Interim Results

Polar Capital Technology Trust PLC 12 December 2005 Polar Capital Technology Trust PLC Unaudited results for the six months ended 31 October 2005 12 December 2005 • Diluted NAV per share rises 14.8% as technology share prices recover strongly over the half year • All outstanding warrants now successfully converted • Led by Japan, equity markets move sharply ahead supported by plentiful liquidity, strong corporate cash flows and positive earnings surprises • Technology end demand remains robust with particular strength in broadband communications, wireless handsets and consumer electronics • The immediate outlook remains encouraging although 2006 may prove a more volatile environment for investors • We remain optimistic about the prospect of a medium term recovery by the technology sector. FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (Unaudited) (Restated) Movement Half year ended Year ended 31 October 2005 30 April 2005 ----------------------------------------------- Net assets per ordinary share 217.78p 189.77p 14.8% (note1) Price per ordinary share 202.50p 165.50p 22.4% Total net assets £292,344,000 £236,439,000 23.6% (note 2) Shares in issue 134,238,821 115,320,162 Note 1: On 30 September 2005, all remaining warrants were exercised, resulting in the issue of 19,195,659 new shares. The net assets per ordinary share at 31 October 2005 includes all these new shares. The net assets per ordinary share shown for 30 April 2005 is the diluted NAV which includes an adjustment to reflect a theoretical exercise of warrants and a further adjustment for IFRS. The undiluted net assets per share at 30 April 2005 adjusted for IFRS is 205.03p. Note 2: The total net assets figures have been calculated in accordance with IFRS and the 30 April 2005 figure restated. -------------------------------------------------------------------------------- For further information please contact: Brian Ashford-Russell / Ben Rogoff Peter Binns Polar Capital Technology Trust PLC Binns & Co PR Limited Tel: 020 7227 2700 Tel: 020 7786 9600 -------------------------------------------------------------------------------- CHAIRMAN'S STATEMENT After a difficult start to 2005, most stock markets sprang to life as we entered our new financial year. Notwithstanding a sharp sell-off in October, the Dow Jones World Technology Index rose by 9.5% over the half year in dollar terms and by 18.1% in sterling. Your company's net asset value per share rose by 14.8% to 217.8p from a diluted NAV per share of 189.8p at the year end. The shortfall against the index was partly the result of the dilutive effect of the warrants being exercised and also the consequence of the relatively high levels of cash held as we entered the new financial year. The half year saw very marked contrasts in performance across the different regions. Japanese equities (as measured by the Topix Index) rose nearly 25% while those in the USA struggled to beat cash returns. The American cyclical bull market looked somewhat weary over the summer. Although corporate earnings have continued to surprise on the upside, higher energy prices and the Federal Reserve's steady monetary tightening led to an erosion in consumer confidence. In contrast, Japanese consumer confidence has been building, given evidence of improving economic conditions, an end to price deflation and more constructive corporate and political policies. We have been bullish on Japan for some time and remain very positive about the longer term outlook while inclined to believe that the market may be a little ahead of itself in the short term. Sadly however, the Japanese bull market has - as we feared - left technology shares largely on the sidelines. In spite of the market's dramatic advance, Japanese technology shares lagged both their European and American counterparts over the half year. Conditions in the technology industry have been, if not buoyant, then certainly robust. Earnings have generally exceeded consensus forecasts with operating margins particularly strong. The roll-out of broadband communications has continued apace. Wireless handset growth has exceeded expectations and there have been signs of better demand in the IT services sector. However, both the PC and the consumer electronics sector have been subject to relentless price pressure with revenue growth lagging well behind volume growth. With the exception of the biotechnology sector, which performed outstandingly over the period, the key to