ANW.L Regulatory News (ANW)

ABERDEEN NEW THAI INVESTMENT TRUST PLC

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 AUGUST 2016

The following is the unaudited Interim Board Report for the Six months ended 31 August 2016.

INTERIM BOARD REPORT

Interim Board Report

Investment Objective

The investment objective of the Company is to provide shareholders with a high level of long-term, above average capital growth through investment in Thailand.

Investment Process

Longer term shareholders will know that our Manager's investment process, which has served us well over the years, is designed to ensure that investments are made in companies with solid balance sheets, healthy revenue accounts with strong cash flows, and where management have experience of business cycles and treat their shareholders fairly. The portfolio is positioned with our holdings either in market leaders in their respective industries or well managed small cap companies. The recent market strength has been driven by gains in more speculative securities (which are now trading on exceptionally high multiples) and we have therefore lagged the Stock Exchange of Thailand Index ("SET Index") over the last six months. However, we remain confident that the portfolio remains positioned for the longer term with an eye to any political risk.

Performance

Thai equities rose markedly during the period under review despite bouts of volatility. The Company's benchmark, the SET Index, rose by 29.0% (sterling total return) in a liquidity driven market as predominantly passive foreign fund inflows drove larger capitalisation stocks higher. This compared to a 19.4% increase in the Company's net asset value total return which, whilst a solid increase, reflected our Manager's defensive portfolio positioning and our small cap holdings' relative underperformance. Meanwhile, the Ordinary shares reached 477.75p, representing a total return of 19.7%, assuming dividends are reinvested. Notably, sterling weakness caused by the Brexit vote pushed the baht up more than 9%, magnifying the returns for UK investors. More encouragingly, over the last five years, your Company's gross portfolio total return has been 14.4% per annum, compared with the SET Index total return of 13.0% per annum, again in sterling terms.

Overview

A solid rally in Thai equities that began at the start of 2016 extended into the reporting period. The market was among the world's best performers during an eventful six months. Prices, however, of many stocks became somewhat unshackled from the realities of their business operations, as well as earnings. For instance, Thai Airways (not held in the portfolio) posted returns of almost 200% during the review period, despite having a weak balance sheet and it requiring significant operational restructuring to improve efficiencies. Not holding certain stocks such as PTT, CP All or CP Foods also detracted from overall returns.

On the external front, the US Federal Reserve's decision to keep interest rates on hold and projections for fewer rate rises emboldened investors. China's policy attempts at stabilisation and efforts to avoid further market shocks also helped quell market jitters. Although Thailand was not immune to the global sell-off that ensued following Britain's historic vote to leave the EU, the market rebounded swiftly, as investors, leery of European markets, favoured emerging ones instead. Expectations of more monetary easing from major central banks further supported sentiment. At home, a series of bomb attacks at several popular tourist destinations provided cause for concern, but did not appear to dent risk appetite or cripple the vital tourism industry.

The Thai economy started to bear the fruit of last year's fiscal stimulus. Although both the central bank and finance ministry downgraded their full-year growth forecasts, GDP growth advanced at a better-than-expected pace in the first half. Tourism continued to be the shining star that underpinned the economy. Consumer confidence rose towards the period-end after the country's worst drought in decades began to ease. Automotive production and domestic vehicle sales showed signs of improvement, but failed to fully mitigate stubbornly sluggish exports.

To stimulate consumption further, the government introduced a scheme that allows for tax deductions on purchases of specific community-based products, such as handicrafts, garments and pottery. In addition, cabinet approved changes to the personal income-tax system from next year, including greater deductions and widening taxable income brackets to benefit middle-income earners. Meanwhile, the Bank of Thailand kept rates on hold throughout the period, deeming the policy rate sufficiently accommodative. Separately, it launched a new payment platform to reduce bank transfer fees.

In politics, investors cheered the results of a referendum that saw most voters approve the constitution drafted by the junta. This paves the way for a 2017 general election and potential return to political normalcy.

