Half-year Report

RNS Number : 0273P

Symphony International Holdings Ltd

29 August 2017

 

Symphony International Holdings Limited

Interim Financial Results for the six month period ended 30 June 2017.

29 August 2017

Symphony International Holdings Limited (LSE: SIHL, "SIHL", the "Company" or "Symphony"), the London listed investor in fast growing Asian consumer businesses, today announces its interim results for the six months to 30 June 2017.

Key operational and financial highlights:

·        Symphony's unaudited Net Asset Value ("NAV") at 30 June 2017 ("2Q17") was US$636.9 million, which is 4.0% and 1.4% lower than at 31 March 2017 (US$663.2 million) and 31 December 2016 (US$645.8 million), respectively. NAV per share was US$1.24 compared to US$1.28 and US$1.22, respectively, on the same dates. On a fully-diluted basis (adjusting for in-the-money vested options), the NAV per share at 30 June 2017 was $1.22

·        The change in NAV was predominantly due to cash dividends paid to shareholders, cash used to buyback and cancel shares under the share buyback programme and fair value adjustments to unlisted investments during the quarter, which were partially offset by an increase in the share price of Minor International Pcl ("MINT") and an appreciation in the Thai baht, Malaysian ringgit and Singapore dollar. In addition, the NAV per share was positively impacted by the purchase and cancellation of 3.3% of the shares outstanding at 31 December 2016

·        At 30 June 2017, Symphony's share price had increased by 3.7% since 31 December 2016. The discount to NAV that Symphony's share price traded on 30 June 2017 was 33.1%, which compares to 34.3% at 31 December 2016

·        Temporary investments (which include cash and cash equivalents) and listed investments at 30 June 2017 amounted to US$456.4 million or US$0.89 per share.  Symphony's share price on the same date represented a discount of 6.6% to temporary and listed investments

For further information:

Anil Thadani                                      [phone]

Symphony Asia Holdings Pte. Ltd.

Numis Securities Limited:

Hugh Jonathan                                   [phone]

Nathan Brown                                   

About Symphony International Holdings Limited

Symphony International Holdings Limited (LSE:SIHL) is a London listed strategic investment company that invests in hospitality, healthcare and lifestyle businesses and develops luxury branded real estate in Asia.  It offers a way for investors to gain exposure to rising disposable incomes and wealth in fast growing economies. Symphony's objective is to provide superior capital growth by investing in high quality companies and form long-term business partnerships with talented entrepreneurs and management teams. Symphony's investment team has a broad range of expertise - many of its professionals have been working in Asia for more than 25 years. For more information please visit our website at www.symphonyasia.com.

Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful.

The foregoing may contain certain forward looking or forward sounding statements with respect to the investments, prospects and/or liquidity of the Company. Forward looking statements, by their very nature, involve risk and uncertainty, because they relate to circumstances and events that may or may not take place in the future due to the numerous factors that could cause actual events to differ materially from those implied by any forward looking statements.  Neither the Company nor its Investment Manager undertake to update any such forward looking statements.

No representation or warranty is made by the Company as to the accuracy or completeness of the information contained in this announcement and no liability will be accepted for any loss arising from its use.

This announcement is for information purposes only and does not constitute an invitation or offer to underwrite, subscribe for or otherwise acquire or dispose of any securities of the Company in any jurisdiction.  All investments are subject to risk. Past performance is no guarantee of future returns.  Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions.

This announcement is not an offer of securities for sale into the United States. The Company's securities have not been, and will not be, registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an exemption from registration.  There will be no public offer of securities in the United States.

The Company and the Investment Manager are not associated or affiliated with any other fund managers whose names include "Symphony", including, without limitation, Symphony Financial Partners Co., Ltd.

Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful.

 

29 August 2017

Symphony International Holdings Limited

Interim Financial Results for the six-month period ended 30 June 2017

Symphony International Holdings Limited (the "Company" or "Symphony") announces the interim results for the six months ended 30 June 2017. The condensed interim financial statements of the Company and its subsidiaries have been prepared in accordance with IAS 34 Interim Financial Reporting and have not been audited or reviewed by the auditors of the Company.

Introduction

The Company is an investment company initially incorporated as a limited liability company under the laws of the British Virgin Islands on 5 January 2004. The Company voluntarily re-registered itself as a BVI Business Company on 17 November 2006. The Company's investment objectives are to increase the aggregate net asset value of the Company ("NAV") calculated in accordance with the Company's policies through strategic longer-term investments in consumer-related businesses, primarily in the healthcare, hospitality and lifestyle ("HH&L") sectors (including branded real estate developments) and through investments in special situations and structured transactions, which have the potential to generate attractive returns and to enhance the NAV.

The Company was admitted to the Official List of the UK Listing Authority on 3 August 2007 under Chapter 14 of the UK Listing Rules and its securities were admitted to trading on the London Stock Exchange's main market for listed securities on the same date.

Symphony's Investment Manager is Symphony Asia Holdings Pte. Ltd. (the "Investment Manager" or "SAHPL"). The Company has entered into an Investment Management Agreement with the Investment Manager. SAHPL's licence for carrying on fund management in Singapore is restricted to serving only accredited investors and/ or institutional investors. Symphony is an accredited investor.

As at 30 June 2017, the issued share capital of the Company was US$400.89 million (30 June 2016: US$414.08 million) consisting of 511,885,713 (30 June 2016: 528,838,811) ordinary shares.

Net Asset Value

The NAV attributable to the ordinary shares on 30 June 2017 was US$1.244 (30 June 2016: US$1.3472) per share.  This represented a 1.9% increase over the NAV per share of US$1.221 at 31 December 2016.  On a fully diluted basis (adjusting for in-the-money vested options), the NAV per share was US$1.221 at 30 June 2017 (30 June 2016: US$1.3315).

