified by the inclusion of investments and
derivative financial instruments at fair value through profit or loss.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) for investment trusts issued by the Association of Investment Companies
(AIC) in July 2022 is consistent with the requirements of UK-adopted IAS, the
Directors have sought to prepare the Financial Statements on a basis compliant
with the recommendations of the SORP.
Going Concern
The financial position of the Company as at 30 April 2025 is shown in the
Balance Sheet above. As at 30 April 2025 the Company's total assets exceeded
its total liabilities by a multiple of over 38. The assets of the Company
consist mainly of securities that are held in accordance with the Company's
Investment Policy, as set out in the Annual Report and these securities are
readily realisable. The Company has a three-year fixed rate term loan with The
Bank of Nova Scotia which falls due for repayment on 30 September 2027. The
Directors have considered a detailed assessment of the Company's ability to
meet its liabilities as they fall due. The assessment took account of the
Company's current financial position, which used a variety of falling
parameters to demonstrate the effects on the Company's share price and net
asset value. In addition, the Company's cash flows were stressed tested for
base case and reasonable worse case scenarios such as reduction in dividend
and interest income and increase in administrative expenses. In light of the
results of these tests, the Company's cash balances, and the liquidity
position, the Directors consider that the Company has adequate financial
resources to enable it to continue in operational existence for at least 12
months.
The Company has within its corporate structure the requirement to hold a
continuation vote every five years. In accordance with this, a continuation
vote will be put to the Shareholders at the forthcoming AGM. Since the
continuation vote is taking place within the 12 months after the signing date
of the 2025 Annual Report and Financial Statements, it is relevant to consider
this as part of the going concern assessment. Ahead of the upcoming
continuation vote, the Board, Investment Manager and Corporate Broker have
been seeking Shareholder views including any concerns and an indication of
whether they were likely to vote in favour of the Company's continuation. No
comments adverse to the continuation vote have been received to date and the
Shareholders who provided feedback were minded, at the time of writing, to
vote in favour of the resolution for the Company to continue. Shareholders
highlighted the contact between the Investment Manager and Shareholders, the
long-term investment horizon of many Shareholders, the diversification of the
Company's register of Shareholders and the Company's inclusion on many buy
lists at private wealth managers and retail platforms. As such, the Directors
are confident that the continuation vote will be passed at the AGM to be held
on 10 September 2025 and therefore the Company will continue in existence. The
Directors acknowledge that there can be no certainty that the continuation
vote will be passed although, at the date of approval of these financial
statements, they have no reason to believe that it will not do so.
(B) PRESENTATION OF STATEMENT OF COMPREHENSIVE INCOME
In order to reflect better the activities of an investment trust company and
in accordance with the guidance set out by the AIC, supplementary information
which analyses the Statement of Comprehensive Income between items of a
revenue and capital nature has been presented alongside the Statement of
Comprehensive Income. The results presented in the revenue return column is
the measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in section 1158 of the
Corporation Taxes Act 2010.
(C) INCOME
Dividends receivable from equity shares are taken to the revenue return column
of the Statement of Comprehensive Income on an ex-dividend basis.
Special dividends are recognised on an ex-dividend basis and may be considered
to be either revenue or capital items.
The facts and circumstances are considered on a case by case basis before a
conclusion on appropriate allocation is reached.
Where the Company has received dividends in the form of additional shares
rather than in cash, the amount of the cash dividend foregone is recognised in
the revenue return column of the Statement of Comprehensive Income. Any excess
in value of shares received over the amount of the cash dividend foregone is
recognised in the capital return column of the Statement of Comprehensive
Income.
Unfranked income includes the taxes deducted at source.
Bank interest, money market fund interest and other income receivable are
accounted for on an accruals basis and is recognised in the period in which it
was earned.
Interest outstanding at the year end is calculated on a time apportioned basis
using the market rates of interest.
(D) EXPENSES AND FINANCE COSTS
All expenses, including finance costs, are accounted for on an accruals basis.
All indirect expenses have been presented as revenue items per the
non-allocation method except as follows:
- any performance fees payable are allocated wholly to capital,
reflecting the fact that, although they are calculated on a total return
basis, they are expected to be attributable largely, if not wholly, to capital
performance.
