Vtech 2003 Annual Report Download - page 32

VTech Holdings Ltd30
Report of the Directors
Notes:
1. Newcourt Trustees Limited as trustee of The Wong Chung Man 1984 Trust
beneficially owned all the issued shares in Conquer Rex Limited, Honorex
Limited and Twin Success Pacific Limited.
2. Honorex Limited beneficially owned all the issued shares in Conquer Rex
Limited.
There were no contracts of significance with corporate
substantial shareholders during the year under review.
MANAGEMENT CONTRACTS No contracts concerning the
management and administration of the whole or any substantial
part of the business of the Company were entered into or existed
during the year.
SECURITIES PURCHASE ARRANGEMENTS At the annual general
meeting held on 9th August 2002, shareholders renewed the
approval of a general mandate authorizing the directors to effect
repurchases of the Company’s own shares up to a limit of 10% of
the shares in issue as at that date.
PURCHASE, SALE OR REDEMPTION OF LISTED SHARES The Company has
not redeemed any of its shares during the year. Neither the
Company nor any of its subsidiaries has purchased or sold any of
the Company’s shares during the year.
MAJOR CUSTOMERS AND SUPPLIERS During the year the five largest
suppliers in aggregate accounted for less than 30% of the total
value of the Group’s purchases. The Group’s largest customer
accounted for approximately 10.3% of the Group revenue and
the Group’s five largest customers in aggregate accounted for
approximately 37% of the Group revenue during the year.
None of the directors, their associates or any shareholder (who, to
the knowledge of the directors, owns more than 5% of the
Company’s share capital) had an interest in the customers and
the suppliers noted above.
PRE-EMPTIVE RIGHTS There is no provision for pre-emptive rights
under the bye-laws of the Company and there are no statutory
restrictions against such rights under the laws of Bermuda in
which the Company is incorporated.
SHARE OPTION SCHEMES The Company operates share option
schemes for the purposes of providing incentives and rewards to
eligible participants who contribute to the success of the Group’s
operations. Eligible participants of these share option schemes
include employees of the Company and/or any of its subsidiaries,
including executive directors of any of such companies.
On 10th August 2001, the Company adopted a share option
scheme (the “2001 Scheme”) under which the directors may, at
their discretion, at any time during the 10 years from the date of
adoption of the 2001 Scheme, invite employees of the Company
and any subsidiaries of the Group, including executive directors
(but excluding non-executive directors) to take up shares of the
Company in accordance with the terms of the 2001 Scheme.
The share option scheme adopted by the Company on 24th
September 1991 (the “1991 Scheme”) expired on 23rd September
2001. Options granted and not yet exercised under the 1991
Scheme have lapsed during the year.
HomeRelay Communications, Inc. (“HomeRelay”, formerly known
as Unbound Communications, Inc.), a subsidiary of the Company,
located and established under the laws of the United States of
America, adopted a stock option plan in August 2000 (the
“HomeRelay Plan”). Under the HomeRelay Plan, HomeRelay may
grant up to 10% of HomeRelay’s common stock and a committee
designated by the board of directors of HomeRelay may fix the
terms and vesting of the options which in no event shall exceed
10 years.
Details of the 1991 Scheme, the 2001 Scheme and the HomeRelay
Plan are set out in note 20 to the financial statements.
CONNECTED TRANSACTION As announced on 11th April 2003, the
Company has entered into a transaction which constitutes a
connected transaction for the Company under Chapter 14 of the
Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited (the “Listing Rules”) and Chapter 11 of the
Listing Rules of the Financial Services Authority in the United
Kingdom (as the case may be) as set out below:
On 11th April 2003, the Company as tenant entered into an
agreement with Aldenham Company Limited (“Aldenham”) as
landlord for the lease of the premises situated at Bowen Road,
Hong Kong for 2 years commencing on 1st April 2003 at a
monthly rental of HK$250,000 for the purpose of providing
housing to Mr. Allan WONG Chi Yun, a director of the Company, in
accordance with the terms of his employment contract.
Aldenham is a company 50% owned by Mr. Allan WONG Chi Yun’s
wife and 50% owned by a trust the beneficiaries of which are
Mr. Allan WONG Chi Yun and his family members. Aldenham is
therefore a connected person of the Company as defined in the
Listing Rules. The entering into of the lease by the Company
constituted a connected transaction for the Company.
MATERIAL LEGAL PROCEEDINGS On 7th June 2002, the Group and
Lucent Technologies Inc. (“Lucent”) settled the lawsuit filed by
the Group against Lucent in January 2001 in a mutually
satisfactory manner. There was no admission of wrongdoing by
either party. Under the terms of the settlement, Lucent agreed to
adjust the purchase price of the acquisition downward by
US$50.0 million and such amount was fully settled in cash during
the year ended 31st March 2003.
After settling its claims against Lucent, the Group commenced
litigation against PricewaterhouseCoopers LLP (“PwC”) on
28th February 2003, seeking damages for PwC’s alleged
malpractice and breach of duty and fraud in representing the
Group concerning the acquisition of part of the Lucent Consumer
Telephone Business in March 2000. On 1st May 2003, PwC moved
to dismiss the complaint and it is anticipated that the Court will
rule on that motion within the next several months. The Group
remains confident that it will prevail on PwC’s motion to dismiss
although there is no way to accurately predict the outcome. The
Group attempted to settle with PwC which refused to enter any
settlement discussion with the Group.