RNS Number : 6679W

Polar Capital Technology Trust PLC

17 July 2024

POLAR CAPITAL TECHNOLOGY TRUST PLC

AUDITED RESULTS ANNOUNCEMENT FOR THE FINANCIAL YEAR TO 30 APRIL 2024

FINANCIAL HIGHLIGHTS

FINANCIAL SUMMARY			Change %
	As at 30 April 2024	As at 30 April 2023	Year Ended 2024	Year Ended 2023
Total net assets	£3,804,533,000	£2,828,141,000	34.5%	(7.3%)
Net Asset Value (NAV) per ordinary share	3,154.11p	2,239.48p	40.8%	(2.8%)
Benchmark¹	5007.08	3604.43	38.9%	2.9%
Price per ordinary share	2,920.00p	1,940.00p	50.5%	(4.9%)
Discount of ordinary share price to the NAV per ordinary share²	(7.4%)	(13.4%)
Ordinary shares in issue³	120,621,569	126,285,544	(4.5%)	(4.6%)
Ordinary shares held in treasury	16,693,431	11,029,456	51.4%	122.4%

KEY DATA	For the year to 30 April 2024
KEY DATA	Local Currency %	Sterling Adjusted %
Benchmark¹
Dow Jones Global Technology Index (TR)	38.4	38.9
Other Indices over the year (total return)
FTSE World	18.6	19.2
FTSE All-Share		7.5
S&P 500 Composite	22.7	23.3
Nikkei 225	35.6	17.8
Eurostoxx 600	11.9	9.0

	As at 30 April
EXCHANGE RATES	2024	2023
US$ to £	1.2522	1.2569
Japanese Yen to £	197.04	171.15
Euro to £	1.1711	1.1385

	For the year to 30 April
EXPENSES	2024	2023
Ongoing charges ratio²	0.80%	0.81%
Ongoing charges ratio including performance fee²	0.80%	0.81%

Data supplied by Polar Capital LLP and HSBC Securities Services.

1 Dow Jones Global Technology Index (total return, Sterling adjusted, with the removal of relevant withholding taxes). See annual report further details.

2 Alternative Performance Measures provided in the Annual Report.

3 The issued share capital as at close of business on 11 July 2024 (latest practicable date) was 137,315,000 ordinary shares of which 17,657,777 were held in treasury.

HISTORIC PERFORMANCE

As at 30 April	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Net Assets (£m)	606.6	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
Share price (pence)	442.0	592.0	566.0	947.0	1,148.0	1,354.0	1,774.0	2,364.0	2,040.0	1,940.0	2,920.0
NAV per share (pence)	458.4	599.2	605.5	945.4	1,159.7	1,446.4	1,715.6	2,496.4	2,305.1	2,239.5	3,154.1
Indices of Growth¹
Share price²	100.0	133.9	128.1	214.3	259.7	306.3	401.4	534.8	461.5	438.9	660.6
NAV per share²	100.0	130.7	132.1	206.2	252.9	315.5	374.2	544.5	502.8	488.5	688.0
Dow Jones Global Technology Index ³	100.0	129.5	129.3	198.3	232.2	281.9	333.0	487.3	483.1	496.9	690.3

The Company commenced trading on 16 December 1996 and the share price on the first day was 96.0p per share and the NAV per share was 97.5p.

Notes:

1 Rebased to 100 at 30 April 2014

2 Total return assumes reinvestment of dividends.

3 Dow Jones World Technology Index (total return, Sterling adjusted) with the removal of relevant withholding taxes.

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

Introduction

On behalf of myself and the Board I am pleased to present to you the Annual Report of the Company for the financial year ("FY24") ended 30 April 2024.

In my last full year statement to you, we reflected on the acceleration of Artificial Intelligence ("AI"), the investment opportunities this could bring and the wider impact on our sector. During the financial year under review, we continued to see widespread adoption and exciting developments in generative AI. Notwithstanding this, the market backdrop remains a challenge with geopolitical events dominating much of the year and interest rates continuing to rise sharply throughout the year.

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.

I am pleased to be reporting strong absolute performance during the financial year under review. This was largely due to the Manager's decision to rotate towards AI as a primary investment theme and focus on the enablers and beneficiaries in this space including semiconductor and component subsectors. The diminution in the risks of prolonged high inflation and recession have helped equity markets generally. The Company performed well against its peer group with the net asset value (NAV) per share rising from 2,239.48p to 3,154.11p, an increase of 40.8%, versus an increase in the benchmark of 38.9% in Sterling terms over the same period.

Discount Management

The Company's discount narrowed during the financial year under review, ending the year at 7.4% compared to 13.4% at the end of FY23.

The Board continually 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. Equally, the Board will also use discretion to issue shares at a premium.

Utilising this discretion, we repurchased a total of 5,663,975 ordinary shares (representing 4.1% of the issued share capital) in the year under review at an average price of 2,442.50 pence per share and an average discount of 12.3%. Following the year end and up to close of business 11 July 2024, the Company has bought back a further 964,346 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.

Board Composition

As noted in my Half Year Statement to Shareholders, Charlotta Ginman stepped down as Audit Chair on

31 October 2023 and was succeeded by Jane Pearce as part of a smooth and orderly transition. Charlotta remained on the Board as a non-executive Director of the Company and will retire at the Company's Annual General Meeting ("AGM") in September 2024 following nine years continuous service. On behalf of the Board, I would like to thank Charlotta for her service to the Company over the years.

Subsequent to Charlotta's retirement the Board will comprise five non executive Directors; while the Board considers the composition to be appropriate and covering all skills required we are in the midst of a recruitment process. It is three years since the Board last undertook a market search and we felt we should survey the market and seize the opportunity to hire an additional individual who would add to the Board's existing diversity and skill sets should such an individual be identified. We have appointed a recruitment consultant with a perceived ability to fulfil a search criterion focussed on exploring a broad pool of candidates and in particular, candidates with minority ethnic and/or diverse backgrounds. 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 is detailed further within the Remuneration Committee Report, an annual fee review was undertaken to ensure that remuneration paid to Directors remains attractive, competitive and in line with those of its peers to attract and retain the best candidates. The Board usually favours modest increases year on year (where applicable) and with effect from 1 May 2024, the Directors' base fee increased by c.3% to £36,000 and the fee of the Chair to £65,500. The supplement for the Audit Committee Chair was increased to £8,500 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 FY25 will be £235,000. The maximum level currently provided for in the Company's Articles of Association is £300,000. In order to provide headroom and flexibility particularly should the Board find it wants to recruit an additional member, it is proposed that the Articles are updated, by way of special resolution at the AGM, to increase the maximum level to £350,000 per annum.

Share Split

The price of the Company's existing ordinary shares ('Existing Ordinary Shares') has increased in recent years and particularly during the financial year under review with our shares now trading regularly above £30 per share. Whilst this is positive for the Company and our Shareholders, we recognise that a higher share price might be a barrier to investment for certain investors including regular savers who may wish to invest smaller amounts per transaction on a regular basis.

The Directors are therefore proposing the sub-division of each Existing Ordinary Share into 10 new ordinary shares (the "New Ordinary Shares") (the "Share Split"), thereby resulting in a lower market price per ordinary share. The Share Split will not itself affect the overall value of any shareholder's holding in the Company and the New Ordinary Shares will carry the same rights and be subject to the same restrictions (save as to nominal value) as the Existing Ordinary Shares. We have made arrangements to ensure that there will be no interruption to trading in the ordinary shares on the London Stock Exchange when the Share Split takes place.

The Share Split requires the approval of shareholders and, accordingly, resolution 10 in the Notice of AGM seeks this approval. The Share Split is conditional on the New Ordinary Shares being admitted to the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange's main market for listed securities. If resolution 10 is passed, the Share Split will become effective on admission. Further details of the proposed Share Split are set out in the Directors' Report in the annual report and in the Notice of AGM

Annual General Meeting

We are pleased to confirm that the Company's AGM will be held on 11 September 2024 at 2:30pm at The Royal Institution, 21 Albemarle St, London W1S 4BS. We look forward to welcoming shareholders to the meeting, at which they will receive a presentation from the 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.

We are conscious of the importance of shareholder engagement and would like to encourage shareholders to engage with the Board and the Investment Manager. As such, the Board invites shareholders 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 with the subject heading PCTT AGM.

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 its progress and receives regular updates on the developments on the corporate side of Polar Capital's business. As at 30 April 2024, 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

The outlook for the technology sector is exciting as Artificial Intelligence (AI) capabilities develop at a rapid pace. The parallel computing infrastructure to support this growth has dominated sector and market returns - as the Manager argues is typical during the 'buildout' phase of a new general-purpose technology (GPT). This has brought concentration challenges in the near term but should provide immense future opportunities as AI is applied to every industry.

The Manager has continued to invest in the team to take advantage of the AI opportunity, adding two additional investment analysts during the year. Shareholders will have the opportunity to hear from the technology investment team members at the AGM.

FINANCIAL AND PERFORMANCE REVIEW FOR THE YEAR ENDED 30 APRIL 2023

The NAV per share increased to 3,154.11p as at 30 April 2024 from 2,239.48p at the start of the year, which represents a 40.8% increase, and the Company finished the year with total net assets of £3,804.5m. The Investment Manager's Report sets out in detail the performance of the Company for the financial year. The chart contained in the annual report shows in greater detail the movement in total net assets for the 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 £1,115.4m (2023: £105.2m loss), of which there was a £1,124.6m gain (2023: £98.3m loss) from capital and a £9.2m loss (2023: £6.9m loss) on our 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 (2023: no change). The earnings per share were 904.21p (2023: losses of 81.28p per share). These were made up of 911.68p from capital return and a loss of 7.47p from revenue return.

Capital Return

The investment portfolio was valued at £3,713.8m (2023: £2,640.2m) at the year end 30 April 2024. The investment portfolio delivered a total of realised and unrealised gains of £1,147.9m (2023: £106.8m loss) for the year ended 30 April 2024. The Company's valuation approach is described in Note 2 (f) in the annual report. The derivative losses of £22.0m (2023: £0.03m gains) 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.

Revenue Return

The total investment income of £15.5m (2023: £16.2m) represents dividend income derived from listed investments. During the year under review, the Company received other operating income of £6.4m (2023: £3.8m) 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 £27.3m (2023: £23.1m).These are made up of investment management fees of £25.9m (2023: £21.9m) and administrative expenses of £1.4m (2023: £1.2m). In addition, the Company had finance costs of £1.9m (2023: £1.6m). 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. 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. There was no performance fee accrued at the year ended 30 April 2024 (2023: £nil).

Ongoing Charges

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 2024 was 0.80%, a slight reduction from the previous year of 0.81%. The OCR including the performance fee for the year to 30 April 2024 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

As in the prior years, the Company's absolute level of cash remained relatively high, closing the year at £102.6m (2023: £239.1m), this equates to less than 3% of the Company's NAV as at 30 April 2024. 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 2024, the Company held the BlackRock Institutional Cash Series - US Treasury Fund with a value at year end of £33.0m (2023: £90.4m).

Portfolio Turnover

Portfolio turnover (purchases and sales divided by two) totalled £2,836.5m equating to 85.5% for the year to 30 April 2024 (2023: 77%) of average net assets over the year. Details of the investment strategy and portfolio are given in the Investment Manager's Review.

Gearing

The Company can use gearing for investment purposes as stated in the annual report. As at the year end, the Company had fully drawn the two, two-year fixed rate term loans (JPY 3.8bn and USD$36m) with ING Bank N.V. Both loans fall due for repayment on 30 September 2024. The repayment of both loans, totalling approximately £48.0m (2023: £50.8m), would equate to less than 2% of the Company's NAV as at 30 April 2024. Consideration of the future level of borrowings required by the portfolio manager is currently under review.

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 2024, the other currency losses of £1.3m (2023; gains of £8.4m) represents the exchange losses on currency balances of £4.1m (2023: gains of £7.2m) and net gains on translation of loan balances of £2.8m (2023: gains of £1.2m). 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

16 July 2024

INVESTMENT MANAGER'S REPORT

Market Review

Equity markets delivered strong returns during the Trust's fiscal year as inflation trended back towards target, unemployment remained low and economic growth surprised to the upside. The MSCI All Country World Net Total Return Index in Sterling returned +18.1% during the fiscal year, while the S&P 500 and the DJ Euro Stoxx 600 indices returned +23.3% and +9.0% respectively. The 'goldilocks' combination of disinflation and strong economic growth was entirely at odds with investor pessimism and bearish positioning at the start of the fiscal year, which reflected a torrid 2022, adverse financial conditions, above-average valuations and the allure of significantly higher risk-free rates. Investors poured $1.3trn into money market funds during 2023, 10x more than flowed into equity funds.

The fiscal year began amid the fallout from the collapse of Silicon Valley Bank and Credit Suisse. Decisive policymaker actions prevented contagion and reminded investors that in extremis the so-called 'Fed put' (an assumption that if necessary the Fed will step in to support financial markets) was alive and well. Global markets rebounded from lows in March to almost recover their December 2021 highs by the end of July 2023, supported by resilient consumer spending and strong labour markets, even as central banks hiked rates aggressively. Inflation trended down ('core PCE' declined from 5.2% in 2022 to 4.1% in 2023 and is forecast to reach 2.6% in 2024) without triggering a recession or even an increase in the unemployment rate, which remained below pre-pandemic levels in many countries.

