Final Results for the year ended 31 December 2016

RNS Number : 1286Y

Symphony International Holdings Ltd

01 March 2017

 

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

1 March 2017

Symphony International Holdings Limited

Financial Results for the year ended 31 December 2016

Symphony International Holdings Limited ("Symphony" or the "Company") announces results for the year ended 31 December 2016. 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 education and 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 2016, the issued share capital of the Company was US$414.08 million (31 December 2015: US$413.36 million) consisting of 528,838,811 (31 December 2015: 528,096,195) 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 2016 was US$1.2211 per share (US$1.1988 per share on a fully diluted basis). This represents a 7.3% decline over the NAV per share of US$1.3172 at 31 December 2015 (US$1.3011 per share on a fully diluted basis).

 

Chairmen's Statement

If there was one lesson from 2016, it is that anything can happen. The level of volatility and geopolitical uncertainty in 2016 resulting from a number of unexpected outcomes and events has been unprecedented in recent times. In particular, the political developments in the US and United Kingdom, as well as terrorist attacks in Europe, the US and a number of other locations had a mixed, but generally unfavourable, impact across geographies. Asia experienced more of an impact in the fourth quarter as a result of uncertainty over foreign and trade policies under a new US administration as well as heightened expectations of more rate rises by the US Federal Reserve in 2017. As a result, the value of Symphony's portfolio was also affected toward the end of the year. At 31 December 2016, our NAV and NAV per share were US$645.8 million and US$1.22 (US$1.20 on a fully diluted basis), respectively. This compares to a NAV and NAV per share a year earlier of US$695.6 million and US$1.32, respectively. Excluding the impact of the US$40 million dividend paid in 2016 (6.25 cents per share), Symphony's NAV would have been 1.4% lower year-over-year.

Despite the difficult environment, Symphony made three new investments and several partial exits during 2016. In June, Symphony announced the acquisition of the Christian Liaigre Group ("CLG") with a co-investor. CLG is a leading luxury brand that fits well into our investment portfolio. We see significant opportunity to grow the existing business, particularly in Asia and into new complementary business areas. Symphony also invested in a portfolio of listed healthcare companies during the year. This investment is the result of over two years of development effort by the investment management team to create a platform for Symphony to gain diversified exposure to healthcare services businesses using a portfolio approach. In December, we made the first investment in the education sector through a joint venture, WCIB International Co. Ltd ("WCIB"), with established Thai partners that have extensive experience in the sector. WCIB is developing the Wellington College International Bangkok, the fifth international addition to the Wellington College family of schools outside the UK. This is a very exciting project that fits perfectly with our strategy to invest in businesses that cater to rising affluence in Asia. WCIB will also have an option to develop schools under the Wellington College name in Myanmar, Cambodia, Laos and Vietnam.

Symphony made partial exits of its listed investments through several transactions in 2016 that generated proceeds of US$34.4 million. The sale of 25.3 million MINT shares was completed at an annualised rate of return and times the original cost of the investment of 20.1% and 4.4 times, respectively, which generated US$26.6 million. The residual balance of proceeds was from the sale of 3.4 million shares and 1.2 million units of IHH and PREIT, respectively, which also generated double-digit annualised returns.

We announced two transactions in December that relate to the sale of land by Symphony's joint venture company, Minuet. Approximately eight hectares of land was sold to WCIB and Minuet entered into a binding agreement to sell an additional seven hectares of land to Land & Houses Public Company limited, a Thai listed property developer. The land sales will generate gross proceeds for Minuet of approximately US$50 million based on the average December 2016 exchange rate. The gross sale price for both transactions was over 70% above Minuet's average cost of land in US dollars based on current exchange rates. We expect these land sales and the school development by WCIB to support incremental demand and higher prices for land in the vicinity, which should benefit Symphony's land holdings in the area. These partial exits endorse our investment strategy and ability to generate attractive returns.

In terms of the performance of our portfolio, MINT added an additional 17 hotels with 2,062 rooms and increased the number of restaurants from 1851 to 1,996 during the year. MINT's revenue and EBITDA in 2016 grew by 19% and 18%, respectively, year-over-year. Our healthcare investments, IHH and PREIT also expanded their portfolios. IHH acquired the Tokuda and City Clinic Groups in Bulgaria, which added 750 beds and four medical centres to its portfolio. IHH also broke ground for the 250-bed Parkway Yangon Hospital and signed an agreement for a new ParkwayHealth Shanghai International Hospital, which will add an additional 450 beds when completed. IHH posted revenue and EBITDA growth of 19% and 7%, respectively, year-over-year. In addition to generating value through asset recycling initiatives that saw the divestment of four properties, PREIT also acquired one nursing home in March 2016, bringing the number of properties in its portfolio to 44. PREIT's revenue and net property income increased both by 7% in 2016, year-over-year.

