Annual Results for Year Ending 30 April 2011

RNS Number : 5312I

Polar Capital Technology Trust PLC

16 June 2011

 



THIS ANNOUNCEMENT CONTAINS REGULATED INFORMATION

POLAR CAPITAL TECHNOLOGY TRUST PLC

ANNUAL RESULTS ANNOUNCEMENT FOR THE FINANCIAL YEAR TO 30 APRIL 2011

16 June 2011

Key Points

·    NAV per share rose by 17.0%, outperforming the Dow Jones World Technology Index's rise of 4.7% and the FTSE World Index rise of 9.3%;

·    21.7% increase in share price over the year to 30 April 2011;

·    Asset growth was driven by successful stock selection and strong performance of the Company's core investment themes;

·    Our appointed Fund Manager won the techMARK 'Technology Fund Manager of the Year' Award for the second year running (2009 and 2010);

·    The outlook for the technology sector remains positive with the new disruptive cycle unfolding

Financial Highlights

	Year ended 30 April 2011	Year ended 30 April 2010	Movement %
Net assets per ordinary share	368.74p	315.13p	+ 17.0
Price per ordinary share	373.50p	306.80p	+ 21.7
Total net assets	£468,716,000	£398,627,000	+ 17.6
Ordinary shares in issue	127,111,211	126,497,914	+0.5
Subscription shares in issue	25,294,991	-	-
Price per subscription share	25.75p	-	-
Benchmark Change over the year to 30 April 2011 Dow Jones World Technology Index (sterling adjusted)			+ 4.7

For further information please contact:
Ben Rogoff	Ed Gascoigne-Pees / Georgina Turner
Polar Capital Technology Trust PLC	Financial Dynamics
Tel: [phone]	Tel: [phone] / 020 7269 7136

A copy of the annual report and audited financial statements will be available from the Company's website at www.polarcapitaltechnologytrust.co.uk

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Chairman's Statement

Richard Wakeling

REVIEW OF THE YEAR AND PERFORMANCE

Your Company has enjoyed a good year to 30 April 2011 in several respects. Notwithstanding the weakness of our primary investment currency, the US Dollar, the Net Asset Value per share rose by 17.0%.In doing so, it substantially outperformed the 4.7% sterling adjusted return of the Dow Jones World Technology Index.

The Company's shares experienced a further rerating and ended the year at a modest premium to NAV. This enabled us to make a "one for five" subscription share issue in February and also to issue new ordinary shares for the first time in five years. Our share price return over the financial year of 21.7% compares favourably with equity returns in most major markets and we have derived much encouragement from the many positive developments in the technology industry over the year.

After the exceptional equity market returns of the previous year, we had anticipated that it would be harder to make progress in 2010-11. After a difficult start to our year, stock markets moved higher over the balance of the period, gaining considerable momentum with confirmation of the US Federal Reserve's decision to extend "quantitative easing". However, the year was not short of issues. Bull markets are often described as climbing a "wall of worry" but it might be more accurate to describe this one as scrambling up a veritable "Eiger of angst". Each quarter saw new woes drive anxious investors towards the sanctuaries of cash, gold and pharmaceutical supplements. Greek debt, oil spills in the Gulf of Mexico, Irish bankruptcy, Euro contagion, the prospect of an economic "double dip", Chinese tightening in the face of gathering inflation and a rising tide of commodity prices, political unrest in the Arab world and, most momentously and tragically, the Japanese earthquake all took their toll. Yet, the combination of expansionary monetary policy, a lack of competing attractions for investors' cash and some remarkable corporate earnings growth more than outweighed these issues.

The technology sector was the object of growing media and investor attention as the year progressed. While much of this focussed on the spectacular growth of social networking and on Apple's transformation of the computing and mobile communications landscapes, our own attentions were equally drawn by the growing evidence that our "new cycle" thesis was well founded. The reorientation of corporate technology spending, the high prices paid by "last generation" technology companies to secure strategic "next generation" technology and the continuing and dramatic growth in the earnings of the better positioned companies all bore witness to the existence of a "new cycle". Over the last year, we observed a growing polarisation in the performance and valuation of technology companies, one that helped our manager to outperform our benchmark.

FEES

At the year end, our NAV per share had returned to the level prevailing at the end of April 2000, notwithstanding the 50% decline in the Index since then. Accordingly, the Directors are pleased to report that the good performance of the Company has resulted in the payment of a performance fee for the first time in 10 years. The amount payable is £3.3m

OUTLOOK

Few of the sources of last year's anxiety have gone away. Indeed, macro concerns persist and there is growing apprehension about the implications of the suspension of "quantitative easing" at the end of June 2011, particularly so as, in a number of countries, monetary and fiscal policy tightening are set to coincide. Inflationary concerns have not yet fed through to wage inflation outside the emerging markets but rising input prices may mean that corporate profit margins are at or very close to their peak. If so, then revenue growth will increasingly be the critical differentiator of corporate performance and the micro outlook, while still positive, is likely to prove less of a driver for share prices over the next year.  However, corporate cash flows are exceptionally strong, increasing the likelihood of more merger and acquisition activity and an extended period of robust capital spending. Moreover, valuations remain modest and equities are not facing stiff competition for investors' cash. Consequently, we expect the "grind higher" to continue over the next year but would not be surprised to encounter some tense and testing periods of share price weakness during the months ahead.

Within technology, we face an interesting dilemma. The "new generation" of technology companies continues to offer very strong earnings growth but could not be considered cheap on conventional valuation yardsticks. In contrast, the very large capitalisation and generally older companies promise little or no growth but are unquestionably inexpensive. They are also, partly out of exasperation with the lack of interest they have been attracting from investors, becoming more active in buying back shares and raising their dividends. While it is a challenge for our Manager to balance the portfolio correctly between the very different attractions of these two technology groups, it is also likely to produce exciting opportunities. Certainly, we expect the "new cycle" trends to broaden further and penetrate deeper over the next year.

Just as the 1990s witnessed a sustained increase in the proportion of capital spending devoted to technology, so now we are seeing a similar trend as companies focus on the application of technology to enhance productivity. Given the strength and positive outlook for corporate cash flows, and hence spending, we expect to see our sector enjoy material benefits over the years ahead.

BOARD

Following my decision to retire at the end of this year's AGM the Board initiated a search for a new director using an external recruitment agency. The search was very successful and we decided to look ahead and appoint two new directors who will join the Board on 30 June. Peter Hames and Sarah Bates offer a number of different skills all of which we believe will make them excellent additions to the Board.

There is never a perfect moment to step down as Chairman but I am pleased to be able to do so from a position of corporate strength and following a period of strong asset growth. I am delighted that the Board have appointed Michael Moule to succeed me and I wish him and our new Directors great success in their new roles. I would like to extend the same good wishes to the rest of the team that manage the Company and thank shareholders for their support over the last nearly fifteen years.  

AGM

We will hold our AGM at the RAC Club in Pall Mall, London on 4 August 2011 at 12 noon and hope that many shareholders will attend. 

Finally, I would like to congratulate the Manager on winning the Techmark 2010 Award as Technology Fund Manager of the Year for the second year in succession.  

Richard Wakeling
15 June 2011

investment manager's report

Ben Rogoff

Market Review

The continuation of one of the most remarkable post-recession earnings recoveries and the announcement of a second round of quantitative easing (QE2) saw global equities advance strongly over the past year. Unfortunately pronounced US Dollar weakness (which fell 9% against the British Pound) reduced returns significantly, with the FTSE World index rising just 9.3% in Sterling terms. Despite myriad challenges, the world economy expanded by 5% driven by emerging economies (+7%) as both China and India grew real GDP in excess of 10%. Although developed economies grew by a respectable 3%, growth in the US and the Eurozone has only been on par with the early 1990s recovery trajectory, despite the deeper downturn. Corporate earnings continued to materially outpace global growth, reflecting margin expansion and the weakened position of labour. It was this earnings growth that drove equities during the year, supported by M&A activity and low interest rates.

Prior to US Federal Reserve Chairman Ben Bernanke's speech in late August 2010 when he revealed his willingness to embark on a second round of quantitative easing, equity markets had corrected sharply as negatives including a Greek bailout, Chinese economic tightening, an oil spill in the Gulf of Mexico, and a deterioration in US economic data led investors to question the recovery. Despite a lukewarm reception, QE2 and the return of the 'Fed put' presaged a sharp rebound in investor sentiment and a reallocation from bonds to equities. While a strong first quarter earnings season resulted in equity markets ending the financial year at highs, risk appetite elsewhere began to contract during March and April reflecting a wave of negative macro developments including soaring oil prices (amid unrest in the Middle East), a tragic earthquake and tsunami that devastated Japan's east coast; Portugal's request for EU assistance; and monetary policy tightening in emerging markets.

The strongest regional returns (taking into account the impact of foreign exchange movements) were generated in Europe, as the low interest rates necessary to support the so-called PIIGS and Euro weakness helped drive strong export growth. Europe also benefited from uncharacteristically decisive ECB action which significantly reduced the risk of contagion.  Asian equities also performed strongly, reflecting superior growth and positive fund flows. US stocks trailed modestly as the strong earnings recovery was offset by pronounced Dollar weakness, while Japan - unsurprisingly given the tragic events in March - underperformed materially with the strength of the Yen further hindering its recovery. As earnings growth drove equity returns, "growth stocks" naturally outperformed "value stocks" and large capitalisation companies materially trailed smaller capitalisation alternatives that also benefited from elevated M&A activity.

Technology Review

The technology sector trailed global equities over the period as the poor performance of a number of large caps (and US Dollar weakness) depressed overall returns, the Dow Jones World Technology index rising just 4.7% in Sterling terms. Deteriorating macroeconomic trends led to a pronounced rotation out of the sector before QE2 and an acceleration of M&A activity acted as welcome catalysts. The combination of superior growth and additional compression in the sector's relative forward price earnings (PE) ratio left the sector trading around  the market multiple by year end despite a vastly superior aggregate balance sheet.

Valuation compression was most keenly felt by large caps which contributed to their trailing small caps by a staggering 30% during the year. Despite some strong individual large cap performances from the likes of Apple, IBM and Oracle, a number of industry giants began to creak under the weight of their incumbency.  A series of earnings mishaps and gross margin degradation at Cisco, together with a poor quarter from Hewlett Packard in February saw both companies join the 'penalty box' already occupied by Nokia. However, the greatest contribution to the de-rating of large caps was the stunning debut of Apple's category creating tablet - the iPad - which, having been initially considered as a complement, rapidly became perceived as the PC industry's would-be assailant.

In contrast, small and mid cap companies enjoyed a halcyon period driven by superior earnings growth, relative PE expansion and burgeoning M&A activity. SAP's acquisition of Sybase for a 48% premium in May was the spark that lit the small and mid cap powder keg. The rush of transactions that followed (and the full prices paid), made it clear that a new technology cycle had taken hold. This was epitomised by Hewlett-Packard's acquisition of storage vendor 3PAR following a bidding war with Dell. In addition to supporting small cap valuations, the more expensive M&A transactions also made a mockery of one of the key attractions of large caps - their so-called 'free cash flow' - which added additional downward pressure to valuations. At the sector level, late cycle areas including software and IT services outperformed while defensive (healthcare) and early cycle subsectors (semiconductors, hardware) trailed. Poorest performance was once again reserved for the alternative energy subsector, despite resurgent energy prices.

Our Performance

The Company's net asset value rose 17.0% per share compared to the 4.7% return recorded by the Dow Jones World Technology Index in Sterling terms. Given that we construct the portfolio using this benchmark as our primary tool to manage risk, the magnitude of our outperformance was ahead of our expectations. A constructive 'top-down' view (based on the near perfect alignment of investors and policymakers) allowed us to take advantage of periods of market weakness and made us receptive to a contrarian (positive) view on QE2.  However, most of our outperformance was driven from the 'bottom-up' as our long held view that a disruptive new cycle would disproportionately benefit small and mid cap stocks played out. M&A activity also provided an important performance boost, the thrilling bidding war for 3PAR proving the most edifying moment in a year that had more than its fair share of highs.

Economic Outlook

We expect the global economy to continue to 'muddle through' during the coming year with global growth estimated at 4.5% in 2011, once again skewed in favour of developing economies that should grow c. 6.5% versus advanced economies at c. 2.5%. In the developed world, monetary policy should remain extremely accommodative while in emerging markets policy tightening is set to continue in order to avoid overheating amid narrowing output gaps and food / energy price inflation. The US economy should continue to grow at/around trend growth (2%-3%) aided by a Zero Interest Rate Policy that should endure beyond the end of QE2. While there will be substantial variation across economies, Europe should also be able to grow c. 2% due to low interest rates and benign core inflation. Although growth is likely to decelerate as policy normalises, Asia should remain an economic bulwark over the coming year driven by China and India which are expected to grow at 9% and 8% respectively. Japan - the one country that could do with a little inflation - unfortunately continues to experience core inflation close to zero with growth set to slow this year due to the recent Japanese earthquake.

As recent declines in Treasury yields and commodity prices attest, risks to this sanguine economic view have increased lately.  Policy tightening in emerging markets certainly represents a key risk given how dependent the global economy is on developing world growth. The recent rise in oil prices amid unrest in the Middle East has clearly contributed to inflationary pressures while disruption in Japan could impact growth later in the year once the inventory buffer is depleted. While deficit reduction will be a significant headwind over the coming year, sovereign risk is more worrying still given the existential threat it represents. Greek debt trading at distressed levels (and still no agreement in place about how the European Stability Mechanism will be funded post 2013) reflects the difficulty in finding a solution acceptable to both creditor and debtor electorates. Should default risk extend to Spain, widespread contagion would likely become self-fulfilling. While we recognise that the risk of a 'growth scare' has indeed risen, we suspect growth will prove more resilient than feared.  We also have not given up on a more substantial improvement in employment trends given that no post-war US President has been re-elected with unemployment above 7.5%.

Market Outlook

We remain hopeful that equity markets can make additional gains over the coming year although returns will likely be subject to greater volatility. Stocks remain modestly valued on a price earnings basis (the S&P trading at 13x forward year estimates) and continue to look more attractive than both bonds and cash. Recent M&A activity at levels well above market prices suggests there is considerable value remaining in stocks, especially with cash generating negative real returns. Strong free cash flows should provide additional valuation support by helping to finance buybacks, dividends and cash M&A whilst earnings revisions remain firmly positive.

Although this investment backdrop will become less uniformly benign as the recovery extends, it should remain broadly supportive reflecting substantial output gaps in the developed world. However, given the extent of margin recovery to date, material upside to equities will likely depend on PE expansion that eluded stocks over the past twelve months. This is unlikely to occur before the recovery is perceived to have become self-sustaining which, in turn, will require labour and/or housing markets to show marked improvement.

Although valuations appear well supported, there are a number of headwinds that stocks will have to contend with over the coming months. Risk appetite may continue to contract given the myriad of near-term economic concerns (inflation, oil, policy tightening). While the market appears comfortable that sovereign risk is likely to remain contained, any risk to Spain (an economy twice the size of Greece, Ireland and Portugal combined) would represent a material negative. Having acknowledged the soothing influence QE2 has had on risk assets, we are naturally nervous about its imminent conclusion and the impact it might have on sentiment ahead of June as investors digest the removal of the Fed 'backstop'. The end to QE2 may also lead to a reversal in fortunes for the US Dollar whose weakness has been a significant contributor to higher risk asset prices in recent months. A further unwind in the Dollar carry trade would likely lead to further reversals in commodities and other Dollar-denominated assets which could extend into equities.

Technology Outlook

We continue to believe that sub-trend growth in the developed world will continue to provide a positive backdrop for the technology sector as corporates are likely to remain focused on delivering productivity. However the current cycle is unlikely to resemble that of the 1990s when overall IT budgets grew at multiples of global GDP for much of a decade. Indeed, leading IT expert Gartner expects technology spending to increase by 5.6% in 2011 and enjoy a 4.8% CAGR between 2010 and 2015. These modest expectations reflect both the deflationary impact of a new technology cycle and the ongoing efforts by IT managers to reduce the cost of supporting existing IT assets which will likely result in further intensification of competition between today's incumbents.

As with the broader market, the technology sector forward price-to-earnings ratio has fallen over the past year - global technology stocks today trading at c. 14 times forecast next twelve month earnings. Given that technology remains the only sector with a significant aggregate net cash position, cash adjusted forward PEs are even more compelling at c. 13x. However, overall valuation metrics are flattered by modestly rated large caps that are struggling with slowing growth or in some cases, are beginning to look impaired by the new cycle. As a result we are not anticipating a material revaluation over the coming year in either direction.

Undemanding valuations should be relatively buttressed by M&A activity that is continuing at an elevated pace, with $37bn in deals announced so far during 2011. Given that the technology sector sports an almost absurd $710bn cash balance (UBS) M&A activity is likely to continue to support small and mid-cap values. It may also begin to engulf larger 'non-aligned' companies such as Juniper Networks, or Network Appliance as the primary consolidators (Microsoft, IBM, HP, Cisco, Oracle and Dell) stop 'shadow boxing' and begin to trade proper blows as competition intensifies, a view  supported by Microsoft's recent $8.5bn acquisition of Skype. In addition to M&A activity, valuations should also benefit from greater efforts to return excess capital to shareholders via dividends and share buybacks. US companies have announced plans to repurchase $150bn of their own stock so far in 2011, the highest level since 2007.

