General Announcement

Reference No C&-061124-B9E44

Company Name	:	SYMPHONY HOUSE BHD
Stock Name	:	SYMPHNY
Date Announced	:	24/11/2006


Type	:	Announcement
Subject	:	SYMPHONY HOUSE BERHAD (“SYMPHONY” OR THE “COMPANY”) CALL OPTION AGREEMENTS IN RELATION TO ORDINARY SHARES IN VSOURCE ASIA SDN BHD (“VSASIA”), A 71.6% OWNED SUBSIDIARY OF SYMPHONY

Contents :

1. INTRODUCTION

The Board of Directors of Symphony wishes to announce that the Company has, today, entered into two Call Option Agreements with the following parties:

(i) Encik Abdul Hamid Sh Mohamed (“

HSM

”), an executive director of Symphony and a director of VsAsia, for the grant of call option by Symphony to require Symphony to sell to him up to 13,912 ordinary shares of RM1.00 each in VsAsia (“

VsAsia Shares

”), representing 4% of the present issued and paid up share capital of VsAsia at an exercise price of RM413.49 per share, out of which:

(a) up to 10,434 VsAsia Shares, representing 3% of the present issued and paid-up capital of VsAsia, have been allocated in favour of HSM

(“

HSM Option

”), and

(b) up to 3,478 VsAsia Shares, representing 1% of the present issued and paid-up capital of VsAsia (“

Key Management Option

”), are to be held by HSM on trust for certain key management employees of the Symphony Group to be identified by the Group Chief Executive of Symphony (“

Key Management

”); and

(ii) Encik Jasmy Ismail, a director of VsAsia and the Chief Executive of Symphony’s Technology Services Division, for the grant of the call option by Symphony to require Symphony to sell to him up to 3,478 VsAsia Shares, representing 1% of the present issued and paid up share capital of VsAsia at an exercise price of RM413.49 per share (“

JI Option

”).

(The HSM Option, Key Management Option and JI Option shall collectively be referred to as “

Call Options

”.)

2. DETAILS OF THE CALL OPTIONS

2.1

In December 2005, the Employees Provident Fund Board ("

EPF

") acquired a 15% interest in VsAsia through the subscription of 33,153 new VsAsia Shares (“

Subscription Shares

”) and the acquisition of VsAsia Shares from certain minority shareholders of VsAsia. On 1 December 2005, Symphony and EPF entered into a put option agreement for the grant of an option to EPF enabling EPF to dispose to Symphony the Subscription Shares if:

(a) VsAsia fails to meet the minimum requirements for listing on the Main Board of Bursa Malaysia Securities Berhad ("

Bursa Securities

") or any application for listing is rejected by the Securities Commission or any other relevant authority by a cut off date; or

(b) VsAsia meets the minimum requirements for listing on the Main Board of Bursa Securities but VsAsia refuses or declines to list as at the cut-off date for any reason whatsoever.

2.2

SHB intends to procure the listing of VsAsia on the Main Board of Bursa Securities or such other approved exchange as may be determined by the Board of Symphony.

2.3

The implementation of VsAsia's business growth strategies towards achieving the earnings target and eventual listing of VsAsia is dependent on

the commitment of the senior management of VsAsia as well as Symphony's ability to retain the senior management.

2.4

HSM is a Director of VsAsia and Symphony and is involved in overseeing the growth of VsAsia. JI is a Director of VsAsia and is also the Chief Executive of Symphony’s Technology Services Division.

2.5

As an incentive for HSM, JI and the Key Management in ensuring the growth of VsAsia, which will eventually result in its listing, Symphony has agreed to grant to HSM, JI and the Key Management the Call Options.

