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Lenovo Group Limited 2013/14 Annual Report
Stock Code 992

Table of contents

  • Page 1
    Lenovo Group Limited 2013/14 Annual Report Stock Code 992

  • 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
    ... CONSOLIdATEd STATEmENT OF COmPrEHENSIVE INCOmE 326 CONSOLIdATEd BALANCE SHEET 328 BALANCE SHEET 329 CONSOLIdATEd CASH FLOW STATEmENT 330 CONSOLIdATEd STATEmENT OF CHANGES IN EQUITY 333 NOTES TO THE FINANCIAL STATEmENTS 395 FIVE-YEAr FINANCIAL SUmmArY 396 COrPOrATE INFOrmATION 302 dIrECTOrS' rEPOrT...

  • Page 4
    A740 Desktop Lenovo is the world's #1 PC company, having outgrown the market every quarter for more than 4 years. This growth is driven by innovative products that meet customers' needs, empowering them to do more.

  • Page 5
    WORLD NO. 1 PCS

  • Page 6
    ...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 Total dividend per share (HK cents) Cash and Working Capital Bank...6 4 Lenovo Group Limited 2013/14 Annual Report

  • Page 7
    ... to Equity Holders of the Company for the year ended March 31 (US$ million) 1,365 1,067 821 603 432 273 129 473 635 817 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Note: 1 Excluding restructuring charges and other income, net. 2013/14 Annual Report Lenovo Group Limited 5

  • Page 8
    ThinkPad Yoga Lenovo's rapid growth in tablets is driven by the same innovation excellence that makes us the PC leader. The Yoga Tablet changed the tablet game. But it's just the beginning of what Lenovo will bring to tablets.

  • Page 9
    WORLD NO. 2 PCS AND TABLETS

  • Page 10
    ... worldwide. • We built a strong foundation in servers, growing volume by 33% year-over-year. More importantly, we positioned ourselves for even stronger future growth by increasing investments in our infrastructure, people, and our product portfolio. 8 Lenovo Group Limited 2013/14 Annual Report

  • Page 11
    ... 25 million daily downloads. Our ecosystem is helping to create a new and unique experience for Lenovo users. And we have created several star applications. Already, the award winning SHAREit app has more than 100 million users, and we have several more apps with over 50 million users to date. Our...

  • Page 12
    ... gives us a key competitive advantage by giving us additional flexibility to meet customers' needs. Operational excellence is a core Lenovo strength, making us one of the few companies in the world that can make the dual model work. ThinkPad X1 Carbon 10 Lenovo Group Limited 2013/14 Annual Report

  • Page 13
    ... Strategic Roadmap." The first new Plus combines PC, mobile and smart TV to become "Smart Connected Devices." Everything we do starts with our core PC business, but Lenovo is one of the few companies able to provide a full range of Internet connected devices. This Plus enables us to share innovation...

  • Page 14
    ..., Chief Operating Officer and President of Lenovo EMEA, APMM & PC Business Group HE ZHIQIANG Senior Vice President and President of Ecosystem and Cloud Services Business Group PETER D. HORTENSIUS Senior Vice President and Chief Technology Officer 12 Lenovo Group Limited 2013/14 Annual Report

  • Page 15
    ... of Mobile Business Group GERRY P. SMITH Executive Vice President and President of Lenovo Americas & Enterprise Business Group WONG WAI MING Executive Vice President and Chief Financial Officer QIAO JIAN Senior Vice President, Human Resources 2013/14 Annual Report Lenovo Group Limited 13

  • Page 16
    Yoga 2 ThinkPad 8 Lenovo continues to expand beyond its strong position in China, the world's largest smartphone market, adding dozens of new markets in Asia, Europe and the Americas. We're already the world's fourth largest smartphone company and we will be even stronger in the years ahead.

  • Page 17
    WORLD NO. 3 SMART CONNECTED DEVICES

  • Page 18
    ...'s sales and operating profits with margin expansion. During the fiscal year under review, the global traditional PC industry - including traditional products such as desktop and notebook - continued to decline due to macro economic issues and the evolution of new form 16 Lenovo Group Limited 2013...

  • Page 19
    ... in markets outside of China in addition to its leading position in the China market. Lenovo's smartphone unit shipments achieved a record-high level of over 50 million for the fiscal year, growing by 72 percent year-on-year, driven by the strong 2013/14 Annual Report Lenovo Group Limited 17

  • Page 20
    ..., up 1 percentage point year-on-year, benefiting from its strong product mix with improved average selling price and stringent expense control. Americas (AG) AG accounted for 21 percent of the Group's total revenue driven by growth across all products. Lenovo's PC unit shipments in AG grew by 27...

  • Page 21
    ... year 2013/14, Lenovo achieved strong and balanced unit shipments growth in both commercial and consumer PC products, as well as in mobile devices during the year under review. Revenue by Product (%) Desktop 6% 15% 28% Notebook MIDH Others 51% 2013/14 Annual Report Lenovo Group Limited 19

  • Page 22
    ...4-in-1 user experience from one optimized, hybrid/convertible, leading business-class device. Commercial targeted products like ThinkPad® T440p, with performance, efficiency and durability that make it the corporate laptop workhorse that sets the industry benchmark. Its award winning keyboard, full...

  • Page 23
    ... 25 million daily downloads, helping to create a new and unique experience for Lenovo users. The Group has developed several star applications, among which the SHAREit app has recorded more than 100 million accumulated users, and this App has also won an award at Mobile World Congress. Lenovo has...

  • Page 24
    ... culture. This shared set of values helps us operate with even greater speed, creating a clear competitive advantage." - Yuanqing Yang, Chairman and CEO "...We have always been able to bring companies, cultures and people together to win quickly." Additionally, Lenovo's "global-local" model...

  • Page 25
    ...-driven incentive payments. In addition, US$79 million severance costs were incurred for the year as we rebalance our skills to redeploy resources to our high growth mobile business and increase productivity and efficiency of the global operations. 2013/14 Annual Report Lenovo Group Limited 23

  • Page 26
    ...research and development related spending of US$83 million. 2014 US$'000 2013 US$'000 For the year ended March 31 Depreciation of property, plant and equipment and amortization of prepaid lease payments Amortization of intangible assets Employee benefit costs, including - long-term incentive awards...

  • Page 27
    ... to the land use right of a new office site in Hefei. Construction-in-progress Construction-in-progress comprises mainly the Group's investments in the headquarters in Beijing, China, the manufacturing facilities and staff quarters in China and the information technology systems. Intangible assets...