In terms of key themes, we continue to believe that the sector remains in the early stages of a disruptive new cycle based on three key drivers - cloud computing, broadband applications and the growing ubiquity / mobility of computing. Gartner's recent CIO survey helped reinforce this view as it revealed that 'cloud computing', 'virtualisation' and 'mobility' represent the top three IT priorities today. We expect cloud computing to make further progress over the coming year as application migration gathers momentum. We also expect desktop virtualisation (VDI) to continue to enjoy accelerated adoption as CIOs begin to use their datacentres to 'deliver' desktop computing, in part to ease the migration to Windows 7. Together with growth in video related traffic, these virtual workloads should result in significant additional demand for storage while potentially driving an optical upgrade cycle as telecom operators look to reduce their data delivery costs.

Strong growth in 'broadband applications' also looks set to continue reflecting low penetration rates in key application categories such as, e-commerce (c.4% of US retail sales), online advertising (c.12% of the total US advertising market) and 'Software-as-a-Service' (SaaS) (c. 12% of worldwide software). While we have exposure to each of these categories, SaaS is our preferred 'broadband application' as we have high conviction that the multi-tenant, rental model developed by the likes of Salesforce.com will become the dominant delivery model for enterprise software while expanding the size of the existing market. Lastly, given the massive interest in Facebook and to a lesser extent Twitter, we are continuing to analyse the social networking space but have limited exposure today given a paucity of publicly traded entities and 'frothy' valuations.

Our third key theme - ubiquitous computing - enjoyed the most explosive growth over the past year due largely to strength in smartphones, augmented by the birth of a new computing category - the tablet. Having been previously the preserve of early adopters and enterprise, 2010 was the year when smartphones became mass market products as volumes grew 80% year over year resulting in penetration rising from 18% to 27% by the first quarter of 2011. While this trend has continued to benefit Apple and its supply chain, the mass market transition via Android devices has been even better news for volume beneficiaries such as ARM Holdings, Qualcomm, HTC and Atmel. Far from the panacea that incumbents once argued, smartphone growth has clearly come at the expense of the traditional handset market and its dominant vendors such as Nokia. This dynamic has recently made odd bedfellows of Nokia and Microsoft and is an excellent reminder of why incumbents rarely fare well from new cycles.

Given the importance of penetration rates in our investment process, we may scale back our smartphone exposure over the coming twelve months as 2011 is likely to prove the peak year for smartphone unit growth. However, we are in no immediate rush as tablets represent a significant incremental opportunity for many of the vendors that currently dominate smartphones. Enterprise adoption seems assured following a recent Goldman Sachs survey that revealed that more than 80% of CIOs are planning to adopt tablets which - beyond the tablet vendors themselves - should also help flash memory companies such as Sandisk and enterprise WiFi vendors (due to the need for pervasive wireless coverage in the enterprise to support tablets).

Unfortunately for the PC industry, the tablet has already begun to cannibalise netbooks and over time, future tablet growth is expected to come more materially at the expense of notebooks. While this would be unequivocally positive for companies with limited PC exposure today such as Apple, ARM and Qualcomm, incumbent PC vendors will have to contend with a contracting PC market and the impossibility of recapturing their former dominant market shares in a new product category. This twin threat was recognised in December when Microsoft revealed that the next iteration of its PC operating system ('Windows 8') would run natively on ARM as well as Intel-based processors.

In addition to our three core themes, we expect a fourth - emerging market growth - to continue to play a supporting role over the coming year. As a result of a shift towards domestic consumption and a longer list of investable companies, we are becoming increasingly able to gain emerging market exposure in each of our preferred themes. Internet stocks such as Baidu.com and Tencent remain our favoured way of gaining exposure to Chinese consumption while IT software / services companies such as VanceInfo are helping Chinese corporations apply IT to help stymie wage inflation. Although there have been a flurry of new listings in areas where we are fundamentally very bullish, we have been unwilling to participate where they have come at valuations that remind us a little of the late 1990s.   Additional areas that we favour include cyber-security, real-time analytics and a potential 'arms war' between Intel and ARM-based competition as Intel attempts to out-manufacture its architecturally superior competition. Emerging themes worthy of mention include unified communications driven by the upgrade of thirty year old circuit switching infrastructure and solid state drives, the eventual successors to hard disks.

Conclusions

Equity markets are likely to continue climbing the so-called 'wall of worry' over the coming year as a myriad of potential top-down "show stoppers" make it impossible for investors to revel in what should be the third year of this bull market. While we cannot know if any of these existential risks will unfold, we do know that over time people have been all too willing to 'call' the end of things. In contrast, history has generally been characterised by inertia which is why - despite an intellectually beguiling bear case that rests on 'unresolved' structural issues - we prefer to side with the null hypothesis, that policymakers will do whatever they can to ensure the global economy continues to 'muddle through'. We fully expect to have to deal with 'echoes' of the recent crisis that will likely manifest as 'growth scares' from time to time. As such investors should expect to contend with greater volatility than has been evident during the past few years.

Turning to technology, we believe that the sector is just two years into a new disruptive cycle that will continue to disproportionately benefit small and mid-cap companies without legacy exposures to defend. While the shape of the current portfolio already reflects this view, we have retained a considerable large cap exposure as we are mindful that next-generation valuations that have expanded over the past year may come under some pressure should the current growth scare escalate. As such we expect to use periods of market weakness and /or adverse rotation to amplify the portfolio's current shape because we think the odds of a 'double dip' recession are low.

Cloud computing and the mass production of IT

Last year we set out that the transition to cloud computing was analogous to the change that occurred in the electricity industry once Tesla had invented the transformer. This year we will make the case that - in addition to making it possible to deliver IT as a service - the shift to 'cloud computing' represents nothing less than the IT industry transitioning towards a mass production model. We expect this process to broadly resemble previous industrial transformations, in particular those that have taken place in agriculture, automotive and construction. We believe that today's datacentres bear remarkable resemblance to the unprecedented scale represented by the late 19th century skyscraper. Likewise we expect the move towards a mass production model to significantly lower the cost of computing while materially expanding the market in a similar way to how Ford and his assembly line drove mass adoption of the automobile. Finally we believe that agricultural mechanisation provides a useful roadmap for how 'cloud computing' is likely to treat labour. We hope this discursive piece provides a useful framework for how we expect this transformative process to progress.

As shareholders may already know, we typically avoid 'blue sky' (early) investment opportunities because we believe that even successful new technologies take longer to become pervasive than they theoretically should. Often referred to as the 'hype cycle', this mismatch between elevated expectations and a more pedestrian reality reflects the debilitating combination of risk intolerance and inertia. This emotional 'friction' means that wholesale change usually occurs only once the perceived pain of non-adoption is considered greater than adoption itself which is why paybacks associated with new technologies have to be far more compelling in practice than they need be on paper in order to become widely deployed. This dynamic also points to why industrial transformations have often occurred following a dislocation which can act as an overdue catalyst by creating a need 'to do' something.

The development of the skyscraper in the late 19th century certainly followed this pattern. Once Henry Bessemer had made it possible to mass produce cheap steel, thick and heavy masonry walls could be replaced with skeleton steel structures. The world's first skyscraper in 1885 - the ten storey Home Insurance Building in Chicago - theoretically should have presaged wholesale change in construction given the additional rent generated by more floors and thinner walls. However, the prospect of extra rental income proved insufficient to overcome early objections. However, once the safety elevator and relaxed building regulations had made fifty storey skyscrapers such as the Woolworth Building (1931) a reality, the uplift in rental yields was more than enough to overcome inertia. Likewise, early steam powered tractors enjoyed only limited success, but the productivity associated with smaller and cheaper alternatives introduced in the 1920s led to wholesale adoption at the expense of horsepower. The early car was similarly unable to displace the horse and carriage until manufacturing had moved to a mass production model.

We have long argued that a plethora of new technologies with compelling payback periods would form the basis of a new (and very disruptive) cycle. In line with the historical parallels described above, this new cycle is only now beginning to gain the traction we believe it has long warranted. The ability to recentralise computing via server and datacentre consolidation has been an available option for some time, thanks to virtualisation software and the existence of plentiful bandwidth. However, the compelling paybacks associated with this approach were insufficient to drive wholesale adoption until the recent downturn (and resultant IT budget pressure) made it clear that the enterprise-centric form of computing - where c.80% of the average IT budget is consumed solely maintaining existing assets- is deeply flawed and unsustainable.

Of course, mass adoption cannot occur before a new technology has been first stress-tested. This role is carried out by so-called 'early adopters' that are either able to see the future with greater clarity or (more likely) are unencumbered by legacy exposures. In our sector, the recentralised model of computing has long been the norm for next-generation technology companies such as Google, Amazon and Salesforce.com, not solely because they are agents of change but also because they are young entities with limited need to support old, often critical, applications. This lack of incumbency was a major reason why the first skyscraper - an architectural form that will forever be associated with Manhattan - was built in Chicago rather than New York which, with two centuries of history already behind it was intrinsically a more conservative city with well established building codes. In contrast, Chicago was "young..., bold and short on precedent" (a description that could easily by applied to Google today) with a pressing need for new construction following the Great Fire of 1871.

Once early adopters in Chicago had significantly de-risked the concept, the compelling economics associated with the skyscraper led to its appearance in older US cities such as New York (1889), Boston (1893) and Pittsburgh (1895). This emulation process is beginning to play out in the technology sector today as large companies increasingly embrace 'private clouds' that make it possible to deliver existing IT more cheaply and as a service. However, just as skyscrapers remained the preserve of only the largest developers, so the prohibitive cost of building private clouds will preclude smaller companies from this approach. This 'crowding out' of small companies was also a feature of early agricultural mechanisation due to the cost of and risk associated with expensive farm equipment. However, mechanisation became widespread once a rental market was established, a dynamic that - once public clouds are more broadly adopted - will also make it possible for smaller companies to access the cheaper and more flexible form of computing made possible by the Cloud.

Despite the considerable progress made to date, the current consensus still holds that the mass adoption of cloud computing is unlikely until concerns related to its security and its applicability are addressed. In our opinion, these challenges represent little more than the 'normal' response made by incumbents keen to slow the process of change by labelling disruptive technologies as 'inferior'. As discussed last year, Edison spent a good part of a decade spreading disinformation about alternating current (AC) technology in order to fend off its challenge to direct current (DC). That is not to say that there is no truth to the claim that new technologies are often inferior to existing ones when first introduced. As such it is near impossible for disruptive technologies to disprove the inferiority claim evidenced by how long skyscrapers had to contend with predictions of disaster that were ultimately unfounded.

Similarly it takes time for new technologies to demonstrate their potential to materially expand the existing market opportunity, particularly when so-called 'experts' pour scorn on their widespread applicability. These experts - such as Thomas Watson (Chairman of IBM) who in 1943 predicted that there was a 'world market for maybe five computers' and Ken Olsen, (CEO of minicomputer vendor Digital Equipment) who in 1977 opined that 'there is no reason why anyone would want to have a computer in the home' - often carry weight well beyond what they ultimately warrant. As such our confidence in cloud computing becoming pervasive rests on it overwhelming, rather than overcoming, the adoption barriers that exist today. This is likely to echo the automotive experience where sharply lower prices drove widespread adoption despite the advice given by the president of the Michigan Savings Bank to  Henry Ford's lawyer not to invest in the Ford Motor Company in 1903 when he infamously declared that 'the horse is here to stay but the automobile is only... a fad". We think that the cloud and the vastly lower cost of computing it can deliver will - in time - make today's detractors feel equally humbled by their lack of foresight.

However, before the IT industry can fully transition to a mass production model, it will first need to fully embrace standardisation and automation. Before Henry Ford could deliver '"a motor card for the great multitude" he first needed to ensure that his auto parts were interchangeable. This process of standardisation had already been pioneered in the photography equipment market by George Eastman in 1892 following the advent of machinery that could make parts instead of a skilled craftsperson. An ominous portent for skilled labour, standardisation also enhanced buying power by reducing the number of suppliers. Faced today with the challenge of reducing its running costs, the IT industry has also begun to tackle the complexity that reflects the kaleidoscope of computing platforms that have existed to date. Indeed one of the key drivers of server virtualisation is that it allows hardware to become standardised while running a myriad of different operating systems at the virtualised layer. Another way that standardisation is being applied within IT is by the pre-configured combinations of software and hardware components such as Oracle's Exadata, which significantly reduce the need for expensive IT 'craftsmen'. With Google reputed to be running as few as five different hardware configurations across its entire 1m + server base, it should be clear that the move towards more homogenous environments is a precondition for true cloud computing.

The 1908 introduction of the 'Model T' - a simple car with no factory options - epitomised this standardisation process - but at $825 it was clearly too expensive to drive mass adoption.  As a result, between 1908 and 1915 Henry Ford built on the progress already made by rival automaker Ransom E Olds who had introduced the first assembly line in 1901.  Inspired by the meat packing houses of Chicago and facilitated by factory electrification and the availability of high speed tools, Ford created the moving assembly line. Not only did this take work to the workers but, as a result of the division of labour the economics associated with automotive production changed forever, as manpower per car fell from 12.5 hours to just 93 minutes. With cars coming off the line in three minute intervals, only one colour - 'Japan Black' - would dry fast enough which is why the 'Model T' was available in any colour 'so long as it's black'. By the time the last car - number 15,000,000 - was produced in 1927, Ford's 'Model T' had transformed the automotive industry from a low unit, high cost model dependent on skilled labour to a mass production variant made possible by standardisation and automation.

Unfortunately for those employed in IT today, we expect the impact on labour from cloud computing to broadly resemble the post 1920s agricultural experience rather than the 'mixed' experience of auto workers who at least benefited from higher wages paid by Ford to counter the negatives associated with repetitive work. The first phase of agriculture mechanisation had been a boon for labour as new equipment such as harvesters led to the doubling of total farmland between 1870 and 1920. The so-called Bonanza farms - large scale operations made possible by this early mechanisation - still required a large number of people to operate, not least because early harvesters took six people and thirty six horses to pull. This first, labour dependent wave of mechanisation bears a remarkable resemblance to the experience of the IT industry post the mainframe during which labour greatly benefited from both the growth and decentralisation of computing. However, while the first wave of agricultural mechanisation helped improve the productivity of labour, the second came largely at its expense as machines such as the gasoline-powered combine harvester only required one person to operate. This essentially "eliminated much of the labour requirement in harvesting" and presaged a significant reduction in labour input per acre farmed and rapid growth in average farm sizes.  Despite the remarkable growth in farm output that occurred during this period, agricultural employment fell in both absolute and relative terms as the mass production model took its toll.

This trend towards larger farms and reduced labour is the same dynamic driving cloud scale datacentres today. Like their agricultural equivalents, giant server farms are making it possible to deliver units of computing, storage and networking with cost savings at up to 80% less than traditional enterprise datacentres due to enhanced buying power and the ability to reduce power costs (15-20% of total) by being located in regions with relatively inexpensive electricity and abundant water supply. They also significantly reduce labour costs due to their homogeneity and use of virtualisation and infrastructure tools that help automate tasks such as provisioning which could also eliminate 25% of labour hours by 2015. Combined we expect these factors to drive a remarkable increase in output per unit of labour (and power) given that a single system administrator in an internal datacentre today might manage c.10 servers while Google is already managing at a scale of 10,000 servers per head. While these inherent advantages are already somewhat apparent in early iterations (such as private clouds) we believe that the utilisation required to deliver the mass production of IT will only be possible in public clouds operating at scale. In these massive configurations not only do labour costs tend towards zero but overall utilisation can be maximised because the multi-tenancy of public clouds allows workloads with variable demand to be aggregated which in turn reduces the overall variability. In other words, multi-tenancy means that the larger the cloud, the higher the utilisation rate and the lower the cost of computing.

Based on the experience of previous transformations, the downward pressure on computing costs is likely to be dramatic. The Bessemer converter made it possible to deliver steel for c. 33% less, Ford was able to more than halve the cost of the 'Model T' between 1908 and 1916 and the combination of mechanisation and larger farm sizes resulted in a near quadrupling of UK wheat yields between 1945 and 2005, having been largely static for the preceding sixty years. Unsurprisingly falling prices and / or rising yields inevitably cause significant disruption to existing markets and incumbent vendors. In 1867, the market for rails (railroad track) was dominated by wrought iron which cost less than half as much as steel alternatives. Seventeen years later - with steel rails selling at just $32/ton - iron rails essentially disappeared. Likewise steam powered cars were superseded by the likes of the 'Model T' which, in 1918, cost 85% less than the leading steam car of the day, the Stanley Steamer. The combination of lower prices, technology alternatives and new entrants - a staggering 241 automobile manufacturers went into business in the US between 1904 and 1908 - naturally results in greater competition. This pattern is apparent in the technology space today as modest overall IT budget growth and a significant shift in technology priorities has led to intensifying competition between incumbent vendors such as Cisco and Hewlett Packard. Just as there were c.two thousand US automakers in the early 1900s but were 'only' one hundred remaining by 1920, so we expect consolidation within the technology industry to accelerate as troubled incumbents look to reinvent themselves and those unable to operate at mass production scale disappear.

For new entrants and those legacy vendors able to refashion themselves, the opportunities made possible by mass production are significant as sharply lower prices have often presaged market growth due to price elasticity of demand. This dynamic is almost always vastly underestimated by naysayers who - due to a myopic focus on 'inferiority' - think about incremental opportunities in percentages rather than factors. Even the most enlightened industry participants are sometimes unable to grasp the exponentials associated with mass adoption, epitomised by the prediction of Gottfried Daimler that the worldwide automobile market could not surpass one million units "due to a lack of chauffeurs". Whereas once the car had been the preserve of the wealthy, the price of a 'Model T' had fallen so significantly by 1914 that a Ford assembly line worker could buy one with four months pay. By 1920 more than 8m Americans owned cars. Widespread adoption also played out in agriculture following the introduction of tractors such as the Fordson, the market expanding from 4,000 units produced in 1910 to a peak of 564,000 in 1951.

