POLAR CAPITAL TECHNOLOGY TRUST PLC

 

AUDITED RESULTS ANNOUNCEMENT FOR THE FINANCIAL YEAR TO 30 APRIL 2025

 

 

FINANCIAL SUMMARY			Change %
	As at 30 April 2025	As at 30 April 2024	Year Ended 2025	Year Ended 2024
Total net assets	£3,804,889,000	£3,804,533,000	0.01%	34.5%
Net Asset Value (NAV) per ordinary share1	325.20p	315.41p	3.1%	40.8%
Benchmark2	5259.96	5007.08	5.1%	38.9%
Price per ordinary share1	288.50p	292.00p	(1.2%)	50.5%
Discount of ordinary share price to the NAV per ordinary share3	(11.3%)	(7.4%)
Ordinary shares in issue1,4	1,170,007,019	1,206,215,690	(3.0%)	(4.5%)
Ordinary shares held in treasury 1,4	203,142,981	166,934,310	21.7%	51.4%

 

 

KEY DATA	For the year to 30 April 2025
	Local Currency %	Sterling Adjusted %
Benchmark2
Dow Jones Global Technology Index (TR)	12.06	5.1
Other Indices over the year (total return)
FTSE World	12.30	5.23
FTSE All-Share		7.53
S&P 500 Composite	12.10	5.04
Nikkei 225	-4.33	-1.06
Eurostoxx 600	8.01	7.63

 

	As at 30 April
EXCHANGE RATES	2025	2024
US$ to £	1.3357	1.2522
Japanese Yen to £	190.52	197.04
Euro to £	1.1750	1.1711

 

	For the year to 30 April
EXPENSES	2025	2024
Ongoing charges ratio3	0.77%	0.80%
Ongoing charges ratio including performance fee3	0.77%	0.80%

Data supplied by Polar Capital LLP and HSBC Securities Services.

 

1.     Prior year was rebased following the sub-division of Ordinary Shares of 25p each into 10 new Ordinary Shares of 2.5p each, approved at the AGM held on 11 September 2024 and effective on 13 September 2024.

2.     Dow Jones Global Technology Index (total return, Sterling adjusted, with the removal of relevant withholding taxes). See Annual Report for further details.                      

3.     Alternative Performance Measure - see Annual Report for further details.                  

4.     The issued share capital as at close of business 4 July 2025 (latest practicable date) was 1,373,150,000 ordinary shares of which 215,103,569 were held in treasury.                       

 

HISTORIC PERFORMANCE

As at 30 April	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025
Net Assets (£m)	793.0	801.3	1,252.5	1,551.6	1,935.6	2,308.6	3,408.8	3,051.0	2,828.1	3,804.5	3,804.9
Share price (pence) #	59.2	56.6	94.7	114.8	135.4	177.4	236.4	204.0	194.0	292.0	288.5
NAV per share (pence) #	59.9	60.6	94.5	116.0	144.6	171.6	249.6	230.5	223.9	315.4	325.2
Indices of Growth1
Share price2	100.0	95.6	160.0	193.9	228.7	299.7	399.3	344.6	327.7	493.2	487.3
NAV per share2	100.0	101.1	157.8	193.5	241.3	286.3	416.6	384.5	373.7	526.3	542.7
Dow Jones Global Technology Index 3	100.0	99.9	153.2	179.3	217.8	257.2	376.5	373.2	383.8	533.2	560.2

 

The Company commenced trading on 16 December 1996 and the share price on the first day was 9.6p^# per share and the NAV per share was 9.75p^#.

 

Notes:

1 Rebased to 100 at 30 April 2015

2 Total return assumes reinvestment of dividends.

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

# Prior years were rebased following the sub-division of Ordinary Shares of 25p each into 10 new Ordinary Shares of 2.5p each, approved at the AGM held on 11 September 2024 and effective on 13 September 2024.

All data sourced from Polar Capital LLP.

 

 

For further information please contact:
Ben Rogoff	Ed Gascoigne-Pees
Polar Capital Technology Trust PLC	Camarco
Tel: 020 7227 2700	Tel: 020 3757 4984

 

CHAIR'S STATEMENT

On behalf of myself and the Board I am pleased to present to you the Annual Report of the Company for the financial year ended 30 April 2025 (FY25).

 

With the recent investment trust market challenges and meeting requisitions, it would be remiss not to reflect that the Board is conscious of the interest in the investment trust industry of activist Shareholders. The Board has reflected on and continually monitor the Shareholder register and position of the Company. While the Board does not feel there are any current concerns, the Board is mindful of acting in the best interests of Shareholders and stakeholders at all times and we would like to reassure Shareholders of this.

 

Performance

The Manager's report is provided in the annual report and gives an overview of the year past and the outlook for the near future.

 

The financial year under review has been a challenging period for the Company with the technology sector experiencing volatility following the arrival of DeepSeek's potentially low-cost AI Model, President Trump's Administration and the uncertainty surrounding the introduction of US Tariffs and retaliatory tariffs as well as other geopolitical and macro-economic factors. During the year under review, your Company's net asset value (NAV) per share rose from 315.41p to 325.20p, an increase of 3.1%, while the Benchmark increased 5.1% in Sterling terms over the same period. Underperformance came largely from an overweight position in the small cap sector and from difficult stock selection within it. The annualised performance returns of the Company over the past five and ten years were 13.6% and 18.4% respectively, which compare to total returns from our benchmark of 16.8% and 18.8%.

 

While we await the longer-term impact of President Trump's administration, the Board remains optimistic about the overall outlook for the technology sector. We continue to believe that there are interesting developments and long-term opportunities within our sector, particularly with the developments in agentic Artificial Intelligence (AI); this is discussed further in the Manager's Report.

 

Discount Management

The Company's discount widened during the financial year under review, ending the year at 11.3% compared to 7.4% at the end of FY24. It averaged 10.4% over the financial year. The Board actively monitors the discount at which the Company's ordinary shares trade in relation to the Company's underlying NAV and, whilst the Board does not have a formal discount policy, it will continue to exercise its discretion to buy back shares at a discount in normal market conditions. Equally, the Board will also use discretion to issue shares at a premium.

 

Utilising this discretion, we repurchased a total of 36,208,671 ordinary shares (representing 2.6% of the issued share capital) in the year under review at an average price of 318.19 pence per share and at an average discount of 10.4% to the prevailing NAV. Following the year end, and up to close of business 4 July 2025, the Company has bought back a further 11,960,588 shares. While purchase levels have been relatively low on an individual transaction basis, we should note that this activity does not preclude the Manager determining that a more significant amount than usual on any one day should be purchased. Such a decision may be influenced by, in the Manager's view, there being a particular investment opportunity best accessed through buying shares in the Company rather than buying individual securities.

Fees

As previously reported in the Company's Half Year results, we concluded our formal three-yearly review of the management fee arrangements and were very pleased to have achieved an agreement with the Manager for an overall reduction to the base management fee as well as the complete removal of the performance fee. The revised arrangements came into effect on 1 May 2025.

 

New fee arrangements:

The new base management fee is now structured over two tiers and the performance fee was removed entirely:

 

·      Tier 1:    0.75% on NAV up to and including £2bn

·      Tier 2:    0.60% on NAV above £2bn

 

Please refer to the Annual Report further information on fees.

 

Board Composition

As reported in the Half-Year Chair's Statement, a recruitment process was undertaken in the latter half of 2024 in order to identify and appoint a new non-executive director following the retirement of Charlotta Ginman who reached her nine-year tenure in September 2024. We were delighted to welcome Adiba Ighodaro to the Board with effect from 3 December 2024. Adiba brings a considerable expertise in legal and investor matters and has various Board roles already. She will stand for election by Shareholders at the AGM to be held in September 2025. Further information on the recruitment process undertaken and Adiba's background and experience is contained in the Annual Report.

The Board continues to work on longer-term succession planning as each of the Directors approach their nine year tenure on the Board. The Board is in early-stage discussions and are working to finalise a managed programme of recruitment, appointment and retirement which we expect will be carried out during 2026 and will conclude by Q4 2027. Further information will be shared when available.

There have been no other changes to the membership of the Board during the year under review. The Directors' biographical details are available on the Company's website and are provided in the Annual Report.

Directors' Fees

As detailed further within the Remuneration Committee Report, an annual fee review was undertaken to ensure that the remuneration paid to Directors remains attractive, competitive and in line with those of its peers in order to attract and retain the best candidates. The Board usually favours modest increases year-on-year (where applicable) and with effect from 1 May 2025, the Directors' base remuneration increased by 2.8% to £37,000 and the remuneration of the Chair to £67,200. The supplement for the Audit Committee Chair was increased to £9,000 to reflect the additional time required in connection with increased audit regulation and overall responsibility of the Chair of the Audit Committee, whilst the supplement for the Senior Independent Director remained unchanged at £4,200.

 

In aggregate, the Directors fees for FY26 will be £265,400. The maximum level currently provided for in the Company's Articles of Association is £350,000 which provides headroom for succession planning and appointment overlap should it be necessary.

Annual General Meeting

We are pleased to confirm that the Company's AGM will be held on 10 September 2025 at 2:30pm at the offices of Herbert Smith Freehills Kramer, Exchange House, Primrose Street, London, EC2A 2EG. We look forward to welcoming Shareholders to the meeting, at which they will receive a presentation from the Investment Manager and his team and Shareholders will also have the opportunity to ask questions and meet the Board; light refreshments will be available following the meeting.

 

The Notice of AGM will shortly be provided to Shareholders and will also be available on the Company's website. Shareholders are encouraged to read the detailed explanations on the formal business and the resolutions to be proposed at the AGM contained within the Shareholder Information section of the Annual Report as well as the Notice of AGM.

In order to ensure that Shareholders are able to follow the proceedings of the AGM without attending in person, the Company will also broadcast the meeting online via zoom videoconferencing. However, please note that Shareholders joining via zoom will not be able to vote online during the AGM and are therefore encouraged to submit their votes via proxy, as early as possible. All formal resolutions will be voted on by way of a poll. In addition to voting on resolutions proposed at the AGM, we also welcome Shareholder engagement with the Board and the Investment Manager. As such, the Board invites Shareholders to not only attend the AGM in person but to submit questions in writing to which we will respond, as far as possible, ahead of the AGM date. Please send your questions to [email protected] with the subject heading PCTT AGM.

Continuation Vote

The Company has within its corporate structure the requirement to hold a continuation vote every five years. The last continuation vote was held in September 2020, for which 100% of the votes cast were in favour, and the next continuation vote will be held at the forthcoming AGM on 10 September 2025.

 

Ahead of the upcoming continuation vote, the Board, Investment Manager and Corporate Broker have been seeking Shareholder views including any concerns and an indication of whether they were likely to vote in favour of the Company's continuation. No comments adverse to the continuation vote have been received to date and the Shareholders who provided feedback were minded, at the time of writing, to vote in favour of the resolution for the Company to continue. Shareholders highlighted the contact between the Investment Manager and Shareholders, the long term investment horizon of many Shareholders, the diversification of the Company's register of Shareholders and the Company's inclusion on many buy lists at private wealth managers and retail platforms. As such, the Directors are confident that the continuation vote will be passed at the AGM to be held on 10 September 2025 and therefore that the Company will continue in existence. As such the Board is supportive of the Company continuing in its current form and recommends Shareholders vote in favour of continuation as indeed the Directors propose to do. The Board acknowledge that there can be no certainty that the continuation vote will be passed although, at the date of approval of these financial statements, we have no reason to believe that it will not do so.

Environmental, Social and Governance (ESG)

The Investment Manager incorporates ESG considerations into its investment process and the Board continues to engage closely with the Manager to monitor their progress and receives regular updates on the developments on the corporate side of Polar Capital's business. As at 30 April 2025, based on MSCI ESG ratings, the portfolio and the benchmark were both A rated.

Please refer to the ESG Report in the Annual Report which incorporates both the investment and corporate approaches.

 

Outlook

Whilst the macro-economic uncertainties remain and it is likely that market volatility will persist, we remain positive on the outlook for the sector with rapid developments in agentic AI falling into place. We look forward to the investment opportunities this brings for the sector and our portfolio, which looks well placed to benefit from these developments in the AI space. It is important to remember, however, that continuing devaluation of the US dollar could potentially cause a headwind to the performance of the Company as, in the near term, the majority of our assets are US dollar based. I encourage you to read the IM report in the annual report for a flavour of the excitement the Manager has about various themes developing within our sector.

 

Catherine Cripps

Chair

10 July 2025

 

 

FINANCIAL AND PERFORMANCE REVIEW FOR THE YEAR ENDED 30 APRIL 2025

 

The NAV per share increased to 325.20p as at 30 April 2025 from 315.41p* at the start of the year, which represents a 3.1% increase, and the Company finished the year with total net assets of £3,804.9m. The Investment Manager's Report in the Annual Report sets out in detail the performance of the Company for the financial year.

 

Total Return

The Company generates returns from both capital growth (capital return) and dividend income received (revenue return). The total return from the portfolio for the year was a gain of £118.4m (2024: gain of £1,115.4m), of which there was a £129.7m gain (2024: £1,124.6m gain) from capital and a £11.3m loss (2024: £9.2m loss) on the income account which offsets all expenses against dividend income. Full details of the total return can be found in the Statement of Comprehensive Income in the Annual Report. As a matter of policy, all expenses are allocated to income with the exception of the performance fee which is allocated to capital. The Company's allocation of expenses is described in Note 2(d) in the Annual Report and the allocation methodology is considered on an annual basis. No change to the policy is recommended (2024: no change). The earnings per share were 9.97p (2024: earnings per share of 90.42p*). These were made up of 10.92p from capital return and a loss of 0.95p from revenue return.

 

Capital Return

The investment portfolio was valued at £3,664.9m (2024: £3,713.8m) at the year end 30 April 2025. The investment portfolio delivered a total of realised and unrealised gains of £128.5m (2024: gains of £1,147.9m) for the year ended 30 April 2025. The Company's valuation approach is described in Note 2 (f) in the Annual Report. The derivative gains of £2.8m (2024: £22.0m losses) have arisen as a result of the call and put options which are used to facilitate efficient portfolio management. Full details of the derivatives are set out in the Investment Managers Report and Note 6 in the Annual Report.

 

Revenue Return

The total investment income of £19.1m (2024: £15.5m) represents dividend income derived from listed investments. During the year under review, the Company received other operating income of £6.3m (2024: £6.4m) which was derived from bank interest and Money Market Fund (MMF) interest. It should be noted, however, that the MMF is held primarily as a cash diversification factor rather than an income generating investment. As stated above, as a matter of policy, all expenses (excluding the performance fee) are charged to revenue and as a result, expenses normally exceed the income received in any given year. As has been the case for many years, the revenue reserve therefore remains negative. The Company historically has not paid dividends given the nature of its focus on longer term capital growth. The Directors do not recommend the payment of a dividend for the financial year under review. The Board reviews this stance on a periodic basis.

 

Total Expenses and Finance Costs

The total expenses for the year under review amounted to £32.5m (2024: £27.3m). These are made up of investment management fees of £30.9m (2024: £25.9m) and administrative expenses of £1.6m (2024: £1.4m).

In addition, the Company had finance costs of £1.8m (2024: £1.9m). The Company's operating expenses comprise predominantly variable costs, such as management, depositary and custody fees which increase and decrease based on the net asset value. Other expenses remained at a similar level to the last year. There was no performance fee accrued at the year ended 30 April 2025 (2024: £nil). The Company keeps under close review the costs and expenses associated with the running of the Company to ensure that they continue to provide value for money. As reported in the Company's Half Year results, an agreement was made with Polar Capital for a reduction to the base management fee and the complete removal of the performance fee. The revised arrangements came into effect from the new financial year commencing 1 May 2025. Further details can be found in the Annual Report.

 

 

Ongoing Charges

The ongoing Charges Ratio (OCR) is a measure of the ongoing operating costs of the Company. It is calculated in line with the AIC recommended methodology, represents the total expenses of the Company, excluding finance costs, and is expressed as a percentage of the average daily net asset value during the year. The OCR demonstrates to Shareholders the annual percentage reduction in NAV as a result of recurring operational expenses, that is, the expected cost of managing the portfolio. Whilst based on historical information, the OCR provides an indication of the likely level of costs that will be incurred in managing the Company in the future. The OCR for the year to 30 April 2025 was 0.77%, a reduction from the previous year of 0.80%. The OCR including the performance fee for the year to 30 April 2025 was the same as no performance fee was accrued at the year end. See Alternative Performance Measures in the Annual Report.

 

Cash and Cash Equivalents

The Company's absolute level of cash at the year end was £187.9m (2024: £102.6m), this equates to less than 5% of the Company's NAV as at 30 April 2025. As noted above, as part of the Company's cash diversification strategy, the Company has taken a cautious approach and has chosen to invest 50% of its USD cash balance into a USD Treasury Money Market Fund. As at 30 April 2025, the Company held the BlackRock Institutional Cash Series - US Treasury Fund with a value at year end of £21.4m (2024: £33.0m). 

 

Portfolio Turnover

Portfolio turnover (purchases and sales divided by two) totalled £4,563.9m equating to 119.9% for the year to 30 April 2025 (2024: 85.5%) of average net assets. Details of the investment strategy and portfolio are given in the Investment Manager's Review in the Annual Report.

 

Gearing

The Company can use gearing for investment purposes as stated in the Annual Report. During the year, the Company had two loan facilities with ING Bank NV of 36m US Dollars and 3.8bn Japanese Yen ("JPY"), both of which were repaid in September 2024. The JPY loan was replaced with a three year fixed rate term loan of JPY 15bn from The Bank of Nova Scotia. This loan is due for repayment in September 2027. The repayment of this loan, totalling approximately £78.7m would equate to 2% of the Company's NAV as at 30 April 2025.

 

Foreign Exchange

The majority of the Company's assets and revenue are denominated in currencies other than Sterling and are impacted by foreign exchange movements. As at the year ended 30 April 2025, the other currency losses of £1.6m (2024: £1.3m losses) represents the exchange losses on currency balances of £2.5m (2024: £4.1m losses) and net gains on currency translation and settlement of loans of £0.9m (2024: gains of £2.8m). The Company's total return and net assets can be affected by the currency translation and movements in foreign exchange. Note 27 (a) (ii) in the Annual Report, analyses the currency risk and the management of such risks.

 

 

Catherine Cripps

Chair

10 July 2025

 

INVESTMENT MANAGER'S REPORT

 

Market Review

 

Equity markets delivered modest gains during the Trust's fiscal year to the end of April 2025 (FY25) following a strong FY24 although this belied significant geopolitical and market volatility. Global equity markets, as per the MSCI All Country World Net Total Return Index, returned +4.8% during the fiscal year, while the US (S&P 500 index) and Europe (DJ Euro Stoxx 600 index) returned +5% and +7.6% respectively. Economic growth remained firm, led by consumer spending, while labour markets showed only mild signs of softening. The inflation picture also continued to improve globally, including in the US, where headline Consumer Price Inflation (CPI) fell from 4.9% in April 2023 to 2.3% by April 2025, nearing the Federal Reserve (Fed)'s 2% goal. Progress on inflation changed the balance of risks for many central banks and shifted policy focus from managing the risk of higher/sticky inflation to supporting economic growth and labour markets. The Fed duly began its interest rate-cutting cycle with a 50 basis point (bps) cut at its September meeting, followed by 25bps cuts at the November and December meetings. The European Central Bank and Bank of England began their own rate cuts in June and August respectively.

 

Equity markets broadly trended higher through 2024 as economic growth surprised to the upside and major

macroeconomic and political risks appeared to dissipate, supporting higher equity valuation multiples. 2024 US GDP (gross domestic product) growth ended the year at +2.9%, up from forecasts of just 1.2% at the start of the year. Performance for the calendar year was again dominated by the largest technology companies, with the 'Magnificent Seven' (Mag-7) returning +71% and continuing to benefit from positive earnings revisions and excitement about artificial intelligence (AI), accounting for almost 60% of the S&P 500's 2024 return.

 

From the turn of the calendar year (the final third of the Trust's fiscal year), markets were no longer led by changes in the Fed's language and CPI components but buffeted by political developments. The election of Donald Trump as US President proved the defining event of the fiscal year as markets were forced to react to sweeping tariff policies, a flurry of Executive Orders and bilateral dealmaking. Equity markets initially took this political upheaval in their stride: Trump's pro-growth, pro-business, low-tax agenda appeared to have ignited animal spirits, and the equity market upgraded its economic growth expectations. The nomination of Scott Bessent as Treasury Secretary and Elon Musk's high-profile Department of Government Efficiency (DOGE) role led investors to be more sanguine about inflationary tariffs, expanding deficits and geopolitical instability. The decisive election outcome in the form of a Republican 'clean sweep' and stock market 'Trump bump' added fuel to the 'US exceptionalism' narrative: US equities saw c$141bn worth of inflows during the month following Trump's election (the largest monthly inflows on record), cyclicals outperformed defensives, and the S&P 500 high beta factor reached the 99th percentile by early December.

 

The reality of the Trump administration's policy agenda and erratic modus operandi proved more challenging, and the S&P 500 soon gave back all its post-election gains. The market turned more defensive as investors digested trade uncertainties, DOGE disruption and even a potential shift in the geopolitical world order as Trump and Vice-President Vance raised significant questions about the future viability of NATO and the survival of Pax Americana (which succeeded in galvanizing Europe - particularly Germany - into increasing defence spending). Growth and inflation concerns emerged as consumer and business confidence collapsed and policy uncertainty spiked to early Covid and global financial crisis (GFC) levels. Against this volatile backdrop, the arrival of DeepSeek's low-cost AI model shocked the market and prompted a momentum unwind in small/mid-cap, long-duration and AI infrastructure stocks and, without mega-cap technology/AI leadership, the market struggled.