performance has been stock rather than sector selection. There has also been evidence of a growing divergence in the fortunes of the new and old generations of technology companies and we expect the former to continue to outpace the latter. During the half year our geographical asset allocation has varied only modestly. However, over the last few weeks, we have reduced our Japanese exposure and also our weightings in European smaller companies where we see some risk from valuations that fail to provide a sufficient discount for illiquidity. October's market sell-off has in one sense been welcome in that it has reduced investor complacency. Like the Fed, we will be watching very carefully to see if the recent increase in inflationary expectations feeds through to a rise in core inflation. We are quite optimistic that it will not but see the eventual consequence of the Fed's tightening as being a marked slowdown in real estate inflation in the USA and hence also in consumer spending. While we think it likely that a recession will be avoided, 2006 may see periods when recession fears rise and this could lead to increased volatility in equity markets. Technology shares are unlikely to be immune from any related turbulence. We expect 2006 to be a more challenging period for investors but remain optimistic about the prospects for a medium term recovery by the technology sector. There are two further items which require comment. The introduction of International Financial Reporting Standards ('IFRS') has brought both changes in the presentation of the financial information as well as numerous accounting changes. We have moved to these standards in common with all UK listed companies that produce consolidated accounts and as these are the standards which will be applied at our year end in 2006 they have also been used in this set of interims. In terms of presentation the Group Statement of Total Return has been replaced by the Consolidated Income Statement. This statement does not differentiate between income and capital but in line with the guidance from the Association of Investment Trusts Companies ('AITC') we have shown a split as previously. There are also other key changes under IFRS which impact investment companies, the move to classifying investments at 'fair value through profit and loss' and the separation of certain transaction costs from the purchase price of the investments. The holding of investments at fair value through profit & loss requires them to be shown at bid or 'selling' price rather than at mid-market prices as in the past. They are also described in the balance sheet as Investments held at Fair Value under the heading non-current assets rather than fixed assets as previously. Transaction costs are now shown as a capital item under 'Other administrative expenses' in the Consolidated Income Statement. These purchase costs, (stamp duty and brokerage commission), were previously included in the book cost of an investment but are now a separate line entry in the Consolidated Income Statement. The adverse impact of moving to fair value on the total value of the portfolio is £798,000 while the separation of the transaction cost does not affect the portfolio value. The notes to the financial statements give full details and reconciliations of all these changes. The second item is that Brian Ashford-Russell, our manager, will be taking a sabbatical leave of absence during the first quarter of 2006. Although he will be travelling, he will remain in regular contact. Ben Rogoff, our deputy manager, will be acting manager during this period, supported by Tim Woolley and the rest of the Polar Capital technology team. The Board is fully satisfied with these arrangements. Richard Wakeling 9 December 2005 Consolidated Income Statement for the half year ended 31 October 2005 (Unaudited) (Unaudited) (Audited) Half year ended 31 Half year ended 31 Year ended 30 April 2005 October 2005 October 2004 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ------------------------------------------------------------------------------- Investment 1,298 - 1,298 1,120 - 1,120 2,501 - 2,501 income Other 400 - 400 447 - 447 793 - 793 operating income Gain/(loss) on - 38,630 38,630 - (17,180) (17,180) - (13,778) (13,778) investments held at fair value ------------------------------------------------------------------------------- Total income 1,698 38,630 40,328 1,567 (17,180) (15,613) 3,294 (13,778) (10,484) ------------------------------------------------------------------------------- Expenses Investment (1,692) - (1,692) (1,559) - (1,559) (3,224) - (3,224) management fee Other (433) (418) (851) (377) - (377) (609) - (609) administrative expenses (note 7) ------------------------------------------------------------------------------- Profit/(loss) (427) 38,212 37,785 (369) (17,180) (17,549) (539) (13,778) (14,317) before finance costs and tax Finance (215) - (215) (278) - (278) (501) - (501) costs ------------------------------------------------------------------------------- Profit/(loss) (642) 38,212 37,570 (647) (17,180) (17,827) (1,040) (13,778) (14,818) before tax Tax (113) - (113) (64) - (64) (154) - (154) ------------------------------------------------------------------------------- Net Profit/ (755) 38,212 37,457 (711) (17,180) (17,891) (1,194) (13,778) (14,972) (loss) for the period ------------------------------------------------------------------------------- Basic and 31.83p (13.01p) (11.42p) diluted -------- -------- -------- earnings per ordinary share (pence) The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Trust 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. Consolidated Statement of Changes in Equity -------- --------- -------- -------- -------- -------- -------- For the half year ended Ordinary Capital Share Warrant Warrant Retained Total 31 October 2005 share redemption premium reserve exercise earnings (unaudited) capital reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 -------- --------- -------- -------- -------- -------- -------- Balance at 30 April 2005 28,830 9,145 90,134 6,179 1,483 101,466 237,237 as previously reported Effect of transition to - - - - - (798) (798) IFRS; revaluation of -------- --------- -------- -------- -------- -------- -------- investments at 1 May 2005 to fair value Opening balance at 1 May 28,830 9,145 90,134 6,179 1,483 100,668 236,439 2005 under IFRS Profit for the period - - - - - 37,457 37,457 Exercise of warrants for 4,799 - 14,397 (6,053) 6,053 - 19,196 ordinary shares Repurchase of warrants - - - (126) - (150) (276) Shares bought back for (69) 69 - - - (472) (472) cancellation -------- --------- -------- -------- -------- -------- -------- Balance at 31 October 33,560 9,214 104,531 - 7,536 137,503 292,344 2005 -------- --------- -------- -------- -------- -------- -------- -------- --------- -------- -------- -------- -------- -------- For the half year ended Ordinary Capital Share Warrant Warrant Retained Total 31 October 2004 share redemption premium reserve exercise earnings (unaudited) capital reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 -------- --------- -------- -------- -------- -------- -------- Balance at 30 April 36,832 713 88,842 7,147 940 172,162 306,636 2004 Loss for the period - - - - - (17,891) (17,891) Exercise of warrants for 430 - 1,292 (543) 543 - 1,722 ordinary shares Repurchase of warrants - - - (173) - (115) (288) Shares bought back for (4,673) 4,673 - - - (28,967) (28,967) cancellation -------- --------- -------- -------- -------- -------- -------- Balance at 31 October 32,589 5,386 90,134 6,431 1,483 125,189 261,212 2004 -------- --------- -------- -------- -------- -------- -------- -------- --------- -------- -------- -------- -------- -------- For the year ended Ordinary Capital Share Warrant Warrant Retained Total 30 April 2005 share redemption premium reserve exercise earnings (Audited) capital reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 -------- --------- -------- -------- -------- -------- -------- Balance at 30 April 36,832 713 88,842 7,147 940 172,162 306,636 2004 Loss for the year - - - - - (14,972) (14,972) Exercise of warrants for 430 - 1,292 (543) 543 - 1,722 ordinary shares Repurchase of warrants - - - (425) - (438) (863) Shares bought back for (8,432) 8,432 - - - (55,286) (55,286) cancellation -------- --------- -------- -------- -------- -------- -------- Balance at 30 April 28,830 9,145 90,134 6,179 1,483 101,466 237,237 2005 -------- --------- -------- -------- -------- -------- -------- Consolidated Balance Sheet at 31 October 2005 ------------------------------------------------------------------------------------------ (Unaudited) (Unaudited) (Audited) Group Company Group Company Group Company Interim Interim Interim Interim Year End Year End 31 October 31 October 31 31 October 30 April 30 April 2005 2005 October 2004 2005 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 --------- --------- --------- --------- --------- --------- Non