Portfolio

The Company performed well in absolute terms on the back of market optimism. This was despite underperforming the SET Index.

From a fundamental business point of view, the portfolio of companies performed much in-line with your Manager's expectations. The share prices of the underlying holdings tended to lag the rally, largely because they are more defensive in nature than the speculative names that led the run-up.

Among the portfolio's holdings, Homepro was the largest contributor, as the retailer bucked the industry trend to bounce back with decent sales and margins. In particular, the unusually hot summer boosted sales of air conditioners and fans. Homepro's extensive network, wide range of products and adroit working capital management continued to hold the company in good stead.

Banpu also rebounded, in tandem with recovering coal prices, after a prolonged rout. The company is looking to repay debt by spinning off its power division in an initial public offering. Another holding with good profit margins is the tube and can manufacturer Alucon. Healthy demand for its end-products continued to drive income. Coca-Cola bottler Haad Thip was also boosted by high profits and good sales volumes.

In the banking sector, Tisco Financial Group was among the portfolio's best-performing holdings. Although the sector remained weak, smaller lenders like Tisco were more resilient, as reflected by an improvement in non-performing loans. Tisco's main automotive loans business benefited from increasing second hand vehicles prices and a revival in sales of cars and trucks.

Conversely, Big C Supercenter ("Big C") was the top detractor, as its operating environment remained challenging in the context of ongoing weakness in domestic consumption, which only showed signs of a pick-up towards the period-end. Your Manager chose not to participate in Berli Jucker's tender offer for the retailer, taking the view that the price was not attractive enough. Your Manager believes Big C has the potential to unlock some of the constraints imposed by its former owner, Casino Group, and capitalise on synergies with Berli Jucker parent, TCC Group. Big C's profits remained resilient on the back of rental and service income, as well as lower interest expenses.

BEC World continued to face stiff competition in its digital TV division, and suffered from lower advertising revenues. This was in line with the broader industry trend. TV remains the dominant platform for advertisers, and BEC's high-quality content has helped the company retain a sizeable market share. Your Manager is confident of its ability to weather the economic downturn.

Bangkok Insurance lagged the broader market rally, but reported resilient results and paid out higher dividends. Another holding in this sector, Thai Reinsurance, was weighed down by poor headline numbers, but it was able to pay its first dividend in five years. Much of its losses were incurred from reclassifying its investment in Thaire Life Assurance, a portfolio holding that enjoyed healthy bottom-line growth.

Cyclical factors were responsible for some holdings' underperformance. For Hana Microelectronics, this was driven by inventory cycles and soft notebook sales. However, its operations are diversified and stable, and its balance sheet remains robust. LPN Development reported lacklustre pre-sales of new condominium projects. Its core customer base was hampered by lower purchasing power among those in the lower-to-middle income brackets, and the banks' clampdown on mortgage approvals. Despite the challenges, the company reported good earnings with healthy margins. Meanwhile, the unusually dry weather detracted from Eastern Water Resources' performance, but the company continues to post steady growth driven by sales volumes on the eastern seaboard.

Elsewhere, Siam City Cement's share price was depressed since the change in major shareholder in 2015, from Holcim to Jardine Cycle & Carriage. However, there has been no change in its fundamentals. The company recently made a number of significant acquisitions across high growth markets in Asia.

Portfolio activity was minimal during the review period, in keeping with your Manager's long-term buy-and-hold approach. Your Manager took profits on names that performed well, including Kasikornbank, Siam Commercial Bank, Homepro and PTT Exploration and Production, and used the proceeds to top up Hana Microelectronics and Siam City Cement.

Outlook

Ample liquidity from low interest rates at home and abroad should continue to propel Thai equities. Analysts' predictions of central bank policy divergence made late last year have not panned out. Instead, the US Federal Reserve's reluctance to hike rates has brought it in line with the 'lower for longer' monetary policy stance of other major central bankers. Meanwhile, Thailand, because of its reliance on exports, continues to reckon with moderating Chinese demand.

