Half Year Report

RNS Number : 0868T

Polar Capital Technology Trust PLC

10 December 2012

 



POLAR CAPITAL TECHNOLOGY TRUST PLC (the "Company")

Unaudited Half Year Results for the six months ended 31 October 2012

10 December 2012

Financial Highlights

	(Unaudited)	(Audited)
	Half year ended	Year ended	Movement
	31 October 2012	30 April 2012	%
Undiluted net assets per ordinary share  (note1)	370.60p	392.56p	(5.6)
Total net assets	£475,185,000	£503,292,000	(5.6)
Benchmark Index: Dow Jones World Technology (total return sterling adjusted)			(5.4)
Share Price
per ordinary share	366.00p	387.00p	(5.4)
per subscription share	10.22p	12.75p	(19.8)
Shares in issue
Ordinary	128,219,920	128,208,023
Subscription	24,786,282	24,798,179

Note 1:  As at 31 October 2012 there was no dilutive NAV per share as the subscription share conversion price (478p) was above the share price of the ordinary shares

INDEX CHANGES over the half year ended 31 October 2012 (Total return)
	Local Currency	Sterling Adjusted
	%	%
Benchmark: Dow Jones World Technology	(6.1)	(5.4)
Other Indices:
FTSE World	-	2.7
FTSE All-Share	-	3.3
S&P 500 composite	2.2	3.0

 Investment Manager's Report

Market Review

The half year to 31 October 2012 saw equity markets make further progress as mixed economic data and political uncertainty was ameliorated by decisive intervention by policymakers in both Europe and the US, the FTSE World index rising 2.7% in Sterling terms. Sterling based returns were modestly augmented by US Dollar strength (+0.7%) and gains by the Yen (+0.6%), offset somewhat by Euro weakness (-1.4%). The fiscal first half began with a sharp correction in equity markets as travails in both Spain and Greece reintroduced the real possibility of a Euro exit and/or break-up. Soaring risk aversion saw ten year Spanish sovereign yields rise to 7.4% and the Euro make a new two year low against the US Dollar while perceived 'safe havens' such as ten year US Treasuries and German Bunds entered unchartered territory as yields fell to new lows of 1.4% and 1.2% respectively.

Despite deteriorating economic newsflow over the period, equity markets remained relatively resilient reflecting positive political developments in Europe following the Eurozone decision to lend Spain EUR100bn to shore up its banks and a successful European summit with Germany apparently softening its stance by allowing the European Stability Mechanism (ESM), once ratified, to directly recapitalise banks. That policymakers were alive to the challenge was made apparent in July when ECB President Mario Draghi reiterated that the ECB was "ready to do whatever it takes to preserve the Euro" which by September had taken the form of an open-ended commitment to buy unlimited quantities of short-dated bonds of those countries requesting aid, on the condition they adhere to centrally controlled austerity budgets. This basic pattern of weak economics and decisive intervention in developed markets continued through the balance of the year allowing stocks to continue to climb the so-called 'wall of worry', aided by a strong second quarter earnings season, an additional round of QE in the US and ongoing M&A activity that helped underpin valuations.

While equity markets remained robust into the conclusion of the first fiscal half, there were a number of negative developments that were more fully felt beyond the reporting period. These included heightened political uncertainty (ahead of upcoming elections in the US, Japan, and leadership change in China) with US Presidential elections bringing the so-called 'fiscal cliff' into greater focus. Likewise pockets of civil unrest following the passing of additional austerity measures in France, Greece and Spain led to renewed concern about Eurozone growth while Spanish regional elections raised the possibility of a Catalan referendum on independence.  The third quarter reporting season also provided stocks with a significant amount of buffeting as weakening Chinese demand, fiscal uncertainty and unfavourable foreign exchange comparisons took their toll on corporate earnings and/or guidance.

Technology Review

Technology shares significantly underperformed the broader market during the half year, the Dow Jones World Technology Index falling 5.4% in Sterling terms. Most of this underperformance came during the final months of the period as Apple unwound some of its earlier gains, negative trends in the PC market accelerated and the third quarter earnings season proved the most challenging technology reporting period post the 2008/9 crisis. The fiscal year began inauspiciously as the much-awaited Facebook IPO in May proved to be a 'sell the news' event. The sector ceded some relative ground during the Summer as macroeconomic uncertainty and US Dollar strength combined to create a difficult second quarter earnings season. PC related companies bore the brunt of slower growth in emerging markets (particularly China) as unit growth turned decisively negative. While early (and relatively modest) earnings resets from the PC supply chain were explained away by slower global growth, deeper and more widespread downward revisions that followed pointed at more than just a pause ahead of a new Microsoft Windows 8 operating system . Indeed, the announcement of Microsoft's own tablet ('Surface') together with a massive downward revision from HP made it clear that the PC market was in genuinely new (and worrisome) territory.

In contrast, the smartphone and tablet markets continued to make progress with dominant vendors Apple and Samsung and their supply chains continuing to wrest share from former leaders, Nokia and Research in Motion. Despite a lackluster second quarter earnings report, Apple continued its remarkable ascent as investors focused on upcoming product updates. However, the September launch of the iPhone 5 proved another 'sell the news' moment as relatively modest design changes to the phone left investors wanting more. Unfortunately supply constraints resulted in solid, if unspectacular, first weekend sales and sharply lower gross margin guidance when the company reported third quarter earnings which presaged a late October sell-off that extended into November leaving the stock more than 20% from its all-time highs. A disappointing third quarter report was far from unique to Apple as a more challenging economic environment and uncertainty ahead of leadership change in the US, China and Japan combined to produce a tricky third quarter earnings season. Not only did this combination leave its mark on incumbents whose fortunes are tied to the health of IT budgets, but it also resulted in a number of next-generation companies posting disappointing results and/or guidance.

