Interim Results

RNS Number : 8286T

Polar Capital Technology Trust PLC

13 December 2011

 



POLAR CAPITAL TECHNOLOGY TRUST PLC (the "Company")

Unaudited Half Year Results for the six months ended 31 October 2011

13 December 2011

Financial Highlights

	(Unaudited)	(Audited)	Movement
	Half year ended	Year ended	%
	31 October 2011	30 April 2011
Undiluted net assets per ordinary share  (note1)	350.48p	368.74p	(5.0)%
Total net assets	£447,669,000	£468,716,000	(4.5)%
Benchmark Index: Dow Jones World Technology  (total return sterling adjusted)			(3.3)%
Note 1:  As at 31 October 2011 there is no dilutive NAV per share as the subscription share conversion price was above the share price of the ordinary shares
Outlook Despite a more challenging backdrop we feel strongly that the sector remains in the early stages of a disruptive new cycle based upon three inter-related drivers: cloud computing, Internet applications and ubiquitous (mobile) computing.
	(Unaudited)	(Audited)
	Half year ended	Year ended
	31 October 2011	30 April 2011
Share Price
per ordinary share	353.50p	373.50p
per subscription share	14.00p	25.75p
Shares in issue
Ordinary	127,730,248	127,111,211
Subscription	25,275,954	25,294,991

For further information please contact:
Ben Rogoff	Ed Gascoigne-Pees / Georgina Turner
Polar Capital Technology Trust PLC	FTI Consulting
Tel: [phone]	Tel: [phone]

Investment Manager's Report

Market Review

The half year to 31 October 2011 saw equity markets fall sharply as an early 'growth scare' developed into a nascent sovereign crisis before a strong conclusion to the period ameliorated earlier losses, the FTSE World index falling 10.1% in Sterling terms. Sterling based returns were augmented by Dollar strength (+ 3.5%) and gains by the Yen (+7.8%) despite further efforts by the Bank of Japan to impede its progress. Despite a number of negative top-down developments towards the close of the previous financial year including soaring oil prices amid internecine conflict in Libya, Portugal requiring ECB assistance and a terrible earthquake in Japan, global equity markets had still managed to close out the year at highs. However, this resilience was tested early in the new financial year by deteriorating macroeconomic data and the resurfacing of sovereign risk in the form of a potential Greek default. This combination, together with the impending end of QE2, set the tone for the first fiscal quarter and weighed on investor sentiment, risk assets and ten year US Treasury yields which fell below 3%. The so-called 'risk off' trade reached a low point during mid July as the Federal Reserve lowered US growth expectations and downplayed expectations for further quantitative easing (QE). With investor sentiment at depths not seen since July 2010, the successful passing of an austerity package in Greece presaged a powerful counter-trend rally in June driven by a rotation from bonds into equities.

Unfortunately this rally proved short-lived as a more challenging second quarter earnings season and continued widening of Italian and Spanish sovereign spreads (despite the apparent 'resolution' in Greece) augured in a more deleterious period as the absence of coordinated and forceful intervention raised the spectre of a new financial crisis. This was particularly true in the US where a last minute agreement to raise the debt ceiling (in order to avoid default) came at a significant cost to credibility as the hyper-partisan behaviour of both parties contributed directly to the subsequent S&P downgrade of US credit worthiness and the loss of its coveted triple-A rating. Likewise Chancellor Merkel's refusal to consider German-backed bonds ahead of fiscal reform made it clear that domestic considerations could delay - or worse still - preclude a necessary solution to Eurozone travails. Amid clear deterioration of economic data in Europe and with the Federal Reserve opting to just extend the duration rather than the size of its balance sheet, ("operation Twist") risk aversion stepped up a gear in late summer leaving ten year US Treasury yields at record lows (c. 1.7%) and global equities c.-19% from their 2011 highs. However, by late September selling had become indiscriminate, evidenced by implied volatility at post Lehman highs and stock cross-correlation reaching extreme levels. The rally that followed was prompted by expectations of an imminent plan to 'save' the Eurozone which presaged a short-covering rally that extended, forcing liquidity out of safe-havens into risk assets.

Technology Review

Technology shares significantly outperformed the broader market during the half year, the Dow Jones World Technology index falling 3.3% in Sterling terms. While some of the sector's outperformance was passive (reflecting the outperformance of US equities and the Dollar), strong performances from large cap technology stocks contributed significantly to the sector's relative returns. This was particularly evident in the US where IBM (+8.2%) and Apple (+15.6%) helped large caps (as measured by the Russell 1000 technology index) deliver positive Sterling based returns (+0.6%) during the half year.  The magnitude of Apple's performance was all the more remarkable given the resignation and subsequent passing of its talismanic CEO Steve Jobs who since returning to the company in 1997 presided over a remarkable renaissance during which the company compounded revenue growth at over 18%, resulting in a more than sixty-fold increase in Apple's share price. Compared to their large-cap peers, and in sharp contrast to the experience of the previous financial year, small caps and unweighted indices trailed by more than 15% and 11% respectively as heightened  risk aversion resulted in the 'crowding out' of riskier assets as investors sought refuge in cheap, mega-cap 'stores of wealth'.  This dynamic not only overwhelmed the superior earnings delivered by the vast majority of our next-generation companies but it also helped obfuscate the implosion of a number of large-cap incumbents including Hewlett Packard, Nokia and Research in Motion during the period.

