Interim Results
Henderson Technology Trust PLC
15 December 2000
HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
* HTT's net assets drop by 2.3% to £653m.
* Technology shares suffered a difficult half year with our global
benchmark down 9.9% in sterling terms.
* Slowing global economic expansion implies a more moderate rate of growth
for technology spending.
* November's collapse in technology share prices led us to reinvest some
of our cash to, in particular, the US market.
* Short-term earnings visibility remains poor but the longer term
prospects are more positive.
Chairman's Statement
The Company had a difficult half-year. Although our assets markedly
out-performed the relevant technology benchmarks, we suffered a fall of 2.3%
in total net assets to 386.6p per share. At 31 October, the Company's net
assets amounted to £653m; this compares with a peak of over £830m in March.
The period since our half year end has seen a severe sell off in technology
shares around the world with our assets at one stage falling to £500m before
recovering.
Technology shares have fallen sharply from their early spring peaks. The
declines have been most marked in Asia and Europe but North America has also
been hard hit. After the spectacular but increasingly speculative gains of the
preceding sixteen months, a retracement was inevitable and the question has
simply been the extent to which those earlier profits were lost. At our year
end in April, we emphasised that one of the reasons behind our relative
caution towards the sector was the still enormous profits on which investors
in technology companies were sitting. Usually, sustainable uptrends in
technology shares do not commence before the gains of the previous year have
been completely obliterated. In spite of the substantial falls endured over
recent months, most technology indices were, at 31 October, some 20-40% above
their levels of twelve months previously.
While technology shares have been in dishevelled retreat over the period, the
FTSE World Index rose by 2.6% in sterling terms. Most stock markets have
struggled to develop any positive momentum. With the global economy slowing,
concerns have mounted about the risk of a 'hard-landing' and the pace of
corporate earnings growth is clearly decelerating. The sharp rise in oil
prices together with the continuing weakness in the Euro have further
undermined investor sentiment. Only sterling's weakness against the dollar
converted negative returns in most equity markets to a positive outcome for
the World Index. However, value investors who have for so long endured the
shade, enjoyed their best half year for some considerable time.
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
What began as a valuation based correction in the technology sector has, over
the past quarter, evolved into a more fundamentally driven decline. The
slowdown in the global economy is one factor acting to constrain growth in
technology spending but there are also a number of industry-specific issues.
First, the collapse in 'dot com' share prices has led not only to the demise
of their spending plans but may also have reduced the pressure felt by more
traditional businesses to increase their e-commerce expenditure. Certainly the
half year was marked not only by the continuing free fall of 'dot com' share
prices but also by a wave of earnings warnings.
Secondly, the unusually tight conditions in the components market earlier this
year resulted in an inventory mix problem for a number of the systems vendors.
This in turn led to some order cancellations. The combination of a slowdown in
overall demand and continuing weakness in PC sales has forced component makers
to review their capital spending plans. Consequently, the share prices of
semiconductor equipment producers have, in many cases, halved and the Asian
technology sector, which is particularly exposed to the PC and component
cycles has fallen sharply.
The communications sector has, over the last few years, been a particularly
important driver for technology spending. However, here too there are a
growing number of issues. The capital markets have become increasingly
reluctant to finance the huge cash requirements of both new and traditional
operators. Consequently, we have seen the first bankruptcies in this area and
increasing evidence of balance sheet strain across the carrier industry. Some
knock-on effect onto systems and component suppliers is inevitable and share
prices in these sectors have begun to reflect the stock market's nervousness
about the likelihood of some interruption to these companies' growth records.
Over the space of six months, we have moved from an environment in which
investors believed the opportunities to be boundless and growth guaranteed to
one where the market is reluctant to take anything on trust and is
increasingly focused on downside risk. During the half year, technology
markets throughout the world were savaged. By the end of October only a few
groups had escaped relatively unscathed - storage, a few e:business software
vendors, processing services and health care. Of these health care, and within
it, biotechnology, were the outstanding performers with the ASE Biotechnology
Index rising by 45% over the period.