 

Portfolio Overview

The following is an overview of the Company's portfolio as at 30 June 2017:

Minor International Public Company Limited ("MINT") is a diversified consumer business and is one of the largest hospitality and restaurant companies in the Asia-Pacific region. Anil Thadani (a Director of the Company) currently serves on MINT's board of directors. Sunil Chandiramani (a Director of the Company) currently serves as an advisor to MINT's board of directors. MINT is a company that is incorporated under the laws of Thailand and is listed on the Stock Exchange of Thailand. 

MINT owns 69 hotels and manages 86 other hotels and serviced suites with 19,896 rooms. In addition to owning hotels under the Four Seasons, St. Regis and Marriott brands, MINT owns and manages hotels under its own brand names that include Anantara, Oaks, Elwana, Avani,  Per AQUUM and Tivoli in 24 countries.

As at 30 June 2017, MINT also owned and operated 2,037 restaurants (comprising 1,031 equity-owned outlets and 1,006 franchised outlets) under the brands The Pizza Company, Swensen's, Sizzler, Dairy Queen, Burger King, Beijing Riverside, Thai Express, The Coffee Club, Veneziano Coffee Roasters, and Breadtalk. Approximately two-thirds of these outlets are in Thailand with the remaining number in other Asian countries and the Middle East. MINT's operations also include contract manufacturing an d an international lifestyle consumer brand distribution business in Thailand focusing on fashion, cosmetics through retail (339 outlets), wholesale and direct marketing channels under brands that include GAP, Esprit, Bossini, Tumi and Zwilling Henckels amongst others.

As at 30 June 2017, the Company's gross investment in MINT was approximately US$74.0 million through the acquisition of ordinary shares (including shares in Minor Corporation Public Company Limited that were exchanged for ordinary shares in MINT) and exercise of warrants.

The Company sold 4 million, 25.3 million and 4.2 million shares in 2014, 2016 and the first half of 2017, respectively. The gross proceeds from these sales amounted to US$36.2 million, which reduced the Company's net investment cost in MINT to US$37.8 million.  As at 30 June 2017, the fair market value of the Company's investment in MINT was US$393.7 million (31 December 2016: US$336.0 million), representing an unrealised gain in value of approximately US$355.9 million. Symphony has also received aggregate after tax dividends if US$21.2 million from the date of the investment to 30 June 2017.

Minuet Ltd ("Minuet") is a joint venture between the Company and an established Thai partner. The Company has a direct 49% interest* in the venture and is considering several development and/or sale options for the land owned by Minuet, which is located in close proximity to central Bangkok, Thailand.

*  The Company also has a 49% shareholding in La Finta Limited, which itself holds a 2% interest in Minuet.

The Company initially invested approximately US$78.3 million by way of an equity investment and interest bearing shareholder loan for its interest in Minuet. Since the initial investment by the Company, Minuet has received proceeds from rental income and partial land sales.  As at 30 June 2017, the Company's investment cost (net of shareholder loan repayments) was approximately US$47.2 million. The fair value of the Company's interest in Minuet as at 30 June 2017 was US$80.2 million (31 December 2016: US$76.7 million) based on an independent third party valuation.

IHH Healthcare Berhad ("IHH") is one of the largest healthcare providers in the world by market capitalisation. Its portfolio of healthcare assets includes Parkway Holdings Limited, Pantai Holdings Berhad, International Medical University and Acibadem Saglik Yatirimlari Holding A.S. ("Acibadem"). IHH has a broad footprint of assets in Asia as well as Turkey, Abu Dhabi, Central and Eastern Europe that employ 30,000 people and operate over 10,000 licensed beds in 50 hospitals in ten countries worldwide.

The Company invested US$50.1 million in February 2012 to acquire shares in Integrated Healthcare Hastaneler Turkey Sdn Bhd, which were subsequently converted into 56,203,299 shares of IHH at the time of IHH's IPO in July 2012.  During 2015 and 2016 the Company sold 14.0 million and 3.4 million shares of IHH, respectively, in the market. The Company's cost, net of proceeds from these sales amounted to approximately US$21.6 million at 30 June 2017. On the same date, the fair value of the Company's investment in IHH was US$52.0 million (31 December 2016: US$54.9 million), representing an unrealised gain in value of approximately US$30.4 million. Since the initial investment in IHH, Symphony has received aggregate dividends and has dividends receivable that amount to US$1.3 million up to 30 June 2017.

Christian Liaigre Group ("CLG"): Symphony announced in May 2016 that it acquired, as part of a consortium, Financier CL SAS, the holding company of the Christian Liaigre Group ("CLG"). The Liaigre brand is synonymous with discreet luxury, and has become one of the most sought-after luxury furniture brands. CLG has a strong intellectual property portfolio and offers a range of bespoke furniture, lighting, fabric & leather, and accessories through a network of 26 showrooms in 11 countries across Europe, the US and Asia. In addition, CLG also undertakes exclusive interior architecture projects for select yachts, hotels, restaurants and private residences. In January 2017, Symphony entered into an assignment agreement to take-up part of a bridge loan.

Parkway Life Real Estate Investment Trust ("PREIT") is one of Asia's largest listed healthcare real estate investment trusts by asset size. It is listed on the Singapore Exchange. PREIT was established by Parkway Holdings Limited to invest primarily in income-producing real estate and/or real estate-related assets in the Asia-Pacific region (including Japan and Singapore) that is/are used primarily for healthcare and/or healthcare-related purposes. As at 30 June 2017, PREIT's total portfolio size stood at 49 properties with a value of approximately S$1.7 billion. PREIT owns the leasehold to three Singapore hospitals, which are leased to Parkway Holdings Limited on long-term leases, and a mixture of leasehold and freehold ownership of 45 properties in Japan (comprising 44 nursing homes and one pharmaceutical manufacturing unit) and strata titled units/lots within Gleneagles Medical Centre, Kuala Lumpur, Malaysia. At 30 June 2017, the Company held 12.8 million units in PREIT, which equates to a shareholding of approximately 2.1 per cent.