The performance of our lifestyle sector investments that include WCG, C Larsen and CLG was mixed during the year. WCG continued to expand its footprint and added nine outlets, bringing the total number of outlets in South East Asia to 76. Following a difficult first half of 2016, particularly in Thailand, same-store-sales and total system sales improved in the fourth quarter. WCG saw an overall improvement in revenues, but weaker EBITDA in 2016 due to higher expenses associated with a new central kitchen and ERP system, which was required to support further store openings. We expect to see an improvement in margins as WCG continues to build scale. C Larsen reported an improvement in sales due to growth from a combination of orders for large homes, miscellaneous projects and offices. C Larsen also recently opened its second franchise of the Clinton Street Baking Company in Bangkok. CLG, the newest addition to our lifestyle sector portfolio, had a disappointing year due to various factors including weaker general economic conditions in Europe, terrorist attacks in Paris and Brussels and Brexit. Based on recent results the business appears to be stabilising and we are working with management to expand the existing business and explore complementary businesses to further leverage the Liaigre brand name. 

On the property side of Symphony's portfolio, we continue to explore opportunities to increase value and monetise assets where appropriate. The Amanresorts development in Desaru, Malaysia is ongoing and after some delays, we plan to launch at the end of 2017. We have received inquiries regarding villa sites at this development, which is promising as marketing has not yet begun. As mentioned earlier, Minuet made two land sales in December 2016, which should benefit values in the vicinity as the Wellington College International Bangkok and other housing developments progress. Our other property asset in Thailand, the two office buildings in central Bangkok held by SG Land continue to provide an attractive yield. In Japan, we continue to hold our interest in the joint venture that holds a key development site in Hirafu village in Niseko, Hokkaido. Recent property developments in the area have been met with strong sales and together with increasing arrivals, we are now evaluating the advantages of a development versus an outright sale of the property.  

The discount that our share price traded to NAV per share at 31 December was 34%. Although this discount compares favourably to 46% a year earlier, we continue to try to reduce this gap. In December, we announced the appointment of Numis Securities Limited as our corporate broker and subsequently initiated a share buyback plan in January. At the time of writing this, the buyback programme seems to have had some success with the discount narrowing to around 24%. Subject to shareholder approval at the next annual general meeting, we plan to continue the share buyback, which together with our existing dividend programme, should narrow the gap further.

Despite the current difficult environment, we expect our portfolio to continue to benefit from rising incomes in Asia. The global shift in politics and changing policies towards protectionism, particularly in the US, could have a negative impact on Asia and investor sentiment, but the fundamental growth drivers in the region remain intact. Although we expect headwinds to continue, the majority of our portfolio is driven more by domestic and intra-regional demand and is less susceptible to fluctuations in global trade. We continue to focus on growing our NAV over time and hope to announce some new transactions we are currently working on over the next year. 

Once again, we thank our shareholders and business partners for their continued support.  

Pierangelo Bottinelli

Chairman, Symphony International Holdings Limited

Anil Thadani

Symphony Asia Holdings Pte. Ltd.

27 February 2017

Investment Manager's Report

This "Investment Manager's Report" should be read in conjunction with the financial statements and related notes of the Company. The financial statements of the Company were prepared in accordance with the International Financial Reporting Standards ("IFRS") and are presented in U.S. dollars. The Company reports on each financial year that ends on 31 December. In addition to the Company's annual reporting, NAV and NAV per share are reported on a quarterly basis being the periods ended 31 March, 30 June, 30 September and 31 December. The Company's NAV reported quarterly is based on the sum of cash and cash equivalents, temporary investments, the fair value of unrealised investments (including investments in unconsolidated subsidiaries, associates and joint ventures) and any other assets, less any other liabilities. The financial results presented herein include activity for the period from 1 January 2016 through 31 December 2016, referred to as "the year ended 31 December 2016".

Our Business

Symphony is an investment company incorporated under the laws of the British Virgin Islands. The Company's shares were listed on the London Stock Exchange on 3 August 2007. Symphony's investment objective is to create value for shareholders through longer term strategic investments in high growth innovative consumer businesses, primarily in the healthcare, hospitality and lifestyle sectors (including branded real estate developments), which are expected to be among the fastest growing sectors in Asia, as well as through investments in special situations and structured transactions.

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. Symphony Capital Partners Limited ("SCPL") is a service provider to the Investment Manager. The common shareholders and their respective interests in SIMgL and SAHPL are the same.

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.

Investments

At 31 December 2016, the total amount invested by Symphony since admission to the Official List of the London Stock Exchange in August 2007 was US$412.5 million. SIHL's total cost of investments after taking into account shareholder loan repayments, partial realisations and the cost of fully realised investments was US$283.6 million at 31 December 2016 from US$261.5 million a year earlier. As at 31 December 2016, the healthcare, hospitality, lifestyle, lifestyle/ real estate sectors and a structured investment accounted for 22.3%, 15.1%, 27.8%, 31.9% and 2.9% of total cost of investments, respectively.