Portfolio Performance

Our relative performance fell slightly short of the benchmark, with the net asset value per share falling 5.6% during the half year. The performance of small-caps was not the primary cause of this modest shortfall as they fell broadly inline with large-caps over the period, as measured by the Russell 1000 and 2000 technology indices respectively. Instead, the portfolio was negatively impacted by its underweight position in Apple (which outperformed during the period), poor returns from communication stocks due to continued weakness in service provider capital spending while semiconductor stocks bore the brunt of weaker economic trends and a contracting PC market. In terms of positives, relative performance was generated by underweight PC exposure, the decision to retain some liquidity ahead of third quarter earnings season and a number of strong individual stock performances including Ariba, Kenexa, Springsoft and OPNET all of which were acquired during the period for premiums that ranged between 19-42%.

Market Outlook

Markets have been robust this year largely because policymakers have been alive to the need for decisive intervention. However, as evidenced by third quarter earnings season, this intervention remains necessary because the economic recovery remains fragile. With US economic data mixed (ex-housing), European growth remaining elusive and with China showing only limited signs that the worst of its slowdown is behind it, our 'muddling through' thesis is currently being stress tested. However, we have opined previously that we expected a series of 'echoes' as is the norm following financial crises and that given the backdrop of fiscal tightening and de-leveraging these were likely to take the form of growth scares. While we acknowledge that there may be some additional downside risk to 2013 estimates, we believe this is likely to be modest and strongly disagree with the view that the current earnings cycle may have played out. In our experience, the third quarter has always been an awkward seasonal period (especially for technology earnings) even without the added distraction of the Olympics and leadership change in three of the world's most important economies. Following the Chinese leadership transition and conclusion of elections in the US and Japan, investors have refocused on the next significant policy challenge: tackling the so-called 'fiscal cliff'. While US lawmakers have used confrontational rhetoric in early post-election exchanges, we are hopeful that a credible plan will be agreed upon in order to avoid the automatic spending cuts and tax increases that are scheduled to begin in January 2013.

This view, together with our belief that China will avoid a 'hard landing' (there being plenty of policy ammunition available to the new leadership given the absence of inflation) may appear complacent but these positions are entirely compatible with our long held belief that our interests as equity investors have rarely been as closely aligned with those of policymakers as they are today. As such we remain confident that worst case outcomes will continue to be avoided, allowing the global economy to continue to 'muddle through'. If we are correct, equity valuations look well supported even if earnings are subject to some modest further downward revision. This is particularly true relative to other asset classes, especially versus 'safe havens' and their promise of negative real returns. Having looked a little overbought and with sentiment full, if not ebullient at recent highs, markets are more attractive now that investors have become decidedly more bearish (evidenced by our favoured bull-bear indicator and German two year bond yields which hit zero during November).  As such (and having retained some liquidity ahead of what we feared could prove a trickier earnings season) we have moved the portfolio to a more fully invested position in order to take advantage of modest valuations, strong balance sheets, favourable seasonality and de-risked fourth quarter earnings expectations.   

Risk Factors

As well as the risks outlined above, there are a number of additional risks that investors should consider. These include the risk of sovereign default and/or the break-up of the Eurozone (albeit unlikely in the short term given the Draghi plan), a 'hard landing' in China and insufficient political will in the developed world to deliver austerity resulting in a loss of market confidence. As in previous years, geopolitical risk remains the most significant exogenous factor to consider, particularly in the Middle East (given the risk to energy prices) with the region in flux as a result of the so-called Arab Spring and Islamist governments assuming power in Egypt and Turkey. With Israel warning that Iran's capability to enrich uranium must be stopped before mid 2013, there is a heightened risk of military action by Israel and/or the US in order to prevent Iran from attaining nuclear capability.

Technology Outlook

Having performed strongly during (and into the close of) our last fiscal year, the technology sector has fared relatively poorly over the half year as a challenging third quarter earnings season reminded investors of the sector's cyclical sensitivity, while slower emerging market growth has revealed the extent of the secular headwinds faced by the PC industry. Although we are not expecting a sharp snapback in corporate spending in the fourth quarter, we are hopeful that many of the projects that were delayed due to political/fiscal uncertainty will recommence once corporates have better visibility into how the US intends to tackle its federal budget deficit. At the consumer level, we suspect that a slew of recent product launches (iPhone 5, Google Nexus 7, iPad Mini, Windows Surface, Amazon Kindle Fire HD) may have elongated purchase decisions too. While a few of our core holdings delivered disappointing third quarter results, it was not all doom and gloom evidenced by strong reports from a number of our companies including ARM Holdings, eBay, Facebook, Ixia and Radware.

We continue to believe that technology valuations remain compelling, particularly after the recent correction and even more so once adjusted for the sector's disproportionately strong balance sheet. As such we remain hopeful that the sector should remain a solid 'each way' bet for generalists - attractive for both its operating leverage and (in the event of a difficult market) its unrivalled net cash position. However, the combination of slower economic growth and the deflationary impact of a new technology cycle is likely to continue to dampen overall IT spending. Unfortunately for IT managers, muted budget growth is entirely at odds with computing needs that are increasing inexorably. As such we expect corporate fortunes to continue to bifurcate as IT buyers are forced to reallocate their budgets in favour of cheaper, disruptive alternatives - a dynamic entirely consistent with previous periods of economic uncertainty. Given our view that the technology sector has entered a more pernicious phase we anticipate significantly more uneven value creation and elevated (not to mention expensive) M&A activity as incumbents attempt to reinvent themselves with even greater urgency.

