Lenovo 2014 Annual Report Download - page 120

118 Lenovo Group Limited 2013/14 Annual Report
DIRECTORS’ REPORT
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.
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.
Details of the CCT Agreements are set out below:
Supply Agreement
Date: February 28, 2011
Parties: NEC and NEC Embedded Products, Ltd. (“NECP”) (formerly known as NEC
Personal Products, Ltd.), a wholly owned subsidiary of NEC (whose rights and
obligations were transferred to NEC Personal Computers, Ltd. (“NECPC”), a
member of the JVCo Group, on and following the Closing Date)
Services provided/received: The supply of certain “NEC” branded personal computer products to NEC.
Term: For a period of five years commencing from the Closing Date or until the date on
which NEC no longer holds any shares in JVCo, whichever the earlier.
Annual cap(Note 1):1/7/2011 – 31/3/2012 : JPY65,018 million (US$786,717,800)
1/4/2012 – 31/3/2013 : JPY88,132 million (US$1,066,397,200)
Revised annual cap(Note 2):1/4/2013 – 31/3/2014 : JPY140,000 million (US$1,372,000,000)
1/4/2014 – 31/3/2015 : JPY140,000 million (US$1,372,000,000)
1/4/2015 – 31/3/2016 : JPY140,000 million (US$1,372,000,000)
1/4/2016 – 1/7/2016 : JPY35,000 million (US$343,000,000)