VTech Announces FY2010 Annual Results

Strong profit growth amid adverse economic conditions

HONG KONG, June 14, 2010 -

    -- Profit attributable to shareholders of the Company grew 44.2% to
       US$206.5 million
    -- Net profit margin expanded by 3.6 percentage points, from 9.9% to
       13.5%
    -- Group revenue up by 5.8% to US$1,532.3 million
    -- Strong balance sheet, with net cash of US$382.6 million
    -- Final dividend of US62.0 cents per share, total dividend per share
       for the year up 47.2%

VTech Holdings Ltd (HKEx: 303; ADR: VTKHY) today announced its results
for the year ended 31 March 2010, reporting strong growth in profit amid
adverse economic conditions.

(Logo: photos.prnewswire.com/prnh/20090615/HKM004 )

Group revenue for the year ended 31 March 2010 rose by 5.8% over the
previous financial year, to US$1,532.3 million. Profit attributable to
shareholders of the Company grew strongly, by 44.2%, to US$206.5 million. The
proportionally higher profit was mainly attributable to effective spending on
advertising and promotions for electronic learning products (ELPs), as well
as better foreign exchange risk management. Basic earnings per share
increased by 43.1% to US83.7 cents, compared to US58.5 cents in the financial
year 2009. The Board of Directors has proposed a final dividend of US62.0
cents per ordinary share. Together with the interim dividend of US16.0 cents
per share, this gives a total dividend for the year of US78.0 cents per
ordinary share, an increase of 47.2% over the previous financial year.

"We have successfully managed our businesses through the adverse economic
conditions, achieving an increase in revenue and a proportionally higher
growth in profit," said Mr. Allan Wong, Chairman and Group CEO of VTech
Holdings Limited. "Our ability to make further progress across our businesses
in the face of very difficult market conditions testifies to the strength of
the Group."

Segment Results

North America

North America remains VTech's largest market, representing 57.0% of Group
revenue. Despite the most severe downturn in the US economy since World War
II, VTech managed to increase revenue by 12.9% to US$872.6 million in the
financial year 2010.

Growth was driven by higher sales of telecommunication (TEL) products and
contract manufacturing services (CMS). Their revenues rose during the
financial year by 34.2% and 7.0% to US$515.2 million and US$122.4 million
respectively.

The Group's TEL products continue to lead the market in industrial
design, innovative features and competitive pricing. During the financial
year, both the VTech and AT&T brands gained further retailer and consumer
support against the competition. The core AT&T range, and the opening price
point VTech branded DECT 6.0 cordless telephones, sold especially well.
Additionally, we have been able to capitalise on the exit of a major
competitor towards the end of the calendar year 2008. All these factors
contributed to considerable gains in market share for the Group. Our
estimated share of the US corded and cordless phone market reached almost
50%.

The Group's first enterprise phone, which sells under the AT&T brand, was
launched during the first half of the financial year. VTech offers the only
SMB telephony system in the US market to feature optional DECT 6.0 repeaters,
which give an unprecedented talk range of up to half a mile. This makes it
ideal for use in multi-level buildings, warehouses, restaurants, distribution
centres and similar facilities. This product has been well received by our
customers and sales have been steadily increasing.

Sales of ELPs, affected by the poor economy in the region, declined by
14.4% to US$235.0 million. Platform products were the main contributor to
this revenue decline. As noted at the interim, in view of the unstable
economic conditions, the Group had strategically delayed the launch of a
major new platform product. The Bugsby Reading System was the only new
platform launched. Its retail performance was in line with our expectation.

Standalone products sold well, by contrast, including popular products
such as the Tote & Go Laptop(TM) and Move & Crawl Ball(TM). The infant
category performed especially well. VTech's very strong infant product line
up has continued to gain support from retailers, including more shelf space
and promotional activities.

A significant new standalone product launch in the financial year 2010
was the Jungle Gym line. This product line combines electronic learning, fun
and physical activities. Products in this line are sold outside the
traditional learning aisle and have therefore created a new avenue for growth
for VTech's ELPs. Within the line, the Bouncing Colour Turtle(TM) has sold
especially well.

CMS saw sales improve sharply in North America in the second half of the
financial year, following a decline in the first half. As a result, revenue
increased by 7.0% to US$122.4 million. Professional audio equipment, where
our reputation continues to grow, saw further sales increases from existing
and new customers.

Europe

Revenue from Europe declined by 7.3% to US$528.9 million in the financial
year 2010, accounting for 34.5% of Group revenue.

