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2011/12 Annual Report Lenovo Group Limited
Stock Code: 992
Journey from PC to PC+

Table of contents

  • Page 1
    Journey from PC to PC+ Stock Code: 992 2011/12 Annual Report Lenovo Group Limited

  • Page 2
    ...efficient global supply chain and strong strategic execution. Formed by Lenovo Group's acquisition of the former IBM Personal Computing Division, the Company develops, manufactures and markets reliable, high-quality, secure and easy-to-use technology products and services. Its product lines include...

  • Page 3
    ... CHAIrmAN ANd CEO STATEmENT 10 59 87 105 109 176 LENOVO mANAGEmENT TEAm AUdIT COmmITTEE rEPOrT dIrECTOrS' rEPOrT mANAGEmENT'S dISCUSSION ANd ANALYSIS COmPENSATION COmmITTEE rEPOrT INdEPENdENT AUdITOr'S rEPOrT CONSOLIdATEd BALANCE SHEET COrPOrATE GOVErNANCE rEPOrT COrPOrATE SOCIAL rESPONSIBILITY...

  • Page 4
    ...expenses Expense-to-revenue ratio (%) EBITDA1 Pre-tax income Pre-tax income margin (%) Profit attributable to equity holders of the Company EPS - basic (US cents) EPS - diluted (US cents) Interim dividend per share (HK cents) Final dividend per share (HK cents) 2 2012 US$ million 2011 US$ million...

  • Page 5
    ...) 798 603 432 305 821 484 473 273 129 (226) 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Notes: 1 Excluding discontinued operations for the period from April 1, 2006 to March 31, 2008. 2 Excluding restructuring charges and other income, net. 2011/12 Annual Report Lenovo Group Limited 3

  • Page 6

  • Page 7
    PC INNOVATION REDEFINE

  • Page 8
    ..., China, and created a joint venture with Compal. Both ventures will help further provide products to our customers in faster, more efficient ways while enhancing Lenovo's global supply chain and strengthening our integrated innovation capabilities. • Our Mobile Internet Digital Home (MIDH) Group...

  • Page 9
    ... committed to continuing our strong momentum. I have great confidence in our strategy and our team, and believe we are well positioned to continue to grow in the years ahead. Yang Yuanqing Chairman and Chief Executive Officer Hong Kong, May 23, 2012 2011/12 Annual Report Lenovo Group Limited 7

  • Page 10

  • Page 11
    CLOUD READY AND CLOUD EASY

  • Page 12
    ... Technology Officer PETER D. HORTENSIUS Senior Vice President and President of Product Group GIANFRANCO LANCI Senior Vice President and President of EMEA LIU JUN Senior Vice President and President of Mobile Internet and Digital Home Business Group 10 2011/12 Annual Report Lenovo Group Limited

  • Page 13
    qIAO JIAN Senior Vice President, Human Resources GERRY SMITH Senior Vice President, Global Supply Chain MILKO VAN DUIJL Senior Vice President and President of APLA WONG WAI MING Senior Vice President and Chief Financial Officer 2011/12 Annual Report Lenovo Group Limited 11

  • Page 14

  • Page 15
    PC+ EVOLUTION ACROSS FOUR SCREENS

  • Page 16
    ... as in all product and customer segments. Lenovo also achieved strong performance in unit shipments, revenue and profit growth for its PC business. With this consistent strong performance, Lenovo became the world's number two PC maker in fiscal year 2011/12 and continued to close the gap with the...

  • Page 17
    ...). Lenovo ranked number one in two of the top three PC markets in the world, namely China and Japan, in the fiscal year 2011/12. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10/11 10/11 10/11 10/11 11/12 11/12 11/12 11/12 Market Share Lenovo Markets 0 China China accounted for 42 percent of the Group's total revenue...

  • Page 18
    ... to reach double-digit level. LENOVO SHARE GAINS IN ALL EMERGING MARKET REGIONS IN FY12 ASEAN Brazil EET HTK India LAS MEA Russia EM 4.8% 3.7% 7.4% (+0.8) (+0.6) 6.8% 6.0% (+0.8) (+1.1) 13.0% (+3.8) 7.4% (+2.2) (+1.1) 9.6% 7.2% (+1.4) (+1.5) 16 2011/12 Annual Report Lenovo Group Limited

  • Page 19
    ...its channel strategy. Lenovo also expanded its footprint in consumer markets through expanding retail presence, supported by investments in branding to assert the Group's consumer image. PERFORMANCE OF PRODUCT GROUPS During the fiscal year 2011/12, Lenovo achieved strong and balanced unit shipments...

  • Page 20
    ...won a Gold Product Design Award from the iF 2012 out of over 2,000 product entries from around the world, for its pioneering design strategy that combines stylish aesthetics and innovative comfort features. Notebook Products Lenovo also achieved strong balanced unit shipments growth and market share...

  • Page 21
    ... senior management teams at Lenovo and key HDDs suppliers, allocation of HDD supply to high margin products and strategic customers. The Group successfully turned the industry crisis into an opportunity to continue outperforming its industry peers. Lenovo secured product supplies adequate to meet...

  • Page 22
    ...strengthening Lenovo's ability to deliver innovative products with faster time-to-market, the Group signed an agreement with Compal Electronics, Inc. in September 2011 to form a joint venture company that will build and operate a new product development and manufacturing center in Hefei, China. The...

  • Page 23
    ... global culture is critical to driving the speed, efficiency, innovation and execution that separates Lenovo from the competition. The Group believes that building a strong culture is in many ways just as important as building outstanding products or developing an effective business model. A company...

  • Page 24
    ... Asia's best managed technology companies by Finance Asia and one of the world's most reputable companies according to Fortune's Global Rep Trak 100. LENOVO LEARNING AND DEVELOPMENT FRAMEWORK 20% 70% 10% Experiences People & Relationships Education 22 2011/12 Annual Report Lenovo Group Limited

  • Page 25
    ... FINANCIAL HIGHLIGHTS 2012 US$'000 29,574,438 821,497 472,992 4.67 4.57 2011 US$'000 21,594,371 603,202 273,234 2.84 2.73 For the year ended March 31 Revenue EBITDA1 Profit attributable to equity holders of the Company Earnings per share (US cents) - Basic - Diluted Dividend per ordinary share (HK...