The marked underperformance of small-cap stocks created a formidable investment headwind that we were unable to overcome, our own net asset value per share falling 5.0% over the half year. In addition to small-cap underperformance, the Trust was also negatively impacted by the poor returns generated by semiconductor companies that were among the hardest hit by deteriorating macroeconomic trends and an inventory drawdown exaggerated by less severe than anticipated supply disruptions post the Japanese earthquake. Networking stocks also detracted from performance due to a hiatus in service provider capital spending as a result of a strike at Verizon and AT&T's proposed acquisition of T-Mobile, exacerbated by cyclical weakness. Relative performance was further hindered by exposure to Chinese IT services companies which were particularly weak due to the combination of softening fundamentals and a series of corporate governance / accounting scandals that greatly reduced the desirability of Chinese ADRs. In terms of positives, the Trust benefited during the half year from some strong individual stock performances including Opnet (+11.7%), Amazon (+9.0%), Google (+9.0%), Commvault (+8.1%) and Teradata (+6.7%), solid stock picking in Europe and by raising liquidity ahead of the summer sell-off. It also benefited from M&A activity via the acquisition of Netlogic Microsystems by Broadcom for a 50% premium which, together with a slew of further transactions, provided additional support for next-generation valuations and our new cycle thesis in general.

Market Outlook

Although we have no unique insight into how the existential 'top-down' challenges that have dominated markets since April will be resolved, we continue to believe that, the current sovereign risk 'episode' will ultimately prove to have been another 'echo' rather than a repeat performance of the 2008/9 credit crisis. Clearly risks to this view have risen commensurate with European sovereign spreads and the perceived failure of policymakers. However, as recent events attest (co-ordinated cuts to the emergency Dollar funding rate, reduction in Chinese bank reserve requirements) policymakers remain acutely aware of what needs to be done even if they are unable to deliver on a timescale that would better suit investors. While previous stopgap efforts have delivered only temporary mollification, the latest series of measures may yet prove the kernel of a lasting solution to the Eurozone crisis which - in our view - has always required the ECB to completely engulf the problem by embarking on quantitative easing and / or open-ended intervention. We are also relatively upbeat regarding China where policymakers should be able to re-accelerate the economy now that the policy-induced slowdown has successfully taken the sting out of worrisome inflationary trends. Lastly we believe that too many investors continue to equate an earnings recession (a realistic if less than ideal outcome) with a repeat performance of the credit crisis which seems highly unlikely given the massive contractions that have already occurred in US housing, employment and vehicle sales.

As such we remain hopeful that despite the considerable 'wall of worry' that exists today, equities should be able to generate solid absolute and superior relative returns (as compared to 'risk free' alternatives) for investors with a medium term investment horizon. While we will only know in hindsight, there is a good chance that the August / September lows prove durable given the indiscriminate selling that occurred at that time, not least in German equities that experienced a similar waterfall decline to that experienced by UK stocks during the 1987 crash. This disorderly retreat was driven by the overarching desire for capital preservation which reached fever pitch in August when a gold ETF became the largest exchange traded fund in the world, and again in September as investors drove ten year US Treasury yields below the S&P dividend yield for only the second time since 1958. Having been modestly geared at the August lows, and fully invested in September, we took profits during the October rally to end the half year with c. 5% liquidity

Risk Factors

As well as the risks outlined above, there are a number of additional risk factors that investors should consider. These include sovereign default risk, a 'hard landing' in China and insufficient political will in the developed world to deliver necessary fiscal tightening resulting in a loss of market confidence. Longer term risks remain unchanged and are driven by structural imbalances that remain largely unresolved. Other risks that could affect our thesis include policy error relating to emerging market inflation, a disorderly US Dollar decline and rising protectionism in the event of faltering global growth. As in previous years, political risk remains the most significant exogenous factor to consider, particularly in the Middle East as a result of the so-called 'Arab Spring' and a hardening of attitude towards Iran post the recent IAEA findings.

Technology Outlook

Turning to technology, we continue to believe that the sector should fare relatively well against anything other than a worst case economic outcome as sub-trend global growth is likely to drive greater focus on productivity. The combination of weaker markets and robust underlying growth has left valuations looking undemanding both absolute and relative to the broader market, particularly once the sector's vastly superior aggregate balance sheet is considered. We expect this net cash position, together with free cash generation to finance future stock repurchases and dividend growth, which should continue to attract new investors to the sector, particularly those keen to avoid companies and/or industries reliant on external financing. With IT budget growth likely to prove modest next year  we anticipate more uneven value creation going forwards as competition between incumbents intensifies, exacerbated by the move from enterprise towards cloud computing. This is likely to fuel further M&A activity as legacy vendors try to remain pertinent which in turn should disproportionately benefit small and mid caps that have less to lose from a new cycle. While we are a little frustrated that the portfolio has not directly benefited from more acquisitions during the first half, we are hopeful that M&A will prove a more positive tailwind during the fiscal second half, particularly if corporate confidence improves.

