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Shares in Symphony International rose +21% in September as the company announced an “orderly realisation” of its portfolio.

Long-term readers of our newsletters will know that, as the largest independent shareholder, we have worked to improve corporate governance at the company and unlock value trapped in the persistently wide discount at which the company has traded. This culminated in a 2021 public campaign to Save Symphony.

We view this as a pleasing outcome and will be following the realisation process closely to ensure shareholder value is optimised.

Symphony International was the most meaningful contributor to returns during the month. The shares rose +35% in local (dollar) terms, with Sterling weakness resulting in a +41% GBP return for AGT. This was driven exclusively by discount narrowing (indeed the NAV was marginally negative of the month) as the discount moved from 56% to 40%. This speaks to the powerful returns that can be earned when discounts reach extreme levels. Our view remains that a change to the company’s strategy and to its Board will be required for shareholders to have a chance of capturing the latent value on offer, and we continue to engage with shareholders on this and other matters.

At the end of the month, we launched a public campaign to remove and replace the Board of Directors of Symphony International Holdings (SIHL). Our rationale for doing so, along with supporting materials, can be found at www.savesymphony.com. We encourage all SIHL shareholders to get in touch with us at tom.treanor@assetvalueinvestors.com.

Symphony International reduced returns by -140bps, as the NAV fell 21% and the discount widened from
39% to 54%. Key holding Minor International (39% of NAV), the Thai-listed hotel and food group, fell -39% as its
activities were affected by the COVID-19 outbreak, with travel bans and lockdowns affecting large swathes of
its operations. With a high debt burden (115% of equity), this naturally raised questions about the ability of
Minor’s balance sheet to withstand the crisis. While the debt burden is prima facie worrying – it increased
significantly following the acquisition of NH Hotels – some comfort can be found in several factors: (1) Minor
owns many of its own hotels, giving it the flexibility to explore sale-and-leaseback transactions if needed,
which would release capital to support the balance sheet; (2) covenants have been loosened (leases will be
excluded from debt calculations, perpetual debt will continue to be treated as ,equity); (3) the bridging loans
used to acquire NH Hotel have been extended by 6 years; and (4) gross cash and undrawn facilities total
USD2 billion (70% of market cap). Therefore, we feel reasonably confident about Minor’s financial strength
and its ability to weather the crisis.

Minor’s founder/CEO and management team have steered the company through multiple crises over the
years, including the SARS outbreak of 2003, the tsunami of 2004, the Icelandic ash cloud of 2010, and
multiple coups in its home country. We are encouraged by the company’s recently reopened China
operations already showing early signs of a V-shaped recovery,

We believe Symphony’s sharply widening discount from already very wide levels is primarily a function of
the shares’ illiquidity. We continue to engage with the Board and management regarding solutions to the
persistently wide discount to NAV.

Symphony International (SIHL) was the largest detractor from NAV over
the month, reducing returns by 32bps as the share price fell by -7%,
driven by a -3% decline in NAV (due to a fall in Minor’s share price) and
a widening of the discount from 35% to 38%. Following the month-end,
Minor International (55% of NAV) released results for the first quarter of
2019, with like-for-like net profit up +20%, driven by a strong
performance at NH Hotels (the European hotel chain acquired by Minor
in late 2018).

Symphony International’s NAV held up well (down just 2%), but – as is often
the case with this off-the-radar illiquid stock – small clumsy sell orders had a
disproportionate impact on its share price with the discount widening to 36%
(from 28%). We are fairly sanguine about such moves given their tendency to
correct themselves relatively quickly and, indeed, SIHL’s discount has
narrowed to 32% at the time of writing.

While Symphony rebounded from the depressed price at which
it closed last month-end, its discount remained wide on
continued strength from main holding, Thai hotels and
restaurants group Minor International. Minor is currently in the
midst of a de facto takeover bid for Spanish-based hotels group
NH Hotels, in which it already owns a 45% stake, and is
tendering for additional NH shares at a price which equates to
10.6x e2018 EBITDA (which compares favourably to where
historic deals have been struck in the sector). The purchase will
accelerate Minor’s plan to become a truly global player in the hotels sector and there are clear top-line synergies from a
combination, such as re-branding hotels across Minor’s enlarged
portfolio. Under the stewardship of founder and CEO Bill
Heinecke, Minor has a distinguished track record in M&A and
has demonstrated a talent for opportunistic and well-timed
acquisitions ahead of inflection points in earnings. Minor’s
shares had been weak on fears that the acquisition would
require an equity raise, but the company has announced that coinvestors
have been lined up to acquire part of the holding
should Minor’s tender offer be accepted by more than an
expected number of NH shareholders. Since this clarification,
the shares have rebounded strongly.

