Financial Statements of Lenovo Group Limited

Description
Lenovo (HKSE: 992) (ADR: LNVGY) is a $46 billion global Fortune 500 company and a leader in providing innovative consumer, commercial, and enterprise technology. Our portfolio of high-quality, secure products and services covers PCs (including the egendary Think and multimode YOGA brands), workstations, servers, torage, smart TVs and a family of mobile products like smartphones (including the Motorola brand), tablets and apps.

NEVER
STANDING
STILL
Lenovo Group Limited | 2014/15 Annual Report
Stock Code 992
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NEW
ENGAGEMENT.
NEW ERA.
ABOUT LENOVO
Lenovo (HKSE: 992) (ADR: LNVGY)
is a $46 billion global Fortune 500
company and a leader in providing
innovative consumer, commercial, and
enterprise technology. Our portfolio
of high-quality, secure products and
services covers PCs (including the
legendary Think and multimode
YOGA brands), workstations, servers,
storage, smart TVs and a family of
mobile products like smartphones
(including the Motorola brand), tablets
and apps. Join us on LinkedIn, follow us
on Facebook or Twitter (@Lenovo)
or visit us at www.lenovo.com.
NEW
ENGAGEMENT.
NEW ERA.
CONTENTS
4 FINANCIAL HIGHLIGHTS
8 CHAIRMAN AND CEO STATEMENT
12 LENOVO MANAGEMENT TEAM
16 MANAGEMENT’S DISCUSSION AND ANALYSIS
43 CORPORATE GOVERNANCE REPORT
84 AUDIT COMMITTEE REPORT
91 COMPENSATION COMMITTEE REPORT
102 CORPORATE SOCIAL RESPONSIBILITY REPORT
122 DIRECTORS’ REPORT
139 INDEPENDENT AUDITORS’ REPORT
140 CONSOLIDATED INCOME STATEMENT
141 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
142 CONSOLIDATED BALANCE SHEET
144 CONSOLIDATED CASH FLOW STATEMENT
145 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
146 NOTES TO THE FINANCIAL STATEMENTS
211 FIVE-YEAR FINANCIAL SUMMARY
212 CORPORATE INFORMATION
NEW
JOURNEY.
NEW
EXPERIENCE.
NEW
JOURNEY.
NEW
EXPERIENCE.
Yoga 3 Pro
4 Lenovo Group Limited 2014/15 Annual Report
FINANCIAL HIGHLIGHTS
2015 2014 Year-on-year
For the year ended March 31 US$ million US$ million Change

Group Results
Revenue 46,296 38,707 20%
Gross profit 6,682 5,064 32%
Gross profit margin (%) 14.4 13.1 1.3 pts
Operating expenses (5,574) (4,012) 39%
Expense-to-revenue ratio (%) 12.0 10.4 1.6 pts
EBITDA
1
1,715 1,365 26%
Pre-tax income 971 1,014 -4%
Pre-tax income margin (%) 2.1 2.6 -0.5 pts
Profit attributable to equity holders of the Company 829 817 1%
EPS – basic (US cents) 7.77 7.88 -0.11
EPS – diluted (US cents) 7.69 7.78 -0.09
Interim dividend per share (HK cents) 6.0 6.0 Nil
Final dividend per share (HK cents)
2
20.5 18.0 2.5
Total dividend per share (HK cents) 26.5 24.0 2.5
Cash and Working Capital
Bank deposits and cash and cash equivalents 3,026 3,953 -23%
Total borrowings (3,054) (455) 571%
Net (debt)/cash reserves (28) 3,498 N/A
Cash conversion cycle (days) (2) (2) Nil
Notes:
1
Excluding restructuring charges and other income, net.
2
Subject to shareholders’ approval at the forthcoming annual general meeting.
5 2014/15 Annual Report Lenovo Group Limited
Notes:
1
Excluding restructuring charges and other income, net.
Revenue Analysis by Geography
for the year ended March 31 (US$ million)
EBITDA
1
for the year ended March 31 (US$ million)
Revenue Analysis by Business Group
for the year ended March 31 (US$ million)
Pro?t Attributable to
Equity Holders of the Company
for the year ended March 31 (US$ million)
AP Mobile
China PC
AG Others
EMEA Enterprise
38,707 38,707 46,296
1,715
829
1,365
817
1,067
635
821
473
603
273
46,296
2014 2014
2014 2014 2013 2013 2012 2012 2011 2011 2015 2015
25%
1%
28%
6%
21%
3%
26%
2%
16%
14%
14%
20%
38%
82%
32%
72%
2015 2015
6 Lenovo Group Limited 2014/15 Annual Report
FINANCIAL HIGHLIGHTS
NEW
HORIZON.
NEW
VISION.
7 2014/15 Annual Report Lenovo Group Limited
NEW
HORIZON.
NEW
VISION.
Moto 360
IN THE PAST YEAR,
WE TOOK BOLD
ACTION TO BUILD
AN EVEN STRONGER
FOUNDATION FOR OUR
FUTURE. NOW, WE ARE
READY TO TAKE THE
NEXT STEPS. LENOVO
WILL NEVER STAND
STILL. INSTEAD, WE
WILL BE BOLD AND
WILL LEAD THE NEXT
WAVE OF INNOVATIONS
THAT MAKE OUR
CUSTOMERS' LIVES
MORE PRODUCTIVE
AND MORE
ENJOYABLE.
Throughout our history, Lenovo has succeeded by combining a
clear focus on meeting our short-term commitments with a clear
understanding of the changes and investments needed to ensure our
long-term success. No fiscal year better illustrates Lenovo’s ability to
combine these two qualities than the one we just completed. Once
again, Lenovo delivered record performance across all product lines.
At the same time, we took bold action for the future, completing two
major acquisitions that further strengthen our company by building
new pillars for growth. We are now a stronger and more diversified
company that is well positioned to be a global technology leader for
years to come.
RECORD PERFORMANCE
During the past fiscal year, we again delivered record performance
across all our businesses. Our achievements include:
• Record shipments and revenue: We again set all-time records for
unit shipments and sales, with revenue of $46.3 billion. Lenovo
now sells almost 5 devices every second of every day – while
continuing to improve profitability.
• Completed two historic acquisitions: Lenovo successfully closed
deals to acquire both the x86 server business from IBM and
Motorola from Google. These deals immediately made Lenovo #3
worldwide in both x86 servers and in smartphones.
CHAIRMAN AND CEO STATEMENT
8 Lenovo Group Limited 2014/15 Annual Report
• Completed 2 straight years as global PC leader: We continued to win in our core PC
business, achieving a record market share of almost 20%, and highlights include record
share level in all Geos.
• We also set new records in smartphones and tablets:
– In smartphones, we shipped a record 76 million units and strengthened our position
as the world’s #3 smartphone company. The addition of Motorola helped us expand
to more than 60 markets worldwide, making us a truly global smartphone company.
And now, almost 60% of smartphone volume comes from outside of China, giving us a
global footprint that is a true competitive advantage.
– We again had record volume in our tablet business, selling almost 12 million units and
outperforming the market by 24 points over the year, becoming #3 in the world. Our
strong performance was driven by strong growth in EMEA and our innovative new
Yoga Tablets in the premium segments.
• We greatly strengthened our Enterprise business through a combination of strong organic
growth with the x86 acquisition. Our ThinkServer business grew 50% year-on-year, and
System X is well positioned to grow in share and profitability.
• We continued to strengthen our Ecosystem business, with approximately 400 million
users and 70 million active monthly users. Two of our star apps – SHAREit and SECUREit
– have become major successes globally.
• We again demonstrated our innovation leadership, with great new products driving our
growth across all product lines. This year we won a record 77 awards at the Consumer
Electronics Show, the world’s largest and most prestigious technology event, and 20
awards at the 2015 Mobile World Congress, the top mobile technology event.
Our record performance is the result of our proven formula for success:
• A clear strategy that balances delivering strong short-term results with reaching
long-term objectives: We protect our core PC business, increasing profitability even as
we continue to see strong opportunities for growth, particularly from the
continuing consolidation in the industry. In Enterprise, we protect profit
as we push for rapid growth. In Mobile and Ecosystem/Cloud, we are
clearly attacking to drive growth and gain share. Our clear strategy
continues to drive strong execution worldwide.
• Our commitment to and investment in innovation that
differentiates our products: Lenovo’s investments in innovations
continue to drive growth through differentiation across our entire
product portfolio. Lenovo continues to be the clear leader in the PC
space, where we defined new “multimode” PC space with products
like Yoga, and we also brought great innovation to markets in
smartphones, tablets and servers. In addition, we are recognized for
innovative software, such as our SHAREit and SECUREit apps. With
our investments in key component technology, materials development,
and software, you can expect a new generation of innovative products
that are both more exciting and more useful for our customers.
Vibe X2 Pro
9 2014/15 Annual Report Lenovo Group Limited
CHAIRMAN AND CEO STATEMENT
• Operational excellence: Lenovo never stops improving its unique, efficient business
model. This starts in PCs with our dual-business model: serving global, large enterprise
customers through our relationship model and small-to-medium businesses and
consumers through our transaction model. Yet we also create new business models, such
as our new ShenQi business in China, to reach customers online. No matter the route
used to reach customers, our hybrid manufacturing model gives us a key competitive
advantage by giving us additional flexibility to meet customers’ needs. Operational
excellence continues to be a core Lenovo strength.
And our business transformation project, currently underway, will help us better leverage
internet to do business with our customers, and make our business model even more
advanced, optimized and efficient.
• A strong, diverse global team that attracts the top talents at both a worldwide level
and in key markets. While incredibly diverse, our team is united by the Lenovo Way – our
commitment, ownership and pioneer culture. This shared set of values helps us operate
with even greater speed, creating a clear competitive advantage.
DIVERSIFIED FOR FUTURE GROWTH
Today, Lenovo is a bigger and more diverse company than ever thanks not only to strong
organic growth, but also due to the successful completion of two historic acquisitions in the
last fiscal year. The acquisitions of both the System X server business from IBM and then
Motorola from Google immediately made Lenovo a significantly stronger global player in
both x86 servers and smartphones. More importantly, Lenovo now has three major growth
engines – PC, Enterprise and Mobile.
The strengthening of new growth engines makes Lenovo’s business significantly more
balanced. A year ago, more than 80% of Lenovo’s revenue came from PCs; now, even with
record PC performance, this segment is only 63% of our new business. Not only is Lenovo
less reliant on one particular business, but we are now able to attack growth opportunities
across the full spectrum of personal technology products.
Our business today is more diverse not only in terms of products, but also in terms of
geographic focus.
In the 10 years since Lenovo made another historic deal – acquiring IBM’s PC division
– we have proven we know how to not only integrate acquisitions, but also how to
strengthen and grow these new businesses. Just as we built the PC
business from #3 a decade ago to #1 today, our expectation is to
grow these new businesses to compete with the world leaders.
We will accomplish in the same way we have built Lenovo in the
last six years: by attacking to gain share while building from our
foundation of strengths.
Yoga 3 Pro
10 Lenovo Group Limited 2014/15 Annual Report
ORGANIZED TO DRIVE GROWTH
Even though Lenovo is far larger and a much more diverse business than even a few years
ago, our clear Protect and Attack strategy continues to guide our growth.
To provide better focus and to drive these diverse businesses to meet these objectives,
we have reorganized our company by combining our PC and Enterprise business groups
into a single strategic business unit. This combined unit enables us to better leverage our
comprehensive portfolio for customers and partners, and to drive savings across our supply
chain, procurement and R&D. Our Mobile Business Group and Ecosystem & Cloud will
continue to focus on driving growth and innovation. This organizational structure increases
focus where alignment synergies exist, and aligns our leadership strengths and talent.
Most importantly, our strategy will be driven by a new mission: to transform from a product-
centric company to a customer-centric company. To ensure we truly own relationships with
the people who use our products every day, we will focus on two transformations. First,
from a product perspective, we will do more than simply make the best hardware, but
will create a fusion of hardware, software and cloud service platform, what we call 3-in-1
devices. Second, from a business model perspective, we will create multiple touch points to
engage the people using our products, treating each essentially as a relationship customer.
Through this combination, we will focus on solving customer pain points and ensuring we
deliver the best customer experience.
READY FOR THE FUTURE
In the past year, we took bold action to build an even stronger foundation for our
future. Now, we are ready to take the next steps. Lenovo will never stand still.
Instead, we will be bold and will lead the next wave of innovations that make
our customers’ lives more productive and more enjoyable. We will continue
to balance delivering strong short-term performance with long-term growth,
making Lenovo a leader today and well into the future.
I am confident that all the great innovations and results we’ve
accomplished already will be eclipsed by the even more remarkable
achievements in Lenovo’s future.
Thank you.
Yang Yuanqing
Chairman and Chief Executive Officer
Vibe band
11 2014/15 Annual Report Lenovo Group Limited
12 Lenovo Group Limited 2014/15 Annual Report
LENOVO MANAGEMENT TEAM
GERRY P. SMITH
Executive Vice President and Chief Operating
Of?cer of PC and Enterprise Business Groups
LIU JUN
Executive Vice President and
President of Mobile Business Group
HE ZHIQIANG
Senior Vice President and President of
Ecosystem and Cloud Services Business Group
YANG YUANQING
Chairman and Chief Executive Of?cer
GIANFRANCO LANCI
Corporate President and
Chief Operating Of?cer
13 2014/15 Annual Report Lenovo Group Limited
PETER D. HORTENSIUS
Senior Vice President and
Chief Technology Of?cer
WONG WAI MING
Executive Vice President and
Chief Financial Of?cer
QIAO JIAN
Senior Vice President,
Human Resources
14 Lenovo Group Limited 2014/15 Annual Report
FINANCIAL HIGHLIGHTS
System x3950 X6
NEW
THINKING.
NEW
INSPIRATION.
15 2014/15 Annual Report Lenovo Group Limited
F
L
E
X
2
0
NEW
THINKING.
NEW
INSPIRATION.
16 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
Fiscal year 2014/15 was another record year for Lenovo
with a more diversified business. Lenovo continued to
deliver solid performance along with smooth integration
of Motorola and System X. The Group has broadened
its device business from PC to include mobile and
enterprise business. All these businesses delivered
strong performance and contributed to the Group’s
record performance during the year under review.
ThinkPad X1 Carbon
17 2014/15 Annual Report Lenovo Group Limited
BUSINESS REVIEW
Fiscal year 2014/15 was another record year for Lenovo with a more diversified business. Lenovo continued to
deliver solid performance along with smooth integration of Motorola and System X. The Group has broadened
its device business from PC to include mobile and enterprise businesses. All these businesses delivered strong
performance and contributed to the Group’s record performance during the year under review. The Group’s PC
business continued to lead the industry, while the M&A transactions further strengthened its mobile and enterprise
business as two new growth pillars for the Group. During the year under review, Lenovo continued to strengthen
its leading position in the PC industry with record shipments and continuous growth in revenue, share and profit.
The Group’s mobile business together with Motorola delivered record shipments and built a more globally balanced
business. The Group’s Think Server business recorded hyper-growth while the System X business integration has
been on track and stabilized towards the fiscal year-end. The Group has included two quarters of System X and five
months’ of Motorola performance in the Group’s fiscal year results.
For the fiscal year ended March 31, 2015, the Group’s consolidated revenue increased by 20 percent year-on-year
to record-high US$46,296 million. Excluding currency impacts, the revenue increase would be 23 percent compared
to last fiscal year. Revenue of the Group’s PC business was US$33,346 million, representing a year-on-year increase
of 5 percent. The revenue of Mobile business increased 71 percent year-on-year to US$9,142 million. The revenue
of Enterprise business increased 420 percent year-on-year to US$2,628 million. Meanwhile, revenue of other goods
and services were US$1,180 million.
The Group’s gross profit increased by 32 percent year-
on-year to US$6,682 million and gross margin increased
1.3 percentage points year-on-year to 14.4 percent.
Operating expenses increased by 39 percent year-on-
year to US$5,574 million. The expenses-to-revenue ratio
was 12.0 percent. Both gross margin and expense to
revenue ratio have included the increase from adding
System X and Motorola businesses. The Group’s profit
before taxation before non-cash M&A related accounting
charges was US$1,139 million, up 12 percent against
last year. The non-cash M&A-related charges included
intangible asset amortization, imputed interest expense
of the three-year promissory note issued as part of
the transaction, and others. The Group’s profit before
taxation reached US$971 million, representing a 4
percent decrease year-on-year. The Group’s net income
before non-cash M&A related accounting charges
was US$997 million, up 22 percent year-on-year. The
Group’s net income was US$829 million, representing
an increase of 1 percent from the previous fiscal year.
18 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
PERFORMANCE OF PRODUCT BUSINESS GROUPS
During the fiscal year 2014/15, Lenovo has built a more balanced product portfolio and each of its products
achieved strong unit shipments growth. The Group’s non PC revenue contribution rose from 18 percent a year ago
to 28 percent in the fiscal year under review.
Revenue by Product (%)
2%
(3%)
6%
(1%)
72%
(82%)
20%
(14%)
Mobile
Enterprise
PC
Others
PC Business Group (PCG)
During the fiscal year under review, the global PC industry continued to decline due to macro-economic issues
and the evolution of new form factors. Despite the market challenges, the Group continued to outperform the PC
market through solid execution of its strategy to reach record-high market share across all geographic, product and
customer segments. In December 2014, Lenovo achieved an important milestone with ThinkPad products reaching
100 million units sold.
The Group’s commercial PC unit shipments increased 3 percent year-on-year, compared to the 3 percent year-
on-year decline by the market. Lenovo’s market share in the worldwide commercial PC market increased by 1.3
percentage points year-on-year to a record high of 20.9 percent during the period under review, according to
preliminary industry estimates. The Group’s consumer PC unit shipments grew 15 percent year-on-year, a 17-point
premium to the market, to drive its market share up by 2.8 percentage points year-on-year to a record high of 18.5
percent, according to the preliminary industry estimates.
Revenue of the Group’s PC business was US$33,346 million, representing approximately 72 percent of the Group’s
total revenue, recorded a year-on-year increase of 5 percent. The business group also recorded a record high pre-
tax income of US$1,771 million, up 51 percent year-on-year and pre-tax margin was 5.3 percent against 3.7 percent
last year.
19 2014/15 Annual Report Lenovo Group Limited
Mobile Business Group (MBG)
During the fiscal year under review, the Group’s mobile
business continued to deliver strong growth driven through
aggressive expansion in markets outside of China. The
Group’s worldwide smartphone shipments grew over 50
percent year-on-year to 76 million including two quarters
of Motorola, driven by aggressive business expansion
in emerging markets outside of China from Lenovo brand
products and strong growth of the Motorola brand products. Together
with Motorola, the Group’s total smartphone shipments from markets outside of
China represent 41 percent of worldwide shipments in the fiscal year under review,
which now makes Lenovo a truly global player that ranked number three worldwide.
Lenovo’s market share in the worldwide smartphone market continued to expand by
1.0 percentage points year-on-year to 5.7 percent during the period under review,
according to preliminary industry estimates.
On the tablet side, the Group’s tablet shipments increased 26 percent year-on-year,
a 24-point premium to the market, to 11.6 million unit shipments during the fiscal year
under review, according to preliminary industry estimates. The Group’s tablet shipments
outside of China continued to show strong growth, accounting for 87 percent of the
Group’s total shipments. The Group’s worldwide tablet market share increased by 1.0
percentage points year-on-year to 5.1 percent.
The total revenue from Mobile business including Motorola increased 71 percent year-on-year to US$9,142 million,
representing approximately 20 percent of the Group’s total revenue. Profitability of Motorola has been improving
since closing of the transaction in October last year. Nevertheless, the Mobile Business Group still recorded a loss
before taxation of US$370 million and a negative 4.0 percent pre-tax margin.
Enterprise Business Group (EBG)
The Group’s enterprise business that now includes System X has become number three worldwide, according to
preliminary industry estimates. During the year under review, the Think Server business continued to show strong
growth while the System X business showed signs of stabilization during the first two quarters of integration.
Revenue of the Enterprise business was US$2,628 million, including two quarters of System X contribution,
representing approximately 6 percent of the Group’s total revenue. The loss before taxation was US$121 million, and
its pre-tax margin was negative 4.6 percent.
Others
Apart from devices, the Group continued to build a foundation for its ecosystem business during the period under
review, helping to create a better user experience for Lenovo’s product users. The Group’s star applications,
including SHAREit and SECUREit apps, continued to show good customer traction. The Group now has one of the
world’s largest app stores with around 400 million users and 70 million monthly active users, an increase of 170
percent year-on-year.
Revenue from ecosystem, cloud services and other products such as consumer electronic businesses acquired in
previous acquisitions decreased 3 percent to US$1,180 million, representing approximately 2 percent of the Group’s
total revenue.
Moto X
20 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
PERFORMANCE OF GEOGRAPHIES
Lenovo achieved solid and balanced performance in all geographies where it has operations – China, Americas, Asia
Pacific, and Europe-Middle East-Africa – as well as across product and customer segments.
Revenue by Geography (%)
AG
AP China
EMEA
FY13/14
100%
80%
60%
40%
20%
0%
FY14/15
32%
26%
14%
28%
38%
21%
16%
25%
China
China accounted for 32 percent of the Group’s total revenue. Despite the softness of the PC market due to macro-
economic issues, Lenovo continued to outperform in the China PC market through its solid execution and strong
brand and distribution channel network. The Group maintained its strong number one position with market share
gain of 1.5 point year-on-year to record-high of 36.6 percent, and continued to improve its profitability by leveraging
its leadership position.
The Group has refined its Lenovo brand smartphone strategy and focused on balancing growth and profitability amid
stiff competition in China. The Group believes China remains an important market and will continue to expand its
business through more routes to market, including online and the new channel from ShenQi, and a broader product
portfolio from mainstream to premium with Motorola re-entering China.
During the year under review, the Think Server business continued to show strong growth while the System X
business showed signs of stabilization during the first two quarters of integration in China.
Profit before taxation remained flat at US$795 million and operating margin was 5.4 percent, flat year-on-year
attribute to the performance in smartphone business.
21 2014/15 Annual Report Lenovo Group Limited
Americas (AG)
Americas accounted for 26 percent of the Group’s total revenue driven by growth across all products. Lenovo’s PC
unit shipments in AG grew by 4 percent year-on-year, an 8-point premium to the market, driven by strong growth in
consumer businesses. The Group’s market share increased by 0.9 percentage points from a year ago to a record-
high of 11.7 percent, according to preliminary industry estimates. The Group continued to deliver solid growth in
the North America region driven by balanced growth in both consumer and commercial businesses, and further
increased its market share in North America by 0.5 points to 10.9 percent year-on year. However, the Group’s
performance in Brazil was still impacted by the weak market environment, though actions have been taken to
stabilize the business.
The Group’s smartphone shipments have achieved strong growth in the region during the period under review,
thanks to the inclusion of Motorola. The Group’s EBG business is preparing to attack and gain more enterprise
customers in the future.
The Group earned US$8 million operating profit in the region, and operating margin was 0.1 percent, a decrease of
0.7 percentage point year-on-year. The decrease was mainly attributable to the poor performance in Brazil.
Asia Pacific (AP)
Asia Pacific accounted for 14 percent of the Group’s total revenue. The Group continued to drive strong profitable
growth in its businesses in AP during the year under review. The Group’s PC shipments achieved a 6-point premium
growth to the market driven by strong shipments growth in ASEAN and ANZ regions with year-on-year growth of 8
percent and 51 percent, respectively. The Group’s market share in AP increased by 0.9 percentage points year-on-
year, to a record high of 15.7 percent during the period under review, according to preliminary industry estimates.
The Group also achieved strong growth in smartphones driven by strong growth from Motorola during the period
under review. The Group’s EBG business will leverage its existing PC channel expertise and product portfolio from
System X to accelerate the business in the future.
Profit before taxation increased by 176 percent to US$302 million during the fiscal year and operating margin was 4.6
percent, an increase of 2.8 percentage points year-on-year.
Europe-Middle East-Africa (EMEA)
EMEA accounted for 28 percent of the Group’s total revenue. Lenovo’s PC unit shipments in EMEA grew by 35
percent year-on-year, which was a 32-point premium to the market. The Group’s market share in EMEA increased
by 4.5 percentage points year-on-year to a record high of 19.4 percent for the fiscal year, according to preliminary
industry estimates. Strong year-on-year unit shipments growth and share gains were recorded across all EMEA
regions during the period under review.
22 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
The Group continued to expand its smartphone business in EMEA and achieved strong growth during the year under
review. The Group’s EBG business will attack with more aggression to grow the enterprise business in the region.
Profit before taxation in EMEA regions increased by 119 percent to US$411 million during the fiscal year under
review with operating margin improved by 1.2 percentage points year-on-year to 3.2 percent.
Lenovo PC Share in 4 GEOs (%)
FY13/14
FY13/14
FY13/14
FY13/14
FY14/15
FY14/15
FY14/15
FY14/15
36.6
11.8
19.3
15.7
35.1
10.9
14.8
14.7
P
R
C
A
G
E
M
E
A
A
P
+1.5pts
+0.9pts
+4.5pts
+1.0pts
MATERIAL RISKS OF THE GROUP
The following are key risks that we consider to be of great significance to the Group as it stands today. They have
the potential to affect the Group’s business adversely and materially.
For each risk there is a description of the possible impact of the risk on the Group should it occur, and the mitigation
plan to manage the risk.
The Group also faces risks and uncertainties in common with other businesses. These have not been set out as key
risks below.
This list is likely to change over time as different risks take on larger or smaller significance. The size, complexity and
spread of the business and the continually changing environment in which the Group operates also mean that the
list cannot be an exhaustive list of all significant risks that could affect the Group.
23 2014/15 Annual Report Lenovo Group Limited
Risk Description Key Risk Mitigations
Business Risk
The Group operates in a highly competitive industry
which faces rapid changes in market trends, consumer
preferences and constantly evolving technological
advances in hardware performance, software features
and functionality. We face aggressive product and price
competition from competitors.
Failure to respond effectively to changes in market
trends or consumer preferences at competitive prices
against the backdrop of global slowdown in the
traditional PC market could harm our competitive
position.
Continual reviews of competition and market trends.
Maintain a competitive position through commitments to
innovate and build a broad product portfolio and grow
brand name to differentiate the Group and gain market
recognition.
Execution of clear strategy to protect and drive
profitability in the core PC business, while diversifying
by attacking in the faster growing Mobile and Enterprise
businesses.
The Group operates globally and as such our results
could be impacted by global and regional changes in
macro-economic and socio-political conditions and
regulatory environments.
Adverse economic conditions may result in
postponements or decreased spending amid concern
over weak economic conditions. In addition, they may
contribute to potential supply chain volatility, causing
potential product shortages or delays and insolvency of
key suppliers.
Ongoing unstable political conditions and changes in
regulatory or legal regulations in one or several countries
may increase the cost of operations and expose the
Group to potential liability.
The Group has diversified its geographic sources of
revenue and profit to reduce its dependency on any
single country or region.
24 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
Risk Description Key Risk Mitigations
Cyber Attack and Security Risk
The Group could be impacted negatively if we sustain
cyber-attacks and other data security breaches that
disrupt our operations or damage our reputation.
We manage and store various proprietary information
and sensitive or confidential data relating to our
operations. In addition, our cloud computing business
routinely processes, stores and transmits large amounts
of data for our customers, including sensitive and
personally identifiable information. We may be subject
to attack from hackers and other malicious software
programs that attempt to penetrate our networks and
exploit any security vulnerability in our system and
products.
Sophisticated hardware and operating system software
and applications that we produce or procure from third
parties may contain “bugs” that could unexpectedly
interfere with the operation of the system or may present
unidentified security risk.
Breaches of our security measures and misappropriation
of proprietary information, sensitive or confidential data
about us and our customers could lead us to loss of
reputation, disruption in business operations, exposure
to potential litigation and liability and result in a loss of
revenue and increased cost.
The Group will continue to maintain a significant investment
in enhancing IT security and security information
awareness.
Integration Risk
The Group has experienced growth and expansion through
acquisitions. Targets may be large and complex.
We may face risks and challenges in managing the
integration of business models, products and services, IT
infrastructure, operations, culture and employees.
The bene?ts of these acquisitions may not be realized as
quickly and as ef?ciently if there is dif?culty in integrating
them.
The diversion of management attention to integration issues
encountered could adversely affect the Group’s business.
Integration risk is considered at an early stage as part of the
review of acquisition opportunities and integration planning
takes place before completion of the acquisition.
Post-acquisition stabilization support, reviews and issue
resolution procedures have been established.
The Group has good track record in and experience of
integrating acquisitions of both large and small targets.
25 2014/15 Annual Report Lenovo Group Limited
Risk Description Key Risk Mitigations
Financial Risk
As the Group operates globally, signi?cant or prolonged
economic instability or ?nancial market deterioration may
materially and adversely impact the Group’s ?nancial
condition.
The Group is exposed to a variety of ?nancial risks, such as
foreign currency risk, cash ?ow risk, credit risk and liquidity
risks.
The Group Treasury department has put in place a
?nancial risk management programme that focuses on the
unpredictability of ?nancial markets and seeks to minimize
the potential adverse impact on the Group’s ?nancial
performance.
For more analysis, see “Notes To The Financial Statements”
(pages 160 to 165).
Intellectual Property Risk
The Group could suffer if we do not develop and protect
our own intellectual property or our suppliers are not able
to develop or protect desirable technology or technology
licenses.
The risks include:
• the legal costs of protecting and enforcing intellectual
property rights;
• loss or diminished value of intellectual property as an
asset, as a result of legal ?ndings of unenforceability and
challenges to title or ownership;
• the legal costs to defend against legal action alleging
intellectual property infringement and any potential
resulting settlement or damages;
• design-around costs and negative impact to customer
relationships.
Take full advantage of legal protections by registering
trademarks and applying for patents.
For licensed IP, take appropriate steps to assure its continued
validity.
Risk transfer to suppliers by contract terms to minimize risk
and obtain indemni?cation from suppliers.
Monitor, develop and execute litigation settlement strategy.
Use patent portfolio if appropriate to decrease potential
damages.
Supply Risk
The Group’s supply chain operations could be disrupted by:
• Catastrophic events
• Unfavorable changes in business, political or economic
factors.
The occurrence of any of the above in our own or our
suppliers’ manufacturing activities and logistic hubs could
result in signi?cant losses and harm our revenue, pro?tability
and adversely affect our competitive position, and require
substantial expenditures and recovery time in order to fully
resume operations.
Utilize cost and operational analysis to understand potential
impacts. Ensure broad sourcing to minimize impact of regional
catastrophes and ensure adaptation plans in place.
Adequate insurance coverage as last line of defense.
26 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
ENVIRONMENT
Lenovo’s corporate environmental policy applies to all of its operations and provides the foundation upon which
Lenovo’s Environmental Management System (EMS) operates. The EMS establishes the framework for Lenovo to
ensure regulatory compliance, efficient resource use, and environmental performance improvements. Lenovo’s EMS
is ISO 14001 certified and covers the company’s global manufacturing, research, product design and development
activities for personal computers, tablets, smartphones and related products, servers, and digital and peripheral
products.
The compliance organization is supported by a global network of internal environmental focal points and external
partners. We also support our commitment to compliance through internal and external audits of our own
facilities and those of our suppliers. The environmental and health and safety management systems at both our
manufacturing and development sites are subjected to internal audits at least annually. These sites also undergo
third-party environmental and health and safety audits at least once every three years, with most sites being audited
twice every three years.
Lenovo’s global Quality Management System, which has earned ISO 9001 certification, aims to achieve customer
satisfaction and deliver safe and superior products, solutions, and services while meeting customer requirements.
Stakeholders
Lenovo actively manages its relationships with employees, customers, suppliers, investors, regulators, members of
the communities in which we operate, and other stakeholders whose actions can affect the company’s performance
and value.
Key mechanisms for engaging with stakeholders include:
• Employee surveys such as the “Lenovo Listens” survey, commuting surveys, and others
• Customer surveys and direct customer interaction
• Supplier conferences and quarterly business reviews, and
• Ongoing community relations interactions with local communities
In addition to these and other formal stakeholder interactions, Lenovo engages with individual stakeholder groups on
an ad-hoc basis as needed.
Details of Lenovo sustainability program is set out in the Corporate Social Responsibility Report as stated on pages
102 to 120 of this annual report.
27 2014/15 Annual Report Lenovo Group Limited
Lenovo strives for continuous improvement in its corporate social responsibility performance. The table below
summarizes the objectives set for environment-related key performance indicators (KPIs) for FY 2014/15:
Sustainability Key Performance Indicators (KPIs)
Target Type Objective
Product energy Drive reduction in product energy use.
Quantify and reduce lifecycle CO
2
e emissions associated with the use of
Lenovo products.
Product materials Minimize the use of hazardous or potentially hazardous materials; drive
the use of environmentally sustainable materials.
Ensure all products across all business units contain some Post
Consumer Recycled Content (PCC).
Waste management Minimize environmental impacts associated with solid waste generated
from Lenovo operations and products.
Site energy consumption Maximize energy efficiency and minimize CO
2
e emissions associated with
the development, manufacture and delivery of Lenovo products.
Site air emissions Absolute reduction in CO
2
e emissions from Lenovo operations worldwide.
Supplier environmental
performance
Minimize potential environmental impact of Lenovo’s Category 1, 2 and 3
suppliers.
Voluntary compliance with the Dodd-Frank Act.
Monitor and drive good water management practices in the Lenovo
Supply Chain.
Monitor the Supplier FMD readiness.
Transportation Minimize CO
2
e emissions generated from transportation activities
associated with the development, manufacture & delivery of Lenovo
products. Establish the foundation for driving future reductions in Lenovo
international product transport carbon emissions.
Packaging Minimize packaging material consumption while driving the use of
environmentally sustainable materials.
Product end-of-life management Ensure customer access to convenient, reliable and compliant product
take back programs.
28 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
To support each objective, Lenovo has established numerous KPIs and targets. Full details on these objectives and
targets, including our results, will be reported in Lenovo’s FY 2014/15 Global Sustainability Report. For example,
climate change is a significant environmental aspect for Lenovo and is addressed via objectives related to product
and facility energy use. To support these objectives, we have established numerous KPIs and targets. Some sample
targets for this area are listed below.
• Establish a product carbon footprint for all newly released notebook, desktop, and visual products.
• Support external development of product carbon footprint methodologies and standards.
• Achieve a global energy intensity rate for Lenovo sites equal to or better than the previous year. Energy intensity
is the kilowatt hours of electricity consumed per unit produced for manufacturing sites and kilowatt hours per
employee at R&D and office sites.
• Increase the percentage of energy purchased from renewable generation sources relative to the previous fiscal
year for FY 2014/15. The purchase of renewable energy credits and carbon offsets may be used to support
reaching this target.
TALENT AND CULTURE
Win As One Team
The acquisitions of IBM X86 and Motorola Mobility catapulted Lenovo to the number 3 positions in both Enterprise
Servers and smartphones, in 2014/15. These historic deals clearly establish Lenovo as a global technology leader
with the right growth engines for future success: a balanced portfolio, a clear strategy, innovative products and
services, and a diverse global team. The Talent and Culture integration of these companies was a key business
priority in 2014/15.
“Bringing teams from three different cultures together
is a significant challenge. But it is one we at Lenovo
have successfully faced before. We will do it again.”
– Yuanqing Yang, Chairman and CEO
A variety of “Win As One” talent and culture initiatives were launched to support the integration efforts, focusing on:
• Accelerating the on-boarding and effectiveness of new leaders
• Building strong engagement in newly joined teams
• Facilitating the open exchange of ideas and best practices across organizations
Leveraging previous experience with M&A integration, Lenovo’s top leadership communicated a clear vision for
integration success, emphasizing the importance of an inclusive, cohesive cultural environment. Three key principles
were reinforced: “Be Frank, Respect and Compromise.”
29 2014/15 Annual Report Lenovo Group Limited
“We must have open minds so that we put everything
on the table and build up trust. We know that differences
will arise, and we must work together to find the
compromise that is best for the business.”
– Yuanqing Yang, Chairman and CEO
Lenovo’s long-standing traditions of Commitment and Ownership, Innovation and Entrepreneurial Leadership are
at the center of the talent and culture integration efforts. These pillars provide a clear guiding focus to drive the
company’s future success.
30 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
“We are all working from a clear strategy, and a consistent
core culture of commitment and ownership... Respect
everyone’s different backgrounds and skill sets. Encourage
cooperation, collaboration and creativity. Give people
freedom and they will deliver great results.”
– Yuanqing Yang, Chairman and CEO
Employee Performance and Compensation
To drive a strong ownership and commitment culture, Lenovo follows a rigorous pay for performance approach at
all levels of our professional workforce. This approach includes annual and goal setting and review, group calibration
of individual ratings to ensure fair assessment, and pay decisions tied to both team performance and individual
contribution. This pay for performance approach ensures that top contributors are paid very well relative to market
and share in the company’s success.
Talent Management and Succession Planning
During the annual Organizational and Human Resource Planning (OHRP) process, leaders at all levels evaluate and
make key decisions about organizational structure, strategic roles, and individual talent relative to Lenovo’s current
and future business imperatives. Lenovo’s OHRP process is critical for ensuring that the right structure and talent is
in place to deliver on the company’s strategy now and in the future.
Talent Acquisition
Lenovo’s global talent acquisition activities are closely linked to the annual OHRP process, which drives the
organization’s hiring for planned talent gaps. We also quickly respond to any unplanned talent gaps driven by
attrition. Our vision is to get the right talent in the right place at the right time. Our talent acquisition strategy is
focused on building the Lenovo employment brand, developing our global talent acquisition capability and investing
in programs to hire the next generation of Lenovo employees.
Training and Development
Development for employees at Lenovo begins with the New Employee Orientation training session when they are
hired, and continues throughout their career with the company. Every employee is responsible for creating and
maintaining an Individual Development Plan (IDP), which includes assessing their strengths and skill gaps and
identifying the actions required for future career growth. Lenovo’s 70-20-10 approach to employee development
recognizes that employees learn through three distinct types of experiences: on the job assignments (70%),
developmental coaching and mentoring relationships (20%), and formal coursework and training (10%). Lenovo
places a high priority on executive development, bringing leaders together twice a year to share best practices, learn
from external experts and drive strategic alignment across the enterprise.
31 2014/15 Annual Report Lenovo Group Limited
BRAND BUILDING
Lenovo recognizes that just as our business has expanded dramatically, the relationship between consumers and
brands also has changed significantly. Lenovo is no longer just a PC company, and our brand needs to be able to
talk equally to teenagers about phones, SMB owners about PCs, CIOs about servers, and many spaces in between.
We need to redefine our brand at a time when brands no longer can just push out a message through mass
media to gain recognition, but instead are expected to be part of highly nuanced, highly social dialogue in which
consumers drive the conversation. And we need to do this while facing competitors born on the Internet with an
entirely different business model.
To do this, we studied brands that are creating disruption in the marketplace. We found that such brands have a
clear point of view and go to market with a distinct attitude and powerful energy. The good news is that this aligns
well with our identity, our fundamental believe that life rewards those who never stand still. Lenovo is a team that
works incredibly hard because we believe that a day is wasted if we don’t move something forward. The reason
this attitude is so important is that our customers share our “never stand still” approach. Millennials wake up each
morning excited to make progress. And when you look at our professional customers, they share this same energy.
It’s all about showing progress. We believe – and our customers believe – that life rewards those who never stand
still.
Lenovo’s new brand starts with two important components. The first is the new logo, which has two elements. The
word Lenovo now has a more contemporary design to make it easier to read and pronounce. More importantly,
the word is housed in a shape that is meant to be a window into the world that surrounds us. It is designed to be
incredibly flexible so that while the word Lenovo doesn’t change, the images, colors and patterns around it do,
making it dynamic and energetic. Second, the logo has a broad color palette. So in addition to red, black and grey
we’re also using blue, green, orange and pink.
Lenovo officially unveiled its new brand identity at the inaugural Lenovo Tech World in Beijing, and will roll it out
during the upcoming year. This steady roll out will be part of our marketing, our events, our retail environment, our
offices and our products. You’ll start to see this more energetic attitude across everything we do as we continue
our journey to becoming one of the world’s leading, most respected and most recognized personal technology
companies.
32 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
FINANCIAL HIGHLIGHT