Despite a more challenging backdrop we feel strongly that the sector remains in the early stages of a disruptive new cycle based upon three inter-related drivers: cloud computing, Internet applications and ubiquitous (mobile) computing. Consistent with views expressed in our most recent Annual Report, we believe that cloud computing is best understood as the IT industry moving away from complex enterprise IT towards a mass production alternative that can deliver a highly automated, elastic form of computing at vastly lower prices. Beyond infrastructure, increasing comfort with the Internet has driven growth in a number of new application sets (such as e-commerce, online advertising and software-as-a-service) which looks likely to continue given current low penetration rates. As applications are increasingly delivered via a web browser they are becoming hardware agnostic which should drive further growth of Internet-connected devices such as smartphones and tablets, that in turn are reinforcing changes already taking place to infrastructure and applications in the post PC world.

Having previously signalled our intent to rotate the portfolio more fully towards next-generation names, we took the decision to slow that process as a direct result of a more challenging market environment. Instead we have maintained our core overweight small/mid cap positioning which we have augmented during weak periods.  In addition we have also revisited a clutch of unexciting but much improved cyclicals that have been left for dead despite remarkably strong balance sheets and lowered break-evens since the last crisis. As confidence returns we are hopeful that today's crowded trade - mega-cap stores-of-wealth - will be unwound which should help improve market breadth and restore lustre to our small / mid cap portfolio. In the meantime, we will continue to move the portfolio more substantially away from the index as and when we anticipate large-cap impairment or in the event of unwarranted and marked underperfomance of small-caps stocks.

Ben Rogoff

12 December 2011

Risks and Uncertainties

The Directors consider that the principal risks and uncertainties faced by the group for the remaining six months of the financial year, which could have a material impact on performance, are consistent with those outlined in the annual report for the year ended 30 April 2011. 

These principal risks can be summarised as market volatility, stock pricing and liquidity risk, currency and interest rate risk, counterparty risk, differing economic cycles between different markets and risk inherent in technology, such as obsolescence and consumer acceptance of changes.

The investment manager's report comments on the outlook for market related risks, including the increased volatility in share prices and economic cycles.

The Company has a risk management framework that is a structured process for identifying, assessing and managing the risks associated with the Company's business.  The investment portfolio is diversified by geography which mitigates risk but is focused on the technology sector and has a high proportion of investments listed on US markets or exposed to the US Dollar.

Responsibility Statement

The Directors of Polar Capital Technology Trust plc, which are listed in the Shareholder Information Section, confirm to the best of their knowledge:

§ The condensed set of financial statements have been prepared in accordance with IAS34 as adopted by the European Union and give a true and fair view of the, financial position of the Company and the Group as at 31 October 2011 and the results for the six months ended 31 October 2011 as required by the Disclosure and Transparency Rules 4.2.4R;  

§ The Interim Management Report (constituting the Investment Manager's Report) includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R.

The half year financial report for the six month period to 31 October 2011 has not been audited or reviewed by the Auditors.

The half year financial report for the six month period to 31 October 2011 was approved by the Board on 12 December 2011 and the responsibility statement was signed on its behalf by Michael Moule, Chairman of the Board.

Related Party Transactions

In accordance with DTR 4.2.8R there have been no new related party transactions during the six month period to 31 October 2011 and therefore nothing to report on any material effect by such transactions on the financial position or performance of the Company during that period. There have been no changes in any related party transaction described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year

Consolidated Statement of Comprehensive Income for the half year ended 31 October 2011
		(Unaudited)			(Unaudited)			(Audited)
		Half year ended			Half year ended			Year ended
		31 October 2011			31 October 2010			30 April 2011
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
		return	return	return	return	return	return	return	return	return
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Notes
Investment income	2	2,178	-	2,178	1,793	-	1,793	3,548	-	3,548
Other operating income	2	14	-	14	20	-	20	37	-	37
(Losses) / gains on investments held at fair value		-	(20,689)	(20,689)	-	26,336	26,336	-	75,384	75,384
Loss on derivatives		-	(357)	(357)	-	-	-	-	(303)	(303)
Other currency losses		-	(698)	(698)	-	(952)	(952)	-	(770)	(770)
Total income		2,192	(21,744)	(19,552)	1,813	25,384	27,197	3,585	74,311	77,896
Expenses
Investment management fee		(2,436)	-	(2,436)	(2,078)	-	(2,078)	(4,452)	-	(4,452)
Performance fee		-	-	-	-	(1,331)	(1,331)	-	(3,337)	(3,337)
Other administrative expenses		(406)	-	(406)	(385)	-	(385)	(751)	-	(751)
Total expenses		(2,842)	-	(2,842)	(2,463)	(1,331)	(3,794)	(5,203)	(3,337)	(8,540)
(Loss) / profit before finance costs and tax		(650)	(21,744)	(22,394)	(650)	24,053	23,403	(1,618)	70,974	69,356
Finance costs		(454)	-	(454)	(431)	-	(431)	(826)	-	(826)
(Loss) / profit before tax		(1,104)	(21,744)	(22,848)	(1,081)	24,053	22,972	(2,444)	70,974	68,530
Tax		(324)	-	(324)	(220)	-	(220)	(445)	-	(445)
Net (Loss) / profit for the period and total comprehensive income		(1,428)	(21,744)	(23,172)	(1,301)	24,053	22,752	(2,889)	70,974	68,085
Earnings per ordinary share (pence)	3	(1.12)	(17.05)	(18.17)	(1.03)	19.01	17.98	(2.28)	56.05	53.77
The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment 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.
The net loss for the period of the Company was £23,172,000 (31 October 2010: profit of £22,752,000 and 30 April 2011: profit of £68,085,000).
The Group does not have any other Comprehensive Income and hence the net profit/(loss), as disclosed above is the same as the Group's total Comprehensive Income.