However, as a result of 'top down' concerns, investors have spent much of the half year seeking refuge in expensive, mega-cap 'stores of wealth', continuing a trend that commenced in April 2011. While this dynamic has aided the performance of several of our largest holdings, it has also contributed significantly to the 'crowding out' of small-caps resulting in them giving up all of their post 2008 outperformance versus large-caps. Having telegraphed our intent in our last annual report to move more materially away from legacy incumbents (and therefore our market cap weighted index) we are excited about the value on offer in small and mid-caps many of which have been left for dead by investors myopically focused on the preservation of capital and/or yield generation. With the new cycle becoming ever more problematic for incumbents we anticipate further increasing our small and mid-cap weightings in order to increase our exposure to favoured themes while taking advantage of the 'crowding out' that has been driven by a 'top-down' trade that looks inappropriate when applied to our sector given our new cycle thesis.

In terms of thematic positioning, we are likely to continue to increase our current underweight PC position now that the market has been 'found out' due to the malevolent combination of cyclical and secular headwinds, exacerbated by a hiatus ahead of the release of Windows 8 based devices. We also expect to further reduce our smartphone exposure given rising penetration rates. For now we continue to favour dominant vendors Apple and Samsung and their supply chains, especially those companies like Qualcomm and ARM that are difficult to displace. However, the deteriorating relationship between Apple and Samsung suggests that growth at the expense of weaker players has largely played out. Fortunately, as a result of the recent changes made to our investment policy we have greater flexibility to adjust our holdings to reflect this dynamic. In contrast, we anticipate retaining (and likely increasing) our overweight Internet exposure as we believe the likes of Amazon, eBay, Facebook and Linkedin are natural beneficiaries of cheap and increasingly ubiquitous (due to the proliferation of smartphones and tablets) Internet usage. Advertising, eCommerce, Software as a Service (SaaS) and social networking remain key Internet application categories, in our opinion. More controversially we expect to persist with an overweight communications position that has proved deleterious over the half year as carriers have remained reticent to increase investment in their networks. We remain hopeful that the introduction of 4G devices such as the iPhone 5 will act as an overdue catalyst for accelerated 4G network deployments as appears to be the case in the UK. Recent positive sector newsflow following Softbank's decision to invest in US wireless carrier Sprint, together with more encouraging 2013 spending guidance from AT&T suggests that the worst may already be behind us.

We continue to believe that the sector remains in the early stages of a new, if increasingly disruptive, cycle. This should continue to provide us with exciting investment opportunities at a time when overall technology valuations remain attractive and well supported by the sector's strong balance sheet. We remain most excited about Cloud computing and are continually looking for ways to gain exposure to its next phase which is likely to be characterised by enterprises more fully embracing public and hybrid cloud architectures.

Ben Rogoff

7 December 2012

Risks and Uncertainties

The Directors consider that the principal risks and uncertainties faced by the Group for the remaining six months of the financial year, which could have a material impact on performance, are consistent with those outlined in the annual report for the year ended 30 April 2012. 

These principal risks can be summarised as market volatility, stock pricing and liquidity risk, currency and interest rate risk, counterparty risk, differing economic cycles between different markets and risk inherent in technology, such as obsolescence and consumer acceptance of changes.

The investment manager's report comments on the outlook for market related risks, including the increased volatility in share prices and economic cycles.

The Company has a risk management framework that is a structured process for identifying, assessing and managing the risks associated with the Company's business.  The investment portfolio is diversified by geography which mitigates risk but is focused on the technology sector and has a high proportion of investments listed on US markets or exposed to the US Dollar.

Responsibility Statement

The Directors of Polar Capital Technology Trust plc, which are listed in the Shareholder Information Section, confirm to the best of their knowledge:

§ The condensed set of financial statements have been prepared in accordance with IAS34 as adopted by the European Union and give a true and fair view of the financial position of the Company and the Group as at 31 October 2012 and the results for the six months ended 31 October 2012 as required by the Disclosure and Transparency Rules 4.2.4R;  

§ The Interim Management Report (constituting the Investment Manager's Report) includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R.

The half year financial report for the six month period to 31 October 2012 has not been audited or reviewed by the Auditors.

The half year financial report for the six month period to 31 October 2012 was approved by the Board on 7 December 2012 and the responsibility statement was signed on its behalf by Michael Moule, Chairman of the Board.

Related Party Transactions

In accordance with DTR 4.2.8R there have been no new related party transactions during the six month period to 31 October 2012 and therefore nothing to report on any material effect by such transactions on the financial position or performance of the Company during that period. There have been no changes in any related party transaction described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year

Consolidated Statement of Comprehensive Income for the half year ended 31 October 2012
		(Unaudited)			(Unaudited)			(Audited)
		Half year ended			Half year ended			Year ended
		31 October 2012			31 October 2011			30 April 2012
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue		Capital		Total
		return	return	return	return	return	return	return		return		return
		£'000	£'000	£'000	£'000	£'000	£'000	£'000		£'000		£'000
Notes
Investment income	2	3,001	-	3,001	2,178	-	2,178	3,539		-		3,539
Other operating income	2	13	-	13	14	-	14	29		-		29
(Losses) / gains on investments held at fair value		-	(27,156)	(27,156)	-	(20,689)	(20,689)	-		34,317		34,317
Loss on derivatives		-	-	-	-	(357)	(357)	-		(307)		(307)
Other currency losses		-	(240)	(240)	-	(698)	(698)	-		(108)		(108)
Total income		3,014	(27,396)	(24,382)	2,192	(21,744)	(19,552)	3,568		33,902		37,470
Expenses
Investment management fee		(2,616)	-	(2,616)	(2,436)	-	(2,436)	(4,885)		-		(4,885)
Other administrative expenses		(370)	-	(370)	(406)	-	(406)	(718)		-		(718)
Total expenses		(2,986)	-	(2,986)	(2,842)	-	(2,842)	(5,603)		-		(5,603)
(Loss) / profit before finance costs and tax		28	(27,396)	(27,368)	(650)	(21,744)	(22,394)	(2,035)		33,902		31,867
Finance costs		(374)	-	(374)	(454)	-	(454)	(835)		-		(835)
(Loss) / profit before tax		(346)	(27,396)	(27,742)	(1,104)	(21,744)	(22,848)	(2,870)		33,902		31,032
Tax		(422)	-	(422)	(324)	-	(324)	(497)		-		(497)
Net (Loss) / profit for the period and total comprehensive income		(768)	(27,396)	(28,164)	(1,428)	(21,744)	(23,172)	(3,367)		33,902		30,535
Earnings per ordinary share (pence)	3	(0.60)	(21.37)	(21.97)	(1.12)	(17.05)	(18.17)	(2.64)		26.56		23.92
The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Polar Capital Technology Trust plc.  There are no minority interests.
The net loss for the period of the Company was £28,164,000 (31 October 2011: loss of £23,172,000 and 30 April 2012: profit of £30,535,000).
The Group does not have any other comprehensive income and hence the net profit/(loss), as disclosed above is the same as the Group's total comprehensive income.

