Final Results

RNS Number : 5276Q

Symphony International Holdings Ltd

01 March 2016

 

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

1 March 2016

Symphony International Holdings Limited

Financial Results for the year ended 31 December 2015

Symphony International Holdings Limited ("Symphony" or the "Company") announces results for the year ended 31 December 2015. The condensed financial statements of the Company has 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.

As at 31 December 2015, the issued share capital of the Company was US$413.36 million (31 December 2014: US$409.13 million) consisting of 528,096,195 (31 December 2014: 523,557,998) ordinary shares.

Symphony's Investment Manager is Symphony Asia Holdings Pte. Ltd. ("SAHPL"), which replaced Symphony Investment Managers Limited ("SIMgL") on 15 October 2015, (with SAHPL and SIMgL, as the case maybe, hereinafter referred to as the "Investment Manager").  The Company entered into an Investment Management Agreement (with SAHPL as the Investment Manager) that replaced the Investment Management and Advisory Agreement (with SIMgL as the Investment Manager) ("Investment Management Agreement") on 15 October 2015.

Net Asset Value

The NAV attributable to the ordinary shares on 31 December 2015 was US$1.3172 per share (US$1.3011 per share on a fully diluted basis). This represents a 2.2% decline over the NAV per share of US$1.3473 at 31 December 2014 (US$1.3356 per share on a fully diluted basis).

Portfolio Overview

The following is an overview of the Company's portfolio as at 31 December 2015:

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 59 hotels and manages 79 other hotels and serviced suites with 17,714 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, Tivoli and Per AQUUM in 22 countries.

As at 31 December 2015, MINT also owned and operated 1,851 restaurants (comprising 957 equity-owned outlets and 894 franchised outlets) under the brands The Pizza Company, Swensen's, Sizzler, Dairy Queen, Burger King, Beijing Riverside, Thai Express and The Coffee Club amongst others. 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 and an international lifestyle consumer brand distribution business in Thailand focusing on fashion, cosmetics through retail (307 outlets), wholesale and direct marketing channels under brands that include GAP, Esprit, Bossini, Red Earth, Pedro, Tumi and Zwilling Henckels amongst others.

As at 31 December 2015, the Company's gross investment in MINT was approximately US$74.0 million. Symphony held 359.8 million shares on the same date through the acquisition of approximately 289.3 million ordinary shares (including the cost of the acquisition of approximately 98.5 million shares in Minor Corporation Public Company Limited that were exchanged for 112.3 million ordinary shares in MINT as part of a merger of the two entities in June 2009 and the exercise of warrants to subscribe to 17.5 million shares of MINT in April 2013) and the receipt of bonus shares of approximately 13.3 million, 28.5 million and 32.7 million in May 2008, April 2012 and April 2015, respectively. At the end of 2014, the Company divested 4 million shares held in MINT for net proceeds of US$4.5 million, reducing total net cost in MINT to US$69.5 million. As at 31 December 2015, the fair market value of the Company's investment in MINT was approximately US$361.9 million (31 December 2014: US$323.2 million), representing an unrealised gain in value of approximately US$292.4 million.

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 31 December 2015, the Company's investment cost (net of shareholder loan repayments) was approximately US$60.9 million. The fair value of the Company's interest in Minuet as at 31 December 2015 was US$80.2 million (31 December 2014: US$87.7 million) based on an independent third party valuation, representing an unrealised gain in value of approximately US$19.3 million.

Parkway Life Real Estate Investment Trust ("P-REIT") is one of Asia's largest listed healthcare real estate investment trusts by asset size. It is listed on the Singapore Exchange. P-REIT 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 31 December 2015, P-REIT's total portfolio size stood at 47 properties with a value of approximately S$1.6 billion. P-REIT 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 43 properties in Japan (comprising 42 nursing homes and one pharmaceutical manufacturing unit) and strata titled units/lots within Gleneagles Medical Centre, Kuala Lumpur, Malaysia. The Company holds 38.5 million units in P-REIT, which equates to a shareholding of approximately 6.36 per cent.

As at 31 December 2015, the Company invested approximately US$33.8 million (31 December 2014: US$33.8 million) in P-REIT units whose fair value on the same date was US$63.2 million (31 December 2014: US$68.5 million), representing an unrealised gain in value of approximately US$29.4 million.

