Interim Results

Polar Capital Technology Trust PLC 18 December 2003 POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 18 December 2003 • Net assets per share rise 37.5% • Signs of a pick-up in capital spending follow gathering economic momentum • Improved cash flows, refinanced balance sheets and recovering profitability augur well for IT spending • Anticipate strong fourth quarter earnings leading analysts to upgrade their technology earnings forecasts • Cyclical but not secular bull market well underway FINANCIAL HIGHLIGHTS -------------------- Half year ended Year ended Movement 31 October 2003 30 April 2003 % Total net assets £306,156,000 £221,022,000 38.5% Net assets per ordinary share (undiluted) 203.9p 148.3p 37.5% per ordinary share (diluted) 190.2p 141.3p 34.6% Price per ordinary share 169.75p 120.5p 40.9% per warrant 71.0p 27.25p 160.6% For further information please contact: Brian Ashford-Russell Peter Binns / Jacqui Graves Polar Capital Technology Trust PLC Binns & Co PR Limited Tel: 020 7592 1500 or 07796 172173 Tel: 020 7786 9600 POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 Chairman's Statement The company enjoyed a strong recovery over the half year with net assets climbing to £306m, a level first reached in the summer of 1999 but last seen in March 2002. The net assets per share rose from 148.3p to 203.9p over the period, an increase of 37.5%. Equity market conditions over the half year proved benign with investor, consumer and business sentiment improving markedly following the end of the war in Iraq. Monetary conditions have been maintained at a relatively loose setting and the initial sell-off in bond markets that followed the American capture of Baghdad has given way to stability. The combination of low interest rates and fiscal stimulus has ensured resilient demand from consumers. Business confidence has also gradually improved, helped by a marked improvement in corporate profits and cash flows. The result has been the beginning of a recovery in capital spending. The USA has led the global recovery with growth in the third calendar quarter exceeding 8%, the highest level in many years. Europe's upturn has lagged behind that in the States but should pick up some momentum from here. Asia has continued to exert a positive influence on global growth with the Chinese economy forging ahead and even Japan showing signs of a modest upturn. Against this background, it is hardly surprising that technology shares should have performed so well. The sector has always had pronounced cyclical characteristics and the current recovery follows a period in which a sharp downturn in capital spending devastated the industry's profitability. Demand for the industry's output began to stabilise earlier this year but has now clearly turned upwards. Moreover, it is doing so following a period in which many technology companies have slashed costs. The result is that even a modest upturn in demand is being translated into a very sharp recovery in earnings. Third quarter results were very strong but will - we think - pale by comparison with those in the December quarter. Much of the industry's customer base has seen a stabilisation in operating performance and, as a result of tight capital spending constraints, vastly improved cash flows. Furthermore the telecommunications industry has taken steps to refinance balance sheets. These actions are finally producing a greater willingness to spend IT budgets and consider new projects. While we expect spending to be far more measured than in the late 1990s, we are encouraged by this change in attitudes and believe that it bodes well for those technology companies selling solutions that offer their customers a high and easily measurable return on investment. POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 In the consumer electronics market, a wave of new product introductions is helping to drive demand. With product and systems demand recovering, conditions are improving dramatically in the semiconductor industry. Moreover, strong unit demand is likely to be supplemented by the replenishment of much depleted inventories. The result will be a very pronounced earnings recovery. Our strategy over most of the half year has remained unchanged. Although we had originally expected to raise liquidity over the summer, our increasing confidence in an upturn has led us to remain fully invested throughout most of the period. Our geographical asset allocation showed some variation with a decision to increase our Japanese weighting in April / May as a consequence of greater confidence in economic policy and evidence of compelling value. That asset allocation move was largely reversed in October. Over the half year, Europe produced the best returns with Asia close behind and, in all areas, smaller companies greatly outperformed their larger counterparts. At a sectoral level, our positioning has been and remains critically influenced by our belief in a cyclical upturn in the global economy. The consequence has been that we have maintained relatively modest weightings in the more defensive sectors such as healthcare, processing services and defence electronics. Instead, we have emphasised semiconductors and software, both of which we regard as potential beneficiaries of global recovery. We continue to believe that the fourth quarter of 2003 will