- transaction costs incurred on the acquisition or disposal of
investments are expensed either as part of the unrealised gain/loss on
investments (for acquisition costs) or as a deduction from the proceeds of
sale (for disposal costs).
Finance costs are calculated using the effective interest rate method and are
accounted for on an accruals basis.
(E) TAXATION
The tax expense represents the sum of the overseas withholding tax deducted
from investment income, tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the Statement of Comprehensive
Income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted at the balance sheet
date.
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns in the
supplementary information in the Statement of Comprehensive Income is the
'marginal basis'. Under this basis, if taxable income is capable of being
offset entirely by expenses presented in the revenue return column of the
Statement of Comprehensive Income, then no tax relief is transferred to the
capital return column.
Deferred tax is the tax expected to be payable or recoverable on temporary
differences between the carrying amounts of assets and liabilities in the
Financial Statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised.
Investment trusts which have approval as such under section 1158 of the
Corporation Tax Act 2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised based on tax
rates that have been enacted or substantively enacted at the balance sheet
date.
Deferred tax is charged or credited in the Statement of Comprehensive Income,
except when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity.
(F) INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
When a purchase or sale is made under contract, the terms of which require
delivery within the timeframe of the relevant market, the investments
concerned are recognised or derecognised on the trade date and are initially
measured at fair value.
On initial recognition the Company has designated all of its investments as
held at fair value through profit or loss as defined by UK-adopted IAS.
All investments are measured at subsequent reporting dates at fair value,
which is either the bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted. Investments in
unit trusts or OEICs are valued at the closing price, the bid price or the
single price as appropriate, as released by the relevant investment manager.
IFRS 13 defines fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Fair values for unquoted investments, or for investments for which there is
only an inactive market, are established by using various valuation
techniques. These may include recent arms length market transactions, the
current fair value of another instrument that is substantially the same,
discounted cash flow analysis and option pricing models. Where there is a
valuation technique commonly used by market participants to price the
instrument and that technique has been demonstrated to provide reliable
estimates of prices obtained in actual market transactions, that technique is
utilised. Where no reliable fair value can be estimated for such instruments,
they are carried at cost, subject to any provision for impairment.
Changes in fair value of all investments held at fair value and realised gains
and losses on disposal are recognised in the capital return column of the
Statement of Comprehensive Income.
(G) RECEIVABLES
Receivables are initially recognised at fair value and subsequently measured
at amortised cost. Receivables do not carry any interest and are short-term in
nature and are accordingly stated at their nominal value (amortised cost) as
reduced by appropriate allowances for estimated irrecoverable amounts.
(H) CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits. Cash equivalents are
short-term maturity of three months or less, highly liquid investments that
are readily convertible to known amounts of cash on demand. These include
investments in AAA-rated money market funds.
The Company's investment in BlackRock's Institutional Cash Series plc - US
Treasury Fund of £21,367,000 (2024: £33,015,000) is managed as part of the
Company's cash and cash equivalents as defined under IAS 7. This is measured
at fair value through profit or loss and is classified as Level 1 in the IFRS
13 fair value hierarchy.
In the Balance Sheet bank overdrafts are shown within current liabilities.
(I) PAYABLES
Payables are initially recognised at fair value and subsequently measured at
amortised cost. Payables are not interest- bearing and are stated at their
nominal value (amortised cost).
(J) BANK LOANS
Interest bearing bank loans are initially recognised at cost, being the
proceeds received net of direct issue costs, and subsequently at amortised
cost. The amounts falling due for repayment within one year are included under
current liabilities in the Balance Sheet.
(K) DERIVATIVE FINANCIAL INSTRUMENTS
The Company's activities expose it primarily to the financial risks of changes
in market prices, foreign currency exchange rates and interest rates.
Derivative transactions which the Company may enter into comprise forward
exchange contracts, the purpose of which is to manage the currency risks
arising from the Company's investing activities, quoted options on shares held
within the portfolio, or on indices appropriate to sections of the portfolio,
the purpose of which is to provide additional capital return.
The use of financial derivatives is governed by the Company's policies as
approved by the Board, which has set written principles for the use of
financial derivatives.