2.6 The salient terms of the Call Option Agreements are as follows:

Call Options	:	Symphony shall grant the following options: (a) HSM, the option to require Symphony to sell to him up to 13,912 VsAsia Shares, representing 4% of the present issued and paid up share capital of VsAsia, out of which: (i) up to 10,434 VsAsia Shares, representing 3% of the present issued and paid-up capital of VsAsia, have been allocated in favour of HSM, and (ii) up to 3,478 VsAsia Shares, representing 1% of the present issued and paid-up capital of VsAsia, are to be held by HSM on trust for certain Key Management; and (b) JI, the option to require Symphony to sell to him up to 3,478 VsAsia Shares, representing 1% of the present issued and paid up share capital of VsAsia. (The VsAsia Shares to be disposed by Symphony under the Call Options shall be referred to as “Option Shares”)
Exercise Period	:	The Call Options shall only be exercisable for the period commencing from the effective date of the Call Options Agreements until 5.00p.m. on 31 December 2009
Exercise Price	:	The Exercise Price shall be RM413.49 per share, subject to such adjustments as may be permitted under the Call Option Agreements.
Settlement mode	:	Cash settlement to be paid on completion of the sale and purchase of the Option Shares.
Conditions to the exercise of the Call Options	:	The HSM Option and JI Option shall only be exercisable within the Exercise Period subject to the fulfillment or waiver of the following conditions to the satisfaction of Symphony at the time of its exercise: (a) HSM and JI having satisfied the key performance indicators prescribed by the Board of Directors of Symphony required for the vesting of the HSM Option and JI Option respectively; (b) HSM and JI providing a written undertaking to Symphony in a form satisfactory to Symphony that they will not, following the listing of VsAsia or any other company identified as the listing vehicle for VsAsia subsequent to a share swap exercise whereby HSM and JI are issued shares in NewCo (“NewCo Shares”) in exchange for the VsAsia Shares, sell, transfer, assign or dispose of the Option Shares or the NewCo Shares (as the case may be), unless they have offered Symphony the first right of refusal to buy or acquire the Option Shares or the NewCo Shares (as the case may be); (c) such other approvals as may be required by the relevant authorities or pursuant to the relevant laws at the time of the exercise or waiver from such regulatory authorities, if applicable. The Key Management Option shall only be exercisable within the Exercise Period subject to terms to be determined by the Group Chief Executive of the Symphony.

2.7

The Exercise Price is equivalent to the price paid by EPF in its acquisition of VsAsia Shares which was completed in December 2005. This Exercise Price also represents a premium of approximately 31% and 22% to the acquisition price for the VsAsia Shares of about RM316 and RM339 per VsAsia Share paid by Symphony when the Company acquired its interests in VsAsia in February and November 2004 respectively. The Exercise Price shall be subject to adjustment as may be permitted under the respective Call Option Agreements.

2.8

The proceeds from the exercise of the Call Options amounting in total to RM7.2 million (based on 17,390 new VsAsia Shares to be exercised at RM413.49 per VsAsia Share), will be used for working capital purposes.

2.9

Other than the Exercise Price, HSM, JI and the Key Management will not be assuming any liability on the exercise of the Call Options.

2.10

The original cost of Symphony’s investment in VsAsia, which was acquired between February 2004 and June 2005, is RM86.8 million. As such, the original cost of investment for the 5% interest to be disposed to HSM, JI and the Key Management upon the full exercise of the Call Options is RM6.1 million.

2.11

For purposes of illustration, based on the carrying of investment of VsAsia in the books of Symphony as at 30 September 2006 and assuming the Call Options are fully exercised on that date, Symphony will record a gain of approximately RM0.7 million.

3. RATIONALE FOR THE CALL OPTIONS

VsAsia is expected to be one of the main contributors to the earnings of Symphony Group. In addition, we intend to procure the listing of VsAsia on the Main Board of Bursa Securities or such other approved exchange as may be determined by the Board of Symphony. The implementation of its business growth strategies toward achieving the earnings target and eventual listing of VsAsia is dependent on the commitment of the senior management of VsAsia as well as our ability to retain the senior management.

The Call Options are intended to motivate, retain and reward the senior management of the VsAsia Group and Symphony Group without adversely affecting the cashflows of the Group, by giving them the opportunity to participate in the future growth of the VsAsia Group and enabling them to relate directly to the performance of the VsAsia Group. The Call Options are expected to align the interests of the senior management with that of our Company’s, in particular to procure the listing of VsAsia.

4. INFORMATION ON VSASIA

VsAsia was incorporated in Malaysia under the name NetCel360 Sdn Bhd on 6 January 2000 as a private limited company under the Companies Act, 1965. On 7 November 2001, its name was changed to Vsource (Malaysia) Sdn Bhd. It was subsequently converted into a public company on 29 March 2004 and assumed the name of Vsource Asia Berhad on 22 April 2004. On 28 October 2005, the company converted its status to a private limited company. The principal activity of VsAsia is the provision of business process outsourcing ("

BPO

") services and management services to its subsidiaries.

The VsAsia group's clients are mainly multi-national companies, particularly Fortune 500 Companies and Global 500 Companies that have operations in the Asia-Pacific region, United States of America ("

") and Europe. VsAsia provides a comprehensive range of sophisticated BPO services designed to operate key administrative, customer support and sales functions in multiple countries. VsAsia was awarded the Multimedia Super Corridor status on 20 December 2000 by Multimedia Development Corporation Sdn Bhd.