Strong equity market returns depended on the (surprising) fact that aggressive rate hikes did not derail the economy. Instead, US real GDP growth of 2.5% in 2023 (and expectations for 2.7% in 2024) significantly exceeded expectations at the start of 2023 (1.4% and 1.0% for 2023 and 2024 respectively). This 'goldilocks' scenario was tested during the fiscal year, however, as US bond yields touched 5% in October 2023 on a narrowly-averted US government shutdown, increased US Treasury issuance, a ratings agency downgrade and emerging 'higher for longer' interest rate commentary from central bankers.

The rise in yields proved short-lived and they retraced to c3.9% by the end of the calendar year, spurring a cross-asset rally. Favourable seasonal trends were buoyed by investors' growing hopes of a soft landing (where inflation comes down without a significant increase in unemployment). Markets took dovish commentary from Fed policymakers and supportive inflation data as a signal that the Fed had completed its hiking cycle and began to price the first rate cut in March, with expectations for six or seven 25-basis-point interest rate cuts by the end of 2024.

The New Year (and final third of the Trust's fiscal year) presented challenges as US 10-year Treasury yields rebounded to c.4.6% in April as labour markets and economic data remained firm, and inflation readings came in a little hotter than expected. This pushed out market expectations of the timing of the first Fed cut from March to November and put upward pressure on real yields (government bond yields adjusted for inflation), which moved from 1.7% coming into the year to c.2.2% by the end of April.

Despite still being incomplete, the rise and fall of inflation has been remarkable, demonstrating that credible central banks can contain inflation by controlling inflation expectations, rather than just slowing down the economy. The Fed also enjoyed notable tailwinds including productivity gains, benign weather and a tepid Chinese recovery. We have previously argued (in our 1945-1947 inflation parallel) that many Covid-related imbalances would probably have resolved themselves eventually, but the historic path taken by the Fed reflected the uniqueness of the post-pandemic episode. Larry Summers, a former Treasury Secretary, described the Fed's actions in the two years after 2021 as a "less than 1% probability set of actions relative to what the market expected".

An inescapable feature of equity markets during the fiscal year was the dominance of a select group of mega-cap technology stocks, the so-called 'Magnificent Seven' - latterly the 'Fab Four' (or Five) - which returned +60% combined in USD terms, according to Bloomberg. These returns emerged following a disastrous calendar 2022 when the group declined -45%, and FY24 returns were driven almost entirely by positive estimate revisions. Their dominance of equity returns (and indeed profit pools) has been felt more widely across the market as large cap stocks (Russell 1000) outperformed small cap (Russell 2000) by 10ppts during the fiscal year, 32ppts over the past 3 years and 50ppts over the past 5 years.

Technology Review

The technology sector led global equity markets higher during the Trust's fiscal year as the Dow Jones Global Technology Index returned +38.9% against the MSCI All Country World Net Total Return Index's +18.1%. Technology outperformance was driven by a number of factors: better than expected growth, positive earnings revisions, improved margins, and the increasing likelihood of an economic 'soft landing'. However, the most important technology theme during the year was the proliferation, evolution, and investment implications of Generative AI (GenAI). Our previous fiscal year saw the launch of ChatGPT in November 2022, followed by Microsoft's $10bn investment in OpenAI in January 2023. However, GenAI became impossible for investors to ignore in May 2023, when NVIDIA delivered remarkable Q1 results accompanied by the largest guidance beat ($11bn vs. $7.15bn) in the history of the semiconductor industry.

At the stock level, companies exposed to AI computing (where demand for servers, chips and related components increased significantly) delivered positive returns during the fiscal year, led by NVIDIA which gained a staggering +213%. This helped the Philadelphia Semiconductor Index (SOX) return +58.7% over the same period, led by AI-related chip makers and semiconductor capital equipment companies, as cloud providers invested aggressively in the new technology.

Strength in AI-related data centre spending 'crowded out' non-AI spending in areas such as CPU and cloud servers, reinforcing the divergence between AI and non-AI returns. Non-AI semiconductor fundamentals were mixed: communications infrastructure spending remained weak, PC and smartphone inventory cycles appeared to bottom, while automotive and industrial end markets softened significantly before potentially bottoming towards fiscal year end. Apple had a challenging year amid China market share loss concerns while the distinct lack of a positive AI narrative weighed on Apple's multiple.

The software sector delivered reasonable absolute returns as the Bloomberg Americas Software Index returned +23.8%, but significantly lagged the technology sector on a relative basis. This was due to a lack of positive revenue growth revisions (revenue growth in the software sector overall has been decelerating since mid-2021) and the deterioration of the narrative around AI's impact on existing application software vendors. Enterprise IT budgets remained fairly tight and continued to consolidate around the largest vendors as a more ROI-focused 'best of suite' approach overtook the 'best of breed' buying behaviour more generous technology budgets enabled during covid. Microsoft was the clearest beneficiary of this trend, topping almost every CIO 'spending intentions' survey.

Infrastructure software companies generally struggled as the fiscal year progressed, despite the fact that public cloud aggregate revenue growth (to which their growth is often tethered) reaccelerated to +21% in Q4 2023 and +24% in 1Q 2024, as customer 'optimisation' activities attenuated. AI was called out as a meaningful contributor at Microsoft and Amazon, but this has yet to translate into improved performance in cloud consumption stocks. Cybersecurity stocks fared better, reflecting robust budgets, spend consolidation and the likelihood of AI-enabled cyberattacks requiring new tools. Ransomware attacks reaccelerated to +70% yoy in 2023 as hackers begin to use GenAI tools to help them create malware faster than ever before. The average cost of a breach reached $4.5m in 2023, a 3-year CAGR of +15%, and United Health's $1.6bn ransomware attack was the first >$1bn breach.

The NASDAQ Internet Index returned +37.2% following a challenging FY23 (+1%), during which consumer- focused internet companies were hurt by post-pandemic normalisation trends and concerns about an imminent recession. The recession in the US never arrived and the largest e-commerce and advertising platforms (such as Amazon, Google and Meta) dominated returns in FY24. These companies consolidated market share gains and delivered strong results as the online consumer remained resilient. Newfound expense discipline helped deliver significant upside to earnings estimates for the megacap internet companies. Furthermore, a higher cost of capital decimated smaller peers - a dynamic which helped other 'vertical leaders' such as Uber Technologies and DoorDash. The AI narrative around the largest internet platforms oscillated during the fiscal year. Concerns around longer-term disruption weighed against near-term revenue benefits from better AI-driven ad targetting, product enhancements and strategic advantages from their data assets, scale, distribution, compute and technical expertise. Smaller players struggled, especially those with weaker balance sheets or aggressive online Chinese competition, such as Match.com and Etsy.

Long-duration assets and second-liners struggled for footing against a backdrop of high yields, mixed fundamentals and limited exposure to AI. This resulted in unusual performance divergence among technology funds and trusts, with those striving to discover the 'next' Microsoft, Meta and NVIDIA largely missing out on returns generated by the existing ones. As important as early AI enablers and beneficiaries, the absence of these stocks from portfolios meant many failed to capture AI- driven returns during the year. The IPO market tentatively reopened during the fiscal year, as the high profile ARM IPO raised c$5.2bn. There was a smattering of other noteworthy technology IPOs (Instacart; Klaviyo; Kokusai Electric), but capital markets activity remained fairly subdued overall.

Large-cap technology stocks once again significantly outperformed their small and mid-cap peers as the Russell 1000 Technology Index and Russell 2000 Technology Index delivered returns of +43.5% and +29.8% respectively. Returns were led by the largest technology companies, which in part explains why the S&P 500 Information Technology Sector saw its valuation premium to the S&P 500 Index expand to 1.36x from 1.21x at the start of the calendar year, against a 10-year average of 1.1x. However, this valuation expansion was not experienced beyond the US; the Dow Jones Global ex-US Technology sector (W2TEC) which has no mega-cap constituents, significantly underperformed (+1.8%).

Portfolio Performance

The Trust outperformed its benchmark with the net asset value per share rising +40.8% during the fiscal year versus an increase of 38.9% for the Dow Jones Global Technology Index. The Trust's share price advanced by 50.5%, reflecting the additional impact of the discount narrowing from 13.4% to 7.4% during the period. We continue to monitor the discount and the Trust bought back 5.66m shares during the fiscal year, at an average discount of 12.3% to NAV.

While the zeitgeist of 2023 was captured by a select group of mega-cap stocks, returns during the Trust's fiscal year were less uniformly positive for the so-called Magnificent 7. Instead, returns were dominated by the proliferation, evolution and investment implications of generative AI (GenAI) following NVIDIA's remarkable quarter and record guidance delivered in May.

The Trust benefited from our decision to rotate decisively towards AI as a primary investment theme, as outlined in our interim report. This was largely focused on the semiconductor and component subsectors, including memory-related assets, advanced packaging, testing and EDA software. In addition, we made a series of investments in smaller Asian component and materials companies that we expect to play a more significant role in AI computing than they did during the Cloud era. While the Trust was broadly neutral NVIDIA (which returned a staggering +213%), it benefited from a slew of other AI-related assets, including chipmakers AMD (+78%), ARM (+98%) and Micron (+76%), datacentre spending beneficiaries Arista Networks (+61%), Fabrinet (+83%) and Pure Storage (+122%), as well as semiconductor capital equipment makers Disco (+158%) and KLA (+79%).

While software sector fortunes were more mixed, select Trust holdings such as ServiceNow (+52%) and HubSpot (+44%) benefited from spend consolidation and a supportive AI narrative. The same dynamic drove returns in the cybersecurity subsector as tool consolidation and the need for scaled data assets to defend against more sophisticated AI-powered attacks supported spending. The Trust benefited from strong performance in a number of its cybersecurity holdings including CrowdStrike (+145%), Cloudflare (+87%), CyberArk (+93%), Palo Alto Networks (+60%) and Zscaler (+93%).

In the internet subsector, the Trust enjoyed strong returns from its exposure to dominant franchises in ecommerce and streaming that delivered strong revenue growth and improved profitability amid a more benign competitive landscape. These included Amazon (+67%), DoorDash (+112%), Netflix (+68%), Shopify (+47%), Spotify (+111%) and Uber (+114%).

The Trust also benefitted from the decision to reduce and/or exit companies we believed would prove limited beneficiaries or eventual losers from AI. The most significant of these was Apple (+1%) that meaningfully underperformed during the year due to smartphone market headwinds and a limited AI narrative. Our underweight Apple position was responsible for 336bps of positive contribution to the Trust's relative performance during the year. Performance also benefited from not holding Intel (-1%), which had execution issues in its business model transition, non-AI related semiconductor companies that experienced inventory digestion as well as an underweight exposure to EV-related assets. We extended this underweight EV position during the year following the sales of On Semiconductor (-2%) and Infineon (-4%) amid deteriorating automotive datapoints.

In terms of negatives, liquidity proved the largest headwind to performance as cash (4.5% average) cost 249bps and Nasdaq puts an additional 76bps. While meaningful, our cash and put positions are designed to ameliorate our portfolio beta (which is considerably higher than our benchmark) in the event of a market setback. They also inform portfolio construction, emboldening us to hold larger positions in higher beta stocks than we might otherwise. Relative performance was also negatively impacted by further large-cap outperformance with the Russell 1000 Technology Index (large cap) and Russell 2000 Technology Index (small cap) returning +43% and +30% respectively. On a three and five-year basis, the gap has extended in favour of large caps to 62% and 138% respectively. During the fiscal year, this was largely transmitted via underweight positions in Meta (+80%) and Alphabet (+52%), which comprised more than 10% of our portfolio but dragged on relative performance given they made up 13% of the benchmark.

While AI drove the Trust's performance during the year, there were also some negative offsets including an underweight position in chipmaker Broadcom (+109%), which dragged on our relative performance by 120bps. In addition, there were some smaller AI positions to which we arrived late and/or failed to capture the upside from, including Gold Circuit, Unimicron and Rambus. Earlier hopes that infrastructure software would benefit from AI-related application development also proved premature with a lack of revenue reacceleration or AI participation weighing on holdings such as MongoDB (-19%), Snowflake (+5%) and Teradata (-4%).

Trust performance was also negatively impacted by exposure to more rate-sensitive areas such as fintech and alternative energy. Within fintech, our holdings in Mastercard (+19%) and Visa (+17%) both generated strong positive returns but fell well short of our benchmark. Smaller fintech companies fared meaningfully less well, although our exits of Adyen (-24%) and Flywire (-29%) helped reduce this impact. Our modest exposure to alternative energy proved an additional drag, again ameliorated by several stock sales including Enphase Energy (-33%) and First Solar (-3%). Smaller Trust holdings in factory automation and robotics-related companies such as Harmonic Drive Systems (-16%), Keyence (+0%) and Cognex (-12%) were negatively impacted by China weakness. Our decision to modestly add back to some longer-duration stocks such as Roblox (+0%) and Tesla (+12%) towards the end of 2023 also proved premature as yields rebounded in early 2024, leading to sustained underperformance from this group.

