30 November 2017
Allianz
Technology
Trust PLC
Annual Financial Report
www.allianztechnologytrust.com
1
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Key Information
Investment objective
Allianz Technology Trust PLC (the Company) invests principally
in the equity securities of quoted technology companies on a
worldwide basis with the aim of achieving long-term capital
growth in excess of the Dow Jones World Technology Index
(sterling adjusted, total return) (the benchmark).
Investment policy
The investment policy of the Company is to invest in a
diversified portfolio of companies that use technology in an
innovative way to gain a competitive advantage. Particular
emphasis is placed on companies that are addressing
major growth trends with innovation that replaces existing
technology or radically changes products and services and the
way in which they are supplied to customers.
What constitutes a technology stock
The investment management team views technology
companies as those with revenues primarily generated by the
application of technology products and services. This is divided
into two areas:
Traditional telecommunications, media and technology
(TMT) segments which include Internet, computers and
computer peripherals, software, electronic components
and systems, communications equipment and services,
semiconductors, media and information services.
Non-traditional tech companies which are those in various
other industries that use technology in an innovative way to
gain a strategic, competitive edge.
As technology becomes ever more pervasive, it is increasingly
difficult to differentiate between technology companies and
significant adopters as outlined above. Much is spoken of
disruptive technologies – those which will force change within
an industry and which may often displace the dominance of
incumbent market leaders. The challenge is to understand
not only current technologies, but also future trends and the
likely effects. Recently there has been rapid adoption of cloud
computing and there is an increasing focus on AI (artificial
intelligence) which is showing significant influence on many
industries.
Asset allocation
The fund managers do not target specific country or regional
weightings and aim to invest in the most attractive technology
shares on a global basis. The fund managers aim to identify
the leading companies in emerging technology growth sub-
sectors. The majority of the portfolio will comprise mid and
large cap technology shares.
Risk diversification
The Company aims to diversify risk and no holding in the
portfolio will comprise more than 15% of the Company’s assets
at the time of acquisition. The Company aims to diversify the
portfolio across a range of technology sub-sectors.
Gearing
In normal market conditions gearing will not exceed 10% of
net assets but may increase to 20%. The Company’s Articles
of Association limit borrowing to one quarter of its called up
share capital and reserves. As at 30 November 2017 there was
no borrowing facility in place.
Liquidity
In normal market conditions the liquidity of the portfolio, that
is the proportion of the Company’s net assets held in cash or
cash equivalents, will not exceed 15% of net assets but may be
increased to a maximum of 30%.
Derivatives
The Company may use derivatives for investment purposes
within guidelines set down by the Board.
Foreign currency
The Company’s current policy is not to hedge foreign currency.
Benchmark
One of the ways in which the Company measures its
performance is in relation to its “benchmark”, which is an
index made up of some of the world’s leading technology
shares. The benchmark used is the Dow Jones World
Technology Index (sterling adjusted, total return). The
Company’s strategy is to have a concentrated portfolio which
is benchmark aware rather than benchmark driven. Therefore,
the Company has tended to have a significantly higher than
benchmark allocation to high growth, mid cap companies
which are considered to be the emerging leaders in the
technology sector. The Managers believe that the successful
identification of these companies relatively early on in their
growth stages, offers the best opportunity for outperformance
over the long-term.
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Contents
2
12
38
26
55
85
Overview
IFC Key Information
Financial Highlights
2
Financial Summary
4
5
Chairman’s Statement
12 Why invest in technology?
21 Allianz Technology Trust PLC
Investment managers
22
Insights
26 Game Changer
30 The Robot Revolution
34 Outside The Box
Investment Managers’
Review
38
47
52
Investment Managers’ Review
Top 20 Holdings
Investment Portfolio
Directors’ Review
55 Directors’ Review
56 Directors
58
Strategic Report
63 Directors’ Report
76
Statement of Directors’
Responsibilities
77 Audit Committee Report
81 Directors’ Remuneration
Implementation Report
84 Directors’ Remuneration Policy
Report
Financial Statements
Financial Statements
85
Independent Auditor’s Report
86
Income Statement
91
Balance Sheet
92
93
Statement of Changes in Equity
94 Notes to the Financial Statements
Investor Information
108
Investor Information
113 Notice of Meeting
1
Silicon Valley, California, USA
Financial Highlights
As at 30 November 2017
Net assets per ordinary share
Share price per ordinary share
+41.0%
2017 1178.6p
2016 835.9p
+50.2%
2017 1,200.0p
2016 799.0p
Benchmark
Performance against benchmark1
+31.5%
2017 984.8
2016 748.7
Performance against sector average1
550
d
e
x
e
d
n
i
%
50
Nov 07
Allianz Technology Trust2
Benchmark3
Nov 17
1 10 years to 30 November 2017.
Rebased to 100 at 30 November
2007.
2 Allianz Technology Trust – Net Asset
Value (PAR) – undiluted.
3 Dow Jones World Technology Index
(sterling adjusted, total return).
4 Morningstar Technology Sector
Nov 17
Average
Source: AllianzGI/Datastream.
550
d
e
x
e
d
n
i
%
50
Nov 07
Allianz Technology Trust2
Sector average4
2
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Shareholders’ funds (£m)
NAV per ordinary share (p)
313.4
216.7
1,178.6
835.9
175.7
157.7
131.6
612.2
675.1
519.0
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Ordinary share price (p)
Benchmark
1,200.0
799.0
576.5
632.0
517.0
531.4
568.5
417.3
984.8
748.7
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Premium (discount) of ordinary share
price to net asset value per share (%)
1.8
2013
2014
2015
2016
2017
(0.4)
(5.8)
(6.4)
(4.4)
3
Overview Financial Summary
As at
30 November
2017
As at
30 November
2016
Net Asset Value per Ordinary Share
Ordinary Share Price
Premium (discount) on Ordinary Share Price to Net Asset Value
Dow Jones World Technology Index (sterling adjusted, total return)
1,178.6p
1,200.0p
1.8%
984.8
835.9p
799.0p
(4.4%)
748.7
Total Net Assets
£313,432,947
£216,671,377
Net Revenue Return per Ordinary Share
Ongoing Charges*
For the
year ended
30 November
2017
(4.75p)
1.02%
For the
year ended
30 November
2016
(2.59p)
1.03%
% change
+41.0
+50.2
n/a
+31.5
+44.7
% change
n/a
n/a
*Ongoing charges are calculated by dividing operating expenses paid by the Company by the average NAV over the period excluding any performance fees.
Five year performance summary
30 November 30 November 30 November 30 November 30 November
2013
2014
2015
2016
2017
Shareholders’ Funds
Net Asset Value per Ordinary Share
Ordinary Share Price
Dow Jones World Technology Index (sterling adjusted, total return)
Premium (discount) of Ordinary Share Price to Net Asset Value per share
£313.4m
£216.7m
£175.7m
£157.7m
£131.6m
1,178.6p
1,200.0p
984.8
1.8%
835.9p
799.0p
748.7
(4.4%)
675.1p
632.0p
568.5
(6.4%)
612.2p
576.5p
531.4
(5.8%)
519.0p
517.0p
417.3
(0.4%)
4
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Chairman’s Statement
Dear Shareholder
A year of strong performance
It is pleasing to report that the year under review has been an extremely successful one for your
Company and one in which it beat its benchmark index by some considerable distance.
In the year to 30 November 2017, the Company’s Net Asset Value (NAV) per share increased by an
outstanding 41.0%. Our benchmark index, the Dow Jones World Technology (sterling adjusted, total
return), increased by 31.5% over the same period, creating an outperformance for the portfolio of
9.5% in NAV terms. In both absolute and relative terms, your Manager has delivered an exceptional
performance.
Over this extremely positive period, the market price of the Company’s shares performed even better
than the NAV, with the share price rising 50.2% over the year, from 799p to 1200p. The discount to NAV
narrowed, from a 4.4% discount (at 30 November 2016) to a small premium of 1.8% one year later.
This year has also seen Shareholders’ Funds increasing by almost £100 million to £313.4 million (30
November 2016: £216.7 million).
No dividend is proposed for the year ended 30 November 2017 (2016: nil). Given the nature of
the Company’s investments and its stated objective to achieve long-term capital growth the Board
considers it unlikely that any dividend will be declared in the near future.
Investment Managers’ Review
Six months ago, when I commented on the Company’s interim results to 31 May 2017, I noted that
global markets had been strong and that all-time market highs had been reached in the US; this trend
continued unabated throughout the Company’s second half. Your Company’s performance is explored
in depth in the Investment Managers’ Review on pages 38 to 45 which also discusses the significant
global geopolitical factors that have provided a complex backdrop to the year under review. Of course,
20 January 2017 marked the inauguration of Donald Trump as the 45th president of the United States
and the Manager’s review naturally considers the impact the Trump administration has had on the
portfolio.
How do we compare with our peers and other indices?
The table below compares the Company to its technology investment trust peers and related indices.
You will note that the Company’s performance over all timeframes has been strong and that, when
compared to peers and indices, your Company has been in 1st or 2nd place over each of the time
periods set out below:
% increase
ATT NAV
Dow Jones World Technology Index (sterling adjusted,
total return)
MSCI World Technology Index (total return)
Russell MidCap Technology Index
Polar Capital Technology (NAV)
ATT NAV performance against above comparatives
Source: AllianzGI in sterling as at 30 November 2017.
1 year
3 years
5 years
10 years
41.0
92.5
234.3
349.7
31.5
29.9
23.4
36.1
1st
85.3
184.3
295.8
86.3
83.4
95.5
2nd
193.6
199.4
192.7
1st
299.3
326.4
372.2
2nd
5
Overview Chairman’s Statement (continued)
The table below provides a comparison with the broader UK and world equity indices which many
investors will use when reviewing the performance of their individual investments.
% increase
ATT NAV
FTSE All Share Index (total return)
FTSE World Index (total return)
Source: AllianzGI in sterling as at 30 November 2017.
1 year
3 years
5 years
10 years
41.0
13.4
15.4
92.5
25.2
48.6
234.3
57.1
107.0
349.7
76.5
150.9
As noted in previous reports the Board pays close attention to the Company’s performance position
against the wider universe of open ended funds, closed ended funds and exchange traded funds.
The performance of your Company versus the other funds within the Morningstar Global Technology
Sector - Equity (Morningstar) category is very strong over all periods and exceptional over the longer
investment terms of 5 and 10 years.
Peer Group Ranking vs Morningstar
1 year
4/70
3 years
5 years
10 years
7/59
1/58
4/50
Growing the Company
Your Board considers that growing the Company is strongly in the interest of all shareholders. In
addition to delivering capital growth per share, increasing the total value of the Company should
make the Company more attractive to a wider range of investors through improved secondary market
liquidity and marketability and also enables the Company’s fixed expenses to be spread over a larger
asset base.
Each year the Board considers carefully what level of expenditure should be incurred to promote
the growth of the Company, recognising that the benefit of much marketing-related expenditure is
cumulative and hence that returns are not easily measured within each financial year. Over recent years
the Board has modestly increased marketing expenditure on a strongly focused basis and it is very
pleasing to note the growing awareness of the Company’s shares amongst potential shareholders has
been achieved. Awareness has grown on the back of the Company’s long-term performance record as
well as the numerous (and prestigious) awards and positive press comment that this performance has
generated.
How marketing can serve to grow the Company
Our communications programme has created significant demand for the Company’s shares in recent
years, particularly through execution-only investment platforms. The programme includes targeted
advertising and substantial communications with national and industry journalists, since press
coverage can be highly influential.
The Company’s website (www.allianztechnologytrust.com) is managed by Allianz Global Investors
and is at the heart of ongoing marketing initiatives. During the period under review, the website was
redesigned in a ‘responsive’ format that provides an optimal viewing experience (by way of easy
viewing and navigation) for visitors using all forms of devices – mobile phones, tablets and desktop
computers. As well as a much cleaner ‘look and feel’, the redesign has added substantial new content
that the Board believes shareholders will appreciate. It is pleasing to report that visitor numbers have
increased substantially since the new site went live.
6
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Chairman’s Statement (continued)
Accessing the very latest information
The Company’s website provides information on both the Company’s investment performance and
the technology sector as a whole. You will find video interviews, press coverage, regulatory market
announcements and a full Literature & Resources library. The ‘How to invest’ section includes detailed
background information as well as links to the most popular online trading platforms.
Shareholders are reminded that, via the website, they can register to receive monthly performance
updates via email as well as regular ‘Investment Insights from Silicon Valley’ updates from the
Company’s Investment Manager.
Performance awards raise awareness
Award recognition is instrumental in raising awareness of the Company’s specialist investment
theme (and the technology sector as a whole). Allianz Technology Trust has received high profile and
prestigious recognition in recent years. Awards include the Investment Week Investment Company
of the Year Award, Specialist category (2015 and 2017) where the judging panel comprised some of
the UK’s leading researchers and investors in investment trusts. In September 2017, the Company
was recognised by Investors Chronicle as a ‘Top 100 Fund’ for the fifth consecutive year whilst it was
also selected as the ‘Best Investment Trust 2017’ by the users of MoneyAM. Such awards reflect the
Company’s long-term investment performance track record and drive the sustained and ongoing
demand for the Company’s shares that its marketing campaign seeks to achieve.
Softbank Pepper robots which provide assistance to customers in a mall in Chiba, Japan
7
Overview Chairman’s Statement (continued)
Successful issuance of shares
As stated earlier, the Board remains keen to increase the number of shares in issue as a means of
growing the Company. However, where there is market volatility the Board will also consider buying
back shares when the discount is over 7% and all other factors align. The Board considers carefully the
parameters which should apply to both re-issuances of shares held in treasury and shares to be bought-
back from the market and will only proceed when the action is in the best interests of shareholders.
In the year under review, 675,000 shares were issued out of those held in treasury at an average price
of 1173p and an average discount of 2.99%, while no shares were bought back. Market conditions
were very different from the previous year (to 30 November 2016) when it had not proved possible to
issue any shares out of those held in treasury. Indeed, in that period shares had been bought back at an
average discount of 11.0%.
At 30 November 2017, the Company had 26,594,427 Ordinary shares in issue with a further 1,708,453
shares held in treasury available for re-issue into the market to meet demand subject to appropriate
pricing; it should be noted that shares being re-issued into the market shall only be issued at an average
discount narrower than that at which they were bought back.
Since the start of the current financial year and up to 12 February 2018 the Company has issued a
further 540,000 shares out of those held in treasury at an average price of 1172p and an average
discount of 2.29%, while no shares were bought back. As of 12 February 2018, 1,168,453 shares are held
in treasury.
The Board is very pleased that excellent investment performance, well focused marketing and
conducive market conditions have combined to enable the reissuance of a significant number of shares
from treasury. The Board is also taking steps to ensure that, should appropriate demand arise, the
Company is able to issue new shares once those held in treasury have all been reissued. Any such new
shares will only be issued at a premium to NAV.
Our focus on the costs of running the Company
Your board works hard to ensure that the costs of running the Company are both reasonable and
competitive, whilst also recognising that Allianz Technology Trust is a specialist vehicle.
The ongoing charges figure (OCF) is calculated by dividing operating expenses by the average net
asset value. The OCF for the period under review was 1.02% (2016: 1.03%). The OCF excludes any
performance fee to which the Investment Manager may be entitled if the Company’s NAV per share
outperforms its benchmark (as is explained in more detail in Note 2 on page 96 of the Financial
Statements). As a result of the Company’s significant outperformance of its benchmark in the year to
30 November 2017, a performance fee of £433,476 was earned by the Investment Manager for this
period (2016: £nil). Your board is pleased that the Company’s excellent performance over the period
has triggered the payment of a performance fee. The Investment Management Agreement is in place
to encourage, recognise and reward such excellent results. It should be added that the Company was
one of the very best performing UK-listed investment trusts over the 2017 calendar year.
Towards the end of the last financial year the Board entered into discussions with Allianz Global
Investors (AllianzGI) with a view to reducing the rate of AllianzGI’s fees as the Company’s assets
increase. I am pleased to report that a tiered management fee structure has now been agreed whereby
the present management fee of 0.8% per annum on market capitalisation reduces to 0.6% per annum
for any amount of market capitalisation in excess of £400 million. This change became effective on 1
December 2017.
8
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Chairman’s Statement (continued)
Change of financial year end
The Board has reflected on the November financial year end of the Company and concluded that
changing this to a December year end should help shareholders by providing greater clarity in
reporting comparative performance. The Board has decided that the current financial year will run for
thirteen months to 31 December 2018. The interim report for 2018 will be for the six months to May.
Key Investor Information
The Key Investor Information (KID) is a new document which came into force in January 2018 for
investment trusts and many other investment products operating under the Packaged Retail and
Insurance-based Investment Products (PRIIP) Regulation. The KID is a standardised pan-European
document that contains product, risk, charges and other information. It is a regulatory requirement that
you are provided with a KID before you invest, and you will be required to declare that you have seen
the latest KID when you make your investment.
The Allianz Technology Trust KID is available from the Literature Library at www.allianztechnologytrust.
com. However, your chosen platform provider or stockbroker should provide you with a copy before
accepting your investment instructions. Please note that existing investors do not need to review the
KID unless planning to top up an investment.
The KID’s standardised format is intended to allow potential investors to compare funds easily, on a
like-for-like basis. However, your Board shares wider industry concerns that disclosures mandated for
inclusion may prove to be unhelpful for investors. Specific concern surrounds the methodology for
both the investment performance and risk sections as, particularly given the exceptionally strong five-
year performance period on which they are required to be based, the published figures may result in a
misleadingly optimistic view. Your Board would therefore strongly encourage any prospective investor
in the Company not to rely solely on the KID when making their investment decision.
Board matters
Your Company’s Investment Manager continues to enjoy considerable benefits from being located
in San Francisco, close to where many of the Company’s top holdings are located. As a Board we
recognise the advantage the Company gains by being located at ‘the heart of the action’. Moreover, we
have worked hard to optimise working practices with the Manager, whilst recognising the constraints
imposed by the geographical distance and time zone difference between London and San Francisco.
The Company’s Board meetings are generally held in London, but we schedule a visit to San Francisco
every couple of years. The most recent San Francisco Board meeting was in November 2017 and the
next visit is tentatively planned for 2019. The frequency of these visits recognises the importance of
good communications and close working relationships between the Manager and the Board, but also
the costs and time commitment of such trips.
An internally facilitated Board and Manager performance appraisal process was conducted towards
the end of the year. This confirmed that the current Board is working in an effective manner with no
significant shortcomings identified.
In accordance with the Articles of Association, at this year’s AGM Elisabeth Scott shall retire by rotation
and Richard Holway shall retire due to tenure having served as a Director for in excess of nine years. I
am pleased to confirm that Elisabeth and Richard are fully effective as independent directors and the
re-election of both is fully supported by the Board.
9
Overview Chairman’s Statement (continued)
Continuation vote
In accordance with our Articles of Association we are required to propose a continuation vote every five
years. The most recent continuation vote was proposed and passed by Shareholders at the 2016 AGM.
Shareholders will have a further opportunity to vote on the continuation of the Company at the AGM to
be held in 2021.
Outlook
Since the end of the reporting period, markets were initially buoyant but volatility has recently
increased significantly and confidence appears to have waned. The chances of a significant market
correction remain a high possibility. Indeed 2017 may have created false hope in certain sectors and it
is realistic to assume that the path ahead may be less smooth. There is also concern on the implications
of rising interest rates around the world, rising labour costs in China and, in the US, tax cuts.
However, we should not let the concerns highlighted above detract from the likelihood that technology
should continue to grow its influence over the global economy. As such, your board shares the
Manager’s positive view that the case for strong relative performance from the technology sector
remains robust. As always, stock selection will be of the utmost importance but we believe that the
Manager’s carefully chosen portfolio of technology investments should continue to deliver positive
returns over the longer term.
Annual General Meeting
The AGM will be held at The City of London Club, 19 Old Broad Street, London EC2N 1DS, on
Wednesday, 25 April 2018 at 12 noon. All of your Board look forward to welcoming and meeting those
shareholders who are able to attend.
Robert Jeens
Chairman
22 February 2018
10
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Chairman’s Statement (continued)
11
Overview Allianz Technology Trust PLC
Why invest in
technology?
12
13
Overview The technology sector is the single
greatest contributor to global growth
14
Apple’s new corporate headquarters, the Apple Park campus, opened to employees in April 2017 while still under construction.
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 The technology sector is the single
greatest contributor to global growth
15
Overview Why invest in technology?
With every year, technology forms a larger and more important
part of our world; while the growth of online shopping or our
enthusiasm for smart phones are more obvious examples, the
influence of technology reaches far further, from preventing
accidents as you drive, to promoting energy efficiency, even
helping you find love. Technology is changing our workplaces,
the way we communicate, the fabric of our lives. Investing in
technology keeps investors focused on the future.
The impact of the growth of technology
on individual industries should not be
underestimated. Twenty years ago, car
companies were not technology companies,
but today, the greatest innovation in the motor
industry is coming from technology companies
such as Google, rather than Ford or Chrysler.
Over the next decade, the key determinant of
the success or otherwise of a motor company
is likely to be the extent to which it can harness
technology to build better and safer cars. That
may mean using robots in the manufacturing
process, or Artificial Intelligence (AI) to make
them safer.
This is a profound change. At the moment,
technology only captures around 5% of the car
market, mostly in areas such as semiconductors.
However, it promises to capture far more,
particularly as worldwide attention on global
warming and CO2 emissions increases. Electric
car specialist Tesla is moving from luxury to mass
market, and incumbent car manufacturers must
catch up or risk obsolescence.
This phenomenon is being seen across multiple
industries. Sectors that considered themselves
immune to the march of technology are finding
they must embrace it and innovate, or face
extinction. In the process, real value is being
created for investors in technology companies.
for example, advertisers had little insight into
who was watching and responding to their
output. Now they can be laser-targeted on the
right audience for their messaging. Technology
is allowing companies to manage their supply
chains more efficiently, creating less waste and
improving performance.
Technology brings with it an ecosystem in its own
right. For example, cyber security has become a
major enterprise. Where there is sensitive data,
there will be criminals trying to access that data.
This year has seen major breaches for companies
that are household names. Data security is
mission-critical for companies aiming to protect
their clients, and their own reputations.
It should be said that the pervasiveness of
technology does not necessarily make it a
good investment. There remain concerns over
valuation levels among certain high profile
technology names and technology investment
needs a discriminating eye.
However, in many cases technology companies
can command a premium simply because they
are delivering structural growth at a time of
flat economic growth. A technology company
with the power to exploit a niche area can make
super-normal returns in a way that companies in
many other industries struggle to do.
However, technology is not simply about taking
staid old industries and ‘disrupting’ them,
technology also has an important role in allowing
businesses to be more efficient. A decade ago,
Digital advertising is a good example of this type
of growth. Digital now constitutes around half
of advertising revenues, compared to just 10%
as little as 10 years ago. The digital advertising
16
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Why invest in technology? (continued)
market is now worth around $220 billion.1
Google’s parent company Alphabet generated
$73.8 billion dollars in net digital ad sales in 2017,
according to internet research firm eMarketer.
These super-normal returns are not confined
to developed markets. The impact is often far
more powerful when they are happening in
emerging markets. The Chinese e-commerce
market is estimated at over $1trillion and is
around two and a half times that of the US.2 The
Chinese are bypassing the traditional high street
and embracing online shopping. For companies
participating in this growth – such as Alibaba or
Tencent – the potential returns are significant.
Similar stories can be found in countries such as
India and selectively in other emerging markets.
At the same time, China is leading the way in
areas such as environmental technology.
investment and investors may be concerned
with a company’s past performance rather than
its future prospects. Technology investment,
however, demands that investors look forward,
uncovering the trends of the future, looking to
see where industries are going, and who is likely
to win or lose from those developments.
At each stage, therefore, the technology investor
should be aligned with the winners from change,
rather than those at the wrong end of it. We
continue to see new industries being created,
while old industries die or are forever altered
and technology sits at the heart of this global
innovation. Assuming that the future will look like
the past is a dangerous way to invest in today’s
climate of rapid change. Companies can rise
quickly and change the dynamics of an industry
before investors have a chance to adjust.
Investment markets can often be backward-
looking. Benchmarks that reward yesterday’s
winning companies have often set the pace for
It is also worth noting that technology is not
just one type of company. Certainly, there are
the traditional technology companies – fast-
17
Overview Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Why invest in technology? (continued)
Most investing is done for the long-term – to
save for retirement, or for children’s education,
or simply to build a nest-egg – it makes
sense, therefore, to ensure that a portfolio is
investing for long-term trends. An investment
in technology can help keep a portfolio focused
firmly on the future.
1 Source: Recode, July 2017. 2 Source: Remarkety,
June 2017. 3 Source: S&P Dow Jones Indices,
November 2017. 4 Source: MSCI, November 2017.
growing, disruptive companies such as Amazon
or Facebook, where revenue growth might be
50% per year.
However, the sector has alternative options:
Microsoft and Apple, for example, could be
considered more stable options. Less highly-
valued, they pay growing dividends and deliver
steady, annuity-like earnings. There are also
more ‘value’ companies such as Intel or ‘special
situations’ such as the semiconductors, where
there is significant consolidation. This means it is
possible to build a portfolio that can perform in
a range of market environments. The diversity of
technology companies is often overlooked.
The growth of technology has been seen in its
increasing dominance of stock market indices.
Technology currently forms around 24%3 of the
S&P 500 index, its largest sector weight. For the
MSCI World, it is 17%.4 As technology’s influence
grows, we see it forming a greater part of stock
market indices.
18
Why invest in technology? (continued)
How technology dominates the S&P 500 index
Information Technology
24.0%
Financials
Health Care
Consumer Discretionary
Industrials
Consumer Staples
Energy
Utilities
Materials
Real Estate
Telecommunication Services
14.8%
14.1%
12.1%
10.1%
8.1%
5.8%
3.1%
3.0%
2.9%
2.0%
Source: S&P Index as at 30 November 2017. The weightings for each sector of the index are rounded to the nearest tenth of a percent; therefore,
the aggregate weights for the index may not equal 100%.