  • Page 26
    ... lease payments Amortization of intangible assets Employee benefit costs - long-term incentive awards Rental expenses under operating leases 2012 US$'000 2011 US$'000 77,721 97,684 1,938,256 66,418 63,252 81,856 94,284 1,431,218 41,375 52,670 24 2011/12 Annual Report Lenovo Group Limited

  • Page 27
    ... intangible assets including trademarks and trade names, and internal use software. During the year, the Group completed the formation of the NEC JV and the acquisition of Medion. Goodwill and other intangible assets including trademarks and trade names and customer relationships of US$581 million...

  • Page 28
    ... liabilities mainly represent the present value of the contingent consideration payable of US$429 million in connection with the arrangements with the respective former shareholders of NEC JV and Medion with reference to certain performance indicators. 26 2011/12 Annual Report Lenovo Group Limited

  • Page 29
    ... US$725 million. Bank borrowings The US$200 million term loans have been repaid in March 2012. CAPITAL EXPENDITURE The Group incurred capital expenditure of US$329 million (2011: US$148 million) during the year ended March 31, 2012, mainly for the acquisition of office equipment, completion of...

  • Page 30
    ..., 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. 28 2011/12 Annual Report Lenovo Group Limited

  • Page 31
    ... and innovation in PCs while also expanding its business across the four screens (PC, tablet, smartphone, Smart TV) of devices and into the ecosystem of cloud, services and other applications that make up the PC+ market. Lenovo's FY13 China Kickoff Event 2011/12 Annual Report Lenovo Group Limited...

  • Page 32
    ... innovation in PCs and developing new PC+ products, as well as balance between commercial and consumer customer groups. The Group's Emerging Markets business has shown strong growth and as reaching scale is also moving to a more profitable model. 30 2011/12 Annual Report Lenovo Group Limited

  • Page 33
    ... • Channel • Brand • Ecosystem The Group will continue its investment in building its core competencies, product innovation, branding and new PC+ segments, including mobile internet and digital home (MIDH), balancing expenses and revenues to drive longterm sustainable profit growth. Lenovo...

  • Page 34

  • Page 35
    DOESN'T STOP DOING DO

  • Page 36
    ... Compensation Committee Nomination and Governance Committee Chief Executive Officer Reporting Delegation/ Supervision Reporting Internal Audit Senior Management Conducting audits Supervision Reporting Conducting audits GROUP'S OPERATIONS 34 2011/12 Annual Report Lenovo Group Limited

  • Page 37
    ... the appropriate professional qualifications, or accounting or related financial management expertise as required under the Listing Rules. Board Composition 9% 55% 36% Executive Director Non-Executive Directors Independent Non-Executive Directors 2011/12 Annual Report Lenovo Group Limited 35

  • Page 38
    ...the closing of a transaction between the Company and certain private equity investors, including the General Atlantic group, whose interests were represented by its senior executive, Mr. Grabe, the Board is satisfied and has demonstrated to the satisfaction of The Stock Exchange of Hong Kong Limited...

  • Page 39
    ... information technology, investment, employees compensation and corporate governance matters for the benefit of the Company and its shareholders as a whole and, in particular, the independent shareholders; and Mr. Grabe confirmed his independence to the Exchange in respect of each of the factors set...

  • Page 40
    ...Innovation Center and manufacturing plant in Beijing to enhance their understanding of the operations of the Company. In addition to Board meetings, during the year, the Company also arranged independent non-executive directors of the Company to attend certain culture and finance function activities...

  • Page 41
    ... ad hoc matters • Notice of not less than 7 days (or other reasonable period) be given • Generally, not less than 3 days (or other reasonable period) before the meeting • One-on-one briefing offered to each director prior to the meeting 2011/12 Annual Report Lenovo Group Limited...

  • Page 42
    ... company policy to govern securities transactions by directors and designated senior management of the Company. All the directors of the Company have confirmed, after specific enquiry, their compliance with the required standard during the year. 40 2011/12 Annual Report Lenovo Group Limited

  • Page 43
    ... shareholders' communication policy of the Company (the "Shareholders' Communication Policy") Disbandment of the Strategy Committee Adoption of a Board principle on the term of independent non-executive directors • • • • • • • 2011/12 Annual Report Lenovo Group Limited...

  • Page 44
    CORPORATE GOVERNANCE REPORT Board Committees As at the date of this annual report, the Company has preserved three board committees ("Board Committees") with defined terms of reference (which are posted on the Company's website and HKEx's website) - Audit Committee, Compensation Committee and ...

  • Page 45
    ... to the Compensation Committee. The Committee held three meetings during the period from April 1, 2011 to February 8, 2012 to review the business performance and business strategy of the Group and assess the performance of the CEO for FY2010/11. 2011/12 Annual Report Lenovo Group Limited 43

  • Page 46
    ... of the Committee • Review of the standard form of letter of appointment for non-executive directors • Review of and recommendation to the Board for adoption of the Board principle regarding the term of independent non-executive directors 44 2011/12 Annual Report Lenovo Group Limited

  • Page 47
    ... to excuse himself from the Strategy Committee meeting to avoid conflict of interest. (10) The name of the "Governance Committee" was changed to "Nomination and Governance Committee". (11) The Strategy Committee was disbanded on February 8, 2012. 2011/12 Annual Report Lenovo Group Limited 45

  • Page 48
    ... and their biography are set out on pages 90 to 91 of this annual report. Internal Control The Board acknowledges its responsibility to ensure the Company maintains sound and effective internal controls. This is achieved through a defined management structure with specified limits of authority and...

  • Page 49
    ... the quarterly financial statements and compliance with key internal controls. Lenovo recognizes the importance of self testing of key controls by management in order to ensure that the internal controls are working as intended or that necessary actions have been taken to address control weaknesses...