 

Trump's Liberation Day Executive Order on 2 April unleashed further volatility; indeed, April was the fifth most volatile month in 85 years. A baseline 10% tariff was set on imports from all countries from 5 April and much higher 'reciprocal tariffs' on around 60 'worst offenders' from 9 April. The size and scope of the Liberation Day announcement surprised the market and appeared to confirm the administration's commitment to reordering global trade policy and geopolitics. Equity markets experienced significant volatility in early April: the VIX (a measure of market volatility) closed above 50, the S&P 500 registered some of the largest intraday swings in history amid record trading volumes and fell more than 20% from mid-February highs. The trade- weighted dollar weakened significantly, closing down more than 10% from January highs by mid-April.

 

Fortunately, the sharp correction in the bond and equity market prompted a softening in the trade tariff negotiations, which led to a rebound in the market. On 9 April - the deadline for reciprocal tariffs to go into effect and following unsettling moves in the bond market - Trump paused the higher reciprocal tariff rates for 90 days on all countries excluding China (where the cumulative tariff was increased to 125%) to provide an opportunity for countries to engage in trade talks. In the face of extremely bearish investor sentiment, the S&P 500 recovered more than 15% from its lows to close above its Liberation Day level within a month. The rebound included nine consecutive trading session gains; the first time this has happened since November 2004. While most countries appeared to be negotiating, China announced counter-tariffs on US goods. This started a cycle of retaliation which resulted in a 145% tariff on Chinese imports to the US and the Chinese restricting rare earth exports, which are critical to various high-tech industries. In early May, however, China and the US also reached an agreement to lower tariffs to 10% and 30% respectively for 90 days, leading to a further move higher in markets following a solid Q1 earnings season.

 

 

Technology review

The technology sector (as measured by the Dow Jones Global Technology Index) returned +5.1% for the Trust's fiscal year through 30 April 2025. The rapid progress of AI remained the sector's primary focus, but modest positive headline returns belied significant sector volatility, as well as within the AI story itself.

 

Despite cracks appearing in some large companies in 2025, large-cap technology stocks continued to significantly outpace their small and mid-cap peers over the fiscal year: the Russell 1000 (large cap) Technology Index and Russell 2000 (small cap) Technology Index delivered returns of +5.9% and -12.3% respectively. Similarly, the market cap-weighted NASDAQ 100 Index gained +7% while the equal-weighted NASDAQ 100 (the same stocks held at equal weights) returned -1.5%. Despite DeepSeek and regulatory headwinds, the Bloomberg Magnificent 7 Total Return Index still delivered +15.8% during the year. US exceptionalism driven by AI continued as the dominant investment theme for much of the year with the continued outperformance of the Mag-7 driving returns. However, the technology sector had to contend with several growth scares during the year. These, combined with continued progress on inflation, prompted the Fed to finally begin its rate-cutting cycle in September. This helped sector performance, and the Trump victory and Republican 'clean sweep' as a pro-business, deregulatory and - above all - pro-AI administration was anticipated to offer an (even more) fertile environment for US AI dominance. The effective US tariff rate reached c18% by early May, up from 3% at the start of the year and the highest since 1934. This theoretically translates to a real GDP growth headwind of -0.7% in 2025 and a 1.7% increase in the price level.

 

The tech sector made new highs in early February 2025, returning +29% in local terms from the start of the Trust's fiscal year. This was led by AI infrastructure stocks as earlier excitement gave way to AI strength, evidenced by upwardly revised AI capital expenditure (capex) budgets, rapid adoption and significant model progress. Microsoft, Amazon and Alphabet were consistently capacity- constrained against the strong AI demand backdrop. While there were occasional AI setbacks, the year was defined by a rapidly improving AI story as new entrants such as Elon Musk's xAI and its 200k GPU (Graphics Processing Unit) Colossus cluster emerged. Instead of GPT-5 (seemingly delayed), OpenAI released its o1 model - the first widely available reasoning model that allocates more time to deliberate to tackle more complex tasks. Reasoning models (aka 'test time compute') represents a new vector for model improvement as performance scales predictably with the time spent on inference, and a significant step on the path to agentic AI. OpenAI also announced its o3 model, which showed better than human performance on the ARC-AGI benchmark (built to measure progress toward AGI).

AI adoption progressed meaningfully at both individual and corporate levels. The first nationally representative survey of generative AI adoption indicated that in August 2024, 39% of the US population aged 18-64 used generative AI. ChatGPT itself reached 200 million weekly active users (globally) in August 2024, 300 million by December and 500 million by April 2025. AI chatbots accounted for more than 9% of search activity by this stage, according to Wells Fargo. Furthermore, FinTech provider Stripe also reported that other AI startups are growing at a significantly faster rate than the software-as-a-service (SaaS) companies that came before them. The 100 highest-revenue AI startups on its platform took a median of 20 months to reach $30m+ in annualised revenue, five times faster than for the equivalent SaaS companies during the SaaS boom in 2018.

 

Against this bullish AI backdrop, the arrival of DeepSeek's R1 model in February 2025 sent shockwaves through the tech industry and prompted a meaningful correction in AI infrastructure stocks.

 

However, AI stocks rebounded as deeper evaluation suggested the impact may not be as stark as first appreciated. While many of DeepSeek's innovations were hailed as "impressive" by Western counterparts, there was considerable scepticism related to its training cost claims. Furthermore, DeepSeek R1 is a 'text-only' model with a limited context window in contrast to other natively multimodal frontier models. Even DeepSeek's disruptive inference pricing soon came to be better understood as 'just' the acceleration of an existing path of rapidly declining inference costs. More importantly, the market was reassured by the fact that all hyperscalers raised capex post-DeepSeek. Sam Altman, OpenAI's CEO, referenced GPUs "melting" under overwhelming consumer demand for its new image generation capabilities, as well as broader demand.

Tariffs presented an incremental challenge to a more vulnerable AI narrative post-DeepSeek as technology production is skewed to Asian countries with high trade deficits with the US, while sector-specific semiconductor tariffs brought further uncertainty. The sector faced geopolitical headwinds throughout the fiscal year from Biden-era export controls (prohibited customers) and latterly Diffusion Rules (which aimed to limit the amount of AI compute that can be shipped to specific countries - later abandoned by President Trump).

 

Despite strong AI demand, the DeepSeek rout meant the semiconductor sector was the weakest subsector (SOX -14.3%) during the fiscal year. NVIDIA delivered a series of outstanding quarters despite reported delays to its next-generation Blackwell chips resulting in some stock price turbulence. Since January 2023, NVIDIA's quarterly revenues have risen more than sixfold from $6bn to >$40bn. Broadcom's custom ASICs proved to a be a worthy alternative source of AI compute for hyperscalers and Shareholders alike (while Advanced Micro Devices (AMD) struggled), and its dominant position in high-end merchant silicon for AI networking benefitted from AI data centre investments. Other networking stocks also benefited from the power/compute density theme and the power complex became the first non-tech industry to be 'pulled into' the AI theme as increased capex and larger compute clusters highlighted potential future power bottlenecks.

 

The semiconductor sector also had to contend with weak end demand and inventory digestion in many mature, cyclical markets including automotive, industrial, PC and smartphone. Apple's results were uninspiring but were overshadowed by excitement about a potential AI-driven iPhone upgrade cycle following the (ultimately disappointing) release of Apple Intelligence, its suite of AI features integrated into iOS 18 announced in June 2024. Investors remain concerned about regulatory threats to Apple's services business, particularly the multibillion-dollar advertising payments it receives from Google to remain the default search engine on Safari.

 

TSMC - the world's leading semiconductor foundry - also experienced some cyclical headwinds and, early in the Trust's fiscal year, reduced its expectations for 2024 overall semiconductor industry growth (excluding memory) to just +10% year-on-year (y/y), despite outlining a 50% AI compound annual growth rate (CAGR) over the next five years. Cyclical weakness and TSMC's dominance weighed on semiconductor equipment providers, which reversed their earlier gains following foundry-related capex cuts at both Intel and Samsung Electronics. Weak Q3 orders at ASML Holding and potentially tighter export controls to China weighed on the group.

The internet sector performed reasonably well (NASDAQ Internet Index +11.4%), led by Meta Platforms (Meta) where the AI story strengthened during the year (Llama models; monetisation via existing businesses; wearables). Streaming platforms Netflix and Spotify Technology delivered strong returns in a volatile environment; both expanded their user bases while increasing monetisation and profitability, solidifying their natural monopoly status. Alphabet struggled despite further AI progress as investors became increasingly concerned about its core search business coming under pressure from AI chatbot competition - albeit in terms of usage rather than revenue at this stage - as well as a series of more hostile regulatory developments.

 

Software delivered solid returns (IGV +14.2%) despite potential AI headwinds with outstanding performances from Palantir Technologies (+405%) and Oracle (+17%) offsetting challenges elsewhere. Microsoft (-4%) struggled despite passing $13bn in annualised AI revenue as free cashflow estimates were frequently revised lower on higher capex, and Azure repeatedly missed growth expectations. An obviously strained OpenAI relationship and disappointing CoPilot adoption/monetisation raised further questions.

 

Application software companies announced AI product enhancements and then struggled to price for them to deliver the numbers to match the pro-AI narrative. Others such as Adobe (-24%) suffered under the threat of new AI-native competition. AI spending 'crowded out' traditional projects and caused some enterprises to adopt a more considered investment approach given the potential risk posed by AI to the existing software stack. The same issue plagued most infrastructure software stocks where a lack of cloud/consumption reacceleration was worsened by mis-execution and a challenging AI narrative. Despite the worldwide CrowdStrike outage in July, cybersecurity proved another relatively bright software spot, as fundamentals proved more durable than elsewhere in software with AI likely to significantly expand the attack surface.

 

Portfolio Performance

The Trust modestly underperformed its benchmark with the net asset value per share rising +3.1% during the fiscal year versus an increase of +5.1% for its benchmark, the Dow Jones Global Technology Index. The Trust's share price declined by -1.2%, reflecting the additional impact of the discount increasing from 7.4% to 11.3% during the period. Together with the Board, we continue to monitor the discount and the Trust bought back 36.2 million shares during the fiscal year, at an average discount of 10.4% to NAV (net asset value). The US dollar weakened by -6.7% during the fiscal year which was a headwind to absolute returns given the Trust's significant exposure to US-denominated assets, although the impact was more modest on a relative basis.

 

The Trust's relative and absolute performance tracked its pro-AI positioning with returns to the 23 January highs (+33.6% absolute; +393bps relative) reflecting strong progress for the AI theme. However, DeepSeek and tariff developments presaged a sharp correction in AI stocks which offset these gains through the April fiscal year end. Relative performance was also negatively impacted by significant large-cap outperformance with the Russell 1000 Technology Index (large cap) and Russell 2000 Technology Index (small cap) returning +5.9% and -12.3% respectively in sterling terms. The sustained underperformance of small cap technology stocks has made keeping up with the (mega-cap dominated) index a longer-term challenge: Over the past three and five years, small-cap have now trailed large-cap technology stocks by -63% and -116% respectively. This has represented a considerable relative performance headwind given our structural underweight exposure to large/mega-cap stocks in a diversified portfolio, although the Trust's first-quartile performance versus the Lipper peer group over these longer periods suggests this is widely felt. On a more positive note, the Trust's NASDAQ (NDX) put options acted as intended during the Q1 selloff, allowing us to maintain the (pro-AI) shape of the portfolio, while reducing the downside beta during the sharpest part of the drawdown. For the year, the puts added 41bps while our cash position (average 3.4%) detracted by -16bps.

 

Despite the DeepSeek and tariff-induced selloff, many AI infrastructure stocks across networking and the power complex still delivered positive relative contributions during the year and, in many cases, were added to on weakness including Arista Networks (+20%), Astera Labs (-28%), Celestica (+85%), Elite Material (+29%), GE Vernova (+126%), Ciena (+36%), F5 Networks (+50%) and Vertiv Holdings (-14%). However, some of the Trust's most significant relative detractors were caught in the selloff, including Micron Technology (-36%), Marvell Technology Group (-50%) and AMD (-42%). NVIDIA (+18%), the Trust's largest absolute position at slightly over 10%, delivered a modest positive relative contribution to returns.

 

Perceived AI leaders were important contributors including Axon Enterprise (+83%), Cloudflare (+29%) and Tesla (+44%), supported by smaller positions in some non-tech 'AI adopters' including Intuitive Surgical (+30%), Doximity (+119%), RELX (+23%) and Cellebrite (+72%). Elsewhere, a handful of FinTech holdings delivered strong returns, most notably Robinhood Markets (+179%), Wise (+26%) and Adyen (+25%).

 

The internet sector was a bright spot, with dominant platforms including Spotify Technology (+105%), Netflix (+93%), Roblox (+77%) and DoorDash (+40%) delivering strong returns amid market volatility. These companies proved adept at growing their user bases at the same time as increasing monetisation and margin profiles. AppLovin (+258%), Meta (+20%) and Shopify (+26%) were the strongest of the large-cap internet companies as positive revisions and 'cleaner' AI narratives were well received, although small overweights rendered them modest relative contributors. Elsewhere, the lack of an Amazon Web Services (AWS) recovery and volatile margins weighed on Amazon (-1%) while concerns around AI disruption brought challenges to Alphabet (-9%). MercadoLibre (+50%) shrugged off Latin American volatility and delivered strong earnings upgrades, executing against a burgeoning e-commerce and FinTech opportunity, while Alibaba (+50%) - repurchased during the year - benefitted from an improved Chinese AI story post-DeepSeek.

 

The Trust benefitted from its structural underweight in application software with a positive contribution from underweights in large index constituents including Adobe Systems (-24%), Microsoft (-5%), Intuit (-6%), Workday (-6%) in favour of an overweight in ServiceNow (+29%). However, underweight positions in legacy software assets viewed as defensive or with a potential AI story were a relative headwind, including IBM (+36%), Oracle (+16%) and SAP (+52%). Palantir Technologies (+405%) also represented a headwind to relative performance, although we were pleased to contain the impact with a small position despite struggling with the valuation. Elsewhere in software, smaller positions in mid-cap companies - including CommVault Systems (+53%), Monday.com (+39%), Twilio (+51%), Klaviyo (+27%), Atlassian (+24%) and DocuSign (+35%) - offset weakness in Braze (-30%) and JFrog (-21%).

 

Infrastructure software proved more challenging as a lack of recovery in cloud consumption trends and underwhelming AI stories weighed on Confluent (-21%), Elastic (-21%), MongoDB (-56%), Datadog (-24%) and Snowflake (-4%). Cybersecurity was a mixed bag with CyberArk Software (+38%) delivering another strong year but a poorly timed exit in CrowdStrike Holdings (+37%) following the global outage was a disappointment. Other 'derivative' AI plays in semiconductor equipment, where a cyclical slowdown, the threat of regulatory blocks on (significant) sales to China and company-specific weakness at Samsung Electronics (-35%) and Intel (-38%) offered a more challenging backdrop. Headwinds from holdings in Disco (-37%), ASM International (-29%) and BE Semiconductor Industries (-25%) were somewhat offset by Advantest (+22%) and underweights in LAM Research (-24%) and Applied Materials (-29%). First Solar (-33%) was also a significant detractor on the risk of Inflation Reduction Act (IRA) subsidies being rolled back following Trump's victory.

 

Market outlook

The market backdrop is still likely to be driven by geopolitical developments in the near term, specifically the effective tariff level. Our base case is that the 'tariff episode' represents a recalibration rather than a full reset of the status quo. Our view remains that it is not in global policymakers' interests to provoke a deep global recession and is within their capacity to avoid it. Recent political developments have led to an inherently more volatile market outlook, but not necessarily an unattractive one for investors with the capacity to absorb it. The growth outlook is now tepid but still positive, and the consumer and labour markets are broadly resilient for now. Deregulation and innovation (in the form of AI) offer significant upside potential, while stagflationary risks from disappointing tariff outcomes, immigration reform, geopolitical upheaval and growing public debt remain causes of concern.

 

The market impact of political change is perhaps unsurprising in the context of the widespread rejection of incumbent parties (and their policies) recorded in the 'year of democracy' across the globe in 2024. Every single incumbent party lost vote share in the 12 developed Western countries that went to the polls in 2024. The causes of this shift have been variously attributed to the impactof inflation, pressures arising from unchecked immigration and diminishing state capacity amid growing public debt burdens. The result is that equity markets have become more sensitive to political developments addressing these issues; inflation, labour market and economic growth trends are more exposed to trade and immigration policy dynamics than they have been in recent years.

In terms of economic growth, the International Monetary Fund's April 2025 update noted that forecasts for global growth have been "revised markedly down" so far this year due to tariffs and global inflation is expected to decline at a slower pace. "Intensifying downside risks" dominate the outlook amid a "highly unpredictable environment". A softer US outlook is the consensus view, although not a recession which is likely if there is limited progress on tariff negotiations: Bloomberg consensus in mid-May suggests 1.4% US real GDP growth in 2025 and a 40% chance of a recession within 12 months, although this number should fall as more trade deals are announced. The speed and quantum of change in the effective US tariff rate will likely be the largest swing factor in determining near-term growth.

 

On the inflation front, US core PCE (personal consumer expenditure) Price Index is sitting at 2.6% and has been broadly stable over the past six months, which should be a supportive backdrop for risk assets. Under the surface, while goods inflation is near zero, services PCE ex-energy and housing (3.25%) is holding up the stubborn 'last mile' to reach the 2% inflation target and appears to be due to lagged inflation in areas such as housing, healthcare and car insurance. Measures of long-term inflation expectations are generally benign, with the 5yr5yr (the market-implied average inflation rate for the five-year period that begins five years from today) remaining rangebound between 2.1% and 2.4%, although the University of Michigan's 5-10-year inflation expectations outlook staying above 4% is more concerning as tariffs start to show up in expectations. This will get the Fed's attention given the importance of maintaining well-anchored inflation expectations, but 5yr5yr and breakevens are not yet signalling anything too concerning.

 

Financial conditions more broadly have loosened after tightening sharply in early April and consumer spending remains "resilient, even with macroeconomic uncertainty", according to Visa. Ten-year Treasury yields have been volatile but have not broken out in either direction and credit spreads tightened to below 2 April levels after blowing out during the Liberation Day disruption. Against this backdrop, we expect the Fed to remain vigilant on inflation but not in a hurry to cut rates until it has a better idea of the impact of Trump's policies on the inflation and the labour market outlook. The disinflation trend has been occurring for a while which gives conviction in the overall process and, given most of the Federal Open Market Committee believe the neutral rate is below current Fed funds (4.25-4.50%), the bias will be to cut, should the inflation data allow it or the labour market data require it. We will continue to monitor US yields, particularly the dollar, for signs of a significant shift in the risk environment, as well as the realisation of Trump's threats to curtail Fed independence.

Valuations appear extended given the geopolitical backdrop. High company valuations present a challenging starting point for long-term future returns but are poor predictors of near-term returns. We do not see valuations as so high that they preclude further expansion, although the high starting point does represent a long way to fall should the market environment deteriorate. We are also aware of other market and economic measures that appear extended. The rebound in the S&P 500 has been one of the strongest since 1928. US households' allocation to equities has touched a record high and high levels of retail participation in financial markets leaves them vulnerable to a change in sentiment. The wealth effect also cuts both ways and a sharp drawdown in asset prices could lead to a loss of consumer confidence and a slowdown in spending.

 

The bull case centres on Trump's deregulatory and pro- business agenda taking over as tariff headwinds fade and AI adoption supports an accelerating economic and earnings growth picture. Negative investor sentiment and light positioning also provide a more encouraging backdrop for forward returns.

 

The S&P 500 has registered two 20%+ years in a row, something which has only occurred 10 times since 1871. Only during the 1990s bull market and the Roaring Twenties did strong returns continue for another two years. On both occasions, technology-led productivity booms were taking hold. This remains central to the bull case for the market in our view. Productivity is notoriously hard to measure - let alone forecast - and is subject to frequent and material revisions. Technology plays a critical role but tends to appear in aggregate macroeconomic data much later than its visibility would suggest: "You can see the computer age everywhere but in the productivity statistics", wrote economist Robert Solow in 1987.

Our base case is productivity gains from AI do not start to show up meaningfully in aggregate statistics (which has historically required >50% adoption), although at lower penetration levels there could be efficiency gains and economic impacts on the labour market and certain industries. AI adoption by end users has been faster than previous technology cycles. As per the Real-Time Population Survey, 40% of the US population (18-64) reported using generative AI to some degree in August 2024 and 28% used it at work. This 40% adoption point took 12 years to reach following the introduction of the PC and four years after the public launch of the internet. We are also hopeful that Trump's deregulation agenda can enable faster adoption of AI technologies than would otherwise have been possible.

 

We also must consider the risk of an AI bubble forming. As BoA puts it: "We are far enough into the AI boom that equities will likely either accelerate towards a more bubble- like state or unwind their already significant gains". Volatility and prices rising together signal a bubble (as opposed to a mere bull market), although these suggest we are closer to 1996-97 than 1998-99. The combination of a potential asset bubble in AI and public policy experimentation (tariffs; deregulation; tax cuts; immigration) could drive a boom/bust cycle at odds with the low-risk, low-return, low-rate era that has been in place since the GFC.

