Interim Management Statement

RNS Number : 9850O

Polar Capital Technology Trust PLC

17 March 2009

 



Polar Capital Technology Trust plc
Interim Management Statement for the 3 months to 30 January 2009 (unaudited)
The investment objective of Polar Capital Technology Trust PLC is to maximise capital growth for our shareholders through investing in a diversified portfolio of technology companies around the world.
Review of Material Events in Period
Performance over the period from 31 October 2008 to 30 January 2009 is shown below. The NAV per share has fallen from 183.5p to 179.0p a fall of 2.5%, while the Dow Jones World Technology Index (£) fell 0.5%.
The shares have traded at discounts of between 18.7% and 20.7% while the wider investment trust sector has seen discounts in the range of 16.3% to 26.8%. 2,037,000 shares have been purchased and cancelled over the period and as at 30 January 2009 there were 128,693,914 shares in issue. Share buy backs will continue.
Manager's Comments: Market performance Sustained Sterling weakness ameliorated the impact of further declines in global equity markets over the reporting period, the FTSE World Index falling just 1.5% in Sterling terms. The period began with the election of a new US President, Barack Obama's victory punctuating both pre and post-election rallies. Unfortunately improved sentiment proved short-lived as the real economy impact of the unfolding credit crisis continued to play out in the form of rising unemployment and further bank bail-outs. A November month-end rally (driven by a slew of interest rate cuts, the announcement of massive stimulus packages and reassuring commentary from the new President) was followed by further improvement in December as investors tried to put a line under a dire 2008, amid credit market improvement and further oil price weakness. Unfortunately this improved sentiment was overwhelmed in January by a cascade of negative macroeconomic developments. Whilst initial worries focused on rising US unemployment, they were soon augmented by events in the Middle East, higher oil prices, and some of the most awful Japanese economic data on record. Creeping nationalisation of the banking system in both the US and the UK did little to lift the gloom. Technology Performance Technology stocks performed broadly inline with the market over the reporting period, the Dow Jones World Technology Index falling 1.1% in Sterling terms. November saw the sector underperform as the macroeconomic slowdown began to take its toll on order momentum resulting in myriad negative pre-announcements ahead of fourth-quarter reporting season. This underperformance continued into December, although this was largely passive as US equities trailed their global peers during the month-long rally.  Rotation towards early cycle stocks such as semiconductors became more apparent in January which resulted in the technology sector outperforming convincingly despite a predictably gloomy Q4 earnings season. Diverging fortunes between legacy incumbents and 'new cycle' beneficiaries was also encouraging, a number of our core next-generation holdings such as Apple, Google and Starent Networks posting respectable earnings reports despite the macroeconomic backdrop. Outlook Despite our expectations that the global economy will continue to deteriorate, we are hopeful that equity markets will remain in a bottoming process that will ebb and flow. We take comfort from improvement in credit markets (tighter spreads, record January corporate bond  issuance) and continue to believe that there remains too much focus on the form that government stimuli will take and too little on the sheer magnitude of money that will be forced into the system to prevent its failure. Just as we felt there was inappropriate focus on inflationary impulses last summer, so today we believe that current deflationary concerns will prove ephemeral. We interpret the meaningful improvement in both nominal and real long-term US Treasury yields as unequivocal positives as we believe they are a prerequisite for market stabilisation because they suggest the forces of deflation are waning.  Whilst we caution that recent technology outperformance may give way to a period of relative profit-taking, we continue to believe that the sector will retain its current leadership status over the medium-term as it is uniquely positioned for a world of sub-trend growth that will invariably follow this downturn. In many ways we believe that the sector provides investors with an 'each-way bet'; should the global economy improve, its early cycle attributes together with the empirical relationship between IT spending and corporate profits should result in sector outperformance. However, should economic recovery be postponed, the technology sector can fall back on its balance sheet strength which all but eliminate the worst-case, financial  scenario that many other sectors face. Over the coming years we expect others to embrace our view that the sector's core competence - delivering productivity - is likely to become more pertinent in a world of sub-trend growth. As such we are using current market weakness to further reduce our liquidity, largely in favour of US mid and small-cap stocks with disproportionate exposure to areas with demonstrable ROI that are early in their adoption curves.  Ben Rogoff, March 2009
	30 January 2009	31 October 2008	ChChange (%)
Share Price (p)	145.5	145.5	0.0
NAV per Share (p)	179.0	183.5	-2.5
Discount (%)	-18.7	-20.7	9.7
Total Assets (£m)	260	264	-1.5
Borrowing (£m)	-31	-25	-24.0
Cash & Fixed Int (£m)	-11	-9	-22.2
Gearing Ratio*	114	111	2.7
*Gearing is expressed as a ratio of total assets to shareholders' funds multiplied by 100. The calculation ignores the effect of cash or fixed interest holdings.

Performance (%)			3 Months			1Year						3 years
Share Price			0.0			-18.2						-14.4
NAV per Share			-2.5			-15.5						-9.1**
Dow Jones World Technology Index			-0.5			-16.0						-13.0
**Not adjusted for warrant exercise in September 2005. NAV per share performance is calculated on the basis of diluted NAV for the entire period.
Geographical Breakdown (%)	30 January 2009					31 October 2008
North America	74.0					72.1
Europe	10.4					10.8
Japan	9.5					8.8
Asia	6.8					7.7
Cash & Equivalents	-0.7					0.6
Sector Breakdown (%)	30 January 2009								31 October 2008
Comms Equipment	21.0								19.9
Semiconductors	20.0								21.0
Software	19.6								20.6
Computing	17.7								14.9
Internet / Consumer	8.6								7.4
Healthcare	3.3								3.9
Clean Energy	2.9								3.8
Electronic Components	2.8								2.7
Services	2.1								2.0
Other Sectors	1.1								1.7
Telecoms / Media	0.7								0.7
Defence / Security	0.2								1.4
Top Ten Holdings (%)		30 January 2009							31 October 2008
Google		5.2							5.0
Apple		4.9							5.1
Oracle		4.5							-
Qualcomm		4.4							4.2
International Business Machines		4.1							2.8
Cisco Systems		4.1							4.9
Intel		4.0							-
Microsoft		3.8							-
Hewlett-Packard		3.5							-
Samsung Electronics		2.7							2.7
Applied Materials		-							4.1
Adobe Systems		-							3.9
Nuance Communications		-							3.8
Texas Instruments		-							3.2
Total		41.2							39.7
Shares in issue
As at 31 October 2008						130,730,914
Shares bought back and cancelled						2,037,000
Shares held in treasury						0
As at 30 January 2009						128,693,914
General Information:				For further information please visit the company's website where a PDF version of this announcement is available.
				www.polarcapitaltechnologytrustplc.co.uk
This interim management statement has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party for any other purpose.

 

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