As at 30 June 2017, the Company's gross investment cost was US$33.8 million (31 December 2016: US$33.8 million) in PREIT units. The Company sold 1.2 million and 24.5 million units in PREIT in 2016 and the first half of 2017, respectively. The net proceeds from these sales amounted to US$45.1 million providing a surplus in proceeds over cost of US$11.3 million. The fair value of Symphony's residual interest at 30 June 2017 was US$24.9 million (31 December 2016: US$60.5 million), together with the surplus over cost it represents an unrealised gain in value of approximately US$36.2 million. Since the initial investment in PREIT, Symphony has also received aggregate dividends of US$26.5 million up to 30 June 2017.

Desaru property joint venture in Malaysia ("Desaru") - The Company has a 49% interest in redeemable preference shares in a property joint venture in Malaysia with an affiliate of Destination Resorts and Hotels Sdn Bhd, a hotel and destination resort investment subsidiary of Khazanah Nasional Berhad, the investment arm of the Government of Malaysia. The joint venture is developing a beachfront country club and private villas on the south-eastern coast of Malaysia that will be branded and managed by Amanresorts.

The Company invested approximately US$29.0 million in January 2012 for its interest in Desaru. Based on an independent third party valuation, the investment was valued at US$22.6 million million at 30 June 2017 (31 December 2016: US$21.4 million).

WCIB International Co. Ltd ("WCIB") - Symphony announced in January 2017 that it entered into a joint venture, WCIB International Co. Ltd. ("WCIB"), that will build and operate Wellington College International Bangkok, the fifth international addition to the Wellington College family of schools. WCIB will operate a co-educational school that will cater to over 1,500 students aged 2-18 years of age when fully completed.

C Larsen Singapore Pte Limited ("C Larsen") is an importer and distributor of high-end US and European furniture brands that include Christian Liaigre, Barbara Barry, Baker, Herman Miller, Minotti, Thomasville, and Bulthaup. The market served by this business is primarily Thailand, but the intention is to grow the business gradually into other parts of Asia. Recently, a new F&B business was added to the company under the brand of Clinton Street Baking Company.

SG Land Co. Ltd ("SG Land") - is a joint venture company that owns the leasehold rights for two office buildings in downtown Bangkok - SG Tower and Millenia Tower. The two buildings in SG Land's portfolio have high occupancy rates and offer attractive rental yields. The Company holds a 49.9% interest in the venture.

The value of SG Land as at 30 June 2017 was US$10.7 million (31 December 2016: US$10.0 million) based on an independent third party valuation.

Niseko property Joint Venture in Japan - The Company invested in a property development venture in March 2011 that acquired two hotels in Niseko, Hokkaido, Japan, which were demolished in late 2012 and are intended to be redeveloped into an upmarket ski-resort development. The joint venture is still evaluating its options in relation to the development of the project. The Company has a 37.5% interest in the venture. The investment amount was less than 2% of NAV.

Wine Connection Group: At the end of April 2014, Symphony invested in the Wine Connection Group ("WCG"), Southeast Asia's leading wine themed F&B chain. WCG currently has over 70 outlets located in Singapore, Thailand and Malaysia. The investment amount was less than 2% of NAV.

Global Healthcare Services Portfolio - During the fourth quarter of 2016, SIHL invested in a portfolio of listed healthcare companies. This investment represents a first step towards gaining diversified exposure to the healthcare sector using a portfolio approach and the scope may be expanded in the future to cover other sectors as well.

Structured Transaction - In February 2014, Symphony completed a structured transaction, which provides a minimum return of 15% per annum. Following the repayment of interest and part of the principal balance during the second quarter of 2017, the amount outstanding was reduced to less than 1% of NAV.

Cash and cash equivalents

Pending investment in suitable opportunities, Symphony has placed funds in certain temporary investments.  As at 30 June 2017, cash and cash equivalents that predominantly comprised bank deposits amounted to US$11.9 million.

Outlook

Financial markets generally performed well during the first half of 2017 despite uncertainty over the geopolitical climate. In particular, there remain concerns over the protectionist agenda and foreign policy of the current US administration, ongoing Brexit negotiations, an escalation in tensions with North Korea and continued conflict in the Middle East.

Despite the concerns over trade and geopolitical security, the economic outlook is positive.  In July, the International Monetary Fund ("IMF") released its revised economic forecast. The IMF kept its forecast unchanged for global output growth at 3.5% and 3.6% for 2017 and 2018, respectively, as growth in global trade and industrial production remained well above 2015-2016 growth rates. For Emerging and Developing Asia, the IMF increased its output growth forecast to 6.5% from 6.4% for both 2017 and 2018 due to a pickup in global trade and strengthening domestic demand, and China's policy easing and supply-side reforms inclusive of anticipated delays to fiscal adjustments. As a result, the IMF's forecasts for China's output growth increased to 6.7% from 6.6% and to 6.4% from 6.2% for 2017 and 2018, respectively, but for India output estimates were maintained at growth of 7.2% and 7.7% for 2017 and 2018, respectively.

Symphony's listed investments that include MINT, IHH Healthcare Berhad ("IHH"), and PREIT continued to build their respective portfolios during the first six-months of 2017. MINT entered the India hospitality market with the Oaks brand, added additional managed properties and increased its interest in the Riverside restaurants group in addition to other restaurant openings. IHH announced it broke ground for the new Gleneagles Shanghai hospital and increased its interest in Continental Hospitals and PREIT acquired an additional yield accretive nursing home in Japan.

Symphony's unlisted lifestyle investments that include CLG, WCG and C Larsen continue to focus on building their operations while WCIB is being developed to begin operations in late 2018. With respect to Symphony's land related investments, the Desaru Amanresorts development is ongoing and expected to launch later this year and we continue to explore strategic options for property investments in Thailand and Japan.

Symphony continues to support the management teams of its portfolio companies and is currently evaluating several opportunities to grow its portfolio.

Principal Risks

Some of the risks that the Company is exposed to are described below.