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, Acibadem Saglik Yatirimlari Holding A.S. ("Acibadem") and a minority shareholding in Apollo Hospitals Enterprises Limited. IHH has a broad footprint of assets in Asia as well as Turkey, Abu Dhabi, Central and Eastern Europe that employs over 25,000 people and operates close to 10,000 licensed beds in 49 hospitals 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, the Company sold approximately 14 million shares held in IHH in the market through a series of transactions given an increase in the share price of IHH. The Company's cost, net of proceeds from this sale, amounted to approximately US$27.1 million at 31 December 2015. On the same date, the fair value of the Company's investment in IHH was US$64.1 million (31 December 2014: US$77.1 million), representing an unrealised gain in value of approximately US$36.9 million.

Desaru property joint venture in Malaysia ("Desaru") - The Company has a 49% interest 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$22.5 million at 31 December 2015 (31 December 2014: US$27.5 million), which represents an unrealised loss in value of US$6.5 million. The decline in value during the 2015 is predominantly reflective of the weakening of the Malaysian ringgit by 22.8% during the same period, which was partially offset by interest income on bank deposits held by the joint venture 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 31 December 2015 was US$12.8 million (31 December 2014: US$16.0 million) based on an independent third party valuation. The change in value during the year is predominantly due to a weakening of the Thai baht, a reduced term of the lease on the buildings that is used to determine fair value and repayment of principal shareholder balances.

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 approximately 67 outlets in Singapore and Thailand, up from approximately 50 outlets a year earlier. The investment amount was less than 2% of NAV.

Structured Transaction: In February 2014, Symphony completed a structured transaction, which provides a minimum return of 15% per annum. The investment amount is less than 2% of NAV.

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. In addition to its furniture distribution business, C Larsen opened a franchised restaurant outlet of the New York-based Clinton Street Baking Company in Singapore during 2015. C Larsen plans to open additional franchised outlets under this brand in South East Asia in the coming years. The investment amount was less than 2% of NAV.

Cash and cash equivalents

Pending investment in suitable opportunities, Symphony has placed funds in certain temporary investments. As at 31 December 2015, cash and cash equivalents that predominantly comprised bank deposits amounted to US$73.1 million (31 December 2014: US$80.4 million)

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 Investment Manager is more likely to identify opportunities for the Company 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.

Chairmen's Statement

The significant shifts in financial markets during the past few years have been unusual and 2015 was no exception. There was considerable volatility across markets that were driven by concerns over economic growth and geopolitical tensions. Despite the fluctuations and strong headwinds during the year, we believe that Symphony weathered the difficult market environment relatively well. At 31 December 2015, our NAV and NAV per share were US$695.6 million and US$1.32 (US$1.30 on a fully diluted basis), respectively. This compares to a NAV and NAV per share a year earlier of US$705.3 million and US$1.34, respectively. Excluding the impact of the US$30 million dividend paid in 2015 (4.69 cents per share), Symphony's NAV would have increased by 2.9% year-over-year in 2015, compared to a 2.7% decline in the MSCI AC Asia Index. 

During 2015, we explored a number of investment opportunities, some of which are ongoing and we hope to complete in 2016. Aside from a small follow-on investment in Niseko, we made a partial exit of our investment in IHH through a sale in the market of 14 million shares to take advantage of a sharp run-up in IHH's share price. The partial exit generated approximately US$23 million in proceeds and was completed at an annualised rate of return and times the original cost of the investment of 20.6% and 1.8x, respectively. We continue to hold 42 million shares in IHH. 

Overall our portfolio companies in the healthcare sector that include IHH and PREIT continued to grow. During 2015, IHH increased its footprint with the addition of 11 hospitals, which provided approximately 3,000 more beds to its portfolio. This expansion brought the total number of beds and hospitals in IHH's portfolio to approximately 10,000 and 49, respectively. IHH reported core revenue and EBITDA growth (excluding contributions from PREIT and exceptional items) in 2015 of 12% and 9%, respectively that was driven by an increase in patient volumes and treatment intensities across the group in addition to a ramp up in business in new hospitals. We see the rapidly growing demand for quality healthcare services continuing to drive IHH's growth and expansion for the foreseeable future. Subsequent to 2015, IHH announced plans for a 350-bed hospital in Western China and the breaking of ground for a 250-bed facility in Myanmar. We continue to work with IHH management on specific projects where we see opportunities to add value.