 

Market risks

The main risks to our market outlook are political and include tariff policies weighing on growth and stoking inflation (stagflation), immigration reform weakening the labour market and the looming threat of rising Federal debt. Political instability and upward pressure on US fiscal deficits and national debt have placed significant downward pressure on the US Dollar, which weakened by -6.4% on a trade-weighted basis and by -6.3% versus GBP during the Trust's fiscal year. Having benefited from USD strength over many years, the Trust was - and could continue to be - negatively impacted by GBP strength / USD weakness given the significant weighting of dollar-based assets in both the Trust portfolio and the Dow Jones Global Technology Index around which it is built. As a reminder, the Manager does not look to hedge this risk but does actively manage FX exposure relative to the benchmark.

There is also the potential for further setbacks to the AI story which has led markets higher, especially as it becomes more complex amid the frenetic pace of innovation. We expect volatility will become more elevated and the market environment more 'fat tailed'; 2025 so far has not disappointed in this regard. Given the high valuation starting point, we expect - all else equal - more frequent significant drawdowns to be a feature of this equity bull market as policy uncertainty remains elevated.

 

The greatest risk to the market outlook near term is further arbitrary policy actions from the Trump administration which hurt the economy and undermine the institutions and behavioural norms which have underpinned political and market stability. This may include a failure to reduce effective tariff rates (or even a re-escalation), attempts to undermine central bank independence and/or a strategic miscalculation which provokes an unintended negative consequence.

 

Growing deficits and debt burdens are perhaps the biggest issue for the longer-term risk asset outlook. According to the Congressional Budget Office, the federal deficit is projected to increase to $1.93trn in 2025, up 5.5% from $1.83trn in 2024 and reaching 6.2% of GDP. Extending the 2017 tax cuts would leave the total and primary deficit at 6.4% and 3.1% of GDP in 2024, at uncomfortably high levels given that US debt-to-GDP is roughly 100% and could reach 130% within a decade. While this may support higher nominal growth near term, the risk of a rebound in inflation as well as the lurking threat of debt markets being unwilling to finance such fiscal largesse at prevailing rates could jeopardise the path of future interest rate cuts. Large government deficits can also crowd out private investment and slow the creation of jobs, thus driving further deficit spending to boost the economy and labour market.

 

If we were to look for imbalances in the economy that may need to be unwound, the fact that US government debt is up $12.7trn since the depths of Covid while nominal GDP is only up $9.7trn is sometimes cited as evidence that fiscal largesse has caused distortions. Yet there appears to be no public appetite for fiscal conservatism and public debt is set to rise above $100trn in 2024, or about 93% of global GDP, and is projected to reach 100% of global GDP by 2030, 10 points higher than in 2019. There are significant structural drivers of the growing public debt burden, including the costs of an aging population, increasing healthcare and climate adaptation costs and a step up in defence and energy security spending due to growing geopolitical tensions. This is not necessarily a problem for the market or the economy in the near term ("It's a myth that expansions die of old age", according to former Fed chair Janet Yellen), but rising debt-to-GDP should lead to higher interest rates which could crowd out private investment and raises the risk of fiscal dominance, constraining central banks' freedom of manoeuvre.

 

Changes to immigration policy may also bring market headwinds, although this is by no means certain. Lower net immigration could put downward pressure on both the supply and demand sides of the economy. In industries that employ a high share of immigrant labour (e.g. food production; construction), sharply lower net migration might put upward pressure on domestic worker wages. The US economy has been able to grow faster than potential GDP growth over the past two years in part due to the immigration surge boosting labour force growth, so a reversal in that trend could prove a headwind - although this may be offset by higher productivity from technology adoption and workers remaining in jobs longer.

 

The Trump administration's early geopolitical moves have provoked significant market volatility well beyond its tariff actions and have contained some shocking elements - not least the party of Ronald Reagan openly siding with the Russians in a war. The disastrous meeting between Zelensky, Trump and Vance raised significant questions about the future viability of NATO and the survival of Pax Americana. In terms of the impact on our outlook, we assume that Trump's own instincts and preferences play an outsized role in historically strategic policy, resulting in leadership that is unpredictable and likely to further test the boundaries of executive authority.

 

The Middle East also remains in a fragile state with the potential for further conflict between Israel and Iran. Of most concern is Taiwan, where the potential risks associated with a miscalculation or accidental escalation are significant, as Taiwan accounts for 60% of global semiconductor shipments and more than 90% of leading- edge semiconductor manufacturing capacity. A war game simulation estimated the potential impact on the global economy of a war in the Taiwan Strait at c$10trn or 10% of global GDP, significantly larger than the GFC or the pandemic. Taiwanese and Chinese stocks represented 10.7 of PCT's NAV at fiscal year end as opposed to 7.9% of the Dow Jones Global Technology Index. The potential impact of a deterioration in the political situation would likely be felt far more widely across the PCT portfolio, however, given Taiwan's centrality to the AI story, as well as the size of the Chinese market as a source of end demand.

Despite overall constructive economic and company trends, the market outlook is more complex than a year ago and appears more vulnerable to setbacks. The nature of the US administration being both radical and mercurial has elevated the risk profile. As one analyst put it: "One should keep extremely wide confidence intervals in place when forecasting the administration's actions and the downstream macroeconomic impacts". We do not see meaningful imbalances in the economy that will require a sharp downturn to unwind, although we are of course watching tariff impacts, labour market and inflation trends very closely for signs of weakness that we can respond quickly to if required. We expect higher volatility to become a more embedded feature of the equity market.

We are also open to the potential that the move to a multi-polar world might presage a more structural market regime shift under the surface where the US moves from a disinflationary posture with secular stagnation headwinds (dominated by demand-side shocks) to a more inflationary regime more exposed to supply-side shocks. A higher- inflation/higher-growth/higher-volatility environment could also see sustained rebuilding of term premia, which was estimated to be negative for much of the past decade and would have significant investment implications. It is too early to call a new regime (and we will at best be fast followers in doing so), but we are alive to the idea that the conditions for such a regime shift are increasingly apparent.

However, our overall outlook is positive because the AI story - albeit more complex - remains the most exciting market (and perhaps even macro) story we have come across, and it feels a high hurdle for investors to move structurally away from equities when the optionality embedded in AI is material in size and likely to play out over the next five years.

Technology Outlook

Earnings outlook

Increased spending on AI infrastructure meant 2024 proved one of the best years for IT spending since the pandemic with growth of 7.7%, exceeding earlier expectations (+6.8%) and well ahead of the 3.5% recorded in 2023. For 2025, worldwide IT spending is expected to further accelerate to +9.8% y/y. While data centre systems spending is expected to decelerate to +23.2% y/y from 39.4%, this still represents remarkable growth, driven by AI-optimised servers where spending is forecast to exceed twice that spent on traditional servers next year. In addition, all other spending categories are expected to accelerate in 2025, led by software (+14.2%), devices (+10.4%) and IT services (+9%). While these forecasts might be subject to some tariff-related headwinds, 2025 was recently expected to be the best year for IT spending since 2021 while 2024-25 may still represent the best back-to-back growth since 1995-96.

 

For 2025, the technology sector is expected to deliver revenue growth of 11.7%, while earnings are expected to increase by 18%, the highest of any US sector on both metrics. These forecasts are well in excess of anticipated S&P 500 market growth, where revenues and earnings are pegged at 4.9% and 9% respectively. The technology sector's outperformance is expected to continue in 2026 with early forecasts for 10.6%/16.6% comfortably ahead of market expectations (6.2%/13.4%). While these forecasts may appear at odds with tariff-related developments, corporate earnings have thus far proved more resilient than feared. First-quarter earnings season has been supportive, as (at the time of writing) 74% of S&P 500 companies have beaten on earnings per share (EPS, with the median earnings surprise of 8.5% while Q1 earnings growth is tracking at +12% versus the +6% consensus estimate at the start of the year. Tariff concerns have been flagged in virtually every earnings call, but the impacts have been largely contained so far. However, while macroeconomic conditions may create more significant crosscurrents, we believe technology fortunes this year will once again be determined by the path of AI progress.

 

Valuation

The forward P/E of the technology sector contracted modestly over the past year. Twelve months ago, valuations had rebounded to approximately 26x forward P/E, up from c24x at the end of FY23. This marked a full recovery from the post-pandemic compression, with valuations continuing to expand and reaching a peak

of around 31x in the summer, before easing ahead of 2025. However, pronounced market weakness during 1Q25 caused a sharp correction, with valuations falling significantly before rebounding to 26x by fiscal year-end. Continued market strength post-period has driven valuations higher still, with technology stocks now trading at a forward P/E of 27.5x, above both the five-year (25.6x) and 10-year (21.7x) averages. This reflects elevated broader market valuations and the sustained momentum of AI as a central investment theme.

 

The relative P/E of the technology sector, having recovered to post-bubble highs (1.4x) in 2023, ended 2024 broadly flat. However, this stability was interrupted by the DeepSeek-led market selloff in 1Q25 which saw the sector's premium compress to just 1.1x, its lowest relative level since the pandemic. The recent market recovery has helped lift this back to 1.35x. While this may suggest more limited near-term valuation upside, we believe that continued AI progress could support a structural re-rating of the sector, mirroring the upward valuation drift seen during the internet cycle of the mid-1990s.

 

Mag-7 update

Of course, the valuation question remains significantly influenced by a select group of mega-cap technology stocks that as well as substantially driving returns last year, also dominate indices. Despite this, many of our earlier Mag-7 observations remain unchanged - they are unique, non-fungible assets trading at extended, but not excessive valuations. This reflects the fact that Mag-7 outperformance has largely tracked the group's relative earnings progress, with valuation expansion playing a secondary role - recently, the Mag-7 accounted for 33.4% of the S&P 500's market cap and 25.3% of its earnings - a similar ratio to this time last year, when these companies comprised about 29% and 22% of market cap and earnings, respectively. Following recent weakness in several of the Mag-7, the group is, at the time of writing, trading at the lowest valuation premium to the S&P 493 since 2019.

 

However, this year we are more focused on the sustainability of the mega-cap group's growth profile, rather than valuation. Earlier gains together with aggressive AI investment suggest future margin gains may become more difficult to deliver. At the same time, rising capital intensity has impacted free cashflow with estimates for this year at Alphabet, Amazon and Meta having fallen 20-25% year-to-date, according to Morgan Stanley.

 

Given the strong correlation between earnings revisions and recent Mag-7 performance, negative revisions are unlikely to be well received by the market, nor is the evolution to more capital-intensive business models likely to be straightforward. Investors may also interpret the direction of earnings revisions as indicative of whether AI-related spending is offensive or defensive, driven by the pursuit of new opportunities or aimed at protecting existing markets. As investors we cannot know the answer to this critical question (until it is too late) because companies never admit to being on the wrong side of technology change. However, new technologies often begin as complements and end as substitutes, which explains why previous technology cycles have rarely been kind to incumbents, with nearly 50% dropping out of the top ranks every decade.

 

The good news is that today's market leaders are hyperaware of obsolescence risk, as reflected in their massive R&D investments. In 2023 alone, the top five tech companies spent $223bn on R&D, an amount 1.6x greater than total US venture capital (VC) spending. As such, we are not yet concerned about the near-term risk posed to Mag-7 by AI. Rather, we wonder if the negative reception to sharply higher hyperscale capex (from Alphabet, Amazon and Microsoft) signals the beginning of a new phase where these companies become less effective AI conduits. Of course, we will continue to evaluate each company on its individual merits and are willing to maintain large absolute weightings in these unique, category-defining assets. However, our null hypothesis has shifted from 'half-full' to 'half-empty,' as AI-driven risks to existing profit pools and the diminishing value of incumbency become more apparent. As a result, we have increased our relative underweight positioning in long-term holdings we find less compelling at current levels such as Alphabet, Apple and Microsoft.

Disruption ahead

The idea of previous winners becoming less effective conduits for AI appears to be already playing out within the software sector, evidenced by slowing industry growth, widening disparities in company performance and an increasingly uphill AI narrative battle. Earlier hopes that leading SaaS companies could monetise AI through premium-priced products have largely gone unrealised. Adobe struggled to drive the adoption of Firefly, a task complicated by rapid AI advancements elsewhere, such as Google's remarkable video-generation model Veo2 as well as OpenAI's Sora. Microsoft, despite its deep AI investments, has failed to show meaningful revenue acceleration from Copilot, even as Azure benefited from AI-driven workloads. Meanwhile, Workday recently lowered its medium-term revenue growth expectations, reinforcing broader concerns about industry deceleration.

 

Consumption-based software alternatives have fared little better - despite easing headwinds from cloud optimisation, growth has failed to reaccelerate. Weak execution, often symptomatic of a slowing growth environment, has further weighed on infrastructure stocks that were initially seen as better positioned to capture AI-driven workload growth. Additional negative developments include elevated executive turnover, further headcount reductions and limited strategic M&A beyond the industrial software subsector. Against this backdrop, the latest phase of post-pandemic pivot from growth to profitability (the private equity playbook) has gone unrewarded by a market increasingly concerned about terminal growth rates and obsolescence risk.

 

This concern appears well placed, as we believe AI represents a greater existential threat than an opportunity for many incumbent software providers - a view we outlined last year. Today, AI-assisted code generation is increasingly challenging the notion of 'code as a barrier' and every improvement in near zero-cost AI-written code further diminishes the standalone value of existing proprietary platforms. Looking ahead, AI is likely to automate many tasks currently performed by knowledge workers, reducing reliance on the very software tools designed to support them.

 

Limited strategic M&A

We believe potential disruption to pre-AI-vintage companies has played a large part in the dearth of strategic software M&A in recent years. Last year, deal value increased by 23% y/y (following a dire 2023) helped by private equity activity, which saw Everbridge, Instructure, Smartsheet and Zuora put out of their public market misery. There were also several strategic acquisitions, including IBM's acquisition of HashiCorp, alongside a notable wave of consolidation in design and industrial software. Synopsys' $35bn acquisition of Ansys was the largest deal of the year, while Emerson acquired AspenTech for $15bn and Siemens snapped up Altair for $10.3bn. Given NVIDIA's aspirations in this domain including Omniverse - a 3D collaboration platform - and its newly introduced Cosmos for accelerating physical AI systems, these high-multiple exits in simulation software may soon look inspired.

 

Looking ahead, expectations are for a further recovery in M&A activity this year, bolstered by a more accommodative regulatory environment under the new administration and over $2trn in private equity and venture capital dry powder. AI could serve as an additional catalyst, with subscale public and private companies likely seeking stronger partners just as some well-capitalised large-cap companies look for acquisitions to offset slowing organic growth.

 

Cloud update: darker clouds ahead?

As expected, the easing of cloud optimisation headwinds and a surge in AI-driven demand propelled revenue growth of over 20% among the three leading public cloud providers in 2024. AWS ended the year with an estimated 52% market share, down from 55% in 2023, as Microsoft Azure (now at 31%) captured most of these share gains, helped by its strategic relationship with OpenAI. Google Cloud maintained strong double-digit growth, holding a 13% share, though it remains a distant third. Meanwhile, Oracle Cloud Infrastructure (4%) has emerged as a fast- growing challenger, driven by competitively priced GPU offerings and its role in powering OpenAI's model training.

All cloud platforms continue to benefit from AI-related demand. In Q4, Microsoft attributed 1300bps of Azure's +31% revenue growth to AI up from 600bps of +28% Azure growth this time last year. In addition, Microsoft's overall AI revenues exceeded a $13bn run rate in 4Q24. While Amazon does not quantify AWS's AI-specific revenue, it called it "a multi-billion-dollar annualised revenue run-rate business". Likewise, Google Compute Platform (GCP) reported "very strong" AI demand. We continue to believe that public cloud will remain the default choice for compute and storage - Gartner estimates that 70-75% of new enterprise AI applications will be built and/or deployed primarily in cloud environments.

 

However, the primary challenge for the cloud incumbents is how to reaccelerate growth in a market already worth more than $320bn and where penetration has risen sharply. A recent Morgan Stanley CIO survey suggests that 42% of workloads were already in the public cloud in 4Q24, which is set to increase to 58% within three years. All things being equal, higher cloud penetration rates should equate to lower future growth and greater economic sensitivity. This may have been apparent in 4Q24 with all three public cloud vendors experiencing sequential deceleration and aggregate year-on-year growth falling to 20.7%, down from 22.2% in the previous quarter.

 

AI to the rescue? Maybe.

The hope is that cloud infrastructure and SaaS growth reaccelerate as enterprise AI adoption increases from just 3% of workloads today to an estimated 10% by 2027. This is one of the key debates for 2025 and beyond. However, history suggests that AI monetisation may prove less straightforward than many incumbents expect as others take the opportunity to challenge in adjacent markets, competing away the upside and potentially more. Early signs of substitution risk are already visible, with IT budgets increasingly favouring AI-related initiatives at the expense of traditional compute and storage. Likewise, cloud optimisation could prove a permanent feature, rather than a limited post-pandemic adjustment as AI excels at uncovering inefficiencies.

 

The shift to accelerated compute - the foundational architecture of AI - may also be ushering in a new era of competition for the public cloud giants. This could come in the form of hybrid compute which may be better positioned than it was pre-AI, able to optimise data pipelines by running different workloads in the most suitable locations. Gartner predicts that 90% of organisations will adopt a hybrid cloud approach by 2027. At the same time, established hyperscalers will also have to contend with so-called neo-clouds - new industry entrants (often former crypto miners) offering low-cost GPU rentals. Their advantage lies in ready-available to power and preferential access to NVIDIA GPUs. Over the past year, $20bn has been invested across 25 neo-cloud providers with CoreWeave leading the pack and doubling its data centre footprint. While the long-term viability of these neo-clouds remains uncertain, they are currently gaining share, pressuring GPU pricing and challenging industry assumptions, reinforcing the idea that Amazon is not the Walmart of cloud computing, but rather its Neiman Marcus.

 

In addition, there are other vast AI clusters being built outside traditional public cloud platforms. In October 2024, Meta CEO Mark Zuckerberg revealed that Llama 4 models were being trained on 100,000+ Nvidia H100 GPUs, while xAI's Colossus (used to train Grok 3) has 200,000 GPUs, making it the largest known AI compute cluster. Others have been built by TikTok owner ByteDance, while Tesla runs 35,000 H100 GPUs, alongside its in-house Dojo supercomputer. While these clusters are for internal use (to train models) today, history says this could change; after all, AWS began as Amazon's internal compute platform before it launched EC2 and S3 to external customers in 2006. Today, xAI uses Colossus to both train and run inference workloads for Grok. Other AI leaders are also becoming more self-sufficient, with many choosing to design their own silicon to reduce dependence on NVIDIA. At best, this may reduce their overall reliance on cloud providers. At worst, they might become direct competitors, scaling their infrastructure just as AWS did when it redefined the cloud industry.

 

The hyperscalers (and leading SaaS vendors) may also have to contend with future competition from AI Labs such as OpenAI and Anthropic. Historically, OpenAI relied entirely on Microsoft Azure for its infrastructure. However, this relationship is evolving, as evident from the $500bn Stargate announcement in January 2025 that saw Microsoft transition from OpenAI's exclusive infrastructure provider to a right of first refusal (RoFR) partner. This change likely reflects the differing priorities of a public company accountable to Shareholders and a private company aiming squarely for artificial general intelligence (AGI. OpenAI is also in flux, with CEO Sam Altman attempting to transition the company into a for-profit public benefit corporation (PBC) able to attract necessary investment. For now, Microsoft and OpenAI have reaffirmed their core partnership, which is set to remain in place through 2030. However, OpenAI has launched several applications that compete (or might compete) with Microsoft including SearchGPT and Operator, an agentic offering. More recently, OpenAI hired the CEO of Instacart as its CEO of Applications, to oversee its efforts to develop and scale customer-facing products.

AI Cycle Update

Rapid adoption

Last year we argued that AI diffusion was likely to proceed rapidly, informed by the presence of essential AI building blocks - six billion smartphones, vast datasets and cloud infrastructure - and by historical adoption trends showing that implementation lags halved with each major general purpose technology (GPT): c80 years for steam, c40 years for electricity, and c20 years for ICT (Information and Communication Technologies). Today, it is clear that AI adoption is significantly outpacing historical trends with OpenAI recently announcing 500 million weekly active users, up from more than 100 million from February and adding more than a million users in a single hour. Similarly, Meta revealed in January that its AI assistant (Meta AI) had reached 700 million MAU (Monthly Active Users). More recently, Microsoft processed over 100 trillion tokens in its most recent quarter, up 5x y/y with a record 50 trillion tokens processed in March alone.

 

Although the pace of enterprise adoption has trailed consumer adoption, AI has become a strategic imperative. A recent McKinsey survey revealed that 72% of companies now actively use AI, up from 50% observed consistently over the past six years. Echoing this, half the S&P 500 constituents referenced AI on their Q4 2024 earnings calls - marking an all-time high. CIO surveys also consistently reveal that AI is the highest IT spending priority for 2025, followed by cybersecurity and digital transformation, both of which are likely being pulled into the AI conversation. Meta's open-source Llama model, along with its derivatives, has already been downloaded 650 million times while corporate use cases continue to extend well beyond software copilots. Walmart recently announced it had used GenAI to create or improve over 850 million pieces of data in its product catalogue, work that would have required "nearly 100 times the current headcount to complete in the same amount of time". Economist Erik Brynjolfsson (who expects AI to drive "at least 3%" average US productivity over the coming decade) believes we are "near the bottom of the productivity J-curve for AI". If so, corporate AI adoption should accelerate before long, although many companies are likely to remain guarded about disclosing the specifics of their AI "secret sauce."