current assets Investments held at 287,283 290,778 273,367 276,635 218,738 222,128 fair value --------- --------- --------- --------- --------- --------- Current assets Investments 1,648 - 1,596 - 1,603 - Other receivables 24,297 27,404 42,868 45,876 29,408 32,464 Cash and cash 51,558 46,604 31,852 27,172 58,222 53,379 equivalents --------- --------- --------- --------- --------- --------- 77,503 74,008 76,316 73,048 89,233 85,843 --------- --------- --------- --------- --------- --------- Total assets 364,786 364,786 349,683 349,683 307,971 307,971 --------- --------- --------- --------- --------- --------- Current liabilities (48,178) (48,178) (67,862) (67,862) (40,242) (40,242) (amounts falling due --------- --------- --------- --------- --------- --------- within one year) Total assets less 316,608 316,608 281,821 281,821 267,729 267,729 current liabilities --------- --------- --------- --------- --------- --------- Non current (24,264) (24,264) (20,609) (20,609) (30,492) (30,492) liabilities --------- --------- --------- --------- --------- --------- (amounts falling due after more than one year) Net assets 292,344 292,344 261,212 261,212 237,237 237,237 --------- --------- --------- --------- --------- --------- Equity Ordinary share 33,560 33,560 32,589 32,589 28,830 28,830 capital Capital redemption 9,214 9,214 5,386 5,386 9,145 9,145 reserve Share premium 104,531 104,531 90,134 90,134 90,134 90,134 Warrant reserve - - 6,431 6,431 6,179 6,179 Warrant exercise 7,536 7,536 1,483 1,483 1,483 1,483 reserve Retained earnings 137,503 137,503 125,189 125,189 101,466 101,466 (note 1) --------- --------- --------- --------- --------- --------- Total equity 292,344 292,344 261,212 261,212 237,237 237,237 attributable to equity --------- --------- --------- --------- --------- --------- shareholders Basic and diluted net 217.78p 217.78p 200.38p 200.38p 205.72p 205.72p asset value per --------- --------- --------- --------- --------- --------- ordinary share Note 1 : Retained earnings comprise other capital reserves and the revenue reserve Consolidated Cash Flow Statement for the half year ended 31 October 2005 ---------------------------------------------------------------------------------------- (Unaudited) (Unaudited) Half year ended 31 October 2005 Half year ended 31 October 2004 £'000 £'000 £'000 £'000 ------------ ------------ ----------- ----------- Cash flows from operating activities Profit/(loss) before tax 37,570 (17,827) Adjustments for: Increase in investments (69,387) (716) Decrease/(increase) in 5,018 (8,182) receivables Increase in payables 2,345 11,681 Finance costs 215 278 ------------ ----------- (61,809) 3,061 ------------ ----------- Net cash from operating (24,239) (14,766) activities before tax Taxation paid (117) (89) ------------ ----------- Net cash from operating (24,356) (14,855) activities Cash flows from/(used in) financing activities Exercise of warrants 19,196 1,722 Repurchase of warrants (276) (288) Cost of shares repurchased (472) (28,967) Loans taken out (25,101) - Loans matured 24,399 - Finance costs (214) (276) ------------ ----------- Net cash from financing activities 17,532 (27,809) ------------ ----------- Net decrease in cash and cash (6,824) (42,664) equivalents ------------ ----------- Cash and cash equivalents at 58,222 74,254 the beginning of the period Effect of foreign exchange 160 262 rate changes ------------ ----------- Cash and cash equivalents at 51,558 31,852 the end of the period ------------ ----------- NOTES TO THE ACCOUNTS for the six month period ended 31 October 2005 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 months to 31 October 2005. Both Polar Capital Technology Trust Plc and PCT Finance Limited are registered and domiciled in England. The board approved the accounts on 9 December 2005. The unaudited accounts to 31 October 2005 have been prepared using the accounting policies expected to be used in the Group's annual accounts to 30 April 2006. These accounting policies will be based on International Financial Reporting Standards ('IFRS') and comprise standards and interpretations approved by the International Accounting Standards Board ('IASB') together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that IFRS has been adopted by the European Union. Due to the continuing work of the IASB and possible amendments to the interpretative guidance, the Group's accounting policies and consequently the information presented, may