deliver earnings well in excess of most analysts' forecasts. As a result, we expect to see significant upward revisions to forecasts over the next three months. If so, then we may finally see expectations catch up with and perhaps even overtake reality. Should this happen, we may look to reduce our cyclical and increase our defensive exposure. Although we are greatly encouraged by the stabilisation and subsequent improvement in technology demand and earnings prospects, we do not believe that this marks the beginning of a secular bull market of the type enjoyed in the 1990s. Valuations remain - on average - too demanding; new drivers for technology spending too sparse; and memories of the boom and subsequent crash between 1999 and 2002 too fresh in the mind. Rather, we consider this to be a strong cyclical uptrend in a technology market that we expect will - over the next 3-5 years - be characterised by periods of out and under performance. R K A Wakeling Chairman 17 December 2003 POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 Group Statement of Total Return (incorporating the Revenue Account) for the half year ended 31 October 2003 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 31 October 2003 31 October 2002 30 April 2003 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ---------------------------------------------------------------------------------------------------------------------- Total capital gains/ (losses) from investments - 84,874 84,874 - (77,096) (77,096) - (65,865) (65,865) Repurchase of warrants - (8) (8) - - - - 71 71 Income from fixed asset investments 944 - 944 876 - 876 2,092 - 2.092 Other interest receivable and similar income 240 - 240 645 - 645 891 - 891 --------------------------------------------------------------------------------------------------- Gross revenue from capital gains/(losses) 1,184 84,866 86,050 1,521 (77,096) (75,575) 2,983 (65,794) (62,811) Management fees (831) - (831) (1,116) - (1,116) (1,611) - (1,611) Other administrative expenses (339) - (339) (410) - (410) (601) - (601) --------------------------------------------------------------------------------------------------- Net return/(loss) on ordinary activities before interest payable and taxation 14 84,866 84,880 (5) (77,096) (77,101) 771 (65,794) (65,023) Interest payable and similar charges (297) - (297) (248) - (248) (567) - (567) --------------------------------------------------------------------------------------------------- Net (loss)/return on ordinary activities before taxation (283) 84,866 84,583 (253) (77,096) (77,349) 204 (65,794) (65,590) Taxation on ordinary activities (76) - (76) (72) - (72) (134) - (134) --------------------------------------------------------------------------------------------------- Net (loss)/return on ordinary activities after taxation (359) 84,866 84,507 (325) (77,096) (77,421) 70 (65,794) (65,724) --------------------------------------------------------------------------------------------------- (Loss)/return per ordinary share (pence) Basic (0.24p) 56.89p 56.65p (0.22p) (51.74p) (51.96p) 0.05p (44.16p) (44.11p) --------------------------------------------------------------------------------------------------- Full Diluted (0.23p) 53.85p 53.62p (0.21p) (49.79p) (50.00p) 0.05p (42.71p) (42.66p) The revenue columns of this statement represent the revenue accounts of the Group POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 Balance Sheets as at 31 October 2003 (Unaudited) (Unaudited) (Audited) Group Company Group Company Group Company Interim Interim Interim Interim Year End Year End October 2003 October 2003 October 2002 October 2002 April 2003 April 2003 £'000 £'000 £'000 £'000 £'000 £'000 --------------------------------------------------------------------------------------------------------------------- Fixed asset Investments at market value 291,243 289,740 205,909 205,909 216,410 216,410 --------------------------- ------------------------------ -------------------------- 291,243 289,740 205,909 205,909 216,410 216,410 Unlisted at directors' valuation Subsidiary undertaking - 3,611 - 3,434 - 3,513 Other United Kingdom 795 795 345 345 444 444 Overseas - - 10 10 - - --------------------------- ------------------------------ -------------------------- 292,038 294,146 206,264 209,698 216,854 220,367 --------------------------- ------------------------------ -------------------------- Current assets Debtors 66,223 69,151 3,654 6,389 51,761 54,661 Cash 59,507 54,471 33,925 27,756 36,760 30,347 --------------------------- ------------------------------ -------------------------- 125,730 123,622 37,579 34,145 88,521 85,008 --------------------------- ------------------------------ -------------------------- Creditors: amounts falling due within one year (64,058) (64,058) (23,074) (23,074) (73,336) (73,336) --------------------------- ------------------------------ -------------------------- Net current assets 61,672 59,564 14,505 11,071 15,185 11,672 --------------------------- ------------------------------ -------------------------- Total assets less current liabilities 353,710 353,710 220,769 220,769 232,039 232,039 Creditors: amounts falling due after more than one year (47,554) (47,554) (10,957) (10,957) (11,017) (11,017) --------------------------- ------------------------------ -------------------------- Total net assets 306,156 