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TECHNOLOGY DISRUPTION Recoding the corporate DNA

Annual Report & Financial Statements for the year ended 30 April 2018

Annual R

eport & Financial Statem

ents 2018

For more information www.polarcapitaltechnologytrust.co.uk

THE INVESTMENT OBJECTIVE IS TO MAXIMISE LONG-TERM CAPITAL GROWTH THROUGH INVESTING IN A DIVERSIFIED PORTFOLIO OF TECHNOLOGY COMPANIES AROUND THE WORLD.

Contents

Overview02 About your Company

04 Financial Highlights

05 Performance

Strategic Report08 Chair’s Statement

11 Manager’s Report

27 Portfolio Review

37 Strategic Report

Governance52 Directors

54 Investment Team

56 Directors’ Report

59 Report on Corporate Governance

69 Audit Committee Report

73 Directors’ Remuneration Report

77 Statement of Directors’ Responsibilities

Independent Auditors’ Report78 Independent Auditors’ Report

Financial Statements84 Statement of Comprehensive Income

85 Statement of Changes in Equity

86 Balance Sheet

87 Cash Flow Statement

88 Notes to the Financial Statements

Shareholder Information113 Contacts & Information

114 Capital Gains Tax

115 Investing

117 Warning to Shareholders

118 Alternative Performance Measures (APMs)

119 Glossary

Polar Capital Technology Trust plcAnnual Report & Financial Statements for the year ended 30 April 2018

Full details in the Financial Summary on

Page 04~ Alternative performance measure as per page 118. * Dow Jones World Technology Index (total return, Sterling adjusted, with the removal of relevant withholding taxes)

Performance over the year to 30 April 2018

NET ASSETS PER ORDINARY SHARE TOTAL RETURN~

+22.7%

SHARE PRICE TOTAL RETURN~

+21.2%

BENCHMARK* TOTAL RETURN

+17.1%(2017: +56.1%) (2017: +67.3%) (2017: +53.4%)

INTRODUCTION

Overview

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OBJECTIVE The investment objective is to maximise long-term capital growth through investing in a diversified portfolio of technology companies around the world. The investment policy is set out in full in the Strategic Report on pages 37 and 38.

RATIONALE Over the last three 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.

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 will be 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, financial, e-commerce and renewable energy, as well as the more obvious applications such as computing and associated industries.

INVESTMENT APPROACH Stocks 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;

• exploiting international valuation anomalies; and

• sector volatility.

CONTINUATION VOTE The shareholders have the opportunity to vote on the continuation of the Company in it’s current form every five years. The next continuation vote will be held at the AGM in 2020.

ABOUT YOUR COMPANY

BENCHMARKThe Company has a Benchmark of the Dow Jones World Technology Index (total return, Sterling adjusted, with the removal of relevant withholding taxes) against which Net Asset Value (NAV) performance is measured for the purpose of assessing performance fees.

While the Investment Manager is Benchmark aware in the construction of the portfolio, the team seeks to identify high growth companies which can result in a significant difference between the portfolio and the Benchmark. An analysis of the portfolio is set out on pages 27 to 36. The full portfolio at 30 April 2018 is also available on the Company’s website.

GEARINGThe 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 overall level of net gearing is agreed between Polar Capital LLP as the Alternative Investment Fund Manager (AIFM) and the Board. 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.

The Investment Manager’s use of derivatives is controlled 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.

DIVIDENDSThe Company has not historically paid a dividend as the objective is capital growth.

MANAGEMENT The Company is led by an experienced Board of Non-executive Directors with extensive knowledge of investment matters and the regulatory framework in which such activity is undertaken. The Directors have appointed various third party suppliers to provide a range of services including investment management, depositary and administrative services to the Company.

02 Polar Capital Technology Trust plcAnnual Report & Financial Statements for the year ended 30 April 2018

The role of the Board is to provide oversight of the Company’s activities and to ensure the appropriate financial resources and controls are in place to deliver the investment objective and manage the risks associated with such activities. Details of the Directors’ skills and relevant experience are given on pages 52 and 53.

Polar Capital LLP has been the appointed Investment Manager and AIFM throughout the year. Ben Rogoff, the appointed portfolio manager, has been responsible for the Company’s portfolio since 1 May 2006 and is supported by a team of technology specialists. Details of the investment team are given on pages 54 and 55.

Polar Capital LLP is authorised and regulated by the Financial Conduct Authority.

FEES The Company pays both a tiered basic management fee and a performance fee, details of which are set out in the Strategic Report on pages 45 and 46.

SHARE PRICE AND NET ASSET VALUEInformation on the Company including Monthly Factsheets, the NAV and share price can be found on the Company’s website. The Company’s NAV, is released on the next working day following the calculation date, to the London Stock Exchange.

Share price information is also available from The London Stock Exchange Website www.londonstockexchange.co.uk (PCT), Bloomberg (PCT.LN), Datastream (PCT), Lipper (71000395) and Reuters (PCT.L).

The SEDOL code for the ordinary shares is 0422002 and the ISIN is GB004220025.

PORTFOLIO DETAILS A full portfolio listing is published quarterly on the Company’s website.

AICThe Company is a member of the Association of Investment Companies (“AIC”) and the AIC website www.theaic.co.uk contains detailed information about investment trusts including guides and statistics.

WEBSITE The Company’s website can be found at www.polarcapitaltechnologytrust.co.uk

It contains useful information on the Company including stock exchange announcements, financial statements and other reports and notices, commentary by the portfolio manager and useful links to third parties.

REGISTRAREquiniti Limited Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA

Shareholder helpline: 0800 876 6889 (or +44 371 384 2476) www.shareview.co.uk

Shareholders who have their shares registered in their own name, not through a share savings scheme or ISA, can contact the registrars with any queries on their holding. Post, telephone and Internet contact details are given above.

In correspondence you should refer to Polar Capital Technology Trust plc, stating clearly the registered name and address and, if available the full account number.

ELECTRONIC COMMUNICATIONSIf you hold your shares in your own name you can choose to receive communications from the Company in electronic format. This method reduces costs, is environmentally friendly and, for many, is convenient.

If you would like to take advantage of Electronic Communications please visit our registrar’s website at www.shareview.co.uk. You will need your Shareholder reference number. Once registered, on the day that shareholder documents are sent out by post you will receive an e-mail providing the website address where the documents can be viewed and downloaded. Paper copies will still be available on request.

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FINANCIAL HIGHLIGHTS

FINANCIAL SUMMARY

As at30 April 2018

As at30 April 2017 Movement

Total net assets~ £1,551,611,000 £1,252,525,000 +23.9%

Net assets per ordinary share~ 1159.69p 945.39p +22.7%

Benchmark (see below) 992.81 848.19 +17.1%

Price per ordinary share 1148.00p 947.00p +21.2%

(Discount)/Premium of ordinary share price to the NAV per ordinary share~ (1.0%) 0.2%

Ordinary shares in issue* 133,795,000 132,487,000 +1.0%

*The issued share capital on 17 July 2018 is 133,825,000 shares.

KEY DATA

For the year to 30 April 2018

Local Currency %

Sterling Adjusted %

Benchmark

Dow Jones World Technology Index (total return Sterling adjusted, with the removal of relevant withholding taxes) 24.6 17.1

Other Indices over the year (total return)

FTSE World 14.4 7.7

FTSE All-Share 8.2

S&P 500 Composite 13.3 6.6

Nikkei 225 19.3 14.5

Eurostoxx 600 2.9 7.5

EXCHANGE RATES

30 April 2018 30 April 2017

US$ to £ 1.3774 1.2938

Japanese Yen to £ 150.72 144.21

Euro to £ 1.1400 1.1881

For the year to 30 April

2018 2017

Ongoing charges ratio (see page 40)#~ 0.99% 1.01%

Ongoing charges ratio including performance fee#~ 1.76% 1.01%

Data supplied by Polar Capital LLP and HSBC Security Services.

# Ongoing charges represents the total expenses of the Company, excluding finance costs, expressed as a percentage of the average daily net asset value, in accordance with AIC guidance issued. From 3 January 2018, the research cost borne by the Company is included in the ongoing charges calculation.

~ Alternative performance measure as per page 118.


HISTORIC PERFORMANCE

To 30 April 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Net Assets (£m) 300.4 274.2 398.6 468.7 503.3 528.8 606.6 793.0 801.3 1,252.5 1,551.6

Share price (pence) 190.8 183.0 306.8 373.5 387.0 398.5 442.0 592.0 566.0 947.0 1,148.0

NAV per share (pence) 226.7 216.8 315.1 368.7 392.6 412.4 458.4 599.2 605.5 945.4 1,159.7

Indices of Growth1

Share price 100.0 95.9 160.8 195.8 202.9 208.9 231.7 310.4 296.7 496.5 601.8

NAV per share2 100.0 95.6 139.0 162.6 173.2 181.9 202.2 264.3 267.1 417.0 511.5

Dow Jones World Technology Index3 100.0 94.6 132.0 138.2 149.7 158.6 179.4 232.2 232.0 355.8 416.4

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

Notes:

1 Rebased to 100 at 30 April 2008.

2 The NAV per share growth is based on NAV per share as adjusted for warrants and subscription shares.

3 Dow Jones World Technology Index (total return, Sterling adjusted) and from April 2013 with the removal of relevant withholding taxes.

All data sourced from Polar Capital LLP.

10 YEAR PERFORMANCE GRAPH

PCTT ordinary share price

PCTT NAV per share (note 2)

Benchmark

April 2008

0

600

700

500

300

400

200

100

April 2011

April 2009

April 2013

April 2016

April 2012

April 2015

April 2010

April 2014

April 2017

April 2018

PERFORMANCE

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Overview

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08 Chair’s Statement

11 Manager’s Report

27 Portfolio Review

37 Strategic Report

STRATEGIC REPORT

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Our Benchmark is the Dow Jones World Technology index (total return, Sterling adjusted with relevant withholding taxes removed) and this has driven returns over time. The Polar Capital technology team, led by Ben Rogoff in respect of the Company, has delivered further returns by outperforming that Benchmark, both last year by 2.7% and this year by 5.6%. The team is not hidebound by the Benchmark (to mix metaphors) but does pay some attention to it. We have said to our shareholders that we will provide a broad technology exposure and, in what is a volatile sector, we seek to pay attention to risk both in absolute and relative terms. Companies in this sector perform spectacularly well, from time to time, and also perform spectacularly badly. Obviously the team tries to pick the former group and avoid the latter, but from time to time, the unexpected happens. Hence Ben Rogoff’s approach is to run a reasonably diversified portfolio with the aim of delivering good long-term outperformance but avoiding peaks and troughs in the shorter term. Therefore, we are pleased to see relative outperformance over 5 and 10 years.

Ben describes the reasons for the team’s outperformance in detail in his report on pages 11 to 26. In broad terms, his long-term thesis, that cloud computing would have a radical effect on the sector, has continued to prove correct. One or two older companies (and perhaps Microsoft is one) have shown signs of reinventing themselves but many spiral downwards and are not included in the portfolio.

Looking in a bit more detail, the portfolio has outperformed in all of its market capitalisation categories and almost all of its geographic regions.

We are pleased, therefore, to be paying a performance fee this year, for the first time since 2011. This reflects both good absolute returns (without which a performance fee is not payable) and an effective long-term approach which has delivered outperformance for shareholders.

CHAIR’S STATEMENT

Dear ShareholderI am pleased to be reporting to you for the first time as your Chair. I would like to thank my predecessor, Michael Moule, for his contribution to your Company. His immense enthusiasm, investment knowledge and curiosity make him a very hard act to follow. I shall do my best.

As Michael said last year, he was appointed in 2011 and presided over considerable growth in Polar Capital Technology since that point, fuelled by post crisis Central Bank support and extraordinary change in and opportunities provided by the technology sector. Part of the role of a Chair’s statement is to put the twelve-month period of this report into context. It is perhaps worth remembering that in the year to 30 April 2017, the net assets per share of your Company rose by just over 56.0%, despite considerable political surprise and upheaval during that period.

The twelve months on which I now report seems almost muted by comparison: the net asset value per share rose a further 22.7%, taking net assets per share to 1,159.69p and the net assets of your Company to £1,551.6m. The share price rose by almost as much, providing a return of 21.2%.

Shareholders may remember that a considerable part of 2016/17’s return was due to the weakness of Sterling, following the result of the Brexit referendum. This year, that weakness reversed to some extent providing a headwind, and not a tailwind to returns.


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We do consider the performance fee and the Benchmark carefully. The business model of Polar Capital, which involves performance fees, has worked well for shareholders and we do understand the ethos of Polar Capital in managing the capacity constraints of their investment teams according to the markets and sectors in which they invest. We regularly review the overall fee structure including the performance element with the next review due later this year.

REGULATIONI had wondered perhaps too optimistically if this section could be removed over time. However, the last year has thrown a few further curve balls into our paths.

MiFID II: although if we were starting from here, I don’t think anyone would set up the way client commission has been used for broker research for fund managers, and the agency problem is real, the transition is less straightforward for a trust which is competing for research and resources with investment vehicles in other regulatory regimes. We expect, however, change to continue on this front. Our research and commission costs have been falling quite quickly and we have had detailed discussions with Polar over the years on this front.

In 2016 our commissions payable were £2.7m of which £1.8m was for research, in the year to April 2017 they were £2.3m of which £1.5m was for research and, in the year to 30 April 2018, commissions were lower again at £2.1m of which £1.4m was for research. Of the latter, £1.2m was prior to the implementation of MiFID II (1 May 2017-2 January 2018) and £0.2m was the direct cost for the four months from 3 January to 30 April 2018, this period reflects the new MiFID II regime. From 30 April 2017, assets have risen by 23.9% from £1,252.5m to £1,551.6m.

In response to the arrival of what is called unbundling, we negotiated with Polar that we would pay 50% of the newly unbundled research costs for the calendar year 2018, with a cap of USD$878,000 (approximately £637,000), in addition to our execution costs, which Polar have also negotiated downwards. The total cost of research for 2018 is estimated at $1.76m and has been calculated based on prior years research consumption and revised, reduced cost rates with various research providers.

In connection with the contribution to research costs we have also put in a third tier on the basic management fee with effect from 1 January 2018. We will review these arrangements with Polar Capital later in the year in the light of experience and the services being provided for the fees paid.

PRIIPS/KIDS Along with other investment trusts, we were required by our regulatory authorities to produce a new form of Key Investor Document, which is available on the Company’s website. We did at the time indicate that we thought that this was perhaps not the only document investors might consider when investing in the shares of the Company and made an announcement to that effect. Our view persists.

THE BOARDWe have appointed two new Directors to your Board: Stephen White and Charles Park. For the appointment of both we used an external online-based Board level service and we are very pleased Stephen and Charles agreed to join us. Their biographical details are on page 53. Stephen brings many years of direct investment experience and considerable investment trust expertise as well. Charlie brings many years of experience of looking at US company cashflows (as he puts it) as well as considerable experience of starting and growing his own investment firm. Brian Ashford- Russell has decided to retire at the AGM, which will be an important milestone for the Company, after his great contribution to its foundation and development.

09

CHAIR’S STATEMENT CONTINUED

AGM DETAILSWe are pleased to confirm the AGM will this year return to the Royal Automobile Club, Pall Mall, London and will be held at 2.30pm on 6 September followed by tea. I would encourage shareholders not to miss this event. Ben Rogoff, the investment manager, will give shareholders a presentation which provides insight into the development and impact of new technologies on the Company’s portfolio. There will be ample opportunity to ask questions and to meet the Board, Ben and his team after the meeting. A video of the presentation will be placed on the Company’s website shortly after the AGM. The formal business of the AGM is contained in a separate circular and also on the website.

OUTLOOKIn the Manager’s Report, Ben Rogoff describes in detail his view of the long-term direction of the sector, or sectors, in which Polar Capital Technology Trust invests. He has been right about the radical impact of cloud computing on enterprise computing as well as the development of big data and these trends have underpinned the portfolio in recent years. We expect these themes to continue and the disruption caused already by such trends not to diminish.

The companies at the forefront of these changes are doing well, demand seems robust and debt levels are generally low. The speed with which dominant market shares are developed is to an extent alarming, and margins are substantial. In many ways, it’s better to be invested in the disrupting than the disrupted and it’s the disruptors that are the focus of your Company.

The sector is itself volatile. Technologies get superseded and in some instances the winners take all. In addition, valuations for our preferred non-legacy companies within the sector are not cheap, and we have had extraordinary returns over the last two years.

However, market timing is a very unreliable source of returns. Our view is therefore that it is entirely possible that there will be some downturn in the prices of the companies in which we invest although we don’t know when that might happen. We have tried to make sure that we avoid the riskiest companies within the sector, cash levels are a little higher than usual and we have a small investment in put options to give a little protection. The purpose of this is to be able to take advantage of any set back to invest further into those companies which our manager believes will take advantage of the extraordinary opportunities provided by the technology sectors in the long term.

Sarah Bates

Chair17 July 2018


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MARKET REVIEWEquity markets enjoyed another positive year driven by earnings growth and positive revisions while valuation expansion was kept in check by rising risk-free rates, political uncertainty and the return of market volatility. Returns were also hampered by further Sterling strength, the Pound rising 6.5% and 4.5% against the Dollar and Yen respectively, although falling 4.1% against a strong Euro. This left the FTSE World TR index in Sterling terms advancing 7.7% during the year, with currency dampening returns. Developed markets benefited from strengthening macroeconomic conditions which provided upward momentum to earnings estimates that also benefited from the weaker USD Dollar, the trade-weighted basket falling 7.3%. However, a more synchronised global recovery also saw oil (+35%) rise sharply, contributing to the upward move in 10 year US Treasury yields which began the year at 2.28% and ended the period at 2.94% having briefly exceeded 3%. This, together with elevated levels of political / trade uncertainty and more hawkish central bank language resulted in a dramatic return of market volatility during the final third of our fiscal year.

Although the US market (+6.6% in Sterling terms) continued to perform well in absolute terms, it trailed other major markets on a relative basis as economic momentum and tax reform were offset by higher sovereign yields and the weaker US Dollar.

While the first half of the year saw investors question President Trump’s ability to reaccelerate growth, the passage of the tax reform bill in December resulted in a volte-face which, together with nascent evidence of wage inflation presaged a significant bond market reversal as 10 year US Treasury yields exploded higher. This legislation – which reduced the corporate tax rate to 21% from 35%, its lowest point since 1939 – added additional impetus to earnings growth that had already been benefiting from improved macroeconomic conditions and rebounding energy prices.

US economic improvement – most apparent in the unemployment rate which fell to 3.9% and in the new order component of the December ISM manufacturing index which posted its highest reading in nearly fourteen years – resulted in further policy tightening, the Federal Reserve raising interest rates three times, leaving Fed Funds at 1.75% by period end. While bond and equity markets continued to diverge, higher risk-free rates made it difficult for stocks to rerate despite the improved earnings outlook. Together with President Trump’s increasingly aggressive rhetoric and protectionist trade policies, higher bond yields presaged the return of equity market volatility with the S&P 500 experiencing its first 10% correction in two years during early 2018. This came as a particularly rude awakening following an extended period of low volatility and a record fifteen consecutive months of positive S&P 500 returns.

11 Market Review

12 Technology Review

13 Portfolio Performance

13 Market Outlook

18 Technology Outlook

20 Thematic Update

27 Portfolio Review

30 Full Portfolio

34 Top Twenty Investments

MANAGER’S REPORT

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chose to reinvest their tax windfalls. This was likely influenced by fear of technology disruption which reached fever pitch following Amazon’s acquisition of Whole Foods in June.

The improved backdrop saw Gartner revise up its 2018 IT spending forecast to +6.2% (the highest annual growth rate forecast since 2007) while the sector delivered strong earnings growth throughout the year. Next-generation software stocks performed particularly well as beneficiaries of increased spending, IT budget reallocation and increased focus on “digital transformation” with most delivering strong growth and for the most part improved profitability. The software subsector also proved a relative safehaven amid concerns about trade wars due to its minimal exposure to China, while the acquisition of Mulesoft by Salesforce.com set a new valuation benchmark for software acquisitions in what was otherwise a quiet year for M&A.

The so-called FANG stocks (Facebook, Amazon, Netflix and Google), together with their Chinese counterparts (Alibaba, Baidu and Tencent), continued to dominate the headlines, although strong fundamentals were at times overshadowed by regulatory and privacy-related concerns that began early in the year following the EU decision to fine Google €2.42 billion for allegedly breaking competition law.

However, this paled into relative insignificance following news of an earlier Facebook data breach involving political consultant Cambridge Analytica that allegedly used personal information harvested from more than 50m Facebook profiles without permission to target and influence US voters. This escalation of privacy concerns added to worries about so-called fake news and led to Facebook CEO Mark Zuckerberg appearing before a Senate sub-committee where he apologised for his “mistake”. This overhang, together with greater investment spending saw both Alphabet (+4%) and Facebook (+8%) take time-outs during what was otherwise a very strong year for the Internet subsector. E-commerce trends remained robust, with Cyber Monday registering the largest online sales day ever with $6.6bn spent, +17% y/y, while in China, the Singles’ Day promotion saw gross merchandise value (GMV) growth accelerate to +39% y/y from +32% in 2016.

Other developed markets performed well during our fiscal year, driven by improved economic backdrops, continuing low interest rates and more modest bond-market corrections reflecting larger initial output gaps. Europe (+7.5%) enjoyed a strong first-half following the triumph of Emmanuel Macron in the French Presidential election and upward revisions to ECB 2017 GDP forecasts. Economic data also remained supportive with the Eurozone manufacturing PMI registering 60.6 in December, the highest level since the survey began in 1997. However, less dovish commentary from the ECB as it began to articulate its exit policy for quantitative easing (QE) and greater political uncertainty following Italian general elections weighed on returns during the second half, further frustrated by US Dollar weakness and poor weather. Japan (+14.5%) outperformed during the year, aided by PM Shinzo Abe’s landslide election victory in October, and strong earnings momentum. However, the strongest performance was reserved for Asian equities (+17.0%), aided by US Dollar weakness and semiconductor-related strength.

Although North Korean missile tests and political brinksmanship weighed on sentiment during the first half, this lifted following a historic meeting between the leaders of North Korea and South Korea (confirming the common goal of a nuclear-free Korean Peninsula) and a remarkable warming of relations between President Trump and President Kim Jong-un.

TECHNOLOGY REVIEWThe technology sector delivered another strong period of absolute and relative returns, our benchmark, the Dow Jones World Technology index, advancing 17.1% in Sterling terms during the past fiscal year. Not only did this follow a remarkable prior year, but unlike in previous periods outperformance was not aided by the sector’s disproportionate US exposure. Although the weaker US Dollar detracted from the Trust’s absolute return during the period, technology stocks outperformed materially in most major markets due to a combination of superior earnings growth and valuation rerating as the sector continued to attract incremental investors. In addition to strong secular drivers, technology earnings benefited from macroeconomic tailwinds and fiscal reform directly via lower tax rates and indirectly as a result of increased technology spending as many companies

MANAGER’S REPORT CONTINUED


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These trends helped each of the Chinese Internet giants Alibaba (+45%), Baidu (+31%) and Tencent (+50%) deliver exceptional returns during the year. Amazon (+59%) also benefited from these trends, as well as remarkable growth at its cloud platform, AWS. See the Technology Outlook on page 18.

In contrast and consistent with our long-held thesis, former enterprise computing winners such as IBM (-11%), Oracle (-3%) and SAP (+5%) – none of which were held in the portfolio over the period – all struggled to meet market expectations as Cloud adoption continued unabated. Against a backdrop of increasing IT budget / capital-spending trends, this underperformance became increasingly difficult to explain away as “business model transition” or short-term “mis-execution”, epitomised by weaker than expected 2H18 guidance from IT services leader Accenture who cited pricing pressure as a headwind, a timely reminder of the deflation associated with Cloud migration. That said, incumbents Cisco (+26%) and Intel (+38%) both delivered strong returns due to better than expected growth and resulting multiple expansion. Apple (+10%) and the smartphone supply chain round-tripped during an eventful year with remarkable first-half strength (in anticipation of an iPhone supercycle) unwound during a painful second half following disappointing iPhone X sales and the likelihood of another flat year for total iPhone unit sales. That Apple was able to deliver inline performance reflected strength in its services business, an undemanding valuation and the effect of lower repatriation taxes (following the passage of tax reform legislation) given Apple’s massive offshore cash balance. Smartphone-related weakness and the blocking of Broadcom’s proposed acquisition of Qualcomm (-7%) on national security grounds, took the shine off an exceptional year for semiconductor companies that benefited from strong demand for sensors, memory, storage and advanced compute driven by Cloud, Artificial Intelligence (AI) and the Internet of Things (IoT).

PORTFOLIO PERFORMANCEOur total return performance came in ahead of our benchmark, our own net asset value per share rising 22.7% during the year versus a 17.1% gain in the Sterling adjusted benchmark. In the US, the most

significant positive contribution to performance was made by Amazon which was also our largest overweight position. In addition, the portfolio benefited from its significant overweight exposure to software-as-a-service (SaaS) companies such as New Relic (+64%), RingCentral (+97%), ServiceNow (+65%) and Zendesk (+60%) which delivered strong growth and multiple expansion. Computer gaming companies also contributed positively, with Ubisoft (+90%) and Nintendo (+60%) particularly strong performers while our small position in payments upstart Square (+144%) proved our third largest absolute contributor during the year. Stock selection was positive across all major regions and across all market-capitalisation tiers.

Relative performance was also positively impacted by underweight / zero positions in a number of large index constituents including IBM, Oracle and Qualcomm that delivered disappointing returns during the year. The portfolio benefited from one acquisition with MuleSoft acquired by Salesforce.com for a 36% premium. Our AMD (-23%) position proved our largest detractor during the year, the stock digested its earlier gains as progress with its new CPU / GPU families failed to drive earnings estimates higher. Chip-rival Intel (+38%), where we were underweight, also hurt our relative performance as growth in its server business reaccelerated driving a valuation re-rating. Performance was also hindered by other underweight positions in a number of positive index contributors such as Cisco (+26%) and Microsoft (+31%), together with a number of next-generation holdings that disappointed including Criteo, CyberArk and Tesla. Our decision to hold a modest amount of liquidity and index put options also detracted from performance in what proved to be another strong year for technology returns.

MARKET OUTLOOKLooking back, 2017 proved the strongest year for global growth since 2011, with GDP +3.8% y/y as c.120 countries (accounting for three quarters of world GDP) experienced accelerating growth. This broadening and more synchronised upswing looks set to continue with 2018 on track to be the “first year since the financial crisis that the global economy will be operating at or near full capacity” with growth pegged at 3.9% this year and next.

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Advanced economies are expected to expand by 2.5% in 2018, driven by 2.9% growth in the US (2017: 2.3%) with consumption supported by wage growth, small business optimism at the highest level in decades and the expansionary impact of tax reform, offset by further policy normalisation. After delivering its fastest annual growth rate since 2007, Europe should experience another solid year with GDP expected to expand by 2.4% (2017: 2.3%) aided by labour market improvement, business capital spending and supported by loose monetary policy / quantitative easing (QE). The UK is likely to trail with growth pegged at just 1.6% (2016: 1.8%) due to soft consumption (relating to earlier Sterling weakness) and ongoing Brexit uncertainty. Japan remains a key beneficiary of global economic acceleration although growth is expected to moderate to 1.2% this year (2017: 1.9%) due to lower fiscal stimulus and Yen strength. After a strong 2017, developing economies are expected to further accelerate this year to 4.9% (2017: 4.8%) aided by reacceleration in India with growth forecast at c.7.4% (2017: 6.7%E) following a weaker year due to rebounding oil prices, demonetisation and the implementation of the Goods and Services Tax. Although growth rebounded in 2017 for the first time in seven years, China is expected to resume a gradual slowdown to 6.6% this year (2017: 6.9%) due to economic rebalancing / structural reforms and efforts to curb the expansion of credit.

Strengthening company numbersThe improved economic backdrop has presaged a sharp recovery in US corporate earnings which bounced back sharply in 2017, aided by the weaker US Dollar and the recovery of oil / commodity-related earnings. Current forecasts have the pace of earnings growth accelerating this year with estimates currently experiencing their largest upward revision since Factset began tracking the data.

The first-quarter earnings season has been exemplary with the S&P 500 on track to deliver 24.9% earnings growth y/y – the highest earnings growth since Q3’10 – boosted by recently enacted US tax reform and the new 21% corporate tax rate. Revenue growth has also impressed with the S&P 500 tracking at 8.2% y/y which would represent the highest revenue growth reported by the index since Q4’11. As in prior years, earnings should also be buttressed by buybacks with

S&P 500 companies sitting on nearly $1.8tr in cash and equivalents, much of which has been stranded offshore until recently. This year is therefore likely to prove a record year with more than $178bn in buybacks already announced by the end of February (more than twice the prior 10-year average) while Apple alone repurchased $23.5bn worth of stock in its most recent quarter, the largest single-stock buyback ever and more than the market value of 275 of the S&P 500 constituents. Although elevated margins may appear a risk to earnings progress, this largely reflects the growing influence of margin-rich technology companies that currently account for 19.1% of S&P 500 earnings. Adjusting for this improved mix, US non-financial (ex-tech) EBITDA margins remain far from 1990s highs. While higher interest costs may prove a headwind (each additional percentage point on the corporate bond yield said to reduce EPS by c.4%) the altogether thornier issue of wage inflation represents the most latent risk to margins.

Interest rate normalisationHowever, the elimination of output gaps is already beginning to have an impact on monetary policy which – in the US, in particular – has already become less market friendly. The Fed has already begun to unwind its balance sheet and raise interest rates (six times since the lows) with expectations for a further two hikes in 2018. The Bank of England has also raised interest rates for the first time since 2008, (although this was largely due to earlier Sterling depreciation), while the ECB – having bought more than € 2tr worth of bonds – may also begin to wind down its own QE programme.