Market Outlook

If the market surprise of 2022 was how high inflation remained for so long, 2023's revelation was how little impact the fastest monetary tightening cycle in a generation had on the real economy. Various explanations include: a delay in the 'transmission' of higher rates given the high proportion of mortgages and corporate debt which had been fixed at very low rates during the 'zero-rates' era; the benefit of interest income on 'excess consumer deposits' in supporting consumer spending; corporate unwillingness to let go of the workers they had fought hard (and paid up) to attract and retain. In contrast with prior years, our base case for 2024 is broadly in line with consensus on many of the key near-term debates (inflation, rates, valuations) and our belief is that where we do differ, the range of outcomes is narrower. Some of the other 'known' risks are more binary in nature (e.g. US presidential elections).

In its April 2024 update, the IMF projected 3.2% global growth in 2024, 30bps higher than its October 2023 forecast, and 3.2% in 2025. This outlook is described as "surprisingly resilient, despite significant central bank

interest rate hikes to restore price stability". The persistence of US growth is striking, now expected to accelerate modestly from 2.5% in 2023 to 2.7% in 2024, against expectations for a deceleration to 2.1% for both years in the IMF's January 2024 update. Despite strong economic growth, the disinflation process remains broadly on track and "monetary policy should ensure that inflation touches down smoothly": global headline inflation is expected to fall from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025.

Our base case remains that central banks have won the battle on inflation. Much of the earlier excess inflation proved to be supply-side driven including covid disruptions (e.g. container freight rates increased 5x between 2020 and late 2021) and exogenous commodities price shocks from Russia's invasion of Ukraine. Demand imbalances have also played a part, including government stimulus and demand swings for goods versus services. Common causes have seen common solutions: disinflation dynamics have been reasonably homogeneous across countries. Goods disinflation has been widely observed while services has proven stickier, around c3-5% in developed economies.

For its part, the Fed kept long-term inflation expectations 'well-anchored' and prioritised credibility above all else; the '5yr5yr' - a market-implied expected average inflation rate over a five-year period that begins five years from today - remained in a 2-2.5% range despite headline CPI inflation in the high single-digits. This proved sufficient to deliver a 'soft landing' most thought impossible, judging by the c75% of economists who expected a recession coming into 2023, and the Fed futures curve which anticipated the Fed would have to cut rates by the second half of 2023. We expect the Fed to manage the balance between keeping rates restrictive enough to ensure inflation returns to target and cutting early enough to prevent a recessionary outcome.

The path of inflation is the key determinant of Fed policy, and it will (rightly) remain 'data dependent', but

policymakers are clearly cognizant of the need to manage de facto tightening from higher 'real' rates as inflation trends lower and policy rates sit unchanged. Indeed, real rates are already around c2%, versus an average 3% level at which the Fed has historically started cutting, and other central banks including Sweden's Riksbank, the ECB and the BoE have either begun cutting or signalled they will soon. The 'maximum employment' aspect of the Fed's 'dual mandate' will also likely receive more attention, and arguably Chair Powell introduced a form of 'labour market put' at the January FOMC press conference: "If we saw an unexpected weakening in… the labor market, that would certainly weigh on cutting sooner. Absolutely."

Equities tend to rally after the Fed begins a cutting cycle, although the returns are (unsurprisingly) better in non- recessionary scenarios. Deutsche Bank found that the S&P 500 has returned +7% in the 12 months following the first rate cut in recessionary scenarios, and +18% in non- recessionary scenarios. Longer-term, Goldman Sachs found a c50% positive return over 2 years absent a recession and negative mid-teens returns when a recession occurred. Interestingly, the overall level of the market coming into the rate cutting cycle has made little difference historically. Since 1980, there have been 20 times when the Fed has cut rates when the S&P 500 was within 2% of all-time highs, and the market has been higher a year later on all 20 occasions.

Investors should also be comforted by central banks' increasing ability and confidence in using their balance sheets to deal with sector or asset-class specific issues. Indeed, one of the great challenges last year was understanding how an aggressive Fed tightening cycle did not cause a spike in unemployment or a recession. In addition to the reasons suggested above, liquidity provided by years of Quantitative Easing plus covid-era balance sheet expansion (from 18% of GDP in 2019 to 28%) mollified the impact of monetary tightening from rate cuts. In addition, central banks have been very willing to use their balance sheets to support the economy and the debt and labour markets (and, by extension, risk assets), as seen with the Fed's Bank Term Funding Program (BTFP) and the Bank of England's successful intervention during the LDI crisis. We expect balance sheet operations to remain a permanent part of the landscape.

Valuations appear extended, but not unreasonable. Equity market valuations have rebounded since June and October 2023 lows (c15.5x) and the S&P now trades on 21x 2024 consensus earnings and 18.5x 2025, based on +11% and +9.5% EPS growth. Historically, equity valuations have expanded following the end of Fed hiking cycles, but multiple expansion is typically accompanied by a decline in bond yields. Economic growth appears positive but moderating (total revenue growth tracks nominal GDP growth normally), which suggests upside to revenues (absent AI-related areas) might be limited. S&P profit margins are back to pre-GFC highs and elevated versus history, having troughed in Q4 2022. Several incremental headwinds to further margin expansion suggest profit growth could be more similar to revenue growth in 2024, although analysts are still assuming significant operating leverage with S&P 500 expected earnings growth (+11%) ahead of revenue growth of 4.9%. However, we are optimistic longer-term that AI could drive sufficient labour productivity for knowledge workers to make a material difference to the c$53trn global wage bill (c54% of GDP). Our valuation base case is that significant further multiple expansion is unlikely from this point, and equity returns should better track EPS growth absent a recession or bull case scenario.

Market Risks

The most significant risk to the market outlook is the prospect of a recession or 'hard landing'. Past economic downturns have seen S&P 500 EPS decline by 11% peak-to-trough and the index level fall by -24%, although prices and valuations typically bottom faster than earnings. The median forecasted probability of a US recession in the next 12 months fell steadily from 65% to 30% during the fiscal year. However, there remains a possibility that the 'long and variable lags' of the fastest monetary tightening cycle in a generation will ultimately push the economy into recession. Cracks in commercial real estate have caused concern, but the office market accounts for just 2-3% of banks' loan portfolios while office investment is only 0.35% of GDP.

We believe the odds of a US recession are still relatively low, despite warnings from several traditional leading indicators such as the yield curve (still inverted) and the Conference Board's Leading Indicator, which has never experienced such a large 6- month decline without a recession. On the monetary side, the money supply has never contracted this fast without some sort of negative outcome - even in our favoured parallel the post-WW2 'recovery loop', there was a brief recession in 1948-49 as the economy transitioned from a wartime to a peacetime footing. Central bankers may have more data (and some other tools) to help the economy adjust, but if there is an asset quality problem rather than a liquidity problem, there is only so much they can do.

The most bearish market view is any challenge to the idea that the Fed actually has managed to get inflation sustainably under control, and the threat from a 'second wave' of inflation could necessitate further tightening. There was a second (and third) wave of high inflation in the 1970s related to geopolitical developments (Vietnam war, energy crisis, deficit spending). This would hurt equity performance: markets were flat between 1967-1980 and credit outperformed significantly as yields averaged >7%.

A longer-term issue which could contribute to a higher neutral interest rate and lower equity multiples is the growth in public debt, which has reached record levels as a percentage of GDP in many countries. Historically (e.g. 1919, 1946, 1995), peak government debt-to-GDP has been resolved by a combination of lower fiscal deficits (or surpluses) and an acceleration in GDP. This has not (yet) occurred; since the 2020 peak, GDP growth has been strong, but the federal deficit in FY23 was c$2trn (7% of GDP), doubling from $1.0trn in FY22.To date, this increased deficit has been of limited concern to the bond market but our working assumption is that it 'cares' about deficits in a non-linear way, and perhaps 5% on the 10-year US treasury might mark a potential 'break point'. However, we also acknowledge that being the reserve currency of the world may allow for ongoing structural US deficit financing with limited penalties.

Beyond a recession, we are most concerned about geopolitical risk, a topic we covered in depth last year. This risk is heightened in what is an election-heavy year, where countries accounting for >60% of global GDP are holding elections - US, India, and UK among them - but also because there is an emerging narrative about the reversal of the post 1980s 'peace dividend' which has supported global growth, trade, stability, and asset values. The emerging 'multipolar' world could reverse this feedback loop as trade and supply chains decouple, higher inflation and higher deficits become embedded - the '1970s scenario'. China represents its own category of geopolitical and economic risk. A bearish view might consider the 'success' of China's initial lockdown as its zenith as a global power before the inherent limitations of an investment-led growth model and/or totalitarian leadership were laid bare. China's nominal GDP growth has decelerated to the lowest level since the 1970s which helps explain the weakness in Chinese equity and property markets. This could reflect a new normal for China after three decades of double-digit nominal GDP growth.

In terms of US-Sino relations, there are several paths that a deterioration might take in 2024. These include further outbound investment restrictions, export controls, and even the revocation of 'Most Favoured Nation' status, something of which Trump is in favour. China may also be at risk of exporting deflation to the rest of the world but the economic impact to the US should be contained (exports to China make up 0.6% of US GDP), and a direct effect of a 1% shock to Chinese growth on US GDP is estimated at less than 0.01%.

A far greater risk comes from the potential for an escalation in tensions surrounding Taiwan as President Xi described unification as "a historical inevitability" in his 2024 New Year's address. A second Trump presidency would bring an added element of uncertainty and higher likelihood of a miscalculation. A recent 'war game' simulation estimated the potential impact on the global economy of a war in the Taiwan Strait at c$10trn or c10% of global GDP, significantly larger than the GFC or the pandemic. As it relates to PCT, Taiwan accounts for 60% of global semi shipments and >90% of leading-edge semi manufacturing capacity. For context, OPEC has about 40% of global oil capacity. It might take 5 years + to rebuild Taiwan's semiconductor capacity and would undoubtedly set the evolution of AI back materially.

Increasing market concentration has been a feature of the post-GFC market, with the largest 10% of stocks' accounting for a portion of the overall stock market (c.75%) not seen since the Wall Street Crash of 1929.

This is not just a technology sector phenomenon as large caps are outpacing small caps nearly everywhere, even on a sector-neutral basis. The rejuvenation of small caps has been long called for by active managers (including us), but the case for broadening is not straightforward.

A more supportive rate environment should help small cap outperformance as we saw in Q4 2023, when yields dropped sharply back to c3.8% and small and mid-caps led the market higher. As we saw then, the upside from a small cap rally can be explosive as Russell 2000 bull markets have produced average gains of 131%, with 7 of 11 bull markets producing triple-digit gains. However, the earnings picture is complicated as large-cap market dominance has reflected higher EPS estimates, in contrast with small-caps where earnings have trended lower since the start of 2022. Absent an earnings recovery, it is hard to argue for structurally higher small-cap multiples.

The risk profile of small caps is also less appealing: the Russell 2000 has a record percentage of unprofitable companies with significantly more debt to refinance in the next few years, in stark contrast with strong balance sheets at larger corporates. Finally, the dominance of large caps may simply reflect the changing nature of the economy as larger companies have enjoyed increasing returns to scale, formerly having been subject to diminishing returns. This reflects a number of structural changes including the increasing relative importance of network effects, globalisation and potentially large cap companies' ability to develop and exploit proprietary software. In fact, returns on capital for large companies were generally lower than for smaller companies in the 1980s and 1990s, but since 2000 they have become significantly higher for larger companies. The gap may also reflect different attitudes to investment. For example, total capex and R&D spending for the Magnificent Seven this year is expected to total c$350bn and the Magnificent 7 reinvests c60% of their operating cash flow back into capex and R&D, or about 3x rate of the other 'S&P 493'. Our view is that while a broadening of the market is certainly possible and would be welcome, change of leadership often require a break in the cycle.

There is risk to equity markets from competition from other asset classes. Yields on equities, high grade bonds, T-bills and REITs recently converged for the first time in 20 years. As such, there is far greater competition for capital with investors able to collect the same earnings yield as the S&P 500 at varying risk/return profiles. If rates trend lower as expected, we should expect some rotation into US equities, although equity ownership as a percentage of total assets is already at record highs.

Our broader conclusion remains unchanged from our interim report: whether there is a recession or not and what equity markets do over the next six to 12 months perhaps misses the point. Astounding new innovations such as AI augur well for a longer-term innovation-led growth and prosperity cycle. Markets appear fully valued if we think the timeline to AI's economic impact is 5+ years away, but much more reasonable if that timeline is sooner. The shortening timeline to Artificial General Intelligence (AGI) - the ability to understand, learn, and apply knowledge across a broad range of tasks and domains at a level comparable to human intelligence- presents a further upside scenario.

Technology Outlook

Earnings outlook

Having stabilised in 2023 with growth of 3.5% y/y, worldwide IT spending is expected to reach $5.1trn this calendar year representing an increase of 8% y/y, in current dollar terms. This represents a notable acceleration and an upward revision from the +6.8% forecast in January. While Gartner believe it will take until 2025 to translate into enterprise budgets, it is clear that AI has already become a corporate imperative with c45% of CIOs planning to adopt AI within 12-24 months. Strength expected in datacentre spending (+10% y/y) suggests that the digital groundwork for AI is being built ahead of enterprise adoption, led by hyperscalers. Likewise, an expected rebound in devices, following two very weak consecutive prior years, is predicated on AI-related product cycles.