VsAsia's consolidated profit after taxation and consolidated net asset based on its audited financial statements for the 11 month period ended 31 December 2005 are RM3.89 million and RM36.5 million respectively.

A summary of VsAsia's financial information is set out below:

(All in RM’000)
13 month period ended 31.01.2002
Year ended
31.01.2003
Year ended
31.01.2004
Year ended
31.01.2005
11 month period ended
31.12.2005

Revenue
42,136
100,840
69,167
66,333
60,180

Profit / (Loss) before taxation
(1,403)
20,924
6,082
(4,937)
3,897

Profit / (Loss) after tax
(1,023)
20,924
5,999
(6,263)
3,892

Net assets
60,693
81,363
16,321
10,375
36,487

5. EFFECTS OF THE CALL OPTIONS

5.1 Issued and paid-up share capital and major shareholders' shareholdings

The exercise of the Call Options will not have any effect on Symphony's issued and paid-up share capital and major shareholders' shareholdings.

5.2 Symphony’s shareholding in VsAsia

Based on the present number of VsAsia Shares in issue, upon the full exercise of the Call Options, Symphony’s effective shareholding in VsAsia will decrease from 71.6% to 66.6%.

Symphony had earlier announced the implementation of an employees share option scheme for VsAsia and its group of companies to grant options to eligible senior management of the VsAsia Group, allowing them to subscribe for new VsAsia Shares not exceeding 5% of the total issued and paid-up share capital of VsAsia at the time of offer at the exercise price of RM413.49 per VsAsia Share (“

VsAsia ESOS

”).

Following the full exercise of the options under VsAsia ESOS, Symphony’s effective shareholding in VsAsia will be further diluted from 66.6% to 63.4%.

5.3 Earnings

The vesting of the Call Options is expected to be spread over the duration of the Call Options. The first block of the Call Options is expected to be vested after the close of the financial year ending 31 December 2006.

In addition, the exercise of the Call Options is not expected to take place in the financial year ending 31 December 2006. Accordingly, Symphony does not expect any material impact on its consolidated earnings for the financial year ending 31 December 2006. However, for purposes of illustration, based on the carrying of investment of VsAsia in the books of Symphony as at 30 September 2006 and assuming the Call Options are fully exercised on that date, Symphony will record a gain of approximately RM0.7 million.

5.4 Net assets

As the exercise of the Call Options is not expected to take place in the financial year ending 31 December 2006 and the vesting of the Call Options is expected to take place after the financial year ending 31 December 2006, Symphony does not expect any material impact on its consolidated net assets for the financial year ending 31 December 2006.

6. APPROVALS REQUIRED

The Call Option Agreements are not subject to shareholders’ approval or any regulatory approval.

7. MAJOR SHAREHOLDERS' AND DIRECTORS' INTEREST

Save as disclosed below, none of Symphony's Directors, major shareholders and/or persons connected to the Directors and/or major shareholders has any interest, direct or indirect, in the Call Options:

(i) HSM, has interest in the HSM Option. In this regard, he has abstained and continues to abstain from all Board deliberations in respect of the said transaction.

8. STATEMENT BY THE DIRECTORS

Symphony's Board (save for HSM who has abstained from all Board deliberations in relation to the HSM Option), having considered all aspects for the HSM Option and JI Option, is of the opinion that this exercise is fair and reasonable and is in the best interests of Symphony.

9. RELATED PARTY TRANSACTION

HSM is an Executive Director of Symphony and a Director of VsAsia while JI is a Director VsAsia and a number of other subsidiaries of Symphony. As such, the grant of the Call Options to HSM and JI are related party transactions. However, no shareholders’ approval is required.

10. ESTIMATED TIME FRAME FOR COMPLETION

The Call Options are effective on the date of the signing of the Call Option Agreements.

11. DEPARTURE FROM SC'S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES ("SC GUIDELINES")

The Call Options does not depart from the SC Guidelines.

12. DOCUMENTS AVAILABLE FOR INSPECTION

The Call Option Agreements are available for inspection at Symphony's registered address at Level 17, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur during normal business hours from Mondays to Fridays (except public holidays) for a period of 3 months from the date of this announcement.

This announcement is dated 24 November 2006.

(All in RM’000)	13 month period ended 31.01.2002	Year ended 31.01.2003	Year ended 31.01.2004	Year ended 31.01.2005	11 month period ended 31.12.2005
Revenue	42,136	100,840	69,167	66,333	60,180
Profit / (Loss) before taxation	(1,403)	20,924	6,082	(4,937)	3,897
Profit / (Loss) after tax	(1,023)	20,924	5,999	(6,263)	3,892
Net assets	60,693	81,363	16,321	10,375	36,487