Interim Results

RNS Number : 7945X

Polar Capital Technology Trust PLC

13 December 2010

 



                               POLAR CAPITAL TECHNOLOGY TRUST PLC (the "Company")

Unaudited Half Year Results for the six months ended 31 October 2010

13 December 2010

Key Points

Financial Highlights

	(Unaudited)	(Audited)	Movement
	Half year ended	Year ended	%
	31 October 2010	30 April 2010
Net assets per ordinary share	333.11p	315.13p	5.7%
Price per ordinary share	328.00p	306.80p	6.9%
Total net assets	£421,379,000	£398,627,000	5.7%
Shares in issue	126,497,914	126,497,914	-
Benchmark Index: Dow Jones World Technology  (total return sterling adjusted)			-2.5%

Corporate Highlights

·         As announced on 10 December 2010 the Board is considering a bonus issue of subscription shares to shareholders. The Board believes that over the longer term investment in the technology sector through the management of Polar Capital will deliver outperformance and that subscription shares represent an attractive option for shareholders to subscribe in the future for further ordinary shares in the Company.

·         After serving 14 years and seeing the Company through the continuation vote in 2010 Mr Richard Wakeling has announced that he will stand down as Chairman of the Board at the next AGM in August 2011. A successor will be appointed during the first half of 2011.

·         Polar Capital has won for the second year running the techMARK 'Technology Fund Manager of the Year' Award

Outlook

·         Whilst Sterling weakness held back returns, the NAV over the half year was ahead of benchmark

·         The outlook for the technology sector looks favourable in 2011, particularly for  next generation companies.

·         New technology cycle continues to unfold, driven by cloud computing, broadband applications and ubiquitous computing

For further information please contact: Ben Rogoff Ed Gascoigne-Pees / Georgina Turner Polar Capital Technology Trust PLC Financial Dynamics Tel: [phone] Tel: [phone]

Interim Management Report

The half year to 31 October 2010 saw markets fall modestly, with a strong conclusion to the period proving insufficient to offset earlier weakness.  The FTSE World index fell 0.7% in Sterling terms over the period. Sterling-based returns were hampered by Dollar weakness (-4.4% against the Pound) although this was offset by the rise in the Yen (+10.5%) which prompted intervention by the Bank of Japan in early October. Although markets ended the previous financial year at near twelve month highs, a slew of negative top down developments early in the fiscal year saw equities and risk appetite fall sharply. Whilst the escalation of the sovereign debt crisis facing Greece and others was met forcefully by the ECB with a Euro750bn bailout plan, ongoing Euro weakness suggests that investors remain unconvinced that weaker Eurozone economies would escape contagion. Additional negatives such as the oil spill in the Gulf of Mexico, ongoing tightening of financial market regulations and Chinese efforts to dampen asset price inflation added materially to the gloom. Fears about the recovery trajectory were augmented by a clear deterioration of US macroeconomic data in June and July as US labour markets failed to improve.

Whilst some alleviation of the sovereign risk issue in Europe and a strong second quarter earnings season allowed shares to stage intermittent rallies, the trend remained to the downside as plunging US Treasury yields reflected the risk associated with a faltering recovery. The downward revisions to US GDP, weak payroll and housing data likely prompted Fed Chairman, Ben Bernanke, to state he was ready to use 'unconventional measures... if the outlook (were) to deteriorate'. This verbal intervention marked a clear watershed during the half year as the possibility of a further round of quantitative easing saw investor sentiment and markets rebound sharply, aided by a pick-up in M&A activity, the anticipated Republican gains in the mid-term elections and a third-quarter earnings season that came in ahead of expectations. 