Model progress

AI models made significant gains during a frenetic 2024. Frontier models made continued progress, led by OpenAI's GPT-4o, Google's Gemini 2.0, and Meta's Llama 3. While architectural advances and data curation improvements played a role, most of these gains came from post-training techniques and test-time scaling. Post-training model optimisation helped GPT-4o and Gemini 2.0 easily surpass previous benchmarks set by GPT-4 in code generation and multimodal understanding. GPT-4o also introduced a (remarkable) voice mode, enabling real-time, voice-based conversations, with the model also able to interpret non-verbal cues. Open-source models also continued to make strong progress, particularly in terms of cost efficiency with Llama 3 said to have achieved performance comparable to GPT-4 at just 1/50th of the cost. While OpenAI's GPT-5 was delayed, xAI released Grok 3 - the first Gen3 model (between 10 and 10 FLOPs of compute), an order of magnitude (OOM) greater than existing Gen2 models. Achieving the highest benchmark scores of any base model to date, Grok 3 suggests that pre-training scaling laws continue to hold for a new generation of AI.

A new scaling vector: test-time compute

However, the most significant gains last year were generated beyond scaling pretrained models. In September, OpenAI released its o1 models. Unlike most LLMs (large language models) which are zero-shot (processing inputs and generate outputs rapidly, relying only on the knowledge learned during training), o1 introduced the world to reasoning models which can generate internal chains of thought (CoT) at run-time. This enables the model to perform human-like multi- step reasoning; by breaking down complex tasks into manageable steps (thinking' about the question) o1 significantly outperforms GPT-4o on most reasoning-heavy tasks and exceeds human PhD-level performance on a benchmark of physics, biology and chemistry problems.

 

Reasoning models perform predictably better the longer they are allowed to 'think' at test time (inference). As such, so-called test-time compute represents a powerful new approach for advancing AI capabilities, complementary to traditional 'brute force' model scaling. There has already been a rush of new reasoning models (including OpenAI o3, Anthropic's Claud 3.7 and DeepSeekR1). In addition, both OpenAI and Google have introduced advanced reasoning capabilities (branded 'Deep Research') to their flagship consumer offerings. These allow the models even longer to complete tasks, with OpenAI's Deep Research Mode taking between 5-30 minutes, depending on the complexity of the query.

 

Running out of benchmarks

Less than three years after the introduction of ChatGPT, OpenAI's o3 can solve 25% of problems on a Frontier Maths benchmark, where no other model has exceeded 2% previously. Even more remarkably, o3 achieved

76-88% on the ARC-AGI benchmark (built to measure progress toward AGI) as compared to 5% with GPT-4o in early 2024. If "GPT-4 offered us a glimpse of the future", reasoning models are surely early evidence of superhuman AI. They also represent a critical step towards agentic AI while accelerating the timeline towards AGI.

 

Capex strength set to continue

Model progress, intense competition and AGI aspirations resulted in a remarkable year for capex with the big four hyperscalers spending $226bn (+70% y/y) during 2024. Earlier concerns about a potential slowdown were lost in a blaze of upward capex revisions with estimates for 2024 rising 34% and 48% respectively during the year. This momentum continued into 2025 as each of the hyperscalers raised their expected capex budgets for the year during their Q4 reports.

 

Strong AI venture funding should also remain supportive for training and inference spending with $110bn (+62% y/y) raised in 2024. In October, OpenAI's $6.6bn raise took its valuation beyond any VC-backed technology company in history at the time of its IPO (initial public offering) while Anthropic raised an additional $4bn from Amazon last year. AI VC funding has accelerated into 2025 with AI companies raising $67bn in 1Q25 (+246% y/y) even though overall VC spending has only just recovered to 2021 levels.

 

The pursuit of Gen-4 models (GPT-6 and beyond) is expected to further drive AI capex as they are likely to require more than one million H100s equivalent costing tens of billions. However, these mega-clusters

are significantly more power hungry as they move from Gen-3 (100MW) to Gen-4 (1GW). For reference, 1GW of power is equivalent to half the estimated output of the Hoover Dam or the amount required annually to supply 3.2 million UK homes. Current estimates suggest that by 2028, data centres could consume up to 12% of projected US electricity use. This power imperative explains why power-related stocks have been 'pulled in' to the AI trade as hyperscalers scramble to acquire DC sites with readily available power and sign long-term Power Purchase Agreements (PPAs). The totemic deal between Microsoft and Constellation Energy signed in September which will see the infamous nuclear power facilities reopened on Three Mile Island, captured the zeitgeist perfectly.

 

Capex trade, interrupted

However, capex-related stocks were severely challenged by the release of DeepSeek R1 model in January as a small Chinese AI lab had seemingly closed the performance gap with US models at a fraction of the cost ($6m versus $100m spent on GPT-4). This sent shockwaves through the technology market, wiping out $1trn of market capitalisation as investors questioned the sustainability and necessity of current AI capex.

 

While it may still be too soon to fully assess the implications of DeepSeek's impressive innovations, the "just $6m" training costs have been widely debunked; reports indicate the company deployed tens of thousands of GPUs costing over $1bn. Likewise, cheap inference pricing is perhaps best viewed as another example of the ongoing, rapid decline in inference costs. As Anthropic CEO Dario Amodei noted, DeepSeek models are "roughly on the expected cost reduction curve that has always been factored into… calculations". For instance, input token cost price declines between OpenAI's o1-mini (September 2024) and the o3-mini (January 2025) represent an annualised price reduction of approximately 75%. These price reductions are possible because of 2x cost improvements coming from new hardware, as well as 4-10x improvement from algorithmic progress per year. As such, collapsing inference costs have been described as a "hallmark of AI improvement".

 

Indeed, collapsing inference costs have not prevented Microsoft growing its Azure AI revenues to a $13bn run rate nor have they derailed OpenAI's own revenue projections which are reportedly now forecast at $13bn in 2025 rising to $125bn in 2029, up from expectations of $12bn/$100bn last autumn. This points to a volume explosion in token usage already with lower inference pricing likely driving significantly higher revenues via higher usage (more users, more use-cases, more advanced models etc.). Reasoning models consume significantly more tokens than traditional frontier models because they only 'think' when generating tokens; deep research-type queries on OpenAI's o3 are said to require 2,000x more compute than o1 preview.

Reasoning models are also the foundation of agentic AI, enabling multi-step problem-solving and autonomous decision-making without human intervention. Not only do AI agents likely require 50-100x more tokens than single- shot requests, but we also expect agentic AI to act as a force multiplier in the coming years, scaling far beyond human-driven usage and current comprehension. NVIDIA CEO Jensen Huang has suggested that inference demand could increase by a factor of one million, or even one billion.

 

In time, these projections may even prove conservative should more efficient AI lead to far higher usage. The idea that greater efficiency can paradoxically lead to increased rather than decreased overall consumption of a resource was first articulated by William Jevons in 1865. Jevons observed that improved efficiency in coal usage actually drove up coal demand instead of reducing it by unlocking new, previously non-existent (invisible) markets at previous (higher) price points. History is littered with examples of Jevons paradox, including the steel industry transformed by the Bessemer process, the transition from DC to AC electricity and of course, Moore's Law. In the immediate DeepSeek aftermath, Microsoft CEO Satya Nadella exclaimed: "Jevons paradox strikes again! As AI get more efficient and accessible, we will see its use skyrocket". While this came as little immediate comfort to AI infrastructure-related stocks, we expect "any published DeepSeek improvement (to) be copied by Western labs almost immediately". As such, all future AI models should enjoy better performances at a lower cost which is likely to accelerate both AI adoption and model progress.

 

A less straightforward capex story

While most infrastructure-related stocks have rebounded strongly following the DeepSeek-related selloff, we remain bullish on the sustainability of AI capex growth. In part, this reflects that despite DeepSeek uncertainty, aggregate AI capex at the US hyperscalers accelerated in 1Q25 reaching $81bn (+71% y/y) while FY25 capex growth estimates increased to +44% y/y from +38% earlier.

 

That said, the advent of new scaling vectors means that the capex story has become more nuanced. Today, reasoning (or test-time compute) is "early on the scaling curve and therefore can make big gains quickly". However, once it and other optimisations have been more fully exploited, we still expect the path to maximum capability will be to train the largest, most dense model feasible. This assumes scaling laws continue to hold as they provide a high degree of the predictability for the returns on incremental investments in the (costly) pretraining process.

 

For now, scaling laws appear intact. In November 2024, Jensen Huang said "foundation model pre-training scaling is intact and is continuing" while Sam Altman posted "there is no (scaling) wall". However, scaling laws are likely to plateau naturally over time as the rate of AI model improvement follows an exponential decay. What this means is that the industry "will have to work harder over time to get further performance improvements.

 

In today's AI race, some of the contenders may decide that the diminishing returns and escalating costs are no longer justifiable, leading them to withdraw. This dynamic could explain the changing nature of the Microsoft/OpenAI relationship. Others may consider the performance of recent 'fast follower' models like DeepSeek and conclude the race is in fact, over. Looking at the number of active models above 10 FLOPs suggests that the field has already significantly thinned.

 

However, and continuing with the parallel, it is well understood that marginal improvements in sport yield outsized gains, with fractions of a second separating champions from the rest of the field. In elite sprinting, every 0.01 second improvement is the result of months, if not years of optimisation. Usain Bolt's world record 9.58 second 100 metre sprint in 2009 was only 1.6% faster than the record set by Asafa Powell in 2007, but that difference cemented his status as the fastest person in history. In endurance sports, the same principle applies; Eliud Kipchoge's sub-two-hour marathon in 2019 required breakthroughs in shoe technology, drafting strategies and meticulous pacing. At the cutting edge of performance, the compounding effect of marginal gains determines greatness.

The biggest opportunity

While these factors (accuracy; emergent behaviour; multimodality) explain our continued excitement around training-related AI capex, the most significant driver of today's AI spending remains the size of the prize. According to Bernstein, information workers represent 34% of the global labour force and contribute $20trn to GDP. A 20% productivity uplift could represent a $4trn opportunity and a potential $800bn in annual willingness to spend. If a 20% uplift appears optimistic, consider that McKinsey believes AI could automate 30-50% of tasks in about 60% of occupations by 2030. In the longer term, the opportunity is likely to be significantly greater should AI begin to substitute rather than augment human labour.

 

Much more than Moore

Unlocking this vast opportunity rests on continued advancement in model capabilities which, as outlined above, are progressing rapidly. As we have previously argued, humans struggle with non-linear change particularly when compounding over many years. The exponential scaling of semiconductors (as predicted by Moore's Law) was driven by an improvement of 1-1.5 orders of magnitude (OOMs) per decade. In contrast, AI scaling has been progressing at one OOM per year or 5-6x faster than Moore's Law. As a reminder, one OOM is a 10x difference, whereas 3 OOMs is equivalent to 1,000x. This exponential scaling is evident in the cost of AI, which - for a constant level of intelligence - has been declining by approximately 10× every 12 months, compared to Moore's Law, where the cost of silicon per square inch historically fell by around 2× every 18 months. This explains why leading models today are said to be "running out of benchmarks" where their predecessors just a decade ago "could barely identify simple images of cats and dogs". As one AI commentator argues, "we are racing through the OOMs, and it requires no esoteric beliefs, merely trend extrapolation of straight lines, to take the possibility of AGI…by 2027 extremely seriously".

 

AGI coming into view

When we first referenced AGI in last year's Annual Report, we were careful to downplay the likely timeline of so-called 'superintelligence'. Today, it feels increasingly possible that within a few years AI might be "able to understand, learn and apply knowledge across a range of cognitive tasks at a human-like level". Sam Altman has said that "systems that start to point to AGI are coming into view" with superintelligence possible "in a few thousand days". Elon Musk believes "AI will supersede the intelligence of any single human being by the end of 2025". Perhaps more importantly, Musk has suggested that the "probability that AI exceeds the intelligence of all humans combined by 2030 is 100%". Metaculus (a community-driven forecasting platform) anticipates the first general AI system by 2030, a year ahead of its forecast last year.

 

Agentic AI first

While there are still many dissenting voices around the AGI timeline, most AI commentators believe the next step on that journey is agentic AI with 2025 billed as the "year of agents". Like AGI, agentic definitions vary, reflecting a spectrum of agentic capabilities not dissimilar to differing levels of autonomy in vehicles.

 

Agentic AI comprises compound AI systems that chain together multiple task-specific models where the LLM decides the control flow of an application. The remarkable gains in reasoning models have paved the way for a new wave of AI agents designed to bridge the gap between LLM-based assistants (tools) and human agency. There has already been a flurry of agentic announcements from software companies such as Salesforce and ServiceNow. However, we are more focused on product previews such as OpenAI's Operator - "an agent that can use its own browser to perform tasks for you" - and Google's Project Mariner an experimental AI agent that can "think multiple steps ahead". Multiple Chinese AI labs have also launched agents, such as UI-TARS from ByteDance and Manus from Chinese startup Monica. Gartner predicts that by 2028, one-third of all GenAI interactions will use agents like these. Over time, these agents are likely to gain increasing autonomy, shifting decision-making authority away from the human in the loop toward the underlying LLM itself. At that point, they might more closely resemble the programs depicted in the movie Tron (1982), which independently operate and compete on behalf of their users, marking a significant evolution from today's human-guided 'copilot' systems.

Today, agentic AI remains nascent, with hallucination (error) rates still incompatible with agency. However, Operator provides our first real glimpse into a world where AI is no longer a tool used by humans, but instead performs tasks previously done by humans. Today, basic AI agents are already creating Neon (serverless) databases at four times the rate of human developers. End users simply describe what they want to build and AI agents autonomously initiate database operations, manage data workflows and scale infrastructure effortlessly.

 

Technology/AI risks

Given its centrality to sector fortunes, the key risk posed to technology stocks relate to AI. The Trust's significant exposure to AI means any setbacks to AI fundamentals or investment narrative could be magnified in the portfolio. These risks may include a slowdown in the pace of AI model improvement (including a tapering of the 'scaling laws' observed so far), production challenges presented by the rapid development cadence of each generation of leading-edge semiconductors (as we saw with NVIDIA's Blackwell delay) and other bottlenecks in scaling AI such as sourcing sufficient power for data centres and ever-larger datasets to train models. Other AI risks include the advent of 'cheaper' models like those introduced by DeepSeek that challenge capital intensity and negatively impact hyperscaler capex. Disappointing AI adoption (undermining investor confidence) or very rapid adoption (provoking public or political backlash) could also present challenges, although neither is likely to derail the technology's progress in the longer -term. There is also the risk that despite improvement, AI model hallucination rates remain incompatible with agentic AI, potentially delaying or preventing AGI.

Regulation also poses a significant threat to AI progress should it escalate sharply. While export controls aimed at slowing China's AI progress may become more effective as scaling continues, additional restrictions could stifle innovation while insufficient oversight could accelerate AI proliferation. Given that DeepSeek was heralded as AI's 'Sputnik moment', greater AI competition between the US and China could presage a new AI 'space race'. The original Sputnik moment led to the creation of NASA in 1958, with US space spending soaring from 0.1% of GDP in 1958 to over 4.4% by 1966 , culminating in the 1969 moon landing. A similar trajectory may now unfold in AI, as sovereign investments surge. However, AI competition, particularly if the industry continues to make rapid progress towards AGI, could increase the likelihood of Manhattan Project-type regulatory intervention. However, this might simply slow US progress while shifting leadership to more permissive nations, rather than mitigating risks.

 

On a more prosaic level, regulation also presents a significant risk to the sector should behavioural remedies challenge the natural monopoly status of some of today's mega-caps. We are hopeful the worst-case scenarios will be avoided given the critical role mega-cap US technology companies will play in counterbalancing the AI threat from China. Indeed, a further deterioration in US/Sino relations may present a greater risk and any escalation in tensions around Taiwan would likely put pressure on the semiconductor industry.

 

Other risks include tariffs which are impossible to fully assess other than at a very high level due to moving targets and the inherent lack of clarity (e.g. the semiconductor sector is still undergoing a Section 232 investigation). Even as these waypoints are reached, there is significant scope for exemptions and/or phased implementations given the need to deliver US AI supremacy. Valuation also remains a key risk, particularly following the absolute and relative rerating in the technology sector as well as the broader market. While we believe the rerating is appropriate given AI progress, it does leave valuations more exposed to disappointment, both within and beyond the technology sector. However, we remain dismissive of the notion that AI stocks are in a bubble, akin to the dot.com period in the late 1990s. While there are features of today's market that rhyme with that earlier period, we do not believe investors are really considering trillion-dollar market opportunities, scaling laws and an accelerated path to AGI. Factors that would challenge this view include much higher valuations (technology traded above 2x the market multiple in 2000), a 'hot' IPO market dominated by immature AI companies and the application of new valuation metrics necessary to justify elevated valuations. None of these conditions exist today.

Concentration risk

For several years, we have consistently reminded Shareholders of the concentration risk embedded both within the Trust and in the market cap-weighted benchmark around which the portfolio is constructed.

Following another period of pronounced large-cap outperformance, this risk remains elevated. At year-end, our three largest holdings - NVIDIA, Apple and Microsoft - accounted for approximately 23% of NAV and 31% of the benchmark. Our top five holdings, which also include Meta and Broadcom, represented around 34% of NAV and 50% of the benchmark.

 

As a large team with a growth-centric investment approach, we would welcome the opportunity to move materially underweight positions in the largest index constituents should we become concerned about their growth prospects, their positioning in an AI-first world or if we believe there are more attractive risk/reward profiles elsewhere. That said, large-caps continue to dominate small-caps, and the strong performance of the Mag-7 during 2024 serves as a reminder of the opportunity cost associated with a premature move away from unique assets, many of which still capture the zeitgeist of this technology cycle.

 

However, as previously discussed, there may be some early evidence of AI disruption beginning to challenge the investment narratives at certain mega-caps, including Alphabet and Apple. We have held both positions for close to 20 years but have meaningfully reduced them over the past 12 months. We remain unafraid and prepared to materially underweight or exit large index constituents should we become concerned about their growth or return prospects, or AI positioning. We will continue to communicate our thoughts and positioning as they evolve, just as we did when we pivoted the portfolio towards AI. For now, Shareholders should expect lower equity exposures to these stocks (potentially augmented by call options to mitigate upside risk) and greater daily variance in terms of our relative performance.

 

Conversely, while the Trust can hold up to a full benchmark weight subject to a maximum limit of 15%, we remain unlikely to do so; we struggle with the idea that we are reducing risk by making the portfolio ever more concentrated. Instead, our intention remains to construct a diversified portfolio comprising the best of what the benchmark has to offer, plus a selection of growth technology companies which investors may lack the resources or expertise to discover, analyse and monitor for themselves. We continue to believe that a diversified portfolio of growth stocks and themes capable of outperformance and constructed to withstand investment setbacks, should deliver superior returns over the medium term, particularly on a risk-adjusted basis.

 

Conclusion

The Trust has fully participated in the recent market rebound as we maintained our constructive positioning. This reflects our conviction in the significant AI progress and strong company results under the surface, even amid market and geopolitical volatility, and our belief that it remains within policymakers' interests and capacity to avert a severe global recession. NASDAQ puts helped to soften the Trust's beta during the sharpest phase of the market drawdown, as intended, and we have retained some protection given the timeline for progress on tariffs is short and there may well be temporary pauses or supply constraints even as things improve.

 

Setting aside current macroeconomic uncertainties, we believe recent volatility is best understood as a persistent feature of new technology cycles, when the innovation curve is at its steepest and both the pace of progress and scale of the opportunity are hard to define. The recent DeepSeek episode underscores this point, proving an important, if unwanted, reminder of this. In many ways, the current period feels highly analogous to the mid- 1990s when people were excited about the potential of what Fed Chair Alan Greenspan would go on to call the "new economy" (in late 1997) but had not moved into the self-reflexive euphoria of the full dot.com bubble. Interestingly, between 1995 and 1998 - the internet years prior to the dot.com 'melt up' - there were nine NASDAQ Index corrections of -10% or more, seven of which were drawdowns of -15% or greater. However, during this volatile period, the Index rose by 350% (in US dollar terms). While history is an imperfect guide, investors should anticipate elevated volatility and bouts of AI-related risk aversion, even against a backdrop of continued AI progress.

 

To date, that progress has been remarkable - the product of rapid, non-linear scaling. Together with the advent of reasoning models, many of the building blocks necessary for agentic AI are falling into place. The promise of these agents is that they transform AI from a passive tool to an active participant in the digital ecosystem with infinite scalability. AI-enabled non-human scaling could change the world as we know it, just as agricultural mechanisation did in the 19th century (when labour force participation in agriculture declined from 58% in 1860 to 27% by 1920). However, before that, McCormick's horse-pulled reaper (1831) had already transformed the grain harvest by six-fold, increasing the amount of wheat that each person (and horse) could harvest in a day to 12-15 acres compared to two acres previously possible using tools like scythes. This not only helped the US wheat crop quadruple between the 1830s and the 1860s, but mechanised agriculture, and the surpluses it produced led to higher living standards and greatly improved food security. While the Great Irish Famine (1845-49) proved a tragic exception, peacetime famines had largely been eradicated in the US and Europe by the late 19th century.

We expect AI to unlock similar productivity gains and unknowable positive externalities while enabling individuals and businesses to reduce their dependency on human scaling, allowing them to "reap as much as they can sow".

