Interim Results
Polar Capital Technology Trust PLC
17 December 2004
- 1 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
17 December 2004
• Net assets per share fell by 3.7% over the half year while our benchmark
fell 4.2% over the same period
• The technology industry continues to heal the excesses of the last boom
while sowing the seeds for the next secular uptrend
• We are optimistic about the prospects for improved returns in the New
Year; hence the Company entered the second half fairly fully invested
FINANCIAL HIGHLIGHTS (Unaudited) (Audited)
-------------------- Half year ended Year ended Movement
31 October 2004 30 April 2004
Net assets
per ordinary share (undiluted) 200.38p 208.13p (3.7)%
per ordinary share (diluted) 186.80p 193.71p (3.6)%
Price
per ordinary share 161.00p 164.75p (2.3)%
per warrant 60.50p 64.75p (6.6)%
Total net assets £261,212,000 £306,636,000 (14.8)%
Shares in issue 130,355,162 147,328,288
--------------------------------------------------------------------------------
For further information please contact:
Brian Ashford-Russell / Ben Peter Binns / Jacqui
Rogoff Graves
Polar Capital Technology Trust Binns & Co PR Limited
PLC
Tel: 020 7592 1500 Tel: 020 7786 9600
--------------------------------------------------------------------------------
- 2 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Chairman's Statement
Over the half year to 31 October, stock markets struggled to make progress with
the FTSE World Index closing the period up 1.5% in sterling terms. For
technology investors, the half year saw pronounced weakness during the summer
give way to a strong autumn rally. The Company's net asset value per share fell
by 3.7% over the half year, slightly better than our benchmark which fell 4.2%.
Stock markets have traded within a modest range for most of this half year with
the boundaries of that range marked by the brief ascendancy of the bull or bear
camp. The former have justified their stance by pointing to the stock market's
modest valuation both in absolute terms and relative to bonds, to the corporate
sector's good health and profitability, and to the reasonable growth being
enjoyed by the global economy. The bears have, by contrast, taken fright at the
continuing structural weaknesses of the US economy, the recessionary impact of
sharply rising oil prices; and the likelihood that corporate profit margins are
close to their peak.
Global economic momentum is certainly past its peak while the move in the USA
towards tightening credit is having some impact in slowing demand growth. The
decision by the Chinese authorities in the late spring to dampen economic growth
also contributed to a summer lull but perhaps the single most important factor
has been the strength in oil prices and the uncertainty to which this has given
rise. Employment growth has disappointed and, despite very strong cash flows,
companies have been hesitant about increasing their spending. Technology shares
certainly felt the full impact of the loss of cyclical momentum. Following a
period in which earnings revisions had been consistently and strongly upwards,
the June quarter's results marked a downward trend. The incidence of
disappointing earnings announcements increased markedly from May onwards. The
problem was most severe in the components industry where a combination of excess
inventory and slowing demand led to earnings guidance being revised dramatically
downwards. Semiconductor related shares were the worst performing sector within
the technology industry for most of the half year. Their weakness was also
largely responsible for the very poor performance of the Asian technology
indices.
Elsewhere within technology, there were some encouraging developments. Companies
have, on the whole, been effective in their management of costs and balance
sheets have steadily been rebuilt. There has been some evidence of an increase
in merger and acquisition activity and signs also of greater interest on the
part of private equity funds in acquiring listed technology businesses.
- 3 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Moreover, in some areas of the industry, most notably in the roll-out of
broadband infrastructure, growth rates continue to be remarkable. Also the
quality of companies seeking IPOs is greatly improved relative to the position
some years ago, as evidenced by the sucessful debut of Google, the online search
company. The technology industry, therefore, continues along the path of healing
the excesses of the last boom while gradually sowing the seeds for the emergence
of the next secular uptrend.
Over the half year, our liquidity levels have varied considerably. We raised a
material amount of cash in the first quarter of 2004 to which we added
significantly in May and June on evidence of weakening technology demand. We
also initiated a hedging position in the summer designed to protect our assets
against a fall in NASDAQ. However, following a period of particular weakness in
July and August and signs that investor sentiment had deteriorated to a level of
acute pessimism, we unwound our hedge and reinvested much of our liquidity. In
doing so, we have emphasised investment in the USA and Europe, have added to our
smaller company exposure, and have focused
on those areas that may benefit from a seasonal pick-up in spending over the New
Year. We have also continued to buy back our own shares at levels that have been
usefully accretive to our net asset value per share. The result of these actions
is that we enter our second half fairly fully invested.