Consolidated Balance Sheet at 31 October 2011
		(Unaudited)	(Unaudited)	(Audited)
		31 October 2011	31 October 2010	30 April 2011
		Group	Group	Group
Notes		£'000	£'000	£'000
Non current assets
Investments held at fair value		426,771	410,279	458,094
Current assets
Derivative financial instruments		116	-	307
Overseas tax recoverable		19	434	18
Other receivables		9,370	5,059	9,630
Cash and cash equivalents		46,106	45,454	45,505
		55,611	50,947	55,460
Total assets		482,382	461,226	513,554
Current liabilities
Other payables		(4,400)	(9,521)	(15,857)
Bank loans		(30,313)	(30,326)	(28,981)
		(34,713)	(39,847)	(44,838)
Net assets		447,669	421,379	468,716
Equity attributable to equity shareholders
Called-up share capital	4	32,185	31,624	32,031
Capital redemption reserve		12,588	12,588	12,588
Share premium		121,470	117,902	119,499
Special non-distributable reserve	5	7,536	7,536	7,536
Capital reserves		340,004	314,827	361,748
Revenue reserve		(66,114)	(63,098)	(64,686)
Total equity		447,669	421,379	468,716
Net asset value per ordinary share (pence)	6	350.48	333.11	368.74

Consolidated Cash Flow Statement for the half year ended 31 October 2011
	(Unaudited)	(Unaudited)	(Audited)
	Half year ended	Half year ended	Year ended
	31 October 2011	31 October 2010	30 April 2011
	Group	Group	Group
	£'000	£'000	£'000
Cash flows from operating activities
(Loss)/profit before finance costs and tax	(22,394)	23,403	69,356
Adjustment for non-cash items:
Foreign exchange losses	698	952	770
Adjusted (loss)/profit before finance costs and tax	(21,696)	24,355	70,126
Adjustments for :
Decrease/(increase) in investments	31,514	(24,248)	(72,370)
Decrease/(increase) in receivables	260	1,167	(3,404)
(Decrease)/increase in payables	(11,443)	1,205	7,556
	20,331	(21,876)	(68,218)
Net cash (used in)/generated from operating activities before tax	(1,365)	2,479	1,908
Overseas tax (deducted at source)/refunded	(325)	(176)	15
Net cash (used in)/generated from operating activities	(1,690)	2,303	1,923
Cash flows from financing activities
Proceeds from issues of share capital	2,051	-	2,385
Proceeds from conversion of subscription shares	76	-	-
Subscription share issue costs paid	(2)	-	(381)
Loans matured	(30,461)	(59,286)	(59,286)
Loans taken out	30,250	59,786	59,786
Finance costs	(468)	(426)	(836)
Net cash generated from financing activities	1,446	74	1,668
Net (decrease)/increase in cash and cash equivalents	(244)	2,377	3,591
Cash and cash equivalents at the beginning of the period	45,505	42,070	42,070
Effect of foreign exchange rate changes	845	1,007	(156)
Cash and cash equivalents at the end of the period	46,106	45,454	45,505