Technology shares modestly trailed the broader market with the Dow Jones World Technology index falling 2.5% over the half year in Sterling terms. While some of the sector's underperformance was passive (reflecting the underperformance of US equities and the Dollar), technology's relative performance peaked in April/May concurrent with US Treasury yields/growth expectations. Deteriorating macroeconomic conditions definitely left their mark as investors began to question the accuracy of 2011 earnings estimates, particularly in the most cyclically exposed sub-segments such as semiconductors. In addition, PC related shares performed poorly as evidence of order cancellations early in the period were followed in August by an Intel profit warning and the surprise departure of Mark Hurd, the highly regarded CEO of Hewlett Packard. Furthermore, the stunning debut of Apple's iPad made plain the risk posed to the PC market by alternative computing devices such as tablets. A number of other large-caps shares also lagged the market as a combination of structural (Nokia, Microsoft) and cyclical (Cisco) headwinds made them look like 'growth cyclicals' at best. 

In contrast, our own net asset value per share rose by 5.7% over the same period as small and mid-cap technology stocks materially outperformed over the half year due to a combination of superior earnings growth, relative PER multiple expansion (scarcity of growth) and surging M&A activity. Both second and third-quarter earnings seasons made plain the widening gulf between legacy and next-generation companies. Outstanding returns from new cycle standard bearers such as F5 Networks (+64% share price return in Sterling terms), Riverbed (+77%) and Salesforce.com (+29%) were in stark contrast to more pedestrian performances from the likes of IBM and SAP. Next generation companies also benefited from a significant pick up in M&A activity which began in May with SAP's acquisition of Sybase followed by further transactions in August and September (Intel/McAfee, HP/3PAR, IBM/Netezza, HP/Arcsite). This confirmed our view that a new technology cycle was firmly underway and this was epitomised by Hewlett Packard's acquisition of storage vendor 3PAR following a bidding war with Dell. 

Whilst we are encouraged by the Federal Reserve's rhetoric and believe that it is committed to eliminating the worst-case deflationary outcome, we still see little to challenge our long held view that the developed world is likely to experience a multi-year period of sub trend growth as the impact of deleveraging becomes apparent. We still believe that equity markets can continue to make positive progress over the coming half year given undemanding valuations and a further round of QE in the US but acknowledge that risks to this view are increasing as governments are increasingly forced to deliver on their fiscal commitments. With this in mind we expect monetary policy to remain extremely accommodative in the developed world, even as central banks in emerging markets have begun to adopt more neutral stances in order to manage the balance between growth and inflationary pressures. Although the risk of a policy error appears to have risen, we still expect the global economy to muddle through, aided by the absence of structural inflation in the developed world due to excess capacity and high unemployment.

As well as the risks outlined above, there are a number of additional risk factors that investors should consider. These include sovereign default risk, further deterioration in labour and housing markets resulting in a so-called 'double-dip', and insufficient political will to deliver on fiscal tightening commitments resulting in a loss of market confidence. Longer-term risks remain unchanged and are based on the structural imbalances that remain largely unresolved. Other risks that could affect our thesis include premature interest rate hikes, a disorderly US Dollar decline, rapidly rising food and energy prices and rising protectionism. As in previous years, political risk remains the most significant exogenous factor to consider. 

Turning to technology, we continue to believe that sub-trend global growth should continue to provide a positive backdrop for the technology sector, as it should result in greater corporate focus on delivering productivity. Valuations relative to the wider market appear undemanding, especially given the sector's vastly superior aggregate balance sheet. Recent corporate action is also supportive with a number of companies issuing debt or using retained cash to announce significant buybacks and/or dividend hikes. Likewise, the return of private equity driven M&A has further stimulated interest in  technology stocks. While IT budget growth is likely to remain subdued in 2011, we suspect that value creation will become increasingly uneven going forward as the deflationary impact of the new cycle continues to take its toll. This will likely drive greater competition between the technology behemoths of today, a dynamic being accelerated by the re-centralisation of computing. 

As such, we believe the recent acceleration in M&A activity is best understood as incumbents retooling for a new cycle which is why we have continued to de-emphasise our exposure to 'cheap' large cap legacy companies that have much to lose from a disruptive new cycle. Instead we continue to prefer next generation companies with little to lose and much to gain. Although these companies trade at higher forward PEs, they have been able to deliver organic growth somewhat independent of cyclical tailwinds and/or financial engineering. Now that cyclical recovery and cost cutting have stopped obfuscating the new cycle, we expect this superior growth trajectory to continue to support premium valuations, not least because we expect the recent acceleration in M&A activity to persist. Having 'lost' a number of holdings over the half year to acquisition, we expect this dynamic to continue to deliver value as incumbents shamelessly attempt to reinvent themselves. 