We expect the technology sector will benefit over the near term from seasonal
tendencies, a degree of pent-up capital expenditure during the December quarter
and greater investor optimism about the prospects for 2005. While there remain a
number of material issues that are likely to preclude markets running away too
far on the upside, we believe that the pendulum has swung towards increased
investor appetite for risk. This should be of benefit to our area of
specialisation and we are optimistic about the prospects for improved returns
into the New Year but will reassess our stance in the first quarter of 2005 as
the earning reporting season begins to unfold.
R K A Wakeling,
Chairman
16 December 2004
- 4 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Group Statement of Total Return (incorporating the Revenue Account)
for the half year ended 31 October 2004
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 October 2004 31October 2003 30 April 2004
Revenue Capital Total Revenue Capital Total Revenue Capital* Total*
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
Total capital
(losses)/gains
from
investments - (17,180) (17,180) - 84,874 84,874 - 90,434 90,434
Repurchase of
warrants - (115) (115) - (8) (8) - (8) (8)
Income from
fixed asset
investments 1,120 - 1,120 944 - 944 1,828 - 1,828
Other interest
receivable and
similar income 447 - 447 240 - 240 888 - 888
-------------------------------------------------------------------------------------------------
Gross revenue
and capital
gains/(losses) 1,567 (17,295) (15,728) 1,184 84,866 86,050 2,716 90,426 93,142
Management fee (1,559) - (1,559) (831) - (831) (2,098) - (2,098)
Other
administration
expenses (377) - (377) (339) - (339) (586) - (586)
-------------------------------------------------------------------------------------------------
Net (loss)/return on
ordinary activities
before interest
payable and
taxation (369) (17,295) (17,664) 14 84,866 84,880 32 90,426 90,458
Interest
payable and
similar
charges (278) - (278) (297) - (297) (569) - (569)
-------------------------------------------------------------------------------------------------
Net
(loss)/return
on ordinary
activities
before
taxation (647) (17,295) (17,942) (283) 84,866 84,583 (537) 90,426 89,889
Taxation on
ordinary
activities (64) - (64) (76) - (76) (143) - (143)
-------------------------------------------------------------------------------------------------
Net
(loss)/return
on ordinary
activities
after taxation (711) (17,295) (18,006) (359) 84,866 84,507 (680) 90,426 89,746
-------------------------------------------------------------------------------------------------
(Loss)/return
per ordinary
share (pence)
Basic (0.53p) (12.91p) (13.44p) (0.24p) 56.89p 56.65p (0.45p) 60.44p 59.99p
-------------------------------------------------------------------------------------------------
Fully diluted (0.5p) (12.16p) (12.66p) (0.23p) 53.85p 53.62p (0.43p) 57.14p 56.71p
-------------------------------------------------------------------------------------------------
* Restated The revenue columns of this statement represent the revenue accounts
of the Group see note 2
- 5 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Balance Sheets
as at 31 October 2004
(Unaudited) (Unaudited) (Audited)
Group Company Group Company Group Company
Interim Interim Interim Interim Year End Year End
October 2004 October 2004 October 2003 October 2003 April April
2004 2004
£'000 £'000 £'000 £'000 £'000 £'000
--------------------------------------------------------------------------------------------------------
Fixed asset
investments
Listed at
market value:
United Kingdom 34,958 34,958 41,871 41,871 36,280 36,280
Overseas 237,517 237,517 247,869 247,869 235,562 235,562
------------------------------------------------------------------------------------
272,475 272,475 289,740 289,740 271,842 271,842
Unlisted at
directors'
valuation:
Subsidiary
undertaking - 3,268 - 3,611 - 3,174
Other United
Kingdom 892 892 795 795 842 842
------------------------------------------------------------------------------------
273,367 276,635 290,535 294,146 272,684 275,858
------------------------------------------------------------------------------------
Current
assets
Investments 1,596 - 1,503 - 1,563 -
Debtors 42,868 45,876 66,223 69,151 34,569 37,539
Cash 31,852 27,172 59,507 54,471 74,254 69,673
------------------------------------------------------------------------------------
76,316 73,048 127,233 123,622 110,386 107,212
------------------------------------------------------------------------------------
Creditors:
amounts
falling due
within one
year (67,862) (67,862) (64,058) (64,058) (41,840) (41,840)
------------------------------------------------------------------------------------
Net current assets 8,454 5,186 63,175 59,564 68,546 65,372
------------------------------------------------------------------------------------
Total assets