change prior to the publication of the Group's first annual accounts under IFRS. The results for the six months ended 31 October 2005 are the Group's first unaudited results under IFRS and do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. Full statutory accounts for the year ended 30 April 2005, prepared under UK GAAP, including 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 have been delivered to the Registrar of Companies. When preparing the accounts to 31 October 2005, certain accounting and valuation methods previously applied under UK GAAP have been amended to comply with IFRS as follows:- Investments are valued at fair value rather than mid-market value. Book Cost of investments excludes transaction costs on purchases. These amendments represent a change in accounting policy. 2. Accounting Polices (a) Basis of accounting The accounts of the Group have been prepared in accordance with IFRS. The date of transition to IFRS is 1 May 2005. As permitted by Paragraph 36A of IFRS1 - First-time Adoption of International Accounting Standards, the comparative information has not been restated to comply with IAS39 - Financial Instruments : Recognition and Measurement, however the effect of the adjustments that would be required for the comparatives to comply are set out in note 8. The accounts have been prepared on the historical cost basis of accounting, modified to include the revaluation of investments at fair value and in accordance with the accounting policies set out below. All of the Group's operations are of a continuing nature. Where presentational guidance set out in the Statement of Recommended Practice: Financial Statements of Investment Trust Companies ('the SORP') issued by the AITC in January 2003 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. (b) Basis of consolidation The Group accounts consolidate the accounts of the Company and entities controlled by the Company (its wholly owned subsidiary undertaking, PCT Finance Limited) made up to 30 April and 31 October each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. (c) Presentation of Income Statement In order to better reflect the activities of an investment trust company, and in accordance with the guidance issued by the AITC supplementary information which analyses the Consolidated Income Statement between items of a revenue and capital nature has been presented alongside the Consolidated Income Statement. In accordance with the Company's status as a UK investment company under section 266 of the Companies Act 1985, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 842 of the Income and Corporation Taxes Act 1988. (d) Income Dividends receivable from equity shares are taken to the revenue column of the Consolidated Income Statement on an ex-dividend basis. Special dividends are recognised on an ex-dividend basis and may be considered to be capital items. The facts and circumstances are considered on a case by case basis before a conclusion on appropriate allocation is reached. Where the Company has received dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised as capital. The fixed returns on debt securities and non-equity shares are recognised under the effective interest rate method. Bank interest and other income receivable are accounted for on an accruals basis. The dealing profits of the subsidiary undertaking, representing realised gains and losses on the sale of current asset investments, are dealt with in the Consolidated Income Statement as a revenue item. (e) Expenses and interest payable All expenses, including the management fee and interest payable are accounted for on an accruals basis and are charged wholly to the revenue column of the Consolidated Income Statement except for transactions costs which are charged as detailed below and any performance fees payable which are allocated to capital reflecting the fact that although they are calculated on a total return basis they are expected to be attributable largely, if not wholly, to capital performance. All transaction costs on the purchases and sale of investments are dealt with in the Consolidated Income Statement. When an investment is purchased the difference between the price paid for the investment and its bid price is shown within the 'Gain/(loss) on investments held at fair value'. Other transaction costs on purchases, such as stamp duty, commissions etc, are included within 'Other administrative expenses'. Costs incurred on the sales of investments are deducted from the disposal proceeds of the investment and included within 'Gain/(loss) on investments held at fair value'. (f) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit before tax as reported in the Consolidated Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Consolidated Income Statement is the 'marginal basis'. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Consolidated Income Statement, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under section 842 of the Income and Corporation Taxes Act 1988 are not liable for taxation on capital gains. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Consolidated Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. (g) Investments When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. On initial recognition the Group has designated all of its investments as fair value through profit and loss as defined by IFRS. All investments are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or OEICs are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. Fair value for unquoted investments, or for investments for which there is only an inactive market, are established by using various valuation techniques. These may include recent arm's length market transactions, the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost, subject to any provision for impairment. Current asset investments are those investments held by the subsidiary company. On initial recognition these investments have been designated as fair value through profit and loss as defined by IFRS and measured at subsequent reporting dates at fair value. (h) Movements in fair value Changes in fair value of all investments held at fair value are recognised in the Consolidated Income Statement. On disposal, realised gains and losses are also recognised in the Consolidated Income Statement. (i) Other receivables Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. (j) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (k) Non current liabilities All currency bank loans are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition these loans are subsequently measured at cost. The amount of the loans due for repayment within one year of the balance sheet date is included under current liabilities. (l) Foreign currency The Group's functional currency and the currency used for presentation of these accounts is pounds sterling because that is the currency which is most relevant to the majority of the company's shareholders and creditors. Transactions denominated in currencies other than pounds sterling during the period are translated into sterling at the appropriate daily exchange rates. Assets and liabilities denominated in currencies other than pounds sterling at the balance sheet date are translated into sterling at the exchange rates ruling at that date. Gains and losses on retranslation are included in the profit or loss for the period. (m) Derivative financial instruments The use of financial derivatives is governed by the Group's policies as approved by the Board, which has set written principles for the use of financial derivatives. Derivative instruments utilised by the Group comprise index options and forward foreign exchange contracts. A derivative instrument is considered to be used for hedging purposes when it alters the market risk profile of an existing underlying exposure of the Group. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Consolidated Income Statement as they arise. If capital in nature, the associated change in value is presented as a capital item in the Consolidated Income Statement. 3. Earnings per ordinary share Earnings per ordinary share is based on the net profit after taxation attributable to the ordinary shares of £37,457,000 (31 October 2004 - losses of £17,891,000; 30 April 2005 - losses of £14,972,000) and on 117,669,333 (31 October 2004 - 137,496,022; 30 April 2005 - 131,110,198) ordinary shares, being the weighted average number of shares in issue during the period. 4. Net asset value per ordinary share Net asset value per ordinary share is based on net assets attributable to the ordinary shares of £292,344,000 (31 October 2004 - £261,212,000; 30 April 2005 - £237,237,000) and on 134,238,821 (31 October 2004 - 130,355,162; 30 April 2005 - 115,320,162) ordinary shares, being the number of ordinary shares in issue at the end of the period. 