  • Page 50
    ... mitigation plans to be implemented. These are monitored and reviewed by each business function as well as at the group level. These influential risks are highlighted to the Audit Committee, along with the status of actions taken to manage these risks. 48 2011/12 Annual Report Lenovo Group Limited

  • Page 51
    ... Group. The Company has adopted a policy on engagement of external auditor for non-audit services, under which the external auditor is required to comply with the independence requirements under Code of Ethics for Professional Accountants issued by Hong Kong Institute of Certified Public Accountants...

  • Page 52
    ...nou fin d p nc an res em cial s r en ele ts, as e Investment community communication e.g. roadshows, site visits and annual analyst roundtable 50 2011/12 Annual Report Lenovo Group Limited Sha reho mee ldings' ting s COMMUNICATION CHANNELS WITH SHAREHOLDERS AND OTHER STAKEHOLDERS y's pan Com...

  • Page 53
    ... Company's website (www.lenovo.com/hk/publication) and HKEx's website (www.hkex.com.hk) on May 27, 2011 and July 22, 2011 respectively. Details of the proposed resolutions for 2012 annual general meeting are set out in the circular which will be dispatched to our shareholders with this annual report...

  • Page 54
    ... Suisse Asian Investment Conference Location Hong Kong Hong Kong Beijing Singapore Hong Kong Taipei New York Taipei Hong Kong Qingdao, China Hong Kong Singapore Hong Kong New York & Boston San Francisco Las Vegas Las Vegas Hong Kong Taipei Hong Kong 52 2011/12 Annual Report Lenovo Group Limited

  • Page 55
    ... Group's new global branding campaign has also won a number of awards fully demonstrates the company's leading international best practices of our Annual Report is being highly recognized. The report has won the Grand Award for "Best of Annual Reports in Hong Kong" and the Gold Award of "Best Annual...

  • Page 56
    ... in providing award-winning investor relations services. Listing Information The Company's shares are listed on the Stock Exchange of Hong Kong. In addition, shares are traded in the United States through an American Depositary Receipt (ADR) Level 1 Programme. Market Capitalization and Public Float...

  • Page 57
    ... annual general meeting or extraordinary general meeting are set out in the Corporate Governance section of the Company's website. Shareholders may send their enquiries requiring the Board's attention to the Company at the registered address of the Company or by email to [email protected]...

  • Page 58
    ...) by the relevant holder or group of holders as recorded in the registers maintained under the SFO. The approximate percentage of shareholding is calculated on the basis of 10,335,612,596 Shares of the Company in issue as at March 31, 2012. (ii) 56 2011/12 Annual Report Lenovo Group Limited

  • Page 59
    ... code Board lot size Ordinary shares outstanding as of March 31, 2012 Free float Market capitalization as of March 31, 2012 Hong Kong Stock Exchange 992 2,000 shares 10,335,612,596 shares 5,995 million shares HK$72.2 billion (Approx. US$9.3 billion) LENOVO'S SHARE PRICE PERFORMANCE (April 1, 2011...

  • Page 60
    ... July 3, 2012 Note: 1 Hong Kong time The investor relations team values and is eager to hear suggestions and comments from shareholders and investors. For enquiries from institutional investors and securities analysts please contact [email protected]. 58 2011/12 Annual Report Lenovo Group Limited

  • Page 61
    ...and a member of Hong Kong Institute of Certified Public Accountants, and experience in accounting or related financial management expertise as required under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). auditor, internal auditor and...

  • Page 62
    ... of the geographical reporting segments and (c) the provisions for warranty costs, expected returns, slow moving inventories and doubtful receivables; Reviewed the statutory accounts filing progress of the Group; • Reviewed the global business partner management process of the Group and the...

  • Page 63
    ... Audit Committee an independence statement confirming that for the year ended March 31, 2012 and thereafter to the date of this annual report, they are independent of the Group in accordance with the independence requirements of the Hong Kong Institute of Certified Public Accountants. Based on the...

  • Page 64
    ... • Others • Reviewed and approved the compensation disclosure in the FY2010/11 annual report • • Reviewed the annual agenda of the Committee Reviewed and recommended to the Board on amendments to the terms of reference of the Committee 62 2011/12 Annual Report Lenovo Group Limited

  • Page 65
    ...performance-driven compensation policy covering its Directors, senior management and general employees. Generally, Lenovo's compensation should serve to support the Company's business strategy, assist the attraction and retention of top talent, reinforce the Company's performance driven culture, and...

  • Page 66
    ... Program in 2005, the Company granted its employees, including directors and senior management, share options. No further options have been granted since 2004. Details of the Share Option Plan are set out in the Directors' Report on pages 93 to 94. Retirement Benefits The Company operates a number...

  • Page 67
    ... about the Company's priorities and values. Fixed Compensation Performance Bonus Long-Term Incentive Program EMPLOYEE COMPENSATION PACKAGE Similar to senior management, employees at Lenovo are eligible for fixed compensation including base salary, allowances and benefits-in-kind. Eligible...

  • Page 68
    ... the financial statements. SAR and RSU awards outstanding for non-executive directors as of March 31, 2012 under this scheme are presented in the "Long-Term Incentive Schemes" section of this report. 2011-12 Chairman/CEO and Senior Management Review Fixed Compensation As a part of its annual review...

  • Page 69
    ... as well as all outstanding awards for executive and non-executive directors as of March 31, 2012 under the LTI Program are set out in the "Long-Term Incentives Schemes" section of this report. Fiscal Year 2011/12 Employees Review Fixed Compensation As a part of its annual review, the Committee was...

