Interim Management Statement

RNS Number : 4251C

Polar Capital Technology Trust PLC

01 September 2008

 



Polar Capital Technology Trust plc
Interim Management Statement for the 3 months to 31 July 2008 (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 30 April 2008 to 31 July 2008 is shown below. The NAV per share fell from 223.38p to 211.93p a fall of 6.4%, while the Dow Jones World Technology Index (£) fell 6.9%.
467,000 shares have been purchased and cancelled in the period leaving 132, 041,914 shares in issue at 31 July 2008. The Annual General Meeting was held on 31 July and all resolutions were approved.
Manager's Comments: Market performance Equity markets fell sharply over the three month reporting period, the FTSE World Index falling 9.7% in Sterling terms. The principal reason for this weakness was a deteriorating inflationary backdrop, with energy prices soaring by more than 20% during May and June. This prompted an apparent volte-face by central bankers who appeared to shift their attention from faltering growth to inflation containment, evidenced by an ECB rate rise despite deteriorating European macroeconomic conditions. A quiet May was followed by six weeks of unrelenting selling pressure before markets staged a respectable rally during the final two weeks of the quarter due to a sharp correction in the oil price (c.14%). Technology Performance Whilst the technology sector lost ground during the period, it outperformed the broader market, the Dow Jones World Technology Index falling 6.9% in Sterling terms. A better than expected first quarter earnings season saw the sector outperform during May aided by strong reports from a number of leading companies, including Google, Research in Motion and Qualcomm. The impact of June profit-taking was ameliorated by strong relative performance during July as investors rotated back into the sector as a result of increased M&A activity, positive developments at the stock level (not least the resolution of all outstanding legal issues between Nokia and Qualcomm) and a relatively robust Q2 earnings season.  Outlook Given the amount of column inches dedicated to the 'credit crisis' it is clear that the current macroeconomic travails are now well understood. Whilst markets cannot currently rely on lower interest rates to combat slowing growth, the willingness of central banks to swallow the necessary medicine (higher rates) in order to stymie the inflation threat should result in the return of the so-called 'Fed put' once inflationary pressures subside. Whilst we do not anticipate equities staging a sustained recovery until earnings estimates have been more meaningfully lowered, we suspect that the current bear market rally may extend as investors become emboldened by sharply lower energy prices. To this end we used weakness during July to reduce liquidity largely in favour of US and Asian equities. We continue to believe that in spite of the pervasive sense of doom and gloom all is not lost. It is our long held belief that the attractiveness of financial assets wax and wane according to prevailing inflation expectations. Although it may no longer be fashionable to say so, we do not believe that the era of low inflation is concluding. Rather, our view remains that cyclical pressures - low interest rates, emerging market growth and high energy prices - have coalesced to create the perfect inflationary storm. Fortunately storms pass, and right now it appears that each variable may have already peaked. Moreover, we believe that globalisation has reduced the risk of sustained wage push inflation; as such slower global growth should result in the abatement of inflationary pressure allowing stocks to positively re-rate in due course. Where does this leave the technology sector? Over the near-term it feels likely that we will remain on the under-card of the main bout taking place between financials and commodities. However, once the worst of the macroeconomic headwinds are behind us we fully expect the technology sector to regain leadership status. Not only does our sector empirically perform well post the last US rate cut but its superior relative earnings / valuation profile looks particularly attractive. Whilst some commentators highlight how poorly the tech sector performed during the last downturn we believe the analogy to be fallacious as our sector has not enjoyed even a 'typical' capital spending cycle during the past expansion. From a relative performance perspective, technology stocks have meaningfully lagged other sectors / geographies that have been more direct beneficiaries of emerging market growth; as the 'decoupling' thesis is increasingly challenged we expect our sector - awash with cash and armed with productivity-enhancing solutions to combat cost / margin pressures - to begin to deliver the strong relative returns implied by its superior growth profile.  Ben Rogoff, August 2008
	31 July 2008	30 April 2008	Change
Share Price (p)	181.00	190.75	-5.1%
NAV per Share (p)	211.93	226.38	-6.4%
Discount (%)	-17.09	-18.68	8.5
Total Investments (£m)	270	287	-5.9%
Borrowing (£m)	-23	-24	-4.2
Gearing (%)*	92.02	92.23	-0.23
* The gearing ratio is calculated by dividing total assets by net assets. The calculation ignores the effect of cash or fixed interest holdings.

Performance (%)			3 Months	1Year	3 years
Share Price			-5.11	-20.18	18.69
NAV per Share			-6.38	-12.98	26.80**
Dow Jones World Technology Index			-6.86	-8.90	13.53
**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 (%)		31 July 2008		30 April 2008
North America		65.7		64.0
Europe		15.8		17.9
Asia		9.8		9.4
Japan		4.9		4.2
Cash & Equivalents		3.8		4.5
Sector Breakdown (%)		31 July 2008		30 April 2008
Software		20.7		20.4
Communication Equipment		20.5		18.0
Semiconductors		17.0		18.1
Computing		13.9		11.7
Healthcare		7.9		8.6
Clean Energy		6.7		8.4
Internet / Consumer		6.5		7.2
Services		2.4		3.2
Electronic Components		1.8		2.0
Other Sectors		1.3		0.9
Defence / Security		0.8		0.3
Telecoms/Media		0.5		1.2
Top Ten Holdings (%)		31 July 2008		30 April 2008
Google		4.0		3.1
Qualcomm		3.8		2.8
Apple		3.5		3.9
Research in Motion		3.3		-
Oracle		3.2		-
Microsoft		3.1		-
Intel		2.9		-
Cisco Systems		2.9		3.0
Nokia		2.9		2.1
International Business Machines		2.9		2.2
Applied Materials		-		2.7
Adobe Systems		-		2.7
Nuance Communications		-		2.4
Texas Instruments		-		2.3
Total		32.5		27.1
Shares in issue
As at 30 April 2008	132,508,914
Shares bought back and cancelled	467,000
Shares held in treasury	0
As at 31 July 2007	132,041,914
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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