The Company's and the Company's investment management team's past performance is not necessarily indicative of the Company's future performance and any unrealised values of investments presented in this document may not be realised in the future.

The Company is not structured as a typical private equity vehicle (it is structured as a permanent capital vehicle), and thus may not have a comparable investment strategy. The Company is more likely to invest as a long-term strategic partner in investments which may be less liquid and which are less likely to increase in value in the short term.

The Company's organisational, ownership and investment structure may create certain conflicts of interests (for example in respect of the directorships, shareholdings or interests, including in portfolio companies that some of the Directors and members of the Company's investment management team may have). In addition, neither the Investment Manager nor any of its affiliates owes the Company's shareholders any fiduciary duties under the Investment Management Agreement between, inter alia, the Company and the Investment Manager. The Company cannot assume that any of the foregoing will not result in a conflict of interest that will have a material adverse effect on the business, financial condition and results of operations.

The Company is highly dependent on the Investment Manager, the Key Persons (as defined in the Investment Management Agreement) and the other members of the Company's investment management team and the Company cannot assure shareholders that it will have continued access to them or their undivided attention, which could affect the Company's ability to achieve its investment objectives.

Shareholders have no rights to direct the Company's investments or its investment policies and procedures, since the Investment Manager has a broad discretion as regards this. The decision to make changes (material or otherwise) to the Company's investment policy and strategy rests solely with the Board. Only in very limited circumstances: (i) does the Board have a prior right of approval in respect of the making of investments or disposals; and (ii) is the Company able to remove the Investment Manager (which do not include the underperformance of the Investment Manager and/or the Company's investments).

The Investment Manager's remuneration is based on the Company's NAV (subject to minimum and maximum amounts) and is payable even if the NAV does not increase, which could create an incentive for the Investment Manager to increase or maintain the NAV in the short term (rather than the long-term) to the potential detriment of Shareholders.

The Company is exposed to foreign exchange risk when investments and/or transactions are denominated in currencies other than the U.S. Dollar, which could lead to significant changes in the NAV that the Company reports from one quarter to another.

The Company's investments include investments in companies that it does not control, meaning that there is a risk that such portfolio companies may make decisions which do not serve the Company's interests.

 

The Company has made, and may continue to make, investments in companies in emerging markets, which exposes it to additional risks (including, but not limited to, the possibility of exchange control regulations, political and social instability, nationalisation or expropriation of assets, the imposition of taxes, higher rates of inflation, difficulty in enforcing contractual obligations, fewer investor protections and greater price volatility) not typically associated with investing in companies that are based in developed markets. Furthermore, the Company has made, and may continue to make, investments in portfolio companies that are susceptible to economic recessions or downturns. Such economic recessions or downturns may also affect the Company's ability to obtain funding for additional investments.

The Company's investment policies contain no requirements for investment diversification and its investments could therefore be concentrated in a relatively small number of portfolio companies in the HH&L sectors (including branded real estate developments) within the Asia-Pacific region.

The Investment Manager has identified but has not yet contracted to make further potential investments. The Company cannot guarantee shareholders that any or all of these prospective investments will take place in the future.

The Company cannot assure shareholders that the values of investments that it reports from time to time will in fact be realised. For certain of the Company's investments, there is no single standard for determining fair value and, in many cases, fair value is best expressed as a range of fair values from which a single estimate may be derived. The NAV could be adversely affected if the values of investments that it records are materially higher than the values that are ultimately realised upon the disposal of the investments.

A number of the Company's investments are currently, and likely to continue to be, illiquid and/or may require a long-term commitment of capital. The Company's investments may also be subject to legal and other restrictions on resale. The illiquidity of these investments may make it difficult to sell investments if the need arises.

The Company's real estate investments may be subject to the risks inherent in the ownership and operation of real estate businesses and assets. A down turn in the real estate sector or a materialisation of any of the risks inherent in the real estate business and assets could materially adversely affect the Company's real estate investments. The Company's portfolio companies also anticipate selling a significant proportion of development properties prior to completion. Any delay in the completion of these projects may result in purchasers terminating off plan sale agreements and claiming refunds, damages and/or compensation.

The Company's current investment policies and procedures provide that it may invest an amount equivalent to not less than 70% of its total assets, as determined at the time of each investment, predominantly in longer-term investments in the HH&L sectors (including branded real estate developments) in the Asia-Pacific region and no more than 30% of its total assets in special situations and structured transactions which, although they are not typical longer-term investments, have the potential to generate attractive returns and enhance the Company's net asset value.

 

The market price of the Company's shares may fluctuate significantly and shareholders may not be able to resell their shares at or above the price at which they purchased them.

The Company's shares are currently trading, and have in the past traded, and could in the future trade, at a discount to NAV for a variety of reasons, including due to market conditions.  The only way for shareholders to realise their investment is to sell their shares for cash.  Accordingly, in the event that a shareholder requires immediate liquidity, or otherwise seeks to realise the value of his investment through a sale, the amount received by the shareholder upon such sale may be less than the underlying NAV of the shares sold.

Directors' Responsibility Statement

We, the directors of Symphony International Holdings Limited, confirm that to the best of our knowledge:

(a)    the condensed interim financial statements, which have been prepared in accordance with IAS 34 - Interim Financial Reporting, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R; and

(b)    the interim financial results include a fair review of information required by:

(i)    DTR 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 financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last annual report that could do so.