Consolidated Statement of Changes in Equity for the half year ended 31 October 2011
	(Unaudited) Half year ended 31 October 2011
	Called-up share capital	Capital redemption reserve	Share premium	Special non-distributable reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2011	32,031	12,588	119,499	7,536	361,748	(64,686)	468,716
Total comprehensive income:
Loss for the period to 31 October 2011	-	-	-	-	(21,744)	(1,428)	(23,172)
Transactions with owners, recorded directly to equity:
Subscription share issue costs	-	-	(2)	-	-	-	(2)
Issue of ordinary share capital	150	-	1,901	-	-	-	2,051
Issue of ordinary shares on conversion of subscription shares	4	-	72	-	-	-	76
Total equity at 31 October 2011	32,185	12,588	121,470	7,536	340,004	(66,114)	447,669
	(Unaudited) Half year ended 31 October 2010
	Called-up share capital	Capital redemption reserve	Share premium	Special non-distributable reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2010	31,624	12,588	117,902	7,536	290,774	(61,797)	398,627
Total comprehensive income:
Profit/(loss) for the period to 31 October 2010	-	-	-	-	24,053	(1,301)	22,752
Total equity at 31 October 2010	31,624	12,588	117,902	7,536	314,827	(63,098)	421,379
	(Audited) Year ended 30 April 2011
	Called-up share capital	Capital redemption reserve	Share premium	Special non-distributable reserve	Capital  reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
Total equity at 30 April 2010	31,624	12,588	117,902	7,536	290,774	(61,797)	398,627
Total comprehensive income:
Profit/(loss) for the year to 30 April 2011	-	-	-	-	70,974	(2,889)	68,085
Transactions with owners, recorded directly to equity:
Bonus issue of subscription shares	254	-	(254)	-	-	-	-
Subscription share issue costs	-	-	(381)	-	-	-	(381)
Issue of ordinary share capital	138	-	1,994	-	-	-	2,132
Issue of ordinary shares on conversion of subscription shares	15	-	238	-	-	-	253
Total equity at 30 April 2011	32,031	12,588	119,499	7,536	361,748	(64,686)	468,716

NOTES TO THE ACCOUNTS

For the six month period ended 31 October 2011

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 month period to 31 October 2011.

The unaudited accounts to 31 October 2011 have been prepared using the accounting policies used in the Group's annual accounts to 30 April 2011.  These accounting policies are based on International Financial Reporting Standards ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and by the International Accounting Standards Committee ("IASC") as adopted by the European Union.

The financial information in this half year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The financial information for the six month periods ended 31 October 2011 and 31 October 2010 have not been audited.  The figures and financial information for the year ended 30 April 2011 are an extract from the latest published accounts and do not constitute statutory accounts for that year.  Full statutory accounts for the year ended 30 April 2011, prepared under IFRS, including the report of the auditors which was unqualified and did not contain a statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies.

The Group's accounting policies have not varied from those described in the Annual Report for the year ended 30 April 2011.

The financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise stated.

2. Income
	(Unaudited)	(Unaudited)	(Audited)
	For the half	For the half	For the
	year ended	year ended	year ended
	31 October 2011	31 October 2010	30 April 2011
	£'000	£'000	£'000
Income from investments held at fair value through profit or loss
Franked dividends	65	88	140
Unfranked dividends	2,113	1,705	3,408
	2,178	1,793	3,548
Other operating income
Bank interest	14	20	34
Interest received on tax reclaims	-	-	3
	14	20	37
Total income	2,192	1,813	3,585
3. Earnings per ordinary share
	(Unaudited)	(Unaudited)	(Audited)
	For the half	For the half	For the
	year ended	year ended	year ended
	31 October 2011	31 October 2010	30 April 2011
	£'000	£'000	£'000
Net (loss) / profit for the period:
Revenue	(1,428)	(1,301)	(2,889)
Capital	(21,744)	24,053	70,974
Total	(23,172)	22,752	68,085
Weighted average number of shares in issue during the period	127,498,353	126,497,914	126,620,066
Revenue	(1.12)p	(1.03)p	(2.28)p
Capital	(17.05)p	19.01p	56.05p
Total	(18.17)p	17.98p	53.77p
The Company has in issue 25,275,954 subscription shares which are convertible into ordinary shares.
Further details of the conversion price are given in note 4.
There was no dilution of the return per ordinary share in respect of the conversion rights attaching to the subscription shares.
4. Called-up share capital
	(Unaudited)	(Unaudited)	(Audited)
	31 October 2011	31 October 2010	30 April 2011
	£'000	£'000	£'000
Allotted, Called up and Fully paid:
Ordinary shares of 25p each
Opening balance of 127,111,211 (31 October 2010 and 30 April 2011: 126,497,914)	31,778	31,624	31,624
Issue of 600,000 (31 October 2010: nil; 30 April 2011: 550,000) ordinary shares	150	-	138
Conversion of 19,037 (31 October 2010: nil; 30 April 2011: 63,297) subscription shares to ordinary shares	4	-	16
Closing balance of 127,730,248 (31 October 2010: 126,497,914; 20 April 2011: 127,111,211) ordinary shares	31,932	31,624	31,778
Subscription shares of 1p each:
Opening balance of 25,294,991 (31 October 2010 and 30 April 2011: nil)	253	-	-
Bonus issue of nil (31 October 2010: nil; 30 April 2011: 25,358,288) subscription shares	-	-	254
Conversion of 19,037 (31 October 2010: nil; 30 April 2011: 63,297) subscription shares to ordinary shares	-	-	(1)
Closing balance of 25,275,954 (31 October 2010: nil; 20 April 2011: 25,294,991) subscription shares	253	-	253
Total share capital	32,185	31,624	32,031
The subscription shares were issued as a bonus issue to the ordinary shareholders on 11 February 2011, on the basis of one subscription share for every five ordinary shares. Each subscription share confers the right (but not the obligation) to subscribe for one ordinary share on the last business day of each month between and including 31 March 2011 and 31 March 2014, when the rights under the subscription shares will lapse.
The conversion prices are as follows:
(a) If exercised between and including 31 March 2011 and 31 March 2012, 401 pence.
(b) If exercised between and including 1 April 2012 and 31 March 2014, 478 pence.
5. Special non-distributable reserve
This non-distributable reserve was previously included in the accounts as "warrant exercise reserve" and was originally created from the exercise of warrants (which expired on 30 September 2005). As there are no longer warrants in existence, the new name of the reserve is considered to be more appropriate.
6. Net asset value per ordinary share
	(Unaudited)	(Unaudited)	(Audited)
	31 October 2011	31 October 2010	30 April 2011
Undiluted:
Net assets attributable to ordinary shareholders (£'000)	447,669	421,379	468,716
Ordinary shares in issue at end of period	127,730,248	126,497,914	127,111,211
Net asset value per ordinary share	350.48p	333.11p	368.74p
Diluted:
Net assets attributable to ordinary shareholders (£'000)	549,026	421,379	570,149
Ordinary shares in issue at end of period if subscription shares converted	153,006,202	126,497,914	152,406,202
Net asset value per ordinary share	358.83p	333.11p	374.10p
The diluted net asset value per ordinary share has been calculated on the assumption that 25,275,954 (31 October 2010: nil; 30 April 2011: 25,294,991) subscription shares in issue were converted at 401 pence per share, resulting in a total number of shares in issue of 153,006,202(31 October 2010: 126,497,914; 30 April 2011: 152,406,202).  As can be seen from the above calculation the subscription shares currently have no dilutive effect on the NAV per share.
7. Dividend
In accordance with stated policy, no interim dividend has been declared for the period (31 October 2010 and 30 April 2011 - nil).
8. Performance fee
At 31 October 2011, a performance fee of £nil is provided for in the accounts (31 October 2010: £1,331,000; 30 April 2011: £ 3,337,000). The Company can earn a performance fee which would be payable as a result of outperformance over the Benchmark index, subject to the adjusted NAV per share exceeding the high water mark which for these purposes is 373.5 pence per share.

