Chair's Statement
The financial information set out below does not constitute the company's statutory accounts for the years ended 30 April 2023 or 30 April 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 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 2023 can be found here.
Introduction
Dear Shareholder,
On behalf of myself and the Board I am pleased to share with you the Annual Report of the Company for the year to 30 April 2023. This is my first full year Chair Statement following my appointment as Chair in September 2022.
The year under review and in particular the period since my appointment as Chair, has been a tumultuous one for markets, with the post-COVID settling down period, the continuation of the Russia-Ukraine war and the sizeable hikes in interest rates as the central banks sought somewhat belatedly to tackle the surge in inflationary pressures causing a global cost of living crisis. This has also had a resultant negative impact on long-duration assets such as technology stocks. To add to these, on the day of my appointment we sadly marked the passing of Queen Elizabeth II and of course more recently we celebrated the coronation of our newest monarch, King Charles III.
Performance
The Manager’s report is provided on pages 14 to 27 and gives an overview of the year past and the outlook for the near future. Over the year under review, your Company’s net asset value (NAV) per share fell from 2305.13p to 2239.48p, a decrease of 2.8%, while the Benchmark increased 2.9% in Sterling terms over the same period. I would like to be reporting more positive performance numbers, but generally markets have not been constructive and technology in particular has suffered in the post-Covid reset and high interest rate environment. Furthermore, our underweighting of the “mega-cap” technology stocks which now dominate the index and which continue to lead the sector was a significant factor in our underperformance relative to the benchmark. That said, the Company has performed well against its technology investment trust peer group. We believe that there are interesting and exciting times ahead for our sector, particularly in the field of Artificial Intelligence (“AI”) and this is discussed further in the Manager’s Report.
Catherine Cripps
Chair
Discount Management
The Board actively monitors the discount at which the Company’s ordinary shares trade in relation to the Company’s underlying NAV and, whilst the Board does not have a formal discount policy or a fixed target level for all times and circumstances, it will continue to exercise its discretion to buy back shares at a discount. Equally, should fortunes change, the Board will also use discretion to issue shares at a premium as has been done in the past. The intent when buying back shares is to seek to reduce the volatility of the share price, to add a small amount to NAV per share and to address significant imbalances in the supply and demand for shares.
We have continued to buy back stock regularly, repurchasing a total of 6,070,882 shares in the year under review at an average price of 1932.28 pence per share and an average discount of 11.95%. Following the year end and up to 13 July 2023, the Company has bought back a further 1,229,369 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
Outside of my appointment as Chair on the retirement of Sarah Bates after 12-years, there have been no other changes to the membership of the Board during the financial year under review. Biographical details of all Directors are available on the Company’s website and are provided on pages 8 and 9.
The Board is aware of the FCA’s Diversity and Inclusion Policy and notes that its current composition meets two of the three ‘comply or explain’ targets with three of the six members being female and two of the three senior positions being occupied by females. However we do not meet the recommended ethnicity requirements. While there are no immediate plans to recruit to the Board, the Board has put in place a succession plan based on the recommended nineyear tenure of Directors. It is a priority of the Board to be able to meet all aspects of the FCA’s Diversity policy as part of these future succession plans. Of paramount importance is having the correct mix of skills around the table, diversity of thought and a constructive culture that engenders lively discussion. When we next select our recruitment consultant to assist us with a director search we will set parameters that ensure potential candidates are sourced from a broad pool such that the Board can consider candidates with minority ethnic backgrounds, especially at the final round of the recruitment process. Further information is provided in the Nomination Committee Report on page 90.
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 7 September 2023 at 2:30pm. We have considered feedback from the prior few years AGM’s and analysed the attendance levels pre, during and post-COVID. Due to the previous lack of take up for the option of attendance on-line we are opting this year to hold an in-person only meeting and will not be providing a hybrid attendance option. We have also considered comments from shareholders on cost and location, and have this year decided to move the meeting to a central City base. We will therefore be using the auditorium at the offices of Herbert Smith Freehills, Exchange House, Primrose Street, London, EC2A 2EG. We look forward to welcoming shareholders to the meeting who 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 again 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. Detailed explanations on the formal business and the resolutions to be proposed at the AGM is contained within the Shareholder Information section on pages 133 to 134 as well as the Notice of AGM.
Environmental, Social and Governance (ESG)
We continue to keep abreast of ESG developments and changes in the landscape. Through regular engagement with the Manager, we have seen how ESG considerations have been integrated into the overall house style, the technology team investment approach and decision making as well as the methodology behind this. As a Board, we believe that the Manager is best placed to integrate ESG factors into the investment decision-making process, with the Board providing oversight and challenge, to ensure that the process is being executed as expected. This challenge is undertaken through regular reporting and engagement with the Manager. The Board receives tailored ESG related information including the ratings of investee companies and is able to use this as a tool to inform discussions with the Manager during Board meetings. As at 30 April 2023, based on MSCI ESG ratings, the portfolio and the benchmark were both rated A.
The Board also receives regular updates on the progress that has been made on the corporate side of Polar Capital’s business. Please refer to the ESG Report on pages 40 to 51 which incorporates both the investment and corporate approaches.
Outlook
Given the recent breakthroughs in Artificial Intelligence (“AI”), we remain positive on the outlook and the future of technology, despite a challenging macro backdrop. We look forward to the investment opportunities this brings for the sector, which looks well placed to benefit from AI disruption.
Finally, the Board is delighted to welcome Alastair (Ali) Unwin formally as Deputy Fund Manager following his recent promotion within Polar Capital. Ali joined the Polar Capital Technology team in 2019, has worked closely with Ben Rogoff since joining the team and has been a regular presenter to the Board. This appointment formalises the involvement that Ali has on the portfolio and the Board are pleased to support this move. Ben and Ali are supported by an experienced technology team who have significant experience of investing in the sector. Shareholders will have the opportunity to meet and talk with Ali, along with other members of the technology team at the AGM.