For and on behalf of the Board of Directors

Pierangelo Bottinelli

Chairman, Symphony International Holdings Limited

Anil Thadani

Chairman, Symphony Asia Holdings Pte. Ltd

Director, Symphony International Holdings Limited

Symphony International Holdings Limited

Condensed statement of financial position

As at 30 June 2017

	Note	30 June 2017	31 December 2016
		US$'000	US$'000
Non-current assets
Financial assets at fair value through profit or loss	6	655,950	638,222
		655,950	638,222
Current assets
Other receivables and prepayments		93	67
Cash and cash equivalents		11,879	15,793
		11,972	15,860
Total assets		667,922	654,082
Equity attributable to equity holders of the Company
Share capital		400,893	414,080
Equity compensation reserve		63,040	62,960
Accumulated profits		173,013	168,713
Total equity		636,946	645,753
Current liabilities
Interest-bearing borrowings (secured)	8	30,602	4,953
Other payables		374	3,362
Bank overdraft		-	14
Total liabilities		30,976	8,329
Total equity and liabilities		667,922	654,082

Symphony International Holdings Limited

Condensed statement of comprehensive income

for the financial period from 1 January 2017 to 30 June 2017

	Note	6 months ended 30 June 2017	6 months ended 30 June 2016
		US$'000	US$'000
Other operating income		4,976	3,209
Other operating expenses		(983)	(544)
Management fees		(7,303)	(7,459)
		(3,310)	(4,794)
Share options expense		(327)	(603)
Loss before investment results and income tax		(3,637)	(5,397)
Fair value changes in financial assets at fair value through profit or loss	6	31,520	61,207
Profit before income tax		27,883	55,810
Income tax expense		-	-
Profit for the period		27,883	55,810
Other comprehensive income for the period, net of tax		-	-
Total comprehensive income for the period		27,883	55,810
		US Cents	US Cents
Earnings per share:
Basic	9	5.36	10.57
Diluted		5.32	10.53

Symphony International Holdings Limited

Condensed statement of changes in equity

for the financial period from 1 January 2017 to 30 June 2017

	Share capital	Equity compensation reserve	Foreign currency translation reserve	Accumulated profits	Total equity
	US$'000	US$'000	US$'000	US$'000	US$'000
At 1 January 2016	413,358	62,074	-	220,154	695,586
Transactions with owners of the Company, recognised directly in equity
Issuance of shares	446	-	-	-	446
Value of services received for issue of share options	-	603	-	-	603
Exercise of share options	276	(276)	-	-	-
Profit for the period	-	-	-	55,810	55,810
Dividend paid	-	-	-	(39,980)	(39,980)
Total transactions with owners of the Company	722	327	-	15,830	16,879
At 30 June 2016	414,080	62,401	-	235,984	712,465
At 1 January 2017	414,080	62,960	-	168,713	645,753
Transactions with owners of the Company, recognised directly in equity
Issuance of shares	373	-	-	-	373
Value of services received for issue of share options	-	326	-	-	326
Exercise of share options	246	(246)	-	-	-
Share buyback	(13,807)	-	-	(1,627)	(15,434)
Profit for the period	-	-	-	27,883	27,883
Dividend paid	-	-	-	(21,955)	(21,955)
Total transactions with owners of the Company	(13,188)	80	-	4,301	(8,807)
At 30 June 2017	400,892	63,040	-	173,014	636,946

Symphony International Holdings Limited

Condensed statement of cash flows

for the financial period from 1 January 2017 to 30 June 2017

				6 months ended 30 June 2017		6 months ended 30 June 2016
				US$'000		US$'000
Cash flows from operating activities
Profit before income tax				27,883		55,810
Adjustments for:
Exchange differences				(4,772)		(2,593)
Interest income				(106)		(616)
Other income				(98)		-
Interest expense				306		12
Fair value changes in financial assets at fair value through profit or loss				(31,520)		(61,207)
Share options expense				326		603
				(7,981)		(7,991)
Changes in working capital:
Decrease in other receivables and prepayments				73		19
(Decrease) in other payables and accrued operating expenses				(4,597)		(6)
Cash used in operations				(12,505)		(7,978)
Interest received (net of withholding tax)				134		875
Net cash used in operating activities				(12,371)		(7,103)
Cash flows from investing activities
Net proceeds from disposal/(purchase) of financial assets at fair value through profit or loss				18,420		(12,016)
Net cash from/(used in) investing activities				18,420		(12,016)
Cash flows from financing activities
Interest paid			(271)		(11)
Dividend paid			(20,389)		(36,938)
Issue of new shares			373		446
Share buyback			(15,434)		-
Proceeds from/(repayment of) borrowings			25,424		(20)
Net cash used in financing activities			(10,297)		(36,523)
Net decrease in cash and cash equivalents			(4,248)		(55,642)
Cash and cash equivalents at beginning of period			15,779		73,142
Effect of exchange rate fluctuations			348		111
Cash and cash equivalents at end of the period			11,879		17,611

Symphony International Holdings Limited

Notes to the condensed interim financial statements

for the financial period from 1 January 2017 to 30 June 2017

These notes form an integral part of the condensed interim financial statements.

1       REPORTING ENTITY

Symphony International Holdings Limited (the "Company") is a company domiciled in the British Virgin Islands.

The financial statements of the Company as at and for the year ended 31 December 2016 are available upon request from the Company's registered office at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola VG1110 British Virgin Islands.                                                               

2       STATEMENT OF COMPLIANCE

These condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.  They do not include all of the information required for full annual financial statements, and should be read in conjunction with the condensed financial statements of the Company as at and for the year ended 31 December 2016.

These condensed interim financial statements were approved by the Board of Directors on 25 August 2017.

3       SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 31 December 2016.  The Company qualifies as investment entity, as a result of which all immediate investments are carried at fair value.

4       Estimates

The preparation of interim financial statements in conformity with International Financial Reporting Standards requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the condensed financial statements as at and for the year ended 31 December 2016.

 

5       financial risk management

The Company's financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended 31 December 2016.