less current
liabilities 281,821 281,821 353,710 353,710 341,230 341,230
Creditors:
amounts
falling due
after more
than one year (20,609) (20,609) (47,554) (47,554) (34,594) (34,594)
------------------------------------------------------------------------------------
Total net assets 261,212 261,212 306,156 306,156 306,636 306,636
------------------------------------------------------------------------------------
Capital and
reserves
Called up
share capital 32,589 32,589 37,545 37,545 36,832 36,832
Capital
redemption
reserve 5,386 5,386 - - 713 713
Share premium 90,134 90,134 88,842 88,842 88,842 88,842
Warrant
reserve 6,431 6,431 7,147 7,147 7,147 7,147
Warrant
exercise
reserve 1,483 1,483 940 940 940 940
Other capital
reserves 180,242 183,510 225,703 229,314 226,504 229,678
Revenue
reserve (55,053) (58,321) (54,021) (57,632) (54,342) (57,516)
------------------------------------------------------------------------------------
Equity
shareholders'
funds 261,212 261,212 306,156 306,156 306,636 306,636
------------------------------------------------------------------------------------
Net asset
value per
ordinary 200.38p 200.38p 203.86p 203.86p 208.13p 208.13p
share - undiluted
------------------------------------------------------------------------------------
- diluted 186.80p 186.80p 190.24p 190.24p 193.71p 193.71p
------------------------------------------------------------------------------------
- 6 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Group Cash Flow Statement
for the half year ended 31 October
2004
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 October 2004 31 October 2003 30 April 2004
£'000 £'000 £'000
-----------------------------------------------------------------------------------------
Net cash outflow
from operating
activities (795) (577) (2,521)
Net cash outflow
from servicing of
finance (264) (376) (634)
Net tax recovered 8 17 -
Net cash inflow from
forward currency
contracts 2,023 689 6,879
Net cash inflow from
derivative contracts 335 - -
Net cash (outflow) /
inflow from
financial investment (15,541) 8,659 26,184
--------------------------------------------------
Net cash (outflow) /
inflow before
financing (14,234) 8,412 29,908
Net cash (outflow) /
inflow from
financing (27,507) 14,839 10,074
--------------------------------------------------
(Decrease) /
Increase in cash (41,741) 23,251 39,982
--------------------------------------------------
Reconciliation of operating revenue to net cash
outflow from operating activities
Net (loss)/return
before interest
payable and taxation (369) 14 32
Increase in current
asset investments (33) - (1,563)
Decrease/(increase)
in accrued income 123 (49) (90)
(Increase)/decrease
in other debtors (99) 12 (33)
(Increase) /decrease
in other creditors 17 (210) (335)
Capital dividends - - 19
Overseas withholding
tax suffered (97) (67) (145)
Scrip dividends
included in
investment income (61) - (133)
Interest
accumulations
included in
investment income (276) (277) (273)
--------------------------------------------------
Net cash outflow
from operating
activities (795) (577) (2,521)
--------------------------------------------------
Reconciliation of net cash flow to movement in
net funds
(Decrease)/increase
in cash (41,741) 23,251 39,982
Movement in long
term loans - (14,221) (14,214)
--------------------------------------------------
Change in net funds
resulting from cash
flows (41,741) 9,030 25,768
Exchange movements (923) (1,782) (1,544)
--------------------------------------------------
Net movement in the
period (42,664) 7,248 24,224
Net funds at the
beginning of the
period 28,929 4,705 4,705
--------------------------------------------------
Net funds at end of
the period (13,735) 11,953 28,929
--------------------------------------------------
Represented by:
Bank balances and
short term deposits 31,852 59,507 74,254
Debt falling due
within one year (24,978) - (10,731)
Debt falling due
after more than one
year (20,609) (47,554) (34,594)
--------------------------------------------------
(13,735) 11,953 28,929
--------------------------------------------------
- 7 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Notes
1. Management fees
Polar Capital Partners Ltd. ('Polar Capital') were appointed investment
managers in February 2001. As part of the investment management contract
with Polar Capital the Company contractually agreed for the full amount of
compensation paid to Henderson, the previous investment managers, plus
legal and other professional advisers fees and costs together with extra
fees paid to the directors for work incurred in the change of investment
manager to be recovered from Polar Capital. These costs amounted to
£3,466,000 and have been offset against the management fee payable to Polar
Capital over the 10 quarters from February 2001 to July 2003. From 1 August
2003 the Company has paid management charges at the full contractual rate.