By delivering vastly lower costs and unprecedented flexibility, cloud computing should similarly expand the reach of the IT industry by attracting new incremental buyers while generating a plethora of new applications. An early example of this is how the per user, per month model associated with Software-as-a-Service (SaaS) has made it possible for small and medium sized companies to easily access enterprise software having previously been priced out by the upfront cost and onerous risk associated with the traditional (licence) model. By converting fixed costs such as capital spending into variable ones, cloud computing eliminates much of the friction associated with new projects which should lead to greater experimentation. Furthermore, the ability to use cloud capacity on an ad hoc basis means that for the first time in the history of computing it costs the same to provision one thousand servers for an hour as it does one server for a thousand hours. This concept, known as 'elasticity' should enable IT to address complex tasks that had been previously prohibited by time constraints, such as real-time analysis of massive datasets that to date have been too large to tackle within a tolerable time horizon.

This mass production model is finally beginning to make headway with IT buyers, as evidenced by a number of encouraging recent CIO surveys. To some degree this softening of attitude reflects early successes associated with SAAS, private clouds and managing virtualised environments, IDC recently estimating the average number of virtual machines  (VMs) per server have risen from 3 in 2005 to c.6.6 today. In addition, we suspect that CIOs are also beginning to take the advice of advisors such as Gartner who now recommend that unless IT departments fully embrace the Cloud they risk disintermediation by business users. As a result of this combination of 'stick' (business user disintermediation) and 'carrot' (early cloud success) adoption appear to be inflecting, a Gartner survey revealing that 41% of IT buyers will continue, or begin to, invest in cloud computing in 2011. This should help fuel more than a tenfold increase in the market for cloud computing by 2020, with public clouds expected to grow by 27% per annum (to $160bn) in contrast to private clouds that are forecast to expand with an 8% CAGR (to $18bn) over the same timeframe.

This coming bifurcation in fortunes between private and public clouds reflects how the adoption of cloud computing is coming at the expense of traditional enterprise IT, which by 2014 will account for only 62% of IT workloads from 79% today. This trend will naturally recalibrate the focus of IT spending away from on-premise environments towards managed hosting and cloud providers, largely at the expense of incumbent vendors that may have to contend with negative growth in servers, storage and networking at in-house datacentres over the next three years.

With an estimated 10% of workloads already running in the Cloud, we believe the transition to a mass production model is at or approaching an inflection point beyond which further progress should be rapid, Morgan Stanley recently suggesting that public cloud workloads could grow at 50% per annum over the next three years, about twice as fast as consensus estimates. Just as the skyscraper ultimately changed the skyline, so we expect the cloud - and the mass production model it delivers - to transform the IT industry beyond recognition over the coming years.

Ben Rogoff

15 June 2011

Key data as at 30 April 2011
Financial highlights	As at 30 April 2011	As at 30 April 2010	Movement %
Net assets per ordinary share	368.74p	315.13p	17.0
Price per ordinary share	373.50p	306.80p	21.7
Total net assets	£468,716,000	£398,627,000	17.6
Ordinary shares in issue	127,111,211	126,497,914	0.5
Subscription shares in issue	25,294,991	-	-
Price per subscription share	25.75p	-	-

Exchange rates	As at 30 April 2011	As at 30 April 2010
US$ to £	1.6680	1.5307
Japanese Yen to £	135.34	143.90
Euro to £	1.1242	1.1512

	For the year to 30 April 2011
Benchmark Change over the year to 30 April 2011	Local Currency %	Sterling adjusted %
Dow Jones World Technology (total return)	14.1	4.7
Other Indices over the year to 30 April 2011 (total return)
FTSE World	-	9.3
FTSE All-share	-	13.7
S&P 500 composite	17.2	7.6

Historic Performance for the years ended 30 April

	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011
Total Assets less current liabilities (£m)	401.3	287.2	221.0	306.6	236.4	358.2	335.5	300.4	274.2	398.6	468.7
NAV per share (pence)
- undiluted	270.2	192.8	148.3	208.1	205.0	n/a	n/a	n/a	n/a	n/a	n/a
- diluted	243.7	178.5	141.3	193.7	189.8	255.9	239.7	226.7	216.8	315.1	368.7
Share price (pence)	281.5	165.0	120.5	164.8	165.5	245.0	228.0	190.8	183.0	306.8	373.5
Indices of Growth
Share price	100.0	58.6	42.8	58.5	58.8	87.0	81.0	67.8	65.0	109	132.7
Net asset value per share (diluted)	100.0	73.2	58.0	79.5	77.9	105.0	98.4	93.0	88.9	129.3	151.3
Dow Jones World Technology Index (Sterling)	100.0	67.4	48.4	58.1	52.6	69.5	68.1	69.1	65.3	91.2	95.5

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:

Rebased to 100 at 30 April 2001.

The net asset value per share growth is based on diluted NAV per share.  From 2005 onwards the total net assets figures have been calculated in accordance with IFRS, with investments valued at market bid price. Prior to 2005 investments were valued at market mid price.

Sources: HSBC Securities Services and Polar Capital LLP.

Market Capitalisation of underlying investments
	<£2bn	$2bn-$10bn	>$10bn
% of invested assets as at 30 April 2011 (as at 30 April 2010)	18.1% (19.6%)	15.3% (16.9%)	66.6% (63.5%)

Classification of group investments as at 30 April 2011
				Total
	North  America %	Europe %	Asia %	30 April 2011 %	30 April 2010 %
Computing	18.3	0.4	2.3	21.0	20.2
Components	0.8	-	-	0.8	-
Software	18.8	1.6	0.3	20.7	18.6
Semiconductors	12.0	3.1	8.0	23.1	24.9
Healthcare	1.0	-	-	1.0	0.3
Telecoms / media	-	0.4	0.5	0.9	0.8
Services	1.4	0.5	2.6	4.5	4.4
Communications equipment	11.7	2.0	3.4	17.1	16.4
Internet / consumer	5.6	-	2.0	7.6	9.7
Clean energy	-	0.1	-	0.1	0.1
Defence / security	-	0.2	-	0.2	0.1
Other sectors	-	-	0.6	0.6	1.2
Unquoted investments	-	0.2	-	0.2	0.2
Total investments	69.6	8.5	19.7	97.8	96.9
Other net assets (excluding loans)	4.9	0.8	2.7	8.4	10.1
Loans	(3.6)	-	(2.6)	(6.2)	(7.0)
Grand total (net assets of £468,716,000)	70.9	9.3	19.8	100.0	-
At 30 April 2010 (net assets of £398,627,000)	70.2	8.8	21.0	-	100.0

North America Equity investments over 0.75% of net assets as at 30 April 2011		Value of holding		% of net assets
		30 April	30 April	30 April	30 April
* These investments represented less than 5% of the portfolio at the date of investment		2011	2010	2011	2010
		£'000	£'000	%	%
Apple		38,468	30,113	8.2*	7.6*
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 iPod, iTunes and iPhone offerings.  Having previously redefined the smartphone category with the iphone, Apple's newest product - the IPad- has essentially created the tablet market.
IBM		20,350	13,470	4.3	3.4
International Business Machines (IBM) is one of the world's leading providers of enterprise solutions, offering a broad portfolio of hardware, IT services and software solutions.  Whilst the company's revenue growth rate has moderated over recent years, it has been able to deliver fairly consistent earnings per share growth as a result of acquisitions, cost-saving initiatives and share repurchases.
Oracle		20,316	10,846	4.3	2.7
Oracle is the leading vendor of relational database management systems (RDBMS) and is the world's second largest software company, with offerings that span database systems, middleware and a broad range of applications such as ERP, CRM and SCM.  Post its acquisition of Sun Microsystems, the company has begun to introduce vertically integrated systems such as its Exaseries products that combine Oracle software and Sun hardware.
Google		18,505	14,762	3.9	3.7
Google is the dominant provider of Internet search and online advertising, provider of web applications and tools, as well as a developer of software and mobile applications.  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, Google remains a critical element in the growth of Internet advertising and e-commerce.

Microsoft		15,610	20,901	3.3	5.2*
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.  Whilst the company is unlikely to be a net beneficiary from the transition towards cloud computing, an overdue PC upgrade cycle and a new operating system ('Windows 7') should create favourable near term tailwinds.
Qualcomm		12,694	6,535	2.7	1.6
Qualcomm is the world leader in wireless code division multiple access (CDMA) technologies for mobile communications.  The company has more than 3,000 patents for CDMA and licenses its IP to the world's leading handset and infrastructure providers.  The company also sells chipsets via its QCT division.  Recent settlements with Broadcom (2009) and Nokia (2008) resulted in the removal of Qualcomm's legal overhang.
Cisco		10,183	14,059	2.2	3.5
Cisco Systems is a pre eminent provider of Internet protocol (IP)-based equipment that is used to carry data, voice and video traffic.  In addition to its core router and switch offerings, the company also produces IP telephony products, set-top boxes and videoconferencing systems.  Although the company should benefit from data traffic growth this dynamic is being off set by intensifying competition in its core (switching) market.
Intel		9,592	12,223	2.0	3.1
Intel is the world's largest supplier of semiconductor chips.  The company designs and manufactures microprocessors, boards and semiconductor components that are used in computers, servers, and networking and communication products.  As the world's largest supplier of microprocessors, Intel enjoys a worldwide market share of more than 75%.  New products include Atom (for netbooks), ultra-low voltage CPUs for thin notebooks and the new Xeon 5500, a server chip optimised for virtualised environments.
EMC		8,974	5,707	1.9	1.4
EMC is a leading provider of enterprise storage systems that allow its customers to store, manage and retrieve massive amounts of information.  In addition to its position in storage area networks (SANs), EMC also offers network-attached file servers and a wide array of software designed to manage, protect and share data.  The company is the majority owner of VMware and has made a number of promising acquisitions of next-generation storage vendors that should help support growth going forwards.
Texas Instruments		6,389	6,117	1.4	1.5
An early pioneer in the field of semiconductors, TI is today a leading provider of both digital signal processors and analogue / mixed signal chips.  The company has adopted a 'fab-light' manufacturing model which allows it to better manage utilisation rates during downturns allowing it to continue to generate strong free cash flows.  The company has divested some non-core assets over recent years, returning the proceeds in the form of stock repurchases.

Juniper Networks			5,747	4,176	1.2	1.0
Juniper Networks is a global supplier of core and edge routers to service providers and large enterprises.  Its products help carry data across IP networks and the company has also entered the market for other next-generation IP technologies such as network security and WAN optimisation.  The company recently developed its own Ethernet switch which it hopes will allow it to wrest market share from Cisco in the enterprise market.
Cognizant			5,422	3,807	1.2	1.0
Whilst headquartered in New Jersey, Cognizant's business primarily takes place in India where it is one of the largest and fastest growing IT service companies.  Cognizant has been a multi-year beneficiary of the growth in the Indian outsourcing market and remains well positioned to benefit from the current rebound in IT spending and the persistence of an attractive labour arbitrage.
Hewlett Packard			5,187	9,396	1.1	2.4
One of the world's largest providers of IT solutions, HP has used cash flows generated by its print supplies business to acquire companies such as EDS, Compaq and 3Com.  This willingness to acquire has resulted in this former hardware company becoming one of the few systems companies, aping a transition undertaken previously by IBM.
Citrix Systems			5,056	2,456	1.1	0.6
Citrix Systems offers a suite of products that help its customers compute over the wide area network (WAN).  Its core product is well established, having been used to deliver Windows desktops and applications from remote servers.  Newer offerings allow full desktop images (VDI) to be delivered over the Internet, SaaS collaboration via its GoTo product range, and application acceleration appliances that help improve application performance.
Network Appliance			4,757	3,083	1.0	0.8
Commonly known as NetApp, the company is a leading vendor of network-attached storage (NAS) systems that are often deployed by midsized and large enterprises.  Although NAS was once considered to be inferior to storage area network (SAN) alternatives, the technology is well placed to benefit from further adoption of server virtualisation, unified storage and the shift towards 10G Ethernet.  As such NetApp has been able to consistently grow its market share against almost all incumbent storage vendors.
Salesforce.com	Software-as-a-service		4,324	3,913	0.9	1.0
Broadcom	Semiconductors		4,101	2,595	0.9	0.6
F5 Networks	Networking equipment		4,004	4,920	0.9	1.2
Intuit	Tax and payroll software		3,997	-	0.9	-
Altera	Communication semiconductors		3,796	1,640	0.8	0.4
Corning	Specialty glass/materials		3,647	1,132	0.8	0.3
Skyworks Solutions	Communication semiconductors		3,596	-	0.8	-
Total investments over 0.75%			214,715		45.8
Other investments			111,768		23.8
Total North American investments			326,483		69.6

Europe Equity investments over 0.75% of net assets as at 30 April 2011		Value of holding		% of net assets
		30 April	30 April	30 April	30 April
		2011	2010	2011	2010
		£'000s	£'000s	%	%
Ericsson		7,119	3,343	1.5	0.8
Ericsson has a long and rich history in the telecommunications industry having been first established in 1876 when Lars Magnus Ericsson set up a telegraph repair shop in Stockholm.  Today the company is synonymous with telecom infrastructure, particularly in the wireless arena where the company enjoys a leading market share.  As such, we believe that Ericsson is well positioned to benefit from the ongoing smartphone penetration / growth in mobile data in the developed world, together with wireless deployments in emerging markets.
ARM Holdings		4,795	2,863	1.0	0.7
ARM Holdings is the global leader in RISC processor IP.  The ARM architecture is becoming more relevant as we experience a proliferation in mobile devices, be it smartphone or tablet, due to the superior power consumption to performance ratio than Intel based alternatives.  We believe there is room for ARM to move outside of its core market for mobile devices into higher end applications such as laptops and servers with the upcoming generation of IP cores.
ASML Holdings	Semiconductor capital equipment	4,419	3,668	0.9	0.9
SAP	Software	4,299	1,782	0.9	0.4
Total investments over 0.75%		20,632		4.3
Other investments		19,232		4.2
Total European investments		39,864		8.5

Asia/Pacific Equity investments over 0.75%  of net assets as at 30 April 2011		Value of holding		% of net assets
		30 April	30 April	30 April	30 April
		2011	2010	2011	2010
		£'000s	£'000s	%	%
Samsung Electronics		15,698	10,497	3.3	2.6
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, LCD displays, and mobile handsets.
Taiwan Semiconductor		9,383	4,217	2.0	1.1
TSMC is the world's largest semiconductor foundry, providing a full range of services from design to product delivery.  The company is becoming increasingly dominant at the leading edge of the technology road map, where smaller rivals are struggling to adequately resource their product offerings.

Canon		5,307	7,415	1.1	1.9
Canon is one of the world's largest companies in the field of imaging and optical technology, manufacturing a wide range of products for both consumer and professional use.  Examples include printers, copiers, cameras, semiconductor manufacturing equipment, and medical equipment.
Infosys Technologies		4,943	5,671	1.1	1.4
Infosys Technologies provides IT consulting and software services.  Based in India, it has been one of the world's most successful exponents of the 'offshoring' model, winning business from major customers across a very wide range of industries.
Tencent Holdings		4,904	3,996	1.0	1.0
Tencent Holdings is China's largest internet company by revenue, and offers a full 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 400 million active accounts.  The company are now successfully monetising this enormous 'community' via add-on services such as online gaming.
Fujitsu	IT Services	3,645	4,945	0.8	1.2
Total investments over 0.75%		43,880		9.3
Other investments		48,174		10.4
Total Asian/Pacific investments		92,054		19.7

DIRECTORS in office at the year end

Chairman

R K A Wakeling + * ^
(aged 64)

Appointed to the Board as Chairman in 1996. Formerly chief executive of Johnson Matthey plc 1991-1994 and a non-executive director of Logica plc from 1995-2002 and was a non-executive director of The Brunner Investment Trust plc until 2010.

Mr Wakeling has served on the Board for over 9 years and retires at the conclusion of the AGM on 4 August.

B J D Ashford-Russell
(aged 52)

Appointed to the Board in 1996. Mr Ashford-Russell 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.

Mr Ashford-Russell has served on the Board for over 9 years and is connected to the investment manager. He stands for annual re-election.

P F Dicks + * ^ ^#
(aged 68)

Appointed to the Board in 1996 and elected Senior Independent Director in 2004. Mr Dicks is Chairman of the Remuneration Committee. He is the Chairman of Private Equity Investor plc and Sportingbet plc as well as a director of several other companies including Standard Microsystems Corporation and Graphite Enterprise Trust plc.

Mr Dicks has served on the Board for over 9 years and stands for annual re-election.

D J Gamble + * ^
(aged 67)

Appointed to the Board in 2002. He is Chairman of Hermes Property Unit Trust and Montanaro UK Smaller Companies Investment Trust plc. Mr Gamble is a director of IBM Pension Trustees Ltd., Barrie & Hibbert plc, Vencap International plc and Dunedin Enterprise Investment Trust plc. Mr Gamble was chief executive of British Airways Pension Investment Management Ltd. until his retirement in 2004.

R A S Montagu + * ^ ^#
(aged 45)

Appointed to the Board in 2007. Mr Montagu co-founded Montagu Newhall Associates in 2000, a specialist investor in technology and healthcare venture capital industries where he was a partner until 2010.

M B Moule+ * ^ ^#
(aged 65)

Appointed to the Board in 2007 and elected Chairman of the Audit Committee in 2010 and will become Chairman of the Board at the conclusion of the AGM. Mr Moule was a director of investment trusts at Henderson Global Investors, where he had been the investment manager for The Bankers Investment Trust plc and Law Debenture Corporation plc until his retirement in 2003. He is a director of The European Investment Trust plc and Montanaro UK Smaller Companies Investment Trust plc.

⁺  Member of Audit Committee

^*  Member of Management Engagement Committee

^{^}  Member of Nomination Committee

^#  Member of Remuneration Committee

The Board considers that the majority of the Directors including Mr Dicks, who has served more than nine years and stands for annual re-election, are independent in character and there were no relationships or circumstances which were likely to affect or could appear to affect their judgement.