The fair value of investments, excluding temporary investments (but including structured investments), held by Symphony was approximately US$661.1 million at 31 December 2016, up from US$639.1 million a year earlier. This change is comprised of new investments of US$70.5 million less shareholder loan repayments and proceeds from partial exits of US$48.5 million. The fair value of listed investments declined by approximately US$3.4 million, which was offset by similar gain in the value of unlisted investments during the same period.

As at 31 December 2016, we had the following investments:

Minor International Public Company Limited

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 68 hotels and manages 87 other hotels and serviced suites with 19,776 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 23 countries.

As at 31 December 2016, MINT also owned and operated 1,996 restaurants (comprising 1,018 equity-owned outlets and 978 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 (327 outlets), wholesale and direct marketing channels under brands that include GAP, Banana Republic, Brooks Brothers, Kojima Denim, Etam, Esprit, Bossini, Charles & Keith, Henckels and Red Earth.

MINT reported core revenue and EBITDA (before non-recurring items) of 19% and 18%, respectively. The growth was driven by all business units. Core net profit declined by 3% during the same period due to weaker performance in the fourth quarter, together with higher depreciation and tax rates of recently consolidated businesses that reduced overall profit margins to 8.4% in 2016 from 10.3% in 2015.

MINT's hotel and mixed-use business had revenues (excluding non-recurring items) of THB27.8 billion during 2016, which is 18% higher than the same period a year earlier. MINT increased the number of rooms in its portfolio that are owned (including majority owned and joint ventures) and managed by 1,332 and 730 during the year, respectively. During 2016, MINT expanded its hospitality business inorganically and organically. In January 2016, MINT announced the launch of the Oaks brand in India with the development of Oaks Neemrana. In February, MINT completed the acquisition of the Tivoli hotel group and announced a new hotel development in Bali, Indonesia. Additional other projects were announced during the year in India, Sri Lanka, the UAE and Oman amongst others.

At the end of 2016, MINT's total number of restaurants reached 1,996 comprising 1,018 equity-owned outlets and 978 franchised outlets. Approximately 64% were in Thailand with the remaining number in other Asian countries and the Middle East. Approximately 145 restaurants were added during 2016 and total system sales increased by 9.1% during the same period. The retail trading and contract manufacturing businesses remained flat with revenues of THB3.5 billion during 2016.

Symphony's gross and net investment cost in MINT was approximately US$74.0 million and US$42.9 million, respectively at 31 December 2016. On the same date, the fair value of Symphony's investment in MINT was US$336.0 million, down from US$361.9 million a year earlier. The change in value of approximately US$25.9 million was predominantly driven by the sale of 25.3 million MINT shares during the year that generated proceeds of US$26.6 million, which was partially offset by a marginal increase in the value of MINT shares. The annualised return and times the original cost of investment on the partial sale of shares in 2016 was 20.1% and 4.4 times. Symphony has received in aggregate proceeds of US$31.1 million from the sale of MINT shares and after tax dividends of US$17.8 million from the date of investment to 31 December 2016.

Minuet Limited

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. As at 31 December 2016, Minuet held approximately 331 rai (53 hectares) of land in Bangkok, Thailand.

The Company initially invested approximately US$78.3 million by way of an equity investment and interest bearing shareholder loans. Since the initial investment by the Company, Minuet has received proceeds from rental income and partial land sales. As at 31 December 2016, 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 on the same date was US$76.7 million (31 December 2015: US$80.2 million) based on an independent third party valuation of the land plus the net value of the other assets and liabilities of Minuet. The change in value is predominantly related to a decline in the value of the land held by Minuet following the sale of approximately 47 rai (8 hectares) of land to WCIB, an education joint venture between SIHL and established Thai partners. The decline in the value related to the sale of land was partially offset by an increase in the average value per rai of residual land by 10.2%. SIHL received distributions of US$13.7 million from Minuet during the year. At the end of December 2016, Minuet entered into an agreement to sell an additional 6.9 hectares of Land & Houses Public Company Limited, a Thai listed property developer.

Parkway Life Real Estate

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. 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 that is/are used primarily for healthcare and/or healthcare-related purposes.

As at 31 December 2016, P-REIT's total portfolio size stood at 44 properties with a value of approximately S$1.7 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 40 properties in Japan (comprising 39 nursing homes and one pharmaceutical manufacturing unit) and strata titled units/lots within Gleneagles Medical Centre, Kuala Lumpur, Malaysia. The Company holds 37.3 million units in P-REIT, which equates to a shareholding of approximately 6.2%.

PREIT reported net property income of S$102.4 million in 2016, which is 6.7% higher from the same period a year ago. The growth was driven by the contribution from the Japan property acquired in March 2016, higher yielding properties acquired from the asset recycling initiative completed in March 2015, higher rent from existing properties and an appreciation of the Japanese yen.