Our other investment in the healthcare sector, PREIT, has been focused on asset recycling initiatives to drive growth. Following the sale of seven properties in December 2014, PREIT re-deployed the capital proceeds with the acquisition of an additional seven properties in March 2015. The asset recycling contributed to a yield enhancement of approximately 0.5% and a higher quality portfolio of properties.  In 2015, PREIT reported an increase in gross and net property income by 2.3% and 2.4%, respectively. In addition, PREIT's annualised distribution yield increased by 15.3% during the same period.

MINT, our primary investment in the hospitality sector reported a stellar performance in 2015 despite the strong economic headwinds in emerging Asian economies. In addition to expanding its portfolio by 20 hotels and 143 restaurants, MINT reported growth in revenue and EBITDA of 15% and 9%, respectively, which excludes benefits from fair value adjustments. MINT is on track to achieve its expansion plan of having 140 hotels and 2,700 restaurants in its portfolio by 2017. Subsequent to the 2015 financial year, MINT continued to announce new projects with the launch of the Oaks Group in India and separately, an Anantara development in Bali, Indonesia.  We are seeing increasing business and leisure travel in Asia, particularly originating from China and India, which is only expected to increase and be a key driver for the hospitality sector. We feel MINT is one of best positioned hospitality companies in the region to capitalise on these trends.

In the lifestyle sector, our investments in WCG and C Larsen remain focused on expansion. Although we did see some reduced growth during the second half of 2015 due to the difficult market environment, the Wine Connection Group continued to expand its footprint in Singapore and Thailand with 67 outlets at the end of 2015. The management team is in the process of expanding to other Asian countries that will begin in the first quarter of 2016. The WCG brand and concept is highly transferable to other Asian countries and we are confident on the long-term growth prospects for this business. During 2015, C Larsen increased its lifestyle offering with the opening of a food and beverage outlet in Singapore that is franchised under the Clinton Street Bakery Company name. Aside from successfully continuing to grow its furniture retail and distribution business, C Larsen intends to expand the food and beverage business to other cities in Asia.

On the property development side, our Amanresorts branded development in Desaru, Malaysia is progressing and we hope to begin marketing of the villas towards the end of 2016. The unique nature of the site, close proximity to Singapore and six star facilities that include a marina, will make it a truly enviable location for a vacation property. In Niseko, we continue to hold our land and explore various development and sale options. We saw strong visitor numbers to Niseko that reinforces its reputation as the premier skiing destination in Asia. During the 2015/2016 ski season, there was strong demand for new property development releases, which we expect will only increase in the future.

Our properties in Bangkok, Thailand that include the two SG Land office buildings and the land held by Minuet did not have any material movements in value during 2015. Symphony continues to receive an attractive yield from the SG Land buildings and we are exploring opportunities to enhance the value of the Minuet land, which we hope to provide more details later in 2016.

In October 2015, we announced a restructuring of the Investment Management Group that is responsible for implementing Symphony's investment strategy. Specifically, we changed the investment manager from Symphony Investment Managers Limited to Symphony Asia Holdings Pte. Ltd. ("SAHPL"). The change was in response to SAHPL being granted a Capital Markets Services Licence by the Monetary Authority of Singapore to conduct Fund Management activities for accredited and institutional investors. The new structure provides more regulatory oversight and a stronger corporate governance framework of the fund manager. The license also gives us the ability to develop new investment products for Symphony and other clients, and explore other ways to generate additional income to benefit Symphony's share price and NAV. In addition to the dividend policy initiated in 2014, we are looking at other options that may help narrow the discount that Symphony's share price trades to NAV per share.

Since inception, we have had a clear strategy to grow Symphony's NAV over time by investing in well-run business and assets that benefit from growing incomes in Asia. The permanent capital structure provides the freedom not to have to deploy capital at inopportune times within businesses cycles and to also allow Symphony to hold growing businesses beyond the five to seven year periods that are typical of private equity firms. Our current portfolio continues to grow and has fared relatively well compared to the indices that we benchmark ourselves against and we see no reason to prematurely exit these investments. We expect our investee companies to continue to perform well despite the strong economic headwinds that will likely last through 2016 and possibly beyond that. We are opportunistically exploring several investments for Symphony and our investee companies, some of which we hope to close in 2016.