We continue to believe that we remain in the early stages of a disruptive new cycle that is based on three key drivers - the shift towards 'cloud computing' (described at length in last year's annual report), growth in broadband applications and the advent of ubiquitous computing. We will continue to move the portfolio away from our index as and when we anticipate large cap impairment. We remain as convinced as ever about the potential of this new cycle and expect the next phase to be characterised by continued small and mid-cap outperformance.

Ben Rogoff

10 December 2010

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 2010. 

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 2010 and the results for the six months ended 31 October 2010 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 2010 has not been audited or reviewed by the Auditors.

The half year financial report for the six month period to 31 October 2010 was approved by the Board on 10 December 2010 and the responsibility statement was signed on its behalf by Richard Wakeling, 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 2010 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 six months ended 31 October 2010
	(Unaudited)			(Unaudited)			(Audited)
	Half year ended			Half year ended			Year ended
	31 October 2010			31 October 2009			30 April 2010
	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
Investment income	1,793	-	1,793	1,495	-	1,495	2,680	-	2,680
Other operating income	20	-	20	10	-	10	24	-	24
Gains on investments held at fair value	-	26,336	26,336	-	38,827	38,827	-	126,458	126,458
Other losses/(gains)	-	(952)	(952)	-	(800)	(800)	-	11	11
Total income	1,813	25,384	27,197	1,505	38,027	39,532	2,704	126,469	129,173
Expenses
Investment management fee	(2,078)	-	(2,078)	(1,551)	-	(1,551)	(3,302)	-	(3,302)
Performance fee	-	(1,331)	(1,331)	-	-	-	-	-	-
Other administrative expenses	(385)	-	(385)	(261)	-	(261)	(588)	-	(588)
Total expenses	(2,463)	(1,331)	(3,794)	(1,812)	-	(1,812)	(3,890)	-	(3,890)
Profit/(loss) before finance costs and tax	(650)	24,053	23,403	(307)	38,027	37,720	(1,186)	126,469	125,283
Finance costs	(431)	-	(431)	(259)	-	(259)	(547)	-	(547)
Profit /(loss) before tax	(1,081)	24,053	22,972	(566)	38,027	37,461	(1,733)	126,469	124,736
Tax	(220)	-	(220)	(190)	-	(190)	(220)	(76)	(296)
Net profit/(loss) for the period and total comprehensive income	(1,301)	24,053	22,752	(756)	38,027	37,271	(1,953)	126,393	124,440
Earnings per ordinary share (pence)	(1.03p)	19.01p	17.98p	(0.60p)	30.06p	29.46p	(1.54p)	99.92p	98.38p
The total columns of this statement represent the Group's Income Statement, 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 profit for the period of the Company was £22,752,000 (31 October 2009: £37,271,000 and 30 April 2010: £124,440,000).
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 and Company Balance Sheets at 31 October 2010
	(Unaudited)		(Unaudited)		(Audited)
	At 31 October 2010		At 31 October 2009		At 30 April 2010
	Group	Company	Group	Company	Group	Company
	£'000	£'000	£'000	£'000	£'000	£'000
Non current assets
Investments held at fair value	410,279	412,467	299,031	301,198	386,031	388,207
Current assets
Other receivables	5,493	8,885	1,638	5,023	6,704	10,091
Cash and cash equivalents	45,454	39,874	44,250	38,698	42,070	36,507
	50,947	48,759	45,888	43,721	48,774	46,598
Total assets	461,226	461,226	344,919	344,919	434,805	434,805
Current liabilities
Other payables	(9,521)	(9,521)	(6,594)	(6,594)	(8,311)	(8,311)
Bank loans	(30,326)	(30,326)	-	-	(27,867)	(27,867)
	(39,847)	(39,847)	(6,594)	(6,594)	(36,178)	(36,178)
Total assets less current liabilities	421,379	421,379	338,325	338,325	398,627	398,627
Non current liabilities
Bank loans	-	-	(26,875)	(26,875)	-	-
Net assets	421,379	421,379	311,450	311,450	398,627	398,627
Equity attributable to equity shareholders
Ordinary share capital	31,624	31,624	31,624	31,624	31,624	31,624
Capital redemption reserve	12,588	12,588	12,588	12,588	12,588	12,588
Share premium	117,902	117,902	117,902	117,902	117,902	117,902
Warrant exercise reserve	7,536	7,536	7,536	7,536	7,536	7,536
Capital Reserves	314,827	317,015	202,400	204,567	290,774	292,950
Revenue Reserve	(63,098)	(65,286)	(60,600)	(62,767)	(61,797)	(63,973)
Total equity	421,379	421,379	311,450	311,450	398,627	398,627
Net asset value per ordinary share (pence)	333.11p	333.11p	246.21p	246.21p	315.13p	315.13p