Annualised dividend per unit declined by 8.8% in 2016 compared to 2015, where unit holders benefited from a one-off capital distribution (spread over four quarters) that related to proceeds from the divestment of seven Japan properties in December 2014. PREIT's gearing at 31 December 2016 was 36.3%, which is well within the 60% limit allowed under the Monetary Authority of Singapore's Property Funds Guidelines and will allow for further yield accretive acquisitions.

As at 31 December 2016, Symphony's gross and net investment cost in PREIT was US$33.8 million and US$31.5 million, respectively. The fair value on the same date was US$60.5 million (31 December 2015: US$63.2 million). The change in value predominantly relates to the sale of 1.2 million units during 2016, which generated proceeds of US$2.3 million. The annualised return and times the original cost of the investment for the partial sale was 15.2% and 2.9 times, respectively. In addition to the sale proceeds, Symphony has received cumulative dividends of US$25.4 million from PREIT.

IHH Healthcare Berhad

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 30,000 people and operates close to 10,000 licensed beds in 52 hospitals worldwide.

IHH reported revenue and EBITDA growth of 19% and 7%, respectively, in 2016 year-over-year. The change was driven by organic growth of existing operations and hospitals acquired in 2015 (Continental and Global Hospitals) and 2016 (Tokuda Group and City Clinic Group). Net profit after tax and minority interest (excluding exceptional items) declined by 4% during the same period due to unrealised foreign exchange losses, higher financing costs, impairment charges related to a hospital in India and higher depreciation related to new hospitals.

Parkway Pantai saw in-patient admissions increase by 9.1% and 5.4% in Singapore and Malaysia, respectively, in 2016 compared to a year earlier. Average revenue per inpatient admission decreased by 0.4% in Singapore and increased by 7.7% in Malaysia during the same period. The organic revenue growth from Parkway Pantai, particularly the continued ramp up of the Mount Elizabeth Novena Hospital, was partially offset by  start-up losses at new hospitals in Malaysia and pre-opening expenses related to Gleneagles Hong Kong.

Acibadem saw admissions increase by 31.6% while average revenue per inpatient admission declined by 2.5% in 2016. Excluding the effects of the depreciation of the Turkish lira, Acibadem's revenue and EBITDA increased by 22% and 7%, respectively during the same period.

The Company's gross and net investment cost in IHH was US$50.1 million and US$21.6 million, respectively at 31 December 2016. The fair value on the same date was US$54.9 million (31 December 2015: US$64.1 million). The change in value relates to the sale of 3.4 million IHH shares during 2016 and a decline in the value of residual shares due to a 2.8% and 4.5% decline in the share price and the Malaysian ringgit, respectively. The sale of shares in 2016 generated gross proceeds for US$5.5 million with an annualised return and times money over the original cost of 15.0% and 1.9 times, respectively. Symphony has received proceeds of US$28.5 million from the sale of IHH shares and aggregate dividend proceeds of US$1 million since the date of investment.

Investment in the Christian Liaigre Group

The Christian Liaigre Group ("CLG") was founded in 1985 in Paris and is a brand synonymous with discreet luxury, and has become one of the most sought-after luxury furniture brands, renowned for its minimalistic design style. CLG has a strong intellectual property portfolio and provides a range of bespoke furniture, lighting, fabric & leather, and accessories. In addition to operating a network of 26 showrooms in 11 countries across Europe, the US and Asia, CLG undertakes exclusive interior architecture projects for select yachts, hotels, and restaurants and private residences.

The weaker economic environment in Europe, the terrorist attacks in Paris and Brussels, as well as Brexit have contributed to less traffic in the showrooms and lower orders than forecast in 2016. The management team has seen a recovery in traffic and orders since December and recently secured an exceptional new site on rue du Faubourg Saint Honoré that will become the flagship showroom for Liaigre brand. Symphony together with a co-investor are working with management to expand and grow the existing business, particularly in Asia, and explore new complementary businesses to further compliment and leverage the Liaigre brand name.

Symphony, together with Navis Capital Partners and key management, acquired CLG in June 2016 for an undisclosed sum. Symphony's investment was more than 5% of NAV and due to strategic concerns, specific valuation information has not been disclosed publicly.  

Property Joint Venture In Malaysia

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 development is ongoing and operations are expected to commence at the end of 2017. The property will include a Club, 46 club suites and prototype villas. When fully developed the site will have a total of 52 villas.

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$21.4 million at 31 December 2016 (31 December 2015: US$22.5 million). The change in value is predominantly reflects of the weakening of the Malaysian ringgit by 4.5% during 2016.

Other Investments

In addition to the investments above, Symphony has seven additional non-material investments, at 31 December 2016. Pending investment in suitable opportunities, Symphony has placed funds in certain temporary investments. As at 31 December 2016, cash and cash equivalents that comprised bank deposits and cash at bank amounted to US$15.8 million.