For 2024, the technology sector is expected to deliver revenue growth of 9.3%, while earnings are expected to increase by 18% which would represent the best year for earnings since 2021. These forecasts are well in excess of anticipated S&P 500 market growth, where revenues and earnings are pegged at 4.9% and 11% respectively. The technology sector's outperformance is expected to continue in 2025 with early forecasts for 10.8% / 13.8% comfortably ahead of market expectations (5.8% / 9.5%). While macroeconomic conditions may create crosscurrents, we believe technology fortunes this year will be determined by the path of AI progress.

Valuation

The forward P/E of the technology sector has expanded during the past year. A year ago, valuations had recovered to c24x forward P/E, having ended 2022 at c.19x. Since then, valuations have increased further as technology earnings and stock performance (especially Mag-7) 'crowded out' the broader market. At time of writing, technology stocks trade at 26.5x, well ahead of five (23.9x) and ten-year (20.3x) averages. This reflects the arrival of AI as an investment theme and a much improved inflationary backdrop. The premium enjoyed by the sector expanded during the past year with excitement around AI resulting in the sector making post-bubble highs (1.4x the market multiple), levels last seen briefly during the pandemic period. At time of writing, this premium has fallen back to c.1.3x - at the high end of the post-bubble range. While this suggests less valuation upside in the near- term, we believe that AI represents a unique moment for the technology sector such that the post-bubble range (between 0.9-1.3x) may no longer be valid.

Magnificent 7

However, the valuation question is greatly influenced by a select group of mega-cap stocks that - as well as driving returns last year - also dominate technology indices. As such, this year we present some high-level thoughts on the so-called 'Mag-7' given the implication for future returns, prospects of a broadening market and, of course, our own positioning.

While 2023 proved a remarkable year for the group, returns are highly sensitive to the starting point; since the beginning of 2021, Mag-7 - at time of writing - has only outperformed the S&P 500 by 10%. At time of writing, the group sports a premium valuation; a forward P/E of 29.6x as compared with 20.9x for the overall index and 18.6x for the remaining 493 S&P 500 (SPX) companies. However, Mag-7 accounts for c.29% of SPX market cap and is expected to generate c.22% of SPX net income. One might argue a little extended, but very clearly far from bubble territory. Moreover, the group is expected to deliver three year compound annual revenue growth of 12% versus 3%, higher margins (22% vs. 10%) and a greater re-investment ratio (61% vs. 18%) than the SPX493. This superior profile has shown little sign of abating as in Q1 2024, expected S&P 500 earnings growth of +6% y/y is expected to come from Magnificent 7 earnings growth tracking to +48% y/y while the remaining 'S&P 493' are forecast to deliver -2% y/y. These metrics reflect the group's uniqueness, with each member dominating large markets, enjoying scale advantages or natural monopoly status while investing heavily in new opportunities to avoid the so-called innovator's dilemma. Most also have strong AI stories in our opinion, and all are what we consider non-fungible companies and stocks. As such, we expect to retain sizeable positions in the largest stocks in the benchmark over the coming year, assessing each on its own merits and not defaulting to a market broadening narrative, even if we (and other active managers) strongly desire it.

Next generation / longer-duration stocks

Next-generation valuations have also expanded as we predicted in last year's Annual Report when we suggested it was 'highly likely' that we had already seen the lows. Since then, an improved inflation outlook and moderating cloud optimisation headwinds have seen software valuations recover to c.7.0x forward EV/sales, having bottomed at around 5.1x (and peaking at 16x in 2021). According to KeyBanc, this leaves them ahead of five and ten-year pre-covid averages of 6.1x and 7.2x respectively. Higher growth stocks have experienced a greater valuation recovery with companies growing revenues above 20% today trading at 10.9x forward EV/sales; down 62% from highs but well ahead of pre-COVID five-and ten-year averages of 7.8x and 7.0x respectively. In contrast, unprofitable growth stocks have recently made new valuation lows, trading at less than 3.0x forward EV/sales.

Survival of the fittest

The partial recovery in software valuations (and related lack of market interest in unprofitable growth stocks) reflects a slower growth environment ameliorated by higher industry margins. This year, the median software growth rate is forecast at 14-15% as compared to 17% in 2023, and 26-27% in 2022. However, the adoption of the so-called PE playbook, as highlighted last year, has become the norm for most software companies and has been rewarded by the market. Unlike prior downcycles, the recalibration was rapid, reflecting unique post-pandemic challenges - bloated and disconnected workforces, waning product and corporate relevance, the end of 'free money' and, more recently, the birth of genAI. The focus on more profitable growth has seen the median software company's free cashflow margin expand by a remarkable 1500bps from c.5% in 2019 to c.19-20% in 2024E. This recalibration has seen the best companies become better versions of themselves. For instance, while CrowdStrike stock has more than recaptured 2021 highs, over the past c.3 years it has grown revenues from $1.1bn to $2.9bn while expanding operating margins (OMs) from 10% to 19%. ServiceNow - recently at all-time highs - has grown revenues from $5.5bn to $8.5bn while expanding OMs from 25% to 29%. In addition, both companies should be able to use AI to deliver further margin improvement as well as monetise the technology via AI-enhanced product lines.

Against this backdrop, unprofitable companies are not merely anachronistic - they represent a pool of companies unwilling or (more likely) unable to deliver margin expansion. They are former pandemic / WFH winners, derivative plays on now unloved themes, SPACs, or companies that might have changed the world in 2040 had zero interest rates prevailed. They are the broken toys used by equity investors to play themes that didn't last or never happened. Some may yet reinvent themselves, but history suggests most will disappear, to be combined, reconstructed, or dismantled by private equity. As such, we continue to tread tentatively in longer-duration stocks, doing our best to avoid the siren call of 'cheaper valuations'.

More M&A activity likely

Following a dismal 2023 for M&A, this year has got off to an encouraging start. After a notable absence of strategic M&A, 2024 has already seen HP announce the $14bn acquisition of Juniper Networks, while Synopsys and Ansys are set to combine in a $35bn stock and cash transaction. More recently, IBM scooped up Hashicorp for $6.5bn, representing c.8.5x EV/CY25 revenues and a 42% one-day premium, while in the UK, there was recently a bidding war between Viavi and Keysight for Spirent. In addition, private equity is likely to remain active with c.$2.5trn in 'dry powder' having acquired Alteryx, New Relic and most recently, Darktrace. We expect AI to play a part in greater M&A too, as point solution companies continue to struggle versus platforms with LLMs likely to prove highly disruptive to pre-GenAI vintages. Nonetheless, a recovery in M&A activity should provide some downside support to current valuation multiples.

Cloud / AI Update

Cloud reacceleration

After decelerating for ten quarters, public cloud revenue growth finally reaccelerated in Q4'23 reflecting the combination of waning optimization activity and ramping AI workloads. In Q1'24, aggregate cloud revenue growth reaccelerated 3ppts sequentially to +24% y/y - remarkable given a greater than $210bn industry revenue run-rate. We are hopeful that the post-COVID optimization process is largely complete, a view supported by CIO surveys that suggest cloud spending should more closely track consumption from here. More importantly, AI workloads are beginning to 'move the needle' with AI called out as a meaningful contributor at Microsoft (7pts of Azure revenue growth in its most recent quarter) and Amazon ("multibillion-dollar revenue run rate" in AWS). We expect these tailwinds to grow stronger as the public cloud remains a key conduit for accessing AI. Foundation models with ever greater parameter counts require larger clusters of connected AI servers, while the compute requirements of AI applications are said to double every 3.5 months; both needs fit well with cloud flexibility and scalability.

A new architecture for AI

The hyperscalers also have the 'deep pockets' required to invest in AI infrastructure, which due to extreme performance required by AI training is heralding a significant shift in IT architecture from serial to parallel compute. We consider the architectural break far more significant than the transition to cloud from on-premise compute. This is apparent from an AI server bill of materials (BOM) said to be 25x greater than a general purpose cloud server. A useful parallel for this might be comparing a Toyota Prius with Formula 1; both are cars, but one is designed for general purpose and efficiency (cloud), the other for extreme performance (AI).

Unprecedented growth

The nascent 'AI war' that began a year ago (when Microsoft looked to leverage its OpenAI relationship to challenge Google's search business) has given way to something far more significant, accompanied by an unusual urgency that feels reminiscent of the 1990s. Having increased by c.5% during 2023, datacentre capex will materially accelerate this year with all of the US hyperscalers raising future spending intentions in both Q4'23 and Q1'24. At time of writing, hyperscaler capex is expected to exceed $170bn in 2024, representing growth of 44% y/y. This is sharply higher than earlier expectations of +26% after Q4 results, and +18% at the beginning of the calendar year. According to Gartner, AI servers will account for nearly 60% of hyperscaler total server spending in 2024.

To date, the greatest beneficiary of AI infrastructure spending has been Nvidia as its GPU chips sit at the epicentre of the new AI architecture. In its most recent quarter, the company registered datacentre revenues of $18.4bn, a remarkable 409% y/y increase. Growth at this scale is extremely unusual in technology history, leading many to suggest that AI spending is a 'bubble'. We strongly disagree and consider instead that we are early in the accelerated buildout of a general purpose technology.

Building the AI rails

Sizing the AI infrastructure opportunity is difficult to say the least - in last year's paper we had the temerity to suggest that AI capex "might exceed $100bn". Since then, Jensen Huang, CEO of Nvidia, has sized the AI market at $1Trn while Dr Lisa Su, CEO of rival AMD, has suggested the market for AI chips will reach $400bn by 2027, which including other component, system and networking costs implies an $800bn opportunity. At face value this suggests that AI spending could increase at a 70% CAGR through 2027 by which time it would reach c.0.8% of global GDP.

This would be extraordinary, but not unprecedented given that between 1830-1839, US railroad investment increased from 0.2% of GDP to just above 0.9% by 1839, corresponding to a 31% CAGR in nominal terms. After a digestion period, railroad investment reaccelerated, averaging 1.7% of GDP between 1850 and 1859. This astonishing period included a blow-off (bubble) phase after 1850, with investment peaking at 2.6% of GDP in 1854. At the height of the equivalent UK railroad boom, investment averaged 7% of GDP for three years. More recently, the dotcom period witnessed telecom companies spend $1trn (in today's money) building out the Internet during the five years following the Telecommunications Act of 1996. While both historic parallels are useful reminders that infrastructure builds often end badly, current AI spending appears to us to be in its infancy.

The Biggest Opportunity

Underpinning AI spending is the scale of the AI opportunity, reflecting its would-be general purpose technology (GPT) status. Because it addresses knowledge work, economist Erik Brynjolfsson has described AI as "the ultimate GPT - the most general of GPTs". Accenture estimates that as much as 40% of all working hours will be supported or augmented by language-based AI while McKinsey believe that generative AI could automate 30-50% of tasks in about 60% of occupations, adding the equivalent of between $2.6-4.4trn in economic output annually by 2030.

These longer-term opportunities are buttressed by early AI monetisation. Less than four years after launching a 'capped profit' arm in 2019, OpenAI is said to have reached a $2bn revenue run-rate with more than 92% of the Fortune 500 as customers. Meta has also demonstrated its ability to monetise GenAI by improving advertiser ROI and reducing the cost of customer acquisition.

Enterprise adoption of copilots (AI-powered companion software) and premium AI-enabled products has also

been encouraging. These tools enable knowledge workers to be more productive; Github Copilot (launched by Microsoft in collaboration with OpenAI in 2022) is helping software developers code up to 55% faster by writing 46% of the code. Lexis+ AI - a legal GenAI assistant from RELX - allows users to "draft clauses, legal documents.. and summarise case law.. (and) the reasoning behind the case". Law enforcement technology provider Axon recently announced 'Draft One', AI-powered software capable of auto drafting police reports based on body-camera footage, saving officers an hour per day on paperwork; in Colorado, police experienced an 82% decline in time spent writing reports. Payment provider Klarna also announced it had replaced 700 full-time contact centre employees with AI agents saving the company $40m per annum. These are early glimpses into AI innovation and disruption, less than two years after the launch of ChatGPT.

Happening now

Rapid adoption and monetisation of nascent AI tools points to a faster than expected diffusion rate. History shows that the delay between invention and widespread use of new technologies has fallen significantly over time, while analysis of earlier GPTs by the Brookings Institute suggests that implementation lag halves with each successive GPT: 80 years for steam, 40 years for electricity, and 20 years for ICT. We expect AI to take less than 10 years to diffuse widely as it 'stands on the shoulders of giants' - technologies such as cloud, internet, leading edge semiconductors and billions of smartphones. Key AI breakthroughs did not happen overnight; the Cloud is nearly 20 years old. NVIDIA has been designing GPUs since 1999. Billions of smartphones and other connected devices have created vast datasets for training AI models and a near-ubiquitous channel for its distribution.

The idea of rapid AI diffusion is visible in real-world developments that include growing recognition among policymakers of the importance of AI and the need to address it through legislation with the number of AI-related bills passed into law increasing from just one in 2016 to 37 by 2022. The Hollywood writers' strike in May 2023 was another notable development as 11,500 film and television writers began industrial action amid concerns around the AI's role in scriptwriting, fearing that AI-generated scripts could undermine writers' work and compensation. While some investors may be concerned about the risk of slower AI diffusion, the actions of those most exposed to the technology and legislators charged with controlling it suggest otherwise.