 

 

Ben Rogoff & Ali Unwin

 10 July 2025*

 

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

 

 

 

PORTFOLIO POSITIONING

 

By Market Capitalisation	Benchmark weighting 30 April 2025	% of invested assets 30 April 2025	% of invested assets 30 April 2024
Large Cap (>$10bn)	95.8	89.4	89.3
Mid Cap (>$1bn-$10bn)	3.8	10.1	10.0
Small Cap (<$1bn)	0.4	0.5	0.7

Total

100.0

100.0

 

 

By Region	Benchmark weighting 30 April 2025	% of total net assets 30 April 2025	% of total net assets 30 April 2024
US & Canada	81.6	71.9	72.6
Asia Pacific (ex-Japan)	10.9	12.1	10.0
Europe (inc - UK)	5.1	6.2	6.6
Other Net Assets	-	3.7	2.4
Middle East & Africa	0.3	3.1	3.0
Japan	2.1	2.1	5.1
Latin America	-	0.9	0.3
Total		100.0	100.0

 

All data sourced from Polar Capital LLP.

 

CLASSIFICATION OF INVESTMENTS*

as at 30 April 2025

 

	North America (inc. Latin America) %	Europe %	Asia Pacific (inc. Middle East) %	Total 30 April 2025 %	Total 30 April        2024 %	Benchmark Weightings as at 30 April 2025 %
Semiconductors & Semiconductor Equipment	19.2	1.6	8.0	28.8	35.2	29.8
Software	14.8	1.4	3.0	19.2	22.8	27.2
Interactive Media & Services	10.3	0.1	1.2	11.6	13.4	15.8
Technology Hardware, Storage & Peripherals	5.6	-	0.8	6.4	8.2	17.9
IT Services	5.2	0.2	0.1	5.5	3.0	4.8
Electronic Equipment, Instruments & Components	3.7	-	1.8	5.5	3.8	0.3
Entertainment	2.0	2.1	-	4.1	2.5	0.6
Broadline Retail	2.2	-	1.5	3.7	2.2	-
Communications Equipment	2.7	-	0.1	2.8	1.6	2.4
Electrical Equipment	2.1	-	-	2.1	-	-
Aerospace & Defence	1.1	-	0.1	1.2	0.8	-
Capital Markets	0.9	-	-	0.9	-	-
Automobiles	0.8	-	-	0.8	0.8	-
Hotels, Restaurants & Leisure	0.7	-	-	0.7	0.5	0.2
Financial Services	0.3	0.4	-	0.7	0.2	-
Healthcare Equipment & Supplies	0.4	-	0.3	0.7	0.4	-
Healthcare Technology	0.4	-	-	0.4	-	-
Professional Services	-	0.3	-	0.3	-	-
Real Estate Management & Development	0.3	-	-	0.3	-	-
Building Products	-	-	0.2	0.2	0.4	-
Specialty Retail	-	0.1	-	0.1	-	-
Machinery	-	-	0.1	0.1	0.8	-
Trading Companies & Distributors	0.1	-	-	0.1	-	-
Chemicals	-	-	0.1	0.1	0.1	-
Media	-	-	-	-	0.5	-
Ground Transportation	-	-	-	-	0.3	-
Life Sciences Tools & Services	-	-	-	-	0.1	-
Total investments (£3,664,891,000)	72.8	6.2	17.3	96.3	97.6
Other net assets (excluding loans)	2.0	0.4	3.4	5.8	3.7
Loans	-	-	(2.1)	(2.1)	(1.3)
Grand total (net assets of £3,804,889,000)	74.8	6.6	18.6	100.0	-
At 30 April 2024 (net assets of £3,804,533,000)	74.9	6.8	18.3	-	100.0

 

* The classifications are derived from the Benchmark as far as possible. The categorisation of each investment is shown in the portfolio available on the Company's website. Where a dash is shown for the Benchmark it means that the sector is not represented in the Benchmark. Not all sectors of the Benchmark are shown, only those in which the Company has an investment at the financial year end.

 

FULL PORTFOLIO as at 30 April 2025

 

					Value of holding		% of net assets
Ranking					30 April 2025	30 April 2024	30 April 2025	30 April 2024
2025	2024	Stock	Sector	Region	£'000	£'000	%	%
1	(1)	Nvidia	Semiconductors & Semiconductor Equipment	North America	342,219	395,876	9.0	10.4
2	(2)	Microsoft	Software	North America	258,174	335,337	6.8	8.8
3	(4)	Meta Platforms	Interactive Media & Services	North America	240,661	188,666	6.3	5.0
4	(5)	Apple	Technology Hardware, Storage & Peripherals	North America	185,568	163,959	4.9	4.3
5	(8)	Broadcom	Semiconductors & Semiconductor Equipment	North America	162,907	96,108	4.3	2.5
6	(6)	Taiwan Semiconductor	Semiconductors & Semiconductor Equipment	Asia Pacific	153,370	139,427	4.0	3.7
7	(3)	Alphabet	Interactive Media & Services	North America	151,504	278,153	4.0	7.3
8	(21)	Spotify Technology	Entertainment	Europe	79,947	40,702	2.1	1.1
9	(14)	Cloudflare	IT Services	North America	79,538	60,421	2.1	1.6
10	(13)	Arista Networks	Communications Equipment	North America	69,589	62,166	1.8	1.6
Top 10 investments					1,723,477		45.3
11	(16)	CyberArk Software	Software	Asia Pacific	66,724	56,882	1.8	1.5
12	(44)	Shopify	IT Services	North America	60,224	21,874	1.5	0.6
13	(-)	Alibaba	Broadline Retail	Asia Pacific	58,628	-	1.5	-
14	(18)	KLA	Semiconductors & Semiconductor Equipment	North America	55,399	47,574	1.5	1.3
15	(32)	Netflix	Entertainment	North America	51,682	28,412	1.4	0.7
16	(36)	SAP	Software	Europe	51,502	26,651	1.4	0.7
17	(12)	Amazon.com	Broadline Retail	North America	49,473	73,038	1.3	1.9
18	(38)	Tencent	Interactive Media & Services	Asia Pacific	47,580	26,331	1.2	0.7
19	(26)	Axon Enterprise	Aerospace & Defence	North America	43,403	31,277	1.1	0.8
20	(-)	Corning	Electronic Equipment, Instruments & Components	North America	42,451	-	1.1	-
Top 20 investments					2,250,543		59.1
21	(-)	Vertiv	Electrical Equipment	North America	41,332	-	1.1	-
22	(7)	Advanced Micro Devices	Semiconductors & Semiconductor Equipment	North America	38,698	134,752	1.0	3.5
23	(19)	ServiceNow	Software	North America	38,637	43,916	1.0	1.2
24	(-)	GE Vernova	Electrical Equipment	North America	38,540	-	1.0	-
25	(-)	MediaTek	Semiconductors & Semiconductor Equipment	Asia Pacific	37,690	-	1.0	-
26	(-)	Oracle	Software	North America	37,523	-	1.0	-
27	(89)	Palo Alto Networks	Software	North America	37,072	4,101	1.0	0.1
28	(41)	eMemory Technology	Semiconductors & Semiconductor Equipment	Asia Pacific	36,688	25,127	1.0	0.7
29	(-)	SK Hynix	Semiconductors & Semiconductor Equipment	Asia Pacific	35,455	-	0.9	-
30	(69)	MercadoLibre	Broadline Retail	North America	35,022	10,587	0.9	0.3
Top 30 investments					2,627,200		69.0
31	(-)	Robinhood Markets	Capital Markets	North America	34,817	-	0.9	-
32	(-)	Ciena	Communications Equipment	North America	34,743	-	0.9	-
33	(11)	CrowdStrike	Software	North America	34,179	74,376	0.9	2.0
34	(-)	Snowflake	IT Services	North America	33,248	-	0.9	-
35	(28)	Tesla	Automobiles	North America	31,138	30,877	0.8	0.8
36	(-)	Celestica	Electronic Equipment, Instruments & Components	North America	31,122	-	0.8	-
37	(-)	Xiaomi	Technology Hardware, Storage & Peripherals	Asia Pacific	30,418	-	0.8	-
38	(-)	Palantir Technologies	Software	North America	29,576	-	0.8	-
39	(-)	Credo Technology Group	Semiconductors & Semiconductor Equipment	North America	29,099	-	0.8	-
40	(35)	Elastic	Software	North America	28,732	26,879	0.8	0.7
Top 40 investments					2,944,272		77.4
41	(10)	Micron Technology	Semiconductors & Semiconductor Equipment	North America	28,327	85,513	0.7	2.2
42	(64)	CommVault Systems	Software	North America	28,281	12,120	0.7	0.3
43	(15)	Pure Storage	Technology Hardware, Storage & Peripherals	North America	28,091	57,835	0.7	1.5
44	(51)	DoorDash	Hotels, Restaurants & Leisure	North America	27,460	19,289	0.7	0.4
45	(59)	Elite Material	Electronic Equipment, Instruments & Components	Asia Pacific	26,580	13,469	0.7	0.4
46	(-)	Astera Labs	Semiconductors & Semiconductor Equipment	North America	23,532	-	0.7	-
47	(-)	TDK	Electronic Equipment, Instruments & Components	Asia Pacific	22,911	-	0.6	-
48	(34)	HubSpot	Software	North America	22,426	26,899	0.6	0.7
49	(-)	Flex	Electronic Equipment, Instruments & Components	North America	21,733	-	0.6	-
50	(48)	Monday.com	Software	Asia Pacific	20,736	19,936	0.6	0.5
Top 50 investments					3,194,349		84.0
51	(46)	Coherent	Electronic Equipment, Instruments & Components	North America	20,150	20,575	0.6	0.6
52	(9)	ASML	Semiconductors & Semiconductor Equipment	Europe	19,613	86,304	0.5	2.3
53	(77)	Nutanix	Software	North America	19,396	7,726	0.5	0.2
54	(25)	ASM International	Semiconductors & Semiconductor Equipment	Europe	19,313	31,519	0.5	0.9
55	(43)	Amphenol	Electronic Equipment, Instruments & Components	North America	19,061	23,267	0.5	0.6
56	(81)	Nova	Semiconductors & Semiconductor Equipment	Asia Pacific	17,053	7,111	0.5	0.2
57	(54)	Tokyo Electron	Semiconductors & Semiconductor Equipment	Asia Pacific	16,825	16,318	0.4	0.4
58	(-)	Atlassian	Software	Asia Pacific	16,680	-	0.4	-
59	(-)	MACOM Technology Solutions	Semiconductors & Semiconductor Equipment	North America	15,748	-	0.4	-
60	(-)	Adyen	Financial Services	Europe	15,304	-	0.4	-
Top 60 investments					3,373,492		88.7
61	(82)	Intuitive Surgical	Healthcare Equipment & Supplies	North America	14,850	6,821	0.4	0.2
62	(-)	Doximity	Healthcare Technology	North America	14,404	-	0.4	-
63	(50)	E Ink	Electronic Equipment, Instruments & Components	Asia Pacific	14,352	19,435	0.4	0.5
64	(-)	Twilio	IT Services	North America	13,980	-	0.4	-
65	(61)	Roblox	Entertainment	North America	13,934	13,212	0.3	0.4
66	(-)	Unity Software	Software	North America	13,536	-	0.3	-
67	(58)	BE Semiconductor Industries	Semiconductors & Semiconductor Equipment	Europe	12,153	13,834	0.3	0.4
68	(-)	RELX	Professional Services	Europe	11,742	-	0.3	-
69	(55)	ARM	Semiconductors & Semiconductor Equipment	Europe	11,691	14,683	0.3	0.4
70	(74)	Hoya	Healthcare Equipment & Supplies	Asia Pacific	11,409	8,276	0.3	0.2
Top 70 investments					3,505,543		92.1
71	(-)	Toast	Financial Services	North America	10,990	-	0.3	-
72	(-)	Affirm	IT Services	North America	10,534	-	0.3	-
73	(-)	Take-Two Interactive Software	Entertainment	North America	9,659	-	0.3	-
74	(-)	Zillow	Real Estate Management & Development	North America	9,494	-	0.3	-
75	(-)	SiTime	Semiconductors & Semiconductor Equipment	North America	8,908	-	0.2	-
76	(-)	Cellebrite	Software	Asia Pacific	8,670	-	0.2	-
77	(91)	Klaviyo	Software	North America	8,567	2,841	0.2	0.1
78	(53)	Nitto Boseki	Building Products	Asia Pacific	8,231	16,690	0.2	0.4
79	(52)	Marvell Technology	Semiconductors & Semiconductor Equipment	North America	7,951	16,984	0.2	0.4
80	(37)	Advantest	Semiconductors & Semiconductor Equipment	Asia Pacific	7,866	26,645	0.2	0.7
Top 80 investments					3,596,413		94.5
81	(-)	First Solar	Semiconductors & Semiconductor Equipment	North America	7,861	-	0.2	-
82	(-)	Wise	IT Services	Europe	7,571	-	0.2	-
83	(-)	Impinj	Semiconductors & Semiconductor Equipment	North America	5,800	-	0.2	-
84	(-)	SCOUT24	Interactive Media & Services	Europe	5,685	-	0.1	-
85	(63)	Fabrinet	Electronic Equipment, Instruments & Components	Asia Pacific	5,550	12,655	0.1	0.3
86	(-)	DocuSign	Software	North America	5,433	-	0.1	-
87	(-)	Zalando SE	Specialty Retail	Europe	5,170	-	0.1	-
88	(67)	Braze	Software	North America	4,767	11,516	0.1	0.3
89	(45)	Harmonic Drive Systems	Machinery	Asia Pacific	4,514	20,982	0.1	0.6
90	(-)	Xometry	Trading Companies & Distributors	North America	4,442	-	0.1	-
Top 90 investments					3,653,206		95.8
91	(-)	FOCI Fiber Optic Communications	Communications Equipment	Asia Pacific	2,888	-	0.1	-
92	(85)	MEC	Chemicals	Asia Pacific	2,871	4,692	0.1	0.1
93	(92)	Zuken	IT Services	Asia Pacific	2,595	2,748	0.1	0.1
94	(-)	Astroscale	Aerospace & Defence	Asia Pacific	2,327	-	0.1	-
95	(-)	Nlight	Electronic Equipment, Instruments & Components	North America	1,003	-	0.1	-
96	(96)	Cermetek Microelectronics	Electronic Equipment, Instruments & Components	North America	1	1	-	-
		Total equities	3,664,891			96.3
		Other net assets	139,998			3.7
		Total net assets	3,804,889			100.0

 

Note: Asia Pacific includes Middle East and North America includes Latin America.

 

STRATEGIC REPORT

 

This report has been provided in accordance with The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013. The aim of this report is to provide information to Shareholders on the Company's strategy and the potential for such to succeed, including a fair review of the Company's performance during the year ended 30 April 2025, the position of the Company at the year end and a description of the principal risks and uncertainties, including both economic and business risk factors underlying any such forward-looking information.

 

Business Model and Regulatory Requirements

The Company's business model follows that of an externally managed investment trust providing Shareholders with access to an actively managed portfolio of technology shares selected on a worldwide basis.

 

The Company is designated as an Alternative Investment Fund (AIF) under the Alternative Investment Fund Management Directive (AIFMD) and, as required by the Directive, has contracted with Polar Capital LLP to act as the Alternative Investment Fund Manager (AIFM) and Investment Manager (or Manager) and HSBC Bank Plc to act as the Depositary.

 

Both the AIFM and the Depositary have responsibilities under AIFMD for ensuring that the assets of the Company are managed in accordance with the Investment Policy and are held in safe custody. The Board remains responsible for setting the investment strategy and operational guidelines as well as meeting the requirements of the FCA's UK Listing Rules and the Companies Act 2006.

 

The AIFMD requires certain information to be made available to investors in AIFs before they invest and requires that material changes to this information be disclosed in the Annual Report of each AIF. Investor Disclosure Documents, which set out information on the Company's investment strategy and policies, leverage, risk, liquidity, administration, management, fees, conflicts of interest and other shareholder information are available on the Company's website.

 

There have been no material changes to the information requiring disclosure. Any information requiring immediate disclosure pursuant to the AIFMD will be disclosed to the London Stock Exchange. Statements from the Depositary and the AIFM can be found on the Company's website.

 

Investment Objective and Policy

While observing the Dow Jones Global Technology Index (total return, Sterling adjusted, with the removal of relevant withholding taxes) as the Benchmark against which NAV performance is measured, Shareholders should be aware that the portfolio is actively managed and is not designed to track any particular benchmark index or market. The performance of the portfolio can vary from the Benchmark performance, at times considerably.

 

Over recent decades the technology industry has been one of the most vibrant, dynamic and rapidly growing segments of the global economy. Technology companies offer the potential for substantially faster earnings growth than the broader market.

 

Investments are selected for their potential shareholder returns, not on the basis of technology for its own sake. The Investment Manager believes in rigorous fundamental analysis and focuses on:

 

·      management quality;

·      the identification of new growth markets;

·      the globalisation of major technology trends; and

·      exploiting international valuation anomalies and sector volatility.

 

Changes to Investment Policy

Any material change to the Investment Policy will require the approval of the Shareholders by way of an ordinary resolution at a general meeting. The Company will promptly issue an announcement to inform Shareholders and the public of any change to its Investment Policy. No changes to the Investment Policy are presently anticipated.

 

Investment Strategy Guidelines and Board Limits

The Board has established guidelines for the Investment Manager in pursuing the Investment Policy. The Board uses these guidelines to monitor the portfolio's exposure to different geographical markets, sub-sectors within technology and the spread of investments across different market capitalisations.

 

These guidelines are kept under review as cyclical changes in markets and new technologies will bring certain

sub-sectors or companies of a particular size or market capitalisation into or out of favour.

 

Asset Allocation

Technology may be defined as the application of scientific knowledge for practical purposes and technology companies are defined accordingly. While this offers a very broad and dynamic investing universe and covers many different companies, the portfolio of the Company (the 'Portfolio') is focused on companies which use technology or which develop and supply technological solutions as a core part of their business models. This includes areas as diverse as information, media, communications, environmental, healthcare, finance, e-commerce and renewable energy, as well as the more obvious applications such as computing and associated industries.

 

The Board has agreed a set of parameters which seek to ensure that investment risk is spread and diversified. The Board believes that this provides the necessary flexibility for the Investment Manager to pursue the Investment Objective, given the dynamic and rapid changes in the field of technology, while maintaining a spread of investments.

 

Market Parameters

With current and foreseeable investment conditions, the Portfolio will be invested in accordance with the Investment Objective and Policy across worldwide markets, generally within the following ranges:

 

·      North America up to 85%.

·      Europe up to 40%.

·      Japan and Asia up to 55%.

·      Rest of the world up to 10%.

 

The Board has set specific upper exposure limits for certain countries where they believe there may be an elevated risk.

 

The Company will at all times invest and manage its assets in a manner that is consistent with spreading investment risk and invests in a Portfolio comprised primarily of international quoted equities which is diversified across both regions and sectors.

 

Investment Limits

In applying the Policy, the Company will satisfy the following investment restrictions:

 

·      The Company's interest in any one company will not exceed 10% of the gross assets of the Company, save where the Benchmark weighting of any investee company in the Company's portfolio exceeds this level, in which case the Company will be permitted to increase its exposure to such investee company up to the Benchmark 'neutral' weighting of that company or, if lower, 15% of the Company's gross assets.

 

·      The Company will have a maximum exposure to companies listed in emerging markets (as defined by the MSCI Emerging Markets Index) of 25% of its net assets.

 

·      The Company may invest in unquoted companies from time to time, subject to prior Board approval. Investments in unquoted companies in aggregate will not exceed 10% of the gross assets of the Company.

 

Such limits are measured at the time of acquisition of the relevant investment and whenever the Company increases the relevant holding.

 

In addition to the restrictions set out above, the Company is subject to Chapter 11 of the FCA's UK Listing Rules (UKLR) which apply to closed ended investment companies with a listing on the London Stock Exchange.

 

In order to comply with the current UKLR's, the Company will not invest more than 10% of its total assets at the time of acquisition in other listed closed ended investment funds, whether managed by the Investment Manager or not. This restriction does not apply to investments in closed ended investment funds which themselves have published investment policies to invest no more than 15% of their total assets in other listed closed ended investment funds. However, the Company will not in any case invest more than 15% of its total assets in other closed ended investment funds.

 

Cash, Borrowings (Gearing) and Derivatives

The Company may borrow money to invest in the Portfolio over both the long and short-term. Any commitment to borrow funds is agreed by the Board and the AIFM.

 

The Investment Manager may also use from time-to-time derivative instruments, as approved by the Board, such as financial futures, options, contracts-for-difference and currency hedges. These are used for the purpose of efficient portfolio management. Any such use of derivatives will be made in accordance with the Company's policies on spreading investment risk as set out in this investment policy and any leverage resulting from the use of such derivatives will be subject to the restrictions on borrowings.

 

Cash

The Company may hold cash or cash equivalents if the Investment Manager feels that these will, at a particular time or over a period, enhance the performance of the Portfolio. The Board has agreed that management of cash may be achieved through the purchase of appropriate government bonds, money market funds or bank deposits depending on the Investment Manager's view of the investment opportunities and the benefits of diversification.