Consolidated and Company Cash Flow Statements for the six months ended 31 October 2010
	(Unaudited)		(Unaudited)		(Audited)
	Half year ended 31 October 2010		Half year ended 31 October 2009		Year ended 30 April 2010
	Group	Company	Group	Company	Group	Company
	£'000	£'000	£'000	£'000	£'000	£'000
Cash flows from operating activities
Profit before finance cost and tax	23,403	23,403	37,720	37,720	125,283	125,283
Adjustment for  non cash items:
Foreign exchange losses	952	952	800	800	(11)	(11)
Adjusted profit before finance costs and tax	24,355	24,355	38,520	38,520	125,272	125,272
Adjustments for:
Increase in investments	(24,248)	(24,260)	(31,186)	(31,192)	(118,186)	(118,201)
Decrease in receivables	1,167	1,162	5,592	5,588	663	657
Increase/(decrease) in payables	1,205	1,205	(444)	(444)	1,270	1,270
	(21,876)	(21,893)	(26,038)	(26,048)	(116,253)	(116,274)
Net cash from operating activities before tax	2,479	2,462	12,482	12,472	9,019	8,998
Overseas tax deducted at source	(176)	(176)	(270)	(270)	(513)	(513)
Net cash generated from operating activities	2,303	2,286	12,212	12,202	8,506	8,485
Cash flows from financing activities
Share buy back cost adjustment	-	-	-	-	8	8
Loans matured	(59,286)	(59,286)	-	-	-	-
Loans taken out	59,786	59,786	-	-	-	-
Finance costs	(426)	(426)	(260)	(260)	(545)	(545)
Net cash from/(used in) financing activities	74	74	(260)	(260)	(537)	(537)
Net increase in cash and cash equivalents	2,377	2,360	11,952	11,942	7,969	7,948
Cash and cash equivalents at the beginning of the period	42,070	36,507	33,729	28,187	33,729	28,187
Effect of foreign exchange rate changes	1,007	1,007	(1,431)	(1,431)	372	372
Cash and cash equivalents at the end of the period	45,454	39,874	44,250	38,698	42,070	36,507