We thank our shareholders and business partners for their continued support and trust.

Pierangelo Bottinelli

Chairman, Symphony International Holdings Limited

Anil Thadani

Symphony Asia Holdings Pte. Ltd.

Symphony International Holdings Limited Unaudited condensed statement of financial position As at 31 December 2015
	Note	2015	2014
		US$'000	US$'000
Non-current assets
Financial assets at fair value through profit or loss	6	627,292	630,053
		627,292	630,053
Current assets
Other receivables and prepayments		220	43
Cash and cash equivalents		73,142	80,376
		73,362	80,419
Total assets		700,654	710,472
Equity attributable to equity holders of the Company
Share capital		413,358	409,127
Reserves		62,074	61,596
Accumulated profits		220,154	234,688
Total equity carried forward		695,586	705,411
Current liabilities
Interest-bearing borrowings		4,772	4,748
Other payables		296	313
Total liabilities		5,068	5,061
Total equity and liabilities		700,654	710,472

Symphony International Holdings Limited Unaudited condensed statement of comprehensive income For the financial year ended 31 December 2015
	Note	2015	2014
		US$'000	US$'000
Other operating income		1,435	1,847
Other operating expenses		(7,407)	(5,191)
Management fees		(15,000)	(15,000)
		(20,972)	(18,344)
Share options expense		(1,986)	(3,871)
Loss before investment results and income tax		(22,958)	(22,215)
Fair value changes in financial assets at fair value through profit or loss	6	38,425	137,896
Profit before income tax		15,467	115,681
Income tax expense		-	-
Profit for the year		15,467	115,681
Other comprehensive income for the year, net of tax		-	-
Total comprehensive income for the year		15,467	115,681
Earnings per share:
		US Cents	US Cents
Basic	8	2.94	22.23
Diluted		2.90	22.08

Symphony International Holdings Limited Unaudited condensed statement of changes in equity For the financial year ended 31 December 2015
	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 2014, as previously reported	402,054	59,798	(2,487)	146,509	605,874
Impact of changes in accounting policies	-	-	2,487	(2,491)	(4)
At 1 January 2014, as restated	402,054	59,798	-	144,018	605,870
Total comprehensive income for the year	-	-	-	115,681	115,681
Transactions with owners of the Company, recognised directly in equity
Issuance of shares	5,000	-	-	-	5,000
Value of services received for issue of share options	-	3,871	-	-	3,871
Exercise of share options	2,073	(2,073)	-	-	-
Dividend paid of US$0.04 per share	-	-	-	(25,011)	(25,011)
Total transaction with owners of the Company	7,073	1,798	-	(25,011)	(16,140)
At 31 December 2014	409,127	61,596	-	234,688	705,411

Symphony International Holdings Limited Unaudited condensed statement of changes in equity (continued) For the financial year ended 31 December 2015
	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 2015	409,127	61,596	-	234,688	705,411
Total comprehensive income for the year	-	-	-	15,467	15,467
Transactions with owners of the Company, recognised directly in equity
Issuance of shares	2,723	-	-	-	2,723
Value of services received for issue of share options	-	1,986	-	-	1,986
Exercise of share options	1,508	(1,508)	-	-	-
Dividend paid of US$0.05 per share	-	-	-	(30,001)	(30,001)
Total transaction with owners of the Company	4,231	478	-	(30,001)	(25,292)
At 31 December 2015	413,358	62,074	-	220,154	695,586