  • Page 70
    ... was HK$6.221. No options are granted and/or cancelled during the year. The accounting policy adopted for the above share option schemes are set out in note 2(w)(iv) to the financial statements. Other details are set out in note 30(b). 2. 3. 4. 68 2011/12 Annual Report Lenovo Group Limited

  • Page 71
    ... - 11.30.2012 08.20.2011 - 08.20.2013 08.19.2012 - 08.19.2014 06.01.2008 - 06.01.2011 06.01.2009 - 06.01.2011 08.07.2010 - 08.07.2012 11.30.2010 - 11.30.2012 08.20.2011 - 08.20.2013 08.19.2012 - 08.19.2014 Mr. Zhu Linan Ms. Ma Xuezheng 2011/12 Annual Report Lenovo Group Limited 69

  • Page 72
    ....2012 11.30.2010 - 11.30.2012 08.20.2011 - 08.20.2013 08.19.2012 - 08.19.2014 06.01.2009 - 06.01.2011 08.07.2010 - 08.07.2012 11.30.2010 - 11.30.2012 08.20.2011 - 08.20.2013 08.19.2012 - 08.19.2014 Professor Woo Chia-Wei Mr. Ting Lee Sen 70 2011/12 Annual Report Lenovo Group Limited

  • Page 73
    ... the board of directors or unforeseen emergency. Note 2: These units were nullified in accordance with the operation of the SAR plan rules. Members of the Compensation Committee Mr. William O Grabe (Chairman) Professor Woo Chia-Wei Mr. Ting Lee Sen 2011/12 Annual Report Lenovo Group Limited 71

  • Page 74
    ... to set an example with its sustainability programs and have been recognized by the global community. In 2010, Lenovo was selected as a constituent stock of the Hang Seng Corporate Sustainability Index Series - the first index of its kind to focus exclusively on Hong Kong and mainland China. In 2011...

  • Page 75
    ... action against an employee who Makes an internal report in good faith Provides information or assists in an investigation regarding such a report; or Files, testifies or participates in a legal or administrative proceeding related to such matters 2011/12 Annual Report Lenovo Group Limited...

  • Page 76
    ... their own and the wider marketplace. One of Lenovo's strengths is having a workforce composed of people from various cultures that allows us to capitalize on diverse perspectives in the development, manufacturing, marketing and sale of our products. 74 2011/12 Annual Report Lenovo Group Limited

  • Page 77
    ... HR processes to enhance work life balance, mentoring, networking, training and external partnerships with other players engaged in initiatives for women. WILL is a global program with regional leaders in Australia/New Zealand, Brazil, Canada, China, France, Western Europe, UK, India, Japan and the...

  • Page 78
    ... and peripheral products. Lenovo's EMS assures the highest level of environmental protection for Lenovo's products as well as Lenovo's site operations worldwide. Facilities included in Lenovo's ISO 14001 registration are listed in the table below. 76 2011/12 Annual Report Lenovo Group Limited

  • Page 79
    ... must support this commitment to leadership in environmental affairs. Every employee and contractor of Lenovo must follow this policy and report any environmental, health, or safety concerns to Lenovo management, who must take prompt corrective action. 2011/12 Annual Report Lenovo Group Limited 77

  • Page 80
    ... Policy: working to ensure compliance, acting to prevent pollution and reduce its environmental impact, striving to develop products with industry leading environmental attributes and pushing to continually improve its global environmental performance. 78 2011/12 Annual Report Lenovo Group Limited

  • Page 81
    ... company entered into contracts with external partners in Europe, North America and Latin America. In China, internal reorganization resulted in creation of the China Compliance and Standards group and increased resources committed to compliance assurance. 2011/12 Annual Report Lenovo Group Limited...

  • Page 82
    ...in North America. All sites continue to identify and implement energy efficiency projects and evaluate the opportunity to implement the use of renewable energy. During FY 2011/12 the Lenovo manufacturing facility in Shanghai, China was recognized by Pudong New District for their award winning energy...

  • Page 83
    ...the company's supply chain. This work has allowed Lenovo to begin tracking the water performance of its suppliers and initiate dialogue regarding opportunities for improved performance and corrective actions for identified compliance issues. The company continues its engagement in the development of...

  • Page 84
    ... these programs in every country it conducts business, with many of those programs free to the consumer. For business customers, Lenovo's Asset Recovery Service (ARS) provides computer take-back, data destruction, refurbishment and recycling services. 82 2011/12 Annual Report Lenovo Group Limited

  • Page 85
    ...partnered with the EICC on supplier training events relating to topics such as supply chain capability building, material extraction, working hrs., EICC eLearning modules, carbon reporting, water pollution and energy efficiency. Lenovo also continues to optimize its global logistics program to drive...

  • Page 86
    ... of career academies in the United States. To support this pilot program, Lenovo donated ThinkPad laptops and tablets (US$150,000) and cash (US$75,000). Lenovo, during FY 2011/12, was the technology sponsor for North Carolina State's Kenan Follows program for Curriculum and Leadership Development...

  • Page 87
    DIRECTORS' REPORT & FINANCIAL STATEMENTS

  • Page 88
    ... 108 Directors' Report Independent Auditor's Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Balance Sheet 109 Consolidated Cash Flow Statement 110 Consolidated Statement of Changes in Equity 111 Notes to the Financial Statements...

  • Page 89
    ... 2012 is set out in the consolidated and company balance sheets on pages 106 to 108. The consolidated cash flows of the Group for the year are set out in the statement on page 109. An interim dividend of HK3.8 cents (2011: HK2.6 cents) per ordinary share, amounting to a total of approximately HK$392...

  • Page 90
    ... Listing of Securities on The Stock Exchange of Hong Kong Limited ("Stock Exchange") ("Listing Rules"). The Nomination and Governance Committee has duly reviewed the independence of each of these directors. The Company considers they are independent. 88 2011/12 Annual Report Lenovo Group Limited

  • Page 91
    ... Stores, Inc., China Glass Holdings Limited and Chinasoft International Limited (all HKSE listed) and an independent director of Fiat Industrial S.P.A.(MTA Italian Stock Exchange listed). He is an Advisor Professor of Business School, Nanjing University. 2011/12 Annual Report Lenovo Group Limited...

  • Page 92
    ...and systems. Mr. He holds a Bachelor's degree in Computer Communication from Beijing University of Posts and Telecommunications and a Master's degree in Computer Engineering from the Institute of Computing Technology of the Chinese Academy of Sciences. 90 2011/12 Annual Report Lenovo Group Limited

  • Page 93
    ... in human resources, strategy, marketing and branding. She holds a Bachelor's degree in management science from Fudan University and holds an EMBA from China-Europe International Business School. Mr. Gerry Smith, 48, joined the Group in August 2006 as Senior Vice President, Global Supply Chain and...