5. Daily NAV The NAV released to the London Stock Exchange is calculated in accordance with the AITC recommendations and is not on the same basis as the numbers reported in this financial statement. The daily NAV does not reflect retained earnings or losses and currently quoted equities are valued at mid-market price, although it is anticipated that this will move to bid in accordance with IFRS from 1 January 2006. 6. Dividend In accordance with stated policy, no interim dividend has been declared for the period (31 October 2004 and 30 April 2005 - nil). 7. Other administrative expenses The other administrative expenses include the transaction costs (brokerage and stamp duty) on the purchasing of investments which in prior years were included in the book cost of the investment. 8. Reconciliation from UK GAAP to IFRS (i) Total return for the half year ended 31 October 2004 As explained in the Accounting Policies, comparative information has not been restated to reflect the requirements of IAS39 retrospectively. No other IFRSs affect the total return previously reported. Had IAS39 been applied to the Statement of Total Return for the half year ended 31 October 2004, the valuation of investments at the period's opening and closing dates would have had to be adjusted to bid, reducing the return to equity shareholders by £131,000. (ii) Equity at 30 April 2005, being the Group's last financial year As explained in the Accounting Policies, comparative information has not been restated to reflect the requirements of IAS39 retrospectively and consequently 30 April 2005 represents both the balance sheet date of the last published annual report and the last date prior to transition to IFRS. Reconciliation of equity at 1 May 2005 (date of transition to IFRS) ------------------------------------------------------------------------------------------- Note (Audited) Effect of Opening balances Previously transition to at reported 30 IFRS 1 May 2005 April 2005 £'000 £'000 £'000 ----- ------------ ------------- ------------- Investments Listed at market value: 1 United Kingdom 27,248 (312) 26,936 Overseas 190,560 (486) 190,074 ------------ ------------- ------------- 217,808 (798) 217,010 Unlisted at directors' valuation: Subsidiary undertaking - - - Other United kingdom 930 - 930 ------------ ------------- ------------- 218,738 (798) 217,940 ------------ ------------- ------------- Current assets Investments held at fair 1,603 - 1,603 value Debtors 29,408 - 29,408 Cash and cash equivalents 58,222 - 58,222 ------------ ------------- ------------- 89,233 - 89,233 Creditors: amounts falling due (40,242) - (40,242) within one year ------------ ------------- ------------- Net current assets 48,991 - 48,991 ------------ ------------- ------------- Total assets less current 267,729 (798) 266,931 liabilities Creditors: amounts falling due (30,492) - (30,492) after more than one year ------------ ------------- ------------- 237,237 (798) 236,439 ------------ ------------- ------------- Capital and reserves Called up share capital 28,830 - 28,830 Capital redemption reserve 9,145 - 9,145 Share premium 90,134 - 90,134 Warrant reserve 6,179 - 6,179 Warrant exercise reserve 1,483 - 1,483 Retained earnings 2 - 100,668 100,668 Other capital reserves 157,002 (157,002) - Revenue reserve (55,536) 55,536 - ------------ ------------- ------------- 237,237 (798) 236,439 ------------ ------------- ------------- Notes: (1) Effect of revaluing investments at fair value. (2) Retained earnings comprise other capital reserves and revenue reserves. 9. Interim Report The interim report will be posted to shareholders in January 2006. Copies will be available from the Secretary at the Registered Office, 4 Matthew Parker Street, London, SW1H 9NP. Portfolio Review - Equity Investments over 0.75% of net assets at 31 October 2005 -------------------------------------------------------------------------------------- North America £'000 Stock Activity % of net assets ------- ---------------------- ----------------------- ------------- 4,779 Genetech Biotechnology 1.6% 3,975 Medtronic Medical technology 1.4% 3,646 Yahoo Internet advertising 1.2% 3,484 Genzyme Transgenics Biotechnology 1.2% 3,412 KLA Tencor Semiconductor capital equipment 1.2% 3,334 Amgen Biotechnology 1.1% 3,135 International Business IT services 1.1% Machines 3,134 Network Appliance Storage hardware 1.1% 3,074 Apple Computers Computing 1.1% 2,954 Qualcomm Wireless technology 1.0% 2,946 Agilent Technologies Test and measurement 1.0% 2,915 DST Systems IT services 1.0% 2,904 St Jude Medical Medical technologies 1.0% 2,537 Lockheed