Consolidated Balance Sheet at 31 October 2012
			(Unaudited)	(Unaudited)	(Audited)
			31 October 2012	31 October 2011	30 April 2012
			Group	Group	Group
Notes			£'000	£'000	£'000
Non current assets
Investments held at fair value			461,385	426,771	488,587
Current assets
Derivative financial instruments			-	116	-
Overseas tax recoverable			40	19	14
Other receivables			1,930	9,370	1,334
Cash and cash equivalents			44,649	46,106	49,211
			46,619	55,611	50,559
Total assets			508,004	482,382	539,146
Current liabilities
Other payables			(2,635)	(4,400)	(5,909)
Bank loans			(10,050)	(30,313)	(9,974)
Total assets less current liabilities			495,319	447,669	523,263
Non current liabilities
Bank loans			(20,101)	-	(19,949)
Derivative financial instruments			(33)	-	(22)
			(20,134)	-	(19,971)
Net assets			475,185	447,669	503,292
Equity attributable to equity shareholders
Called-up share capital		4	32,303	32,185	32,300
Capital redemption reserve			12,588	12,588	12,588
Share premium			123,325	121,470	123,271
Special non-distributable reserve			7,536	7,536	7,536
Capital reserves			368,254	340,004	395,650
Revenue reserve			(68,821)	(66,114)	(68,053)
Total equity			475,185	447,669	503,292
Net asset value per ordinary share (pence)		5	370.60	350.48	392.56

Consolidated Cash Flow Statements
for the half year ended 31 October 2012	(Unaudited)	(Unaudited)	(Audited)
	Half year ended	Half year ended	Year ended
	31 October 2012	31 October 2011	30 April  2012
	Group	Group	Group
	£'000	£'000	£'000
Cash flows from operating activities
(Loss)/profit before finance costs and tax	(27,368)	(22,394)	31,867
Adjustment for non-cash items:
Foreign exchange losses	240	698	108
Adjusted (loss)/profit before finance costs and tax	(27,128)	(21,696)	31,975
Adjustments for :
Decrease/(increase) in investments	27,202	31,514	(30,186)
(Increase)/decrease in receivables	(596)	260	8,296
Decrease in payables	(3,278)	(11,443)	(9,931)
	23,328	20,331	(31,821)
Net cash (used in)/generated from operating activities before tax	(3,800)	(1,365)	154
Overseas tax deducted at source	(448)	(325)	(493)
Net cash used in from operating activities	(4,248)	(1,690)	(339)
Cash flows from financing activities
Proceeds from issues of share capital	57	2,127	4,043
Subscription share issue costs paid	-	(2)	(2)
Loans matured	-	(30,461)	(30,461)
Loans taken out	-	30,250	30,250
Finance costs	(359)	(468)	(830)
Net cash (used in)/generated from financing activities	(302)	1,446	3,000
Net (decrease)/increase in cash and cash equivalents	(4,550)	(244)	2,661
Cash and cash equivalents at the beginning of the period	49,211	45,505	45,505
Effect of foreign exchange rate changes	(12)	845	1,045
Cash and cash equivalents at the end of the period	44,649	46,106	49,211

Consolidated Statement of Changes in Equity for the half year ended 31 October 2012
	(Unaudited) Half year ended 31 October 2012
	Called-up share capital	Capital redemption reserve	Share premium	Special non-distributable reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2012	32,300	12,588	123,271	7,536	395,650	(68,053)	503,292
Total comprehensive income:
Loss for the period to 31 October 2012	-	-	-	-	(27,396)	(768)	(28,164)
Transactions with owners, recorded directly to equity:
Issue of ordinary shares on conversion of subscription shares	3	-	54	-	-	-	57
Total equity at 31 October 2012	32,303	12,588	123,325	7,536	368,254	(68,821)	475,185
	(Unaudited) Half year ended 31 October 2011
	Called-up share capital	Capital redemption reserve	Share premium	Special non-distributable reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2011	32,031	12,588	119,499	7,536	361,748	(64,686)	468,716
Total comprehensive income:
Loss for the period to 31 October 2011	-	-	-	-	(21,744)	(1,428)	(23,172)
Transactions with owners, recorded directly to equity:
Subscription share issue costs	-	-	(2)	-	-	-	(2)
Issue of ordinary share capital	150	-	1,901	-	-	-	2,051
Issue of ordinary shares on conversion of subscription shares	4	-	72	-	-	-	76
Total equity at 31 October 2011	32,185	12,588	121,470	7,536	340,004	(66,114)	447,669
	(Audited) Year ended 30 April 2012
	Called-up share capital	Capital redemption reserve	Share premium	Special non-distributable reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2011	32,031	12,588	119,499	7,536	361,748	(64,686)	468,716
Total comprehensive income:
Profit/(loss) for the year to 30 April 2012	-	-	-	-	33,902	(3,367)	30,535
Transactions with owners, recorded directly to equity:
Subscription share issue costs	-	-	(2)	-	-	-	(2)
Issue of ordinary share capital	150	-	1,901	-	-	-	2,051
Issue of ordinary shares on conversion of  subscription shares	119	-	1,873	-	-	-	1,992
Total equity at 30 April 2012	32,300	12,588	123,271	7,536	395,650	(68,053)	503,292