Consolidated and Company Statements of Changes in Equity for the six months ended 31 October 2010 (Unaudited)
	Ordinary share capital	Capital redemption reserve		Share premium	Warrant exercise reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000		£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2010	31,624	12,588		117,902	7,536	290,774	(61,797)	398,627
Total comprehensive income:
Profit/(loss) for the period	-	-		-	-	24,027	(1,301)	22,726
Total equity at 31 October 2010	31,624	12,588		117,902	7,536	314,801	(63,098)	421,353
Company
Total equity at 30 April 2010	31,624	12,588		117,902	7,536	292,950	(63,973)	398,627
Total comprehensive income:
Profit/(loss) for the period	-	-		-	-	24,039	(1,313)	22,726
Total equity at 31 October 2010	31,624	12,588		117,902	7,536	316,989	(65,286)	421,353
Consolidated and Company Statements of Changes in Equity for the six months ended 31 October 2009 (Unaudited)
	Ordinary share capital		Capital redemption reserve	Share premium	Warrant exercise reserve	Capital  reserves	Revenue reserve	Total
	£'000		£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2009	31,624		12,588	117,902	7,536	164,373	(59,844)	274,179
Total comprehensive income:
Profit/(loss) for the period	-		-	-	-	38,027	(756)	37,271
Total equity at 31 October 2009	31,624		12,588	117,902	7,536	202,400	(60,600)	311,450
Company
Total equity at 30 April 2009	31,624		12,588	117,902	7,536	166,534	(62,005)	274,179
Total comprehensive income:
Profit/(loss) for the period	-		-	-	-	38,033	(762)	37,271
Total equity at 31 October 2009	31,624		12,588	117,902	7,536	204,567	(62,767)	311,450

Consolidated and Company Statements of Changes in Equity for the year ended 30 April  2010 (Audited)
	Ordinary share capital				Capital redemption reserve	Share  premium		Warrant exercise reserve	Capital  reserves	Revenue reserve	Total
	£'000				£'000	£'000		£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2009	31,624				12,588	117,902		7,536	164,373	(59,844)	274,179
Total comprehensive income:
Profit/(loss) for the year	-				-	-		-	126,393	(1,953)	124,440
Transactions with owners, recorded directly to equity:
Share buyback cost adjustment	-				-	-		-	8	-	8
Total equity at 30 April 2010	31,624				12,588	117,902		7,536	290,774	(61,797)	398,627
Company
Total equity at 30 April 2009	31,624				12,588	117,902		7,536	166,534	(62,005)	274,179
Total comprehensive income:
Profit/(loss) for the year	-				-	-		-	126,408	(1,968)	124,440
Transactions with owners, recorded directly to equity:
Share buy back cost adjustment	-				-	-		-	8	-	8
Total equity at 30 April 2010	31,624				12,588	117,902		7,536	292,950	(63,973)	398,627

NOTES TO THE ACCOUNTS

For the six month period ended 31 October 2010

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 2010.

The unaudited accounts to 31 October 2010 have been prepared using the accounting policies used in the Group's annual accounts to 30 April 2010.  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 by 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 2010 and 31 October 2009 have not been audited.  The figures and financial information for the year ended 30 April 2010 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 2010, prepared under IFRS, including the report of the auditors which was unqualified and did not contain a statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies.

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

2. Earnings per ordinary share
	(Unaudited)	(Unaudited)	(Audited)
	For the half year ended	For the half year ended	For the year ended
	31 October 2010	31 October 2009	30 April 2010
Net Profit / (loss) for the period	£'000	£'000	£'000
Revenue	(1,301)	(756)	(1,953)
Capital	24,053	38,027	126,393
Total	22,752	37,271	124,440
Weighted average number of shares	126,497,914	126,497,914	126,497,914
Revenue	(1.03)p	(0.60p)	(1.54p)
Capital	19.01p	30.06p	99.92p
Total	17.98p	29.46p	98.38p
3. Net asset value per ordinary share
	(Unaudited)	(Unaudited)	(Audited)
	For the half year ended	For the half year ended	For the year ended
	31 October 2010	31 October 2009	30 April 2010
	£'000	£'000	£'000
Net asset value	421,379	311,450	398,627
Number of ordinary shares in issue	126,497,914	126,497,914	126,497,914
Net asset value per ordinary share	333.11p	246.21p	315.13p

4. Share capital

During the period, the Company made no market purchases of its own ordinary shares for cancellation.

5. Dividend

In accordance with stated policy, no interim dividend has been declared for the period (31 October 2009 and 30 April 2010 - nil).                                                                                    

6. Performance fee

At 31 October 2010, a performance fee of £1,331,000 is provided for in the accounts (31 October 2009 and 30 April 2010 - nil).

