Lenovo 2009 Annual Report Download - page 31

2008/09 Annual Report Lenovo Group Limited
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The Group has also arranged other short-term credit facilities. At March 31, 2009, the Group’s total available credit
facilities amounted to US$4,210 million (2008: US$2,628 million), of which US$279 million (2008: US$384 million) was
in trade lines, US$498 million (2008: US$406 million) in short-term and revolving money market facilities and US$3,433
million (2008: US$1,838 million) in forward foreign exchange contracts. At March 31, 2009, the amounts drawn down
were US$91 million (2008: US$150 million) in trade lines, US$1,964 million (2008: US$1,127 million) being used for the
forward foreign exchange contracts; and US$20 million (2008: US$61 million) in short-term bank loans.
At March 31, 2009, the Group’s outstanding bank loans represented the term loans of US$665 million (2008: US$500
million) and short-term bank loans of US$20 million (2008: US$61 million). When compared with total equity of
US$1,311 million (2008: US$1,613 million), the Group’s gearing ratio was 0.52 (2008: 0.35). The net cash position of
the Group at March 31, 2009 is US$1,178 million (2008: US$1,630 million).
2009 2008
US$ million US$ million
Bank deposits and cash and cash equivalents 1,863 2,191
Less: total borrowings (685) (561)
1,178 1,630
The Group adopts a consistent hedging policy for business transactions to reduce the risk of currency fluctuation
arising from daily operations. At March 31, 2009, the Group had commitments in respect of outstanding forward foreign
exchange contracts amounting to US$1,964 million (2008: US$1,127 million).
The Group’s forward foreign exchange 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,
2009 amounted to approximately US$216 million (2008: US$211 million), US$7 million (2008: US$7 million) and US$35
million (2008: 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 flows in a particular period.
HUMAN RESOURCES
At March 31, 2009, the Group had a total of 22,511 (2007/08: 23,111) employees.
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.