A derivative instrument is considered to be used for hedging purposes when it
alters the market risk profile of an existing underlying exposure of the
Company. The use of financial derivatives by the Company does not qualify for
hedge accounting under UK-adopted IAS. As a result, changes in the fair value
of derivative instruments are recognised in the Statement of Comprehensive
Income as they arise. If capital in nature, associated change in value is
presented in the capital return column of the Statement of Comprehensive
Income.
(L) RATES OF EXCHANGE
Transactions in foreign currencies are translated into Sterling at the rate of
exchange ruling on the date of each
transaction. Monetary assets, monetary liabilities and equity investments in
foreign currencies at the balance sheet date are translated into Sterling at
the rates of exchange ruling on that date. Realised profits or losses on
exchange, together with differences arising on the translation of foreign
currency assets or liabilities, are taken to the capital return column of the
Statement of Comprehensive Income.
Foreign exchange gains and losses arising on investments held at fair value
are included within changes in fair value.
(M) SHARE CAPITAL
Represents the nominal value of authorised and allocated, called-up and fully
paid shares issued.
(N) CAPITAL RESERVES
Capital reserves - gains/losses on disposal includes:
- gains/losses on disposal of investments
- exchange differences on currency balances and on settlement of
loan balances
- cost of own shares bought back
- other capital charges and credits charged to this account in
accordance with the accounting policies above
Capital reserve - revaluation on investments held includes:
- increases and decreases in the valuation of investments and
loans held at the year end.
All of the above are accounted for in the Statement of Comprehensive Income
except the cost of own shares bought back or issued which are accounted for in
the Statement of Changes in Equity.
(O) REPURCHASE OF ORDINARY SHARES (INCLUDING THOSE HELD IN
TREASURY)
Where applicable, the costs of repurchasing ordinary shares including related
stamp duty and transaction costs are taken directly to equity and reported
through the Statement of Changes in Equity as a charge on the capital reserve.
Share repurchase transactions are accounted for on a trade date basis.
The nominal value of ordinary share capital repurchased and cancelled is
transferred out of called up share capital and into the capital redemption
reserve.
Where shares are repurchased and held in treasury, the transfer to capital
redemption reserve is made if and when such shares are subsequently cancelled.
(P) SHARE ISSUE COSTS
Costs incurred directly in relation to the issue of new shares together with
additional share listing costs have been deducted from the share premium
reserve.
(Q) SEGMENTAL REPORTING
Under IFRS 8, 'Operating Segments', operating segments are considered to be
the components of an entity about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The chief
operating decision maker has been identified as the Manager (with oversight
from the Board).
The Board is of the opinion that the Company is engaged in a single segment of
business, namely by investing in a diversified portfolio of technology
companies from around the world in accordance with the Company's Investment
Objective, and consequently no segmental analysis is provided.
In line with IFRS 8, additional disclosure by geographical segment has been
provided in Note 26 in the Annual Report.
Further analyses of expenses, investment gains or losses, profit and other
assets and liabilities by country have not been given as either it is not
possible to prepare such information in a meaningful way or the results are
not considered to be significant.
(R) KEY ESTIMATES AND JUDGMENTS
Estimates and assumptions used in preparing the Financial Statements are
reviewed on an ongoing basis and are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances. The results of these estimates and assumptions form the basis
of making judgements about carrying values of assets and liabilities that are
not readily apparent from other sources.
The only estimates and assumptions that may cause material adjustment to the
carrying value of assets and liabilities relate to the valuation of unquoted
investments and investments for which there is an inactive market. These are
valued in accordance with the techniques set out in Note 2(f). At the year
end, there was no unquoted investments (2024: same).
The majority of the Company's investments are in US Dollars, the level of
which varies from time to time. In determining the functional currency the
Board considered the indicators in IAS 21 and the guidance in the AIC SORP.
The Board considered that the indicators were mixed as although the Company's
investments are predominantly denominated in USD, the majority of the
Company's operating expenses and the Company's shares are denominated in
Sterling. The Board consider that Sterling best reflects the economic
environment in which the Company operates and is most relevant to the majority
of the Company's Shareholders and creditors, and therefore concluded that the
Company's functional currency is Sterling.