NOTES TO THE ACCOUNTS

For the six month period ended 31 October 2011

1.     General Information

The consolidated accounts comprise the unaudited results for Polar Capital Technology Trust plc and its subsidiary PCT Finance Limited for the six month period to 31 October 2012.                                                                                                                                               

The unaudited accounts to 31 October 2012 have been prepared using the accounting policies used in the Group's annual accounts to 30 April 2012. These accounting policies are based on International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Accounting Standards Committee ("IASC"), as adopted by the European Union.
                                                                                                                                           

The financial information in this Half Year Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The financial information for the six month periods ended 31 October 2012 and 31 October 2011 have not been audited. The figures and financial information for the year ended 30 April 2012 are an extract from the latest published accounts and do not constitute statutory accounts for that year. Full statutory accounts for the year ended 30 April 2012, prepared under IFRS, including the report of the auditors which was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies.                                                                                                                                       

The Group's accounting policies have not varied from those described in the Annual Report for the year ended 30 April 2012.                                                                                                                                                                                                                            

The financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (£'000), except where otherwise stated.                                                                                                                                                                                    

2. Income
	(Unaudited)	(Unaudited)	(Audited)
	For the half	For the half	For the
	year ended	year ended	year ended
	31 October 2012	31 October 2011	30 April 2012
	£'000	£'000	£'000
Income from investments held at fair value through profit or loss
Franked dividends	55	65	133
Unfranked dividends	2,946	2,113	3,406
	3,001	2,178	3,539
Other operating income
Bank interest	13	14	29
Total income	3,014	2,192	3,568
3. Earnings per ordinary share
	(Unaudited)	(Unaudited)	(Audited)
	For the half	For the half	For the
	year ended	year ended	year ended
	31 October 2012	31 October 2011	30 April 2012
	£'000	£'000	£'000
Net (loss) / profit for the period:
Revenue	(768)	(1,428)	(3,367)
Capital	(27,396)	(21,744)	33,902
Total	(28,164)	(23,172)	30,535
Weighted average number of shares in issue during the period	128,210,050	127,498,353	127,651,825
Revenue	(0.60)p	(1.12)p	(2.64)p
Capital	(21.37)p	(17.05)p	26.56p
Total	(21.97)p	(18.17)p	23.92p
The Company has in issue 24,786,282 subscription shares which are convertible into ordinary shares. Further details of the conversion price are given in note 4. There was no dilution of the return per ordinary share in respect of the conversion rights attaching to the subscription shares.
4. Called-up share capital
	(Unaudited)	(Unaudited)	(Audited)
	31 October 2012	31 October 2011	30 April 2012
	£'000	£'000	£'000
Allotted, Called up and Fully paid:
Ordinary shares of 25p each
Opening balance of 128,208,023 (31 October 2011 and 30 April 2012: 127,111,211)	32,052	31,778	31,778
Issue of nil (31 October 2011 and 30 April 2012: 600,000) ordinary shares	-	150	150
Conversion of 11,897 (31 October 2011: 19,037; 30 April 2012: 496,812) subscription shares to ordinary shares	3	4	124
Closing balance of 128,219,920 (31 October 2011: 127,730,248; 30 April 2012: 128,208,023) ordinary shares	32,055	31,932	32,052
Subscription shares of 1p each:
Opening balance of 24,798,179 (31 October 2011 and 30 April 2012: 25,294,991)	248	253	253
Conversion of 11,897 (31 October 2011: 19,037; 30 April 2012: 496,812) subscription shares to ordinary shares	-	-	(5)
Closing balance of 24,786,282 (31 October 2011: 25,275,954; 30 April 2012: 24,798,179) subscription shares	248	253	248
Total share capital	32,303	32,185	32,300
The subscription shares were issued as a bonus issue to the ordinary shareholders on 11 February 2011, on the basis of one subscription share for every five ordinary shares. Each subscription share confers the right (but not the obligation) to subscribe for one ordinary share on the last business day of each month between and including 31 March 2011 and 31 March 2014, when the rights under the subscription shares will lapse.
The conversion price is 478 pence.
5. Net asset value per ordinary share
	(Unaudited)	(Unaudited)	(Audited)
	31 October 2012	31 October 2011	30 April 2012
Undiluted:
Net assets attributable to ordinary shareholders (£'000)	475,185	477,669	503,292
Ordinary shares in issue at end of period	128,219,920	127,730,248	128,208,023
Net asset value per ordinary share	370.60p	350.48p	392.56p
There is no dilutive effect on the net asset value per ordinary share in respect of the conversion rights attaching to the subscription shares as the conversion price is higher than the ordinary share price of the Company at each period end.
6. Dividend
In accordance with stated policy, no interim dividend has been declared for the period (31 October 2011 and 30 April 2012 - nil).