For the year ended March 31
2015
US$’000
2014
US$’000

Revenue 46,295,593 38,707,129
Gross profit 6,681,813 5,063,649
Gross profit margin 14.4% 13.1%
Operating expenses (5,573,299) (4,011,594)
Operating profit 1,108,514 1,052,055
Other non-operating expenses – net (137,547) (37,860)
Profit before taxation 970,967 1,014,195
Profit for the year 836,603 817,470
Profit attributable to equity holders of the Company 828,715 817,228
Earnings per share (US cents)
– Basic 7.77 7.88
– Diluted 7.69 7.78
EBITDA* 1,714,829 1,365,061
Profit before taxation before non-cash M&A-related accounting charges 1,138,727 1,014,195
Net income before non-cash M&A related accounting charges 996,475 817,228
Dividend per ordinary share (HK cents)
– Interim dividend 6.0 6.0
– Proposed final dividend 20.5 18.0
* Excluding restructuring charges and other income, net
33 2014/15 Annual Report Lenovo Group Limited
Results
For the year ended March 31, 2015, the Group achieved total sales of approximately US$46,296 million. Profit
attributable to equity holders for the year was approximately US$829 million, representing an increase of US$12
million as compared with last year. Gross profit margin for the year was 1.3 point up from 13.1 percent reported last
year. Basic earnings per share and diluted earnings per share were US7.77 cents and US7.69 cents, representing a
decrease of US0.11 cents and US0.09 cents respectively as compared with last year.
The Group adopts geographical segments as the reporting format. Geographical segments comprise China, AP,
EMEA and AG. Analyses of revenue by segment are set out in Business Review and Outlook below.

2015 2014
For the year ended
March 31
Revenue from
external customers
US$’000
Adjusted
pre-tax income
US$’000
Revenue from
external customers
US$’000
Adjusted
pre-tax income
US$’000

China 14,700,270 794,795 14,725,659 788,130
AP 6,549,339 302,183 6,162,919 109,350
EMEA 12,803,357 410,858 9,580,700 187,482
AG 12,242,627 7,999 8,237,851 68,627
46,295,593 1,515,835 38,707,129 1,153,589
Operating expenses analyzed by function for the year ended March 31, 2015 and 2014 are as follows:

2015 2014
For the year ended March 31 US$’000 US$’000

Other income – net 1,490 22,427
Selling and distribution expenses (2,302,182) (1,900,005)
Administrative expenses (1,883,114) (1,402,979)
Research and development expenses (1,220,919) (732,454)
Other operating (expenses)/income – net (168,574) 1,417
(5,573,299) (4,011,594)
34 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
Operating expenses for the year increased by 39% as compared with last year. This is principally attributable to
the operating expenses of US$1,433 million recorded by System X and Motorola following the completion of the
respective acquisitions on October 1 and October 30, 2014. Key expenses by nature comprise:

2015 2014
For the year ended March 31 US$’000 US$’000

Depreciation of property, plant and equipment and amortization
of prepaid lease payments (127,516) (74,472)
Amortization of intangible assets (287,877) (127,163)
Employee benefit costs, including (2,997,614) (2,332,675)
– long-term incentive awards (99,062) (80,274)
Rental expenses under operating leases (88,774) (75,922)
Net foreign exchange loss (189,550) (79,242)
Advertising and promotional expenses (675,760) (554,415)
Others (1,206,208) (767,705)
(5,573,299) (4,011,594)
Depreciation and amortization charges increased by US$214 million which is attributable to the increase in
the business activities of the Group as well as the amounts brought in by System X and Motorola. Additional
amortization of intangible assets in connection with the acquisition of System X and Motorola for the year totaled
US$127 million. The increase in employee benefit costs is in line with the increased headcount as a result of the two
acquisitions and the continuous expanding business operations of the Group. The impact of currency fluctuations
during the year present a challenge, the Group recorded a net exchange loss of US$190 million (2014: US$79
million) for the year.
Other non-operating expenses (net) for the year ended March 31, 2015 and 2014 comprise:

2015 2014
For the year ended March 31 US$’000 US$’000

Finance income 30,902 33,893
Finance costs (185,504) (80,974)
Share of profits of associates and joint ventures 17,055 9,221
(137,547) (37,860)
Finance income mainly represents interest on bank deposits.
Finance costs for the year increased by 129 percent as compared with last year. This is mainly attributable to
interest expense of US$65 million in relation to the 5-Year US$1.5 billion notes, issued in May 2014, bearing annual
interest at 4.7% due in May 2019; an increase in factoring costs of US$30 million; and US$17 million interest
expense in relation to promissory note issued to Google Inc.
Share of profits of associates and joint ventures represents operating income arising from principal business
activities of respective associates and joint ventures.
35 2014/15 Annual Report Lenovo Group Limited
FINANCIAL POSITION
The Group’s major balance sheet items are set out below:

Non-current assets (US$’000) 2015 2014

Property, plant and equipment 1,496,474 667,413
Prepaid lease payments 225,111 40,884
Construction-in-progress 311,888 351,934
Intangible assets 8,929,713 3,339,516
Interests in associates and joint ventures 45,719 20,753
Deferred income tax assets 530,047 389,330
Available-for-sale financial assets 73,400 35,157
Other non-current assets 41,191 111,558
11,653,543 4,956,545
Property, plant and equipment
Property, plant and equipment comprises mainly the Group’s freehold land and buildings, plant and machinery
and office equipment. Increase of 124 percent is mainly attributable to the amounts brought in from Motorola and
System X totalling US$591 million and the completion of the manufacturing plants in China and the Group’s further
investments in the laboratory facilities.
Prepaid lease payments
Prepaid lease payments represent the land use right in respect of the manufacturing sites, staff quarters and
headquarters in China. The increase of 451 percent is due to additions in the land use right in respect of the
research and development sites in Shanghai and Wuhan, China, and staff quarters in Wuhan and Hefei, China
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
Intangible assets comprise goodwill and other intangible assets including trademarks and trade names, and internal
use software. During the year, the Group completed two business combination activities. Goodwill and other
intangible assets including trademarks and trade names, customer relationships and patent and technology of
US$2,723 million and US$3,098 million were recognised respectively.
Interests in associates and joint ventures
Interests in associates and joint ventures increased by 120 percent over last year, mainly brought about by additional
investments and share of profits from principal business activities of respective associates and joint ventures during
the year.
36 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
Deferred income tax assets
Deferred income tax assets as at March 31, 2015 amounted to US$530 million, representing an increase of 36
percent over last year, which is partly attributable to the amounts brought in from Motorola and System X totalling
US$82 million, and the temporary differences in relation to provisions, accruals and deferred revenue arising in the
normal course of business.
Available-for-sale financial assets
Available-for-sale financial assets increased 109 percent over last year, mainly attributable to the additional
investments and fair value gain during the year.
Other non-current assets
Other non-current assets amounted to US$41 million as at March 31, 2015. The decrease of 63 percent over last
year is mainly attributable to the transfer of land use right in respect of staff quarters in China to prepaid lease
payments upon receipt of land use right certificate from the authority concerned.

Current assets (US$’000) 2015 2014

Inventories 2,995,389 2,701,015
Trade receivables 5,177,840 3,171,354
Notes receivable 334,738 447,325
Derivative financial assets 184,534 61,184
Deposits, prepayments and other receivables 3,572,015 3,000,826
Income tax recoverable 136,857 65,715
Bank deposits 171,139 94,985
Cash and cash equivalents 2,855,223 3,858,144
15,427,735 13,400,548
Inventories
Inventories of the Group increased by 11 percent, which is mainly due to the amounts brought in from Motorola and
System X totalling US$499 million.
Trade receivables and Notes receivable
Trade receivables and notes receivable amounted to US$5,513 million as at March 31, 2015. The increase of
52 percent over last year is mainly attributable to the amounts brought in from Motorola and System X totalling
US$2,319 million.
Derivative financial assets/liabilities
Derivatives relate to foreign currency forward contracts that are designated as hedges for the fair value of recognized
assets or liabilities or a firm commitment, or of highly probable forecast transactions. Derivatives are initially
recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their
fair values.
37 2014/15 Annual Report Lenovo Group Limited
Deposits, prepayments and other receivables
Majority of other receivables of the Group are amounts due from subcontractors for part components sold in the
ordinary course of business. Included in prepayments are in-transit product shipments to customers of US$581
million as at March 31, 2015 (2014: US$413 million) by which the Group defers the cost of shipped products
awaiting revenue recognition until the goods are delivered and revenue is recognized.

Equity attributable to owners of the Company (US$’000) 2015 2014

Share capital 2,689,882 1,650,101
Reserves 1,393,761 1,360,029
4,083,643 3,010,130
Share capital
Share capital amounted to US$2,690 million as at March 31, 2015. The increase in share capital is due to the
issuance of ordinary shares of the Company as part of the purchase consideration for the business combination of
System X and Motorola totalling US$1,039 million.

Non-current liabilities (US$’000) 2015 2014

Borrowings 1,885,848 10,125
Warranty provision 338,700 277,231
Deferred revenue 548,300 438,385
Retirement benefit obligations 399,782 156,515
Deferred income tax liabilities 200,730 142,881
Other non-current liabilities 2,440,435 844,914
5,813,795 1,870,051
Borrowings
Bank borrowings (classified as non-current) increased by US$1,876 million mainly due to the issuance of 5-year
US$1.5 billion notes bearing annual interest at 4.7% due in May 2019 and the drawn down of a term loan of
US$400 million due in December 2018. The proceeds would be used for general corporate purposes including
working capital, and to fund any acquisition activities.
Warranty provision
The Group records warranty liabilities at the time of sale for the estimated costs that will be incurred under its basic
limited warranty. The specific warranty terms and conditions vary depending upon the product and the country in
which it was sold, but generally include technical support, repair parts and labor associated with warranty repair
and service actions. The period ranges from one to three years. The aggregate current and non-current amounts
of warranty provision increased by 37 percent when compared with last year, which is mainly due to the amounts
brought in from Motorola and System X totalling US$397 million. The Group reevaluates its estimates on a quarterly
basis to assess the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
38 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
Retirement benefit obligations
The Group operates various pension schemes. The schemes are generally funded through payments to insurance
companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined
benefit and defined contribution plans. The increase of 155 percent is mainly attributable to the amounts brought in
from Motorola and System X totalling US$183 million.
Deferred income tax liabilities
Deferred income tax liabilities comprise withholding tax on undistributed earnings, tax liabilities on upward valuation
of intangibles arising from business combination and accelerated tax depreciation. The increase of 40 percent over
last year is largely due to the amounts brought in from Motorola and System X totalling US$86 million.
Other non-current liabilities
Other non-current liabilities amounted to US$2,440 million as at March 31, 2015. The increase of 189 percent over
last year is mainly due to the deferred consideration of US$1,393 million payable to Google Inc. in respect of the
business combination activities of Motorola.