However, we expect policy and liquidity conditions to remain supportive with G4 central bank balance sheets likely to expand until late this year and Mario Draghi all but ruling out ECB rate hikes this year. As such we remain hopeful that inevitable policy normalisation – now that the “era of QE and financial repression” is ending – will be carefully managed, not least because central banks have very little firepower in the event of an unforeseen economic shock. This view depends on core inflation remaining below target (core PCE averaging c.1.6% during 2018 vs. the 2% Fed target) despite unemployment falling to 3.9% – 17-year lows and decisively below levels once considered the “natural rate”. While the market has begun to discount somewhat higher inflation (10-year Treasury Inflation



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Protected Securities (TIPS) spread rising to 2.15%) rising long-term Treasury yields also reflect other factors including higher growth, the Fed unwinding its balance sheet and $1.5tr of unfunded tax cuts. While we expect the alignment of interest between policymakers and investors – the bedrock of this long-bull market – to be increasingly tested, we remain hopeful that their respective paths will not diverge critically over the coming year.

The valuation conundrumThe combination of strong earnings progress and choppier market conditions has resulted in some recent valuation compression, the forward 12-month PE on the S&P 500 falling back to 16.5x (from 18.2x in January), leaving this metric broadly inline with the five-year (16.1x), but above the 10-year (14.3x) averages. International markets appear better value, but less so on a sector adjusted basis. However, lower equity multiples have been more than offset by higher US Treasury yields and measures of inflation such that the relative valuation gap between equities and bonds has narrowed over the past year. While the Fed Model (which compares earnings and bond yields) continues to suggest that equities remain substantially undervalued versus both Treasuries and corporate bonds, the so-called Rule of 20 (where the fair value PE is equivalent to 20 – CPI) suggests that equities are only modestly undervalued today having traded at fair value briefly according to this measure at the January 2018 highs. Although valuations remain appropriate for the current (low) inflation environment, higher bond yields and/or rising inflationary pressures will likely act as valuation headwinds going forwards. As such we do not expect equity valuations to expand easily from here (and it is quite possible that cycle-high valuations have already been seen). That is not to say we are bearish – downside risk to valuations should prove modest absent deflation or inflation, the two primary causes of sharply lower PEs. But the key question remains – at what level does the current inverse relationship between stocks and bonds break down? Of course, we will not know the answer to this until after the event, but history suggests the relationship turns negative once 10-year US Treasury yields breach 4%. However, we imagine the path to 3.5%–4% is likely to involve more serious buffeting than investors have become accustomed to simply because we do not know where the break point is.

As we regularly opine in our monthly updates, we are hopeful that in the absence of further PE expansion, investors may gravitate towards and ultimately crowd in stocks able to deliver genuine growth. This may help to explain why “growth” often outperforms in late-stage bull markets when “value” ought to be doing better as yields rise, epitomised by the so-called Nifty Fifty period, Japan between 1988–90 and of course the TMT bubble. At these times, technology and regulatory change has often played a key role in carving out subsets of stocks that perfectly capture the excitement of the time. Radio stocks played a prominent role in the years prior to 1929 epitomised by RCA which was growing revenues at 50% per year, while another frontier industry – electric utilities – were “the favourites of speculators”. Technology companies were also well represented within the so-called Nifty Fifty – 50 stocks identified by Morgan Guaranty Trust that were among the fastest-growing companies on the planet in the latter half of the 1960s. These included hardware high-fliers Burroughs, Digital Equipment and IBM as well as reprographics darlings Polaroid and Xerox. Likewise, technology leadership in consumer electronics, video gaming and use of assembly-line robots in manufacturing helped create the preconditions for the late 1980s Japanese equity market bubble. And the late 1990s bubble – characterised by the classic “new” and “old” economy division – was driven by the confluence of game-changing technologies and telecom deregulation.

DisruptionThe zeitgeist of today is of course disruption made possible and being delivered by technology winners, epitomised by Amazon and the other FANG stocks 20 years after “Internet 1.0”. Once again, the world is divided into winners and losers, while a number of nascent technologies such as artificial intelligence and blockchain have the long-term potential to change everything. Despite this potentially heady mix, markets have yet to really experience anything that resembles a late 1990s “blow-off”. After all, bull markets tend to go out with a bang (not a whimper) with peaks often marked by excess. This can take the form of investment fads, sentiment, use of leverage and valuation.

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Each of these variables has become a little more elevated over the past year: Bitcoin and marijuana-related stocks have delivered incredible returns to speculative investors, equity flows have continued to improve and leverage is at post-financial crisis highs as US corporates replace equity with cheap debt. However, valuations still look appropriate and sentiment remains remarkably restrained. The so-called “melt-up” scenario therefore still exists as a bull case and could be presaged by a great rotation moment where higher yields force a reallocation away from bonds, but remain below levels that might derail equities. M&A activity – subdued in 2017 – could also explode back to life as a result of repatriation and technology disruption, with private equity a potent incremental buyer.

In short, the final phase of this bull market could yet surprise us to the upside given that we have the necessary ingredients for another Nifty Fifty and many of the late-cycle conditions that could trigger a “melt-up”.

Looking for signalsThat said, we are ever mindful of the duration of this long bull market – now the second longest on record. While “bull markets don’t die of old age”, we will continue to watch for signs of deterioration that might help us better navigate choppier waters. Fortunately, there are few signs today of the usual preconditions that might indicate the market is at a peak such as widening credit spreads, loss of breadth and recession probability above 20%. With corporate leverage back at highs (and mindful of the 2016 market correction caused by the high yield market seizing up as energy prices plunged) we remain focused on credit spreads as a potential trigger.

According to CSFB, a widening of high yield spreads has preceded eight of the last nine market peaks on average by seven months (and at least two months) before an equity market correction. Another key indicator we will be watching is the yield curve because it typically inverts in anticipation of the next recession and ahead of an equity market correction. As Ned Davis states, ”Bull markets often end in a predictable manner. The economy begins to grow above potential with inflation starting to rise, and the Fed raising interest rates to keep inflation in check. This generally leads to an inverted yield curve, which makes it either unprofitable or risky for banks to lend…”.

Although the yield curve has been flattening, this should be expected late cycle while the lead time between full inversion and a recession can be as much as 18 months. Finally, we will watch for deteriorating breadth as per our Nifty Fifty scenario where an ever-diminishing number of stocks shore up a market that really wants to go down. “Persistent divergence between the S&P 500 making a series of new highs, while market breadth makes a series of lower highs” has been present “in virtually every” market top, a process that can last anywhere from four months to two years. Deteriorating breadth characterised tops in 1929, 1972, 1987 and of course during the 1990s technology bubble. However – and despite much FANG-related chatter to the contrary – recent market breadth has been positive while none of the indicators we follow look particularly concerning.

RisksAs ever, there are myriad risks that could challenge our view. The most significant of these relates to policy error and/or the loss of policymaker support with the elimination of output gaps and late-cycle fiscal stimulus potentially forcing the Fed to normalise interest rates ahead of schedule. Mario Draghi’s anticipated departure from the ECB in 2019 could further increase the “risk of missteps or disorderly financial market adjustments” with the changing of the guard feeling a little like politicians moving from a peace to a war footing.

The market sell-off in January following the spike in average hourly earnings made it abundantly clear that wage pressure remains the most significant risk to orderly policy normalisation. Sharply higher rates would likely spill into equity markets, potentially presaging a 1987-type moment, and/or a recession, already statistically overdue given the length of the current expansion (105 months) as compared to the median of 37 months. A recession or a growth scare could also be induced by a trade dislocation should President Trump succeed in further emulating President Reagan, considered by some to have been “the most protectionist president since Herbert Hoover”. A key tenet of his pre-election campaign, investors should not be surprised by “Trumpist” efforts to “save U.S. jobs” through higher tariffs, bilateral trade deals, and lower trade deficits.



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The decision in January to impose US tariffs on imported solar panels and refrigerators and aimed squarely at the Chinese, has commenced a tit-for-tat series of tariffs today covering more than $100bn worth of trade. Markets have absorbed this well as a war of words ahead of negotiations aimed at reducing the US trade gap with China by $100bn. While we expect worst-case scenarios to be avoided, the President’s acerbic style (“trade wars are good, and easy to win”) will only add to the uncertainty.

While the Trump victory has so far proved the high watermark for so-called populism, the risk posed by this political movement, continues to simmer. Condemned as right-wing or worse, populist parties have been on the rise in Europe since the financial crisis initially as protests against income inequalities, political correctness, liberal elites, globalisation and the EU. However, the migration crisis and Angela Merkel’s Willkommenspolitik open door policy has seen many of these protest parties morph into anti-immigration / socially conservative parties that “defy classic left right categorisation”. This issue has apparently driven a wedge between “old” and “new” Europe with some governments in the Visegrad group containing “political parties in favour of heterodox policies that break away from the patterns set by Western democracies” including Fidesz in Hungary led by Viktor Orban and Law and Justice in Poland. In Austria, the nationalist Freedom party joined the government having captured 26% of the vote in November elections. While this outcome has been avoided in Germany, Angela Merkel’s party suffered its worst post-war election result during September elections. Immigration dominated the contest benefiting the Alternative for Germany (AfD) party which received 12.6% of the vote (identical to UKIP’s share in 2005). Unlike UKIP – which achieved its Brexit referendum goal and then imploded – the AfD continues to gain support (>14% at present) because popular (illiberal) concerns continue to go unaddressed by (liberal) elites. Recently concluded Italian elections delivered the same message with Mario Renzi’s ruling centre-left Democratic Party

punished by voters worried about immigration at a time when the economy remains below pre-crisis levels with unemployment above 10%. As discussed last year, “continued failure by political establishments to listen to voters and unwind some of the perceived excesses will make a 1930s rerun significantly more likely” – a position that looks increasingly obvious and inauspicious twelve months later.

In addition to those outlined above, there are a number of additional risks that investors should consider. As in prior years, China represents a key risk to the global economy and financial markets. Having stabilised in 2017, growth is expected to slow this year as economic rebalancing continues. This trend may continue as President Xi - now the “most powerful Chinese leader of the modern age” having consolidated power by abolishing term limits – could continue to address the longer-term issues facing China’s economy or make trade concessions to placate the US that come at the expense of near-term growth. These issues include excessive leverage (overall credit reaching >250% of GDP) and an overvalued housing market.

As we have consistently argued, China should be able to avoid a hard landing due to the self-funded nature of its growth, while reserves have been somewhat rebuilt and inflation remains relatively benign affording policymakers some room for manoeuvre. Political risk remains elevated, with North Korea and Iran likely focal points, while European populist movements (and arguably Jeremy Corbyn’s Labour Party) represent latent threats to the (market friendly) status quo. Other risks include Brexit where the divorce from Europe “could take the best part of a decade”, the ongoing challenge to nation states posed by Islamic extremism, unintended consequence of US Dollar strength particularly in emerging markets, and seasonality – the six months prior to mid-term elections (due in November) empirically “the weakest stretch of the Presidential cycle”.

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TECHNOLOGY OUTLOOKWorldwide IT spending is expected to reach $3.7tr in 2018 with estimated growth of 6.2%, the highest in a decade. While less impressive on a constant currency basis (+3.4%) technology spending appears to be recovering with the improved macroeconomic backdrop and the sector a beneficiary of fiscal reform as companies opt to reinvest their tax windfalls in order to reinvent themselves and stay relevant during a period of (what we believe is) unprecedented disruption. As in prior years, budgets continue to shift in favour of newer technologies with security, cloud software and mobility the top three IT priorities this year, according to Piper Jaffray. The combination of secular and cyclical factors saw the technology sector deliver outstanding growth in 2017 with revenue and earnings of 10.4% and 16.9%, well ahead of the S&P 500 which posted 6.3% and 10.8% respectively. While the relative lustre of technology may dim this year as tax reform lifts all boats, technology earnings should be well supported by the better economy, improved margins and of course, lower taxes. Tax reform may also be acting as a tailwind for business spending with the CEO of Salesforce.com recently noting that “multiple customers were accelerating software investments due to tax reform”. This view appears well supported by an outstanding first-quarter earnings season that has seen technology deliver the highest blended revenue growth of any sector (+16.1% y/y), nearly twice the overall market (+8.5%) rate. While the technology sector is expected to deliver less earnings growth than the broader market for the full year (16.1% vs. 19.2%), this reflects the uneven impact of tax reform and sharp recoveries expected in both energy and financials. However, in revenue terms technology (+11.9%) should substantially outgrow the S&P 500 (+7.2%) in 2018.

The combination of superior growth and marked outperformance saw the technology sector enjoy a well deserved re-rating over the past year leaving it trading on a forward PE of 18.0x as compared to 17.8x at prior year-end. This represents the highest level since 2007 and a c.9% premium to the broader market, ignoring the sector’s relative balance sheet strength. Although we do not expect the sector to materially

re-rate versus the market over the coming year due to ongoing Cloud disruption, relative valuation downside should also prove limited given the sector’s growth and balance sheet profile. Following another strong year, we remain constructive and continue to see significant opportunities within the technology sector for 2018. In contrast, many commentators instead remain focused on the downside risks associated with our sector while others believe technology stocks are in the middle of another bubble. We remain of the view that the 1990s parallel is too easy, while over-exuberance is contained to a few exciting longer-term opportunities. Rather than signalling a return to bubble-like conditions, we regard this excitement as normal fare for a sector where mainstream adoption often takes significantly longer than originally hoped.

Our own excitement remains underpinned by a new cycle thesis that appears to be gathering strength with every earnings season. Cloud adoption – the kernel of this long-held view – is continuing to capture “every” additional workload. Gartner – a long-time naysayer and proponent of the hybrid approach – recently conceded that public cloud computing was “growing more strongly than initially forecast”. After reaching $34.7bn last year (+37% y/y), infrastructure as a service (IaaS) is forecast to grow 32% in 2018 as enterprises continue to migrate production workloads. Amazon Web Services (AWS) remains at the vanguard of this mass production form of computing having achieved a $22bn revenue run rate, with growth accelerating to +49% y/y in Q1’18. That AWS has been able to maintain its growth trajectory at scale speaks volumes about the size of the market opportunity, something that Amazon CEO Jeff Bezos called out in his 2014 letter to shareholders when he said that AWS was “market size unconstrained”. Both Microsoft Azure and Google Cloud have also made good progress (estimated +90% and +75% y/y growth respectively), although Google remains a distant number three. While Alibaba has built a strong beachhead in China, everyone else appears all but irrelevant in an industry “where scale really matters”. E (SaaS) has also continued to prosper, reaching $58.6bn last year and is expected to grow 22% in 2018. We expect growth in excess of 20% to continue for the foreseeable future as the market potentially



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triples during the so-called “second decade of SaaS”. Platform as a service (PaaS) is also expected to grow c.25% this year driven by rapid-application development platforms (aPaaS) and low-code business process management (BPM).

The Cloud is the futureWhile it is impossible to know precisely where penetration is, a recent survey of 100 CIOs revealed that the public cloud accounts for c.21% of workloads today. This is headed much higher as adoption inflects with the same survey estimating penetration of 44% by 2021, while Cisco believes that more than 60% of workloads and compute instances will be processed by public cloud data centres three years from now. The reason that the Cloud has become the default computing platform reflects the fact it is more scalable and cheaper (we believe every $1 spent at AWS represents c.$4 lost to traditional IT), more secure (IaaS workloads will suffer at least 60% less security incidents than traditional data centres), increasingly global (number of hyperscale data centres expected to near double between 2016–21) with lower migration costs as offshore IT providers ramp their skills and capacity. The Cloud also allows enterprises to reduce maintenance spending – said to account for as much as 75% of IT budgets – by “eliminating technical debt associated with maintaining legacy systems”. And for most companies, the Cloud represents the only real way to embrace Artificial Intelligence (AI) today. However, the overarching reason why Cloud adoption is accelerating is as a key enabler of the so-called digital transformation – “the business imperative of responding to needs of a new generation of customers, partners and suppliers who expect transactions to be seamless, real-time, Facebook-like in experience, Amazon-like in reliability”. This requires the adoption of concepts such as DevOps and “innovation at scale” – likely beyond the capabilities of internal IT and legacy vendors but table stakes for AWS with multiple CIOs reporting that they “have never seen a technology company of this size and scale deliver this much continuous innovation to customers”.

The growing divergence between incumbents and next-generation companies is likely to intensify over the coming years as workloads continue to gravitate towards the public cloud, while emerging technologies such as AI – where the Internet platforms enjoy a leadership position – are likely to accelerate this trend. This is already apparent from the reallocation of IT budgets away from legacy areas while deflation is permeating up the stack. According to Jeff Bezos, the Cloud threat “encompasses servers, networking, data centres, infrastructure software, databases, data warehouses, and more”. The impact is already apparent today, with overall device unit growth having come to a halt and market shares in flux. However, the improving economy and improved pricing (aided by component shortages) are ameliorating this impact for now.

The PC market is expected to be flat in 2018 having contracted c.3% in unit terms during 2017, with enterprise “strength” due to Windows 10 offset by ongoing consumer weakness. Storage continues to fall as an IT priority despite expectations that the volume of data stored will triple by 2021. While the server market has been stronger than expected (+4.7% y/y in 2017) this largely reflects hyperscale / AI-related demand and pass-through of higher prices of components. Downward pressure on units will continue to be exerted by c.4x greater workload intensity in cloud data centres compared to traditional ones. Smartphone growth is also faltering with units forecast to grow 3% annually through 2021. While IT services are also expected to enjoy a c.4.5% five year CAGR, “segment growth will be varied” with IaaS driving net new spending with “next to zero” growth in infrastructure and network implementation.

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The structural headwinds facing legacy technologies and once-dominant incumbents is most apparent at IBM which suffered 22 consecutive quarters of negative year-over-year revenue growth before “turning the corner” in Q1’18 when it posted 1% y/y growth which CEO Ginni Rometty “was pleased with”.

Oracle has also fared poorly; having mocked the Cloud as “complete gibberish” and “idiocy” in 2008, CEO Larry Ellison has attempted to catch up via a series of acquisitions including Netsuite, Responsys and RightNow. However, Oracle’s revenues are essentially flat with where they stood in 2011 despite spending more than $25bn on acquisition since then. Rival SAP has also been reinvesting vigorously having spent more than $28bn on M&A (we believe equivalent to c.90% of the free cash flow generated during the period) but has only rarely been able to deliver Cloud growth and margin improvement. While both Cisco and Intel are faring better – reflecting their dominant positions and less competition – they also appear increasingly reliant on M&A to shore up growth. Unlike people who can opt to age gracefully, technology companies cannot – terminal growth is negative, and the value of incumbency atrophies - thanks to deflation and the so-called innovator’s dilemma.

The road to redemption is a difficult one that few successfully travel. Microsoft’s successful Cloud pivot – greatly aided by its dominance of office productivity software and a visionary CEO – is thus likely to prove a siren call for investors.

That said, at a time when global growth is reaccelerating, there is a chance that incumbents might enjoy an economic time-out as budgets lift. The improved economic environment prompted Mark Benioff – CEO of Salesforce.com - to recently declare he had “never seen a demand environment like this”. Repatriation could also help as previously offshore cash is deployed on buybacks, M&A and business spending. Financial engineering has long been the mainstay of challenged incumbents – the potential return of c.$1tr of offshore cash by the largest technology companies will provide them with a new source of ammunition. However, this positive is likely being overplayed because incumbent balance sheets have already been greatly depleted via bond issuance to finance dividends, buybacks and of course, M&A. While it is true that tech

giants are awash with cash, their net cash positions are far less healthy. For instance, we calculate that Oracle has negligible net cash once a 15% haircut is applied to its $58bn offshore cash and its onshore cash ($13bn) and debt ($61bn) are considered. Likewise, Microsoft’s $146bn gross cash is nearer $23bn net, while Intel is in a net debt position. Even Apple’s fully taxed net cash position is closer to $122bn, equivalent to c.42% of its headline $285bn gross cash. In contrast, no such distinction exists at either Alphabet or Facebook with their combined gross / net cash of $145bn / $132bn and debt of $4bn. Of course, generalist investors may not care about this nuance as technology balance sheets remain unusually strong compared to other sectors, something likely to become increasingly attractive as interest costs rise.

THEMATIC UPDATEBeyond Cloud computing and the bifurcation of fortunes within the technology sector, there are a number of other core themes that are captured within the portfolio. As we have previously articulated, Internet platforms remain the greatest beneficiaries of smartphone ubiquity and plentiful bandwidth with more than 4.1bn people accessing the Internet today, c.54% of the world’s population. While 2017 proved another vintage one for many Internet stocks, the subsector began the year amid greater regulatory scrutiny and ended it embroiled in a data / privacy debate following Cambridge Analytica revelations. The growing political and press narrative at times resembled an outright backlash, likely driven by growing Internet-related disruption. The introduction of General Data Protection Regulation (GDPR) in Europe – legislation designed to strengthen the data rights of EU citizens from May 2018 – also helped shape the narrative. At the risk of sounding overly sanguine, we do not believe that the Internet platforms have breached anti-trust regulations either via higher pricing or consumer welfare – they are not exclusive suppliers and in many instances deliver their services for free in exchange for the collection and use of data. Nor do we think that GDPR (and similar data protection legislation that may follow) will undermine their raison d’etre. Not only do the Internet companies appear confident that they will be compliant, but they may end up benefitting as the inability to collect data in the offline world embellishes their inherent data advantage.



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While the risk of greater taxation exists – for instance, a draft European Commission has proposed a levy based on where the customer rather than the company is located – we do not think it will prove easy to change the basis of global taxation. Instead, we hope that the internet sub-sector is able to avoid worst-case outcomes by proactively improving their business practices, use of data and “cleaning up” content on their platforms.

Risks and rewardsWhile regulatory risk may be dominating the headlines, the Internet economy remains in rude health. The outlook for online advertising (+16% y/y in 2017) remains resilient as it continues to take share from offline media spend. The US continues to lead with online accounting for c.40% of overall spending with mobile (search / display / video) a key growth driver. As previously, Alphabet (Google) and Facebook continue to dominate the market with their large audiences and ROI advantages that they deliver for their advertisers. This advantage is likely to persist as innovation around new ad formats and superior targeting contributes to the wide and deep moats both have established. However, both Amazon and eBay are also increasing their focus on their respective advertising opportunity. Retail remains the largest ad vertical in the US at c20% of the total market and both companies have specific advantages specific to the sector in their purchase data and ability to close the attribution loop between advertising and purchases. Social media continues to grow its share of advertising Dollars and time spent online with Facebook the undisputed global leader with 2.1bn monthly active users (MAU) and 1.4bn daily active users (DAU) while its messaging platforms Messenger and WhatsApp boast 1.2bn and 1.5bn MAU respectively. In China, Tencent’s WeChat remains the market leader in China with more than 1bn MAU.

The growth in e-commerce continues at a steady pace, assisted by the tailwinds of an improving global economy. In 2018, global retail is forecast to grow c.5% while eCommerce is expected to deliver 15%, with online penetration increasing a further 1% as it continues to take market share steadily from offline.

Mobile commerce (mCommerce) continues to outpace overall eCommerce, representing 23% of online but only 3% of overall US retail spending. There are still large retail categories significantly underpenetrated online such as grocery and home furnishings and a B2B eCommerce market ripe for disruption. Traditional bricks and mortar retailers are likely to continue to face headwinds, especially those who fail to adapt to the new digital environment or those with a larger store base than required today. Over 5,000 store closures were announced in the US during 2017, highlighting the level of stress experienced offline in contrast to the fortunes of Amazon which captured more than 70% of US online retail sales growth (and 35% of total retail growth) during 2017. Omnichannel remains a major theme following Amazon’s acquisition of Whole Foods and the introduction of Alibaba’s Hema supermarket store format, central to its “New Retail” strategy for blending offline and online experiences.

Internet-driven disruption is also accelerating in media content as time shifting to digital away from linear TV continues. Consumer consumption of media content remains in flux as new forms of content across a wide range of devices compete for leisure time. YouTube has now surpassed 1.5bn monthly logged-in users who spend on average more than one hour per day watching content just on their mobile device. However, its fastest growing medium of consumption is the TV, +90% y/y. As a key battleground, the race for premium video supremacy continues. In 2018 Netflix and Amazon are expected to spend c.$7bn and $5bn on content respectively, Google is forecast to invest several billion dollars to support YouTube, and both Twitter and Snap are also increasing spending. In this environment, it is not surprising that fears of “peak TV” have been wide of the mark – a phrase coined by the CEO of FX Networks in 2015 to describe the overwhelming amount of TV content available on broadcast, cable, satellite and streaming platforms.

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At that time, a then record 422 scripted series aired in the US, but this has continued to grow, reaching 487 in 2017 with almost all of the growth driven by the enormous incremental budgets of the over-the-top (OTT) players. Subscription models remain a popular and successful mode of monetising media content employed by all of today’s top ten grossing non-game apps in stark contrast with 2009 when none used it.

Video streaming category leader Netflix has reached 110m paying subscribers while music streaming leader and recent IPO Spotify has exceeded 70m. Dating app Tinder has quickly risen to become the second highest grossing app globally in 2017 aided by subscriptions and its innovative use of micropayments designed to boost profile views.

Smartphone: sales up, units downOur concerns about a slowing smartphone market were borne out in 2017. Although smartphone sales to end users rose 2.7% y/y to 1.54bn units, worldwide sales recorded their first ever decline in Q4 with 408m units shipped (-5.6% y/y) while the Chinese market – the largest in unit terms - faltered as annual shipments fell year over year–. With global smartphone penetration estimated at 66% and 80-90% in the most advanced markets, the unit story is essentially over with growth forecast at c.3% CAGR between 2016–21. This may be further frustrated by extending replacement cycles which in the US increased to 2.6 years, up from 2.4 years in 2016. However, in value terms the smartphone market expanded by 9% in 2017 as average selling prices (ASPs) increased 6% and a whopping 11% in Q4 driven by the $1000 iPhone X and the $930 Galaxy Note 8. This is both new news and an unusual feature in mature technology markets following significant price hikes at the high-end of the market led by Samsung and Apple. Although higher prices reflect a significant increase in features (OLED screen, 3D sensors, wireless charging etc) and a corresponding bill of materials (BOM) the gross margin dollar uplift is material.

Apple and Samsung with their dominant share of profits and high-end smartphones look well placed to capture most if not all of this additional value. While higher prices make easy copy, high-end smartphones continue to represent incredible value for money given their utility and frequency of use (25% of users spend more than 7 hours per day on their smartphones) with high residual values also ameliorating the actual cost

of ownership, particularly in the case of Apple. Nevertheless, it is clear that the best days of the smartphone market are behind it unless something like augmented reality (AR) can genuinely change everything by obsoleting the c.3.2bn smartphone installed base. Until then, we have no idea where replacement cycles will extend to, although the PC experience is sobering (now at 5–6 years).

Consistent with our long-held views, Apple remains our favourite smartphone-related stock which we believe is best understood as a mass affluent / luxury goods company whose premium brand, customer base and ecosystem allow it to capture a vast majority of industry profits with only c.16% smartphone market share. While disappointing iPhone X sales have put an end to hopes of a so-called supercycle, Apple’s ability to raise prices is highly supportive of our own view. We also remain excited about its services business which generated $8.5bn in Q1 (+27% adjusting for the longer-quarter last year) and 500m customers visiting the App Store each week.

As this recurring revenue stream grows in Apple’s mix its valuation may tend towards consumer peers such as Coca-Cola. However, our bullishness is constrained by smartphone-related headwinds (maturity and lengthening replacement cycles at a time when iPhone sales may be plateauing at c.215m units/year). It will also be difficult for the company to grow units in the US where it already sells 70m units which represent 58% market share of c.120m phones that come up for replacement each year (assuming a 2.3 year upgrade cycle). Other risks include China, both in terms of demand (c.30% of iPhone sales) and supply (components made in China) in the event of a trade war. As such, we expect to retain a large but significant underweight position in this remarkable, inexpensively valued but growth challenged company.

The Apple-related inventory correction during the final third of our fiscal year took the shine off a remarkable year for the semiconductor sector which posted c.22% revenue growth during 2017. Surging memory prices greatly contributed to ASPs which rose 7% (the highest rate achieved since 2000), but even without this boost, the industry still delivered c.10% growth. We expect growth to slow during the year ahead due to smartphone-related weakness and as memory price increases moderate or potentially reverses.



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However, AI and cloud computing should continue to drive demand while PC unit growth may turn positive for the first time in six years as chip-set security problems found in legacy Intel and AMD chip-sets ignite a corporate upgrade cycle. We are also very excited about opportunities related to power-train electrification but cautious on smartphone-related segments due to slowing unit growth, particularly at the high end where semiconductor content is multiple times higher than mainstream smartphones. Following a much quieter year for semiconductor M&A (value of deals declining to $27.7bn in 2017) we expect the muted deal backdrop to persist following President Trump’s pre-emptive decision to block the proposed acquisition of Qualcomm by Broadcom on national security grounds.

The disappointing debut of the iPhone X also reminded investors of the smartphone exposure that comes with robotics in what was otherwise an outstanding year for industry fundamentals and share prices alike. The proliferation of machine vision, industrial IoT and real-time analytics aided by cheap compute and storage enabled by cloud computing has given robots new capabilities that have radically changed payback periods and reduced implementation costs. Modular production lines – thanks to improvements in control systems and reduced time spent reprogramming robots for multiple tasks – provide greater flexibility to manufacturers of multiple low volume products. This has created large incremental opportunities as users are able to achieve faster time to market, epitomised by so-called “Fast Retail”. In addition, demand from traditional users of robots has remained strong. The automotive industry which accounts for c.35% of total robot volume, has accelerated its adoption of lightweight materials, leading to a meaningful increase of robot density to deal with more complicated manufacturing processes. Likewise, the adoption of new technologies has been driving demand in the smartphone industry, the growth of OLED (Organic Light-Emitting Diode) displays (included in the iPhone X) creating a large opportunity for the robotic industry due to the complicated manufacturing process. In addition, the Samsung battery issue and recall led to smartphone makers introducing machine vision-based production trace systems to improve quality control.

While OLED-related weakness represents a near-term headwind, we remain hugely excited about longer-term prospects for the robotics industry.