  • Page 28
    ... sold in the ordinary course of business. Included in prepayments are in-transit product shipments to customers by which the Group defers the cost of shipped products awaiting revenue recognition until the goods are delivered and revenue is recognized. 26 Lenovo Group Limited 2013/14 Annual Report

  • Page 29
    ... the share capital of Hong Kong companies. As a result, the amounts of share premium and share redemption reserve of the Company, totaling US$1,616 million, are transferred to the share capital. Non-current liabilities (US$'000) Bank borrowings Warranty provision Deferred revenue Retirement benefit...

  • Page 30
    ...expenditure of US$675 million (2013: US$441 million) during the year ended March 31, 2014, mainly for the acquisition of property, plant and equipment, additions in construction-in-progress and investments in the Group's information technology systems. 28 Lenovo Group Limited 2013/14 Annual Report

  • Page 31
    ... annual interest at 4.7%, Notes due 2019. The proceeds of the Notes would be used for general corporate purposes including working capital, and to fund any acquisition activities. The Group has also arranged other short-term credit facilities. At March 31, 2014, the Group's total available credit...

  • Page 32
    ..., 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. 30 Lenovo Group Limited 2013/14 Annual Report

  • Page 33
    ... in faster growing Mobile, Enterprise and Ecosystem/Cloud businesses. Lenovo is committed to driving innovation, supported by its efficient business model and strong execution from its diverse global team to drive continuous strong future growth. 2013/14 Annual Report Lenovo Group Limited 31

  • Page 34
    ... the acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a truly global smartphone player in the fast-growing mobile space. Meanwhile, on the enterprise front, Lenovo and International Business Machines Corporation ("IBM...

  • Page 35
    ... more diversified global technology leader in the future. The Group will continue its investment in building its core competencies, product innovation, and end-to-end efficiency enhancing its competitiveness to ensure future sustainable profit growth. 2013/14 Annual Report Lenovo Group Limited 33

  • Page 36
    ... to meet the challenges of the future. SHAREHOLDERS AND OTHER STAKEHOLDERS BOARD OF DIRECTORS Key objectives: responsible for the overall conduct of the Group's business and setting the Group's strategy Audit Committee Key objectives: provide an independent review of the financial statements...

  • Page 37
    ... Awards (H-share companies and other Mainland enterprises Category) organized by the Hong Kong Institute of Certified Public Accountants. A G PC+ ER MIN E R H O T NSF FOR TRA OVO LEN or t Rep ual Ann /13 2 2012Code 99 ck Sto roup vo G Leno ited Lim 2013/14 Annual Report Lenovo Group Limited...

  • Page 38
    ... public companies (Number of companies) Remarks: ED - Executive director NED - Non-executive director INED - Independent non-executive director Global Accounting / Equity operations Internal investment / controls Financial IT industry Areas of experience 36 Lenovo Group Limited 2013/14 Annual...

  • Page 39
    ... detailed above and in the biographies of directors set out on pages 105 to 108 of this annual report, there are no other relationships among the Board to the best knowledge of the Board members as of the date of this annual report. • • • • 2013/14 Annual Report Lenovo Group Limited 37

  • Page 40
    ... directors' skills, experience and knowledge • ensures good corporate governance practices and procedures are established and effective communication with shareholders and other stakeholders Chief Executive Officer • formulates and recommends the strategy of the Group to the Board • executes...

  • Page 41
    ...for example, gender, age, and length of service) of the Board will be reviewed from time to time by the Nomination and Governance Committee to ensure that the Board has a balance of skill and expertise for providing effective leadership to the Company. 2013/14 Annual Report Lenovo Group Limited 39

  • Page 42
    ... the notice of the 2014 annual general meeting the reason why the Board considers the individual continues to be independent and the recommendation to shareholders to vote in favour of the re-election of such independent non-executive director. 40 Lenovo Group Limited 2013/14 Annual Report

  • Page 43
    ...; and 5. Ms. Ma has confirmed her independence to the Stock Exchange in respect of each of the factors set out in rule 3.13 of the Listing Rules that the Stock Exchange takes into account in assessing the independence of a non-executive director. 2013/14 Annual Report Lenovo Group Limited 41

  • Page 44
    ...and further promotes the Company's commitment to sound corporate governance. In general, these guidelines require non-employee directors to maintain a certain level of equity awards granted to them for so long as he or she is a director of the Company. 42 Lenovo Group Limited 2013/14 Annual Report

  • Page 45
    ... of the Group and its development Attending Continuous Professional Development Program • to ensure that he/she keeps breast of new laws, regulations or developments in business that are relevant to their roles as a director of the Company 2013/14 Annual Report Lenovo Group Limited 43

  • Page 46
    ... fiscal year 2013/14, the trainings and activities for the Board were set out below: Site Visit The Board had the opportunity to meet with senior management of Beijing and Brazil teams and to visit Lenovo Innovation Center in Beijing, Lenovo Brazil office in Sao Paulo and the manufacturing plant in...

  • Page 47
    ...: Protect Innovation; Protect Information" and the attendance rate of directors was 100%. Online training tool As part of the global confidentiality awareness initiative, the directors are required to attend the online training for information security 2013/14 Annual Report Lenovo Group Limited 45

  • Page 48
    ... management Attending experts briefing/seminar/ conference relevant to the Company's business or director's duties Attending online training at Lenovo University Note: Dr. Wu Yibing retired as a non-executive director of the Company on July 16, 2013. 46 Lenovo Group Limited 2013/14 Annual Report

  • Page 49
    ... than 3 days (or other reasonable period) before the meeting • If appropriate, one-on-one briefing offered to each director prior to the meeting • To consider ad hoc matters • Notice of not less than 7 days (or other reasonable period) be given 2013/14 Annual Report Lenovo Group Limited 47

  • Page 50
    ... corporate activities. The insurance coverage is reviewed on an annual basis. • All directors were provided with a tablet and a notebook to gain access to meeting materials of the Board and Board committees meetings through an internal electronic platform. 48 Lenovo Group Limited 2013/14 Annual...

  • Page 51
    ...of focus BOARD OF DIRECTORS Financial Chief Financial Officer report Financial results Forecasts Treasury items Corporate Governance, Diversity and Talent • Board and Board Committees' evaluation • Board Diversity Policy • Succession planning 2013/14 Annual Report Lenovo Group Limited 49

  • Page 52
    ... and directors' training 5% 10% 21% Board Committees' reports Other matters (including ad hoc projects and treasury) The regular items of a Board meeting for reviewing quarterly results include a report from CEO on business performance and strategy execution, a report from Chief Financial Officer...