Current liabilities (US$’000) 2015 2014

Trade payables 4,662,411 4,751,345
Notes payable 171,049 108,559
Derivative financial liabilities 80,897 58,462
Other payables and accruals 9,066,487 6,658,254
Provisions 1,203,547 852,154
Deferred revenue 640,161 410,330
Income tax payable 168,536 177,741
Borrowings 1,168,274 445,477
17,161,362 13,462,322
Trade payables and Notes payable
Trade payables and notes payable decreased by 1 percent, largely due to fewer purchases activities during the
fourth quarter, which is in line with the business projections.
Other payables and accruals
Other payables and accruals comprise the allowance for billing adjustments relating primarily to allowance for future
volume discounts, price protection, rebates, and customer sales 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
increase of 36 percent over last year is mainly due to the amounts brought in from Motorola and System X totalling
US$3,013 million.
Provisions
Provisions comprise warranty liabilities (due within one year) and environmental restorations. The amounts arising
from the business combination activities of Motorola and System X contributed to an increase of US$373 million as
at March 31, 2015.
39 2014/15 Annual Report Lenovo Group Limited
Borrowings
Borrowings (classified as current) amounted to US$1,168 million as at March 31, 2015, representing an increase of
162 percent over last year, which is mainly attributable to the drawdown of loans of US$1,431 million offset by loan
repayment of US$678 million during the year.
CAPITAL EXPENDITURE
The Group incurred capital expenditure of US$972 million (2014: US$675 million) during the year ended March 31,
2015, mainly for the acquisition of property, plant and equipment, prepaid lease payments, additions in construction-
in-progress and intangible assets.
LIQUIDITY AND FINANCIAL RESOURCES
At March 31, 2015, total assets of the Group amounted to US$27,081 million (2014: US$18,357 million), which
were financed by equity attributable to owners of the Company of US$4,084 million (2014: US$3,010 million), non-
controlling interests (net of put option written on non-controlling interest) of US$22 million (2014: US$15 million), and
total liabilities of US$22,975 million (2014: US$15,332 million). At March 31, 2015, the current ratio of the Group
was 0.90 (2014: 1.00).
The Group had a solid financial position. At March 31, 2015, bank deposits, cash and cash equivalents totaled
US$3,026 million (2014: US$3,953 million), of which 53.2 (2014: 66.9) percent was denominated in US dollar, 35.6
(2014: 23.8) percent in Renminbi, 2.8 (2014: 4.1) percent in Euro, 0.7 (2014: 2.2) percent in Japanese Yen, and 7.7
(2014: 3.0) percent in other currencies.
The Group adopts a conservative policy to invest the surplus cash generated from operations. At March 31, 2015,
75.4 (2014: 81.8) percent of cash are bank deposits, and 24.6 (2014: 18.2) percent of cash are investments in liquid
money market funds of investment grade.
Although the Group has consistently maintained a very liquid position, banking facilities have nevertheless been put
in place for contingency purposes.
The Group entered into 5-Year revolving loan facility agreement with syndicated banks for US$500 million on
February 2, 2011. The facility was utilized to the extent of US$300 million as at March 31, 2015 (2014: Nil).
In addition, on December 18, 2013, the Group entered into another 5-Year loan facility agreement with syndicated
banks for US$1,200 million, comprising US$800 million as short term. The facility was utilized to the extent of
US$1,100 million, comprising US$700 million short-term, as at March 31, 2015 (2014: Nil).
On May 8, 2014, the Group completed the issuance of 5-Year US$1.5 billion notes bearing annual interest at 4.7%
due in May 2019. The proceeds 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, 2015, the Group’s total available credit
facilities amounted to US$12,223 million (2014: US$7,890 million), of which US$1,353 million (2014: US$489 million)
was in trade lines, US$339 million (2014: US$325 million) in short-term and revolving money market facilities and
US$10,531 million (2014: US$7,076 million) in forward foreign exchange contracts. At March 31, 2015, the amounts
drawn down were US$316 million (2014: US$214 million) in trade lines, US$9,822 million (2014: US$6,513 million)
being used for the forward foreign exchange contracts, and US$177 million (2014: US$145 million) in short-term
bank loans.
40 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
At March 31, 2015, the Group’s outstanding borrowings represented by the term bank loan of US$395 million
(2014: US$310 million), short-term bank loans of US$1,168 million (2014: US$145 million) and long term notes of
US$1,491 million (2014: Nil). When compared with total equity of US$4,106 million (2014: US$3,025 million), the
Group’s gearing ratio was 0.74 (2014: 0.15). The net debt position of the Group at March 31, 2015 is US$28 million
(2014 net cash position: US$3,498 million).
The Group is confident that all the facilities on hand can meet the funding requirements of the Group’s operations
and business development.

2015 2014
At March 31 US$ million US$ million

Bank deposits and cash and cash equivalents 3,026 3,953
Less: total borrowings (3,054) (455)
(28) 3,498
The Group adopts a consistent hedging policy for business transactions to reduce the risk of currency fluctuation
arising from daily operations. At March 31, 2015, the Group had commitments in respect of outstanding forward
foreign exchange contracts amounting to US$9,822 million (2014: US$6,513 million).
The Group’s forward foreign exchange contracts are either used to hedge a percentage of future transactions which
are highly probable, or used as fair value hedges for identified assets and liabilities.
CONTINGENT LIABILITIES
The Group, in the ordinary course of its business, is involved in various claims, suits, investigations, and legal
proceedings that arise from time to time. Although the Group does not expect that the outcome in any of these
legal proceedings, individually or collectively, will have a material adverse effect on its financial position or results of
operations, litigation is inherently unpredictable. Therefore, the Group could incur judgments or enter into settlements
of claims that could adversely affect its operating results or cash flows in a particular period.
HUMAN RESOURCES
At March 31, 2015, the Group had a headcount of more than 60,000 worldwide.
The Group implements remuneration policy, bonus and long-term incentive schemes with reference to the
performance of the Group and individual employees. The Group also provides benefits such as insurance, medical
and retirement funds to employees to sustain competitiveness of the Group.
41 2014/15 Annual Report Lenovo Group Limited
FUTURE PROSPECTS
LOOKING FORWARD, THE GROUP WILL CONTINUE TO FOCUS ON TRANSFORMING INTO A TRULY
GLOBAL AND DIVERSIFIED COMPANY WITH IMPROVED OPERATING EFFICIENCY AND STRENGTHENED
COMPETITIVENESS. THE GROUP IS CONFIDENT THAT MOTOROLA AND SYSTEM X ARE ON
TRACK TO DELIVER THEIR TARGETS. THE GROUP WILL CONTINUE TO INVEST IN BUILDING ITS
CORE COMPETENCIES, PRODUCT INNOVATION, AND END-TO-END EFFICIENCY ENHANCING ITS
COMPETITIVENESS TO ENSURE FUTURE SUSTAINABLE PROFIT GROWTH.
Lenovo has demonstrated a consistent and solid track record in delivering results through strong execution of its
clear strategy to balance short-term results and long-term objectives. The Group will continue to focus on protecting
and driving profitability in the core PC business, while attacking in fast growing mobile, enterprise and ecosystem
and cloud businesses. Lenovo believes its strong PC leadership remains a solid profit engine with plenty of further
opportunities for profitable growth, particularly as the industry continues to consolidate.
Meanwhile, the rise of new technology and market trends, particularly the social mobile internet, has posed market
opportunities and challenges as consumer behavior is changing. The Group is undergoing a transformation process,
changing its focus from a product-centric to customer-centric company; from selling products to providing a
distinctive experience and engaging customers. The Group will increase the number and quality of touch points with
customers beyond purchase, establishing a stronger connection and engagement with customers. From the product
perspective, the Group will broaden from hardware to end to end experiences beyond devices. This will include a
focus on personalization and connectivity (to networks, device to device and cloud services). In addition, the Group
will pursue innovations from its sales, manufacturing, services and marketing process, to further enhance its user
experiences. The Group believes this transformation will position Lenovo well to capture the growth opportunities
arising from this trend.

Mobile
Drive mobile pro?table
growth through
global expansion,
integration synergy &
consumer centric
transformation
Leverage synergies
and innovation to
fund the growth
Ecosystem & Cloud
Expand ecosystem
and cloud services
and deliver a
differentiated “Device
+ Service” user
experience
PC
Protect pro?t & core Attack new markets & pro?t pools
Enterprise
Business Model Transformation
Global-local business model | In-house manufacturing | Vertical integration | Sustainability | On time delivery | Quality leadership
Operational Excellence
Global Culture
Customer focused | 5P culture | Diversity & inclusion | Entrepreneurship
Customer-driven product & services innovation | Global branding | New markets | Premium products | Security & privacy leadership
Innovation Leadership
Unique business models | Start-up model | Internet model
Accelerate to
undisputed #1 in
global PC with better
pro?tability
leveraging industry
consolidation
FY2015/16 Strategy
42 Lenovo Group Limited 2014/15 Annual Report
MANAGEMENT’S DISCUSSION & ANALYSIS
To facilitate the Group’s strategy, effective from April 1, 2015, Lenovo has realigned its four business groups into
two strategic business groups – PCG/EBG and MBG/ECS – to increase focus where synergies exist and align
leadership strengths. PCG/EBG will continue to drive savings from the integration of its supply chain, procurement
and R&D resources and provide the most comprehensive portfolio to its customers. MBG/ECS will prioritize growth
and innovation by creating strong affinity between device and service in the mobile internet market to capture those
growth opportunities from new trends such as the Internet of Things.
Lenovo’s solid execution of its clear strategy continues to be the firm foundation upon which the Group’s success
is built. The Group’s commitment to innovation across its entire product portfolio helps differentiate the Group
worldwide. Lenovo has a clear strategy, great global scale, and proven operational excellence. With the integration
of System X and Motorola, it will give the Group three growth engines – PC, Mobile and Enterprise. Looking forward,
the Group will continue to focus on transforming into a truly global and diversified company with improved operating
efficiency and strengthened competitiveness. The Group is confident that Motorola and System X are on track to
deliver their targets. The Group will continue to invest in building its core competencies, product innovation, and
end-to-end efficiency enhancing its competitiveness to ensure future sustainable profit growth.
B50 Touch
43 2014/15 Annual Report Lenovo Group Limited
CORPORATE GOVERNANCE REPORT
2012
2013
2014
Investor Relations
Corporate Governance Principles and Structure
Leadership
• Board Composition
• Division of Responsibilities
• Appointment and Election
• Directors’ Securities Transactions
• Induction and Continuous Professional Development
• Remuneration of Directors and Senior Management
• Company Secretary
Accountability and Audit
• Financial Reporting
• Internal Control
• Enterprise Risk Management
• External Auditor
Shareholders
• Communication with Shareholders
• Shareholders’ Rights
• Shareholding Structure
Effectiveness
• Board’s Responsibilities and Delegation
• Board Process
• Board Activities
• Board Committees
• Board and Board Committees’ Effectiveness Review
Information for Investors
Citation for Corporate
Governance Disclosure –
Hong Kong Management
Association’s 2012 Best
Annual Reports Awards
The Hong Kong Institute of
Directors Corporate
Governance Score-card
2012 – One of the Ten Best
Performing Companies in
Corporate Governance
Score
Corporate Governance
Excellence Award – The
Chamber of Hong Kong
Listed Companies’ Hong
Kong Corporate
Governance Excellence
Awards 2014
Platinum Award (H-share
Companies and Other
Mainland Enterprises
Category) – Hong Kong
Institute of Certified Public
Accountants’ 2014 Best
Corporate Governance
Disclosure Awards
Platinum Award – The
Asset’s Excellence in
Management and Corporate
Governance Benchmarking
Awards 2014
Platinum Award (H-share
Companies and Other
Mainland Enterprises
Category) – Hong Kong
Institute of Certified Public
Accountants’ 2013 Best
Corporate Governance
Disclosure Awards
Platinum Award – The
Asset’s Excellence in
Management and Corporate
Governance Awards 2013
44 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE PRINCIPLES AND STRUCTURE
The board of directors (the “Board”) and the management of Lenovo Group Limited (the “Company”) strive to
attain and uphold a high standard of corporate governance and to maintain sound and well-established corporate
governance practices for the interest sake of shareholders and other stakeholders including customers, suppliers,
employees and the general public. The Company abides strictly by the governing laws and regulations of the
jurisdictions where it operates and observes the applicable guidelines and rules issued by regulatory authorities. It
regularly undertakes review of its corporate governance system to ensure it is in line with international and local best
practices.
Throughout the year ended March 31, 2015, the Company has complied with the code provisions of the Corporate
Governance Code and Corporate Governance Report (the “CG Code”) set out in Appendix 14 to the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the
“Listing Rules”), and where appropriate, met the recommended best practices in the CG Code, save for the
exception which is explained below.
Code Provision A.2.1 (Separate the roles of Chairman and Chief Executive Of?cer)
Since November 3, 2011, Mr. Yang Yuanqing (“Mr. Yang”) has been performing both the roles as the chairman of the
Board (the “Chairman”) and chief executive of?cer of the Company (the “CEO”). The Board has recently reviewed
the organization human resources planning of the Company and is of the opinion that it is appropriate and in the best
interests of the Company at the present stage for Mr. Yang to continue to hold both the positions as it would help to
maintain the continuity of the strategy execution and stability of the operations of the Company. The Board comprising a
vast majority of independent non-executive directors meets regularly on a quarterly basis to review the operations of the
Company led by Mr. Yang.
The Board also appointed Mr. William O. Grabe (“Mr. Grabe”) as the lead independent director (the “Lead Independent
Director”) with broad authority and responsibility. Among other responsibilities, the Lead Independent Director will chair
the Nomination and Governance Committee meeting and/or the Board meeting when considering (i) the combined roles
of Chairman and CEO; and (ii) assessment of the performance of Chairman and/or CEO. The Lead Independent Director
will also call and chair meeting(s) with all independent non-executive directors without management and executive
director present at least once a year on such matters as are deemed appropriate. Accordingly, the Board believes that
the current Board structure with combined roles of Chairman and CEO, the appointment of Lead Independent Director
and a vast majority of independent non-executive directors will provide an effective balance on power and authorizations
between the Board and the management of the Company.
Apart from the foregoing, the Company met the recommended best practices in the CG Code as disclosed in
the respective sections of this report. Particularly, the Company published quarterly financial results and business
reviews in addition to interim and annual results. Quarterly financial results enhanced the shareholders’ ability to
assess the performance, financial position and prospects of the Company. The quarterly financial results were also
prepared using the accounting standards consistent with the policies applied to the interim and annual financial
results.
45 2014/15 Annual Report Lenovo Group Limited
The Company’s corporate governance structure and overall approach to corporate governance have also been
designed to support and work within our organizational structure and to meet the challenges of the future.
CORPORATE GOVERNANCE STRUCTURE
BOARD OF DIRECTORS
More details,
Pages 46 to 61
Audit Committee
More details,
Pages 84 to 90
Internal Audit
Lenovo Executive
Committee*
Senior Management
Compensation
Committee
More details,
Pages 91 to 101
Nomination and
Governance
Committee
More details,
Pages 63 to 65
Chief Executive Officer
More details,
Page 48
SHAREHOLDERS AND OTHER STAKEHOLDERS
More details,
Pages 78 to 81
* a management committee comprising the CEO and certain members of the senior management
46 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
LEADERSHIP
Board Composition
The composition, experience and balance of skills of the Board are regularly reviewed to ensure that the mix of skills
and experience is appropriate to meet the needs of the Company and its subsidiaries (collectively the “Group”). As
of the date of this annual report, there are eleven Board members consisting of one executive director, two non-
executive directors and eight independent non-executive directors.
The structure, size and composition (including, 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.
The Board diversity mix is shown below while the detailed biographies and a snapshot of the Board’s experience are
set out on pages 125 to 127 of this annual report.
Designation
Age Group
Gender
Areas of Experience
Male
Female
Executive director
Non-executive directors
Independent non-executive directors
45-55
56-65
over 65
9%
18%
46%
27%
27%
73%
9%
91%
Global operations
Accounting/Internal controls
Equity investment/Financial
IT industry
100%
18%
55%
73%
47 2014/15 Annual Report Lenovo Group Limited
Key Features of the Board Composition
•
The current composition of the Board exceeds the requirements under rule 3.10A of the Listing Rules,
as more than half of its members are independent non-executive directors, thus exhibiting a strong
independent element which enhances independent judgement.
•
Mr. Nicholas C. Allen, an independent non-executive director of the Company, has the appropriate
professional qualifications, or accounting or related financial management expertise, as required under the
Listing Rules.
•
Mr. Grabe, an independent non-executive director of the Company was appointed as the Lead
Independent Director for enhancing corporate governance of the Company. The roles and responsibilities
of the Lead Independent Director are set out on page 48 of this report.
•
The Company has maintained on its website and Hong Kong Exchanges and Clearing Limited’s website
(the “HKEx’s website”) an updated list of its directors identifying their roles and functions and whether
they are independent non-executive directors.
•
Independent non-executive directors are also identified as such in all corporate communications that
disclose the names of directors of the Company.
•
Mr. Zhu Linan and Mr. Zhao John Huan, non-executive directors of the Company, also serve on the board
of directors of Legend Holdings Corporation, which company held approximately 30.60% of the total
number of shares in issue of the Company as at March 31, 2015 according to the interest as recorded
in the register maintained under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong
Kong) (the “SFO”) (details are set out on page 81 of this report).
•
To the best knowledge of the Board members, there are no other relationship among the members of
the Board as of the date of this annual report except for the relationships (including financial, business,
family, and other material and relevant relationships) as mentioned in this report and in the biographies of
directors set out on pages 125 to 127 of this annual report.
•
The Board adopted a Board diversity policy (the “Board Diversity Policy”) which relates to the selection
of candidates for the Board. A summary of the Board Diversity Policy including the views and measurable
objectives is set out on page 49 of this report.
48 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Division of Responsibilities
The Board has a coherent framework with clearly defined responsibilities and accountabilities designed to safeguard
and enhance long-term shareholder value and provide a robust platform to realise the strategy of the Group. A
summary of responsibilities of leadership of the Company and those of Lead Independent Director is given in the
diagram below.
LEAD INDEPENDENT DIRECTOR
Mr. William O. Grabe
• chairs the Nomination and Governance Committee
meeting and/or the Board meeting when considering (i) the
combined roles of Chairman and CEO; (ii) assessment of the
performance of Chairman and/or CEO
• calls and chairs meeting(s) with all independent non-
executive directors at least once a year on such matters
as are deemed appropriate and provide feedbacks to
Chairman and/or CEO
• serves a key role in the Board evaluation process
• responds directly to shareholders and other stakeholders
questions and comments that are directed to the Lead
Independent Director or to the independent non-executive
directors as a group, when appropriate
• if requested by major shareholders, ensures that he is
available, when appropriate, for consultation and direct
communication
• performs other duties as the Board may designate
CHIEF EXECUTIVE OFFICER
Mr. Yang Yuanqing
• formulates and recommends the strategy of the Group to
the Board
• executes the strategy agreed by the Board
• makes and implements operational decisions and managing
the business day-to-day
• leads the business and the management team
CHAIRMAN
Mr. Yang Yuanqing
• leads the Board in the determination of its strategy and in
the achievement of its objectives
• provides leadership and manages the Board to ensure that
all directors are properly briefed on issues arising at Board
meetings and receive adequate, complete and reliable
information in a timely manner
• approves the Board’s agenda, taking full account of the
issues and concerns of Board members. Board agendas
are structured to allow adequate and sufficient time for the
discussion of the items on the agenda, in particular, strategic
matters
• facilitates and encourages active engagement of Board
members, particularly on matters of the Group’s strategy
or other major proposals, by drawing on directors’ skills,
experience and knowledge
• ensures good corporate governance practices and
procedures are established and effective communication
with shareholders and other stakeholders
NON-EXECUTIVE DIRECTORS
Independent non-executive directors:
Mr. Ting Lee Sen, Dr. Tian Suning, Mr. Nicholas C. Allen,
Mr. Nobuyuki Idei, Mr. William O. Grabe, Mr. William Tudor
Brown, Ms. Ma Xuezheng and Mr. Yang Chih-Yuan Jerry
Non-executive directors:
Mr. Zhu Linan and Mr. Zhao John Huan
• participate in Board meetings to bring an independent
judgement to bear on issues of strategy, policy,
performance, accountability, resources, key appointments
and standards of conduct
• take the lead where potential conflicts of interests arise
• scrutinise the Group’s performance in achieving agreed
corporate goals and objectives, and monitoring performance
reporting
• make a positive contribution to the development of the
Group’s strategy and policies through independent,
constructive and informed comments
• engage with senior management and other relevant parties,
such as the external or internal auditors as well as the
Company’s legal department, to ensure that the various
concerns and issues relevant to the management and
oversight of the business and operations of the Company
and the Group are properly addressed
49 2014/15 Annual Report Lenovo Group Limited
Appointment and Election
Diversity
The Board values diversity as a factor in selecting candidates to serve on the Board, and believes that the diversity
which exists in its composition provides significant benefits to the Board and the Company.
The Board adopted a Board Diversity Policy which relates to the selection of candidates for the Board. The
Board believes that a key success factor of an effective Board is that it comprises a range and balance of skills,
experience, knowledge and independence, with individuals that work as a team. The Board Diversity Policy was
adopted to ensure that diversity in its broadest sense continues to remain a feature of the Board.
The Nomination and Governance Committee has been delegated with the responsibilities for the review of the Board
Diversity Policy on an annually basis. During the fiscal year 2014/15, the Nomination and Governance Committee
reviewed the below measurable objectives and the progress in achieving these objectives:
Measurable Objectives Progress for Achieving Objectives
Objective 1 Consider candidates for appointment as independent non-
executive directors from a wide pool of backgrounds, skills,
experience and perspectives that would complement the existing
Board
• Appointment of Mr. Yang Chih-Yuan
Jerry as independent non-executive
director
• In the ordinary course of the Board
succession process
Objective 2 Report annually against the objectives and other initiatives taking
place within the Company which promote diversity
FY2015/16 and ongoing
Objective 3 Report annually on the outcome of the composition and structure
of the Board as well as any issues and challenges the Board is
facing when considering the diverse make up of the Company
FY2015/16 and ongoing
Appointment process
The Board recognises the need to ensure the Board and senior management are always well resourced, with the
suitable people in terms of skills and experience to deliver the Group’s strategy.
There is a formal and transparent procedure for the appointment of new directors to the Board, the primary
responsibility of which has been delegated to the Nomination and Governance Committee. The Nomination
and Governance Committee is composed of the Chairman and two independent non-executive directors. This
composition ensures that any decisions made are impartial and are in the best interest of the Company.
The Nomination and Governance Committee’s assessment of the candidates includes, but is not limited to,
consideration of the relevant knowledge and diversity of backgrounds, skills, experience and perspectives that would
complement the existing Board.
50 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Evaluation of the Board composition
and establishment of desired criteria
for prospective directors
Identification of
candidates
Evaluation of suitability
of candidates
Meeting with
candidates
Final deliberation by Nomination
and Governance Committee
Recommendation to
the Board for approval
The Nomination and Governance Committee also
ensures that candidates satisfy the requisite skills and
core competencies to be deemed fit and proper, and
to be appointed as director. The nomination process
involves the following six stages:
Following a formal, rigorous and transparent process
implemented and led by the Nomination and Governance
Committee, the Board appointed Mr. Yang Chih-Yuan
Jerry as an independent non-executive director of the
Company with effect from November 6, 2014 and
Mr. Yang Chih-Yuan Jerry will be subject to election by
shareholders at the forthcoming annual general meeting.
Succession
The Nomination and Governance Committee regularly reviews the structure, size and composition (including the
skills, knowledge and experience) required of the Board and makes recommendations to the Board as appropriate.
The Board has satisfied itself that the committee has in place appropriate plans for orderly succession to the Board
as well as procedures to ensure an appropriate balance of skills on the Board and its committees. The Board
and the Nomination and Governance Committee have regularly discussed and reviewed Board composition and
succession planning during the year and this will continue in the fiscal year 2015/16.
Tenure
In accordance with the articles of association of the
Company (the “Articles of Association”), all directors
are subject to retirement by rotation. At each annual
general meeting, one-third of the directors for the time
being shall retire from office. The retiring directors shall
be eligible for re-election. New appointments either to
fill a casual vacancy or as an addition to the Board are
subject to re-election by shareholders of the Company
at the next following annual general meeting of the
Company.
All non-executive directors (including independent
non-executive directors) have entered into letters of
appointment with the Company for a term of three
years. Their terms of appointment shall be subject to
retirement from office by rotation and re-election at the
annual general meeting in accordance with the Articles
of Association.
Board Tenure
below 5 years
5-10 years
over 10 years
28%
36%
36%
51 2014/15 Annual Report Lenovo Group Limited
The Company agreed that the independence of directors is an important principle of the Company. In line with
the best practices on corporate governance, the Board adopted the principle that each term of an independent
non-executive director of the Company shall not be more than three years and shall, subject to re-election by
shareholders at any subsequent annual general meeting of the Company, be renewable for additional three-year
terms up to a total of nine years. At the recommendation of the Nomination and Governance Committee, the Board
may invite an independent non-executive director to serve for an additional three-year term extending up to a total of
twelve years subject to re-election at any subsequent annual general meeting of the Company. The Company will set
out in the document accompanying the notice of the forthcoming 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 the independent non-executive director.
Independence
The independent non-executive directors do not participate in the day-to-day management of the Company and do
not engage in any business dealing or other relationships with the Group (other than in situations permitted by the
applicable regulations) in order to ensure that they remain truly capable of exercising independent judgement and
act in the best interests of the Company and its shareholders.
Each of the independent non-executive directors has made a confirmation of independence pursuant to rule 3.13
of the Listing Rules. On May 20, 2015, the Nomination and Governance Committee conducted an annual review of
the independence of all independent non-executive directors of the Company for the year ended March 31, 2015.
Having taken into account the factors as set out in rule 3.13 of the Listing Rules in assessing the independence
of independent non-executive directors, the Nomination and Governance Committee (with the relevant committee
member abstaining from voting on the resolution concerning his own independence) concluded that all of the
independent non-executive directors satisfied the criteria of independence as set out in the Listing Rules.
In addition, the Nomination and Governance Committee affirmed that all independent non-executive directors of the
Company provided a strong independent element on the Board, were free from any business or other relationship
which could materially interfere with the exercise of their judgement, and remained independent for the year ended
March 31, 2015.
Conflicts of interest
Directors have a statutory duty to avoid situations in which they have or may have interests that conflict with those
of the Company. The Board has a set procedure and guidance to deal with the actual or potential conflicts of
interest of directors as follows:
• The Board deals with each appointment on its individual merit and takes into consideration all the circumstances.
• Actual and potential conflicts of interest are notified to the Board before they arise.
• Prior to taking an additional responsibilities or external appointments, directors are obliged to ensure that they
will be able to meet the time commitment expected of them in their role at the Company and do not have any
potential conflicts that may arise when take up a position with another company.
• Decisions regarding transactions with directors and their related parties are always dealt with by other directors,
such as matter regarding the remuneration of executive director is handled by the Compensation Committee.
All potential conflicts of interest will be recorded, which are reviewed on an annual basis by the Nomination and
Governance Committee to ensure that the procedures are working effectively.
52 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Under the Articles of Association of the Company, directors are also required to declare their direct or indirect
interests, if any, in any proposal, transaction, arrangement or contract that is significant in relation to the Company’s
business and the director’s interest or his associate’s interest or the interest of the entity connected with the director
is material.
Commitments
All directors are committed to devote sufficient time and
attention to the affairs of the Company. Directors are
given guidelines on their time commitments to the affairs
of the Company and corresponding confirmations were
received from the directors in their letters of appointment.
Directors have also disclosed to the Company the number
and nature of offices held in Hong Kong or overseas listed
public companies or organisations and other significant
commitments, with the identity of the public companies
or organisations. Directors are reminded to notify the
Company in a timely manner and bi-annually confirm
to the Company of any changes of such information.
With respect to those directors who stand for re-
election at the forthcoming annual general meeting, all
of their directorships held in listed public companies in
the past three years are also set out in the document
accompanying the notice of the forthcoming annual
general meeting.
Share ownership
The Board has adopted stock ownership guidelines for non-employee director. The Board believes that share
ownership aligns the interests of its directors with the long-term interests of the shareholders 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.
Directors’ Securities Transactions
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model
Code”) set out in Appendix 10 to the Listing Rules from time to time and devised based on the principles of the
Model Code a comprehensive and operative company policy to govern securities transactions by directors and
designated senior management of the Company. All directors of the Company have confirmed, after specific enquiry,
their compliance with the required standard during the year.
Directorship with Other
Listed Public Companies
55% 45%
0-2 (Number of companies)
3-5 (Number of companies)
53 2014/15 Annual Report Lenovo Group Limited
Induction and Continuous Professional Development
The Company is aware of the requirement to regularly review and agree with each director their training needs.
Keeping up-to-date with key business developments is essential for directors to maintain and enhance their
effectiveness.
Induction program
Continuous professional
development program
DIRECTOR’S ROLES
AND
RESPONSIBILITIES
Induction program
Upon joining the Company, directors are provided with a bespoke induction program to further their understanding of
the nature of the Company, its business and the markets in which it operates, and also enhance their knowledge of
the Group, its operation and staff. Induction program is tailored to each new director, depending on the experience
and background of the director. Normally, a comprehensive, formal and tailored induction program covering amongst
other things:
F
O
L
L
O
W
I
N
G