The Company can earn a performance fee which would be payable as a result of outperformance over the Benchmark index, subject to the adjusted NAV per share exceeding the high water mark which for these purposes is 315.13 pence per share.

Portfolio Review:

Classification of group investments at 31 October 2010
				Total	Total
	North			31 October	30 April
	America	Europe	Asia	2010	2010
	%	%	%	%	%
Computing	16.0	-	1.9	17.9	20.2
Software	20.2	0.6	-	20.8	18.6
Semiconductors	12.2	2.8	7.1	22.1	24.9
Healthcare	0.5	-	-	0.5	0.3
Telecoms/media	-	0.4	-	0.4	0.8
Services	1.9	0.4	3.8	6.1	4.4
Communications equipment	12.8	1.1	3.7	17.6	16.4
Internet/consumer	7.4	-	2.9	10.3	9.7
Clean energy	-	0.1	-	0.1	0.1
Defence/Security	-	0.3	-	0.3	0.1
Other sectors	-	-	1.1	1.1	1.2
Unquoted Investments	-	0.2	-	0.2	0.2
Total Investments	71.0	5.9	20.5	97.4	96.9
Other net assets (excluding loans)	7.1	0.6	2.1	9.8	10.1
Loans	(4.2)	-	(3.0)	(7.2)	(7.0)
GRAND TOTAL (net assets of £421,353,000)	73.9	6.5	19.6	100.0	-
At 30 April 2010 (net assets of £398,627,000)	70.2	8.8	21.0	-	100.0

Fund Distribution by Market Capitalisation
	Market Capitalisation
	<$2bn	$2bn-$10bn	>$10bn
% of invested assets at 31 October 2010	22.0	14.6	63.4
% of invested assets at 30 April 2010	19.6	16.9	63.5

INDEX CHANGES over the half year ended 31 October 2010
(Total return)	Local Currency	Sterling Adjusted
	%	%
Benchmark:
Dow Jones World Technology	1.8	(2.5)
Other Indices:
FTSE World	-	(0.7)
FTSE All-Share	-	4.2
S&P 500 composite	0.7	(3.6)
EXCHANGE RATES	31 October 2010	30 April 2010
US$ to £	1.5988	1.5307
Japanese Yen to £	128.78	143.90
Euro to £	1.1503	1.1512