A model of improvement

Diffusion, monetisation, and corresponding capex are highly dependent on continued AI model progress. We believe the advent of the transformer model in 2017 represented a key breakthrough which is why we describe it as the 'Bessemer moment for AI'. As with steel in 1856, this breakthrough has resulted in discontinuous technology progress; the parameter count of OpenAI's GPT-4 (2023) is rumoured to be one million times larger than the DeepMind model that beat Lee Sedol at Go just seven years ago. Higher parameter counts have significantly increased the learning capacity of AI models, enabling them to handle a broader range of general-purpose tasks.

Recent model progress includes multimodality (able to analyse images and audio) and far larger token context windows (the amount of information that can be processed in any prompt). In February, OpenAI announced Sora, a remarkable AI 'text-to-video model' able to generate video based on descriptive prompts with "an emergent grasp of cinematic grammar". The furious pace of model improvement recently saw Google's Gemini Ultra become the first model to exceed the 'human expert performance' threshold on MMLU, an AI benchmark which measures knowledge across 57 subjects. Improved performance is also helping ameliorate earlier technology challenges with newer LLMs such as GPT-4 experiencing lower hallucination rates (incorrect model outputs). The expected launch of OpenAIs GPT-5 over the summer as well as the launch of Meta's 425bn-parameter Llama 3 and Amazon's 2trn parameter Olympus will serve as important waypoints to assess continued AI model progress.

Our confidence in continued AI progress is underpinned by scaling laws which have so far predicted improvements in model performance based on increasing model size, the amount of training data and computing power applied. This is a complex topic to tackle here, but to us it is highly reminiscent of Moore's Law, which famously stated that the number of transistors on a microchip would double approximately every two years. Humans struggle to model non-linear change, but Moore's Law held true for many decades, predicting the exponential progress of semiconductors that followed. We believe that for as long as they hold, scaling laws predict a continued non-linear pace of AI model improvement and ever-greater investment required to stay on the curve. In a recent interview, Mark Zuckerberg defended Meta's decision to significantly increase AI spending with reference to scaling laws:, "I think it's likely enough that we'll keep going. I think it's worth investing the $10bns or $100bn+ in building the infrastructure.

General intelligence

Zuckerberg's excitement (and capex plans) reflects an apparently shortening timeline to artificial general intelligence (AGI), a point where AI might achieve the cognitive abilities of humans across a wide range of tasks. This would have seemed remarkable -crazy even - just a few years ago, but within the AI community, AGI is widely considered attainable in the near future. Founder of DeepMind Demis Hassabis has said AGI could be less than a decade away, while Shane Legg, Google's chief AGI scientist, believes there is a 50% chance of general intelligence by 2028. Sam Altman also believes it could be reached within the next four or five years. A shortening timeline to AGI might make sense of a series of peculiar recent AI developments including the late 2023 debacle at OpenAI when Altman himself was fired and rehired in a matter of days, as well as decision by Geoffrey Hinton ('The Godfather of AI') to leave Google in May 2023 so he "could talk about the dangers of AI". It might also explain why Altman has mooted the idea of raising $7trn - twice the size of UK GDP - to 'reshape the semiconductor industry'. After all, if we are indeed close to achieving AGI, the world is going to need a lot of chips.

Welcome to the AI-era

We expect AI to profoundly change the world. At a prosaic level, AI should deliver a significant productivity boost, as was the case with prior GPTs. Current expectations for US productivity to average c.1.4% this decade look mismodelled; GS believe that AI could increase US productivity by 1.5% annually over the next decade, while Erik Brynjolfsson expects US productivity to average "at least 3%".

Risk to jobs

If so, the coming decade could be "the best ever" although we acknowledge that concerns about AI risk to jobs is understandable given its scope and pace of AI improvement. However, history demonstrates that humans have adapted well to prior technology disruption; in 1850, agriculture explained two-thirds of US jobs before mechanisation steadily reduced this to just 4% by 1970. Despite this, and subsequent technology innovations, median G7 unemployment has "oscillated based on economic cycles, rather than any technological waves" since 1750.

While knowledge work is in the crosshairs of this new GPT, we expect the first wave of AI to complement rather than substitute human work, as is the usual pattern of technology change. Even when AI adoption becomes more disruptive all is far from lost, as the agricultural experience demonstrates. While focus will inevitably fall on jobs 'lost to AI' there should be many more made possible by the union of human + machine.

Unfortunately, we cannot know what new opportunities will be made possible by AI. However, we do know that earlier tools and GPTs created opportunities that were previously unthinkable. For instance, the sewing machine changed the relationship between humans and clothing. Previously, clothes were prohibitively expensive; Singer's sewing machine (1855) transformed this by increasing stitches per minute 22-fold, reducing the time it took to produce a shirt from 14 ½ hours to c.1 Today, apparel is a $2trn industry.

Likewise, the telegraph - the precursor of all modern communication systems - "freed communication from transportation". By changing the relationship between information and distance, the telegraph (1837) challenged price arbitrage, changed the way wars were waged, created the 'information industry' (news agencies such as Reuters and AP) and gave life to the first 'fintech' application - wire transfer - introduced by Western Union in 1871.

Hopefully these two lesser known case studies help explain why we know AI will create massive new markets, and challenge existing relationship that exist today. However, we cannot yet know what form these will take, just as Morse - who tried to sell his telegraph system to the US government for $100,000 - did not fully understand its commercial potential.

Idea Generation

We know that earlier technology tools and GPTs have changed relationships. Our early bet is that AI changes the relationship between people and ideas. Transportation technologies (horse, canals, railroads, containers, aviation etc) tamed distance by transforming the movement of physical goods (freight, people). Communication technologies (telegraph, telephone, internet etc) tamed distance by changing the velocity of information. We suspect AI will transform the speed of knowledge creation after years of declining research productivity. The ability to inject limitless AI into research should meaningfully accelerate scientific progress, and unlock new ideas, just as the telegraph acted as "an agency for the alteration of ideas".

Technology Risks

Given its centrality to sector fortunes, the key risk posed to technology stocks relate to AI. A complex and fluid topic, the most important of these is that the AI monetisation timeline disappoints, perhaps because early productivity gains prove limited. Greater availability of AI chips might also lead to a less intense demand environment, leading to concerns about industry growth. Other potential AI- related risks include greater antitrust scrutiny and other legal challenges relating to data use. We remain sanguine that regulation designed to slow AI proliferation will prove manageable as countries talk a better story than they implement given the strategic importance of AI. We also note that better provision of guardrails could actually accelerate AI diffusion, just as improved safety following the regulation of the aviation industry acted as a tailwind for consumer adoption. We should also remind investors that should AI become a GPT that there are likely to be far more losers than winners from today's cohort of companies within and beyond the technology sector. However, the most significant AI risk relates to model improvement failing to keep up with scaling laws which would negatively impact hyperscaler capex plans and our (AGI-related) bull case.

Beyond AI, there are many macroeconomic risks that are covered elsewhere in this report. As previously highlighted, the most important of these relate to inflation (failing to return to pre-pandemic levels) and recession (brought on by higher interest rates or sharply higher energy prices). As such, the timing and magnitude of interest rate cuts is likely to remain a key focal point for investors. In addition, there is likely downside risk to technology spending should CEO confidence meaningfully deteriorate. Similarly earnings estimates will remain subject to macroeconomic turbulence with less scope for cost cutting now technology margins have recovered to 25.6% in Q1'24, up from 22.4% a year ago. While we hope this would be disproportionately felt by non-AI segments, it might also result in weaker consumption trends and a disappointing recovery trajectory for cloud spending.

Valuation remains a key risk too, particularly following the absolute and relative re-rating in technology stocks. Heightened sensitivity to earnings disappointments during Q1 earnings season is symptomatic of elevated valuations and investor expectations. While we believe the re-rating is appropriate given the arrival of AI as a key investment theme, higher risk-free rates and/or diminished prospects of interest rate cuts could challenge this view. We are also dismissive of the notion that AI stocks are in a bubble, akin to the dotcom 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 (tech 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.

As in prior years, regulation beyond AI remains a key risk too, with potentially adverse outcomes in outstanding antitrust cases against Alphabet and Amazon likely to impact other natural monopolies within our sector. In Europe, large 'gatekeeper' technology platforms will be forced to comply with the Digital Markets Act (DMA) designed to foster greater competition, with fines of up to 10% of global revenues for non-compliance. However, we believe worst- case outcomes will continue to be averted, in part because many of these companies represent the vanguard in the emerging AI battleground with China. Instead, deteriorating US-Sino relations may represent a more significant risk, given that Taiwan represents a critical geopolitical fault line and could potentially impact a significant portion of our portfolio.

Concentration risk

In addition, it would be remiss of us not to again remind shareholders about the concentration risk both within the Trust and the market-cap weighted index around which we construct the portfolio. After another year of large-cap outperformance, this risk remains elevated. At year end, our three largest holdings - NVIDIA, Microsoft, and Alphabet - represent c. 27% and c.35% of our NAV and benchmark respectively while our top five holdings (which additionally includes Apple and Meta) represent c37% and c53% of our NAV and benchmark respectively. We continue to believe that this concentration risk is justified because they are unique, non-fungible assets that capture the zeitgeist of this technology cycle and appear well positioned for AI given their significant scale advantages.

That said, we remain unafraid of the idea of moving to materially underweight positions in the largest index constituents should we become concerned about their growth or return prospects, or should we find more attractive risk-reward profiles elsewhere in the market. This past year, we have meaningfully reduced our Apple position to c820bps underweight at the end of the fiscal year. However, the timing of a more concerted move away from mega-caps remains highly uncertain, not least because in aggregate the stocks continue to enjoy strong relative earnings revisions while valuations remain far from ebullient.

In the meantime, we should remind shareholders that while PCT is able to hold up to a full benchmark weight subject to a maximum limit of 15%, we are unlikely to hold positions much above 10%. When we do so, it is likely to be via smaller equity positions held in combination with a slither of call options designed to ameliorate upside risk in exchange for a modest premium. In the end, we struggle with the notion that we are reducing risk by making the portfolio ever more concentrated. Instead, we continue to believe that a diversified portfolio of AI-exposed growth stocks capable of outperformance, but also constructed to withstand investment setbacks, should deliver superior returns over the medium term, particularly on a risk-adjusted basis.

Conclusion

We hope this (long) outlook section adequately conveys our excitement about Generative AI. We truly believe the AI story is just beginning. Where others may predict steady diffusion, we expect AI adoption to follow the pattern of electrification which was "sweeping and widespread". For now, we (and the Trust portfolio) are heavily focused on the companies helping build the AI 'rails': chips, systems, storage, networking. We believe these are the most direct beneficiaries of an infrastructure build-out that is only a few quarters old. After decades of understandable investor focus on software enabled by the cloud, AI has turned the spotlight back to hardware; the c.25x higher bill of materials of an AI server epitomises an architectural shift away from general purpose cloud in favour of high-performance compute. In addition to large holdings in NVIDIA, AMD and Broadcom, we have added a series of Asian suppliers (PCBs, systems, testers and more) that we expect to benefit from higher ASPs and growing AI share of their revenue mix. We are also intrigued by edge AI opportunities in traditional technology segments such as PC and smartphone - markets we typically eschew as growth investors. While we will tread carefully in these otherwise mature areas, AI has the potential to steepen innovation curves, shorten replacement cycles and render massive PC and smartphone installed bases obsolete. Combined with Cloud and several infrastructure software companies, these AI enablers explain around two-thirds of the Trust portfolio today.

In time, there should be other software winners too; for now we have gravitated towards the largest incumbents, particularly those with large, unique, and critical datasets such as Microsoft, SAP, and ServiceNow that are able to monetise their domain expertise via copilots or premium-priced products. Longer-term, we remain unsure about how the deterministic, packaged software industry of today will coexist with the probabilistic nature of AI models. How will software innovation and codified 'best practice' contend with recursive AI able to adapt, learn and iterate?

While this question is longer-term and more theoretical in nature, there is already genuine investor debate about whether Adobe (not held) - a truly remarkable software company - is a 'winner' or 'loser' from AI less than two years after the launch of ChatGPT. This speaks to the pace of model improvement, as well as the reach and disruptive capabilities of AI. We expect this debate and the shadow cast by AI to extend within software and other technology subsectors as AI becomes ever more capable. This is why we introduced a so- called 'AI lens' to our investment process last year; not only to help us identify potential AI winners, but to ensure that we have properly considered and debated the risks posed by the nascent General Purpose Technology (GPT).

Our approach may appear premature and at odds with the current consensus view that AI will take a reasonably long time to diffuse. History also suggests we might be early given that incumbents can benefit from the early adoption stage of a new GPT as it creates incremental opportunities to leverage existing (if soon to be obsolete) investments, particularly while the new technology is inferior, expensive, or limited in scope. However, if we are right about rapid AI diffusion and model improvement (our base case), investors may have less time than they think to avoid the potential losers from AI. Our experience investing during the internet, cloud and smartphone cycles reminds us it is considerably easier to spot early losers from disruptive new technologies than it is to identify the early winners.

The combination of accelerated infrastructure build-out and concomitant model improvement, together with potential for more rapid disruption elsewhere explains why we have pivoted the portfolio towards AI during the past year. While this may result in somewhat greater daily volatility, our enthusiasm for AI will continue to be matched by a pragmatic (and highly liquid) approach to portfolio construction given heightened levels of uncertainty and opportunity associated with AI disruption and a new computing stack.