 

Gearing and Derivatives

The Company's Articles of Association permit borrowings up to the amount of its paid-up share capital plus capital and revenue reserves. The Company may use gearing in the form of bank loans which are used on a tactical basis by the Investment Manager, when considered appropriate. The Board monitors the level of gearing available to the Portfolio Manager and agrees, in conjunction with the AIFM, all bank facilities in accordance with the Investment Policy. The Board approves and controls all bank facilities and any net borrowings over 20% of the Company's net assets at the time of draw down will only be made after approval by the Board.

 

During the year, the Company had two loan facilities with ING Bank NV of 36m US Dollars and 3.8bn Japanese Yen (JPY), both of which were repaid in September 2024. The JPY loan was replaced with a three year fixed rate term loan of JPY 15bn from The Bank of Nova Scotia. The JPY loan has been fixed at an all-in rate of 2.106% pa. This loan is due to be repaid in September 2027.

 

Details of the loans are set out in Note 17 to the Financial Statements.

 

The Investment Manager's use of derivatives is monitored by the Board in accordance with the Company's investment policy and any leverage from the use of such derivatives will be subject to the restriction on gearing.

 

Future Developments

The Board remains positive on the longer-term outlook for technology and the Company will continue to pursue its Investment Objective. The outlook for future performance is dependent to a significant degree on the world's financial markets and their reactions to economic events and other geopolitical forces. In accordance with the Articles of Association, the Board will be proposing the five-yearly continuation vote of the Company at the Annual General Meeting to be held in September 2025; as discussed in more detail in the Chair's Statement, the Board is supportive of the Company continuing in its current form and will be recommending that Shareholders vote in favour of the resolution. The Chair's Statement and the Investment Manager's Report comment on the outlook.

 

Dividends

The Company's revenue varies from year to year and the Board considers the dividend position each year in order to maintain the Company's status as an investment trust. The revenue reserve remains in deficit and historically the Company has not paid dividends given its focus on capital growth. The Directors do not recommend, for the year under review, the payment of a dividend (2024: no dividend recommendation).

 

Service Providers

Polar Capital LLP has been appointed to act as the Investment Manager and AIFM as well as to provide or procure company secretarial services, marketing and website services which it arranges through Huguenot Limited, and administrative services, including accounting, portfolio valuation and trade settlement which it has arranged to deliver through HSBC Securities Services (HSS or the Administrator).

 

The Company also contracts directly, on terms agreed periodically, with a number of third parties for the provision of specialist services. The cost of the services outlined below are paid for directly by the Company and are separate from the Investment Management Fee payable to Polar Capital:

 

•              Stifel Nicolaus Europe Limited as Corporate Broker;

•              Equiniti Limited as Share Registrars;

•              HSBC Securities Services as Custodian and Depositary;

•              RD:IR for Investor Relations and Shareholder Analysis;

•              Camarco as PR advisors; and

•              Perivan Limited as designers and printers for shareholder communications.

 

Investment Management Company and Management of the Portfolio

As the Company is an investment vehicle for Shareholders, the Directors have sought to ensure that the business of the Company is managed by a leading specialist investment management team and that the investment strategy remains attractive to Shareholders. The Directors believe that a strong working relationship with the investment management team will help to achieve the optimum return for Shareholders. As such, the Board and the Investment Manager operate in a supportive, co-operative and open environment.

 

The Investment Manager is Polar Capital LLP (Polar Capital), which is authorised and regulated by the Financial Conduct Authority, to act as Investment Manager and AIFM of the Company with sole responsibility for the discretionary management of the Company's assets (including uninvested cash) and sole responsibility to take decisions as to the purchase and sale of individual investments. The Investment Manager also has responsibility for asset allocation within the limits of the investment policy and guidelines established and regularly reviewed by the Board, all subject to the overall control and supervision of the Board.

 

Polar Capital provides a team of technology specialists led by Ben Rogoff. Each team member focuses on specific areas while Ben Rogoff, with Alastair Unwin as Deputy, has overall responsibility for the portfolio. Polar Capital also has other specialist and geographically focused investment teams which may contribute to idea generation. The technology investment team's biographies can be found in the Annual Report. The Investment Manager has other investment resources which support the investment team and has experience in administering and managing other investment companies.

 

Management fee

As reported within the Chair's Statement, the Company announced that it had concluded its three-yearly review of the base management fee arrangements with the Investment Manager, Polar Capital. The new base management fee is structured over two tiers, and the performance fee has been removed entirely.

 

With effect from 1 May 2025, the base management fee paid by the Company monthly in arrears to the Manager is calculated on the daily Net Asset Value ('NAV') as follows:

 

•              Tier 1:            0.75 per cent. for such of the NAV up to and including £2bn.

•              Tier 2:            0.60 per cent. for such of the NAV above £2bn.

 

Prior to 1 May 2025, the fee basis for the financial year ended 30 April 2025 was as follows:

 

•              Tier 1:            0.80 per cent. for such of the NAV up to and including £2bn;

•              Tier 2:            0.70 per cent. for such of the NAV between £2bn and £3.5bn; and

•              Tier 3:            0.60 per cent. for such of the NAV above £3.5bn.

 

Any investment in funds managed by Polar Capital are wholly excluded from the base management fee calculation. Management fees of £30,854,000 (2024: £25,919,000) have been paid for the year to 30 April 2025 of which £2,246,000 (2024: £2,386,000) was outstanding at the year end and accrued within the financial statements.

 

Under the terms of the IMA, the Board may undertake a three-yearly review of the fee arrangements, the next of which will be undertaken in the financial year ending 30 April 2028, with the anticipation that any changes proposed and subsequently agreed will take effect from the start of the following financial year. The Board is however at liberty to review the fees at any time should they deem it appropriate and in the best interests of Shareholders to do so.

 

Longer-Term Viability

In accordance with the AIC Code of Corporate Governance (AIC Code), the Company is required to make a forward-looking longer-term viability statement. The Board has considered and addressed the ability of the Company to continue to operate over a period significantly beyond the twelve-month period required for the going concern statement. The Board has considered the industry and market in which the Company operates and believes that despite the market volatility and geopolitical events experienced during the financial year under review, there continues to be a strong appetite for technology investment. The Board continues to use five years as a reasonable term over which the viability of the Company should be viewed; Shareholders have the opportunity to vote on the continuation of the Company every five years, therefore the outlook for the next five-year period incorporates the continuation vote which will be put to Shareholders at the forthcoming AGM in September 2025.

 

The process and matters considered in establishing the longer-term viability are detailed within the Audit Committee Report in the annual report. In establishing the positive outlook for the Company over the next five years to 30 April 2030 the Board has taken into account:

 

The ability of the Company to meet its liabilities as they fall due	The assessment took account of the Company's current financial position, its cash flows and its liquidity position, the principal risks as set out in the Annual Report and the Committee's assessment of any material uncertainties and events that might cast significant doubt upon the Company's ability to continue as a going concern. The assessment was then subject to a sensitivity analysis over a five-year period, which stress tested a number of the key assumptions underlying the forecasts both individually and in aggregate for normal, favourable and stressed conditions and considered whether financing facilities will be renewed.   The portfolio comprises a spread of investments by size of company, traded on major international stock exchanges.   99.9% of the current portfolio could be liquidated within four trading days and there is no expectation that the nature of the investments held within the portfolio will be materially different in future.   The expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position. The ongoing charges of the Company for the year ended 30 April 2025 (excluding performance fees) were 0.77% (2024: 0.80%).   Repayment of the bank facility, drawn down at the year end, and due in September 2027, would equate to approximately 42% of the cash or cash equivalents available to the Company at 30 April 2025, without having to liquidate the portfolio of investments.   The Company has no employees and consequently does not have redundancy or other employment related liabilities or responsibilities.
The Company will propose a resolution on the continuation of the Company at the AGM in September 2025	The Company has within its corporate structure the requirement to hold a continuation vote every five years. The last continuation vote was passed at the AGM held in September 2020 with 100% of the votes in favour.   Ahead of the upcoming continuation vote, the Board, Investment Manager and Corporate Broker have been seeking Shareholder views including any concerns and an indication of whether they were likely to vote in favour of the Company's continuation. No comments adverse to the continuation vote have been received to date and the Shareholders who provided feedback were minded, at the time of writing, to vote in favour of the resolution for the Company to continue. Shareholders highlighted the contact between the Investment Manager and Shareholders, the long term investment horizon of many Shareholders, the diversification of the Company's register of Shareholders and the Company's inclusion on many buy lists at private wealth managers and retail platforms. As such, the Directors are confident that the continuation vote will be passed at the AGM to be held on 10 September 2025 and therefore that the Company will continue in existence. The Directors acknowledge that there can be no certainty that the continuation vote will be passed although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
Factors impacting the forthcoming years	The Investment Manager's Report and the Strategic Report provide a comprehensive review of factors which may impact the Company in forthcoming years. In making its assessment, the Board considered these factors alongside the Principal Risks and Uncertainties, and their corresponding mitigation and controls, in the Annual Report.
Regulatory changes	Despite the increased level of regulation and the unpredictability of future requirements it is considered that regulation will not increase to a level that makes the running of the Company uneconomical or untenable in comparison to other competitive products. The Board is aware of the FCA's proposal to include the closed ended sector within scope of the Consumer Composite Investments (CCI) regime. The Board has contributed to the consultation process and supports the AIC's stance against the inclusion of investment trusts within this regime given the potential negative consequences for the sector.
Closed-ended Investment Funds	Despite high discounts across the sector, it is believed that the business model of being a closed ended investment fund will continue to be wanted by investors and the Company's Investment Objective will continue to be desired and achievable. Notwithstanding this, the Board regularly discusses the risks to the sector given the rise in shareholder activism and consolidation across the wealth management industry and has engaged in an active share buy back process to help address the discount to NAV that the Company's shares have traded at.

 

Further, the Board recognises that there has been significant progress made in the technology sector and immense change in what is deemed to be a technology company which broadens the universe for potential investment. Technology remains a specialist sector for which there continues to be a need for independent specialist sector investment expertise. The Board therefore have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the five years to 30 April 2030.

 

GOING CONCERN

The Board has also considered the ability of the Company to adopt the Going Concern basis for the preparation of the Financial Statements.

 

Consideration included the forthcoming continuation vote as well as the Company's current financial position, its liquidity position and its assessment. In addition, the Company's cash flows were stressed tested for base case and reasonable worse case scenarios. Further detail on the assessment for going concern is provided in the Report of the Audit Committee in the annual report in Note 2(a) of the Financial Statements.

 

KEY PERFORMANCE INDICATORS

The Board appraises the performance of the Company and the Investment Manager as the key supplier of services to the Company against Key Performance Indicators ('KPIs'). The objectives of the KPIs comprise both specific financial and shareholder related measures and these KPIs have not differed from the prior year.

 

KPI	Control process	Outcome
The provision of investment returns to shareholders measured by long-term NAV 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 2025 the total net assets of the Company amounted to £3,804,889,000 (2024: £3,804,533,000). The Company's NAV over the year to 30 April 2025, underperformed the Benchmark by 2.0%. The NAV per share rose by 3.1% from 315.41p to 325.20p while the Benchmark increased 5.1% in Sterling terms over the same period. As at 30 April 2025 the portfolio comprised 96 (2024: 96) 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.
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 2025: • Minimum discount over year: 5.63% • Maximum discount over year: 19.42% • Average discount over year: 10.23%   In the year ended 30 April 2025, the Company bought back 36,208,671 ordinary shares (representing 2.6% of the issued share capital) at an average discount of 10.4%. Subsequent to the year end and to close of business 4 July 2025, the Company bought back a further 11,960,588 shares. The discount at close of business on 4 July 2025 was 9.9%.   Over the previous five financial years ended 30 April 2025: • Maximum premium over period: 6.06% • Maximum discount over period: 19.42% • Average discount over period: 9.38%   Over the previous five financial years ended 30 April 2025 the Company has bought back a total of 203,142,981* Ordinary shares and issued 27,490,000* as a result of market demand.
To qualify and continue to meet the requirements for Sections 1158 and 1159 of the 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 2025 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 2025 was 0.77% of the average daily net assets (2024: 0.80%). There was no performance fee payable for the year ended 30 April 2025 (2024: nil).

* The figures have been rebased following the ten for one share split on 13 September 2024.

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Board is responsible for the management of risks faced by the Company and through delegation to the Audit Committee, has established procedures to manage risk, oversee the internal control framework and determine the nature and extent of the principal risks the Company is willing to take in order to achieve its long-term strategic objectives.

 

The established risk management process the Company follows, identifies and assesses various risks, their likelihood, and possible severity of impact, considering both internal and external controls and factors that could provide mitigation. A post mitigation risk impact score as well as a risk appetite rating is then determined for each principal risk.

 

At each Audit Committee, identified principal risks are reviewed and reassessed against the backdrop of the dynamic external environment the Company is operating in. The Audit Committee carries out a robust assessment of overall risks and uncertainties faced by the Company with the assistance of the Investment Manager.

 

The Committee also identifies any emerging risks during its review process and continues to closely monitor these risks as they develop, implementing mitigating actions as necessary. Emerging risks during the financial year under review included the geopolitical landscape, in particular, the unravelling of the previous world order regarding security and trade which has resulted in a more inflationary and volatile environment. In addition, consideration was given to the impact on the Company's portfolio of the uncertainty around trade tariffs and the ongoing tension between China and Taiwan, using a detailed horizon analysis compiled by the investment management team.

 

The Principal Risks post mitigation are detailed on the following pages along with a high-level summary of their management through mitigation and status arrows to indicate any change in assessment over the past financial yearyear under review included the geopolitical landscape, consolidation of wealth managers and the rise of post truth politics, the latter having the potential to ensnare Big Tech in the ensuing political fallout. In addition, further consideration was given to the deterioration of relations between China and Taiwan, using a detailed horizon analysis to assess the medium and longer term impacts on the Company's portfolio.

 

Management of risks through Mitigation & Controls
PORTFOLIO RISK	Trend year on year
Failure to achieve investment objective on an absolute or relative basis
Regular reporting and monitoring of the Company's investment performance against peer group, benchmark and detailed annual review of investment strategy with Investment Manager.   Clear communication with Shareholders on the investment strategy through annual, half year reports and monthly factsheets. The Investment Manager also visits large shareholders and has regular interaction with clients.
Portfolio management errors including breach of investment policy
Investment limits and restrictions are encoded into dealing and operations systems of the Manager to ensure there is early warning of any potential issue of compliance or regulatory matters. HSBC Depositary oversees all trades and monitoring against investment limits. The Board monitors the investment limits and restrictions and would investigate any breaches.
OPERATIONAL RISK
Failure in services provided by Investment Manager (Polar Capital LLP)
Compliance, trading and risk oversight by fully resourced and expert Polar Capital compliance, operations and risk functions. Periodic updates are received from Polar's operational risk team in respect of the key operational risks and the associated controls in place.
Accounting / Financial and/or Custody Errors
Management accounts are produced and reviewed monthly, statutory reporting and daily NAV calculations are produced by the external Administrator and verified by the Investment Manager. Accounting records are tested, and valuations verified independently as part of the year-end financial reporting process.
Failure of Depositary, Custodian, Sub-Custodian or Deposit taker
Due diligence and service reviews are undertaken with third-party service providers including the Custodian and Depositary with any exceptions highlighted to the Board.
Unforeseeable natural disaster or other unpredictable event ("Black Swan").
The Company has a disaster recovery plan in place along with a Black Swan Committee comprised of any two directors, who are able to provide a response to such events as necessary.
IT Failure, Fraud and Cyber Risk
Annual review of internal control reports from suppliers including cyber protocols and disaster recovery procedures.   The Board proactively seeks to keep abreast of developments through updates with representatives of the Investment Manager (Polar's Chief Technology Officer). Polar Capital has controls in place and has continued to evolve its cyber defence capabilities during 2024 and Q1 2025 amid a persistently hostile threat landscape.
REGULATORY RISKS
Breach of Statutes and Regulations
Polar Capital Compliance & Operations ensure a strong compliance environment and report to Board on an annual basis.   There is an independent risk function at Polar Capital. AIFMD limits are hardcoded into Bloomberg and monitored by the Operations and Compliance teams. The Depositary also monitors AIFMD limits and reports exceptions to the Board. In addition, the Fund Accounting Manager reports to the Board on a monthly basis through the Investment Limits schedule.   The Board receives regulatory reports for discussion and, if required, considers the need for any remedial action. In addition, as an investment company, the Company is required to comply with a framework of tax laws, regulation and company law.   The Board monitors regulatory change with the assistance of the Investment Manager, Company Secretary and external professional suppliers and implements necessary changes should they be required.
Failure to effectively communicate significant events to the shareholder and investor base
Polar Capital Sales Team and the Corporate Broker provide periodic reports to the Board on communications with shareholders and feedback received.   Experienced sales and client services team maintain the Company's website and ensure it contains documents holding relevant information and presentations from the Manager.   Annual, half year reports and monthly factsheets are prepared by experienced company secretaries or specialist advisors. Statutory/regulatory documentation is compiled and checked by legal advisors, auditors or brokers (when necessary) and the Board undertakes a review prior to publication. Once published, the Chair offers annual meetings with shareholders.
ECONOMIC AND MARKET RISK
Global geopolitical risk affecting changes in policy regarding taxes/assets, tariffs, trade agreements (NAFTA, China, Mexico), immigration and political tensions
The impact on the portfolio from geopolitical changes is monitored through existing control systems such as the monthly investment limits schedule.   The Investment Manager regularly reports to the Board on geographic influences, the macro economic outlook and matters of interest in relation to the portfolio and utilises horizon scanning where appropriate
Uncertainty in regulatory environment
Potential regulatory change as a result of the changing political environment is closely monitored by the board with the help of the company secretary.   The Investment Manager's Operations team monitors FX and interest rate exposure of portfolio. Note 27 in the Annual Report describes the impact of changes in foreign exchange rates.
KEY STAFF RISK
Loss of Portfolio Manager or other key professionals by the Investment Manager through resignation, redundancy or change of control
The strength and depth of investment team provides comfort that there is not over-reliance on one person with alternative senior technology portfolio managers available to act if needed. For each key business process roles, responsibilities and reporting lines are clear and unambiguous.   Key personnel are incentivised by equity participation in the investment management company. Ali Unwin was appointed as Deputy Fund Manager and is responsible for managing the portfolio of the Company alongside Ben Rogoff, Lead Manager since 1 May 2006.
The Board has insufficient resource and breadth of experience to oversee its operations
Respected industry recruiters are used to source suitably experienced candidates for non-executive directorships with detailed succession planning and skills analysis driving the recruitment process at Board level. A Board, Committee and Individual evaluation process is carried out annually and justification for re-election of Directors is provided in Annual Report to Shareholders.

        

      Increase

        Decrease

       

     Unchanged

 

 

SECTION 172 OF THE COMPANIES ACT 2006

 

The statutory duties of the Directors are detailed in s171-177 of the Companies Act 2006. The Board recognises that under s172, Directors have a duty to promote the success of the Company for the benefit of its Shareholders as a whole and in doing so have regard to the consequences of any decision in the long term, as well as having regard to the Company's wider stakeholders amongst other considerations. The fulfilment of this duty not only helps the Company achieve its Investment Objective but ensures decisions are made in a responsible and sustainable way for Shareholders.

 

To ensure that the Directors are aware of, and understand, their duties, they are provided with an induction, including details of all relevant regulatory and legal duties as a Director when they first join the Board, and continue to receive regular and ongoing updates on relevant good practice, legislative and regulatory developments. They also have continued access to the advice and services of the Company Secretary and, where deemed necessary, the Directors may seek independent professional advice. The Schedule of Matters Reserved for the Board, as well as the Terms of Reference of its committees are reviewed annually and further describe Directors' responsibilities and obligations and include any statutory and regulatory duties.

 

The Board seeks to understand the needs and priorities of the Company's Shareholders and stakeholders and these are taken into account during all of its discussions and as part of its decision-making process. As an externally managed investment company, the Company does not have any employees or customers, however the key stakeholders and a summary of the Board's consideration and actions where possible in relation to each group of stakeholders are described below.

 

SHAREHOLDERS

Engagement

The Directors have considered shareholder engagement when making the strategic decisions during the year that affect shareholders, the confirmation of the continued appointment of the Investment Manager and the recommendation that shareholders vote in favour of the resolutions to be proposed at the AGM. The Directors have also engaged with and taken account of shareholders' interests during the year.

 

The Portfolio Manager has held numerous face to face meetings and interacted with a number of shareholders and institutions in addition to presenting at a number of conferences during the year. Where appropriate, directors are invited to attend these conferences to meet with shareholders and prospective investors; in addition, the annual Investor Relations dinner was again held in October 2023. Positive feedback was received from all attendees of the dinner who welcomed the opportunity to interact with the Board and Manager.

 

The Chair will write to the Company's largest shareholders following the publication of the Annual Report and Financial Statements offering the opportunity to meet to discuss any matters of interest or concern.

 

The Company's next AGM will be held at 2:30pm on Wednesday 10 September 2025 at the offices of Herbert Smith Freehills Kramer, Exchange House, Primrose Street, London, EC2A 2EG. The Board recognises that the AGM is an important event for Shareholders and the Company and is keen to ensure that Shareholders are able to exercise their right to attend, vote and participate. Shareholders will also be able to watch the proceedings of the AGM live via Zoom Conference. Details of how to access the online link are provided in the Notice of AGM. Once again, we will be inviting feedback from Shareholders and will take this into account when planning the 2026 meeting.

 

The Board believes that shareholder engagement remains important and is keen that the AGM be a participative event for all shareholders who attend. Shareholders are encouraged to send any questions ahead of the AGM to the Board via the Company Secretary at [email protected] 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 [email protected].