Total return – how technology has performed against UK and global equities
Dow Jones World Technology (sterling adjusted, total return)
FTSE All-Share Total Return
FTSE World Total Return
295.8%
184.3%
107.0%
57.1%
5 years
150.9%
76.5%
10 years
Source: Thomson DataStream, total return % in GBP, to 30 November 2017.
431.9%
361.9%
239.1%
20 years
19
Overview 20
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Allianz Technology Trust PLC
Allianz Technology Trust is managed by the Allianz Global Investors Global
Technology team based in San Francisco.
The team is co-headed by Walter Price and Huachen Chen, who have worked together for more than 30 years and who both
have decades of experience working within the sector. The team includes two experienced portfolio managers/analysts, Michael
Seidenberg and Danny Su, who each offer more than a decade’s experience. They are supported by over ten global sector analysts,
nine of whom focus purely on technology companies. Based in the US, Europe and Asia, these specialists extend a global reach
which is ever-more important in the technology sector.
Top 100 Funds
Allianz Technology Trust has been chosen from almost 3,000 eligible actively-managed funds as one of Investors Chronicle ‘Top
100 Funds’ for five consecutive years. The Company’s selection is based on its performance history relative to risk, fees, tenure of
manager and consistency of returns.
Investment Company of the Year Awards
The award recognises excellence in closed-ended fund
management and highlights the Company’s consistent
performance over time.
Online Personal Wealth Awards
The Company was selected as Best Investment Trust 2017 by
the users of MoneyAM.
At the heart of the technology industry…
The AllianzGI Global Technology team’s location in San
Francisco delivers a considerable advantage: the team
benefits from its proximity to Silicon Valley – ‘the heart of
the action’ - where many of the world’s leading technology
companies are headquartered. The Manager has close
and regular contact with companies that are identified for
possible inclusion in the portfolio. Ten of the Company’s
top twenty holdings are located within fifty miles of the
Manager’s offices. A further three are within two hours’
flight time and a further four elsewhere in the United
States.1
1Allianz Global Investors 2017
W A S H I N G T O N
O R E G O N
I D A H O
San Francisco
N E V A D A
C A L I F O R N I A
21
Overview Investment managers
Walter C. Price CFA
Huachen Chen CFA
Managing Director,
Senior Portfolio Manager
Managing Director,
Senior Portfolio Manager
Huachen is a Senior Portfolio Manager, and
joined AllianzGI in 1984. He has covered
many sectors within technology, as well as the
electrical equipment and multi-industry areas.
Since 1990, he has had extensive portfolio
responsibilities for technology and capital
goods stocks and has managed U.S. and Global
portfolios with Walter Price. In 1994 Huachen
became a principal of AllianzGI. Prior to
AllianzGI, he worked for Intel Corporation from
1980 to 1983, where he had responsibilities for
semiconductor process engineering.
Walter is a CFA charter-holder, Managing
Director and Portfolio Manager on the AllianzGI
technology team in San Francisco. He received
his BS with Honours in electrical engineering
from Massachusetts Institute of Technology
(M.I.T) and his BS and MS in management
from the Sloan School at M.I.T. In 1971 he
joined Colonial Management, an investment
advisory firm in Boston, where he became a
senior analyst responsible for the chemical
industry and the technology area. Walter joined
AllianzGI in 1974 as a senior securities analyst
in technology and became a principal in 1978.
Since 1985, he has had increasing portfolio
responsibility for technology stocks and has
managed many technology portfolios. Walter
is a current Director and past president of the
M.I.T. Club of Northern California. He also heads
the Educational Council for M.I.T. in the Bay Area
and is a past Chairman of the AIMR Committee
on Corporate Reporting for the computer and
electronics industries.
22
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Michael Seidenberg CFA
Danny Su
Director,
Portfolio Manager/Analyst
Director,
Portfolio Manager/Analyst
Michael is a portfolio manager/analyst and a
director with AllianzGI, which he joined in 2009.
He received his BS in Business Administration
from the University of Colorado in 1990 and
his MBA from Columbia Business School in
1996 with concentrations in Finance and
Accounting. He began his investing career with
Citadel Investment Group in 2001 covering
the software space. Over the next eight years
Michael broadened his coverage list to include
a variety of technology sectors. Prior to joining
AllianzGI in Sept 2009, he worked at a number of
hedge funds including Pequot Capital and Andor
Capital.
Danny is a portfolio manager/analyst and a
director with AllianzGI, which he joined in
2000. He received his dual BS in Electrical
Engineering and Economics from M.I.T. in 1993.
He received his Master of Management degree
from Kellogg Graduate School of Management
at Northwestern in 1998. From 1993 to 1996,
he was a business analyst with McKinsey
& Company in Hong Kong. He has global
responsibility for hardware, semiconductor,
semiconductors capital equipment, and contract
manufacturers.
A laser drill, manufactured by IPG Photonics, can be used to drill almost any material
23
Overview Allianz Technology Trust PLC
Insights
24
25
Insights Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
game
changer
How artificial intelligence
will transform roads, homes
and industry.
Chess has become the battleground for human
versus robot, and at the start of December
2017, robots took a significant leap forward.
AlphaZero, the artificial intelligence-powered
robot created by Google-owned DeepMind,
beat the world’s best chess-playing computer
program. It taught itself to play in under four
hours. The best human chess players can no
longer compete.1
However, while this shows the capability of
artificial intelligence (AI), its reach is now
far broader. The first truly autonomous car,
Waymo, has been let loose on the streets of
Phoenix, Arizona with no-one at the wheel, but
AI is already in the cars we drive, preventing
accidents and improving the driving experience.
It is in living rooms, with consumer-AI options,
such as Amazon’s Echo. It is increasingly being
used in medicine and in finance.
AI is not new, but it has historically been difficult
to collect the data that it needs to learn. This
data-gathering is now widespread, and as more
data is collected the limits of AI’s potential
are extended. Computers have become
sufficiently powerful to analyse these huge data
sets and uncover patterns within them. In a
26
recent report for the Harvard Business Review,
Massachusetts Institute of Technology professors
Erik Brynjolfsson and Andrew McAfee said: “The
most important general-purpose technology
of our era is artificial intelligence, particularly
machine learning (ML).” Increasingly, machines
have the ability to keep improving their
performance without human intervention,
learning to perform tasks on their own.
Waymo started out as Google’s self-driving car
project and is the culmination of seven years
of work and more than $1billion in investment.
Widespread use of self-driving cars and home
robots may still be some way off, but AI is already
making its presence felt in everyday life. Most
new cars, for example, have some element of AI.
Sensors ensure that the car brakes automatically
should objects get too close, or track the car’s
mechanics and contact the garage if something
goes wrong.
convenient. In our portfolio, we hold NVIDEA,
which looks for patterns in data, which can
then be applied to anything from driving cars to
recommendations on websites.
Consumer applications have also become
increasingly widespread. Alexa, the smooth-
talking robot who fronts the Amazon Echo
is a feature of many households. It has been
suggested that she could bring the U.S.
e-commerce giant $10 billion of revenues
by 2020.2 Google Translate, once a source
of amusement to anyone with a more than
rudimentary command of foreign languages,
has harnessed Internet data using a new
algorithm. Rather than simply taking each
word and translating it, Google uses AI to build
a diagram of words and meanings. The new
system looks at the connection between words
to build a translation tool that some say is now
almost indistinguishable from a good translator.
They can interact with intelligent maps, which
can take account of traffic conditions. Intelligent
maps are likely to be a key application, as
consumers look for maps that constantly update,
taking account of traffic signals and accidents. AI
will increasingly be used to make our lives more
Google claims that the new algorithm reduces
translation errors by around 60%. Translators
suggest that the new system is more effective
for certain languages; it is better at translation
between Indo-European languages than it is at
Chinese-English, for example. Others suggest
27
Insights Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
that the system may need additional sensory
inputs – a video of the relevant phrase perhaps
– before it achieves genuinely naturalistic
language. Nevertheless, the progress made to
date has implications for certain professions and
for education, but also for effective cross-border
communication.
AI has important industrial and social uses.
For example, the oil and gas industry is able
to gather far more data on seismic waves in a
potential drilling location, which can then be
compared to data from elsewhere around the
world, enabling geologists to build a better idea
about the right places to drill.3
In healthcare, big data and machine learning
potentially revolutionises diagnostics, giving
doctors far greater insight. For example,
technology can now diagnose tumours that
radiologists might miss with the naked eye.
Computers can be trained by looking at millions
of photos, far more than a radiologist could ever
observe, and therefore pick up on abnormalities
at an earlier stage. This could change the
profession, allowing radiologists to undertake
more detailed, value-added work.
Other healthcare innovations include remote
monitoring of patient statistics such as blood
pressure, weight and heart rate. We may also
see increasing personalisation of health powered
by AI, which can analyse genetic data, looking
at how it interacts with environment to build a
better understanding of why people become
ill. It should also help understand what types of
medicine work for different types of people. AI
may become vital in helping stretched health
care systems reform.
AI also promises to transform areas such as
finance. It should help companies build a
more nuanced understanding of credit risk,
for example, which will influence the pricing
of loans or life insurance. Financial technology
groups are harnessing big data to steal a
march on the banks, improving their pricing for
consumers.
With productivity the watchword for
policymakers, AI also offers the means for
28
Unless you have direct exposure to groups like
DeepMind, you have no idea how fast—it is
growing at a pace close to exponential. The risk
of something seriously dangerous happening is
in the five-year timeframe. 10 years at most.” He
believes there should be regulatory oversight, at
a national and international level, to control the
use of AI and ensure that the proper checks and
balances are in place.
For us, as investors, it is about making sure we
understand the transformative effect of AI, and
those who benefit from its growth. It promises to
revolutionise a disparate range of industries and
we want to make sure we are on the right side of
the trend.
1 The Guardian, December 2017. 2 CNBC, March
2017. 3 Forbes, May 2015.
companies to improve their output. Companies
such as Google and Microsoft are starting to
put analytics capability in the cloud. With all
products of this type, users can ask the analytical
engine various questions, and the engine can tell
them the best way to solve that problem. It may
flag that a company is seeing significant sales
growth in a specific country, or for a specific
product line and adding sales people would be
beneficial to revenue growth. As such, it can
enable companies to be more targeted in the
way they deploy their resources.
AI keeps developing. In May 2017, researchers at
Google Brain announced that they had created
AutoML, an AI capable of creating its own AI.
This uses an approach called ‘reinforcement
learning’. AutoML managed to build the
equivalent of a ‘child’, who could outperform its
human counterparts on a range of tasks.
Experts continue to warn about the dangers
of AI. Elon Musk wrote on Edge.org: “The
pace of progress in artificial intelligence (I’m
not referring to narrow AI) is incredibly fast.
29
Insights Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
THE ROBOT
REVOLUTION
From science fiction into the mainstream:
robots, cobots and the rise of automation.
30
and 10% by value compared to the same 9
month period in 2016. Companies such as Tesla
are setting the benchmark for their competitors.
The company recently bought German firm
Grohmann Engineering, which specialises in
automated processes. Tesla CEO and Chairman
Elon Musk has a vision of complete automation
in the building of cars, with the aim of getting
past the limits of human speed. If he succeeds,
it could present as great a challenge to the
automotive sector as Tesla’s electric cars.
Robots are also required to support new
industries. For example, the growth of
e-commerce is putting increasing pressure on
distribution networks. Warehouses must be run
more efficiently, and robots are an important
Necessity is the mother of invention. The best
technology ideas address the biggest problems –
climate change, productivity, security. This year,
the Company made its first investment in the
field of specialist robotics. This sector, once small
and experimental, has seen a notable shift and
is now addressing some pressing concerns for
governments and companies.
China is the largest market for industrial robots,
accounting for over 25% of global sales.1 For the
Chinese government and Chinese companies,
robots address the very real and pressing
problem of rising wages. Wages in China are now
higher than in the newest member of the EU,
Croatia.2 The median monthly wages in Shanghai
have hit $1,135 as workers have sought to share
the country’s rapid economic growth. No longer
can China lay claim to be a centre of low cost
manufacturing; that title has been seized by
countries such as Vietnam or the Philippines.
China is progressively moving its economy to
a more consumer-led model, but this does
not mean it can abandon its manufacturing
engine in the short-term. To remain globally
competitive, Chinese companies have had to
embrace robots. This helps create efficiency and
keep costs lower. The government has made
robot involvement in manufacturing a clear
policy priority with its ‘Made in China 2025’
initiative and subsequent Robotics Industry
Development Plan. The robotics plan is a five-
year program to grow the country’s industrial
robotics sector.
However, it is not just in China that demand for
robots is increasing. There have been increasing
examples of ‘re-shoring’, companies bringing
manufacturing back into developed countries
rather than getting it done more cheaply
offshore. This may be because the economics
of offshore manufacturing no longer work, or
because there is increased scrutiny of supply
chains, or because greater technical know-how
is needed.
This also creates increasing demand for robotics
to reduce costs and improve efficiency to
combat higher labour costs. For the first nine
months of 2017, North America saw 27,294
orders of robots with a value of almost $1.5
billion.3 This equates to growth of 14% by units
31
Insights Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
part of the race to automate fulfilment and
meet delivery goals. Robots are part and parcel
of the big data and artificial intelligence (AI)
revolutions. Robots use ‘deep learning’, gathered
from big data to train and adapt to new tasks.
Another significant problem that robots are
being used to address is that of an ageing
population. It is notable that many of the early
developments in robotics have emerged from
Japan, which has among the most challenging
demographics in the world. The country has
little inward migration and a declining working
age population to support its elderly. A quarter
of Japan’s population is over 65 and the
government estimates a further 2.5m skilled
care workers will be needed by 2025.4
Robotics presents a possible solution to the
thorny issue of how to care for the elderly in a
country where there are fewer young people.
There are now robots to address loneliness, such
as Chapit, who can chat to elderly, bed-bound
people. There are robots for lifting people in
and out of wheelchairs or beds. There are even
robots who can entertain a room full of people,
leading quizzes or exercise classes. Today,
Japan is at the extreme end of a demographics
problem, but many developed countries,
particularly in Europe, are likely to experience
similar difficulties. Robots remain a creative
solution to a large and growing problem.
To date, the robot market has been dominated
by a small number of Japanese and European
companies. The trend had been well-explored
by investors, and prices for robotics companies
were often high historically. There was also
a potential threat from emergent Chinese
companies, supported by a government keen
to harness the trend. Alternatively, it was the
familiar technology names, for whom it was
a relatively small part of their business mix.
However, this is changing. New companies are
emerging in exciting and niche areas and this
has peaked our interest.
Robots are not homogenous. There are physical
robots that do a task. These are building
the iPhone in China, for example, and are
widely used by companies to reduce their
manufacturing bills. There are two main types
of physical robot: The first are robots that do the
whole task. These are usually static and have one
function. These will have a precise task and do
not adapt.
.
m
o
c
k
c
o
t
s
r
e
t
t
u
h
S
32
Then there are multi-functional robots,
affectionately known as ‘cobots’, which are
designed to collaborate with humans to enable
tasks to be done faster or more efficiently. This
type of robot can move around and may require
less precise movements than a robot on the
production line, but it will need to be more
flexible and may have the ability to be trained on
different tasks.
Cobots often meet with less resistance than
other types of robot, because they help rather
than replace humans. Companies have found
that complete automation often plays badly with
their customers. For example, train companies
that have entirely automated ticket sales have
met with anger and frustration; fully automated
helplines have also seen customer resistance.
Retaining a human element is therefore
important in some industries and services.
There is another type of robot that looks set to
deal with clerical tasks, such as healthcare or
insurance claims, changing a plane reservation
or a supplier. The popular model to date has
been to work out what tasks need to be done
and outsource to low cost centres, such as the
Philippines or India, where they have language
skills. However, increasingly companies
are looking at those tasks, applying AI and
automating them. It could be by voice, or on the
web. This gives better customer service and at a
lower cost.
Some of the companies involved in this are
familiar - Google, Microsoft and Amazon,
for example, who are helping to move voice
recognition technology into the cloud. The
Company also owns Blue Prism, which allows
companies to do a lot of this AI on their own
premises.
Robots are moving into the mainstream,
addressing large and complex problems, rather
than simply being a sci-fi staple. We believe this
will be an important area of investment in the
next few years, as new companies emerge to
exploit the trend.
1 Executive Summary World Robotics 2016
Industrial Robots. 2 Forbes, August 2017.
3 ZDNet, December 2017. 4 Financial Times,
October 2017.
33
.
m
o
c
k
c
o
t
s
r
e
t
t
u
h
S
/
v
o
t
o
p
o
K
y
e
g
r
e
S
l
Insights
What’s going on with TV 2.0?
The way we consume entertainment is
changing. The TV is, for many, no longer the
focal point of a living room, and the idea of
tuning into favourite shows at a designated
time is alien to younger generations. This shift
to ‘on demand’ and subscription entertainment
threatens to disrupt profoundly the whole TV
based value chain of advertising agencies, TV
broadcasters, and entertainment studios. There
will be stark winners and losers from the trend.
34
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 A cursory study of the average family home will
show these changes in action. The television
has become less important, with mobile devices
streaming videos from the internet an increasing
point of interaction. In percentage terms, data
from December 2017 shows that traditional TV
viewing by 18-24 year-olds is down by 15.7%
year-on-year and has now fallen by 43.6% since
2012.1
At the same time, our TV-watching is becoming
less focused. People will often watch television
while also surfing the internet, browsing social
media or doing online shopping. This is bad
news for TV advertisers who rely on consumer
engagement and helps make the argument for a
move to digital advertising.
This changes the landscape of entertainment
and has left the industry in a state of flux. To
date, powerful studios and rights holders were
beholden to broadcast and cable networks
to distribute their content. Those broadcast
and cable networks could command high
fees because there was no other way for the
entertainment producers to distribute their
content. This is changing.
A recent report by the Boston Consulting Group
said: “Powerful digital attackers (among them
Amazon, Apple, and Google) are emerging
from outside the traditional TV ecosystem, and
they are armed with fundamentally different
business models and motivations to engage with
consumers via video services.
Many in the industry continue to believe that the
TV industry will evolve with no major disruptions
to existing relationships and with little shift in
share. Our view of the future of television is
quite different. The disruption of the TV industry
is coming, and—as we’ve seen in other media
industries—it will be deeply rooted in the
changing role of distribution as a critical driver
of value.”2
It believes that the industry is shifting from a
model based on incentives that are aligned
across the value chain to one in which
disintermediation is not only possible but
probable. Companies are changing in response,
with some working across content creation,
aggregation and distribution. Those who are
stuck in old patterns, or who haven’t been quick
enough to change, are already being left behind.
For some time, ‘Digital over-the-top’ (Digital
OTT) companies seemed to pose little threat
to traditional TV. Streaming large videos was
unrealistic with low bandwidth and poor
35
Insights network capacity. This lulled some groups into a
false sense of security. As the infrastructure has
caught up, companies such as Netflix or Amazon
Prime Video are gaining market share from
traditional cable and satellite TV companies.
Boston Consulting Group expects this part of
the market will have doubled from 2014 to
2018, and to command more than $30 billion in
revenues at that point.
This is bad news for traditional pay TV providers.
US consumers are dropping pay TV, with the
number of households with no pay TV service
rising every year. In the meantime, their Digital
OTT rivals have deep pockets and are picking
up choice content. For example, the National
Football League’s Thursday Night game recently
moved from Twitter to Amazon, while Twitter
has retained a multi-year agreement to bring
live football programming to its service.
Increasingly, innovative and challenging
programming is emerging from these
disruptors. Netflix can command big-name stars.
In 2018, its new show Maniac will star Emma
Stone and Jonah Hill. It also won two golden
globes for The Crown and as well as achieving
another 27 awards at various award ceremonies.
These groups have shown they can command
large audiences with strong and credible
content.
This changes the rules in a number of respects.
It issues a huge challenge to cable and satellite
networks to make sure they are giving people
the content they want and in a format they
want. They no longer have a monopoly on high
viewer numbers, which is vitally important for
advertisers. Increasingly, these advertisers can
get the audiences they want from the alternative
providers.
At the same time, approximately 50% of online
viewing occurs in ad-free or ad-light formats.2
It would appear that audiences are increasingly
willing to pay extra to have an ad-free service.
Advertising through a digital group rather than
a pay TV provider is far more targeted. A decade
ago, for example, advertisers had little insight
into who was watching and responding to their
output, now they can get a better idea about
the demographic profile of the audience, their
36
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 interests and their responsiveness. This means
they can be laser-targeted on the right audience
for their messaging.
This could go one step further with augmented
reality options. Artificial intelligence allows smart
devices to monitor an individual’s interaction
with the virtual environment. Chinese group
Baidu recently ran an advertising campaign,
using an augmented reality offer called DuSee.
People can use Baidu’s image recognition
technology on a bottle of L’Oreal’s shampoo,
sparking pink blossoms to pop up on the screen.
Digital is now around half of advertising
revenues, compared to just 10% as little as 10
years ago. The Digital advertising market is now
worth around $220bn).4
Much of this digital advertising has come at
the expense of TV advertising. In the UK, for
example, digital advertising is now the only area
seeing growth apart from cinema.6 Companies
are questioning the value of traditional
advertising, with significant consequences for
‘old school’ advertising and TV companies.
This change in the way people make and
consume entertainment has some obvious
casualties. Pay TV providers that continue
to push over-priced bundles on unwilling
consumers are likely to find their business under
threat, for example. It is more difficult to identify
the beneficiaries. Groups such as Facebook and
Google are generally on the right side of the
trends mentioned above, but a lot of technology
groups are going for the same advertising
markets. At some point this will affect returns
and growth rates will have to moderate.
The real winner may be the viewer. While
companies have cut back on administrative
costs, they have begun to recognise that the
real differentiator between them and their
competitors is strong content. This means
budgets for original programming are rising
fast. Viewers are getting better, higher quality
programmes, with more choice.
1 Marketingcharts.com, December 2017.
2 The Boston Consulting Group, June 2016.
3 Recode.net, July 2017. 4 The Drum, July 2017.
37
Insights Allianz Technology Trust PLC
Investment
Managers’
Review
38
Apple’s flagship iPhone X was released in November 2017
39
Investment Managers’ Review Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Investment Managers’ Review
Economic and market backdrop
The concerns over the health of the global
economy that had weighed on investor
sentiment for much of 2016 dissipated in 2017.
For much of the year, the global economy
experienced a synchronised economic upturn,
led by the US. This was supportive for corporate
earnings, which in many cases, remained robust.
Financial markets weathered three quarter-point
rises in interest rates, with monetary policy
remaining expansive around the globe. Towards
the end of the period under review, concerns
over the withdrawal of loose monetary policy
had started to weigh on sentiment.
The technology sector
Technology companies have shown real strength
in 2017. This strength has had multiple causes:
a search for structural growth in a low growth
world, improving global growth and the onward
march of technology into new sectors and
industries. However, above all, the technology
sector has been driven higher by earnings
growth.
The Dow Jones World Technology Index (sterling
adjusted, total return) was up 31.5% over the
12 month period to 30 November 2017. This
strength has been widely shared, with most
underlying technology sectors participating in
the growth. Earning growth has been significant
(89% year on year for companies in the portfolio)
and, in some cases, materially ahead of
expectations.
This growth has been seen outside the headline
sectors. Even in traditionally slower growth areas
such as semiconductors, for example, supply
and demand moved into balance after some
significant consolidation, improving pricing for
much of 2017. This improved earnings, which in
turn saw share prices appreciate.
The strength was also not confined to the US.
The Asian technology sector had a buoyant
2017, with companies such as Alibaba and
Tencent showing that technology innovation
is now firmly a global phenomenon. Chinese
stocks were some of the best in the market.
Many technology companies continue to sit
on significant cash balances. Research from
40
Investment Managers’ Review (continued)
Moody’s showed that Apple, Microsoft, Google
parent Alphabet, Cisco Systems and Oracle are
set to hold a cumulative $679 billion in cash, up
16% over 2016. Apple’s $285 billion cash balance
represented nearly 15% of total non-financial
corporate cash held by US Companies.1
They may also be significant beneficiaries of the
changes in the tax rules relating to repatriating
cash balances held offshore. At the moment,
these remittances are subject to high tax rates,
but this will change under the US administration’s
new tax proposals. However, elsewhere
technology companies came under increasing
scrutiny for their tax arrangements. Many now
recognise the need to make concessions to
ensure they can continue to trade freely.
Technology developments over the year
New developments kept technology companies
firmly in the headlines. In early November, and
amid much hype, the Apple iPhone X went on
sale - a celebration of 10 years since the launch
of the first iPhone. While face recognition
technology captured the imagination, it also
addressed some of the issues with existing
iPhones - the glass is harder, the battery life is
better and there are new applications. Whether
it will be enough to support the upgrade cycle is
yet to be seen.
The biggest headlines were reserved for
cryptocurrencies. Although they have been
around since 2009, interest hit fever-pitch in
2017, with around 900 digital currencies now
available. The technology appears to hold
significant promise - in the long term its unique
ledger may have a place, but its uses to date have
been limited, and largely focused on criminality.
The Bitcoin price was up over 4,500% for the year
but has since fallen heavily.
Robotics has become more widespread, with
companies increasingly seeking to mechanise
to offset rising wages, particularly in emerging
markets. At the same time, artificial intelligence
(AI) has become a more important part of daily
lives - from driverless technology in cars, to the
Amazon Echo, it has become a feature in homes
across the globe.
Tesla launched its Model 3 in July after a number
of production delays. It brought the reality of
41
Investment Managers’ Review Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Investment Managers’ Review (continued)
a mainstream, affordable electric vehicle one
step closer. Hurdles remain. In particular, battery
supply is a notable challenge, but new factories
are being built to address this.
Portfolio analysis
Micron and Square were the top contributors to
the portfolio for the 12 months to 30 November
2017. There has been a perception that
technology outperformance has largely been
generated by the FANGs (Facebook, Amazon,
Netflix and Google). While this has a kernel of
truth – these stocks have generally performed
well this year – they have not been the primary
driver of relative and absolute performance in
the fund.
Our semiconductor holdings have been a
notable contributor to overall performance.
Micron has seen a significant appreciation in its
share price, on the back of strong earnings and
a low starting price. The management team
has managed the group’s inventory well, which
has helped to contribute to a stronger pricing
environment for the company. Important too
were the semiconductor holdings we didn’t
own, notably Qualcomm, which saw a series of
setbacks including clashes with the regulatory
authorities over its patent licensing business, a
spat with Apple and a (to date) failed acquisition
for NXP Semiconductors.
