Vtech 2003 Annual Report Download - page 45

Annual Report 2003 43
Notes to the Financial Statements
17 BORROWINGS (continued) Details of the bank loans and
overdrafts are as follows:
2003 2002
US$ million US$ million
United States dollars
Unsecured bank loans and overdrafts at
an average floating rate of 5.8% in 2002,
after taking into account of interest rate swaps —93.0
Euros
Secured bank loans at an average fixed
interest rate of 6.0% (2002: 6.7%) 2.4 2.3
2.4 95.3
18 PENSION SCHEMES The Group operated a defined benefit
scheme and a defined contribution scheme in Hong Kong. The
defined contribution scheme operated in Hong Kong complied
with the requirements under the Mandatory Provident Fund
(“MPF”) Ordinance. For the defined contribution schemes
operated for overseas employees and Hong Kong employees
under the MPF Ordinance, the retirement benefit cost expensed
in the income statement amounted to US$1.4 million (2002:
US$1.2 million) and US$0.1 million (2002: US$0.1 million)
respectively. For the defined benefit scheme (“the Scheme”)
operated for Hong Kong employees, contributions made by the
Group during the year were calculated based on advice from
Watson Wyatt Hong Kong Limited (“Watson Wyatt”), independent
actuaries and consultants. The Scheme is valued annually. The
latest actuarial valuation was completed by Watson Wyatt as at
31st March 2003 using the projected unit credit method.
For the defined benefit scheme, the amounts recognized in the
balance sheet are as follows:
2003 2002
Note US$ million US$ million
Fair value of Scheme assets 8.7 11.5
Present value of funded defined
benefit obligations (11.4) (10.1 )
Unrecognized actuarial gains 4.5 0.4
Assets recognized in the balance sheet 15 1.8 1.8
The amounts recognized in the income
statement are as follows:
Current service cost 1.1 1.4
Interest cost 0.7 0.9
Expected return on plan assets (0.8) (1.0 )
Expenses recognized in the income statement*21.0 1.3
The actual return on plan assets
was as follows:
Expected return on plan assets 0.8 1.0
Actuarial losses on plan assets (2.0) (1.4 )
Actual return on plan assets (1.2) (0.4 )
Movement in the assets recognized in the
balance sheet:
At 1st April 1.8 2.1
Expenses recognized in the income statement*(1.0 ) (1.3 )
Contributions paid 1.0 1.0
At 31st March 1.8 1.8
The principal actuarial assumptions used
for accounting purposes were:
Discount rate 5.5% 7.0%
Expected return on plan assets 7.0% 7.0%
Future salary increases 5.0% 5.0%
19 PROVISIONS
Employee
compensated
Defective Restructuring leave
goods returns costs entitlements Total
US$ million US$ million US$ million US$ million
At 1st April 2002 33.0 4.6 1.5 39.1
Effect of changes in
exchange rate — 0.1 — 0.1
Additional provisions 40.1 — 1.3 41.4
Unused amounts reversed (5.8 ) (0.3) — (6.1 )
Charged to income
statement 34.3 (0.3 ) 1.3 35.3
Utilized during the year (30.7) (2.6 ) (0.8) (34.1 )
At 31st March 2003 36.6 1.8 2.0 40.4
Defective goods returns The Group undertakes to repair or replace
items that fail to perform satisfactorily in accordance with the
terms of the sale. A provision is recognized for expected return
claims, which included cost of repairing or replacing defective
goods, loss of margin and cost of materials scrapped, based on
past experience of the level of repairs and returns.
Restructuring costs Restructuring costs include the costs of
terminating employees and other closure costs relating to the
cessation or streamlining of business activities arising from the
restructuring plan launched in March 2001. Details of the plan
have been provided in the annual financial statements for the
year ended 31st March 2001.
20 SHARE CAPITAL, SHARE OPTIONS AND WARRANTS
Share capital
2003 2002
US$ million US$ million
Authorized
Ordinary shares:
400,000,000 (2002 : 400,000,000)
of US$0.05 each 20.0 20.0
2003 2002
Number of shares US$ million US$ million
Issued and fully paid
Ordinary shares of
US$0.05 each:
Beginning of year
and end of year 225,527,133 11.3 11.3
Share options
The 1991 Scheme Pursuant to the share option scheme adopted
on 24th September 1991 (the “1991 Scheme”), the directors may,
at their discretion, at any time during the ten years from the date
of approval of the 1991 Scheme, invite employees of the
Company and subsidiaries of the Group, including directors, to
take up share options of the Company for incentive purposes.