Domestically, the macroeconomic situation remains mixed, with some sectors showing green shoots and others struggling to gain a solid foothold. The government's attempts at stimulating expansion have reaped some rewards, but the full extent of its efforts remains to be seen. Still, there remain risks on the political front. Although investors have overlooked the bombings, the violence points to underlying problems that may need to be addressed some time in the future.

Much of the Thai market's spectacular run this year has come from foreign inflows on the back of renewed interest in emerging markets, and from the growth of ETFs or indexed funds, rather than from actively-managed portfolios. In many cases, valuations appear somewhat untethered from fundamentals. The upswing may not last. This means that there remains great value in a bottom-up stockpicking approach to investment. I am confident that the well-managed robust businesses in your portfolio have the means and resources to get through tough times, and can outperform in the longer term.

Share Buybacks

The Board continues to monitor the share price discount to NAV and will continue to pursue a policy of selective buybacks of shares where to do so would be in the best interests of shareholders.

During the 6 months ended 31 August 2016 the Company bought back and cancelled 326,300 Ordinary shares (2015 - 658,123). As at 31 August 2016, the Company's issued share capital consisted of 19,533,982 Ordinary shares with voting rights. Between 1 September 2016 and the date of approval of this Report, the Company bought back for cancellation a further 229,700 Ordinary shares leaving 19,304,282 shares with voting rights in issue.

Principal Risks and Uncertainties

Management of Risk

Investment in Thai equities involves a greater degree of risk than that usually associated with investment in major securities markets. The securities which the Company owns may be considered speculative because of the higher degree of risk.

The principal risks and uncertainties associated with the Company are set out in detail on pages 8 to 10 of the Annual Report for the year ended 28 February 2016, which is published on the Company's website, and which are applicable for the remaining 6 months of the Company's financial year ended 28 February 2017 as they have been for the period under review.

The risks may be summarised under the following headings:

- Discount volatility

- Dividends

- Financial and Regulatory

- Foreign Exchange risks

- Gearing

- Investment objective

- Liquidity risk

- Market risk

- Operational

- Political risk and Exchange Controls

Additionally, the Company faces new uncertainties further to the 'Leave' decision of the EU Referendum held in June 2016 and the outcome of the US Presidential election due in November 2016.

Transactions with Manager

Mr Hugh Young, a Director of the Company, is also a director of Aberdeen Asset Management PLC and of its subsidiary, Aberdeen Asset Management Asia Limited, the Company's Investment Manager.

Going Concern

The Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist entirely of equity shares in companies listed on the Stock Exchange of Thailand which are, in most circumstances, realisable within a short timescale.

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants. On 28 October 2015, the Company entered into a three-year multi-currency revolving loan facility ("the Facility") with Scotiabank (Ireland) Limited for £10.0m of which £2.65m had been drawn down as at 31 August 2016.

The Directors are mindful of the principal risks and uncertainties disclosed on pages 8 to 10 and in Note 15 to the financial statements of the Annual Report for the year ended 28 February 2016. After making enquiries, including a review of forecasts detailing revenue and liabilities, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Duration

The Company does not have a fixed life. However, under the Articles of Association, if in the 12 weeks preceding the Company's financial year end (28 February) the Ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying NAV over the same period, notice will be given of a special resolution to be proposed at the following Annual General Meeting that the Company be put into voluntary liquidation. After consideration, the Directors have determined that, for these purposes, the relevant NAV will be calculated including undistributed net revenue for the period.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

- the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

- the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

- the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

The Half-Yearly Financial Report for the six months ended 31 August 2016 comprises the Half-Yearly Board Report, the Directors' Responsibility Statement and a condensed set of Financial Statements.

Nicholas Smith

Chairman

10 October 2016

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONDENSED STATEMENT OF CASHFLOWS (UNAUDITED)

NOTES TO THE ACCOUNTS:

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.

For Aberdeen New Thai Investment Trust plc

Aberdeen Asset Management PLC, Secretary

END