Our performance over the half year benefited from the decision taken in the
spring to increase our US weighting at the expense of Europe and Asia, and to
focus within the USA on the fastest growing companies. Both Europe and Asia
underperformed the USA with the worst damage sustained by Japan's JASDAQ Index
(down 37%) and by the Neuer Markt (down 31%). Almost all our best performing
shares were in North America where companies such as Siebel, I2, Ariba and
Juniper all delivered the extraordinary earnings growth necessary to support
and even enhance their valuations.
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
Most of the cash that we raised in March and April was reinvested into the USA
by the end of May and, for a period over the summer, we maintained a modest
level of gearing. However, in view of the growing evidence of a fundamental
deterioration in demand, we abandoned our original intention of gearing the
portfolio further as we entered the fourth quarter and, instead, began to
raise some cash in September and October. We significantly added to that
liquidity in the first few days of November.
Outlook
Market conditions remain unsettled. With the recent tightening in liquidity,
the global economy has clearly slowed. Corporate earnings growth has
decelerated and the incidence of earnings disappointments has markedly
increased. November witnessed a widespread collapse in technology and
telecommunications shares in every major market with falls of 25% and more
commonplace. Investor sentiment has deteriorated to the point of despair and
valuations for even the fastest growing companies have retreated to more
accessible levels. Uncertainty over the outcome of the US Presidential
Election has further added to the market's woes. For the first time in a year,
all our short-term indicators have turned positive and, while the outlook
remains cloudy, we decided, in the first few days of December, to recommit
some of the cash raised over the last few months.
We expect the news flow from the technology sector to remain negative over the
next three to four months and we may need to wait until the second half of
2001 before the sector's fundamentals begin to improve again. By then interest
rates should have fallen, the inventory correction in the semiconductor market
should be over and the funding issues in the telecommunications industry may
be closer to resolution. Between now and then investors expectations regarding
the sustainable growth rate of the technology industry need to be moderated to
more realistic levels. Although the medium term prospects for the industry
remain very encouraging, we are in a transitional period for growth rates, one
that has inevitably been associated with considerable downward pressure on
valuations. As investors begin to look though this transitional period, the
sector should begin to recover driven by its still unmatched capacity to
generate superior earnings growth.
Change in Management Company
On 25 September 2000 we announced that Brian Ashford-Russell and Tim Woolley,
our principal fund managers, had given notice to resign as employees of
Henderson Global Investors Limited, our management company. Messrs
Ashford-Russell and Woolley intend to form their own investment management
company, Polar Capital Partners. The Management Engagement Committee of our
Board, made up of the independent directors, indicated that it wished to
retain the services of Messrs Ashford-Russell and Woolley as our fund managers
and received confirmation from them that they would be willing for Polar
Capital Partners to become our investment manager once it had been established
and authorised under the Financial Services Act.
Brian Ashford-Russell and Tim Woolley, joined also by David Magliocco from
Henderson Global Investors, have now formed Polar Capital Partners and on 18
October 2000 it was announced that Caledonia Investments plc, the diversified
trading and investment company, had reached agreement in principle to become a
20% shareholder in Polar Capital Partners.
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
On 25 September 2000 we gave notice to terminate our management agreement with
Henderson Global Investors and we expect to transfer the management to Polar
Capital Partners early in 2001. All the parties involved will be taking great
care to arrange a smooth transition. Further details will be announced early
in 2001.
Board Change
Christopher Clarke has resigned as a director of the Company with effect from
15 December 2000. The Board would like to extend its thanks to Mr Clarke for
the invaluable contribution that he has made to the Company over the past four
years.
