THE NEW ZEALAND INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS FOR THE PERIOD FROM 1
NOVEMBER 2006 TO 30 APRIL 2007
Chairman's Statement
At The New Zealand Investment Trust's Annual General Meeting held on 10 May
2007 shareholders supported the Board of Directors' recommendation on all
resolutions, including that they should vote against the Company's continuation
as a UK investment trust. This significant development needs to be seen in the
light of my earlier communications to shareholders that the Directors have
concluded that a UK investment trust is no longer the optimal structure for the
Company due to major tax reforms in New Zealand.
The fact that the Company will no longer continue as an investment trust is not
admission of failure as is the case when most continuation votes fail to pass.
On the contrary, as shown below in the Investment Manager's Report, the Company
continues to perform strongly and the share price and net asset value are
trading around their all time highs. This latest set of Interim Results extends
the record of building value for shareholders and outperforming the markets in
which the Company invests. However, tax changes and the constitution of the
Company's shareholder register with a large body of our investors based in New
Zealand means that it is no longer ideal to operate as an investment trust.
Accordingly the Board are actively engaging with advisers in evaluating the
options for the Company, and to enable those shareholders wishing to do so to
opt for cash at close to net asset value. I will make further announcements
about proposals to put to shareholders as soon as I am in a position to do so.
Donald M. Campbell
Chairman
27 June 2007
Investment Manager's Report covering the period from 1 November 2006to 30 April
2007
Performance
The New Zealand Investment Trust performed strongly over the six-month period
ended 30 April
2007. Measured in New Zealand dollars the diluted net asset value rose by
11.5%, a result that compares favourably with the change in the Company's
Benchmark, the NZX All Index, which rose 9.1%.
While our New Zealand investments continued to perform well, the Australian
component of the portfolio once again made a strong contribution to the good
results. In particular the large holdings in the Australian Stock Exchange and
QBE Insurance did well, with 36% and 25% rises in their respective share prices
over the six month period ended 30 April 2007. Among the largest holdings in
New Zealand companies, those in Auckland International Airport and CanWest
MediaWorks stood out with their share prices gaining 22% and 27%. The largest
holding in the portfolio, Fletcher Building, maintained its strong run, with a
further 20% rise in its share price over the period under review. Among the
weaker performing shares during the period were those whose businesses were
affected negatively by the strength of the New Zealand dollar. Notable among
these were Fisher & Paykel Healthcare, whose share price dropped by 11%. Fisher
& Paykel has a rapidly growing business in the US, but while its products
continue to sell well the New Zealand dollar value of those sales has been
severely undermined by the sharp fall in the value of the US dollar.
Portfolio activity
The most significant change made to the portfolio during the period under
review was a switch from the Australian listed specialist buildings materials
company James Hardie, into Cabcharge Australia.
Although James Hardie has a number of high quality products that should enable
it to increase its market share and profits over the long term, it is
significantly exposed to the ailing US housing market. By contrast, Cabcharge
Australia's business has less cyclical growth characteristics. Cabcharge
Australia is growing rapidly by offering its market leading services in the
highly fragmented taxi and transport industries.
Other deals during the period included taking small positions in two new
placements, RP Data and Flexigroup. Both of these holdings were sold three
months after they had been acquired at substantial
profits. Holdings in Sky TV and Contact Energy were added to, funded by a
reduction in the holding of Guinness Peat Group. Sky TV is a beneficiary of
the strong New Zealand dollar due to the fact that much of its programming is
purchased from US providers, while much of Guinness Peat Group's businesses
are based outside New Zealand.
Economic background
The period under review saw contrasting fortunes for global economies. Globally
the picture was one of pessimism about the outlook for the US, with worries
that the sharp deterioration in the housing market would have a damaging impact
on the wider US economy. The focus on the US tended to overshadow the
remarkable performance of emerging economies, notably China's economy, which
along with most other Asian economies continued to grow at a rapid pace.
The growing influence of emerging economies was felt in commodity markets.
Despite the slowdown in the US, commodity prices remained firm. Strong prices
were not restricted to the markets for metals and energy. Increasingly the
prices of soft commodities are being buoyed by growing demand from emerging
markets for food and materials, and due to the growing use of crops in biofuel
production that were previously predominately used for food stuffs. Soft
commodities are crucial in New Zealand's economy and terms of trade, even
though there are comparatively few quoted soft commodity specialist companies.
Nevertheless, the growing strength of the markets for soft commodities is
boosting incomes in New Zealand, and is likely to be a powerful positive
support for the economy in the future. The Australian economy also continues to
benefit from strong commodity markets, and has provided a propitious background
for corporate profitability during the period under review.
Helped in part by its proximity to Asia, New Zealand's economy has been
stronger than most commentators have expected. Recent economic indicators have
shown little sign that New Zealand is being affected negatively by the slowdown
in the US. Indeed, the Reserve Bank of New Zealand has had to raise interest
rates to 8.0%, by some way the highest level in the developed world, to dampen
inflationary pressures. In May it was reported that retail sales for the first
quarter of 2007 rose by 3.8% from the previous quarter, far above economists'
expectations. The strength of the New Zealand dollar, which has been largely
driven by the country's high interest rates, is having a negative impact on
business confidence in the exporting sector, but has had surprisingly little
impact on tourism. Indeed, it appears that the growing affluence of Asian
consumers, and the unsurpassed attractions of New Zealand as a tourist
destination, is more than offsetting the impact of a strong New Zealand dollar.