  • Page 94
    ...0.02% 0.02% 0.03% 0.01% 0.18% 0.06% 9.29% Name of director Mr. Yang Yuanqing Interests in shares/ underlying shares Ordinary shares Share awards Personal interests 64,340,533 95,310,939 Family interests - - Corporate interests 800,000,000 (Note 3) 92 2011/12 Annual Report Lenovo Group Limited

  • Page 95
    ... number of shares As at March 31, 2012, the maximum number of ordinary shares available for issue under the New Option Scheme is 92,661,051 shares, representing approximately 0.9% of the issued share capital of the Company as at the date of this report. 2011/12 Annual Report Lenovo Group Limited...

  • Page 96
    ... the year ended March 31, 2012 was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of acquisitions of shares in, or debentures of, the Company or any body corporate. 94 2011/12 Annual Report Lenovo Group Limited

  • Page 97
    ... retirement schemes in certain jurisdictions. These benefits form an important part of the company's total compensation and benefits program that is designed to attract and retain highly skilled and talented employees. Defined Benefit Pensions Plans Chinese Mainland - Retirement Schemes The Group...

  • Page 98
    DIRECTORS' REPORT Defined Benefit Pensions Plans (continued) United States of America ("US") - Lenovo Pension Plan The Company provides U.S. regular, full-time and part-time employees who were employed by IBM prior to being hired by the Company and who were members of the IBM Personal Pension ...

  • Page 99
    ... are dependent on Employee paying no less that 3% of salary to the same fund. Prior employees of IBM receive Company contributions varying from 6.7% to 30% of eligible compensation depending on their service and the prior IBM plan they participated in. 2011/12 Annual Report Lenovo Group Limited 97

  • Page 100
    ... information technology services by the Group to Legend Holdings Limited, its subsidiaries and associates for a term of three years commencing from April 1, 2009 and expiring on March 31, 2012. The annual cap amount of the transactions for each of the three financial years ended March 31, 2012 is HK...

  • Page 101
    ...: Term: Annual caps: Transitional Services Agreement Date: Parties: Services provided/received: May 30, 2011 The Company and NEC Services to be provided by NEC Group to JVCo Group and vice versa including business infrastructure related services, development & production services, sales related...

  • Page 102
    ... JPY16 million million million million million million (US$605,000) (US$798,600) (US$798,600) (US$798,600) (US$798,600) (US$193,600) Services provided/received: Term: Annual cap: 100 2011/12 Annual Report Lenovo Group Limited

  • Page 103
    ... Corporation ("NESIC"), an associate of NEC, and NECP (whose rights and obligations were transferred to NECPC, a member of the JVCo Group, on and following the Closing Date) NESIC agreed to provide NECPC with operation and maintenance services for intranet and other internal communication...

  • Page 104
    ...at the date of this report, there is sufficient public float of more than 25 percent of the Company's issued shares as required under the Listing Rules. On behalf of the Board Yang Yuanqing Chairman and Chief Executive Officer Hong Kong, May 23, 2012 102 2011/12 Annual Report Lenovo Group Limited

  • Page 105
    ... for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance. PricewaterhouseCoopers Certified Public Accountants Hong Kong, May 23, 2012 2011/12 Annual Report Lenovo Group Limited 103

  • Page 106
    ... INCOME STATEMENT For the year ended March 31, 2012 Note Revenue Cost of sales Gross profit Other income - net Selling and distribution expenses Administrative expenses Research and development expenses Other operating income - net Operating profit Finance income Finance costs Share of losses of...

  • Page 107
    ... contracts Fair value gain, net of taxes Reclassified to consolidated income statement Actuarial loss from defined benefit pension plans, net of taxes Exchange reserve reclassified to consolidated income statement on disposal of a subsidiary Currency translation differences 2012 US$'000 475,416 2011...

  • Page 108
    ...financial assets Deposits, prepayments and other receivables Income tax recoverable Bank deposits Cash and cash equivalents 23 24(a) 24(b) 24(c) 25 25 1,218,494 2,354,909 639,331 62,883 3,303,053 70,406 413,672 3,757,652 11,820,400 Total assets 15,860,748 106 2011/12 Annual Report Lenovo Group...

  • Page 109
    Note Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity Non-current liabilities Warranty provision Deferred revenue Retirement benefit obligations Deferred income tax liabilities Other non-current liabilities 27(a) 36 21 29 30 2012 US$'000 33,...

  • Page 110
    ... liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities 1,393,722 3,346,336 315,081 2,209,432 On behalf of the Board Yang Yuanqing Director Ma Xuezheng Director 108 2011/12 Annual Report Lenovo Group Limited

  • Page 111
    ... of shares Dividends paid Net decrease in bank borrowings Net cash used in financing activities Increase in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 25 35(a) 2012 US...

  • Page 112
    ... of shares Vesting of shares under long-term incentive program Share-based compensation Dividends paid At March 31, 2011 At April 1, 2011 Profit for the year Other comprehensive (loss)/income Total comprehensive (loss)/income for the year Consideration for acquisition (Note 37(a)(i)) Acquisition of...

  • Page 113
    ...year, expenditures on IT systems are allocated to market segments on a flat rate basis with reference to revenue contributions of the respective markets. Management considers this basis is more appropriate in the measurement of market segment results. 2011/12 Annual Report Lenovo Group Limited 111

  • Page 114
    ... minority rights or contractual terms between shareholders, etc. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Inter-company transactions and balances are eliminated. Profits and losses...

  • Page 115
    ... of the related assets or liabilities. This may mean that amounts previously recognized as other comprehensive income/expense are reclassified to the consolidated income statement. Separate financial statements Investments in subsidiaries in the Company's balance sheet are accounted for at cost less...

  • Page 116
    ... are recognized as other comprehensive income/expense. (ii) - - Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. 114 2011/12 Annual Report Lenovo Group Limited

  • Page 117
    ... in the income statement during the financial period in which they are incurred. Freehold land and buildings comprise mainly factories and office premises. All freehold lands are located outside Hong Kong and are not depreciated. Depreciation of buildings, buildings related equipment and leasehold...