A
P
P
O
I
N
T
M
E
N
T
Receiving Director’s Induction Handbook
to ensure that the director has a proper
understanding of the operations, business and
governance policies of the Company
Meeting with Chairman, Directors and
a Wide Range of Senior Management
from Across the Business
to ensure that the director has a proper
understanding of the culture of the Board
and the operations of the Group
Attending Brie?ng and Presentation
from Senior Executives and Visit to
Business Operations
to ensure the director has a proper
understanding of the operations of the
Group and its development
Attending Continuous Professional
Development Program
to ensure that the director keeps abreast
of new laws, regulations or developments
in business that are relevant to the roles
as a director of the Company
Attending Briefing / Training by External Lawyer
to ensure the director is fully aware of the responsibilities as
a director under statute and common law, the Listing Rules,
applicable legal requirements and other regulatory requirements
O
N

A
P
P
O
I
N
T
M
E
N
T
During the year, Mr. Yang Chih-Yuan Jerry, who joined the Board in November, 2014, received a comprehensive
induction program covering: (i) a directors’ induction handbook; (ii) a briefing training by external lawyer; (iii) a visit to
Lenovo manufacturing plant in Wuhan to enhance his understanding of the businesses and operations of the Group.
54 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Continuous professional development program
As part of the continuous professional development program, the Board members from time to time receive
presentations from senior executives in the business on matters of significance. Financial plans, including budgets
and forecasts, are regularly discussed at Board meetings. The Company would arrange appropriate visits and
seminars covering the Group’s operations, the industry and governance matters for directors to facilitate their
understanding of the Group’s businesses and have a better awareness of the risks associated with the Group’s
operations.
During the fiscal year 2014/15, the trainings and activities for the Board were set out below:
Site Visit
The Board had the opportunity to meet with senior
management of Lenovo Mobile Business Group and
to visit Lenovo Wuhan Experience Center and the
manufacturing plant in Wuhan. These arrangements
provided the Board a better understanding of the latest
technology and products developments of the Group
and an insight into the business operations and the
strategic direction of the Group.
During the visit, directors were provided with updates
and presentations from local management and had the
chance to meet with senior management there and
observe the actual operation of the plant.
Industry Congress
Lenovo operates in an industry which is rapidly changing
in terms of market trends, consumer preferences and
technologies. In order to keep directors updated with
the latest technologies and products development in
the industry, the Company has made arrangements
for directors to attend the Consumer Electronics Show
and the Mobile World Congress in Las Vegas
and Barcelona respectively. During the visits,
directors were given the best product reviews,
product demos and displays that showcase
the technologies of the Company and also
those of other players in the market. These
events provided excellent opportunities for
directors not only to acquire the most advanced
technological knowledge in the market, but
also to meet with the senior management of
the Company and other innovators, builders,
technologists and customers there.
55 2014/15 Annual Report Lenovo Group Limited
Experts Briefing and Seminar
The Company has arranged in-house seminars for directors
to keep them abreast of the affairs relating to the Company.
The directors are also encouraged to attend relevant
external professional programs at the Company’s expense
to keep abreast of issues facing the changing business
environment within which the Group operates.
The Company arranged experts briefing and seminar for
directors on the topics of “China-US Diplomatic and Trade
Relations” and “Risk Management and Internal Control”.
Regulatory Updates
The directors are updated on a continuing basis by
the Company Secretary on any new regulations and
guidelines, as well as any amendments thereto issued
by the Stock Exchange and other regulatory authorities,
particularly the effects of such new or amended
regulations and guidelines on directors specifically,
and the Company and the Group. During the year, the
regulatory updates covering the following topics:
Mr. Jeffrey Bader, previously the special assistant to
the president of the United States for national affairs at
the National Security Council and the principal advisor
to President Obama on Asia, was a guest speaker of
an in-house seminar on the current status of China-US
diplomatic and trade relations
– Recent amendments to the Listing Rules on
connected transactions
– Directors’ duties
– Consultation conclusions on risk management and
internal control: review of the CG code and corporate
governance report
The Board considers the aforementioned training attended and/or participated in by the directors, and the continuing
legal updates provided to the directors, as adequate to enhance the directors’ skills and knowledge to carry out their
duties as directors. All directors are required to provide the Company with their training records on annually basis
and such records are maintained by the Company Secretary for regular review by the Nomination and Governance
Committee.
The Nomination and Governance Committee will, on a continuing basis, evaluate and determine the training needs
of the directors, particularly on relevant new laws and regulations and essential practices for effective corporate
governance, to enable the directors to sustain their active participation in Board deliberations and effectively
discharge their duties.
56 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
In addition to directors’ attendance at meetings and review of relevant materials provided by senior management
during the year, the professional trainings attended by the directors are set out as follows:
Type of training
Name of directors
Reading
regulatory
updates/
Company
Policies
Visiting
the place of
operations,
Company’s
facilities
and meeting
with local
management
Attending
experts briefing/
seminar/
conference
relevant to
the Company’s
business or
director’s duties
Executive director
Mr. Yang Yuanqing ? ? ?
Non-executive directors
Mr. Zhu Linan ? ? ?
Mr. Zhao John Huan ? ? ?
Independent non-executive directors
Mr. Ting Lee Sen ? ? ?
Dr. Tian Suning ? ? ?
Mr. Nicholas C. Allen ? ? ?
Mr. Nobuyuki Idei ? ? ?
Mr. William O. Grabe ? ? ?
Mr. William Tudor Brown ? ? ?
Ms. Ma Xuezheng ? ? ?
Mr. Yang Chih-Yuan Jerry (Note) ? ? ?
Note: Mr. Yang Chih-Yuan Jerry was appointed as an independent non-executive director of the Company with effect from November 6, 2014.
Remuneration of Directors and Senior Management
A formal and transparent procedure for fixing the remuneration packages of individual directors and senior
management is in place. Details of remuneration policies and other relevant information are set out in the
Compensation Committee Report of this annual report on pages 91 to 101.
Company Secretary
The Company Secretary, Mr. Mok Chung Fu, Eric is responsible for facilitating the Board process, as well as
communications among Board members with shareholders and management. During the year, the Company
Secretary undertook appropriate professional training to update his skills and knowledge.
57 2014/15 Annual Report Lenovo Group Limited
EFFECTIVENESS
Board’s Responsibilities and Delegation
The Group is controlled through the Board who is responsible for steering the success of the Group by overseeing
the overall strategy and directing and supervising its affairs in a responsible and effective manner. The Board also
sets the Group’s core values and adopts proper standards to ensure that the Company operates with integrity and
complies with the relevant rules and regulations.
The Company has a formal schedule of matters specifically reserved to the Board and those delegated to
management. The management is responsible for the daily operations and administration function of the Group
under the leadership of the CEO. The Board has given clear directions to management as to the matters that must
be approved by the Board before decisions are made on behalf of the Company or entering into any commitments
on behalf of the Group. The types of decisions to be delegated by the Board to management include implementation
of the strategy and direction determined by the Board, operation of the Group’s businesses, preparation of financial
statements and operating budgets, and compliance with applicable laws and regulations. These arrangements
will be reviewed periodically to ensure that they remain appropriate to the Company’s needs. A list of senior
management and their biographies are set out on pages 127 to 128 of this annual report.
Schedule of Matters Reserved to the Board includes:
• setting the Group’s strategy
• approval of annual budget
• approval of major capital and equity transactions
• approval of major disposals and acquisitions
• approval of transactions that requires disclosure under the Listing Rules
• recommendation on appointment or reappointment of external auditor
• approval of the Group’s financial statements
• recommending or declaring a dividend
• succession planning and appointment to the Board
• reviewing the performance of the Board and its committees
• other significant operational and financial matters
58 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Board Process
The Board recognises the importance of providing timely and appropriate information to directors so as to enable
them to make informed decisions and to perform their duties and responsibilities effectively.
BOARD
MEETING
• Pursuant to the Articles of Association
that, unless otherwise permissible in
the Articles of Association, a director
shall not vote on any resolution of
the Board approving any transaction,
arrangement, contract or other
proposal in which he/she is materially
interested nor shall he/she be counted
in the quorum present at the meeting.
• Minutes of Board meeting recorded in
sufficient detail the matters considered
by the Board and decisions reached,
including any concerns raised
by directors or dissenting views
expressed.
• Minutes of Board meeting were
circulated to the respective Board
members for comment where
appropriate and duly kept in minutes
book for inspection by any director.
Dispatch Board papers to
directors
• Agenda and supporting
documents 7 days, with
updated financial figures 3 days
(or other reasonable period) prior
to the meeting
Dispatch Board papers to
directors
• Generally, not less than 3 days
(or other reasonable period)
before the meeting
• If appropriate, one-on-one
briefing offered to each director
prior to the meeting
Convene Board Meeting
• Notice of not less than 7 days
(or other reasonable period) be
given
Meeting agenda and notice
• Finalized by the Chairman
in consultation with Board
members
• Notice of not less than 30 days
be given
The Board meets at least 4
times a year at approximately
quarterly intervals
• To review financial performance,
strategy and operations
Regular Board Meeting
Meeting dates are set 2 years
in advance
• To facilitate maximum
attendance
Other Board Meeting
• To consider ad hoc matters
59 2014/15 Annual Report Lenovo Group Limited
Other Key Features of Board Process
• The directors are supplied in a timely manner with all relevant documentation and financial information to
assist them in the discharge of their duties. Monthly updates of the financial performance of the Company are
furnished to the Board between regular Board Meetings.
• In addition to standing agenda items, there may be discussions on “deep-dive” topics. During the year “deep-
dive” presentations included the Group’s specific strategy and business in a specific market.
• The Board systematically visits the Group’s business locations both to review its operations and meet with
local management. During the year, the Board visited and reviewed the Group’s business and its operations in
Wuhan.
• Senior management are invited to attend Board meetings, where appropriate, to report on matters relating
to their areas of responsibility, and also to brief and present details to the directors on recommendations
submitted for the Board’s consideration. Additional information or clarification may be required to be furnished,
particularly with respect to complex and technical issues tabled to the Board.
• To enhance the communication between directors and senior management and have an understanding of
management planning, directors are invited to attend Lenovo’s Global Leadership Team event and participate
in small group discussions with relevant senior management.
• Separate executive sessions were arranged for (i) the Chairman to meet with non-executive directors in the
absence of management and (ii) the Lead Independent Director to meet with other independent non-executive
directors in the absence of executive director and management to discuss matters relating to any issue or
other matters such persons would like to raise.
• To enhance communication with and contribution from all the directors, the Chairman meets with each non-
executive director on an one-on-one basis at least once a year.
• All directors have direct access to the General Counsel and Company Secretary of the Company who are
responsible for advising the Board on corporate governance and compliance issues.
• Written procedures are in place for directors to seek, at the Company’s expense, independent professional
advice in performing directors’ duties. No request was made by any director for such advice during the year.
• The Company has established continuous disclosure policy (the “Continuous Disclosure Policy”) and its
implementation guideline on monitoring, reporting and disseminating inside information. The critical concerns
of the Group’s operations and developments are communicated and addressed to the Board in a timely
manner.
• As permitted by the Articles of Association, a director or a former director of the Company may be indemnified
out of the Company’s assets against any liability incurred by the director to a person other than the Company
or an associated company of the Company that attaches to such director in his or her capacity as a director
of the Company, to the extent permitted by law. Such permitted indemnity provision has been in force since
the adoption of the new articles of association of the Company on July 2, 2014.
• The Company has arranged appropriate insurance to cover the liabilities of the directors arising from
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.
60 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Board Activities
Board activities are structured to assist the Board in achieving its goal to support and advise senior management on
the delivery of the Group’s strategy within a transparent governance framework. The diagram below shows the key
areas of focus for the Board, which appear as items on the Board’s agenda at relevant times throughout the financial
year. Concentrated discussion of these items assists the Board in making the most appropriate decision based on
the long-term opportunities for the business.
Business
Awareness and
Performance
Corporate
Governance,
Social
Responsibility,
Diversity and
Talent
Business Strategy
and Risks
Financial
Performance
• Discussion of main
strategic issues
relating to commercial,
geographic and
structural areas
• Review of processes
and controls for
strategic and
operational risks
• Chief Financial Of?cer
report
• Financial results
• Forecasts and budgets
• Treasury items
• Review and discussion
of practices of social
responsibility
• Board and Board
Committees’
effectiveness review
• Board diversity and
succession planning
• CEO report
• Operations updates
• Board Committees’
reports
61 2014/15 Annual Report Lenovo Group Limited
Time allocation
During the fiscal year 2014/15, a total of seven Board
meetings were held, of which four Board meetings were
primarily to review quarterly business performance and
strategy execution and the remaining three were for
reviewing specific strategy in the geography, business
or other relevant areas. Given the geographical spread
of the Group’s business, in addition to the meetings
in Hong Kong and the United States, the Company
also held meetings in Wuhan with a particular focus on
reviewing the strategies and business of Lenovo Mobile
Business Group which also provided an opportunity
for directors to meet with the local management team.
The chart beside this paragraph shows how the Board
allocated its time during the year.
Directors are expected to attend all meetings of the
Board and the Committees on which they serve and to
devote sufficient time to the Company to perform their
duties. Where Directors are unable to attend meetings
they receive papers for that meeting giving them the
opportunity to raise any issues with the Chairman in
advance of the meeting.
At each scheduled meeting the Board receives updates from the CEO and Chief Financial Officer on the financial
and operational performance of the Group and any specific developments in their areas of the business for which
they are directly responsible and of which the Board should be aware. Chairman of the respective Board committees
would also report on matters discussed and/or approved at the relevant Board committees’ meetings held prior to
the Board meetings. Meetings are structured so as to allow for consideration and debate of all matters. In addition
to these regular reports, the Board considered and/or resolved the following non-routine matters during the year:
• Appointment of Mr. William Tudor Brown as a member of Audit Committee
• Appointment of Mr. Yang Chih-Yuan Jerry as an independent non-executive director
• Adoption of the new articles of association of the Company
• Amendments to various agreements entered into with NEC Corporation or its subsidiaries
• Amendments to the delegation of authority policy of the Company
• Discussion on new businesses
• Discussion on Board and Board committees’ evaluation results
The Board
Allocation of agenda time
Operational developments
Financial
Corporate governance
and directors’ training
Strategic matters
Board Committees’ reports
Other matters
(including Ad hoc
projects and treasury
matters)
11%
15%
37%
15%
3%
19%
62 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Board Committees
As at the date of this annual report, the Company has preserved three Board committees (the “Board
Committees”) with defined terms of reference (which are posted on the Company’s website and HKEx’s website) –
Audit Committee, Compensation Committee, and Nomination and Governance Committee. The terms of reference of
Audit Committee, Compensation Committee, and Nomination and Governance Committee reference those set out in
the CG Code prevailing from time to time.
AUDIT COMMITTEE
Chairman:
Mr. Nicholas C. Allen
Members:
Mr. Ting Lee Sen
Ms. Ma Xuezheng
Mr. William Tudor Brown
COMPENSATION
COMMITTEE
Chairman:
Ms. Ma Xuezheng
Members:
Mr. William O. Grabe
Mr. Ting Lee Sen
Mr. William Tudor Brown
Mr. Zhu Linan
NOMINATION AND
GOVERNANCE COMMITTEE
Chairman:
Mr. Yang Yuanqing
Members:
Mr. Nobuyuki Idei
Mr. William O. Grabe
BOARD OF DIRECTORS
Chairman and Executive Director
Mr. Yang Yuanqing (CEO)
Non-executive Directors
Mr. Zhu Linan
Mr. Zhao John Huan
Independent Non-executive Directors
Mr. Ting Lee Sen
Dr. Tian Suning
Mr. Nicholas C. Allen
Mr. Nobuyuki Idei
Mr. William O. Grabe (Lead Independent Director)
Mr. William Tudor Brown
Ms. Ma Xuezheng
Mr. Yang Chih-Yuan Jerry
The Board may also establish committees on an ad hoc basis to approve specific projects as deemed necessary.
Should the need arise, the Board will authorize an independent board committee comprising the independent
non-executive directors to review, approve and monitor connected transactions (including continuing connected
transactions) that should be approved by the Board.
All Board Committees follow the same principles and procedures as those of the Board and are provided with
sufficient resources to perform their duties. The Board Committees will report to the Board on 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.
63 2014/15 Annual Report Lenovo Group Limited
Audit Committee
The Audit Committee is authorised by the Board to perform its duties within its terms of reference. Details of the
Audit Committee, including its membership, responsibilities and main activities during the fiscal year 2014/15, are
summarized in the Audit Committee Report as stated on pages 84 to 90 of this annual report.
Compensation Committee
The Compensation Committee is authorised by the Board to perform its duties within its terms of reference. Details
of the Compensation Committee, including its membership, terms of reference and work done during the fiscal year
2014/15, are summarized in the Compensation Committee Report as stated on pages 91 to 101 of this annual
report.
Nomination and Governance Committee
Membership
The Nomination and Governance Committee (defined as “Committee” in this section) of the Board of the Company
as at the date of this annual report, is comprised of three members including Mr. Yang Yuanqing (Committee
Chairman) and two independent non-executive directors, Mr. Nobuyuki Idei and Mr. William O. Grabe.
Responsibilities
The Committee is responsible for reviewing the composition of the Board and Board committees to ensure they are
properly constituted and balance in terms of skills, experience and diversity. In addition to this, it is also responsible
for:
• Making recommendation to the Board on succession planning for directors and CEO;
• Assessment of the performance of the Chairman and/or CEO and making proposals to the Compensation
Committee;
• Monitoring corporate governance issues and developments to ensure that the Company is in line with the
international best practices;
• Reviewing and determining the director induction and continuous professional development programs; and
• Reviewing and monitoring the annual Board and Board committees’ evaluation and the progress of the
implementation actions.
Key Features
• The Committee’s terms of reference which clearly deal with its membership, authority, duties and frequency of
meetings are published on the Company’s website and HKEx’s website.
• The Committee is provided with sufficient resources to perform its duties.
• The Committee is authorised to obtain outside legal or other independent professional advice in performing its
duties at the Company’s expense. No request was made by any member for such advice during the year.
64 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
• General Counsel and Company Secretary are invited to attend the Committee meetings in order to provide insight
and enhance the Committee’s awareness of corporate governance issues and developments.
• 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.
Main Activities
During the year ended March 31, 2015, the Committee
held two meetings in which the following activities were
considered and/or resolved:
Board and Board committees’ compositions
• Reviewed and recommended to the Board on the
structure, size and composition of the Board including
the diversity and balance of skill, knowledge and
experience of the directors.
• Considered and recommended changes to the Board
and Board Committee’s composition:
(i) appointment of Mr. William Tudor Brown as a
member of Audit Committee;
(ii) appointment of Mr. Yang Chih-Yuan Jerry as an
independent non-executive director.
• Reviewed and discussed the progress against Board
diversity targets.
Assessment of the performance of the Chairman and CEO and succession planning
• Assessed the performance of the Chairman and CEO for the fiscal year 2013/14 and making recommendation to
the Compensation Committee.
• Reviewed the arrangement of same person acting as Chairman and CEO.
• Reviewed and discussed succession planning for the position of directors and review potential candidates for this
role.
Nomination and Governance Committee
Allocation of agenda time
Board and Board
Committees’ compositions
Corporate governance
matters
Board and Board
Committees’ evaluation
Others
Assessment of performance
of the Chairman and CEO,
and succession planning
6%
42%
30%
7%
15%
65 2014/15 Annual Report Lenovo Group Limited
Corporate Governance matters
• Reviewed corporate governance disclosures in 2013/14 annual report and 2014/15 interim report.
• Reviewed and assessed the independence of independent non-executive directors and affirmed the Committee’s
view over their independence.
• Reviewed and discussed the induction and continuous professional development programs for the directors of
the Company.
• Reviewed the policies and practices on corporate governance, and the compliance with legal and regulatory
requirements of the Group.
Board and Board Committees’ evaluation
• Oversaw the process of the Board and Board Committees’ evaluation for the fiscal year 2014/15.
• Discussed and approved the proposed actions to be taken in response to the findings of 2013/14 Board and
Board Committees’ evaluation. The Committee also reviewed reports on the status of the action plan to monitor
the progress being made.
Performance and Effectiveness
The Board undertook an annual review of its committees’ performance and effectiveness. The review concluded that
overall the Committee was effective in carrying out its duties. Details of the Board and Board Committees’ review
process can be found under “Board and Board Committees’ Effectiveness Review” as set out in this report on pages
67 to 68.
66 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Board and Board Committees Meetings and Attendance
Details of directors’ attendance at the annual general meeting, Board and Board Committees meetings held during
the year ended March 31, 2015 are set out below:
Attendance/Meetings held in the year
Name of directors
Board
(Notes 1 & 2)
Audit
Committee
(Notes 1 & 4)
Compensation
Committee
(Note 1)
Nomination and
Governance
Committee
(Notes 1 & 7)
Annual
General
Meeting
(Notes 3 & 4)
Executive director
Mr. Yang Yuanqing (Chairman & CEO) 7/7 – – 2/2 1/1
Non-executive directors
Mr. Zhu Linan 6/7 – 3/4 – 0/1
Mr. Zhao John Huan 7/7 – – – 0/1
Independent non-executive directors
Mr. Ting Lee Sen 7/7 4/4 4/4 – 0/1
Dr. Tian Suning 7/7 – – – 0/1
Mr. Nicholas C. Allen 7/7 4/4 – – 1/1
Mr. Nobuyuki Idei 7/7 – – 2/2 1/1
Mr. William O. Grabe (Lead Independent Director) 7/7 – 4/4 2/2 1/1
Mr. William Tudor Brown (Note 5) 7/7 3/3 4/4 – 0/1
Ms. Ma Xuezheng 7/7 4/4 4/4 – 1/1
Mr. Yang Chih-Yuan Jerry (Note 6) 3/3 – – – N/A
Notes:
(1) The attendance figure represents actual attendance/the number of meetings a director is entitled to attend.
(2) The Board held four regular meetings and three strategic meetings during the year.
(3) The Company held the annual general meeting on July 2, 2014.
(4) Representatives of the external auditor participated in every Audit Committee meeting and the annual general meeting held during the year.
(5) Mr. William Tudor Brown was appointed as a member of the Audit Committee with effect from May 22, 2014.
(6) Mr. Yang Chih-Yuan Jerry was appointed as an independent non-executive director of the Company with effect from November 6, 2014.
(7) For corporate governance reasons, Mr. Yang Yuanqing was required to excuse himself from the agenda item relating to assessment of the
performance of the Chairman and CEO of the Nomination and Governance Committee meeting to avoid conflict of interest.
During the year, the Chairman held two executive sessions with non-executive directors (including independent non-
executive directors), the first one being a session attended by only human resources management to review the
organization human resources planning of the Company while the other was without the presence of management to
discuss other Board matters.
To enhance the corporate governance practices, the Lead Independent Director held executive session with
independent non-executive directors without the presence of executive director and management after each regular
Board meeting to discuss matters relating to any issue or other matters such persons would like to raise.
67 2014/15 Annual Report Lenovo Group Limited
Board and Board Committees’ Effectiveness
Review
Review process
The Board is aware of the importance of continually
assessing its own performance in support of the
leadership of the Group. The Board has established a
formal process, led by the Nomination and Governance
Committee, for the annual evaluation of the performance
of the Board and Board Committees, to ensure that they
continue to act effectively and efficiently and to fulfill
their respective duties.
The objectives of the evaluation were to build on the
improvements made since the last evaluation, thereby
improving the collective contribution of the Board as a
whole and also the competence and effectiveness of
each individual director.
Mr. Grabe, the Lead Independent Director, is
delegated with authority to take a key role in the Board
evaluation process. Mr. Grabe, in consultation with
the Chairman and supported by the General Counsel
and the Company Secretary, compiled and circulated
a comprehensive questionnaire for completion by
all directors, the aim of which was to evaluate the
performance and effectiveness of the Board and its
Committees.
The questionnaire considered:
• Board processes and their effectiveness
• Time management of Board meetings
• Board composition and dynamics
• Strategic and operational oversight
• Succession planning
• Board support
Following the completion of the questionnaire by
each director, Mr. Grabe discussed the draft results
report with the chairpersons of Audit Committee and
Compensation Committee. The process took place
between November 2014 and February 2015.
DETERMINE THE SCOPE OF
EVALUATION
• Board and Board Committees
EVALUATION APPROACH
• Conducted by completing a comprehensive
questionnaire covering the following areas:
– Roles and responsibilities
– Composition and structure
– Board conduct
– Board contribution
– Relationship with management
– Relationship with shareholders
– Board Committees
DISCUSSION AND REVIEW OF
EVALUATION RESULTS
• Preparing the draft results report
• Discussion of the draft results report between the Lead
Independent Director and the chairpersons of Audit
Committee and Compensation Committee
• Review of the results report by the Nomination and
Governance Committee
• Finalizing the results report
• Reporting to the Board in a manner that did not identify
individuals’ speci?c responses, ensuring that these
responses could be as open, frank and informative as
possible
• Following review of the results, the Board drew
conclusions 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
BOARD AND BOARD COMMITTEES’
EFFECTIVENESS REVIEW PROCESS
68 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Review results
A consolidated report of the outputs from the evaluation was prepared by the Nomination and Governance
Committee for review and consideration by the Board. The results of the evaluation were thoroughly discussed at a
Board meeting on February 2, 2015.
Overall the review found that the Board and Board Committees continue to operate effectively. The Board also
identified enhancement areas, which will be incorporated into the future Board program to ensure that the operation
of the Board and Board Committees continue to improve. These areas will continuously be reviewed by the Board.
Board action plan for FY2015/16
After a thorough discussion of the review, the Board
has identified the following themes and areas of focus:
• Board process – Time spent on routine would be
further managed to enable strategic or business
discussions to take priority, whilst ensuring the
critical areas of oversight would be maintained.
• Succession planning – Continue to develop our
succession planning, insights into high potential
individuals.
• Communication with senior management – Continue
to encourage greater interaction between Board
members and senior management to benefit from
their experience.
Lenovo’s Global Leadership Team Event
69 2014/15 Annual Report Lenovo Group Limited
ACCOUNTABILITY AND AUDIT
Financial Reporting
The Board acknowledges its responsibility for presenting a balanced, clear and comprehensive assessment of the
Company’s performance, position and prospects. The Board is also responsible for the preparation of financial
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 139 of this annual report.
The current practices of the Company on the timeline for publication of financial results and the related reports are
set out below:
Annual Results FY2013/14
• Announced within 2 months
• Published the annual report within 14 days following the annual results announcement
Interim Results FY2014/15
• Announced within 1.5 months
• Published the interim report within 14 days following the interim results announcement
Quarterly Results FY2014/15 Q1 & Q3
• Announced within 45 days
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 defined control
responsibility to:
• Achieve business objectives and safeguard assets against unauthorized use or disposition;
• Ensure maintenance of proper accounting records for the provision of reliable financial information for internal use
or for publication; and
• Ensure compliance with the relevant legislation and regulations.
70 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
For many years, the Company has had an integrated approach for internal control which is consistent with the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) internal control framework.
Risk Assessment
Risks are identified and the likely impact
on the organization is assessed.
Control Environment
The internal organizational environment
driven by the management operating
philosophy, risk appetite, integrity, and
ethical values.
Control Activities
Policies and procedures are implemented
to ensure organizational objectives and
risk-mitigation activities are effectively
executed.
Information and Communication
Relevant information is communicated in
an acceptable format and timely fashion
to enable the organization to meet its
objectives.
Monitoring Activities
The internal control process is continually
monitored. Modifications are made to
improve internal control activities as a
result of the monitoring process.
Risk Assessment
F
u
n
c
t
i
o
n
D
i
v
i
s
i
o
n
O
p
e
r
a
t
i
n
g