Capitalisation and NAV

As at 31 December 2016, the Company had US$414.1 million in issued share capital and its NAV was approximately US$645.8 million. Symphony's NAV is the sum of its cash and cash equivalents, temporary investments, the fair value of unrealised investments (including investments in subsidiaries, associates and joint ventures) and any other assets, less any other liabilities. The audited financial statements contained herein may not account for the fair value of certain unrealised investments. Accordingly, Symphony's NAV may not be comparable to the net asset value in the audited financial statements. The primary measure of SIHL's financial performance and the performance of its subsidiaries will be the change in Symphony's NAV per share resulting from changes in the fair value of investments.

Symphony was admitted to the Official List of the London Stock Exchange ("LSE") on 3 August 2007 under Chapter 14 of the Listing Manual of the LSE. The proceeds from the IPO amounted to US$190 million before issue expenses pursuant to which 190.0 million new shares were issued in the IPO. In addition to these 190.0 million shares and 94.9 million shares pre-IPO, a further 53.4 million shares were issued comprising of the subscription of 13.2 million shares by investors and SIHL's investment manager, the issue of 33.1 million bonus shares, and the issue of 7.1 million shares to SIHL's investment manager credited as fully paid raising the total number of issued shares to 338.3 million.

The Company issued 4,119,490 shares, 2,059,745 shares, 2,059,745 shares and 2,059,745 shares on 6 August 2010, 21 October 2010, 4 August 2011 and 23 October 2012, respectively, credited as fully paid, to the Investment Manager, Symphony Investment Managers Limited. The shares were issued as part of the contractual arrangements with the Investment Manager.

On 4 October 2012, SIHL announced a fully underwritten 0.481 for 1 rights issue at US$0.60 per new share to raise proceeds of approximately US$100 million (US$93 million net of expenses) through the issue of 166,665,997 million new shares, fully paid, that commenced trading on the London Stock Exchange on 22 October 2012.

As part of the contractual arrangements with the Investment Manager in the Investment Management Agreement, as amended, the Investment Manager was granted 82,782,691 and 41,666,500 share options to subscribe for ordinary shares at an exercise price of US$1.00 and US$0.60 on 3 August 2008 and 22 October 2012, respectively. The share options vest in equal tranches over a five-year period from the date of grant. The Investment Manager exercised share options amounting to 4,054,970, 4,278,330, 4,538,197 and 742,616 on 8 May 2014, 10 June 2014, 17 April 2015 and 23 June 2016, respectively, at the exercise price of US$0.60 per share. Together with the shares issued to the Investment Manager, the shares issued pursuant to the rights issue and shares issued pursuant the exercise of options, increased the Company's fully paid issued share capital to 528.8 million shares.

Revenue and Other Operating Income

Management concluded during 2014 that the Company meets the definition of an investment entity and adopted IFRS 10, IFRS 12 and IAS 27 standards where subsidiaries are de-consolidated and their fair value is measured through profit or loss. As a result, revenue, such as dividend income, from underlying investments in subsidiaries is no longer consolidated.

During the 2016 fiscal year, Symphony recognised other income of US$1.0 million, which comprised interest income from bank deposits and loan interest from unconsolidated subsidiaries. This compares with other income of US$1.4 million in 2015 comprising the same items.

Expenses

Other Operating Expenses

Other operating expenses include fees for professional services, exchange losses, interest expense, insurance, communication, travel, Directors' fees and other miscellaneous expenses and costs incurred for analysis of proposed deals. For the year ended 31 December 2016, other operating expenses amounted to US$4.9 million (2015: US$7.4 million). The change in other operating expenses is predominantly due to lower exchange losses of US$3.6 million (2015: US$6.3 million), a non-cash item that was partially offset higher operating expenses of US$0.2 million.   

Management Fee

The management fee amounted to US$15.0 million for the year ended 31 December 2016 (2015: US$15.0 million). The management fee was calculated on the basis of 2.25% of NAV (with a floor and cap of US$8 million and US$15 million per annum, respectively).

Share Options Expense

Under the terms of the Investment Management and Advisory Agreement, the Investment Manager was granted Share Options to subscribe for shares of the Company. On 3 August 2008, the Investment Manager was granted 82,782,691 Share Options to subscribe for shares at US$1.00 each and on 22 October 2012, the Investment Manager was granted 41,666,500 Share Options to subscribe for shares at US$0.60 each. The share options vest in five equal tranches over a period of five years. The 82,782,691 Share Options granted on 3 August 2008 were fully vested and expensed by the end of the 2012 financial year.

An expense was recognised based on the fair value of the Share Options calculated using the Binomial Tree option-pricing model at 31 March, 30 June, 30 September and 31 December, respectively. The total expense during the 2016 financial year was US$1.2 million (2015: US$2.0 million) that was recognised in the statement of comprehensive income.