2. (Loss)/return per ordinary share
Basic revenue (loss)/return per ordinary share is based on the net loss
after taxation attributable to the ordinary shares of £711,000 (31 October
2003 - losses of £359,000; 30 April 2004 - losses of £680,000) and on
133,954,938 (31 October 2003 - 149,179,442; 30 April 2004 - 149,607,557)
ordinary shares, being the weighted average number of shares in issue
during the period.
Basic capital (loss)/return per ordinary share is based on net capital
losses of £17,295,000 (31 October 2003 - gains of £84,866,000; 30 April
2004 - gains of £90,426,000) and the weighted average number of shares in
issue during the period as shown above.
The total capital gains/(losses) from investments figure for the year ended
30 April 2004 has been restated from £85,675,000 to £90,434,000. This
restatement was necessary as the cost of the Company purchasing its own
shares had been included in the Statement of Total Return for the year
ended 30 April 2004. These costs are now shown in the Group reconciliation
of movements in equity shareholders' funds (see below). This restatement
has no impact on the net asset value of the Company.
Group reconciliation of movement in equity shareholders' funds
(Unaudited) (Unaudited) (Audited)
Interim Interim Year ended
October 2004 October 2003 April 2004
£'000 £'000 £'000
Net loss after taxation (711) (359) (680)
(Decrease)/increase in capital
reserves (17,259) 84,866 90,426
------------ ------------ -----------
(18,006) 84,507 89,746
Exercise of warrants for ordinary
shares 1,722 1,178 1,178
Repurchase of warrants (172) (551) (551)
Cost of ordinary share repurchases (28,968) - (4,759)
------------ ------------ -----------
Net (decrease)/increase in
shareholders' funds (45,424) 85,134 85,614
Equity shareholders' funds at
beginning of period 306,636 221,022 221,022
------------ ------------ -----------
Equity shareholders' funds at end
of period 261,212 306,156 306,636
------------ ------------ -----------
3. Net asset value per ordinary share
Undiluted net asset value per ordinary share is based on net assets
attributable to ordinary shares of £261,212,000 (31 October 2003 -
£306,156,000; 30 April 2004 - £306,636,000) and on 130,355,162 (31 October
2003 - 150,178,288 and 30 April 2004 - 147,328,288) ordinary shares being
the number of ordinary shares in issue at the end of the period.
Diluted net asset value per ordinary share is calculated on the assumption
that the 20,395,659 warrants in issue at 31 October 2004 (31 October 2003
and 30 April 2004 - 22,662,533) were converted into ordinary shares at the
exercise price of 100p. Dilution is assumed to occur only if the diluted
net asset value is greater than the subscription price of 100p.
- 8 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
4. Dividend
In accordance with stated policy no interim dividend has been declared for
the period (31 October 2003 and 30 April 2004 - nil).
5. Accounts for the year ended 30 April 2004
The figures and financial information for the period ended 30 April 2004
are extracted from the latest published accounts of the Group and do not
constitute statutory accounts for that year. These accounts have been
delivered to the Registrar of Companies and included the report of the
auditors which was unqualified and did not contain a statement under either
section 237(2) or 237 (3) of the Companies Act 1985.
7. Interim Report
The interim report was approved by the directors on 16 December 2004 and
will be posted to shareholders in January 2005. Copies will be available
from the Secretary at the Registered Office, Cayzer House, 30 Buckingham
Gate, London SW1E 6NN.