U
n
i
t
E
n
t
i
t
y
Information & Communication
Control Activities
Control Environment
Monitoring Activities
Compliance
Reporting
Operations
Within this framework, management is responsible for setting the appropriate tone from the top, risk assessment,
and the design, implementation and maintenance of internal controls, while the Board and its Audit Committee
oversee the actions of management and monitor the effectiveness of the established controls. Other teams such as
Finance, Legal, and Human Resources provide assistance and expertise to management to assist it in undertaking
its responsibilities.
Management of internal controls
Essential to the internal control system are well defined policies and procedures that are properly documented and
communicated to employees. The corporate policies form the basis of all our major guidelines and procedures
and set forth the control standards required for the functioning of our business entities. 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.
71 2014/15 Annual Report Lenovo Group Limited
Additionally, Lenovo has a strong corporate culture based on good business ethics and accountability. Lenovo’s
Code of Conduct (the “Code”), which applies to all employees, forms the basis of Lenovo’s commitment to
conducting all business with uncompromising integrity and ethical behavior. The Code also helps employees
determine when to ask for advice, and where to obtain it. All Lenovo employees are required to comply with the
Code, which is available in multiple languages and is accessible on the Company’s website and internal intranet, and
to participate in regular training to reinforce the Company’s commitment to compliance and conducting business
with integrity. Lenovo regards any violation of the Code as a serious matter and is committed to investigating all
reported concerns. Furthermore, in keeping with best practices, Lenovo has developed and implemented an Anti-
Bribery and Anti-Corruption Policy which reinforces the Code and provides additional specific guidance regarding
compliance with rules and laws related to bribery and corruption.
Along with establishing guidelines, principles and values, Lenovo recognizes that an environment where employees
feel free to bring concerns to management is also required to make our internal control system successful.
Lenovo’s corporate policy on reporting unlawful or inappropriate conduct makes it clear that all reports will be kept
anonymous and confidential to the extent possible. Most importantly, if employees seek advice, raise a concern
relating to a potential compliance issue, or report suspected misconduct, Lenovo will not tolerate any form of
retaliation or harassment.
The comprehensive controls framework established by the Company covers all activities and transactions.
Management performs periodic enterprise wide risk assessments and continuously monitors and reports progress
of action plans to address these key risks. Management also assesses business risks when formulating corporate
strategies, and tracks and reports on the implementation of strategic initiatives, business plans, budgets and
financial results regularly to the Board. Additionally, as part of our commitment to financial integrity, all relevant
senior executives regularly verify the accuracy and completeness of the quarterly financial statements and confirm
compliance with key internal controls.
Another feature of our internal control system is the execution of key control self-testing by management to
reasonably assure that internal controls are working as intended and that necessary actions have been taken to
address control weaknesses. Specific employees with controls knowledge and expertise have been embedded
across the business functions to further assist management with designing, executing, and monitoring controls. The
Group Controller oversees and coordinates the activities of these individuals who in turn help to clearly communicate
control requirements across all organizations and process owners.
To assist the Board’s Audit Committee in its oversight and monitoring activities, the Company maintains an
independent, worldwide Internal Audit function. Internal Audit provides objective assurance to the Audit Committee
that the system of internal controls is effective and operating as intended. The mission of Internal Audit is to provide
the Board and Lenovo management with:
• Independent and objective assessment of Lenovo’s system of internal controls;
• Guidance to Lenovo stakeholders for improving risk management;
• Proactive support to improve Lenovo’s control posture; and
• Independent investigations regarding certain allegations of fraud and violations of the Code and other company
policies.
72 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
To enable it to fulfill its mission, Internal Audit has unrestricted access to all corporate operations, records, data
files, computer programs, property, and personnel. To preserve the independence of the Internal Audit function, the
Head of Internal Audit reports directly to the Audit Committee on all audit matters and to the Chief Financial Officer
on administrative matters. The Head of Internal Audit is authorized to communicate directly with the Chairman of the
Board, the Audit Committee Chair and other Board members as deemed necessary. To help ensure the quality of
the Internal Audit function and provide assurance that the Internal Audit function is in conformity with the standards
of the Institute of Internal Auditors, Internal Audit has implemented a comprehensive and continuous quality
assurance program covering all Internal Audit activities. In addition, the Audit Committee periodically commissions
an independent, external quality assurance review of the Internal Audit function.
In selecting the audits to perform each year, Internal Audit performs a risk assessment using information collected
from process owners, the enterprise risk management team, senior executives, the external auditor and the Board
along with an analysis of prior audit issues and other data. Internal Audit develops an audit plan that prioritizes areas
with significant risks or deemed to be strategic in nature to the business. The audit plan is reviewed by the Audit
Committee, which is also given quarterly updates on the performance of the plan and key findings. As necessary
throughout the year, the audit plan will be modified to reflect emerging risks or changes to business plans. Ad hoc
reviews of areas of concern identified by management or the Audit Committee may also be performed. During the
last year, Internal Audit issued multiple reports covering all significant operational and financial units worldwide. In
keeping with best practices, Internal Audit regularly monitors the status of management action plans resulting from
audit findings to ensure completion and reports progress each quarter to the Audit Committee. Audit Committee
reporting also includes identified key control issues to provide the Audit Committee full visibility to the status of
Lenovo’s control environment.
Furthermore, Internal Audit is responsible for investigating certain allegations of potential violations of the Code,
or any other company policies as appropriate. Internal Audit partners with Legal, Ethics and Compliance, Human
Resources, and other subject matter experts where necessary to ensure the appropriate expertise when performing
these investigations. Management and the Audit Committee are informed of the results of these investigations, any
resulting required actions, and status updates on actions.
Inside information
Regarding procedures and internal controls for the handling and dissemination of inside information, the Company:
(i) is aware of its obligations under the SFO and the Listing Rules and the overriding principle that inside
information should be announced immediately if it is the subject of a decision;
(ii) conducts its affairs with close regard to the applicable laws and regulations prevailing in Hong Kong;
(iii) has included in the Code a strict prohibition on the unauthorized use of non-public or inside information;
(iv) has established a Continuous Disclosures Policy and implemented guidelines for monitoring, reporting and
disseminating inside information to our shareholders, investors, analysts and media. These policies and
guidelines also identify who are the Company’s authorized spokespersons and their responsibilities for
communications with stakeholders; and
(v) has communicated to all relevant staff regarding the implementation of the Continuous Disclosures Policy and
the relevant trainings are also provided.
73 2014/15 Annual Report Lenovo Group Limited
Control effectiveness
The Board, through the Audit Committee of the Company, conducts a continuous review of the effectiveness of the
internal control system operating in the Company and considers it to be adequate and effective. The review covers
all material controls, including financial, operational and compliance controls, and risk management functions. The
Board is not aware of any significant areas of concern which may affect the shareholders. The Board is satisfied that
the Company has fully complied with the code provisions on internal controls as set forth in the CG 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 to be
understood and managed properly to provide a foundation for the Company’s sustained growth. In line with the
commitment to deliver sustainable value, Lenovo has implemented an Enterprise Risk Management (ERM) framework
to proactively manage risks.
Lenovo’s ERM framework is effected by the Board and management team, and is applied in strategy setting and
across all major functions of the Company. It involves:–
• The ERM team, who is responsible to design, implement, review, and update Lenovo ERM framework.
• All Lenovo major functions, where risk ownership is established via the appointment of ERM Champions in each
function.
Risk Champions ERM Team Audit Committee Board of Directors
Identify risks
Assess
Manage
Monitor
Review
Risk registration
Report risks to
Audit Committee
Risk projects
Engage actuarial work
Recommend risk tolerance
Review risks
Raise concerns
Approve risk tolerance
Within this framework, critical and major risks of the business functions, especially in view of the changing business
environment, are identified and assessed to determine the appropriate risk mitigation plans to be implemented.
These are monitored and reviewed by each business function as well as at the group level. And at least annually,
these influential risks are highlighted to the Audit Committee, along with the status of actions taken to manage these
risks. Actuarial studies are also engaged periodically to quantify the risks, and the group risk tolerance adjusted
accordingly.
74 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
The ERM framework covers all types of risks faced by the Company, both external and internal, and has helped
enhance the Company’s efforts to provide strong support for our rapid growing business, across all markets. During
the year, there was continued strong focus at the business level to address the fast changing industry trends. At the
operational level, risk management was also strengthened to improve the robustness of our supply chain.
This framework will continue to be strengthened, so as to create a robust risk management culture which safeguards
the value of the Company.
External Auditor
Independence of external auditor
The Group’s external auditor is PricewaterhouseCoopers (“PwC”), who is remunerated mainly for its audit services
provided to the Group. The Company has adopted a policy on engagement of the external auditor for non-audit
services, under which the external auditor is required to comply with the independence requirements under the
Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants.
The external auditor may provide certain non-audit services to the Group given that these do not involve any
management or decision making functions for and on behalf of the Group; do not perform any self assessments;
and do not act in an advocacy role for the Company. The engagement of the external auditor for permitted and
approved non-audit services shall be approved by the Audit Committee if the value of such non-audit services is
equal to or above US$320,000.
During the year, PwC provided audit and insignificant non-audit services to the Group.
Remuneration of external auditor
The fees paid or payable to PwC for audit and non-audit services for the financial year ended March 31, 2015 and
the comparative figures for the financial year ended March 31, 2014 are as follows:
2015
US$mn
2014
US$mn
Audit 7.4 4.5
Non-audit 1.9 0.7
Total 9.3 5.2
75 2014/15 Annual Report Lenovo Group Limited
INVESTOR RELATIONS
Lenovo establishes an investor relations team to promote open, transparent, efficient and consistent communications
with shareholders, investors and equity analysts. The team commits to proactively providing the investment
community all necessary information, data and services in a timely manner, in order to help participants in the
investment community to better understand the Company’s strategy, operations and new development.
Communications with Investors
During the fiscal year 2014/15, the Company’s senior management team presented its annual and quarterly earnings
results through webcast and physical meetings to communicate with shareholders, investors and analysts. Through
various investor relations activities such as analyst briefings, conference calls and global investor roadshows, the
senior management team presented and communicated with investors and analysts on the Company’s strategy and
development.

During the fiscal year, in order to help the investor community better understand the Company’s strategy, the
Company also cooperated with different securities houses in organizing trips to the Company’s innovation center
and manufacturing plants in China.
In addition to regular one-on-one investor meetings, the senior management team also participated in the following
investor conferences held by major international investment banks to maintain active communications with
institutional investors around the world.
76 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Investor Conferences Attended FY2014/15
Date Conference Location
May 2014 Nomura Pan-Asia Tech Forum Hong Kong
June 2014 J.P. Morgan Global China Summit 2014 Beijing
June 2014 UBS Taiwan Conference Taipei
September 2014 J.P. Morgan 18th Annual Asia Pacific Equity Conference Boston
September 2014 Credit Suisse Asian Technology Conference Taipei
September 2014 CLSA Investor’s Forum 2014 Hong Kong
November 2014 Morgan Stanley Asia Pacific Summit Singapore
November 2014 J.P. Morgan Global TMT Conference Hong Kong
November 2014 Daiwa Investment Conference Hong Kong
December 2014 Barclays Asia TMT Conference Hong Kong
March 2015 Bank of America Merrill Lynch “Taiwan, Technology & Beyond” Conference Taipei
March 2015 Credit Suisse Asian Investment Conference Hong Kong
Market Recognitions
The Company’s continuous effort in investor relations has been well-recognized by the investment community.
Lenovo was honored the “Best CFO”, “Best IR Company”, “Best IR Professionals” and “Best Company
(Ranked #2 over 145 companies)” under the technology industry of The 2014 All-Asia Executive Team by
Institutional Investor.
In the IR Magazine Awards 2014, Lenovo was named to the Global Top 50 Investor Relations Award, and
has also been shortlisted for the Global Top Mid-Cap Investor Relations Award. At the IR Magazine’s Greater
China Awards 2014, Lenovo was also ranked as one of the Top 3 best performing company in “Grand Prix for
Best Overall Investor Relations – Large Cap”, “Best Investor Relations by a Mainland Chinese Company”,
“Best Investor Relations by Senior Management in Greater China: Mr. Wong Wai Ming” and “Best in Sector
for Technology”.
Besides, Lenovo was honored the FinanceAsia Achievement Awards – The Best China Deal (Lenovo’s US$2.3
bn acquisition of IBM’s x 86 server business) by FinanceAsia.
Lenovo’s fiscal year 2013/14 annual report which themed as “The Lenovo Experience Building a Better Way” has
also won a number of awards fully demonstrates our leading international best practices of our annual report is
being highly recognized.
77 2014/15 Annual Report Lenovo Group Limited
The report has also won the Bronze Award of “Annual Reports – Overall Presentation: Electronics” in
Mercury Excellence Awards 2014/15 and Honors Winner of “Design: Covers – Annual Reports: Artistic/
Illustrations” in Galaxy Awards 2014.
Bronze Award of “ Annual Reports
- Overall Presentation: Electronics”
Honors Winner of “Design: Covers
- Annual Reports: Artistic/Illustrations”
Index Recognition
Lenovo is currently a constituent stock of the Main Board of Hang Seng Index, MSCI China Free Index, MSCI
Information Technology Index, Hang Seng Composite Index, Hang Seng Mainland Composite Index, Hang Seng
Commerce & Industry Index, Hang Seng China-Affiliated Corporations Index, Hang Seng Corporate Sustainability
Index, Global Compact 100 and FTSE China 50 Index.The investor relations team will continue to endeavor to do
the best 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.
Market Capitalization and Public Float
As at March 31, 2015, the market capitalization of listed shares of the Company was approximately HK$125.7 billion
based on the total number of 11,108,654,724 issued shares of the Company and the closing price of HK$11.32 per
share.
The daily average number of traded shares was approximately 39.05 million shares over an approximate free float of
6,320 million shares in the fiscal year 2014/15. The highest closing price for the share was HK$12.62 per share on
September 8, 2014 and the lowest was HK$8.34 per share on May 8, 2014.
In accordance with the publicly available information and as far as the Directors are aware, the Company has
maintained a public float of more than 25% of the Company’s issued shares throughout the financial year ended
March 31, 2015 and has continued to maintain the public float as at the date of this annual report.
78 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
SHAREHOLDERS
Communication with Shareholders
The Company is committed to safeguard shareholders’ interests and believes that effective communication with
shareholders and other stakeholders is essential for enhancing investor relations and investor understanding of the
business performance and strategies of the Group. To achieve this, the Company has established the shareholders’
communication policy (the “Shareholders’ Communication Policy”) setting out various formal channels of
communication with shareholders and other stakeholders for ensuring fair disclosure and comprehensive and
transparent reporting of the Company’s performance and activities. The Nomination and Governance Committee of
the Company will review the Shareholders’ Communication Policy on a regular basis to ensure its effectiveness.
Teleconferences
and webcasts
for analysts
and media
briefings
Publication of
financial
reports,
announcements,
circulars and
press releases
Shareholders’
meetings
Investment
community
communication
e.g. roadshow,
site visits and
annual analyst
roundtable
Company’s
website
COMMUNICATION CHANNELS
WITH SHAREHOLDERS AND OTHER STAKEHOLDERS
Constructive use of the general meetings
The annual general meeting and other general meetings
of the Company are the primary forum for communication
by the Company with its shareholders and for shareholder
participation. The Board encourages shareholders to
participate in general meetings as it provides a valuable
opportunity to discuss the Company, its corporate
governance and other important matters. Notice of the
annual general meeting and related papers are sent to
shareholders at least 20 clear business days prior to the
date of the annual general meeting. The information sent
to shareholders includes a summary of the business to be
covered at the annual general meeting, where a separate
resolution is prepared for each substantive matter.
The Company arranged a question and answer session in the annual general 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.
79 2014/15 Annual Report Lenovo Group Limited
2014 Annual General Meeting
The annual general meeting of the Company held on
July 2, 2014 (the “2014 Annual General Meeting”) was
attended by, among others, the CEO, Chief Financial
Officer, chairpersons of the Audit Committee and
Compensation Committee, the Lead Independent Director,
and representatives of the external auditor PwC and other
professional consultant to answer questions raised by
shareholders at the meeting.
Separate resolutions were proposed on each issue,
including the re-election of individual retiring directors.
The matters resolved and the percentages of votes cast in
favour of the resolutions are summarised below:
Matters Being Voted Upon Percentage of Affirmative Votes
Received the audited financial statements for the year ended March 31,
2014 together with the directors’ report and independent auditor’s report
99.99%
Declaration of a final dividend for the issued shares for the year ended
March 31, 2014
99.85%
Re-election of retiring directors and authorization of the Board to fix
directors’ fees
98.35% to 99.91%
with respect to each
individual resolution
Re-appointment of PwC as auditor and authorization of the Board to fix
auditor’s remuneration
99.69%
Approval of granting the general mandate to the directors to allot, issue
and deal with the additional Company’s shares
67.49%
Approval of granting the general mandate to the directors to buy back the
Company’s shares
99.99%
Approval of authorisation to directors to extend the general mandate to
issue new shares by adding the number of shares repurchased
70.89%
Approval of the adoption of new articles of association of the Company 91.05%
All of the resolutions proposed at the 2014 Annual General Meeting were decided by way of poll voting.
Procedures for conducting the poll were explained by the Chairman at the commencement of this meeting. The
poll was conducted by Tricor Abacus Limited, the Company’s share registrar, as scrutineer and the details of
poll voting results were posted on the Company’s website (www.lenovo.com/hk/publication) and HKEx’s website
(www.hkex.com.hk) on July 2, 2014.
2015 Annual General Meeting
All shareholders are encouraged to attend and participate in the Company’s 2015 annual general meeting. Details of
the proposed resolutions for the 2015 annual general meeting are set out in the circular which will be dispatched to
the Company’s shareholders with this annual report.
80 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
Shareholders’ Rights
Procedures for convening a general meeting
Shareholder(s) holding at least 5% of the total voting right of the Company of all the shareholders having a right to
vote at general meetings may, in accordance with the requirements and procedures set out in Companies Ordinance
(Chapter 622 of the Laws of Hong Kong) (the “Companies Ordinance”), request the Board to convene a general
meeting by requisition, by stating the general nature of the business to be dealt at a general meeting and depositing
the signed requisition at the registered office of the Company for the attention of the Company Secretary in hard
copy form.
Procedures for putting forward proposals at an annual general meeting
(a) Shareholder(s) holding at least 2.5% of the total voting rights or (b) at least 50 shareholders having a right to
vote on the resolution at an annual general meeting may, in accordance with the requirements and procedures set
out in Companies Ordinance, requisition for the circulation of resolutions to be moved at annual general meetings
and circulation of statements of not more than 1,000 words with respect to the matter referred to in the proposed
resolution. Such written request must (i) state the resolution and signed by all the requisitionists in one or more
documents in like form; and (ii) be deposited in hard copy form at the registered office of the Company for the
attention of the Company Secretary not less than six weeks before the annual general meeting; or if later, the time at
which notice is given of that annual general meeting.
The detailed procedures for shareholders to convene and put forward proposals at an annual general meeting or
general meeting, including proposing a person other 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.
Constitutional documents
Rights of the shareholders are also provided under the Articles of Association. During the year, the Company has
adopted the new articles of association of the Company so as to bring the constitution of the Company in line
with provisions of the Company Ordinance which came into effect on March 3, 2014, the Listing Rules and current
corporate practices. An up to date consolidated version of the Articles of Association of the Company is available on
the Company’s website and the HKEx’s website.
81 2014/15 Annual Report Lenovo Group Limited
Shareholding Structure
Shareholding as recorded in the register of members of the Company as of March 31, 2015
According to the register of members of the Company as of March 31, 2015, there were 864 registered shareholders
of whom 97.22% 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.
Details of shareholders by size of shareholding as of March 31, 2015 are as follows:
Size of shareholding
Number of
shareholders
Percentage of
shareholders
Number of
shares held
Percentage of
the total number
of shares in issue
1-2,000 262 30.32% 373,792 0.00%
2,001-10,000 395 45.72% 2,714,000 0.03%
10,001-100,000 182 21.07% 5,693,745 0.05%
100,001-1,000,000 18 2.08% 6,542,000 0.06%
1,000,001 and above 7 0.81% 11,093,331,187 99.86%
Total 864 100.00% 11,108,654,724 100.00%
Remarks:
(i) A board lot size comprises 2,000 Shares.
(ii) 68.63% of all the issued Shares were held through HKSCC Nominees Limited.
Shareholding structure according to the interest disclosed under the Securities and Futures Ordinance as of
March 31, 2015
Shareholding Structure
as of March 31, 2015
Legend Holdings Corporation
Mr. Yang Yuanqing
Other directors
Public
30.60%
6.02%
0.18%
63.20%
Remarks:
(i) The approximate percentage of shareholding is calculated based on the aggregate long positions held in the total number of shares in issue of the
Company (other than the positions held in or pursuant to equity derivatives) by the relevant holder or group of holders as recorded in the registers
maintained under the SFO.
(ii) The approximate percentage of shareholding is calculated on the basis of 11,108,654,724 Shares of the Company in issue as of March 31, 2015.
82 Lenovo Group Limited 2014/15 Annual Report
CORPORATE GOVERNANCE REPORT
INFORMATION FOR INVESTORS
Ordinary Shares (as of 31 March 2015)
Listing Hong Kong Stock Exchange
Stock code 992
Board lot size 2,000 shares
Ordinary shares outstanding as of March 31, 2015 11,108,654,724 shares
Free float 6,320 million shares
Market capitalization as of March 31, 2015 HK$125.7 billion (Approx. US$16.1 billion)
7
8
9
10
11
12
13
14
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
(Lenovo’s share price Apr 1, 2014 to Mar 31, 2015)
American Depositary Receipts Level I Program
Ordinary share to ADR 20:1
Stock code LNVGY
Basic Earnings per Share
Basic earnings per share for the year ended March 31, 2015 2.77 U.S. cents
83 2014/15 Annual Report Lenovo Group Limited
Dividend per Share
Dividend per ordinary share for the year ended March 31, 2015
– Interim 6.0 HK cent
– Final
1
20.5 HK cents
Financial Calendar 2014/2015 (Hong Kong Time)
First Quarter Results Announcement August 14, 2014
Initial Closing of the Acquisition of IBMx86 October 1, 2014
Completed Acquisition of Motorola Mobility from Google October 30, 2014
Interim Results Announcement November 6, 2014
Third Quarter Results Announcement February 3, 2015
Final Closing of Acquisition of IBMx86 March 31, 2015
Annual Results Announcement May 21, 2015
Annual General Meeting July 2, 2015
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].
Note:
1 Subject to Shareholders’ approval at the forthcoming annual general meeting.
84 Lenovo Group Limited 2014/15 Annual Report
AUDIT COMMITTEE REPORT
Financial Reporting
• The quality and acceptability of accounting policies and practices
• The clarity of the disclosures and compliance with financial reporting standards
• Material areas in which significant judgements have been applied
Internal Audit and Controls
• Effectiveness of internal control system
• Scope of the internal audit work
• Analysis of main areas of risk
• Efficiency of internal audit function
External Audit, Engagement and Policies
• Appointment and remuneration
• Scope of the audit work
• Independence requirements
• Significant audit points
• Assessment of performance of external auditor
Others
• Tax and treasury matters
• Key litigation and legal exposure
• Compliance with ethical rules and concerns
AUDIT
COMMITTEE
Main areas of oversight
THE AUDIT COMMITTEE
The audit committee (the “Audit Committee”) of the 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 four
members, all of whom including the Audit Committee chairman are independent non-executive directors.
The members who held office during the year and up to the date of this annual report are:
Chairman Mr. Nicholas C. Allen Independent non-executive director
Member Mr. Ting Lee Sen Independent non-executive director
Member Ms. Ma Xuezheng Independent non-executive director
Member Mr. William Tudor Brown Independent non-executive director (appointed as a member on
May 22, 2014)
The chairman, Mr. Allen has appropriate professional qualifications being a member of the Institute of Chartered
Accountants in England and Wales 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”). More information on the
skills and experience of the members of Audit Committee may be found in the directors’ biographies set out on
pages 125 to 127 of this annual report.
RESPONSIBILITIES
The Audit Committee is responsible for assisting the Board in carrying out its responsibilities in relation to financial
reporting requirements, risk management and the assessment of internal controls. It also reviews the effectiveness
of the Company’s internal audit function and manages the Company’s relationship with PricewaterhouseCoopers
(“PwC”), the external auditor. It acts in an advisory capacity and makes recommendations to the Board. The main
responsibilities of the Audit Committee can be grouped into below different areas of competency:
85 2014/15 Annual Report Lenovo Group Limited
• The Audit Committee’s terms of reference which clearly deal with its membership, 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 Company at least four times a year at
quarterly intervals and is provided with sufficient resources to perform its duties.
• The Audit Committee is authorised to obtain outside legal or other independent professional advice in
performing its duties at the Company’s expense. No request was made by any member for such advice
during the year.
• Other management from the business are also invited to attend certain meetings from time to time in
order to provide insight and enhance the Audit Committee’s awareness of key issues and developments.
• Separate executive sessions were arranged for the Audit Committee to meet with external auditor, internal
auditor and General Counsel in the absence of management to discuss matters relating to any issues
arising from the audit and any other matters such persons would like to raise.
• In addition to standing agenda items, the Audit Committee may also request to discuss on particular
“deep-dive” topics.
• The chairman will report back to the Board after each of the Audit Committee meeting on its decisions or
recommendations.
KEY FEATURES
86 Lenovo Group Limited 2014/15 Annual Report
AUDIT COMMITTEE REPORT
Review of financial
reporting:
• any proposed
changes to
accounting policies
• key assumptions,
judgements and
estimates
• key litigation and
legal exposures S
T
A
N
D
I
N
G