  • Page 118
    ... method to allocate the cost of trademarks and trade names over their estimated useful lives of up to 5 years. (iii) Customer relationships Customer relationships acquired in a business combination are recognized at fair value at the acquisition date. Customer relations have a definite useful life...

  • Page 119
    ... statement as part of other income when the Group's right to receive payments is established. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized as other comprehensive income/expense. 2011/12 Annual Report Lenovo Group Limited 117

  • Page 120
    .... Dividends on available-for-sale equity instruments are recognized in the income statement as part of other income when the Group's right to receive payments is established. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet...

  • Page 121
    ... for impairment. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. 2011/12 Annual Report Lenovo Group Limited 119

  • Page 122
    ... classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (q) Trade and other payables Trade payables are obligations to pay for part components or services that have been acquired in the...

  • Page 123
    ... and recorded when delivery occurs. Revenue from provision of systems integration service and information technology technical service is recognized over the term of contract or when services are rendered. The Group defers the cost of shipped products awaiting revenue recognition until the goods are...

  • Page 124
    ... an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date...

  • Page 125
    ... types of awards, namely share appreciation rights and restricted share units ("Long-term Incentive Awards"). The Company reserves the right, at its discretion, to pay the award in cash or ordinary shares of the Company. The fair value of the employee services received in exchange for the grant of...

  • Page 126
    ... exposure are shown in United States dollars, translated using the spot rate at the balance sheet date. Differences resulting from the translation of the financial statements of foreign operations into the Group's presentation currency are excluded. 124 2011/12 Annual Report Lenovo Group Limited

  • Page 127
    ...) Foreign currency risk (continued) Group 2012 United States dollar US$'000 Trade and other receivables Bank deposits and cash and cash equivalents Trade and other payables Intercompany balances before elimination Gross exposure Notional amounts of forward exchange contracts used as economic hedges...

  • Page 128
    ... by the global channel financing program. (iii) Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding...

  • Page 129
    ...March 31, 2011 Bank loans Trade, notes and other payables and accruals Others Derivatives settled in net: Forward foreign exchange contracts Interest rate swap contracts Derivatives settled in gross: Forward foreign exchange contracts - outflow - inflow 58,499 7,856,295 - - - Over 3 months to 1 year...

  • Page 130
    ... is based on the assumption that the interest rates of all the currencies covered by the global channel financing program go up and down at the same time and with the same magnitude; however, such assumptions may not be necessarily true in reality. 128 2011/12 Annual Report Lenovo Group Limited

  • Page 131
    ... quoted forward exchange rates at the balance sheet date, with the resulting value discounted back to present value. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. - - 2011/12 Annual Report Lenovo Group Limited...

  • Page 132
    ... value hierarchy for the years ended March 31, 2012 and 2011 are as follows: Financial assets Group 2012 US$'000 At the beginning of the year Exchange adjustment Additions At the end of the year 2,216 50 10,055 12,321 2011 US$'000 2,095 121 - 2,216 130 2011/12 Annual Report Lenovo Group Limited

  • Page 133
    ... of whether additional taxes will be due. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. 2011/12 Annual Report Lenovo Group Limited 131

  • Page 134
    ... weighted average estimated time of shipment arrival. Cost of in-transit products is deferred in deposits, prepayment and other receivables in the balance sheet until revenue is recognized. The estimates of days-in-transit are reviewed semi-annually. 132 2011/12 Annual Report Lenovo Group Limited

  • Page 135
    ... benefit costs and obligations are dependent on various assumptions. The Group's major assumptions primarily relate to discount rate, expected return on assets, and salary growth. In determining the discount rate, the Group references market yields at the balance sheet date on high quality corporate...

  • Page 136
    ... TO THE FINANCIAL STATEMENTS 5 Segment information (continued) (a) Segment revenue and adjusted pre-tax income/(loss) for reportable segments 2012 Revenue from external customers US$'000 China Emerging markets (excluding China) Mature markets Segment total Unallocated: Headquarters and corporate...

  • Page 137
    ...tax assets and post-employment benefit assets (there are no rights arising under insurance contracts) located in China and other countries are approximately US$1,801,595,000 (2011: US$1,592,475,000) and US$1,834,314,000 (2011: US$847,214,000) respectively. 2011/12 Annual Report Lenovo Group Limited...

  • Page 138
    ... and overdrafts Dividend and relevant finance costs on convertible preferred shares Factoring cost Commitment fee Interest on contingent considerations Others 7,794 - 21,955 6,130 4,911 2,694 43,484 2011 US$'000 16,330 3,810 17,022 11,218 - 795 49,175 136 2011/12 Annual Report Lenovo Group Limited

  • Page 139
    ... rate for the year was 31% (2011: 27%). The tax credit relating to components of other comprehensive income is as follows: 2012 Before tax US$'000 Fair value change on available-for-sale financial assets Fair value change on cash flow hedges Actuarial loss from defined benefit pension plans Exchange...

  • Page 140
    ... FINANCIAL STATEMENTS 10 Employee benefit costs 2012 US$'000 Wages and salaries (including reversal of provision for restructuring costs of US$809,000 (2011: provision of US$1,095,000)) Social security costs Long-term incentive awards granted (Notes 30(a)) Pension costs - Defined contribution plans...

  • Page 141
    ... O. Grabe and Professor Woo Chia-Wei have elected to defer their receipts of the cash of director's fee into fully vested share units under the long-term incentive program (Note 30(a)) for the two years ended March 31, 2012 and 2011. (ii) (iii) 2011/12 Annual Report Lenovo Group Limited 139

  • Page 142
    ... in the calculation of weighted average number of ordinary shares in issue. 2012 Weighted average number of ordinary shares in issue 10,133,177,289 US$'000 Profit attributable to equity holders of the Company 472,992 2011 9,634,806,069 US$'000 273,234 140 2011/12 Annual Report Lenovo Group Limited

  • Page 143
    ... Dividends 2012 US$'000 Interim dividend of HK3.8 cents (2011: HK2.6 cents) per ordinary share, paid on November 30, 2011 Proposed final dividend - HK10.0 cents (2011: HK5.0 cents) per ordinary share 50,473 132,741 183,214 2011 US$'000 32,581 64,020 96,601 2011/12 Annual Report Lenovo Group Limited...