306,156 209,812 209,812 221,022 221,022 --------------------------- ------------------------------ -------------------------- Capital and reserves Called up share capital 37,545 37,545 37,250 37,250 37,250 37,250 Share premium 88,842 88,842 87,959 87,959 87,959 87,959 Warrant reserve 7,147 7,147 8,558 8,558 8,070 8,070 Warrant exercise reserve 940 940 567 567 568 568 Other capital reserves 225,703 229,314 129,535 132,969 140,837 144,350 Revenue reserve (54,021) (57,632) (54,057) (57,491) (53,662) (57,175) --------------------------- ------------------------------ -------------------------- Equity shareholders' funds 306,156 306,156 209,812 209,812 221,022 221,022 --------------------------- ------------------------------ -------------------------- Net asset value per ordinary 203.86p 203.86p 140.81p 140.81p 148.34p 148.34p share - undiluted --------------------------- ------------------------------ -------------------------- - diluted 190.24p 190.24p 134.53p 134.53p 141.25p 1.41.25p --------------------------- ------------------------------ -------------------------- POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 Group Cash Flow Statement for the half year ended 31 October 2003 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 31 October 2003 31 October 2002 30 April 2003 £'000 £'000 £'000 ------------------------------------------------------------------------------------------------------------ Net cash (outflow)/inflow from operating activities (557) 339 32 Net cash outflow from servicing of finance (376) (128) (478) Net tax recovered 17 - 10 Net cash inflow from forward currency contracts 689 - - Net cash inflow/(outflow) from financial investment 8,659 (3,423) 890 ---------- ---------- ---------- Net cash inflow/(outflow) before financing 8,412 (3,212) 454 Net cash inflow/(outflow) from financing 14,839 5 (413) ---------- ---------- ---------- Increase /(decrease) in cash 23,251 (3,207) 41 ---------- ---------- ---------- Reconciliation of operating revenue to net cash (outflow)/inflow from operating activities Net result before interest payable and taxation 14 (5) 771 (Increase)/decrease in accrued income (49) 45 101 Decrease/(increase) in other debtors 12 22 (48) (Decrease)/increase in other creditors (210) 348 158 Overseas withholding tax suffered (67) (71) (129) Scrip dividends included in investment income - - (59) Interest accumulations included in investment income (277) - (762) ---------- ---------- ---------- (577) 339 32 ---------- ---------- ---------- Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash 23,251 (3,207) 41 Movement in long term loans (14,221) - - ---------- ---------- ---------- Change in net debt resulting from cash flows 9,030 (3,207) 41 Exchange movements (1,782) 218 (372) ---------- ---------- ---------- Movement in net debt in the year 7,248 (2,989) (331) Net funds at the beginning of the period 4,705 5,036 5,036 ---------- ---------- ---------- Net funds at end of the period 11,953 2,047 4,705 ---------- ---------- ---------- Represented by: Bank balances and short term deposits 59,507 33,925 36,760 Debt falling due within one year - (20,921) (21,038) Debt falling due after more than one year (47,554) (10,957) (11,017) ---------- ---------- ---------- 11,953 2,047 4,705 ---------- ---------- ---------- POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 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. 2. Return/(loss) per ordinary share Revenue/(loss) return per ordinary share is based on the net loss after taxation attributable to the ordinary shares of £359,000 (31 October 2002 - losses of £325,500; 30 April 2003 - return of £70,000) and on 149,179,442 (31 October 2002 - 148,996,157; 30 April 2003 - 148,998,143) ordinary shares, being the weighted average number of shares in issue during the year. Basic capital return/(loss) per ordinary share is based on net capital gains of £84,866,000 (31 October 2002 - losses of £77,096,000; 30 April 2003 - losses of £65,794,000) and the weighted average number of shares in issue during the year as shown above. 3. Net asset value per ordinary share Undiluted net asset value per ordinary share is based on net assets attributable to ordinary shares of £306,156,000 (31 October 2002 - £209,812,000; 30 April 2003 - £221,022,000) and on 150,178,288 (31 October 2002 and 30 April 2003 - 149,000,162) 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 22,662,533 warrants in issue at 31 October 2003 (31 October 2002 - 27,140,659; 30 April 2003 - 25,590,659) 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. 4. Dividend In accordance with stated policy no interim dividend has been declared for the period (31 October 2002 and 30 April 2003 - nil). 