I
T
E
M
S
S
P
E
C
I
F
I
C

I
T
E
M
S
May August / February November
Review of follow-up
items:
• minutes of previous
meeting
• reports on actions
taken or status of
follow-up items
arose from previous
meetings
Review of external
audit:
• scope of the audit
work
• significant audit
points
Review of internal
audit and controls:
• internal audit planning
methodology
• summary of
internal audit and
investigation
• non-audit services
provided by the
external auditor
• internal controls of
the Group including
key controls issues
• Interim results, including
review of:
- reports to the Audit
Committee from Chief
Financial Officer, Chief
Auditor and external
auditor
- draft interim report
- draft results
announcement
• Meeting with the external
auditor in the absence of
management
• Meeting with the Chief
Auditor and the General
Counsel in the absence of
management
• Recommendations to the
Board on interim results,
interim report and related
results announcement
• Quarterly results,
including review of:
- reports to the Audit
Committee from Chief
Financial Officer, Chief
Auditor and external
auditor
- draft results
announcement
• Review of the Ethics and
Compliance program of
the Group including the
whistleblowing arrangements
• Recommendations to the
Board on the quarterly
results and related results
announcement
• 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
- draft results
announcement
• Review of enterprise risk
management
• Review of the performance
and independence of
external auditor
• Review of annual agenda of
the Audit Committee
• Meeting with the external
auditor in the absence of
management
• Meeting with the Chief
Auditor and the General
Counsel in the absence of
management
• Recommendations to the
Board on:
- approval of the annual
results, annual report
and related results
announcement
- re-appointment of external
auditor
MAIN ACTIVITIES DURING FY2014/15
The work of the Audit Committee follows an agreed annual work plan and principally falls under three main areas:
financial reporting; internal audit and controls; the oversight of external audit and the management of the Company’s
relationship with PwC. The timetable of the Audit Committee for the fiscal year 2014/15 is set out in the below
diagram.
87 2014/15 Annual Report Lenovo Group Limited
Audit Committee
Allocation of agenda time
FY2014/15 FY2013/14
Financial reporting 44% 44%
Internal audit and controls 17% 17%
External audit matters and
engagement
16% 16%
Others (including compliance,
tax and treasury matters)
23% 23%
44%
17%
16%
23%
FINANCIAL REPORTING
With the support of the external auditor, the Audit Committee assessed whether suitable accounting policies had
been adopted, whether management had made appropriate estimates and judgements and whether disclosures
were in compliance with the financial reporting standards. The Audit Committee:
• Reviewed and recommended to the Board for approval the audited financial results of the Company and its
subsidiaries (collectively, the “Group”) for the year ended March 31, 2014 together with the related annual results
announcement and the annual report incorporating the directors’ report and corporate governance report after
discussion with the management and external auditor;
• Reviewed and recommended to the Board for approval the unaudited interim financial results of the Group for the
six months ended September 30, 2014 together with the related interim results announcement and the interim
report after discussion with the management and external auditor;

• Reviewed and recommended to the Board for approval the unaudited financial results of the Group for the three
months ended June 30, 2014 and for the nine months ended December 31, 2014 together with its respective
results announcements after discussion with the management and external auditor;
• Received reports from and met with external auditor and internal auditor to discuss the scope of their review and
findings;
• Reviewed and discussed with management on significant judgements and key assumptions together with
presentational and disclosure issues associated with accounting standards and interpretive guidance affecting
the Group’s financial statements and financial results announcements; items reviewed and discussed included
(a) the accounting treatment for acquisitions; (b) the purchase price allocation following the acquisitions; (c) the
accounting treatment on the Group’s goodwill and (d) the accounting provisions and treatments for warranty
provision, indirect tax receivables, inventories and employees benefits plans;
• Reviewed worldwide accounting and finance business transformation organization of the Group;
In the fiscal year ended March 31, 2015, the Audit Committee held four meetings, with all members in attendance
at each meeting. The attendance record of the Audit Committee’s members is set out in the Corporate Governance
Report on page 66 and the chart below shows how the Audit Committee allocated its time during the fiscal year
2014/15.
The main matters and areas that the Audit Committee reviewed and considered at its four meetings during the year
were as follows:
88 Lenovo Group Limited 2014/15 Annual Report
AUDIT COMMITTEE REPORT
INTERNAL AUDIT AND CONTROLS
To discharge the responsibility of reviewing and monitoring the effectiveness of the Group’s internal control and risk
management systems, the Audit Committee received regular reports from the Chief Auditor and if required from
management including legal and other business units. At each meeting, the Audit Committee reviewed the process
for identifying, assessing and reporting key risks and control issues of Group. The Audit Committee:
• Discussed the yearly internal audit plan of the Group to ensure adequate scope, coverage over the activities of
the Group and the resource requirements of internal audit to carry out its functions and also reviewed the results
of the internal audit work quarterly;
• Reviewed the effectiveness of the internal control system (including the adequacy of resources, staff qualification
and experience, training programmes and budget of the Group’s internal audit, accounting and financial reporting
function) operating in the Group and reviewed the corrective actions taken by the management;
• Reviewed the control issues of Group level significance and specific control issues. The Audit Committee was
particularly concerned to understand the potential impact on resources in those businesses as they integrate and
automate and standardise processes and controls;
• Reviewed the enterprise risk management of the Group including a summary of the risk management status and
the action plans for the fiscal year 2014/15; assessed the risk universe and the high risk items and reviewed the
steps taken by management to control these risks;
• Reviewed the management letter point status and reviewed the actions/processes undertaken by the Group;
EXTERNAL AUDIT
To discharge the responsibility of overseeing the Board’s relationship with the external auditor and monitoring the
external auditor’s performance, objectivity and independence and also the effectiveness of the audit process, the
Audit Committee:
• Reviewed and considered the external auditor’s statutory audit scope and results 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, 2014;
• Reviewed and considered the external auditor’s audit plan and scope for the fiscal year 2014/15;
• Reviewed the results of the audit and the reports submitted by external auditor, which summarised matters arising
from their audit on the Group during the year ended March 31, 2015, together with management’s responses
and/or comments to the findings;
• Assessed the external auditor’s independence and objectivity including a review of the non-audit services
provided by the external auditor;
• Evaluated the performance of PwC and recommended to the Board for approval of the re-appointment PwC as
external auditor of the Group for the year ended March 31, 2015;
89 2014/15 Annual Report Lenovo Group Limited
OTHERS
During the fiscal year 2014/15, the Audit Committee also:
• Received and reviewed the reports from General Counsel regarding legal matters of the Group;
• Reviewed the Ethics and Compliance program including the whistleblowing procedure of the Group for employees
to raise concerns about possible improprieties in financial reporting, internal controls or other matters, and the
enhancements to this program;
• Reviewed and discussed with the management on the major contemplated and completed transactions of the
Company;
• Reviewed the IT recovery plan and cybersecurity of the Group;
• Reviewed the tax update for the Group;
• Reviewed and approved the Audit Committee report for the fiscal year 2013/14;
• Reviewed and approved the annual agenda of the Audit Committee for the fiscal year 2014/15.
At the meeting held on May 20, 2015, the Audit Committee reviewed and recommended to the Board the approval
of the audited financial statements of the Group for the year ended March 31, 2015 together with the related annual
results announcement and this annual report incorporating the directors’ report and corporate governance report.
INTERNAL CONTROLS
The Group’s internal control system covers every activity and transaction. Within this framework, management
performs periodic enterprise wide risk assessments and continuously monitors and reports the progress of actions
plans to address the key risks. Based on the information received from management, external auditor and internal
auditor, the Audit Committee concluded that for the year ended March 31, 2015, the Group’s internal control system
was adequate and effective. Further information about the internal controls framework and control processes are set
out in the Corporate Governance Report on pages 69 to 74. The Audit Committee also confirmed that the Group
had, in the fiscal year 2014/15, satisfactorily complied with the code provisions on internal controls as set forth in
the Corporate Governance Code and Corporate Governance Report in Appendix 14 to the Listing Rules.
RECOMMENDATION FOR RE-APPOINTMENT OF THE EXTERNAL AUDITOR
The Audit Committee recognizes the importance of maintaining the independence of the external auditor.
Consistent with its terms of reference, the Audit Committee has evaluated PwC’s qualifications, performance, and
independence, including that of the lead audit partner. The Company has established a policy pursuant to which
non-audit services, provided by the external auditor must be pre-approved by the Audit Committee. This policy is
more fully described in the Corporate Governance Report on page 74. The Audit Committee has concluded that
provision of the non-audit services described in that section was compatible with maintaining the independence
of PwC. In addition, PwC has provided the Audit Committee an independence statement confirming that for the
year ended March 31, 2015 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 review and discussions referred to above, the Audit Committee was satisfied with the external auditor’s
work, its independence and objectivity, and therefore recommended the re-appointment of PwC as the Group’s
external auditor for the financial year ending March 31, 2016 for shareholders’ approval at the forthcoming annual
general meeting to be held on July 2, 2015.
90 Lenovo Group Limited 2014/15 Annual Report
AUDIT COMMITTEE REPORT
PERFORMANCE AND EFFECTIVENESS
The Board undertook an annual review of its committees’ performance and effectiveness. The review concluded
that overall the Audit Committee was effective in carrying out its duties. Details of the Board and Board committees’
review process can be found under “Board and Board Committees’ Effectiveness Review” as set out in the
Corporate Governance Report on pages 67 to 68.
PRIORITIES FOR FY2015/16
Looking ahead, the priorities of the Audit Committee for the fiscal year 2015/16 are:
• To stay focused on financial accounting and reporting, audit quality, internal controls and risk management.
• To remain vigilant on the impacts of the economic conditions on the Group.
• To focus on the integration of the Group’s control processes into new acquisitions.
Members of the Audit Committee
Mr. Nicholas C. Allen (Chairman)
Mr. Ting Lee Sen
Ms. Ma Xuezheng
Mr. William Tudor Brown
91 2014/15 Annual Report Lenovo Group Limited
COMPENSATION COMMITTEE REPORT
THE COMPENSATION COMMITTEE
The compensation committee (defined as “Committee” in this section) of the board of directors (the “Board”) of
Lenovo Group Limited (the “Company”) as at the date of this annual report is comprised of five members, all of
whom are non-executive directors of the Company (the “Non-executive Directors”) and majority of whom including
the Committee chairman are independent non-executive directors of the Company (the “Independent Non-
executive Directors”).
The members who held office during the year and up to the date of this annual report are:
Chairman Ms. Ma Xuezheng Independent Non-executive Director
Member Mr. Ting Lee Sen Independent Non-executive Director
Member Mr. William Tudor Brown Independent Non-executive Director
Member Mr. William O. Grabe Independent Non-executive Director and Lead
Independent Director
Member Mr. Zhu Linan Non-executive Director
TERMS OF REFERENCE
The Committee is responsible for considering (i) the Company’s structure and aggregate value of compensation
programs for Chairman of the Board, CEO, other Directors and senior management; and (ii) the establishment of a
formal and transparent procedure for developing policy on compensation. It is also responsible for the determination
of the compensation level and package paid to the Chairman of the Board, CEO, other Directors and senior
management and reviewing the recommendation from independent consultant on the compensation of Non-
executive Directors. The Committee shall ensure that no Director is involved in deciding his or her own individual
compensation. The Committee is authorized to obtain outside independent professional advice to support its
function.
SUMMARY OF WORK DONE
In the fiscal year ended March 31, 2015, the Committee held four meetings. The attendance record of the
Committee’s members is set out in the Corporate Governance Report on page 66.
During the year, the Committee:
Review of Company and Market Information
• Reviewed the analysis and the recommendations of its independent consultant on the FY2014/15 Non-
executive Directors’ compensation package and submitted the same to the Board for approval
• 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
• Reviewed the updates on long-term incentives (“LTI”) spend versus budget
• Reviewed the holding power and share ownership positions of both executives and Non-executive Directors
• Reviewed degree of alignment between CEO pay and performance
• Analysed Lenovo performance versus peer companies on a range of relevant financial metrics
92 Lenovo Group Limited 2014/15 Annual Report
COMPENSATION COMMITTEE REPORT
Compensation Program
• Reviewed and approved the FY2013/14 bonus payments and FY2014/15 compensation for senior management
• Reviewed and approved the FY2013/14 bonus payments and FY2014/15 compensation for Chairman of the
Board and CEO
• Provided input as to actions for integration of compensation programs for newly acquired businesses
• Discussed the design of the performance bonus and LTI programs, including potential enhancements
• Reviewed and approved the FY2015/16 LTI budget
Others
• Reviewed and approved the compensation disclosure in the FY2013/14 annual report
• Reviewed the annual agenda of the Committee
COMPENSATION POLICY
Overall Principles
Lenovo recognizes the importance of attracting and retaining top-caliber talent and is strongly committed to effective
corporate governance. Consistent with this philosophy, the Company has a formal, transparent and performance-
driven compensation policy covering its directors, senior management and general employees.
Generally, Lenovo’s compensation serves to support the Company’s business strategy, assist the attraction and
retention of top talent, reinforce the Company’s performance driven culture, and in the meanwhile reflect market
practices of other leading international IT enterprises, with particular focus on Lenovo’s closest competitors.
The Committee makes regular reviews of Lenovo’s compensation practices to ensure they reflect the overall
principles and objectives stated above.
Non-executive Directors
The Committee regularly reviews the compensation of Non-executive Directors to ensure its appropriateness
considering the Non-executive Directors’ time commitment, workload, job requirements and responsibilities versus
Lenovo’s peer companies and the broader market. Details of the current package and the review carried out in this
fiscal year are set out in the section headed “Remuneration Reviews” below.
Chairman/CEO and Senior Management
To ensure Lenovo’s compensation for the Chairman/CEO and senior management reflect the policy and principles
described above, the Committee considers a number of relevant factors in the determination of their compensation.
Such factors include: salaries and total compensation paid by peer companies, job responsibilities and scope,
employment conditions elsewhere in the Company, market practices, the Company’s business performance and
individual 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.
93 2014/15 Annual Report Lenovo Group Limited
The Chairman/CEO Pay Mix chart reflects FY2014/15 emoluments disclosed in note 11. The Senior Management
Pay Mix chart reflects average FY2014/15 emoluments including LTI that were awarded in June 2014.
Chairman/CEO Pay Mix Senior Management Pay Mix (Average)
Performance Bonus
Base
LTI
Performance Bonus
Base
LTI
7% 16%
28%
65%
44%
40%
Fixed Compensation
Fixed compensation includes base salary, allowances and benefits-in-kind (e.g. medical, dental and life insurance,
etc.). Base salary and allowances are set and reviewed annually for each position, reflecting competitive market
positioning for comparable positions, market practices, as well as the Company’s performance and individual
contribution to the business. Allowances are provided to facilitate temporary and permanent staff relocations.
Benefits-in-kind are reviewed regularly taking into consideration relevant industry and local market practices.
Performance Bonus
The Chairman/CEO and senior management are eligible to receive performance bonuses. The amounts paid
under the plan are based on the performance of the Company using select financial and non-financial metrics, its
subsidiaries, relevant performance groups and/or geographies as appropriate, as well as individual performance.
Long-Term Incentive Program (“LTI Program”)
The Company operates a LTI Program which was adopted by the Company on May 26, 2005. The purpose of the
LTI Program is to attract, retain, reward and motivate executive and non-executive directors, senior management
and selected top-performing employees of the Company and its subsidiaries.
Under the LTI Program, the Company maintains two types of equity-based compensation vehicles: (i) share
appreciation rights, and (ii) restricted share units. These vehicles are described in more detail below.
(i) Share Appreciation Rights (“SARs”)
SARs entitle the holder to receive the appreciation in value of the Company’s share price above a predetermined
level. SARs are typically subject to a vesting schedule of up to four years.
(ii) Restricted Share Units (“RSUs”)
RSU is equivalent to the value of one ordinary share of the Company. Once vested, RSU is converted to an
ordinary share, or its cash equivalent. RSUs are typically subject to a vesting schedule of up to four years.
Dividends are typically not paid on RSUs.
94 Lenovo Group Limited 2014/15 Annual Report
COMPENSATION COMMITTEE REPORT
The Company reserves the right to pay any awards under the LTI Program in cash or in ordinary shares at its
discretion. The Company has created and funded a trust to pay shares to eligible recipients. In the case of SARs,
shares are due after exercise by the recipient. In the case of RSUs, shares 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, reflecting competitive
market positioning, market practices, especially those among Lenovo’s competitors, as well as the Company’s
performance and each individual’s actual and expected contribution to the business. In certain circumstances,
awards under the LTI Program may be made to support the attraction of new hires. Award levels and mix may vary
by individual, role, and level.
Prior to the adoption of LTI 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 Scheme
are set out on pages 130 to 131 of the Directors’ Report.
Retirement Benefits
The Company operates a number of retirement schemes for its employees, including executive directors and senior
management. These schemes are reviewed regularly and are intended to deliver benefit levels that are consistent
with local market practices. Details of the programs are set out in the Directors’ Report on pages 132 to 135.
General Employees
As at March 31, 2015, the Group had a headcount of more than 60,000 worldwide.
Lenovo believes that employees are its most important strategic resource and recognizes that each employee must
be valued as an individual and treated fairly and equitably. Lenovo’s compensation philosophy supports this value
and targets compensation competitively within the relevant competitive market, with significant opportunity for
increased pay based on performance. Through the compensation program, Lenovo seeks to identify and reward
exceptional performance in ways that send clear messages about the Company’s priorities and values.
EMPLOYEE COMPENSATION PACKAGE
Performance
Bonus
Long-Term
Incentive Program
Fixed
Compensation
Similar to senior management, employees at Lenovo are eligible for fixed compensation including base salary,
allowances and benefits-in-kind. Eligible employees would also receive performance bonus based on individual and
performance group-based performance. In addition, selected top-performing employees are eligible to participate in
the LTI Program.
95 2014/15 Annual Report Lenovo Group Limited
REMUNERATION REVIEWS
The Committee regularly reviews the Company’s compensation programs to ensure alignment with its stated
objectives as well as competitiveness in the talent market. Typically, reviews for base salary, performance bonus, and
LTI awards are conducted on a yearly basis. Non-executive Directors’ fees are reviewed for alignment with market
practice on an annual basis as well.
Fiscal Year 2014-15 Non-executive Directors Review
In May 2014, the Committee engaged an independent international compensation consulting firm to conduct an
analysis of the compensation package of the Non-executive Directors to ensure its appropriateness considering
the Non-executive Directors’ time commitment, workload, job requirements and responsibilities versus Lenovo’s
peer companies and the broader market. Overall, the cash retainer and annual LTI award remained constant
at US$87,500 and US$200,000* respectively. Final recommendations as subsequently approved by the Board
(comprising executive director of the Company only) based on the delegation from shareholders of the Company are
summarized in the table below:

Compensation Element 2014/15 2013/14

Cash Retainer $87,500 USD $87,500 USD
LTI Award $200,000 USD $200,000 USD
Total Remuneration $287,500 USD $287,500 USD
* The LTI award consists of SARs and RSUs which can be settled in either Lenovo shares or their cash equivalent upon exercise. SARs and
RSUs are subject to a three-year vesting period and are otherwise subject to the same terms and conditions of the SAR and RSU schemes
described above.
Consistent with prior practice, the Chairman of the Audit Committee received an additional cash payment equal to
US$27,500 (approximately HK$214,500). The fee for the Chairman of the Compensation Committee was reviewed
in light of changing market dynamics and increased responsibilities for this role. The final recommendation, as
subsequently approved by the Board (comprising executive director of the Company only) based on the delegation
from shareholders of the Company, was to increase from US$10,500 (approximately HK$81,900) to US$20,000
(approximately HK$156,000). In addition, the Lead Independent Director received an additional cash payment equal
to US$35,000 (approximately HK$273,000) per year.
Further details of the compensation of the Non-executive Directors are included in note 11 to the financial
statements. SAR and RSU awards outstanding for Non-executive Directors as of March 31, 2015 under this scheme
are presented in the “Long-Term Incentive Schemes” section of this report.
Fiscal Year 2014-15 Chairman/CEO and Senior Management Review
Fixed Compensation
As a part of its annual review process, the Committee had reviewed and approved base pay changes for the
Chairman/CEO and senior management in May 2014, effective July 1, 2014.
To ensure the Chairman/CEO’s compensation package remains competitive with the market, base salary for the
Chairman/CEO was increased by 5% to RMB8,389,348 (approximately US$1,353,201) (Note: the translation of RMB
into USD is based on the exchange rate of RMB1.00 to USD0.1613 as at March 31, 2015 for information purposes
only) (actual pay delivered in local currency). Base salaries for senior management were increased by 0% to 53%
to account for changes in role, scope, and market pay levels and in consideration of individual performance and
contributions.
96 Lenovo Group Limited 2014/15 Annual Report
COMPENSATION COMMITTEE REPORT
Performance Bonus
Chairman/CEO and senior management’s fiscal year 2014/15 performance bonus payouts were approved in the May
2015 Committee meeting. Final bonus payouts for Chairman/CEO and senior management were determined based
on overall pre-tax income, total revenue, smart phone revenue, enterprise revenue as well as individual performance.
Overall
PTI
Individual Performance
Total
Revenue
Smart Phone
Revenue
Enterprise
Revenue
Approved performance bonus payments for the fiscal year 2014/15 will be delivered in June 2015.
LTI Program
The most recent full cycle of LTI awards including both SARs and RSUs was made in June of 2014. Selected
executives, including the Chairman/CEO and senior management also received performance-based RSU awards
based on Lenovo’s pre-tax income during the most recent fiscal year. The next cycle of LTI awards including SARs
and RSUs is expected to be in June 2015.
Remuneration of Senior Management
The remuneration of senior management fell within the following bands for the year ended March 31, 2015:
Remuneration bands
Number of senior
management
US$3,194,626 to US$3,259,075 1
US$3,259,392 to US$3,323,841 1
US$3,786,739 to US$3,851,188 1
US$4,823,850 to US$4,888,299 1
US$5,478,250 to US$5,542,699 1
US$5,838,587 to US$5,903,036 1
US$10,311,711 to US$10,376,160 1
97 2014/15 Annual Report Lenovo Group Limited
Fiscal Year 2014-15 Employees Review
Fixed Compensation
Each year management conducts a market review to ensure fixed compensation changes are aligned and
competitive with market trends. The review incorporates input from several external survey providers and formal
assessments of individual performance. Any approved market-based merit increases were effective from July 1,
2014.
Performance Bonus
Performance bonus for general employees is based on individual performance and performance of their respective
business unit or “Performance Group”. For fiscal year 2014/15, there were a total of approximately 34 different
Performance Groups within the Company each with their unique performance metrics and targets. For the fiscal year
2014/15 performance bonus, mid-year progress payment was made in December 2014, and full payment based on
annual business outcomes will be trued-up in June 2015 based on approved final bonus funding.
Bonus Target
Performance
Group
Score
Individual
Performance
Modi?er
FINAL
BONUS
PAYOUT
x x =
Performance 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).
LTI Program
For fiscal year 2014/15,18% of eligible employees (excluding executive directors) received an award under the LTI
Program. These awards were granted in June of 2014.
Emoluments of Directors for FY2014/15 and Five Highest Paid Individuals
Details of the emoluments of Directors and the five highest paid individuals are set out in note 11 to the financial
statements.
98 Lenovo Group Limited 2014/15 Annual Report
COMPENSATION COMMITTEE REPORT
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 its subsidiaries.
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 (the “New Option Scheme”) and termination of the share
option scheme that was adopted on January 18, 1994.
Pursuant to the terms of New Option Scheme, the New Option Scheme shall be valid and effective for a period of
10 years commencing on the adoption date and expiring on the tenth anniversary of the adoption date. Accordingly,
the New Option Scheme had been expired on April 26, 2012, and no further options could thereafter be granted
under the New Option Scheme. However, all remaining provisions will remain in full force and effect to govern the
exercise of all the options granted under the New Option Scheme prior to its expiration. Further details of the New
Option Scheme are set out in the Directors’ Report on pages 130 to 131.
Details of the movement of the share options of the Company during the year ended March 31, 2015 were as
follows:
Number of share options
Category of
participants
Held at
April 1,
2014
Exercised
during
the year
Lapsed
during
the year
Held at
March 31,
2015
Exercise
price
(HK$)
Grant date
(mm.dd.yyyy)
Exercise
period
(mm.dd.yyyy)
Continuous contract
employees
31,487,601 1,172,000 30,315,601 – 2.545 04.27.2004 04.27.2004 to
04.26.2014
Notes:
(1) Weighted average closing price of the listed shares of the Company immediately before the dates on which the options were exercised by
continuous contract employees was HK$9.032.
(2) No share options are granted and/or cancelled under the New Option Scheme during the year.
(3) The accounting policy adopted for the New Option Scheme is set out in the note 2(x)(iv) to the financial statements. Other details are set out in
note 29(b) to the financial statements.
99 2014/15 Annual Report Lenovo Group Limited
Long-Term Incentive Program
The movements in the share awards during the fiscal year are as follows:
Number of units
Name Award type
Fiscal
Year of
Award
Effective
price
(HK$)
As at
April 1, 2014
(unvested)
Awarded
during
the year
Vested
during
the year
Exercised
during
the year
Cancelled/
lapsed
during
the year
(Note 2)
As at
March 31, 2015
(unvested)
Total
outstanding
as at
March 31, 2015
Vesting period
(mm.dd.yyyy)
Mr. Yang Yuanqing SAR 08/09 5.88 – – – 3,939,855 1,901,999 – – 06.01.2009 – 06.01.2012
SAR 09/10 3.17 – – – 22,800,000 5,933,991 – – 05.25.2010 – 05.25.2013
SAR 09/10 5.23 – – – – – – 6,596,156 02.08.2011 – 02.08.2014
SAR 10/11 4.92 2,757,554 – 2,757,554 – – – 11,030,219 02.21.2012 – 02.21.2015
SAR 11/12 6.80 5,566,178 – 2,783,090 – – 2,783,088 11,132,358 02.13.2013 – 02.13.2016
SAR 12/13 8.22 10,544,680 – 3,514,893 – – 7,029,787 14,059,573 02.04.2014 – 02.04.2017
SAR 13/14 9.815 – 14,520,062 – – – 14,520,062 14,520,062 06.03.2015 – 06.03.2018
RSU 10/11 4.92 1,969,682 – 1,969,682 – – – – 02.21.2012 – 02.21.2015
RSU 11/12 6.80 3,339,707 – 1,669,854 – – 1,669,853 1,669,853 02.13.2013 – 02.13.2016
RSU 12/13 8.22 4,274,870 – 1,424,957 – – 2,849,913 2,849,913 02.04.2014 – 02.04.2017
RSU 12/13 7.82 2,164,779 – 2,164,779 – – – – 06.03.2014
RSU 12/13 7.82 3,216,329 – 1,072,110 – – 2,144,219 2,144,219 06.03.2014 – 06.03.2016
RSU 13/14 9.815 – 5,329,589 – – – 5,329,589 5,329,589 06.03.2015 – 06.03.2018
RSU 13/14 9.815 – 1,423,663 – – – 1,423,663 1,423,663 06.03.2015
Mr. Zhu Linan SAR 11/12 4.56 107,666 – 107,666 107,666 40,676 – – 08.19.2012 – 08.19.2014
SAR 12/13 6.36 182,877 – 91,439 182,878 96,363 91,438 91,438 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 121,361 79,232 242,723 242,723 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 4.56 51,270 – 51,270 – – – – 08.19.2012 – 08.19.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Mr. Zhao John Huan SAR 11/12 5.78 34,637 – 34,637 – – – 103,913 11.03.2012 – 11.03.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 274,316 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 5.78 16,494 – 16,494 – – – – 11.03.2012 – 11.03.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Mr. Ting Lee Sen SAR 08/09 5.88 – – – 195,980 104,571 – – 06.01.2009 – 06.01.2011
SAR 09/10 3.88 – – – – – – 263,796 08.07.2010 – 08.07.2012
SAR 09/10 4.47 – – – – – – 38,163 11.30.2010 – 11.30.2012
SAR 10/11 4.59 – – – – – – 237,001 08.20.2011 – 08.20.2013
SAR 11/12 4.56 107,666 – 107,666 – – – 323,000 08.19.2012 – 08.19.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 274,316 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 4.56 51,270 – 51,270 – – – – 08.19.2012 – 08.19.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Dr. Tian Suning SAR 08/09 5.88 – – – 195,980 96,111 – – 06.01.2009 – 06.01.2011
SAR 09/10 3.88 – – – – – – 263,796 08.07.2010 – 08.07.2012
SAR 09/10 4.47 – – – – – – 38,163 11.30.2010 – 11.30.2012
SAR 10/11 4.59 – – – – – – 237,001 08.20.2011 – 08.20.2013
SAR 11/12 4.56 107,666 – 107,666 – – – 323,000 08.19.2012 – 08.19.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 274,316 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 4.56 51,270 – 51,270 – – – – 08.19.2012 – 08.19.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
100 Lenovo Group Limited 2014/15 Annual Report
COMPENSATION COMMITTEE REPORT
Number of units
Name Award type
Fiscal
Year of
Award
Effective
price
(HK$)
As at
April 1, 2014
(unvested)
Awarded
during
the year
Vested
during
the year
Exercised
during
the year
Cancelled/
lapsed
during
the year
(Note 2)
As at
March 31, 2015
(unvested)
Total
outstanding
as at
March 31, 2015
Vesting period
(mm.dd.yyyy)
Mr. Nicholas C. Allen SAR 09/10 4.47 – – – – – – 107,343 11.30.2010 – 11.30.2012
SAR 10/11 4.59 – – – – – – 237,001 08.20.2011 – 08.20.2013
SAR 11/12 4.56 107,667 – 107,667 – – – 323,000 08.19.2012 – 08.19.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 274,316 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 4.56 51,270 – 51,270 – – – – 08.19.2012 – 08.19.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Mr. Nobuyuki Idei SAR 11/12 5.23 48,029 – 48,029 – – – 144,085 09.28.2012 – 09.28.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 274,316 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 5.23 22,872 – 22,872 – – – – 09.28.2012 – 09.28.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Mr. William O. Grabe SAR 08/09 5.88 – – – 195,980 100,908 – – 06.01.2009 – 06.01.2011
SAR 09/10 3.88 – – – – – – 263,796 08.07.2010 – 08.07.2012
SAR 09/10 4.47 – – – – – – 38,163 11.30.2010 – 11.30.2012
SAR 10/11 4.59 – – – – – – 237,001 08.20.2011 – 08.20.2013
SAR 11/12 4.56 107,667 – 107,667 – – – 323,000 08.19.2012 – 08.19.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 274,316 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 4.56 51,270 – 51,270 – – – – 08.19.2012 – 08.19.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
RSU (Deferral) 13/14 8.67 – 28,333 28,333 – – – – Note 1
RSU (Deferral) 13/14 9.185 – 24,188 24,188 – – – – Note 1
RSU (Deferral) 14/15 11.48 – 20,680 20,680 – – – – Note 1
RSU (Deferral) 14/15 10.29 – 23,071 – – – 23,071 23,071 Note 1
RSU (Deferral) 14/15 11.36 – 20,898 – – – 20,898 20,898 Note 1
Mr. William Tudor Brown SAR 12/13 8.07 35,651 – 17,825 – – 17,826 53,476 01.31.2014 – 01.31.2016
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 12/13 8.07 9,636 – 4,818 – – 4,818 4,818 01.31.2014 – 01.31.2016
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Ms. Ma Xuezheng SAR 11/12 4.56 107,666 – 107,666 – – – 107,666 08.19.2012 – 08.19.2014
SAR 12/13 6.36 182,877 – 91,439 – – 91,438 182,877 07.03.2013 – 07.03.2015
SAR 13/14 7.88 364,084 – 121,361 – – 242,723 364,084 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 275,884 – – – 275,884 275,884 08.15.2015 – 08.15.2017
RSU 11/12 4.56 51,270 – 51,270 – – – – 08.19.2012 – 08.19.2014
RSU 12/13 6.36 73,153 – 36,576 – – 36,577 36,577 07.03.2013 – 07.03.2015
RSU 13/14 7.88 98,401 – 32,800 – – 65,601 65,601 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 67,509 – – – 67,509 67,509 08.15.2015 – 08.15.2017
Mr. Yang Chih-Yuan Jerry SAR 12/13 8.63 16,395 – 8,198 – – 8,197 24,593 02.20.2014 – 20.02.2016
SAR 13/14 7.88 245,757 – 81,919 – – 163,838 245,757 08.16.2014 – 08.16.2016
SAR 14/15 11.48 – 186,221 – – – – 186,221 08.15.2015 – 08.15.2017
RSU 12/13 8.63 4,432 – 2,216 – – 2,216 2,216 02.20.2014 – 20.02.2016
RSU 13/14 7.88 66,421 – 22,140 – – 44,281 44,281 08.16.2014 – 08.16.2016
RSU 14/15 11.48 – 45,568 – – – 45,568 45,568 08.15.2015 – 08.15.2017
Note 1: Proceeds in respect of quarterly deferral grants to be paid only at point of termination from the board of directors or unforeseen emergency.
Note 2: These units were nullified in accordance with the operation of the SAR plan rules.
101 2014/15 Annual Report Lenovo Group Limited
OTHER SHAREHOLDER ORIENTED FEATURES
Share Ownership Guidelines
Lenovo maintains share ownership guidelines for selected executives, including the Chairman/CEO and senior
management. The guidelines help to align executives with shareholders and focus executives on the long-term
performance of Lenovo by requiring certain levels of share ownership. The guidelines (expressed as a multiple
of base salary) vary by role and level and are expected to be achieved within 5 years of becoming an eligible
executive. If the guideline is not achieved, executives are required to retain a minimum portion of vested shares
delivered through Lenovo’s incentive plans until the guideline is met. The guideline is then expected to be maintained
throughout the executive’s remaining employment. As of fiscal year end, 100% of executives covered by the
guidelines have achieved the targeted level of ownership. Additionally, the Non-executive Directors are subject to
similar guidelines and are in full compliance.
Claw Back Policy
Lenovo maintains a claw back policy for selected executives, including the Chairman/CEO and senior management.
The policy states that in the event of a restatement of the Company’s previously issued financial statements as
a result of errors, omission, fraud or non-compliance, the Board may, in its discretion, attempt to recover all or a
portion of compensation, with respect to any fiscal year in which the Company’s financial results are negatively
affected by such restatement.
PERFORMANCE AND EFFECTIVENESS
The Board undertook an annual review of its committees’ performance and effectiveness. 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 the Corporate Governance
Report on pages 67 to 68.
Members of the Compensation Committee
Ms. Ma Xuezheng (Chairman)
Mr. Ting Lee Sen
Mr. William Tudor Brown
Mr. William O. Grabe
Mr. Zhu Linan
102 Lenovo Group Limited 2014/15 Annual Report
CORPORATE SOCIAL RESPONSIBILITY REPORT
SUSTAINABILITY
Lenovo is committed to being a responsible and active corporate citizen, consistently working to improve its
business while contributing to the betterment of our local communities, the environment and society overall. We
practice corporate citizenship in everything we do at Lenovo, from a commitment to the highest ethical standards,
product quality and safety, and safe and healthy workplaces – to a concern for the environment in all aspects of
business, as well as efforts to donate our time and resources to philanthropy. We believe this outlook and approach
differentiates Lenovo as we work to maintain our leadership in the PC industry and expand our position in the
Enterprise and Mobile areas.
Despite a difficult worldwide PC market over the past several years, in FY 2014/15 Lenovo achieved record revenue
and record profits. The company also reached a number of significant milestones – including the acquisition of
the IBM x86 server business and Motorola Mobility. As a result, not only did we maintain our position as the
world’s number one PC company and increase our market share in this space, we also became the third largest
manufacturer of x86 servers and the number three smartphone player in the world.
While Lenovo is proud of our accomplishments in the past fiscal year, we have many challenges ahead of us and
recognize that with such significant growth in sales and market leadership comes greater expectations for social
responsibility and, in particular, increases the investment that will be required to meet our aggressive environmental
and sustainability targets.
At Lenovo, the core of our culture is ownership and commitment. We empower employees to take ownership for
what they do along with living up to their commitments. As a result, as a company, we continually strive to improve
the world not only through our innovations and business advancements, but also through the way we conduct our
business and how we treat our people, the many communities we serve and the environment around us.
Lenovo supports and implements sustainable and responsible business practices globally and is devoted to
ensuring that our products, employees, sites, and suppliers are following these commitments. These sustainable
and responsible business practices serve as a means to minimize risk, reduce costs, increase shareholder value and
support our 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
103 2014/15 Annual Report Lenovo Group Limited
In the past, Lenovo’s organization was structured around consumer and commercial PC sectors – now, as we move
forward, we’re aligning around three distinct business groups – PC & Enterprise, Mobile, and Ecosystem & Cloud
Services. This new structure will support the seamless integration of our recent acquisitions as well as provide
greater consistency across the business groups in how we fulfill our sustainability commitments. We will focus on
integrating the new cultures and sustainability programs and ensuring that any new acquisitions are quickly and fully
aligned to Lenovo’s environmental management system and our environmental objectives and targets, as well as
accounted for in our internal and external metrics.
Lenovo continued to demonstrate leadership in FY 2014/15 with sustainability and social responsibility programs
that have been recognized by the global community, including:
• Lenovo was selected as a constituent stock of the 2014 Hang Seng Corporate Sustainability Index for the fifth
year in a row, acknowledging Lenovo’s ongoing commitment to sustainability. In addition, Lenovo was the top-
rated company in the index’s Information Technology sector.
• Lenovo was selected for inclusion in the second United Nations Global Compact 100 (GC 100) – a global stock
index that combines corporate sustainability and baseline financial performance. The GC 100 marries corporate
performance on environmental and social issues with a requirement of basic profitability.
• Lenovo was selected for inclusion in the Corporate Knights 2015 Global 100 Most Sustainable Corporations in
the World (Global 100) Index.
• Lenovo was honored in December 2014 with the Corporate Governance Excellence Award (Hang Seng Index
Constituent Companies Category) and Sustainability Excellence Award, jointly conferred by the Chamber of Hong
Kong Listed Companies and the Centre for Corporate Governance and Financial Policy at Hong Kong Baptist
University.
• Lenovo is rated as “Prime” by oekom research AG, an independent research institute specializing in corporate
responsibility assessments. The oekom corporate rating is based on a comprehensive set of criteria for ethical
assessment of companies.
• Lenovo achieved a 2014 CDP disclosure score of 98 (out of a possible 100) and a ranking of performance band B.
Lenovo received honors from CDP over the past year, including being listed in the Climate Disclosure Leadership
Index as one of the highest-ranked companies as well as being awarded a “Sustainability Leadership Model
Enterprise Award” in China. For further details on these accomplishments and Lenovo’s climate change initiatives,
please see www.lenovo.com/climate.
• In January 2015, Lenovo was again listed on the U.S Environmental Protection Agency’s Top 30 Tech & Telecom
list of the largest green power purchasers.
• Lenovo continues to be recognized in the area of occupational health and safety management. In June 2014, the
Lenovo Information Products Company (LIPC) Shenzhen location received its fourth consecutive “Work Safety
Management Outstanding Contribution Unit” award from the Futian District, Shenzhen, China. Lenovo’s United
States Fulfillment Center (USFC) in Whitsett, North Carolina, received its sixth consecutive “Gold Award” in May
2014 and Lenovo’s Morrisville, North Carolina, headquarters received its ninth “Gold Award” in June 2014 from
the North Carolina Department of Labor.
104 Lenovo Group Limited 2014/15 Annual Report
CORPORATE SOCIAL RESPONSIBILITY REPORT
• Lenovo continues to make investments in our supply chain and is actively engaged in due diligence efforts to
track the use of materials sourced from conflict regions – known as conflict minerals – and challenge our suppliers
to set and meet climate change reduction targets, in addition to meeting our extensive auditing and reporting
requirements.
Lenovo is a signatory to and member of the UN Global Compact and fully embraces its policies and principles. The
UN Global Compact is a public-private strategic policy initiative for businesses committed to aligning operations
and strategies with ten universally accepted principles in the area of human rights, labor, environment and anti-
corruption.
Our Corporate Sustainability Policy, signed and endorsed by Chairman and CEO Yuanqing Yang, outlines the
social, environmental and economic principles against which the company operates. The policy is available athttp://www.lenovo.com/sustainability.
Lenovo’s sustainability commitments and FY 2014/15 highlights are summarized below. More extensive information
on sustainability can be found athttp://www.lenovo.com/csr or in Lenovo’s annual Global Sustainability Report
which is available athttp://www.lenovo.com/sustainability.
Ethics and Compliance at Lenovo
Lenovo promotes an organizational culture that encourages the highest ethical standards of business conduct and
a commitment to compliance with all laws wherever we operate. Lenovo’s Ethics and Compliance Office works in
partnership with our business units across the globe to ensure they operate within the letter and spirit of our legal
and ethical obligations. The Office plays a critical role in providing the resources and information employees need to
make well-informed choices and decisions.
An integral part of our ethics and compliance program is Lenovo’s Code of Conduct that applies to all
employees worldwide. The Code describes our commitment to conduct business with integrity and establishes
clear expectations regarding compliance and holding employees accountable for their behavior. The Code
is available in seven languages and is accessible on our website along with other corporate policies athttp://www.lenovo.com/CSRPolicies. Each newly hired Lenovo employee receives training and information about
our ethics and compliance program, and all employees are required to participate in subsequent mandatory training
sessions held on a regular basis.
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 of legal or regulatory requirements
• Substantial and specific danger to health and safety, or
• Violation of Lenovo’s corporate policies and guidelines, in particular our Code of Conduct.
105 2014/15 Annual Report Lenovo Group Limited
Lenovo provides formal, confidential ways to report potential violations of law, company policy or the Code of
Conduct, including the LenovoLine, a confidential reporting system available 24 hours-a-day, seven days-a-week.
In locations where it is legal to do so, employees may anonymously report concerns about business practices. All
reported concerns are addressed and tracked to resolution.
Lenovo has a clear non-retaliation policy, and will not tolerate harassment, retaliation, discrimination or other adverse
action against an employee who:
• Makes a 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.
On October 29, 2014, Lenovo finalized its purchase of Motorola Mobility from Google, accelerating its established
strategy to become a global leader across the full spectrum of smartphones and connected devices and welcoming
nearly 3,500 new colleagues around the world. Lenovo operates Motorola Mobility as a wholly-owned subsidiary
within the Lenovo Group of companies. For a transitional period, Motorola Mobility will continue to administer its
own ethics and compliance programs, including its own reporting line and its own Code of Conduct, available online
at motorolamobility.ethicspoint.com. During calendar year 2015, however, the entities intend to coordinate and
consolidate their Codes of Conduct, consistent with the principles described above.
Employee Health and Welfare
Lenovo’s Occupational Health and Safety (OHS) organization is committed to ensuring the implementation of
an effective health and safety management system that includes programs that are designed to meet or exceed
regulatory compliance.
We believe that workplace injuries and illnesses are preventable, and as a result our incident rate continues to
be consistently below the industry average. Lenovo’s standardized occupational health and safety programs are
designed to meet or exceed regulatory compliance. Our efforts have resulted in a significant decline in our global
manufacturing incident rates over the past several years. Also notable, during this reporting period, there were
no significant accidents involving Lenovo employees, fires, property damage or regulatory violation at any of our
locations in the over 60 countries in which we do business.
All our global manufacturing locations are OHSAS 18001 certified by Bureau Veritas. In addition all our manufacturing
locations go through a rigorous internal audit process to ensure a high level of regulatory and OHS compliance. All
manufacturing locations in China are certified to meet requirements of the national Work Safety Standardization law.
Lastly, we continue to monitor the performance of our key worldwide contract manufacturing locations to ensure a
high level of regulatory compliance and standard of care.
106 Lenovo Group Limited 2014/15 Annual Report
CORPORATE SOCIAL RESPONSIBILITY REPORT
Lenovo is proud of our occupational health and safety performance which has been recognized with annual awards
received at the local and national governmental levels. Here are just a few examples:
• The Monterrey, Mexico manufacturing facility is currently certified by the Mexico State Secretary of Labor with the
Program of Self-Assessment on Safety and Occupational Health in the Workplace.
• In May 2014, all Lenovo manufacturing locations in China attained the “Work Safety Standardization” certification
by their respective local governments.
• In May and June 2014, respectively, the Lenovo United States Fulfillment Center (USFC) in Whitsett, NC, received
its sixth consecutive “Gold Award” and Lenovo’s Morrisville, NC, headquarters received its ninth consecutive “Gold
Award” from the North Carolina Department of Labor for low incident rates reported.
• In June 2014, Lenovo LIPC received its fourth consecutive “Work Safety Management Outstanding Contribution
Unit” award from the Futian Free Trade Zone located in Shenzhen, China.
• In March 2015, Lenovo Pondicherry, India manufacturing received the Environmental Health and Safety (EHS)
“3-Star” Award after participating in the EHS 2014 competition among various industries in the Southern region
organized by the Confederation of Indian Industry (CII).
Diversity
Lenovo views diversity as a key competitive advantage for the company and believes that leveraging our cultural,
national and regional differences enables us to better understand our customers and address their needs. We
believe that our diversity sets us apart and differentiates us from our competitors. Having a workforce composed of
people from various backgrounds and cultures enables us to capitalize on diverse perspectives in the development,
manufacturing, and marketing of our products.
Diversity contributes to the overall business strategy of Lenovo and is therefore a key ingredient to profitability.
Employees have an opportunity to leverage their experiences and knowledge to grow their careers. We are uniquely
positioned to help our company successfully maneuver this new global reality because we have a strong foundation
for advocating for and advancing inclusion in our workplace. Learning to harness diversity as a strength is an
essential competency and skill that our current and future leaders can develop and leverage to help make our
business more successful on a global scale.
We passionately believe that by leveraging both the similarities and differences of our diverse workforce we are
uniquely able to meet the needs of our diverse customer set, attract, develop and retain top talent, and create a
workplace where employees are inspired to achieve their greatest potential.
In 2010 Lenovo launched “The Lenovo Way.” It is embodied in the statement: “We do what we say and we own
what we do.” It unites our diverse workforce by aligning around the same goals and strategy to keep us winning in
the marketplace.
107 2014/15 Annual Report Lenovo Group Limited
In the spirit of the Lenovo Way culture, we have implemented a number of successful programs and initiatives, such
as our global Women in Lenovo Leadership (WILL) program, which focuses on establishing programs and initiatives
to meet the development needs of women. Lenovo has also established a scholarship in honor of one of our first
female senior vice presidents. This scholarship is given to a young woman entering a U.S. college or university and
majoring in engineering or computer science studies. In addition, globally Lenovo offers a scholarship program for
children of employees, thus investing in our workforce and future.
Lenovo also sees mutual value in promoting diversity in our business relationships. To read more about our Supplier
Diversity program, please see the Global Supply Chain section.
Lenovo’s Commitment to Diversity and Nondiscrimination is accessible on our website along with other corporate
policies athttp://www.lenovo.com/CSRPolicies.
Product Quality and Safety
Lenovo has a well-earned industry reputation for delivering superior quality products and is committed to ensuring
that its products are safe throughout their life cycle, including design, development, manufacturing, transportation,
installation, use, service, and recycling. This enables Lenovo to have deep insight into opportunities to minimize risk
and cost, as well as identifying new opportunities for enhancing and increasing product quality and safety to meet
the preferences of our customers.
Corporate strategies, policies and guidelines have been designed to support Lenovo’s commitment to product
quality and safety. Lenovo strives to ensure that our products meet all applicable legal requirements, voluntary safety
requirements to which we subscribe, and best practices in ergonomics wherever our products are sold.
Lenovo’s global Quality Management System, which has earned ISO 9001 certification, aims to achieve customer
satisfaction and deliver superior products, solutions, and services, while meeting customer requirements. Lenovo’s
Quality Policy forms the foundation of our Quality Management System. Lenovo’s Quality Policy is available athttp://www.lenovo.com/quality.
The Environment
Lenovo is committed to accountability and leadership in environmental affairs and continues to build upon a history
of environmental achievement. This commitment is documented in Lenovo’s corporate environmental affairs policy
which applies to all operations and forms the foundation of Lenovo’s Environmental Management System (EMS).
The EMS establishes the framework through which Lenovo manages all facets of its environmental aspects and
drives continuous improvement in its environmental performance. Lenovo’s EMS is ISO 14001 certified and covers
the company’s global manufacturing, research, product design and development activities for personal computers,
tablets, smartphones and related products, servers, and digital 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.