  • Page 53
    ...a regular basis, including their decisions or recommendations to the Board, unless there are legal or regulatory restrictions on their ability to do so. The member list of the Board Committees is also posted on the Company's website and HKEx's website. 2013/14 Annual Report Lenovo Group Limited 51

  • Page 54
    .... • The chairman of the Committee being also the Chairman and CEO, is required to excuse himself from the agenda items relating to succession planning of the Chairman and/or CEO and the assessment of performance of the Chairman and/or CEO. 52 Lenovo Group Limited 2013/14 Annual Report

  • Page 55
    ...The review concluded that overall the Committee was effective in carrying out its duties. Details of the Board and Board Committees' evaluation process can be found under "Board and Board Committees' Evaluation" as set out in this report on pages 55 to 56. 2013/14 Annual Report Lenovo Group Limited...

  • Page 56
    ... session with independent non-executive directors without the presence of executive director and all the senior management after each regular Board meeting to discuss matters relating to any issue or other matters such persons would like to raise. 54 Lenovo Group Limited 2013/14 Annual Report

  • Page 57
    ... and agreed proposed implementation or action plan MONITOR AND FOLLOW-UP MEETINGS • Monitoring the progress of the implementation or action taken semi-annually • Reporting back to the Board on the progress by Nomination and Governance Committee 2013/14 Annual Report Lenovo Group Limited 55

  • Page 58
    ... laws and regulations. These arrangements will be reviewed periodically to ensure that they remain appropriate to the Company's needs. The list of members of senior management and their biographies are set out on pages 108 to 109 of this annual report. 56 Lenovo Group Limited 2013/14 Annual Report

  • Page 59
    ... statements for each financial year which gives a true and fair view of the state of affairs of the Group on going concern basis while the external auditor's responsibilities to shareholders are set out in the Independent Auditor's Report on page 123 of this annual report. Internal Control The Board...

  • Page 60
    ...everyday work at Lenovo. The policies address legal, regulatory, and operational topics, including, for example, intellectual property, data privacy, employee health and safety, delegation of authority, information security, and business continuity. Additionally, the Company's Code of Conduct, which...

  • Page 61
    ... the applicable laws and regulations prevailing in Hong Kong and has implemented policies and procedures which strictly prohibit unauthorized use of confidential and inside information, and has communicated to all relevant staff regarding this matter. 2013/14 Annual Report Lenovo Group Limited 59

  • Page 62
    ...controls as set forth in the Corporate Governance Code. Enterprise Risk Management At Lenovo, risk is defined as a potential action, event or circumstance that could impact the Company's ability, favorably or unfavorably, to meet its strategic goals. Risk is an inherent part of the Company and needs...

  • Page 63
    ... securities houses in organizing trips to the company's Beijing hub and its flagship, PC and smartphone stores in China. Various site visits were also organized to Lenovo's innovation center and manufacturing plants, as well as its stores in China. 2013/14 Annual Report Lenovo Group Limited 61

  • Page 64
    ... Annual dbAccess Taiwan Conference 2013 Daiwa Investment Conference Barclays Asia TMT Conference Nomura @ CES 2014 UBS CES Meeting Daiwa Investment Conference Bank of America Merrill Lynch "Taiwan, Technology & Beyond" Conference Credit Suisse Asian Investment Conference Location Hong Kong Beijing...

  • Page 65
    ... in providing award-winning investor relations services. Key Shareholders Information Listing Information Lenovo Group Limited's shares are listed on the Stock of Exchange of Hong Kong. In addition, shares are traded in the United States through an American Depositary Receipt (ADR) Level 1 Programme...

  • Page 66
    ... meeting for shareholders and media to communicate directly with Chairman and senior management. The Company also arranged a product display at the annual general meeting venue to update shareholders on the latest products strategy of the Company. 64 Lenovo Group Limited 2013/14 Annual Report

  • Page 67
    ... mandate to the directors to repurchase the Company's ordinary shares Approval of authorisation to directors to extend the general mandate to issue new ordinary shares by adding the number of ordinary shares repurchased 99.50% 72.97% 99.99% 73.86% 2013/14 Annual Report Lenovo Group Limited 65

  • Page 68
    ...than a retiring director for election as a director 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. 66 Lenovo Group Limited 2013/14 Annual Report

  • Page 69
    ... 97.76% had their registered addresses in Hong Kong. However, the actual number of investors in the shares of the Company (the "Shares") may be larger than that as a substantial portion of the Shares are held through nominees, custodian houses and HKSCC Nominees Limited. Shareholding as of March 31...

  • Page 70
    ... 20:1 LNVGY 6.0 HK cents 18.0 HK cents 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]. 68 Lenovo Group Limited 2013/14 Annual Report

  • Page 71
    ... board of directors (the "Board") of Lenovo Group Limited (the "Company") has been established since 1999 and as at the date of this annual report, is comprised of three members, all of whom including the Audit Committee chairman are independent non-executive directors. The members who held office...

  • Page 72
    ..., authority, duties and frequency of meetings are published on the websites of the Company and Hong Kong Exchanges and Clearing Limited. The Audit Committee meets with external auditor, Chief Financial Officer, General Counsel, and management of the finance and internal audit functions of the...

  • Page 73
    ... year 2013/14 is set out in the below diagram. May • Annual results, including review of: - reports to the Audit Committee from Chief Financial Officer, Chief Auditor and external auditor - draft annual report incorporating directors' report, corporate governance report and financial statements...

  • Page 74
    ...the Board for approval the audited financial results of the Company and its subsidiaries (collectively, the "Group") for the year ended March 31, 2013 together with the related annual results announcement and the annual report incorporating the directors' report and corporate governance report after...

  • Page 75
    ... auditor's statutory audit scope for the fiscal year 2013/14, including their plan and the terms of engagement, and the letter of representation to be given by the Board in respect of the financial year ended March 31, 2013; • • • • • 2013/14 Annual Report Lenovo Group Limited 73

  • Page 76
    ... to the Board the approval of the audited financial statements of the Group for the year ended March 31, 2014 together with the related annual results announcement and this annual report incorporating the directors' report and corporate governance report. Based on the review and discussions...