- 9 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Portfolio Review
Equity Investments over 1% of net assets at 31 October 2004
North America
£'000 Stock Activity % of net assets
-------------------------------------------------------------------------------
3,760 Symantec Security software 1.4%
-------------------------------------------------------------------------------
3,526 Harris Communications 1.3%
equipment
-------------------------------------------------------------------------------
3,379 KLA Tencor Semiconductor 1.3%
equipment
-------------------------------------------------------------------------------
3,216 Texas Instruments Semiconductors 1.2%
-------------------------------------------------------------------------------
3,092 St Jude Medical Medical devices 1.2%
-------------------------------------------------------------------------------
2,879 Medtronic Medical devices 1.1%
-------------------------------------------------------------------------------
2,815 Qualcomm Wireless 1.1%
communications
-------------------------------------------------------------------------------
2,670 IBM Computer hardware and 1.0%
services
-------------------------------------------------------------------------------
2,641 Dell Computer Computer hardware 1.0%
-------------------------------------------------------------------------------
2,634 Lockheed Martin Aerospace/defence 1.0%
-------------------------------------------------------------------------------
30,612 Total investments over 1% 11.6%
102,169 Other investments 39.1%
------- --------
132,781 Total North American investments 50.7%
------- --------
Europe
£'000 Stock Activity % of net assets
-------------------------------------------------------------------------------
3,845 Wincor Nixdorf ATM & EPOS systems 1.5%
-------------------------------------------------------------------------------
3,290 Atos Origin Services 1.3%
-------------------------------------------------------------------------------
2,697 Sage Application software 1.0%
-------------------------------------------------------------------------------
2,630 Check Point Software Security software 1.0%
Technologies
-------------------------------------------------------------------------------
12,462 Total investments over 1% 4.8%
52,397 Other investments 20.0%
------- --------
64,859 Total European investments 24.8%
------- --------
Asia
£'000 Stock Activity % of net assets
-------------------------------------------------------------------------------
3,978 Daikin Industries Electrical systems 1.5%
-------------------------------------------------------------------------------
3,594 LG Philips LCD LCD panel maker 1.4%
-------------------------------------------------------------------------------
3,593 Nitto Denko LCD components 1.4%
-------------------------------------------------------------------------------
3,072 Toshiba Diversified 1.2%
electronics
-------------------------------------------------------------------------------
3,042 CKD Corporation Industrial automation 1.2%
-------------------------------------------------------------------------------
3,008 Zeon LCD materials 1.2%
-------------------------------------------------------------------------------
20,287 Total investments over 1% 7.9%
28,778 Other investments 11.0%
------- --------
49,065 Total Asian investments 18.9%
------- --------
- 10 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
Portfolio Review
Classification of Investments - at 31 October 2004
TOTAL TOTAL
North America Europe Asia 31 October 2004 30 April 2004
% % % % %
------------------------------------------------------------------------------------------
Computing 11.5 1.6 - 13.1 8.4
Components 10.1 3.3 10.4 23.8 27.8
Software 10.8 8.8 2.0 21.6 19.0
Services 2.2 2.7 - 4.9 5.5
Communications 2.8 2.4 0.7 5.9 5.5
Life 8.8 3.1 - 11.9 13.2
Sciences
Consumer,
Media and
Internet 2.2 0.8 2.6 5.6 4.2
Other
Technology 2.3 1.8 3.2 7.3 5.2
Unquoted
Investments - 0.3 - 0.3 0.3
------------------------------------------------ -------
EQUITY INVESTMENTS 50.7 24.8 18.9 94.4 89.1
------------------------------------------------ -------
Money Market
Funds - 9.6 - 9.6 -
Corporate
Bonds - - 0.6 0.6 -
Forward
Currency
Contracts (14.7) 15.0 - 0.3 0.4
Net Current
Assets* (0.1) 3.0 9.7 12.6 25.3
Loans - - (17.5) (17.5) (14.8)
------------------------------------------------ -------
OTHER NET ASSETS (14.8) 27.6 (7.2) 5.6 10.9
------------------------------------------------ -------
GRAND TOTAL
(net assets of
£261,212,000) 35.9 52.4 11.7 100.0 -
------------------------------------------------ -------
At 30 April 2004
(net assets of
£ 306,636,000) 34.3 58.0 7.7 - 100.0
------------------------------------------------ -------
*Net Current
Assets exclude
forward
currency
contracts and
loans
repayable in
one year
- 11 -
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2004
INDEX CHANGES (total return) over the half year to 31 October 2004
Local Currency Sterling
Adjusted
% %
Benchmark - (4.2)
Technology Indices:
Dow Jones World Technology (0.3) (3.5)
Pacific SE (USA) 3.9 0.5
Technology
MS Eurotec (based in US (0.8) (4.0)
dollars)
FTSE Techmark 100 - (2.2)
Tec Dax (15.0) (12.7)
Tokyo SE Electronics (14.6) (14.1)
DS Asia Ex Japan (14.8) (17.5)
Electronics
Market Indices:
FTSE World - 1.5
S&P 500 Composite 3.0 (0.4)
FTSE All-Share - 4.3
FTSE World Europe (ex UK) - 5.2
Tokyo SE (Topix) (8.1) (7.6)
FTSE World Pacific Basin - 4.3
(ex Japan)
EXCHANGE RATES 31 October 2004 30 April 2004
US$ to £ 1.8323 1.7733
Japanese Yen to £ 194.57 195.70
Euro to £ 1.4404 1.4792
Fund Distribution by Market Capitalisation as at 31 October 2004
Market Capitalisation % of invested
assets
< $2bn 33.5%
$2bn-$10bn 32.0%
> $10bn 34.5%
This information is provided by RNS
The company news service from the London Stock Exchange
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