Conclusion
The uncertain future of The New Zealand Investment Trust is inevitably having
an impact on investment strategy. New positions in illiquid stocks are being
avoided, and the portfolio is being focussed in a relatively concentrated list
of medium and large companies' shares that combine attractive investment
fundamentals with decent liquidity. Until such time as there is a clear and
agreed restructuring programme the majority of the portfolio will continue to
be invested in the shares of New Zealand and Australian companies rather than
cash. We are confident that these remain attractive long term investments.
Richard Scott
Exeter Asset Management
(A subsidiary of iimia Investment Group plc)
Acting on advice from
Brook Asset Management Ltd
27 June 2007
The Directors announce the unaudited statement of interim results for the six
months ended 30 April 2007 as follows:
INCOME STATEMENT
(incorporating the profit and loss account* of the Company)
1 November 2006 1 November 2005
to 30 April 2007 to 30 April 2006
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains on - 6,782 6,782 - 2,033 2,033
investments
at fair value
Realised - (19) (19) - 14 14
exchange
(losses)/gains
on capital
items
Unrealised - 36 36 - (93) (93)
exchange gains/
(losses) on
capital items
Unfranked 744 - 744 639 - 639
investment
income
Bank interest 52 - 52 72 - 72
Investment (87) - (87) (77) - (77)
Manager's fee
Investment (96) - (96) (88) - (88)
Adviser's fee
Cost of share - - - (1) - (1)
options
Other expenses (149) - (149) (134) - (134)
Return on 464 6,799 7,263 411 1,954 2,365
ordinary
activities
before taxation
Taxation on (131) - (131) (89) - (89)
ordinary
activities
Return on
ordinary
activities
after
taxation for 333 6,799 7,132 322 1,954 2,276
the period
Basic return 3.21p 65.45p 68.66p 3.03p 18.38p 21.41p
per Ordinary
share
Diluted return 3.20p 65.27p 68.47p 3.02p 18.33p 21.35p
per Ordinary
share
* The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital columns are prepared under
guidance published by the Association of Investment Companies.
A separate statement of total recognised gains and losses has not been prepared
as all gains and losses are included in the income statement.
These accounts have been prepared using the accounting standards and policies
adopted at the year end.
All revenue and capital items in the above statement derive from continuing
operations.
These accounts are unaudited and are not the Company's statutory accounts.
BALANCE SHEET
As at As at As at
30 April 31 October 30 April
2007 2006 2006
�'000 �'000 �'000
(Unaudited) (Audited) (Unaudited)
Fixed assets
Investments at fair value through 43,216 38,538 39,002
profit or loss
Current assets
Debtors 1,319 32 47
Cash at bank 2,705 2,140 2,026
4,024 2,172 2,073
Creditors : amounts falling due (2,759) (273) (615)
within
one year
Net current assets 1,265 1,899 1,458
Total assets less current 44,481 40,437 40,460
liabilities
Provision for deferred taxation (4) - -
Total net assets 44,477 40,437 40,460
Share capital and reserves
Share capital 2,688 2,688 2,686
Share premium 9,192 9,192 9,184
Capital redemption reserve 89 89 89
Capital reserve 34,716 27,917 27,298
Own shares held (3,818) (726) (370)
Share options reserve 1 1 1
Revenue reserve 1,609 1,276 1,572
Total net assets 44,477 40,437 40,460
Retained revenue for the current (333) - (322)
period
Total net assets for the purpose 44,144 40,437 40,138
of calculating the net asset value
per Ordinary share
Basic net asset value per Ordinary 453.95p 384.20p 377.69p
share
Fully diluted net asset value per 452.20p 383.10p 376.53p
Ordinary share
Basic net asset value per Ordinary
share
including current period revenue 457.38p 384.20p 380.72p
Fully diluted net asset value per 455.60p 383.10p 379.54p
Ordinary
share including current period
revenue
The basic net asset value per Ordinary share is based on net assets of �
44,144,000 (31 October 2006: �40,437,000 and 30 April 2006: �40,138,000) and on
9,724,350 Ordinary shares (31 October 2006: 10,525,060 and 30 April 2006:
10,627,187) being the number of Ordinary shares in issue at the period end
(excluding 1,025,870 Ordinary shares held in Treasury as at 30 April 2007,
225,160 as at 31 October 2006 and 117,033 as at 30 April 2006 respectively).
The fully diluted net asset value per Ordinary share has been calculated on the
assumption that the options granted are exercised at 161.47p, 173.53p, 189.30p,
239.23p and 319.38p respectively. The figure is therefore based on adjusted net
assets of �44,322,000 and on 9,801,350 Ordinary shares being the adjusted
number of Ordinary shares that would result from the exercise of the options.
