Lenovo 2008 Annual Report Download - page 25

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Lenovo Group Limited • Annual Report 2007/08
US$406 million (2007: US$291 million) in short-term and revolving money market facilities and US$1,838 million (2007:
US$1,735 million) in forward foreign exchange contracts. At March 31, 2008, the amount drawn down was US$150 million
(2007: US$104 million) in trade lines, US$1,127 million (2007: US$896 million) being used for the currency forward contracts
and US$61 million (2007: US$18 million) in short-term bank loans.
At March 31, 2008, the Group’s outstanding bank loan represented the term loan of US$500 million (2007: US$100 million)
and short-term bank loans of US$61 million (2007: US$18 million). When compared with total equity of US$1,613 million
(2007: US$1,134 million), the Group’s gearing ratio was 0.35 (2007: 0.10). The net cash position of the Group at March 31,
2008 is US$1,630 million (2007: US$946 million).
2008
US$ million
2007
US$ million
Bank deposits and cash and cash equivalents 2,191 1,064
Less: total borrowings (561) (118)
1,630 946
The Group adopts a consistent hedging policy for business transactions to reduce the risk of currency uctuation arising
from daily operations. At March 31, 2008, the Group had commitments in respect of outstanding foreign exchange forward
contracts amounting to US$1,127 million (2007: US$896 million).
The Group’s foreign exchange forward contracts are either used to hedge a percentage of future intercompany
transactions which are highly probable, or used as fair value hedges for the identified assets and liabilities.
The Group issued 2,730,000 convertible preferred shares at the stated value of HK$1,000 per share and unlisted warrants
to subscribe for 237,417,474 shares for an aggregated cash consideration of approximately US$350 million. The convertible
preferred shares bear a fixed cumulative preferential cash dividend, payable quarterly, at the rate of 4.5 percent per annum
on the issue price of each convertible preferred share. The convertible preferred shares are redeemable, in whole or in
part, at a price equal to the issue price together with accrued and unpaid dividends at the option of the Company or the
convertible preferred shareholders at any time after the maturity date at May 17, 2012. On November 2, 2007, 955,001
convertible preferred shares were converted into 350,459,078 voting ordinary shares. The fair value of the liability
component and equity component of the convertible preferred shares, and warrants at March 31, 2008 amounted to
approximately US$211 million (2007: US$318 million), US$7 million (2007: US$11 million) and US$35 million (2007: US$35
million) respectively. The warrants will expire on May 17, 2010.
Contingent Liabilities
The Group, in the ordinary course of its business, is involved in various other claims, suits, investigations, and legal
proceedings that arise from time to time. Although the Group does not expect that the outcome in any of these other legal
proceedings, individually or collectively, will have a material adverse effect on its financial position or results of operations,
litigation is inherently unpredictable. Therefore, the Group could incur judgments or enter into settlements of claims that
could adversely affect its operating results or cash ows in a particular period.
Human Resources
At March 31, 2008, the Group had a total of approximately 23,111 (2007: 25,100) employees, 16,791 (2007: 19,300) of whom
were employed in the Chinese Mainland, 1,970 (2007: 2,000) in the U.S. and 4,350 (2007: 3,800) in other countries.
The Group implements remuneration policy, bonus and long-term incentive schemes with reference to the performance of
the Group and individual employees. The Group also provides benefits such as insurance, medical and retirement funds to
employees to sustain competitiveness of the Group.