6       Financial assets at fair value through profit or loss

During the financial period ended on 30 June 2017:

i.       During the six month period ended 30 June 2017, Britten Holdings Pte. Ltd. and Symphony (Mint) Investment Limited, subsidiaries of the Company, sold approximately 24.5m shares held in Parkway Life Real Estate and 4.2 million shares held in Minor International PCL., respectively in the market through a series of transactions; and

ii.      On 27 January 2017, the Company's wholly owned subsidiary, Dynamic Idea Investments Limited, which holds the Company's interest in the Christian Liaigre Group, entered into an assignment agreement to take-up part of a bridge loan related to this investment. The associated cost for the assignment was less than 5% of NAV

iii.     On 6 June 2017, the Company's wholly owned subsidiary, Teurina Limited, which entered into a structured investment, received the repayment of accrued interest and partial payment of principal associated with the structured investment. The proceeds received were less than 2% of NAV

iv.     The Company recognised a gain in financial assets at fair value through profit or loss of US$31,520,000 (30 June 2016: US$61,207,000).

7       financial instruments

Carrying amounts versus fair values

The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed statement of financial position, are as follows.

	Fair value through profit or loss	Loans and receivables	Other financial liabilities	Total carrying amount	Fair value
	US$'000	US$'000	US$'000	US$'000	US$'000
30 June 2017
Financial assets measured at fair value
Financial assets at fair value through profit or loss	655,950	-	-	655,950	655,950
Financial assets not measured at fair value
Other receivables and prepayments	-	93	-	93	93
Cash and cash equivalents	-	11,879	-	11,879	11,879
	655,950	11,972	-	667,922	667,922
Financial liabilities not measured at fair value
Other payables	-	-	374	374	374
Interest-bearing borrowings (secured)	-	-	30,602	30,602	30,602
Bank overdraft	-	-	-	-	-
	-	-	30,976	30,976	30,976

 

	Fair value through profit or loss	Loans and receivables	Other financial liabilities	Total carrying amount	Fair value
	US$'000	US$'000	US$'000	US$'000	US$'000
31 December 2016
Financial assets measured at fair value
Financial assets at fair value through profit or loss	638,222	-	-	638,222	638,222
Financial assets not measured at fair value
Other receivables and prepayments	-	67	-	67	67
Cash and cash equivalents	-	15,793	-	15,793	15,793
	638,222	15,860	-	654,082	654,082
Financial liabilities not measured at fair value
Other payables	-	-	3,362	3,362	3,362
Interest-bearing borrowings (secured)	-	-	4,953	4,953	4,953
Bank overdraft	-	-	14	14	14
	-	-	8,329	8,329	8,329

Quoted investments

Fair value is based on quoted market bid prices at the financial reporting date without any deduction for transaction costs.

Unquoted investments

The fair value of unquoted equity investments including joint ventures and associates are measured with reference to the enterprise value at which the portfolio company could be sold in an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale, and is determined by using valuation techniques such as (a) market multiple approach that uses a specific financial or operational measure that is believed to be customary in the relevant industry, (b) price of recent investment, or offers for investment, for the portfolio company's securities, (c) current value of publicly traded comparable companies, (d) comparable recent arms' length transactions between knowledgeable parties, and (e) discounted cash flows analysis.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

Other financial assets and liabilities

The notional amounts of financial assets and liabilities with a maturity of less than one year or which reprice frequently (including other receivables, cash and cash equivalents, accrued operating expenses, and other payables) approximate their fair values because of the short period to maturity/repricing.

 

Fair value hierarchy for financial instruments

The table below analyses financial instruments carried at fair value, by valuation method.  The different levels have been defined as follows:

·     Level 1:      quoted prices (unadjusted) in active markets for identical assets or liabilities;

·    Level 2:      inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

·    Level 3:      inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	Level 1	Level 2	Level 3	Total
	US$'000	US$'000	US$'000	US$'000
30 June 2017
Financial assets at fair value through profit or loss (non-current)	-	-	655,950	655,950
31 December 2016
Financial assets at fair value through profit or loss (non-current)	-	-	638,222	638,222

Significant unobservable inputs used in measuring fair value

This table below sets out information about significant unobservable inputs used at 30 June 2017 in measuring financial instruments categorised as Level 3 in the fair value hierarchy.

Description	Fair value at 30 June 2017	Valuation technique	Unobservable input	Range (Weighted average)	Sensitivity to changes in significant unobservable inputs
Rental properties		Income approach	Rental growth rate Occupancy rate Discount rate	0%-6% (Dec 2016: 0%-6%) 77%-82% (Dec 2016: 77-82%) 13% (Dec 2016: 13%)	The estimated fair value would increase if the rental growth rate and occupancy rate were higher and the discount rate was lower.
Land related investments		Comparable valuation method	Price per square meter for comparable land	US$53 to US$1,941 per square meter (Dec 2016: US$51 to US$1,865 per square meter)	The estimated fair value would increase if the price per square meter were higher.

Description	Fair value at 30 June 2017	Valuation technique	Unobservable input	Range (Weighted average)	Sensitivity to changes in significant unobservable inputs
Operating business		Enterprise value using comparable traded multiples	EBITDA multiple (times)	3.2x to 47.8x, median 11.9x (Dec 2016: 4.7x to 116.9x, median 10.9x)	The estimated fair value would increase if the EBITDA multiple was higher.
			Discount for lack of marketability	20% (Dec 2016: 20%)	The estimated fair value would increase if the discount for lack of marketability were lower.

 

The rental growth rate represents the growth in rental income during the leasehold period while the occupancy rates represent the percentage of the building that is expected to be occupied during the leasehold period. Management adopts independent valuation report that determines the rental growth rate and occupancy rate after considering the current market conditions and comparable occupancy rates for similar buildings in the same area.

 

The discount rate is related to the current yield on long-term government bonds plus a risk premium to reflect the additional risk of investing in the subject properties.  Management adopts independent valuation report that determines the discount based on the independent valuers judgement after considering current market rates.

 

The comparable recent sales represent the recent sales prices of properties that are similar to the Group's properties, which are in the same area.  Management adopts independent valuation report to determine the value per square meter based on the average recent sales prices.

 

The EBITDA multiple represents the amount that market participants would use when pricing investments.  The EBITDA multiple is selected from comparable public companies with similar business as the underlying investment. Management obtains the average EBITDA multiple from the comparable companies and applies the multiple to the EBITDA of the underlying investment.  The amount is further discounted for considerations such as lack of marketability.