We wrote last month on Symphony’s declaration of a large special
dividend that equated to a 12.4% yield on the undisturbed share price.
The shares subsequently traded ex-dividend from early-October yet
ended the month just 1.2% down despite the very sizable distribution.
In addition, largest holding Minor International (57% of NAV) recorded
an increase in share price of over 6%. The combination of a substantial
return of capital at an effective zero discount, the discount narrowing
almost 300bps to 24.8%, and NAV growth driven by Minor resulted in
our position adding 61bps to BTEM’s NAV. We attribute Symphony’s
narrowing discount to a growing recognition that management are
willing to return capital through a combination of buybacks and material
dividends

In 2014, Symphony established a policy of paying an annual dividend in
the first half of each year. In addition to ordinary dividends, large
special dividends were paid for the first three years equivalent to total
dividend yields of 5.5%, 5.8%, and 8.8%. This year, the special
dividend was cut due to limited excess cash being available for
distribution and the dividend yield equated to “just” 4.1%. However, a
very large additional dividend of $0.10 (equivalent on its own to a
12.4% yield) was declared in September following the full sale of
Parkway Life REIT and partial sale of some of the holding in Minor
International. Given dividends effectively represent a return of capital
at a zero discount, such payments are highly accretive to shareholders.
Unusually, however, dividends are paid to option-holders as well as
shareholders and any further returns of capital structured as dividends
(as opposed to, say, tender offers at NAV) may result in a transfer of
intrinsic value away from shareholders to option-holders given how
much closer the strike prices will be to current NAV following the
payment of the latest special dividend. We will continue to discuss this
and other issues with management and the Board. Nevertheless, the
share price responded well to the announcement of this large
distribution and Symphony’s share price increased by 7% over the
month.

Symphony was our largest contributor over January, adding 60bps to NAV. We have written in the past about our constructive engagement with the manager and board of this Asian consumer-focussed closed-end fund, and the announcement mid-month of a buyback programme of at least 10% of the company’s shares over the next year marks further success in this regard. This new buyback is in addition to the existing distribution policy that last year saw a pay-out equivalent to a yield of 9% on the share price at the time. Symphony’s discount to fully-diluted NAV narrowed from 28% to 20% over the month in addition to positive NAV growth of 3%. Further positive news in January came from Symphony’s unlisted portfolio with two sales of plots of land from the Minuet JV, which holds a large site of undeveloped land (with planning permission) within 30km of Bangkok airport. One sale was to a prestigious Thai developer likely to build residential property on the land; the other served as a contribution to an education venture that will build a school (Wellington College International Bangkok) on the acquired land. The sale, totalling 14.9 hectares came at a 15% uplift to carrying value and adds c2% to Symphony’s NAV if one applies the sale price to Minuet’s remaining 46 hectares. Importantly, the development on the land that results from these two sales is likely to increase the value of the remaining land held, while the cash received by Symphony will help fund the NAV-accretive buyback.

Symphony International made a large distribution in the first half of the year
for the third year running – despite a flat NAV, our position increased in value
by 22% in USD (45% In GBP) thanks to a sharply narrower discount (28% in
from 40%) as well as the pay-out to shareholders. NB Private Equity
Partners pulled off the dual trick of a narrowing discount (21% in from 26%)
and rising NAV to register a total return of 19% in USD (41% in GBP). We
continue to engage constructively with the management and board of both
Symphony and NB Private Equity given what we deem unacceptably wide
discounts.

Symphony International was our third largest contributor, with its share price
up +12% in GBP (+5% in traded currency, from $0.77 to $0.81). This had
an exaggerated effect on the discount, which narrowed 420bps, due to a
2% fall in Symphony’s NAV. The death of King Bhumibol Adulyadej,
Thailand’s highly revered monarch, hit the stock market as well as the
currency. Symphony’s largest investment, hotels and restaurants group
Minor International, was not immune from the sell-off and was at one point
down as much as 6.4% on the month before recovering to end the month
just 1.3% down. While the situation in Thailand currently remains calm,
there are understandable fears that the King’s death may presage further
upheaval given the country’s history of political instability. While this cannot
be ruled out, Minor International is a high quality business that has shown
remarkable resilience to trade robustly through various crises in the last 15
years including SARS, the Tsunami, multiple coups and terrorism.

Symphony was just behind Aker in terms of contribution on the
back of discount compression and positive FX translation (mainly
Thai, Singapore, and Malaysian exposures), followed by DWS
Vietnam (strong NAV; USD-linked currency), and Hudson’s Bay
(bounce off weak sentiment; FX). Detractors were few and far
between, with the largest being Empiric Student Property on the
back of the BREXIT vote. Notably, just 5% of ESP’s students are
from non-UK EU countries and we believe the sell-off is unjustified.
We added to our holding.