VTech sells its TEL products to customers in Europe mainly on an Original
Design Manufacturing (ODM) basis. Sales of these TEL products fell by 11.5%
to US$171.4 million in the financial year 2010. There was a rebound in the
second half as customers began to restock following severe draw downs in
inventory, but this was unable to offset the sales decline in the first half.
Nevertheless, VTech's market share continued to increase during the financial
year.

Co-branded "T-Home/VTech" products based on our exclusive agreement with
Deutsche Telekom appeared on the shelves in August 2009 in Germany, with the
full product range reaching the shelves in the final quarter of the financial
year. The Group's first IAD appeared on the market at the same time. These
new products contributed to the rebound in the second half of the financial
year 2010.

ELP sales to Europe decreased by 6.5% to US$241.7 million in the
financial year 2010. As in North America, declining consumer demand and lower
average selling prices depressed sales for the full financial year.
Standalone products again fared better than platform products.

In spite of the overall sales decline in this region, ELP sales in the UK
and Germany were relatively stable. During the financial year 2010, the
Kidizoom and Kidizoom Pro cameras were the top selling toys in Germany and
the UK. Furthermore, Kidizoom camera was named Pre-School Toy of the Year
2009 by the Toy Retailers Associations in the UK for the second consecutive
year.

Despite a strong pick up in the second half, CMS revenue in Europe
declined slightly by 2.0% to US$115.8 million for the full financial year.
Demand for switching mode power supplies and wireless products was impacted
by the economic contraction in the region. However, we continued to see gains
in professional audio equipment as existing customers increased orders.

Asia Pacific and Other Regions

Asia Pacific continued to outperform other markets during the financial
year, as the region's economies proved more resilient during the global
downturn. Revenue rose by 47.6% to US$81.5 million, accounting for 5.3% of
Group revenue.

All product lines achieved sales increases. Sales of TEL products reached
US$22.9 million, growing by 59.0% over last year. The rise in revenue was in
part due to the agreement signed in June 2009 with a leading Australian
telecommunications and information services company Telstra, for which VTech
is now its direct supplier of fixed line telephones. For ELPs, sales in the
region rose by 23.4%, to US$15.8 million during the financial year.

CMS exhibited similarly strong growth to that of TEL products in Asia
Pacific, with sales rising by 52.9% to US$42.8 million. Growth was mainly
driven by a customer in the area of solid state lighting. VTech worked with
the customer to develop and produce its new range of LED light bulbs for home
use and played a significant role in launching the new products on the market
on time.

Sales from other regions were flat, with revenue for the financial year
decreasing slightly, by 0.8%, to US$49.3 million. This accounted for 3.2% of
Group revenue. The decrease was attributable to sales declines in ELPs. Sales
of TEL products grew by 13.9% to US$32.8 million during the financial year.
Other regions comprise mainly markets in Latin America, the Middle East and
Africa, which the Group has been developing in recent years as potential new
avenues of growth.

Outlook

Retail markets in most developed countries started to show signs of
recovery towards the end of the calendar year 2009. This, coupled with the
rebound in sales we have seen in the first three months of the calendar year
2010, gives some cause for optimism. However, given the financial instability
of certain EU countries and the subsequent volatility in global financial
markets, we still see considerable uncertainty over the sustainability of
this recovery. Additionally, the continued weakness of European currencies
will create pressure on our revenue and profitability.

Rising costs will add to the challenges in the financial year 2011.
Material and component prices have increased markedly since their lows in
2008 and 2009. Lead times are also longer. Leveraging our economies of scale
and strong procurement power, VTech is working closely with suppliers to
mitigate these impacts.

Labour costs in mainland China are also affected by the increase in the
minimum wage, which came into effect in May 2010. We will continue to
re-engineer products for lower costs, and seek productivity gains through
increasing automation and improving processes.

Going forward, we are still cautiously optimistic that the Group will
deliver growth in the financial year 2011. This will be achieved through
pursuing our strategy of product innovation, gains in market share,
geographic expansion and operational excellence.

North America and Europe

After a strong performance in the previous financial year, growth will
not be easy to achieve for TEL products in North America in the financial
year 2011. Nevertheless, we still expect further gains in market share in our
core product lines, namely corded and cordless telephones for consumers.
Beyond these, the AT&T branded SMB telephony systems will add momentum to
sales. Our second model in this category, Synapse(TM), was launched in
January 2010 and sales are gradually building up. We are currently selling
these products through value added resellers, and we are also recruiting
distributors through our "SMB Partner Program".

In Europe, despite the uncertainty of the economic situation, we expect
TEL products to resume growth in the financial year 2011. Most of our
existing customers are giving us more orders. VTech is steadily gaining
market share in Germany as a result of the Deutsche Telekom agreement.
Additionally, while volumes are still small compared to cordless phones, we
have been shipping an increasing number of integrated access devices (IADs).
This provides further impetus to sales growth.

