Chair's Statement
The financial information set out below does not constitute the company's statutory accounts for the years ended 30 April 2024 or 30 April 2023 but is derived from those accounts. Statutory accounts for 2023 have been delivered to the registrar of companies, and those for 2024 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The full Annual Report and Financial Statements for the Year Ending 30 April 2024 can be found here.
Introduction
On behalf of myself and the Board I am pleased to present to you the Annual Report of the Company for the financial year (“FY24”) ended 30 April 2024.
In my last full year statement to you, we reflected on the acceleration of Artificial Intelligence (“AI”), the investment opportunities this could bring and the wider impact on our sector. During the financial year under review, we continued to see widespread adoption and exciting developments in generative AI. Notwithstanding this, the market backdrop remains a challenge with geopolitical events dominating much of the year and interest rates continuing to rise sharply throughout the year.
Performance
The Manager’s report is provided on pages 14 to 34 and gives an overview of the year past and the outlook for the near future.
I am pleased to be reporting strong absolute performance during the financial year under review. This was largely due to the Manager’s decision to rotate towards AI as a primary investment theme and focus on the enablers and beneficiaries in this space including semiconductor and component subsectors. The diminution in the risks of prolonged high inflation and recession have helped equity markets generally. The Company performed well against its peer group with the net asset value (NAV) per share rising from 2,239.48p to 3,154.11p, an increase of 40.8%, versus an increase in the benchmark of 38.9% in Sterling terms over the same period.
Catherine Cripps
Chair
Discount Management
The Company’s discount narrowed during the financial year under review, ending the year at 7.4% compared to 13.4% at the end of FY23.
The Board continually monitors the discount at which the Company’s ordinary shares trade in relation to the Company’s underlying NAV and, whilst the Board does not have a formal discount policy, it will continue to exercise its discretion to buy back shares at a discount. Equally, the Board will also use discretion to issue shares at a premium.
Utilising this discretion, we repurchased a total of 5,663,975 ordinary shares (representing 4.1% of the issued share capital) in the year under review at an average price of 2,442.50 pence per share and an average discount of 12.3%. Following the year end and up to close of business 11 July 2024, the Company has bought back a further 964,346 shares. While purchase levels have been relatively low on an individual transaction basis, we should note that this activity does not preclude the Manager determining that a more significant amount than usual on any one day should be purchased. Such a decision may be influenced by, in the Manager’s view, there being a particular investment opportunity best accessed through buying shares in the Company rather than buying individual securities.
Board composition
As noted in my Half Year Statement to Shareholders, Charlotta Ginman stepped down as Audit Chair on 31 October 2023 and was succeeded by Jane Pearce as part of a smooth and orderly transition. Charlotta remained on the Board as a non-executive Director of the Company and will retire at the Company’s Annual General Meeting (“AGM”) in September 2024 following nine years continuous service. On behalf of the Board, I would like to thank Charlotta for her service to the Company over the years.
Subsequent to Charlotta’s retirement the Board will comprise of five non executive Directors; while the Board considers the composition to be appropriate and covering all skills required we are in the midst of a recruitment process. It is three years since the Board last undertook a market search and we felt we should survey the market and seize the opportunity to hire an additional individual who would add to the Board’s existing diversity and skill sets should such an individual be identified. We have appointed a recruitment consultant with a perceived ability to fulfil a search criterion focused on exploring a broad pool of candidates and in particular, candidates with minority ethnic and/or diverse backgrounds. Further information will be shared when available.
There have been no other changes to the membership of the Board during the year under review. The Directors’ biographical details are available on the Company’s website and are provided on pages 8 and 9.
Current Base Management Fee Arrangement:
effective 1 May 2022
| 0.80% | £0 - £2bn |
| 0.70% | £2bn - £3.5bn |
| 0.60% | over £3.5bn |
Base Management Fee Arrangement:
to 30 April 2022
| 1% | Up to £800m |
| 0.85% | £800m - £1.6bn |
| 0.80% | £1.6bn - £2.00bn |
| 0.70% | over £2.0bn |
Directors’ Fees
As is detailed further within the Remuneration Committee Report, an annual fee review was undertaken to ensure that remuneration paid to Directors remains attractive, competitive and in line with those of its peers to attract and retain the best candidates. The Board usually favours modest increases year on year (where applicable) and with effect from 1 May 2024, the Directors’ base fee increased by c.3% to £36,000 and the fee of the Chair to £65,500. The supplement for the Audit Committee Chair was increased to £8,500 to reflect the additional time required in connection with increased audit regulation and overall responsibility of the Chair of the Audit Committee, whilst the supplement for the Senior Independent Director remained unchanged at £4,200.