Symphony International Holdings Limited Unaudited condensed statement of cash flows For the financial year ended 31 December 2015
		2015	2014
		US$'000	US$'000
Cash flows from operating activities
Profit before income tax		15,467	115,681
Adjustments for:
Exchange loss		6,341	3,895
Interest income		(1,435)	(1,847)
Interest expense		23	34
Fair value changes in financial assets at fair value through profit or loss		(38,425)	(137,896)
Share options expense		1,986	3,871
		(16,043)	(16,262)
Changes in working capital:
Increase in other receivables and payments		(182)	(4)
(Decrease)/Increase in other payables		(12)	14
		(16,237)	(16,252)
Interest received (net of withholding tax)		1,181	1,856
Net cash used in operating activities		(15,056)	(14,396)
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss		-	(11,035)
Proceeds from disposal of financial assets at fair value through profit or loss		35,402	-
Net cash from/(used in) investing activities		35,402	(11,035)
Cash flows from financing activities
Net proceeds from issue of share capital		2,723	5,000
Interest paid		(24)	(35)
Dividend paid		(30,001)	(25,011)
Proceeds from borrowings		67	193
Net cash used in financing activities		(27,235)	(19,853)
Net decrease in cash and cash equivalents		(6,889)	(45,284)
Cash and cash equivalents at 1 January		80,376	126,231
Effect of exchange rate fluctuations		(345)	(571)
Cash and cash equivalents at 31 December		73,142	80,376

Symphony International Holdings Limited

Notes to the unaudited condensed financial statements

For the financial year ended 31 December 2015

These notes form an integral part of the unaudited condensed 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 2014 are available upon request from the Company's registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

2           Statement of compliance

These condensed 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 financial statements of the Company as at and for the year ended 31 December 2014.

The Board of Directors approved these unaudited condensed financial statements on 26 February 2016.

3           Significant accounting policies

The accounting policies applied by the Company in these condensed financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 31 December 2014.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

The financial statements have been prepared on a fair value basis, except for certain items which are measured on a historical cost basis.  The financial statements are presented in thousands of United States dollars (US$'000), which is the Company's functional currency, unless otherwise stated.

4           Estimates and judgement

The preparation of unaudited condensed 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 unaudited condensed 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 financial statements as at and for the year ended 31 December 2014.

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 2014.

6           Financial assets at fair value through profit or loss

 

During the financial year ended 31 December 2015, the following occurred via the unconsolidated subsidiaries: the Company recognised a gain in the financial assets at fair value through profit and loss of US$38,425,000 (31 December 2014: 137,896,000).

 

7           Financial instruments

 

Carrying amounts versus fair values

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

	Fair value through profit or loss	Loans, cash  and receivables	Other financial liabilities	Total carrying amount	Fair value
	US$'000	US$'000	US$'000	US$'000	US$'000
31 December 2015
Financial assets measured at fair value
Financial assets at fair value through profit or loss	627,292	-	-	627,292	627,292
Financial assets not measured at fair value
Other receivables and prepayments	-	220	-	220	220
Cash and cash equivalents	-	73,142	-	73,142	73,142
	627,292	73,362	-	700,654	700,654
Financial liabilities not measured at fair value
Other payables	-	-	296	296	296
Interest-bearing borrowings	-	-	4,772	4,772	4,772
	-	-	5,068	5,068	5,068

	Fair value through profit or loss	Loans, cash and receivables	Other financial liabilities	Total carrying amount	Fair value
	US$'000	US$'000	US$'000	US$'000	US$'000
31 December 2014
Financial assets measured at fair value
Financial assets at fair value through profit or loss	630,053	-	-	630,053	630,053
Financial assets not measured at fair value
Other receivables and prepayments	-	43	-	43	43
Cash and cash equivalents	-	80,376	-	80,376	80,376
	630,053	80,419	-	710,472	710,472
Financial liabilities not measured at fair value
Other payables	-	-	313	313	313
Interest-bearing borrowings (secured)	-	-	4,748	4,748	4,748
	-	-	5,061	5,061	5,061

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.

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
31 December 2015
Financial assets at fair value through profit or loss	-	-	627,292	627,292
31 December 2014
Financial assets at fair value through profit or loss	-	-	630,053	630,053

Significant unobservable inputs used in measuring fair value

This table below sets out information about significant unobservable inputs used at 31 December 2015 in measuring the underlying investments of the financial assets categorised as Level 3 in the fair value hierarchy.

Underlying investment	Fair value at 31 December 2015 US$'000	Valuation technique	Unobservable input	Range (Weighted average)	Sensitivity to changes in significant unobservable inputs
Rental properties	12,265	Income approach	Rental growth rate Occupancy rate Discount rate	6-10% (2014: 8%-10%) 80-95% (2014: 80-95%) 13% (2014: 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	99,161	Comparable valuation method	Price per square meter for comparable land	US$53 to US$1,484 per square meter (2014: US$60 to US$1,101 per square meter)	The estimated fair value would increase if the price per square meter were higher.
Operating business	14,831	Enterprise value using comparable traded multiples	EBITDA multiple (times)	5.4x to 17.2x, average 11.1x (2014: 6.9x to 13.6x, average 9.8x)	The estimated fair value would increase if the EBITDA multiple was higher.
			Discount for lack of marketability	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$489,220,722 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.

