Interim Management Statement

RNS Number : 3480Y

Polar Capital Technology Trust PLC

01 September 2009

 

Polar Capital Technology Trust plc

Interim Management Statement for the 3 months to 31 July 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 30 April 2009 to 31 July 2009 is shown below.

There have been no share buy backs in the period and the discount has ranged from -12.0% to -15.6%.  The Annual General Meeting was held on 29 July 2009 and all resolutions were passed on a show of hands. The AGM presentation and proxy votes can be viewed on the company's website.

Manager's Comments:

Market performance

Equities made further progress during the period as further evidence of economic improvement led to improved risk appetite, the FTSE World index rising 5.3% in Sterling terms. Stocks were particularly strong in May due to promising US home sales and payroll data which suggested that US housing and employment markets were bottoming. This sense of normalisation was aided by a solid Q1 earnings season and further evidence of capital markets reopening which resulted in sharply higher Treasury yields, rising equity and commodity prices. On the other hand it also presaged a very significant rally in Sterling that largely offset overseas equity returns during May. A quiet run up to second-quarter earnings season meant that macro developments took centre stage in June and early July. Perhaps indicative of expectations that had risen commensurate with market progress, macroeconomic data appeared more mixed than during May. Whilst the repayment of $68bn in TARP funds by ten US financial institutions was another sign of normalisation, cautious FOMC commentary at the June meeting together with disappointing July consumer confidence and weaker non-farm payrolls data resulted in soft commodity prices, sharply lower Treasury yields and an equity-market pullback. However, once Q2 earnings season commenced the focus returned to the micro level where improvement has been unequivocal, evidenced by an atypical level of positive earnings surprises. Stocks moved sharply higher whilst bonds surrendered their recent gains particularly as positive macroeconomic data later in July (housing, real GDP forecasts) added to the sense that the worst had past. 

Technology Performance

Technology stocks modestly underperformed the market during the period, the Dow Jones World Technology index rising 3.9% as improving risk appetite led to a broadening in the market and outperformance from riskier sectors previously eschewed by investors. This reallocation in favour of other cyclically-exposed areas begun during Q1 earnings season perhaps as a result of a number of large-cap technology companies (such as EMC and Dell) refusing to 'call the trough'. Whilst this may have held back the technology sector as a whole, it clearly did not hold

back component companies that were able to cite clear directional change as a result of less inventory de-stocking amid economic stabilisation. In what proved to be a particularly quiet run-up to Q2 earnings season, more than fifteen US semiconductor companies positively pre-announced during June alone. As elsewhere Q2 reporting season proved to be a positive catalyst for stocks, particularly for the most upstream companies that benefited from the aforementioned improvement in destocking. However, beyond the most cyclical subsectors, earnings were a little more mixed (reflecting raised expectations more than anything else) with strong quarters from the likes of Apple, Intel and IBM partially offset by lacklustre reports from Microsoft and Nokia.

Nonetheless, overall earnings have been good enough to justify recent stock gains, whilst company guidance has been better than feared, reflecting improved sentiment as well as modest improvement in actual visibility. As we anticipated there has been an uptick in M&A activity with EMC prevailing in the battle (with Network Appliance) for Data Domain, Intel buying Wind River (embedded software) and IBM acquiring SPSS (data mining software). We expect this to continue as the economy stabilises and incumbents that are increasingly encroaching on each others' core markets seek to stake out their claims. 

Outlook

We remain relatively sanguine about the prospects for further gains in equities, particularly in the US where leading indicators suggest that the recession may be over, even if this will not be confirmed officially for several months.

With earnings expectations moving higher and inflation unlikely to prove an issue in the developed world, we suspect that there remains significant cash on the sidelines or in other asset classes that may be reallocated in favour of equities. As for technology, strong year-to-date performance suggests a period of consolidation (at least relative to the market) is likely, however our medium term secular view remains positive.

	31 July 2009	30 April 2009	Change (%)
Share Price (p)	204.0	183.0	11.5
NAV per Share (p)	231.9	216.8	7.0
Discount (%)	-12.0	-15.6	22.9
Total Assets (£m)	319	274	16.4
Borrowing (£m)	25	28	-10.7
Cash & Fixed Int (£m)	28	28	0.0
Gearing Ratio*	108.67	111.15	-2.23
*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				5 years
Share Price			11.5	12.7				35.6
NAV per Share			7.2	9.4				30.1**
Dow Jones World Technology Index			5.4	7.0				26.5
**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 2009			30 April 2009
North America	71.8			73.0
Asia	10.5			9.2
Europe	9.2			9.5
Japan	6.0			6.0
Cash & Equivalents	2.5			2.3
Sector Breakdown (%)	31 July 2009				30 April 2009
Semiconductors	23.4				21.5
Comms Equipment	22.1				22.3
Software	19.7				19.9
Computing	15.9				16.0
Internet / Consumer	8.2				8.8
Healthcare	3.1				3.1
Services	2.2				1.7
Clean Energy	2.1				3.3
Other Sectors	1.4				1.1
Electronic Components	1.1				1.6
Telecoms / Media	0.8				0.7
Top Ten Holdings (%)		31 July 2009				30 April 2009
Apple		5.5				5.2
Google		4.6				4.5
Cisco Systems		4.3				4.3
Microsoft		4.3				4.0
Qualcomm		3.4				3.8
Intel		3.3				3.2
Samsung Electronics		3.1				2.9
Hewlett-Packard		3.0				3.0
Oracle		2.7				3.0
International Business Machines		2.6				2.2
Total		36.6				36.1

Shares in issue
As at 30 April 2009		126,497,914
Shares bought back and cancelled		0
Shares held in treasury		0
As at 31 July 2009		126,497,914
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.

 

END

 

 

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