 

Shareholders are kept informed by the publication of annual and half year reports, monthly fact sheets, access to commentary from the Investment Manager via the Company's website and attendance at events in which the Investment Manager presents.

 

The Company, through the sales and marketing efforts of the Investment Manager, encourages retail investment platforms to engage with underlying Shareholders in relation to Company communications and enable those Shareholders to cast their votes on shareholder resolutions; the Company however has no responsibility over such platforms. Shareholders who hold shares via an online stockbroker or platform are encouraged to exercise their vote through their respective platforms and where possible attend the AGM proceedings. Further information on how to vote through the platforms can be found on the AIC's website (www.theaic.co.uk) and in the Shareholder information section in the Annual Report.

 

The Company has also made arrangements with its registrar for shareholders, who own their shares directly rather than through a nominee or share scheme, to view their account online at www.shareview.co.uk. Other services are also available via this service.

 

Outcomes and strategic decisions during the year

AGM

This year the Board will hold a physical AGM. However, in order to provide those shareholders who are unable to attend the AGM physically with an opportunity to view the AGM, the Board will make a zoom link available to enable shareholders to watch the proceedings of the AGM live via Zoom Conference. Details of how to access the online link are provided in the Notice of AGM. Further details can be found in the shareholder information section of the Annual Report.

 

Buybacks

Further to shareholder authority being granted, the Company has the facility to conduct share buy backs when, in normal market conditions, it is in the best interests of Shareholders to do so. The Company bought back a total of 36,208,671 shares during the year under review. Subsequent to the year end and to close of business 4 July 2025, the Company bought back a further 11,960,588.

 

Gearing

The Company is aware of the positive effect that leverage can have in increasing the return to Shareholders when utilised. The Company has a term loan in place with The Bank of Nova Scotia, which expires in September 2027. Consideration will be given to the renewal of or the replacement of the term loan if it is deemed to be in the best interests of the Company's Shareholders in maximising returns.

 

Continuation Vote

The Company has within its corporate structure the requirement to hold a continuation vote every five years; ahead of each vote the Board, Investment Manager and Corporate Broker seek the feedback of shareholders including any concerns, and an indication of whether they were likely to vote in favour of the Company's continuation. The last continuation vote was held in September 2020, for which 100% of the votes cast were in favour, and the next continuation vote will be held at the AGM on 10 September 2025.

 

Ahead of the upcoming continuation vote, the Board, Investment Manager and Corporate Broker have been seeking shareholder views including any concerns, and an indication of whether they were likely to vote in favour of the Company's continuation. No comments adverse to the continuation vote have been received to date and the Shareholders who provided feedback were minded, at the time of writing, to vote in favour of the resolution for the Company to continue. Shareholders highlighted the contact between the Investment Manager and Shareholders, the long term investment horizon of many Shareholders, the diversification of the Company's register of Shareholders and the Company's inclusion on many buy lists at private wealth managers and retail platforms. As such, the Directors are confident that the continuation vote will be passed at the AGM to be held on 10 September 2025 and therefore that the Company will continue in existence. The Directors acknowledge that there can be no certainty that the continuation vote will be passed although, at the date of approval of these financial statements, the have no reason to believe that it will not do so.

 

Directors Remuneration

The remuneration of Directors is reviewed regularly and was increased with effect from 1 May 2024 and again from 1 May 2025, to reflect the rise in inflation and bring the fees of the Directors more in line with the wider market. Further details are provided in the Report of the Remuneration Committee in the Annual Report.

 

THE INVESTMENT MANAGER

Engagement

Through the Board meeting cycle, regular updates and the work of the Management Engagement Committee reviewing the services of the Investment Manager twice yearly, the Board is able to safeguard shareholder interests by:

 

·      Ensuring adherence to the Investment Management Policy and reviewing the agreed management and performance fees;

·      Ensuring excessive risk is not undertaken in the pursuit of investment performance;

·      Reviewing the Investment Manager's decision making and consistency in investment process;

·      Ensuring compliance with statutory legal requirements, regulations and other advisory guidance such as consumer duty and aspects of operational resilience; and

·      Considering the succession plans for the Technology Team in ensuring the continued provision of portfolio management services.

 

Maintaining a close and constructive working relationship with the Manager is crucial as the Board and the Investment Manager both aim to continue to achieve consistent, long-term returns in line with the Investment Objective. The culture which the Board maintains to ensure this involves encouraging open discussion with the Investment Manager; recognising that the interests of shareholders and the Investment Manager are aligned, providing constructive challenge and making Directors' experience available to support the Investment Manager. This culture is aligned with the collegiate and meritocratic culture which Polar Capital has developed and maintains.

 

Outcomes and strategic decisions during the year

 

ESG

The Board continued to engage with the Investment manager to understand how ESG has been integrated into the overall house style, the technology team investment approach and decision making as well as the methodology behind this. The Board also receives information on how ESG affects Polar Capital as a business and the technology team in particular.

 

Consumer Duty

The Board has worked with the Investment Manager to ensure the obligations of the new Consumer Duty regulations are appropriately applied to the Company. All communications including the website, fact sheets and other published documentation, have been reviewed to ensure they are appropriate for all end users.

 

Management

The Management Engagement Committee has recommended the continued appointment of the Investment Manager on the terms agreed within the Investment Management Agreement.

 

INVESTEE COMPANIES

Stewardship

The Board has instructed the Investment Manager to take into account the published corporate governance policies of the companies in which it invests.

 

The Board has also considered the Investment Manager's Stewardship Code and Proxy Voting Policy. The voting policy is for the Investment Manager to vote at all general meetings of companies in favour of resolutions proposed by the management where it believes that the proposals are in the interests of shareholders. However, in exceptional cases, where it believes that a resolution could be detrimental to the interests of shareholders or the financial performance of the Company, appropriate notification will be given and abstentions or a vote against will be lodged.

 

The Investment Manager reports to the Board, when requested, on the application of the Stewardship Code and Voting Policy. The Investment Manager's Stewardship Code and Voting Policy can be found on the Investment Manager's website in the Corporate Governance section (www.polarcapital.co.uk).

 

The Technology Investment Team also use the services of ISS to assist with their own evaluation of companies' proposals or reporting ahead of casting votes on behalf of the Company at their general meetings. In the event that an investee company has share blocking in place, the default position is to refrain from voting to ensure the ability to trade these stocks if required.

 

During the year ended 30 April 2025, votes were cast at 100% of investee company general meetings held. At 50% of those meetings a vote was either cast against management recommendation, withheld or abstained from. Further information on how the Investment Manager considers ESG in its engagement with investee companies can be found in the ESG Report within the Annual Report.

 

Outcomes and strategic decisions during the year

During the year the Board discussed the impact of ESG and other market factors and how the Investment Manager factors these into its strategy, investment and decision-making process. The Board receives information on the ratings of investee companies and is able to use this as tool to inform discussions with the Manager during Board meetings.

 

SERVICE PROVIDERS

Engagement

The Directors have frequent engagement with the Company's other key service providers through the annual cycle of reporting, site visits and due diligence meetings. This engagement is completed with the aim of having effective oversight of delegated services, seeking to improve the processes for the benefit of the Company and to understand the needs and views of the Company's service providers, as stakeholders in the Company. Further information on the Board's engagement with service providers is included in the Corporate Governance Statement and the Report of the Audit Committee. During the year under review, due diligence meetings have been undertaken by the Investment Manager and where possible, service providers have joined meetings to present their reports directly to the Board or the Audit Committee as appropriate.

 

Outcomes and strategic decisions during the year

The reviews of the Company's service providers have been positive and the Directors believe their continued appointment is in the best interests of the shareholders and the Company as a whole. The accounting and administration services of HSBC Securities Services (HSS) are contracted through Polar Capital and provided to the Company under the terms of the IMA. The Board, through due diligence undertaken by the Company Secretary and the Polar Capital Compliance team, is satisfied that the service received continues to be of a high standard.

 

PROXY ADVISORS

Engagement

The support of proxy adviser agencies is important to the Directors, as the Company seeks to retain a reputation for high standards of corporate governance, which the Directors believe contributes to the long-term sustainable success of the Company. The Directors consider the recommendations of these various proxy voting agencies when contemplating decisions that will affect shareholders and also when reporting to shareholders through the Half Year and Annual Reports.

 

Recognising the principles of stewardship, as promoted by the UK Stewardship Code, the Board welcomes engagement with all of its investors. The Board recognises that the views, questions from, and recommendations of many institutional investors and proxy adviser agencies provide a valuable feedback mechanism and play a part in highlighting evolving shareholders' expectations and concerns.

 

Outcomes and strategic decisions during this year

Where possible the Chair and other representatives of the Company have engaged with the stewardship teams of some larger investors to understand and address their expectations in terms of board governance, recruitment and diversity. Prior to the Company's AGMs, the Company engages with agencies including PIRC and ISS to fact check their advisory reports and clarify any areas or topics contained within the report. This ensures that whilst the proxy advisory reports provided to shareholders are objective and independent, the Company's actions and intentions are represented as clearly as possible to assist with shareholders' decision making when considering the resolutions proposed at the AGM.

 

THE AIC

Engagement

The Company is a member of the AIC and has supported lobbying activities. Representatives of the Manager sit on a variety of forums run by the AIC which aids development and understanding of new policies and procedures. The Directors may cast votes in the AIC Board Elections each year and regularly attend AIC events.

 

The Board supports the AIC's 'My share, my vote' campaign and encourages all Shareholders to do the same by signing the petition on the AIC's website; the AIC are lobbying government to make a change in company law to require nominees, which includes retail platforms, to automatically and without charge, pass on voting rights and information to the underlying Shareholders which at present is optional. We encourage this action as we believe shareholder engagement is important.

 

Approved by the Board on 10 July 2025

By order of the Board

 

Jumoke Kupoluyi, ACG

Polar Capital Secretarial Services Limited

Company Secretary

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK-adopted international accounting standards and applicable law.

 

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable, relevant and reliable;

·      state whether they have been prepared in accordance with UK-adopted international accounting standards;

·      assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

·      use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

 

We confirm that to the best of our knowledge:

 

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and

·      the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

 

Catherine Cripps

Chair

10 July 2025

 

 

Status of announcement 

 

The figures and financial information contained in this announcement are extracted from the Audited Annual Report for the year ended 30 April 2025 and do not constitute statutory accounts for the year. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006. 

 

The Annual Report and Financial Statements for the year ended 30 April 2025 have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 30 April 2024 are extracted from the published Annual Report and Financial Statements for the year ended 30 April 2024 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements for the year ended 30 April 2024 have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.

 

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 April 2025

 

	Notes	Year ended 30 April 2025			Year ended 30 April 2024
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	19,055	-	19,055	15,471	-	15,471
Other operating income	4	6,309	-	6,309	6,438	-	6,438
Gains on investments held at fair value	5	-	128,523	128,523	-	1,147,978	1,147,978
Gains/(losses) on derivatives	6	-	2,767	2,767	-	(22,030)	(22,030)
Other currency losses	7	-	(1,649)	(1,649)	-	(1,292)	(1,292)
Total income		25,364	129,641	155,005	21,909	1,124,656	1,146,565
Expenses
Investment management fee	8	(30,854)	-	(30,854)	(25,919)	-	(25,919)
Other administrative expenses	9	(1,644)	-	(1,644)	(1,393)	-	(1,393)
Total expenses		(32,498)	-	(32,498)	(27,312)	-	(27,312)
Gains before finance costs and tax		(7,134)	129,641	122,507	(5,403)	1,124,656	1,119,253
Finance costs	10	(1,786)	-	(1,786)	(1,874)	-	(1,874)
Profit before tax		(8,920)	129,641	120,721	(7,277)	1,124,656	1,117,379
Tax	11	(2,366)	-	(2,366)	(1,942)	-	(1,942)
Net profit for the year and total comprehensive income		(11,286)	129,641	118,355	(9,219)	1,124,656	1,115,437
Earnings per share (basic and diluted) (pence)*	12	(0.95)	10.92	9.97	(0.75)	91.17	90.42

 

*The comparative figures have been rebased following the ten for one share split on 13 September 2024.

 

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards.

 

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the AIC.

 

All items in the above statement derive from continuing operations.

 

The Company does not have any other comprehensive income.

 

The notes below form part of these Financial Statements.

 

STATEMENT OF CHANGES IN EQUITY

for the year ended 30 April 2025

 

		Share capital	Capital redemption reserve	Share premium	Special non- distributable reserve	Capital reserves	Revenue reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Total equity at 30 April 2023		34,329	12,802	223,374	7,536	2,683,759	(133,659)	2,828,141
Total comprehensive income/(expense):
Profit/(loss) for the year to 30 April 2024		-	-	-	-	1,124,656	(9,219)	1,115,437
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury	15	-	-	-	-	(139,045)	-	(139,045)
Total equity at 30 April 2024		34,329	12,802	223,374	7,536	3,669,370	(142,878)	3,804,533
Total comprehensive income/(expense):
Profit/(loss) for the year to 30 April 2025		-	-	-	-	129,641	(11,286)	118,355
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury	15	-	-	-	-	(117,935)	-	(117,935)
Share split costs		-	-	-	-	(64)	-	(64)
Total equity at 30 April 2024		34,329	12,802	223,374	7,536	3,681,012	(154,164)	3,804,889

 

The notes below form part of these Financial Statements.

 

BALANCE SHEET

as at 30 April 2025

 

	Notes	30 April 2025 £'000	30 April 2024 £'000
Non current assets
Investments held at fair value through profit or loss	13	3,664,891	3,713,758
Current assets
Receivables		39,801	37,607
Overseas tax recoverable		441	346
Cash and cash equivalents	14	188,911	103,033
Derivative financial instruments	13	12,958	9,557
		242,111	150,543
Total assets		3,907,002	3,864,301
Current liabilities
Payables		(22,337)	(11,295)
Bank loans		-	(48,036)
Overdraft at bank and derivative clearing houses	14	(1,046)	(437)
		(23,383)	(59,768)
Non current liabilities
Bank loans		(78,730)	-
Net assets		3,804,889	3,804,533
Equity attributable to equity Shareholders
Share capital	15	34,329	34,329
Capital  redemption  reserve		12,802	12,802
Share premium		223,374	223,374
Special non-distributable reserve		7,536	7,536
Capital reserves		3,681,012	3,669,370
Revenue reserve		(154,164)	(142,878)
Total equity		3,804,889	3,804,533   3,804,533
Net asset value per ordinary share (pence)*		325.20	315.41

 

* The comparative figure has been rebased following the ten for one share split on 13 September 2024.

 

The Financial Statements, were approved and authorised for issue by the Board of Directors on 10 July 2025 and signed on its behalf by:

 

Catherine Cripps

Chair

 

The notes below form part of these Financial Statements.

 

Registered number 3224867

 

CASH FLOW STATEMENT

for the year ended 30 April 2025

 

	Notes	2025 £'000	2024 £'000
Cash flows from operating activities
Profit before tax		120,721	1,117,379
Adjustments
Gains on investments held at fair value through profit or loss	5	(128,523)	(1,147,978)
(Gains)/losses on derivative financial instruments	6	(2,767)	22,030
Proceeds of disposal on investments		4,648,853	2,857,451
Purchases of investments		(4,464,412)	(2,811,714)
Proceeds on disposal of derivative financial instruments	13	99,136	21,743
Purchases of derivative financial instruments	13	(99,770)	(50,759)
Decrease/(increase) in receivables		1,550	(742)
(Decrease)/increase in payables		(9)	641
Finance costs		1,786	1,874
Overseas tax		(2,461)	(1,909)
Foreign exchange losses	7	1,649	1,292
Net cash generated from operating activities		175,753	9,308
Cash flows from financing activities
Finance costs paid		(1,776)	(1,871)
Ordinary shares repurchased into treasury		(117,689)	(139,836)
Share split costs		(64)	-
Loan repaid		(46,689)	-
Loan drawn		78,307	-
Net cash used in financing activities		(87,911)	(141,707)
Net increase/(decrease) in cash and cash equivalents		87,842	(132,399)
Cash and cash equivalents at the beginning of the year		102,596	239,096
Effect of movement in foreign exchange rates on cash held	7	(2,573)	(4,101)
Cash and cash equivalents at the end of the year	14	187,865	102,596
	Notes	2025 £'000	2024 £'000
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows:
Cash held at bank, overdraft and derivative clearing houses	14	166,498	69,581
BlackRock's Institutional Cash Series plc (US Treasury Fund), money market fund	14	21,367	33,015
Cash and cash equivalents at the end of the year	14	187,865	102,596

 

The notes below form part of these Financial Statements.

 

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 April 2025

 

1.    GENERAL INFORMATION

Polar Capital Technology Trust plc is a public limited company registered in England and Wales whose shares are traded on the London Stock Exchange.

               

The principal activity of the Company is that of an investment trust company within the meaning of Section 1158/1159 of the Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.

               

The Company financial statements have been prepared and approved by the Directors in accordance with international accounting standards in accordance with UK-adopted international accounting standards ("UK-adopted IAS").

               

The Company's presentational currency is Pounds Sterling. All figures are rounded to the nearest thousand pounds (£'000) except as otherwise stated.

       

2.    ACCOUNTING POLICIES

The material accounting policy information and other explanatory information have been applied consistently for all years presented are set out below:     

 

(A)           BASIS OF PREPARATION

The Financial Statements have been prepared on a going concern basis under the historical cost convention, as modified by the inclusion of investments and derivative financial instruments at fair value through profit or loss.

 

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in July 2022 is consistent with the requirements of UK-adopted IAS, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP.

 

Going Concern

The financial position of the Company as at 30 April 2025 is shown in the Balance Sheet above. As at 30 April 2025 the Company's total assets exceeded its total liabilities by a multiple of over 38. The assets of the Company consist mainly of securities that are held in accordance with the Company's Investment Policy, as set out in the Annual Report and these securities are readily realisable. The Company has a three-year fixed rate term loan with The Bank of Nova Scotia which falls due for repayment on 30 September 2027. The Directors have considered a detailed assessment of the Company's ability to meet its liabilities as they fall due. The assessment took account of the Company's current financial position, which used a variety of falling parameters to demonstrate the effects on the Company's share price and net asset value. In addition, the Company's cash flows were stressed tested for base case and reasonable worse case scenarios such as reduction in dividend and interest income and increase in administrative expenses. In light of the results of these tests, the Company's cash balances, and the liquidity position, the Directors consider that the Company has adequate financial resources to enable it to continue in operational existence for at least 12 months.

 

The Company has within its corporate structure the requirement to hold a continuation vote every five years. In accordance with this, a continuation vote will be put to the Shareholders at the forthcoming AGM. Since the continuation vote is taking place within the 12 months after the signing date of the 2025 Annual Report and Financial Statements, it is relevant to consider this as part of the going concern assessment. Ahead of the upcoming continuation vote, the Board, Investment Manager and Corporate Broker have been seeking Shareholder views including any concerns and an indication of whether they were likely to vote in favour of the Company's continuation. No comments adverse to the continuation vote have been received to date and the Shareholders who provided feedback were minded, at the time of writing, to vote in favour of the resolution for the Company to continue. Shareholders highlighted the contact between the Investment Manager and Shareholders, the long-term investment horizon of many Shareholders, the diversification of the Company's register of Shareholders and the Company's inclusion on many buy lists at private wealth managers and retail platforms. As such, the Directors are confident that the continuation vote will be passed at the AGM to be held on 10 September 2025 and therefore the Company will continue in existence. The Directors acknowledge that there can be no certainty that the continuation vote will be passed although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.

               

(B)           PRESENTATION OF STATEMENT OF COMPREHENSIVE INCOME

In order to reflect better the activities of an investment trust company and in accordance with the guidance set out by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. The results presented in the revenue return column is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in section 1158 of the Corporation Taxes Act 2010.            

 

(C)           INCOME

Dividends receivable from equity shares are taken to the revenue return column of the Statement of Comprehensive Income on an ex-dividend basis.

 

Special dividends are recognised on an ex-dividend basis and may be considered to be either revenue or capital items.

 

The facts and circumstances are considered on a case by case basis before a conclusion on appropriate allocation is reached.

 

Where the Company has received dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in the revenue return column of the Statement of Comprehensive Income. Any excess in value of shares received over the amount of the cash dividend foregone is recognised in the capital return column of the Statement of Comprehensive Income.

 

Unfranked income includes the taxes deducted at source.

 

Bank interest, money market fund interest and other income receivable are accounted for on an accruals basis and is recognised in the period in which it was earned.

 

Interest outstanding at the year end is calculated on a time apportioned basis using the market rates of interest.

               

(D)           EXPENSES AND FINANCE COSTS

All expenses, including finance costs, are accounted for on an accruals basis.

 

All indirect expenses have been presented as revenue items per the non-allocation method except as follows:

 

-       any performance fees payable are allocated wholly to capital, reflecting the fact that, although they are calculated on a total return basis, they are expected to be attributable largely, if not wholly, to capital performance.

-       transaction costs incurred on the acquisition or disposal of investments are expensed either as part of the unrealised gain/loss on investments (for acquisition costs) or as a deduction from the proceeds of sale (for disposal costs).

 

Finance costs are calculated using the effective interest rate method and are accounted for on an accruals basis.

               

(E)           TAXATION

The tax expense represents the sum of the overseas withholding tax deducted from investment income, tax currently payable and deferred tax.