Liquidity and Capital Resources

At 31 December 2016, Symphony's cash balance was US$15.8 million. Symphony's primary uses of cash are to fund investments, pay expenses and to make distributions to shareholders, if and when declared by our board of directors. Taking into account current market conditions, it is expected that Symphony has sufficient liquidity and capital resource for its operations. The primary sources of liquidity are capital contributions received in connection with the initial public offering of shares, related transactions and a rights issue (See description under "Capitalisation and NAV"), in addition to cash from investments that it receives from time to time and bank facilities.

This cash from investments is in the form of dividends on equity investments, payments of interest and principal on fixed income investments and cash consideration received in connection with the disposal of investments. Temporary investments made in connection with Symphony's cash management activities provide a more regular source of cash than less liquid longer-term and opportunistic investments, but generate lower expected returns. Other than amounts that are used to pay expenses, or used to make distributions to our shareholders, any returns generated by investments are reinvested in accordance with Symphony's investment policies and procedures. Symphony may enter into one or more credit facilities and/or utilise other financial instruments from time to time with the objective of increasing the amount of cash that Symphony has available for working capital or for making opportunistic or temporary investments. At 31 December 2016, the Company had total interest-bearing borrowings of US$5.0 million (2015: US$4.8 million) associated with our property related investment in Niseko, Hokkaido, Japan. The Company's unconsolidated subsidiary, Symphony (MINT) Investment Limited, which hold's the Company's investment in MINT had a bank facility outstanding of approximately US$10.1 million at 31 December 2016 (2015: nil).

Principal Risks

Described below are some of the risks that the Company is exposed to:

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 opportunities for the Company are more likely to be 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.

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'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 Healthcare, Hospitality and Leisure ("HH&L") sectors (including education and branded real estate developments) within the Asia-Pacific region.

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

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 related investments may be subject to the risks inherent in the ownership and operation of real estate businesses and assets. A downturn in the real estate sector or a materialization 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 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 net asset value that the Company reports from one quarter to another.

The Company's investment policies and procedures (which incorporate the Company's investment strategy) provide that the Investment Manager should review the Company's investment policies and procedures on a regular basis and, if necessary, propose changes to the Board when it believes that those changes would further assist the Company in achieving its objective of building a strong investment base and creating long term value for its Shareholders. The decision to make any changes to the Company's investment policy and strategy, material or otherwise, rests with the Board in conjunction with the Investment Manager and Shareholders have no prior right of approval for material changes to the Company's investment policy.

Companies in which the Company invests in connection with special situations and structured transactions typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors' actions and market conditions, as well as general economic downturns. Investments that fall into this category tend to have relatively short holding periods and entail little or no participation in the board of the company in which such investments may be made. Special situations and structured transactions in the form of fixed debt investments also carry an additional risk that increases in interest rates could decrease their value.

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 education and 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. Following the Company's investments, it may be that the proportion of its total assets invested in longer-term investments falls below 70% and the proportion of its total assets invested in special situations and structured transactions exceeds 30% due to changes in the valuations of the assets, over which the Company has no control.

Pending the making of investments, the Company's capital will need to be temporarily invested in liquid investments and managed by a third-party investment manager of international repute or held on deposit with commercial banks before they are invested. The returns that temporary investments are expected to generate and the interest that the Company will earn on deposits with commercial banks will be substantially lower than the returns that it anticipates receiving from its longer-term investments or special situations and structured transactions.

In addition, while the Company's temporary investments will be relatively conservative compared to its longer-term investments or special situations and structured transactions, they are nevertheless subject to the risks associated with any investment, which could result in the loss of all or a portion of the capital invested.

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 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.

ANIL THADANI

Chairman

Symphony Asia Holdings Pte. Ltd.

27 February 2017

Symphony International Holdings Limited

Unaudited condensed statement of financial position

As at 31 December 2016 

	Note	2016	2015
		US$'000	US$'000
Non-current assets
Financial assets at fair value through profit or loss	7	638,222	627,292
		638,222	627,292
Current assets
Other receivables and prepayments		67	220
Cash and cash equivalents		15,793	73,142
		15,860	73,362
Total assets		654,082	700,654
Equity attributable to equity holders of the Company
Share capital		414,080	413,358
Equity compensation reserve		62,960	62,074
Accumulated profits		168,713	220,154
Total equity carried forward		645,753	695,586
Current liabilities
Interest-bearing borrowings		4,953	4,772
Other payables		3,362	296
Bank overdraft		14	-
Total liabilities		8,329	5,068
Total equity and liabilities		654,082	700,654