In the case of Mr Ashford-Russell the Board has concluded that he should not be considered as independent due to his relationship with the investment manager.

As previously announced the Board will be appointing two new Directors on 30 June 2011.  These Directors will stand for election at the Annual General Meeting on 4 August 2011 and their details are given below:

Mrs S C Bates
(aged 52)

Mrs Bates Is the current Chairman of the Association of Investment Companies, and a non executive director of St. James's Place Plc, Development Securities Plc, New India Investment Trust Plc, Witan Pacific Investment Trust Plc, and JP Morgan American Investment Trust Plc. She is also Chairman of the Stena (UK) pension fund and Chairman of the Cancer Research UK pension fund's investment committee as well as being a member of a number of other charitable and pension fund investment committees.

P Hames
(aged 49)

Mr Hames spent 18 years of his investment career in Singapore. 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.  He also played an important role in the development of Aberdeen's Global Emerging Markets products.

DIRECTORS' REPORT INCLUDING THE BUSINESS REVIEW AND THE REPORT ON CORPORATE GOVERNANCE

The Directors present their Directors' Report including the Business Review and the Report on Corporate Governance together with the Audited Financial Statements for the Company and Group prepared under International Financial Reporting Standards as adopted by the European Union ("IFRS") for the year ended 30 April 2011.

Principal Activities and Status

The 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 and subscription shares are listed and traded on the London Stock Exchange.

The business of the Company is to provide shareholders with access to a discretionary managed portfolio of technology stocks and shares selected on a worldwide basis. The Company's investment portfolio is a 'long-only' fund which means that it buys and holds shares to seek appreciation in their value and consequently in the Net Asset Value (NAV) of the Company.

The Company seeks to manage its portfolio in such a way as to meet the tests set down in Section 1158 of the Corporation Tax Act 2010 and thus retrospectively qualify on an annual basis as an investment trust. This qualification permits the accumulation of capital within the portfolio without any liability to UK Capital Gains Tax. HM Revenue & Customs approval of the Company's status as an investment trust has been received in respect of the year ended 30 April 2010 subject to matters that may arise from any subsequent enquiry into the Company's tax return.

The Directors are of the opinion that the Company has and will continue to conduct its affairs so as to enable the Directors each year to seek approval as an investment trust.

The Company has no employees or premises and the Board is comprised of non-executive Directors. The day to day operations and functions of the Company have been delegated to third parties. The Company has one subsidiary, PCT Finance Limited a wholly owned dealing company whose results are consolidated with those of the Company.

The Company's ordinary and subscription shares are eligible for inclusion within the stocks and shares component of an ISA.

Life of the Company

The Articles of Association of the Company provide that at the Annual General Meeting of the Company to be held in 2015, and at every fifth Annual General Meeting thereafter, a vote on whether the Company should continue will be proposed as an ordinary resolution. The last vote for the continuation of the Company was  proposed at the Annual General Meeting in 2010 and was passed on a vote of hands.  99.9% of the votes lodged by shareholders were in favour.

Business Review

The Company is required by the Companies Act 2006 to set out a business review for shareholders to provide a fair review of the business of the Group during the financial year to 30 April 2011, the position of the Group at the end of the year and a description of the principal risks and uncertainties.

Full details of the Investment Manager's activities and its views are given in the Investment Manager's Report. The Board considers that the Chairman's Statement and the Investment Manager's Report when read in conjunction with the information provided in the Directors' Report fulfils the requirements of the business review and gives a comprehensive analysis of the development and performance of the business of the Group and the position of the Group at the end of the financial year.

Future Developments

The Board remains positive on the longer-term outlook for technology and the Company will continue to pursue its investment objective in accordance with the stated investment policy and strategy. The outlook for the 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 Chairman's Statement and the Investment Manager's Report comment on the outlook.

Investment Objective, Policy and Strategy Objective and policy

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

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 technology 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 and renewable energy, as well as the more obvious applications such as computing and associated industries.

Rationale

The Directors believe that the rationale for this objective continues to be valid. 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 broad market, reflecting the long-term secular uptrend in technology spending.

Strategy

The Company invests its technology assets in a portfolio comprised primarily of international quoted equities which is diversified across both regions and sectors within the overall investment objective to manage investment risk.

Investment approach

Equities are selected on the basis of their potential for shareholder returns, not on the basis of technology for its own sake. Rigorous fundamental analysis is applied with a focus on:

•   management quality;

•   the identification of new growth markets;

•   the globalisation of major technology trends; and

•   exploiting international valuation anomalies and sector volatility.

Asset allocation

The portfolio is constructed without specific reference to any individual market, index or benchmark and the Board regularly discusses asset allocation. The maximum exposure to any one market may be 100% but the Board has agreed a set of parameters which are based upon current market conditions and provides a range which guides the Investment Manager depending on market conditions and future expectations. The Board believes 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.

As well as the market parameters shown below, the Board also monitors the portfolio's exposure to different sub-sectors within technology and the spread of investments across different market capitalisations. 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

Not withstanding 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 an aggregate limit of 25% of the portfolio that may be exposed to emerging markets (as defined by the MSCI Emerging Markets Index) with specific upper limits for certain countries.

Largest investment

The largest single investment that may be held in the portfolio is limited to 5% of the portfolio at the time of acquisition, except for US and UK government bonds, which might be used as part of the cash management process.

Unquoted investments

Investment in unquoted companies may be made from time to time where there has been prior Board approval. These investments in aggregate will not exceed 10% of the portfolio, in each case measured at the time of investment.

Derivatives

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 only.

Cash and borrowings

From time to time the 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 management of cash is through the purchase of appropriate government bonds, money market funds or bank deposits depending on the Investment Manager's view of the investment opportunities.

The Company may also borrow money to invest in the portfolio over both the long and short-term. Any commitment to borrow funds is agreed by the Board. Borrowings may be in currencies which best match the currency in which the investments are denominated. The constitution of the Company permits borrowings of up to 100% of net assets but the limits agreed by the Board set a range of up to 20% at the time of drawing the relevant borrowings.

Gearing

The Company has banking facilities with ING Bank NV for a 12 month term loan for up to £30m which was drawn down on 2 August 2010 in the amount of Japanese Yen 1,634,000,000 and US Dollar 28,200,000. The facility is repayable on 2 August 2011.  As at 30 April 2011, using the exchange rates prevailing at that date, the sterling amount of the facility was £28.9m.

Performance

At the year end the portfolio comprised of 127 investments with the single largest investment being Apple representing 3.7% by book cost or 8.2.% when investment value is used. The portfolio analysis on pages 22 to 29 provides details on the distribution of investments by market capitalisation, the different sectors in the different principal geographies and all the investments which individually represented more than 0.75% of net assets.

The changes in the share price, net asset value and benchmark over the financial year are shown on page 22.

A review and commentary on the investment activities this year and the Investment Manager's comments and the outlook for technology shares are given in the Chairman's Statement on pages 2 and 3 and the Investment Manager's Report on pages 5 to 21.

Movement in Net Asset Value (total return) per share

Over the year to 30 April 2011 the Net Asset Value per share rose by 17% compared to the rise in the Benchmark, the Dow Jones World Technology Index (total return, sterling adjusted) of 4.7%.

	%	%	p per share
NAV per share at 30 April 2010			315.13
Benchmark performance		4.7
Asset allocation	0.3
Stock selection	13.8	14.1
Other factors
Due to cash	- 0.4
Due to gearing	- 0.3
Due to share issues	0.1
Due to management fees and finance costs	-1.2	-1.8
Performance of NAV		17.0
NAV per share at 30 April 2011			368.74

Key Performance Objectives

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.

•   The provision of investment return to ordinary shareholders as measured by long-term NAV growth, and relative performance against the benchmark and technology indices.

The Board reviews and compares at each meeting the performance of the portfolio and the views of the Investment Manager.

•   The Company's NAV has over the last year outperformed the Dow Jones World Technology Index for the reasons explained in the Chairman's Report and the Investment Manager's Report.

•   Over the longer term NAV growth has outperformed the Dow Jones World Technology Index as shown in the Historic Performance graph on page 23.

•   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 of the composition of the share register including trading patterns and discount/premium levels of the Company's ordinary shares. The Board discusses and authorises the issue or buy back of shares when appropriate.

•   The discount/premium of the ordinary share price to the NAV per ordinary share over the year has ranged from a maximum discount of 10.6% to a premium of 3.1%. The Company has not bought back any shares in the year to 30 April 2011 and has issued 550,000 ordinary shares when the issue price after costs exceeded the NAV.

•   To qualify and meet the requirements for Section 1158 of the Corporation Tax Act 2010.

•   This has been achieved in each year since launch.

Assets

At 30 April 2011 the total net assets of the Group amounted to £468,716,000 compared with £398,627,000 at 30 April 2010. The Net Asset Value per share rose by 17.0% from 315.13p to 368.74p.

Revenue and Dividends

The gross revenue return for the year was £3,585,000 (2010: £2,704,000) and the net revenue loss after taxation amounted to £2,889,000 (2010: Loss £1,953,000). The total return for the year amounted to a profit after tax of £68,085,000 (2010: £124,440,000).

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.  However, due to the level of accumulated revenue losses the Company does not expect to pay a dividend for the foreseeable future and Directors do not recommend the payment of a dividend.

Benchmark

The Company has a benchmark of the Dow Jones World Technology Index (total return, sterling adjusted) against which NAV performance is measured for the purpose of assessing performance fees.

As at 30 April 2011 the Dow Jones World Technology Index was calculated as a market capitalisation based index of 536 technology companies worldwide. 71% of the index weighting is in North America, 9% in Europe and 20% in Asia/Pacific. By market capitalisation 75% is represented by large companies, 22% by mid-caps and 3% by smaller companies.

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 it has delivered.

The Company was established with a performance fee benchmark of the FTSE World Index (capital return). This was changed in May 2000 to a composite benchmark and the components of the benchmark were kept under review by the Board. The Board decided that with effect from 1 May 2006 the benchmark should change to the Dow Jones World Technology Index (total return, Sterling adjusted). This single index as a benchmark should provide shareholders with a more readily available and understandable measure and is also in keeping with those used by the Company's peer group.

Business Risks

In delivering long--term returns to shareholders the identification and monitoring of risk is crucial. In addition to the detailed internal controls set out in the corporate governance report the Board seeks to identify, assess and monitor risks to the business.

These relate primarily to economic uncertainties and its particular sphere of activity of investing in worldwide stock markets.

·              The appropriateness of the investment mandate and strategy is considered as this may lead to a depressed share price as investors seek alternative investments or low risk strategies.

·              As the Company's assets comprise mainly of listed equities the principal risks to the performance of the business are market related.

·              While the portfolio is diversified across a number of stock markets worldwide, the investment mandate is focused on technology and thus the portfolio will be more sensitive to investor sentiment and the commercial acceptance of technological developments than a general investment portfolio.

·              Technology stocks also have greater relative price volatility and are subject to the risks of developing technologies, competitive pressures and other factors including the acceptance of new technologies and rapid obsolescence.

·              Many companies in the technology sector are smaller companies and are therefore subject to the risks attendant on investing in smaller capitalisation businesses.

·              There is significant exposure to the economic cycles of Europe, Asia and the US as these are the major investment markets for technology stocks.

·              A very small element of the investment portfolio is invested into unlisted securities. These investments are made where they offer specialist management or investment opportunities which would otherwise not be available. At the year-end this amounted to less than 0.2% of NAV.

·              The Board has regard to the degree of risk which the Investment Manager incurs in order to generate the investment returns and the effect of gearing on the portfolio by borrowed funds which can magnify the portfolio returns per share positively or negatively.

There is a second group of business risks in the form of financial, operational including accounting and taxation, and legal and regulatory requirements.

·              The financial risks which arise from the investment activities expose the Company to risks such as market price, credit, liquidity, foreign currency and interest rates.

·              The operational and accounting risks cover disruption to or failure of systems and processes provided by the Investment Manager including any sub contractors to which the Investment Manager has delegated the task.  The keeping of safe custody records and systems provided by the custodian or sub custodians.  Suppliers may deliver sub standard services which impact on the Company or its customers.  The taxation risk that the Company may fail to obtain qualification on an annual basis as an investment trust or recover withholding taxes on overseas investments.

·              Legal and regulatory risks include: compliance with the FSA's Listing Rules and Transparency and Disclosure Rules; meeting the provisions of the Companies Act 2006 and other legislation affecting UK companies and compliance with accounting standards.

The policies for managing the risks posed by exposure to market prices, interest rates, foreign currency exchange rates, credit and liquidity are set out in note 31 to the accounts.

Other business risks are managed through regular reporting to the Board on the diversification of the portfolio, market and sector views, the investment strategy including analytical performance data and attribution presented by the Investment Manager. Any investment in unquoted companies or funds is approved by the Directors before the investment is made.

The Board also receives regular financial information on the Company and discusses the share register and share price performance at each meeting.

Information and guidance on the second group of risks is managed by the use of 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. 

Management Company and Management of the Portfolio

As the Company is an investment vehicle for shareholders the Directors have sought to ensure that the business of the Company is managed by a leading specialist investment management team and that the investment strategy remains attractive to shareholders.

The Directors believe that a strong working relationship with the investment management team will achieve the optimum return for shareholders and to this end value the inclusion on the Board of Mr Ashford-Russell.

Investment team

The Investment Manager is Polar Capital LLP, ('Polar Capital') which is authorised and regulated by the Financial Services Authority.

Under the terms of the investment management agreement Polar Capital provides investment management, accounting, company secretarial and administrative services. It has also procured the provision of a share savings plan and ISA accounts for the Company's shares from BNP Paribas Securities Services.

Polar Capital provides a team of technology specialists led by Ben Rogoff, who is supported by Craig Mercer and Nick Evans. Each member focuses on specific areas and the team is supported by two researchers. Ben has overall responsibility for the portfolio and looks after the US investments. Polar Capital also has other specialist and geographically focused investment teams which 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.

Continued appointment

The 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.

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.

Fee arrangements

Management fee

•   1% based on Net Asset Value plus borrowings, on a per share basis, payable quarterly in arrears. Any investments in funds managed by Polar Capital are wholly excluded from the base management fee calculation.

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 Net Asset Value per share exceeds the total return on the Dow Jones World Technology Index (total return, Sterling adjusted) multiplied by the time weighted average of the number of shares in issue during that period, subject to a high water mark.

•   The Net Asset Value 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; and

•   255.88 pence per share, this being the Adjusted NAV per share as at 30 April 2006 when the current performance fee arrangements became effective.

•   Any performance fee accrual included in the Net Asset Value 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 £4,452,000 have been paid for the year to 30 April 2011 (2010: £3,302,000) and as a result of the investment performance being ahead of the Benchmark and the existing high water mark being exceeded the manager has earned a performance fee in respect of the financial year to 30 April 2011 of £3,337,000. No performance fee was earned or paid in 2010.  A new high water mark of 368.74 p per ordinary share was established as at 30 April 2011 which will be used for the payment of any future performance fee.

Capital Structure

Issued

The Company's share capital is divided into ordinary shares of 25p each and subscription shares of 1p each. At the year-end there were 127,111,211 ordinary shares in issue (2010: 126,497,914) and 25,294,991 (2010: nil) subscription shares.   As at the date of this report there are 127,416,770 ordinary shares in issue and 25,289,432 subscription shares in issue.

Changes during the year

The Company published a prospectus on 18 January 2011 for the creation and issue of a new share class of subscription shares.  Shareholder approval was given at the General Meeting held on 11 February 2011.  The subscription shares were admitted to dealings on the London Stock Exchange on 14 February 2011 and 25,358,288 subscription shares were issued free to qualifying existing ordinary shareholders who were on the share register on 10 February 2011.

Each subscription share carries the right to subscribe for one ordinary share at 401p per ordinary share up to and including the last business day of March 2012 and at 478p per ordinary share from 1 April 2012 to the last business day of March 2014.  After the last business day of March 2014 the right to convert the subscription shares will lapse.  If 75% or more of the original issue of subscription shares have been converted or cancelled then the Company may give notice to all outstanding subscription share holders that a final subscription date will take place earlier than March 2014.

The first conversion of the subscription shares took place on 31 March 2011 and up to the date of this report 68,856 subscription shares have been converted and 68,856 ordinary shares issued.

The Company has issued 550,000 ordinary shares during the year at prices between 388.5p per share and 390.5p per share and a further 300,000 ordinary shares since the year end at prices between 371.0p and 374.5p per share.  Ordinary shares may be issued when the issue price is in excess of the NAV and after costs there is a benefit to existing shareholders.

During the year the Company obtained two block listings of ordinary shares on the London Stock Exchange which removes the need to apply for a listing each time new ordinary shares are issued.  On 30 December 2010 the Company block listed 6,324,890 ordinary shares under a general corporate purpose scheme. A second block listing was obtained in respect of 25,358,288 ordinary shares to be issued in satisfaction of conversion notices from holders of the subscription shares.

Voting rights

Ordinary 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.  Subscription shares do not carry any rights to attend or vote at meetings of shareholders of the Company but the rights attached to the subscription shares may only be altered or abrogated with the sanction of the subscription shareholders.

Details for the lodging of proxy votes are given when a notice of meeting is given.

Transferability

There are no restrictions on the transferability of the shares and the Company is not aware of any arrangements which may result in such agreements.

Powers to issues ordinary shares and make market purchases of ordinary and subscription purchases

The Board was granted by shareholders at the AGM in 2010 the power to allot up to a nominal value of £1,581,223 equity securities and to issue those shares for cash without offering those shares to shareholders in accordance with their statutory pre-emption rights.