  • Page 144
    NOTES TO THE FINANCIAL STATEMENTS 14 Property, plant and equipment (a) Group Freehold land and buildings US$'000 At April 1, 2010 Cost Accumulated depreciation and impairment loss Net book amount Year ended March 31, 2011 Opening net book amount Exchange adjustment Reclassification Additions ...

  • Page 145
    ...Closing net book amount At March 31, 2011 Cost Accumulated depreciation Net book amount Year ended March 31, 2012 Opening net book amount Exchange adjustment Additions Disposals Depreciation Closing net book amount At March 31, 2012 Cost... 1,284 1,224 2011/12 Annual Report Lenovo Group Limited 143

  • Page 146
    ...(1,415) - 32,092 Company Internal use software 2012 US$'000 3,602 10 - 28,543 - (27,548) - - - 4,607 2011 US$'000 2,204 (9) - 4,868 - (3,461) - - - 3,602 No interest expenses were capitalized in construction-in-progress as at March 31, 2012 and 2011. 144 2011/12 Annual Report Lenovo Group Limited

  • Page 147
    ... (2011: US$61,165,000) and US$3,412,000 (2011: US$3,170,000) are included in the 'cost of sales', 'selling and distribution expenses', 'administrative expenses' and 'research and development expenses' in the consolidated income statement respectively. 2011/12 Annual Report Lenovo Group Limited 145

  • Page 148
    ... Amortization Closing net book amount At March 31, 2012 Cost Accumulated amortization Net book amount 34,170 10,987 23,183 23,183 (58) 3,461 6,097 (7,912) 24,771 49,960 25,189 24,771 24,771 95 27,548 3,598 (1) (10,209) 45,802 74,919 29,117 45,802 146 2011/12 Annual Report Lenovo Group Limited

  • Page 149
    ...CGUs. The estimated growth rates used for value-in-use calculations are as follows: 2012 China REM Latin America North America West Europe Japan, Australia, New Zealand 11.5% 7.3% N/A 1.0% (1.9%) 0.2% 2011 21.3% 6.2% 5.0% (0.3%) 5.4% (4.0%) Management determined budgeted gross margins based on past...

  • Page 150
    ... Technology Limited) 49% - Distribution and development of IT technology and software 49% - Property development Interest held indirectly 2012 23% 2011 23% Principal activities Distribution and development of IT technology Company name Associate 148 2011/12 Annual Report Lenovo Group Limited

  • Page 151
    ... At March 31, 2011 Available-for-sale financial assets Derivative financial assets Trade receivables Notes receivable Deposits and other receivables Bank deposits Cash and cash equivalents - - 1,368,924 391,649 1,766,184 42,158 2,954,498 6,523,413 2011/12 Annual Report Lenovo Group Limited 149

  • Page 152
    ... Accruals and other payables Bank borrowings - - 20,110 - - 20,110 Company Loans and receivables 2012 US$'000 Assets Deposits Amounts due from subsidiaries Cash and cash equivalents 499 777,818 37,124 815,441 2011 US$'000 379 692,351 25,955 718,685 150 2011/12 Annual Report Lenovo Group Limited

  • Page 153
    ... balance sheet: Group 2012 US$'000 Deferred income tax assets: Current Non-current Deferred income tax liabilities: Non-current Net deferred income tax assets 252,946 79,547 332,493 (83,594) 248,899 2011 US$'000 193,274 57,824 251,098 (17,093) 234,005 2011/12 Annual Report Lenovo Group Limited...

  • Page 154
    ... The remaining balances of tax losses will expire as follows: Group 2012 US$'000 Expiring in - 2012 - 2014 - 2015 - 2016 - 2017 - 2018 - 2019 754 14,525 6,795 2,168 44,067 8,213 4,865 81,387 2011 US$'000 - 16,263 7,146 5,616 42,098 13,108 8,419 92,650 152 2011/12 Annual Report Lenovo Group Limited

  • Page 155
    ... 2011 US$'000 112,520 81 (15,892) - (18,020) - 78,689 1,442 75,031 2,216 78,689 23 Inventories Group 2012 US$'000 Raw materials and work-in-progress Finished goods Service parts 484,314 613,962 120,218 1,218,494 2011 US$'000 293,660 411,810 98,232 803,702 2011/12 Annual Report Lenovo Group Limited...

  • Page 156
    NOTES TO THE FINANCIAL STATEMENTS 24 Receivables (a) Customers are generally granted credit term ranging from 0 to 120 days. Ageing analysis of trade receivables of the Group at the balance sheet date, based on invoice date, is as follows: Group 2012 US$'000 0 - 30 days 31 - 60 days 61 - 90 days ...

  • Page 157
    ... 0%-12.01% Company 2012 US$'000 - - - 37,124 - 37,124 37,124 37,124 0%-0.25% 2011 US$'000 - 20,000 20,000 25,955 - 25,955 45,955 45,955 0%-0.21% 26 Payables (a) Ageing analysis of trade payables of the Group at the balance sheet date, based on invoice date, is as follows: Group 2012 US$'000 0 - 30...

  • Page 158
    ... returns. Majority of other payables are obligations to pay for finished goods that have been acquired in the ordinary course of business from subcontractors. The carrying amounts of accruals and other payables approximate their fair value. (c) (d) 156 2011/12 Annual Report Lenovo Group Limited

  • Page 159
    ... loans have been settled in March 2012. Majority of the short-term loans are denominated in United States dollar. The exposure of all the bank borrowings of the Group and the Company to interest rate changes and the contractual repricing dates at the end of the reporting period are within one year...

  • Page 160
    .... The Company also approved a share-based compensation package for non-executive directors. Under the long-term incentive program, the Company may grant awards, at its discretion, using any of the two types of equity-based compensation: (i) share appreciation rights and (ii) restricted share units...

  • Page 161
    ... of the SARs awarded under the long-term incentive program were calculated by applying a BlackScholes pricing model. For the year ended March 31, 2012, the model inputs were the fair value (i.e. market value) of the Company's shares at the grant date, taking into account the expected volatility...