By far the largest contributor was Symphony International, the Asianconsumer focussed fund. Its shares climbed 19% (in GBP) on a total
return basis following a distribution in March that equated to a near-9%
yield on the undisturbed share price prior to the announcement. This is
the third year in a row that Symphony has paid a substantial
distribution, and should help counter the perception that management
are oblivious to the very wide discount to NAV at which the company’s
shares trade (39% at month-end). Over the course of our current
financial year, we have increased our shareholding in Symphony by
almost a third to reflect our high level of conviction and the compelling
valuation.

Other helpful contributors included Symphony International (NAV
growth from rise in Minor International’s share price, small contraction
in discount), Blackrock World Mining (commodities rally), NB Private
Equity Partners (200bps discount contraction, strong USD vs GBP), and
DWS Vietnam (bounce in Vietnamese market).

Symphony International was the largest contributor for the second
month running as its discount narrowed 500bps into a still wide 42%.
Sofina contributed 26bps to returns, with its strong share price
performance buoyed by Euro strength. Sofina has been a consistent
strong performer over an extended holding period, but we trimmed the
position as its discount dipped below 30% having been as wide as 37%
at the start of the year. Harbourvest Global Private Equity’s ascension
into the FTSE All-Share and FTSE 250 ensured it was a solid contributor
to returns as index tracker buying pushed in its discount.

The stand-out performer was Symphony International, up 11% in
November. Despite Thai-listed Minor International accounting for over
half of Symphony’s NAV, there is a near-zero correlation between daily
moves in the two companies’ share prices. We once again took
advantage of the resulting high volatility in Symphony’s discount to add
to our position at the low levels seen at the start of the month.

Detractors were few and far between, with Symphony International Holdings
(the Asian-consumer focussed closed-end fund) alone in subtracting materially
from returns. The company’s share price divorced even further from NAV in
October, with the 5.3% increase in the latter almost mirrored by a 5.4% decline
in the former. The company undoubtedly has its issues. Management are
reticent to engage in any marketing, preferring instead to add to their
substantial personal holdings at the very wide discount to NAV. The “standard”
LSE listing has no requirement for a wholly independent board, and the ability of
shareholders to replace directors is limited. Sell-side research is produced by
the Small-Cap rather than Investment Companies desk at the company’s
corporate broker. Base fees are high at 2.25% of NAV, albeit capped at $15m.
Although we acknowledge these concerns, we still believe the company’s shares
to be mis-priced on a 48% discount to estimated NAV. The current share price is
covered by cash and listed securities 1.6x over, with the 8% stake in Minor International alone covering 95% of the share price. We like the listed assets,
and see hidden upside in the private holdings (mainly real estate). We like
management’s track record, and the long-term alignment of interests that
results from their substantial amount of skin-in-the-game via their near-15%
stake and options. We like being paid a 7.3% dividend yield and we like the
wind-up vote scheduled for two years’ time that will be triggered if the discount
is wider than 35%. We are also cognisant of the 83 million management
warrants expiring in 2018 that are worthless at the current share price but have
an intrinsic value of $16m at NAV. We added to our position in Symphony
during the month.

Symphony International was our largest contributor, as it bounced
back from a pronounced fall at the end of August. Minor
International, the Thai hotels and restaurants group that accounts
for 45% of Symphony’s NAV, strongly outperformed a weak Thai
market rising +8.5% vs MSCI Thailand’s negative return of -4% for
the month.

A clumsy sell order saw Symphony’s share price
drop 12% over two days during which its underlying holdings were
unchanged. We were able to add to our position at a 41% discount
to NAV at what proved to be a temporarily depressed price, and
were gratified to see the share price rebound quickly. We continue
to see upside in Minor International, the high growth and high
return-on-capital Thai-listed hotels & restaurants operator which is
by far Symphony’s largest holding at 45% of NAV.

Symphony International last year introduced a dividend policy
following our constructive dialogue with management regarding the
excessively wide discount to NAV at which the company’s shares trade.
The ordinary dividend was maintained at the same level, but a
substantial special dividend was again paid (20% up on last year) for a
total dividend yield of 5.8%. Symphony’s shares are excessively cheap
on a discount of 37% to diluted NAV with investments in listed shares
and cash covering the market cap 1.3x over. We continue to engage
with management regarding other measures to tackle the discount.

We are the largest shareholder in Symphony International, a
London listed investment company focusing on listed and unlisted
assets in Asia. Having acquired our stake towards the end of 2012
on a discount of 49% we have been encouraging management to be
more pro-active in dealing with the persistently wide discount.
Whilst management have been slow in adopting any policies we
were reassured by the alignment of interests with the lead manager
who has consistently been adding to his shareholding in the
company – now worth $40m. At the end of March we were pleased
to see that the company announced its first dividend. At prevailing
prices this reflects a yield of almost 5.5% and the company intends
to pay an ordinary dividend going forward together with one off
extraordinary dividends. This is a positive first step from the
company in tackling their wide discount.