Portfolio Review:

Classification of group investments at 31 October 2012
				Total	Total
	North			31 October	30 April
	America	Europe	Asia	2012	2012
	%	%	%	%	%
Computing	17.7	0.7	0.6	19.0	22.8
Components	0.4	-	0.5	0.9	1.0
Software	20.3	2.1	-	22.4	21.0
Semiconductors	12.0	2.3	9.0	23.3	21.8
Healthcare	0.3	-	-	0.3	-
Telecoms / media	0.5	0.3	-	0.8	0.4
Services	1.0	-	0.3	1.3	1.8
Communications equipment	10.1	1.2	1.2	12.5	14.9
Internet / consumer	10.6	-	3.4	14.0	11.9
Clean energy	0.9	0.7	-	1.6	0.6
Defence/ Security	-	-	-	-	0.2
Other sectors	0.3	-	0.5	0.8	0.5
Unquoted Investments	-	0.2	-	0.2	0.2
Total Investments	74.1	7.5	15.5	97.1	97.1
Other net assets (excluding loans)	4.9	1.0	3.3	9.2	8.8
Loans	(4.5)	-	(1.8)	(6.3)	(5.9)
TOTAL (net assets of £475,185,000)	74.5	8.5	17.0	100.0	-
At 30 April 2012 (net assets of £503,292,000)	74.1	8.6	17.3	-	100.0

Source: Polar Capital

Fund Distribution by Market Capitalisation
	Market Capitalisation
	<$2bn	$2bn-$10bn	>$10bn
% of invested assets at 31 October 2012	15.7	19.5	64.8
% of invested assets at 30 April 2012	14.5	15.4	70.1
EXCHANGE RATES		31 October 2012	30 April 2012
US$ to £		1.61	1.62
Japanese Yen to £		128.77	129.66
Euro to £		1.24	1.23