Having seen unexciting growth in recent years,
the semiconductor industry is being given a new
lease of life by the demand from developments
in software-as-a-service, AI and the connected
car. These innovations need high performance
processing chips to manage large volumes
of data. The sector has seen considerable
consolidation, which has also helped pricing.
Other notable holdings in the portfolio
benefiting from this trend are Lam Research,
Broadcom and Applied Materials.
Square was our second strongest contributor
to overall performance on an absolute basis.
We identified this company relatively early in
its lifecycle. It started as a payment processing
company. It evolved a system allowing small
businesses such as hairdressers or cab drivers
to accept credit card payments. It has now
42
Investment Managers’ Review (continued)
transitioned from hardware to software.
Increasingly those same businesses are
starting to use Square’s software to manage
other aspects of their business – staffing
costs, inventories. It allows far more efficient
business operations for small merchants. It
has also recently started to offer small loans to
businesses.
During the year, we made our first investments
in robotics companies, building positions in
IPG Photonics and Teradyne. Both contributed
positively to the portfolio’s performance over
the period. In previously low wage economies,
such as China, wages have risen significantly,
threatening corporate profitability.
Companies are increasingly seeking to retain
competitiveness in the face of mounting wages
and robotics has proved an effective means to
do this. Equally, where companies are seeking to
repatriate manufacturing back to the US, they will
also need robotics capabilities to keep costs low.
Teradyne makes small robots, nicknamed ‘co-
bots’. They are not designed to replace humans,
but to remove some of the repetitive tasks –
polishing metal or attaching two components
together, for example. The robots can be trained
to perform different tasks and are designed to
help humans complete tasks more quickly and
efficiently. IPG Photonics makes lasers, used
in the manufacturing process for cutting and
welding parts for cars, planes and electronics.
Elsewhere among the top performers on an
absolute basis in the portfolio were some more
familiar names; Amazon.com, Facebook and
Samsung Electronics. In most cases this was a
function of earnings, which continued to support
the relatively high price to earnings multiples
of these stocks. Apple also saw encouraging
returns, having seen little share price movement
in 2016. The reception for the iPhone X is still
hard to read, but investors had become overly
gloomy.
Although Sophos was a positive contributor to
absolute performance, it was a more difficult
year for our cyber security holdings. This came in
spite of some notable data breaches, including
some at major technology companies. Holdings
in Palo Alto, FireEye and CyberArk Software
Square was a strong
contributor to portfolio
performance. As well
as payment processing,
businesses are using Square’s
software to manage other
aspects of their operations,
such as staffing costs and
inventories.
43
Investment Managers’ Review
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Investment Managers’ Review (continued)
detracted from the overall performance of the
Company. A lot of the companies are currently
going through business model transition,
moving from selling hardware and licenses to
a subscription service where customers pay
fees. In the long-term, this should be a more
sustainable business model, and revenues
should become more predictable, but in the
interim, this has created volatility in earnings.
A secondary problem is that some groups
have been weak in executing this transition
and investors have lost faith. Valuations were
already relatively high and in the end, were
not supported by business reality. Similar
weakness has been seen in LendingClub, the
largest detractor from overall performance.
Management has executed poorly on the
group’s business plan, in spite of some
compelling opportunities.
Overseas holdings
It has become increasingly clear in recent years
that the US has no monopoly on innovation.
Some of the most innovative and fastest
growing companies are to be found outside the
US, particularly in Asia. Chinese internet stocks
have had a particularly strong run, notably
Alibaba and Tencent, though investors have
started to grow concerned about valuations.
We pared back our weighting to China in the
wake of the US Election, believing that there
was too much uncertainty as to how the
new relationship between the US and China
would work. This has hurt performance – our
underweight position in Tencent was the largest
detractor from overall returns on a relative basis
for the Company. We rebuilt positions in China
early in 2017 but pared some again late in the
year after great performance and some concern
about difficult comparisons in the first half of
2018.
Absolute performance
The Company delivered a very strong absolute
gain of 41%. The primary drivers for the
portfolio’s absolute performance include
positions in some high-growth software
companies, as well as robust performance
from semiconductor and robotics stocks. These
44
the sector. New tax rules will allow companies to
repatriate cash balances held offshore at lower
tax rates. Cash repatriation can lead to larger
cash returns to shareholders of large technology
companies, and it could spark M&A activity in
the tech sector, which should benefit smaller
companies. Additionally, companies across the
economy will likely spend at least some of the
tax savings to invest in their businesses. We
expect more spending to flow to technology
companies that offer innovative products and
services designed to help businesses increase
productivity and improve efficiency. In our view,
these factors should lead to continued strong
earnings growth for technology companies.
1 Moody’s, November 2017.
companies performed well due to higher
demand for innovative technologies and
components that enable the technologies, which
led to consistently strong earnings growth.
Relative performance
A final note on relative performance: this year we
outperformed the Dow Jones World Technology
Index (sterling adjusted, total return), with
the Company returning 41.0% against an
index performance of 31.53%. Although our
investments are not driven by the weightings of
individual companies in the benchmark, we are
aware of the benchmark and use it to measure
the success of our performance. While many of
the companies mentioned above contributed
on an absolute and relative basis, stocks such as
Amazon and Netflix are not currently part of our
benchmark, and have therefore helped overall
performance.
Outlook
While some investors assume technology
companies may only see a small benefit from US
tax reform, we believe this can significantly help
45
Investment Managers’ Review 46
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Top 20 Holdings
Sector
Headquarters
Value of holding
Percentage of portfolio
1
Apple
2
Amazon.com
Technology, Hardware Storage & Peripherals
Internet & Direct Marketing Retail
California, USA
17,553,000
5.8%
Washington, USA
17,167,000
5.6%
Apple is a leading global consumer electronics
company, making personal computers, software, mobile
communications devices, and networking solutions. Its
market capitalisation is now £889 trillion, with revenues of
almost $230bn in 2017. Over one billion people have bought
an iPhone, its flagship product, since it launched a decade
ago.
Amazon.com continued its disruption of the retail
marketplace in 2017. The online retailer sells the majority of
its products directly, but has also built up a raft of third-party
sellers on its site. Investors have continued to underestimate
its influence and its earnings beat expectations in 2017.
Amazon is also well positioned to capitalise on the secular
trends of cloud computing and digital media initiatives.
3
Micron Technology
4
Microsoft
Semiconductors & Semiconductor Equipment
Idaho, USA
16,642,000
5.5%
Software
Washington, USA
14,808,000
4.9%
Micron produces many forms of semiconductor devices,
including dynamic random access memory, flash memory,
and solid-state drives. Its consumer products are marketed
under the brands Crucial Technology and Lexar. Micron
and Intel together created IM Flash Technologies, which
produces NAND flash memory. Micron is ranked among the
Top 5 Semiconductor producing companies in the world.
Microsoft develops, manufactures, licenses, and supports
a wide range of software products for computing devices.
Since Satya Nadella took over as CEO in 2014, the company
has focused less on hardware and more on software and
cloud computing. In the quarter to 30 September, it reached
its goal of a $20 billion revenue run rate for its commercial
cloud offering.
47
Investment Managers’ Review Top 20 Holdings (continued)
Sector
Headquarters
Value of holding
Percentage of portfolio
5
Square
6
Facebook
IT Services
California, USA
12,972,000
4.3%
Internet Software & Services
California, USA
12,014,000
3.9%
Square helps different types of merchants run their business
better - from secure credit card processing to faster access
to cash. It makes software and hardware payments products,
including Square Register and Square Reader. It also has
a number of services for small business, such as Square
Capital, a financing program, and Square Cash, a person-to-
person payments service, plus Square Payroll.
Facebook hit more than 2 billion monthly active users in 2017
and is increasingly monetising these through advertising.
It has faced criticism this year over its dissemination of fake
news, hate messages and violence, but is now working hard
to combat these problems. It continues to innovate with
virtual reality and Oculus, and also acquired tbh, a social
media app for US high school students, during the year.
7
DXC Technology
8
Arista Networks
IT Services
Virginia, USA
9,291,000
3.0%
Communications Equipment
California, USA
8,971,000
2.9%
Formed during the year from the merger of Computer
Sciences Corporation (CSC) and the Enterprise Services
business of Hewlett Packard Enterprise, DXC Technology
provides information technology and consulting services to
businesses and governments. It operates in more than 70
countries.
Arista Networks (previously Arastra) is a computer
networking company which designs and sells multilayer
network switches to deliver software-defined networking
(SDN) solutions for large datacentre, cloud computing,
high-performance computing and high-frequency trading
environments. It exceeded $1bn in global sales during the
year, and reported earnings ahead of market expectations.
48
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Top 20 Holdings (continued)
Sector
Headquarters
Value of holding
Percentage of portfolio
9
Palo Alto Networks
10
Alphabet Inc
Communications Equipment
Internet Software & Services
California, USA
8,628,000
2.8%
California, USA
8,546,000
2.8%
It was a more difficult year for security groups in spite of
some major data breaches. In particular, the transition to a
subscription model and resulting weaker earnings has held
back share prices in 2017. Nevertheless, security remains
a huge problem for individuals and corporations. Palo
Alto Networks provides enterprise-level next-generation
firewalls, plus a range of security features for networks.
Alphabet is the parent company of Google, the world’s
leading search engine. The group remains a primary
beneficiary of the secular shift to online spending. It also
owns YouTube. During the year, Google launched AutoDraw,
a tool using artificial intelligence and machine learning to
recognise users’ drawings, and added ‘Family Groups’, which
lets users group their family’s individual Google accounts.
11
Samsung Electronics
12
IPG Photonics
Technology, Hardware Storage & Peripherals
Electronic Equipment Instruments & Components
Seoul, South Korea
8,514,000
2.8%
New York, USA
8,464,000
2.8%
Samsung Electronics is a South Korean multinational
electronics company, and is the world’s largest
manufacturer of mobile phones and smartphones.
Significant improvements in its smartphone range have
seen it emerge as a major rival to Apple in recent years.
The company also manufacturers televisions, cameras, and
electronic components.
This year saw the Company build its first holdings in
robotics companies. IPG Photonics makes lasers, used in the
manufacturing process for precision cutting and welding
parts for cars, planes and electronics. It is fulfilling a need
for more sophisticated manufacturing processes. It was
founded in 1990 by physicist Valentin P. Gapontsev, seen as
a pioneer in the field of fibre lasers.
49
Investment Managers’ Review Top 20 Holdings (continued)
Sector
Headquarters
Value of holding
Percentage of portfolio
13
ServiceNow
14
Teradyne
Software
California, USA
8,243,000
2.7%
Semiconductors & Semiconductor Equipment
Massachusetts, USA
7,981,000
2.6%
ServiceNow offers everything-as-a-service cloud computing,
including the enterprise platform-as-a-service management
software for human resources, law, facilities management,
finance, marketing, and field operations. ServiceNow
specialises in IT Service Management, IT Operations
Management and IT Business Management applications and
provides forms-based workflow application development.
Teradyne is a new holding in 2017. It makes small robots,
nicknamed ‘co-bots’. They are not designed to replace
humans, but to remove some of the repetitive tasks
– attaching two components together, for example.
Adaptable, the robots can be trained to perform different
tasks and are designed to improve the efficiency of the
manufacturing process.
15
Lam Research
16
Paycom Software
Semiconductors & Semiconductor Equipment
California, USA
7,754,000
2.5%
Software
Oklahoma, USA
6,946,000
2.3%
Lam Research makes semiconductor processing equipment
used in the fabrication of integrated circuits. Its products
are used primarily in front-end wafer processing but also for
back-end wafer-level packaging and related manufacturing
markets. It helps chipmakers build smaller, faster, more
powerful devices. AI development and Bitcoin mining
increased demand for Lam Research’s products in 2017.
Paycom is a US online payroll and human resource
technology company that provides functionality and data
analytics that businesses need to manage the complete
employment life cycle. During 2017, it continued to make
progress with smaller companies (50 to 2,000 employees),
often at the expense of larger competitors. This saw it beat
its own guidance and market expectations.
50
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Top 20 Holdings (continued)
Sector
Headquarters
Value of holding
Percentage of portfolio
17
Applied Materials
18
Workday
Semiconductors & Semiconductor Equipment
California, USA
5,815,000
1.9%
Software
California, USA
5,758,000
1.9%
Applied Materials supplies equipment, services and software
for manufacturing semiconductor (integrated circuit)
chips for electronics; flat panel displays for computers,
smartphones and televisions; and solar products. It also
supplies equipment to produce coatings for flexible
electronics and packaging and is benefiting as semiconductor
makers upgrade to new production techniques.
Workday is one of the largest and fastest growing providers
of human capital management (HCM) software solutions,
delivered via a software-as-a-service model. HCM suites
automate core Human Resource functions, such as personnel
records, benefits administration, and compensation but
can also offer workforce management and performance,
recruiting, compliance and learning management.
19
Sophos
20
Baidu
Software
Oxfordshire, United Kingdom
5,689,000
1.9%
Internet Software & Services
Beijing, China
5,131,000
1.7%
Security supplier Sophos is the Company’s largest UK
holding. It develops products for encryption, network
security, email security, mobile security and unified threat
management, aimed at enterprises with 100 to 5000
employees. In February 2017, the group bought Invincea, a
software company that provides malware threat detection,
prevention, and pre-breach forensic intelligence.
Chinese web services group Baidu is one of the world’s
largest internet companies, and a leader in artificial
intelligence. It has the world’s second largest search engine,
after Google, but also has Baidu Brain, Baidu Cloud and Baidu
Music. It held its first AI developer conference during the
year, and also announced a partnership with AMD to expand
its artificial intelligence capabilities.
51
Investment Managers’ Review Investment Portfolio
at 30 November 2017
Geographical breakdown
United States
80.6%
China
United Kingdom
Republic of Korea
Germany
Netherlands
Switzerland
Spain
Japan
Russian Federation
5.4%
4.1%
2.8%
1.6%
1.2%
1.2%
1.1%
1.0%
0.9%
The weightings for each country are rounded to the nearest tenth of a percent; therefore, the aggregate weights may not equal 100%.
Sector breakdown
Software
Semiconductors & Semiconductor Equipment
Internet Software & Services
Technology Hardware Storage & Peripherals
IT Services
Internet & Direct Marketing Retail
Communications Equipment
Electronic Equipment Instruments & Components
Automobiles
Health Care Technology
Consumer Finance
Professional Services
25.0%
19.2%
15.1%
11.0%
9.9%
6.6%
5.8%
4.2%
1.0%
0.9%
0.8%
0.4%
The weightings for each sector are rounded to the nearest tenth of a percent; therefore, the aggregate weights may not equal 100%.
52
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Investment Portfolio (continued)
at 30 November 2017
Investment
Sector#
Sub-sector#
Country
Fair Value
£’000
% of
Portfolio
Apple
Technology, Hardware Storage & Peripherals
Technology, Hardware Storage & Peripherals
United States
Amazon.com*
Internet & Direct Marketing Retail
Internet & Direct Marketing Retail
Micron Technology
Semiconductors & Semiconductor Equipment
Semiconductors
Systems Software
Data Processing & Outsourced Services
United States
Microsoft
Square*
Facebook
Software
IT Services
Internet Software & Services
Internet Software & Services
DXC Technology
IT Services
IT Consulting & Other Services
Arista Networks
Communications Equipment
Communications Equipment
Palo Alto Networks
Communications Equipment
Communications Equipment
Alphabet Inc.
Internet Software & Services
Internet Software & Services
Top ten investments
126,592
41.5
Samsung Electronics
Technology, Hardware Storage & Peripherals
Technology, Hardware Storage & Peripherals
South Korea
IPG Photonics*
Electronic Equipment Instruments & Components
Electronic Manufacturing Services
ServiceNow
Teradyne
Software
Systems Software
Semiconductors & Semiconductor Equipment
Semiconductor Equipment
Lam Research
Semiconductors & Semiconductor Equipment
Semiconductor Equipment
Paycom Software*
Software
Application Software
Applied Materials
Semiconductors & Semiconductor Equipment
Semiconductor Equipment
Workday
Sophos *
Baidu ADR
Software
Software
Application Software
Systems Software
Internet Software & Services
Internet Software & Services
China
Top twenty investments
196,887
64.6
Infineon Technologies
Semiconductors & Semiconductor Equipment
Semiconductors
NVIDIA
Semiconductors & Semiconductor Equipment
Semiconductors
Salesforce.com
Software
Application Software
Alibaba
Proofpoint
Yelp
Internet Software & Services
Internet Software & Services
Software
Systems Software
Internet Software & Services
Internet Software & Services
ASML Holding*
Semiconductors & Semiconductor Equipment
Semiconductor Equipment
Temenos
Software
Amadeus IT Holdings*
IT Services
Paypal
IT Services
Top thirty investments
# GICS Industry classifications
* Not constituents of the Benchmark.
Application Software
Data Processing & Outsourced Services
Spain
Data Processing & Outsourced Services
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United Kingdom
Germany
United States
United States
China
United States
United States
Netherlands
Switzerland
17,553
17,167
16,642
14,808
12,972
12,014
9,291
8,971
8,628
8,546
5.8
5.6
5.5
4.9
4.3
3.9
3.0
2.9
2.8
2.8
8,514
8,464
8,243
7,981
7,754
6,946
5,815
5,758
5,689
5,131
2.8
2.8
2.7
2.6
2.5
2.3
1.9
1.9
1.9
1.7
4,913
4,778
4,773
4,441
4,228
4,050
3,858
3,725
3,364
3,148
1.6
1.6
1.6
1.4
1.4
1.3
1.3
1.2
1.1
1.0
238,165
78.1
53
Investment Managers’ Review
Investment Portfolio (continued)
at 30 November 2017
Sector#
Software
Software
Sub-sector#
Country
Fair Value
£’000
% of
Portfolio
Home Entertainment Software
Japan
Application Software
United Kingdom
Investment
Nintendo
Micro Focus
NetEase ADR
Cognex*
Tesla*
Yandex
Netflix*
Internet Software & Services
Internet Software & Services
Electronic Equipment Instruments & Components
Electronic Equipment & Instruments
Automobiles
Automobile Manufacturers
Internet Software & Services
Internet Software & Services
Internet & Direct Marketing Retail
Internet & Direct Marketing Retail
United States
United States
United States
United States
United States
United States
Veeva Systems
Health Care Technology
Health Care Technology
NetApp
Oracle
Top forty investments
Technology, Hardware Storage & Peripherals
Technology, Hardware Storage & Peripherals
United States
Software
Systems Software
United States
Microchip Technology
Technology, Hardware Storage & Peripherals
Technology, Hardware Storage & Peripherals
United States
Tencent
Internet Software & Services
Internet Software & Services
Tableau Software
Software
Systems Software
China
United States
Pure Storage
LendingClub*
HP
Technology, Hardware Storage & Peripherals
Technology, Hardware Storage & Peripherals
United States
Consumer Finance
Consumer Finance
United States
Technology, Hardware Storage & Peripherals
Technology, Hardware Storage & Peripherals
United States
Blue Prism
Software
Barracuda Networks
Software
Systems Software
Systems Software
Mercadolibre*
Internet Software & Services
Internet Software & Services
Cree
Semiconductors & Semiconductor Equipment
Semiconductors
Top fifty investments
Okta
Internet Software & Services
Internet Software & Services
Alfa Financial Software
Software
Application Software
Electronic Equipment Instruments & Components
Technology Distributors
United Kingdom
United States
United States
United States
United States
United Kingdom
United States
CDW
Vantiv
Broadcom
Autodesk
Guidewire Software
51Job ADR
Symantec
Fireeye
Top sixty investments
IT Services
Data Processing & Outsourced Services
United States
Semiconductors & Semiconductor Equipment
Semiconductors
Software
Software
Application Software
Application Software
Singapore
United States
United States
Professional Services
Human Resources & Employment Services
United States
Software
Software
Systems Software
Systems Software
United States
United States
3,073
3,061
3,011
2,987
2,959
2,914
2,860
2,855
2,753
2,713
1.0
1.0
1.0
1.0
1.0
1.0
0.9
0.9
0.9
0.9
267,351
87.7
2,710
2,688
2,676
2,540
2,413
2,273
2,056
1,839
1,798
1,586
0.9
0.9
0.9
0.8
0.8
0.7
0.7
0.6
0.6
0.5
289,930
95.1
1,557
1,538
1,519
1,505
1,491
1,386
1,364
1,337
1,217
1,201
0.5
0.5
0.5
0.5
0.5
0.5
0.4
0.4
0.4
0.4
304,045
99.7
Cirrus Logic
Semiconductors & Semiconductor Equipment
Semiconductors
United States
914
0.3
Total Investments
# GICS Industry classifications
* Not constituents of the Benchmark.
54
304,959
100.0
US online payroll and human resource technology company Paycom beat its own market expectations in 2017
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Allianz Technology Trust PLC
Directors’
Review
55
Directors’ Review Directors
Robert Jeens, MA (Cantab), FCA
Humphrey van der Klugt, BSc (Hons), FCA
Chairman of the Board, the Nomination Committee and the
Management Engagement Committee.
Robert joined the Board on 1 August 2013 and became
Chairman on 2 April 2014. Following 12 years with Touche
Ross, where he was an audit partner, Robert became Finance
Director of Kleinwort Benson Group and subsequently
Woolwich plc. He has extensive experience of the asset
management industry and is currently a Non-Executive
Director of both JPMorgan Russian Securities plc and
Chrysalis VCT plc. He has also had experience of technology
companies, as Chairman of nCipher plc and as a Non-
Executive Director of Dialight plc, and is currently Chairman of
Remote Media Group, a cloud-based digital signage company.
Chairman of the Audit Committee. Member of the
Nomination Committee and the Management Engagement
Committee.
Humphrey joined the Board on 1 July 2015 and became
Chairman of the Audit Committee and Senior Independent
Director on 14 April 2016. He is currently a director of
JPMorgan Claverhouse Investment Trust plc and Worldwide
Healthcare Trust PLC. He is an experienced investment
manager and investment company director, having previously
served as a director of trusts managed by BlackRock, Fidelity
and Standard Life Aberdeen. Humphrey initially qualified as
a chartered accountant with Peat Marwick Mitchell & Co.
(now KPMG) in 1979, and in 2004 retired from a long career
as a fund manager and director of Schroder Investment
Management Limited.
56
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Directors (continued)
Richard Holway, MBE
Elisabeth Scott, MA(Hons), MSc
Member of the Audit Committee, the Nomination
Committee and the Management Engagement Committee.
Member of the Audit Committee, the Nomination
Committee and the Management Engagement Committee.
Richard joined the Board on 29 January 2007. He was Group
Marketing Director for Hoskyns (now Capgemini) before
setting up his own technology analysis company in 1986.
He is currently the Chairman of TechMarketView LLP. He
is a patron of the Prince’s Trust, co-founder of the Trust’s
Technology Leadership Group and was a member of the
Trust’s advisory board until 2016.
Elisabeth joined the Board on 1 February 2015. She was
managing director and country head of Schroder Investment
Management (Hong Kong) Limited from 2005 to 2008 and
Chairman of the Hong Kong Investment Funds Association
from 2005 to 2007. She worked in the Hong Kong asset
management industry from 1992 to 2008. She is a director
of Pacific Horizon Investment Trust plc, Fidelity China Special
Situations plc, Dunedin Income Growth Investment Trust plc
and Chairman of India Capital Growth Fund plc. She is a board
member of the Association of Investment Companies.
Meeting attendance by the Directors during the year ending 30 November 2017 was as follows:
Number of meetings in the year
Robert Jeens
Richard Holway
Elisabeth Scott
Humphrey van der Klugt
Board
Audit
Committee
Nomination
Committee
Management
Engagement
Committee
5
5
5
5
5
2
*
2
2
2
2
1
1
1
1
1
1
1
1
1
1
All Directors attended the Annual General Meeting of the Company.
None of the Directors has a service contract with the Company. The terms of their appointment are detailed in a letter sent to them
when they join the Board. These letters are available for inspection on request to the Company Secretary.
* Robert Jeens’ attendance at the Audit Committee is by invitation as he is not a Committee member.
57
Directors’ Review Strategic Report
Introduction
This Strategic Report is provided in accordance with The
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 as amended and is intended to provide
information about the Company’s strategy and business needs,
its performance and results for the year, and the information
and measures which the Directors use to assess, direct and
oversee Allianz Global Investors GmbH, UK Branch (the
Investment Manager) in the management of the Company’s
activities. This report is intended to be read in conjunction with
the Directors’ Report and is not intended to duplicate such.
Strategy and Business Model
The objective of the Company is to provide shareholders
with an investment in equity securities of quoted technology
companies on a worldwide basis with the aim of achieving
long-term capital growth. The Company carries on business
as an investment trust and maintains a primary listing on
the London Stock Exchange. Investment trusts are collective
investment vehicles constituted as closed ended public limited
companies. The Company is managed by a board of non-
executive Directors and the management of the Company’s
investments is delegated to the Investment Manager. The
Company’s day-to-day functions, including administrative,
financial and share registration services are carried out by duly
appointed third party service providers including BNY Mellon’s
appointment as Custodian and Depositary.
The Company complies, where relevant, with the Financial
Conduct Authority’s (FCA) Handbook including the Disclosure
Guidance and Transparency Rules. Regulatory and portfolio
information is announced via the regulatory news service on
a daily, monthly and other periodic basis thereby assisting
current and potential investors to make informed investment
decisions. Additional portfolio information, technology
commentary and corporate information is available on the
Company’s website www.allianztechnologytrust.com.
Performance
The investment portfolio at the year end is set out on pages
52 to 54 and the top twenty holdings are listed on pages 47 to
51. In the year ended 30 November 2017, the Company’s total
return on net assets per share was 41.0% (2016: 23.8%),
outperforming the Dow Jones World Technology Index
(sterling adjusted, total return) by 9.5%. Further details on the
performance of the Company, future trends and factors that
may impact future performance of the Company are included
in the Chairman’s Statement and the Investment Managers’
Review.