(S) NEW AND REVISED ACCOUNTING
STANDARDS
There were no new UK-adopted IAS or amendments to UK-adopted IAS applicable to
the current year which had any significant impact on the Company's Financial
Statements.
i) The following new or amended standards became effective for the current
annual reporting period and
the adoption of the standards and interpretations have not had a material
impact on the Financial Statements
of the Company.
Standards & Interpretations Effective for periods commencing on or after
Amendments to IAS 1 Presentation of Financial Statements The amendments clarify that only covenants with which an entity must comply on 1 January 2024
or before the reporting date will affect a liability's classification as
- Non-current liabilities with Covenants current or non-current and the disclosure requirement in the financial
statements for the risk that non-current liabilities with covenant could
- Deferral of Effective Date Amendment (published 15 July 2020) become repayable within twelve months.
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
(publicised 23 January 2020)
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) The amendments address the disclosure requirements to enhance the transparency 1 January 2024
of supplier finance arrangements and their effects on a company's liabilities,
cash flows and exposure to liquidity risk.
ii) At the date of authorisation of the Company's Financial Statements, the
following relevant standards that potentially impact the Company are in issue
but are not yet effective and have not been applied in the Financial
Statements.
Standards & Interpretations Effective for periods commencing on or after
Lack of Exchangeability (Amendments to IAS 21) The amendments specify how to assess whether a currency is exchangeable and 1 January 2025
how to determine a spot exchange rate if it is not.
Annual Improvements to IFRS The amendments clarify the requirements for: 1 January 2026
Accounting Standards-Volume 11 Hedge accounting by a first-time adopter (IFRS 1 First-time Adoption of
International Financial Reporting Standards); Gain or loss on derecognition
(IFRS 7 Financial Instruments: Disclosures); Transaction price (IFRS 9
Financial Instruments); Derecognition of lease liabilities (IFRS 9);
Determination of a 'de facto agent' (IFRS 10 Consolidated Financial
Statements) and Cost method (IAS 7 Statement of Cash Flows).
Amendments to IFRS 9 and IFRS 7 - Amendments The amendments address two of the issues 1 January 2026
to the Classification and Measurement of Financial identified during the post-implementation
Statements review of IFRS 9, being the derecognition of
a financial liability settled through electronic
transfer and the classification of financial assets, it also introduces new
and amended disclosure requirements.
The Directors expect that the adoption of the standards listed above will have
either no impact or that any impact will not be material on the Financial
Statements of the Company in future periods.
3. INVESTMENT INCOME Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Revenue:
UK dividend income 58 -
Overseas Dividend income 18,997 15,471
19,055 15,471
All investment income is derived from listed investments.
Included within income from investments is £48,000 (2024: nil) of special
dividends classified as revenue in nature in accordance with note 2(c). No
special dividends have been recognised in capital (2024: same).
4. OTHER OPERATING INCOME Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Bank interest 3,932 2,529
Money market fund interest 2,377 3,909
6,309 6,438
5. GAINS ON INVESTMENTS HELD AT FAIR VALUE Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Net gains on disposal of investments at historic cost 695,869 476,684
Transfer on disposal of investments (618,762) (151,853)
Gains on disposal of investments based on carrying value at previous balance 77,107 324,831
sheet date
Valuation gains on investments held during the year 51,416 823,147
128,523 1,147,978
6. GAINS/(LOSSES) ON DERIVATIVES Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Gains/(losses) on disposal of derivatives held 10,212 (21,716)
Losses on revaluation of derivatives held (7,445) (314)
2,767 (22,030)
The derivative financial instruments represent the call and put options, which
are used for the purpose of efficient portfolio management. Refer to Note 13
below for further
details.
7. OTHER CURRENCY LOSSES Year ended Year ended
30 April 2025 30 April 2024
£'000 £'000
Exchange losses on currency balances (2,573) (4,101)
Exchange gains on settlement of loan balances 9,753 -
Exchange (losses)/gains on translation of loan balances (8,829) 2,809
(1,649) (1,292)
8. INVESTMENT MANAGEMENT AND PERFORMANCE FEE
Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Investment management fee paid to Polar Capital (charged wholly to 30,854 25,919
revenue)
Performance fee paid to Polar Capital (charged wholly to capital) - -
There was no performance fee payable in respect of the year nor outstanding at
the year end (2024: same).