	‹----- 31 December 2015-----›		‹----- 31 December 2014 -----›
	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	630,053	630,053	485,222	485,222
Total gains or losses in profit or loss	38,425	38,425	137,896	137,896
Additions/(Deductions)	(41,186)	(41,186)	6,935	6,935
Balance at 31 December	627,292	627,292	630,053	630,053

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:

	‹----- 31 December 2015-----›		‹----- 31 December 2014 -----›
	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	16,517	(17,083)	15,795	(16,128)

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) 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           Earnings per share

 

		2015	2014
		US$'000	US$'000
Basic and diluted earnings per share are based on:
Net profit for the year attributable to equity holders of the Company		15,467	115,681

Basic earnings per share

		Number of shares 2015	Number of shares 2014
Issued ordinary shares at 1 January		523,557,998	515,224,698
Effect of shares issued		4,538,197	8,333,300
Issued ordinary shares at 31 December		528,096,195	523,557,998
Weighted average number of shares (basic)		526,772,554	520,423,704

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:

		2015	2014
Weighted average number of shares (basic)		526,772,554	520,423,704
Effect of share options		5,713,299	3,474,907
Weighted average number of shares (diluted)		532,485,853	523,898,611

As at 31 December 2015, there were nil outstanding warrants. This compares to 111,855,210 outstanding warrants at 31 December 2014 to subscribe for 111,855,210 new ordinary shares of no par value at an exercise price of US$1.22, which expired on 3 August 2015. The warrants outstanding at the end of 31 December 2014 have not been included in the computation of diluted earnings per share as their effect would have been anti-dilutive.

At 31 December 2015, there were 111,577,694 (2014: 116,115,891) outstanding share options to subscribe for ordinary shares of no par value.  At 31 December 2015, 94,911,094 (2014: 91,115,991) of the unexercised share options had fully vested. 82,782,691 (2014: 82,782,691) of the share options 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 31 December 2015, 12,128,403 (2014: 8,333,300) of the share options have an exercise price of US$0.60 (2014: US$0.60) and have been included in the computation of diluted earnings per share. At 31 December 2015, 16,666,600 (2014: 24,999,900) of the share options had not yet vested and had an exercise price of US$0.60 (2014: US$0.60) and have not been included in the computation of diluted earnings per share. 

9           Operating segments

The Company has investment segments, as described below.  Investment segments are reported to the Board of Directors of the Investment Manager 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)
Hospitality	Includes investment in Minor International Public Company Limited (MINT)
Lifestyle	Includes investments in C Larsen (Singapore) Pte Ltd,  Privee Holdings Pte. Ltd,  (Maison Takuya) and the Wine Connection Group (WCG)*
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

*Prior to 30 June 2015, management categorised WGC in the hospitality operating segment.

Information on reportable segments

	Healthcare	Hospitality	Lifestyle	Lifestyle/ real estate	Cash and temporary investments	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
31 December 2015
Investment income
-  Interest income	1,026	-	-	23	386	1,435
-  Unrealised gain in profit or loss	8,171	40,758	(3,381)	(8,494)	1,371	38,425
	9,197	40,758	(3,381)	(8,471)	1,757	39,860
Investment expenses
- Exchange loss	(1,187)	-*	9	(4,801)	(362)	(6,341)
Net investment results	8,010	40,758	(3,372)	(13,272)	1,395	33,519

31 December 2014
Investment income
-  Interest income	1,254	-	-	34	559	1,847
-  Unrealised gain in profit or loss	11,288	121,878	4,473	(730)	987	137,896
	12,542	121,878	4,473	(696)	1,546	139,743
Investment expenses
-    Exchange loss	(956)	(2)	(138)	(2,181)	(618)	(3,895)
Net investment results	11,586	121,876	4,335	(2,877)	928	135,848