58
Share Buybacks and Share Issues
The Directors continually monitor the level of premium or
discount of the share price to the net asset value (NAV) per
share. Over the year to 30 November 2017, the mid-market
price of the Company’s shares increased by 50.2% (2016:
26.4%), with a premium at the year end of 1.8% (2016: 4.4%
discount). As part of its discount management policy, the
Company is prepared to buy back shares, for cancellation or to
be held in treasury, at prices representing a discount greater
than 7% to NAV, where there is a demand in the market for
it to do so. The Company is also prepared to issue shares out
of treasury at a slight discount. Further details of treasury
issuance of shares by the Company can be found in the
Chairman’s Statement, the Directors’ Report and Note 11 on
page 101; there were 675,000 shares issued out of those held
in treasury in the year to 30 November 2017 (2016: nil).
Results and Dividends
Details of the Company’s results are shown in the Financial
Highlights on page 2. The revenue reserve remains
substantially in deficit, and no dividend is proposed in respect
of the year ended 30 November 2017 (2016: nil). As stated
in the Chairman’s Statement the Board considers that it is
unlikely that a dividend will be declared in the near future.
Future Development
The future development of the Company is dependent on
the success of the Company’s investment strategy against
the background of the economic environment and market
developments and the future attractiveness of the Company
as an investment vehicle when considering the developments
in the pensions and long-term savings markets. The Chairman
gives his view on the outlook in his statement on page 10 and
the Investment Managers discuss their view of the Company’s
portfolio and the outlook on pages 42 to 45.
The Board holds a strategy specific meeting at least once
per year at which time they consider the position of the
Company and the strategy for the period ahead making
recommendations for change where appropriate. The last
strategy specific meeting was held in November 2017.
Marketing the Company’s investment strategy
The Company continues to operate a targeted and
coordinated marketing programme in order to raise
awareness of its investment strategy. This programme targets
potential investors as well as communicating the latest
developments to its valued existing shareholders.
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Strategic Report (continued)
The programme is aimed at both professional and retail
investors and aims to create ongoing and sustained demand
for the Company’s shares. The retail audience includes those
investors who delegate their investment decisions to financial
advisers as well as the ever increasing numbers who are
researching and making their own investment decisions.
The programme includes advertising and other promotional
activity as well as communicating with national journalists
and the financial intermediary press, since positive coverage
of the Company’s specialist investment strategy can be highly
influential.
Undoubtedly, the marketing programme’s success has been
boosted by the number of performance awards won by the
Company over recent years.
The marketing programme has been highly successful in
generating demand from retail investors in recent years
which is, of course, to the benefit of all of the Company’s
shareholders. Increasingly investors are choosing to buy and
sell stocks and shares via online trading platforms rather than
via a traditional stockbroker. Approximately 26% (2016: 19%)
of the Company’s shares are now held by investors on these
platforms and this percentage has increased markedly over
recent years. Many platform providers offer Individual Savings
Account and pension products as well as the facility to invest
on a regular monthly basis. Competition amongst platform
providers is intense so investing online can be a very cost-
effective way to buy Allianz Technology Trust shares.
Viability Statement
In accordance with the Corporate Governance provisions
the Company is required to make a forward looking (longer
term) Viability Statement. In order to do this the Board
has considered the appetite for a technology investment
trust against the current market backdrop and has formally
assessed the prospects for the Company over a period of four
years.
The directors believe that the period of four years continues
to be appropriate as such time frame incorporates the
Company’s next five-year continuation vote which will be
proposed at the AGM to be held in 2021. In order to assess the
prospects for the Company the Board has considered:
The investment objective and strategy taking into account
recent, past and potential performance against both the
benchmark, other indices of note and peers;
The financial position of the Company, which does not
currently utilise gearing in any form but does maintain a
portfolio of, in the main, non-income bearing investments;
The liquidity of the portfolio and the ability to liquidate the
portfolio on the failure of a continuation vote;
The ever increasing level of technology adopted by both
individuals and corporations alike;
The inherent risks in such technology both in terms of speed
of advancement but also potential catastrophe with the
growth of cyber fraud; and
The principal risks faced by the Company as outlined below.
The Board is fully aware that the world of technology is
constantly moving and growing and the perceived picture
of technology now and in four years’ time is potentially very
different. Based on the results of the formal assessment the
Board believes it is reasonable to expect that the Company
will continue in operation and meet its liabilities for both
the period of four years under direct review but also for the
foreseeable future.
Monitoring Performance – Key Performance
Indicators
The Board assesses its performance in meeting the Company’s
objective and assessing the longer term viability of the
Company against the following Key Performance Indicators
(KPIs):
NAV per Ordinary Share relative to the Company’s
benchmark, the Dow Jones World Technology Index
(sterling adjusted, total return)
Ordinary Share price
Premium/Discount of Share price to NAV
Ongoing Charges
Peer group performance
Numerical analysis of the above is provided on page 4 in
the Financial Summary, and is explored further within the
Chairman’s Statement. The Board regularly reviews forms of
stock and attribution analysis to determine the contribution to
relative and absolute performance of the portfolio of the top
and bottom stocks.
59
Directors’ Review Strategic Report (continued)
The top contributors to and detractors from the Company’s Net Asset Value total return over the year to 30 November 2017 were
as follows:
Active Contribution
(%)
3.62
3.46
3.10
2.19
1.75
1.55
1.43
1.41
1.35
1.34
21.20
Active Contribution
(%)
(0.40)
(0.21)
(0.20)
(0.19)
(0.13)
(0.12)
(0.10)
(0.07)
(0.07)
(0.06)
(1.54)
Top ten contributors
Micron Technology, Inc.
Square, Inc. Class A
Apple Inc.
Amazon.com, Inc.
Samsung Electronics Co., Ltd.
Arista Networks, Inc.
IPG Photonics Corporation
Sophos Group Plc
DXC Technology Co.
Facebook, Inc. Class A
Top ten detractors
LendingClub Corp
Palo Alto Networks, Inc.
Symantec Corporation
Twitter, Inc.
MuleSoft, Inc. Class A
Cirrus Logic, Inc.
CSRA, Inc.
Guidewire Software, Inc.
Tableau Software, Inc. Class A
Splunk Inc.
Source: AllianzGI. 30 November 2016 - 30 November 2017.
60
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Strategic Report (continued)
Investment Controls and Monitoring
The Board in conjunction with the Investment Manager has put in place a schedule of investment controls and restrictions within
which investment decisions are made. These controls include limits on size and type of investment. The controls are monitored on a
constant basis, are formally signed off by the Manager monthly and are reviewed by the Board at every meeting.
Principal Risks and Uncertainties
The principal risks identified by the Board are set out in the table below, together with information about the actions taken to
mitigate these risks. A more detailed version of this table in the form of a Risk Map and Controls document is reviewed in full and
updated by the Audit Committee and Board at least twice yearly; individual risks are considered by the Board in further detail
depending on the market situation and a high-level review of all known risks faced by the Company is considered at every Board
meeting. The principal risks and uncertainties faced by the Company relate to the nature of its objectives and strategy as an
investment company and the markets in which it operates.
Description
Mitigation
Investment Strategy Risk
The Company’s NAV may be adversely affected by the
Investment Manager’s inappropriate allocation of funds to
particular sub-sectors of the technology market and/or to the
selection of individual stocks that fail to perform satisfactorily,
leading to poor investment performance in absolute terms
and/ or against the benchmark.
Technology Sector Risk
The technology sector is characterised by rapid change.
New and disruptive technologies can place competitive
pressures on established companies and business models, and
technology stocks may experience greater price volatility than
securities in some slower changing market sectors.
Cyber Risk
The Company may be at risk of cyber attacks which may
result in the loss of sensitive information or disruption to the
business.
Market Risk
The Company’s NAV may be adversely affected by a general
decline in the valuation of listed securities and/or adverse
market sentiment towards the technology sector in particular.
Although the Company has a portfolio that is diversified by
company size, sector and geography its principal focus is
on companies with high growth potential in the mid-size
ranges of capitalisation. The shares of these companies may
be perceived as being at the higher end of the risk spectrum,
leading to a lack of interest in the Company’s shares in some
market conditions.
The Investment Manager has responsibility for sectoral
weighting and for individual stock picking, having taken
due account of Investment Objectives and Controls that
are agreed with the Board from time to time and regularly
reviewed. These seek, inter alia, to ensure that the portfolio is
diversified and that its risk profile is appropriate.
The Board reviews investment performance, including a
detailed attribution analysis comparing performance against
the benchmark, at each Board meeting. At such meetings,
the Investment Manager reports on major developments and
changes in technology market sectors and also highlights
issues relating to individual securities.
The operations of the Company are carried out by the
Investment Manager and various third party service providers.
All service providers report to the Board on operational issues
including cyber risks and the controls in place to capture
potential attacks. The Board meets with the AllianzGI Head of
Information Security and is satisfied that appropriate controls
are in place. See Operational Risk below.
The Board and the Investment Manager monitor stock
market movements and may consider hedging, gearing or
other strategies to respond to particular market conditions.
The Investment Manager maintains regular contact with
shareholders to discuss performance and expectations and to
convey the belief of the Board and the Investment Manager
that superior returns can be generated from investment
in carefully selected companies that are well managed,
financially strong and focused on those segments of the
technology market where disruptive change is occurring.
61
Directors’ Review Strategic Report (continued)
Description
Mitigation
Currency Risk
A high proportion of the Company’s assets is likely to be held
in securities that are denominated in US Dollars, whilst its
accounts are maintained in Sterling.
Movements in foreign exchange rates affect the
performance of the Investment Portfolio and creates a risk for
shareholders.
Financial and Liquidity Risk
The financial risks to the Company and the controls in place
to manage these risks are disclosed in detail in Note 15
beginning on page 103.
The Board monitors currency movements and determines
hedging policy as appropriate. The Board does not currently
seek to hedge this foreign currency risk.
Financial and liquidity reports are provided to and
considered by the Board on a regular basis.
Operational Risk
Disruption to or the failure of the systems and processes
utilised by the Investment Manager or other third party
service providers. This encompasses disruption or failure
caused by cyber crime and covers dealing, trade processing,
administrative services, financial and other operational
functions.
The Board receives regular reports from the Investment
Manager and third parties on internal controls including
reports on monitoring visits carried out by the Depositary
on behalf of the Company. The Board has further
considered the increased risk of cyber-attacks and has
received reports and assurance from the Investment
Manager regarding the controls in place.
In addition to the specific principal risks identified in the table above, the Company faces risks arising from the provision of
services from third parties including the Investment Manager where succession planning for the individuals carrying out the
day-to-day investment activities has been discussed. General risks are also present relating to compliance with accounting, legal
and regulatory requirements, and with corporate governance and shareholder relations issues which could have an impact
on reputation and market rating. Management of the services provided and the internal controls procedures of the third party
providers is monitored and reported on by the Manager to the Board. These risks are all formally reviewed by the Board twice each
year and at such other times as deemed necessary. Details of the Company’s compliance with corporate governance best practice,
including information on relations with shareholders, are set out in the Corporate Governance Statement within the Directors’
Report beginning on page 66.
The Board’s review of the risks faced by the Company also includes an assessment of the residual risks after mitigating action has
been taken.
On behalf of the Board
Robert Jeens
Chairman
22 February 2018
62
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Directors’ Report
The Directors present their Report and the audited Financial
Statements for the year ended 30 November 2017.
Information pertaining to the business review is included in
the Strategic Report, detailed on pages 58 to 62.
Principal Activity and Status
The Company was incorporated on 18 October 1995 and its
Ordinary Shares were listed on the London Stock Exchange
on 4 December 1995. The Company is registered as a
public limited company in England under company number
03117355. The Company is an investment company within
the meaning of section 833 of the Companies Act 2006 and
carries on business as an investment trust. The Company is a
member of the Association of Investment Companies.
The Company has applied for and been accepted as an
approved investment trust under sections 1158 and 1159
of the Corporation Taxes Act 2010 and Part 2 Chapter 1 of
Statutory Instrument 2011/2999. This approval relates to
accounting periods commencing on or after 1 December
2012. The Directors are of the opinion, under advice, that the
Company has continued to conduct its affairs so as to be able
to retain such approval.
As an investment trust pursuant to section 1158 of the
Corporation Taxes Act 2010, the Financial Conduct Authority
(FCA) rules in relation to non-mainstream investment
products do not apply to the Company.
Investment Objective
The Company invests principally in the equity securities of
quoted technology companies on a worldwide basis with the
aim of achieving long-term capital growth, in excess of the
Dow Jones World Technology Index (sterling adjusted, total
return) (the Benchmark).
Investment Funds
The market value of the Company’s investments at 30
November 2017 was £305m (2016: £210m) with gains of
£89m (2016: £37m) over book cost. Taking these investments
at this valuation, the net assets attributable to each Ordinary
Share amounted to 1178.6p at 30 November 2017 (2016:
835.9p).
Investment Management Agreement
The management contract with Allianz Global Investors
GmbH, UK Branch (AllianzGI), in place during the year
is terminable at six months’ notice (2016: six months’).
Under the contract AllianzGI provides the Company with
investment management, accounting, company secretarial
and administration services and provides for a management
fee of 0.8% per annum (2016: 0.8% per annum) payable
quarterly in arrears and calculated on the average value of
the market capitalisation of the Company at the last business
day of each month in the relevant quarter. In addition there
is a fee of £55,000 per annum (2016: £55,000 per annum)
to cover AllianzGI’s administration costs. As mentioned in
the Chairman’s Statement on page 8, the management
fee structure changed on 1 December 2017 to a tiered
management fee of 0.8% per annum on market capitalisation
up to £400 million and 0.6% thereafter.
In addition, the Investment Manager is entitled to a
performance fee, subject to a ‘high water mark’, based on
the level of outperformance of the Company’s net asset
value (NAV) per share over its benchmark, the Dow Jones
World Technology Index (sterling adjusted, total return),
during the relevant Performance Period. The performance
fee is calculated as 12.5% (2016: 12.5%) of outperformance
against the Company’s benchmark multiplied by the weighted
average number of shares in issue and the NAV at the year
end. This is capped at 2.25% of the Company’s NAV at the
relevant year end. To the extent that the Company has
underperformed the benchmark, such underperformance is
carried forward and must be offset by future outperformance
before a performance fee can be paid. Underperformance/
outperformance amounts carried forward do so indefinitely
until offset. A performance fee was payable for the year ended
30 November 2017 which equated to £433,476 (2016: £nil).
See also Note 2 on page 96.
Continuing Appointment of the Investment
Manager
During the year, in accordance with the Listing Rules
published by the FCA, the Board reviewed the performance
of the Investment Manager. The review considered the
Company’s investment performance over both the short
and longer terms, together with the quality and adequacy
of other services provided. The Board also reviewed the
appropriateness of the terms of the Investment Management
Agreement, in particular the length of notice period and the
management fee structure.
The Board is satisfied that the continuing appointment of the
Investment Manager under the terms of the Investment
Management Agreement is in the best interests of
shareholders as a whole.
63
Directors’ Review
Directors’ Report (continued)
Going Concern
The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements as the assets
of the Company consist mainly of securities that are readily realisable and the Company’s assets are significantly greater than its
liabilities. Accordingly the Company has adequate financial resources to continue in operational existence for the foreseeable
future. The Company is subject to a continuation vote of the Shareholders every five years; the last continuation vote was put
to Shareholders and passed at the AGM held in 2016. Further details on the longer term viability of the Company, including
consideration of the continuation vote, are provided in the Strategic Report on page 59.
Related Party Transactions
During the financial year no transactions with related parties took place which would materially affect the financial position or the
performance of the Company.
Capital Structure
The Company’s capital structure is set out in Note 11 on page 101.
Voting Rights in the Company’s Shares
As at 12 February 2018 Allianz Technology Trust PLC’s capital consisted of:
Share class
Ordinary Shares of 25p in issue
Ordinary Shares of 25p held in treasury
Total
Number of
shares issued
Voting rights
Total
per share Voting Rights
27,134,427
1,168,453
28,302,880
1
0
27,134,427
0
27,134,427
Interests in the Company’s Share Capital
Information on major interests in shares provided to the Company under the Disclosure and Transparency Rules (DTR) of the UK
Listing Authority is published via a Regulatory Information Service.
The Company is aware of the following interests representing 3% or more of the issued ordinary share capital of the Company. This
information was correct at the date of notification. It should be noted that these holdings may have changed since being notified
to the Company. However, notification of any change is not required until the next applicable percentage threshold is crossed. The
percentage shown is based on the total voting rights as at 30 November 2017 and 12 February 2018 respectively.
30 November 2017
Total voting rights
26,594,427
12 February 2018*
Total voting rights
27,134,427
Number of
shares
% of
capital
Number of
shares
% of
capital
2,890,221
2,060,774
1,295,855
1,016,585
10.9
2,890,221
7.7
4.9
3.8
2,151,575
1,295,855
1,016,585
10.7
7.9
4.8
3.7
Holder
Rathbone Brothers PLC
Charles Stanley Group
Brewin Dolphin
East Riding of Yorkshire Council
* Latest practical date
64
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Directors’ Report (continued)
Repurchase and Reissue of Shares
At the Annual General Meeting (AGM) held on 19 April 2017,
authority was granted for the repurchase of up to 3,891,318
Ordinary Shares of 25p each, representing 14.99% of the
issued share capital at the time. The Board has in place a
discretionary discount protection mechanism, described in the
Chairman’s Statement and Strategic Report. In the year under
review the Company did not buy back any shares for holding in
treasury (2016:107,999 shares). The Company will not reissue
shares from treasury at a discount higher than the one used
when the shares were bought back. During the year under
review, 675,000 shares were reissued from treasury (2016:nil).
Since the year end a further 540,000 shares have been
reissued from treasury. As at 12 February 2018, 1,168,453
shares are held in treasury for reissue into the market.
The Board and Gender Diversity
The Board currently consists of a non-executive Chairman,
Mr Robert Jeens, and three non-executive Directors. The
names and biographies of those Directors who held office
at 30 November 2017 and at the date of this Report appear
on pages 56 and 57 and indicate their range of investment,
industrial, commercial and professional experience. Currently
three of the Company’s Directors are male and one is
female. As the Company is an investment trust, all of its
activities are outsourced and it does not have any employees.
Therefore it has nothing further to report in respect of gender
representation within the Company.
Directors
The Directors of the Company all served throughout the year.
At the AGM, in accordance with the Articles of Association,
Elisabeth Scott will retire by rotation and, being eligible, offers
herself for re-election. In line with good Corporate Governance
practice, having now served more than nine years’ on the
Board, Richard Holway shall stand for re-election annually
and, being eligible, also offers himself for re-election. The
Board confirms that Richard remains fully effective as an
independent director and as a whole confirms their support of
each individual standing for re-election and recommends their
continuation as members of the Board. The attendance record
of each Director at meetings of the Board through the year is
shown on page 57.
Directors’ Fees
A report on Directors’ Remuneration is set out on pages 81 to
84.
Directors’ and Officers’ Liability Insurance
Directors’ and Officers’ Liability Insurance cover is in place and
is provided at the expense of the Company.
Conflicts of Interest
Under the Companies Act 2006 a director must avoid a
situation where he has, or can have, a direct or indirect interest
that conflicts, or possibly may conflict, with the Company’s
interests. Since 1 October 2008, directors have been able,
if appropriate, to authorise these conflicts and potential
conflicts. The Board reports annually on the Company’s
procedures for ensuring that its powers of authorisation of
conflicts are operated effectively and that the procedures have
been followed.
Each of the Directors has provided a statement of all conflicts
of interest and potential conflicts of interest relating to the
Company. These statements have been considered and
approved by the Board. The Directors have undertaken to
notify the Chairman and Company Secretary of any proposed
new appointments and new conflicts or potential conflicts for
consideration, if necessary, by the Board. The Board has agreed
that only Directors who have no interest in the matter being
considered will be able to take the relevant decision and that in
taking the decision the Directors will act in a way they consider,
in good faith, will be most likely to promote the Company’s
success. The Board is able to impose limits or conditions
when giving authorisation if it thinks this is appropriate. The
Board confirms that its powers of authorisation are operating
effectively and that the agreed procedures have been followed
in the period under review.
The Board and Matters Reserved for the Board
The Board is responsible for efficient and effective leadership
of the Company and for the Company’s affairs. There is a
formal schedule of matters reserved for the decision of the
Board and there is an agreed procedure for Directors, in the
furtherance of their duties, to take independent professional
advice if necessary at the Company’s expense.
The specific areas reserved for the Board include the setting of
parameters for and the monitoring of investment strategy, the
review of investment performance (including performance
relative to the benchmark and to the Company’s peer group)
and investment policy; final approval of statutory Companies
Act requirements including the payment of any dividend
and the allotment of shares; matters of a Stock Exchange
or Internal Control nature such as approval of shareholder
65
Directors’ Review
Directors’ Report (continued)
statutory documentation; performance reviews and director
independence; and, in particular matters of a strategic or
management nature, such as the Company’s long term
objectives, commercial and corporate strategy, share buy-back
and share issue policy, share price and discount/premium
monitoring; the appointment or removal of the Investment
Manager; unquoted investment valuations; consideration
and final approval of borrowing requirements and limits and
corporate governance matters.
In order to enable them to discharge their responsibilities,
prior to each meeting Directors are provided, in a timely
manner, with a comprehensive set of papers giving detailed
information on the Company’s transactions, financial position
and performance. Representatives of the Investment Manager
attend each Board meeting, enabling the Directors to seek
clarification on specific issues or to probe further on matters
of concern. A full report is received from the Investment
Manager at each meeting. In the light of these reports,
the Board reviews compliance with the Company’s stated
investment objectives and, within these established guidelines,
the Investment Manager takes decisions as to the purchase
and sale of individual investments.
Board Committees
For the year under review the Management Engagement and
the Nomination Committees were chaired by the Chairman of
the Company, Robert Jeens. The Audit Committee was chaired
by Humphrey van der Klugt. As permitted by the AIC Code, the
full Board performs the duties of a Remuneration Committee.
The full Terms of Reference, which clearly define the
responsibilities of each Committee, can be obtained from the
Company Secretary and can be found on the website www.
allianztechnologytrust.com.
Audit Committee
The Audit Committee Report is on pages 77 to 80.
Management Engagement Committee
The Management Engagement Committee meets at least
once per year, and is composed of all the current Directors.
The Management Engagement Committee is responsible
for the regular review of the terms of the contract with the
Investment Manager and for making recommendations
to the Board in respect of such contract. The Management
Engagement Committee last met in September 2017
at which meeting it was concluded the management
arrangements in place continued to be appropriate. The
66
continuing appointment of the Investment Manager was
therefore recommended to and accepted by the Board.
The Management Engagement Committee also reviewed
the fee arrangements with the Investment Manager. The
management fee was amended as of 1 December 2017 and
the changes are explained further in Note 18 of the Financial
Statements on page 107.
Nomination Committee
The Nomination Committee is composed of all the current
Directors and meets at least once per year. The Nomination
Committee is responsible for considering the composition
of the Board, for running the recruitment process for new
directors, making appointment recommendations to the
Board when appropriate and for carrying out the annual Board
and Chairman Evaluation process. The Nomination Committee
met in September 2017 to make arrangements for the 2017
Board Evaluation process as discussed below.
Board Evaluation
An external evaluation was conducted in 2016 and it was
decided that an internal evaluation would be performed
on this occasion. The evaluation process adopted required
each director to complete an in-depth questionnaire on the
workings of and individual contributions to the Board as a
whole and the performance of the Chairman. Questions also
included a review of the interaction with the Investment
Manager. The Senior Independent Director led a review of the
Chairman.
The results of the questionnaires were collated anonymously
and discussed at the Board meeting in November 2017. Any
concerns were discussed openly and addressed with both the
Board and the Investment Manager present. It was agreed by
all participants that the evaluation process had been effective
and that the review points identified would be of benefit to the
Board and the Company as a whole.
Corporate Governance Statement
Introduction
The Board is accountable to the Company’s shareholders for
high standards of corporate governance and this statement
for the year under review to 30 November 2017 describes how
the Company applies the main principles identified in the UK
Corporate Governance Code (the Governance Code) issued in
April 2016. The Governance Code is available from the website
of the Financial Reporting Council (the FRC) at www. frc.org.
uk. The Association of Investment Companies (the AIC) has
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Directors’ Report (continued)
published its own Code on Corporate Governance (the AIC
Code), by reference to the AIC Corporate Governance Guide
for Investment Companies (the AIC Guide), both revised in July
2016, which provide a comprehensive guide to best practice in
certain areas of governance where the specific characteristics
of investment trusts suggest alternative approaches to those
set out in the Governance Code.
Both the AIC Code and AIC Guide are available from the AIC
website at www.theaic.co.uk and have been endorsed by the
FRC which has confirmed that following of the AIC Guide by
investment companies should fully meet the obligations under
the Governance Code.
This Statement of Corporate Governance forms part of the
Directors’ Report.
Application of the Main Principles of the Governance Code
and the AIC Code
This statement describes how the main principles identified in
the Governance Code and the AIC Code (the Codes) have been
applied by the Company throughout the year as is required by
the Listing Rules of the Financial Conduct Authority (the FCA).
In instances where the Governance Code and the AIC Code
differ, an explanation will be given as to which governance
code has been applied, and the reason for that decision.
The Board is of the opinion that the Company has complied
fully with the main principles identified in the Codes except as
set out below:
the role of the chief executive-Code provision A2.1;
the need for an internal audit function-Code provision C3.6;
and
executive directors’ remuneration-Code provisions D2.1,
D2.2 and D2.4.
For the reasons set out in the AIC Guide, and as explained
in the Codes, the Board considers that these provisions are
not relevant to the Company which does not have a Chief
Executive or any executive directors, and which is an externally
managed investment company, the administrative and
management functions for which are carried out by third party
service providers. The Company has therefore not reported
further in respect of these provisions.
67
Directors’ Review
Directors’ Report (continued)
AIC Code Principles
How the principles are applied
THE BOARD
1
The chairman should be
independent.
2
A majority of the board should be
independent of the manager.
3
4
Directors should be submitted for
re-election at regular intervals.
Nomination for re-election
should not be assumed but be
based on disclosed procedures
and continued satisfactory
performance.
The board should have a policy on
tenure, which is disclosed in the
annual report.