  • Page 77
    ... of the Chairman and CEO for FY2012/13 • Reviewed the market data and relevant trends for mobile and internet-related businesses and the broader technology industry • Reviewed the market positioning for the compensation of CEO and senior management 2013/14 Annual Report Lenovo Group Limited 75

  • Page 78
    ...performance. The compensation structure of Lenovo's Chairman/CEO and senior management consists of base salaries, allowances, performance-based bonuses, LTI, retirement benefits, and benefits-in-kind. These components and their mix are described below. 76 Lenovo Group Limited 2013/14 Annual Report

  • Page 79
    ... that were awarded in February 2013. Chairman/CEO Pay Mix Base 6% Performance Bonus LTI 34% 60% Senior Management Pay Mix (Average) Average Base 12% Average Performance Bonus Average LTI 36% 52% Fixed Compensation Fixed compensation includes base salary, allowances and benefits-in-kind...

  • Page 80
    ... funded a trust to pay shares to eligible recipients. In the case of SARs, awards are due after exercise by the recipient. In the case of RSUs, awards are due after the employee satisfies any vesting conditions. The number of units that are awarded under the LTI Program is set and reviewed annually...

  • Page 81
    ... 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 82
    ... financial statements. SAR and RSU awards outstanding for Non-executive Directors as of March 31, 2014 under this scheme are presented in the "Long-Term Incentive Schemes" section of this report. Fiscal year 2013-14 Chairman/CEO and Senior Management Review Fixed Compensation As a part of its annual...

  • Page 83
    ... Group scores may range from 0% to 300% based on final results against targets. Individual Performance Modifiers range from 0% to 150% and are linked to the employee Performance Ratings and progress against established Key Performance Indicators (KPIs). 2013/14 Annual Report Lenovo Group Limited...

  • Page 84
    ... are set out in note 11 to the financial statements. LONG-TERM INCENTIVE SCHEMES The Company implemented share option scheme and the LTI Program to attract, retain, reward and motivate Executive and Non-executive Directors, senior management and selected top-performing employees of the Company and...

  • Page 85
    ....20.2013 08.19.2012 - 08.19.2014 07.03.2013 - 07.03.2015 08.16.2014 - 08.16.2016 08.20.2011 - 08.20.2013 08.19.2012 - 08.19.2014 07.03.2013 - 07.03.2015 08.16.2014 - 08.16.2016 Mr. Zhu Linan Mr. Zhao John Huan Mr. Ting Lee Sen Dr. Tian Suning 2013/14 Annual Report Lenovo Group Limited 83

  • Page 86
    ... Xuezheng Note 1: Note 2: Proceeds in respect of quarterly deferral grants to be paid only at point of termination from the board of directors or unforeseen emergency. These units were nullified in accordance with the operation of the SAR plan rules. 84 Lenovo Group Limited 2013/14 Annual Report

  • Page 87
    ...under "Board and Board Committees' Evaluation" as set out in the Corporate Governance Report on pages 55 to 56. Members of the Compensation Committee Ms. Ma Xuezheng (Chairman) Mr. Ting Lee Sen Mr. William Tudor Brown Mr. William O. Grabe Mr. Zhu Linan 2013/14 Annual Report Lenovo Group Limited 85

  • Page 88
    ...long-term prospects for profitability. Lenovo's sustainability commitments encompass Ethics and Compliance at Lenovo Employee Health and Welfare Diversity Product Quality and Safety The Environment Global Supply Chain, and Social Investments In the past, Lenovo's organization was structured around...

  • Page 89
    ...rated company in the index's Information Technology sector and the only company in its sector among the Hong Kong top 20. Lenovo was selected for inclusion in the first United Nations Global Compact 100 (GC 100) - a new global stock index that combines corporate sustainability and baseline financial...

  • Page 90
    .... Employees are directed to report to their managers or other company resources, including Human Resources, the Ethics and Compliance Office, Internal Audit, Corporate Security, or the Legal Department, any information pertaining to Fraud by or against Lenovo Unethical business conduct Violation...

  • Page 91
    ... programs and processes to enhance work-life balance, mentoring, networking, training and external partnerships with other women's initiatives. WILL is a global program with regional leaders in Australia/New Zealand, Brazil, Canada, China, France, Western Europe, UK, India, Japan and the U.S. Lenovo...

  • Page 92
    ... 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. ISO 14001 Registered Manufacturing & Development Facilities Location No. 6 Chuangye Road, Beijing, China...

  • Page 93
    ... incidents, catastrophic weather conditions, and supply chain disruptions, among others. Annually, each business unit is required to identify risks, assess their impacts on Lenovo's strategy execution and develop risk mitigation plans. • • • 2013/14 Annual Report Lenovo Group Limited 91

  • Page 94
    ...'s Global Real Estate team analyzed the environmental impact of all sites larger than 9,000 square feet, including newly acquired sites, evaluated multiple energy projects and is working on developing management practices for sustainable real estate. 92 Lenovo Group Limited 2013/14 Annual Report

  • Page 95
    ... placed Lenovo in the Leadership Group for performance and disclosure for the Asia excluding Japan region. In November 2013, Lenovo was awarded a "Best Responding Companies" award at a CDP event in Hong Kong. Lenovo was also recognized in 2013 as part of the CDP Supply Chain Performance Leadership...

  • Page 96
    ... water impacts in its supply chain and monitors the regulatory performance of suppliers located in China using the Institute of Public & Environmental Affairs (IPE) database. For additional details on Lenovo's waste and water inventory, see http://www.lenovo.com/waterandwaste Lenovo's energy...

  • Page 97
    ... agreement, to comply with the EICC Code of Conduct. Due to significant joint ventures and acquisitions, Lenovo has strategic actions planned to incorporate the suppliers of these new companies into our programs. However, as many of these suppliers are common to both Lenovo's and these new companies...

  • Page 98
    ... first launch in South China in June 2013, Lenovo also plans to expand the project to East China and subsequently to the rest of the world. • • In FY2013/14, 100% of the suppliers targeted for the program had formally executed agreements in place and a monthly management system was in place...

  • Page 99
    ... predefined goals upon program completion. Lenovo aims to advance, enhance and extend education at all levels. We support education-related programs and initiatives through our industry-leading products and technologies, community investments and program sponsorships. We do not limit the scope of...

  • Page 100
    ... Room to Read Social Mobilizer in India uses a Lenovo laptop during a workshop with the program's at-risk girls. For seven years, Lenovo has been a corporate sponsor and technology partner of the Women's Forum for the Economy and Society. The objective of the forum is to highlight and enhance women...