After a difficult 2016, software stocks enjoyed a banner year as valuations recovered alongside fundamental strength. In addition to an improved backdrop for spending, the subsector also benefited from a shift in investor focus from consumer (Internet) names in favour of critical modernisations that are beginning to happen as the agility that consumers want and now expect, begins to ripple back up through the corporate structure. In this new data-driven world, “software has evolved from being a method of modernisation to a source of differentiation”, but in order to meet the new exacting needs of customers, companies need agile yet broad back-end capabilities. It also requires the recognition that for every business, the showroom, the storefront is digital and the importance of leveraging the corporate treasure – its data. At the same time, the Cloud has enabled smaller companies (that may not even have an IT department) to access applications previously tackled with spreadsheets or pen and paper with just a credit card. Today there are myriad vertical SaaS apps that bestow upon their users domain expertise once the reserve of enterprise customers and their IT service partners. While we have taken some profits after a strong run and some multiple expansion, we believe the sector remains well supported by actual and potential M&A, much improved profitability and the emergence of “winners” in many of the most important business software categories.

New Smartphone Unit Shipments vs. Y/Y Growth

Android iOS Other Y/Y Growth

1.5B

1.0B

0.5B

2009 2010 2011 2012 2013 2014 2015 2016 20170

90%

60%

30%

0%

New

Sm

artp

hone

Shi

pmen

ts, G

loba

l

Y/Y

Gro

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Computer gaming companies enjoyed another strong year with most of our holdings significantly outperforming the technology market. With two-thirds of American households regularly playing them, video games have truly evolved into a mass market medium. Adoption has been enabled by the proliferation of increasingly capable electronic devices and Internet connectivity, which has enabled the creation of large player networks and digital distribution. The global video games software industry is estimated to have grown a healthy 10.7% in 2017 to $116bn with mobile (c.43% of the total industry) driving nearly all of the growth. In addition, industry profitability has been transformed by full game digital downloads (now c.40% penetrated) and additional digital content (DLC/MTX) which today accounts for between 20–40% of sales at EA, Activision and Take-Two with c.90%incremental gross margins. Back end monetisation is actually greater than upfront game sales at some successful digital franchises (GTA Online registered its highest ever bookings in Q4’17 more than four years after launch) and this trend looks set to continue with the emergence of AI which can leverage immense data sets of human behaviour to further improve monetisation.

While we remain constructive on the group, we are continuing to monitor the progress of Fortnite, a free to play console (and now mobile and PC) game which has attracted more than 45m players with a new game genre (“Battle Royal”). Unlikely to pose much risk to existing AAA franchises, the back-end only monetisation of Fortnite is new to console gaming and could potentially prove disruptive over time.

In addition, there are a number of other themes that we are excited about including payments where smartphone-enabled disruption is extending, driven by new entities that have been able to create superior user experiences and generate trust. Although these companies are enabled by technology, they are not about technology. It is about financial inclusion, consumer empowerment, and disruption of the status quo. For instance, Atom Bank - one of the UK’s first digital banks, already offers mortgage products and has started taking customer deposits. Revolut started life as a provider of competitive foreign exchange rates, before broadening its offering. Monzo was initially pitched as an elegant way to ringfence spending but

today its distinctive card is now prevalent among millennials in the UK. The updated European Payment Services Directive (or PSD2) came into force in January this year and will only exacerbate the problem for incumbents. Its central aim is to open the market to greater competition and ultimately lower the cost of payment processing. Banks are required to build Application Programme Interfaces (APIs) in order to allow qualified parties to access customer data (with the consumer’s approval, of course). This should enable start-ups with very asset light models to compete on a reasonably level playing field, benefiting from existing infrastructure that banks have invested in. Although there are a limited number of pure-plays on this theme, we continue to favour Visa which should benefit from growth in digital spending which only accounted for 9% of total retail spend in 2016 but is expected to reach 15% by 2020. While losing part of the eBay business will create an earnings headwind, Paypal also remains a preferred payments play as it continues to enjoy strong core growth and good traction with its acquired assets. We also have exposure to two of the most important global payment assets – WeChat and AliPay – via our holdings in Tencent and Alibaba.

China Mobile Payment Volume

$16T

$12T

$8T

2012 2013 2014 2015 2016 2017$0

$4T

Mob

ile P

aym

ent V

olum

e, C

hina

China Mobile Payment Share*

WeChat Pay 38%

Others 8%

AliPay 54%



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The final word belongs to AI following a breakthrough year when almost every company was alerted to the potential opportunities and disruption it posed. Interest in start ups exploded as VC investors poured over $14bn into AI companies, 2.4x more than during 2016. Interestingly, c.70exit events also happened in 2017 (+75% y/y) driven by corporates wanting to own the technology in-house. Acquirers included technology companies such as Apple, Cisco and Samsung but also non-traditional ones too including Centrica and John Deere.

This explosion in AI-related activity reflects the significant improvement in machine learning (ML) and deep learning – a network based on complicated algorithms capable of adapting to new data without

being explicitly reprogrammed – that have driven the recent evolution of AI. For us, how AI diffuses in the real economy and brings changes to existing business models matters far more than a smart speaker capable of playing music via voice commands. If the target (and average age) of VC funding is any guide then we can get a sense which sectors are going to be disrupted. Speech translation / recognition is one of the very few AI applications reaching a mature phase as consumers use these technologies on their smartphones. Consumer-facing smart robots and recommendation engines are also considered potentially disruptive to incumbents while computer vision, natural language processing, video recognition and virtual assistants are still at an early stage but hold great potential.

Artificial Intelligence Timeline

AI Research

Machine Learning General AI

Initial AI Concepts

1960s 1970s 1980s 1990s 2000s 2010s 2020s Unknown

Algorithms Focused on a Specific Problem That Provides Insights

Applies Intelligence to Any Problem (Near-Human-Level Intelligence)

Supervised Learning

Unsupervised Learning

Deep Learning

Narrow AI General AI

Reinforcement Learning

Much of the recent excitement and why this potential is beginning to feel within reach reflects the remarkable progress made comparing human and AI systems when playing games – a relatively simple, controlled, experimental environment. According to this, AI has clearly made significant progress with performance achieving human (Jeopardy / Atari / Switchboard) and super-human (Go / Pac-Man) levels. However, just as

1970s calculators could perform arithmetic better than humans, AI today remains extremely narrow and not very intelligent. According to Facebook’s head of AI, the most advanced systems today are “dumber than rats”. Likewise, while as many as 800m jobs could be under threat from automation only 6% of the most repetitive jobs are at danger of being automated entirely.

25

This reality is in stark contrast with views held by Bill Gates and Steven Hawking who believe (malevolent) superhuman AI is coming while Elon Musk famously stated, “with artificial intelligence we are summoning the demon”. This difference of opinion may be explained by the fact that the timeline to general purpose AI remains unknown. AI experts believe that so-called artificial general intelligence (AGI) could arrive between 2040–2050 while futurist Ray Kurzweil thinks the Singularity – the point where “there will be no distinction between human and machine” could occur in 2045. Until then (or some later date) it is more likely that “we will invent whole new modes of cognition that don’t exist in us and don’t exist anywhere in biology”. As the founding executive editor of Wired explained “when we invented artificial flying we were inspired by biological modes of flying... But the flying we invented — propellers bolted to a wide fixed wing — was a new mode of flying unknown in our biological world”. Likewise, the future of AI, at least for now, is not general AI. Rather “it will be many hundreds of extra-human new species of thinking… a galaxy of finite intelligences, working in unfamiliar dimensions, exceeding our thinking in many of them, working together with us in time to solve existing problems and create new ones”. We can’t wait.

Ben Rogoff & Team17 July 2018



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PORTFOLIO REVIEW

PERFORMANCE ATTRIBUTIONMovement in Net Asset Value (total return) per share Over the year to 30 April 2018 the Net Asset Value per share rose by 22.7% compared to the total return provided by the Benchmark of 17.1%.

% %Pence

per share

NAV per share at 30 April 2017 945.39

Benchmark total return 17.1

Investment Manager’s Added Contribution

Stock selection and asset allocation effect 9.1

Stock trading and timing effect (0.8)

8.3

Other factorsLiquidity/gearing effect (0.9)

Ongoing charges including performance fee (1.8)

(2.7)

Performance of NAV 22.7 214.30

NAV per share at 30 April 2018 1,159.69

Performance Contribution by Investment The top ten relative contributors and the bottom ten relative detractors from performance over the year to 30 April 2018.

-0.80% -0.60%

All data sourced from Polar Capital LLP

* Includes contribution from call options and stock held.

0.0% 0.80%0.60% 1.00%0.40%0.20%-0.40% -0.20%

Top ten contributors to and bottom ten detractors from relative return

ServiceNow

Oracle

International Business Machine

Amazon.com

RingCentral

UBISOFT Entertainment

Square

Zendesk

Apple

New Relic

Advanced Micro Devices

Microsoft

CyberArk Software

Intel

Lumentum

SPDR S&P 500 ETF Trust

Criteo

MACOM Technology Solutions

Cisco

NVIDIA

-0.68

-0.55

-0.33

-0.32

-0.29

-0.26

-0.21

-0.27

-0.23

-0.20

0.92

0.66

0.52

0.46

0.46

0.45

0.41

0.38

0.40

0.35

27

60.00%50.00% 70.00%10.00% 40.00%30.00%20.00%

US & Canada70.6

69.0

20182017

Asia Pacific (ex-Japan)13.3

15.5

Europe (inc-UK)6.1

5.9

Japan4.8

5.7

Middle East & Africa1.9

1.4

Cash3.3

2.5

0.00%

Breakdown of Investments by Regionas at 30 April 2018

20182017

Market Capitalisation of Underlying Investmentsas at 30 April 2018

1.3

5.2

60.00%50.00% 70.00% 80.00%30.00% 40.00%20.00%10.00%

Market Capitalisation <£1bn

Market Capitalisation $1bn-$10bn

Market Capitalisation >$10bn

0.00%

22.0

23.7

76.7

71.1

Performance Contribution by Region*

over the year to 30 April 2018

0.03

0.04

-0.50

-0.94

US & Canada

Europe (inc-UK)

Japan

Latin America

Middle East & Africa

6.00%5.00% 7.00%3.00% 4.00%2.00%1.00%0.00%-1.00%

Asia Pacific (ex-Japan)

Liquidity/gearing effect

0.89

1.20

6.71

-0.94

Mid Cap (>$1bn–$10bn)

Large Cap (>$10bn)

Small Cap (<$1bn)

Liquidity/gearing effect

Performance Contribution by Market Capitalisation*

over the year to 30 April 2018

5.00%3.00% 4.00%2.00%1.00%0.00%-1.00

3.10

1.09

4.18 4.18

PORTFOLIO REVIEW CONTINUED

* This represents the gross return of the fund minus the benchmark return. This reflects the attribution effect where the fund's return is compared to the benchmark return.


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Classification of Investments* as at 30 April 2018

North America

% Europe

%

Asia & Pacific

(inc. Middle

East) %

Total 30 April

2018%

Total 30 April

2017%

Benchmark weightings as

at 30 April 2018

Internet Software & Services 19.6 0.6 8.0 28.2 27.6 24.6%Software 23.7 1.2 1.8 26.7 26.8 22.6%Semiconductors & Semiconductor Equipment 8.6 2.8 4.2 15.6 13.7 20.3%Technology Hardware, Storage & Peripherals 6.7 0.1 3.2 10.0 12.6 18.7%Electronic Equipment, Instruments & Components 2.1 0.2 1.1 3.4 3.8 0.7%Internet & Direct Marketing Retail 3.4 – – 3.4 3.9 –Communications Equipment 2.3 – – 2.3 1.5 5.1%IT Services 1.6 0.2 0.1 1.9 2.0 6.8%Machinery 0.3 – 0.7 1.0 1.8 –Healthcare Technology 0.9 – – 0.9 1.0 0.5%Aerospace & Defense 0.8 – – 0.8 0.8 –Auto Components – 0.3 – 0.3 – –Chemicals – – 0.3 0.3 1.0 –Diversified Consumer Services 0.3 – – 0.3 – 0.5%Professional Services – 0.3 – 0.3 – –Healthcare Equipment & Supplies 0.2 – – 0.2 0.7 –Electrical Equipment – 0.2 – 0.2 – –Household Durables – 0.2 – 0.2 0.2 0.1%Automobiles 0.1 – – 0.1 – –Media – – – – – 0.1%

Total investments (£1,491,331) 70.6 6.1 19.4 96.1 97.4 100%

Other net assets (excluding loans) 2.9 1.6 1.7 6.2 5.5

Loans (1.1) – (1.2) (2.3) (2.9)

Grand total (net assets of £1,551,611,000) 72.4 7.7 19.9 100.0 –

At 30 April 2017 (net assets of £1,252,525,000) 70.3 8.7 21.0 – 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 respresented 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.

BENCHMARK The Company has a Benchmark of the Dow Jones World Technology Index (total return, in Sterling with the removal of relevant withholding taxes), (“the Benchmark”) against which net asset value performance is measured for the purpose of assessing performance fees.

As at 30 April 2018 the Dow Jones World Technology Index was calculated as a market capitalisation based index of 657 technology companies worldwide. 69.5% of the index weighting is in North

America, 7.5% in Europe and 19.2% in Asia & Pacific. By market capitalisation 88.0% is represented by large companies, 11.1% by mid-caps and 0.9% by smaller companies.

Shareholders should be aware that the Company’s portfolio is actively managed and is not designed closely to track any particular Benchmark, index or market. Given the dynamic nature of technology markets and the rapid changes in share prices of technology shares favoured by the Investment

Manager, the performance of the portfolio can vary from the Benchmark performance, at times considerably.

Although the Company has a Benchmark, this is neither a target nor an ideal investment strategy. The purpose of the Benchmark is to set a reasonable return for Shareholders above which the Investment Manager is entitled to a share of the extra performance the Investment Manager has delivered.

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FULL PORTFOLIO*

as at 30 April 2018

Value of holding £’000 % of portfolio

US & Canada

Microsoft Software 121,855 8.2

Alphabet Internet Software & Services 120,642 8.1

Apple Technology Hardware, Storage & Peripherals 98,663 6.6

Facebook Internet Software & Services 84,826 5.7

Amazon.com Internet & Direct Marketing Retail 38,800 2.6

Intel Semiconductors & Semiconductor Equipment 32,921 2.2

Adobe Software 31,961 2.1

Salesforce.com Software 24,378 1.6

Nvidia Semiconductors & Semiconductor Equipment 21,346 1.4

Texas Instruments Semiconductors & Semiconductor Equipment 19,443 1.3

ServiceNow Software 17,875 1.2

Red Hat Software 17,458 1.2

Cisco Communications Equipment 17,421 1.2

Dolby Laboratories Electronic Equipment, Instruments & Components 16,708 1.1

Zendesk Software 16,611 1.1

Splunk Software 16,362 1.1

Xilinx Semiconductors & Semiconductor Equipment 15,052 1.0

8X8 Internet Software & Services 13,359 0.9

Axon Enterprise Aerospace & Defense 12,795 0.9

Pegasystems Software 12,681 0.9

Medidata Solutions Healthcare Technology 12,532 0.8

Visa IT Services 12,032 0.8

Activision Software 11,725 0.8

Electronic Arts Software 11,649 0.8

Arista Networks Communications Equipment 11,517 0.8

Applied Materials Semiconductors & Semiconductor Equipment 11,225 0.8

IAC Interactive Internet Software & Services 11,190 0.8

New Relic Internet Software & Services 11,128 0.7

Ansys Software 10,855 0.7

Micron Technology Semiconductors & Semiconductor Equipment 10,605 0.7

PayPal IT Services 10,200 0.7

Proofpoint Software 10,184 0.7

Alteryx Internet Software & Services 9,666 0.6

* Excluding cash


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HubSpot Software 9,618 0.6

Advanced Micro Devices Semiconductors & Semiconductor Equipment 9,035 0.6

Take-Two Interactive Software Software 8,776 0.5

Broadcom Semiconductors & Semiconductor Equipment 8,179 0.5

2U Internet Software & Services 7,998 0.5

Five9 Internet Software & Services 7,827 0.5

Everbridge Software 7,728 0.5

Booking Internet & Direct Marketing Retail 7,598 0.5

Aspen Technology Software 7,078 0.5

Twilio Internet Software & Services 7,074 0.5

Ebay Internet Software & Services 7,005 0.5

RingCentral Software 6,990 0.5

Cognex Electronic Equipment, Instruments & Components 6,784 0.4

MuleSoft Internet Software & Services 6,693 0.4

Nutanix Internet Software & Services 6,193 0.4

Rapid7 Software 6,191 0.4

Pure Storage Technology Hardware, Storage & Peripherals 6,042 0.4

Littlefuse Electronic Equipment, Instruments & Components 5,707 0.4

Lumentum Communications Equipment 5,437 0.4

Cree Semiconductors & Semiconductor Equipment 5,377 0.4

Box Internet Software & Services 5,364 0.4

Tableau Software Software 5,126 0.3

Proto Labs Machinery 4,792 0.3

Kinaxis Software 4,395 0.3

Chegg Diversified Consumer Services 4,108 0.3

Intuitive Surgical Healthcare Equipment & Supplies 3,856 0.3

Dropbox Internet Software & Services 3,016 0.2

Coupa Software Internet Software & Services 2,993 0.2

Universal Display Electronic Equipment, Instruments & Components 2,591 0.2

Expedia Internet & Direct Marketing Retail 2,507 0.2

Despegar.com Internet & Direct Marketing Retail 2,409 0.2

Tesla Motors Automobiles 2,322 0.2

Cerner Healthcare Technology 2,166 0.1

Appian Software 2,059 0.1

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Mongodb Software 1,568 0.1

KVH Industries Communications Equipment 1,427 0.1

Square IT Services 911 0.1

Pivotal Software Software 121 0.0

Total US & Canada 1,090,726 73.1

Asia Pacific (ex-Japan)

Tencent Internet Software & Services 55,974 3.8

Samsung Electronics Technology Hardware, Storage & Peripherals 47,147 3.2

Alibaba Internet Software & Services 41,928 2.8

Taiwan Semiconductor Semiconductors & Semiconductor Equipment 28,670 1.8

Baidu Internet Software & Services 14,476 1.0

NetEase Internet Software & Services 8,562 0.5

Silergy Semiconductors & Semiconductor Equipment 5,309 0.4

Naver Technology Hardware, Storage & Peripherals 4,201 0.3

Atlassian Software 3,815 0.3

Seeing Machines Electronic Equipment, Instruments & Components 3,288 0.2

Pixart Imaging Semiconductors & Semiconductor Equipment 3,186 0.2

E Ink Electronic Equipment, Instruments & Components 2,310 0.2

Total Asia Pacific (ex–Japan) 218,866 14.7

Japan

Tokyo Electron Semiconductors & Semiconductor Equipment 16,303 1.1

Nintendo Software 15,801 1.0

Keyence Electronic Equipment, Instruments & Components 12,925 0.9

Advantest Semiconductors & Semiconductor Equipment 9,728 0.7

Fuji Machine Manufacturing Machinery 5,549 0.4

Shin-Etsu Chemical Chemicals 4,722 0.3

Harmonic Drive Systems Machinery 4,281 0.3

Renesas Electronics Semiconductors & Semiconductor Equipment 3,469 0.2

Zuken IT Services 2,162 0.1

Total Japan 74,940 5.0

FULL PORTFOLIO* continuedas at 30 April 2018

* Excluding cash


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Europe

ASML Semiconductors & Semiconductor Equipment 19,027 1.2

UBI Soft Entertainment Software 13,283 0.8

Infineon Technologies Semiconductors & Semiconductor Equipment 9,888 0.7

Soitec Semiconductors & Semiconductor Equipment 8,246 0.6

Aixtron Semiconductors & Semiconductor Equipment 7,097 0.5

RELX Group Professional Services 4,003 0.3

TKH Group Electrical Equipment 3,074 0.2

TOM TOM Household Durables 2,393 0.2

Tobii Technology Hardware, Storage & Peripherals 1,303 0.1

Materalise Software 1,223 0.1

Total Europe 69,537 4.7

United Kingdom

Mimecast Internet Software & Services 9,773 0.7

Aptiv Auto Components 4,847 0.3

First Derivatives IT Services 3,401 0.2

Aveva Group Software 3,257 0.2

Accesso Technology Electronic Equipment, Instruments & Components 2,623 0.2

Herald Ventures Limited Partnership II

Other 91 0.0

Total United Kingdom 23,992 1.6

Middle East & Africa

CyberArk Software Software 9,080 0.6

Mix Telematics ADR Internet Software & Services 4,190 0.3

Total Middle East & Africa 13,270 0.9

Total Investments 1,491,331 100.0

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TOP TWENTY INVESTMENTSAs at 30 April 2018

Value of holding Of net assetsBenchmark

Weights

30 April 2018

£’000

30 April 2017

£’000

30 April 2018

%

30 April 2017

%

30 April 2018

%

30 April 2017

%

Microsoft Software 121,855 76,288 7.9 6.1 9.5 8.6

Microsoft is the largest software company in the world. Founded in 1975, the company has built a dominant franchise in desktop software through its ubiquitous Windows operating system and Office productivity software. While the company is unlikely to be a net beneficiary from the transition towards cloud computing it is making some progress with Azure and Office 365 and an ageing PC installed base and end of support for Windows XP should provide an additional tailwind.

Alphabet Internet Software & Services 120,642 108,486 7.8 8.7 8.1 8.8

Alphabet is the dominant provider of Internet search and online advertising, web applications and tools. The company operates a leading index of web sites and media content and offers an auction based advertising platform. By helping content owners to efficiently find customers online, Alphabet remains a critical element in the growth of Internet advertising and e-commerce. Alphabet’s Android (mobile OS) combined with Chrome (browser) and 'Google' maps (local search) have enabled it to maintain its market leadership during the mobile internet transition.

Apple Technology Hardware, Storage & Peripherals

98,663 88,851 6.3 7.1 11.1 12.2

Apple is a leading supplier of personal computers and digital media products that feature the company’s proprietary OS X operating system. The company has become somewhat synonymous with the explosion in digital media as evidenced by market share gains in its core business and the spectacular success of its iTunes, iPhone and iPad offerings. Apple dominates the high end of the smartphone and tablet markets with “luxury brand” status and remains a disruptive innovative force despite its scale and relative maturity.

Facebook Internet Software & Services 84,826 72,312 5.4 5.8 5.4 5.7

Facebook is a free social networking site that allows registered users to create profiles, upload photos and video, send messages and keep in touch with friends, family and colleagues. Founded in 2004 it was originally designed as a means for university students to communicate and to socialize online. Facebook has become the world’s largest social network and grown to over 2 billion active users.

Tencent Internet Software & Services 55,974 33,483 3.5 2.8 3.6 2.7

Tencent Holdings offers a suite of online services - primarily entertainment and communication related - to users. The company originally started out as an “instant messaging” service provider back in 1999, and has gone on to dominate this market in China with over 1 billion active accounts. Tencent’s leading Internet platforms in China include QQ (QQ Instant Messenger) and WeChat. The company is now successfully monetising this enormous “community” via add-on services such as online gaming, advertising and e-commerce.

Samsung Technology Hardware, Storage & Peripherals

47,147 48,157 2.9 3.8 3.6 4.0

Samsung manufactures a very wide array of products ranging from components to finished products for both consumer electronics and industrial end markets. The company is particularly renowned for its high global market share in the fields of memory semiconductors (NAND/DRAM), LCD displays, and mobile smartphones/tablets. Samsung, alongside Apple has grown to dominate the smartphone industry but has the advantage of a more vertically integrated supply chain.

Alibaba Internet Software & Services 41,928 29,487 2.7 2.4 2.7 2.0

Alibaba is China’s pre-eminent e-commerce company. The company provides consumer-to-consumer (Taobao), business-to-consumer (Tmalll, AliExpress) and business-to-business (Alibaba.com) sales services via web portals, as well financial services (Alipay) and data-centric cloud computing services through its subsidiaries.


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£’000

30 April 2017

£’000

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30 April 2017

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30 April 2018

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30 April 2017

%

Amazon.com Internet & Direct Marketing Retail 38,800 36,105 2.5 2.9 – –

Amazon.com is a dominant eCommerce provider having expanded significantly since its early days as an online book, music and video vendor. Today the company has added a significant number of product categories and sells its own hardware (Kindle-branded e-readers and Echo smart speakers combined with the Alexa virtual assistant). Furthermore, Amazon.com owns the world’s pre-eminent public cloud (Amazon.com Web Services) which promises to lower drastically the cost of computing.

Intel Semiconductors & Semiconductor Equipment

32,921 12,421 2.1 1.0 3.2 2.8

The world’s largest supplier of semiconductor chips. Intel designs and manufactures microprocessors, boards and semiconductor components that are used in computers and servers, as well as networking and communication products. As the world’s largest supplier of microprocessors, Intel enjoys a worldwide market share of more than 75%. Intel is now looking to expand its addressable market into mobile computing (tablets & smartphones) bringing it into more direct competition with ARM based alternatives.

Adobe Software 31,961 18,085 2.0 1.4 1.4 1.1

Adobe Systems is one of the world’s largest software companies headquartered in San Jose, California. Its products enable its customers to create, deliver and measure personalised content, Once known for standalone products such as Postscript and Photoshop, the company today largely delivers its software as a service around three cloud offerings: Creative Cloud (media creation), Document Cloud (managing documents) and Experience Cloud (data-driven marketing).

Taiwan Semiconductor Semiconductors & Semiconductor Equipment

28,670 15,874 1.8 1.3 – 2.0

TSMC is the world’s largest semiconductor foundry, providing a full range of services from design to product delivery. The company has dominated the leading-edge of the technology road-map for many years, as smaller rivals struggled to resource adequately their product offerings. More recently, the competitive environment has intensified with Apple moving some business to TSMC (from Samsung) but with both Intel and Samsung now more open to manufacturing for others at the leading edge, as scale becomes increasingly important.

Salesforce.com Software 24,378 21,332 1.6 1.7 1.1 0.9

A leading provider of customer relationship management (CRM) software, Salesforce.com is a standard bearer for a new software delivery model commonly known as “software as a service” (SAAS). By eliminating many of the upfront and ancillary costs associated with the prevailing licence model, the ability to deliver software “on demand” is helping Salesforce.com expand the applicability of its core products.

Nvidia Semiconductors & Semiconductor Equipment

21,346 7,885 1.4 0.6 1.8 1.0

Founded in 1993, Nvidia is provider of graphics processing units (GPUs) for the gaming and professional markets, as well as system on a chip units (SoCs) for the mobile computing and automotive market. In addition to GPU manufacturing, Nvidia provides parallel processing capabilities to researchers and scientists that allow them to efficiently run high-performance applications. More recently, Nvidia has moved into the mobile computing market, where it produces Tegra mobile processors for smartphones and tablets as well as vehicle navigation and entertainment systems. Nvidia is also now focused on artificial intelligence.

Texas Instruments Semiconductors & Semiconductor Equipment

19,443 14,753 1.3 1.2 1.3 1.3

TI has been at the forefront of the US semiconductor industry ever since engineer Jack Kilby invented the integrated circuit (IC) in 1958. Today, Dallas-based Texas Instruments offers the semiconductor industry’s broadest portfolio of analogue and embedded processing products. The company also boasts best in class free cash flow generation which it is committed to returning entirely to Shareholders.

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Weights

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£’000

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30 April 2018

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30 April 2017

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ASML Semiconductors & Semiconductor Equipment

19,027 10,320 1.2 0.8 1.1 0.9

ASML is the largest supplier in the world of photolithography systems for the semiconductor industry. Founded in 1984, headquartered in Veldhoven, Netherlands. The company manufactures machines for the production of integrated circuits (ICs).

ServiceNow Software 17,875 15,246 1.2 1.2 0.4 0.3

Founded in 2004, ServiceNow is a Software-as-a-Service (SaaS) leader with more than $1bn in annual revenues. Initially focused on replacing legacy IT Helpdesk applications, ServiceNow today helps automate business processes and workflow across a range of different areas including IT service management (ITSM), security, customer service and HR.

Red Hat Software 17,458 11,223 1.1 0.9 0.4 0.3

Red Hat is a leading provider of open-source solutions. Founded in 1993, Red Hat has its corporate headquarters in Raleigh, North Carolina, with satellite offices worldwide. Red Hat has become associated to a large extent with its enterprise operating system Red Hat Enterprise Linux and with the acquisition of open-source enterprise middleware vendor JBoss. Red Hat also offers Red Hat Virtualization (RHV), an enterprise virtualization product. Red Hat help companies solve business challenges, align their IT and business strategies, and prepare for the future of technology. It do this by providing secure solutions through an open business model and an affordable, predictable subscription model.

Cisco Communications Equipment 17,421 6,956 1.1 0.6 2.8 2.8

Cisco is the worldwide leader in networking for the internet. Founded in 1984, headquartered in San Jose, California, in the center of Silicon Valley. Cisco develops, manufactures and sells networking hardware, telecommunications equipment and other high-technology services and products. Cisco's networking solutions connect people, computing devices and computer networks, allowing people to access or transfer information without regard to differences in time, place or type of computer system.

Dolby Laboratories Electronic Equipment, Instruments & Components

16,708 14,397 1.1 1.1 – –

Incorporated in 2004, Dolby Laboratories designs and manufactures audio and imaging products for the cinema, television, broadcast and entertainment industries. The Company’s products are used in content creation, distribution and playback to manage image and sound quality, transmission and playback. In addition to its core Dolby Digital IP, newer products include Dolby Atmos (surround sound), Dolby Vision (enhanced imaging) and Dolby Voice (audio conferencing).

Zendesk Software 16,611 15,327 1.1 1.2 – –

Originally founded in Norway, San Francisco-based Zendesk is a leading software as a service (SaaS) customer service platform company. Its ticketing system allows companies to manage customer requests for support regardless of which channel the customer uses to make contact (email, chat, social media, voice).

Total top twenty investments 873,654 656,988 56.0 52.6 – –

TOP TWENTY INVESTMENTS continuedAs at 30 April 2018


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The Strategic Report Section of this Annual Report comprises the Chair’s Statement, the Investment Manager’s Report including information on the portfolio and this Strategic Report. It has been prepared to provide information to Shareholders on the Company’s strategies and potential for those strategies to succeed, including a fair review of the strategy and performance of the Company during the year ended 30 April 2018, the position of the Company at the year end and a description of the principal risks and uncertainties. The Strategic Report Section contains certain forward looking statements, made by the Directors in good faith based on the information available to them at the time of their approval of this report. Such statements should be treated with caution due to inherent uncertainties, including both economic and business risk factors underlying any such forward-looking information.