In aggregate, the Directors fees for FY25 will be £235,000. The maximum level currently provided for in the Company’s Articles of Association is £300,000. In order to provide headroom and flexibility particularly should the Board finds it wants to recruit an additional member, it is proposed that the Articles are updated, by way of special resolution at the AGM, to increase the maximum level to £350,000 per annum.
Share Split
The price of the Company’s existing ordinary shares (‘Existing Ordinary Shares’) has increased in recent years and particularly during the financial year under review with our shares now trading regularly above £30 per share. Whilst this is positive for the Company and our Shareholders, we recognise that a higher share price might be a barrier to investment for certain investors including regular savers who may wish to invest smaller amounts per transaction on a regular basis.
The Directors are therefore proposing the sub-division of each Existing Ordinary Share into 10 new ordinary shares (the “New Ordinary Shares”) (the “Share Split”), thereby resulting in a lower market price per ordinary share. The Share Split will not itself affect the overall value of any shareholder’s holding in the Company and the New Ordinary Shares will carry the same rights and be subject to the same restrictions (save as to nominal value) as the Existing Ordinary Shares. We have made arrangements to ensure that there will be no interruption to trading in the ordinary shares on the London Stock Exchange when the Share Split takes place.
The Share Split requires the approval of shareholders and, accordingly, resolution 10 in the Notice of AGM seeks this approval. The Share Split is conditional on the New Ordinary Shares being admitted to the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange’s main market for listed securities. If resolution 10 is passed, the Share Split will become effective on admission. Further details of the proposed Share Split are set out in the Directors’ Report on page 73 and in the Notice of AGM.
Current Base Management Fee Arrangement:
effective 1 May 2022
| 0.80% | £0 - £2bn |
| 0.70% | £2bn - £3.5bn |
| 0.60% | over £3.5bn |
Base Management Fee Arrangement:
to 30 April 2022
| 1% | Up to £800m |
| 0.85% | £800m - £1.6bn |
| 0.80% | £1.6bn - £2.00bn |
| 0.70% | over £2.0bn |
Annual General Meeting
We are pleased to confirm that the Company’s AGM will be held on 11 September 2024 at 2:30pm at The Royal Institution, 21 Albemarle St, London W1S 4BS. We look forward to welcoming shareholders to the meeting, at which they will receive a presentation from the Manager and his team and shareholders will also have the opportunity to ask questions and meet the Board; light refreshments will be available following the meeting.
The notice of AGM will shortly be provided to shareholders and will also be available on the Company’s website. Shareholders are encouraged to read the detailed explanations on the formal business and the resolutions to be proposed at the AGM contained within the Shareholder Information section on pages 135 to 136 of this document as well as the Notice of AGM. In order to ensure that shareholders are able to follow the proceedings of the AGM without attending in person, the Company will also broadcast the meeting online via zoom video conferencing. However, please note that shareholders joining via zoom will not be able to vote online during the AGM and are therefore encouraged to submit their votes via proxy, as early as possible. All formal resolutions will be voted on by way of a poll.
We are conscious of the importance of shareholder engagement and would like to encourage shareholders to engage with the Board and the Investment Manager. As such, the Board invites shareholders to submit questions in writing to which we will respond, as far as possible, ahead of the AGM date. Please send your questions to cosec@polarcapital.co.uk with the subject heading PCTT AGM.
Environmental, Social and Governance (ESG)
The Investment Manager incorporates ESG considerations into its investment process and the Board continues to engage closely with the Manager to monitor its progress and receives regular updates on the developments on the corporate side of Polar Capital’s business. As at 30 April 2024, based on MSCI ESG ratings, the portfolio and the benchmark were both A rated.
Please refer to the ESG Report on pages 46 to 51 which incorporates both the investment and corporate approaches.
Outlook
The outlook for the technology sector is exciting as AI capabilities develop at a rapid pace. The parallel computing infrastructure to support this growth has dominated sector and market returns – as the Manager argues is typical during the ‘buildout’ phase of a new general‑purpose technology (GPT). This has brought concentration challenges in the near term but should provide immense future opportunities as AI is applied to every industry.
The Manager has continued to invest in the team to take advantage of the AI opportunity, adding two additional investment analysts during the year. Shareholders will have the opportunity to hear from the technology investment team members at the AGM.