Robert Jeens joined the Board as non-executive director on 1 August 2013 and
he has been Chairman since 2 April 2014. The Board, through the Nomination
Committee, formally reviews the Chairman each year and it considers that
Robert Jeens is independent both in character and in judgement and that there
are no relationships or circumstances which are likely to affect, or could appear
to affect, his judgement.
Humphrey van der Klugt is the Senior Independent Director and provides a
sounding board for the Chairman and serves as an intermediary for the other
directors when necessary and in particular assisted with the Board evaluation
process.
The Board is currently composed of four non-executive directors and all
are considered to be independent of the Investment Manager. None of the
directors have any former association with the Investment Manager and each is
considered to be independent in character and judgement. Richard Holway has
served on the Board for more than nine years. Board colleagues are however
in full agreement that Richard maintains the ability to act independently and
he continues to add value by virtue of his particular skills and considerable
experience.
New directors stand for election by shareholders at the AGM of the Company
following their appointment and at three yearly intervals thereafter. Directors
with more than nine years’ service stand for annual re-election. Under the
guidance of the Nomination Committee, the Board reviews Board and Board
Committee composition every year.
In accordance with the above, Richard Holway will stand for re-election
annually.
Directors’ appointments are formally reviewed every three years after the first
AGM following their date of joining the Board. After nine years on the Board,
directors’ appointments are reviewed annually. No director has a contract of
service and a director may resign by notice in writing to the Board at any time.
A performance review of the Board and the individual directors is conducted
annually.
The Board aims to refresh its composition from time to time and regularly
reviews the need to do this. A programme of refreshment was carried out
through 2015 and resulted in the appointment of two new directors and
the retirement of three long-standing directors. A full review of the Board
composition was carried out by the Nomination Committee in 2017, whereby it
was agreed that no changes were needed to the composition.
5
There should be full disclosure of
information about the board.
The directors’ biographies on pages 56 and 57 demonstrate a breadth of
investment, industrial, commercial and professional experience and expertise.
68
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Directors’ Report (continued)
AIC Code Principles
How the principles are applied
6
7
8
9
The board should aim to have a
balance of skills, experience, length
of service and knowledge of the
company.
The board should undertake
a formal and rigorous annual
evaluation of its own performance
and that of its committees and
individual directors.
Each year the Board reviews its composition, seeking to ensure a balance of
skills and experience. As a Board refreshment programme was completed in
2015, it is believed that such a balance exists.
It has been the Board’s practice for many years to undertake a formal and
rigorous annual evaluation of its own performance and that of its committees
and individual directors. The latest such evaluation took place in the year ended
30 November 2017. The Board does not currently anticipate utilising external
facilitators on an annual basis but acknowledges the knowledge conveyed and
independence demonstrated by the external evaluators used in 2016.
Director remuneration should
reflect their duties, responsibilities
and the value of their time spent.
The Directors’ Remuneration Implementation Report is on pages 81 to 83.
When setting remuneration levels the Board gives due regard to the amount
of time required by each director, the remuneration levels of peer investment
trusts, the market as a whole and any views expressed any shareholders.
The independent directors should
take the lead in the appointment
of new directors and the process
should be disclosed in the annual
report.
All directors are deemed to be independent. The Nomination Committee
considers the required and desirable competencies for new appointments.
Consultants are appointed to assist in the recruitment process and all directors
are encouraged to meet a shortlist of candidates which will take due account
of diversity, including gender diversity, prior to a final recommendation being
made to the Board.
10
Directors should be offered
relevant training and induction.
When a new Director is appointed there is an induction process carried out
by the Investment Manager. Thereafter, Directors are provided on a regular
basis with key information on the Company’s policies, regulatory and statutory
requirements and internal financial controls. Changes affecting Directors’
responsibilities are advised to the Board as they arise.
In addition to the induction process and regular provision of information the
Investment Manager runs periodic investment forums.
11
The chairman (and the board)
should be brought into the process
of structuring a new launch at an
early stage.
This principle does not apply to the Company as it is an established investment
company. In the event of restructuring or other market considerations the
whole Board would participate and would receive guidance from third party
service providers where appropriate.
69
Directors’ Review Directors’ Report (continued)
AIC Code Principles
How the principles are applied
BOARD MEETINGS AND THE RELATIONSHIP WITH THE INVESTMENT MANAGER
12
Boards and managers should
operate in a supportive, co-
operative and open environment.
13
The primary focus at regular board
meetings should be a review of
investment performance and
associated matters such as gearing,
asset allocation, marketing/
investor relations, peer group
information and industry issues.
14
Boards should give sufficient
attention to overall strategy.
The Board meets formally at least five times each year. Representatives of the
Investment Manager, including senior executives of the management company
and the fund managers, together with the Company Secretary attend every
meeting and other investment professionals and marketing executives join
the meetings from time to time. The Chairman encourages participation and
discussion at the meetings and encourages directors to meet with members of
the Investment Manager and other professionals as appropriate.
Full investment and performance reports are received and discussed at every
Board meeting and matters such as gearing, asset allocation, marketing and
investor relations, peer group information and industry issues are all matters
that are covered by the regular agenda. Additional focus being placed on
particular areas from time to time and as the market situation requires.
The Board devotes time outside of the formal Board meetings to discuss and
plan strategy and meet with its advisers and continually monitors the matters
discussed throughout the year. Additionally a Strategy focused Board meeting
is held at least once per year at which various third party service providers and
other professionals may be invited to present on particular matters of interest.
15
16
17
The board should regularly review
both the performance of, and
contractual arrangements with, the
manager.
The Management Engagement Committee formally meets once each year
to consider the performance of the Investment Manager and the contractual
terms of engagement. The recommendation of the Board on the continued
appointment of the Investment Manager is on page 63.
The board should agree policies
with the manager covering key
operational issues.
The investment management contract covers the provision of operational
matters and the Board discusses with the Investment Manager and agrees
policies concerning key operational matters such as: corporate governance
issues and voting in respect of portfolio holdings; performance reporting
methodology including matters such as benchmarking, gearing, share buy
backs and investment restrictions.
Boards should monitor the level
of the share price discount or
premium (if any) and, if desirable,
take action to reduce it.
The share price is monitored and the NAV is reported on a daily basis. The Board
receives reports at each Board meeting. The Company has implemented a
discount control mechanism by pursuing a share buy back programme where
discounts exceed 7% and when market conditions are appropriate.
18
The board should monitor and
evaluate other service providers.
The Audit Committee receives and considers internal controls reports from
third party service providers and the Investment Manager and Company
Secretary report to the Committee on their monitoring and evaluation of these
services.
70
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Directors’ Report (continued)
AIC Code Principles
How the principles are applied
19
20
21
SHAREHOLDER COMMUNICATIONS
The board should regularly monitor
the shareholder profile of the
company and put in place a system
for canvassing shareholder views
and for communicating the board’s
views to shareholders.
The board should normally take
responsibility for, and have a
direct involvement in, the content
of communications regarding
major corporate issues even if
the manager is asked to act as
spokesman.
The board should ensure that
shareholders are provided with
sufficient information for them to
understand the risk:reward balance
to which they are exposed by
holding the shares.
The Chairman works with the Investment Manager to ensure that there is
effective communication with the Company’s shareholders.
There is a process for monitoring and analysing the shareholder register and
this is reported at each Board meeting. Visits to institutional shareholders and
private client brokers are offered and carried out in a rolling programme.
There is an opportunity for shareholders to meet and communicate with the
Directors and Investment Managers at the Company’s AGM, at which the
portfolio managers give a presentation.
The Board, or a Committee of the Board, reviews all major communications by
the Company.
Every year the Board agrees a budget with the Investment Manager for a
programme of marketing activity to communicate with investors and to reach
a wider audience. In addition to the Annual and Half-Yearly Report, both of
which are sent or made available to all shareholders and those others who have
registered to receive them, the Company publishes a copy online and makes
available in hard copy a monthly factsheet and publishes daily on its website
(www.allianztechnologytrust.com) the NAV of the Company’s shares and many
other details of interest to investors.
Alternative Performance Measures
In addition to providing guidance on Corporate Governance, the AIC provides the investment company industry with leadership on the
reporting of alternative performance measures to support a fair and balanced approach to the performance of your Company.
Risk Management & Internal Controls
The Directors are responsible for overseeing the effectiveness of the risk management and internal control systems for the Company,
which are designed to ensure that proper accounting records are maintained, that the financial information on which business
decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded. Such a system
of internal control is designed to manage rather than eliminate the 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 Directors, through the procedures outlined below and further detailed in the Strategic Report and the Audit Committee Report,
have kept the effectiveness of the Company’s risk management and internal controls under review throughout the year covered by
these financial statements and up to the date of approval of the Annual Financial Report. The Board has identified risk management
controls in the key areas of business objectives, accounting, compliance, operations and company secretarial as areas for extended
review.
71
Directors’ Review Directors’ Report (continued)
The Directors’ confirmation, set out on pages 61 and 62
of the annual report, confirms that they have carried out a
robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity.
The Investment Manager has established an internal
control framework to provide reasonable assurance on the
effectiveness of the internal controls operated on behalf of
its clients. The Investment Manager’s compliance and risk
department assesses the effectiveness of the internal controls
on an ongoing basis.
The Investment Manager provides the Board with regular
reports on all aspects of internal control (including financial,
operational and compliance control, risk management and
relationships with external service providers). Business risks
have been analysed and recorded in a Risk Matrix, which is
formally reviewed by the Audit Committee at its meetings and
at other times as necessary. It is believed that an appropriate
framework is in place to meet the requirements of the AIC
Code.
The Investment Manager, at least on a quarterly basis,
reports to the Board on the market and on the investment
performance of the Company’s portfolio. Further information
is contained in the Chairman’s Statement, the Directors’
Report and the Investment Managers’ Review.
Relations with Shareholders
The Company has regular contact with its institutional
shareholders particularly through the Investment Manager.
The Chairman also makes regular direct contact and he
and the other directors are available to meet institutional
shareholders from time to time.
The Board supports the principle that the AGM be used to
communicate with private investors. The full Board attends the
AGM and the Chairman of the Board chairs the AGM. Details
of the proxy votes received in respect of each resolution
are made available to shareholders at the meeting and are
available on the website www.allianztechnologytrust.com
following the meeting. The Investment Manager attends the
AGM to give a presentation to the meeting on the year under
review and the outlook for the year ahead.
Directors’ Responsibility, Accountability and Audit
The Directors’ Statement of Responsibilities in respect
of the financial statements is set out on page 76. The
72
Independent Auditors’ Report is set out on pages 86 to 90.
The Board has delegated contractually to external agencies,
including the Investment Manager, the management of the
investment portfolio, the custodial services (which include
the safeguarding of the assets), the day to day accounting,
company secretarial and administration requirements and the
registration services.
Each of these contracts was 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
insofar as they relate to the affairs of the Company. The Board
receives and considers regular reports from the Investment
Manager and ad hoc reports and information are supplied to
the Board as required.
Auditor objectivity and independence
Grant Thornton UK LLP is the Auditor of the Company. The
Board believes that auditor objectivity and independence is
safeguarded for the following reasons: the extent of non-
audit work which may be carried out by Grant Thornton UK
LLP is limited and would flow naturally from the firm’s role as
auditor to the Company; Grant Thornton UK LLP has provided
information on its independence policies and the safeguards
and procedures it has developed to counter perceived threats
to its objectivity; it also confirms that it is independent within
the meaning of all regulatory and professional requirements
and that the objectivity of the audit team is not impaired.
Each director at the date of approval of this report confirms
that:
(a) in so far as the director is aware, there is no relevant
audit information of which the Company’s auditors are
unaware; and
(b) the director has taken all the steps he or she ought to have
taken as a director in order to make himself/herself aware
of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act 2006.
Grant Thornton UK LLP has expressed willingness to continue
to act as Auditor to the Company; a resolution to re-appoint
Grant Thornton UK LLP as statutory auditor to the Company
will be proposed at the forthcoming AGM; a further resolution
authorising the directors to determine the auditor’s
remuneration will also be proposed.
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Directors’ Report (continued)
The UK Stewardship Code and Exercise of Voting
Powers
The Company’s investments are held in a nominee name. The
Board has delegated discretion to discharge its responsibilities
in respect of investments, including the exercise of voting
powers on its behalf, to the Investment Manager, AllianzGI.
The Stewardship Code published by the FRC sets out good
practice on engagement with investee companies. The FRC
sees it as complementary to the UK Corporate Governance
Code.
The AllianzGI policy statement on the Stewardship Code can
be found on the Company’s website www.esgmatters.com
within the literature section. The Board has reviewed this
policy statement and believes that the Company’s delegated
voting powers are being properly executed.
AllianzGI subscribes to the ISS Proxy Voting Services. ISS
manages the voting process and recommends actions based
upon AllianzGI’s Global Proxy Voting Policy Guidelines. Where
recommendations are for a vote to be cast against a resolution
or for an abstention, and for all extraordinary general meeting
resolutions, the relevant portfolio managers or analysts are
consulted and may decide on a different course of action. The
reasons for such deviations are recorded as are all the reasons
for abstaining on or voting against any resolution.
In the event of a director holding a directorship on the board of
a company in which the Company is invested, they would be
prohibited from participating in decisions made concerning
those investments.
Corporate Social Responsibility (CSR), Community
and Employee Responsibilities, Emissions,
Environmental and Ethical Policy (EEE)
The Company’s investment activities and day to day
management is delegated to the Investment Manager and
other third parties. As an investment trust, the Company has
no direct social, community, employee or environmental
responsibilities. Its principal responsibility to shareholders is to
ensure that the investment portfolio is properly managed and
invested. As detailed above, the management of the portfolio
has been delegated to the Investment Manager.
In light of the nature of the Company’s business there are
no relevant human rights issues and the Company does not
have a human rights policy. The Company does not maintain
premises, hold any physical assets or operations and does
not have any employees. Consequently, the Company has no
greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing
sources under the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013. The Board has noted the
Investment Manager’s report on greenhouse gas emissions on
its own operations and the views of the Investment Manager
on CSR and EEE which it adheres to in engaging with the
underlying investee companies and in exercising its delegated
responsibilities in voting. The Investment Manager engages
with the Company’s underlying investee companies in relation
to their corporate governance practices and in developing
their policies on social, community and environmental
matters. Further information may be found in the Investment
Manager’s Statement of Corporate Governance, including the
approach to CSR and EEE which is available on the Investment
Manager’s website www.esgmatters.co.uk.
The Company’s primary objective is to invest principally in
the equity securities of quoted technology companies on a
worldwide basis with the aim of achieving long-term capital
growth. The Directors believe that the Company would be in
breach of its fiduciary duties to shareholders if investment
decisions were based solely on CSR and EEE considerations.
The Investment Manager therefore takes account, in general
terms, of these considerations as a part of its investment
evaluations.
Whistleblowing
As the Company has no employees it does not have a formal
policy concerning the raising, in confidence, of any concerns
about improprieties for appropriate independent investigation.
The Audit Committee has, however, received and noted
the manager’s policy on this matter. However, any matters
concerning the Company may be raised with the Chairman or
Senior Independent Director.
Modern Slavery Act 2015
The Company does not provide goods or services in the
normal course of business, and as a financial investment
vehicle does not have customers. The Directors do not
therefore consider that the Company is required to make a
statement under the Modern Slavery Act 2015 in relation to
slavery or human trafficking.
Bribery Act 2010
The Board has a zero tolerance policy in relation to bribery
and corruption in its business processes and activities and has
received assurance via internal controls reporting from the
73
Directors’ Review Directors’ Report (continued)
Company’s main third party service providers that adequate
safeguards are in place to protect against any such potentially
illegal behaviour by employees or agents.
Electronic Communications
The Company has enabled electronic communications
whereby shareholders may opt to receive documents
electronically. Shareholders who opted for this receive either
an email, where an email address has been registered, or
letter notifying them of the availability of the Company’s
Annual Report, Half-Year Report and any other Shareholder
documents on the Company’s website. Those that elected not
to switch to electronic means will continue to receive hard-
copy documents by post. In order to reduce the Company’s
impact on the environment we encourage Shareholders,
wherever possible, to register an email address and to receive
notifications electronically. We will however continue to make
available postal copies where required.
Common Reporting Standard (CRS)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law
by the International Tax Compliance Regulations 2015. CRS
requires the Company to provide certain additional details to
HMRC in relation to UK resident foreign investment holders.
The reporting obligation began in 2016 and will be an annual
requirement going forward. The Registrars, Link Asset Services,
have been engaged to collate such information and file the
reports with HMRC on behalf of the Company.
Annual General Meeting
The formal Notice of AGM is set out on pages 113 to 116.
The Directors consider that the resolutions relating to the
items of special business, as detailed below, are in the best
interests of shareholders as a whole. Accordingly, the Directors
unanimously recommend to the shareholders that they vote
in favour of the resolutions to be proposed at the forthcoming
AGM, as they intend to do in respect of their own holdings of
Ordinary Shares.
The Board welcomes all shareholders to the AGM at which
the Investment Manager will present his review of the year
and prospects for the future. All Directors aim to be present
at the AGM to meet and talk with shareholders. Additionally,
shareholders wishing to communicate directly with the Board
may make contact via the Investment Manager or Company
Secretary, details of whom can be found on page 109.
74
The following Resolutions relating to items of special business
will be proposed:
Authority to allot new shares, to sell Treasury Shares and to
Disapply Pre-Emption Rights
Resolutions authorising the Directors to allot new share capital
and to sell shares held as treasury shares for cash and to
disapply pre-emption rights in relation to such were passed at
the AGM of the Company on 19 April 2017 under Section 551
and Section 570 of the Companies Act 2006 and will expire on
28 April 2018.
Approval is therefore being sought for the renewal of the
Directors’ authority to allot new shares up to an aggregate
nominal amount of £678,360 representing 2,713,442 Ordinary
Shares of 25p each, such amount being equivalent to 10%
of the present issued share capital and also renewal of the
Directors’ authority to sell shares held as Treasury Shares.
Approval is also sought for the renewal of the authority to
disapply pre-emption rights in respect of the allotment of
new shares or the sale by the Company of shares held by it as
Treasury Shares, for cash up to an aggregate nominal value of
£678,360 (representing 2,713,442 Ordinary Shares).
If passed, these authorities will remain in place until the
conclusion of the next AGM of the Company, or, if earlier, on
25 July 2019.
The directors do not currently intend to allot new shares under
these authorities other than to take advantage of opportunities
in the market as they arise and only if they believe it would be
advantageous to the Company’s existing shareholders to do
so. The directors confirm that no allotments of new shares will
be made unless the lowest market offer price of the ordinary
shares is at least at a premium to net asset value. Treasury
Shares may be resold by the Company at a discount to NAV
provided that such shares are resold by the Company at a
lower discount to the NAV than the average discount at which
they were repurchased by the Company.
Continuation of share buy-back programme
A resolution authorising the Directors to make market
purchases of the Company’s Ordinary Shares was passed at
the AGM of the Company on 19 April 2017, under Section 701
of the Companies Act 2006.
The Board is proposing the renewal of the Company’s
authority to make market purchases of Ordinary Shares either
for cancellation or for holding in treasury. The Board believes
that such purchases in the market at appropriate times and
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Directors’ Report (continued)
prices may be a suitable method of enhancing shareholder
value. The Company would make either a single purchase or a
series of purchases, when market conditions are suitable and
within guidelines set from time to time by the Board, with the
aim of maximising the benefits to shareholders.
The Board believes that the Company’s ability to purchase its
own shares may assist liquidity in the market. Additionally,
where purchases are made at prices below the prevailing
NAV, this enhances the NAV for the remaining shareholders.
It is therefore intended that purchases will only be made at
prices below NAV, with the purchases to be funded from the
realised capital profits of the Company (which are currently in
excess of £300 million – including investment holding gains).
The rules of the UK Listing Authority limit the maximum price
which may be paid by the Company to 105% of the average
middle-market quotation for an Ordinary Share on the 5
business days immediately preceding the date of the relevant
purchase. The minimum price to be paid will be 25p per
Ordinary Share (being the nominal value). Overall these share
buy-back proposals should help to reduce the discount to NAV
at which the Company’s shares are then trading. Under the
FCA Listing Rules, a company is permitted to purchase up to
14.99% of its equity share capital through market purchases
pursuant to a general authority granted by shareholders in
general meeting.
The current authorities expire at the conclusion of the
forthcoming AGM. Accordingly, a Special Resolution will
be proposed at the AGM giving authority to make market
purchases of up to 14.99% of the Company’s issued Ordinary
Share capital, being equivalent to 4,067,450 Ordinary Shares
or, in the event of change in the issued share capital between
the date of this Report and the AGM to be held on 25 April
2018, an amount equal to 14.99% of the Company’s issued
Ordinary Share capital at the date of the AGM.
The Board and the Annual Report
The Board is responsible for reviewing the entire annual report
and has noted the supporting information received and the
recommendations of the Audit Committee. The Board has
considered whether the annual report satisfactorily reflects a
true picture of the Company and its activities and performance
in the year under review with a clear link between the relevant
sections of the report. The Board was then able to confirm
that the annual report, taken as a whole, is fair, balanced
and understandable and provides the information necessary
for Shareholders to assess the Company’s position and
performance, business model and strategy.
By order of the Board
Eleanor Emuss
Company Secretary
22 February 2018
75
Directors’ Review Statement of Directors’ Responsibilities
Neither an audit nor a review provides assurance on the
maintenance and integrity of the website, including controls
used to achieve this, and in particular whether any changes
may have occurred to the financial information since first
published. These matters are the responsibility of the Directors
but no control procedures can provide absolute assurance in
this area.
The Directors each confirm to the best of their knowledge that:
(a) the Financial Statements, prepared in accordance with
applicable accounting standards, give a true and fair view
of the assets, liabilities, financial position and return of the
Company; and
(b) the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Company, together with a description of
the principal risks and uncertainties that the Company
faces.
The Directors confirm that the Annual Report and Financial
Statements, taken as a whole are fair, balanced and
understandable and provide the information necessary to
assess the Company’s position and performance, business
model and strategy.
For and on behalf of the Board
Robert Jeens
Chairman
22 February 2018
The Directors are responsible for preparing the Annual
Financial 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 financial statements
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards
and applicable law). The financial statements are required
by law to give a true and fair view of the state of affairs of the
Company and of the total return of the Company for that
year. In preparing these financial statements, the Directors are
required to:
select suitable accounting policies and then apply them
consistently;
make judgements and estimates that are reasonable and
prudent;
state whether applicable UK accounting standards have
been followed; and
prepare the financial statements on the going concern basis,
unless it is inappropriate to presume that the Company will
continue in business.
The Directors confirm that the financial statements comply
with the above requirements.
The Directors are responsible for keeping adequate accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website.
The financial statements are published on www.
allianztechnologytrust.com, which is a website maintained by
the Investment Manager. The work undertaken by the Auditors
does not involve consideration of the maintenance and
integrity of the website and, accordingly, the Auditors accept
no responsibility for any changes that may have occurred to
the financial statements since they were initially presented
on the website. Visitors to the website need to be aware that
legislation in the United Kingdom governing the preparation
and dissemination of the financial statements may differ from
legislation in other jurisdictions.
76
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Audit Committee Report
Introduction from the Chairman
I am pleased to present my formal report to Shareholders as Chairman of the Audit Committee for the
year ended 30 November 2017.
I was appointed Chairman of the Audit Committee on 13 April 2016.
Responsibility
The primary responsibilities of the Committee are to ensure the integrity of the Company’s financial
reporting and the appropriateness of the risk management processes and internal controls. The report
details how we carry out this role.
Composition and Meetings
The members of the Committee during the year were myself as Chairman, Richard Holway and
Elisabeth Scott. Robert Jeens, Chairman of the Board, is not a member of the Committee but will attend
meetings by invitation. All the members of the Committee are independent Non-Executive Directors,
and their skills and experience are set out on pages 56 and 57. The Board reviews the composition of
the Audit Committee and it considers that, collectively, its members have sufficient recent and relevant
financial and sector experience to fully discharge their responsibilities.
The Committee meets at least twice per year. The attendance of the Committee members is
shown on page 57. The Committee invites the external auditors and personnel from the Managers
financial, compliance and risk functions to attend and report to the Committee on relevant matters.
As part of the year end process I, as Chairman of the Committee attended additional meetings with
representatives of the Investment Manager and the external auditor. In addition, during the year, the
Committee also met privately with the external auditor to give them an opportunity to raise any issues
without management present. After each Committee meeting I report to the Board on the main items
discussed at the meeting.
77
Directors’ Review
Audit Committee Report (continued)
Role and Responsibilities of the Audit Committee
The Committee’s authority and duties are defined in its terms of reference, which were reviewed
during the year, and are available on the Company’s website www.allianztechnologytrust.com. The
principal activities carried out during the year were:
Financial reporting: we considered the Company’s financial reports, including the implications
of any new accounting standards and regulatory changes, significant accounting issues and the
appropriateness of the accounting policies adopted. We considered and are satisfied that, taken
as a whole, the Annual Report is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company’s performance and strategy.
External audit: we considered the scope of the external audit plan and the subsequent findings from
this work, receiving regular reports from the external auditor.
Risk and internal control: we considered the key risks facing the Company and the adequacy and
effectiveness of the internal controls and risk management processes.
External auditor: we considered the independence, effectiveness and fees of the external auditor, as
detailed later in this report.
Internal audit
The Committee continues to believe that the Company does not require an internal audit function as
it delegates its day-to-day operations to third parties from whom it receives internal control reports.
Reports from third party auditors on the internal controls maintained on behalf of the Company by
AllianzGI and by other providers of administrative and custodian services to AllianzGI or directly to the
Company were reviewed during the year.
Risk Management
The Board has ultimate responsibility for the management of the risks associated with the Company.
The Committee assists the Board by undertaking a formal assessment of risks and reporting to the
Board as appropriate. The Committee has reviewed its approach to risk management and the reporting
of such to the Board and has concluded that the processes in place are adequate and provide a robust
assessment of risk associated with the Company.