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
Group Statement of Total Return ( incorporating the Revenue Account )
for the half year
ended 31 October
2000
Half year ended 31 October
2000
Unaudited
Revenue Capital Total
£'000 £'000 £'000
Total capital (losses)/gains on - (11,908) (11,908)
investments
Repurchase of warrants - - -
Income from fixed asset investments 1,057 - 1,057
Other interest receivable and similar 1,205 - 1,205
income
Gross revenue from capital 2,262 (11,908) (9,646)
gains/(losses)
Management fee (5,807) - (5,807)
Other administrative expenses (451) - (451)
Net (loss)/return on ordinary activities
before interest payable and taxation (3,996) (11,908) (15,904)
Interest payable (221) - (221)
Net (loss)/return on ordinary activities
before taxation (4,217) (11,908) (16,125)
Taxation on net returns on
ordinary activities (55) - (55)
Net (loss)/return on ordinary activities
after taxation (4,272) (11,908) (16,180)
(Loss)/return per ordinary share
Undiluted (2.89p) (8.06p) (10.95p)
Fully diluted - - -
Half year ended 31 October 1999
Audited & Restated*
Revenue Capital Total
£'000 £'000 £'000
Total capital (losses)/gains on - 97,300 97,300
investments
Repurchase of warrants - (85) (85)
Income from fixed asset investments 1,091 - 1,091
Other interest receivable and similar 1,299 - 1,299
income
Gross revenue from capital gains/(losses) 2,390 97,215 99,605
Management fee (6,950) - (6,950)
Other administrative expenses (290) - (290)
Net (loss)/return on ordinary activities
before interest payable and taxation (4,850) 97,215 92,365
Interest payable (108) - (108)
Net (loss)/return on ordinary activities
before taxation (4,958) 97,215 92,257
Taxation on net returns on
ordinary activities (31) - (31)
Net (loss)/return on ordinary activities
after taxation (4,989) 97,215 92,226
(Loss)/return per ordinary share
Undiluted (3.39p) 66.01p 62.62p
Fully diluted (3.08p) 59.99p 56.91p
Year ended 30 April
2000
Audited
Revenue Capital Total
£'000 £'000 £'000
Total capital (losses)/gains on - 429,750 429,750
investments
Repurchase of warrants - (85) (85)
Income from fixed asset investments 2,073 - 2,073
Other interest receivable and similar 6,516 - 6,516
income
Gross revenue from capital 8,589 429,665 438,254
gains/(losses)
Management fee (48,627) - (48,627)
Other administrative expenses (636) - (636)
Net (loss)/return on ordinary activities
before interest payable and taxation (40,674) 429,665 388,991
Interest payable (593) - (593)
Net (loss)/return on ordinary activities
before taxation (41,267) 429,665 388,398
Taxation on net returns on
ordinary activities (53) - (53)
Net (loss)/return on ordinary activities
after taxation (41,320) 429,665 388,345
(Loss)/return per ordinary share
Undiluted (28.02p) 291.32p 263.30p
Fully diluted - 260.42p 235.38p
The revenue columns of this statement represent the Revenue Accounts of the
Group.
* Restated for change in accounting policy (see note 6).
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
Balance Sheets
As at 31 October 2000
Group Company Group Company Group Company
Interim Interim Interim Interim Year Year
End End
October October October October April April
2000 2000 1999 1999 2000 2000
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Fixed assets
Investments at market 646,675 646,675 376,582 376,582 691,197 691,197
value
Investment in TR 91 91 2,635 2,635 3,043 3,043
Technology PLC
------- ------- ------- ------- ------- -------
646,766 646,766 379,217 379,217 694,240 694,240
Unlisted at director's
valuation:
Subsidiary undertaking - 4,802 - 1,077 - 4,448
Other United Kingdom 228 228 261 261 1,724 1,724
Overseas 315 315 313 313 427 427
------- ------- ------- ------- ------- -------
647,309 652,111 379,791 380,868 696,391 700,839
Current assets ------- ------- ------- ------- ------- --------
Investments 226 - 231 - - -
Debtors 2,933 5,114 6,321 6,981 1,670 3,996
Cash 26,900 20,143 18,043 16,426 46,806 40,031
------- ------- ------- ------- ------- ------
30,059 25,257 24,595 23,407 48,476 44,027
Creditors: amounts falling
due (8,236) (8,236) (17,179) (17,068) (61,357) (61,356)
within one year
------- ------- ------- ------- ------- -------
Net current assets/ 21,853 17,021 7,416 6,339 (12,881) (17,329)
(liabilities)
------- ------- ------- ------- ------- -------
Total assets less current 669,132 669,132 387,207 387,207 683,510 683,510
liabilities
Creditors: amounts falling
due after more than one (15,768) (15,768) (14,599) (14,599) (14,783) (14,783)
