Vtech 2008 Annual Report Download - page 49

VTech Holdings Ltd Annual Report 2008 47
18 RESERVES CONTINUED
Group Company
2008 2007 2008 2007
Note US$ million US$ million US$ million US$ million
Revenue reserve
Brought forward 230.5 202.9 164.3 127.0
Pro t attributable to shareholders 215.7 182.9 99.3 192.6
Final dividend in respect of the previous year 5 (98.8) (62.1) (98.8) (62.1)
Interim dividend in respect of the current year 5 (29.1) (21.5) (29.1) (21.5)
Special dividend in respect of the previous year 5 –(71.7) –(71.7)
Carried forward 318.3 230.5 135.7 164.3
Exchange reserve
Brought forward 1.3 (7.2) (1.2) (1.2)
Exchange translation di erences 15.4 8.5 ––
Carried forward 16.7 1.3 (1.2) (1.2)
Capital reserve
Brought forward 2.8 1.6 2.8 1.6
Equity-settled share-based transactions 0.9 1.2 0.9 1.2
Transfer to share premium (1.9) –(1.9) –
Carried forward 1.8 2.8 1.8 2.8
Hedging reserve
Brought forward –0.6 ––
Transfer to income statement 2 9.8 4.1 ––
Fair value losses on hedging during the year (10.8) (4.7) ––
Carried forward (1.0) –––
The consolidated pro t attributable to shareholders includes
a pro t of US$99.3 million (2007: US$192.6 million) which has
been dealt with in the  nancial statements of the Company.
Reserves of the Company available for distribution to
shareholders amounted to US$135.7 million (2007: US$164.3
million).
The application of share premium account is governed by the
Companies Act 1981 of Bermuda. The exchange reserve mainly
comprises exchange di erences arising from the translation
of the  nancial statements of foreign operations. The capital
reserve comprises the fair value of the actual or estimated
number of unexercised share options granted to employees of
the company recognised in accordance with the accounting
policy adopted for share-based payments. The hedging reserve
comprises the e ective portion of the cumulative net change
in fair value of hedging instruments used in cash  ow hedges
pending subsequent recognition of the hedged cash  ow.
19 FINANCIAL INSTRUMENTS
The Group enters into foreign exchange contracts and interest
rate swaps to hedge certain exposures on  uctuations of
foreign currency exchange rates and interest rates respectively.
The Group does not use derivative  nancial instruments for
speculative purposes.
(a) Credit risk
Financial assets which potentially subject the Group to credit
risk consist principally of cash, short-term deposits and trade
debtors. The Group’s deposits and cash are placed with major
 nancial institutions. Trade debtors are presented net of the
allowance for doubtful debts. Credit risk with respect to trade
debtors is limited due to the large number of customers
comprising the Group’s customer base and their dispersion
across di erent industries and geographical areas. Accordingly,
the Group has no signi cant concentration of credit risk. In
addition, credit risks are mitigated by the use of insurance plans.
The Group manages these risks by monitoring credit ratings and
limiting the aggregate risk to any individual counterparty.
(b) Foreign exchange risk
The Group is exposed to foreign currency risk primarily through
sales and purchases that are denominated in currencies other
than the functional currency of the operations to which they
relate. As the Hong Kong Dollar (“HKD”) is pegged to United
States Dollar (“USD”), the Group does not expect any signi cant
movements in the HKD/USD exchange rate. The currencies
giving rise to foreign currency risk are primarily denominated in
Canadian dollars (“CAD”), Euro (“EUR”), Pounds Sterling (“GBP”),
and Japanese Yen (“JPY”).