Portfolio Review:

Classification of group investments at 31 October 2011
				Total	Total
	North			31 October	30 April
	America	Europe	Asia	2011	2011
	%	%	%	%	%
Computing	17.0	0.3	2.2	19.5	21.0
Components	1.2	-	0.2	1.4	0.8
Software	20.2	2.0	0.6	22.8	20.7
Semiconductors	10.8	2.5	9.4	22.7	23.1
Healthcare	-	-	-	-	1.0
Telecoms / media	-	0.3	0.3	0.6	0.9
Services	1.4	0.3	0.9	2.6	4.5
Communications equipment	10.7	1.8	2.4	14.9	17.1
Internet / consumer	7.4	-	2.6	10.0	7.6
Clean energy	0.3	-	-	0.3	0.1
Defence/ Security	-	0.2	-	0.2	0.2
Other sectors	-	-	0.2	0.2	0.6
Unquoted Investments	-	0.2	-	0.2	0.2
Total Investments	69.0	7.6	18.8	95.4	97.8
Other net assets (excluding loans)	8.4	1.8	1.2	11.4	8.4
Loans	(4.8)	-	(2.0)	(6.8)	(6.2)
TOTAL (net assets of £447,669,000)	72.6	9.4	18.0	100.0	-
At 30 April 2011 (net assets of £468,716,000)	70.9	9.3	19.8	-	100.0

Fund Distribution by Market Capitalisation
	Market Capitalisation
	<$2bn	$2bn-$10bn	>$10bn
% of invested assets at 31 October 2011	15.0	16.2	68.8
% of invested assets at 30 April 2011	18.1	15.3	66.6

INDEX CHANGES over the half year ended 31 October 2011 (Total return)
	Local Currency	Sterling Adjusted
	%	%
Benchmark:
Dow Jones World Technology	(6.4)	(3.3)
Other Indices:
FTSE World	-	(8.8)
FTSE All-Share	-	(7.8)
S&P 500 composite	(7.1)	(4.0)
EXCHANGE RATES	31 October 2011	30 April 2011
US$ to £	1.6141	1.6680
Japanese Yen to £	125.86	135.34
Euro to £	1.1572	1.1242