  • Page 101
    ... in driving active and ongoing employee volunteer programs and is a critical component of Lenovo's social responsibility initiatives. Nearly 200 Lenovo North America employees volunteered to help build seven homes for Habitat for Humanity in 2013. 2013/14 Annual Report Lenovo Group Limited 99

  • Page 102
    ... bank drives, and provided over 12,000 items for school supply drives. In the East Asia Region, Lenovo embarked on the "Power Up Kids Project" in March 2014. The Project was designed to engage and mobilize millennials to take action for positive change within their communities in Indonesia. Working...

  • Page 103
    302 dIrECTOrS' rEPOrT 323 INdEPENdENT AUdITOr'S rEPOrT 324 CONSOLIdATEd INCOmE STATEmENT 325 CONSOLIdATEd STATEmENT OF COmPrEHENSIVE INCOmE 326 CONSOLIdATEd BALANCE SHEET 328 BALANCE SHEET 329 CONSOLIdATEd CASH FLOW STATEmENT 330 CONSOLIdATEd STATEmENT OF CHANGES IN EQUITY 333 NOTES TO THE FINANCIAL...

  • Page 104
    ... 2014 is set out in the consolidated and company balance sheets on pages 126 to 128 of this annual report. The consolidated cash flows of the Group for the year are set out in the statement on page 129 of this annual report. An interim dividend of HK6.0 cents (2013: HK4.5 cents) per share, amounting...

  • Page 105
    ... largest suppliers combined 14% 43% None of the directors of the Company, their associates or any shareholder (which to the knowledge of the directors owns more than 5% of the Company's share capital) had an interest in the major suppliers noted above. 2013/14 Annual Report Lenovo Group Limited...

  • Page 106
    ... long-term incentive program of the Company purchased 103,812,000 shares from the market for award to employees upon vesting. Details of the program are set out under section headed "Long-Term Incentive Program" in the Compensation Committee Report on page 78 of this annual report. Save as disclosed...

  • Page 107
    ..., a company holding substantial interests in the issued shares of the Company. He is also a non-executive director of Peak Sport Products Co., Limited (HKSE listed). He was previously a director of Foshan Saturday Shoes Co., Ltd. (Shenzhen Stock Exchange listed). 2013/14 Annual Report Lenovo Group...

  • Page 108
    ... retirement in June 2007. Mr. Allen is also an independent non-executive director of CLP Holdings Limited, Hysan Development Company Limited (both HKSE listed), VinaLand Limited (London Stock Exchange AIM listed) and Texon International Group Limited. 106 Lenovo Group Limited 2013/14 Annual Report

  • Page 109
    ...Annapurna Labs. He was a non-executive director and a senior independent director of ANT plc (London Stock Exchange listed) until his retirement from these positions in February 2013. He also served on the UK Government Asia Task Force until May 2012. 2013/14 Annual Report Lenovo Group Limited 107

  • Page 110
    ... leadership in Lenovo's core global commercial business, growing Lenovo's workstation business, and managing Lenovo's global enterprise business in server and related products. Dr. Hortensius also led the business team that negotiated the IBM x86 server acquisition. Prior to the Think Business Group...

  • Page 111
    ... positions in listed companies in Hong Kong. He was an independent non-executive director of the Company from March 30, 1999 until his appointment to the position of Chief Financial Officer on May 23, 2007. Mr. Wong is a member of the Hong Kong Institute of Certified Public Accountants and the...

  • Page 112
    DIRECTORS' REPORT DIRECTORS' INTERESTS As at March 31, 2014, the interests and short positions of the directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and ...

  • Page 113
    ... to the Company and the Stock Exchange pursuant to the Model Code. DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES Share Option Scheme At an extraordinary general meeting of the Company held on March 25, 2002, the shareholders of the Company approved the adoption of a new share option scheme...

  • Page 114
    ...the share options; (ii) the average of the closing prices of the Company's ordinary shares as stated in the Stock Exchange's daily quotation sheets for the 5 trading days immediately preceding the date of the grant; or (iii) the nominal value of the ordinary shares. Life of the scheme The New Option...

  • Page 115
    ... Program The Company adopted the long-term incentive program on May 26, 2005, under which the Board or the trustee of the program shall select the employees (including but not limited to the directors) of the Group for participation in the program, and determine the number of shares to be awarded...

  • Page 116
    ... income protection for its employees through the provision of defined benefit pension plans, defined contribution plans, and/or contributions to various public retirement schemes in certain jurisdictions. These benefits form an important part of the Company's total compensation and benefits program...

  • Page 117
    ... by Company contributions to a qualified pension fund, which is held for the sole benefit of participants and beneficiaries. For the year ended March 31, 2014, an amount of Yen 494,440,913 was charged to the income statement with respect to this plan. 2013/14 Annual Report Lenovo Group Limited 115

  • Page 118
    ... rate: Future salary increases: Future pension increases: 2.75% Age-group based 1.75% • • The plan was 68% funded at the actuarial valuation date. • There was a net liability of EUROS 11,414,676 under this plan at the actuarial valuation date. 116 Lenovo Group Limited 2013/14 Annual Report

  • Page 119
    ... options. Company matching contributions, are directed to participant accounts and fluctuate based on changes in the stock prices of the underlying investment portfolio. United Kingdom ("UK") - Lenovo Stakeholders Plan UK regular, full-time, part-time and fixed term Lenovo contract employees are...

  • Page 120
    ... by independent shareholders at an extraordinary general meeting of the Company on March 18. 2014 and are subject to reporting requirements under the Listing Rules. Details of the CCT Agreements are set out below: Supply Agreement Date: Parties: February 28, 2011 NEC and NEC Embedded Products, Ltd...

  • Page 121
    ... Transitional Services Agreement Date: Parties: Services provided/received: May 30, 2011 (continued) 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 122
    DIRECTORS' REPORT CONTINUING CONNECTED TRANSACTIONS NEC Mobiling Agreement Date: Parties: April 1, 1995 (continued) NEC Mobiling, Ltd., 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) NEC Mobiling...

  • Page 123
    ...) NEC and NECPC (a member of the JVCo Group on and following the Closing Date) NEC agreed to grant a licence of certain patents used in connection with the operation of NEC's personal computer business in Japan to NECPC at a royalty of 0.03% of gross sales of certain products and/or services of NEC...

  • Page 124
    ... knowledge of the directors of the Company, as at the date of this report, there is sufficient public float of more than 25% of the Company's issued shares as required under the Listing Rules. On behalf of the Board Yang Yuanqing Chairman and Chief Executive Officer May 21, 2014 122 Lenovo Group...

  • Page 125
    ... AUDITOR'S REPORT Independent Auditor's Report To the shareholders of Lenovo Group Limited (incorporated in Hong Kong with limited liability) We have audited the consolidated financial statements of Lenovo Group Limited (the "Company") and its subsidiaries (together, the "Group") set out on...