INTRODUCTION AND BUSINESS MODEL The Company’s business model follows that of an externally managed investment trust and the investment objective is to provide Shareholders with access to an actively managed portfolio of technology shares selected on a worldwide basis with the investment objective to maximise long-term capital growth.

Further information on the operation of the business is set out in the Directors’ Report on pages 56 to 58.

The Board has appointed Polar Capital LLP as its Investment Manager and AIFM.

Polar Capital LLP also provides or assists in providing Company Secretarial services and general administration including liaison with directly appointed third party suppliers.

INVESTMENT OBJECTIVE AND POLICY Shareholders should be aware that the portfolio is actively managed and is not designed to track any particular benchmark, indices or market. The performance of the portfolio can vary from the Benchmark performance, at times considerably.

STRATEGIC REPORT

Over the last four 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 broad 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.

Objective The Company’s investment objective has been since formation, and will continue to be, to maximise long-term capital growth by investing in a diversified portfolio of technology companies around the world.

Policy At the Annual General Meeting in 2012 the current investment policy, as detailed below and available on the Company’s website, was approved. The portfolio has been managed in accordance with the policy and restrictions in the year to 30 April 2018.

Asset AllocationTechnology 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.

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STRATEGIC REPORT CONTINUED

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.

Risk DiversificationThe 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.

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, 20% of the Company’s gross assets.

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

• The Company may invest in unquoted companies from time to time, subject to prior Board approval. Investments in unquoted companies in aggregate will not exceed 10% of the gross assets of the Company (measured at the time of acquisition of the relevant investment and whenever the Company increases the relevant holding).

In addition to the restrictions set out above, the Company is subject to Chapter 15 of the UK Listing Authority’s Listing Rules which apply to closed ended investment companies with a premium listing on the Official List of the London Stock Exchange. In order to comply with the current Listing Rules, the Company will not invest more than 10% of its total assets at the time of acquisition in other listed closed ended investment funds, whether managed by the Investment Manager or not. This restriction does not apply to investments in

closed ended investment funds which themselves have published investment policies to invest no more than 15% of their total assets in other listed closed ended investment funds. However, the Company will not in any case invest more than 15% of its total assets in other closed ended investment funds.

Borrowing, Cash 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 Company’s Articles of Association permit borrowings up to the amount of its paid up share capital plus capital and revenue reserves but any net borrowings in excess of 20% of the Company’s net assets at the time of drawdown will only be made with the approval of the Board.

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 set out above.

Changes to investment policyAny 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 of its investment policy.

INVESTMENT STRATEGY GUIDELINES AND BOARD LIMITSThe Board has within the Investment Policy 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.


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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.

Market parameters Notwithstanding the ability to invest up to 100% of the portfolio in any one market, with current and foreseeable investment conditions the Portfolio will be invested in accordance with the objective across worldwide markets within the following geographical and market parameters:

• North America up to 85% of the Portfolio

• Europe up to 40% of the Portfolio

• Japan and Asia up to 55% of the Portfolio

• Rest of the world up to 10% of the Portfolio

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

CashThe Company may hold cash or near 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.

Gearing The Board monitors the level of gearing available to the Investment Manager and agrees, in conjunction with the AIFM, all bank facilities. Deployment of such facilities in excess of 20% of the net asset value of the Company at the time of draw down requires Board agreement.

During the year the Company had two three-year loan facilities with ING Bank NV: One for US Dollars 23,000,000 of which was drawn down on 2 October 2015 at a fixed rate of 2.21%pa and one for Japanese Yen 2,800,000,000 at a fixed rate of 0.995%pa. These loans fall due for repayment on 2 October 2018. It is anticipated that the loan facilities will be replaced following expiry of the current facilities.

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

FUTURE DEVELOPMENTSThe 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 geo-political forces. The Chair’s Statement and the Manager’s Report comment on the outlook.

PERFORMANCEAt 30 April 2018 the total net assets of the Company amounted to £1,551,611,000 (2017: £1,252,525,000). The NAVper share rose by 22.7% from 945.39p to 1,159.69p. As at 30 April 2018 the portfolio comprised of 110 (2017: 120) investments. The top twenty investments in the portfolio at 30 April 2018 are described on pages 34 to 36 and a full listing of investments is on pages 30 to 33 and can also be found on the Company’s website.

The portfolio has been analysed on pages 28 and 29 and provides details on the distribution of investments by market capitalisation and by the different sectors in the different principal geographies.

The changes in the share price, NAV and Benchmark over the financial year are shown on page 04.

A review and commentary are given in the Chair’s Statement on pages 8 to 10 and the Manager’s Report on pages 11 to 26.

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The ongoing charges ratio shown on page 4 has been calculated in accordance with guidance issued by the AIC and constitutes the management fee in Note 8 and the other administrative expenses (Note 9) as a percentage of average daily net assets over the year. A second ongoing charge is provided which takes into account the performance fee detailed in Note 8.

DIVIDENDS

The Company’s revenue varies from year to year and the Board considers the dividend position in each year in order to maintain the Company’s status as an investment company. 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 the payment of a dividend.

REGULATORY ARRANGEMENTSThe Company is designated 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 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 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 Listing Rules and the Companies Act.

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 (other than those reflected in these Financial Statements) to this information requiring disclosure. Any information requiring immediate disclosure pursuant to the AIFMD will be disclosed to the London Stock Exchange through a primary information provider.

Statements from the Depositary and the AIFM can be found on the Company’s website.

The Company seeks to manage its portfolio in such a way as to meet the tests set down in Section 1158 and 1159 of the Corporation Tax Act 2010 (as amended by Section 49(2) of the Finance Act 2011) and continue to qualify as an investment trust. This qualification permits the accumulation of capital within the portfolio without any liability to UK Capital Gains Tax. Further information is provided in the Directors’ Report.

The Company has no employees or premises and the Board is composed of Non-executive Directors. The day to day operations and functions of the Company have been delegated to third parties.

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

The Company also contracts directly with a number of third parties for the provision of regularly required services:

• Stifel Nicolaus Europe Limited were appointed on 3 November 2017 as corporate broker;

• Equiniti Limited as the share registrars;

• KPMG LLP as independent Auditors;

• Camarco as PR advisors; and

• Emperor as website designers, internet hosting services and designers and printers for Shareholder communications.


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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 comprise both specific financial and Shareholder related measures, these KPIs have not differed from the prior year.

KPI Control process Outcome

The provision of investment returns to ordinary Shareholders measured by long-term NAV growth and relative performance against the Benchmark.

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

The Company’s NAV has, over the year to 30 April 2018, outperformed the Benchmark. The NAV per share rose by 22.7% while the Benchmark rose 17.1% in Sterling terms over the same period.

The reasons are explained in the Chair’s Statement and the Investment Manager’s Report.

Over the longer-term, as shown by the historic performance data shown on page 05, growth in the NAV has exceeded the Benchmark.

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.

The Board is aware of the vulnerability of a sector specialist Trust to a change in investor sentiment to that sector. While there is no formal discount policy 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.

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

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 2018

• Maximum premium over year: 3.9%

• Maximum discount over year: -5.7%

• Average discount over year: -0.5%

The Company has not bought back any shares in the year to 30 April 2018 and has issued 1,308,000 shares when the issue was NAV enhancing to existing Shareholders. Since the year end a further 30,000 shares have been issued.

Over previous 5 financial years ended 30 April 2018

• Maximum premium over period: 5.0%

• Maximum discount over period: -13.8%

• Average discount over period: -2.2%

Over 5 years the Company has not bought back any shares and has issued 2,158,841 as the result of market demand and 3,404,417 from the conversion of subscription shares.

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KPI Control process Outcome

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 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 2018 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 administration and reviews on a cycle the provision of services from third parties including the costs of their services.

The annual operating expenses are reviewed and any non-recurring project related expenditure sanctioned.

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 2018 excluding the performance fee were 0.99% of net assets (2017: 1.01%). The ongoing charges including the performance fee payable in respect of the year ended 30 April 2018 were 1.76% of net assets.

PRINCIPAL BUSINESS RISKS AND UNCERTAINTIESThe Board is responsible for the management of risks faced by the Company in delivering long-term returns to Shareholders. The identification, monitoring and appraisal of the risks, any mitigation factors and control systems is crucial. The Directors carry out on an annual basis a robust assessment of the principal risks with the assistance of the Investment Manager through the use of a Risk Map which seeks to record risks in four main risk categories; Business, External, Portfolio Management and Infrastructure. Directors continually monitor risks faced by the Company and have met to discuss long-term risks outside of the normal cycle of Audit meetings.

The Risk Map is constructed by identifying and assessing various risks as to their likelihood and their severity of impact, then considering, both internal and external controls and factors that could provide mitigation to arrive at a post mitigation risk impact. The Risk Map therefore provides a structure for robustly reviewing the risks and controls as well a method to report and monitor changes and developments.

The investment objective is to invest the Company’s funds in a portfolio of technology companies worldwide and as such the portfolio will be exposed to market and currency fluctuations with only limited ability to mitigate the consequences through the holding of cash in the portfolio and the use of derivatives and/or currency hedging.


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The Board has identified top risks faced by the Company which are those classified as the having the highest risk level post mitigation, these are kept under regular review by the Board in addition to the periodic review of the full risk map which incorporates all risks and policies. The top risks are detailed below within the greater business risk categories of Business, External and Infrastructure.

Principal Business Risks and Uncertainties

Management of risks through Mitigation & Controls

Changes in overall assessment of the risks over the financial year

BusinessFailure to achieve investment objective and/or Failure in services provided by Investment Manager Unchanged • The appropriateness of the

investment mandate and the execution of the investment strategy may be out of favour or poorly delivered which may lead to poor performance against the Benchmark and peer group leading to a depressed share price, unacceptably large and persistent discount as investors seek alternative investments or lower risk strategies.

• The ordinary shares of the Company are listed on the London Stock Exchange and the share price is determined by supply and demand. The shares may trade at a discount or at a premium to the Company’s underlying NAV and this discount or premium may fluctuate.

The Board seeks to mitigate the impact of such risks through the regular reporting and monitoring of the investment performance against its peer group, other closed ended and open ended funds and Exchange Traded Funds (ETFs).

A day a year is set aside to conduct an annual review of the investment strategy and investment markets which is used as a framework to assess portfolio construction and performance across the remainder of the year. The Board when considering the investment strategy has regard to the degree of risk which the Investment Manager incurs in order to generate investment returns.

For months when the Board is not scheduled to meet they receive a monthly report containing financial information on the Company including gearing and cash balances. They also receive a monthly commentary from the Investment Manager in the factsheet.

A continuation vote is held every five years to provide Shareholders with an opportunity to wind up the Company.

In consultation with its advisors, including the corporate stock broker the Board regularly considers the level of premium and discount of the share price to the NAV and the Board reviews ways to enhance Shareholder value including share issuance and buy backs. The Board is committed to a clear communication program to ensure Shareholders understand the investment strategy. This is maintained through the use of monthly factsheets , an informative and relevant website as well as annual and half year reports.

ExternalGlobal geopolitical risk Elevated• There is significant exposure to the

economic cycles of the markets in which the underlying investments conduct their business operations as well as the economic impact on investment markets where such investments are listed. The fluctuations of exchange rates can also have a material impact on Shareholder returns.

The Board regularly discusses the global geo-political issues and general economic conditions and developments.

Note 27 describes the impact of changes in foreign exchange rates.

The effects of the political changes in the US, Europe and UK have increased uncertainty and increased volatility in financial markets.

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Uncertainty in regulatory environment due to “Brexit” vote Unchanged• The exit of the UK from the

European Union The consequences of the Brexit decision were considered at the time and are monitored on an ongoing basis through existing control systems with particular attention focused on advanced indicators of potential problems. The Board does not believe that there is any direct impact on the operation of the Company from this decision but fluctuations in exchange rates can impact investor returns.

Cyber Risk and/or “Black Swan” Risk Elevated• There are risks from the failure of,

or resulting from cyber-attack disruption to, operational and accounting systems and processes provided by the Investment Manager including: any subcontractors to which the Investment Manager has delegated a task as well as directly appointed suppliers.

• Financial loss due to an unexpected event.

• Adverse impact on personnel or the portfolio. Temporary or permanent requirement to move offices.

There is an annual review of internal control reports from suppliers which includes the disaster recovery procedures of the Investment Manager.

The Company has a disaster recovery plan in place along with a Black Swan Committee.

The number and severity and success of cyber-attacks have increased over the year.

Breach of Statutes and Regulations including failure to keep up with legislative changes Elevated• The legal and regulatory risks

include failure to comply with the FCA’s Prospectus Rules, Listing Rules and Transparency and Disclosure Rules; not meeting the provisions of the Companies Act 2006 and other UK, European and overseas legislation affecting UK companies including MiFID II and the GDPR and not complying with accounting standards. Further risks arise from not keeping abreast of changes in legislation and regulations which have in recent years been substantial.

At each Board meeting there is an administration report which provides details on corporate matters including legislative and regulatory developments and changes, substantial changes in shareholdings and the share register, and share price performance.

Information and guidance on legal and regulatory risks is managed by using the Investment Manager or professional advisers where necessary and the submission of reports to the Board for discussion and, if required, any remedial action or changes considered necessary.

In addition, as an investment company, the Company is dependent on a framework of tax laws, regulation (both UK and EU) and Company law.

The Board monitors new developments and changes in the regulatory environment and seeks to ensure that their impact on the Company is understood and complied with although the Board has no control over such legislative changes and such changes may be intended to affect us, or we may suffer unintended consequences from changes designed to affect others.

The impact of MiFID II and the disruption to the workings of the European Asset Management industry could be significant.

The implementation of the General Data Protection Regulations provides for greater data privacy, while the risk to the Company is deemed to be low the impact of fines should they occur could be significant.


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InfrastructureAccounting Errors Elevated• The Mis-valuation of investments or the

loss of assets from the custodian or sub custodians which affect the NAV per share or lead to a loss of Shareholder value.

• Material accounting errors or misstatements resulting in incomplete or inaccurate financial information.

• Failure to meet investment trust status.

• Inaccuracies in fee calculations.

• Inability of the Company or Shareholders to recover losses.

Regular reporting from the Depositary on the safe custody of the Company’s assets and the operation of control systems related to the portfolio reconciliation are monitored.

Management accounts produced and reviewed on a monthly basis. Statutory reporting and daily NAV calculations produced by 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.

A full review of the internal controls framework is carried out at least annually.

Performance fee due to the Investment Manager for the year ended 30 April 2018.

Immaterial misstatement of note 28 to the prior year financial statements published in July 2017.

MANAGEMENT COMPANY AND MANAGEMENT OF THE PORTFOLIOAs 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 achieve the optimum return for Shareholders.

Investment team The Investment Manager is Polar Capital LLP (“Polar Capital”), which is authorised and regulated by the Financial Conduct Authority.

Under the terms of the investment management agreement Polar Capital provides investment management, and provides and procures accounting, company secretarial and administrative services.

Polar Capital provides a team of technology specialists led by Ben Rogoff. Each member focuses on specific areas while Ben has overall responsibility for the portfolio. Polar Capital also has other specialist and geographically focused investment teams which may contribute to idea generation.

Termination arrangements The investment management agreement may be terminated by either party by giving 12 months’ notice, but under certain circumstances the Company may be required to pay up to one year’s management charges if immediate notice is given and compensation will be on a sliding scale if less than 12 months’ notice is given.

Fee arrangements Management fee The base fee is 1% on the Net Asset Value per share multiplied by the arithmetic mean of the number of shares up to £800m and above £800m the base fee reduces to 0.85%. On 1 January 2018 in connection with discussions and the Company’s agreement to making a contribution to Research costs under MiFID II regulations, a temporary third tier management fee of 0.80% on assets over £1.7bn was introduced. The fee is payable quarterly in arrears based on the NAV at the end of each quarter. Any investments in funds managed by Polar Capital are wholly excluded from the base management fee calculation.

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Performance fee Performance periods will coincide with the Company’s accounting periods.

• Annual performance fee equal to 15% of the amount by which the increase in the adjusted NAV per share exceeds the total return on the Dow Jones World Technology Index (total return, Sterling adjusted with relevant withholding taxes removed) multiplied by the time weighted average of the number of shares in issue during that period, subject to a high water mark.

• The NAV per share (“Adjusted NAV per share”) is adjusted for the purposes of the performance fee calculation by adding back any accruals for unpaid performance fees, any dividends paid or payable by reference to the performance period and the removal of any benefit of share issuance or buy backs.

• High water mark – the performance fee will only be payable if, and to the extent that, the Adjusted NAV per share exceeds the highest of:

– the NAV per share on the last day of the previous performance period;

– the Adjusted NAV per share on the last day of a performance period in respect of which a performance fee was last paid;

• Any performance fee accrual will be included in the NAV calculated in accordance with the AIC guidelines.

• The performance fee which can be paid by the Company in any one performance period is capped at 2% of net assets.

In the event of a termination of the investment management agreement, the date the agreement is terminated will be deemed to be the end of the relevant performance period and any performance fee payable shall be calculated as at that date.

Management fees of £13,202,000 (2017: £9,896,000 ) have been paid for the year to 30 April 2018, of which £nil (2017: £2,747,000) was outstanding at the year end. A performance fee of £11,169,000 has been earned for the year to 30 April 2018 (2017: nil), and the whole of this amount (2017: nil) was outstanding at the year end.

CONTINUED APPOINTMENT OF INVESTMENT MANAGERThe Board, through the Management Engagement Committee, has reviewed the performance of the Investment Manager in managing the portfolio over the longer-term. The review also considered the quality of the other services provided by the Investment Manager, including the strength of the investment team, the depth of the other services provided by the Investment Manager and their resources available to provide such services. We have discussed with the Investment Manager the provision of increased resources and are pleased to see the recruitment of additional people to support the Company, which includes the organisation on the Company’s behalf of third party suppliers, and the quality of the Shareholder communications.

The Board, on the recommendation of the Management Engagement Committee, has concluded that on the basis of longer-term performance it is in the best interests of Shareholders as a whole that the appointment of Polar Capital LLP as Investment Manager is continued on the existing terms.

LONGER-TERM VIABILITY In accordance with the Corporate Governance provisions, the Company is required to make a forward looking longer-term viability statement. Due to this, the Board has considered and addressed the ability of the Company to continue to operate over a longer period.

The Board has considered the financial position of the Company and believes such extends significantly beyond the twelve-month period required for the going concern statement. In addition, the Board has considered the industry and the market in which the Company operates and the continued appetite for technology investment. The Board continues to use five years as a reasonable term over which the viability of the Company should be considered; shareholders have the opportunity to vote on the continuation of the Company every five years, therefore the outlook for the next five-year period incorporates the continuation vote which will be put to shareholders at the AGM in 2020.



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In establishing the positive outlook for the Company over the next five years to 30 April 2023, the Board has taken into account:

The ability of the Company to meet its liabilities as they fall due

The financial position of the Company and its cash flows and liquidity position are described in the Strategic Report and the Financial Statements. Note 27 to the Financial Statements includes the Company’s policies and process for managing its capital; its financial risk management objectives; details of financial instruments and hedging activities. Exposure to credit risk and liquidity risk are also disclosed.

The portfolio comprises of investments traded on major international stock exchanges, there is a spread of investments by size of company.

The current portfolio could be liquidated to the extent of 99.4% within seven trading days and there is no expectation that the nature of the investments held within the portfolio will be materially different in future.

The expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position.

Repayment of the bank facilities, due in October 2018, would equate to approximately 35% of the cash or cash equivalents available to the Company at 30 April 2018, without having to liquidate the portfolio of investments.

The Company has no employees except for the Non-executive Directors and consequently does not have redundancy or other employment related liabilities or responsibilities.

The Company faces a continuation vote at the AGM in September 2020

Under the AIC SORP guidance that, where Shareholders have the opportunity to vote in favour or against a company continuing in existence, it will normally be the case that Shareholders will have to vote in favour of a liquidation before it can occur. It is reasonable to believe that if good performance is achieved over the period until the next continuation vote in 2020 the Company will pass the continuation vote.

Factors impacting the forthcoming years

The Strategic Report Section, comprising the Chair’s Statement, the Investment Manager’s Report and the Strategic Report provide a comprehensive review of such factors along with the principal risks as set out on pages 43 to 45.

Regulatory changes

Despite the increased level of regulations 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 in comparison to other competitive products.

That the business model of being a closed ended investment fund will continue to be wanted by investors and the investment objective be desired and achievable.

Further, the Board recognise that there has been considerable growth 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 believe it appropriate to confirm their assessment for the longer-term viability of the Company for the next five years to 30 April 2023.

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GOING CONCERN The Board has also considered the ability of the Company to adopt the Going Concern basis for the preparation of the Financial Statements. Consideration included the Company’s current financial position, its cash flows and its liquidity position and its assessment of any material uncertainties and events that might cast significant doubt upon the Company’s ability to continue as a going concern. In conjunction with the financial considerations taken into account when reviewing the longer-term viability, the Board considered the year under reviews performance of the portfolio (net assets +22.7%), being in line with the investment objective and strategy against the performance of the benchmark (+17.1%); the liquidity of the portfolio (99.4% liquid over 7 days) and the opportunity for investment and reinvestment of funds. The Board believe it appropriate to present the Company and the Financial Statements as a Going Concern.

CORPORATE RESPONSIBILITYSocially responsible investing and exercise of voting powers The Board has instructed the Investment Manager to take into account the published corporate governance of the companies in which it invests.

The Company 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 has voted at 127 meetings during the year under review in each case supporting the recommendations of the management.

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).

Environment and Greenhouse Gas Emissions The Company’s core activities are undertaken by its Investment Manager which seeks to limit the use of nonrenewable resources and reduce waste where possible.

The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 require companies listed on the Main Market of the London Stock Exchange to report on the greenhouse gas (GHG) emissions for which they are responsible. The Company is an investment trust, with neither employees nor premises, nor has it any financial or operational control of the assets which it owns. Consequently, it has no GHG emissions to report from its operations nor does it have responsibility for any other emissions.

Diversity, gender reporting and human rights policyThe Company has no employees and the Board is comprised of two female and five male Non-executive Directors.

If any new appointments are made to the Board, the Board will continue to have regard to the benefits of diversity, including gender, when seeking to make any such appointments.

The Company has not adopted a policy on human rights as it has no employees or operational control of its assets.

Modern Slavery Act As an investment company, the Company does not provide goods or services in the normal course of business and does not have any customers. Accordingly, it is considered that the Company is not required to make any slavery or human trafficking statements under the Modern Slavery Act 2015.


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Anti-bribery, Corruption and Tax EvasionThe Board has adopted a zero-tolerance policy, which is available on the Company’s website to bribery, corruption and the facilitation of tax evasion in its business activities and uses the principles of the policies formulated and implemented by the Investment Manager and expects the same standard of zero-tolerance to be adopted by third-party service providers.

The Company has implemented a Conflicts of Interest policy to which the Directors must adhere, in the event of divergence between the Investment Manager’s policy and the Company’s policy the Company’s policy shall prevail. The Company is committed to acting with integrity and in the interests of Shareholders and will seek to ensure that the law is enforced should such a need arise.

Approved by the Board on 17 July 2018

By order of the Board

Tracey Lago Polar Capital Secretarial Services Limited Company Secretary

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52 Directors

54 Investment Team

56 Directors’ Report

59 Report on Corporate Governance

69 Audit Committee Report

73 Directors’ Remuneration Report

77 Statement of Directors’ Responsibilities

GOVERNANCE

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SARAH BATES

Independent Non-executive Chair

Appointed to the Board in 2011 and elected Chair in 2017.

Skills and ExperienceSarah is a past Chair of the Association of Investment Companies and has been involved in the UK savings and investment industry in different roles for over 30 years.

Other AppointmentsSarah is a Non-executive Director of Worldwide Healthcare Trust plc. Sarah has announced her retirement from the board and as Chair of St.James Place plc which is expected to be imminent. Sarah is a member of the investment committees of the BBC Pension Scheme and of the University Superannuation Scheme. She was previously Chair of JP Morgan American Investment Trust plc and of Witan Pacific Investment Trust plc. She was previously chair of the audit committees of New India Investment Trust plc and of U and I Group plc. Sarah is a Fellow of CFA UK.

Committee attendance:Audit (by invitation)

Management Engagement (Chair)

Nominations (Chair)

Remuneration (Member)

Shares held:10,500

Standing for re-election:YES

BRIAN ASHFORD-RUSSELL

Non-executive Director

Appointed to the Board in 1996.

Skills and ExperienceBrian is a director and founder of Polar Capital Partners. He was previously head of the technology team at Henderson Global Investors. He managed the Company from launch until 30 April 2006.

Other AppointmentsBrian is a Non-executive director of Polar Capital Holdings plc.

Committee attendance:None

Shares held: 270,000

Standing for re-election: NO – Brian will retire from the Board at the conclusion of the AGM.

TIM CRUTTENDEN

Independent Non-executive Director


Skills and ExperienceTim is currently Chief Executive Officer of VenCap International plc having been with that company in various positions since 1994. VenCap invests in venture capital funds in the US, Asia and Europe, with a primary focus on early stage technology companies.

Other AppointmentsNone

Committee attendance:Audit (Member)

Management Engagement (Member)

Nominations (Member)


Shares held: nil

Standing for re-election: YES

DIRECTORS

Independence and Committee Membership: The Board considers that all Directors are independent in character and there were no circumstances which were likely to affect or could appear to affect their judgement. Due to the direct link with the Management company Mr Ashford-Russell is not deemed to be independent and is therefore not a Member of any of the Board Committees.

Other Appointments: The holding of a number of directorships has been considered carefully by the Board; it has been deemed acceptable, where a Director remains able to devote sufficient time to each appointment.

It was agreed with effect from 1 May 2017 that all the independent non-executive directors will sit on each Board Committee with the exception of the Chair of the Board who may attend by invitation but is not part of the Audit Committee.


CHARLOTTA GINMAN


Appointed to the Board and as Chair of the Audit Committee in 2015.

Skills and ExperienceCharlotta is a Fellow of the Institute of Chartered Accountants in England and Wales and qualified with Ernst & Young before spending a career in investment banking and commercial organisations, principally in technology related businesses.

Other AppointmentsCharlotta is a Non-executive Director and chairs the audit committees of Pacific Assets Trust plc, Motif Bio plc and Keywords Studios plc. Charlotta is also a Non-executive Director of Consort Medical plc and Unicorn AIM VCT plc. As three of Charlotta’s six non-executive directorships are with quoted investment companies that involve less time and commitment than trading companies, hence Charlotta is able to devote sufficient time to all of her appointments.

Committee attendance:Audit (Chair)




Shares held: 3,688


PETER HAMES


Appointed to the Board and as Senior Independent Director, in 2011.

Skills and ExperiencePeter spent 18 years of his investment career in Singapore, where in 1992 he co-founded Aberdeen Asset Management’s Asian operation and as Director of Asian Equities he oversaw regional fund management teams responsible for running a number of top-rated and award winning funds.

Other AppointmentsPeter is a Director of MMIP Investment Management Limited. Peter is also an independent member of the Operating Committee of Genesis Asset Managers LLP and is a Director of the Genesis Emerging Markets Investment Company.




Remuneration (Chairman)

Shares held: 10,000


CHARLES PARK



Skills and ExperienceCharles has over 25 years of specialist investment experience and is a co-founder of Findlay Park Partners, an investment firm specialising in quoted American equity investments. Prior to this, he was a US fund manager at Hill Samuel Asset Management.

Other AppointmentsCharles is Non-executive Director of North American Income Trust plc and is a member of Salters’ Management Company Ltd.





Shares held:nil

Standing for re-election:YES

STEPHEN WHITE



Skills and ExperienceStephen qualified as a Chartered Accountant at PwC before starting a career in investment management. He has more than 35 years’ investment experience, most notably as Head of European Equities at Foreign & Colonial Investment Management and currently as Head of European and US Equities at British Steel Pension Fund.

Other AppointmentsStephen is a Non-executive Director and Chairman of the audit committees of Blackrock Frontiers Investment Trust plc and Aberdeen New India Investment Trust plc and a Non-executive Director of JP Morgan European Smaller Companies Trust plc.





Shares held:10,000


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INVESTMENT TEAM

BEN ROGOFF

Director, Technology

Ben joined Polar Capital in 2003.

Ben is the lead manager of Polar Capital Technology Trust and is a fund manager of the Polar Capital Global Technology Fund and Polar Capital Automation and Artificial Intelligence Fund.

Ben has been a technology specialist for 22 years. Prior to joining Polar Capital, he began his career in fund management at CMI, as a global technology analyst. He moved to Aberdeen Fund Managers in 1998 where he spent four years as a senior technology manager. Ben graduated from St Catherine’s College, Oxford in 1995.

NICK EVANS

Senior Fund Manager

Nick joined Polar Capital in 2007.

Nick has 20 years’ experience as a technology specialist. He has been lead manager of the Polar Capital Global Technology Fund since January 2008 and is also a fund manager on the Polar Capital Technology Trust and Polar Capital Automation and Artificial Intelligence Fund.

Prior to joining Polar Nick was head of technology at AXA Framlington and lead manager of the AXA Framlington Global Technology Fund and the AXA world fund (AWF) – Global Technology from 2001 to 2007 (both rated five stars by S&P). He also spent three years as a Pan-European investment manager and technology analyst at Hill Samuel Asset Management. Nick has a degree in Economics and Business Economics from Hull University, has completed all levels of the ASIP, and is a member of the CFA Institute.

FATIMA IU

Fund Manager

Fatima joined Polar Capital in 2006.

Fatima has 12 years’ experience. She is a fund manager on the Polar Capital Technology Fund, Polar Capital Technology Trust and Polar Capital Automation and Artificial Intelligence Fund. Fatima is responsible for the coverage of European Technology, Global Security, Networking, Clean Energy and Medical Technology.

Prior to joining Polar, Fatima spent 18 months working at Citigroup Asset Management with a focus on consumer products and pharmaceuticals. Fatima holds an MSc in Medicinal Chemistry from Imperial College of Science & Technology in London. She is also a CFA Charterholder.