Following a number of thematic 'false-starts' in recent years, we understand why some investors might default to bubble at times like this. However, we believe AI represents the next general purpose technology. If so, relationships between computers and humans, humans and ideas, are likely to be upended. One of the biggest impediments to the development of AI has been Polanyi's paradox, that "we know more than we can tell"; tasks which humans can intuitively understand how to perform but cannot verbalise or formally encode. Generative AI may have solved this riddle by finding the unknown relationships across vast bodies of data. In the near future, AI may tell us more than we can know today. At times like this, it may be tempting to seek shelter from the uncertainty that discontinuous technological change brings. Instead, we attempt to embrace the unknown, taking comfort from the fact that many of the smartest people who ever lived were unable to know in advance- as Samuel Morse exclaimed in 1844 in his first telegram -'what hath God wrought'

Ben Rogoff & Ali Unwin

16 July 2024*

*Data and statistics referenced within the Investment Manager's report may have changed between the financial year end and the date of publication.

The Investment Managers' Core Themes and ESG Report from a corporate and investment perspective are included in the Annual Report and Accounts.

PORTFOLIO REVIEW

Breakdown of Investments by Region	As at 30 April 2024	As at 30 April 2023
US & Canada	72.6	72.8
Asia Pacific (ex-Japan)	10.0	10.4
Europe (inc - UK)	6.6	3.9
Japan	5.1	4.4
Middle East & Africa	3.0	1.2
Other Net Assets	2.4	6.6
Latin America	0.3	0.7

Market Capitalisation of Underlying Investments	As at 30 April 2024	As at 30 April 2023
>$10bn	89.3%	92.1%
$1bn-$10bn	10.0%	7.5%
<$1bn	0.7%	0.4%

All data sourced from Polar Capital LLP.

CLASSIFICATION OF INVESTMENTS*

as at 30 April 2024

	North America (inc. Latin America) %	Europe %	Asia Pacific (inc. Middle East) %	Total 30 April 2024 %	Total 30 April 2023 %	Benchmark Weightings as at 30 April 2024 %
Semiconductors & Semiconductor Equipment	23.0	4.5	7.7	35.2	24.0	31.5
Software	19.4	0.7	2.7	22.8	24.1	27.3
Interactive Media & Services	12.6	0.1	0.7	13.4	11.7	16.3
Technology Hardware, Storage & Peripherals	6.0	-	2.2	8.2	13.4	16.8
Electronic Equipment, Instruments & Components	1.2	-	2.6	3.8	1.4	0.4
IT Services	2.8	-	0.2	3.0	4.0	4.6
Entertainment	1.1	1.1	0.3	2.5	1.0	0.3
Broadline Retail	2.2	-	-	2.2	3.3	-
Communications Equipment	1.6	-	-	1.6	1.4	2.1
Aerospace & Defence	0.8	-	-	0.8	0.2	-
Automobiles	0.8	-	-	0.8	1.1	-
Machinery	-	-	0.8	0.8	0.9	-
Hotels, Restaurants & Leisure	0.4	0.1	-	0.5	1.2	0.2
Media	0.5	-	-	0.5	-	-
Building Products	-	-	0.4	0.4	-	-
Healthcare Equipment & Supplies	0.2	-	0.2	0.4	1.0	-
Ground Transportation	0.3	-	-	0.3	0.9	-
Financial Services	-	-	0.2	0.2	3.3	-
Chemicals	-	-	0.1	0.1	-	-
Life Sciences Tools & Services	-	0.1	-	0.1	-	-
Healthcare Technology	-	-	-	-	0.4	-
Electrical Equipment	-	-	-	-	0.1	-
Total investments (£3,713,758,000)	72.9	6.6	18.1	97.6	93.4
Other net assets (excluding loans)	2.8	0.2	0.7	3.7	8.4
Loans	(0.8)	-	(0.5)	(1.3)	(1.8)
Grand total (net assets of £3,804,533,000)	74.9	6.8	18.3	100.0	-
At 30 April 2023 (net assets of £2,828,141,000,000)	78.9	4.8	16.3	-	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 2024

					Value of holding		% of net assets
Ranking					30 April 2024	30 April 2023	30 April 2024	30 April 2023
2024	2023	Stock	Sector	Region	£'000	£'000	%	%
1	(4)	Nvidia	Semiconductors & Semiconductor Equipment	North America	395,876	130,855	10.4	4.6
2	(1)	Microsoft	Software	North America	335,337	302,791	8.8	10.7
3	(3)	Alphabet	Interactive Media & Services	North America	278,153	174,388	7.3	6.2
4	(7)	Meta Platforms	Interactive Media & Services	North America	188,666	82,047	5.0	2.9
5	(2)	Apple	Technology Hardware, Storage & Peripherals	North America	163,959	284,199	4.3	10.0
6	(8)	Taiwan Semiconductor	Semiconductors & Semiconductor Equipment	Asia Pacific	139,427	61,421	3.7	2.2
7	(5)	Advanced Micro Devices	Semiconductors & Semiconductor Equipment	North America	134,752	94,299	3.5	3.3
8	(-)	Broadcom	Semiconductors & Semiconductor Equipment	North America	96,108	-	2.5	-
9	(10)	ASML	Semiconductors & Semiconductor Equipment	Europe	86,304	49,941	2.3	1.8
10	(-)	Micron Technology	Semiconductors & Semiconductor Equipment	North America	85,513	-	2.2	-
Top 10 investments					1,904,095		50.0
11	(14)	CrowdStrike	Software	North America	74,376	36,041	2.0	1.3
12	(11)	Amazon.com	Broadline Retail	North America	73,038	46,756	1.9	1.7
13	(13)	Arista Networks	Communications Equipment	North America	62,166	38,201	1.6	1.4
14	(25)	Cloudflare	IT Services	North America	60,421	29,973	1.6	1.0
15	(59)	Pure Storage	Technology Hardware, Storage & Peripherals	North America	57,835	10,694	1.5	0.4
16	(31)	CyberArk Software	Software	Asia Pacific	56,882	24,330	1.5	0.9
17	(29)	Disco Corporation	Semiconductors & Semiconductor Equipment	Asia Pacific	55,005	26,960	1.4	1.0
18	(16)	KLA-Tencor	Semiconductors & Semiconductor Equipment	North America	47,574	35,072	1.3	1.2
19	(9)	ServiceNow	Software	North America	43,916	51,884	1.2	1.8
20	(6)	Samsung Electronics	Technology Hardware, Storage & Peripherals	Asia Pacific	40,845	83,894	1.1	3.0
Top 20 investments					2,476,153		65.1
21	(-)	Spotify Technology	Entertainment	Europe	40,702	-	1.1	-
22	(-)	Synopsys	Software	North America	39,552	-	1.0	-
23	(23)	Qualcomm	Semiconductors & Semiconductor Equipment	North America	39,171	32,525	1.0	1.1
24	(41)	Confluent	Software	North America	32,585	18,140	0.9	0.6
25	(64)	ASM International	Semiconductors & Semiconductor Equipment	Europe	31,519	9,614	0.9	0.3
26	(74)	Axon Enterprise	Aerospace & Defence	North America	31,277	5,357	0.8	0.2
27	(-)	Datadog	Software	North America	30,917	-	0.8	-
28	(50)	Tesla	Automobiles	North America	30,877	13,358	0.8	0.5
29	(27)	Salesforce.com	Software	North America	30,681	27,910	0.8	1.0
30	(-)	Unimicron Technology	Electronic Equipment, Instruments & Components	Asia Pacific	30,078	-	0.8	-
Top 30 investments					2,813,512		74.0
31	(-)	Cadence Design System	Software	North America	28,912	-	0.7	-
32	(-)	Netflix	Entertainment	North America	28,412	-	0.7	-
33	(-)	Quanta Computer	Technology Hardware, Storage & Peripherals	Asia Pacific	27,418	-	0.7	-
34	(12)	HubSpot	Software	North America	26,899	45,203	0.7	1.6
35	(66)	Elastic	Software	North America	26,879	9,134	0.7	0.3
36	(-)	SAP	Software	Europe	26,651	-	0.7	-
37	(-)	Advantest	Semiconductors & Semiconductor Equipment	Asia Pacific	26,645	-	0.7	-
38	(15)	Tencent	Interactive Media & Services	Asia Pacific	26,331	35,666	0.7	1.3
39	(-)	Applied Material	Semiconductors & Semiconductor Equipment	North America	25,924	-	0.7	-
40	(-)	JFrog	Software	Asia Pacific	25,751	-	0.7	-
Top 40 investments					3,083,334		81.0
41	(47)	eMemory Technology	Semiconductors & Semiconductor Equipment	Asia Pacific	25,127	14,524	0.7	0.5
42	(35)	MongoDB	IT Services	North America	24,703	22,107	0.6	0.8
43	(-)	Amphenol	Electronic Equipment, Instruments & Components	North America	23,267	-	0.6	-
44	(26)	Shopify	IT Services	North America	21,874	29,497	0.6	1.0
45	(53)	Harmonic Drive Systems	Machinery	Asia Pacific	20,982	12,777	0.6	0.5
46	(-)	Coherent	Electronic Equipment, Instruments & Components	North America	20,575	-	0.6	-
47	(70)	Teradyne	Semiconductors & Semiconductor Equipment	North America	20,228	7,012	0.5	0.2
48	(-)	Monday.com	Software	Asia Pacific	19,936	-	0.5	-
49	(-)	The Trade Desk	Media	North America	19,913	-	0.5	-
50	(57)	E Ink	Electronic Equipment, Instruments & Components	Asia Pacific	19,435	12,028	0.5	0.4
Top 50 investments					3,299,374		86.7
51	(-)	DoorDash	Hotels, Restaurants & Leisure	North America	19,289	-	0.4	-
52	(49)	Marvell Technology	Semiconductors & Semiconductor Equipment	North America	16,984	13,879	0.4	0.5
53	(-)	Nitto Boseki	Building Products	Asia Pacific	16,690	-	0.4	-
54	(33)	Tokyo Electron	Semiconductors & Semiconductor Equipment	Asia Pacific	16,318	23,016	0.4	0.8
55	(-)	ARM ADR	Semiconductors & Semiconductor Equipment	Europe	14,683	-	0.4	-
56	(-)	King Slide Works	Technology Hardware, Storage & Peripherals	Asia Pacific	14,362	-	0.4	-
57	(-)	Gold Circuit Electronics	Electronic Equipment, Instruments & Components	Asia Pacific	14,100	-	0.4	-
58	(-)	BE Semiconductor Industries	Semiconductors & Semiconductor Equipment	Europe	13,834	-	0.4	-
59	(-)	Elite Material	Electronic Equipment, Instruments & Components	Asia Pacific	13,469	-	0.4	-
60	(60)	Intuit	Software	North America	13,442	10,538	0.4	0.4
Top 60 investments					3,452,545		90.7
61	(42)	Roblox	Entertainment	North America	13,212	17,444	0.4	0.6
62	(46)	Pinterest	Interactive Media & Services	North America	12,816	15,134	0.3	0.5
63	(-)	Fabrinet	Electronic Equipment, Instruments & Components	Asia Pacific	12,655	-	0.3	-
64	(-)	CommVault Systems	Software	North America	12,120	-	0.3	-
65	(24)	Monolithic Power Systems	Semiconductors & Semiconductor Equipment	North America	11,850	32,453	0.3	1.1
66	(-)	SÜSS MicroTec	Semiconductors & Semiconductor Equipment	Europe	11,590	-	0.3	-
67	(82)	Braze	Software	North America	11,516	3,668	0.3	0.1
68	(-)	Kokusai Electric	Semiconductors & Semiconductor Equipment	Asia Pacific	10,810	-	0.3	-
69	(36)	MercadoLibre	Broadline Retail	North America	10,587	20,965	0.3	0.8
70	(-)	Nintendo	Entertainment	Asia Pacific	10,149	-	0.3	-
Top 70 investments					3,569,850		93.8
71	(30)	Uber Technologies	Ground Transportation	North America	9,230	25,788	0.3	0.9
72	(75)	GMO Payment Gateway	Financial Services	Asia Pacific	8,623	5,224	0.2	0.2
73	(-)	Dell Technologies	Technology Hardware, Storage & Peripherals	North America	8,545	-	0.2	-
74	(48)	Hoya	Healthcare Equipment & Supplies	Asia Pacific	8,276	14,264	0.2	0.5
75	(71)	Fuji Machine Manufacturing	Machinery	Asia Pacific	8,066	5,680	0.2	0.2
76	(-)	STMicroelectronics	Semiconductors & Semiconductor Equipment	Europe	7,787	-	0.2	-
77	(-)	Nutanix	Software	North America	7,726	-	0.2	-
78	(58)	Kinaxis	Software	North America	7,651	11,909	0.2	0.4
79	(37)	Lattice Semiconductor	Semiconductors & Semiconductor Equipment	North America	7,316	20,572	0.2	0.7
80	(-)	ASMPT	Semiconductors & Semiconductor Equipment	Asia Pacific	7,231	-	0.2	-
Top 80 investments					3,650,301		95.9
81	(-)	Nova	Semiconductors & Semiconductor Equipment	Asia Pacific	7,111	-	0.2	-
82	(51)	Intuitive Surgical	Healthcare Equipment & Supplies	North America	6,821	13,230	0.2	0.5
83	(21)	Workday	Software	North America	6,661	33,429	0.1	1.2
84	(-)	Varonis Systems	Software	North America	5,461	-	0.1	-
85	(-)	MEC	Chemicals	Asia Pacific	4,692	-	0.1	-
86	(-)	Wix.com	IT Services	Asia Pacific	4,391	-	0.1	-
87	(-)	Ferrotec	Semiconductors & Semiconductor Equipment	Asia Pacific	4,241	-	0.1	-
88	(-)	Deliveroo	Hotels, Restaurants & Leisure	Europe	4,197	-	0.1	-
89	(18)	Palo Alto Networks	Software	North America	4,101	34,847	0.1	1.2
90	(-)	Hamamatsu Photonics	Electronic Equipment, Instruments & Components	Asia Pacific	3,461	-	0.1	-
Top 90 investments					3,701,438		97.1
91	(-)	Klaviyo	Software	North America	2,841	-	0.1	-
92	(76)	Zuken	IT Services	Asia Pacific	2,748	5,187	0.1	0.2
93	(-)	VTEX	Interactive Media & Services	Europe	2,532	-	0.1	-
94	(84)	Seeing Machines	Electronic Equipment, Instruments & Components	Asia Pacific	2,186	3,265	0.1	0.1
95	(-)	Oxford Nanopore Technologies	Life Sciences Tools & Services	Europe	2,012	-	0.1	-
96	(87)	Cermetek Microelectronics	Electronic Equipment, Instruments & Components	North America	1	1	-	-
		Total equities	3,713,758			97.6
		Other net assets	90,775			2.4
		Total net assets	3,804,533			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 2024, 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 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 gross 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 15 of the FCA's Listing Rules which apply to closed ended investment companies with a premium listing on the Official List of the London Stock Exchange.