  • Page 126
    ... March 31, 2014 2014 US$'000 2013 US$'000 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 profits/(losses) of...

  • Page 127
    ...456) 40,725 (20,953) - (118,602) (121,693) 509,899 513,455 (3,556) 509,899 Total comprehensive income for the year Total comprehensive income/(loss) attributable to: Equity holders of the Company Non-controlling interests 692,014 691,772 242 692,014 2013/14 Annual Report Lenovo Group Limited 125

  • Page 128
    CONSOLIDATED BALANCE SHEET At March 31, 2014 2014 US$'000 2013 US$'000 Note Non-current assets Property, plant and equipment Prepaid lease payments Construction-in-progress Intangible assets Interests in associates and joint ventures Deferred income tax assets Available-for-sale financial assets ...

  • Page 129
    ...liabilities Total equity and liabilities Net current (liabilities)/assets Total assets less current liabilities 15,332,373 18,357,093 (61,774) 4,894,771 On behalf of the Board Yang Yuanqing Chairman and Chief Executive Officer Ma Xuezheng Director 2013/14 Annual Report Lenovo Group Limited 127

  • Page 130
    ...,238 Total liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities 1,168,474 3,189,095 623,966 2,326,857 On behalf of the Board Yang Yuanqing Chairman and Chief Executive Officer Ma Xuezheng Director 128 Lenovo Group Limited 2013/14 Annual Report

  • Page 131
    ... of an available-for sale financial asset Decrease in bank deposits Dividend received Interest received Net cash used in investing activities Cash flows from financing activities Exercise of share options Repurchase of shares Contributions to employee share trusts Capital contribution from non...

  • Page 132
    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended March 31, 2014 Attributable to equity holders of the Company Sharebased compensation reserve US$'000 53,078 133,951) 77,724 - - Put option written on noncontrolling interest US$'000 - - - - - (212,900 Share Employee Investment share ...

  • Page 133
    ... Kong. The address of its registered office is 23rd Floor, Lincoln House, Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong. The Company has its primary listing on The Stock Exchange of Hong Kong Limited. The financial statements have been prepared in accordance with Hong Kong Financial Reporting...

  • Page 134
    ... which adopted December 31 as their financial year end date for statutory reporting purposes, their financial statements for the years ended March 31, 2013 and 2014 have been used for the preparation of the Group's consolidated financial statements. 132 Lenovo Group Limited 2013/14 Annual Report

  • Page 135
    ... of that entity are accounted for as if the Group had directly disposed 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. 2013/14 Annual Report Lenovo Group Limited 133

  • Page 136
    ... economic environment in which the entity operates (the "functional currency"). The financial statements of the Company and of the Group are presented in United States dollars, which is the Company's functional and the Group's presentation currency. 134 Lenovo Group Limited 2013/14 Annual Report

  • Page 137
    ... of the replaced part is derecognized. All other repairs and maintenance are charged 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...

  • Page 138
    ... annual rates used for this purpose are: Plant and machinery Tooling equipment Other machinery Furniture and fixtures Office equipment Motor vehicles 50% 14 - 20% 20 - 25% 20 - 33% 20% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date...

  • Page 139
    ... profit or loss, (ii) loans and receivables; and (iii) available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. 2013/14 Annual Report Lenovo Group Limited...

  • Page 140
    ... 12 months of the balance sheet date. (ii) (iii) Recognition and measurement Regular way purchases and sales of financial assets are recognized on the trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets not carried at fair value through profit or loss...

  • Page 141
    ... in the fair value of derivatives that are designated and qualified as cash flow hedges is recognized as other comprehensive income/expense. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. (ii) 2013/14 Annual Report Lenovo Group Limited 139

  • Page 142
    ... deposits held at call with banks, other short-term highly liquid investments which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. 140 Lenovo Group Limited 2013/14 Annual Report

  • Page 143
    ...) (p) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the Company's equity share capital (treasury shares), the...

  • Page 144
    ... costs, engineering charges, storage and warehousing costs, and contribute to bringing inventories to their present location and condition. Non-base manufacturing costs enter into the calculation of gross margin but are not inventoriable costs. 142 Lenovo Group Limited 2013/14 Annual Report

  • Page 145
    ... 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 146
    NOTES TO THE FINANCIAL STATEMENTS 2 Significant accounting policies (continued) (x) Employee benefits (continued) (iii) Long-term incentive program (continued) At each balance sheet date, the Group revises its estimates of the number of Long-term Incentive Awards that are expected to become ...

  • Page 147
    ..., 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. Group 2014 United States dollar US$'000 Trade and other receivables Bank deposits and cash and...

  • Page 148
    ... exposures to customers, including outstanding receivables and committed transactions. For banks and other financial institutions, the Group controls its credit risk through monitoring their credit rating and setting approved counterparty credit limits that are regularly reviewed. The Group has no...

  • Page 149
    ... risk management (continued) (a) Financial risk factors (continued) (iv) Liquidity risk (continued) Group Repayable on demand or 3 months or less US$'000 At March 31, 2014 Bank loans Trade, notes and other payables and accruals Contingent considerations Deferred consideration Guaranteed dividend to...

  • Page 150
    ... objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. 148 Lenovo Group Limited 2013/14 Annual...

  • Page 151
    ... 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. - - 2013/14 Annual Report Lenovo Group Limited...

  • Page 152
    ...management (continued) (d) Fair value estimation (continued) The following table presents the assets and liabilities that are measured at fair value at March 31, 2014 and 2013. Group 2014 Level 1 US$'000 Assets Available-for-sale financial assets Listed equity investments Unlisted equity investments...

  • Page 153
    ... terminal value. Key assumptions include the expected growth in revenues and operating margin, growth rates and selection of discount rates, to reflect the risks involved and the earnings multiple that can be realized for the estimated terminal value. 2013/14 Annual Report Lenovo Group Limited 151

  • Page 154
    ... separate contracts are considered part of one arrangement. The Group sells products to channels. Sales through channels are primarily made under agreements allowing for volume discounts, price protection and rebates, and marketing development funds. The Group monitors the channel inventory level...

  • Page 155
    ... salary growth. In determining the discount rate, the Group references market yields at the balance sheet date on high quality corporate bonds. The currency and term of the bonds are consistent with the currency and estimated term of the benefit obligations being valued. The expected return on plan...