	Portfolio Review: Equity Investments over 0.75% of net assets at 31 October 2010
	North America
	Value of holding								% of net assets
	31 October	30 April							31 October	30 April
	2010	2010							2010	2010
	£'000	£'000							%	%
	33,497	30,113		Apple					7.9	7.6
				Apple is a leading supplier of personal computers and digital media products that feature the company's proprietary OS X 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 and iTunes offerings.  It recent iPhone and iPad products are helping to redefine both the smart phone and computing categories.
	21,471	14,762		Google					5.1	3.7
				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 efficiently to find customers online, Google remains a critical element in the growth of Internet advertising and e-commerce.
	18,411	20,901		Microsoft					4.4	5.2
				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 overdue PC upgrade cycle and a new operating system ('Windows 7') should create favourable near term tailwinds.
	16,550	10,846		Oracle					3.9	2.7
				Oracle is the leading vendor of relational database management systems (RDBMS) and is the world's second largest software company.  With more than $20bn in annual revenues, Oracle's offerings span database systems, middleware and broad range of applications such as ERP, CRM and SCM.  The company has also entered the enterprise hardware and storage markets following its acquisition of Sun Microsystems.
	14,273	14,059		Cisco					3.4	3.5
				Cisco Systems is a preeminent 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.  The company is thus well positioned to benefit from the continued growth of both wireline and wireless broadband traffic.
	10,864	13,470		IBM					2.6	3.4
				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.  While 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.
	10,008	12,223		Intel					2.4	3.1
				Intel is the world's largest supplier of semiconductor chips.  The company designs and manufacturers 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%.  New products include Atom (for netbooks), ultra-low voltage CPUs for thin notebooks and the new Xeon 5500, a server chip optimised for virtualised environments.
	9,645	6,535		Qualcomm					2.3	1.6
				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.
	7,096	5,707		EMC					1.7	1.4
				EMC is a leading provider of enterprise storage systems that allow its customers to store, manage and retrieve massive amounts of information.  In addition to its position in storage area networks (SANs), EMC also offers network-attached file servers and a wide array of software designed to manage, protect and share data.  The company is the majority owner of VMware (a leading virtualisation software supplier) and has relationship with Dell which resells its systems.
	5,963	9,396		Hewlett Packard					1.4	2.4
				One of the world's largest providers of IT solutions, HP has used cash flows generated by its print supplies and enterprise software businesses to acquire companies such as EDS, Compaq and 3Com.  This willingness to acquire has resulted in this former hardware company becoming one of the few systems companies, apeing a transition undertaken previously by IBM.
	5,301	3,807		Cognizant					1.3	1.0
				Whilst headquartered in New Jersey, Cognizant's business primarily takes place in India where it is one of the largest and fastest growing IT service companies.  Cognizant has been a multi-year beneficiary of the growth in the Indian outsourcing market and remains well positioned to benefit from the current rebound in IT spending and the persistence of an attractive labour arbitrage.
	5,118	3,371		Xilinx					1.2	0.8
				Xilinx is a leading vendor of field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). Whilst these products remain more expensive than equivalent application specific integrated circuits or standard products (ASIC/ASSP), they are much more flexible, requiring less upfront investment making them ideal for shorter-run designs. An extremely well run business, Xilinx is a strong Free Cash Flowgenerator.
	4,920	6,117		Texas Instruments					1.2	1.5
				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.  The company has divested some non-core assets over recent years, returning the proceeds in the form of stock repurchases.
	4,903	4,920		F5 Networks					1.2	1.2
				F5 Networks is a leading provider of application delivery networking products that manage, control and optimize Internet traffic within a network.  These products are used for network load balancing, file virtualisation, and WAN optimization all of which improve the reliability and user experience of applications being run remotely.  The company's recent acquisition of Acopia expanded its addressable market into storage virtualisation.
	4,457	4,176		Juniper Networks					1.1	1.0
				Juniper Networks is a global supplier of core and edge routers to service providers and large enterprises.  Its products help carry data across IP networks and the company has also entered the market for other next generation IP technologies such as network security and WAN optimisation.  The company recently developed its own Ethernet switch which it hopes will allow it to wrest market share from Cisco in the enterprise market.
	4,330		3,083	Network Appliance					1.0	0.8
				Commonly known as NetApp, this company is  a leading vendor of network-attached storage (NAS) systems that are often deployed by mid-sized and large enterprises. Although NAS was once considered to be inferior to storage area network (SAN) alternatives, the technology is well placed to benefit from further adoption for server virtualisation, unified storage and the shift towards 10G Ethernet. As such NetApp has been able to consistently grow its market share against almost all incumbent storage vendors.