	Healthcare	Hospitality	Lifestyle	Lifestyle/ real estate	Cash and temporary investments	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
31 December 2015
Segment assets	128,269	361,895	14,972	111,421	83,877	700,434
31 December 2014
Segment assets	145,815	337,692	9,113	128,078	89,731	710,429

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

		31 December   2015	31 December 2014
		US$'000	US$'000
Profit or loss
Net investments results		33,519	135,848
Unallocated amounts:
-   Other corporate expenses		(18,052)	(20,167)
Profit for the period		15,467	115,681
		31 December   2015	31 December 2014
		US$'000	US$'000
Assets
Total assets for reportable segments		700,434	710,429
Other assets		220	43
Total assets		700,654	710,472

 

10         Significant related party transactions

 

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.

During the financial year, directors' fees amounting to US$400,000 (2014: US$400,000) were declared as payable to four directors (2014: four directors) of the Company.  The remaining two directors of the Company are also directors of the Investment Manager who provides management and administrative services to the Company on an exclusive and discretionary basis.  No remuneration has been paid to these directors as the cost of their services form part of the Investment Manager's remuneration.

Other related party transactions

During the financial year ended 31 December 2015, the Company recognised interest income received/receivable on advances made to its unconsolidated subsidiaries totalling US$1,049,000  (31 December 2014: US$1,288,000).

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 2014.  During the financial year ended 31 December 2015, management fee amounting to US$15,000,000 (31 December 2014: US$15,000,000) paid/payable to the Investment Manager has been recognised in the condensed financial statements.

Pursuant to Schedule 2 of the Investment Management Agreement, as amended, the Investment Manager was granted 124,449,191 (31 December 2014: 124,449,191) share options to subscribe for ordinary shares at an exercise price of US$1.00 or US$0.60.

On 3 August 2008, the Company granted 82,782,691 share options 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, the Company granted to the Investment Manager 41,666,500 share options 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 at the exercise price of US$0.60 per share.

At 31 December 2015, the Investment Manager has been issued nil (31 December 2014: nil) management shares.

Symphony's Investment Manager is Symphony Asia Holdings Pte. Ltd. ("SAHPL"), which replaced Symphony Investment Managers Limited ("SIMgL") on 15 October 2015, (with SAHPL and SIMgL, as the case maybe, hereinafter referred to as the "Investment Manager").  The Company entered into an Investment Management Agreement (with SAHPL as the Investment Manager) that replaced the Investment Management and Advisory Agreement (with SIMgL as the Investment Manager) ("Investment Management Agreement") on 15 October 2015.

Other than as disclosed elsewhere in the condensed unaudited financial statements, there were no other significant related party transactions during the years ended 31 December 2015 and 31 December 2014.

11         Commitments

In September 2008, the Company entered into a loan agreement with a joint venture, held via its unconsolidated subsidiary, to grant loans totaling THB140 million (US$3.9 million equivalent at 31 December 2015) to the latter in accordance with the terms as set out therein.  As at 31 December 2015, THB120 million (U$3.3 million equivalent at 31 December 2015) has been drawndown.  The Company is committed to grant the remaining loan amounting to THB20 million (US$0.6 million equivalent at 31 December 2015), 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.

IMPORTANT INFORMATION

This document is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States or any other jurisdiction into which the publication or distribution would be unlawful. These materials do not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities in the United States or any other jurisdiction in which such offer or solicitation would be unlawful. THE securities referred to in this document have not been and will not be registered under the securities laws of such jurisdictions and may not be sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, within such jurisdictions.

No representation or warranty is made by the Company or its Investment Manager as to the accuracy or completeness of the information contained in this document and no liability will be accepted for any loss whatsoever arising in connection with such information.

This Document contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "potential", "should", "will" and "would" or the negative of those terms or other comparable terminology, are based on the Company's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it at the date of this document. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company at the date of this announcement or are within its control. If a change occurs, the Company's business, financial condition and results of operations may vary materially from those expressed in its forward-looking statements. Neither the Company nor its Investment Manager undertake to update any such forward looking statements

Statements contained in this DOCUMENT regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this document is subject to change without notice and, except as required by applicable law, neither the Company nor THE INVESTMENT MANAGER assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.

This document 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. Shareholders and prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions.

This DOCUMENT 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.

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

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.

End of Announcement

 

END

 

 

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