New ordinary shares will not be allotted and issued at below the Net Asset Value. These powers will expire at the AGM in 2011. These powers have been used as described above and renewal of the authorities will be sought at the AGM in 2011.

On 11 February 2011 shareholders, as part of the creation of the new subscription shares, authorised the allotment and issue for cash for up to five years of 25,358,288 ordinary shares in connection with the conversion of the subscription shares.

The Board was also granted shareholder authority at the AGM in 2010 to make market purchases of up to 18,962,037 ordinary shares of the Company for cancellation in accordance with the terms and conditions set out in the shareholder resolution.  Shareholders also granted authority at the General Meeting on 11 February 2011 for the Company to make market purchases of 3,801,207 subscription shares in accordance with the terms and conditions set out in the resolution. Both of these authorities expire at the AGM in 2011 and renewal of the authorities will be sought at the AGM in 2011.

During the financial year to 30 April 2011 no ordinary shares were purchased and no subscription shares were purchased for cancellation.

The level of the ordinary share price discount or premium to the Net Asset Value together with policies for the repurchase or issuance of new ordinary shares are kept under review by the Board.

Major interests in ordinary shares

As at 15 June 2011 notices for the purposes of part 5 of the FSA's Disclosure and Transparency Rules had been received of the following major interests in the voting rights of the Company.

	Number of ordinary  shares	Percentage of voting rights
Lazard Asset Management LLC	6,337,822	4.97% (indirect)
Rathbone Brothers plc	6,324,232	4.96% (indirect)
Legal & General Group plc	5,035,261	3.95% (direct)
Investec Wealth &  Investment Ltd	4,991,963	3.92% (indirect)

The above percentages are calculated by applying the shareholdings as notified to the issued ordinary share capital at 15 June 2011 of 127,416,770 shares.

Directors' share interests

The interests of Directors in the ordinary and subscription shares of the Company at 30 April 2011 and in the ordinary shares as at 30 April 2010 and subscription shares at 14 February 2011 (the date of issue) are as follows:

Beneficial:	Ordinary shares		Subscription shares
	30 April 2011	30 April 2010	30 April 2011	14 February 2011
R Wakeling	18,000	18,000	3,600	3,600
B Ashford-Russell	250,000	250,000	50,000	50,000
P Dicks	30,000	30,000	6,000	6,000
D Gamble	5,902	5,902	1,180	1,180
M Moule	7,000	7,000	1,400	1,400
R Montagu	8,500	8,500	1,700	1,700
Non-beneficial:
P Dicks	1,057	1,057	211	211
R Montagu	2,175	1,075	435	435

There have been no changes in these interests between the end of the financial year and 15 June 2011.

The Payment of Creditors

It has been and will remain the Company's policy for the forthcoming financial year to obtain the best terms for all business and therefore there is no single policy as to the terms used. The Company and its subsidiary's policy is to settle all investment transactions in accordance with the terms and conditions of the relevant market in which it operates. In general the Company agrees with its other suppliers the terms on which business will take place and it is the Company's policy to abide by such terms. There were no trade creditors at 30 April 2011.

Service Providers

Apart from the arrangements with Polar Capital LLP to provide investment, company secretarial and administrative services including accounting, portfolio valuation and trade settlement, the Company also contracts directly with JP Morgan Chase NA which acts as global custodian for all the Company's investments. The Company also retains the services of Cenkos Securities plc as corporate broker, Equiniti Limited as the registrars and PricewaterhouseCoopers LLP as tax advisers and independent auditors. HSBC Securities Services (UK) Limited has been retained by the Investment Manager to provide the accounting, valuation and trade settlement services and BNP Paribas Securities Services is retained by the Investment Manager, on behalf of the Company and at the Company's expense, to provide a share savings arrangement and an ISA. Huguenot Services Limited provides web design and hosting services.

Auditors

PricewaterhouseCoopers LLP have expressed their willingness to continue in office as the Company's independent auditors. A resolution to re-appoint PricewaterhouseCoopers LLP as independent auditors to the Company will be proposed at the forthcoming AGM.

The fees paid in respect of the audit of the annual accounts amounted to £32,000 (2010: £27,000). The Company has also used PricewaterhouseCoopers LLP to give advice on VAT recoverability, Section 1158, and other taxation issues. These other taxation services are provided by the Newcastle office while the audit work is carried out by the Edinburgh office.

The fees paid for the taxation advice services amounted to £25,000 (2010: £55,000). The Directors do not consider the provision of this non-audit work to the Company affects the independence of the auditors.

Annual General Meeting

The Annual General Meeting will be held on 4 August 2011 at 12 noon at The Royal Automobile 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.

The separate Notice of Meeting contains resolutions to receive the accounts, approve the Directors' remuneration report, re-elect retiring Directors and elect the new Directors, re-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.

The full text the resolutions and an explanation of each is contained in the separate Notice of Meeting.

Report on Corporate Governance

The Directors are accountable to shareholders for the governance of the Company's affairs. The UK Listing Rules require all listed companies to disclose how they have applied the principles and complied with the provisions of the 2008 Combined Code as published by the Financial Reporting Council ('Combined Code'). 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 Combined Code are not directly applicable to the Company and the Board has determined that reporting against the AIC Code of Corporate Governance ('AIC Code') which incorporates the Combined Code, provides the most appropriate information to shareholders.

The Financial Reporting Council confirmed in 2009 that by following the AIC Code and the Corporate Governance Guide for Investment Companies produced by the AIC, boards of investment companies should fully meet their obligations in relation to the Combined Code and the UK Listing Rules.

Copies of these codes can be obtained from the relevant organisations. The Company's policies on corporate governance can be found on its website.

The corporate governance report describes how the principles of the Combined Code and the Code of Corporate Governance issued by the AIC have been applied.

In May 2010 the FRC published the new UK Corporate Governance Code which is effective for accounting periods commencing on or after 29 June 2010. The AIC updated its Corporate Governance Code in October 2010 which the FRC has endorsed.  Neither of these Corporate Governance Codes were effective for the accounting period to 30 April 2011 and therefore do not apply to this report.

Background and development

The Board has considered the principles and recommendations of the AIC Code of Corporate Governance by reference to the AIC Corporate Governance Guide for Investment Companies ('AIC Guide'). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in Section 1 of the Combined Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

Application of the AIC code's principles

The Board attaches great importance to the matters contained in the AIC Code and observed the relevant requirements throughout the year under review. 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 in future.

It should be noted that, as an investment trust where the Directors are non-executive, most of the Company's day to day duties are delegated to third parties. The Company has agreed policies and operating procedures with the suppliers of these services.

Directors and Board; independence and composition

The Board is responsible to shareholders for the overall management of the Company's affairs and currently consists of six non-executive Directors - five of whom are considered independent. All the Directors in office at the end of the financial year held office throughout the year.

The Board has announced the appointment of two further independent Directors, Ms Bates and Mr Hames who will join the Board on 30 June 2011. Mr Wakeling will be retiring at the conclusion of the annual general meeting on 4 August 2011. Following these changes the majority of the Board will continue to be independent of the Investment Manager and the Board considers that its overall composition is adequate for the effective governance of the Company.

Each Director has different qualities and areas of expertise on which they may lead where issues arise. The Directors' biographies, set out on pages 30 and 31, demonstrate the breadth of investment, commercial and professional experience relevant to their positions as Directors of the Company.

The Directors' Remuneration Report is set out on pages 50 to 52

The Board is conscious of the need to maintain continuity and believes that retaining Directors with sufficient experience of the Company, industry and the markets is of great benefit to shareholders. The Board also recognises the value of progressive refreshing of and succession planning for company boards. Accordingly the appointment of each Director retiring at the forthcoming AGM has been reviewed by the Nomination Committee prior to submission for re-appointment.

The Board's policy on tenure for Directors states that, in line with the Combined Code, any Director who has served for over nine years should stand for annual re-appointment. 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.

Election of Directors at the AGM

The Board may appoint further Directors without shareholder approval but subject to any such Director standing for election by shareholders at the first AGM following their appointment in accordance with the Articles of Association. 

Ms Bates and Mr Hames are to be appointed as Directors on 30 June 2011 and therefore offer themselves for election at the upcoming AGM.

Two Directors stand for re-election at the AGM in 2011 and the Nomination Committee of the Board has considered each Director.

Mr Dicks stands for annual re-election as he has served more than nine years. He was appointed to the Board in 1996.  Mr Ashford-Russell, who has also been on the Board for more than nine years, stands for annual re-election as required by the Listing Rules due to his association with the Investment Manager. Mr Ashford-Russell has been a Director since 1996.

The Nomination Committee, as part of the Director and Board performance evaluation, has carefully reviewed and rigorously assessed the contribution of each Director standing for re-election and their independence. They determined that each Director continued to offer relevant experience, effectively contributed to the operation of the Board and had demonstrated independent views on a range of subjects.

All the Directors, with the exception of Mr Ashford-Russell, were considered independent of the Investment Manager and had no relationship or conflicts which were likely to affect their judgment.

The Board, on the recommendation of the Nomination Committee, supports each of the Directors standing for election or re-election.

Directors' interests

Mr Ashford-Russell is a partner of Polar Capital LLP and a 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. However, the Board values the fact that Mr Ashford-Russell, although no longer actively involved in the day to day management of the portfolio, serves as a Director of the Company and gives the Directors and shareholders the benefit of his experience and knowledge.

The Chairman of the Company is a non-executive Director and has no conflicting relationships.  Mr Gamble and Mr Moule have a common directorship at another investment trust but this is not considered to affect their ability to act independently.

No Director, except Mr 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.

Conflicts of interests

Directors 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.  With effect from October 2008 the Company introduced additional procedures to handle such situations. Under the Companies Act 2006 public companies may authorise conflicts or potential conflicts if the Articles of Association contain provisions to this effect and the Company's Articles of Association contain such provisions.

The Board has always had in place policies to govern situations where a potential conflict of interests may arise, in particular where a Director is also a director of a company in which the Company invests or may invest. Where such a situation arises, these Directors are excluded from any discussions or decisions relating to investments in their respective companies.

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 Board may impose conditions on authorising any conflict or potential conflict situations. Each Director has agreed to notify the Chairman and the Company Secretary of any changes to his circumstances which would impact on the notified conflicts or potential conflicts and obtain approval before entering into any situation which might give rise to a conflict or potential conflict with the interests of the Company.

Directors are reminded at each Board meeting of their obligations to notify any changes in their statement of conflicts and also to declare any benefits from third parties in their capacity as a Director of the Company which might give rise to a conflict or potential conflict with the Company's interests. No Director has declared receipt of any benefits other than his emoluments in his capacity as a Director of the Company.

Only Directors not involved in the conflict or potential conflict participate in the authorisation process. Directors in deciding whether to authorise a situation take into account their duty to promote the Company's success.

The Board as part of its year-end has considered the register of conflicts, any conditions imposed on such conflicts or potential conflicts and the operation of the notification and authorisation process. They concluded that the process has operated effectively since its introduction.

Except as disclosed above in relation to Mr 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.

Role and responsibilities

The Board meets regularly and seven scheduled Board meetings were held to deal with the stewardship of the Company and other matters including the setting and monitoring of investment strategy and performance, review of financial statements, approval of borrowing limits within which the Investment Manager has discretion to act, and shareholder issues including investor relations. The level of share price discount or premium to Net Asset Value together with policies for re-purchase or issuance of new shares including the use of treasury shares are kept under review along with matters affecting the industry and the evaluation of third party service providers.

A strategy meeting is held each year where past performance attribution is examined and future investment ideas are discussed. Additional meetings of the Board are arranged as required.

The Board has delegated to a number of standing committees specific remits for consideration and recommendation but the final responsibility in these areas remains with the Board.

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 past year.

The number of formal meetings of the Board and its Committees held during the financial year and the attendance of individual Directors are shown below.

1 May 2010 to 30 April 2011

	Board & Strategy	Audit	Management Engagement	Nomination	Remuneration
Number of Meetings	8	3	1	2	1
R Wakeling	8	3	1	2	n/a
B Ashford-Russell	8	3*	1*	2*	n/a
P Dicks	7	3	1	2	1
D Gamble	8	3	1	2	n/a
M Moule	8	3	1	2	1
R Montagu	8	3	1	2	1

*Not a member but attended part of the meeting by invitation

All Directors in office at the date of the meeting attended the 2010 AGM, held on 28 July 2010 and Mr Wakeling and Mr Dicks attended the general meeting held on 11 February 2011 for the approval of the issue of subscription shares. 

A number of ad hoc special purpose Board and committee meetings were held during the year for the approval of documents, the issue of new shares and approval of regulatory announcements.

Mr Dicks missed a Board meeting in July 2010 due to being overseas on another business commitment.

Investment Manager

The Board has contractually delegated the management of the portfolio to the Investment Manager, Polar Capital LLP (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 gearing, asset allocation and sector selection within the limits established and regularly reviewed by the Board. The Board has directly appointed the custodian and the registrars, both of which the Investment Manager monitors and the Investment Manager provides or procures the provision of accountancy services, company secretarial and administrative services and the share savings scheme arrangements. 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 each Board meeting enabling the Directors to probe further on matters of concern or seek clarification on certain issues.

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.

Senior Independent Director

The Board elected Mr Dicks to act as the Senior Independent Director. Mr Dicks can be contacted via the Registered Office of the Company.

Board Committees

The Board has created four standing committees whose terms are described below. 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. Copies of the terms of reference for each of the standing committees are available on the Company's website.

The composition of the standing committees will be reviewed following the appointment of two independent Directors on 30 June 2011.

Audit Committee

The Audit Committee meets three times a year and comprises of all the independent non-executive Directors under the chairmanship of Mr Moule.  Mr Wakeling who was the chairman of the Committee until April 2010 remained on the Committee due to his experience as he has previously served as a finance director of two public companies.  The Chairmanship of the Audit Committee will be considered following Mr Moule's appointment as Chairman of the Board on 4 August 2011.

None of the members of the Committee has any involvement in the preparation of the accounts of the Company, as this has been contracted to the Investment Manager.  The Chairman of the Committee will be present at the AGM to answer questions relating to the financial statements.

The Audit Committee is responsible for reviewing the scope of the annual audit, the annual accounts and the interim report, the terms of appointment of the auditors and their remuneration as well as any non-audit services provided by the auditors. It meets with representatives of the Investment Manager and receives reports on the quality and effectiveness of the accounting records and management information maintained on behalf of the Company. The Committee also considers the internal controls and risk management systems applicable to the Company.

The Audit Committee has direct access to the auditors and to the key senior staff of the Investment Manager and it reports its findings and recommendations to the Board which retains the ultimate responsibility for the financial statements of the Company.

The Audit Committee meets with the auditors each April to review the scope of the annual audit work and meets again each June to review the findings of the auditors and the annual report and accounts prior to approval by the Board. The Committee also meets, without the auditors present, in December to consider the half-year report. The independence and effectiveness of the auditors and the nature of the services provided have therefore been assessed throughout the year and the provision of non-audit services provided by the auditors have been kept under review. These non-audit services comprised the provision of specialist tax advice on matters relating to Section 1158 of the Corporation Tax Act 2010  VAT recovery and recovery of withholding taxes which was provided by a separate office of the audit firm. Details of fees paid to the Auditors are given in note 9 on page 68.

The Audit Committee annually reviews the performance of PricewaterhouseCoopers LLP, the Company's external auditor. In doing so the Audit Committee considers a range of factors including the quality of service, the auditors' specialist expertise and the level of audit fee. The Audit Committee remains satisfied with their effectiveness and therefore has not considered it necessary, to date, to require the external auditors to tender for the audit work. A new audit partner was introduced for this year's audit of the financial statements. There are no contractual obligations restricting the choice of external auditor. Under Company Law the reappointment of the external auditor is subject to shareholder approval at the Annual General Meeting.

The Audit Committee has recommended the re-appointment of the auditors at the AGM.

Management Engagement Committee

The Management Engagement Committee meets at least annually and at such other times as may be necessary. All independent non-executive Directors are members of the Management Engagement Committee which is chaired by the Chairman of the Board. The Committee is responsible for the review of the terms of the investment management contract which is reviewed annually and the Committee also considers, prior to making its recommendation to the Board, whether the retention of the Investment Manager is in the interests of shareholders. The Committee also considers other matters to do with the relationship with the Investment Manager.

Nomination Committee

The Nomination Committee comprises of all the independent non-executive Directors and is chaired by the Chairman of the Board. The Committee meets at least annually and is responsible to the Board for the size and structure of the Board as well as succession planning and tenure policy for Directors. Succession planning will be conducted bearing in mind the balance of skills, knowledge and experience existing on the Board and the Committee will make recommendations to the Board when the further recruitment of non-executive Directors is required. The Chairman does not participate in any discussion on his role or replacement.

Once a decision has been made that additional directors are to be recruited then candidates will be drawn from suggestions put forward by the other Directors and by the use of external agencies. The final selection will be made by the Board following recommendations by the Committee.

The Committee also reviews the performance of the Board as a whole and each individual Director. Re-appointment as a Director is not automatic and will follow a process of evaluation of each Director's performance. The Board acknowledges the rationale of the Combined Code for the rigorous review of Directors serving over six years and annual re-appointment after nine years. Nevertheless the Board 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.

All Directors are appointed for an initial term of three years, subject to re-appointment and Companies Act provisions.

In accordance with the Articles of Association, Directors will stand for election at the first AGM following their appointment and will retire at every third AGM after their last election. The Directors who are subject to annual re-appointment due to length of service would be subject to rigorous assessment of their contribution.

The Nomination Committee, assisted by Trust Associates, undertook the selection of the new directors and led the discussion on the appointment of the new Chairman.

Remuneration Committee

The Remuneration Committee is chaired by Mr Dicks, the Senior Independent Director. Mr Moule and Mr Montagu were elected Committee members from April 2007.