The basis for calculating the investment management and performance fees are
set out in the Strategic Report in the Annual Report and details of all
amounts payable to the Manager are given in Note 16 below.
A revised Investment Management Agreement was put in place with the Manager
which took effect on 1 May 2025. The new base management fee is structured
over two tiers, and the performance fee has been removed entirely. Details of
the revised terms of the Investment Management Agreement are disclosed in the
Strategic Report above.
9. OTHER ADMINISTRATIVE EXPENSES
Year ended Year ended 30 April 2024
30 April 2025 £'000
£'000
Directors' fees and expenses(1) 254 253
National insurance contributions 27 27
Depositary fee(2) 264 227
Registrar fee 61 57
Custody and other bank charges(3) 475 359
UKLA and LSE listing fees(4) 269 208
Legal & professional fees and other financial services(5) 56 3
AIC fees 22 21
Auditors' remuneration - for audit of the financial Statements 82 80
Directors' and officers' liability insurance 50 56
AGM expenses (6) - 6
Corporate brokers' fee(7) - -
Shareholder communications (8) 60 63
Other expenses(9) 24 33
1,644 1,393
1 Full disclosure is given in the Directors' Remuneration Report in the
Annual Report.
2 Depositary fee is based on the value of the net assets. The daily average
net asset value rose by 23% compared to the previous year.
3 Custody fees are based on the value of the assets and geographical activity
and determined on the pre-approved rate card with HSBC.
4 Fees are based on the market capitalisation of the Company which has risen
over the last invoice period.
5 2025 includes legal cost of new loan agreement.
6 Includes reversal of prior year over accruals in this period.
7 2024/2025 annual fee was offset by the commission credit on shares
repurchases.
8 Includes Bespoke promotional marketing cost.
9 2025 includes external third party Board evaluation cost (2024:
Non-executive Directors' search fee).
10. FINANCE COSTS Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Interest on loans and overdrafts 1,762 1,874
Loan arrangement and facility fees 24 -
1,786 1,874
11. TAXATION Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
(a) Analysis of tax charge for the year:
Overseas tax 2,366 1,942
Total tax for the year (see Note 11b) 2,366 1,942
(b) Factors affecting tax charge for the year:
The charge for the year can be reconciled to the profit per the Statement of
Comprehensive Income as follows:
Profit before tax 120,721 1,117,379
Tax at the UK corporation tax rate of 25% (2024: 25%) 30,180 279,345
Tax effect of non-taxable dividends (4,764) (3,868)
Tax effect of gains on investments that are not taxable (32,410) (281,164)
Unrelieved current year expenses and deficits 6,994 5,687
Overseas tax suffered 2,366 1,942
Total tax for the year (see Note 11a) 2,366 1,942
(c) Factors that may affect future tax charges:
There is an unrecognised deferred tax asset comprising:
Unrelieved management expenses 79,679 72,685
Non-trading loan relationship deficits 1,807 1,807
81,486 74,492
The deferred tax asset is based on corporation tax rate of 25% (2024: 25%).
The Company has an unrecognised deferred tax asset of £79,679,000 (2024:
£72,685,000) arising from surplus management expenses of £318,715,000 (2024:
£290,740,000) and unrecognised deferred tax asset of £1,807,000 (2024:
£1,807,000) arising from non-trade loan relationship deficits of £7,227,000
(2024: £7,227,000) based on a corporation tax rate of 25% (2024: 25%). Given
the composition of the Company's portfolio, it is not likely that this assets
will be utilised in the foreseeable future and therefore no asset has been
recognised in the accounts.
Due to the Company's tax status as an investment trust and the intention to
continue meeting the conditions required to maintain approval of such status
in the foreseeable future, the Company has not provided tax on any capital
gains arising on the revaluation or disposal of investments held by the
Company.
