Lenovo 2015 Annual Report Download - page 137

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2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
RETIREMENT SCHEME ARRANGEMENTS (continued)
Defined Contribution Plans (continued)
Canada – Defined Contribution Pension Plan
Canadian regular, full-time and part-time employees are eligible to participate in the Defined Contribution Pension Plan, which is a
tax-qualified defined contribution plan. The Company contributes 3% to 6% of the employee’s eligible compensation, depending on
years of service. All contributions are made in cash, in accordance with the participants’ investment elections.
Hong Kong – Mandatory Provident Fund
The Group operates a Mandatory Provident Fund Scheme for all qualified employees employed in Hong Kong. They are required
to contribute 5% of their compensation (subject to the ceiling under the requirements set out in the Mandatory Provident Fund
legislation). The employer’s contribution will increase from 5% to 7.5% and 10% respectively after completion of five and ten years
of service by the relevant employees.
FACILITY AGREEMENT WITH COVENANT ON CONTROLLING SHAREHOLDER
The Company entered into a facility agreement with a syndicate of banks on February 2, 2011 (the “Facility Agreement”) for a term
loan facility of up to US$500 million (the “Facility”). The final maturity date of the Facility will fall on the date which is 60 months
after February 2, 2011. The Facility Agreement includes, inter alia, terms to the effect that it will be an event of default if Legend
Holdings Corporation (formerly known as Legend Holdings Limited), the controlling shareholder of the Company: (i) is not or ceases
to be the direct or indirect beneficial owner of 20% or more of the issued share capital of the Company; or (ii) is not or ceases to
be the single largest shareholder in the Company.
CONTINUING CONNECTED TRANSACTIONS
Continuing connected transactions with NEC and its associates
On January 27, 2011, the Company entered into a Business Combination Agreement with, amongst others, NEC Corporation
(“NEC”, together with its subsidiaries the “NEC Group”), pursuant to which the Company and NEC agreed to establish Lenovo NEC
Holdings B.V. (“JVCo”, together with its subsidiaries the “JVCo Group”) to own and operate their respective personal computer
businesses in Japan.
At or prior to closing of the Business Combination Agreement on July 1, 2011 (“the “Closing Date”), NEC or other members of
the NEC Group entered into various agreements (the “CCT Agreements”) with the Company, the JVCo or other members of the
JVCo Group in respect of the provision of certain services and products to or by the JVCo Group to facilitate the operation of its
personal computer business in Japan. Details of the CCT Agreements are set out in the announcement dated April 21, 2011 and
the circular issued by the Company to the shareholders on May 11, 2011. The continuing connected transactions under the NEC
Mobiling Agreement ceased subsequently in June 2013 following NEC’s disposal of the shares in NEC Mobiling, Ltd..
Upon the Closing Date, JVCo became an indirect non wholly-owned subsidiary of the Company. As NEC is a substantial
shareholder of the JVCo and therefore, a connected person of the Company, the transactions contemplated under the CCT
Agreements constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. The CCT
Agreements were approved by the independent shareholders at an extraordinary general meeting of the Company on May 27,
2011 and are subject to reporting requirements under the Listing Rules.
On January 20, 2014, it was proposed to revise the annual cap on the transaction amount of transactions contemplated under the
Supply Agreement and the NEC Patent License Agreement, both of which form part of the CCT Agreements, for the three financial
years ending March 31, 2014, 2015 and 2016 and for the period from April 1, 2016 and ending on July 1, 2016 (the “Revised
Annual Caps”) given the continued business growth and improving market conditions. Details of the Revised Annual Caps are set
out in the announcement dated January 20, 2014 and the circular issued by the Company to the shareholders on February 24,
2014. The Revised Annual Caps were approved 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.
On October 7, 2014, the relevant parties entered into various amendment agreements to the Business Combination Agreement,
the relevant shareholders’ agreement and certain agreements governing the existing continuing connected transactions to reflect
the extension of the term of the joint venture beyond 5 years. Details are set out in the announcement dated October 7, 2014.