Martin Aerospace/defence 0.9% 2,495 Autodesk Design software 0.9% 2,489 Electronic Arts Gaming software 0.8% 2,482 Automatic Data Processing IT services 0.8% 2,460 Harris Telecom equipment 0.8% 2,394 CMP Sciences IT Services 0.8% 2,226 Corning Telecom equipment 0.8% ------- ------------- 60,775 Total investments over 20.8% 0.75% 88,727 Other investments 30.3% ------- ------------- 149,502 Total North American investments 51.1% ------- ------------------------------------------ ------------- Europe £'000 Stock Activity % of net assets -------- --------------------- ----------------------- ------------- 3,187 Wincor Nixdorf ATM/POS hardware 1.1% 2,998 Fresenius Medical Care Renal care products & services 1.0% 2,871 Sage Payroll software 1.0% 2,761 Aveva Group Software 0.9% 2,299 Inmarsat Satellite operator 0.8% 2,251 Psion Mobile computing 0.8% 2,240 Austriamicrosystems Semiconductors 0.8% -------- ------------- 18,607 Total investments over 6.4% 0.75% 46,035 Other investments 15.7% -------- ------------- 64,642 Total European investments 22.1% -------- --------------------- ----------------------- ------------- Asia £'000 Stock Activity % of net assets -------- --------------------- ----------------------- ------------- 7,010 Motech Solar cells 2.4% 3,982 JSR LCD materials 1.4% 3,549 Kuroda Electric Components 1.2% 3,524 Tokyo Electron Semiconductor capital equipment 1.2% 3,265 Konica Minolta Photographic supplies & 1.1% equipment 3,252 LG Phillips LCD panels 1.1% 3,136 Trend Micro Security software 1.1% 3,093 Aruze Gaming equipment 1.1% 2,958 Kumho Electric LCD components 1.0% 2,740 CKD Factory automation 0.9% -------- ------------- 36,509 Total investments over 12.5% 0.75% 17,615 Other investments 6.0% -------- ------- 54,124 Total Asian investments 18.5% -------- --------------------- ----------------------- ------------- Portfolio Review - Classification of Investments at 31 October 2005 --------- ---- -------- ---- ------- ---- --------- --- --------- TOTAL TOTAL North Europe Asia 31 October 30 April America 2005 * 2005 % % % % % --------- ---- -------- ---- ------- ---- --------- --- --------- Computing 9.1 1.9 1.1 12.1 10.8 Components 11.4 3.2 9.9 24.5 22.2 Software 8.4 6.6 1.8 16.8 18.3 Services 1.6 1.5 - 3.1 2.5 Communications 3.3 2.2 1.3 6.8 4.0 Life Sciences 11.2 3.2 0.5 14.9 12.6 Consumer, Media and 2.8 1.7 2.0 6.5 6.6 Internet Other Technology 3.3 1.5 1.9 6.7 5.8 Unquoted Investments - 0.3 - 0.3 0.6 --------- ---- -------- ---- ------- ---- --------- --------- EQUITY INVESTMENTS 51.1 22.1 18.5 91.7 83.4 --------- ---- -------- ---- ------- ---- --------- --------- Money Market Funds - 6.5 - 6.5 7.9 Corporate Bonds - - - - 0.7 Forward Currency (5.8) 5.9 - 0.1 - Contracts Net Current Assets 0.1 8.6 8.0 16.7 26.7 Loans - - (15.0) (15.0) (18.7) --------- ---- -------- ---- ------- ---- --------- --------- OTHER NET ASSETS (5.7) 21.0 (7.0) 8.3 16.6 --------- ---- -------- ---- ------- ---- --------- --------- GRAND TOTAL 45.4 43.1 11.5 100.0 (net assets of --------- ---- -------- ---- ------- ---- --------- £292,344,000) At 30 April 2005 41.9 44.4 13.7 100.0 (net assets of £ --------- ---- -------- ---- ------- ---- --------- --- --------- 236,439,000)* *The net assets at 30 April 2005 and the 30 April 2005 classifications have been adjusted to reflect the impact of IFRS. INDEX CHANGES (total return) over the half year to 31 October 2005 -------------- --------------------- Local Currency Sterling Adjusted % % -------------- --------------------- Benchmark - 18.0 Technology Indices: Dow Jones World Technology 9.5 18.1 Pacific SE (USA) Technology 13.9 22.9 MS Eurotec (based in US 8.0 16.6 dollars) FTSE Techmark 100 - 17.6 Tec Dax 13.8 13.9 Tokyo SE Electronics 13.1 10.0 DS Asia Ex Japan Electronics (3.7) 3.9 Market Indices: FTSE World - 16.7 S&P 500 Composite 5.3 13.6 FTSE All-Share - 12.9 FTSE World Europe (ex UK) - 16.3 Tokyo SE (Topix) 28.5 25.0 FTSE World Pacific Basin (ex - 16.8 Japan) EXCHANGE RATES --------------------- -------------- --------------------- 31 October 2005 30 April 2005 -------------- --------------------- US$ to £ 1.7703 1.9099 Japanese Yen to £ 206.07 200.38 Euro to £ 1.4780 1.4794 FUND DISTRIBUTION BY MARKET CAPITALISATION as at 31 October 2005 --------------- Market Capitalisation % of invested assets < $2bn 34.1% $2bn-$10bn 30.4% > $10bn 35.5% This information is provided by RNS The company news service from the London Stock Exchange

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