Interim Management Statement

RNS Number : 4481C

Polar Capital Technology Trust PLC

07 March 2011

 



Polar Capital Technology Trust plc

Interim Management Statement for the 3 months to 31 January 2011 (unaudited) 7 March 2011 Investment objective The investment objective of Polar Capital Technology Trust PLC is to maximise long-term capital growth through investing in a diversified portfolio of technology companies around the world. Share Capital As at 31 January the Company had in issue 126,497,914 ordinary shares. Since 31 January 2011 there have been changes in the ordinary shares in issue and the creation of a new class of Subscription Shares.  Further details are given in the Material Events section below. Material Events in the period On 23 December the Company block listed 6,324,890 ordinary shares for general corporate purposes.  No shares were issued from this block listing in the period to 31 January but 550,000 shares have issued for cash up to 7 March 2011 at prices between 388.5p and 390.5p per share. Further to the Company's announcement on 10 December 2010 in relation to a bonus issue of subscription shares the Company published a prospectus on 18 January 2011 setting out details of proposals for the issue to Qualifying Shareholders, by way of a Bonus Issue, of one Subscription Share for every five Ordinary Shares held in the Company on 10 February 2011. The Bonus Issue was approved by Shareholders by way of a special resolution at the General Meeting of the Company held on 11 February 2011 and 25,358,288 Subscription Shares were issued.  The Subscription Shares were admitted to trading on the main market of the London Stock Exchange from 14 February 2011. Each Subscription Share entitles the holder to subscribe for one Ordinary Share at the applicable Subscription Price by 5.00 p.m. on the last Business Day of each month between the last Business Day in March 2011 and the last Business Day in March 2014, after which the Subscription Rights will lapse. The Subscription Prices were announced on 10 February being based on an amount equal to the unaudited Net Asset Value per Ordinary Share as at close of business on 9 February 2011, plus a premium to such amount, rounded up to the nearest whole penny, as follows: • if the subscription rights are exercised on any day between and including the last Business Day in March 2011 and the last Business Day in March 2012, 401p per Ordinary Share; • if the subscription rights are exercised on any day between and including 1 April 2012 and the last Business Day in March 2014, 478p per ordinary share The Subscription Shares were not issued to Overseas Shareholders (these being holders who are resident in territories outside the EEA, the Channel Islands and the Isle of Man). So that Overseas Shareholders should benefit from the proposals, the Subscription Shares that would have issued to Overseas Shareholders were sold on 14 February 2011 at 28p per Subscription Shares and the proceeds of sale paid to the relevant Overseas Shareholder, save that entitlements of less than £5.00 per Overseas Shareholder were retained by the Company for its own account. The Prospectus is available for inspection at the National Storage Mechanism which is located at www.hemscott.com/nsm.do In addition, the Prospectus is  available to view on the Company's website at www.polarcapitaltechnologytrust.co.uk And from the registered office of the Company at 4 Matthew Parker Street London SW1H 9NP. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the company's website (or any other website) is incorporated into, or forms part of, this announcement. Latest NAVs The unaudited, undiluted NAV per share on 4 March  2011 was 377.96 p.(including current year deficit) Latest  Total Voting Rights As at 28 February 2011, Polar Capital Technology Trust plc's share capital consisted of 127,047,914 ordinary shares of 25 pence each and 25,358,288 subscription shares of 1 pence each. Each ordinary share carries one vote while the subscription shares have no voting rights. Therefore as at 28 February 2011, the total number of voting rights was 127,047,914. No shares were held in Treasury.

Performance Performance over the period from 31 October 2010 to 31 January 2011 is shown below.

Market review

Global equities performed well during the quarter to 31 January 2011as improved sentiment, positive newsflow and switching from bonds into stocks saw the FTSE World index rise 6.6% in Sterling terms. A positive start to the quarter was quickly unwound as escalating tensions between North and South Korea, Chinese economic tightening and the Irish bailout reignited fears of wider European contagion. Despite mixed US macroeconomic data in early December, stocks proved remarkably resilient, reflecting a reallocation from bonds into equities. This dynamic continued throughout the month as investors appeared to be taking heed of the Fed's rhetoric. Stocks rallied sharply into the calendar year end, further aided by extension of the US tax cuts and strong retail sales data. Equity market strength (particularly in the Developed world) continued into January 2011 although gains were offset by Dollar weakness. US data took on a more positive hue with housing beginning to show signs of life and Q4 real final sales growing 7.1%, sequentially the fastest quarterly increase since 1984. Unswayed by these positive developments, the FOMC left US interest rates unchanged and maintained their intent to continue to expand the Fed's balance sheet. In Europe, successful bond auctions in Portugal, Italy and Spain helped the Euro to strengthen. The quarter to 31 January 2011 ended on a nervous note with protests in Egypt beginning to have a deleterious impact on energy prices and regional asset prices.