The Committee meets at least annually and is responsible for recommending the framework for the remuneration of Directors. The Committee reviews the ongoing appropriateness of the remuneration policy and the individual remuneration of Directors based on their contributions. The fees paid to Directors are detailed in the Directors' Remuneration Report on page 52.

Directors' professional development

When a new Director is appointed he or she is offered an induction course provided by 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.

Performance Evaluation

The Board

The evaluation of the Board, its Committees and individual Directors is normally carried out annually by the Chairman of the Nomination Committee. The process involves the Chairman speaking to each Director and the Chairman's review being conducted by the Senior Independent Director. These reviews are reported to the Nomination Committee. In evaluating each Director they are assessed on their relevant experience, their strengths and weaknesses in relation to the overall requirements of the Board and their commitment to the Company in terms of time by regular attendance of Board meetings. The process is constructed to assess the contribution of individual Directors to the overall operation of the Board and its committees.

In 2009 the Board commissioned a third party to undertake an independent review of the effectiveness of the Board. This process involved Directors completing a confidential questionnaire to elicit open and frank responses on areas that are critical to the proper functioning of the Board. The results of the questionnaire were supplemented by telephone interviews held with each director. The report and its conclusions were made available to the whole Board and discussed.

The Nomination Committee has overseen the performance evaluation process and the programme designed to replace gradually the longest serving Directors.

The Investment Manager

The Board reviews the performance of the Investment Manager at each Board meeting and the Company's performance against the market and a peer group of investment companies and funds with similar investment objectives. The investment team provided by the Investment Manager, led by Mr 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.

The Management Engagement Committee regularly reviews the terms of the contract with the Investment Manager.

The Board also monitors through the Investment Manager the performance of its other service providers including the custodian and registrar.

Accountability and audit

The Statement of Directors' Responsibilities in respect of the Accounts is set out on pages 53 and 54 and the Independent Auditors' Report is on pages 55 and 56.

Internal controls

The Board has overall responsibility for the Company's system of internal control and for reviewing its effectiveness. The Company has no employees as its operational functions are carried out by third parties and the Audit Committee does not consider it necessary for the Company to establish its own internal audit function. Contracts with each of these parties were 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 is responsible for the day to day investment management decisions on behalf of the Group and for the provision of accounting and administrative services including company secretarial and accounting. 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 Services Authority and its compliance department monitors compliance with the FSA rules.

The Board has established a process for identifying, evaluating and managing any major risks faced by the Company. The process is documented through the use of a Risk Map which is subject to regular review by the Board and accords with the Turnbull guidance. The controls are embedded within the business and aim to ensure that identified risks are managed and systems are in place to report on such risks. The internal controls seek to ensure the assets of the Company are safeguarded, proper accounting records are maintained and the financial information used in the Group and for publication is reliable. Controls covering the risks identified, including financial, operational, compliance and risk management are monitored by a series of regular reports covering investment performance, attribution analysis, reports from various third parties and from the Investment Manager including risks not directly the responsibility of the Investment Manager.

The 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 has received formal reports from the Investment Manager with details of any known internal control failures. The Board considers reports on the Investment Manager's internal controls and systems operated by other third party suppliers. The Board also receives and considers ad hoc reports from the Investment Manager and information is supplied to the Board as required. The Board also examined the risks and controls operated by the Investment Manager when placing investment trades with third parties.

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

The Board, assisted by the Investment Manager, undertakes an annual review of the Company's system of internal control where the Risk Map is reviewed and control processes considered.

The Board will continue to monitor the system of internal controls in order to provide assurance that they operate as intended.

The Board, assisted by the Investment Manager, has conducted an annual review of the risk map and the effectiveness of the system of internal controls taking into account any issues, none of which were considered significant, which arose during the course of the year ended 30 April 2011 and up to the date of this report.

Relations with shareholders

The Board and the Investment Manager consider maintaining good communications with shareholders and engaging with larger shareholders through meetings and presentations a key priority. Shareholders are kept informed by the publication of annual and interim reports which include financial statements. These reports are supplemented by interim management statements, the daily release of the net asset value 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 Investment Managers make a presentation and shareholders are encouraged to attend. The Chairmen of the Board and of the Committees attend the AGM and are available to respond to queries and concerns from shareholders. Twenty working days notice of the AGM has been given to shareholders and separate resolutions are proposed in relation to each substantive issue. 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. Shareholders may submit questions for the AGM in advance of the meeting or make general enquiries of the Company via the company secretary at the registered office of the Company.

The Company has made arrangements for a share savings scheme and ISA to be available to investors and for these shareholders to receive all Company communications and have the ability to direct the casting of their votes. 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.

The Company has adopted a nominee shareholder code which is set out on page 94.

The Board monitors the share register of the Company; it also reviews correspondence from shareholders at each meeting and maintains regular contact with major shareholders. Shareholders who wish to raise matters with a Director may do so by writing to them at the registered office of the Company.

Corporate Responsibility

Socially responsible investing and exercise of voting powers

The Board has instructed the Investment Manager to take into account the published corporate governance policy and the environmental practices and policies of the companies in which they invest on behalf of the Company.

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 UK companies in favour of resolutions proposed by the management where it believes that the proposals are in the interests of shareholders. However in exceptional cases where it believes that a resolution could be detrimental to the interests of shareholders or the financial performance of the company, appropriate notification will be given and abstentions or a vote against will be lodged.

The Investment Manager reports to the Board, when requested, on the application of the Stewardship Code and voting policy.  The Investment Manager's Stewardship Code and Voting Policy can be found on the Company's website in the Corporate Governance section.

Environment

The Company's core activities are undertaken by its Investment Manager which seeks to limit the use of non-renewable resources and reducing waste where possible

Statement of Compliance

The AIC Code comprises 21 principles to which the Board attaches great importance. The Board consider for the year under review the Directors, Board and Company has complied with the recommendations of the AIC Code in so far as they apply to the Company's business and with the relevant provisions of Section 1 of the Combined Code. For the reasons set out in the AIC Guide, and in the preamble to the Combined Code, the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company.

•   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 from that of Chairman of the Board

•   As there are no executive Directors it does not comply with the Combined Code in respect of executive directors' remuneration

•   The Company does not have an internal audit function as it relies on the systems of control operated by third party suppliers in particular those of the Investment Manager

By order of the Board

N P Taylor FCIS

Polar Capital Secretarial Services Limited

Company Secretary

15 June 2011

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In Respect of the Annual Report, Directors' Remuneration Report and Accounts

The Directors, who were in office at the date of approving these financial statements, are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRS) 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 Group and the Company and of the profit or loss of the Group 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 accounting estimates that are reasonable and prudent;

·      state whether applicable IFRS as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors, who were in office at the date of approving these financial statements, 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 the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group's financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors, who were in office at the date of approving these financial statements, are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of Information to the Auditors

As far as the Directors, who were in office at the date of approving these financial statements, 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, who were in office at the date of approving these financial statements, have taken steps to make themselves aware of any relevant audit information and to establish that the Auditors are aware of such information.

Going Concern

The Board's assessment of the Group's position as at 30 April 2011 and the factors impacting the forthcoming year are set out in the Chairman's Statement and the Investment Manager's Report on pages 2 to 21 and in the Directors' Report which incorporates the business review and corporate governance statements.

The financial position of the Group, its cash flows, and its liquidity position is described in the Business Review on pages 32 to 49. Note 31 to the financial statements includes the Group'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 Group has considerable financial resources and after making enquiries the Directors, who were in office at the date of approving these financial statements, have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future despite the continued uncertain economic outlook. Accordingly the Directors continue to adopt the going concern basis in preparing the annual report and accounts.

Responsibility Statement under the Disclosure and Transparency Rules

The Directors of Polar Capital Technology Trust plc, who were in office at the date of approving these financial statements, and who are listed on page 30, confirm to the best of their knowledge:

·      The financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; and

·      The Chairman's Statement, Investment Manager's Report and Directors' Report (together constituting the Management Report) include a fair review of the development and performance of the business and financial position of the Company and undertakings included in the consolidation taken as a whole, and include a description of the principal risks and uncertainties.

The financial statements were approved by the Board on 15 June 2011 and the responsibility statement was signed on its behalf by Richard Wakeling, Chairman of the Board.

R K A Wakeling

Chairman

15 June 2011

Consolidated Statement of Comprehensive Income for the year ended 30 April 2011

		Year ended 30 April 2011			Year ended 30 April 2010
	Notes	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	3,548	-	3,548	2,680	-	2,680
Other operating income	4	37	-	37	24	-	24
Gains on investments held at fair value	5	-	75,384	75,384	-	126,458	126,458
Loss on derivatives	6	-	(303)	(303)	-	-	-
Other currency (losses)/gains	7	-	(770)	(770)	-	11	11
Total income		3,585	74,311	77,896	2,704	126,469	129,173
Expenses
Investment management fee	8	(4,452)	-	(4,452)	(3,302)	-	(3,302)
Performance fee	8	-	(3,337)	(3,337)	-	-	-
Other administrative expenses	9	(751)	-	(751)	(588)	-	(588)
Total expenses		(5,203)	(3,337)	(8,540)	(3,890)	-	(3,890)
(Loss)/profit before finance costs and tax		(1,618)	70,974	69,356	(1,186)	126,469	125,283
Finance costs	10	(826)	-	(826)	(547)	-	(547)
(Loss)/profit before tax		(2,444)	70,974	68,530	(1,733)	126,469	124,736
Tax	11	(445)	-	(445)	(220)	(76)	(296)
Net (loss)/profit for the year and total comprehensive income		(2,889)	70,974	68,085	(1,953)	126,393	124,440
Earnings per ordinary share (pence)	12	(2.28)	56.05	53.77	(1.54)	99.92	98.38

The total column of this statement represents the Group'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.

All income is attributable to the equity holders of Polar Capital Technology Trust plc. There are no minority interests.

The net profit for the year of the Company was £68,085,000 (2010: profit of £124,440,000).

The Group does not have any other Comprehensive Income and hence the net profit, as disclosed above, is the same as the Group's total Comprehensive Income.

The notes on pages 61 to 90 form part of these financial statements.

Consolidated and Company Statements of Changes in Equity

for the year ended 30 April 2011

	Ordinary share capital £'000	Capital redemption  reserve £'000	Share premium £'000	Warrant exercise  reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
Group
Total equity at 30 April 2009	31,624	12,588	117,902	7,536	164,373	(59,844)	274,179
Total comprehensive income:
Profit/(loss) for the year to 30 April 2010	-	-	-	-	126,393	(1,953)	124,440
Transactions with owners, recorded directly to equity:
Share buyback cost adjustment	-	-	-	-	8	-	8
Total equity at 30 April 2010	31,624	12,588	117,902	7,536	290,774	(61,797)	398,627
Total comprehensive income:
Profit/(loss) for the year to 30 April 2011	-	-	-	-	70,974	(2,889)	68,085
Transactions with owners, recorded directly to equity:
Bonus issue of subscription shares	254	-	(254)	-	-	-	-
Subscription shares issue costs	-	-	(381)	-	-	-	(381)
Issue of ordinary share capital	138	-	1,994	-	-	-	2,132
Issue of ordinary shares on conversion of subscription shares	15	-	238	-	-	-	253
Total equity at 30 April 2011	32,031	12,588	119,499	7,536	361,748	(64,686)	468,716

*The Company Statement of Changes in Equity is as disclosed above with the exception of the Capital and Revenue reserves, the details of which are provided in notes 24 and 25.

The notes on pages 61 to 90 form part of these financial statements.

Consolidated and Company Balance Sheets at 30 April 2011

	Notes	30 April 2011		30 April 2010
		Group £'000	Company £'000	Group £'000	Company £'000
Non current assets
Investments held at fair value	13-15	458,094	460,288	386,031	388,207
Current assets
Derivative financial instruments	13-15	307	307	-	-
Overseas tax recoverable		18	18	478	478
Other receivables	16	9,630	13,023	6,226	9,613
Cash and cash equivalents	17	45,505	39,918	42,070	36,507
		55,460	53,266	48,774	46,598
Total assets		513,554	513,554	434,805	434,805
Current liabilities
Other payables	18	(15,857)	(15,857)	(8,311)	(8,311)
Bank loans	19	(28,981)	(28,981)	(27,867)	(27,867)
		(44,838)	(44,838)	(36,178)	(36,178)
Net assets		468,716	468,716	398,627	398,627
Equity attributable to equity shareholders
Ordinary share capital	20	32,031	32,031	31,624	31,624
Capital redemption reserve	21	12,588	12,588	12,588	12,588
Share premium	22	119,499	119,499	117,902	117,902
Warrant exercise reserve	23	7,536	7,536	7,536	7,536
Capital reserves	24	361,748	363,942	290,774	292,950
Revenue reserve	25	(64,686)	(66,880)	(61,797)	(63,973)
Total equity		468,716	468,716	398,627	398,627
Net asset value per ordinary share (pence)	29	368.74	368.74	315.13	315.13

The financial statements were approved and authorised for issue by the Board of Directors on 15 June 2011.

R K A Wakeling

Chairman

The notes on pages 61 to 90 form part of these financial statements.

Consolidated and Company Cash Flow Statements for the year ended 30 April 2011

	2011		2010
	Group £'000	Company £'000	Group £'000	Company £'000
Cash flows from operating activities
Profit before finance costs and tax	69,356	69,356	125,283	125,283
Adjustment for non-cash items:
Foreign exchange losses/(gains)	770	770	(11)	(11)
Adjusted profit before finance costs and tax	70,126	70,126	125,272	125,272
Adjustments for:
Increase in investments	(72,370)	(72,388)	(118,186)	(118,201)
(Increase)/decrease in receivables	(3,404)	(3,410)	663	657
Increase in payables	7,556	7,556	1,270	1,270
	(68,218)	(68,242)	(116,253)	(116,274)
Net cash from operating activities before tax	1,908	1,884	9,019	8,998
Overseas tax refunded/(deducted) at source	15	15	(513)	(513)
Net cash generated from operating activities	1,923	1,899	8,506	8,485
Cash flows from financing activities
Issue of share capital	2,385	2,385	-	-
Subscription share issue costs	(381)	(381)	-	-
Share buyback cost adjustment	-	-	8	8
Loans matured	(59,286)	(59,286)	-	-
Loans taken out	59,786	59,786	-	-
Finance costs	(836)	(836)	(545)	(545)
Net cash from/(used in) financing activities	1,668	1,668	(537)	(537)
Net increase in cash and cash equivalents	3,591	3,567	7,969	7,948
Cash and cash equivalents at the beginning of the year	42,070	36,507	33,729	28,187
Effect of foreign exchange rate changes	(156)	(156)	372	372
Cash and cash equivalents at the end of the year	45,505	39,918	42,070	36,507

The notes on pages 61 to 90 form part of these financial statements.

Notes to the Consolidated Financial Statements For the year ended 30 April 2011

1.      General Information

The consolidated 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. The Company's presentational currency is pounds sterling. Pounds sterling is also the functional currency because it is the currency which is most relevant to the majority of the Company's shareholders and payables and the currency in which the majority of the Company's operating expenses are paid.

The principal accounting policies followed are set out below:

2.      Accounting Policies

(a) Basis of Preparation

The consolidated financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation 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 January 2009 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 Group as at 30 April 2011 is shown in the balance sheet on page 59. As at 30 April 2011 the Group's total assets exceeded its total liabilities by a multiple of over 11. The assets of the Group consist mainly of securities that are held in accordance with the Company's investment policy, as set out on page 33 and these securities are readily realisable. The Directors consider that the Company has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's accounts.

 (b) Basis of Consolidation

The Group financial statements consolidate the financial statements of the Company and entities controlled by the Company (its wholly owned subsidiary undertaking, PCT Finance Limited) made up to 30 April each year. In the financial statements of the parent company, investment in the subsidiary is recognised at fair value.  Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The Statement of Comprehensive Income is only presented in consolidated form, as provided by Section 408 of the Companies Act 2006.

(c) Presentation of Consolidated Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with the guidance set out by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Consolidated Statement of Comprehensive Income. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the Directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 1158 of the Corporation Taxes Act 2010.

(d) Income

Dividends receivable from equity shares are taken to the revenue return column of the Consolidated 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 Consolidated 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 Consolidated Statement of Comprehensive Income. The fixed returns on debt securities and non-equity shares are recognised under the effective interest rate method. Bank interest and other income receivables are accounted for on an accruals basis. The dealing profits of the subsidiary undertaking, representing realised gains and losses on the sale of current asset investments, are dealt with in the Group financial statements as a revenue item.

(e) Expenses and Finance Costs

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

All expenses have been presented as revenue items 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 gains/losses on investments held (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.

(f) Taxation

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

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated 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 Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Consolidated 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 Consolidated Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

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

Investment trusts which have approval as such under section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable on tax rates that have been enacted or substantively enacted at the balance sheet date.  Deferred tax is charged or credited in the Consolidated Statement of 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.

(g) Investments Held at Fair Value Through Profit or Loss

When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date and are initially measured at fair value.  On initial recognition the Group 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 subsidiary undertakings are stated in the Company's accounts at fair value. Investments in unit trusts or OEICs are valued at the closing price, the bid price or the single price as appropriate, 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 Consolidated Statement of Comprehensive Income.

(h)Other Receivables

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

(i) Cash and Cash Equivalents

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

(j) Other Payables

Other payables are initially recognised at fair value and subsequently measured at amortised cost.  Other payables are not interest-bearing and are stated at their nominal value.           

(k) Bank Loans

All bank loans are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition these loans are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. The amounts falling due for repayment within one year are included under current liabilities in the Balance Sheet.