 

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

 

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the 'marginal basis'. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

 

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

 

Investment trusts which have approval as such under section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the balance sheet date.

 

Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

               

(F)           INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date and are initially measured at fair value.

 

On initial recognition the Company has designated all of its investments as held at fair value through profit or loss as defined by UK-adopted IAS.

 

All investments are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or OEICs are valued at the closing price, the bid price or the single price as appropriate, as released by the relevant investment manager.

 

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

Fair values for unquoted investments, or for investments for which there is only an inactive market, are established by using various valuation techniques. These may include recent arms length market transactions, the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost, subject to any provision for impairment.

 

Changes in fair value of all investments held at fair value and realised gains and losses on disposal are recognised in the capital return column of the Statement of Comprehensive Income.

               

(G)           RECEIVABLES

Receivables are initially recognised at fair value and subsequently measured at amortised cost. Receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value (amortised cost) as reduced by appropriate allowances for estimated irrecoverable amounts.

               

(H)           CASH AND CASH EQUIVALENTS

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term maturity of three months or less, highly liquid investments that are readily convertible to known amounts of cash on demand. These include investments in AAA-rated money market funds.

 

The Company's investment in BlackRock's Institutional Cash Series plc - US Treasury Fund of £21,367,000 (2024: £33,015,000) is managed as part of the Company's cash and cash equivalents as defined under IAS 7. This is measured at fair value through profit or loss and is classified as Level 1 in the IFRS 13 fair value hierarchy.

 

In the Balance Sheet bank overdrafts are shown within current liabilities.

               

(I)            PAYABLES

Payables are initially recognised at fair value and subsequently measured at amortised cost. Payables are not interest- bearing and are stated at their nominal value (amortised cost).

               

(J)            BANK LOANS

Interest bearing bank loans are initially recognised at cost, being the proceeds received net of direct issue costs, and subsequently at amortised cost. The amounts falling due for repayment within one year are included under current liabilities in the Balance Sheet.

               

(K)           DERIVATIVE FINANCIAL INSTRUMENTS

The Company's activities expose it primarily to the financial risks of changes in market prices, foreign currency exchange rates and interest rates. Derivative transactions which the Company may enter into comprise forward exchange contracts, the purpose of which is to manage the currency risks arising from the Company's investing activities, quoted options on shares held within the portfolio, or on indices appropriate to sections of the portfolio, the purpose of which is to provide additional capital return.

 

The use of financial derivatives is governed by the Company's policies as approved by the Board, which has set written principles for the use of financial derivatives.

 

A derivative instrument is considered to be used for hedging purposes when it alters the market risk profile of an existing underlying exposure of the Company. The use of financial derivatives by the Company does not qualify for hedge accounting under UK-adopted IAS. As a result, changes in the fair value of derivative instruments are recognised in the Statement of Comprehensive Income as they arise. If capital in nature, associated change in value is presented in the capital return column of the Statement of Comprehensive Income.

               

(L)           RATES OF EXCHANGE

Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling on the date of each

transaction. Monetary assets, monetary liabilities and equity investments in foreign currencies at the balance sheet date are translated into Sterling at the rates of exchange ruling on that date. Realised profits or losses on exchange, together with differences arising on the translation of foreign currency assets or liabilities, are taken to the capital return column of the Statement of Comprehensive Income.

               

Foreign exchange gains and losses arising on investments held at fair value are included within changes in fair value.

               

(M)          SHARE CAPITAL

Represents the nominal value of authorised and allocated, called-up and fully paid shares issued.

               

(N)          CAPITAL RESERVES

Capital reserves - gains/losses on disposal includes:

 

-       gains/losses on disposal of investments

-       exchange differences on currency balances and on settlement of loan balances

-       cost of own shares bought back

-       other capital charges and credits charged to this account in accordance with the accounting policies above

 

Capital reserve - revaluation on investments held includes:

-       increases and decreases in the valuation of investments and loans held at the year end.

 

All of the above are accounted for in the Statement of Comprehensive Income except the cost of own shares bought back or issued which are accounted for in the Statement of Changes in Equity.

               

(O)          REPURCHASE OF ORDINARY SHARES (INCLUDING THOSE HELD IN TREASURY)

Where applicable, the costs of repurchasing ordinary shares including related stamp duty and transaction costs are taken directly to equity and reported through the Statement of Changes in Equity as a charge on the capital reserve. Share repurchase transactions are accounted for on a trade date basis.

 

The nominal value of ordinary share capital repurchased and cancelled is transferred out of called up share capital and into the capital redemption reserve.

 

Where shares are repurchased and held in treasury, the transfer to capital redemption reserve is made if and when such shares are subsequently cancelled.

               

(P)           SHARE ISSUE COSTS

Costs incurred directly in relation to the issue of new shares together with additional share listing costs have been deducted from the share premium reserve.

               

(Q)          SEGMENTAL REPORTING

Under IFRS 8, 'Operating Segments', operating segments are considered to be the components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker has been identified as the Manager (with oversight from the Board).

 

The Board is of the opinion that the Company is engaged in a single segment of business, namely by investing in a diversified portfolio of technology companies from around the world in accordance with the Company's Investment Objective, and consequently no segmental analysis is provided.

 

In line with IFRS 8, additional disclosure by geographical segment has been provided in Note 26 in the Annual Report.

 

Further analyses of expenses, investment gains or losses, profit and other assets and liabilities by country have not been given as either it is not possible to prepare such information in a meaningful way or the results are not considered to be significant.

               

(R)           KEY ESTIMATES AND JUDGMENTS

 

Estimates and assumptions used in preparing the Financial Statements are reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The results of these estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

 

The only estimates and assumptions that may cause material adjustment to the carrying value of assets and liabilities relate to the valuation of unquoted investments and investments for which there is an inactive market. These are valued in accordance with the techniques set out in Note 2(f). At the year end, there was no unquoted investments (2024: same).

The majority of the Company's investments are in US Dollars, the level of which varies from time to time. In determining the functional currency the Board considered the indicators in IAS 21 and the guidance in the AIC SORP. The Board considered that the indicators were mixed as although the Company's investments are predominantly denominated in USD, the majority of the Company's operating expenses and the Company's shares are denominated in Sterling. The Board consider that Sterling best reflects the economic environment in which the Company operates and is most relevant to the majority of the Company's Shareholders and creditors, and therefore concluded that the Company's functional currency is Sterling.

 

 (S)          NEW AND REVISED ACCOUNTING STANDARDS                           

There were no new UK-adopted IAS or amendments to UK-adopted IAS applicable to the current year which had any significant impact on the Company's Financial Statements.

 

i) The following new or amended standards became effective for the current annual reporting period and

the adoption of the standards and interpretations have not had a material impact on the Financial Statements

of the Company.

 

Standards & Interpretations		Effective for periods commencing on or after
Amendments to IAS 1 Presentation of Financial Statements - 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

 

ii) At the date of authorisation of the Company's Financial Statements, the following relevant standards that potentially impact the Company are in issue but are not yet effective and have not been applied in the Financial Statements.

 

 

Standards & Interpretations		Effective for periods commencing on or after
Lack of Exchangeability (Amendments to IAS 21)	The amendments specify how to assess whether a currency is exchangeable and how to determine a spot exchange rate if it is not.	1 January 2025
Annual Improvements to IFRS Accounting Standards-Volume 11	The amendments clarify the requirements for: Hedge accounting by a first-time adopter (IFRS 1 First-time Adoption of International Financial Reporting Standards); Gain or loss on derecognition (IFRS 7 Financial Instruments: Disclosures); Transaction price (IFRS 9 Financial Instruments); Derecognition of lease liabilities (IFRS 9); Determination of a 'de facto agent' (IFRS 10 Consolidated Financial Statements) and Cost method (IAS 7 Statement of Cash Flows).	1 January 2026
Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Statements	The amendments address two of the issues identified during the post-implementation review of IFRS 9, being the derecognition of a financial liability settled through electronic transfer and the classification of financial assets, it also introduces new and amended disclosure requirements.	1 January 2026

 

The Directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be material on the Financial Statements of the Company in future periods.

               

3.            INVESTMENT INCOME	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Revenue:
UK dividend income	58	-
Overseas Dividend income	18,997	15,471
	19,055	15,471

 

All investment income is derived from listed investments.

 

Included within income from investments is £48,000 (2024: nil) of special dividends classified as revenue in nature in accordance with note 2(c). No special dividends have been recognised in capital (2024: same).

 

4.            OTHER OPERATING INCOME	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Bank interest	3,932	2,529
Money market fund interest	2,377	3,909
	6,309	6,438

 

 

5.            GAINS ON INVESTMENTS HELD AT FAIR VALUE	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Net gains on disposal of investments at historic cost	695,869	476,684
Transfer on disposal of investments	(618,762)	(151,853)
Gains on disposal of investments based on carrying value at previous balance sheet date	77,107	324,831
Valuation gains on investments held during the year	51,416	823,147
	128,523	1,147,978

 

 

6.            GAINS/(LOSSES) ON DERIVATIVES	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Gains/(losses) on disposal of derivatives held	10,212	(21,716)
Losses on revaluation of derivatives held	(7,445)	(314)
	2,767	(22,030)

 

The derivative financial instruments represent the call and put options, which are used for the purpose of efficient portfolio management. Refer to Note 13 below for further details.                                                                                                                   

 

7.            OTHER CURRENCY LOSSES	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Exchange losses on currency balances	(2,573)	(4,101)
Exchange gains on settlement of loan balances	9,753	-
Exchange (losses)/gains on translation of loan balances	(8,829)	2,809
	(1,649)	(1,292)

 

 

8.            INVESTMENT MANAGEMENT AND PERFORMANCE FEE

	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Investment management fee paid to Polar Capital (charged wholly to revenue)	30,854	25,919
Performance fee paid to Polar Capital (charged wholly to capital)	-	-

 

There was no performance fee payable in respect of the year nor outstanding at the year end (2024: same).

 

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

 

A revised Investment Management Agreement was put in place with the Manager which took effect on 1 May 2025. The new base management fee is structured over two tiers, and the performance fee has been removed entirely. Details of the revised terms of the Investment Management Agreement are disclosed in the Strategic Report above.

                               

9.            OTHER ADMINISTRATIVE EXPENSES

	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Directors' fees and expenses1	254	253
National insurance contributions	27	27
Depositary fee2	264	227
Registrar fee	61	57
Custody and other bank charges3	475	359
UKLA and LSE listing fees4	269	208
Legal & professional fees and other financial services5	56	3
AIC fees	22	21
Auditors' remuneration - for audit of the financial Statements	82	80
Directors' and officers' liability insurance	50	56
AGM expenses 6	-	6
Corporate brokers' fee7	-	-
Shareholder communications 8	60	63
Other expenses9	24	33
	1,644	1,393

 

1  Full disclosure is given in the Directors' Remuneration Report in the Annual Report.

2 Depositary fee is based on the value of the net assets. The daily average net asset value rose by 23% compared to the previous year.

3 Custody fees are based on the value of the assets and geographical activity and determined on the pre-approved rate card with HSBC.

4 Fees are based on the market capitalisation of the Company which has risen over the last invoice period.

5 2025 includes legal cost of new loan agreement.

6 Includes reversal of prior year over accruals in this period.

7 2024/2025 annual fee was offset by the commission credit on shares repurchases.

8 Includes Bespoke promotional marketing cost.

9 2025 includes external third party Board evaluation cost (2024: Non-executive Directors' search fee).

 

10.          FINANCE COSTS	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Interest on loans and overdrafts	1,762	1,874
Loan arrangement and facility fees	24	-
	1,786	1,874

 

11.          TAXATION	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
(a) Analysis of tax charge for the year:
Overseas tax	2,366	1,942
Total tax for the year (see Note 11b)	2,366	1,942

 

(b) Factors affecting tax charge for the year:

The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:

 

Profit before tax	120,721	1,117,379
Tax at the UK corporation tax rate of 25% (2024: 25%)	30,180	279,345
Tax effect of non-taxable dividends	(4,764)	(3,868)
Tax effect of gains on investments that are not taxable	(32,410)	(281,164)
Unrelieved current year expenses and deficits	6,994	5,687
Overseas tax suffered	2,366	1,942
Total tax for the year (see Note 11a)	2,366	1,942

 

 

(c) Factors that may affect future tax charges:

There is an unrecognised deferred tax asset comprising:

Unrelieved management expenses	79,679	72,685
Non-trading loan relationship deficits	1,807	1,807
	81,486	74,492

 

The deferred tax asset is based on corporation tax rate of 25% (2024: 25%).

 

The Company has an unrecognised deferred tax asset of £79,679,000 (2024: £72,685,000) arising from surplus management expenses of £318,715,000 (2024: £290,740,000) and unrecognised deferred tax asset of £1,807,000 (2024: £1,807,000) arising from non-trade loan relationship deficits of £7,227,000 (2024: £7,227,000) based on a corporation tax rate of 25% (2024: 25%). Given the composition of the Company's portfolio, it is not likely that this assets will be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

 

Due to the Company's tax status as an investment trust and the intention to continue meeting the conditions required to maintain approval of such status in the foreseeable future, the Company has not provided tax on any capital gains arising on the revaluation or disposal of investments held by the Company.

 

12.          EARNING PER ORDINARY SHARE

	Year ended 30 April 2025			Year ended 30 April 2024
	Revenue return pence	Capital return pence	Total return pence	Revenue return pence	Capital return pence	Total Return pence
The calculation of basic earning per ordinary share is based on the following data:
Net profit for the year (£'000)	(11,286)	129,641	118,355	(9,219)	1,124,656	1,115,437
Weighted average ordinary shares in issue during the year*	1,187,532,192	1,187,532,192	1,187,532,192	1,233,614,300	1,233,614,300	1,233,614,300
From continuing operations
Basic - earning per ordinary shares (pence)*	(0.95)	10.92	9.97	(0.75)	91.17	90.42

 

* The comparative figures have been rebased following the ten for one share split on 13 September 2024.

 

As at 30 April 2025 there are no potentially dilutive shares in issue and the earnings per share therefore equate to those shown above (2024: there was no dilution).

 

13. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

 

(i)            Investments held at fair value through profit or loss

	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Opening book cost	2,460,764	2,058,477
Opening investment holding gains	1,252,994	581,700
Opening fair value	3,713,758	2,640,177
Analysis of transactions made during the year
Purchases at cost	4,475,207	2,799,314
Sales proceeds received	(4,652,597)	(2,873,711)
Gains on investments held at fair value	128,523	1,147,978
Closing fair value	3,664,891	3,713,758
Closing book cost	2,979,243	2,460,764
Closing investment holding gains	685,648	1,252,994
Closing fair value	3,664,891	3,713,758
Of which:
Listed on a recognised Stock Exchange	3,664,891	3,713,758

 

The Company received £4,652,597,000 (2024: £2,873,711,000) from disposal of investments in the year. The book cost of these investments when they were purchased was £3,956,728,000 (2024: £2,397,027,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

 

Included in additions at cost are purchase costs of £2,320,000 (2024: £1,550,000). Included in proceeds of disposals are sales costs of £2,971,000 (2024: £1,726,000). These costs primarily comprise commission.

 

(ii)          Changes in derivative financial instruments	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Valuation at 1 May	9,557	2,571
Additions at cost	99,770	50,759
Proceeds of disposal	(99,136)	(21,743)
Gains/(losses) on disposal	10,212	(21,716)
Valuation losses	(7,445)	(314)
Valuation at 30 April	12,958	9,557

 

The derivative financial instruments represent the call and put options, which are used for the purpose of efficient portfolio management. As at 30 April 2025, the Company held NASDAQ 100 Stock Index put option and the market value of these open put option position was £5,905,000 (2024: NASDAQ 100 Stock Index put options with a market value of £7,192,000). The Company also held Microsoft Corp call option and Apple Inc call options, the market value of these open call option position were £11,000 and £7,042,000 respectively (2024: Microsoft Corp call options with a market value of £403,000 and Apple Inc call option with a market value of £1,962,000).

 

(iii)          Classification under Fair Value Hierarchy:

The table below sets out the fair value measurements using the IFRS 13 fair value hierarchy. Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value measurement of the relevant asset as follows:

 

Level 1 - valued using quoted prices in active markets for identical assets.

 

Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1.

 

Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

 

The valuation techniques used by the Company are explained in the accounting policies above.

 

	Year ended 30 April 2025 £'000	Year ended 30 April 2024 £'000
Equity Investments and derivative financial instruments
Level 1	3,671,944	3,717,533
Level 2	5,905	5,782
Level 3	-	-
	3,677,849	3,723,315

 

As at the year ended 30 April 2025, £5,905,000 (2024: £5,782,000) of NASDAQ 100 Stock Index put options held by the Company have been classified as level 2 due to the absence of regular trading activity levels closer to the measurement date. All other options held at the current and prior year end have been classified as level 1.

 

There has been no transfer between Levels 1, 2 and 3 during the year ended 30 April 2025.

 

(iv)          Unquoted investments

 

As at 30 April 2025, the portfolio comprised no unquoted investment (2024: same):

 

14.          CASH AND CASH EQUIVALENTS	30 April 2025 £'000	30 April 2024 £'000
Cash at bank	167,544	69,964
Cash held at derivative clearing houses	-	54
Money market funds	21,367	33,015
Cash and cash equivalents	188,911	103,033
Overdraft at bank and derivative clearing houses	(1,046)	(437)
	187,865	102,596

 

As at 30 April 2025, the Company held BlackRock's Institutional Cash Series plc - US Treasury Fund with a market value of £21,367,000 (2024: £33,015,000), which is managed as part of the Company's cash and cash equivalents as defined under IAS 7.

 

As defined under IAS 7, the bank overdraft is included in the Company's cash and cash equivalents as it is repayable on demand and forms an integral part of the Company's cash management.

 

15.          SHARE CAPITAL

	30 April 2025 £'000	30 April 2024 £'000
Allotted, Called up and Fully paid:
Ordinary shares of 2.5p* each
Opening balance of 1,206,215,690* (2024: 1,262,855,440*)	30,155	31,571
Repurchase of 36,208,671 (2024: 56,639,750*) ordinary shares into treasury	(905)	(1,416)
Allotted, called up and fully paid: 1,170,007,019 (2024: 1,206,215,690*) ordinary shares of 25p	29,250	30,155
ordinary shares of 2.5p
203,142,981 (2024: 166,934,310*) ordinary shares held in treasury	5,079	4,174
At 30 April 2025	34,329	34,329

 

* The comparative figure has been rebased following the ten for one share split on 13 September 2024.

 

At the Annual General Meeting of the Company held on 11 September 2024, Shareholders approved the sub-division of existing ordinary shares of 25 pence each into ten new shares of 2.5 pence each (ten for one share split). Following the completion of this share split, 137,315,000 ordinary shares of 25 pence each (including 18,073,403 shares held in treasury) were sub-divided into 1,373,150,000 new ordinary shares of 2.5 pence each (including 180,734,030 shares held in treasury). The new ordinary shares were admitted to the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange's main market for listed securities on 13 September 2024.

 

During the year, there were no ordinary shares (outside of the ordinary share issued in relation to the share split) issued to the market (2024: no shares issued). A total of 36,208,671 (2024: 56,639,750*) ordinary shares were repurchased into treasury at a cost of £117,935,000 (2024: £138,355,000 and stamp duty of £690,000).

 

Subsequent to the year end, and to 4 July 2025 (latest practicable date), 11,960,588 ordinary shares were repurchased into treasury at an average price of 335.98p per share.

 

16. TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS

 

(A) TRANSACTIONS WITH THE MANAGER

 

Under the terms of an agreement dated 9 February 2001 the Company has appointed Polar Capital LLP ("Polar Capital") to provide investment management, accounting, secretarial and administrative services.  Details of the fee arrangement for these services are given in the Strategic Report.  The total management fees, paid under this agreement to Polar Capital in respect of the year ended 30 April 2025 were £30,854,000 (2024: £25,919,000) of which £2,246,000 (2024: £2,386,000) was outstanding at the year end.                                  

 

There was no performance fee payable in respect of the year nor outstanding at the year end (2024: same).

 

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

 

A revised Investment Management Agreement was put in place with the Manager which took effect on 1 May 2025. The new base management fee is structured over two tiers, and the performance fee has been removed entirely. Details of the revised terms of the Investment Management Agreement are disclosed in the Strategic Report above.

 

(B) RELATED PARTY TRANSACTIONS

 

The compensation payable to key management personnel in respect of short term employee benefits is £254,000 (2024: £253,000) which comprises £254,000 (2024: £253,000) paid by the Company to the Directors.

 

Refer to Company's 2025 Annual Report for the Directors' Remuneration Report including Directors' shareholdings and movements within the year.

 

17.          NET ASSET VALUE PER ORDINARY SHARE

 

	Net asset value per share
	30 April 2025	30 April 2024
Undiluted:
Net assets attributable to ordinary Shareholders (£'000)	3,804,889	3,804,533
Ordinary shares in issue at end of year*	1,170,007,019	1,206,215,690
Net asset value per ordinary share (pence)*	325.20	315.41

 

*The comparative figures have been rebased following the ten for one share split on 13 September 2024.

 

As at 30 April 2025, there were no potentially dilutive shares in issue (2024: there was no dilution).

 

18.          POST BALANCE SHEET EVENT

 

Subsequent to the year end, and to 4 July 2025, 11,960,588 ordinary shares were repurchased and placed in the Treasury at an average price of 335.98p per share.

 

There are no other significant events that have occurred after the end of the reporting period to the date of this report which require disclosure.