For ELPs, we expect platform products to return to growth in North
America, while momentum for standalone products will continue. The two new
platform products launched this financial year, V.Reader and MobiGo, have
been well received by the trade. V.Reader is an animated e-book system for
children aged three to seven. With a 4.3 inch colour display, stories come to
life on V.Reader through narration, music, animation, and interactions.
MobiGo is a handheld educational gaming system for children aged three to
eight. With its colour touch screen and slide-open keyboard, MobiGo puts the
world of educational fun at children's fingertips. Both products have been on
retail shelves since June and will benefit from extensive media support.
Growth in standalone products will be supported by extensive line-ups of
infant and pre-school items. These are being led by additions to the
successful Jungle Gym line, a new category of bath toys, as well as strong
licensed pre-school products.

In Europe, the introduction of new standalone and platform products is
expected to stimulate sales. MobiGo will be introduced in most European
markets between late summer and fall, while V.Reader will appear in the UK in
the summer. As we receive European currencies for domestic sales in Europe, a
decline in their values would affect our revenue and profitability in US
Dollar terms. Consequently, growth will be difficult to achieve for the
financial year 2011.

The global electronic manufacturing service industry is forecast to
remain on an uptrend in the financial year 2011 and our CMS will continue to
outperform the market. With an established reputation in the professional
audio industry, we expect to gain additional business from both existing and
new customers in North America and Europe. Switching mode power supplies will
see growth opportunities in the new business areas of solar power inverters
and electric vehicle chargers.

Customers are increasingly aware of the efforts we have made in improving
the working conditions for our workforce. The operations of CMS are in full
compliance to the international standards SA8000 and OHSAS18000. These
certifications demonstrate the commitment of CMS in the areas of social
accountability and occupational health & safety. This commitment
differentiates CMS from the competition and will enhance our growth prospects
in the coming years.

Asia Pacific and Other Regions

Asia Pacific is likely to lead the way among other regions and we are
planning to introduce TEL products to the Chinese market. We also expect
increased contributions from the Telstra arrangement in Australia.

For ELPs, we have set up a new team to develop products specifically for
mainland China. These products will hit the shelves by the end of this
calendar year. We will continue to step up our efforts in other Asia Pacific
markets, notably Australia and Japan.

For CMS, we see good opportunities to build on our success in solid state
lighting for the Japanese market. As the performance of the LED light bulbs
is superior to that of conventional light bulbs, we are seeing rapid consumer
adoption of the new technology. As a result of keen competition in this
emerging business segment, tremendous price erosion is expected in the next
few years. CMS will work closely with our customer to accelerate cost
reductions through new product designs and process automation, so as to
improve profit margins through the strong partnership.

"VTech is a company with strong R&D, market leadership position, a strong
balance sheet and a highly efficient operation. We will continue to focus on
product innovation and geographical expansion to deliver growth, while
managing costs and risks to enhance profitability," said Mr. Wong.

About VTech

VTech is one of the world's largest suppliers of corded and cordless
telephones and electronic learning products. It also provides highly
sought-after contract manufacturing services. Founded in 1976, the Group's
mission is to be the most cost effective designer and manufacturer of
innovative, high quality consumer electronics products and to distribute them
to markets worldwide in the most efficient manner.

    Note: Starting from 22:00, 14 June 2010 (HK time), the video archive of
          the FY2010 annual results announcement can be accessed through
          VTech's homepage www.vtech.com in the "Webcasting and
          Presentation" section under "Investors".

    For further information, please contact:

     Grace Pang
     VTech Holdings Ltd
     Tel: +852-2680-1000
     Fax: +852-2680-1788
     Email: grace_pang@vtech.com

    VTech representative in Hong Kong
     Gloria Chiu, GolinHarris
     Tel: +852-2501-7970
     Fax: +852-2810-4780
     Email: gloria.chiu@golinharris.com

    VTech representative in the US
     Meredith Klein, GolinHarris
     Tel: +1-732-859-3789
     Fax: +1-212-373-6001
     Email: mklein@golinharris.com

Grace Pang of VTech Holdings Ltd, +852-2680-1000, or fax, +852-2680-1788, or grace_pang at vtech.com; or VTech representatives in HK, Gloria Chiu of GolinHarris, +852-2501-7970, or fax, +852-2810-4780, gloria.chiu at golinharris.com; or VTech representative in the US, Meredith Klein of GolinHarris, +1-732-859-3789, +1-212-373-6001, mklein at golinharris.com