5. Accounts for the period ended 30 April 2003 The figures and financial information for the period ended 30 April 2003 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 17 December 2003 and will be posted to shareholders in January 2004. Copies will be available from the Secretary at the Registered Office, Cayzer House, 30 Buckingham Gate, London SW1E 6NN. POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 Portfolio Review Equity Investments over 1% of net assets at 31 October 2003 North America £'000 Stock Activity % of net assets ------------------------------------------------------------------------------ 3,671 Genentech Biotechnology 1.2% ------------------------------------------------------------------------------ 3,557 Electronic Arts Gaming software 1.2% ------------------------------------------------------------------------------ 3,516 Maxim Analogue ICs 1.2% ------------------------------------------------------------------------------ 3,397 Symantec Security software 1.1% ------------------------------------------------------------------------------ 3,378 Adobe Publishing software 1.1% ------------------------------------------------------------------------------ 3,246 Qualcomm Wireless communications 1.1% ------------------------------------------------------------------------------ 3,164 IBM Computer hardware and 1.0% services ------------------------------------------------------------------------------ 23,929 Total investments over 7.9% 1% 131,597 Other investments 43.4% ------- ------- 155,526 Total North American investments 51.3% ------- ------- Europe £'000 Stock Activity % of net assets ------------------------------------------------------------------------------ 4,273 Filtronic Wireless communications 1.4% ------------------------------------------------------------------------------ 4,009 ASM Lithography Semiconductor production 1.4% equipment ------------------------------------------------------------------------------ 3,753 Nokia Mobile telephony 1.2% ------------------------------------------------------------------------------ 3,358 TietoEnator IT services 1.1% ------------------------------------------------------------------------------ 3,151 SAP ERP software 1.0% ------------------------------------------------------------------------------ 3,115 Sage Software & computer 1.0% technology ------------------------------------------------------------------------------ 21,659 Total investments over 7.1% 1% 62,748 Other investments 20.6% ------- ------- 84,407 Total European 27.7% ------- investments ------- Asia £'000 Stock Activity % of net assets ------------------------------------------------------------------------------ 4,158 Venture Manufacturing Electronic manufacturing 1.4% services ------------------------------------------------------------------------------ 4,008 NEC Diversified electronics 1.3% manufacturers ------------------------------------------------------------------------------ 3,978 Samsung Electronic Diversified electronics 1.3% manufacturers ------------------------------------------------------------------------------ 3,342 Sankyo Seiki Electronic components 1.1% ------------------------------------------------------------------------------ 3,138 Taiwan Semiconductor Wafer foundry 1.0% Manufacturing ------------------------------------------------------------------------------ 18,624 Total investments over 6.1% 1% 33,481 Other investments 11.0% ------- ------- 52,105 Total Asian investments 17.1% ------- ------- POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 Portfolio Review Classification of Investments - at 31 October 2003 TOTAL TOTAL North America Europe Asia 31 October 2003 30 April 2003 % % % % % -------------------------------------------------------------------------- Computing 7.1 - - 7.1 10.6 Components 10.6 4.3 11.7 26.6 17.1 Software 12.7 8.3 4.5 25.5 17.4 Services 2.1 4.2 - 6.3 8.6 Communications 5.4 4.7 - 10.1 10.0 Life Sciences 8.5 2.0 - 10.5 13.4 Consumer,Media and Internet 2.3 1.6 0.9 4.8 5.9 Other Technology 2.6 1.9 - 4.5 7.2 Unquoted Investments - 0.7 - 0.7 0.2 -------------------------------------------------------------------------- EQUITY INVESTMENTS 51.3 27.7 17.1 96.1 90.4 -------------------------------------------------------------------------- Fixed Interest - - - - 7.8 Forward Currency Contracts (20.2) 21.2 - 1.0 - Net Current Assets - 18.4 - 18.4 16.3 Loans - - (15.5) (15.5) (14.5) -------------------------------------------------------------------------- OTHER NET ASSETS (20.2) 39.6 (15.5) 3.9 9.6 -------------------------------------------------------------------------- GRAND TOTAL (net assets of £306,156,000) 31.1 67.3 1.6 100.0 - -------------------------------------------------------------------------- At 30 April 2003 51.7 46.9 1.4 - 100.0 (net assets of £ 221,022,000) -------------------------------------------------------------------------- Fund Distribution by Market Capitalisation as at 31 October 2003 Market Capitalisation % of invested assets < $500m 11.1% $500m-$2bn 18.4% $2bn-$10bn 29.7% $10bn-$20bn 18.8% $20bn-$50bn 11.6% > $50bn 10.4% POLAR CAPITAL TECHNOLOGY TRUST PLC Unaudited Interim Results for the Six Months ended 31 October 2003 INDEX CHANGES (total return) over the half year to 31 October 2003 Local Currency Sterling Adjusted Technology Indices: % % Dow Jones World Technology 36.7 28.7 PSE (USA) Technology 33.7 25.9 MS Eurotec (based in US dollars) 65.0 55.4 FTSE Techmark 100 52.5 52.5 TecDax 44.7 42.0 TSE Electronics 41.3 44.4 DS Asia Ex Japan Electronics 56.1 47.0 Market Indices: S&P 500 Composite 15.6 8.9 FTSE All-Share 14.2 14.2 FTSE World Europe (ex UK) - 13.5 Tokyo SE (Topix) 31.5 34.4 FTSE World Pacific Basin (ex Japan) - 29.7 FTSE World - 13.3 EXCHANGE RATES 31 October 2003 30 April 2003 US$ to £ 1.6970 1.5982 Japanese Yen to £ 186.55 190.61 Euro to £ 1.4597 1.4321 This information is provided by RNS The company news service from the London Stock Exchange

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