Symphony International Holdings Limited

Unaudited condensed statement of comprehensive income

As at 31 December 2016

	Note	2016	2015
		US$'000	US$'000
Other operating income		1,020	1,435
Other operating expenses	6	(4,890)	(7,407)
Management fees		(15,000)	(15,000)
		(18,870)	(20,972)
Share options expense		(1,162)	(1,986)
Loss before investment results and income tax		(20,032)	(22,958)
Fair value changes in financial assets at fair value through profit or loss	7	8,571	38,425
(Loss)/Profit before income tax		(11,461)	15,467
Income tax expense		-	-
(Loss)/Profit for the year		(11,461)	15,467
Other comprehensive income for the year, net of tax		-	-
Total comprehensive income for the year		(11,461)	15,467
Earnings per share:
		US Cents	US Cents
Basic	9	(2.17)	2.94
Diluted		(2.15)	2.90

Symphony International Holdings Limited

Unaudited condensed statement of changes in equity

For the financial year ended 31 December 2016

		Share capital	Equity compensation reserve	Accumulated profits	Total equity
		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
Contributions by and distributions to owners
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 changes in equity (continued) For the financial year ended 31 December 2016
			Share capital	Equity compensation reserve	Accumulated profits	Total equity
			US$'000	US$'000	US$'000	US$'000
At 1 January 2016			413,358	62,074	220,154	695,586
Total comprehensive income for the year			-	-	(11,461)	(11,461)
Transactions with owners of the Company, recognised directly in equity
Contributions by and distributions to owners
Issuance of shares			446	-	-	446
Value of services received for issue of share options			-	1,162	-	1,162
Exercise of share options			276	(276)	-	-
Dividend paid of US$0.0625 per share			-	-	(39,980)	(39,980)
Total transaction with owners of the Company			722	886	(39,980)	(38,372)
At 31 December 2016			414,080	62,960	168,713	645,753

Symphony International Holdings Limited Unaudited condensed statement of cash flows For the financial year ended 31 December 2016
		2016	2015
		US$'000	US$'000
Cash flows from operating activities
(Loss)/Profit before income tax		(11,461)	15,467
Adjustments for:
Exchange loss		3,606	6,341
Interest income		(1,020)	(1,435)
Interest expense		24	23
Fair value changes in financial assets at fair value through profit or loss		(8,571)	(38,425)
Share options expense		1,162	1,986
		(16,260)	(16,043)
Changes in working capital:
Decrease/(Increase) in other receivables and payments		155	(182)
Increase/(Decrease) in other payables		17	(12)
		(16,088)	(16,237)
Interest received (net of withholding tax)		1,306	1,181
Net cash used in operating activities		(14,782)	(15,056)
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss		(6,025)	-
Proceeds from disposal of financial assets at fair value through profit or loss		-	35,402
Net cash (used in)/ from investing activities		(6,025)	35,402
Cash flows from financing activities
Proceeds from issuance of shares		446	2,723
Interest paid		(24)	(24)
Dividend paid		(36,938)	(30,001)
Proceeds from borrowings		85	67
Net cash used in financing activities		(36,431)	(27,235)
Net decrease in cash and cash equivalents		(57,238)	(6,889)
Cash and cash equivalents at 1 January		73,142	80,376
Effect of exchange rate fluctuations		(125)	(345)
Cash and cash equivalents at 31 December		15,779	73,142

Symphony International Holdings Limited

Notes to the unaudited condensed financial statements

For the financial year ended 31 December 2016

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 2016 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 2016.

The Board of Directors approved these unaudited condensed financial statements on 27 February 2017.

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 2015.

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 2015.

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 2015.

6           Other operating expenses

		2016	2015
		US$'000	US$'000
Exchange loss, net		3,606	6,341
Non-executive director remuneration		400	400
General operating expenses		884	666
		4,890	7,407

7           Financial assets at fair value through profit or loss

 

During the financial year ended 31 December 2016, 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$8,571,000 (31 December 2015: US$38,425,000).

 

 

8           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 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	-	-	4,953	4,953	4,953
Bank overdraft	-	-	14	14	14
	-	-	8,329	8,329	8,329

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
Bank overdraft	-	-	-	-	-
	-	-	5,068	5,068	5,068

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 2016
Financial assets at fair value through profit or loss	-	-	638,222	638,222
31 December 2015
Financial assets at fair value through profit or loss	-	-	627,292	627,292

Significant unobservable inputs used in measuring fair value

This table below sets out information about significant unobservable inputs used at 31 December 2016 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 US$'000		Valuation technique	Unobservable input	Range (Weighted average)	Sensitivity to changes in significant unobservable inputs
	2016	2015
Rental properties	9,592	12,265	Income approach	Rental growth rate Occupancy rate Discount rate	0%-6% (2015: 6%-10%) 77%-82% (2015: 80-95%) 13% (2015: 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	94,606	99,161	Comparable valuation method	Price per square meter for comparable land	US$51 to US$1,865 per square meter (2015: US$53 to US$1,484 per square meter)	The estimated fair value would increase if the price per square meter were higher.
Operating business held for more than 12-months	12,637	14,831	Enterprise value using comparable traded multiples	EBITDA multiple (times)	4.7x to 116.9x, median 10.9x (2015: 5.4x to 17.2x, median 10.2x)	The estimated fair value would increase if the EBITDA multiple was higher.
				Discount for lack of marketability	20% (2015: 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$451,373,016 (2015: 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 2016 -----›		‹----- 31 December 2015 -----›
	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	627,292	627,292	630,053	630,053
Total gains or losses in profit or loss	8,571	8,571	38,425	38,425
Additions/(deductions)	2,359	2,359	(41,186)	(41,186)
Balance at 31 December	638,222	638,222	627,292	627,292

 

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 2016 -----›		‹----- 31 December 2015 -----›
	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	14,836	(15,915)	16,517	(17,083)

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.