Technology Review

Technology stocks outperformed during the quarter to 31 January 2011 despite an earnings disappointment from Cisco Systems, the Dow Jones World Technology index rising 9.3% in Sterling terms.  A quiet November was punctuated by weak guidance from Cisco (who cited government spending and European demand as culprits) which negatively impacted overall sector sentiment. However, the market rebounded soon after as Cisco's troubles became better understood as stock specific (reflecting increased competition in its core business). Sentiment was further improved by strong numbers from Salesforce.com, and positive sales data post Thanksgiving. Encouraging off-quarter reports from Oracle, Adobe and Research in Motion helped stocks move higher with particular strength reserved for semiconductors (reflecting robust end demand and an inventory adjustment that looks largely complete). The technology sector made only modest incremental gains in early 2011 due to US Dollar weakness that offset the positive impact of a strong fourth quarter earnings season. Unlike in previous quarters when good news was overwhelmingly skewed in favour of next-generation companies, an overall improvement in IT spending allowed stalwarts such as IBM and SAP to report strong numbers that belied their undemanding valuations. In contrast, a sharp decline in F5 Networks' stock following a modest shortfall relative to expectations led to a number of next generation names underperforming during the quarter. In other news, Apple's talismanic CEO Steve Jobs announced he would be taking another period of medical leave whilst the Google CEO Eric Schmidt announced he was stepping aside to make way for co-founder Larry Page.

Outlook

Ever since Fed Chairman Ben Bernanke indicated his willingness to embark on a second round of quantitative easing investors have become emboldened by the return of the so-called 'Fed Put', which appears to have led to disallocation from bonds in favour of equities. The combination of 'stick' (reflation) and 'carrot' (dividend yield) has made this allocation call relatively easy and - based on some encouraging fund flow data - looks set to continue. As such equity markets have continued to grind higher despite potential headwinds in the form of higher energy prices, unrest in Egypt and a Chinese interest rate hike. While the case for equities is clearly beyond the remit of this IMS, we certainly believe that a strong argument can be made for PE expansion now that the recovery is better established. A rising market characterised by improved breadth (as the recovery somewhat levels the playing field) and PE expansion runs the risk of obfuscating our base new cycle case. Just as we were quick to recognise the risk posed to incumbents from lacklustre IT budgets, so it would be remiss of us not to acknowledge that a rebound in IT spending (and a potential re-rating of stocks) might disproportionately benefit 'cheap' stocks with late cycle tendencies such as IBM and SAP.

The decision to modestly rotate away from our favoured names in favour of less glamorous, well trod alternatives was made easier by the F5 Networks' shortfall (which highlighted the limited room for error of relatively highly rated names) and our sense that a number of our next-generation names are beginning to reinvest in their businesses in order to support future growth. As such we have continued to reduce our cloud-related exposure (a process begun in late 2010) in favour of stocks that may be more appealing to today's incremental buyer of equities. This tempering of our core positioning (which remains structurally overweight small and mid-cap growth at the expense of impaired or soon to be impaired large-caps), should not be confused with a bearish prognosis. We have retained some liquidity to buy on weakness as and when it occurs and we took advantage of F5 Networks' share price weakness to add to our holding. There is also little doubt in our minds that the new cycle is continuing to gain traction; the Microsoft decision to make Windows 8 run on ARM reflects little more than the negligible success it has had to date replicating its domination of the PC market in the large and rapidly growing smartphone and tablet segments. We expect to unwind our recent rotation once the anticipated PE expansion has substantially played out, or should our preferred cloud-related names become a little extended.

Ben Rogoff,

7 March 2011

	31 January 2011	29 October 2010
Share Price (p)	373.90	328.0
NAV per Share (p)	369.84	333.13
Premium (%)/ (Discount)	1.1	(1.54)
Total Investments (£m)	468	421
AIC Gross Gearing Ratio (%)*	106.0	107.0
AIC Net Gearing Ratio (%)*	97.0	98.0
*Gearing calcultaions are exclusive of current year Revenue/Loss.

Performance (%)				3 Months			1Year			5 years
Share Price				13.99			56.57			42.98
NAV per Share				11.02			39.25			46.91
Dow Jones World Technology Index				9.64			25.66			39.39
Geographical Breakdown (%)	31 January 2011						29 October 2010
North America	68.6						73.0
Asia	14.3						12.2
Europe	8.0						5.9
Japan	5.0						5.9
Cash & Equivalents	4.1						3.0
Sector Breakdown (%)	31 January 2011							29 October 2010
Semiconductors	25.5							21.9
Software	20.8							21.4
Computing	18.4							18.1
Comms Equipment	16.9							18.6
Internet / Consumer	9.8							10.7
Services	4.5							5.9
Hardware	1.2							0.3
Electronic Components	1.0							1.2
Healthcare	0.8							0.5
Telecoms / Media	0.4							0.3
Other Sectors	0.3							0.5
Defence / Security	0.2							0.3
Clean Energy			0.1					0.1
Options			0.1					0.2
Top Ten Holdings (%)		31 January 2011						29 October 2010
Apple		8.1						7.9
Google		4.9						5.1
Oracle		4.0						3.9
Microsoft		3.7						4.4
Samsung Electronics		3.7						2.2
International Business Machines		3.0						2.6
Qualcomm		2.7						2.3
Cisco Systems		2.3						3.4
Taiwan Semicon Manufacturing		2.1						-
EMC Corporation		1.8						-
Infosys Techs		-						1.7
Intel		-						2.4
Shares in issue
As at 30 October 2010						126,497,914
-     Shares bought back and cancelled						0
-     Shares held in treasury						0
As at 31 January 2011						126,497,914*
					*See commentary for end of February position.
General Information:					For further information please visit the company's website where a PDF version of this announcement is available
Monthly fact sheets for the Company are available the Company's website www.polarcapitaltechnologytrustplc.co.uk. The net asset value of the Company's ordinary shares are calculated daily and can be viewed on the London Stock Exchange website at www.londonstockexchange.com 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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