 

The discount for lack of marketability represents the discount applied to the comparable market multiples to reflect the illiquidity of the investee relative to the comparable peer group.  Management determines the discount for lack of marketability based on its judgement after considering market liquidity conditions and company-specific factors.

 

The investment entity approach requires the presentation and fair value measurement of immediate investments; the shares of intermediate holding companies are not listed.  However, ultimate investments in listed entities amounting to US$470,613,000 are held through intermediate holding companies; the value of these companies are mainly determined by the fair values of the ultimate investments.

 

Level 3 valuations

 

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy.

 

	‹-------- 30 June 2017 -------›		‹---- 31 December 2016 ----›
	Financial assets at fair value through profit or loss	Total	Financial assets at fair value through profit or loss	Total
	US$'000	US$'000	US$'000	US$'000
Balance at 1 January	638,222	638,222	627,292	627,292
Total gains or losses in profit or loss	31,520	31,520	8,571	8,571
Additions/(Deductions)	(13,792)	(13,792)	2,359	2,359
Balance at 30 June/ 31 December	655,950	655,950	638,222	638,222

 

Sensitivity analysis

 

Although the Company believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value.  For fair value measurements in Level 3 assets, changing one or more of the assumptions used to reasonably possible alternative assumptions would have the following effects on the profit or loss:

 

	‹-------- 30 June 2017 --------›		‹-------- 30 June 2016 --------›
	Effect on profit or loss		Effect on profit or loss
	Favourable	(Unfavourable)	Favourable	(Unfavourable)
	US$'000	US$'000	US$'000	US$'000
Level 3 assets	16,689	(17,381)	17,081	(16,527)

The favourable and unfavourable effects of using reasonably possible alternative assumptions have been calculated by recalibrating the valuation model using a range of different values.

For rental properties, the projected rental rates and occupancy levels were increased by 5% for the favourable scenario and reduced by 5% for the unfavourable scenario.  The discount rate used to calculate the present value of future cash flows was also decreased by 1% for the favourable case and increased by 1% for the unfavourable case compared to the discount rate used in the year-end valuation.

For land related investments (except those held for less than 12-months where cost approximates fair value), which are valued on comparable transaction basis by third party valuation consultants, the fair value of the land is increased by 15% in the favourable scenario and reduced by 15% in the unfavourable scenario.

 

For operating businesses (except those where a last transacted price exists within the past 12-months that provides the basis for fair value or another method due to unobservable inputs) that are valued on a trading comparable basis using enterprise value to earnings before interest, tax, depreciation and amortisation ("EBITDA"), EBITDA is increased by 15% and decreased by 15% in the favourable and unfavourable scenarios.

8       Interest bearing borrowings (secured)

Total interest bearing borrowings at 30 June 2017 amounted to US$30,601,982 (31 December 2016: US$4,952,820), which consisted of US$5,182,972 (31 December 2016: US$4,952,820) associated with a property related investment in Niseko, Hokkaido, Japan and bank debt of US$25,419,010 (31 December 2016: nil), which has been drawn primarily to facilitate the share buy-back programme. At 31 December 2016, the Company's unconsolidated subsidiary, Symphony (MINT) Investment Limited, had bank debt outstanding of US$10,073,433, which was subsequently paid down by the Company and had nil balance outstanding at 30 June 2017.

9       earnings PER SHARE

		6 months ended 30 June 2017	6 months ended 30 June 2016
		US$'000	US$'000
Basic and diluted earnings per share are based on:
Net profit for the period attributable to equity holders of the Company		27,883	55,810
		Number of shares	Number of shares
Weighted average number of shares (basic)
-  Outstanding during the period		520,195,374	528,158,080

For the purpose of calculation of the diluted earnings per share, the weighted average number of shares in issue is adjusted to take into account any potential dilutive effect arising from the dilutive warrants, share options and contingently issuable shares, with the potential shares weighted for the period outstanding.

The effect of the exercise of warrants and issue of contingently issuable shares on the weighted average number of shares in issue is as follows:

		30 June 2017	30 June 2016
		Number of shares	Number of shares
Weighted average number of shares (diluted)
-  Weighted average number of shares (basic)		520,195,374	528,158,080
-  Effect of options		4,233,783	1,775,723
		524,429,157	529,933,803

At 30 June 2017, there were 110,213,176 (30 June 2016: 110,835,078) outstanding share options to subscribe for ordinary shares of no par value.  At 30 June 2017, 82,782,691 (30 June 2016: 82,782,691) of the share options had fully vested and have an exercise price of US$1.00 and have not been included in the computation of diluted earnings per share as their effect would have been anti-dilutive.

 

At 30 June 2017, 19,097,185 share options (30 June 2016: 11,385,787) had fully vested and had not been exercised with an exercise price of US$0.60 and has been included in the diluted earnings per share calculation. At 30 June 2017, 8,333,300 of the share options (30 June 2016: 16,666,600) had not yet vested and had an exercise price of US$ 0.60 and have been included in the computation of diluted earnings per share.

10     Operating segments

The Company has investment segments, as described below.  Investment segments are reported to the Board of Directors of Symphony Investment Managers Limited, who review this information on a regular basis.  The following summary describes the investments in each of the Company's reportable segments.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Business activities which do not meet the definition of an operating segment have been reported in the reconciliations of total reportable segment amounts to the financial statements.