In order to comply with the current Listing Rules, 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: one for 36m US Dollars at a fixed rate of 5.43% pa and one for 3.8bn Japanese Yen at a fixed rate of 1.13% pa, both of which were drawn down in September 2022. These loans fall due for repayment in September 2024. The loan facilities will be reviewed and may be replaced on expiry.

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 propose the next five-yearly continuation vote of the Company at the Annual General Meeting to be held in September 2025. 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 (2023: 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.

Fee Arrangements

Under the terms of the Investment Management Agreement, the Company pays to the Investment Manager a base fee, and if certain performance criteria are met, a performance fee is payable by the Company.

Management fee

With effect from 1 May 2022, 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: 0.80 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 £25,919,000 (2023: £21,918,000) have been paid for the year to 30 April 2024 of which £2,386,000 (2023: £1,827,000) was outstanding at the year end.

Under the terms of the IMA, the Board may undertake a three-yearly review of the fee arrangements, the next of which would normally commence in 2024, 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.

Further details on the performance fee methodology and calculation are provided within the Shareholder Information section of the annual report.

Longer-Term Viability

In accordance with the AIC Code of Corporate Governance, 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 AGM in 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 2029, 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 Strategic 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. 99.6% of the current portfolio could be liquidated within seven 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 2024 (excluding performance fees) were 0.80% (2023: 0.81%). Repayment of the bank facilities, drawn down at the year end, and due in September 2024, would equate to approximately 47% of the cash or cash equivalents available to the Company at 30 April 2024, 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 AGM in September 2025	Under the AIC SORP, where Shareholders have the opportunity to vote in favour or against a company continuing in existence, it will normally be the case that shareholders will have to vote in favour of a liquidation before it can occur. It is reasonable to believe that if positive long-term performance is achieved over the period until the next continuation vote shareholders will vote in favour of continuation.
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 and Accounts.
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.
Closed-ended Investment Funds	Despite recent 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 Investment Objective will continue to be desired and achievable.

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 2029.

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 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 and 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 growth and relative performance against the Benchmark.

The Board is aware of the vulnerability of a sector specialist investment trust to a change in investor sentiment to that sector.

The Board reviews the performance of the portfolio in detail and hears the views of the Investment Manager at each meeting.

The Board discusses the market factors giving rise to any discount or premium, 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.

At 30 April 2024 the total net assets of the Company amounted to £3,804,533,000 (2023: £2,828,141,000). The Company's NAV over the year to 30 April 2024, outperformed the Benchmark by 1.9%. The NAV per share rose by 40.8% from 2,239.48p to 3,154.11p while the Benchmark increased 38.9% in Sterling terms over the same period. As at 30 April 2024 the portfolio comprised 96 (2023: 87) investments.

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 and Accounts.

Monitoring and reacting to issues created by the discount or premium of the ordinary share price to the NAV per ordinary share with the aim of reduced discount volatility for Shareholders.

The Board receives regular information on the composition of the share register including trading

patterns and discount/premium levels of the Company's ordinary shares.

A daily NAV per share, diluted when appropriate, calculated in accordance with the AIC guidelines, is issued to the London

Stock Exchange.

The Company does not have an absolute target discount level at which it buys back shares but has historically bought back significant amounts of the 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 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 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 adjacent column.

The discount/premium of the ordinary share price to NAV per ordinary share (diluted when appropriate) has been as follows:

Financial year to 30 April 2024:

• Minimum discount over year: 7.41%

• Maximum discount over year: 15.87%

• Average discount over year: 12.38%

In the year ended 30 April 2024, the Company bought back 5,663,975 ordinary shares (representing 4.1% of the issued share capital) at an average discount of 12.3%. Subsequent to the year end and to close of business 11 July 2024, the Company bought back a further 964,346 shares.

Over the previous five financial years ended 30 April 2024:

· Maximum premium over period: 6.06%

· Maximum discount over period: 17.28%

· Average discount over period: 8.22%

Over the previous five financial years ended 30 April 2024 the Company has issued 3,490,000 Ordinary shares as a result of market demand.

To qualify and continue to meet the requirements for Sections 1158 and 1159 of the Corporation Tax Act 2010 ('investment trust status').

The Board receives regular financial information which discloses the current and projected financial position of the Company against each of the tests set out in Sections 1158 and 1159.

This has been achieved for every year since launch in 1996.

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 2024 and will continue to be met.

Efficient operation of the Company with appropriate investment management resources and services from third party suppliers within a stable and risk-controlled environment.

The Board considers annually the services provided by the Investment Manager, both investment and administrative, and reviews on a cycle the provision and costs of services provided by third parties.

The annual operating expenses are reviewed and any non-recurring project related expenditure is approved separately by the Board.

The Board has received and considered satisfactory the internal controls report of the Investment Manager and other key suppliers including contingency arrangements to facilitate the ongoing operations of the Company in the event of withdrawal or failure of services.

The ongoing charges of the Company for the year ended 30 April 2024 excluding the performance fee were 0.80% of net assets (2023: 0.81%). There was no performance fee payable for the year ended 30 April 2024 (2023: nil) and therefore the ongoing charges including the performance fee were 0.80% (2023: 0.81%) of net assets.

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 is then determined for each principal risk.

At each Audit Committee, identified principal risks are reviewed and reassessed against the backdrop of the ever-changing world the Company is operating in. The Audit Committee carries out, at least annually, a robust assessment of overall risks and uncertainties faced by the Company with the assistance of the Investment Manager. During the year under review, the Audit Committee undertook a full review of the content and format of the Company's Risk Map including the mitigating factors and controls associated with each risk. As part of this process, the Committee also introduced a risk appetite rating for each risk to clearly define the types of risk the Board and Manager are willing to take to achieve the Company's objective of maximising shareholder returns whilst operating within a strong governance and control framework.

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, 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.

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 year.

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.
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.
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. Following the year under review, the Board agreed to elevate the post-mitigation score associated with this risk in light of the increased potential for fraud and cyber attacks. The pre-mitigation remains unchanged.
REGULATORY RISKS
Breach of Statutes and Regulation
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 (including inflation, recession and interest rates)
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 and Accounts 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 in the table 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 11 September 2024 at The Royal Institution, 21 Albemarle Street, London, W1S 4BS. 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 2025 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.

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. The Board therefore encourage shareholders invested via the platforms to regularly visit the Company's website or to make contact with the Company directly to obtain copies of shareholder communications.

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.

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 5,663,975 shares during the year under review. Subsequent to the year end and to close of business 11 July 2024, the Company bought back a further 946,346 shares.

Gearing

The Company is aware of the positive effect that leverage can have in increasing the return to shareholders when utilised. The Company has term loans with ING Bank NV, which expire in September 2024. Consideration of the future level of borrowings required by the portfolio manager is currently under review.

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 in September 2025.

Share Split

As reported in the Chair's statement, the market price of the Company's existing ordinary shares has increased in recent years. Whilst this is positive for the Company and its Shareholders, the Board recognises that a higher share price could be a barrier to investment for certain investors including regular savers who may wish to invest smaller amounts per transaction on a regular basis. In order to ensure the Company remains accessible to all, the Directors are proposing a 10 for 1 share split at the AGM taking place in September 2024. Detailed explanations of the resolutions to be proposed at the AGM are contained within the Shareholder Information of the Annual Report and Accounts and within the Notice of AGM.

Directors Remuneration

The remuneration of Directors is reviewed regularly and was increased with effect from 1 May 2023 and again from 1 May 2024, 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).

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 2024, votes were cast at 98% of investee company general meetings held. At 52% 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.

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.

Approved by the Board on 16 July 2024

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

16 July 2024

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 2024 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 2024 have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 30 April 2023 are extracted from the published Annual Report and Financial Statements for the year ended 30 April 2023 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements for the year ended 30 April 2023 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 2024

	Notes	Year ended 30 April 2024			Year ended 30 April 2023
	Notes	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	15,471	-	15,471	16,160	42	16,202
Other operating income	4	6,438	-	6,438	3,820	-	3,820
Gains/(losses) on investments held at fair value	5	-	1,147,978	1,147,978	-	(106,807)	(106,807)
(Losses)/gains on derivatives	6	-	(22,030)	(22,030)	-	34	34
Other currency (losses)/gains	7	-	(1,292)	(1,292)	-	8,409	8,409
Total income		21,909	1,124,656	1,146,565	19,980	(98,322)	(78,342)
Expenses
Investment management fee	8	(25,919)	-	(25,919)	(21,918)	-	(21,918)
Other administrative expenses	9	(1,393)	-	(1,393)	(1,176)	-	(1,176)
Total expenses		(27,312)	-	(27,312)	(23,094)	-	(23,094)
Gain/(loss) before finance costs and tax		(5,403)	1,124,656	1,119,253	(3,114)	(98,322)	(101,436)
Finance costs	10	(1,874)	-	(1,874)	(1,598)	-	(1,598)
Profit/loss) before tax		(7,277)	1,124,656	1,117,379	(4,712)	(98,322)	(103,034)
Tax	11	(1,942)	-	(1,942)	(2,148)	-	(2,148)
Net profit/( loss) for the year and total comprehensive income/(expense)		(9,219)	1,124,656	1,115,437	(6,860)	(98,322)	(105,182)
Earnings/(losses) per share (basic and diluted) (pence)	12	(7.47)	911.68	904.21	(5.30)	(75.98)	(81.28)

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 2024

		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 2022		34,329	12,802	223,374	7,536	2,899,743	(126,799)	3,050,985
Total comprehensive (expense):
Loss for the year to 30 April 2023		-	-	-	-	(98,322)	(6,860)	(105,182)
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury	15	-	-	-	-	(117,662)	-	(117,662)

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

The notes below form part of these Financial Statements.

BALANCE SHEET

as at 30 April 2024

	Notes	30 April 2024 £'000	30 April 2023 £'000
Non current assets
Investments held at fair value through profit or loss	13	3,713,758	2,640,177
Current assets
Receivables		37,607	20,605
Overseas tax recoverable		346	379
Cash and cash equivalents	14	103,033	239,096
Derivative financial instruments	13	9,557	2,571
		150,543	262,651
Total assets		3,864,301	2,902,828
Current liabilities
Payables		(11,295)	(23,842)
Bank loans		(48,036)	-
Bank overdraft	13	(437)	-
		(59,768)	(23,842)
Non current liabilities
Bank loans		-	(50,845)
Net assets		3,804,533	2,828,141
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		3,669,370	2,683,759
Revenue reserve		(142,878)	(133,659)
Total equity		3,804,533	2,828,141
Net asset value per ordinary share (pence)		3,154.11	2,239.48

The Financial Statements, were approved and authorised for issue by the Board of Directors on xx July 2024 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 2024

	Notes	2024 £'000	2023 £'000
Cash flows from operating activities
Profit/(loss) before tax		1,117,379	(103,034)
Adjustments
(Gains)/losses on investments held at fair value through profit or loss	5	(1,147,978)	106,807
Losses/(gains) on derivative financial instruments	6	22,030	(34)
Proceeds of disposal on investments		2,857,451	2,311,861
Purchases of investments		(2,811,714)	(2,266,936)
Proceeds on disposal of derivative financial instruments	13	21,743	46,536
Purchases of derivative financial instruments	13	(50,759)	(42,594)
Increase in receivables		(742)	(472)
Increase/(decrease) in payables		641	(4,580)
Finance Costs		1,874	1,598
Overseas tax		(1,909)	(2,241)
Foreign exchange losses/(gains)	7	1,292	(8,409)
Net cash generated from operating activities		9,308	38,502

Cash flows from financing activities
Finance costs paid		(1,871)	(1,539)
Ordinary shares repurchased into treasury		(139,836)	(116,449)

Net cash used in financing activities		(141,707)	(117,988)

Net decrease in cash and cash equivalents		(132,399)	(79,486)

Cash and cash equivalents at the beginning of the year		239,096	311,363
Effect of movement in foreign exchange rates on cash held	7	(4,101)	7,219

Cash and cash equivalents at the end of the year	14	102,596	239,096

	Notes	2024 £'000	2023 £'000
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows:
Cash held at bank and derivative clearing houses	14	69,581	148,682
BlackRock's Institutional Cash Series plc (US Treasury Fund), money market fund	14	33,015	90,414

Cash and cash equivalents at the end of the year	14	102,596	239,096

The notes below form part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 April 2024

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 principal accounting policies, which 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.