The Committee reviews in detail at least twice per year the full Risk Matrix and Controls schedule and
makes appropriate recommendations to the Board which may include adding or removing risks for
consideration, monitoring and reviewing the mitigating actions applicable to the identified risks and
determining the acceptability of the residual risk against the Board and the Company’s risk appetite;
in turn the Board carries out both a detailed specific review of matters highlighted by the Committee
and a continual assessment of high-level risks. Mitigating actions are considered along with associated
reporting and documentation as provided by the Investment Manager and other third party service
providers.
The Audit Committee also reviews the annual Internal Controls documents provided by key third party
service providers and reports as necessary to the Board. Further details of the key risks associated with
the Company are detailed within the Strategic Report.
78
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Audit Committee Report (continued)
Significant issues considered by the Audit Committee during the year
The Annual Report and Financial Statements are the responsibility of the Board and the Statement of Directors’ Responsibilities is
on page 76. The Audit Committee advises the Board on the form and content of the Annual Report and Financial Statements, any
issues which may arise in relation to these and any specific areas which require judgement.
The Committee is responsible for agreeing a suitable Audit Plan for the year-end audit and production of the Annual Financial
Report. The significant areas of risk and focus, and the primary procedures adopted to mitigate such, agreed by the Committee
and/or within the audit plan for the year under review were substantively unchanged from 2016 and included:
Valuation, existence and
ownership of the Company’s
investments
Valuations of actively traded investments are reconciled using stock exchange prices
provided by third party pricing vendors; where no third party source exists the Manager
and Director valuations are reviewed with appropriate valuation evidence being provided
to ensure valuations are suitable at the year end. Ownership of listed investments is
verified by reconciliation to the custodian’s records
Recognition, completeness and
occurrence of revenue
Income received is accounted for in line with the Company’s accounting policy (as set
out on page 94) and is reviewed by the Committee at each meeting.
Compliance with Section 1158
of the Corporation Tax Act 2010
The Committee regularly considers the controls in place to ensure that the regulations
for ensuring investment trust status are observed at all times.
Maintaining internal controls
The Committee receives regular reports on internal controls from AllianzGI and its
delegates and has access to the relevant personnel at AllianzGI who have responsibility
for risk management.
Performance and Management
Fees
The calculation of the management and performance fees payable to AllianzGI is
reviewed by the Committee before being approved by the Board.
Viability Statement
The Board is required to make a longer term viability statement in relation to the
continuing operations of the Company. The Committee reviews papers produced in
support of the statement made by the Board which assesses the viability of the Company
over a period of four years.
Annual Financial Report
The Committee and then the whole Board reviewed the entire annual financial report and noted all the supporting information
received. It then considered and concluded that the annual report satisfactorily reflected a true picture of the Company and its
activities and performance in the year, with a clear link between the relevant sections of the report. The directors were then able
to confirm that the annual financial report, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position, performance, business model and strategy.
79
Directors’ Review Audit Committee Report (continued)
Auditor Effectiveness
The Committee is responsible for reviewing the terms of appointment of the auditor and for monitoring the audit process
including the effectiveness and objectivity of the Auditor in fulfilling the terms of the agreed Audit Plan and the Audit Findings
Report subsequently issued by them.
As part of the review of the auditor, the members of the Committee and those representatives of the Manager involved in the audit
process reviewed and considered a number of areas including:
the reputation and standing of the audit firm;
the audit processes and evidence of partner oversight
audit communication including details of planning
information on relevant accounting and regulatory developments, and recommendations on corporate reporting; and
the Financial Reporting Council’s Audit Quality Report on Grant Thornton LLP for 2016/17.
Auditor Tenure
There are no contractual obligations which restrict the Committee’s choice of auditor. Grant Thornton UK LLP’s first year as the
Company’s Independent Auditor was for the year ended 30 November 2007, following the merger of Robson Rhodes (who were
appointed as the Company’s auditors in 1996) with Grant Thornton in 2007, and they have appointed Christopher Smith as the
current audit partner. Christopher became the audit partner in 2013 and, following professional guidelines, can serve for up to five
years. The continued appointment of Grant Thornton is considered by the Audit Committee each year, taking into account relevant
guidance and best practice and considering their independence and the effectiveness of the external audit process.
Auditor Independence and Reappointment
The Committee has confirmed the independence of the auditor and Grant Thornton has confirmed that they are independent of
the Company and have complied with relevant accounting standards. Grant Thornton did not provide any non-audit services to the
Company in this or the previous accounting period.
The Committee also took into account the competitiveness of their fees and obtained feedback from the Investment Manager
regarding the performance of the audit team. The Committee is satisfied with the independence and performance of the Auditor
and has recommended their reappointment for a further year.
In accordance with the EU Accounting reform requiring public interest entities to periodically change their auditors, the Company
will be required to put the audit out to public tender in or before the year ending 31 December 2023. There are no current plans to
consider rotation of the audit firm.
Humphrey van der Klugt
Audit Committee Chairman
22 February 2018
80
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Directors’ Remuneration Implementation
Report
Introduction
This implementation report has been prepared in accordance with the requirements of Sections 420-422A of the Companies
Act 2006 and Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as
amended in August 2013 (the Regulations) and is subject to an annual advisory vote of shareholders. An Ordinary Resolution for
the approval of this Remuneration Report will be put to the shareholders at the forthcoming Annual General Meeting (AGM).
The law requires your Company’s Auditor to audit certain of the disclosures provided. Where disclosures have been audited, they
are noted as such. The Auditor’s opinion is included in their report on page 89.
Remuneration Committee
No formal Remuneration Committee has been appointed, the Board as a whole therefore fulfils the function of a Remuneration
Committee. The Company currently has four non-executive Directors, all of whom are considered by the Board to be independent.
The Company has no employees or chief executive officer therefore many of the reporting requirements of the Regulations are not
applicable.
The Board has not received independent advice or services in respect of its consideration of the Directors’ remuneration; however
the Company Secretary provides the Board with details of comparable fees and other market information. The policy is to review
directors’ fee rates from time to time, but reviews will not necessarily result in a change to the rates. Any feedback received from
shareholders is also taken into account when setting remuneration levels. The level of Directors’ fees are therefore determined
by the Board as a whole, Directors abstain from voting on their own fees. Directors’ remuneration is paid quarterly or monthly in
arrears and is paid to the individual director; no payments have been made to third parties on behalf of the individual.
Remuneration Policy Report
The Remuneration Policy Report of the Company is required to be put to a binding vote of shareholders at least once every three
years; the policy was last proposed to and approved by shareholders at the AGM in 2017 and will therefore next be proposed as a
binding vote Resolution at the AGM in 2021. The Remuneration Policy Report follows on page 84 and is available on the Company’s
website www. allianztechnologytrust.com.
Annual General Meeting (AGM) Voting Statement
At the AGM held on 19 April 2017, of the votes cast by proxy for the approval of the Remuneration Implementation Report,
10,982,581 (98.9%) were cast in favour, 12,099 (0.1%) were cast as discretionary, 39,323 (0.35%) were cast against and 69,227 (0.6%)
shares were withheld from the vote. Of the votes cast by proxy for the approval of the Remuneration Policy Report, 10,991,325
(98.9%) were cast in favour, 12,099 (0.1%) were cast as discretionary, 38,247 (0.3%) were cast against and 61,559 (0.5%) shares were
withheld from the vote.
Annual Statement
The Chairman of the Board reports that there have been no changes made to, or major decisions taken, within the year on the level
of, or arrangements for, Directors’ remuneration.
Relative importance of spend on pay
The following disclosure is a statutory requirement. The directors, however, do not consider that the comparison of directors’
remuneration with distributions of the Company is a meaningful measure of the Company’s overall performance. There were no
dividends paid to shareholders or other distributions which made use of the Company’s profit or cash flow deemed to assist in the
understanding of the relative importance of spend on pay. The table below sets out the total level of remuneration compared to
the share buy-backs made in the year:
Total Remuneration
Total Share Buy-backs
2017
£
109,000
-
2016
£
117,484
673,775
81
Directors’ Review
Directors’ Remuneration Implementation
Report (continued)
Directors’ Service Contracts
It is the Board’s policy that none of the Directors has a service contract. The terms of their appointment provide that Directors shall,
in accordance with the Articles of Association, stand for election by shareholders at the first AGM after their appointment, and at
least every three years thereafter. The terms also provide that a Director may resign by notice in writing to the Board at any time
and may be removed without notice and that compensation will not be due on leaving office.
Directors’ and Officers’ Liability Insurance cover is held by the Company. The Board has granted individual indemnities to the
Directors.
Your Company’s Performance
The Regulations require a line graph to be included in the Directors’ Remuneration Report showing total shareholder return
for each of the financial years in the relevant period. The first period for which this graph was required was the year ended 30
November 2013, the graph was required to show the relevant period of five years, each subsequent graph increases by one year
until the maximum relevant period of ten years is reached; thereafter the graph will continue to provide ten years of data. The
graph set out below compares, on a cumulative basis, the total return to Ordinary Shareholders compared to the total shareholder
return on a notional investment made up of shares of the same kind and number as those by reference to which the Company’s
Benchmark is calculated.
Total Shareholder Return for the nine years to 30 November 2017
750
d
e
x
e
d
n
I
%
50
Allianz Technology Trust
Ordinary Share Price Total
Return
Allianz Technology Trust Net
Asset Value Total Return
Dow Jones World Technology
Index (sterling adjusted, total
return)
Nov 08
Nov 09
Nov 10
Nov 11
Nov 12
Nov 13
Nov 14
Nov 15
Nov 16
Nov 17
Source: AllianzGI / Datastream in sterling
Figures have been rebased to 100 as at 30 November 2008
Directors’ Fees
The Directors all served throughout the year and received the fees listed.
In the year to 30 November 2017 the Directors’ fees were paid at the rate of £23,000 (2016: £23,000) per annum with the Chairman
of the Board receiving an extra £12,000 (2016: £12,000) per annum and the Chairman of the Audit Committee an extra £5,000 (2016:
£5,000) per annum. During the year the Directors’ fees were reviewed with no change being proposed.
In accordance with the Articles of Association, the aggregate limit of fees that may be paid to the Directors per annum is £200,000.
These fees exclude any employers’ national insurance contributions, if applicable. Directors are authorised to claim reasonable
expenses from the Company in relation to the performance of their duties. However, the policy is to only claim ad hoc expenses which
would not ordinarily include general travel to and from meetings held in London. No director is entitled to receive share options,
bonuses, pension benefits or other financial or non-financial incentives either in substitution for or in addition to the remuneration
stated above.
82
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Directors’ Remuneration Implementation
Report (continued)
Directors’ Remuneration (Audited Information)
The Directors who served in the year received the following emoluments in the form of fees:
Appointed
Robert Jeens
1 August 2013, Chairman: 2 April 2014
Humphrey van der Klugt
1 July 2015, Audit Committee Chairman: 14 April 2016
Richard Holway
Elisabeth Scott
John Cornish
29 January 2007
1 February 2015
1 May 2005, retired 13 April 2016
No payments of Directors’ fees were made to third parties.
Fees
2017
£
35,000
28,000
23,000
23,000
-
Fees
2016
£
35,000
26,156
23,000
23,000
10,328
109,000
117,484
Directors’ Interests (Audited Information)
The Directors are not required to hold any shares in the Company; however, pursuant to Article 19 of the EU Market Abuse
Regulations the Directors’ Interests in the share capital of the Company are shown in table below.
Appointed
Robert Jeens
1 August 2013
Humphrey van der Klugt
1 July 2015
Richard Holway
Elisabeth Scott
29 January 2007
1 February 2015
Ordinary Shares of 25p each
30
November
2017
30
November
2016
10,000
5,000
17,000
1,650
10,000
5,000
17,000
1,650
There have been no further changes in the above holdings from the year end to the date of this report.
Approval
The Directors’ Remuneration Report was approved by the Board of Directors on 22 February 2018 and signed on its behalf by
Robert Jeens
Chairman
83
Directors’ Review
Directors’ Remuneration Policy Report
In accordance with Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 as amended, the Company is required to put to a binding vote of shareholders, at least every three years, the Company’s
Remuneration Policy Report (the Policy).
The Policy was last proposed to and approved by shareholders at the AGM in 2017 and will therefore next be proposed as an
Ordinary Resolution at the AGM in 2020.
Directors’ Remuneration
The Company’s remuneration policy provides that fees payable to the Directors should reflect the time spent by the Board on the
Company’s affairs and the responsibilities borne by the Directors and should be sufficient to enable candidates of high calibre to be
recruited.
Directors are remunerated solely in the form of fees payable monthly or quarterly in arrears, paid to the Director personally or to a
specified third party. There are no long-term incentive schemes, share option schemes or pension arrangements and the fees are
not specifically related to the Directors’ performance, either individually or collectively.
The 2017 and projected 2018 annual fee rates are Chairman: £35,000, Audit Committee Chairman: £28,000 and Director: £23,000.
The Company does not have a Chief Executive Officer and there are no employees.
The Board consists of non-executive Directors whose appointments are reviewed by the Board as a whole. None of the Directors
has a service contract with the Company and any Director may resign by notice in writing to the Board at any time; there are no set
notice periods and no compensation is payable to a Director on leaving office.
When reviewing the level of remuneration consideration is given to the time, commitment and Committee responsibilities of each
Director. The Board also takes into account the fees paid to directors of companies within its peer group. No communications have
been received from shareholders regarding Directors’ remuneration.
The Company’s Articles of Association limit the aggregate fees payable to Directors to £200,000 per annum. The policy is for the
Chairman of the Board and of each relevant Committee to be paid a fee which is proportionate to the additional responsibilities
involved in the position. It is intended that the above remuneration policy will continue to apply in the forthcoming financial year
and subsequent years.
Robert Jeens
Chairman
84
A laboratory at Lam Research, which makes semiconductor processing equipment used in the manufacture of integrated circuits
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Allianz Technology Trust PLC
Financial
Statements
8585
Independent Auditor’s Report to the
Members of Allianz Technology Trust PLC
Our opinion on the financial statements is unmodified
We have audited the financial statements of Allianz Technology Trust plc (the Company) for the year ended 30 November 2017
which comprise the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Statement of Accounting
Policies and notes to the financial statements. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
give a true and fair view of the state of the company’s affairs as at 30 November 2017 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us
to report to you whether we have anything material to add or draw attention to:
the disclosures in the annual report set out on pages 61 and 62 that describe the principal risks and explain how they are being
managed or mitigated;
the directors’ confirmation, set out on page 72 of the annual report, that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its business model, future performance, solvency or
liquidity;
the directors’ statement, set out on page 94 of the financial statements, about whether the directors considered it appropriate
to adopt the going concern basis of accounting in preparing the financial statements and the directors’ identification of any
material uncertainties to the company’s ability to continue to do so over a period of at least twelve months from the date of
approval of the financial statements;
whether the directors’ statement relating to going concern required under the Listing
Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
the directors’ explanation, set out on page 59 of the annual report, as to how they have assessed the prospects of the Company,
over what period they have done so and why they consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
86
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Independent Auditor’s Report to the
Members of Allianz Technology Trust PLC (continued)
Overview of our audit approach
Overall materiality: £3,134,000, which represents 1% of the Company’s net assets.
Key audit matters were identified as valuation, existence and ownership of investments, and completeness
and occurrence of investment income.
Our audit approach was a risk based substantive audit focused on investments at year end and investment
income recognised during the year. There was no change in our approach from prior year.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Key Audit Matter
How the matter was addressed in the audit
Valuation, existence and
ownership of investments
The company’s business is investing
in equity securities with the aim of
achieving long-term capital growth.
The investment portfolio at the year
end had a carrying value of £305m
and all investments were listed on
recognised stock exchanges.
As a significant, material item in
the financial statements there is a
risk that the investment valuation
recorded in the Statement
of Financial Position may be
incorrect. Also, there is a risk that
investments recorded might not
exist or might not be owned by the
Company. We therefore identified
valuation, existence and ownership
of investments as a significant
risk, which was one of the most
significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
understanding management’s process to value investments through
discussions with management and examination of control reports on third party
administrators and assessing whether the accounting policy for investments is
in accordance with the requirements of United Kingdom Generally Accepted
Accounting Practice (UK GAAP) and the Statement of Recommended Practice
(SORP) issued by the Association of Investment Companies (AIC);
agreeing the valuation of investments to an independent source of market prices
and nominal holdings to confirmation from the custodian in order to obtain
comfort over existence and ownership of investments; and
substantively testing a sample of additions and disposals of investments during
the year by agreeing such transactions to list of trade confirmations and bank
statements as applicable.
The Company’s accounting policy on investments is shown in Policy 4 in the
Statement of Accounting Policies to the financial statements and related disclosures
are included in notes 8. The Audit Committee identified valuation and ownership of
the Company’s investments as a significant issue in its report on page 79, where the
Committee also described the action that it has taken to address this issue.
Key observations
Our testing did not identify any material misstatements in the valuation of the
Company’s investment portfolio as at the year end nor were any issues noted with
regards to the existence or the Company’s ownership of the underlying investments
at the year end.
87
Financial Statements Independent Auditor’s Report to the
Members of Allianz Technology Trust PLC (continued)
Key Audit Matter
How the matter was addressed in the audit
Occurrence and completeness of
investment income
The Company measures
performance on a total return basis
and investment income is one
of the significant components of
this performance measure in the
Income Statement.
Under International Standard on
Auditing (UK) 240 ‘The auditor’s
responsibilities relating to fraud in
an audit of financial statements’,
there is a presumed risk of fraud in
revenue recognition.
We therefore identified
completeness and occurrence of
investment income as a significant
risk, which was one of the most
significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
assessing whether the Company’s accounting policy for revenue recognition is in
accordance with the requirements of UK GAAP and the AIC SORP and testing its
consistent application on revenue recognised during the year;
substantively testing income transactions to assess if they were recognised in
accordance with the policy;
for investments held during the year, obtaining the ex-dividend dates and rates for
dividends declared during the year from an independent source and agreeing the
expected dividend entitlements to those recognised in the Income Statement and
agreeing dividend income recognised by the Company to an independent source;
and
assessing the categorisation of corporate actions and special dividends to identify
whether the treatment is correct.
The Company’s accounting policy on income, including its recognition, is shown
in Policy 2 in the Statement of accounting policies to the financial statements
and related disclosures are included in note 1. The Audit Committee identified
recognition of income as a significant issue in its report on page [78], where the
Committee also described the action that it has taken to address this issue.
Key observations
Our testing did not identify any material misstatements in the amount of revenue
recognised during the year.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature,
timing and extent of our work and in evaluating the results of that work.
We determined materiality for the audit of the financial statements as a whole to be £3,134,000, which is 1% of the Company’s
net assets. This benchmark is considered the most appropriate because net assets, which primarily comprise the Company’s
investment portfolio, are considered to be the key driver of the Company’s total return performance and form a part of the net
assets value calculation.
Materiality for the current year is higher than the level that we determined for the year ended 30 November 2016 to reflect the
increased value of the Company’s net assets, including its investment portfolio, at the year end.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial
statement materiality.
We also determine a lower level of specific materiality for certain areas such as investment income and related party transactions,
being the management fee and directors’ remuneration.
We determined the threshold at which we will communicate misstatements to the audit committee to be £157,000. In addition we
will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.
88
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Independent Auditor’s Report to the
Members of Allianz Technology Trust PLC (continued)
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on
a thorough understanding of the Company’s business, its
environment and risk profile and in particular included:
Obtaining an understanding of relevant internal controls
at both the Company and third-party service providers.
This included obtaining and reading internal controls
reports prepared by the third-party service providers on
the description; design, and operating effectiveness of the
internal controls at the investment manager, custodian, and
administrator, and
Performing substantive audit procedures on specific
transactions, which included journal entries and individual
material balances and disclosures, the extent of which was
based on various factors such as our overall assessment of
the control environment and our evaluation of the design
and implementation of controls that address significant risk.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
annual report set out on pages 2 to 84, other than the financial
statements and our auditor’s report thereon. Our opinion on
the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in
the other information and to report as uncorrected material
misstatements of the other information where we conclude
that those items meet the following conditions:
Fair, balanced and understandable set out on page 76 –
the statement given by the directors that they consider
the annual report and financial statements taken as a
whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the
audit; or
Audit committee reporting set out on pages 77 to 80 – the
section describing the work of the audit committee does
not appropriately address matters communicated by us
to the audit committee is materially inconsistent with our
knowledge obtained in the audit; or
Directors’ statement of compliance with the UK Corporate
Governance Code set out on page 66 – the parts of the
directors’ statement required under the Listing Rules
relating to the company’s compliance with the UK Corporate
Governance Code containing provisions specified for review
by the auditor in accordance with Listing Rule 9.8.10R(2) do
not properly disclose a departure from a relevant provision of
the UK Corporate Governance Code.
Our opinions on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
89
Financial Statements Independent Auditor’s Report to the
Members of Allianz Technology Trust PLC (continued)
Matter on which we are required to report under
the Companies Act 2006
In the light of the knowledge and understanding of the
company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the directors’ report.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept, or
returns adequate for our audit have not been received from
branches not visited by us; or
the financial statements and the part of the directors’
remuneration report to be audited are not in agreement
with the accounting records and returns; or
certain disclosures of directors’ remuneration specified
by law are not made; or we have not received all the
information and explanations we require for our audit.
Responsibilities of directors for the financial
statements
As explained more fully in the Statement of directors’
responsibilities set out on page 76, the directors are
responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
We are responsible for obtaining reasonable assurance that
the financial statements taken as a whole are free from
material misstatement, whether caused by fraud or error.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements of the financial
statements may not be detected, even though the audit is
properly planned and performed in accordance with the
ISAs (UK). Our audit approach is a risk-based approach and is
explained more fully in the ‘An overview of the scope of our
audit’ section of our audit report.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the members for the year ended 30
November 2007, following the merger of Robson Rhodes LLP
with Grant Thornton in 2007. The period of total uninterrupted
engagement including previous renewals and reappointments
of the firm is 23 years. The Company will be required to
put the audit out to tender in or before the year ending 31
December 2023.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Company and we remain
independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to
the audit committee.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
Christopher Smith
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
22 February 2018
90
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Income Statement
for the year ended 30 November 2017
2017
Revenue
£
2017
Capital
£
2017
Total Return
£
2016
Revenue
£
2016
Capital
£
2016
Total Return
£
Notes
Gains on investments held at fair value
through profit or loss
(Loss) gains on foreign currencies
Income
Investment management fee and performance fee
Administration expenses
(Loss) profit before finance costs and taxation
Finance costs: interest payable and similar expenses
(Loss) profit before taxation
Taxation
(Loss) profit attributable to ordinary shareholders
(Loss) earnings per ordinary share
8
1
2
3
4
5
7
-
-
91,039,974
91,039,974
(515,184)
(515,184)
-
-
41,247,845
41,247,845
1,066,899
1,066,899
1,723,582
-
1,723,582
1,426,898
(2,116,945)
(433,476)
(2,550,421)
(1,444,512)
(609,756)
-
(609,756)
(461,918)
-
-
-
1,426,898
(1,444,512)
(461,918)
(1,003,119)
90,091,314
89,088,195
(479,532)
42,314,744
41,835,212
(1,536)
-
(1,536)
(544)
-
(544)
(1,004,655)
90,091,314
89,086,659
(480,076)
42,314,744
41,834,668
(228,129)
-
(228,129)
(191,541)
-
(191,541)
(1,232,784)
90,091,314
88,858,530
(671,617)
42,314,744
41,643,127
(4.75p)
346.78p
342.03p
(2.59p)
162.87p
160.28p
The total return column of this statement is the profit and loss account of the Company.
The supplementary revenue and capital columns are both prepared under the guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or
discontinued in the year.
The net profit for the year disclosed above represents the Company’s total comprehensive income.
The notes on pages 94 to 107 form an integral part of these Financial Statements.
91
Financial Statements Balance Sheet
at 30 November 2017
Non Current Assets
Investments held at fair value through profit or loss
Current Assets
Other receivables
Cash and cash equivalents
Current Liabilities
Other payables
Net current assets
Net assets
Capital and Reserves
Called up share capital
Share premium account
Capital redemption reserve
Capital reserve
Revenue reserve
Shareholders' funds
Net asset value per ordinary share
Notes
2017
£
2017
£
2016
£
8
10
10
304,958,713
209,653,974
2,641,205
7,189,378
9,830,583
14,454,699
6,380,078
20,834,777
10
(1,356,349)
(13,817,374)
8,474,234
7,017,403
313,432,947
216,671,377
11
12
12
12
12
13
13
7,075,720
7,075,720
41,810,716
37,097,551
1,020,750
1,020,750
281,523,911
188,242,722
(17,998,150)
(16,765,366)
313,432,947
216,671,377
1,178.6p
835.9p
The financial statements of Allianz Technology Trust PLC, company number 3117355, were approved and authorised for issue by
the Board of Directors on 22 February 2018 and signed on its behalf by:
Robert Jeens
Chairman
The notes on pages 94 to 107 form an integral part of these Financial Statements.
92
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Statement of Changes in Equity
for the year ended 30 November 2017
Called up
Share
Capital
£
Share
Premium
Account
£
Capital
Redemption
Reserve
£
Capital
Reserve
£
Revenue
Reserve
£
Total
£
Net assets at 1 December 2015
7,075,720
37,097,551
1,020,750
146,601,753
(16,093,749)
175,702,025
Revenue loss
Shares repurchased into treasury during the year
Capital profit
-
-
-
-
-
-
-
-
-
-
(671,617)
(671,617)
(673,775)
42,314,744
-
-
(673,775)
42,314,744
Net assets at 30 November 2016
7,075,720
37,097,551
1,020,750
188,242,722
(16,765,366)
216,671,377
Net assets at 1 December 2016
7,075,720
37,097,551
1,020,750
188,242,722
(16,765,366)
216,671,377
Revenue loss
Ordinary shares issued from treasury during the year
Capital profit
-
-
-
-
4,713,165
-
-
-
-
-
(1,232,784)
(1,232,784)
3,189,875
90,091,314
-
-
7,903,040
90,091,314
Net assets at 30 November 2017
7,075,720
41,810,716
1,020,750
281,523,911
(17,998,150)
313,432,947
The notes on pages 94 to 107 form an integral part of these Financial Statements.
93
Financial Statements Notes to the Financial Statements
for the year ended 30 November 2017
Summary of Accounting Policies
1 The financial statements – have been prepared on the
basis of the accounting policies set out below.