9           Earnings per share

		2016	2015
		US$'000	US$'000
Basic and diluted earnings per share are based on:
Net (loss)/profit for the year attributable to equity holders of the Company		(11,461)	15,467

 

Basic earnings per share

		Number of shares 2016	Number of shares 2015
Issued ordinary shares at 1 January		528,096,195	523,557,998
Shares issued		742,616	4,538,197
Issued ordinary shares at 31 December		528,838,811	528,096,195
Weighted average number of shares (basic)		528,498,445	526,772,554

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:

		2016	2015
Weighted average number of shares (basic)		528,498,445	526,772,554
Effect of share options		5,070,268	5,713,299
Weighted average number of shares (diluted)		533,568,713	532,485,853

As at 31 December 2016 and 31 December 2015, there were no outstanding warrants. 111,855,210 warrants to subscribe for 111,855,210 new ordinary shares of no par value at an exercise price of US$1.22 expired on 3 August 2015.

At 31 December 2016, there were 110,835,078 (2015: 111,577,694) outstanding share options to subscribe for ordinary shares of no par value.  At 31 December 2016, 102,501,778 (2015: 94,911,094) of the unexercised share options had fully vested. 82,782,691 (2015: 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 2016, 19,719,087 (2015: 12,128,403) of the share options have an exercise price of US$0.60 (2015: US$0.60) and have been included in the computation of diluted earnings per share. At 31 December 2016, 8,333,300 (2015: 16,666,600) of the share options had not yet vested and had an exercise price of US$0.60 (2015: US$0.60) and have not 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 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)
	and SQR Global Healthcare Services Fund II
Hospitality	Includes investment in Minor International Public Company Limited (MINT)
Lifestyle	Includes investments in C Larsen (Singapore) Pte Ltd. and the Wine Connection Group (WCG) and Christian Liaigre Group (CLG) and WCIB International Co. Ltd. (WCIB)
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	Lifestyle/ real estate	Cash and temporary investments	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
31 December 2016
Investment income
-  Interest income	816	-	-	24	180	1,020
- Unrealised gain in profit or loss	(1,558)	3,466	(2,376)	7,388	1,651	8,571
	(742)	3,466	(2,376)	7,412	1,831	9,591
Investment expenses
-       Exchange loss	(30)	*	(2,719)	(835)	(22)	(3,606)
Net investment results	(772)	3,466	(5,095)	6,577	1,809	5,985

	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 2016
Segment assets	125,145	325,895	70,496	104,198	28,281	654,015
31 December 2015
Segment assets	128,269	361,895	14,972	111,421	83,877	700,434

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   2016	31 December 2015
		US$'000	US$'000
Profit or loss
Net investments results		5,985	33,519
Unallocated amounts:
-   Other corporate expenses		(17,446)	(18,052)
(Loss) / profit for the year		(11,461)	15,467
Assets
Total assets for reportable segments		654,015	700,434
Other assets		67	220
Total assets		654,082	700,654

 

11         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 (2015: US$400,000) were declared as payable to four directors (2015: 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 2016, the Company recognised interest income received/receivable on advances made to its unconsolidated subsidiaries totalling US$1,020,000 (31 December 2015: US$1,049,000).

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 2016, management fee amounting to US$15,000,000 (31 December 2015: 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 2015: 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 and 742,616 on 23 June 2016 at the exercise price of US$0.60 per share.

At 31 December 2016, the Investment Manager has been issued nil (31 December 2015: 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 2016 and 31 December 2015.

12         Commitments

In September 2008, the Company entered into a loan agreement with a joint venture, held via its unconsolidated subsidiary, to grant loans totaling US$3,900,000 (THB140,000,000). As at 31 December 2016, US$3,300,000 (THB120,000,000) has been drawn down. The Company is committed to grant the remaining loan amounting to US$600,000 (THB20,000,000), 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

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.

The Company announced on 16 January 2017 the initiation of a share Buyback Programme with the intention to acquire at least 10% of its shares in issue on an annual basis. As at 24 February the Company had acquired and cancelled 3.5 million shares at a total cost of US$3.1 million.

Subsequent to 31 December 2016 and up to 24 February 2017, the Company sold 6.1 million units of PREIT in multiple transactions that generated proceeds of US$10.1 million.

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

 

 

FR BRGDDLUDBGRI