Portfolio Review - Equity Investments over 0.75% of net assets at 31 October 2011
North America
		Value of holding		% of net assets
		31 October	30 April	31 October	30 April
		2011	2011	2011	2011
		£'000	£'000
Apple		41,879	38,468	9.4	8.2
Apple is a leading supplier of personal computers and digital media products that feature the company's proprietary OS X operating system.  The company has become somewhat synonymous with the explosion in digital media as evidenced by market share gains in its core business and the spectacular success of its iPod, iTunes and iPhone offerings. Having previously redefined the smartphone category with the iPhone, Apple's newest product - the iPad - has essentially created the tablet market.
Google		23,044	18,505	5.1	3.9
Google is the dominant provider of Internet search and online advertising, provider of web applications and tools, as well as a developer of software and mobile applications.  The company operates a leading index of web sites and media content and offers an auction based advertising platform.  By helping content owners to efficiently find customers online, Google remains a critical element in the growth of Internet advertising and e-commerce
Oracle		18,378	20,316	4.1	4.3
Oracle is the leading vendor of relational database management systems (RDBMS) and is the world's second largest software company, with offerings that span database systems, middleware and a broad range of applications such as ERP, CRM and SCM.  Post its acquisition of Sun Microsystems, the company has begun to introduce vertically integrated systems such as its Exaseries products that combine Oracle software and Sun hardware.
Microsoft		15,814	15,610	3.5	3.3
Microsoft is the largest software company in the world.  Founded in 1975, the company has built a dominant franchise in desktop software through its ubiquitous Windows operating system and Office productivity software.  Whilst the company is unlikely to be a net beneficiary from the transition towards cloud computing, an overdue PC upgrade cycle and a new operating system ('Windows 7') should create favourable near term tailwinds.
IBM		14,881	20,350	3.3	4.3
International Business Machines (IBM) is one of the world's leading providers of enterprise solutions, offering a broad portfolio of hardware, IT services and software solutions.  Whilst the company's revenue growth rate has moderated over recent years, it has been able to deliver fairly consistent earnings per share growth as a result of acquisitions, cost-saving initiatives and share repurchases.
Qualcomm		11,509	12,694	2.6	2.7
Qualcomm is the world leader in wireless code division multiple access (CDMA) technologies for mobile communications.  The company has more than 3,000 patents for CDMA and licenses its IP to the world's leading handset and infrastructure providers.  The company also sells chipsets via its QCT division.  Recent settlements with Broadcom (2009) and Nokia (2008) resulted in the removal of Qualcomm's legal overhang.
Cisco		9,751	10,183	2.2	2.2
Cisco Systems is a pre eminent provider of Internet protocol (IP)-based equipment that is used to carry data, voice and video traffic.  In addition to its core router and switch offerings, the company also produces IP telephony products, set-top boxes and videoconferencing systems.  Although the company should benefit from data traffic growth, this dynamic is being offset by intensifying competition in its core (switching) market.
Intel		8,726	9,592	1.9	2.0
Intel is the world's largest supplier of semiconductor chips.  The company designs and manufactures microprocessors, boards and semiconductor components that are used in computers, servers, and networking and communication products.  As the world's largest supplier of microprocessors, Intel enjoys a worldwide market share of more than 75%.  New products include Atom (for netbooks), ultra-low voltage CPUs for thin notebooks and the new Xeon 5500, a server chip optimized for virtualized environments.
EMC		7,988	8,974	1.8	1.9
EMC is a leading provider of enterprise storage systems that allow its customers to store, manage and retrieve massive amounts of information. In addition to its position in storage area networks (SANs), EMC also offers network-attached file servers and a wide array of software designed to manage, protect and share data.  The company is the majority owner of VMware and has made a number of promising acquisitions of next-generation storage vendors that should help support growth going forwards.
Texas Instruments		5,518	6,389	1.2	1.4
An early pioneer in the field of semiconductors, TI is today a leading provider of both digital signal processors and analogue / mixed signal chips.  The company has adopted a 'fab-light' manufacturing model which allows it to better manage utilisation rates during downturns allowing it to continue to generate strong free cash flows.  The company has divested some non-core assets over recent years, returning the proceeds in the form of stock repurchases.
Network Appliance		5,396	4,757	1.2	1.0
Commonly known as NetApp, the company is a leading vendor of network-attached stoarage (NAS) systems that are often deployed by midsized and large enterprises.  Although NAS was once considered to be inferior to storage area network (SAN) alternatives, the technology is well placed to benefit from further adoption of server virtualisation, unified storage and the shift towards 10G Ethernet.  As such, NetApp has been able to consistently grow its market share against almost all incumbent storage vendors.
Cognizant		5,308	5,422	1.2	1.2
Whilst headquartered in New Jersey, Cognizant's business primarily takes place in India where it is one of the largest and fastest growing IT service companies.  Cognizant has been a multi-year beneficiary of the growth in the Indian outsourcing market and remains well positioned to benefit from the current rebound in IT spending and the persistence of an attractive labour arbitrage.
Salesforce.com		5,233	4,324	1.2	0.9
A leading provider of customer relationship management (CRM) software, Salesforce.com is a standard bearer for a new software delivery model commonly known as 'software as a service' (SAAS). By eliminating many of the upfront and ancillary costs associated with the prevailing licence model, the ability to deliver software 'on demand' is helping Salesforce.com not only expand the applicability of its core product but is also helping the company become a much broader application infrastructure provider.
Juniper Networks		4,544	5,747	1.0	1.2
Juniper Networks is a global supplier of core and edge routers to service providers and large enterprises.  Its products help carry data across IP networks and the company has also entered the market for other next-generation IP technologies such as network security and WAN optimisation.  The company recently developed its own Ethernet switch which it hopes will allow it to wrest market share from Cisco in the enterprise market
Citrix Systems		4,286	5,056	1.0	1.1
Citrix Systems offers a suite of products that help its customers compute over the wide area network (WAN). Its core product is well established, having been used to deliver Windows desktops and applications from remote servers. Newer offerings allow full desktop images (VDI) to be delivered over the Internet, SaaS collaboration via its GoTo product range, and application acceleration appliances that help improve application performance.
VMware		4,248	2,630	0.9	0.6
Software
Broadcom		4,022	4,101	0.9	0.9
Semiconductors
F5 Networks		3,864	4,004	0.9	0.9
Networking equipment
Sandisk		3,747	3,241	0.8	0.7
Semiconductors
Lam Research		3,566	3,348	0.8	0.7
Semiconductors
Check Point Software Technologies		3,394	-	0.8	-
Security software
Altera		3,357	3,796	0.8	0.8
Communication semiconductors
Total investments over 0.75%		208,453		46.6
Other investments		100,432		22.4
Total North American investments		308,885		69.0