The financial statements have been prepared in
accordance with The Companies Act 2006, FRS 102
and with the Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and
Venture Capital Trusts’ (SORP) issued by the Association
of Investment Companies (AIC) in November 2014, as
updated in January 2017.
In order to better reflect the activities of an investment
trust company and in accordance with guidance issued
by the AIC, supplementary information which analyses
the Income Statement between items of a revenue and
capital nature has been presented alongside the Income
Statement. In accordance with the Company’s status as
a UK investment company under section 833 and 834
of the Companies Act 2006, net capital returns may be
distributed by way of dividend under the terms of the
Articles of Association. The Company does not utilise this
ability.
The requirements have been met to qualify for the
exemption to prepare a Cash Flow Statement. The Cash
Flow Statement has therefore been removed from the
financial statements.
The accounting policies adopted in preparing the current
year’s financial statements are consistent with those of
previous years.
The Directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the financial
statements as the assets of the Company consist mainly
of securities which are readily realisable and significantly
exceed liabilities. Accordingly, the Directors believe that
the Company has adequate financial resources to continue
in operational existence for the foreseeable future. The
Company’s business, the principal risks and uncertainties
it faces, together with the factors likely to affect its future
development, performance and position are set out in the
Strategic Report on pages 58 to 62.
2 Revenue – Dividends received on equity shares are
accounted for on an ex-dividend basis. UK dividends are
shown net of tax credits and foreign dividends are grossed
up at the appropriate rate of withholding tax.
94
Special dividends are recognised on an ex-dividend basis
and treated as a capital or revenue item depending on the
facts and circumstances of each dividend.
Where the Company has elected to receive its dividends
in the form of additional shares rather than in cash, the
equivalent of the cash dividend is recognised as revenue.
Any excess in the value of the shares received over the
amount of the cash dividend is recognised in capital.
Deposit interest receivable is accounted for on an accruals
basis.
3
Investment management fees and administrative
expenses – The investment management fee is calculated
on the basis set out in Note 2 to the financial statements
and is charged in full to revenue as permitted by the SORP.
Performance fees are charged in full to capital, as they
are directly attributable to the capital performance of the
investments. Other administrative expenses are charged in
full to revenue. All expenses are recognised on an accrual
basis.
4 Valuation – As the Company’s business is investing in
financial assets with a view to profiting from their total
return in the form of increases in fair value, financial assets
are held at fair value through profit and loss in accordance
with FRS 102 Section 11: ‘Basic Financial Instruments’ and
Section 12 ‘Other Financial Instruments’.
Investments held at fair value through profit or loss are
initially recognised at fair value. After initial recognition,
these continue to be measured at fair value, which
for quoted investments is either the bid price or the
last traded price depending on the convention of the
exchange on which the investment is listed. Gains or losses
on investments are recognised in the capital column of the
Income Statement. Purchases and sales of financial assets
are recognised on the trade date, being the date which the
Company commits to purchase or sell the assets.
Unlisted investments are valued by the Directors based
upon the latest dealing prices, stockbrokers’ valuations,
net asset values, earnings and other known accounting
information in accordance with the principles set out
by the International Private Equity and Venture Capital
Valuation Guidelines issued in December 2015.
5 Finance costs – In accordance with the FRS 102 Section
11: ‘Basic Financial Instruments’ and Section 12: ‘Other
Financial Instruments’, finance costs of borrowing are
calculated using the effective interest rate method and
charged to revenue.
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Notes to the Financial Statements (continued)
for the year ended 30 November 2017
9 Shares sold (re-issued) from treasury – Proceeds
received from the sale of shares held in treasury are
treated as realised profits in accordance with Section 731
of the Companies Act 2006. Proceeds equivalent to the
original cost, calculated by applying a weighted average
price, are credited to the Capital Reserve to replenish the
profits available for distribution; proceeds in excess of the
original cost are credited to the Share Premium account.
10 Significant judgements, estimates and assumptions –
In the application of the Company’s accounting policies,
which are described above, the Directors are required to
make judgements, estimates, and assumptions about
the carrying amounts of assets and liabilities that are not
readily apparent from other sources. These estimates and
associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual
results may differ from the estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period or, in the period of
the revision and future periods if the revision affects both
current and future periods.
There have been no such significant judgements,
estimates or assumptions.
6 Taxation – Where expenses are allocated between capital
and revenue, any tax relief obtained in respect of those
expenses is allocated between capital and revenue on
the marginal basis using the Company’s effective rate of
corporation tax for the accounting period.
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the
balance sheet date, where transactions or events that
result in an obligation to pay more tax or a right to pay less
tax in the future have occurred. Timing differences are
differences between the Company’s taxable profits and its
return as stated in the financial statements.
A deferred tax asset is recognised when it is more likely
than not that the asset will be recoverable. Deferred tax
is measured on a non-discounted basis at the rate of
Corporation tax that is expected to apply when the timing
differences are expected to reverse.
7 Foreign currency – In accordance with FRS 102 Section
30: ‘Foreign Currency Translation’, the company is required
to nominate a functional currency, being the currency
in which the company predominately operates. The
functional and reporting currency is sterling, reflecting
the primary economic environment in which the
company operates, the predominant currency in which
its shareholders operate and the currency in which its
expenses are generally paid.
Transactions in foreign currencies are translated into
sterling at the rates of exchange ruling on the date of
the transaction. Assets and liabilities are translated into
sterling at the rates of exchange ruling at the balance
sheet date. Gains and losses thereon are recognised in
the revenue or capital column of the income statement,
dependent on the nature of the gain or loss. Gains and
losses on investments arising from a change in exchange
rates are taken to the capital reserves.
8 Shares repurchased for cancellation and holding in
treasury – For shares repurchased for cancellation, Share
Capital is reduced by the nominal value of the shares
repurchased, and the Capital Redemption Reserve is
correspondingly increased in accordance with Section 733
of the Companies Act 2006. The full cost of the repurchase
is charged to the Capital Reserve.
For shares repurchased for holding in treasury, the full cost
is charged to the Capital Reserve.
95
Financial Statements Notes to the Financial Statements (continued)
for the year ended 30 November 2017
1. Income
Income from Investments*
Equity income from UK investments
Equity income from overseas investments
Other Income
Deposit interest
Total income
* All equity income is derived from listed investments.
2. Investment Management Fee
2017
£
2016
£
63,390
62,689
1,658,300
1,363,748
1,721,690
1,426,437
1,892
1,892
461
461
1,723,582
1,426,898
2017
Revenue
£
2017
Capital
£
2017
Total
£
2016
Revenue
£
2016
Capital
£
2016
Total
£
Investment management fee
2,116,945
-
2,116,945
1,444,512
Performance fee
Total
-
433,476
433,476
-
2,116,945
433,476
2,550,421
1,444,512
-
-
-
1,444,512
-
1,444,512
The Company’s investment manager is Allianz Global Investors GmbH, UK Branch (the Investment Manager). The Investment
Manager provides the Company with investment management, accounting, company secretarial and administration services
pursuant to the management contract. The management contract is terminable on giving six months’ notice (2016: six months’),
and provides for a base management fee of 0.8% (2016: 0.8%) per annum payable quarterly in arrears and calculated on the
average value of the market capitalisation of the Company at the last business day of each month in the relevant quarter. In
addition there is a fixed fee of £55,000 (2016: £55,000) per annum to cover the Investment Manager’s administration costs.
In each year, in accordance with the management contract the Investment Manager is entitled to a performance fee subject to
various performance conditions. For years beginning on or after 1 December 2013, the performance fee entitlement is equal
to 12.5% of the outperformance of the adjusted NAV per share total return as compared to the benchmark index, the Dow
Jones World Technology Index (sterling adjusted, total return). Such amount is applied to the year end NAV and adjusted for the
weighted average number of Ordinary Shares in issue during the Performance Period. Any underperformance brought forward
from previous years is taken into account in the calculation of the performance fee.
A performance fee is only payable where the NAV per share at the end of the relevant Performance Period is greater than the NAV
per share at the end of the financial year in which a performance fee was last paid. At 30 November 2017 this ‘high water mark’
(HWM) was 542.89p per share. In the event the HWM is not reached in any year, any outperformance shall instead be carried
forward to future periods to be applied as detailed below. Any performance fee payable is capped at 2.25% of the year end NAV of
the Company. For this purpose, the NAV is calculated after deduction of the associated performance fee payable. As at 1 December
2017 the ‘high water mark’ (HWM) was reset to 1180.19p per share.
96
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Notes to the Financial Statements (continued)
for the year ended 30 November 2017
Any outperformance in excess of the cap (or where the HWM has not been met) shall be carried forward to future years to be
available for offset against future underperformance but not to generate a performance fee. To the extent the Company has
underperformed the benchmark, such underperformance is carried forward and must be offset by future outperformance before a
performance fee can be paid. Underperformance/outperformance amounts carried forward do so indefinitely until offset.
The performance fee earned by the Investment Manager for this Performance Period was £433,476 (2016: £nil).
3. Administration Expenses
Auditors’ Remuneration
Fee payable to the Company’s auditor for the audit of the Company’s annual accounts
VAT on auditors’ remuneration
Directors' fees1
Employer national insurance contributions
Marketing costs2
Other administrative expenses3
2017
£
2016
£
28,500
5,700
34,200
29,120
5,824
34,944
109,000
117,484
10,538
11,560
175,351
111,661
280,667
186,269
609,756
461,918
The above expenses include value added tax where applicable.
1 Directors’ fees are set out in the Directors’ Implementation Remuneration Report on page 83.
2 The marketing budget takes into account both the marketing of the Investment Manager but also third party service providers.
3 Other includes American Depositary Receipt (ADR) costs of £4,000 (2016: £25,000).
4. Finance Costs: Interest Payable and Similar Expenses
Interest on overseas overdraft
2017
£
1,536
1,536
2016
£
544
544
97
Financial Statements Notes to the Financial Statements (continued)
for the year ended 30 November 2017
5. Taxation
Overseas taxation
Total tax
Reconciliation of Tax Charge
2017
Revenue
£
228,129
228,129
2017
Capital
£
-
-
2017
Total
£
2016
Revenue
£
228,129
191,541
228,129
191,541
2016
Capital
£
-
-
2016
Total
£
191,541
191,541
(Loss) profit on ordinary activities before taxation
(1,004,655)
90,091,314
89,086,659
(480,076)
42,314,744
41,834,668
Tax on (loss) profit of 19.33% (2016: 20%)
(194,233)
17,417,654
17,223,421
(96,015)
8,462,949
8,366,934
Reconciling Factors
Non taxable income
Non taxable capital gains
Disallowable expenses
Excess of allowable expenses over taxable income
Overseas tax suffered
Total tax
(332,860)
-
(332,860)
(281,404)
-
(281,404)
-
(17,501,459)
(17,501,459)
-
(8,462,949)
(8,462,949)
2,771
524,322
228,129
228,129
-
2,771
81
83,805
608,127
377,338
-
-
228,129
191,541
228,129
191,541
-
-
-
81
377,338
191,541
191,541
The Company’s taxable income is exceeded by its tax allowable expenses. As at 30 November 2017, the Company had
accumulated surplus expenses of £51.8m (2016: £48.7m).
At 30 November 2017 the Company has not recognised a deferred tax asset of £8.8m (2016: £8.3m) in respect of accumulated
expenses based on a prospective corporation tax rate of 17% (2016: 17%). The reduction in the standard rate of corporation tax
was substantively enacted on 15 September 2016 and will be effective 1 April 2020. Provided the Company continues to maintain
its current investment profile, it is unlikely that the expenses will be utilised and that the Company will obtain any benefit from this
asset.
In May 2013 the Company received confirmation from HM Revenue & Customs as an approved investment trust for accounting
periods commencing on or after 1 December 2012, subject to the Company continuing to meet the eligibility conditions at Section
1158 Corporation Tax Act 2010 and the ongoing requirements for approved companies in Chapter 3 of Part 2 Investment Trust
(Approved Company) Tax Regulations 2011 (Statutory Instrument 2011/2999).
In the opinion of the Directors, the Company has conducted its affairs in such a manner that it continues to meet the eligibility
conditions.
The Company has not therefore provided tax on any capital gains and losses arising on the disposals of investments.
6. Dividends on Ordinary Shares
There were no dividends paid or declared during the financial year ended 30 November 2017 (2016: £nil).
98
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Notes to the Financial Statements (continued)
for the year ended 30 November 2017
7. (Loss) Earnings per Ordinary Share
2017
Revenue
£
2017
Capital
£
2017
Total Return
£
2016
Revenue
£
2016
Capital
£
2016
Total Return
£
(Loss) Earnings after taxation attributable
to ordinary shareholders
(1,232,784)
90,091,314
88,858,530
(671,617)
42,314,744
41,643,127
(Loss) Earnings per ordinary share
(4.75p)
346.78p
342.03p
(2.59p)
162.87p
160.28p
2017
No. of Shares
2016
No. of Shares
Weighted average number of Ordinary Shares in issue for the return per Ordinary Share calculations above
25,979,754
25,981,157
8. Investments
Fair value of investments brought forward
Investment holding gains brought forward
Cost of investments held brought forward
Additions at cost
Disposals at cost
Cost of investments held at 30 November
Investment holding gains at 30 November
Fair value of investments held at 30 November
Gains on Investments
Gains on sales of investments based on historical costs
Adjustment for investment holding gains recognised in previous years
Gains on sales of investments based on carrying value at previous balance sheet date
Investment holding gains arising in the year
Gains on investments
2017
£
2016
£
209,653,974
172,918,744
(37,305,864)
(30,598,768)
172,348,110
142,319,976
247,115,994
311,510,015
(203,288,966)
(281,481,881)
216,175,138
172,348,110
88,783,575
37,305,864
304,958,713
209,653,974
39,562,263
34,540,749
(25,248,845)
(29,462,158)
14,313,418
5,078,591
76,726,556
36,169,254
91,039,974
41,247,845
Transaction costs on equity purchases amounted to £186,894 (2016: £241,586) and transaction costs on equity sales amounted to
£151,431 (2016: £220,969).
99
Financial Statements Notes to the Financial Statements (continued)
for the year ended 30 November 2017
9. Investments in Subsidiaries or other companies
As at 30 November 2017 the Company held no investments in subsidiaries, nor did it hold more than 10% of the share capital in any
other company.
10. Other Receivables, Cash and Cash Equivalents, and other Payables
Other Receivables
Sales for future settlement
Accrued income
Other receivables
Cash and Cash Equivalents
Cash at bank
Other Payables
Purchases for future settlement
Other payables
2017
£
2016
£
-
13,804,469
143,785
172,393
2,497,420
477,837
2,641,205
14,454,699
7,189,378
6,380,078
-
13,237,071
1,356,349
580,303
1,356,349
13,817,374
Included within other receivables is a directors’ valuation of a contingent consideration of £413,969 (2016: £448,215) relating to
the acquisition of MicroDose Therapeutx Inc. by Teva Pharmaceuticals USA, Inc., a subsidiary of Teva Pharmaceutical Industries
Limited.
The carrying amount of other receivables, cash and cash equivalents and other payables, each approximate their fair value.
100
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Notes to the Financial Statements (continued)
for the year ended 30 November 2017
11. Called up Share Capital
Allotted and Fully Paid
2017
£
2016
£
28,302,880 Ordinary Shares of 25p (2016: 28,302,880)*
7,075,720
7,075,720
*Inclusive of 1,708,453 (2016: 2,383,453) Ordinary Shares held in treasury for reissue into the market or cancellation at a future
date. Shares held in treasury are non-voting and not eligible for receipt of dividends.
During the year, there were no Ordinary shares repurchased to be held in treasury (2016: 107,999). During the year 675,000
Ordinary Shares were reissued from treasury (2016: nil). Since the year end a further 540,000 shares have been re-issued from
treasury up to and including 12 February 2018.
Allotted 25p ordinary shares
Brought forward
Shares bought back into treasury
Shares issued from treasury
Carried forward
Treasury shares
Brought forward
Shares bought back into treasury
Shares issued from treasury
Carried forward
2017
Number
2017
£
2016
Number
2016
£
25,919,427
6,479,857
26,027,426
6,506,857
-
-
(107,999)
(27,000)
675,000
168,750
-
-
26,594,427
6,648,607
25,919,427
6,479,857
2,383,453
595,863
2,275,454
568,863
-
-
107,999
27,000
(675,000)
(168,750)
-
-
1,708,453
427,113
2,383,453
595,863
101
Financial Statements Notes to the Financial Statements (continued)
for the year ended 30 November 2017
12. Reserves
Capital Reserve
Share
Premium
Account
£
Capital
Redemption
Reserve
£
Gains on
Sales of
Investments
£
Investment
Holding
Gains (Losses)
£
Revenue
Reserve
£
Balance at 1 December 2016
37,097,551
1,020,750
149,759,909
38,482,813
(16,765,366)
Gains on sales of fixed asset investments
Foreign currency losses
Movement in fixed asset investment holding gains
Transfer on disposal of investments
Issue of Ordinary Shares from treasury
Performance fee
Retained loss for the year
-
-
-
-
4,713,165
-
-
-
-
-
-
-
-
-
14,313,418
(515,184)
-
-
-
76,726,556
25,248,845
(25,248,845)
3,189,875
(433,476)
-
-
-
-
-
-
-
-
-
-
(1,232,784)
Balance at 30 November 2017
41,810,716
1,020,750
191,563,387
89,960,524
(17,998,150)
The Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in its technical
guidance TECH 02/17 states that investment holding gains arising out of a change in fair value of assets may be recognised as
gains on sales of investments provided they can be readily converted into cash.
Securities listed on a stock exchange are generally regarded as being readily convertible into cash and hence investment holding
gains in respect of such securities may be regarded as realised under Company Law.
The Share Premium Account arose on the issue of ordinary shares. The difference between the par value of shares and the total
amount received is allocated here. It is not distributable by way of a dividend and cannot be used to repurchase shares.
The Capital Redemption Reserve represents the nominal value of shares repurchased and cancelled. It is not distributable by way of
a dividend and cannot be used to repurchase shares.
The Capital Reserve reflects realised and unrealised gains and losses on investments and other income and costs recognised in the
Capital column of the Income Statement. It can be used for share repurchases for holding in treasury. It is also distributable by way
of a dividend.
The Revenue Reserve reflects revenue gains or losses.
13. Net Asset Value (NAV) per Share
The Net Asset Value per share (which equates the net asset value attributable to each Ordinary Share in issue at the year end
calculated in accordance with the Articles of Association) was as follows:
Ordinary Shares of 25p
Ordinary Shares of 25p
NAV Per Share Attributable
2017
2016
1,178.6p
835.9p
NAV Attributable
2017
2016
£313,432,947
£216,671,377
The Net Asset Value per share is based on 26,594,427 Ordinary Shares in issue as at 30 November 2017 (2016: 25,919,427 Ordinary
Shares).
102
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Notes to the Financial Statements (continued)
for the year ended 30 November 2017
14. Contingent Liabilities and Commitments and Guarantees
At 30 November 2017 there were no outstanding contingent liabilities or commitments (2016: £nil).
15. Financial Risk Management policies and procedures
The Company invests in equities and other investments in accordance with its investment policy as stated on the inside front
cover. In pursuing its investment objective, the Company is exposed to certain inherent risks that could result in a reduction in the
Company’s net return and net assets.
The main risks arising from the Company’s financial instruments are: market risk (comprising market price risk, foreign currency
risk and interest rate risk), liquidity risk and credit risk. The Directors determine the objectives and agree policies for managing each
of these risks, as set out below. The Investment Manager, in close cooperation with the Directors, implements the Company’s risk
management policies. These policies have remained substantially unchanged during the current and preceding period.
(a) Market Risk
The Investment Manager assesses the exposure to market risk when making each investment decision, and monitors the risk on
the investment portfolio on an ongoing basis. Market risk comprises market price risk, foreign currency risk and interest rate risk.
(i) Market Price Risk
Market price risk arises mainly from the uncertainty about future prices of financial instruments held. It represents the potential
loss the Company might suffer through holding market positions in the face of price movements. An analysis of the Company’s
portfolio is shown on pages 52 to 54.
Market Price Sensitivity
The value of the Company’s listed equities excluding unlisted equities, which were exposed to market price risk as at 30 November
was as follows:
2017
£
2016
£
Listed equity investments held at fair value through profit or loss
304,958,713
209,653,974
The following illustrates the sensitivity of the net return and the net assets to an increase or decrease of 20% (2016: 20%) in the fair
values of the Company’s listed investments. This level of change is considered to be reasonably possible based on observation of
market conditions in the year. The sensitivity analysis is based on the impact of a change to the value of the Company’s listed equity
investments at each balance sheet date and the consequent impact on the investment management fees for the year, with all
other variables held constant.
Revenue earnings
Investment management fees
Capital earnings
2017
20% Increase
in fair value
£
2017
20% Decrease
in fair value
£
2016
20% Increase
in fair value
£
2016
20% Decrease
in fair value
£
(487,934)
487,934
(335,446)
335,446
Gains (losses) on investments at fair value
60,991,743
(60,991,743)
41,930,795
(41,930,795)
Change in net return
60,503,809
(60,503,809)
41,595,349
(41,595,349)
103
Financial Statements Notes to the Financial Statements (continued)
for the year ended 30 November 2017
Management of market price risk
The Directors meet regularly to evaluate the risks associated with the investment portfolio. Dedicated fund managers have the
responsibility for monitoring the existing portfolio selection in accordance with the Company’s investment objective and seek to
ensure that individual stocks meet an acceptable risk reward profile.
The Board can authorise the fund managers to use options in order to protect the portfolio against high market volatility. Where
options are employed, the market value of such options can be volatile but the maximum realised loss on any contract is limited to
the original investment cost. No options were taken out in the current year (2016: £nil).
(ii) Foreign Currency Risk
Foreign currency risk is the risk of the movement in the values of overseas financial instruments as a result of fluctuations in
exchange rates.
Management of foreign currency risk
Transactions in foreign currencies are translated into sterling at the rates of exchange ruling on the date of the transaction.
Foreign currency assets and liabilities are translated into sterling at the rates of exchange ruling at the balance sheet date. It is the
Company’s policy not to hedge foreign currency exposure.
Any income denominated in foreign currency is converted into sterling on receipt. The Company does not use financial
instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements
and its receipt.
The table below summarises in sterling terms the foreign currency risk exposure:
2017
Investments
£
2017
Other
Assets and
Liabilities
£
2017
Total
Currency
Exposure
£
2016
Investments
£
2016
Other
Assets and
Liabilities
£
2016
Total
Currency
Exposure
£
Sterling
US Dollar
12,344,354
763,551
13,107,905
5,295,012
(517,698)
4,777,314
269,700,759
7,291,472
276,992,231
189,015,151
8,179,831
197,194,982
Other currency exposure
22,913,600
419,211
23,332,811
15,343,811
(644,730)
14,699,081
304,958,713
8,474,234
313,432,947
209,653,974
7,017,403
216,671,377
Foreign Currency Risk Sensitivity
The following table details the company’s sensitivity to a 20% increase and decrease in sterling against the relevant foreign
currencies and the resultant impact that any such increase or decrease would have on the net return and net assets. The sensitivity
analysis includes all foreign currency denominated items and adjusts their translation at the year end for a 20% change in foreign
currency rates.
US Dollar
Other currency exposure
2017
20% Decrease
in sterling
against
foreign
currencies
£
2017
20% Increase
in sterling
against
foreign
currencies
£
2016
20% Decrease
in sterling
against
foreign
currencies
£
2016
20% Increase
in sterling
against
foreign
currencies
£
69,248,057
(46,165,372)
49,298,746
(32,865,830)
5,833,203
(3,888,800)
3,674,769
(2,449,848)
Change in net return and net assets
75,081,260
(50,054,172)
52,973,515
(35,315,678)
104
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Notes to the Financial Statements (continued)
for the year ended 30 November 2017
(iii) Interest Rate Risk
Interest rate risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates.
Interest Rate Exposure
The table below summarises in sterling terms the financial assets and financial liabilities whose values are directly affected by
changes in interest rates.
2017
Fixed
rate
interest
£
2017
Floating
rate
interest
£
2017
2017
Nil
interest
£
Total
£
2016
Fixed
rate
interest
£
2016
Floating
rate
interest
£
2016
2016
Nil
interest
£
Total
£
-
-
-
7,189,378
304,958,713
312,148,091
-
-
-
7,189,378 304,958,713 312,148,091
-
-
-
6,380,078
209,653,974
216,034,052
-
-
-
6,380,078 209,653,974 216,034,052
Financial assets
Financial liabilities
Net financial assets
Short-term receivables and payables
Net assets per balance sheet
1,284,856
313,432,947
637,325
216,671,377
As at 30 November 2017, the interest rates received on cash balances or paid on bank overdrafts was nil% and 3.0% per annum,
respectively (2016: nil% and 2.7% per annum).
Management of interest rate risk
The Company invests predominantly in equities, the values of which are not directly affected by changes in prevailing market
interest rates. The Company’s policy is to remain substantially fully invested. It does not normally expect to hold significant cash
balances for other than brief periods of time and therefore there is minimal exposure to interest rate risk.
(b) Liquidity risk
Liquidity risk relates to the capacity to meet liabilities as they fall due and is dependent on the liquidity of the underlying assets.
Maturity of financial liabilities
The table below presents the future cash flows payable by the Company in respect of its financial liabilities.
2017
Other Payables - Within one year
Other payables
2016
Other Payables - Within one year
Other payables
Three
months
or less
£
Between
three months
and one year
£
Between
one and
five years
£
More than
five years
£
Total
£
1,356,349
1,356,349
-
-
-
-
-
-
1,356,349
1,356,349
Three
months
or less
£
Between
three months
and one year
£
Between
one and
five years
£
More than
five years
£
Total
£
13,817,374
13,817,374
-
-
-
-
-
-
13,817,374
13,817,374
105
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 November 2017
Management of liquidity risk
Liquidity risk is not considered to be significant as the Company’s assets mainly comprise realisable securities, which can be sold to
meet funding requirements. Short term flexibility can be achieved through the use of overdraft facilities, where necessary. As at 30
November 2017, the Company had no committed borrowing facility (2016: £nil).