XUESONG ZHAO

Fund Manager

Xuesong joined Polar Capital in 2012.

Xuesong has 11 years investment experience. He is a lead manager of the Polar Capital Automation and Artificial Intelligence Fund and is a fund manager on the Polar Capital Technology Trust and Polar Capital Global Technology Fund.

Prior to joining Polar Capital, he spent four years working as an investment analyst within the emerging markets & Asia team at Aviva Investors, where he was responsible for the technology, media and telecom sectors. Prior to that, Xuesong worked as a quantitative analyst and risk manager for the emerging market debt team at Pictet Asset Management. Xuesong holds an MSc in Finance from Imperial College of Science & Technology, a BA in Economics from Peking University and is also a CFA Charterholder.

CHRIS WITTSTOCK

Senior Investment Analyst

Chris joined Polar Capital in 2017.

Chris joined Polar as a senior technology analyst based in the US. Prior to joining, Chris led the International research sales effort at Pacific Crest, a technology investment bank that was ultimately acquired by KeyBanc Capital in 2014. Prior to joining Pacific Crest in 2004, Chris led the International sales effort at Schwab SoundView, the successor company to Soundview Technology Group where he was from 1996.

Chris spent significant time in Europe as a derivative products specialist in the late 80s and 90s, lastly with Morgan Stanley International. He is a graduate of the University of Toronto, Faculty of Engineering (Industrial).

PAUL JOHNSON

Investment Analyst

Paul joined Polar Capital in 2012.

Prior to joining Polar Capital Paul helped manage a private investment fund between 2010 and 2012.

Paul holds a BA in History and Politics and a Masters in History from Keele University. Paul has successfully passed all three levels of the CFA program.

BRADLEY REYNOLDS

Investment Analyst

Brad joined Polar Capital in 2011.

Brad joined Polar Capital as an Analyst and Trader working within the European Market Neutral team with a focus on media and internet. In 2014, he joined the Technology team as an Investment Analyst.

Prior to joining Polar, Brad worked at Ratio Asset Management as an analyst and trader, and from 2007 to 2011 he worked at F&C as a hedge fund analyst. Brad started his career in 2001 at Gartmore Investment Management working within the hedge fund team.

Brad graduated from the University of Hertfordshire with a degree in Business Studies and has passed the Level I examination of the CFA Program.

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The Directors present their Directors’ Report including the Report on Corporate Governance together with the Audited Financial Statements for the Company prepared under International Financial Reporting Standards as adopted by the European Union (“IFRS”) for the year ended 30 April 2018.

INTRODUCTION AND STATUSThe Company is incorporated in England and Wales as a public limited company and domiciled in the United Kingdom. It is an investment company as defined in Section 833 of the Companies Act 2006 and its ordinary shares are listed and traded on the London Stock Exchange.

The “close company” provisions do not apply.

The Company seeks to operate as an investment trust in accordance with sections 1158 and 1159 of the Corporation Taxes Act 2010 (as amended by section 42(2) of the Finance Act 2011). This qualification permits the accumulation of capital gains within the portfolio without liability to UK Capital Gains Tax. The Company has received confirmation from HM Revenue & Customs that on the basis of the information supplied, the Company is an approved investment trust. The Directors, under advice, expect the affairs of the Company to continue to satisfy the conditions.

The Company has registered as a Foreign Financial Institution with the US IRS and been allocated a Global Intermediary Identification Number (GIIN) of J29SBF- 99999-SL-826. The Company has also been allocated the Legal Entity Identifier of 549300TN1O5392UC4K19.

The Company is an investment trust and as such its ordinary shares are excluded from the FCA’s restrictions which apply to non-mainstream investment products. The Company conducts its affairs and intends to do so for the foreseeable future so that the exclusion continues to apply.

The attention of Shareholders is drawn to the Strategic Report Section (Chair’s Statement, the Manager’s Report and the Strategic Report) which provide further commentary on the activities and outlook for the Company, including future developments and dividends.

DIRECTORSThe current Directors of the Company are listed on pages 52 and 53. All the Directors held office throughout the year under review with the exception of Charles Park and Stephen White who were appointed

on 15 January 2018 and Michael Moule who retired as a Director at the AGM in September 2017. Charles Park and Stephen White will seek election at the AGM on 6 September 2018 in accordance with the Articles of Association. All the other Directors are also retiring and standing for re-election at the AGM with the exception of Brian Ashford-Russell who is retiring. The fees paid to the Directors are set out in the Directors’ Remuneration Report.

LISTING RULE 9.8.4Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. The Directors confirm there are no disclosures to be made pursuant to this rule other than the waiver of Director’s fees by Brian Ashford-Russell in respect of the financial year ended 30 April 2018 and his intention to waive his fees for his remaining period in office until retirement at the AGM on 6 September 2018.

CORPORATE GOVERNANCE STATEMENTThe Report on Corporate Governance on pages 59 to 68 form part of this Directors’ Report.

CAPITAL STRUCTURE

IssuedThe Company’s share capital is divided into ordinary shares of 25p each. At the year end there were 133,795,000 ordinary shares in issue (2017: 132,487,000 ordinary shares). At the date of this report there were 133,825,000 ordinary shares in issue.

Changes during the year1,308,000 ordinary shares were issued in the year ended 30 April 2018. Since the year end a further 30,000 shares have been issued. No shares have been purchased for cancellation or to be held in treasury.

Voting rightsOrdinary shares carry voting rights which are exercised on a show of hands at a meeting, or on a poll, where each share has one vote. Details for the lodging of proxy votes are given when a notice of meeting is given.

TransferabilityAny shares in the Company may be held in uncertificated form and, subject to the Articles, title to uncertificated shares may be transferred by means of a relevant system.

DIRECTORS’ REPORT


Subject to the Articles, any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Board may approve. The instrument of transfer must be executed by or on behalf of the transferor and (in the case of a partly-paid share) the transferee.

The Board may, in its absolute discretion and without giving any reason, decline to register any transfer of any share which is not a fully paid share. The Board may also decline to register a transfer of a certificated share unless the instrument of transfer: (i) is duly stamped or certified or otherwise shown to the satisfaction of the Board to be exempt from stamp duty and is accompanied by the relevant share certificate and such other evidence of the right to transfer as the Board may reasonably require; (ii) is in respect of only one class of share; and (iii) if joint transferees, are in favour of not more than four such transferees.

The Board may decline to register a transfer of any of the Company’s certificated shares by a person with a 0.25% interest (as defined in the Articles) if such a person has been served with a restriction notice (as defined in the Articles) after failure to provide the Company with information concerning interests in those shares required to be provided under the Companies Act 2006, unless the transfer is shown to the Board to be pursuant to an arm’s length sale (as defined in the Articles).

The Company is not aware of arrangements to restrict the votes or transferability of its shares.

Powers to issue ordinary shares and make market purchases of ordinary sharesThe Board was granted by Shareholders at the AGM in 2017 the power to allot equity securities up to a nominal value of £3,319,050 and to issue those shares for cash without offering those shares to Shareholders in accordance with their statutory pre-emption rights. These powers will expire at the AGM in 2018 and renewal of the authorities will be sought at the AGM in 2018. New ordinary shares will not be allotted and issued at below the Net Asset Value.

The Board also obtained Shareholder authority at the AGM in 2017 to make market purchases of up to 19,901,020 ordinary shares of the Company for cancellation in accordance with the terms and conditions set out in the resolution. This authority expires at the AGM in 2018 and renewal of the authority to make market purchases of ordinary shares will be sought at the AGM in 2018.

The level of the ordinary share price discount or premium to the Net Asset Value together with internal guidelines for the repurchase or issuance of new ordinary shares are kept under regular review by the Board. The Board considers that discount volatility is unattractive to Shareholders but as a specialist investment fund market sentiment can create sustained discount pressure. With this in mind the Board has a pragmatic approach to share buy backs.

Major interests in ordinary sharesDeclarations of interests in the voting rights of the Company at 30 April 2018 are set out below. The Company has not recieved any further shareholder notifications between 30 April 2018 and the date of this report.

Number of ordinary shares

Percentage of voting rights*

Rathbone Brothers Plc Indirect 10,653,445 7.96

Brewin Dolphin Limited Indirect 9,946,829 7.43

Old Mutual plc Direct 7,811,334 5.84

Investec Wealth& Investment Ltd Indirect 6,712,073 5.02

Lazard Asset Management LLC Indirect 6,383,454 4.77

* The above percentages are calculated by applying the shareholdings as notified, to the issued ordinary share capital at 17 July 2018 of 133,825,000 ordinary shares.

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LIFE OF THE COMPANYThe Articles of Association of the Company provide that a vote on whether the Company should continue will be proposed as an ordinary resolution at every fifth Annual General Meeting of the Company.

Such a resolution was proposed at the AGM on 9 September 2015 and passed with 99.9% of the votes cast in favour of continuing for a further five years. The next continuation vote will be proposed at the Annual General Meeting in 2020.

CORPORATE RESPONSIBILITY A statement on corporate responsibility and the applications of policies is included in the Strategic Report.

DISCLOSURE OF INFORMATION TO THE AUDITORSAs far as the Directors are aware and to the best of their knowledge, having made enquiries, there is no relevant audit information of which the Auditors are unaware and the Directors have taken steps to make themselves aware of any relevant audit information and to establish that the Auditors are aware of such information.

2018 ANNUAL GENERAL MEETINGThe Annual General Meeting will be held on 6 September 2018 at 2.30pm at the RAC Club, 89 Pall Mall, London SW1Y 5HS. Shareholders are encouraged to attend the AGM as it provides an opportunity for them to hear a presentation from the Investment Manager and meet the Directors and Investment team members.

The separate Notice of Meeting contains the usual resolutions to receive the Financial Statements, approve the Directors’ Remuneration Implementation Report, re-elect retiring Directors, appoint the Auditors and empower the Directors to set their fees. As in previous years the Directors are also seeking powers to allot shares for cash and to buy back shares for cancellation or to be held in treasury. The full text of the resolutions to be proposed at the AGM and an explanation of each resolution are contained in the separate Notice of Meeting.


Tracey LagoPolar Capital Secretarial Services Limited

Company Secretary

17 July 2018

DIRECTORS’ REPORT CONTINUED


REPORT ON CORPORATE GOVERNANCE

CORPORATE GOVERNANCE FRAMEWORKThe following diagram demonstrates the governance framework within which the Company is managed. The Directors are ultimately accountable to shareholders for the Company’s affairs and are therefore responsible for the good governance of Company. The Company has no employees and relies on third parties to administer the Company and to provide investment management services.

Nominations Committee

Chair: Sarah BatesMembers: all independent

NEDs

Management Engagement Committee

Chair: Sarah BatesMembers: all independent

NEDs

Audit Committee

Chair: Charlotta GinmanMembers: all independent NEDs with the exception of

the Chair of the Board

Remuneration Committee

Chairman: Peter HamesMembers: all independent

NEDs

Shareholders

Investment Manager AIFM

Third Party Service Providers

Board of Directors

REPORT ON CORPORATE GOVERNANCE The UK Listing Rules require all listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code (the “UK Code”) which was effective during the financial year, issued by the Financial Reporting Council (“FRC”). The UK Code can be viewed at www.frc.org.uk

The Association of Investment Companies (“AIC”) publishes a Code of Corporate Governance (“AIC Code”) and a Corporate Governance Guide for Investment Companies (“AIC Guide”). In July 2016 the AIC published a revised AIC Code and AIC Guide to reflect changes made to the UK Code in April 2016. In line with the UK Code, the revised AIC Code and AIC Guide apply to accounting years beginning on or after 17 June 2016.

The AIC Code and AIC Guide address the relevant principles set out in the UK Code as well as additional principles and recommendations on issues that are specific to investment trusts. The AIC Code can be viewed at www.theaic.co.uk

The FRC has confirmed that by following the AIC Code and the AIC Guide, boards of investment companies will meet their obligations in relation to the UK Code and paragraph 9.8.6 of the Financial Conduct Authority (“FCA”) Listing Rules.

A revised UK Code and AIC Code are expected to be published in mid 2018 and will be applicable to accounting years commencing on or after 1 January 2019.

As an investment company, most of the day to day responsibilities are delegated to outside parties as the Company has no employees and all the Directors are Non-executive. Many of the provisions of the UK Code are not directly applicable to the Company and the Board has determined that reporting against the AIC Code provides the most appropriate information to shareholders.

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Statement of Compliance and Application of the AIC Code’s PrinciplesThe AIC Code comprises 21 principles. The Board has considered the principles and recommendations of the AIC Code by reference to the AIC Guide. The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that for the year under review the Directors, Board and Company have complied with the recommendations of the AIC Code in so far as they apply to the Company’s business. For the reasons set out in the AIC Guide, the Board considers the following provisions are not relevant to an externally managed investment company where all of the day-to-day management and administrative functions are outsourced to third parties;

• as all Directors are Non-executive and day to day management has been contracted to third parties the Company does not have a separate role for a Chief Executive. The Chair of the Board is Non-executive;

• as there are no executive Directors there is no need to comply with the UK Code in respect of executive directors’ remuneration; and

• the Company does not have an internal audit function as it relies on the systems of control operated by the Investment Manager and other third-party suppliers. The Board monitors these systems of internal control to provide assurance that they operate as intended insofar as they relate to the affairs of the Company.

The Board believes that the Company’s current practices are consistent in all material respects with the principles of the AIC Code and where non-compliance occurs, an explanation has been provided. The Board will continue to observe the principles and recommendations set out in the AIC Code. Where the Company’s duties are delegated to third parties the Company has agreed policies and operating procedures with the suppliers of these services.

REPORT ON CORPORATE GOVERNANCE CONTINUED

AIC Code Principle How the principles are applied

1 The Chairman should be independent.

Sarah Bates was appointed to the Board in 2011 and as Chair in 2017. The Chair was independent on appointment and continues to meet the criteria for independence. The Board considers the competence and independence of the Directors on an annual basis. The Chair is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. The Chair works with the Company Secretary for setting the Board’s agenda and for balancing the issues presented to each meeting. Open and frank debate is encouraged at each Board meeting and the Chair keeps in touch with the Company Secretary and other Directors between Board meetings.

2 A majority of the Board should be independent of the manager.

The Board currently comprises seven Non-executive Directors. Brian Ashford-Russell is connected to the Investment Manager and is not therefore considered to be independent, all remaining Directors are considered to be fully independent in character and judgement and have no former connection with the Manager. Consequently, the majority of the Board is independent of the Investment Manager and the Board considers that its overall composition is adequate for the effective governance of the Company. All members of the Board appointed Committees are independent.

3 Directors should be submitted for re-election at regular intervals. Nomination for re-election should not be assumed but be based on disclosed procedures and continued satisfactory performance.

The Articles of Association (Articles) govern the appointment, re-election and removal of a director. Directors are required to stand for election by shareholders at the first AGM following their appointment to the Board. Where a director has served more than 9 years, or there is a regulatory requirement to do so, such director will stand for re-election annually.

The Board formally reviews the performance of the Directors each year and considers any recommendations of the Nomination Committee. Where appropriate, the Board recommends to shareholders the re-election of those standing.

The Company is listed within the FTSE350; directors are therefore required under the UK Code to stand for re-election annually.



4 The Board should have a policy on tenure, which is disclosed in the annual report.

All Directors are appointed for an initial period of three years and are subject to re-election by shareholders in accordance with the Articles. The Board recognises the value of progressive refreshing of and succession planning for company boards which has been demonstrated by the changes in recent years. The Board is however conscious of the need to maintain continuity and believes that retaining Directors with sufficient experience of the Company, industry and markets is of great benefit to Shareholders. The Board is of the opinion that long service does not necessarily compromise the independence or contribution of Directors of Investment Trusts where continuity and experience can significantly benefit a Board, a view supported by the AIC.

5 There should be full disclosure of information about the Board.

The biographies of the Directors are set out on pages 52 and 53.

6 The Board should aim to have a balance of skills, experience, length of service and knowledge of the company.

Each Director has different qualities and areas of expertise on which they may lead where issues arise. The biographies on page 52 and 53 demonstrate a breadth of experience across the investment and financial services sector and exposure to the technology sector.

The Directors have access to the advice and services of the corporate company secretary through its appointed representative who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

7 The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual Directors.

Evaluation of the Board, individual Directors and the Committees is undertaken annually. An external agency is engaged at least every third year, the last external evaluation took place in 2016. The evaluation of the Chair is led by the Senior Independent Director. The evaluation outcomes are reviewed and reported on by the Board as a whole and, should it be deemed necessary, additional reporting measures or operations would be put in place.

8 Director remuneration should reflect their duties, responsibilities and the value of their time spent.

The Directors’ Remuneration Report is provided on pages 73 to 76 and describes the processes undertaken when reviewing remuneration.

9 The independent Directors should take the lead in the appointment of new Directors and the process should be disclosed in the annual report.

The Nomination Committee, which is made up of the independent directors, is responsible for the composition of the Board and it considers not only the existing Board but also if further appointments should be made. The Nomination Committee seeks to balance the time required, the skills, knowledge and experience of individual Directors to form an effective and efficient Board.

10 Directors should be offered relevant training and induction.

When new Directors are appointed they are provided with key information of the Company and the regulatory environment, they are also offered an induction session run by the Manager in conjunction with the Chair. All Directors are asked to identify any training needs on an annual basis.

11 The Chairman (and the Board) should be brought into the process of structuring a new launch at an early stage.

In the event of a major change being proposed for the Company or a restructuring, the whole Board would participate in discussion and actions and would take advice from third parties where appropriate.

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BOARD MEETINGS AND THE RELATIONSHIP WITH THE MANAGER

12 Boards and managers should operate in a supportive, co-operative and open environment

The Board meets at least six times per year. Representatives of the Manager attend Board meetings in a variety of capacities including investment management, compliance, operations and marketing. In addition, the Manager provides a Company Secretary who attends throughout the meetings and senior executives of the Manager join the Board on request. The Board and Manager work in a collaborative, supportive and co-operative manner and the Chair encourages open discussion and debate.

13 The primary focus at regular board meetings should be a review of investment performance and associated matters such as gearing, asset allocation, marketing/investor relations, peer group information and industry issues.

The Board is provided with a full range of information on investment, financial, regulatory and administrative matters for review and discussion including investment performance and attribution analysis at every meeting in addition to periodic marketing, sales and other reports and presentations.

14 Boards should give sufficient attention to overall strategy.

The Board keeps the investment strategy under constant review along with its relevance to the market and shareholders as a whole. At least one Board meeting per year is a dedicated investment strategy meeting. During the strategy meeting the Board will receive presentations from a variety of members of the technology team and will consider requests from the investment manager where appropriate.

15 The Board should regularly review both the performance of, and contractual arrangements with, the manager.

While it may be discussed at any time by the Board, the Management Engagement Committee formally reviews the performance and activities of the Investment Manager annually and considers the terms of the Investment Management Agreement and contractual arrangements.

16 The Board should agree policies with the manager covering key operational issues.

The Board has delegated operational activities to the Manager under the terms of the Investment Management Agreement. Clear investment guidelines are in place which are reported against on a monthly basis. Policies concerning the operations of the Company including regulatory requirements, stewardship, reporting and governance are discussed with and reviewed by the Board from time to time. The Board has put in place Company policies covering regulatory practice and matters such as GDPR and Anti-Corruption, such policies are available on the Company’s website.

17 Boards should monitor the level of the share price discount or premium (if any) and, if desirable, take action to reduce it.

The NAV and share price along with the level of discount and/or premium are considered at every Board meeting and are monitored by the Investment Manager on a daily basis. The Board has the authority to undertake share buy backs or share issues.

18 The Board should monitor and evaluate other service providers.

The full schedule of service providers is reviewed by the Board at least annually; the Audit Committee reviews the internal controls reports provided by third party suppliers. The Board and Manager carry out service review meetings and representatives of various providers present to the Board directly from time to time.




SHAREHOLDER COMMUNICATION

19 The Board should regularly monitor the shareholder profile of the company and put in place a system for canvassing shareholder views and for communicating the Board’s views to shareholders.

The Board receives a shareholder analysis at every Board meeting which is discussed with the Manager’s Head of Sales and the Corporate Broker. The Chair and Directors are available and welcome meetings with institutional shareholders and invite all shareholders to attend the AGM to review the year past and the outlook for the future.

20 The Board should normally take responsibility for, and have a direct involvement in, the content of communications regarding major corporate issues even if the manager is asked to act as spokesman.

The Board, or where relevant a Committee of the Board, considers all material shareholder communications and is kept abreast of minor communications managed by the Manager. Marketing activity is undertaken by the Manager on behalf of the Company. Proposed activity is discussed with the Board before implementation.

21 The Board should ensure that shareholders are provided with sufficient information for them to understand the risk:reward balance to which they are exposed by holding the shares.

The NAV of the Company is published daily via RNS to the London Stock Exchange. The Manager maintains a website for the Company on which a number of shareholder information documents are held including the Annual and Interim Financial Reports, portfolio listings, monthly fact sheets, regulatory and compliance policies and the newly required Key Information Document; the website also has a direct news feed from the London Stock Exchange to ensure all Company announcements are easily accessible.

ROLE, RESPONSIBILITIES AND COMMITTEES

THE BOARDThe Board has a schedule of regular meetings through the year and meets at additional times as required. During the year, Board and Board Committee meetings were held to deal with the ongoing stewardship of the Company and other matters including the setting and monitoring of investment strategy and performance, review of the financial statements and dealing with any shareholder issues including investor relations.

The Board spent considerable time in discussion with the Manager regarding the make-up of the shareholder register. The Board concluded that continual diversification of the shareholder register is in shareholders’ interests and noted the increase in the percentage of the register held by execution only platforms. The Board has discussed with the Manager an approach to improving communications with the shareholders and is content gently to encourage direct investors but is also cognisant of the risks of adversely affecting the Managers investment capacity and large cash flows at potentially elevated levels.

The Board was also responsible for considering, reviewing and implementing appropriate policies in respect of regulatory changes that impacted the Company. The level of the ordinary share price discount or premium to the NAV together with policies for re-purchase or issuance of shares are kept under review along with matters affecting the industry and the evaluation of third party service providers.

A Strategy Board meeting is held each year where investment ideas are discussed. Through this process the Board supervises the management of the investment portfolio, the work of the Investment Manager, the risks to which the Company is exposed and their mitigation, and the quality of services received by the Company.

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A formal schedule of matters specifically reserved for decision by the full Board has been defined and a procedure has been adopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company. No such advice has been sought during the year. The Directors have access to the advice and services of the corporate Company Secretary through its appointed representative who is responsible to the Board for ensuring that Board procedures are followed, and that applicable rules and regulations are complied with. The Board and Investment Manager operate in a supportive, co-operative and open environment.

The number of formal meetings of the Board and its Committees held during the year ended 30 April 2018 and the attendance of individual Directors are shown below:

Board & Strategy Audit

Management Engagement Remuneration Nomination 2017 AGM

Number of Meetings 6 4 1 1 3 1Sarah Bates# 6 4 1 1 3 1Brian Ashford-Russell 6 - - - - 1Tim Cruttenden^ 6 4 0 0 2 1Charlotta Ginman 6 4 1 1 3 1Peter Hames 6 4 1 1 3 1Michael Moule~ 3 2 1 1 3 1Charles Park* 1 1 - - - -Stephen White* 1 1 - - - -

# Sarah Bates attends the Audit Committee by invitation

^ Tim Cruttenden missed one Management Engagement Committee, Remuneration Committee and Nomination Committee meeting due to a conflicting engagement. These meetings were all on the same date.

~ Michael Moule retired from the Board at the AGM on 7 September 2017. He attended the Audit Committee and Remuneration Committee meetings by invitation

* Charles Park and Stephen White were appointed to the Board and Committees on 15 January 2018


Directors’ InterestsBrian Ashford-Russell is a partner of Polar Capital LLP and a Non-executive Director and Shareholder in Polar Capital Holdings plc, the ultimate holding company of Polar Capital LLP and as such he has an interest in the investment management contract. He is therefore not considered to be an independent Director. Brian Ashford-Russell will retire from the Board at the conclusion of the AGM on 6 September 2018.

No Director, except Brian Ashford-Russell, has any links with the Investment Manager, Polar Capital LLP. There were no other contracts during or at the end of the year in which a Director of the Company is or was materially interested and which is or was significant in relation to the Company’s business.

The Directors’ interests in the ordinary shares of the Company are set out on page 75 and in the Directors’ Remuneration Report.

Conflicts of InterestDirectors have a duty to avoid a situation in which they have or could have a conflict of interest or possible conflict with the interests of the Company. The Company’s Articles contain provisions to permit the Board to authorise conflicts or potential conflicts. The Board has always had in place policies to govern situations where a potential conflict of interests may arise, for example where a Director is also a Director of a company in which the Company invests or may invest. Where a conflict situation arises, the conflicted Directors are excluded from any discussions or decisions relating to the matter of conflict.

Each Director has provided the Company with a statement of all conflicts of interest and potential conflicts of interest, these have been approved by the Board and recorded in a register. The Conflicts Register is reviewed at every Board meeting and the Directors are reminded of their obligations to obtain authorisation for such.

No Director has declared receipt of any benefits other than their emoluments and associated expenses in their capacity as a Director of the Company.


Except as disclosed above in relation to Brian Ashford- Russell’s interest in the contract with Polar Capital LLP, there were no contracts subsisting during or at the end of the year in which a Director is or was interested and which is or was significant in relation to the Company’s business or to the Director since its introduction.

Directors’ Professional DevelopmentWhen a new Director is appointed he or she is offered an induction course provided by the Investment Manager. Directors are welcome to visit the Investment Manager at any time to receive an update on any aspect of interest or a general refresher on the operations of the Investment Manager. Directors are also provided on a regular basis with key information on the Company’s policies, regulatory and statutory obligations and internal controls. Changes affecting Directors’ responsibilities are advised to the Board as they arise. Directors also regularly participate in professional and industry seminars and may use the online training modules of the Investment Manager to ensure they maintain their knowledge.

Senior Independent DirectorMr Hames became the SID from the conclusion of the Annual General Meeting on 9 September 2016. The SID leads on matters relating to the position, evaluation and remuneration of the Chair and can be contacted via the Registered Office of the Company.

BOARD COMMITTEESThe Board has created four standing committees whose terms of reference are available on the Company’s website. The Board also creates ad hoc committees from time to time to enact or approve policies or actions agreed in principle by the whole Board. The Chair of each committee attends the AGM to deal with questions relating to the Financial Statements. The Board has delegated to each of the Audit, Management Engagement, Remuneration and Nomination Committees specific remits for consideration and recommendation but the final responsibility in these areas remains with the Board.

Report of the Audit CommitteeCharlotta Ginman chairs the Audit Committee and all the independent Non-executive Directors are members with the exception of the Chair of the Board who may be invited to attend meetings as a guest. The Audit Committee Report is set out on pages 69 to 72.

Report of the Nomination CommitteeSarah Bates, as Chair of the Board, chairs the Nomination Committee and all the independent Non-executive Directors are members. The Committee meets at least annually and is responsible to the Board for the size and structure of the Board as well as for succession planning and the tenure policy for Directors.

When considering Board structure and composition the Committee seeks to ensure the candidates considered will enhance the Board and replace or refresh desired skill sets. The Board has a policy to consider diversity and has worked hard to ensure the broadest range of candidates.

Meetings and Work UndertakenDuring the financial year ended 30 April 2018 the Committee met three times and considered, in particular, the appointment of a new Director to fill the skill set lost by the retirement of Michael Moule and the forthcoming retirement of Brian Ashford-Russell.

This covered:

• Agreeing a specification and method of recruitment of new directors;

• Incorporating the Board’s views on diversity and ensuring the continuation of a balance of skills, knowledge and experience on the Board;

• Appointment of external agency, Nurole Limited, a recruitment consultant independent of the Company, to advertise the position;

• Executing a short-list selection process from a long-list of candidates sourced by Nurole; and

• Carrying out interviews before making a final recommendation to the Board.

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The Nomination Committee was also tasked with and was responsible for carrying out the performance evaluation of each individual director and evaluation of the collective performance of the Board.

This covered:

• Reviewing the evaluation questionnaire completed by each Director;

• Recommending the re-election of each Director based on the evaluation. The Committee acknowledges the rationale of the UK Corporate Governance Code for the rigorous review of Directors serving over six years and annual re-appointment after nine years. Nevertheless, the Committee shares the view of the AIC that length of service will not necessarily compromise the independence or contribution of Directors of investment trusts where continuity and experience can significantly strengthen a Board;

• Confirming adherence with recommended practice of having an externally facilitated review every three years, in 2016 the Committee appointed Lintstock to provide such a service. The findings and recommendations of the review, which were generally favourable, were considered and shared with the Board. The Committee confirmed that the evaluation of the Board, its Committees and individual Directors for 2017 and 2018 would be carried out by the Chair of the Nomination Committee. In the years when the internal system is used, the Chair uses a system that seeks the views of each Director by a questionnaire and subsequent individual interviews. The Chair’s review is conducted by the Senior Independent Director; and

• The Board considered and concluded that the most important things they could do to improve performance would be to

– focus on key factors affecting shareholder value and to implement strategies accordingly;

– focus on efficient intra-Board working relationships to leverage the diverse experience of Board members;

– optimise the working practices with the Investment Manager; and

– improve the depth of knowledge of the investment team and process to drive more effective monitoring, challenge and critique.


Report of the Remuneration CommitteePeter Hames, as Senior Independent Director, chairs the Remuneration Committee and all the independent Non-executive Directors are members. The Committee meets at least annually and is responsible to the Board for consideration and recommendations in relation to directors’ remuneration. In order to undertake such a task consideration is given to peer investment trust companies remuneration levels, industry guidance and standards, the work undertaken by the Board in the prior year and plans for the year ahead, changes in the regulatory environment. Remuneration levels are set to attract the correct calibre of individual to the Board. The Chair is excluded from discussions in relation to the remuneration level of the Chair. Further details are provided in the Directors’ Remuneration Report on page 74.