Healthcare	Includes investments in Parkway Life Real Estate Investment Trust (PREIT) and IHH Healthcare Bhd (IHH) and a Global Healthcare Services Portfolio
Hospitality	Includes investment in Minor International Public Company Limited (MINT)
Lifestyle/Education	Includes investments in C Larsen (Singapore) Pte Ltd and  Wine Connection Group and the Christian Liaigre Group and WCIB International Co. Ltd.
Lifestyle/Real Estate	Includes investments in Minuet Ltd, SG Land Co. Ltd. and a property joint venture in Niseko, Hokkaido, Japan and Desaru Peace Holdings Sdn Bhd
Cash and temporary investments	Includes government securities or other investment grade securities, liquid investments which are managed by third party investment managers of international repute, and deposits placed with commercial banks

 

Information on reportable segments

	Healthcare	Hospitality	Lifestyle/ education	Lifestyle/ real estate	Cash and temporary investments	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
6 months ended 30 June 2017
Investment income
-  Interest income	58	-	-	12	36	106
-  Other income	-	-	98	-	-	98
-   Exchange gain	(441)	-*	3,943	1,049	221	4,772
-  Unrealised gain in profit or loss	6,290	65,600	(44,392)	3,156	866	31,520
	5,907	65,600	(40,351)	4,217	1,123	36,496
Investment expenses
-  Exchange loss	-	-	-	-	-	-
Net investment results	5,907	65,600	(40,351)	4,217	1,123	36,496
6 months ended 30 June 2016
Investment income
-  Interest income	448	-	-	11	157	616
-   Other income	-	-	-	-	-	-
-   Exchange gain	788	-*	(203)	1,890	118	2,593
-  Unrealised gain in profit or loss	11,377	50,849	(2,804)	996	789	61,207
	12,613	50,849	(3,007)	2,897	1,064	64,416
Investment expenses
-  Exchange loss	-	-	-	-	-	-
Net investment results	12,613	50,849	(3,007)	2,897	1,064	64,416

	Healthcare	Hospitality	Lifestyle/ education	Lifestyle/ real estate	Cash and temporary investments	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
30 June 2017
Segment assets	87,433	398,866	57,381	107,506	16,643	667,829
31 December 2016
Segment assets	125,145	325,895	70,496	104,198	28,281	654,015

The reportable operating segments derive their revenue primarily by achieving returns, consisting of dividend income, interest income and appreciation in fair value.  The Company does not monitor the performance of the investments by measure of profit or loss.

'-*=less than US$1,000

 

Reconciliations of reportable segment profit or loss and assets

		30 June 2017	30 June 2016
		US$'000	US$'000
Profit or loss
Net investments results		36,496	64,416
Unallocated amounts:
-   Other corporate expenses		(8,613)	(8,606)
Profit for the period		27,883	55,810

		30 June 2017	31 Dec 2016
		US$'000	US$'000
Assets
Total assets for reportable segments		667,829	654,015
Other assets		93	67
Total assets		667,922	654,082

11     Significant Related Party Transactions

For the purposes of these condensed interim financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence.  Related parties may be individuals or other entities.

Key management personnel compensation

Key management personnel of the Company are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company.  The directors of the Company are considered as key management personnel.

During the financial period ended 30 June 2017, directors' fees amounting to US$198,000
(30 June 2016: US$198,000) were declared as payable to certain directors of the Company.  The remaining two directors of the Company are also directors of the Investment Manager which provides management and administrative services to the Company on an exclusive and discretionary basis.  No remuneration has been paid to these two directors as the cost of their services form part of the Investment Manager's remuneration.

Other related party transactions

During the financial period ended 30 June 2017, the Company recognised interest income received/receivable from subsidiaries totalling US$70,000 (30 June 2016: US$459,000).

 

Pursuant to the Investment Management Agreement, the Investment Manager will provide investment management and advisory services exclusively to the Company.  Details of the remuneration of the Investment Manager are disclosed in the financial statements as at and for the year ended 31 December 2016.  During the financial period ended 30 June 2017, management fee amounting to US$7,303,000 (30 June 2016: US$7,459,000) paid/payable to the Investment Manager has been recognised in the condensed interim financial statements.

Pursuant to the Investment Management Agreement and on 3 August 2008, the Company granted 82,782,691 share options to subscribe for ordinary shares with an exercise price of US$1.00 to the Investment Manager, which had been previously deferred.  These share options have fully vested in five tranches over a period of five years and will expire on the tenth anniversary of the actual grant date, which has been similarly deferred by 1 year as a result of the deferment of the grant. On 22 October 2012 and pursuant to the Investment Management Agreement, the Company granted to the Investment Manager 41,666,500 share options to subscribe for ordinary shares with an exercise price of US$0.60 that will vest in five equal tranches over a period of five years and will expire on the tenth anniversary of the date of grant.

The Investment Manager exercised share options amounting to 4,054,970 and 4,278,330 on 8 May 2014 and 10 June 2014, respectively, and 4,538,197 on 17 April 2015, and 742,616 on 23 June 16, and 621,902 on June 26 2017 at the exercise price of US$0.60 per share.

At 30 June 2017, the Investment Manager has been issued nil (30 June 2016: nil) management shares.

Other than as disclosed elsewhere in the condensed interim financial statements, there were no other significant related party transactions during the 6 months periods ended 30 June 2017 and 30 June 2016.

12     commitments

In September 2008, the Company entered into a loan agreement with a joint venture, held via its unconsolidated subsidiary, to grant loans totalling THB140 million (US$4.1 million equivalent at 30 June 2017) to the latter in accordance with the terms as set out therein.  As at 30 June 2017, THB120 million (U$3.5 million equivalent at 30 June 2017) has been drawdown.  The Company is committed to grant the remaining loan amounting to THB20 million (US$0.6 million equivalent at 30 June 2017), subject to terms set out in the agreement.

In the general interests of the Company and its unconsolidated subsidiaries, it is the Company's current policy to provide such financial and other support to its group of companies to enable them to continue to trade and to meet liabilities as they fall due.

13     Subsequent events

i.      Subsequent to 30 June 2017 through to 21 August 2017, the Company sold approximately 0.9 million units and 9.5 million shares of PREIT and MINT, respectively, which generated proceeds of approximately US$16.4 million

ii.      Subsequent to 30 June 2017 through to 21 August 2017, the Company acquired and cancelled an additional 15.6 million shares as part of its share buyback programme at a total cost of US$13.2 million

 

END

 

 

IR SEDFSIFWSEEA