Portfolio Review - Equity Investments  at 31 October 2012
North America
			Value of holding		% of net assets
			31 October	30  April	31 October	30 April
			2012	2012	2012	2012
			£'000	£'000
Apple			53,561	61,142	11.3	12.1
Apple is a leading supplier of personal computers and digital media products that feature the company's proprietary operating system.  The company has become somewhat synonymous with the explosion in digital media as evidenced by market share gains in its core business and the spectacular success of its iPod, iTunes and iPhone offerings.  Having previously redefined the smartphone category with the iPhone, Apple's  iPad has essentially created the tablet market.
Google			26,591	22,921	5.6	4.6
Google is the dominant provider of Internet search and online advertising, provider of web applications and tools, as well as a developer of software and mobile applications.  The company operates a leading index of web sites and media content and offers an auction based advertising platform.  By helping content owners to efficiently find customers online, Google remains a critical element in the growth of Internet advertising and e-commerce
Microsoft			22,304	23,264	4.7	4.6
Microsoft is the largest software company in the world.  Founded in 1975, the company has built a dominant franchise in desktop software through its ubiquitous Windows operating system and Office productivity software.  Whilst the company is unlikely to be a net beneficiary from the transition towards cloud computing, an ageing PC installed base and a new operating system should create favourable near term tailwinds.
IBM			17,506	15,293	3.7	3.0
International Business Machines (IBM) is one of the world's leading providers of enterprise solutions, offering a broad portfolio of hardware, IT services and software solutions.  Whilst the company's revenue growth rate has moderated over recent years, it has been able to deliver fairly consistent earnings per share growth as a result of acquisitions, cost-saving initiatives and share repurchases.
Qualcomm			12,494	13,365	2.6	2.7
Qualcomm is the world leader in wireless code division multiple access (CDMA) technologies for mobile communications.  The company has more than 3,000 patents for CDMA and licenses its IP to the world's leading handset and infrastructure providers.  The company also sells chipsets via its QCT division.  Recent settlements with Broadcom (2009) and Nokia (2008) resulted in the removal of Qualcomm's legal overhang.
Oracle			10,999	11,415	2.3	2.3
Oracle is the leading vendor of relational database management systems (RDBMS) and is the world's second largest software company, with offerings that span database systems, middleware and broad range of applications.  Post its acquisition of Sun Microsystems, the company has begun to introduce vertically integrated systems such as its Exaseries products that combine Oracle software and Sun hardware.
Intel			10,871	13,841	2.3	2.7
Intel is the world's largest supplier of semiconductor chips.  The company designs and manufactures microprocessors, boards and semiconductor components that are used in computers, servers, and networking and communication products.  As the world's largest supplier of microprocessors, Intel enjoys a worldwide market share of more than 75%.
Cisco			8,214	10,892	1.7	2.2
Cisco Systems is a pre eminent provider of Internet protocol (IP)-based equipment that is used to carry data, voice and video traffic.  In addition to its core router and switch offerings, the company also produces IP telephony products, set-top boxes and videoconferencing systems.  Although the company should benefit from data traffic growth, this dynamic is being offset by intensifying competition in its core (switching) market.
Facebook			6,302	-	1.3	-
With over 1bn active monthly users, Facebook is the world's dominant social networking company. A poorly handled IPO and a lacklustre initial quarter as a public company saw Facebook stock halve from its debut price. However, actual results have been respectable given issues at (once important) customer Zynga and the difficulty associated with traffic shifting from desktop to mobile devices.
VMware			6,179	2,753	1.3	0.5
VMware is today synonymous with cloud computing as the dominant provider of software used by enterprises to virtualise computing and/or create private clouds. Having largely penetrated its core market, VMware has continued to broaden its product portfolio via internal R&D and a number of high profile acquisitions including the recent $1bn acquisition of next-generation networking vendor Nicira.
Texas Instruments			5,534	5,898	1.2	1.2
An early pioneer in the field of semiconductors, TI is today a leading provider of both digital signal processors and analogue / mixed signal chips.  The company has adopted a 'fab-light' manufacturing model which allows it to better manage utilisation rates during downturns allowing it to continue to generate strong free cash flows.  Last year's acquisition of long-term rival National Semi should allow TI to extend its analog market share while better utilising its industry leading 300m fabs.
Salesforce.com			5,319	6,521	1.1	1.3
A leading provider of customer relationship management (CRM) software, Salesforce.com is a standard bearer for a new software delivery model commonly known as 'software as a service' (SAAS).   By eliminating many of the upfront and ancillary costs associated with the prevailing licence model, the ability to deliver software 'on demand' is helping Salesforce.com not only expand the applicability of its core product but is also helping the company become a much broader application infrastructure provider.
Citrix			5,014	5,148	1.1	1.0
Citrix Systems offer a suite of products that help its customers compute over the wide area network (WAN).  Its core product is well established, having been used to deliver Windows desktops and applications from remote servers.  Newer offerings allow full desktop images (VDI) to be delivered over the Internet, SaaS collaboration via its GoTo product range, and a delivery controller that helps improve application performance.
Amazon.com			4,852	4,120	1.0	0.8
Amazon.com is a dominant eCommerce provider having expanded significantly since its early days as an online book, music and video vendor. Today the company has added a significant number of product categories and sells its own hardware (Kindle-branded e-readers and tablets). In addition, Amazon owns the world's pre-eminent public cloud (Amazon Web Services) and Lovefilm, an online video service.
eBay			4,644	4,549	1.0	0.9
While eBay continues to dominate online auctions, it has also expanded significantly into the broader eCommerce market such that fixed-price sales comprise the majority of its transactions. In addition to its eCommerce offering ('marketplace'), eBay also owns PayPal, one of the leading online payment platforms. Both the core and payment business should continue to benefit from growth in eCommerce and mobile payments.
Red Hat			4,563	5,027	1.0	1.0
Red Hat dominates the market for Linux, an open-source operating system (OS), that competes against Microsoft Windows and a number of Unix variants.  With eight of the top ten public Cloud vendors already running Red Hat Enterprise License, Linux appears to be the operating system of choice for large scale Cloud deployments.  Recent efforts to integrate virtualisation and middleware should provide the company with additional sources of growth.
EMC	Storage		4,344	7,512	0.9	1.5
OPNET	Networking		4,058	2,651	0.9	0.5
F5 Networks	Networking		3,846	4,560	0.8	0.9
Juniper Networks	Networking		3,666	4,850	0.8	1.0
Akamai	Internet		3,636	-	0.8	-
SanDisk	Semiconductors		3,423	3,214	0.7	0.6
LSI	Semiconductors		3,368	3,136	0.7	0.6
KLA-Tencor	Semiconductor equipment		3,291	-	0.7	-
Integrated Device Technology	Semiconductors		3,224	3,913	0.7	0.8
TIBCO Software	Enterprise software		3,111	3,038	0.7	0.6
Concur	Software-as-a-Service		3,047	3,014	0.7	0.6
Seagate	Components		3,015	-	0.6	-
Linkedin	Internet		2,930	1,834	0.6	0.4
Teradata	Data warehousing		2,900	2,235	0.6	0.4
Mellanox	Components		2,752	-	0.6	-
Aruba Networks	Networking		2,669	3,324	0.6	0.7
Lam Research	Semiconductors		2,637	3,940	0.6	0.8
JDS Uniphase	Telecom equipment		2,631	-	0.6	-
Ixia	Telecom equipment		2,598	2,037	0.5	0.4
Altera	Semiconductors		2,592	1,971	0.5	0.4
Intuit	Enterprise software		2,581	2,427	0.5	0.5
QLIK Technologies	Enterprise software		2,543	2,617	0.5	0.5
Cavium	Semiconductors		2,530	1,986	0.5	0.4
Synopsys	Design software		2,530	-	0.5	-
Check Point Software	Security software		2,514	4,242	0.5	0.8
Cirrus Logic	Semiconductors		2,509	-	0.5	-
Teradyne	Semiconductor equipment		2,459	3,284	0.5	0.7
Mastercard	Payment services		2,454	1,115	0.5	0.2
Fortinet	Security software		2,415	1,447	0.5	0.3
Broadcom	Semiconductors		2,339	3,155	0.5	0.6
Neustar 'A'	Telecom services		2,270	-	0.5	-
MicroStrategy	Enterprise software		2,198	2,448	0.5	0.5
Polycom	Videoconferencing		2,156	2,676	0.5	0.5
Adobe Systems	Enterprise software		2,110	3,279	0.4	0.6
Silicom	Components		2,095	1,659	0.4	0.3
Xilinx	Semiconductors		2,032	1,769	0.4	0.4
BroadSoft	Telecom equipment		2,017	-	0.4	-
NetScout Systems	Networking		1,964	2,688	0.4	0.5
Network Appliance	Storage		1,923	5,124	0.4	1.0
Fusion-io	Storage		1,851	2,691	0.4	0.5
Semtech	Semiconductors		1,847	2,470	0.4	0.5
National Instruments	Instrumentation		1,828	2,345	0.4	0.5
Sourcefire	Security software		1,706	1,887	0.4	0.4
Nvida	Semiconductors		1,680	-	0.4	-
Micron	Semiconductors		1,666	-	0.4	-
Nuance Communications	Enterprise software		1,658	2,841	0.3	0.6
Infoblox	Application software		1,639	125	0.3	-
Keynote Systems	Enterprise software		1,629	-	0.3	-
Imperva	Security software		1,627	-	0.3	-
Itron	Smart metering		1,589	1,658	0.3	0.3
WaterFurnace	Environmental		1,581	1,282	0.3	0.3
EnerNOC	Environmental / Clean energy		1,529	-	0.3	-
Riverbed	Networking		1,483	2,570	0.3	0.5
Exa	Design software		1,439	-	0.3	-
Splunk	Enterprise software		1,261	-	0.3	-
Cognizant	IT Services		1,241	2,844	0.3	0.6
Pronto Labs	Other		1,227	-	0.3	-
Athenahealth	Software-as-a-Service		1,196	-	0.3	-
PROS	Application software		1,168	708	0.2	0.1
Pervasive Software	Application software		1,037	571	0.2	0.1
Symmetricom	Telecom equipment		1,033	-	0.2	-
ServiceNow	Software-as-a-Service		971	-	0.2	-
Gartner 'A'	Services		864	-	0.2	-
Kulicke & Soffe Industries	Semiconductor equipment		856	-	0.2	-
Cerner	Healthcare software		851	-	0.2	-
E2open	Software-as-a-Service		843	-	0.2	-
Proofpoint	Security software		820	-	0.2	-
CommVault Services	Storage software		775	769	0.2	0.2
Lattice Semiconductor	Semiconductors		711	2,316	0.1	0.5
Total North American investments			351,930		74.1