12. EARNING PER ORDINARY SHARE
Year ended 30 April 2025 Year ended 30 April 2024
Revenue return Capital return Total return Revenue return Capital return Total
pence pence pence pence pence Return
pence
The calculation of basic earning per ordinary share is based on the following
data:
Net profit for the year (£'000) 1,124,656 1,115,437
(11,286) 129,641 118,355 (9,219)
Weighted average ordinary shares in issue during the year*
1,233,614,300 1,233,614,300 1,233,614,300
1,187,532,192 1,187,532,192 1,187,532,192
From continuing operations
Basic - earning per ordinary shares (pence)* (0.95) 10.92 9.97 (0.75) 91.17 90.42
* The comparative figures have been rebased following the ten for one share
split on 13 September 2024.
As at 30 April 2025 there are no potentially dilutive shares in issue and the
earnings per share therefore equate to those shown above (2024: there was no
dilution).
13. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(i) Investments held at fair value through profit or
loss
Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Opening book cost 2,460,764 2,058,477
Opening investment holding gains 1,252,994 581,700
Opening fair value 3,713,758 2,640,177
Analysis of transactions made during the year
Purchases at cost 4,475,207 2,799,314
Sales proceeds received (4,652,597) (2,873,711)
Gains on investments held at fair value 128,523 1,147,978
Closing fair value 3,664,891 3,713,758
Closing book cost 2,979,243 2,460,764
Closing investment holding gains 685,648 1,252,994
Closing fair value 3,664,891 3,713,758
Of which:
Listed on a recognised Stock Exchange 3,664,891 3,713,758
The Company received £4,652,597,000 (2024: £2,873,711,000) from disposal of
investments in the year. The book cost of these investments when they were
purchased was £3,956,728,000 (2024: £2,397,027,000). These investments have
been revalued over time and until they were sold any unrealised gains/losses
were included in the fair value of the investments.
Included in additions at cost are purchase costs of £2,320,000 (2024:
£1,550,000). Included in proceeds of disposals are sales costs of £2,971,000
(2024: £1,726,000). These costs primarily comprise commission.
(ii) Changes in derivative financial instruments Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Valuation at 1 May 9,557 2,571
Additions at cost 99,770 50,759
Proceeds of disposal (99,136) (21,743)
Gains/(losses) on disposal 10,212 (21,716)
Valuation losses (7,445) (314)
Valuation at 30 April 12,958 9,557
The derivative financial instruments represent the call and put options, which
are used for the purpose of efficient portfolio management. As at 30 April
2025, the Company held NASDAQ 100 Stock Index put option and the market value
of these open put option position was £5,905,000 (2024: NASDAQ 100 Stock
Index put options with a market value of £7,192,000). The Company also held
Microsoft Corp call option and Apple Inc call options, the market value of
these open call option position were £11,000 and £7,042,000 respectively
(2024: Microsoft Corp call options with a market value of £403,000 and Apple
Inc call option with a market value of £1,962,000).
(iii) Classification under Fair Value Hierarchy:
The table below sets out the fair value measurements using the IFRS 13 fair
value hierarchy. Categorisation within the hierarchy has been determined on
the basis of the lowest level of input that is significant to the fair value
measurement of the relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data.
The valuation techniques used by the Company are explained in the accounting
policies above.
Year ended 30 April 2025 Year ended
£'000 30 April 2024
£'000
Equity Investments and derivative financial instruments
Level 1 3,671,944 3,717,533
Level 2 5,905 5,782
Level 3 - -
3,677,849 3,723,315
As at the year ended 30 April 2025, £5,905,000 (2024: £5,782,000) of NASDAQ
100 Stock Index put options held by the Company have been classified as level
2 due to the absence of regular trading activity levels closer to the
measurement date. All other options held at the current and prior year end
have been classified as level 1.
There has been no transfer between Levels 1, 2 and 3 during the year ended 30
April 2025.
(iv) Unquoted investments
As at 30 April 2025, the portfolio comprised no unquoted investment (2024:
same):
14. CASH AND CASH EQUIVALENTS 30 April 2025 30 April 2024
£'000 £'000
Cash at bank 167,544 69,964
Cash held at derivative clearing houses - 54
Money market funds 21,367 33,015
Cash and cash equivalents 188,911 103,033
Overdraft at bank and derivative clearing houses (1,046) (437)
187,865 102,596
As at 30 April 2025, the Company held BlackRock's Institutional Cash Series
plc - US Treasury Fund with a market value of £21,367,000 (2024:
£33,015,000), which is managed as part of the Company's cash and cash
equivalents as defined under IAS 7.