  • Page 156
    ...THE FINANCIAL STATEMENTS 5 Segment information (continued) (a) Segment revenue and adjusted pre-tax income for reportable segments 2014 Revenue from external customers US$'000 China AP EMEA AG Segment total Unallocated: Headquarters and corporate expenses Restructuring costs Finance income Finance...

  • Page 157
    ... and post-employment benefit assets (there are no rights arising under insurance contracts) located in China and other countries is approximately US$2,305,752,000 (2013: US$2,067,456,000) and US$2,226,306,000 (2013: US$1,988,441,000) respectively. 2013/14 Annual Report Lenovo Group Limited 155

  • Page 158
    ... Net gain/(loss) on disposal of available-for-sale financial assets and investments Dividend income from available-for-sale financial assets - 21,880 547 22,427 2013 US$'000 19,861 (316) 362 19,907 7 Operating profit Operating profit is stated after charging/(crediting) the following: 2014 US$'000...

  • Page 159
    ...) (844) 76,772 29,949 169,707 The weighted average applicable tax rate for the year was 22.8% (2013: 17.1%).The increase is caused by changes in tax concessions and profitability of the Group's subsidiaries in respective countries they are operating. 2013/14 Annual Report Lenovo Group Limited 157

  • Page 160
    ...,035) - - (1,658) - (1,658) (1,658) - (118,602) (121,693) 10 Employee benefit costs 2014 US$'000 Wages and salaries Social security costs Long-term incentive awards granted (Notes 30(a)) Pension costs - Defined contribution plans - Defined benefit plans (Note 36) Others 1,868,018 152,371 80,274...

  • Page 161
    ... by the Group to directors of the Company in connection with the management of the affairs of the Company and its subsidiaries. The remuneration of each director and the chief executive who is also a director, for the years ended March 31, 2014 and 2013 is set out below: 2014 Retirement payments and...

  • Page 162
    ...follows: 2014 US$'000 Basic salaries, allowances, and benefits-in-kind Discretionary bonuses Employer's contribution to pension schemes Long-term incentive awards Others 3,873 14,199 285 9,262 260 27,879 2013 US$'000 2,222 8,760 469 4,083 1,074 16,608 160 Lenovo Group Limited 2013/14 Annual Report

  • Page 163
    ... to equity holders of the Company by the weighted average number of ordinary shares in issue during the year after adjusting shares held by the employee share trusts for the purposes of awarding shares to eligible employees under the long term incentive program. 2014 Weighted average number of...

  • Page 164
    ... long-term incentive awards are dilutive, and the number of shares that are deemed to be issued. - There is no adjustment to profit attributable to equity holders of the Company used for the calculation of diluted earnings per share. 13 Dividends 2014 US$'000 Interim dividend of HK6.0 cents (2013...

  • Page 165
    ...-in-progress Disposals Depreciation Acquisition of subsidiaries Closing net book amount At March 31, 2014 Cost Accumulated depreciation and impairment losses Net book amount Leasehold improvements US$'000 Plant and machinery US$'000 Furniture and fixtures US$'000 Office equipment US$'000 Motor...

  • Page 166
    ...FINANCIAL STATEMENTS 14 Property, plant and equipment (continued) (b) Company Leasehold improvements US$'000 At April 1, 2012 Cost Accumulated depreciation Net book amount Year ended March 31, 2013 Opening net book amount Exchange adjustment Reclassification Additions Disposals Depreciation Closing...

  • Page 167
    ...) (732) 184,051 Company Internal use software 2014 US$'000 3,967 - - 2,857 (1,038) (5,406) - (206) 174 2013 US$'000 4,607 2 - 17,834 - (18,476) - - 3,967 No interest expenses were capitalized in construction-in-progress as at March 31, 2014 and 2013. 2013/14 Annual Report Lenovo Group Limited 165

  • Page 168
    ...(2013: US$75,948,000) and US$27,588,000 (2013: US$6,680,000) are included in the 'cost of sales', 'selling and distribution expenses', 'administrative expenses' and 'research and development expenses' in the consolidated income statement respectively. 166 Lenovo Group Limited 2013/14 Annual Report

  • Page 169
    ... related to the future cash flow of the CGU extrapolated using constant projection of cash flows beyond the five-year period. The estimated growth rates adopted do not exceed the long-term average growth rates for the businesses in which the CGU operates. 2013/14 Annual Report Lenovo Group Limited...

  • Page 170
    ...The estimated compound annual growth rates used for value-in-use calculations under the five-year financial budgets period are as follows: 2014 China APLA EMEA North America AP AG 2% N/A -2% N/A -1% 0% 2013 8% -2% -1% 0% N/A N/A Management determined budgeted gross margins based on past performance...

  • Page 171
    ...The following sets out the aggregate amount of the Group's share of associates and joint ventures: Group 2014 US$'000 Share of (losses)/profits of associates Share of profits/(losses) of joint ventures (679) 9,900 9,221 2013 US$'000 446 (1,164) (718) 2013/14 Annual Report Lenovo Group Limited 169

  • Page 172
    ... 9,161,762 Liabilities at fair value through income statement US$'000 Liabilities At March 31, 2014 Trade payables Notes payable Derivative financial liabilities Other payables and accruals Bank borrowings Deferred consideration and guaranteed dividend under other non-current liabilities Contingent...

  • Page 173
    ...tax assets: Recovered within 12 months Recovered after 12 months Deferred income tax liabilities: Recovered after 12 months Net deferred income tax assets 2013 US$'000 324,837 64,493 389,330 (142,881) 246,449 290,414 58,975 349,389 (113,992) 235,397 2013/14 Annual Report Lenovo Group Limited 171

  • Page 174
    ...realization of the related tax benefit through the future taxable profits is probable. At March 31, 2014, the Group did not recognize deferred income tax assets in respect of deductible temporary differences of approximately US$2,188,939,000 (2013:US$2,406,161,000) and tax losses of approximately US...

  • Page 175
    ... Company 2014 US$'000 - - - 8,500 - 8,500 - - 8,500 8,500 2013 US$'000 23 Inventories Group 2014 US$'000 Raw materials and work-in-progress Finished goods Service parts 1,222,589 1,263,341 215,085 2,701,015 2013 US$'000 884,591 910,666 169,534 1,964,791 2013/14 Annual Report Lenovo Group Limited...

  • Page 176
    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 2014 US$'000 0 - 30 days 31 - 60 days 61 - 90 days ...

  • Page 177
    ...sheet date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. 25 Bank deposits and cash and cash equivalents Group 2014 US$'000 Bank deposits - matured between three to twelve months - restricted bank balances 2013 US$'000 Company 2014...