Report of the Management Engagement CommitteeThe Management Engagement Committee is chaired by the Chair of the Board, Sarah Bates, and comprises all of the independent Non-executive Directors. During the financial year ended 30 April 2018 the Committee met once and considered the relationship with the Investment Manager, including the annual review of the services provided by the Investment Manager prior to making its recommendation to the Board, on the retention of the Investment Manager being in the interests of Shareholders. The Committee is also responsible for keeping under review the terms of the investment management agreement and the Investment Manager’s appointment as AIFM, in connection with such the Committee considers the level and structure of management and performance fee paid or payable to the Investment Manager.

SERVICE PROVIDER PERFORMANCE EVALUATION PROCESS

Investment ManagerThe Board has contractually delegated the management of the portfolio to the Investment Manager. It is the Investment Manager’s sole responsibility to take decisions as to the purchase and sale of individual investments other than unquoted investments where the Board is consulted. The Investment Manager has responsibility for tactical gearing, asset allocation and sector selection within the guidelines established and regularly reviewed by the Board.


The Investment Manager is responsible for providing or procuring accountancy services, company secretarial and administrative services. The Investment Manager also ensures that all Directors receive in a timely manner all relevant management, regulatory and financial information. Representatives of the Investment Manager attend all Board meetings enabling the Directors to probe further on matters of concern or seek clarification on certain issues.

The whole Board reviews the performance of the Investment Manager and, at each Board meeting, the Company’s performance against the market and a peer group of funds with similar investment objectives is reviewed. The investment team provided by the Investment Manager, led by Ben Rogoff, has long experience of investment in technology. In addition, the Investment Manager has other investment resources which support the investment team and experience in managing and administering other investment trust companies

Alternative Performance MeasuresThe Company uses a variety of performance measures when monitoring the performance of the portfolio managed by the Investment Manager, these measures are considered to be alternative performance measures under the ESMA guidelines and are described further on page 118.

Other Suppliers The Board also monitors directly or through the Investment Manager the performance of its other key service providers.

• The Board has directly appointed HSBC Bank Plc as Depositary and Stifel Nicolaus as Corporate Broker. The Depositary reports quarterly and makes an annual presentation to the Board. The Corporate Broker provides reports to each Board meeting and joins the Board on request to discuss markets and other issues.

• The Registrars, Equiniti Limited, are directly appointed by the Board and their performance is monitored by the Company Secretary.

• Other suppliers such as printers, website services and PR agents are monitored by the Company Secretary and each report to the Board as and when deemed necessary.

Accountability and AuditThe Statement of Directors’ Responsibilities in respect of the Financial Statements is set out on page 77 and the Independent Auditors’ Report is on pages 78 to 81.

INTERNAL CONTROLSThe Board has overall responsibility for the Company’s system of internal control, for reviewing its effectiveness and ensuring that risk management and control process are embedded in the day to day operations which are operated or overseen by the Investment Manager.

The Board through the Audit Committee has established a process for identifying, evaluating, monitoring and reviewing, and managing any principle risks faced by the Company. This is documented through the use of a Risk Map which is subject to regular review by the Audit Committee and accords with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014 by the Financial Reporting Council. As the Company has no employees and its operational functions are carried out by third parties, the Audit Committee does not consider it necessary for the Company to establish its own internal audit function.

Contracts with suppliers are entered into after full and proper consideration by the Board of the quality and cost of the services offered, including the control systems in operation in so far as they relate to the affairs of the Company.

The Investment Manager has an internal control framework to provide reasonable but not absolute assurance on the effectiveness of the internal controls operated on behalf of its clients. The Investment Manager is authorised and regulated by the Financial Conduct Authority and its compliance department monitors compliance with the FCA rules.

The Audit Committee reviews and reports to the Board on the operation of the controls which are embedded within the business of the Investment Manager and other third-party suppliers. Controls and risk management covering the risks identified, including financial, operational, compliance, safeguarding of assets, maintenance of proper accounting records and the publication of reliable financial information are monitored by a series of regular reports from the Investment Manager including risks not directly the responsibility of the Investment Manager.

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Operation of Internal ControlsThe process was active throughout the year and up to the date of approval of this Annual Report. However, such a system is designed to manage rather than eliminate risks of failure to achieve the Company’s business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board, in assessing the effectiveness of the Company’s internal controls has, through the Audit Committee, received formal reports on the policies and procedures in operation. The reports also include results of tests, with details of any known internal control failures from the Investment Manager for its financial year ended 31 March 2018. For the year under review, no material errors or control failures had been identified. The Investment Manager has subsequently provided confirmation that there has been no material change to the control environment up to the signing of these Financial Statements.

The Board also considers reports provided by other third-party suppliers and ad hoc reports from the Investment Manager are supplied to the Board as required.

The Investment Manager has delegated the provision of accounting, portfolio valuation and trade processing to HSBC Securities Services but remains responsible to the Company for these functions and provides the Board with information on these services.

Based on the work of the Audit Committee and the reviews of the reports received by the Audit Committee on behalf of the Board, the Board has concluded that there were no material control failures during the year and up to the date of this report.

Relations with ShareholdersThe Board and the Investment Manager consider maintaining good communications with Shareholders and engaging with larger Shareholders through meetings and presentations a key priority.

The Board regularly considers the share register of the Company and receives regular reports from the Investment Manager and the corporate broker on meetings attended with Shareholders and any concerns that are raised in such meetings. The Board also reviews correspondence from Shareholders and and may attend Investor presentations.

The Chair each year contacts the largest Shareholders to enable them to raise any concerns direct with the Board without using the Investment Manager or Company Secretary as a conduit. The Chair or other Directors are available to Shareholders who wish to


raise matters either in person or in writing. The Chair and Directors may be contacted through the registered office of the Company. In 2017/18 the then Chairman, Michael Moule, received one response to this contact and no concerns were raised.

Shareholders are kept informed by the publication of annual and half year reports which include Financial Statements. These reports are supplemented by the daily release of the NAV per share to the London Stock Exchange and the publication by the Investment Manager of a monthly factsheet. All this information together with the Investment Manager’s presentations is available from the Company’s website at www.polarcapitaltechnologytrust.co.uk

The Board is also keen that the AGM be a participative event for all Shareholders who attend. The portfolio manager makes a presentation and Shareholders are encouraged to attend. The Chairs of the Board and of the Committees attend the AGM and are available to respond to queries and concerns from Shareholders. The Directors make themselves available after the AGM to meet Shareholders.

Where the vote is decided on a show of hands, the proxy votes received are relayed to the meeting and subsequently published on the Company’s website. Proxy forms have a “vote withheld” option.

The Notice of Meeting sets out the business of the AGM together with the full text of any special resolutions.

The Board will engage with Shareholders on any matters where significant dissent is shown at the AGM and following the AGM acknowledge such dissent in its announcement of the results of the AGM and disclose in the next Annual Report steps it has taken or will take to resolve the issue.

The Company has made arrangements for investors through the Alliance Trust Savings Scheme to receive all Company communications and have the ability to direct the casting of their votes. The Company however has no responsibility for the Alliance Trust Savings Scheme. The Company has also made arrangements with its registrar for Shareholders, who own their shares direct rather than through a nominee or share scheme, to view their account over the Internet at www.shareview.co.uk. Other services are also available via this service.


Tracey LagoPolar Capital Secretarial Services Limited Company Secretary

17 July 2018


AUDIT COMMITTEE REPORT

INTRODUCTION FROM THE CHAIRI am pleased to present, as Chair of the Audit Committee, what is my third annual report to shareholders for the year ended 30 April 2018.

Committee CompositionThe Committee comprises all of the independent Non-executive Directors; the Chair of the Board attends Committee meetings as an observer by invitation.

The Audit Committee, as a whole, has competence relevant to the sector in which the Company operates. Committee members have a range of financial, investment and other relevant sector experience including fund management in both equity and venture capital funds. The requirement for at least one member of the Committee to have recent and relevant financial experience is satisfied by both Stephen White and myself being Chartered Accountants and we both currently chair Audit Committees for other public companies.

More information about the Committee members can be found on pages 52 and 53.

The Committee met four times during the financial year with all members attending each meeting.

Committee Role and ResponsibilitiesThe Committee has written terms of reference, which are available to view on the website, www.polarcapitaltechnologytrust.co.uk. The terms of reference clearly define the Committee’s responsibilities and duties. In addition to the terms of reference, the Committee has developed an annual agenda which corresponds with the meeting schedule, to ensure all key responsibilities are completed and managed.

SIGNIFICANT ISSUES CONSIDERED BY THE AUDIT COMMITTEE DURING THE YEAR

Significant Reporting MattersAnnual Report and Financial Statements (Annual Report) The Board has asked the Committee to confirm that in its opinion the Annual Report as a whole can be taken as fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s financial position, performance, business model and strategy. In doing so the Committee has given consideration to:

• the comprehensive control framework around the production of the Annual Report, including the verification processes in place to deal with the factual content;

• extensive levels of review are undertaken in the production process, by the Investment Manager and the Committee; and

• the internal control environment as operated by the Investment Manager and other suppliers including any checks and balances within those systems.

As a result of the work performed, the Committee has concluded that the Annual Report for the year ended 30 April 2018, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy, and it has reported on these findings to the Board.

Valuation of InvestmentsDuring the year the Committee reviewed the robustness of the Investment Manager’s processes in place for recording investment transactions as well as ensuring the valuation of assets is carried out in accordance with the adopted accounting policies and as laid out in note 2 (f).

Existence and Ownership of InvestmentsDuring the year the Committee received reassuring quarterly reports from the Depository on its work and safe keeping of the Company’s investments.

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Other Reporting MattersAccounting PoliciesDuring the year the Committee ensured that the accounting policies as set out on pages 88 to 93 were applied consistently throughout the year. In light of there being no unusual transactions during the year or other possible reasons, there were no changes to currently adopted policies.

Going Concern The Audit Committee, at the request of the Board, considered the ability of the Company to adopt the Going Concern basis for the preparation of the Financial Statements. Having reviewed the Company’s financial position, the Committee is satisfied that it is appropriate for the Board to prepare the financial statements for the year ended 30 April 2018 on a going concern basis. See page 48 for further details.

Viability StatementThe Committee considered the longer-term viability requirements, so the Board may state that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

The assessments took account of the Company’s current financial position, its cash flows and its liquidity position and the principal risks as set out on pages 43 to 45 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 Committee recommended to the Board that the Company’s longer-term prospects to continue its operations and meet its expenses and liabilities as they fall due over the next five years to 30 April 2023 are reasonable. See pages 46 and 47 for further details.

Taxation The Board ensured that the Company was compliant with section 1158 of the Corporation Tax Act 2010 throughout the year, by seeking and receiving confirmation that the Company continues to meet the eligibility conditions.

Prior to the year under review, PricewaterhouseCoopers LLP provided services to the Company as tax agents in Taiwan and for the iXBRL tagging of the Company’s accounts for submission to HM Revenue and Customs. These services for the year under review have been provided by Grant Thornton LLP and Arrk Solutions, respectively.

Internal Audit The Committee considered the need for an internal audit function however, as an investment trust, it is not deemed necessary as the accounting, administration and other operational services are all outsourced and provided to the Company by third-party providers.

Interim Report and Financial StatementsThe Committee considered and reviewed the Interim Report and Financial Statements, which are not audited or reviewed by the external Auditors, to ensure that they reflected the accounting policies used in the annual Financial Statements.

Internal Controls and Risk Management The Board has ultimate responsibility for the management of risk throughout the Company and has asked the Audit Committee to assist in maintaining an effective Internal Control environment.

The Audit Committee on behalf of the Board has a risk management process which is used throughout the year to monitor the Company’s risks and controls. As part of the year end process the Audit Committee undertook a review of the effectiveness of the system of internal controls taking into account any issues that had arisen during the course of the year.

The Committee acknowledges that the Company is reliant on the systems utilised by external suppliers. Hence representatives of the Investment Manager reported to the Committee on the internal controls operated by the Investment Manager and the committee also received internal control reports from other key suppliers on the quality and effectiveness of the services provided to the Company. During the year the Committee placed special attention on the cyber security policies and processes put in place by such suppliers.


The Audit Committee uses a Risk Map which seeks to identify, monitor and control principal risks as far as possible. Over the year the Audit Committee has undertaken a review of the entire Risk Map to identify the principal risks facing the business and reviewed each risk as to its likelihood and impact. The Committee also robustly considered the mitigating factors and controls to reduce the impact of such risks as described on pages 42 to 45. As well as the annual review the Audit Committee has maintained an active process throughout the year to monitor these risks and controls in order to provide assurance that they operate as intended and that the Risk Map reflects developing and new risks.

There were no issues which arose during the course of the year ended 30 April 2018 and up to the date of this report which were considered significant.

The Audit Committee will actively continue to monitor the system of internal controls through the regular review of the Risk Map and the internal control environment.

The Audit Committee has noted that the Investment Manager has policies on whistleblowing policy, antibribery policy and the Modern Slavery Act and has controls and monitoring to implement their policy across the main contractors which supply goods and services to the Investment Manager and the Company. The Company has adopted an anti-corruption policy which incorporates Anti-Bribery, Anti-Slavery and the Criminal Corporate Offence of Tax Evasion. In addition to this the Company has issued a data privacy notice in relation to the General Data Protection Regulations. All such policies can be found on the Company’s website www.polarcapitaltechnologytrust.co.uk.

The Audit Committee has also considered the policy and controls used by the Investment Manager surrounding the use of brokerage commissions generated from transactions in the Company’s portfolio.

External AuditorAppointment and TenureFollowing the formal competitive tender process in 2016, the Committee agreed to appoint KPMG LLP (KPMG) and the appointment was subsequently confirmed by Resolution of the Shareholders at the AGM held on 7 September 2017. At the time of appointment, a two-year fixed audit fee was agreed. Mr John Waterson is the Audit Partner allocated to the Company by KPMG. Mr Waterson has met with the Board several times prior to and during the audit process.

In accordance with the current legislation, the Company is required to instigate a tender process for Auditors at least every 10 years and will have to change its auditor after a maximum of 20 years. In addition, the nominated Audit Partner will be required to rotate after serving a maximum of 5 years with the Company; it is therefore anticipated that Mr Waterson will serve as Audit Partner until completion of the audit process in 2022. The Company has complied throughout the year ended 30 April 2018 with the provisions of the Statutory Audit Services Order 2014, issued by the Competition and Markets Authority (“CMA Order”).

The re-appointment of KPMG as Auditors to the Company will be submitted for Shareholder approval, together with a separate Resolution to authorise the Directors to reconfirm the remuneration of the Auditors, at the AGM to be held on 6 September 2018.

There are no contractual obligations restricting the choice of external Auditors.

The AuditThe scope of the annual audit was agreed in advance with the Committee with a focus on areas of audit risk and the appropriate level of audit materiality. The Auditors reported to the Audit Committee on the results of the audit work and highlighted any issue which the audit work had discovered, or the Committee had previously identified as significant or material in the context of the Financial Statements.

There were no adverse matters brought to the Audit Committee’s attention in respect of the 2018 audit, which were material or significant or which should be brought to Shareholders’ attention.

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AUDIT COMMITTEE REPORT CONTINUED

EffectivenessThe Audit Committee monitored and evaluated the effectiveness of the Auditors under the terms of their appointment based on an assessment of their performance, qualification, knowledge, expertise and resources. The Audit Committee felt that Mr Waterson and his audit team have provided a fresh perspective to and an in-depth review of the audit process which has been welcomed by the Committee and the Board.

The Auditors’ effectiveness was also considered along with other factors such as audit planning and interpretations of accounting standards. This evaluation has been carried out throughout the year by meetings held with the Auditors, by review of the audit process and by comments from the Investment Manager and others involved in the audit process.

The Auditors were provided with an opportunity to address the Committee without the Investment Manager present to raise any concerns or discuss any matters relating to the audit work and the cooperation of the Investment Manager and others in providing any information and the quality of that information including the timeliness in responding to audit requests. No concerns were raised by the Auditors or the Audit Committee in relation to the service provided by the Investment Manager or any other third-party service provider.

IndependenceIn order to fulfil the Committee’s responsibility regarding independence of the Auditor, the Committee reviewed the senior staffing of the audit, the Auditor’s arrangements concerning any conflicts of interest, the extent of any non-audit services, the Auditor’s independence statement and any other issues that may affect the Auditor’s independence.

FeesAs part of the year end audit, the Committee considered and re-confirmed the level of fees pre-agreed and payable to the Auditors bearing in mind the nature of the audit and the quality of services received. The annual audit fee for the year was £24,500 (2017: £34,000).

Non-Audit ServicesThe Audit Committee’s policy on the provision of non-audit services by the Auditors is available on the Company’s website www.polarcapitaltechnologytrust.co.uk. The policy is produced in line with the FRC ethical standards and any non-audit services are required to be pre-approved by the Audit Committee.

KPMG were appointed to undertake their first annual audit for the year ended 30 April 2018 and have not provided any non-audit services to the Company in the year under review, or in the previous two years. In 2017, PWC, the then auditor, provided non-audit services amounting to £5,000, equivalent to 15% of their audit fee of £34,000.

EFFECTIVENESS OF THE COMMITTEEThe Company, as a member of the FTSE350, is required to engage in an external Board evaluation at least every three years. Such an external evaluation was last carried out in 2016 by Lintstock, an independent third-party specialising in board evaluation. The evaluation process in 2017 and 2018 were internal processes moderated by the Chair and Senior Independent Director with the assistance of the Company Secretary. Both the external and internal processes included a review of the work undertaken by the Audit Committee. I am delighted to confirm that the findings of both the external and internal evaluation processes were positive in all aspects and the Audit Committee was highly rated.

Charlotta Ginman, FCAChair of the Audit Committee

17 July 2018


DIRECTORS’ REMUNERATION REPORT

INTRODUCTIONThis report is submitted in accordance with the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulation 2013 (the “Regulations”) and the Listing Rules of the Financial Conduct Authority in respect of the year ended 30 April 2018. It has been audited where indicated as such.

Chairman’s ReportI was appointed as Chairman of the Committee in September 2016. From 1 May 2017 it was agreed that the membership of the Committee be revised to comprise all the independent Non-executive Directors.

The Committee meets at least annually and is responsible for recommending the framework for the remuneration of Directors including the ongoing appropriateness of the Remuneration Policy and the individual remuneration of Directors based on their contributions. The Committee aims to pay fees relative to other companies in the sector reflecting the responsibilities and time commitments of the Board.

REMUNERATION POLICYThe Remuneration Policy was approved by Shareholders at the AGM in 2017.

How policy supports strategy Operation Policy

The Board consists entirely of Non-executive Directors, who meet regularly to deal with the Company’s affairs.

The intention is that fees payable reflect the time spent by them individually and collectively, be of a level appropriate to their responsibilities and be in line with market practice, sufficient to enable candidates of high calibre to be recruited and retained.

Non-executive Directors have formal letters of appointment and their remuneration is determined by the Board within the limits set by the Articles of Association.

Rates are reviewed annually but the review will not necessarily result in any change to rates.

Non-executive Directors are appointed initially for a three-year term, subject to re-election by Shareholders. All fees are paid in cash, monthly in arrears, to the Director concerned or to a nominated third party.

The Company’s policy in relation to fees is to offer only a fixed basic fee in line with equivalent roles within the sector with additional fees for the roles of Chair of the Company and Chair of the Audit Committee and SID.

As the Company is an investment trust and all the Directors are Non-executive, it is considered inappropriate to have any long-term incentive schemes or benefits.

Non-executive Directors do not receive any bonus, nor do they participate in any long-term incentive schemes or pension schemes.

There are no performance conditions relating to Non-executive Directors fees.

The Remuneration Policy was renewed by shareholders at the AGM in 2017 and will be in force until 30 April 2021, a resolution to renew will be proposed at the AGM to be held in 2020. This Annual report confirms that Directors’ remuneration is in compliance with that Policy and describes the implementation of that Policy for the year under review. Shareholders will be presented with a single remuneration resolution at the AGM on 6 September 2018 which is to receive the Remuneration Report for the year ended 30 April 2018.

In the current year, we considered the time and commitment required of Directors and of the Chair of the Board. We considered for context, comparative fees as well as the requirements to avoid conflict and time constraints due to overboarding, inflation and the need to attract and retain capable people to the role. In light of industry concerns and the UK Corporate Governance guidelines, the Committee has considered the risk of directors’ overboarding. The Committee, on behalf of the Board, has determined that, where external non-executive roles require less time commitment and the director is capable of allocating sufficient time to all roles held, additional appointments would be approved. However, all appointments are subject to prior approval of the Board and are therefore considered on a case-by-case basis.

Shareholders’ views in respect of Directors’ Remuneration are communicated at the Company’s AGM and are taken into account in formulating the Directors’ Remuneration Policy.

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2017/18 FEES PAIDIn the year under review the Directors’ fees were paid at the following annual rates, the Chair £41,500; other Directors £26,800 with the Chair of the Audit Committee and the Senior Independent Director each receiving an extra £3,500 for performing that additional role.

Brian Ashford-Russell again waived his fee for the year ended 30 April 2018 and has indicated that he will do so until his retirement at the AGM in September.

2018 FEE REVIEWThe Committee has carried out its annual review of fees paid to the Directors. While such a review will not necessarily result in any change to the rates the committee believes that it is important that these reviews happen annually.

The Committee when considering fees favours modest annual increases rather than larger increases awarded at longer intervals but will not automatically increase fees every year. The Committee has decided to implement the following increases with effect from 1 May 2018:

ChairThe annual fee for the Chair has been increased from £41,500 to £43,000pa with effect from 1 May 2018. This is an increase of 3.6%.

The Committee believed that the fee for the role of the Chair should be increased sufficiently to reflect again the extra work required.

DirectorsThe annual fee for a Director has been increased from £26,800 to £27,600pa with effect from 1 May 2018. This is an increase of 3.0%.

The Committee considered the extra fee for carrying out the duties of Chair of the Audit Committee and Senior Independent Director was still appropriate. It was decided that the supplements will be increased from £3,500 to £3,600 with effect from 1 May 2018. This is an increase of 2.9%.

Other fees and incentivesAs the Company is an investment trust it has no executive Directors or employees and as all the Directors are Non-executive, it is considered inappropriate to have any long-term incentive schemes and the fees are not specifically related to the Directors’ performance, either individually or collectively.

DIRECTORS’ REMUNERATION REPORT CONTINUED

Mrs Bates did not participate in the discussion about the remuneration for the Chair. Each Director excluded themself when the fees relating to their position were discussed.

The Directors are entitled to be reimbursed for reasonable expenses incurred by them in connection with the performance of their duties and attendance at Board and General Meetings. In certain circumstances, under HMRC rules travel and other out of pocket expenses reimbursed to the Directors may be considered as taxable benefits. Where expenses are classified as taxable under HMRC guidance, they are paid gross and shown in the taxable column of the Directors remuneration table. The taxable expenses comprise of travel and associated expenses incurred by the Directors attending the Board meetings held in London and are subject to tax and National Insurance. The policy for claiming such expenses was not changed during the year.

Service ContractsNone of the Directors has a contract of service or a contract for services and a Director may resign by giving one month’s notice in writing to the Board at any time. In accordance with recommended practice, each Director has received a letter setting out the terms of their appointment.

New Directors are appointed and elected with the expectation that they will serve for a period of at least three years. Each Director’s appointment is reviewed formally each time a Director retires by rotation under the Articles of Association.

Directors’ and officers’ liability insurance / IndemnityDirectors’ and officers’ liability insurance cover is held by the Company in respect of the Directors.

The Company has to the extent permitted by law and the Company’s Articles of Association provided each Director with a Deed of Indemnity which, subject to the provisions of the Articles of Association and UK legislation, indemnifies the Director in respect of costs which they may incur relating to the defense of any proceedings brought against them arising out of their position as Directors (excluding criminal and regulatory penalties). Directors’ legal costs may be funded up-front provided they reimburse the Company if the individual is convicted or, in an action brought by the Company, judgment is given against him. These provisions were in force during the year and remain in force.


The results of the Shareholder vote on the Directors’ Implementation Report submitted to the 2017 Annual General Meeting and on Directors’ Policy Report submitted to the 2017 Annual General Meeting were follows:

Implementation Report Policy Report

Votes for 99.3% of votes cast 99.4% of votes castVotes against 0.7% of votes cast 0.6% of votes castVotes withheld 227,287 261,761

REMUNERATION IMPLEMENTATION REPORT – REMUNERATION PAID IN THE YEAR ENDED 30 APRIL 2018 (AUDITED)The fees payable in respect of each of the Directors were as follows:

Year ended 30 April 2018 Year ended 30 April 2017

Fixed fee

Taxable expenses

(note.1)Total

Remuneration Fixed fee

Taxable expenses

(note.1)Total

Remuneration

Sarah Bates (Chair) (note.2) 36,267 – 36,267 26,000 – 26,000Brian Ashford-Russell (note.3) - – – – – –Tim Cruttenden (note.4) 26,800 – 26,800 2,778 – 2,778Charlotta Ginman (Chair of the Audit Committee) 30,300 – 30,300 29,000 – 29,000Peter Hames (Senior Independent Director) 30,300 1,122 31,422 28,000 903 28,903Charles Park (appointed 15 January 2018) 7,950 – 7,950 – – –Stephen White (appointed 15 January 2018) 7,950 – 7,950 – – –Michael Moule (retired 7 September 2017) 14,631 – 14,631 40,000 – 40,000Rupert Montagu (retired 9 September 2016) - – – 10,488 – 10,488TOTAL 154,198 1,122 155,320 136,266 903 137,169

Note 1: Taxable travel and subsistence expenses incurred in attending Board and Committee meetings. The amount disclosed above is the gross pre-tax amount.

Note 2: Appointed a director in 2011 and appointed as Chair on 6 September 2017.

Note 3: Fee of £26,800 waived (2017: fee of £26,000 waived).

Note 4: Under the terms of Mr Cruttenden’s appointment his Director’s fee and any expenses incurred are paid to VenCap International plc and will continue to be so.

No pension contributions or other remuneration or compensation was paid or payable by the Company during the year to any of the Directors. Consequently, the figures shown above comprise the single total remuneration figure for each Director.

DIRECTORS’ SHARE INTERESTS (AUDITED)The interests of Directors who were in office at 30 April 2018 in the ordinary shares of the Company at 30 April 2018 and 30 April 2017 or date of appointment are as follows:

Ordinary Shares30 April 2018 30 April 2017

Sarah Bates (Chair) 10,500 9,000Brian Ashford-Russell 270,000 270,000Tim Cruttenden – –Charlotta Ginman 3,688 3,688Peter Hames 10,000 10,000Charles Park (appointed 15 January 2018) – –Stephen White (appointed 15 January 2018) 10,000 –Michael Moule (retired 6 September 2017) – 10,000

There have been no changes in these interests between the end of the financial year and 17 July 2018.

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PERFORMANCEThe Regulations require a line graph to be included in the Directors’ Remuneration Report showing the total shareholder return for each of the financial years in the relevant period. The first period for which this graph was required was the year ended 30 April 2014; the graph was required to show the relevant period of five years. Each subsequent annual graph is required to increase by one year until the maximum relevant period of ten years is reached; thereafter the relevant period will continue to be ten years. The Dow Jones World Technology Index is shown because, as a market capitalisation weighted index based on the entire global technology sector, it is the most relevant benchmark.

DIRECTORS’ REMUNERATION REPORT CONTINUED

RELATIVE IMPORTANCE OF SPEND ON PAYUnder the Regulations (Schedule 8, Part 3 (20)) the Directors’ remuneration report must set out in a graphical or tabular form that shows in respect of the relevant financial year and the immediately preceding financial year the actual expenditure of the company, and the difference in spend between those years, on remuneration paid to or receivable by all employees of the group; and distributions to shareholders by way of dividend and share buyback; and any other significant distributions and payments or other uses of profit or cash-flow deemed by the Directors to assist in understanding the relative importance of spend on pay.

The Directors, however, do not consider that the comparison of Directors’ remuneration with the distributions of the Company is a meaningful measure of the Company’s overall performance. There were no dividends paid to shareholders or other distributions which made use of the Company’s profit or cash flow deemed to assist in the understanding of the relative importance of spend on pay, in line with the Company’s objective of capital growth.

Approved by the Board on 17 July 2018.

Peter HamesChairman of the Remuneration Committee and Senior Independent Director

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STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and 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 are required to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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 and prudent;

• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;

• 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 FINANCIAL REPORT 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 Financial Statements, 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.

Sarah BatesChair

17 July 2018

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

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Independent auditor’s report to the members of Polar Capital Technology Trust plc

1. OUR OPINION IS UNMODIFIED We have audited the financial statements of Polar

Capital Technology Trust plc (“the Company”) for the year ended 30 April 2018 which comprise the Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet, Cash flow Statement, and the related notes, including the accounting policies in note 2.

In our opinion the financial statements:

– the financial statements give a true and fair view of the state of the Company’s affairs as at 30 April 2018 and of its profit for the year then ended;

– have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union;

– have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were appointed as auditor by the shareholders on 7 September 2017. The period of total uninterrupted engagement is for the financial year ended 30 April 2018. We have fulfilled our ethical responsibilities under, and we remain independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

Overview

Materiality: financial statements as a whole

£16m

1% of Total Assets

Risk of material misstatement

Recurring risks Carrying amount of quoted investments

INDEPENDENT AUDITOR’S REPORTto the Members of Polar Capital Technology Trust plc


2. KEY AUDIT MATTER: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT A key audit matter is one that, in our professional judgment, is of most significance in the audit of the

financial statements and includes the most significant assessed risk of material misstatement (whether or not due to fraud) identified by us, including the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matter in arriving at our audit opinion above, together with our key audit procedures to address this matter and, as required for public interest entities, our results from those procedures. This matter was addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on this matter.

The risk Our response

Carrying amount of quoted investments

(£1,491m; 2017: £1,220m)

Refer to page 69 (Audit Committee Report), page 90 (accounting policy) and page 97 (financial disclosures)

Low risk, high value

The Company’s portfolio of quoted investments makes up 93% of the Company’s total assets by value and is considered to be one of the key drivers of results. We do not consider these investments to be at a high risk of significant misstatement, or to be subject to a significant level of judgement because they comprise liquid, quoted investments. However, due to their materiality in the context of the financial statements as a whole, they are considered to be one of the areas which had the greatest effect on our overall audit strategy and allocation of resources in planning and completing our audit.