year
------- ------- ------- ------- ------- -------
Total net assets 653,364 653,364 372,608 372,608 668,727 668,727
------- ------- ------- ------- ------- -------
Capital and reserves
Called up Capital Shares 37,130 37,130 36,926 36,926 36,926 36,926
Share premium 88,016 88,016 87,145 87,145 87,145 87,145
Warrant Reserve 8,710 8,710 8,967 8,967 8,967 8,967
Other non-distributable 570,097 574,899 249,556 250,633 582,006 586,454
reserves
Revenue reserve (50,589) (55,391) (9,986) (11,063) (46,317) (50,765)
------- ------- ------- ------- ------- -------
Equity shareholders' funds 653,364 653,364 372,608 372,608 668,727 668,727
------- ------- ------- ------- ------- -------
Net asset value per
ordinary 439.92p 439.92p 252.27p 252.27p 452.75p 452.75p
Share - undiluted
------- ------- ------- ------- ------- -------
- diluted 386.61p 386.61p 227.68p 227.68p 395.80p 395.80p
------- ------- ------- ------- ------- -------
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
Group Cash Flow Statement
For the half year to 31 October 2000
(Unaudited) (Unaudited) (Audited)
Half year Half year Year ended
ended ended
31 October 31 October 30 April
2000 1999 2000
£'000 £'000 £'000
Net cash outflow from operating activities (47,289) (4,318) (212)
Net cash outflow from servicing of finance (189) (137) (582)
Net tax (paid)/recovered (42) - 23
Net cash inflow from financial investment 20,967 16,316 41,646
Net cash (outflow)/inflow before financing (26,553) 11,861 40,875
Net cash (outflow)/inflow from financing 818 (1,635) 351
Increase/(decrease) in cash (25,735) 10,226 41,226
Reconciliation of operating revenue to net cash inflow from operating
activities
Net loss before interest payable and (3,996) (4,850) (40,674)
taxation
Net purchases of trading stock (225) (231) -
(Increase)/decrease in accrued income 154 (12) (179)
Decrease/(increase) in debtors (782) (51) (38)
(Decrease)/increase in creditors (42,438) 881 40,772
UK income tax deducted at source - - (18)
Overseas withholding tax suffered - (32) (56)
Scrip dividends included in investment (2) (23) (19)
income
(47,289) (4,318) (212)
Reconciliation of net cash flow to movement in net funds/(debt)
(Decrease) / increase in cash (25,735) 10,226 41,226
Net repayment of loans - 1,588 -
Change in net funds/(debt) resulting from (25,735) 11,814 41,226
cash flows
Exchange movements 34 (1,307) (2,139)
Movement in net funds/(debt) in the year (25,701) 10,507 39,087
Net debt at the beginning of the period 32,023 (7,064) (7,064)
Net funds/(debt) at end of the period 6,322 3,443 32,023
Represented By:
Bank balances and short term deposits 22,090 18,042 46,806
Debt falling due within one year - - -
Debt falling due after more than one year (15,768) (14,599) (14,783)
6,322 3,443 32,023
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
Notes
1. Management Fee
Half year Half year Year ended
ended ended
30 April
31 October 31 October 2000
2000 1999
£'000
£'000 £'000
Regular management fee 3,650 1,293 3,275
Irrecoverable VAT 271 313 2,241
Performance related fee - 5,344 43,111
Adjustment to irrecoverable VAT on 1,886 - -
performance fee
_______ _______ _______
5,807 6,950 48,627
_______ _______ _______
The adjustment to irrecoverable VAT arises as a result in a change in
the ratio of taxable sales to total sales. It relates to last year's
accrued performance fee that was paid in the current accounting
period.
The performance related fee was based on 15% of the amount, if any, by
which the increase in the aggregate net asset value of the ordinary
shares exceeds the FT/SE World Index over the relevant performance
period, up to the period ended 30 April 2000. As previously announced,
under the new fee arrangements from 1 May 2000, the performance fee
will be split into two parts. The first part will be at the rate of
10% of the amount, if any, by which the increase in the undiluted net
asset value of the ordinary shares over the financial year exceeds the
increase in the benchmark over the year. The benchmark is a blend of
worldwide technology indices, comprising 50% Pacific SE (USA)
Technology, 15% Morgan Stanley Eurotec, 7.5% Euro NM, 7.5% TechMARK
100, 15% Datastream Asian Electronics and 5% JASDAQ. The second part
comprises a longer term incentive and will be at the rate of 5% of the
amount, if any, by which the increase in the undiluted net asset value
of the ordinary shares over each three year period exceeds LIBOR +5%
over the same period.