(l)  Rates of Exchange

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

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

(m) Share Capital

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

(n) Capital Reserves

Capital reserves - gains/losses on disposal includes:

•   gains/losses on disposal of investments

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

•   cost of own shares bought back

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

Capital reserve - revaluation on investments held includes:

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

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

(o) Derivative Financial Instruments

The Group'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 Group may enter into comprise forward exchange contracts, the purpose of which is to manage the currency risks arising from the Group's investing activities, quoted options on shares, or on indices appropriate to sections of the portfolio, the purpose of which is to provide protection against falls in capital values of the holdings or to enhance capital and hedging risk. The Group does not use derivative contracts for speculative purposes.

The use of financial derivatives is governed by the Group'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 Group. The use of financial derivatives by the Group does not qualify for hedge accounting under IFRS. As a result changes in the fair value of derivative instruments are recognised in the Consolidated Statement of Comprehensive Income as they arise. If capital in nature, the associated change in value is presented in the capital return column of the Consolidated Statement of Consolidated Income.

(p) Segmental Reporting

Under IFRS 8, 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 Directors are of the opinion that the Group has two business segments, being the parent Company, Polar Capital Technology Trust plc, which has the objective of maximising capital growth for its shareholders through investing in a diversified portfolio of technology companies around the world, and its wholly owned subsidiary, PCT Finance Limited, which trades in securities to enhance Group returns. An analysis of financial results and balances by business segment is set out in note 30. The amounts presented for each segment are based on the accounting policies adopted in the Group accounts.

Discrete financial information for these segments is reviewed regularly by the Manager who allocates resources, and the Board who oversees the Manager's performance.

In line with IFRS 8, additional disclosure by geographical segment has been provided in note 30.

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.

(q) Key Estimates and Assumptions

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

The 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(g). At the year end, unquoted investments represent 0.2% of net assets.

(r) Accounting Standards

(a)Standards, amendments and interpretations becoming effective in the year to 30 April 2011:

·      IFRS 1 (Amendment), 'First Time Adoption of International Financial Reporting Standards' simplified the structure of IFRS 1 without making any technical changes. No impact on the Group's Financial Statements.

·      IFRS 3 (Revised), 'Business Combinations' harmonised business combination accounting with US GAAP. Not currently relevant to the Group and therefore has no impact on the Financial Statements.

·      IFRS 5 (Amendment), 'Non-current Assets Held for Sale and Discontinued Operations' (as part of Improvements to IFRSs issued in 2009). Not currently relevant to the Group and therefore has no impact on the Financial Statements.

·      IAS 27 (Revised), 'Consolidated and Separate Financial Statements' introduced changes to the accounting for transactions with non-controlling interests in consolidated financial statements. Adoption did not have any impact on the Group's Financial Statements.

·      IAS 32 (Amendment), 'Financial Instruments: Presentation' - amendments relating to classification of rights issues. No impact on the Group's Financial Statements.

·      IAS 39 (Amendment), 'Eligible Hedged Items'. The amendment prohibits designating inflation as a hedgeable component of a fixed debt, and in a hedge of a one-sided risk with options, prohibits including time value in the hedged risk. Not currently relevant to the Group therefore no impact on the Financial Statements

·      IFRIC 15, 'Agreements for Construction of Real Estate'. Not relevant to the Group.

·      IFRIC 16, 'Hedges of a Net Investment in a Foreign Operation'. Provides clarification to net investment hedging issues. Not currently relevant to the Group therefore no impact on the Financial Statements.

·      IFRIC 17, 'Distributions of Non Cash Assets to Owners' clarifies how an entity should measure distributions of assets other than cash made as a dividend to its owners. Not currently relevant to the Group therefore no impact on the Financial Statements

·      IFRIC 18 'Transfer of Assets from Customers'. Not relevant to the Group.

·      Improvements to IFRS' issued in 2009 comprised numerous other minor amendments to IFRS, resulting in accounting changes for  presentation, recognition or measurement purposes as well as terminology or editorial amendments. These amendments had no impact on the Group's Financial Statements.

(b) Standards, amendments and interpretations to existing standards becoming effective in future accounting periods and have not been adopted early by the Group or Company:

·      IFRS 9, 'Financial Instruments' (effective for financial periods beginning on or after 1 January 2013) replaces IAS 39. Simplifies accounting for financial assets, replacing the current multiple measurement categories with a single principle-based approach to classification. All financial assets to be measured at either amortised cost or fair value. The Group will apply IFRS 9 to all business combinations from 1 May 2013, subject to endorsement by the EU.

·      IAS 24 (revised), 'Related Party Disclosures' (effective for financial periods beginning on or after 1 January 2011,subject to EU endorsement). Revises definition of related parties. Unlikely to have a significant effect.

(c) The following standards, amendments and interpretations to existing standards becoming effective in future accounting periods but are not relevant for the Group's operations:

·      IFRS 1 (amendment), 'First-time Adoption of International Financial Reporting Standards'

·      IFRIC 19, 'Extinguishing Financial Liabilities with Equity Instruments'

·      IFRIC 14 (Amendment), 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'

3        Investment income           

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Franked: Listed investments
Dividend income	140	267
Unfranked: Listed investments
Dividend income	3,408	2,413
	3,548	2,680

4        Other operating income

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Bank interest	34	24
Interest received on tax reclaims	3	-
	37	24

5        Gains on investments held at fair value

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Net gains on disposal of investments at historic cost	80,281	34,464
Transfer on disposal of investments	(45,973)	808
Gains based on carrying value at previous balance sheet date	34,308	35,272
Valuation gains on investments held during the year	41,076	91,186
	75,384	126,458

6        LOSS ON DERIVATIVES           

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Loss on revaluation of derivatives held	(303)	-

7        Other currency (LOSSES)/gainS   

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Exchange (losses)/gains on currency balances	(156)	372
Exchange losses on settlement of loan balances	(13,262)	-
Exchange gains/(losses) on translation of loan balances	12,648	(361)
	(770)	11

8        Investment management fee

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Investment management fee paid to Polar Capital LLP (charged wholly to revenue)	4,452	3,302
Performance fee paid to Polar Capital LLP (charged wholly to capital)	3,337	-

For terms of the investment management agreement, see pages 38 and 39.

9        Other administrative expenses

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Directors' fees	125	110
Auditors' remuneration:
For audit services	32	27
For other services (taxation services)	25	55
Other expenses (including Shareplan and ISA administration fees)	569	396
	751	588

Auditors' remuneration for other services include tax, VAT and Section 1158 advice provided by the Newcastle office of PricewaterhouseCoopers LLP ('PwC'). The Edinburgh office of PwC provide audit services.

The total expense ratio is 1.20% (30 April 2010: 1.16%) based on the percentage of investment management fee (shown in note 8) and the other administrative expenses to the average shareholders' equity over the year.

10     Finance costs

	Year ended 30 April 2011 £'000	Year ended 30 April 2010 £'000
Interest on loans and overdrafts	781	547
Loan arrangement fees	45	-
	826	547

11     Taxation

	Year ended 30 April 2011	Year ended 30 April 2010
a) Analysis of tax charge for the year:
Overseas tax	445	296
Total tax for the year (see note 11b)	445	296
b) Factors affecting tax charge for the year:
The charge for the year can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:
Profit before tax	68,530	124,736
Tax at the UK corporation tax rate of 26%* (2010: 28%)	1,485	-
Tax at the UK corporation tax rate of 28% (2010: 28%)	17,589	34,926
Tax effect of non-taxable dividends	(976)	(661)
Gains on investments that are not taxable	(20,683)	(35,411)
Gains on sales of qualifying offshore funds	-	76
Unrelieved current year expenses and deficits	2,585	1,087
Expenses and finance costs not deductible for tax purposes	2	14
Overseas tax suffered	445	296
Tax relief on overseas tax suffered	(2)	(31)
Total tax for the year (see note 11a)	445	296
c) Factors that may affect future tax charges:
There is an unrecognised deferred tax asset comprising:
Unrelieved management expenses	19,841	18,985
Non-trading deficits	379	190
	20,220	19,175

*Under the Finance Act 2011, the rate of corporation tax lowered to 26% from 1 April 2011.

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 and Group have not provided tax on any capital gains arising on the revaluation or disposal of investments held by the Company.

12     Earnings per ordinary share

	Year ended 30 April 2011			Year ended 30 April 2010
	Revenue return pence	Capital return pence	Total return pence	Revenue return pence	Capital return pence	Total return pence
The calculation of basic earnings per share is based on the following data:
Net (loss)/profit for the year (£'000)	(2,889)	70,974	68,085	(1,953)	126,393	124,440
Weighted average ordinary shares in issue during the year	126,620,066	126,620,066	126,620,066	126,497,914	126,497,914	126,497,914
From continuing operations
Basic - ordinary shares (pence)	(2.28)	56.05	53.77	(1.54)	99.92	98.38

The Company has in issue 25,294,991 subscription shares which are convertible into ordinary shares.

The subscription shares were issued on 14 February 2011.  Further details of the conversion price are given in note 20 on page 76.

There was no dilution of the return per ordinary share in respect of the conversion rights attaching to the subscription shares.

13     INVESTMENTS AT FAIR VALUE

          CHANGES IN NON CURRENT ASSET INVESTMENTS:

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Valuation at 1 May 2010	386,031	388,207	267,845	270,006
Less: Valuation gains	(95,598)	(97,774)	(3,604)	(5,765)
Cost at 1 May 2010	290,433	290,433	264,241	264,241
Additions at cost	419,325	419,325	259,005	259,005
Proceeds of disposal	(422,646)	(422,646)	(267,277)	(267,277)
Gains on disposal	80,281	80,281	34,464	34,464
Cost at 30 April 2011	367,393	367,393	290,433	290,433
Add: Valuation gains	90,701	92,895	95,598	97,774
Valuation at 30 April 2011	458,094	460,288	386,031	388,207
Of which:
Listed on a recognised Stock Exchange	457,393	457,393	385,285	385,285
Unlisted	701	2,895	746	2,922

Included in additions at cost are purchase costs of £1,090,000 (30 April 2010: £692,000). Included in proceeds of disposals are sales costs of £1,097,000 (30 April 2010: £717,000). These comprise mainly stamp duty and commission.

CHANGES IN CURRENT ASSET INVESTMENTS:

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Valuation at 1 May 2010	-	-	-	-
Less: Valuation gains	-	-	-	-
Cost at 1 May 2010	-	-	-	-
Additions at cost	610	610	-	-
Proceeds of disposal	-	-	-	-
Gains on disposal	-	-	-	-
Cost at 30 April 2011	610	610	-	-
Add: Valuation LOSS	(303)	(303)	-	-
Valuation at 30 April 2011	307	307	-	-

The above investments represent derivative financial instruments

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 63.

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.

	30 April 2011 £'000	30 April 2010 £'000
Equity Investments
Level 1	457,393	385,285
Level 2	-	-
Level 3	701	746
Total	458,094	386,031
Derivative financial investments
Level 1	307	-
Level 2	-	-
Level 3	-	-
Total	307	-

Level 3 investments at fair value through profit or loss	30 April 2011 £'000	30 April 2010 £'000
Opening balance	746	701
Acquisitions	-	25
Disposal proceeds	(224)	(190)
Total gains / (losses) included in the Consolidated Statement of Comprehensive Income
- on assets held at the year end	179	210
Closing balance	701	746
Unquoted investments
The value of the unquoted investments as at 30 April 2011 was £701,000 (30 April 2010: £746,000) and the portfolio comprised of the following holdings:
Investment	Valuation £'000
Herald Ventures Limited Partnership	461
Herald Ventures Limited Partnership II	240
	701

14     Subsidiary undertaking

PCT Finance Limited

The company owns the entire share capital consisting of 2 ordinary shares of £1 of PCT Finance Limited, which is registered in England and Wales and operates in the United Kingdom. This subsidiary's business is that of a dealing company. The cost of the investment in the subsidiary was £2 (30 April 2010: £2).

	Company 30 April 2011 £'000	Company 30 April 2010 £'000
Balance brought forward	2,176	2,161
Revaluation of subsidiary	18	15
Balance carried forward	2,194	2,176

The valuation of PCT Finance is at Net Asset Value hence the revaluation each year.

15     Substantial equity interests

The Company has interests of 3% or more of any share class of capital in 2 (30 April 2010: 3) investee companies.

	Company 30 April 2011 %	Company 30 April 2010 %
Sanderson Group plc	4.4	4.4
Circadian Inc.	3.3	3.3
Sinosoft Technology plc	-	3.4

At 30 April 2011 these investments did not represent more than 1% of the Company's investments and therefore are not considered significant in the context of these accounts. The above equity investments are included in investments held at fair value.

16     Other receivables

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Sales for future settlement	9,183	9,183	6,037	6,037
Prepayments and accrued income	385	383	174	173
Amounts due from subsidiary undertaking	-	3,395	-	3,388
VAT recoverable	62	62	15	15
	9,630	13,023	6,226	9,613

The carrying values of other receivables approximate their fair value.

17     CASH AND CASH EQUIVALENTS

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Cash at bank	45,374	39,787	41,830	36,267
Cash held at derivative clearing houses and brokers	131	131	240	240
	45,505	39,918	42,070	36,507

18     Other payables

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Purchases for future settlement	10,863	10,863	7,977	7,977
Accruals	4,994	4,994	334	334
	15,857	15,857	8,311	8,311

The carrying values of other payables approximate their fair value.

19     Bank loans

	Group and Company 30 April 2011 £'000	Group and Company 30 April 2010 £'000
The Group has the following unsecured Japanese Yen loan:
Y1,634m at a fixed rate of 2.22125% repayable 2 August 2011	12,074	-
$28.2m at a fixed rate of 2.75044% repayable 2 August 2011	16,907	-
Y4,010m at a fixed rate of 1.198% repayable 29 June 2010	-	27,867
	28,981	27,867

The Company has banking facilities with ING Bank for Japanese Yen and US dollar borrowings of ¥1.63bn (£12.1m) and $28.2m (£16.9m) at the year end.  The loan is due for repayment in August 2011.

The carrying amount of the loan represents its fair value.

20     share capital

	Group and Company 30 April 2011 £'000	Group and Company 30 April 2010 £'000
Allotted, called up and fully paid:
Ordinary shares of 25p each
Opening balance of 126,497,914	31,624	31,624
Issue of 550,000 ordinary shares (2010:nil)	138	-
Conversion of 63,297 subscription shares to ordinary shares	16	-
Allotted, called up and fully paid: 127,111,211 (30 April 2010: 126,497,914) ordinary shares of 25p	31,778	31,624
Subscription shares of 1p each:
Bonus issue of 25,358,288 subscription shares	254	-
Conversion of 63,297 subscription shares to ordinary shares	(1)	-
Closing balance of 25,294,991 (30 April 2010: nil)	253	-
At 30 April 2011	32,031	31,624

The subscription shares were issued as a bonus issue to the ordinary shareholders on 14 February 2011 on the basis of one subscription share for every five ordinary shares.  Each subscription share confers the right (but not the obligation) to subscribe for one ordinary share on the last business day of each month between and including 31 March 2011 and 31 March 2014, when the rights under the subscription shares will lapse.  The conversion prices have been determined as follows:

(a) If exercised between and including 31 March 2011 and 31 March 2012, 401 pence.

(b) If exercised between and including 1 April 2012 and 31 March 2014, 478 pence.

21     Capital redemption reserve

	Group and Company £'000
As at 1 May 2010	12,588
At 30 April 2011	12,588

22     Share premium

	Group and Company £'000
As at 1 May 2010	117,902
Issue of 550,000 ordinary shares (2010: nil)	1,994
Bonus issue of subscription shares	(254)
Subscription shares issue costs	(381)
Conversion of 63,297 subscription shares to ordinary shares	238
At 30 April 2011	119,499

23     Warrant exercise reserve

	Group and  Company £'000
As at 1 May 2010	7,536
At 30 April 2011	7,536

 At 30 April 2011 there were no warrants outstanding (30 April 2010: nil).

24     Capital reserves

	Capital reserve - gains/ losses on  disposal 30 April 2011 £'000	Capital reserve - revaluation 30 April 2011 £'000	Total capital reserves 30 April 2011 £'000	Capital reserve - gains/ losses on disposal 30 April  2010 £'000	Capital reserve - revaluation 30 April 2010 £'000	Total capital reserves 30 April 2010
Group:
Opening balances	206,758	84,016	290,774	171,990	(7,617)	164,373
Net gains on disposal of investments	34,308	-	34,308	35,272	-	35,272
Transfer on disposal of investments	45,973	(45,973)	-	(808)	808	-
Valuation gains on investments held at year end	-	41,076	41,076	-	91,186	91,186
Loss on revaluation of derivatives held at year end	-	(303)	(303)	-	-	-
Exchange gains/(losses) on currency balances	(156)	-	(156)	372	-	372
Exchange losses on settlement of loan balances	(13,262)	-	(13,262)	-	-	-
Exchange gains/(losses) on translation of loan balances	-	12,648	12,648	-	(361)	(361)
Performance fee	(3,337)	-	(3,337)	-	-	-
Relief on taxable income in capital	-		-	(76)	-	(76)
Share buyback cost adjustment	-	-	-	8	-	8
Closing balance	270,284	91,464	361,748	206,758	84,016	290,774
Company:
Opening balances	206,758	86,192	292,950	171,990	(5,456)	166,534
Net gains on disposal of investments	34,308	-	34,308	35,272	-	35,272
Transfer on disposal of investments	45,973	(45,973)	-	(808)	808	-
Valuation gains on investments held at year end	-	41,076	41.076	-	91,186	91,186
Loss on revaluation of derivatives held at year end	-	(303)	(303)	-	-	-
Revaluation of subsidiary undertaking (see note 13)	-	18	18	-	15	15
Exchange (losses)/gains on currency balances	(156)	-	(156)	372	-	372
Exchange gains/(losses) on settlement of loan balances	(13,262)	-	(13,262)	-	-	-
Exchange losses on translation of loan balances	-	12,648	12,648	-	(361)	(361)
Performance fee	(3,337)	-	(3,337)	-	-	-
Relief on taxable income in capital	-	-	-	(76)	-	(76)
Share buyback cost adjustment	-	-	-	8	-	8
Closing balance	270,284	93,658	363,942	206,758	86,192	292,950

 25    Revenue reserve

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Opening balances	(61,797)	(63,973)	(59,844)	(62,005)
Loss for the year to 30 April	(2,889)	(2,907)	(1,953)	(1,968)
Closing balance	(64,686)	(66,880)	(61,797)	(63,973)

26     Note to the cash flow statement                                                            

Purchases and sales of investments are considered to be operating activities of the Company, given its purpose, rather than investing activities. However, the cash flows associated with these activities are presented below.