Our procedures included:

– Tests of detail: Agreeing the valuation of 100 per cent of quoted investments in the portfolio to externally quoted prices; and

– Enquiry of custodians: Agreeing 100 per cent of investment holdings in the portfolio to independently received third party confirmations from investment custodians.

Our results

– We found the carrying amount of quoted investments to be acceptable.

3. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT

Materiality for the financial statements as a whole was set at £16m, determined with reference to a benchmark of total assets, of which, it represents 1%.

We reported to the Audit Committee any uncorrected identified misstatements exceeding £800,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.

Our audit of the company was undertaken to the materiality level specified above and was performed at the administrator, HSBC Securities Services, in Edinburgh.

Total Assets

£1,605 m (2017: £1,305m)

Materiality

£16m

£16m

Whole financial statements materiality

£0.8m

Misstatements reported to the audit committee

Total AssetsMateriality

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INDEPENDENT AUDITOR’S REPORT CONTINUEDto the Members of Polar Capital Technology Trust plc

4. WE HAVE NOTHING TO REPORT ON GOING CONCERN

We are required to report to you if:

– we have anything material to add or draw attention to in relation to the directors’ statement in note 2 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over Company’s use of that basis for a period of at least twelve months from the date of approval of the financial statements; or

– if the related statement under the Listing Rules set out on page 48 is materially inconsistent with our audit knowledge.

We have nothing to report in these respects.

5. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL REPORT

The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Strategic report and directors’ report Based solely on our work on the other information:

– we have not identified material misstatements in the strategic report and the directors’ report;

– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

– in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report In our opinion the part of the Directors’

Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Disclosures of principal risks and longer-term viability

Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

– the Directors’ confirmation within the longer-term viability statement on pages 46 and 47 that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency and liquidity;

– the principal business risks and uncertainties disclosures describing these risks and explaining how they are being managed and mitigated; and

– the directors’ explanation in the longer-term viability statement of how they have assessed the prospects of the Company, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Under the Listing Rules we are required to review the longer-term viability statement. We have nothing to report in this respect.

Corporate governance disclosures We are required to report to you if:

– we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the directors’ statement that they consider that the annual report and financial statements 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; or

– the section of the annual report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.



6. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

Under the Companies Act 2006, we are required to report to you if, in our opinion:

– adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

– the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

– certain disclosures of directors’ remuneration specified by law are not made; or

– we have not received all the information and explanations we require for our audit.


7. RESPECTIVE RESPONSIBILITIES Directors’ responsibilities As explained more fully in their statement set out

on page 77, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; 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; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities Our objectives are to obtain reasonable assurance

about whether the financial statements as a whole are free from material misstatement, whether due to fraud, other irregularities (see below), or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detect We identified areas of laws and regulations that

could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with the Directors, the manager and the administrator (as required by auditing standards).

We had regard to laws and regulations in areas that directly affect the financial statements including financial reporting (including related company legislation) as well as the Company qualification as an Investment Trust under UK tax legislation, any breach of which could lead to the Company losing various deductions and exemptions from UK corporation tax. We considered the extent of compliance with those laws and regulations as part of our procedures on the related financial statement items.

We communicated identified laws and regulations throughout our team, which included individuals with experience relevant to these laws and regulations, and remained alert to any indications of non-compliance throughout the audit.

As with any audit, there remained a higher risk of non-detection of non-compliance with relevant laws and regulations (irregularities), as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

8. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

John Waterson (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants, Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2EG

17 July 2018

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84 Statement of Comprehensive Income

85 Statement of Changes in Equity

86 Balance Sheet

87 Cash Flow Statement

88 Notes to the Financial Statements

FINANCIAL STATEMENTS

83

STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 30 April 2018

Notes


Revenuereturn

£'000

Capitalreturn

£'000

Totalreturn

£'000

Revenuereturn

£'000

Capitalreturn

£'000

Totalreturn

£'000

Investment income 3 10,021 842 10,863 8,733 – 8,733

Other operating income 4 211 – 211 8 – 8

Gains on investments held at fair value 5 – 308,076 308,076 – 442,491 442,491

(Losses)/gains on derivatives 6 – (4,657) (4,657) – 4,972 4,972

Other currency (losses)/gains 7 – (2,369) (2,369) – 6,333 6,333

Total income 10,232 301,892 312,124 8,741 453,796 462,537

Expenses

Investment management fee 8 (13,202) – (13,202) (9,896) – (9,896)

Performance fee 8 – (11,169) (11,169) – – –

Other administrative expenses 9 (1,119) – (1,119) (923) – (923)

Total expenses (14,321) (11,169) (25,490) (10,819) – (10,819)

(Loss)/profit before finance costs and tax (4,089) 290,723 286,634 (2,078) 453,796 451,718

Finance costs 10 (627) – (627) (650) – (650)

(Loss)/profit before tax (4,716) 290,723 286,007 (2,728) 453,796 451,068

Tax 11 (1,438) – (1,438) (1,220) – (1,220)

Net (loss)/profit for the year and total comprehensive income (6,154) 290,723 284,569 (3,948) 453,796 449,848

(Loss)/Earnings per share (Basic and diluted) (pence) 12 (4.62) 218.24 213.62 (2.98) 342.83 339.85

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

The Company does not have any other comprehensive income.

The notes on pages 88 to 112 form part of these Financial Statements.


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Share capital

£'000

Capital redemption

reserve£'000

Share premium

£'000

Special non-

distributable reserve

£'000

Capital reserves

£'000

Revenue reserve

£'000Total

£'000

Total equity at 1 May 2016 33,084 12,802 141,955 7,536 683,711 (77,781) 801,307

Total comprehensive income:

Issue of ordinary shares 38 – 1,332 – – – 1,370

Profit/(loss) for the year to 30 April 2017 – – – – 453,796 (3,948) 449,848

Total equity at 30 April 2017 33,122 12,802 143,287 7,536 1,137,507 (81,729) 1,252,525

Total comprehensive income:

Issue of ordinary shares 327 – 14,190 – – – 14,517

Profit/(loss) for the year to 30 April 2018 – – – – 290,723 (6,154) 284,569

Total equity at 30 April 2018 33,449 12,802 157,477 7,536 1,428,230 (87,883) 1,551,611


STATEMENT OF CHANGES IN EQUITYfor the year ended 30 April 2018

85

Notes30 April 2018

£’00030 April 2017

£’000

Non current assets

Investments held at fair value through profit or loss 13 1,491,331 1,220,068

Current assets

Receivables 14 9,641 20,807

Overseas tax recoverable 19 70

Cash and cash equivalents 15 101,156 63,602

Derivative financial instruments 13 2,369 716

113,185 85,195

Total assets 1,604,516 1,305,263

Current liabilities

Payables 16 (17,628) (15,545)

Bank loans 17 (35,277) (37,193)

(52,905) (52,738)

Net assets 1,551,611 1,252,525

Equity attributable to equity shareholders

Share capital 18 33,449 33,122

Capital redemption reserve 19 12,802 12,802

Share premium 20 157,477 143,287

Special non-distributable reserve 21 7,536 7,536

Capital reserves 22 1,428,230 1,137,507

Revenue reserve 23 (87,883) (81,729)

Total equity 1,551,611 1,252,525

Net asset value per ordinary share (basic and diluted) (pence) 25 1,159.69 945.39

The Financial Statements, on pages 84 to 87, were approved and authorised for issue by the Board of Directors on 17 July 2018 and signed on its behalf by:

Sarah BatesChair


Registered number 3224867

BALANCE SHEETat 30 April 2018


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CASH FLOW STATEMENTfor the year ended 30 April 2018

Notes2018

£’0002017

£’000

Cash flows from operating activities

Profit before tax 286,007 451,068

Adjustments:

Gains on investments held at fair value through profit or loss (308,076) (442,491)

Losses/(gains) on derivative financial instruments 4,657 (4,972)

Proceeds of disposal on investments 893,130 683,395

Purchases of investments (851,177) (704,627)

Proceeds on disposal of derivative financial instruments 4,762 15,791

Purchases of derivative financial instruments (11,072) (9,291)

Increase in receivables (477) (213)

Increase in payables 8,586 813

Overseas tax (1,387) (1,194)

Foreign exchange losses/(gains) 2,369 (6,333)

Net cash generated/(used in) from operating activities 27,322 (18,054)

Cash flows from financing activities

Issue ordinary shares 14,517 1,370

Net cash generated from financing activities 14,517 1,370

Net increase/(decrease) in cash and cash equivalents 41,839 (16,684)

Cash and cash equivalents at the beginning of the year 63,602 70,325

Effect of movement in foreign exchange rates on cash held (4,285) 9,961

Cash and cash equivalents at the end of the year 15 101,156 63,602


87

1. GENERAL INFORMATIONPolar 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 Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and IFRIC guidance.

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

2. ACCOUNTING POLICIESThe principal accounting policies, which have been applied consistently for all years presented are set out below:

(a) Basis of PreparationThe 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 November 2014 and updated in February 2018 is consistent with the requirements of IFRS, the directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP.

The financial position of the Company as at 30 April 2018 is shown in the balance sheet on page 86. As at 30 April 2018 the Company’s total assets exceeded its total liabilities by a multiple of over 30. The assets of the Company consist mainly of securities that are held in accordance with the Company’s investment policy, as set out on pages 37 and 38 and these securities are readily realisable. The Directors consider that the Company has adequate financial resources to enable it to continue in operational existence. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Company’s accounts.

(b) Presentation of Statement of Comprehensive IncomeIn 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.

NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 April 2018


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(c) IncomeDividends 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 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 CostsAll 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) TaxationThe 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.

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2. ACCOUNTING POLICIES CONTINUED

(e) Taxation continuedIn 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 Taxes 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 lossWhen 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 IFRS.

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.

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.

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 30 April 2018


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(g) ReceivablesReceivables 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 EquivalentsCash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash.

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

(i) PayablesPayables 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 LoansInterest 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 InstrumentsThe 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 IFRS. 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 ExchangeTransactions 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 CapitalRepresents the nominal value of authorised and allocated, called-up and fully paid shares issued.

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2. ACCOUNTING POLICIES CONTINUED

(n) Capital ReservesCapital 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) Segmental ReportingUnder 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 27.

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.

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

The majority of the Company's investments are in US Dollars, however the Board considers the functional currency to be Sterling. In arriving at this conclusion the Board considered that Sterling is most relevant to the majority of the Company's shareholders and creditors and the currency in which the majority of the Company's operating expenses are paid.

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 1(f). At the year end, such investments represent less than 0.01% of net assets and consequently, the Board does not believe these to represent an area of significant judgement or estimation.



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(q) New and revised accounting StandardsThere were no new IFRSs or amendments to IFRSs applicable to the current year which had any significant impact on the Company's accounts.

At the date of authorisation of these financial statements, the following new and amended IFRSs are in issue but are not yet effective and have not been applied in these accounts:

IFRS 9 (2014) Financial Instruments, (effective 1 January 2018).

The requirements of IFRS9 and its application to the assets and liabilities held by the Company were considered ahead of its adoption on 1 January 2018. All assets and liabilities held by the Company are currently recorded as fair value through profit and loss. The classification of all assets and liabilities remains unchanged under IFRS 9 and all figures will be directly comparable to the existing basis of valuation.

IFRS 15, Revenue from Contracts with Customers, (effective 1 January 2018).

Given the nature of the Company’s revenue streams from financial instruments, the provisions of this standard are not expected to have a material impact.

IFRS 2 (amended) Classification and Measurement of Share-based payment transactions, (effective 1 January 2018).

IFRIC22 Foreign currency transactions and advance consideration, (effective 1 January 2018).

Annual Improvement Cycles 2015-2017, (effective 1 January 2019).

IFRS 16 Leases, (effective 1 January 2019).

IFRIC 23 Uncertainty over Income Tax Treatments (effective 1 January 2019).

IAS 19 (amended) Employee Benefits (effective 1 January 2019).

IAS 28 (amended) Investments in Associates and Joint Ventures (effective 1 January 2019).

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 ended30 April 2018

£’000


£’000

Revenue:

Franked: Listed investments

Dividend income 99 140

Unfranked: Listed investments

Dividend income 9,922 8,593

10,021 8,733

Capital:

Special dividends allocated to capital 842 –

All investment income is derived from listed investments.

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4 OTHER OPERATING INCOME

Year ended 30 April 2018

£’000

Year ended 30 April 2017

£’000

Bank interest 211 8

5 GAINS ON INVESTMENTS HELD AT FAIR VALUE


£’000


£’000

Net gains on disposal of investments at historic cost 247,231 130,629

Transfer on disposal of investments (147,916) (16,490)

Gains based on carrying value at previous balance sheet date 99,315 114,139

Valuation gains on investments held during the year 208,761 328,352

308,076 442,491

6 (LOSSES)/GAINS ON DERIVATIVES


£’000


£’000

(Losses)/gains on disposal of derivatives held (3,524) 6,021

Losses on revaluation of derivatives held (1,133) (1,049)

(4,657) 4,972

7 OTHER CURRENCY (LOSSES)/GAINS


£’000


£’000

Exchange (losses)/gains on currency balances (4,285) 9,961

Exchange gains/(losses) on translation of loan balances 1,916 (3,628)

(2,369) 6,333

8 INVESTMENT MANAGEMENT AND PERFORMANCE FEE


£’000


£’000

Investment management fee paid to Polar Capital (charged wholly to revenue) 13,202 9,896

Performance fee paid to Polar Capital (charged wholly to capital) 11,169 –

The basis for calculating the investment management and performance fees are set out in the Strategic Report on pages 45 and 46 and details of all amounts payable to the Manager are given in note 24 on page 103.

The quarterly investment management fee is calculated on the net assets on the last day of the prior quarter. The increase in the management fee for the year ended 30 April 2018 is due to the 24% increase in net assets which took place over the year to 30 April 2018.



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9 OTHER ADMINISTRATIVE EXPENSES


£’000


£’000

Directors’ fees 155 137

National Insurance Contributions 13 11

Depositary fee 136 132

Registrar fee 44 60

Custody and other bank charges 1 209 183

UKLA and LSE listing fees 60 43

Legal, professional fees and other financial services 9 69

AIC fees 21 20

Auditors’ remuneration:

Fees payable to KPMG for the audit of the financial statements to 30 April 2018 25 –

Fees payable to PWC for the audit of the financial statements to 30 April 2017 – 34

Fees payable to PWC for the non-audit services – 5

Directors’ and officers’ liability insurance 9 9

AGM expenses 2 15 6

Corporate brokers’ fee 32 36

PR, website and marketing expenses 3 66 50

Shareholder communications 57 87

Research costs 4 209 -

Other expenses5 59 41

1,119 923

1 Custody fees are based on the value of the assets and geographical activity. The size of the assets and level of activity both increased during the year under review

2 The AGM in 2017 was held at Trinity House which incurred additional expenses. The AGM's prior to 2017 were held at The RAC Club, the AGM to be held in 2018 will return to The RAC Club.

3 Includes marketing expenses payable to Polar Capital LLP of £13,000. This is based on an annual marketing budget of £40,000 agreed with the board and applied from 1 January 2018.

4 These research costs relate solely to specialist technology research and represent 50% (up to an annual cap of £637,000 ($878,000), with the balance of 50% plus any amounts exceeding the cap being absorbed by Polar Capital. These costs applied from 3 January 2018. These costs were previously wrapped up in trade commission. Under MIFID II which applied from 3 January 2018, changes were made to how investment managers pay for their research. This new regime requires investment managers to budget separately for research and trading costs.

5 Includes non-executive director search fee.

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10 FINANCE COSTS


£’000


£’000

Interest on loans and overdrafts 627 650

11 TAXATION


£’000


£’000

a) Analysis of tax charge for the year:

Overseas tax 1,438 1,220

Total tax for the year (see note 11b) 1,438 1,220

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 286,007 451,068

Tax at the UK corporation tax rate of 19%* 54,341 7,142

Tax at the UK corporation tax rate of 20% – 82,696

Tax effect of non-taxable dividends (2,064) (1,739)

Tax effect of gains on investments that are not taxable (57,200) (90,381)

Unrelieved current year expenses and deficits 4,923 2,282

Overseas tax suffered 1,438 1,220

Total tax for the year (see note 11a) 1,438 1,220

c) Factors that may affect future tax charges:

There is an unrecognised deferred tax asset comprising:

Unrelieved management expenses 25,321 20,982

Non-trading deficits 877 807

26,198 21,789

*Under the Finance Act 2015, the rate of corporation tax was lowered to 19% from 1 April 2017.

The deferred tax asset is based on a prospective corporation tax rate of 17% (2017: 17%), which was substantively enacted in September 2016 and is effective from 1 April 2020.

It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and deficits and therefore no deferred tax asset has been recognised.

Due to the Company’s tax status as an investment trust and the intention to continue meeting the conditions required to obtain 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.


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12 (LOSS)/EARNINGS PER ORDINARY SHARE


Revenuereturn pence

Capital returnpence

Totalreturnpence

Revenuereturn pence

Capital returnpence

Totalreturnpence

The calculation of basic earnings per share is based on the following data:

Net (loss)/profit for the year (£’000) (6,154) 290,723 284,569 (3,948) 453,796 449,848

Weighted average ordinary shares in issue during the year 133,214,816 133,214,816 133,214,816 132,368,398 132,368,398 132,368,398

From continuing operations

Basic and diluted – ordinary shares (pence) (4.62) 218.24 213.62 (2.98) 342.83 339.85

As at 30 April 2018, there are no potentially dilutive shares in issue and the earnings per share therefore equate to those shown above (2017: there was no dilution).

13 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

i) Changes in non-current assets investments


£’000


£’000

Cost at 1 May 786,661 643,226

Valuation gains 433,407 121,545

Valuation at 1 May 1,220,068 764,771

Additions at cost 844,674 703,984

Proceeds of disposal (881,487) (691,178)

Gains on disposal 99,315 114,139

Valuation gains 208,761 328,352

Valuation at 30 April 1,491,331 1,220,068

Cost at 30 April 997,079 786,661

Closing fair value adjustment 494,252 433,407

Valuation at 30 April 1,491,331 1,220,068

Of which:

Listed on a recognised Stock Exchange 1,491,240 1,219,749

Unquoted 91 319

Included in additions at cost are purchase costs of £993,000 (30 April 2017: £1,237,000). Included in proceeds of disposals are sales costs of £1,156,000 (30 April 2017: £1,071,000). These comprise mainly of commission. MiFID II came into effect from 3 January 2018, the majority of the commission included in the purchases and sales was incurred prior to MiFID II.

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13 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED

ii) Changes in derivative financial instruments


£’000


£’000

Valuation at 1 May 716 2,244

Additions at cost 11,072 9,291

Proceeds of disposal (4,762) (15,791)

(Losses)/gains on disposal (3,524) 6,021

Valuation losses (1,133) (1,049)

Valuation at 30 April 2,369 716

iii) Classification under Fair Value Hierarchy:The table below sets out the fair value measurements using the IFRS7 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 note on page 90.

There have been no transfers during the year between Levels 1 and 2. A reconciliation of fair value measurements in Level 3 is set out below.


£’000


£’000

Equity Investments and derivative financial instruments

Level 1 1,493,609 1,220,465

Level 2 – –

Level 3 91 319

1,493,700 1,220,784

Level 3 investments at fair value through profit or loss


£’000


£’000

Opening balance 319 298

Disposal proceeds (276) (30)

Total gains/(losses) included in the Statement of Comprehensive Income

– on assets held at the year end 48 51

Closing balance 91 319


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iv) Unquoted investmentsThe value of the unquoted investments as at 30 April 2018 was £91,000 (30 April 2017: £319,000) and the portfolio comprised of the following holdings:

30 April 2018 £’000

30 April 2017 £’000

Herald Ventures Limited Partnership 91 91

Herald Ventures Limited Partnership II – 228

91 319

During the year Herald Ventures Limited Partnership distributed £51,000 (2017: £30,000) and Herald Ventures Partnership II distributed £225,000 (2017 : nil).

Level 3 investments are recognised at fair value through profit & loss on a recurring basis.

A +/- 10% change in the price used to value the investments as at the year end would result in a +/- £9,000 (2017: +/- £32,000) impact to the capital return of the profit & loss.

The investment held in Herald Ventures Limited is valued semi-annually by the Polar Capital Valuation Committee on the recommendation of the Investment Manager.

The most recent valuation was carried out on 30 April 2018, the valuation principle remained as used in previous years, being the Herald Ventures valuation less a 25% public value discount applied to the underlying publicly traded investments of Herald Ventures. The Board believe this to be an appropriate way in which to value an unquoted investment.

14 RECEIVABLES

30 April 2018 £’000

30 April 2017 £’000

Sales for future settlement 8,378 20,021

Prepayments and accrued income 1,248 786

VAT recoverable 15 –

9,641 20,807

The carrying values of other receivables approximate their fair value.

15 CASH AND CASH EQUIVALENTS

30 April 2018 £’000

30 April 2017 £’000

Cash at bank 101,156 63,602

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16 PAYABLES

30 April 2018 £’000

30 April 2017 £’000

Purchases for future settlement 6,042 12,545

Accruals 11,586 3,000

17,628 15,545

The carrying values of other payables approximate their fair value.

17 BANK LOANS

i) Bank loans

30 April 2018 £’000

30 April 2017 £’000

The Company has the following unsecured Japanese Yen and US Dollar loans:

JPN ¥2,800m at a rate of 0.995% repayable 2 October 2018 18,578 19,415

$23m at a rate of 2.21% repayable 2 October 2018 16,699 17,778

35,277 37,193

Bank loans are all due for settlement within 12 months and are stated at amortised cost.

The main covenants relating to the above loans are:

(i) Total borrowings shall not exceed 40% of the Company’s net asset value

(ii) The Company’s minimum net asset value shall be £200 million

(iii) The Company shall not change the investment manager without prior written consent of the lenders.

ii) Reconciliation of bank loans

30 April 2018 £’000

30 April 2017 £’000

Bank loans held as at 30 April 2017 37,193 33,565

Effect of changes in foreign exchange rates on bank loans held (1,916) 3,628

Bank loans held as at 30 April 2018 35,277 37,193

The reduction in the liability arising from the bank loans due to changes in foreign exchange rates is a non-cash movement and is included in the Statement of Comprehensive Income within 'Other currency losses'. As disclosed in note 7, the reduction in the liability creates a foreign exchange gain on bank loans held in the year.


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18 SHARE CAPITAL30 April 2018

£’00030 April 2017

£’000

Allotted, Called up and Fully paid:

Ordinary shares of 25p each

Opening balance of 132,487,000 (30 April 2017: 132,336,159) 33,122 33,084

Issue of 1,308,000 (30 April 2017: 150,841) ordinary shares 327 38

Allotted, called up and fully paid: 133,795,000 (30 April 2017: 132,487,000) ordinary shares of 25p 33,449 33,122

At 30 April 2018 33,449 33,122

During the year a total of 1,308,000 ordinary shares (30 April 2017: 150,841 ordinary shares), nominal value £327,000 (30 April 2017: nominal value £37,710) were issued to the market to satisfy demand, at an average price of 1,111.85p per share, for a total consideration received of £14,517,000 (30 April 2017: £1,370,000).

Subsequent to the year end 30,000 ordinary shares were issued at a price of 1,330.0p per share.

This reserve is not distributable.

19 CAPITAL REDEMPTION RESERVE

30 April 2018 £’000

30 April 2017 £’000

As at 1 May 2017 12,802 12,802

As at 30 April 2018 12,802 12,802

The Capital Redemption Reserve represents the nominal value of shares repurchased and cancelled.


20 SHARE PREMIUM

30 April 2018£’000

30 April 2017£’000

As at 1 May 2017 143,287 141,955

Issue of 1,308,000 (30 April 2017: 150,841) ordinary shares 14,190 1,332

As at 30 April 2018 157,477 143,287

The share premium arises from excess of consideration received on the issue of the shares over the nominal value.


21 SPECIAL NON-DISTRIBUTABLE RESERVE

30 April 2018 £’000

30 April 2017 £’000

As at 1 May 2017 7,536 7,536

As at 30 April 2018 7,536 7,536

The special non-distributable reserve arose from the exercise of warrants which were issued by the Company at launch in 1996. The final warrant conversion was exercised in 2005.


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22 CAPITAL RESERVES

Capital*reserve -

gains/losseson disposal

30 April 2018£’000

Capital**reserve -

revaluation30 April 2018

£’000

Totalcapital

reserves30 April 2018

£’000

Capitalreserve -

gains/losseson disposal

30 April 2017£’000

Capitalreserve -

revaluation30 April 2017

£’000

Totalcapital

reserves30 April 2017

£’000

As at 1 May 2017 710,816 426,691 1,137,507 564,205 119,506 683,711

Net gains on disposal of investments 99,315 – 99,315 114,139 – 114,139

Transfer on disposal of investments 147,916 (147,916) – 16,490 (16,490) –

Valuation gains on investments held during the year – 208,761 208,761 – 328,352 328,352

Net (losses)/gains on derivative contracts (3,524) (1,133) (4,657) 6,021 (1,049) 4,972

Special dividends allocated to capital 842 – 842 – – –

Performance fee allocated to capital (11,169) – (11,169) – – –

Exchange (losses)/gains on currency balances (4,285) – (4,285) 9,961 – 9,961

Exchange gains/(losses) on translation of loan balances – 1,916 1,916 – (3,628) (3,628)

As at 30 April 2018 939,911 488,319 1,428,230 710,816 426,691 1,137,507

* These are realised distributable capital reserves which may be used to repurchase the Company’s shares or be distributed as dividends.

** This reserve comprises holdings gains on investments (which maybe deemed to be realised) and other amounts, which are unrealised. An analysis has not been made between the amounts that are realised (and maybe distributed or used to repurchase the Company’s shares) and those that are unrealised.

23 REVENUE RESERVE

30 April 2018 £’000

30 April 2017 £’000

As at 1 May 2017 (81,729) (77,781)

Loss for the year to 30 April (6,154) (3,948)

As at 30 April 2018 (87,883) (81,729)

The revenue reserve may be distributed or used to repurchase the Company’s shares (subject to being a positive balance).


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24 TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS

(a) Transactions with the ManagerUnder 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 2018 were £13,202,000 (2017: £9,896,000) of which £nil (2017: £2,747,000) was outstanding at the year-end.

A performance fee amounting to £11,169,000. (2017: £nil) is payable in respect of the year, and the whole of this amount (2017: nil) was outstanding at the year end.

In addition, research costs of £209,000 (2017: nil) are payable in respect of period from 1 January 2018 to the year end of which £209,000 (2017: nil) outstanding at the year end.

(b) Related party transactionsThe compensation payable to key management personnel in respect of short term employee benefits is £155,000 (2017: £137,000) which comprises £155,000 (2017: £137,000) paid by the Company to the Directors.

Refer to pages 73 to 76 for the Directors’ Remuneration Report including Directors' shareholdings and movements within the year.

25 NET ASSET VALUE PER ORDINARY SHARE

Net asset value per share

30 April 2018 30 April 2017

Undiluted:

Net assets attributable to ordinary shareholders (£’000) 1,551,611 1,252,525

Ordinary shares in issue at end of year 133,795,000 132,487,000

Net asset value per ordinary share (pence) 1159.69 945.39

As at 30 April 2018, there were no potentially dilutive shares in issue (2017: there was no dilution)

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26 SEGMENTAL REPORTING

Geographical segmentsSince the Company does not have external customers an analysis of the Company’s investments held at 30 April 2018 by geographical segment and the related investment income earned during the year to 30 April 2018 is noted below:

30 April 2018Value of

investments£’000


Grossincome

£’000

30 April 2017Value of

investments£’000


Grossincome

£’000

North America 1,090,726 5,369 865,399 5,426

Europe 93,529 645 75,103 454

Asia & Pacific 307,076 4,007 279,566 2,853

Total 1,491,331 10,021 1,220,068 8,733

27 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

Risk management policies and proceduresThe Company invests in equities and other financial instruments for the long term to further the investment objective set out on page 37. This exposes the Company to a range of financial risks that could impact on the assets or performance of the Company.

The main risks arising from the Company’s pursuit of its investment objective are market risk, liquidity risk, credit risk and gearing risk and the Directors’ approach to the management of them is set out below. The risks have remained unchanged since the beginning of the year to which the financial statements relate.

The Company’s exposure to financial instruments comprise:

– Equity and non-equity shares which are held in the investment portfolio in accordance with the Company’s investment objective

– Term loans and bank overdrafts, the main purpose of which is to raise finance for the Company’s operations

– Cash, liquid resources and short-term receivables and payables that arise directly from the Company’s operations

– Derivative transactions which the Company enters into may include equity or index options, index future contracts, forward foreign exchange contracts and interest rate swaps.

The purpose of these is to manage the market price risks, foreign exchange risks and interest rate risks arising from the Company’s investment activities.

The overall management of the risks is determined by the Board and its approach to each risk identified is set out below. The Board and the investment manager co-ordinate the risk management and the investment manager assesses the exposure to market risk when making each investment decision.


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(a) Market Risk Market risk comprises three types of risk: market price risk (see note 27(a)(i)), currency risk (see note 27(a)(ii)), and interest rate risk (see note 27(a)(iii)).

(i) Market Price RiskThe Company is an investment company and as such its performance is dependent on the valuation of its investments.

Consequently market price risk is the most significant risk that the Company faces.

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s operations.

It represents the potential loss the Company might suffer through holding market positions in the face of price movements.

A detailed breakdown of the investment portfolio is given on pages 30 to 33. Investments are valued in accordance with the Company’s accounting policies as stated in Note 2(f).

At the year end, the Company’s portfolio included derivative instruments of £2,369,000 (30 April 2017: £716,000).

Management of the riskIn order to manage this risk it is the Board’s policy to hold an appropriate spread of investments in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a particular technology sector. The allocation of assets to international markets, together with stock selection covering small, medium and large companies, and the use of index options, are other factors which act to reduce price risk. The Investment Manager actively monitors market prices throughout the year and reports to the Board which meets regularly in order to consider investment strategy.