The financial position of the Company as at 30 April 2024 is shown in the balance sheet above. As at 30 April 2024 the Company's total assets exceeded its total liabilities by a multiple of over 64. 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 two, two-year fixed rate term loans with ING Bank N.V. both of which fall due for repayment on 30 September 2024. 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, its cash flows and its liquidity position. In addition, the Company's cash flows were stressed tested for base case and reasonable worse case scenarios such as higher inflation and interest rate increases. 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. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Company's Financial Statements.

(B) PRESENTATION OF STATEMENT OF COMPREHENSIVE INCOME

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.

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.

FRS 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.

The Company's investment in BlackRock's Institutional Cash Series plc - US Treasury Fund of £33,015,000 (2023: ££90,414,000) is managed as part of the Company's cash and cash equivalents as defined under IAS 7.

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.

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, JUDGMENTS AND ASSUMPTIONS

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 majority of the Company's investments are in US Dollars, the level of which varies from time to time. The Board considers the functional and reporting currency to be Sterling. In arriving at this conclusion the Board considered that Sterling is most relevant to the majority of the Company's Shareholders and creditors and the currency in which the majority of the Company's operating expenses are paid and the Company's shares are denominated in Sterling.

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 (2023: same).

(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
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)	Requirement amended to disclose material accounting policies instead of significant accounting policies and provided guidance in making materiality judgements to accounting policy disclosure.	1 January 2023
Definition of Accounting Estimates (amendments to IAS 8)	Introduced the definition of accounting estimates and included other amendments to IAS 8 to help entities distinguish changes in accounting estimates from changes in accounting policy.	1 January 2023
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)	A mandatory temporary exception to the accounting for deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules; and disclosure requirements for affected entities to help users of the financial statements better understand an entity's exposure to Pillar Two income taxes arising from that legislation, particularly before its effective date.	1 January 2023

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

Amendments to IAS 1 Presentation of Financial Statements

- Non-current liabilities with Covenants

- Deferral of Effective Date Amendment (published 15 July 2020)

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) (publicised 23 January 2020)

The amendments clarify that only covenants with which an entity must comply on or before the reporting date will affect a liability's classification as current or non-current and the disclosure requirement in the financial statements for the risk that non-current liabilities with covenant could become repayable within twelve months.

1 January 2024

Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

The amendments address the disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on a company's liabilities, cash flows and exposure to liquidity risk.

1 January 2024

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 2024 £'000	Year ended 30 April 2023 £'000
Revenue:
Overseas Dividend income	15,471	16,160
	15,471	16,160
Capital:
Special dividends allocated to capital	-	42

All investment income is derived from listed investments.

There was no special dividends classified as revenue or Capital in accordance with note 2 (c) (2023: £350,000 Income and £42,000 Capital).

4. OTHER OPERATING INCOME	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
Bank interest	2,529	1,478
Money market fund interest	3,909	2,342
	6,438	3,820

5. GAINS/(LOSSES) ON INVESTMENTS HELD AT FAIR VALUE	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
Net gains/(losses) on disposal of investments at historic cost	476,684	(130,861)
Transfer on disposal of investments	(151,853)	(59,647)
Gains/(losses) on disposal of investments based on carrying value at previous balance sheet date	324,831	(190,508)
Valuation gains on investments held during the year	823,147	83,701
	1,147,978	(106,807)

6. (LOSSES)/GAINS ON DERIVATIVES	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
(Losses)/gains on disposal of derivatives held	(21,716)	5,019
Losses on revaluation of derivatives held	(314)	(4,985)
	(22,030)	34

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)/GAINS	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
Exchange (losses)/gains on currency balances	(4,101)	7,219
Exchange losses on settlement of loan balances	-	(507)
Exchange gains on translation of loan balances	2,809	1,697
	(1,292)	8,409

8. INVESTMENT MANAGEMENT AND PERFORMANCE FEE

Year ended 30 April 2024

£'000

Year ended

30 April 2023

£'000

Investment management fee payable to Polar Capital (charged wholly to

revenue)

25,919

21,918

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 (2023: same).

The basis for calculating the investment management and performance fees are set out in the Strategic Report above and details of all amounts payable to the Manager are given in Note 16 below.

9. OTHER ADMINISTRATIVE EXPENSES

	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
Directors' fees and expenses¹	253	247
National insurance contributions	27	26
Depositary fee²	227	192
Registrar fee	57	54
Custody and other bank charges³	359	267
UKLA and LSE listing fees⁴	208	204
Legal & professional fees and other financial services	3	16
AIC fees	21	21
Auditors' remuneration - for audit of the financial Statements	80	63
Directors' and officers' liability insurance	56	38
AGM expenses	6	6
Corporate brokers' fee⁵	-	-
Shareholder communications⁶	63	38
Other expenses⁷	33	4
	1,393	1,176

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 21% 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. 2023/2024 annual fee was offset by the commission credit on shares repurchases.

6. Includes Bespoke promotional marketing cost.

7. Includes Non-executive Directors' search fee.

10. FINANCE COSTS	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
Interest on loans and overdrafts	1,874	1,514
Loan arrangement and facility fees	-	84
	1,874	1,598

11. TAXATION	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
(a) Analysis of tax charge for the year:
Overseas tax	1,942	2,148
Total tax for the year (see Note 11b)	1,942	2,148

(b) Factors affecting tax charge for the year:

The charge for the year can be reconciled to the gains/(losses) per the Statement of Comprehensive Income as follows:

Gain/(loss) before tax	1,117,379	(103,034)
Tax at the UK corporation tax rate of 25% (2023: 19.5%)	279,345	(20,092)
Tax effect of non-taxable dividends	(3,868)	(3,159)
Tax effect of (gains)/losses on investments that are not taxable	(281,164)	19,181
Unrelieved current year expenses and deficits	5,687	4,070
Overseas tax suffered	1,942	2,148
Total tax for the year (see Note 11a)	1,942	2,148

There is an unrecognised deferred tax asset comprising:

Unrelieved management expenses	72,685	66,998
Non-trading loan relationship deficits	1,807	1,807
	74,492	68,805

The deferred tax asset is based on a corporation tax rate of 25% (2023: 25%).

The Company has an unrecognised deferred tax asset of £72,685,000 (2023: £66,998,000) arising from surplus

management expenses of £290,740,000 (2023: £267,992,000) and unrecognised deferred tax asset of £1,807,000 (2023: £1,807,000) arising from non-trade loan relationship deficits of £7,227,000 (2023: £7,227,000) based on a corporation tax rate of 25% (2023: 25%). Given the composition of the Company's portfolio, it is not likely that these assets will be utilised in the foreseeable future and therefore no deferred tax 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/(LOSS) PER ORDINARY SHARE

	Year ended 30 April 2024			Year ended 30 April 2023
	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return
The calculation of basic earning/loss per share is based on the following data:
Net gain/(loss) for the year (£'000)	(9,219)	1,124,656	1,115,437	(6,860)	(98,322)	(105,182)
Weighted average ordinary shares in issue during the year	123,361,430	123,361,430	123,361,430	129,409,889	129,409,889	129,409,889
From continuing operations
Basic - earning/(loss) per ordinary share (pence)	(7.47)	911.68	904.21	(5.30)	(75.98)	(81.28)

As at 30 April 2024 there are no potentially dilutive shares in issue and the earnings per share therefore equate to those shown above (2023: 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 2024 £'000	Year ended 30 April 2023 £'000
Opening book cost	2,058,477	2,253,434
Opening investment holding gains	581,700	557,646
Opening fair value	2,640,177	2,811,080
Analysis of transactions made during the year
Purchases at cost	2,799,314	2,236,802
Sales proceeds received	(2,873,711)	(2,300,898)
Gains/(losses) on investments held at fair value	1,147,978	(106,807)
Closing fair value	3,713,758	2,640,177
Closing book cost	2,460,764	2,058,477
Closing investment holding gains	1,252,994	581,700
Closing fair value	3,713,758	2,640,177
Of which:
Listed on a recognised Stock Exchange	3,713,758	2,640,177

The Company received £2,873,711,000 (2023: £2,300,898,000) from disposal of investments in the year. The book cost of these investments when they were purchased was £2,397,027,000 (2023: £2,431,759,000). 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 £1,550,000 (2022: £1,055,000). Included in proceeds of disposals are sales costs of £1,726,000 (2022: £1,231,000). These costs primarily comprise commission.

(ii) Changes in derivative financial instruments	Year ended 30 April 2024 £'000	Year ended 30 April 2023 £'000
Valuation at 1 May	2,571	6,479
Additions at cost	50,759	42,594
Proceeds of disposal	(21,743)	(46,536)
(Losses)/gains on disposal	(21,716)	5,019
Valuation losses	(314)	(4,985)
Valuation at 30 April	9,557	2,571

The derivative financial instruments represent the call and put options, which are used for the purpose of efficient portfolio management. As at 30 April 2024, the Company held NASDAQ 100 Stock Index put option and the market value of these open put option position was £7,192,000 (2023: NASDAQ 100 Stock Index put option with a market value of £1,559,000). The Company also held Microsoft Corp call options and Apple Inc call option, the market value of these open call option position were £403,000 and £1,962,000 respectively (2023: Microsoft Corp call options with a market value of £1,012,000).

(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 2024 £'000	Year ended 30 April 2023 £'000
Equity Investments and derivative financial instruments
Level 1	3,717,533	2,641,189
Level 2	5,782	1,559
Level 3	-	-
	3,723,315	2,642,748

As at the year ended 30 April 2024, £5,782,000 (30 April 2023: NASDAQ 100 Stock Index put options with a market value of £1,559,000) 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 2024.

(iv) Unquoted investments

As at 30 April 2024, the portfolio comprised no unquoted investment (30 April 2023: same).

14. CASH AND CASH EQUIVALENTS	30 April 2024 £'000	30 April 2023 £'000
Cash at bank	69,964	148,682
Cash held at derivative clearing houses	54	-
Money market funds	33,015	90,414
Cash and cash equivalents	103,033	239,096
Bank overdraft	(437)	-
	102,596	239,096

As at 30 April 2024, the Company held BlackRock's Institutional Cash Series plc - US Treasury Fund with a market value of £33,015,000 (30 April 2023: £90,414,000), which is managed as part of the Company's cash and cash equivalents as defined under IAS 7.

15. SHARE CAPITAL

	30 April 2024 £'000	30 April 2023 £'000
Allotted, Called up and Fully paid:
Ordinary shares of 25p each
Opening balance of 126,285,544 (2023: 132,356,426)	31,571	33,089
Repurchase of 5,663,975 (2023: 6,070,882) ordinary shares into treasury	(1,416)	(1,518)
Allotted, called up and fully paid: 120,621,569 (2023: 126,285,544) ordinary shares of 25p ordinary shares of 25p	30,155	31,571
ordinary shares of 25p of 25p
16,693,431 (2023: 11,029,456) ordinary shares held in treasury	4,174	2,758
At 30 April 2024	34,329	34,329

During the year, there were no ordinary shares issued to the market (2023: same). A total of 5,663,975 (2023: 6,070,882) ordinary shares were repurchased into treasury at a cost of £138,355,000 (2023: £117,078,000).

Subsequent to the year end, and to close of business on 11 July 2024 (latest practicable date), 964,346 ordinary shares were repurchased into treasury at an average price of 3,149.86 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 2024 were £25,919,000 (2023: £21,918,000) of which £2,386,000 (2023: £1,827,000) was outstanding at the year end.

There was no performance fee payable in respect of the year nor outstanding at the year end (2023: same).

In addition, the research costs and the first £200,000 of marketing costs per annum are borne by the Manager.

(B) RELATED PARTY TRANSACTIONS

The compensation payable to key management personnel in respect of short term employee benefits is £253,000 (2023: £247,000) which comprises £253,000 (2023: £247,000) paid by the Company to the Directors.

Refer to Company's 2024 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 2024	30 April 2023
Undiluted:
Net assets attributable to ordinary Shareholders (£'000)	3,804,533	2,828,141
Ordinary shares in issue at end of year	120,621,569	126,285,544
Net asset value per ordinary share (pence)	3,154.11	2,239.48

As at 30 April 2024, there were no potentially dilutive shares in issue (2023: there was no dilution)

18. POST BALANCE SHEET EVENT

Subsequent to the year end, and to close of business on 11 July 2024, 964,346 ordinary shares were repurchased and placed into Treasury at an average price 3,149.86 p 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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Polar Capital Technology (LSE:PCT)
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