Europe
			Value of holding		% of net assets
			31 October	30 April	31 October	30 April
			2012	2012	2012	2012
			£'000s	£'000s
SAP			9,224	6,558	1.9	1.3
SAP is a leading provider of Enterprise Resource Planning (ERP) software that is entrenched in most large companies today, from manufacturing to financial services.  The company has been leveraging its strengths in its core business and investing in emerging technologies both via acquisitions and internal R&D efforts.  New products that target mobile, Software-as-a-Service (SaaS) and large datasets (known as 'Big Data') are expected to become more important drivers of growth going forward.
ARM			4,837	3,353	1.0	0.7
ARM is the global leader in semiconductor IP focused on delivering performance with very low power consumption. The company's technology can be found in >90% of mobile phone application processors and basebands and as such has been a key beneficiary of the proliferation of mobile devices (including new form factors such as the tablet). In recent years, ARM has been driving growth outside of core markets from technology extension (entering the graphics space via Mali) and new verticals (microcontrollers in white goods and networking), and has the ambition to replicate its success in the high value server and PC markets.
Ericsson	Telecom equipment		4,021	4,502	0.9	0.9
Impax Environmental Markets	Environmental / Clean Energy		3,169	-	0.7	-
ASML	Semiconductor equipment		2,983	2,738	0.6	0.5
Gemalto	Components		2,009	639	0.4	0.1
Spirent Communications	Telecom equipment		1,556	1,966	0.3	0.4
Adva Optical Networking	Optical equipment		1,494	1,914	0.3	0.4
Ingenico	Point of sales equipment		1,477	1,901	0.3	0.4
ASM International	Semiconductor equipment		1,435	1,266	0.3	0.3
AMS	Semiconductors		1,072	-	0.2	-
Dialog Semiconductor	Semiconductors		1,046	1,501	0.2	0.3
Microgen	Application software		887	874	0.2	0.2
Herald Ventures Limited Partnership	Unquoted investment		378	317	0.1	0.1
Herald Ventures Limited Partnership II	Unquoted investment		270	261	0.1	0.1
Low Carbon Accelerator	Environmental / Clean Energy		64	109	-	-
Total European investments			35,922		7.5

Asia
			Value of holding		% of net assets
			31 October	30 April	31 October	30 April
			2012	2012	2012	2012
			£'000s	£'000s
Samsung Electronics			18,732	19,679	3.9	3.9
Samsung manufactures a very wide array of products ranging from components to finished products for both consumer electronics and industrial end markets.  The company is particularly renowned for its high global market share in the fields of memory semiconductors, LCD displays, and mobile handsets.
Taiwan Semiconductor			10,736	11,193	2.3	2.2
TSMC is the world's largest semiconductor foundry, providing a full range of services from design to product delivery.  The company is becoming increasingly dominant at the leading-edge of the technology road-map, where smaller rivals are struggling to adequately resource their product offerings.
Tencent			6,960	6,764	1.5	1.3
Tencent Holdings is China's largest internet company by revenue, and offers a suite of online services - primarily entertainment and communication related - to users.  The company originally started out as an 'instant messaging' service provider back in 1999, and has gone on to dominate this market in China with over 400 million active accounts.  The company are now successfully monetising this enormous 'community' via add-on services such as online gaming.
Radware	Networking equipment		4,417	3,920	0.9	0.8
Baidu	Internet		3,726	4,601	0.8	0.9
MediaTek	Semiconductors		3,280	1,179	0.7	0.2
Digital Garage	Internet		2,994	1,334	0.6	0.3
Chipbond	Semiconductors		2,321	-	0.5	-
Sina	Internet		2,295	1,624	0.5	0.3
Keyence	Factory automation		2,237	2,427	0.5	0.5
Fanuc	Factory automation		2,171	2,096	0.5	0.4
Hoya	Optical components		2,083	2,356	0.4	0.5
TXC	Components		1,600	-	0.4	-
Hon Hai Precision Industry	Electronic manufacturing		1,592	2,957	0.3	0.6
NHN	Internet		1,480	-	0.3	-
Quanta Computer	Computer hardware		1,193	3,498	0.3	0.7
ASM Pacific	Semiconductor equipment		1,146	1,832	0.2	0.4
Canon	Office automation		1,001	4,549	0.2	0.9
Shinko Electric	Components		999	-	0.2	-
Fujitsu	IT Services		930	2,346	0.2	0.5
Lenovo Group	Computer hardware		650	2,778	0.1	0.6
O-Net Communications	Optical equipment		575	782	0.1	0.2
Array	Networking equipment		415	719	0.1	0.1
Total Asian investments			73,533		15.5

SHAREHOLDER INFORMATION

Directors

MB Moule (Chairman)

BJD Ashford-Russell

PF Dicks

DJ Gamble

RAS Montagu

SC Bates

PJ Hames

Investment Manager

Polar Capital LLP

Authorised and regulated by the Financial Services Authority

Fund Manager

Ben Rogoff

Secretary

Polar Capital Secretarial Services Limited, represented by

Neil Taylor FCIS

Registered Office

4 Matthew Parker Street, London SW1H 9NP

020 7227 2700

Copies

The Half Year report will be posted to shareholders in December 2012 and copies of this statement are available from the company's registered office at 4 Matthew Park Street London SW1H 9NP   The Half Year report will be published on the Company's website at www.polarcapitaltechnologytrust.co.uk

ENDS

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

 

END

 

 

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