  • Page 162
    NOTES TO THE FINANCIAL STATEMENTS 30 Share capital (continued) (b) Share options (continued) 2012 Number of outstanding share options At the beginning of the year Exercised during the year (ii) Lapsed ...2,906,390 1,343,760 498,820 8,485,030 781,315 160 2011/12 Annual Report Lenovo Group Limited

  • Page 163
    ... 20,000 844,000 6,000 2,000 84,000 158,000 240,500 Gross proceeds received HK$ 779,015 103,270 309,810 215,520 489,410 300,830 10,731,100 2,357,250 26,940 22,450 44,900 2,055,140 14,610 4,870 204,540 384,730 585,618 2011/12 Annual Report Lenovo Group Limited 161

  • Page 164
    ...FINANCIAL STATEMENTS 30 Share capital (ii) (continued) (b) Share options (continued) Details of share options exercised during the year ended March 31, 2011 are as follows: (continued) Market value per ordinary share at exercise date HK...$25,116,000 162 2011/12 Annual Report Lenovo Group Limited

  • Page 165
    ....31.2001 to 08.30.2011 Exercise price HK$ 4.312 4.072 2.876 - 380,000 14,836,000 15,216,000 27,674,000 - - 27,674,000 (iv) Details of share options at the balance sheet date are as follows: 2012 Number of outstanding share options 2011 Number of outstanding share options Exercise period (MM.DD...

  • Page 166
    ... for acquisition Issue of ordinary shares Exercise of share options Vesting of shares under long-term incentive program Share-based compensation Dividends paid At March 31, 2012 At April 1, 2010 Interest rate swap contracts - Fair value loss, net of taxes - Reclassified to income statement Loss for...

  • Page 167
    ... - 2,992 52,952 Authorized but not contracted for: - Property, plant and equipment 35,214 2011 US$'000 4,662 8,525 - 13,187 22,782 At March 31, 2012, the Company did not have any capital commitments (2011: Nil) other than as disclosed in Note 33(a) above. 2011/12 Annual Report Lenovo Group Limited...

  • Page 168
    ... to the consolidated cash flow statement (a) Reconciliation of profit before taxation to net cash generated from operations 2012 US$'000 Profit before taxation Share of losses of associates and jointly controlled entities Finance income Finance costs Depreciation of property, plant and equipment and...

  • Page 169
    ... computer business of IBM, the Group assumed a cash balance pension liability for substantially all former IBM employees in Japan, and final salary defined benefit obligations for selected employees in other countries. In the United States, the Group operates a final-salary pension plan that covers...

  • Page 170
    ... determined as follows: 2012 US$'000 Present value of funded obligations Fair value of plan assets Present value of unfunded obligations Liability in the balance sheet 18,111 (6,445) 11,666 1,739 13,405 2011 US$'000 17,037 (6,562) 10,475 1,275 11,750 168 2011/12 Annual Report Lenovo Group Limited

  • Page 171
    ... of the Group: Pension 2012 US$'000 Opening defined benefit obligation Exchange adjustment Current service cost Past service cost Interest cost Actuarial losses/(gains) Contributions by plan participants Benefits paid Curtailments Acquisition of subsidiaries Closing defined benefit obligation 237...

  • Page 172
    ... share capital of NEC JV. On July 29, 2011, the Group acquired 51.89% of the issued share capital of Medion, a publicly traded German stock corporation listed on the Frankfurt am Main stock exchange. Medion is the parent company of the Medion group which is an enterprise in the retail and service...

  • Page 173
    ...have been recognized as administrative expenses in the consolidated income statement for the years ended March 31, 2011 and 2012 respectively. The Group recognizes Medion's non-controlling interests at their proportionate share of Medion's net assets. 2011/12 Annual Report Lenovo Group Limited 171

  • Page 174
    .../ establishment Company name Issued and fully paid up capital Percentage of issued capital held 2012 2011 Principal activities Held directly: Chinese Mainland (Lenovo (Beijing) Limited)1 (wholly foreign-owned enterprise) HK$175,481,300 100% 100% Manufacturing and distribution of IT products and...

  • Page 175
    ...100% 100% 100% 100% 100% Chinese Mainland (Lenovo Mobile Communication Technology Ltd.)1 (Chinese-foreign equity joint venture) Lenovo PC HK Limited Hong Kong RMB187,500,000 100% 100% HK$2 ordinary and HK$1,000,000 non-voting deferred 100% 100% 2011/12 Annual Report Lenovo Group Limited 173

  • Page 176
    ...Lenovo (Wuhan) Limited)1 (Chinese-foreign equity joint venture) Chinese Mainland (Lenovo (Xian) Limited)1 (Chinese-foreign equity joint venture) LLC "Lenovo (East Europe/Asia)" Russia RUB1,910,000 100% 100% RMB10,000,000 100% 100% Distribution of IT products 174 2011/12 Annual Report Lenovo Group...

  • Page 177
    ... 2012 have been used. The company whose English name ends with a "1" is a direct transliteration of its Chinese registered name. (iii) 39 Approval of financial statements The financial statements were approved by the board of directors on May 23, 2012. 2011/12 Annual Report Lenovo Group Limited...

  • Page 178
    ...YEAR FINANCIAL SUMMARY Consolidated income statement 2012 US$'000 Revenue Profit/(loss) before taxation Taxation Profit/(loss) for the year Profit/(loss) attributable to: Equity holders of the Company Non-controlling interests 29,574,438 582,443 (107,027) 475,416 472,992 2,424 475,416 Earnings/(loss...

  • Page 179
    ...N.A. 14th Floor, 388 Greenwich Street, New York, NY 10013, USA COMPANY SECRETARY Mr. Mok Chung Fu STOCK CODES Hong Kong Stock Exchange: American Depositary Receipts: 992 LNVGY REGISTERED OFFICE 23rd Floor, Lincoln House, Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong WEBSITE www.lenovo.com

  • Page 180
    This report is printed on environmentally friendly paper manufactured from elemental chlorine-free pulp Printed on chemistry free plate system and soy ink