2. (Loss)/return per share
The basic capital return per share is based on net capital losses of £
11,908,000 ( 31 October 1999 - returns of £97,215,000; 30 April 2000
returns of £429,665,000) and on 147,800,332 ordinary shares being the
weighted average number of shares in issue for the period (31 October
1999 - 147,279,630; 30 April 2000 - 147,489,961 ordinary shares).
The basic return per ordinary share is based on the net loss on
ordinary activities after taxation of £4,272,000 (31 October 1999 -
losses of £4,989,000; 30 April 2000 losses of £41,320,000) and on the
number of ordinary shares stated above.
3. Net asset value per share
Basic net asset value per ordinary share is based on net assets
attributable to ordinary shares of £653,364,000 (31 October 1999 - £
372,608,000; 30 April 2000 - £668,727,000) and on 148,519,976 (31
October 1999 and 30 April 2000 - 147,702,603) 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 27,620,845 warrants in issue at 31 October 2000
(31 October 1999 and 30 April 2000 - 28,438,218) were converted into
ordinary shares at the exercise price of 100p. Dilution is assumed to
occur only if the undiluted net asset value is greater than the
conversion price of 100p.
4. Dividend
In accordance with stated policy no interim dividend has been declared
for the period (31 October 1999 and 30 April 2000 - nil).
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
5. Accounts for the period ended 30 April 2000
The figures and financial information for the period ended 30 April
2000 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 in 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.
6. Change in accounting policy
In accordance with Financial Reporting Standard 16, Current Taxation
('FRS16') which became effective for accounting periods ending on or
after 23 March 2000, franked investment income is now shown net of the
related tax credits. The comparative figures for the half year ended
31 October 1999 have been restated accordingly. Adoption of FRS16 has
no effect on the revenue or capital returns per ordinary share, nor on
the net asset value per ordinary share.
7. Interim Report
The interim report will be posted to shareholders in January 2001 and
will be available from the Secretary at the Registered Office 4
Broadgate, London EC2M 2DA.
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HENDERSON TECHNOLOGY TRUST PLC
Unaudited Interim Results for the six months
ended 31 October 2000
Largest Investments
The 30 largest equity investments at 31 October 2000 are as shown below.
Stock Country Valuation Activity
£'000
BEA USA 19,888 middleware
Check Point Israel 19,632 internet security
Software
Siebel Systems USA 18,789 sales force automation software
Ariba USA 16,536 enterprise procurement software
Ciena USA 15,565 optical networking equipment
Micromuse USA 15,191 network monitoring software
Brocade USA 14,875 computer storage equipment
I2 Technologies USA 14,341 supply chain management software
Scientific Atlanta USA 14,139 cable TV and satellite equipment
EMC USA 13,800 data storage
Juniper Networks USA 12,892 networking equipment
Vitesse USA 12,522 communication semiconductors
Semiconductor
Cisco USA 12,429 networking equipment
Verisign USA 11,908 internet security
Ballard Power Canada 11,832 environmental technology
Veritas USA 11,653 utility software
Redback Networks USA 11,545 networking equipment
Sun Microsystems USA 11,453 workstations
Broadcom USA 10,720 specialist communications
components
Oracle Systems USA 10,567 database software
Xilinx USA 10,226 programmable logic device
Nortel Networks Canada 10,184 communications equipment
Dell USA 9,650 PC's
CMG UK 9,332 IT consultancy
Sapient USA 9,306 IT consultancy
Open Wave Systems USA 8,924 Wireless data software
America Online USA 8,715 online services
JDS Uniphase USA 8,693 optical components
Seagate USA 8,662 disk drives
Jabil Circuit USA 7,859 electronic manufacturing services
The valuation of these investments total £371,828,000 or 57% of the fixed
assets of the Company. Also included in the portfolio are UK Treasury Bills with
a total value of £29,915,000 as at 31 October 2000.
-ENDS-
For further information please contact:
Brian Ashford-Russell
Henderson Technology Trust PLC
Tel: 020 7410 4100 Mobile: 07796 172173
Issued on behalf of Henderson Technology Trust PLC
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