At 30 April 2007 the issued share capital of the Company was 10,750,220
Ordinary shares of 25 pence each (of which 1,025,870 Ordinary shares were held
in Treasury) (31 October 2006:10,750,220 and 30 April 2006: 10,744,220,
including 225,160 and 117,033 Ordinary shares held in Treasury respectively).
On 12 September 2001 the Directors were each issued an option for 3,000
Ordinary shares of the Company. The options are exercisable at 161.47p each
(being the latest available net asset value at that date) at any date after 12
September 2004 but before 20 June 2011.
On 5 March 2002 the Directors were each issued with a further option for 3,000
Ordinary shares of the Company. The options are exercisable at 173.53p each
(being the latest available net asset value at that date) at any date after 5
March 2005 but before 5 March 2012.
On 16 May 2003 the Directors were each issued with a further option for 3,000
Ordinary shares of the Company. The options are exercisable at 189.30p each
(being the latest available net asset value at that date) at any date after 16
May 2006 but before 16 May 2013.
On 23 March 2004 the Directors were each issued with a further option for 2,000
Ordinary shares of the Company. The options are exercisable at 239.23p each
(being the latest available net asset value at that date) at any date after 23
March 2007 but before 23 March 2014.
On 14 April 2005 the Chairman, Mr Campbell was issued with a further option for
3,000 Ordinary shares of the Company and the other Directors were each issued
with a further option for 2,000 Ordinary shares of the Company. The options are
exercisable at 319.38p each (being the latest available net asset value at that
date) at any date after 14 April 2008 but before 14 April 2015.
On 27 April 2006 the Chairman, Mr Campbell was issued with a further option for
3,000 Ordinary shares of the Company and the other Directors were each issued
with a further option for 2,000 Ordinary shares of the Company. The options are
exercisable at 370.48p each (being the latest available net asset value at that
date) at any date after 27 April 2009 but before 27 April 2016.
In the period the Company purchased for Treasury 800,710 Ordinary shares for a
total cost of �3,092,000. At the period end the Company held 1,025,870 Ordinary
shares in Treasury.
As at the date of this report the issued share capital of the Company was
10,750,220 Ordinary shares of 25 pence each (of which 1,025,870 Ordinary shares
were held in Treasury).
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
for the period 1 November 2006 to 30 April 2007
Capital Own Share
Share Share redemption Capital shares options Revenue
capital premium reserve reserve held reserve reserve Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Six months
to 30 April
2007
31 October 2,688 9,192 89 27,917 (726) 1 1,276 40,437
2006
Net return - - - 6,799 - - 333 7,132
for the
period
Costs of - - - - (3,092) - - (3,092)
shares
purchased
for Treasury
30 April 2,688 9,192 89 34,716 (3,818) 1 1,609 44,477
2007
Year ended
31 October
2006
At 31 2,686 9,184 89 25,344 (322) - 1,250 38,231
October 2005
Net return - - - 2,573 - - 717 3,290
for the
period
Dividends - - - - - - (691) (691)
paid
Cost of - - - - - 1 - 1
share
options to
separate
reserve
Options 2 8 - - - - - 10
conversion
to Ordinary
shares
Cost of - - - - (404) - - (404)
shares
purchased
for Treasury
31 October 2,688 9,192 89 27,917 (726) 1 1,276 40,437
2006
Six months
to 30 April
2006
31 October 2,686 9,184 89 25,344 (322) - 1,250 38,231
2005
Net return - - - 1,954 - - 322 2,276
for the
period
Cost of - - - - - 1 - 1
share
options to
separate
reserve
Cost of - - - - (48) - - (48)
shares
purchased
for Treasury
30 April 2,686 9,184 89 27,298 (370) 1 1,572 40,460
2006
STATEMENT OF CASHFLOWS
1 November 2006 1 November 2005
to 30 April 2007 to 30 April 2006
�'000 �'000
Operating activities
Investment income received 651 568
Interest received 52 80
Investment Manager's fees (40) (75)
paid
Investment Adviser's fees (96) (88)
paid
Secretarial fees paid (28) (28)
Directors' fees paid (18) (12)
Other cash payments (77) (51)
Net cash inflow from 444 394
operating activities
Tax recovered - 26
Capital expenditure and
financial investment
Purchases of investments (3,551) (1,177)
Sales of investments 4,376 -
Exchange (losses)/gains on (19) 14
settlements
Net cash inflow/(outflow) 806 (1,163)
from capital expenditure and
financial investment
Equity dividends paid - -
Net cash inflow/(outflow) 1,250 (743)
before financing
Financing
Cost of shares purchased for (722) (48)
Treasury
Net cash outflow from (722) (48)
financing
Increase/(decrease) in cash 528 (791)
Note
The above financial information for the six months to 30 April 2007 and 30
April 2006 is unaudited and does not constitute statutory accounts as defined
in Section 240 of the Companies Act 1985. The statutory accounts for the year
to 31 October 2006, which contained an unqualified auditors report, have been
lodged with the Registrar of Companies and did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.
END
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