As defined under IAS 7, the bank overdraft is included in the Company's cash
and cash equivalents as it is repayable on demand and forms an integral part
of the Company's cash management.
15. SHARE CAPITAL
30 April 30 April
2025 2024
£'000 £'000
Allotted, Called up and Fully paid:
Ordinary shares of 2.5p* each
Opening balance of 1,206,215,690* (2024: 1,262,855,440*) 30,155 31,571
Repurchase of 36,208,671 (2024: 56,639,750*) ordinary shares into treasury (905) (1,416)
Allotted, called up and fully paid: 1,170,007,019 (2024: 1,206,215,690*) 29,250 30,155
ordinary shares of 25p
ordinary shares of 2.5p
203,142,981 (2024: 166,934,310*) ordinary shares held in treasury 5,079 4,174
At 30 April 2025 34,329 34,329
* The comparative figure has been rebased following the ten for one share
split on 13 September 2024.
At the Annual General Meeting of the Company held on 11 September 2024,
Shareholders approved the sub-division of existing ordinary shares of 25 pence
each into ten new shares of 2.5 pence each (ten for one share split).
Following the completion of this share split, 137,315,000 ordinary shares of
25 pence each (including 18,073,403 shares held in treasury) were sub-divided
into 1,373,150,000 new ordinary shares of 2.5 pence each (including
180,734,030 shares held in treasury). The new ordinary shares were admitted to
the Official List of the Financial Conduct Authority and to trading on the
London Stock Exchange's main market for listed securities on 13 September
2024.
During the year, there were no ordinary shares (outside of the ordinary share
issued in relation to the share split) issued to the market (2024: no shares
issued). A total of 36,208,671 (2024: 56,639,750*) ordinary shares were
repurchased into treasury at a cost of £117,935,000 (2024: £138,355,000 and
stamp duty of £690,000).
Subsequent to the year end, and to 4 July 2025 (latest practicable date),
11,960,588 ordinary shares were repurchased into treasury at an average price
of 335.98p per share.
16. TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS
(A) TRANSACTIONS WITH THE MANAGER
Under the terms of an agreement dated 9 February 2001 the Company has
appointed Polar Capital LLP ("Polar Capital") to provide investment
management, accounting, secretarial and administrative services. Details of
the fee arrangement for these services are given in the Strategic Report.
The total management fees, paid under this agreement to Polar Capital in
respect of the year ended 30 April 2025 were £30,854,000 (2024: £25,919,000)
of which £2,246,000 (2024: £2,386,000) was outstanding at the year
end.
There was no performance fee payable in respect of the year nor outstanding at
the year end (2024: same).
In addition, the research costs and the first £200,000 of marketing costs per
annum are borne by the Manager.
A revised Investment Management Agreement was put in place with the Manager
which took effect on 1 May 2025. The new base management fee is structured
over two tiers, and the performance fee has been removed entirely. Details of
the revised terms of the Investment Management Agreement are disclosed in the
Strategic Report above.
(B) RELATED PARTY TRANSACTIONS
The compensation payable to key management personnel in respect of short term
employee benefits is £254,000 (2024: £253,000) which comprises £254,000
(2024: £253,000) paid by the Company to the Directors.
Refer to Company's 2025 Annual Report for the Directors' Remuneration Report
including Directors' shareholdings and movements within the year.
17. NET ASSET VALUE PER ORDINARY SHARE
Net asset value per share
30 April 30 April
2025 2024
Undiluted:
Net assets attributable to ordinary Shareholders (£'000) 3,804,889 3,804,533
Ordinary shares in issue at end of year* 1,170,007,019 1,206,215,690
Net asset value per ordinary share (pence)* 325.20 315.41
*The comparative figures have been rebased following the ten for one share
split on 13 September 2024.
As at 30 April 2025, there were no potentially dilutive shares in issue (2024:
there was no dilution).
18. POST BALANCE SHEET EVENT
Subsequent to the year end, and to 4 July 2025, 11,960,588 ordinary shares
were repurchased and placed in the Treasury at an average price of 335.98p per
share.
There are no other significant events that have occurred after the end of the
reporting period to the date of this report which require disclosure.
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