	4,305		2,595	Broadcom					1.0	0.6
				Founded in 1991 by a professor and student of UCLA, Broadcom has become one of the largest fabless semiconductor companies in the world with revenues expected to exceed $6.7bn in 2010. As the name suggests, Broadcom is primarily focused on designing chips used in broadband communications. Its core markets include digital set top box (STB), cable modems, servers, networking equipment and latterly, mobile handsets.
	4,138		3,913	Salesforce.com					1.0	1.0
				Founded in 1999 and based in San Francisco, salesforce.com is the leading provider of hosted, outsourced customer relationship management (CRM) software.  The company delivers its software via a web browser on a subscription basis and is widely considered a pioneer of the software-as-a-service (SAAS) alternative to the perpetual licence model adhered to by most software vendors.  Its 'AppExchange' and 'Force.com' platforms have expanded the company's addressable market well beyond just CRM.
	3,739		3,174	Lam Research			Semiconductor capital equipment		0.9		0.8
	3,738		3,814	Research In Motion				Wireless handsets	0.9	1.0
	3,689		2,620	OPNET Technologies				Enterprise software	0.9	0.7
	3,607		2,456	Citrix Systems				Enterprise software	0.9	0.6
	3,537		3,122	Red Hat				Enterprise software	0.8	0.8
	3,363		1,317	Adobe Systems				Enterprise software	0.8	0.3
	3,243		4,045	Riverbed Technology				Networking equipment	0.8	1.0
	210,166			Total investments over 0.75%					50.1
	88,910			Other investments					20.9
	299,076			Total North American investments					71.0
	Europe
	Value of holding								% of net assets
	31 October	30 April							31 October	30 April
	2010	2010							2010	2010
	£'000s	£'000s							%	%
	4,379	3,343		Ericsson					1.0	0.8
				Ericsson has a long and rich history in the telecommunications industry having been first established in 1876. Today the company is synonymous with telecom infrastructure, particularly in the wireless arena where the company enjoys a leading market share. As such, we believe that Ericsson is well positioned to benefit from ongoing smartphone penetration / growth in mobile data in the developed world, together with wireless deployments in emerging markets.
	3,709	3,688		ASML				Semiconductor capital equipment	0.9	0.9
	8,088			Total investments over 0.75%					1.9
	16,957			Other investments					4.0
	25,045			Total European investments					5.9
	Asia
	Value of holding								% of net assets
	31 October	30 April							31 October	30 April
	2010	2010							2010	2010
	£'000s	£'000s							%	%
	9,134	10,497		Samsung Electronics					2.2	2.6
				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.
	7,354	5,671		Infosys Technologies					1.7	1.4
				Infosys Technologies provides IT consulting and software services.  Based in India, it has been one of the world's most successful exponents of the 'offshoring' model, winning business from major customers across a very wide range of industries.
	5,601	4,217		Taiwan Semiconductor					1.3	1.1
				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 adequately to resource their product offerings.
	5,459	7,415		Canon					1.3	1.9
				Canon is one of the world's largest companies in the field of imaging and optical technology, manufacturing a wide range of products for both consumer and professional use.  Examples include printers, copiers, cameras, semiconductor manufacturing equipment, and medical equipment.
	4,570	4,945		Fujitsu					1.1	1.2
				Fujitsu is one of Japan's leading IT conglomerates, providing a comprehensive range of products and services including telecommunication network equipment, semiconductors, and IT consulting.  In recent years the company has undergone significant restructuring resulting in their exit from many non-core businesses.  The result is a much more focused and cash-flow generative organisation which derives the majority of profits from IT services.
	4,311	3,804		Baidu					1.0	1.0
				Baidu operates China's pre eminent Internet search engine.  The company operates a business model similar to that pioneered by Google in the US, but customised to suit the nuances of the Chinese market.  Google has hitherto been Baidu's closest competitor, but recent battles over China's censorship laws have led to much uncertainty over whether Google will continue to serve the Chinese market which has further enhanced Baidu's dominant market share.
	4,167	3,996		Tencent Holdings					1.0	1.0
				Tencent Holdings is China's largest internet company by revenue, and offers a full 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 is now successfully monetising this enormous 'community' via add-on services such as online gaming.
	3,483	2,562		Fanuc				Electronic Components	0.8	0.6
	3,388	1,554		Tokyo Electron				Semiconductor capital equipment	0.8	0.4
	47,467			Total investments over 0.75%					11.2
	38,691			Other investments					9.3
	86,158			Total Asian investments					20.5

SHAREHOLDER INFORMATION

Directors

RKA Wakeling (Chairman)

BJD Ashford-Russell

PF Dicks

DJ Gamble

RAS Montagu

MB Moule

Investment Manager

Polar Capital LLP

Authorised and regulated by the Financial Services Authority

Fund Manager

Ben Rogoff

Deputy Fund Manager

Craig Mercer

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 January 2011 and copies of this statement are available from the company's registered office at 4 Matthew Park Street London SW1H 9NP

ENDS

The Half Year report will be published on the Company's website at www.polarcapitaltechnologytrust.co.uk.

Neither the contents of the Company's website nor the contents of any website assessable 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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