	Group and Company Year ended 30 April 2011 £'000	Group and Company Year ended 30 April 2010 £'000
Proceeds on disposal of fair value through profit or loss investments	419,500	266,652
Purchases of fair value through profit or loss investments	(417,049)	(256,997)
	2,451	9,655

27     Capital commitments

At 30 April 2011 the Group had a commitment to further investment in respect of the following limited partnerships:

	Commitment at 30 April 2011 £'000	Drawn down at 30 April 2011 £'000	Commitment at 30 April 2010 £'000	Drawn down at 30 April 2010 £'000
Herald Ventures Limited Partnership	1,000	1,000	1,000	1,000
Herald Ventures Limited Partnership II	500	375	500	375

28     Related party transactions

Under the terms of an agreement dated 9 February 2001 the Company has appointed Polar Capital LLP  ('Polar Capital') to provide investment management, accounting, secretarial and administrative services.  Details of the fee arrangement for these services are given in the Directors' Report. The total fees, paid under this agreement to Polar Capital for the year ended 30 April 2011 were £7,789,000 (2010: £3,302,000) of which £4,582,000 (2010: £nil) was outstanding at the year-end (including the performance fee). In addition to the above services Polar Capital has procured a Share Savings Scheme, PEP transfer and ISA product to be offered on behalf of the Company by BNP Paribas Securities Services. The total fee paid to BNP Paribas for these services for the year ended 30 April 2011 amounted to £69,000 (30 April 2010: £30,000) (including irrecoverable VAT). The compensation payable to key management personnel in respect of short-term employee benefits is £125,000 (2010: £110,000) which comprises £125,000 (2010: £110,000) paid by the Company to the Directors. Refer to pages 50 to 52 for the Directors' Remuneration Report.

29     Net asset value per ordinary share

	Net asset value per share
	30 April 2011 pence	30 April 2010 pence
Undiluted:
Net assets attributable to ordinary shareholders (£'000)	468,716	398,627
Ordinary shares in issue at end of year	127,111,211	126,497,914
Net asset value per ordinary share	368.74	315.13
Diluted:
Net assets attributable to ordinary shareholders (£'000)	570,149	398,627
Ordinary shares in issue at end of year if subscription shares converted	152,406,202	126,497,914
Net asset value per ordinary share	374.10	315.13

The diluted net asset value per ordinary share has been calculated on the assumption that 25,294,991 subscription shares in issue were converted at 401 pence per share, resulting in a total number of shares in issue of 152,406,202.

30     Segmental reporting

Geographical Segments

An analysis of the Group's investments held at 30 April 2011 by geographical segment and the related investment income earned during the year to 30 April 2011 is noted below:

	Year ended		Year ended
	30 April 2011 Value of investments £'000	30 April 2011 Gross income £'000	30 April 2010 Value of investments £'000	30 April 2010 Gross income £'000
North America	325,413	1,858	268,937	1,298
Europe	39,864	490	29,703	502
Asia	93,124	1,200	87,391	880
Total	458,401	3,548	386,031	2,680

The Directors consider that the Group has two operating segments, being the Company, Polar Capital Technology Trust plc, which invests in shares and securities primarily for capital appreciation in accordance with the Company's published investment objective, and its wholly owned subsidiary, PCT Finance Limited, which trades in securities to enhance Group returns. Discrete financial information for these sectors is reviewed regularly by the Manager and the Board who allocate resources and assess performance. The amounts presented for each segment are based on the accounting policies adopted in the Group accounts.

Segment financial information	30 April 2011 £'000	30 April 2010 £'000
Gross Income:
Company	77,871	129,158
Subsidiary	25	21
Total Income	77,896	129,179
Net Profit:
Company	68,067	124,425
Subsidiary	18	15
Total Comprehensive Income	68,085	124,440
Total Assets:
Company	466,522	396,451
Subsidiary	2,194	2,176
Group Total Assets	468,716	398,627

PCT Finance Limited's liabilities as at 30 April 2011 are £3,395,000 (2010: £3,388,000), all of which are payable to the Company. Hence all of the liabilities included in the consolidated accounts relate to the Company.

The net profit of PCT Finance Limited is made up of £25,000 interest net of £7,000 corporation tax (2010: £21,000 interest net of £6,000 corporation tax). All other figures in that statement relate to the Company.

31     Derivatives and other financial instruments

Risk Management Policies and Procedures

The Group comprises of an investment trust and a wholly owned subsidiary. The Group invests in equities and other financial instruments for the long-term to further the investment objective set out on page 33. This exposes the Group to a range of financial risks that could impact on the assets or performance of the Group.

The main risks arising from the Group's pursuit of its investment objective are market risk, liquidity risk and credit 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 accounts relate.

The Group's exposure to financial instruments comprise:

•   Equity and non-equity shares and fixed interest securities which are held in the investment portfolio in accordance with the Group's investment objective.

•   Term loans and bank overdrafts, the main purpose of which is to raise finance for the Group's operations.

•   Cash, liquid resources and short-term receivables and payables that arise directly from the Group's operations.

•   Derivative transactions which the Group enters into may include equity or index options, index future contracts, and forward foreign exchange contracts. The purpose of these is to manage the market price risks and foreign exchange risks arising from the Group's investment activities, or to enhance capital returns.

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.

(a) Market Risk

Market risk comprises three types of risk: market price risk (see note 31(a)(i)), currency risk (see note 31(a)(ii)), and interest rate risk (see note 31(a)(iii)).

(i) Market Price Risk

The Company is an investment company and as such its performance is dependent on its valuation of its investments. Consequently market price risk is the most significant risk that the Group faces.

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group's operations. It represents the potential loss the Group might suffer through holding market positions in the face of price movements.

A detailed breakdown of the investment portfolio is given on pages 24 to 29. Investments are valued in accordance with the Group's accounting policies as stated in Note 2(g).

At the year end, the Company's portfolio included two derivative instruments, a Nokia Call option and Yahoo Call option.  Both options will mature in September 2011 and are tradeable securities.

Management of the risk

In 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 risks exposure

The Group's exposure to changes in market prices at 30 April on its quoted and unquoted equity investments was as follows:

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Non-current asset investments at fair value through profit or loss	458,094	460,288	386,031	388,207
Current asset investments at fair value through profit or loss	307	307	-	-
	458,401	460,595	386,031	388,207

An analysis of the Group's portfolio is shown on pages 24 to 29.

Market price risk sensitivity

The 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 2010: 15%) in the fair values of the Group'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 Group's equities at each balance sheet date, with all other variables held constant.

	Group 30 April 2011		Group 30 April 2010
	Increase in fair value £'000	Decrease in fair value £'000	Increase in fair value £'000	Decrease in fair value £'000
Statement of Comprehensive Income - profit after tax
Revenue return	(688)	688	(579)	579
Capital return	68,760	(68,760)	57,905	(57,905)
Change to the profit after tax for the year	68,072	(68,072)	57,326	(57,326)
Change to shareholders' funds	68,072	(68,072)	57,326	(57,326)

	Company 30 April 2011		Company 30 April 2010
	Increase in fair value £'000	Decrease in fair value £'000	Increase in fair value £'000	Decrease in fair value £'000
Revenue return	(691)	691	(582)	582
Capital return	69,089	(69,089)	58,231	(58,231)
Change to the profit after tax for the year	68,398	(68,398)	57,649	(57,649)
Change to shareholders' funds	68,398	(68,398)	57,649	(57,649)

(ii) Currency Risk

The Group's total return and net assets can be significantly affected by currency translation movements as the majority of the Group's assets and revenue are denominated in currencies other than sterling.

Management of the risk

The investment manager mitigates the individual currency risks through the international spread of investments and the 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.

Foreign currency exposure

The table below shows, by currency, the split of the Group's non-sterling monetary assets, liabilities and investments that are priced in currencies other than sterling.

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Monetary Assets:
Cash and short-term receivables
US dollars	33,839	33,839	16,938	16,938
Japanese yen	10,890	10,845	20,516	20,474
Euros	1,741	1,731	1,077	1,068
Taiwan dollars	1,506	1,506	4,412	4,412
Swedish kroner	126	126	-	-
Hong Kong dollars	99	99	837	837
Indian rupee	45	45	-	-
Swiss francs	1	1	3	3
Canadian dollars	-	-	116	116
Norwegian kroner	-	-	61	61
Monetary Liabilities:
Other payables
Swedish kroner	-	-	(666)	(666)
Japanese yen	(65)	(65)	(1,818)	(1,818)
US dollars	(10,976)	(10,976)	(6,346)	(6,346)
Bank loans
Japanese yen	(12,074)	(12,074)	(27,867)	(27,867)
US dollars	(16,907)	(16,907)	-	-
Foreign currency exposure on net monetary items	8,225	8,170	7,263	7,212
Non-Monetary Assets:
Investments at fair value
US dollars	355,940	355,940	298,658	298,658
Taiwan dollars	17,482	17,482	14,670	14,670
Korean won	17,425	17,425	13,355	13,355
Japanese yen	17,208	17,208	22,573	22,573
Euros	16,015	16,015	12,690	12,690
Hong Kong dollars	11,342	11,342	7,072	7,072
Swedish kroner	7,119	7,119	3,343	3,343
Total net foreign currency exposure	450,756	450,701	379,624	379,573

During the financial year sterling appreciated by 9.0% against the US dollar (2010: appreciated by 3.3%), depreciated by 6.0% (2010: depreciated by 1.3%) against the Japanese yen, depreciated by 2.3% (2010: appreciated by 2.9%) against the Euro, appreciated by 9.0% (2010: appreciated by 3.5%) against the Hong Kong dollar, appreciated by 5.4% (2010: depreciated by 10.7%) against the Korean won and depreciated by 0.4% (2010: depreciated by 2.1%) against the Taiwan dollar.

Foreign currency sensitivity

The 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.

It is not possible to forecast how much rates might move in the next year but based on historic movements the following changes appear reasonably possible:

£/US dollar +/- 10% (2010: 10%)

£/Euro +/- 10% (2010: 10%)

£/Japanese yen +/- 15% (2010: 15%)

£/Hong Kong dollar +/- 10% (2010: 10%)

£/Korean won +/- 10% (2010: 10%)

£/Taiwan dollar +/- 15% (2010: 15%)

If sterling had depreciated against the currencies shown, this would have the following effect:

	Group 30 April 2011 £'000
	US dollar	Euro	Yen	Hong Kong dollar	Korean  won	Taiwan dollar
Statement of Comprehensive Income- profit after tax
Revenue return	114	25	12	19	17	88
Capital return	40,211	1,973	2,816	1,271	1,936	3,351
Change to the profit after tax for the year	40,325	1,998	2,828	1,290	1,953	3,439
Change to shareholders' funds	40,325	1,998	2,828	1,290	1,953	3,439

	Group 30 April 2010 £'000
	US dollar	Euro	Yen	Hong Kong dollar	Korean  won	Taiwan dollar
Statement of Comprehensive Income- profit after tax
Revenue return	141	15	5	6	9	60
Capital return	34,361	1,530	2,365	879	1,484	3,367
Change to the profit after tax for the year	34,502	1,545	2,370	885	1,493	3,427
Change to shareholders' funds	34,502	1,545	2,370	885	1,493	3,427

If sterling had appreciated against the currencies shown, this would have the following effect:

	Group 30 April 2011 £'000
	US dollar	Euro	Yen	Hong Kong dollar	Korean  won	Taiwan dollar
Statement of Comprehensive Income - profit after tax
Revenue return	(93)	(20)	(9)	(15)	(14)	(65)
Capital return	(32,900)	(1,614)	(2,082)	(1,040)	(1,584)	(2,477)
Change to the profit after tax for the year	(32,993)	(1,634)	(2,091)	(1,055)	(1,598)	(2,542)
Change to shareholders' funds	(32,993)	(1,634)	(2,091)	(1,055)	(1,598)	(2,542)

	Group 30 April 2010 £'000
	US dollar	Euro	Yen	Hong Kong dollar	Korean won	Taiwan dollar
Statement of Comprehensive Income - profit after tax
Revenue return	(115)	(13)	(4)	(5)	(8)	(44)
Capital return	(28,114)	(1,252)	(1,748)	(719)	(1,214)	(2,489)
Change to the profit/loss after tax for the year	(28,229)	(1,265)	(1,752)	(724)	(1,222)	(2,533)
Change to shareholders' funds	(28,229)	(1,265)	(1,752)	(724)	(1,222)	(2,533)

The impact on the Company figures have not been given as they would not materially differ from the Group figures.

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 Risk

Interest 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 Group finances its operations through its term loans as well as bank overdrafts and any retained gains arising from operations.

The Group 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 risk

The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis.

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 2011			30 April 2010
	Within one year £'000	More than one year £'000	Total £'000	Within one year £'000	More than one year £'000	Total £'000
Exposure to floating interest rates:
Cash and cash equivalents (Group)	45,505	-	45,505	42,070	-	42,070
Cash and cash equivalents (Company)	39,918	-	39,918	36,507	-	36,507
Exposure to fixed interest rates:
Bank loan (Group and Company)	(28,981)	-	(28,981)	(27,867)	-	(27,867)
Total exposure to interest rates (Group)	16,524	-	16,524	14,203	-	14,203
Total exposure to interest rates (Company)	10,937	-	10,937	8,640	-	8,640

Interest rate sensitivity

The sensitivity analysis is based on the Group's monetary financial instruments held at each balance sheet date, with all other variables held constant. The table below illustrates the Group's sensitivity to interest rate movements, with a change of 0.25% p.a. in the rates of interest available to the Group's financial assets and a change of 0.25% p.a in the rates of interest available to the Group'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 2011		30 April 2010
	Group £'000	Company £'000	Group £'000	Company £'000
Statement of Comprehensive Income - profit after tax
Revenue return	41	27	36	22
Capital return	-	-	-	-
Change to the profit/loss after tax for the year	41	27	36	22
Change to shareholders' funds	41	27	36	22

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 the 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 Risk

Liquidity risk is the possibility of failure of the Group to realise sufficient assets to meet its financial liabilities.

Management of the risk

The Group's assets mainly comprise readily realisable securities which may be sold to meet funding requirements as necessary.

Liquidity risk exposure

The maturity dates of the Group's existing borrowings are set out in note 19 to the accounts. Short-term flexibility is achieved through the use of overdraft facilities.

At 30 April the financial liabilities comprised of:

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Due within 1 month:
Balances due to brokers	10,863	10,863	7,977	7,977
Accruals	4,994	4,994	334	334
Due after 1 month and within 3 months:
Bank loan	29,351	29,351	28,161	28,161

(c) Credit Risk

Credit 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 risk

This risk is not considered significant. The Group 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. These arrangements were in place throughout the current year and the prior year.

Credit risk exposure

The maximum exposure to credit risk at 30 April 2011 was £55,093,000 comprising:

	Group 30 April 2011 £'000	Company 30 April 2011 £'000	Group 30 April 2010 £'000	Company 30 April 2010 £'000
Balances due from brokers	9,364	9,364	6,277	6,277
Accrued income	355	353	115	114
Cash at bank	45,374	39,787	41,830	36,267
	55,093	49,504	48,222	42,658

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 to be low.

None of the Group's financial assets are past due or impaired.  All deposits were placed with banks that had ratings of A or higher.

(d) Gearing risk

The Group's/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 risk

The Group/Company uses short-term loans to manage gearing risk, details of which can be found in note 19.

Gearing risk exposure

The 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.

(e) Capital Management Policies and Procedures

The 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 33.

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 (i.e. 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.

Status of announcement 

The figures and financial information contained in this announcement are extracted from the Audited Annual Report for the year to 30 April 2011 and do not constitute statutory accounts for the year. The Annual Report and financial statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.  The Directors Remuneration Report and certain other helpful shareholder information has not been included in this announcement but  forms part of the Annual Report which will be  available on the Company's website at www.polarcapitaltechnologytrust.co.uk and will be sent to shareholders in late June. 

The Annual Report and financial statements for the year ended 30 April 2011 have not yet been delivered to the Registrar of Companies but will be following the Annual General Meeting of the Company on 4 August 2011. The Annual Report and financial statements for the year ended 30 April 2010 have been delivered to the Registrar of Companies

The figures and financial information for 2010 are extracted from the published Annual Report and Financial Statements for the year ended 30 April  2010 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006

AGM 

The Annual Report and separate Notice of Meeting for the Annual General Meeting  will be posted to shareholders in late June and will be available thereafter the company secretary at the Registered Office, 4 Matthew Parker Street London SW1H 9NP or from the company's website at www.polarcapitaltechnologytrust.co.uk

The AGM will be held on 4 August 2011 at 12.00 pm at the Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS.

Forward Looking Statements

Certain statements included in this announcement and in the Annual Report and Accounts 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 Business Review on pages 32 to 37 of this Annual Report and Accounts. 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.

 

END

 

 

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