Market price risk exposureThe Company’s exposure to changes in market prices at 30 April on its quoted and unquoted investments was as follows:

30 April 2018£’000

30 April 2017£’000

Non-current asset investments at fair value through profit or loss 1,491,331 1,220,068

Derivative financial instruments at fair value through profit or loss 2,369 716

1,493,700 1,220,784

An analysis of the Company’s portfolio is shown on pages 28 to 36.

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27 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS CONTINUEDMarket price risk sensitivityThe following table illustrates the sensitivity of the return after taxation for the year and the value of shareholders’ funds to an increase or decrease of 15% (30 April 2017:15%) in the fair values of the Company’s investments. This level of change is considered to be reasonably possible based on observation of current market conditions and historic trends. The sensitivity analysis is based on the Company’s investments at each balance sheet date, with all other variables held constant.

30 April 2018 £’000

30 April 2017 £’000

Increase infair value

Decrease infair value

Increase infair value

Decrease infair value

Revenue return (1,904) 1,904 (1,831) 1,831

Capital return 224,055 (224,055) 183,118 (183,118)

Change to the profit after tax for the year 222,151 (222,151) 181,287 (181,287)

Change to shareholders’ funds 222,151 (222,151) 181,287 (181,287)

Change to NAV per share (pence) 166.04 (166.04) 136.83 (136.83)

(ii) Currency Risk The Company’s total return and net assets can be significantly affected by currency translation movements as the majority of the Company’s assets and revenue are denominated in currencies other than Sterling.

Management of the riskThe investment manager mitigates the individual currency risks through the international spread of investments and may make use of forward foreign exchange contracts. Borrowings in foreign currencies are entered into to manage the asset exposure to those currencies, which vary according to the asset allocation.


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Foreign currency exposureThe table below shows, by currency, the split of the Company’s non-sterling monetary assets, liabilities and investments that are priced in currencies other than Sterling.

30 April 2018 £’000

30 April 2017 £’000

Monetary Assets:

Cash and short term receivables

US Dollars 47,478 46,300

Japanese Yen 19,821 12,174

Euros 16,971 11,641

Taiwan Dollars 6,742 1,099

Swedish Kroner 657 703

Korean Won 282 –

Indian Rupee 36 40

Hong Kong Dollars* – (1,255)

Monetary Liabilities:

Payables

US Dollars* (6,069) (12,577)

Japanese Yen* (64) (11,711)

Bank Loans:

US Dollars (16,699) (17,777)

Japanese Yen (18,578) (19,416)

Foreign currency exposure on net monetary items 50,577 9,221

Non-Monetary Items:

Investments at fair value through profit or loss that are equities

US Dollars* 1,184,225 939,721

Japanese Yen 74,939 71,909

Korean Won 51,348 69,700

Euros 67,011 42,564

Taiwan Dollars 39,475 38,091

Hong Kong Dollars 55,974 33,483

Canadian dollars 4,395 7,699

Swedish Kroner 1,304 1,824

Investments at fair value through profit or loss that are derivatives

US Dollars 2,369 716

Total net foreign currency exposure 1,531,617 1,214,928

* 2017 Restated - see page 108.

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27 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS CONTINUEDRestatement of Foreign currency exposure as at 30 April 2017The Hong Kong Dollars under monetary assets has been restated to (£1,255,000) (as previously reported 2017: £1,255,000) as it was previously shown as a positive number. The US Dollars and Japanese Yen under monetary liabilities were restated to £12,577,000 (as previously reported 2017: £13,000), £11,711,000 (as previously reported 2017: £12,000) respectively as the figures were incorrectly rounded twice. The US Dollars in the non-monetary items under investments had double counted the US Dollar option, this is therefore restated to £939,721,000 (as previously reported 2017: £940,437,000). As a result of these changes the total amount has been restated to £1,214,928,000 (as previously reported 2017: £1,241,701,000). There is no impact to the profit and loss account or the net asset value of the Company in this or any earlier period.

Foreign currency exchange rate movementDuring the financial year sterling appreciated by 6.5% against the US Dollar (2017: depreciated by 11.7%), appreciated by 4.5% (2017: depreciated by 6.2%) against the Japanese Yen, depreciated by 4.1% (2017: depreciated by 7.1%) against the Euro, appreciated by 7.4% (2017: depreciated by 11.5%) against the Hong Kong Dollar, depreciated by 0.1% (2017: depreciated by 11.8%) against the Korean Won and appreciated by 4.4% (2017: depreciated by 17.4%) against the Taiwan Dollar.

Foreign currency sensitivityThe following table illustrates the sensitivity of the loss after tax for the year and the value of shareholders’ funds in regard to the financial assets and financial liabilities and the exchange rates for the £/US Dollar, £/Euro, £/Japanese Yen, £/Hong Kong Dollar, £/Korean Won and £/Taiwan Dollar.

Based on the year end position, if Sterling had depreciated, by a further 10%, against the currencies shown, this would have the following effect:

30 April 2018 £’000

US Dollar Euro Yen

Hong Kong

DollarKorean

WonTaiwan Dollar

Statement of Comprehensive Income – profit after tax

Revenue return 550 38 81 14 95 94

Capital return 134,589 9,331 8,457 6,219 5,737 5,134

Change to the profit/loss after tax for the year 135,139 9,369 8,538 6,233 5,832 5,228

Change to shareholders’ funds 135,139 9,369 8,538 6,233 5,832 5,228

30 April 2017 £’000

US Dollar Euro Yen

Hong Kong

DollarKorean

WonTaiwanDollar

Statement of Comprehensive Income – profit after tax

Revenue return 464 25 99 9 82 94

Capital return 107,740 6,022 8,073 3,860 7,744 4,354

Change to the profit/loss after tax for the year 108,204 6,047 8,172 3,869 7,826 4,448

Change to shareholders’ funds 108,204 6,047 8,172 3,869 7,826 4,448


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Based on the year end position, if Sterling had appreciated, by a further 10%, against the currencies shown, this would have the following effect:

30 April 2018 £’000

US Dollar Euro Yen

Hong Kong

DollarKorean

WonTaiwan Dollar

Statement of Comprehensive Income – profit after taxRevenue return (450) (31) (66) (12) (78) (77)Capital return (110,118) (7,635) (6,920) (5,088) (4,694) (4,202)Change to the profit/loss after tax for the year (110,568) (7,666) (6,986) (5,100) (4,772) (4,279)Change to shareholders’ funds (110,568) (7,666) (6,986) (5,100) (4,772) (4,279)

30 April 2017 £’000

US Dollar Euro Yen

Hong Kong

DollarKorean

WonTaiwan Dollar

Statement of Comprehensive Income – profit after taxRevenue return (380) (20) (81) (8) (67) (77)Capital return (88,151) (4,928) (6,605) (3,158) (6,336) (3,563)Change to the profit/loss after tax for the year (88,531) (4,948) (6,686) (3,166) (6,403) (3,640)Change to shareholders’ funds (88,531) (4,948) (6,686) (3,166) (6,403) (3,640)

In the opinion of the Directors, neither of the above sensitivity analyses are representative of the year as a whole since the level of exposure changes frequently as part of the currency risk management process used to meet the Company’s objectives.

(iii) Interest Rate RiskInterest rate changes may affect the income received from cash at bank and interest payable on borrowings.

All cash balances earn interest at a variable rate.

The Company finances its operations through its term loans as well as bank overdrafts and any retained gains arising from operations.

The Company uses borrowings in the desired currencies at both fixed and floating rates of interest to both generate the desired interest rate profile and manage the exposure to interest rate fluctuations.

Management of the riskThe Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. The Company may also enter into interest rate swap agreements.

Interest rate exposure The exposure, at 30 April, of financial assets and liabilities to interest rate risk is shown by reference to:

• floating interest rates (i.e. giving cash flow interest rate risk) – when the rate is due to be re-set;

• fixed interest rates (i.e. giving fair value interest rate risk) – when the financial instrument is due for repayment.

30 April 2018 £’000 30 April 2017 £’000Within

one yearMore than

one year TotalWithin

one yearMore than

one year Total

Exposure to floating interest rates:Cash and Cash equivalents 101,156 – 101,156 63,602 – 63,602 Exposure to fixed interest rates:Bank loan (35,277) – (35,277) (37,193) – (37,193)Total exposure to interest rates 65,879 – 65,879 26,409 – 26,409

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27 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS CONTINUEDInterest rate sensitivityThe sensitivity analysis is based on the Company’s monetary financial instruments held at each balance sheet date, with all other variables held constant.

The table below illustrates the Company’s sensitivity to interest rate movements, with a change of 0.25% p.a. in the rates of interest available to the Company’s financial assets and a change of 0.25% p.a in the rates of interest available to the Company’s financial liabilities. The effect on the revenue and capital return after tax and the value of shareholders’ funds are as follows if rates increased:

30 April 2018 £’000

30 April 2017 £’000

Statement of Comprehensive Income - profit after tax

Revenue return 165 66

Capital return – –

Change to the profit/loss after tax for the year 165 66

Change to shareholders’ funds 165 66

A corresponding decrease in the rate would have equal and opposite effect to that shown in the table above.

This level of change is considered to be reasonably possible based on observation of current market conditions. This is not representative of the year as a whole, since the exposure changes as level of cash/(loans) held during the year will be affected by the strategy being followed in response to the Investment Manager’s perception of market prospects and the investment opportunities available at any particular time.

(b) Liquidity RiskLiquidity risk is the possibility of failure of the Company to realise sufficient assets to meet its financial liabilities.

Management of the riskThe Company’s assets mainly comprise readily realisable securities which may be sold to meet funding requirements as necessary.

Liquidity risk exposureThe maturity of the Company’s existing borrowings are set out in note 17 to the financial statements. Short-term flexibility is achieved through the use of overdraft facilities.

At 30 April the financial liabilities comprised of:

30 April 2018 £’000

30 April 2017 £’000

Due within 1 month:

Balances due to brokers 6,042 12,545

Accruals 11,544 2,956

Due after 3 months and within 1 year:

Bank loan 35,559 37,490


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(c) Credit RiskCredit risk is the exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposals of investments or to repay deposits.

Management of the riskThe Company manages credit risk by using brokers from a database of approved brokers and by dealing through Polar Capital.

All cash balances are held with approved counterparties. HSBC Bank plc is the custodian of the Company’s assets. The Company’s assets are segregated from HSBC’s own trading assets and are therefore protected in the event that HSBC were to cease trading.

These arrangements were in place throughout the current year and the prior year.

Credit risk exposureThe maximum exposure to credit risk at 30 April 2018 was £110,765,000 (30 April 2017: £84,591,000) comprising:

30 April 2018 £’000

30 April 2017 £’000

Balances due from brokers 8,378 20,021

Accrued income 1,231 896

Cash at bank 101,156 63,602

110,765 84,519

All of the above financial assets are current, their fair values are considered to be the same as the values shown and the likelihood of a material credit default is considered low.

None of the Company’s financial assets are past due or impaired. All deposits were placed with banks that had a rating of A or higher.

Investment transactions are carried out with a large number of brokers, the credit standing of each is reviewed periodically by the Investment Manager are set on the amount that may be due from any one broker.

(d) Gearing risk The Company’s policy is to increase its exposure to equity markets through the judicious use of borrowings. When borrowings are invested in such markets, the effect is to magnify the impact on Shareholder’s funds of changes, both positive and negative, in the value of the portfolio.

Management of the riskThe Company uses short-term loans to manage gearing risk, details of which can be found in note 17.

Gearing risk exposureThe loans are valued at amortised cost, using the effective interest rate method in the financial statements. The Board regulates the overall level of gearing by raising or lowering cash balances.

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27 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS CONTINUED(e) Capital Management Policies and ProceduresThe Company’s capital, or equity, is represented by its net assets which are managed to achieve the Company’s investment objective set out on page 37.

The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This review includes:

(i) the planned level of gearing through the Company’s fixed rate loan facility and

(ii) the need to issue or buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (ie the level of share price discount or premium).

The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting period.

The Company is subject to externally imposed capital requirements through the Companies Act with respect to its status as a public company.

In addition in order to pay dividends out of profits available for distribution by way of dividend, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law. The Company is also subject to externally imposed capital requirements through the loan covenants set out in the loan facility.

These requirements are unchanged since the previous year end and the Company has complied with them.


INVESTMENT MANAGER AND AIFMPolar Capital LLP Authorised and regulated by the Financial Conduct Authority

PORTFOLIO MANAGERBen Rogoff

COMPANY SECRETARYPolar Capital Secretarial Services Limited represented by Tracey Lago

REGISTERED OFFICE AND ADDRESS FOR CONTACTING THE DIRECTORS16 Palace Street, London SW1E 5JD 020 7227 2700

INDEPENDENT AUDITORS In respect of the 2018 audit: KPMG LLP Chartered Accountants and Statutory Auditors 15 Canada Square London E14 5GL

SOLICITORHerbert Smith Freehills LLP Exchange House, Primrose Street, London EC2A 2EG

CORPORATE BROKERStifel Nicolaus Europe Limited 150 Cheapside London EC2V 6ET

DEPOSITARY, BANKERS AND CUSTODIANHSBC Bank plc 8 Canada Square London E14 5HQ

COMPANY / REGISTERED NUMBERPolar Capital Technology Trust plc (the Company) is incorporated in England and Wales with company number 3224867 and registered as an investment company under section 833 of the Companies Act 2006.

FINANCIAL CALENDARThe key dates in the Company’s financial year are as follows:

30 April Financial year-end

Early July Announcement of year-end results

Early September Annual General Meeting

31 October Half-year end

Mid December Announcement of half-year results

STATEMENT BY THE DEPOSITARY The statement of the Depositary’s responsibilities in respect of the Company and its report to Shareholders for the year ended 30 April 2018 is available on the Company’s website. The Depositary, having carried out such procedures as it considered necessary, was satisfied that in all material respects the Company was managed in accordance with the applicable FCA rules and AIFMD.

STATEMENT BY THE AIFM The statement by the AIFM in respect of matters to be disclosed to investors for the year ended 30 April 2018 is available on the Company’s website.

SECURITIES FINANCING TRANSACTIONSThe Securities Financing Transactions Regulation, as published by the European Securities and Markets Authority, aims to improve the transparency of the securities financing markets. Disclosures regarding exposure to Securities Financing Transactions (SFTs) or total return swaps will be required on all reports & accounts published after 13 January 2018. During the period to 30 April 2018 and at the balance sheet date, the Company did not use SFTs or total return swaps, as such no disclosure is required.

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CAPITAL GAINS TAX

Information on Capital Gains Tax is available on the HM Revenue & Customs website www.hmrc.gov.uk/cgt/index.

When shares are disposed of a capital gain may result if the disposal proceeds exceed the sum of the base cost of the shares sold and any other allowable deductions such as share dealing costs. The exercise of subscription shares into ordinary shares should not have given rise to a capital gain, however a capital gain may arise on the eventual disposal of those shares.

The calculations required to compute capital gains may be complex and depend on personal circumstances. Shareholders are advised to consult their personal financial advisor for further information regarding a possible tax liability in respect of their shareholdings.

SHAREHOLDERS MAY FIND THE FOLLOWING INFORMATION USEFUL WHEN CONSIDERING THEIR TAX POSITIONThe Company was launched on 16 December 1996 with the issue of ordinary shares at £1 per share and one warrant issued free for every five ordinary shares.

FORMER SHAREHOLDERS OF TR TECHNOLOGY PLCFormer Shareholders of TR Technology PLC who accepted the offers made by Polar Capital Technology Trust plc for their shares in TR Technology PLC may find the following table helpful:

TR Technology plc Polar Capital Technology Trust plc

For each ordinary share of 25p each: On 16 December 1996, one C share of 200p each.

On 14 March 1997, on conversion of the C shares, 3.94342 ordinary shares of 25p each and one warrant to subscribe for ordinary shares in respect of every five ordinary shares arising on conversion of the C shares.

For each stepped preference share of 25p each:

On 16 December 1996, 1.5561743 ordinary shares of 25p each and one warrant to subscribe for ordinary shares in respect of every five such ordinary shares.

For each zero dividend preference share of 25p each:

On 16 December 1996, 2.7392426 ordinary shares of 25p each and one warrant to subscribe for ordinary shares in respect of every five such ordinary shares.

MARKET PRICES OF THE COMPANY’S ORDINARY SHARES AND WARRANTS AND SUBSCRIPTION SHARESThe market prices, for capital gains tax purposes, of the Company’s ordinary shares and warrants at the close of business on 16 December 1996, the first day of dealings in the Company’s ordinary shares and warrants, and 17 March 1997, the first day of dealings after the conversion of the C shares, were as follows:

16 December 1996 17 March 1997

Ordinary shares of 25p each 96.0p 88.5p

Warrants to subscribe for ordinary shares 36.0p 31.0p

The market prices, for capital gains tax purposes, of the Company’s ordinary shares and subscription shares at the close of business on 14 February 2011, the first day of dealings in the Company’s subscription shares were as follows:

14 February 2011

Ordinary shares of 25p each 390.0p

Subscription shares of 1p each to subscribe for ordinary shares 33.5p


INVESTING

InvestingThe ordinary shares of the Company are listed and traded on the London Stock Exchange.

Investors should be aware that the value of the Company’s ordinary shares may reflect the greater relative volatility of technology shares. Technology shares are subject to the risks of developing technologies, competitive pressures and other factors including the acceptance by business and consumers of new technologies. Many companies in the technology sector are smaller companies and are therefore also subject to the risks attendant on investing in smaller capitalisation businesses.

Polar Capital Technology Trust plc is an investment trust and as such its ordinary shares are excluded from the FCA’s restrictions which apply to non-mainstream investment products. The Company conducts its affairs and intends to do so for the foreseeable future so that the exclusion continues to apply.

There are a variety of ways to invest in the Company. However, this will largely depend upon whether you would like financial advice or are happy to make your own investment decisions.

For those investors who would like advice:

Private Client StockbrokersInvestors with a large lump sum to invest may want to contact a private client stockbroker. They will manage a portfolio of shares on behalf of a private investor and will offer a personalised service to meet an individual’s particular needs. A list of private client stockbrokers is available from The Personal Investment Management & Financial Advice Association (PIMFA) at www.pimfa.co.uk

Financial AdvisersFor investors looking to find a financial adviser, please visit www.unbiased.co.uk

Financial Advisers who wish to purchase shares for their clients can also do so via a growing number of platforms that offer investment trusts including Alliance Trust Savings, Ascentric, Nucleus, Raymond James, Seven IM and Transact.

For those investors who are happy to make their own investment decisions:

Online Stockbroking ServicesThere are a number of real time execution only stockbroker services which allow private investors to trade online for themselves, manage a portfolio and buy UK listed shares. Online stockbroking services include Alliance Trust Savings, Barclays Stockbrokers, Halifax Share Dealing, Hargreaves Lansdown, Selftrade and TD Direct investing.

The Company has also made arrangements with its share registrars, Equiniti Limited, for investors to buy and sell shares through the Shareview.co.uk service. Further details can be obtained from the Shareview website or by calling the Shareholder helpline on 0345 603 7037.

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RisksPlease remember that the value of your investments and any income from them may go down as well as up. Past performance is not a guide to future performance. You may not get back the amount that you invest. If you are in any doubt as to the suitability of a plan or any investment available within a plan, please take professional advice.

Investors should be aware of the following risks when considering investing in the shares of Polar Capital Technology Trust plc:

• Past performance is not a guide to future performance. Please remember that any investment in the shares of Polar Capital Technology Trust either directly or through a savings scheme or ISA carries the risk that the value of your investment and any income from them may go down as well as up due to the fluctuations of the share price, the market and interest rates. This risk may result in an investor not getting back their original amount invested.

• Investors should be aware that the value of the NAV of the Company’s shares may reflect the greater relative volatility of technology shares. Technology shares are subject to the risks of developing technologies, competitive pressures and other factors including the acceptance by business and consumers of new technologies. Many companies in the technology sector are smaller companies and are therefore also subject to the risks attendant on investing in smaller capitalisation businesses.

• As the Company invests in overseas companies changes in exchange rates may cause fluctuations in the value of the investments and of your investment in the Company.

• The Company takes on bank debt for investment purposes (‘gearing’) which exposes the company to exchange risk when the borrowings are in different currencies and the value of the investments made with the borrowings may fall and may not be sufficient to cover the borrowings and interest costs. However the Company may increase or decrease its borrowing levels to suit market conditions.

• If you are investing through a savings plan, ISA or other investment arrangement it is important that you read the key features documents and understand the risks associated with investing in the shares of the Company. If you are in any doubt as to the suitability of a plan or any investment available within a plan, please take professional advice.

• Tax rates and reliefs change from time to time and may affect the value of your investment.

Polar Capital Technology Trust plc is a public listed company on the London Stock Exchange Premium Market section and complies with the UK Listing Authority’s Rules. It is not directly authorised and regulated by the Financial Conduct Authority.

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BOILER ROOM SCAMSWe are aware that Shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based "brokers" who target UK Shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments or offering to act on the Shareholder’s behalf on the payment of a retainer or similar in a spurious corporate event. These operations are commonly known as "boiler rooms". These "brokers" can be very persistent and extremely persuasive.

It is not just the novice investor that has been duped in this way; many of the victims have been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.

If you have been contacted by an unauthorised firm regarding your shares the FCA would like to hear from you.

You can report an unauthorised firm using the FCA helpline on 0845 606 1234 or 0800 111 6768 or by visiting their website, which also has other useful information, at www.fca.org.uk

If you receive any unsolicited investment advice:

• Make sure you get the correct name of the person and organisation

• If the calls persist, hang up

If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.

Details of any share dealing facilities that the Company endorses will be included in company mailings.

More detailed information on this or similar activity can be found on the FCA website.

FORWARD LOOKING STATEMENTSCertain statements included in this Annual Report and Financial Statements contain forward-looking information concerning the Company’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company’s control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the principal risks and uncertainties included in the Strategic Report Section on pages 8 to 49 of this Annual Report. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Technology Trust plc or any other entity, and must not be relied upon in any way in connection with any investment decision. The Company undertakes no obligation to update any forward-looking statements.

WARNINGS TO SHAREHOLDERS

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ALTERNATIVE PERFORMANCE MEASURES (APMS)

The Company considers the following APMs which are considered to be known industry metrics:

Discount / Premium A description of the difference between the share price and the net asset value per share usually expressed as a percentage (%) of the net asset value per share.

The share price at 30 April 2018 was 1148.00p and the NAV was 1159.69p, the discount would be 1.0%, (1148.00p-1159.69p)/1159.69p.

Net Asset Value (NAV)

The NAV is the value attributed to the underlying assets of the Company less the liabilities, presented either on a per share or total basis.

The value of the Company’s assets, principally investments made in other companies and cash being held, minus any liabilities. The NAV is also described as "Shareholders’ funds" per share. The NAV is often expressed in pence per share after being divided by the number of shares which have been issued. The NAV per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold by an investor.

As at 30 April 2018, the total equity was £1,551,611,000 and there were 133,795,000 ordinary shares in issue. The NAV per share was therefore 1159.69p. £1,551,611,000/133,795,000.

Ongoing Charges Ongoing charges are calculated in accordance with AIC guidance by taking the Company’s annualised ongoing charges, excluding performance fees and exceptional items, if any, and expressing them as a percentage of the average month end net asset value of the Company over the year.

Ongoing charges include all regular and expected costs and expenses of the Company expressed. Transaction costs, interest payments, tax and non-recurring expenses are excluded from the calculation as are the costs incurred in relation to share issues and share buybacks.

Where a performance fee is paid or is payable, a second ongoing charge is provided, calculated on the same basis as the above but incorporating the amount of performance fee due or paid.

Ongoing charges for the year equals management fee of £13,202,000 plus other operating expenses of £1,119,000 divided by the average NAV in the period. £14,321,000/£1,452,155,855 = 0.99%

Ongoing charges including performance fee based on the above plus the performance fee of £11,169,000. £25,490,000/£1,452,155,855=1.76%

Total Costs Comprising all the operating costs of the Company including transaction costs, interest payments, tax and non-recurring expenses excluded from the ongoing charge calculation. Costs in relation to share issues and share buybacks are excluded from the calculation.

The total cost input can be found in the statement of comprehensive income on page 84.

Total Net Assets The value of the Company’s assets, principally investments made in other companies and cash being held, minus any liabilities.

The total net assets input can be found in the balance sheet on page 86.

NAV Total Return The NAV total return shows how the net asset value per share has performed over a period of time taking into account both capital returns and dividends paid to shareholders.

NAV Total return reflects the change in value of NAV plus the dividend paid to the shareholder. Since the Company has not paid dividend the NAV total return is the same as the NAV per share as at year end 30 April 2018.

Share Price Total Return

The Share Price Total Return – Share price total return shows how the share price has performed over a period of time. It assumes that dividends paid to shareholders are reinvested in the shares at the time the shares are quoted ex dividend.

Share price total return reflects the change in share price value plus the dividend paid to the shareholder. Since the Company has not paid dividends the share price total return is the same as the price per ordinary share as at year end 30 April 2018.


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GLOSSARY

Investment terminology

AAII Bear American Association of Individual Investors sentiment survey showing the mood of individual investors – Bullish/Neutral/Bearish

AAF Report A report prepared in accordance with Audit and Assurance Faculty guidance issued by the Institute of Chartered Accountants in England and Wales. Utilised within the review of internal controls.

AGM The Annual General Meeting, to be held at 2:30pm on Thursday, 6 September 2018 at The RAC Club, 89 Pall Mall, London SW1Y 5HS.

AIC Association of Investment Companies, the industry body for closed ended investment companies.

AIFMD Alternative Investment Fund Managers Directive. Issued by the European Parliament in 2012 and 2013, the Directive requires that, while the Board of Directors of an Investment Trust remains fully responsible for all aspects of the Company’s strategy, operations and compliance with regulations, all alternative investment vehicles (“AIFs”) in the European Union, must appoint a Depositary and an Alternative Investment Fund Manager (“AIFM”). The Company’s AIFM is Polar Capital LLP.

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

BREXIT The advisory public referendum which was held on 23 June 2016 in the United Kingdom to indicate whether voters wanted to remain or withdraw from membership of the European Union (EU). The referendum vote was cast in favour to leave the EU. The process of actually leaving is termed BREXIT.

Closed-ended Investment Company

An Investment Company with a fixed issued ordinary share capital, the shares of which are traded on an exchange at a price not necessarily related to the net asset value of the company and which can only be issued or bought back by the company in certain circumstances.

Custodian The Custodian is HSBC Bank plc, a financial institution responsible for safeguarding, worldwide, the listed securities and certain cash assets of the Company, as well as the income arising therefrom, through provision of custodial, settlement and associated services.

Depositary The Depositary is also HSBC Bank plc. Under AIFMD rules the Company must appoint a Depositary whose duties in respect of investments, cash and similar assets include: safekeeping; verification of ownership and valuation; and cash monitoring. Under the AIFMD rules, the Depositary has strict liability for the loss of the Company’s financial assets in respect of which it has safe-keeping duties. The Depositary’s oversight duties will include but are not limited to share buybacks, dividend payments and adherence to investment limits.

Derivative A contract between two or more parties, the value of which fluctuates in accordance with the value of an underlying security. Examples of derivatives are Put and Call Options, Swap contracts, Futures and Contracts for Difference. A derivative can be an asset or a liability and is a form of gearing because it can increase the economic exposure to shareholders.

Discount / Premium The Company’s share price is determined by market demand for the Company's shares. If the share price is lower than the NAV per share, the shares are said to trade at a discount. If the share price is higher than the NAV, this is described as trading at a premium. Trading at a discount might indicate a higher level of sellers in the market while trading at a premium might indicate higher buying demand.

Fund / Portfolio Manager

Ben Rogoff of Polar Capital LLP has been delegated responsibility for the creation of the portfolio of investments subject to various parameters set by the Board of Directors.

GAAP The Generally Accepted Accounting Practice. This includes UK Financial Reporting Standards (FRS) and International GAAP (IFRS or International Financial Reporting Standards applicable in the European Union).

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Gearing Calculated using the Association of Investment Companies definition. Total assets, less current liabilities (before deducting any prior charges (such as borrowings)) minus cash/cash equivalents divided by Shareholders’ funds, expressed as a percentage.

Investment Company Section 833 of the Companies Act 2006. An Investment Company is defined as a company which invests its funds in shares, land or other assets with the aim of spreading investment risk.

Investment Trust taxation status

Section 1158 of the Corporation Tax Act 2010. UK Corporation Tax law allows an Investment Company (referred to in Tax law as an Investment Trust) to be exempted from tax on its profits realised on investment transactions, provided it complies with certain rules. These are similar to Section 833 above but further require that the Company must be listed on a regulated stock exchange and that it cannot retain more than 15% of income received. The Directors' Report contains confirmation of the Company’s compliance with this law and its consequent exemption from taxation on capital gains.

KPMG The Company’s auditor is KPMG LLP, represented by John Waterson, Partner.

Leverage As defined under AIFMD rules, leverage is any method by which the exposure of an AIF is increased through borrowing of cash or securities or leverage embedded in derivative positions. Leverage is broadly equivalent to gearing but is expressed as a ratio between the assets (excluding borrowings) and the net assets (after taking account of borrowings).

Manager / Investment Manager

Polar Capital LLP (Polar Capital), also appointed as AIFM. The responsibilities and fees payable to Polar Capital are set out in the Directors’ Report.

Non-executive Director

The Company is managed by a Board of Directors who are appointed by letter rather than a contract of employment, with the Company. The Company does not have any executive Directors. Remuneration of the Non-executive Directors is set out in the Directors’ Remuneration Report while the duties of the Board and the various Committees is set out in the Corporate Governance Statement.

PRIIPS The Packaged Retail and Insurance-based Investment Products regulations which came into force on 1 January 2018 in the UK and EU. The regulations require generic pre-sale disclosure of investment “product” costs, risks and certain other matters.

SORP The Statement of Recommended Practice. The financial statements of the Company are drawn up in accordance with the Investment Trust SORP issued by the AIC.

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For more information please visit our website:www.polarcapitaltechnologytrust.co.uk

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Registered Office16 Palace StreetLondon SW1E 5JDTel: 020 7227 2700Fax: 020 7227 2799www.polarcapitaltechnologytrust.co.uk

RegistrarEquiniti LimitedAspect HouseSpencer RoadLancingWest Sussex BN99 6DAwww.shareview.co.uk

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