Europe
		Value of holding		% of net assets
		31 October	30 April	31 October	30 April
		2011	2011	2011	2011
		£'000	£'000
SAP		5,632	4,299	1.3	0.9
SAP is a leading provider of Enterprise Resource Planning (ERP) software that is entrenched in most large companies today, from manufacturing to financial services. The company has been leveraging its strength in its core business and investing in emerging technologies both via acquisitions and internal R&D efforts. New products that target mobile, Software-as-a-Service (SaaS) and large datasets (known as 'big data') are expected to become more important drivers of growth going forward.
Ericsson		5,089	7,119	1.1	1.5
Ericsson has a long and rich history in the telecommunications industry having been first established in 1876 when Lars Magnus Ericsson set up a telegraph repair shop in Stockholm. Today the company is synonymous with telecom infrastructure, particularly in the wireless arena where the company enjoys a leading market share. As such, we believe that Ericsson is well positioned to benefit from the ongoing smartphone penetration / growth in mobile data in the developed world, together with wireless deployments in emerging markets.
ARM Holdings		4,058	4,795	0.9	1.0
ARM Holdings is the global leader in RISC processor IP. The ARM architecture is becoming more relevant as we experience a proliferation in mobile devices, be it smartphone or tablet, due to the superior power consumption to performance ratio than Intel based alternatives. We believe there is room for ARM to move outside of its core market of mobile devices into higher end applications such as laptops and servers with the upcoming generations of IP cores.
Total investments over 0.75%		14,779		3.3
Other investments		19,009		4.3
Total European investments		33,788		7.6

Asia
		Value of holding		% of net assets
		31 October	30 April	31 October	30 April
		2011	2011	2011	2011
		£'000	£'000
Samsung Electronics		17,023	15,698	3.8	3.3
Samsung manufactures a very wide array of products ranging from components to finished products for both consumer electronics and industrial end markets.  The company is particularly renowned for its high global market share in the fields of memory semiconductors, LCD displays, and mobile handsets.
Taiwan Semiconductor		9,320	9,383	2.1	2.0
TSMC is the world's largest semiconductor foundry, providing a full range of services from design to product delivery.  The company is becoming increasingly dominant at the leading-edge of the technology road-map, where smaller rivals are struggling to adequately resource their product offerings.
Canon		4,597	5,307	1.0	1.1
Canon is one of the world's leading companies in the field of imaging and optical technology, manufacturing a wide range of products for both consumer and professional use. Examples include printers, copiers, cameras, semiconductor manufacturing equipment and medical equipment.
Tencent Holdings		4,172	4,904	0.9	1.0
Internet
Baidu		4,008	2,778	0.9	0.6
Internet
Fujitsu		3,622	3,645	0.8	0.8
IT Services
Fuji Photo Film		3,471	2,077	0.8	0.4
Office automation
Total investments over 0.75%		46,213		10.3
Other investments		38,001		8.5
Total Asian investments		84,214		18.8

SHAREHOLDER INFORMATION

Directors

MB Moule (Chairman)

BJD Ashford-Russell

PF Dicks

DJ Gamble

RAS Montagu

SC Bates

PJ Hames

Investment Manager

Polar Capital LLP

Authorised and regulated by the Financial Services Authority

Fund Manager

Ben Rogoff

Deputy Fund Manager

Craig Mercer

Secretary

Polar Capital Secretarial Services Limited, represented by

Neil Taylor FCIS

Registered Office

4 Matthew Parker Street, London SW1H 9NP

020 7227 2700

Copies

The Half Year report will be posted to shareholders in January 2012 and copies of this statement are available from the company's registered office at 4 Matthew Park Street London SW1H 9NP   The Half Year report will be published on the Company's website at www.polarcapitaltechnologytrust.co.uk

Neither the contents of the Company's website nor the contents of any website accessible from the hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

 

END

 

 

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