(c) Credit risk
Credit risk is the risk of default by a counterparty in discharging its obligations under transactions that could result in the Company
suffering a loss.
Management of credit risk
Outstanding settlements are subject to credit risk. Credit risk is mitigated by the Company through its decision to transact with
counterparties of high credit quality. The Company only buys and sells investments through brokers which are considered to be
approved counterparties, thus minimising the risk of default during settlement. Normally trades are settled by payment of cash
against delivery. The credit ratings of brokers are reviewed quarterly by the Investment Manager.
The Company is also exposed to credit risk through the use of banks for its cash position. Bankruptcy or insolvency of banks may
cause the Company’s rights with respect to cash held by banks to be delayed or limited. The Company’s cash balances are held
with The Bank of New York Mellon, rated Aa1 by Moody’s rating agency. The Directors believe the counterparties the Company has
chosen to transact with are of high credit quality, therefore the Company has minimal exposure to credit risk.
The table below summarises the credit risk exposure of the Company as at 30 November:
Other Receivables:
Outstanding settlements
Accrued income
Other receivables
Cash and cash equivalents
2017
£
2016
£
-
13,804,469
143,785
172,393
2,497,420
477,837
7,189,378
6,380,078
9,830,583
20,834,777
Fair Values of Financial Assets and Financial Liabilities
Investments and derivative financial instruments are held at fair value through profit or loss in accordance with FRS 102 sections 11
and 12.
FRS102 sets out three fair value hierarchy levels for disclosure that reflect the significance of the inputs used in making the
measurements.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value
measurement of the relevant assets as follows:
Level 1 - The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the
measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the
asset or liability, either directly or indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
As at 30 November 2017, the financial assets at fair value through profit and loss of £305,372,409 (2016: £210,102,189) are
categorised as follows:
106
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Notes to the Financial Statements (continued)
for the year ended 30 November 2017
Level 1
Level 2
Level 3
2017
£
2016
£
304,958,713
209,653,973
-
-
413,969
448,215
305,372,682
210,102,189
Movements in Level 3 have not been disclosed as they are not material.
16. Capital Management Policies and Procedures
The Company’s objective is to provide long-term capital growth through investing principally in the equity securities of quoted
technology companies on a worldwide basis.
The Company’s capital at 30 November 2017 was as per the equity Shareholders’ Funds in the Balance Sheet on page 92.
The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company’s capital on
an ongoing basis, including the level of gearing, taking into account the Investment Manager’s view on the market and the future
prospects of the Company’s performance. Capital management also involves reviewing the difference between the net asset value
per share and the share price (i.e. the level of share price discount or premium) to assess the need whether to repurchase shares
for cancellation or holding in treasury.
The Company’s objective, policies and processes for managing capital are unchanged from the preceding accounting period and
the Company has complied with them.
The Company will not invest in more than 20% of the net assets using ‘gearing’. The Company’s Articles of Association limit
borrowing to one quarter of its called up share capital and reserves.
17. Transactions with the Investment Manager and related parties
The amounts paid to the investment manager together with details of the investment management contract are disclosed in
Note 2 on page 96. The existence of an independent board of directors demonstrates that the company is free to pursue its own
financial and operating policies and therefore, under FRS 102 Section 33: ‘Related Party Disclosures’, the investment manager is not
considered to be a related party.
The Company’s related parties are its directors. Fees paid to the Company’s Board, including employer national insurance
contributions, are disclosed in Note 3 on page 97. There are no other identifiable related parties at the year end, and as of 12
February 2018.
18. Post Balance Sheet Events
Since the year end a further 540,000 shares have been reissued from treasury. As at 12 February 2018 there were 27,134,427
shares in issue and a further 1,168,453 shares held in treasury.
As of 1 December 2017, the management fee was amended to 0.8% up to a market capitalisation of £400 million per annum and
then 0.6% thereafter.
107
Financial Statements Allianz Technology Trust PLC
Investor
Information
108
Investor Information
Manager and Investment Manager
Allianz Global Investors GmbH, UK Branch 199 Bishopsgate,
London EC2M 3TY
Head of Investment Trusts - AllianzGI
Melissa Gallagher.
Email: melissa.gallagher@allianzgi.com
Company Secretary and Registered Office
Eleanor Emuss.
Email: eleanor.emuss@allianzgi.com
199 Bishopsgate, London EC2M 3TY
Telephone: 020 3246 7405
Website: www.allianztechnologytrust.com
Registered Number
3117355
Bankers
The Bank of New York Mellon, London Branch, One Canada
Square, Canary Wharf, London E14 5AL
Solicitors
Eversheds LLP, 1 Wood Street, London EC2V 7WS
Depositary
BNY Mellon Trust & Depositary (UK) Limited, London Branch,
One Canada Square, Canary Wharf, London E14 5AL
Auditors
Grant Thornton UK LLP, 30 Finsbury Square, London EC2A 1AG
Registrars
Link Asset Services (formerly Capita Asset Services), The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
Telephone: 0371 664 0300. Lines are open 9.00 a.m. to 5.30
p.m. (London time) Monday to Friday.
Email: enquiries@linkgroup.co.uk
Website: www.linkassetservices.com
Stockbrokers
Winterflood Investment Trusts, The Atrium Building, Cannon
Bridge House, 25 Dowgate Hill, London, EC4R 2GA
Identifiers
SEDOL: 0339072
ISIN:
EPIC:
GIIN:
LEI:
GB0003390720 BLOOMBERG: ATT
ATT
YSYR74.99999.SL.826
549300JMDPMJU23SSH75
Financial Calendar
Full year results announced and Annual Financial Report
posted to Shareholders in February/March.
Annual General Meeting held in March/April.
Half year results announced and Half-Yearly Financial Report
posted to Shareholders in July/August.
The year end will change from 30 November to 31 December
with effect from 2018.
How to invest
A list of providers can be found on the Company’s website:
www.allianztechnologytrust.com under ‘How to Invest’ in the
‘Quicklinks’ menu.
Alliance Trust Savings Limited (ATS) is one of a number of
providers offering a range of products and services, including
Share Plans, ISAs and pension products. ATS also maintains
services including online and telephone-based dealing
facilities and online valuations. More information is available
from Allianz Global Investors either via Investor Services
on 0800 389 4696 or on the Company’s website: www.
allianztechnologytrust.com, or from Alliance Trust Savings
Customer Services Department on 01382 573737 or by email:
contact@alliancetrust.co.uk
Market and Portfolio Information
The Company’s Ordinary Shares are listed on the London
Stock Exchange under the code ATT. The market price
range, gross yield and net asset value (NAV) are shown daily
in the Financial Times and The Daily Telegraph under the
headings ‘Investment Trusts’ and ‘Investment Companies’,
respectively. The NAV of the Ordinary Shares is calculated
daily and published on the London Stock Exchange Regulatory
News Service. The geographical spread of investments and
ten largest holdings are published monthly on the London
Stock Exchange Regulatory News Service. They are also
available from the Manager’s Investor Services Helpline
on 0800 389 4696 or via the Company’s website: www.
allianztechnologytrust.com.
109
Investor Information
Investor Information (continued)
Share Price
The share price quoted in the London Stock Exchange Daily
Official List for 30 November 2017 was 1178.6p per Ordinary
Share.
Website
Further information about Allianz Technology Trust
PLC, including monthly factsheets, daily share price and
performance, is available on the Company’s website: www.
allianztechnologytrust.com
Association of Investment Companies (AIC)
The Company is a member of the AIC, the trade body of the
investment trust industry, which provides a range of literature
including fact sheets and a monthly statistical service. Copies
of these publications can be obtained from the AIC, 9th Floor,
24 Chiswell Street, London EC1Y 4YY, or at www.theaic.co.uk.
AIC Category: Technology, Media and Telecommunications.
Shareholder Enquiries – Link Asset Services
In the event of queries regarding their holdings of shares, lost
certificates, dividend payments, registered details, etc.,
shareholders should contact the registrars on 0371 664 0300.
Lines are open 9.00 a.m. to 5.30 p.m. (London time) Monday
to Friday. Calls to this number are charged at local rates, calls
from outside the UK are charged at applicable international
rates. Different charges may apply to calls made from mobile
telephones and calls may be recorded and monitored
randomly for security and training purposes.
Changes of name and address must be notified to the
registrars in writing. Any general enquiries about the Company
should be directed to the Company Secretary, Allianz
Technology Trust PLC, 199 Bishopsgate, London EC2M 3TY.
Telephone: 020 3246 7405.
Share Dealing Services
Link Asset Services operate an online and telephone dealing
facility for UK resident shareholders with share certificates.
Stamp duty and commission may also be payable on
transactions.
110
For further information on these services please contact:
www.linksharedeal.com for online dealing or 0371 664 0445
for telephone dealing. Lines are open 8.00 a.m. to 4.30 p.m.
Monday to Friday. Calls to this number are charged at local
rates, calls from outside the UK are charged at applicable
international rates. Different charges may apply to calls made
from mobile telephones and calls may be recorded and
monitored randomly for security and training purposes.
Share Portal
Link Asset Services also offer shareholders a free online service
called The Share Portal, enabling shareholders to access a
comprehensive range of shareholder related information.
Through The Share Portal, shareholders can; view their current
and historical shareholding details; obtain an indicative share
price and valuation; amend address details; and apply for
dividends to be paid directly to a bank or to change existing
bank details.
Shareholders can access these services at www.signalshares.
com. Shareholders will need to register for a Share Portal
Account by completing an on- screen registration form. An
email address is required.
CREST Proxy Voting
Shares held in uncertificated form (i.e. in CREST) may be voted
through the CREST Proxy Voting Service in accordance with
the procedures set out in the CREST manual.
FATCA
The Company is registered with the Internal Revenue Service
(IRS) as a Foreign Financial Institution for the purposes of the
Foreign Tax Compliance Act (FATCA). The Company’s Global
Intermediary Identification Number (GIIN) is YSYR74.99999.
SL.826
Non Mainstream Pooled Investments
The Company is an investment trust and therefore its shares
are not subject to the Financial Conduct Authority’s (FCA)
rules relating to the restrictions on the retail distribution
of unregulated collective investment schemes and close
substitutes which came into effect on 1 January 2014.
Accordingly, its shares can be recommended by IFAs to retail
investors in accordance with the FCA’s rules in relation to non-
mainstream investment products.
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Investor Information (continued)
Nominee Code
In order to allow investors holding their shares within a nominee company to receive shareholder communications, the Company
undertakes to provide multiple copies of such documents to the registered nominee company where prior notice has been
given. By pre-arrangement, investors in the Company via the Alliance Trust Savings will automatically receive shareholder
communications. The Company encourages nominee companies to provide the underlying investors with sufficient information to
make informed decisions regarding their investments, including the opportunity to attend Company General Meetings.
Alternative Investment Fund Manager
Alternative Investment Fund Manager (Investment Manager)
Allianz Global Investors GmbH (AllianzGI) is an investment company with limited liability incorporated in Germany and registered
in the UK as a branch with establishment number BR009058 and with an establishment address of 199 Bishopsgate, London
EC2M 3TY. It is authorised by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and is subject to limited regulation by
the Financial Conduct Authority (FCA). AllianzGI are active asset managers operating across 19 markets with specialised in-house
research teams around the globe, managing assets for individuals, families and institutions worldwide. As at 30 September
2017, AllianzGI had €494 billion of assets under management worldwide. Through its predecessors, AllianzGI has a heritage of
investment trust management expertise in the UK reaching back to the nineteenth century and as at 31 December 2017 had £1.43
billion of assets under management in a range of investment trusts. Website: www.allianzgi.co.uk
Remuneration Disclosure of the AIFM
Employee remuneration of Allianz Global Investors GmbH for the financial year ending 31 December 2016 (all values in Euro).
Number of employees: 1,678
all employees
thereof
Risk Taker
thereof
Board
Member
thereof
Other
Risk Taker
thereof
Employees
with Control
Function
thereof
Employees with
Comparable
Compensation
Fixed remuneration
155,269,582
9,331,359
3,259,474
3,937,648
Variable remuneration
103,480,985
29,384,056
11,960,620
10,991,691
614,622
547,551
1,519,615
5,884,194
Total remuneration
258,750,567
38,715,415
15,220,094
14,929,339
1,162,173
7,403,809
Remuneration Policy of the AIFM
The compensation structure at AllianzGI Europe is set up to avoid any kind of excessive risk-taking. Variable compensation awards
are delivered via deferral programs to ensure they are linked to sustainable performance. In addition any compensation decisions
have to be reviewed and approved by our Functional, Regional and Global Compensation Committees on both an aggregate and
individual basis, to further ensure effective risk mitigation.
AIFM and Depositary
The Alternative Investment Fund Managers Directive (AIFMD) aims to create a comprehensive and effective regulatory and
supervisory framework for alternative investment fund managers within the EU. Allianz Global Investors GmbH, UK Branch
(AllianzGI) is the Company’s AIFM and BNY Mellon Trust & Depositary (UK) Limited (BNYM) has been appointed as its Depositary in
accordance with AIFMD under a depositary agreement between the Company, and BNYM. Depositary fees are charged in addition
to custody fees and are calculated on the basis of net assets.
111
Investor Information
Investor Information (continued)
AIFM Leverage Disclosure
The Company may borrow cash and employ leverage which may include the use of derivatives in accordance with the stated
investment policy and the underlying investment guidelines set by the Board for the Investment Manager from time to time. It is
acknowledged that the use of leverage may expose the Company to greater risk as volatility levels, in particular within derivative
contracts, can be high. The use of leverage is therefore carefully considered prior to exposure. The AIFMD requires each element of
leverage and its exposure to be expressed as a ratio of the Company’s NAV. The Company does not currently employ gearing and
does not currently invest in derivatives.
AIFM Pre-Investment Disclosures
The AIFMD requires that potential investors are provided with sufficient pre-investment information in order to make an
informed decision. An ‘AIFMD: Information Document’ is available in the Literature Library on the Company’s website at www.
allianztechnologytrust.com which provides information on investment objective, strategy, polices and other pertinent information
which may have an impact on a potential investors decision. There have been no material changes to the information disclosed
within the ‘AIFMD: Information Document’ since publication.
112
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017 Notice of Meeting
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of
Allianz Technology Trust PLC will be held at The City of London
Club, 19 Old Broad Street, London EC2N 1DS on Wednesday,
25 April 2018 at 12 noon to transact the following business:
Ordinary Business
1. To receive and adopt the audited accounts and the Report
of the Directors for the year ended 30 November 2017.
2. To re-elect Elisabeth Scott as a Director of the Company.
3. To re-elect Richard Holway as a Director of the Company.
4. To re-appoint Grant Thornton UK LLP as the Auditors of the
Company.
5. To authorise the Directors to determine the remuneration
of the Auditors.
6. To receive and approve the Directors’ Remuneration
Implementation Report for the year ended 30 November
2017.
Special Business
To consider, and if thought fit, pass the following Resolutions,
of which Resolution 7 will be proposed as an Ordinary
Resolution and Resolutions 8, 9, and 10 will be proposed as
Special Resolutions:
7. THAT, in substitution for any existing authority, but
without prejudice to the exercise of any such authority
prior to the date hereof, the Directors of the Company
be and they are hereby generally and unconditionally
authorised in accordance with Section 551 of the
Companies Act 2006 (the Act) to exercise all the powers of
the Company to allot shares in the Company provided that
such authority shall be limited to shares with an aggregate
nominal value of up to £678,360 equivalent to 2,713,442
shares or, if different, the number representing 10% of
the issued share capital (excluding treasury shares) at the
date of passing the resolution, such authority to expire
at the conclusion of the next Annual General Meeting of
the Company after the passing of this resolution or on the
expiry of 15 months from the passing of this resolution,
whichever is the earlier, unless previously revoked, varied
or extended by the Company in a general meeting, save
that the Company may at any time prior to the expiry of
this authority make an offer or enter into an agreement
which would or might require shares to be allotted after
the expiry of such authority and the Directors shall be
entitled to allot shares in pursuance of such an offer or
agreement as if such authority had not expired.
8. THAT, subject to the passing of resolution 7 above, and
in substitution for any existing power but in addition to
any power conferred on them by resolution 9 below and
without prejudice to the exercise of any such power prior
to the date hereof, the Directors of the Company be and
they are hereby generally empowered, pursuant to Section
570 of the Companies Act 2006 (the Act), to allot equity
securities (as defined in Section 560 of the Act) for cash
pursuant to the authority given by resolution number 7
above as if Section 561(1) of the Act did not apply to any
such allotment of equity securities, provided that this
power shall be limited to the allotment of equity securities:
(a) in connection with or pursuant to an offer by way of
rights, open offer or other pre-emptive offer to the
holders of shares in the Company and other persons
entitled to participate therein in proportion (as nearly as
practicable) to their respective holdings, subject to such
exclusions or other arrangements as the Directors may
consider necessary or expedient to deal with fractional
entitlements or legal or practical problems under the laws
of any territory or the regulations or requirements of any
regulatory authority or any stock exchange in any territory;
(b) (otherwise than pursuant to sub-paragraph (a) above)
up to an aggregate nominal value of £678,360 being
approximately 10% of the nominal value of the issued
share capital of the Company, as at 12 February 2018,
and provided further that the number of equity securities
to which this power applies shall be reduced from time
to time by the number of treasury shares which are sold
pursuant to any power conferred on the Directors by
resolution 9 below, and such power shall expire at the
conclusion of the next Annual General Meeting of the
Company after the passing of this resolution or on the
expiry of 15 months from the date of the passing of this
resolution, whichever is the earlier, unless previously
revoked, varied or renewed by the Company in general
meeting save that the Company may, before such expiry,
make an offer or agreement which would or might require
equity securities to be allotted and the Directors of the
Company may allot equity securities in pursuance of any
such offer or agreement as if the power conferred hereby
had not expired.
9. THAT, in addition to any power conferred on them by
resolution 8 above, and in substitution for any existing
power and without prejudice to the exercise of any
such power prior to the date hereof, the Directors of the
Company be and they are hereby generally empowered,
113
Investor Information
Notice of Meeting (continued)
pursuant to Section 570 of the Companies Act 2006 (the
Act), to sell relevant shares (as defined in Section 560
of the Act) if, immediately before the sale, such shares
are held by the Company as treasury shares (as defined
in section 724 of the Act (treasury shares), for cash as if
Section 561(1) of the Act did not apply to any such sale of
treasury shares, provided that:
(a) where any treasury shares are sold pursuant to this
power at a discount to the then prevailing net asset value
(NAV) of shares, such discount must be (i) lower than
the discount to the NAV per share at which the Company
acquired the shares which it then holds in treasury and
(ii) not greater than 5% of the prevailing NAV per share at
the latest practicable time before such sale (and for this
purpose the Directors shall be entitled to determine in
their reasonable discretion the discount to their net asset
value at which such shares were acquired by the Company
and the NAV per share at the latest practicable time before
such shares are sold pursuant to this power); and
(b) this power shall be limited to the sale of relevant shares
up to an aggregate nominal value of £678,360 being
approximately 10% of the nominal value of the issued
share capital of the Company, as at 12 February 2018,
and provided further that the number of relevant shares
to which this power applies shall be reduced from time
to time by the number of shares which are allotted for
cash as if Section 561(1) of the Act did not apply pursuant
to the power conferred on the Directors by resolution
8 above, and such power shall expire at the conclusion
of the next Annual General Meeting of the Company
after the passing of this resolution or on the expiry of 15
months from the date of the passing of this resolution,
whichever is the earlier, unless previously revoked, varied
or renewed by the Company in general meeting save
that the Company may, before such expiry, make an offer
or agreement which would or might require treasury
shares to be sold and the Directors of the Company may
sell treasury shares in pursuance of any such offer or
agreement as if the power conferred hereby had not
expired.
10. THAT, in substitution for any existing authority but without
prejudice to the exercise of any such authority prior to the
date hereof, the Company be and is hereby generally and
unconditionally authorised, pursuant to and in accordance
with Section 701 of the Companies Act 2006 (the Act), to
114
make market purchases (within the meaning of Section
693(4) of the Act) of fully paid Ordinary shares of 25p each
in the capital of the Company (Ordinary shares) (either
for retention as treasury shares for future reissue, resale,
transfer or cancellation), provided that:
(a) the maximum aggregate number of Ordinary Shares
hereby authorised to be purchased is 4,067,450;
(b) the minimum price (excluding expenses) which may be
paid for each Ordinary Share is 25p;
(c) the maximum price (excluding expenses) which may be
paid for each Ordinary Share shall not be more than the
higher of:
(i) 5% above the average closing price on the London Stock
Exchange of an Ordinary Share over the five business days
immediately preceding the date of purchase: and
(ii) the higher of the last independent trade and the highest
current independent bid on the London Stock Exchange;
and
(d) unless previously varied, revoked or renewed by the
Company in a general meeting, the authority hereby
conferred shall expire at the conclusion of the Company’s
next Annual General Meeting or on the expiry of 15
months from the passing of this resolution, whichever
is the earlier, save that the Company may, prior to such
expiry, enter into a contract to purchase Ordinary Shares
under such authority which will or might be completed
or executed wholly or partly after the expiration of such
authority and may make a purchase of Ordinary Shares
pursuant to any such contract.
By order of the Board
Eleanor Emuss
Company Secretary
199 Bishopsgate, London EC2M 3TY
22 February 2018
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017
Notice of Meeting (continued)
Notes:
1. Members entitled to attend and vote at this Meeting may
appoint one or more proxies to attend, speak and vote in
their stead by completion of a personalised form of proxy.
Full details on how to complete the form of proxy are set
out on the form of proxy. The proxy need not be a Member
of the Company.
2. A proxy must vote in accordance with any instructions
given by the member by whom the proxy is appointed.
A proxy has one vote on a show of hands in all cases
(including where one member has appointed multiple
proxies) except where he is appointed by multiple
members who instruct him to vote in different ways, in
which case he has one vote for and one vote against the
resolution.
3. A personalised form of proxy is provided with the Annual
Financial Report. Any replacement forms must be
requested direct from the Registrar.
4. Completion of the form of proxy does not exclude a
Member from attending the Meeting and voting in person.
5. Duly completed forms of proxy must reach the office
of the Registrars at least 48 hours before the Meeting
(excluding non-business days).
6. Shares held in uncertificated form (i.e. in CREST) may
be voted through the CREST Proxy Voting Service in
accordance with the procedures set out in the CREST
manual on the Euroclear website (www.euroclear.com/
CREST).
7. To be entitled to attend and vote at the Meeting (and
for the purpose of determination by the Company of
the number of votes they may cast), Members must be
entered on the Company’s Register of Members by close
of business on Monday 23 April 2018 (the record date).
8.
If the Meeting is adjourned to a time not more than 48
hours after the record date applicable to the original
Meeting, that time will also apply for the purpose of
determining the entitlement of Members to attend and
vote (and for the purpose of determining the number
of votes they may cast) at the adjourned Meeting. If,
however, the Meeting is adjourned for a longer period
then, to be so entitled, Members must be entered on the
Company’s Register of Members at the time which is 48
hours before the time fixed for the adjourned Meeting
or, if the Company gives new notice of the adjourned
Meeting, at the record date specified in that notice.
9. The right to appoint a proxy does not apply to persons
whose shares are held on their behalf by another
person and who have been nominated to receive
communications from the Company in accordance with
Section 146 of the Companies Act 2006 (nominated
persons). Nominated persons may have a right under an
agreement with the registered shareholder who holds
the shares on their behalf to be appointed (or to have
someone else appointed) as a proxy. Alternatively, if
nominated persons do not have such a right, or do not
wish to exercise it, they may have a right under such an
agreement to give instructions to the person holding
the shares as to the exercise of voting rights. Nominated
persons should contact the registered member by whom
they were nominated in respect of these arrangements.
10. Corporate representatives are entitled to attend and vote
on behalf of the corporate member in accordance with
Section 323 of the Companies Act 2006. Pursuant to the
Companies (Shareholders’ Rights) Regulations 2009 (SI
2009/1632), multiple corporate representatives appointed
by the same corporate member can vote in different ways
provided they are voting in respect of different shares.
11. Members have a right under Section 319A of the
Companies Act 2006 to require the Company to answer
any question raised by a member at the AGM, which
relates to the business being dealt with at the meeting,
although no answer need be given (a) if to do so would
interfere unduly with the preparation of the meeting or
involve disclosure of confidential information; (b) if the
answer has already been given on the Company’s website;
or (c) it is undesirable in the best interests of the Company
or for the good order of the meeting.
12. Members satisfying the thresholds in Section 527 of
the Companies Act 2006 can require the Company, at
its expense, to publish a statement on the Company
website setting out any matter which relates to the audit
of the Company’s accounts that are to be laid before the
meeting. Any such statement must also be sent to the
Company’s auditors no later than the time it is made
available on the website and must be included in the
business of the meeting.
115
Investor Information
P
P
M
id
dle
s
e
x S
tr
e
e
t
P
u rc h Str e et
F e n c h
Fenchurch
Street Stn.
Annual General Meeting venue
The City of London Club
19 Old Broad Street, London EC2N 1DS
Moorgate Stn.
P
Finsbury
Circus
London Wall
The City
of London
Old Broad Street
Club
Bank
r e e t
S t
e
r
h
T
d l e
e
e
n
d
a
Cornhilll
Liverpool
Street Stn.
psgate
Bish
o
H
o
u
n
d
s
ditc
h
Tower 42
Bishopsgate
Leadenhall Street
Cannon
Street Stn.
Monument
Notice of Meeting (continued)
13. As at 12 February 2018, the latest practicable date before
this Notice is given, the total number of shares in the
Company in respect of which members are entitled to
exercise voting rights was 27,134,427 Ordinary Shares
of 25p each. Each Ordinary Share carries the right to one
vote and therefore the total number of voting rights in the
Company on 12 February 2018 is 27,134,427.
14. Further information regarding the meeting which the
Company is required by Section 311A of the Companies
Act 2006 to publish on a website in advance of the
meeting (including this Notice), can be accessed at www.
allianztechnologytrust.com
15. Contracts of service are not entered into with the
Directors, who hold office in accordance with the Articles
of Association.
116
Allianz Technology Trust PLC Annual Financial Report for the year ended 30 November 2017