  • Page 178
    ... and electronic equipment upon return from end-customers and with reference to the historical or projected future return rate. The environmental restoration provision is reviewed at least annually to assess its adequacy to meet the Group's obligation. 176 Lenovo Group Limited 2013/14 Annual Report

  • Page 179
    ... value as the impact of discounting is not significant. Total bank facilities of the Group are as follows: Total facilities 2014 US$'000 Revolving loans Term loans Short-term loans Foreign exchange contracts Other trade finance facilities 1,300,000 711,045 324,643 7,076,019 489,054 9,900,761 2013...

  • Page 180
    ... equipment. These group companies are obliged to fulfill certain conditions under the terms of the government incentives and grants. The government incentive and grants are credited to the income statement upon fulfillment of those conditions. (iii) 178 Lenovo Group Limited 2013/14 Annual Report

  • Page 181
    ... to work towards enhancing the value of the Company and its shares by aligning their interests with those of the shareholders of the Company. The Company also approved a share-based compensation package for non-executive directors. Under the long-term incentive program, the Company may grant awards...

  • Page 182
    ...Long-term incentive program (continued) Under the two types of compensation, the Company reserves the right, at its discretion, to pay the award in cash or ordinary shares of the Company. Movements in the number of units of award granted during the year and their related weighted average fair values...

  • Page 183
    ... price of the option shares is the highest of the closing price of the listed ordinary shares on the date of grant; the average of the closing prices of the listed ordinary shares for the five trading days immediately preceding the date of grant; and the nominal value of the ordinary shares. The New...

  • Page 184
    ... 2014 Number of share options lapsed 2013 Number of share options lapsed Exercise period (MM.DD.YYYY) New Option Scheme 04.26.2003 to 04.25.2013 10.10.2002 to 10.09.2012 Exercise price HK$ 2.245 2.435 14,174,000 - 14,174,000 - 8,236,000 8,236,000 182 Lenovo Group Limited 2013/14 Annual Report

  • Page 185
    ... April 1, 2013 Profit for the year Exercise of share options Repurchase of shares Vesting of shares under long-term incentive program Share-based compensation Release of escrow shares for settlement of acquisition consideration Dividends paid Transfer to share capital (Note 30) At March 31, 2014 At...

  • Page 186
    ... financial statements, on March 31, 2014, the Group and the Company had the following other capital commitments: Group 2014 US$'000 Contracted but not provided for: - Property, plant and equipment - Patent and technology - Prepaid lease payments - IT consulting services 2013 US$'000 Company 2014...

  • Page 187
    ... operations 2014 US$'000 Profit before taxation Share of (gain)/loss of associates and joint ventures Finance income Finance costs Depreciation of property, plant and equipment and amortization of prepaid lease payments Amortization of intangible assets and share-based compensation (Gain)/loss on...

  • Page 188
    ... features, including benefits based on a final pay formula. This plan is closed to new entrants. On the business combinations of NEC personal computer division and Medion, the Group assumed the cash balance pension liability and end-of-employment benefit obligation for all employees from the then...

  • Page 189
    ... of funded plans Present value of unfunded obligations Liability in the balance sheet Representing: Pension benefits obligation Pension plan assets 389,172 (266,875) 122,297 20,185 142,482 142,482 - 142,482 The principal actuarial assumptions used are as follows: 2014 Discount rate Future salary...

  • Page 190
    ... future medical cost trend rates has no effect on the liabilities for post-employment medical benefits. The amounts recognized in the consolidated balance sheet are determined as follows: 2014 US$'000 Present value of funded obligations Fair value of plan assets Present value of unfunded obligations...

  • Page 191
    ... Group: Pension 2014 US$'000 Opening fair value Exchange adjustment Interest income Remeasurements: Return on plan assets excluding interest income Experience (losses)/gains Contributions by the employer Contributions by plan participants Benefits paid Closing fair value Actual return on plan assets...

  • Page 192
    ... TO THE FINANCIAL STATEMENTS 36 Retirement benefit obligations (continued) (c) Additional information on post-employment benefits (pension and medical) (continued) Summary of pensions and post-retirement medical benefits of the Group: 2014 US$'000 Present value of defined benefit obligations Fair...

  • Page 193
    ...92 100% Dual Mix Comércio de Eletrônica Ltda. Brazil BRL106,719 100% ( ) (LCFC (Hefei) Electronics Technology Co., Ltd.) 1 (wholly foreign-owned enterprise) Lenovo (Asia Pacific) Limited Chinese Mainland US$265,000,000 51% Hong Kong HK$1,667,065,380.02 100% 100% Investment holding and...

  • Page 194
    ... C.V. Lenovo Mobile Communication Technology (HK) Limited Israel Italy Japan Korea Mexico Hong Kong ILS1,000 EUR100,000 JPY100,000,000 KRW3,580,940,000 MXN226,308,454 US$1,000,000 100% 100% 51% 100% 100% 100% Chinese Mainland (Lenovo Mobile Communication Technology Ltd.)1 (Chinese-foreign equity...

  • Page 195
    ...400 79.82% NEC Personal Computers, Ltd. Japan JPY500,000,000 51% Stoneware, Inc. United States US$861,341.25 100% ( ) (Sunny Information Technology Service, Inc.)1 (Chinese-foreign equity joint venture) Chinese Mainland RMB20,000,000 100% 2013/14 Annual Report Lenovo Group Limited 193

  • Page 196
    ... of the Notes issue would be used for general corporate purposes including working capital, and to fund any acquisition activities. 40 Approval of financial statements The financial statements were approved by the board of directors on May 21, 2014. 194 Lenovo Group Limited 2013/14 Annual Report

  • Page 197
    ...YEAR FINANCIAL SUMMARY Condensed consolidated income statement 2014 US$'000 Revenue Profit before taxation Taxation Profit for the year Profit/(loss) attributable to: Equity holders of the Company Non-controlling interests 38,707,129 1,014,195 (196,725) 817,470 817,228 242 817,470 Earnings per share...

  • Page 198
    ..., USA COMPANY SECRETARY Mr. Mok Chung Fu, Eric STOCK CODES REGISTERED OFFICE 23rd Floor, Lincoln House, Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong Hong Kong Stock Exchange: American Depositary Receipts: 992 LNVGY WEBSITE www.lenovo.com 196 Lenovo Group Limited 2013/14 Annual Report

  • Page 199
    www.lenovo.com This report is printed on environmentally friendly paper manufactured from elemental chlorine-free pulp Printed on chemistry free plate system and soy ink