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ISO 14001 Registered Manufacturing & Development Facilities
Location Primary Function(s)
No. 6 Chuangye Road, Beijing, China Manufacturing – Administration
No.2 Building, No. 8 Chuangye Road, Beijing, China Manufacturing – Administration
No. 32 Chuangye Middle Road, Beijing, China Manufacturing – Administration
No. 6 Shangdi West Road, Beijing, China Development
Lenovo Science & Technology Park, Huiyang, China Manufacturing
No. 316 Boulevard Escobedo, Apodaca, NL, Mexico Manufacturing
1009 Think Place, Morrisville, NC, U.S. Development – Administration
No. 68 Building, 199 Fenju Road, Shanghai, China Manufacturing
No. 2 Building, 955 Shangfeng Road, Shanghai, China Manufacturing
696 Songtao Road, Shanghai, China Development
No. 88 Tianjian Road, Chengdu, China Manufacturing
ISH2 and Shuncang Buildings, Shenzhen, China Manufacturing
Nanyi Road, Shenzhen, China Development
RS No. 19, Thavalakuppam Village, Pondicherry, India Manufacturing
6540 Franz Warner Parkway, Whitsett, NC, U.S. Manufacturing and Fulfillment Center
3-6-1 Minatomirai, Nishi-ku, Yokohama, Japan Development
No. 999 Qisan North 2nd Road, Xiamen, China Manufacturing
No. 627 Wuyi Road, Dalian City, China Administration
3188-1 Yungu Road, Hefei, Anhui Province, China Manufacturing, Development
No. 19 Gaoxin 4th Road Wuhan,Hubei, China Manufacturing, Development
Rua Matrinxã, 300-A, Manaus, AM, Brazil Manufacturing
Rua Matrinxã, 180-B, Manaus, AM, Brazil Manufacturing
Am Zehnthof 77, Essen, Germany, 45307 Development
The Lenovo Environmental Affairs Policy (www.lenovo.com/environment) provides corporate direction regarding
how Lenovo manages its environmental impacts. The policy shapes our global environmental management system,
the procedures and practices that make up that system and related objectives and targets. The importance of the
direction established by this document is never more evident than in times of change. During FY 2014/15 growth
and change continued apace as Lenovo maintained its position as the world’s largest PC company and expanded its
market share in the server and mobile device markets with the purchase of IBM’s x86 server business and Motorola
Mobility.
Lenovo’s growth continues to provide significant challenges in managing the integration and alignment of
new employees, partnerships, acquisitions, business units and facilities into the Lenovo Global Environmental
Management System. During this major growth period we maintained focus on the key commitments of our
Environmental Policy: working to ensure compliance, acting to prevent pollution and reduce our environmental
impact, striving to develop products with industry-leading environmental attributes and pushing to continually
improve our global environmental performance.
109 2014/15 Annual Report Lenovo Group Limited
Environmental compliance management during rapid growth can also be a challenge. FY 2014/15 saw increases
in the number and types of products offered by Lenovo and the number of countries in which we offer them. At
the same time, the year brought new regulatory and voluntary compliance commitments. Lenovo’s compliance
organization is supported by a global network of internal environmental focal points and external partners.
We also support our commitment to compliance through internal and external audits of our own facilities and
those of our suppliers. The environmental and health and safety management systems at both our manufacturing
and development sites are subjected to internal audits at least annually. These sites also undergo third-party
environmental and health and safety audits at least once every three years, with most sites being audited twice every
three years.
Lenovo also acts to ensure compliance in its supply chain, with Lenovo personnel performing environmental audits at
the sites of our largest suppliers and those organizations whose services potentially present significant environmental
risks. We also require that our suppliers comply with the Electronics Industry Code of Conduct (EICC) and verify this
compliance through third-party audits. During FY 2014/15 Lenovo Tier 1 suppliers performed about 70 self-audits,
covering 60 percent of Lenovo’s procurement spend. In FY 2014/15 Lenovo acquired IBM’s x86 server business
and the Motorola Mobility business, and we will work this coming fiscal year to integrate supply chain programs and
operations. Both companies have robust incoming supplier sustainability programs in place and approximately 50
percent of their respective procurement spend was common with Lenovo suppliers already in our programs.
Environmental and sustainability risks are included in Lenovo’s official risk management process. The risk
management evaluation template includes environmental risk categories such as environmental 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.
Lenovo’s Climate Change Policy (2010) states that Lenovo is committed to reducing the global carbon footprint of
all of its business activities and accepts the findings of current climate science. The policy was updated in February
2015 to support the conclusions as presented by the Fifth Assessment Report (AR5) of the Intergovernmental Panel
on Climate Change (IPCC) – “Climate Change 2014.” Lenovo concurs with the findings and agrees that specific
actions are needed to stabilize atmospheric GHG levels and hold global average temperatures to acceptable
increases. The actions supported by Lenovo include reducing global emissions by 40-to-70 percent between 2010
and 2050 and attaining zero emissions by 2100. These actions align with the global scientific community’s generally
accepted recommendations for maintaining global warming below two degrees Celsius over the 21st century relative
to pre-industrial levels.
Lenovo continues to work internally and externally to reduce the environmental impact of its operations. The positive
results of these efforts were demonstrated by the achievement of the first milestone of our ten-year greenhouse
gas (GHG) reduction commitment at the beginning of FY 2011/12. As of March 31, 2011, we reduced our absolute
Scope 2 greenhouse gas emissions relative to FY2009/10 by 10.4 percent. We also met our goal of either offsetting
or eliminating all Scope 1 emissions, reducing our actual emissions by greater than 16.5 percent and purchasing
offsets to carbon-balance the remainder.
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Our second milestone to reduce Scope 2 emissions by 13 percent relative to FY 2009/10 and offset or eliminate
all Scope 1 emissions was achieved on target by March 31, 2013. We accomplished this by implementing energy
efficiency projects, installing a solar array at the manufacturing plant in Shanghai, China and purchasing Renewable
Energy Credits (RECs) and carbon offsets.
In FY 2014/15, Lenovo continued our progress in reducing our greenhouse gas emissions. We achieved a 1
percent reduction in global Scope 2 GHG emissions relative to the previous fiscal year and carbon balanced 100
percent of Scope 1 GHG emissions. We implemented several energy efficiency projects (lighting improvements in
Beijing, Shanghai, Wuhan, Huiyang, Chengdu and Hefei China; AC upgrades and improvements in Chengdu, Hefei
and Shanghai, China; low energy lighting in Medion, Germany; light sensor installation in Morrisville, NC, USA;
and equipment efficiency improvements in Huiyang and Shenzhen, China); used renewable energy (solar array in
Shanghai, China; hot water solar system in Huiyang, China and solar lamps in Beijing, China) and purchased carbon
offsets (80,000 MT CO
2
e) from carbon offsets projects located in China and RECs from renewable projects in the
United States (15,000 MWh).
Since October 2013, Lenovo’s Beijing sites have been participating in an emissions trading system in Beijing,
China. Lenovo is closely monitoring other provinces where this trading program has been imposed since our sites
in Shanghai, Shenzhen, Huiyang and Wuhan could be impacted in the future. Lenovo is working on establishing a
comprehensive energy system for its Beijing sites to minimize the amount of carbon emissions allowances we must
purchase.
Detailed performance relative to FY 2014/15 energy and GHG emissions targets will be available in the Sustainability
Report later this year.
For additional details on Lenovo’s GHG emissions inventory and management, see Lenovo’s Sustainability Reports
and Climate Change website athttp://www.lenovo.com/climate.
While we have demonstrated good progress during the early stages of our ten-year GHG reduction commitment,
we are keenly aware there is still much to be done. In light of our impressive growth, we realize that accomplishing
our longer term goals will be a significant challenge. With a continued focus on energy efficiency, Lenovo’s Global
Energy Management teams continue to work to identify and implement energy reduction, renewable energy and
carbon offset opportunities that provide the most cost-effective path to meeting our targets.
In May 2014, Lenovo’s Board of Directors and Executive Committee (LEC) acted to increase Lenovo’s climate
change reduction targets from a 20 percent reduction goal relative to FY 2009/10 to a 40 percent reduction goal by
FY 2020/21. Since then we have been evaluating this increased reduction goal and investigating combinations of
investment in onsite renewable generation, energy efficiency and renewable energy credits or offsets that will align
with Lenovo’s business strategy and goals.
Lenovo continued efforts to improve its ability to quantify, track, and mitigate the impacts of its supply chain and
products. During FY 2014/15 we drove efforts on supplier environmental data transparency, reduction and reporting
in EICC tools. Lenovo’s suppliers have achieved overall greenhouse gas emissions reductions even though Lenovo’s
business volumes are growing significantly annually, and we have a very high level of suppliers with public reduction
goals and third-party verification. Lenovo will establish formal GHG quantitative reduction goals for suppliers in FY
2015/16. For water usage and waste generation, we have established baselines on quantities and public reduction
goals.
111 2014/15 Annual Report Lenovo Group Limited
Lenovo established a product transportation carbon emissions baseline for FY 2011/12 and since then has been
working on improving data collection processes and increasing carriers’ coverage in the baseline through the use of
a web-based carbon dashboard. Lenovo has become a founding board member of the Green Freight Asia Network
(GFA) for promoting sustainable logistics practices. GFA was officially launched in August 2013. Please visit www.
greenfreightasia.org for further information.
We continue our engagement in the development of standards and tools to accurately quantify the lifetime impact
of our products. Our China Standards and Compliance Group is engaged in the Chinese government’s development
of a product category rule for establishing the product carbon footprint for information and communications
technologies (ICT) products.
Lenovo has also been actively involved in the following carbon footprint projects:
• Product Carbon Footprint China Standard
• China ICT Product Life-Cycle Assessment Data Service Platform
• IEC Technical Report GHG Quantification Methodology for Computers
• China ICT Supporting Low Carbon Economy, and
• EICC Product Carbon Footprint Data Allocation Algorithm Development.
Due to its strong local presence in China, Lenovo is leading its advocacy efforts in China Energy and Carbon
Standard and policy in the IT products field, and is active in the following energy efficiency and carbon-related
workgroups, associations, and initiatives: China PCF (PCR) Standard Working Group, China Energy Label Standard
and Technical Committee, China Energy Saving Work Association of Chinese Institute of Electronics, China ePCF
Platform Union and China Energy Conservation Program.
Lenovo worked with HP, Seagate, Cisco and MIT on a new method for calculating product carbon footprint
(PCF). The goal of the project was to develop a product-specific allocation methodology that links facility-wide
environmental data to the specific product types being made within that particular facility. Please read the results of
this project in the paper Standardizing Methods for Performing Allocation of Supplier Carbon Data for IT Products.
Lenovo continues to work with other members of the ICT industry, academia and the U.S. Environmental Protection
Agency in the Product Attribute Impact Algorithm (PAIA) project. The project’s goal is to develop a methodology
and tools to simplify and expedite identifying the product carbon footprint for PCs. With the release of tools for
notebooks, desktops and monitors, Lenovo published product carbon footprint values for a typical notebook,
desktop and visuals product during May 2013. Lenovo also participated in the next phase of the PAIA project, which
extended the PAIA methodology to two additional product classes: mobile computer devices (e.g., tablets) and all-
in-one computers.
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Lenovo is committed to disclosing its climate change management practices, results of the evaluation of our
climate change risks and opportunities and our GHG emissions inventory through the CDP public reporting system.
Lenovo’s response to the 2014 CDP Climate Change and Supply Chain Questionnaires achieved a disclosure score
of 98 and performance score of band B. Lenovo was included in the leaders’ category for disclosure and is listed in
the Climate Disclosure Leadership Index (CDLI) as one of the highest ranked companies. Lenovo’s CDP reports are
publicly available athttp://www.cdproject.net.
Lenovo participated in the CDP China Report launch event in Beijing in October 2014 where Lenovo received a
Sustainability Leadership Model Enterprise Award.
Lenovo’s efforts in addressing climate change have been featured in several reports:
• Global Corporate Use of Carbon Pricing – Disclosures to Investors – Sep 2014
• ICT Sector’s Role in Climate Change Mitigation – Sep 2014
• CDP China 100 Climate Change Report 2014 – Policy Push and Market Pull Promoting Low-Carbon Development
– Oct 2014
• Hong Kong and SE Climate Change Report 2014 – Asia ex-Japan Report – Nov 2014
• We Mean Business – The Climate Has Changed – Nov 2014
For further details on these accomplishments and Lenovo’s climate change initiatives, please see
www.lenovo.com/climate.
113 2014/15 Annual Report Lenovo Group Limited
Lenovo is committed to reducing and recycling waste and conserving water. Lenovo tracks waste intensity and
works to identify and implement opportunities to reduce waste quantities. Non-hazardous waste generation
increased over the past five years due to organic growth in production and employee population and structural
changes in terms of forming joint ventures and acquiring other businesses. However, our targeted recycling rate
has been achieved each year. Lenovo generates only minimal amounts of hazardous waste and strives to reduce
this amount year-to-year. From FY 2014/15 we started monitoring and reporting global landfill avoidance rates.
Lenovo tracks and monitors water consumption in its operations even though it does not have any wet processes;
water is used only for human consumption and sanitation. Lenovo is evaluating 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.
Performance relative to FY 2014/15 waste and water targets will be available in the Sustainability Report later in the
year.
For additional details on Lenovo’s waste and water inventory, seehttp://www.lenovo.com/waterandwaste.
Lenovo’s energy and GHG emissions data for the last five years (beginning with the baseline year FY
2009/10) was third-party verified by Bureau Veritas. In addition, Lenovo’s waste and water data for FY
2013/14 was third-party verified. Please see verification statements athttp://www.lenovo.com/climate andhttp://www.lenovo.com/waterandwaste. Lenovo plans to verify FY 2014/15 GHG, waste and water data to a
reasonable level of assurance.
Further details on our strategy, objectives, targets and environmental performance are available athttp://www.lenovo.com/environment. Detailed results regarding our environmental performance are published in our
annual Sustainability Report available athttp://www.lenovo.com/sustainability.
Lenovo’s Environmentally Conscious Products program focused in FY 2014/15 on the following key areas:
• Product Materials, including the use of post-consumer recycled content
• Product Energy, including a focus on product carbon footprint, and
• Product Packaging, including size reduction and use of environmentally-preferable materials
In the product materials area, Lenovo has made continuous progress in the use of post-consumer recycled content
(PCC) plastics. By working with our suppliers to develop and qualify engineered grades of PCC plastics, Lenovo
has used more than 157 million pounds of recycled content plastics with over 69 million net PCC plastics since
beginning these efforts.
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Lenovo Post Consumer Content & Post Industrial Content Usage over Time
"05-'07
"05-'08
"05-'09
"05-'10
"05-'11
"05-'12
"05-'13
"05-'14
Gross lbs. Net PCC lbs. Net PIC lbs.
Lenovo PCC & PIC Usage
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
In using recycled plastics, Lenovo supports its objective of reducing the carbon footprint of its products and has
avoided the emission of greater than 106 million pounds of CO
2
. In addition to supporting Lenovo’s internal goals, by
driving such high-volume demand for engineering-grade PCC plastics, Lenovo is helping to build the infrastructure
and demand for recycled plastic. Consistent with Lenovo’s commitment to continuous improvement, PCC use is
included in Lenovo’s annual EMS objectives and targets.
Increasing the energy efficiency and reducing the carbon footprint of Lenovo’s products is another ongoing focus
area. Lenovo offers a full complement of ENERGY STAR
®
qualified notebooks, desktops, workstations, monitors,
and servers. In 2014, ENERGY STAR
®
availability within Lenovo’s current offerings included:
• Approximately 98 percent of all notebook platforms
1
• Approximately 82 percent of all desktop platforms
1
• Approximately 71 percent of all workstation platforms
1,2
• Approximately 94 percent of all server platforms
2
• Approximately 97 percent of all monitors
1,3
1
Product platforms include Think and Lenovo product lines.
2
For pre-configured systems.
3
Note: Only one monitor of the 29 Lenovo sells is not ENERGY STAR qualified.
115 2014/15 Annual Report Lenovo Group Limited
In addition, many available notebook and desktop configurations and qualified monitors exceed the current ENERGY
STAR
®
energy efficiency criteria by 10 percent to more than 25 percent.
Lenovo offers product take-back and recycling programs for both consumer and business customers worldwide.
Lenovo offers these programs in every country in which it does 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.
GLOBAL SUPPLY CHAIN
Lenovo is committed to driving sustainable activities through its internal operations as well as in its supply chain.
As a long standing member of the Electronics Industry Citizenship Coalition (EICC), Lenovo is contributing to the
development and execution of global policies and programs to improve supplier compliance across a broad range of
sustainability and social responsibility criteria.
Lenovo’s supply chain organization implements its own set of programs in support of corporate-wide sustainability
initiatives. These include efforts to proactively address concerns about labor, environmental impacts, greenhouse
gases, water usage, generation of waste and conflict minerals.
First and foremost, suppliers are contractually required through purchase order terms and conditions and other
formal agreements to comply with all legal, regulatory and various additional sustainability requirements. They are
required to implement and maintain documented quality and environmental management systems that meet ISO
9001/14001 requirements, to follow all laws regarding environmental and workplace conditions, to comply with
restricted materials requirements and to provide the necessary declarations.
However to strengthen and to extend those requirements, most suppliers are also contractually required, via a
specific and separate formal agreement, to comply with the EICC Code of Conduct, to reduce environmental
impacts and to conduct specific due diligence activities for responsible sourcing. To address and focus resources
on the greatest risks, Lenovo strives to ensure at least 95 percent of its procurement spend is covered by these
contracts and activities. Approximately 77 percent of Lenovo procurement spend is from suppliers who are EICC
members, and many of the suppliers also have formal certifications for Occupational Health & Safety (OHS 18001)
and Social Accountability (SA8000) standards.
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The contract stipulates that suppliers not just comply with the code, but that they:
• Conduct annual self-assessments with EICC questionnaires and reporting tools
• Receive comprehensive and detailed independent third-party audits at least every 24 months with EICC approved
auditors
• Provide Lenovo the audit reports and provide accompanying corrective action plans
• Require that their primary suppliers also comply with the Code and receive EICC audits as well
• Have active and continual improvement programs to quantify greenhouse gas emissions, water usage and waste
generation and drive reductions
• Have public policies and programs to reasonably assure that their products do not contain conflict minerals
In FY 2014/15, about 70 suppliers representing approximately 60 percent of our overall procurement spend received
EICC audits. Performance in the audits driven by Lenovo averaged better that 90 percent overall compliance. Due
to our efforts there have been very limited occurrences of negative public reporting. However, labor issues continue
to be the main problem area for supplier compliance and Lenovo intends to implement initiatives that will provide
greater transparency and drive continual improvement.
Lenovo also requires suppliers to report environmental data relating to greenhouse gas (GHG) emissions, water
usage and waste generation. In FY 2014/15, suppliers representing over 90 percent of our procurement spend
reported their emissions. Through focus on reduction goals, supplier total emissions were down 4.5 percent over
the past three years while Lenovo’s business volumes have grown over 50 percent. We also improved supplier third
party verification so that 93 percent of our procurement spend is covered. Finally, we established water and waste
baselines and 91 percent and 77 percent of our procurement spend suppliers, respectively, had public reduction
goals.
Lenovo made significant progress in FY 2014/15 with our conflict minerals program. To comply with the U.S. SEC
Dodd-Frank ruling in the first reporting year, Lenovo signed the Specialized Disclosure. We have publicly disclosed
our Conflict Minerals Report and included the list of smelters in our supply chain. We also improved our conflict
minerals policy to go beyond EICC Code of Conduct requirements and comply with key stakeholder concerns. While
Lenovo and many of its suppliers are not traded on a U.S. stock exchange and therefore not subject to the Dodd-
Frank ruling, we are nevertheless conducting and requiring due diligence activities system-wide. Please see the EICC
Conflict Free Sourcing Initiative for further informationhttp://www.conflictfreesourcing.org/.
117 2014/15 Annual Report Lenovo Group Limited
For our FY 2014/15 due diligence cycle, we conducted a full country-of-origin inquiry utilizing the EICC Conflict
Minerals Reporting Template (CMRT) and employed the EICC Conflict-Free Smelter Program and other initiatives to
validate identified smelters as conflict-free compliant. We determined that 80 percent of surveyed suppliers have
conflict minerals policies and require their own suppliers to conduct CMRT reporting. Also, 72 percent of suppliers
indicated they have identified all smelters in their supply chain. We confirmed that 54 percent of reported smelters
have been certified as conflict free by the EICC or by EICC-approved alliance programs, and approximately 21
percent of the remaining smelters are formally in the process of becoming conflict free compliant. Over 96 percent
of the smelters used by Lenovo suppliers are Tantalum-conflict free. We anticipate significant improvement annually
towards becoming fully conflict free.
In FY 2014/15, Lenovo acquired the IBM x86 server and Motorola Mobility businesses and we will be actively
working this coming fiscal year to integrate programs and operations. Both companies have robust incoming
supplier sustainability programs and approximately 50 percent of their respective procurement spend was common
with Lenovo suppliers already in our programs.
Lenovo sees mutual value in promoting diversity in our business relationships. It is a natural part of our business
strategy to create a diverse and competitive supplier base and to strengthen economic development in historically
underutilized communities. Through its Supplier Diversity Program, Lenovo is committed to maximizing the inclusion
of diverse suppliers through identifying opportunities, developing and incubating relationships, creating processes
that encourage diverse supplier integration, and building on our already strong culture of inclusion – The Lenovo
Way.
Lenovo identifies diverse suppliers as those that are at least 51 percent owned and controlled by women, minorities,
veterans, service-disabled veterans, and persons with a disability. Lenovo also includes suppliers that are defined by
the U.S. Federal Government as a Small Disadvantaged Business, HUB Zone business, or small business.
Lenovo partners with a variety of national and regional organizations, such as National Minority Supplier
Development Council (NMSDC), Women’s Business Enterprise National Council (WBENC), and the North Carolina
Institute of Minority Economic Development (NCIMED), to facilitate supplier identification and program development.
Lenovo is also active in local and regional events aimed at promoting, creating opportunities for, and celebrating
diverse suppliers. Our Supplier Diversity Program has grown significantly over the last year and we currently conduct
more than US$135 million in business annually with small and/or certified diverse suppliers.
For more information, please visit our Supplier Diversity website at www.lenovo.com/supplierdiversity.
As an extension of our Occupational Health and Safety (OHS) process, we continue to monitor the performance of
our key worldwide contract manufacturing locations to ensure a high level of regulatory compliance and standard
of care. Rigorous compliance reviews are conducted on an annual basis to validate compliance and overall OHS
related performance. Identified action items are tracked to closure with a focus on high risk and systemic findings or
exposures.
In addition, key contract manufacturing locations are required to have Lenovo-specific Business Continuity Plans
and robust Pandemic Response Plans to further mitigate risk and support employee well-being. Validation checks
are also completed on a periodic basis.
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Lenovo plans to continue optimizing our logistics programs and working closely with our partners to ship products in
the most environmentally responsible manner.
Lenovo Global Logistics set up a GHG emission baseline for international shipments in April 2012. The baseline was
verified by Bureau Veritas North America in June 2012. Transportation GHG emissions for FY 2013/14 were verified
by Bureau Veritas North America in June of 2014. Global Logistics will expand the baseline and measurement to
domestic transportation and distribution centers across all Lenovo operations. In 2014, Global Logistics has added
China domestic transportation into the Product Transportation GHG Emission scope and plan.
In Asia Pacific, Lenovo Global Logistics is committed to support the incorporation of Green Freight Asia (GFA)
programs. GFA is a network of private companies working to increase the fuel efficiency of and reduce the carbon
impact and air pollution from freight transport in the Asia Pacific region. GFA was incorporated in August 2013 in
Singapore. Lenovo is one of the founding members of GFA and worked closely with the organization to launch GFA
Green Freight Label in 2014.
SOCIAL INVESTMENTS
Lenovo’s Next Generation Hope Fund is helping redefine how Lenovo and our employees support the communities
where we live and do business. This social investment program targets education, entrepreneurship, disaster relief
and regional community outreach. Lenovo provides assistance through financial contributions, equipment donations,
and employee volunteer hours. To measure success, we evaluate the effectiveness of each investment against
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 our education related social investments, but rather we consider each
opportunity based on its own merits. Lenovo donates equipment, provides financial contributions and lends expertise
to schools and related organizations across all global markets. Lenovo supports global education investments in
both K-12 and higher education.
Lenovo North America invests in causes that support K-12 disadvantaged youth with a focus on science,
technology, engineering and math (STEM) education. In 2014, Lenovo launched a partnership with the National
Academy Foundation (NAF) and created The Lenovo Scholar Network, a mobile application development curriculum
at ten NAF academies in public high schools across the U.S. Almost 500 students are now learning how to code
and create apps that serve a community need. The students may earn a Lenovo App Scholar badge by competing
in local and national competitions that culminate in the announcement of the Lenovo Scholar Network finalists at the
NAF Next 2015 annual gathering.
In support of U.S. military and veterans, Lenovo announced a partnership with the United Services Organization
(USO) and became the laptop technology partner of the newest USO Warrior and Family Center located on base at
Walter Reed National Military Medical Center in Bethesda, Maryland.
119 2014/15 Annual Report Lenovo Group Limited
In FY 2014/15, Lenovo employees in the U.S. and Canada more than doubled their reported employee volunteerism
year-to-year, with 16,000 volunteer hours donated to numerous causes and charities.
In China, Lenovo has been a corporate sponsor of Enactus World Cup. This project encourages university students
to leave the comfort of the classroom to help improve lives in communities around the world. Enactus promotes an
entrepreneurial approach to development that empowers people to be a part of their own success.
In cooperation with the YouChange China Social Entrepreneur Foundation, Lenovo initiated the Lenovo Flipped
Classroom project to expand school tools and resources in remote areas of China. Lenovo has provided digital
devices to six schools and plans to roll out the project to more schools next year.
Lenovo also worked with the YouChange China Social Entrepreneur Foundation to organize the “Educational
Informationization Competition,” an event aimed at raising awareness of informationization in poor and remote areas.
Lenovo provided expertise to schools entering the competition and also sponsored prizes to competition winners.
In FY 2014/15, Lenovo Asia-Pacific continued its partnership with Room to Read, which focuses on raising the
literacy rate of girls, with further donations to support the program in Laos. Since the partnership began in 2012,
250 ThinkPad laptops have been deployed across India, Laos, Sri Lanka and Vietnam, helping Room to Read’s
operations staff and volunteers provide more than 16,000 at-risk girls with a basic education and a strong foundation
for future studies. This deployment will extend to Cambodia, Nepal and Bangladesh in 2015.
The donated Lenovo PCs have had a significant impact on improving Room to Read’s operational efficiency in
numerous areas including communications, program administration and monitoring and documenting the progress
of at-risk girls. For girls nearing the end of their secondary studies, the laptops have also been used for university
research and to assist in tertiary education applications. Lenovo’s technology contribution establishes a starting
point for future education opportunities, giving the girls career options that they otherwise would have lacked due to
poor information accessibility.
In Indonesia, Lenovo partnered with Relawan TIK, a non-profit organization, to leverage donated Yoga tablets
in furthering education in east Indonesia, where computer literacy is still low. The Yoga tablets were used in the
classrooms for presentations, teaching and to provide hands-on experience to the students.
In India, Lenovo announced two distinct initiatives in Pondicherry and Bangalore together with Guru-G and Agastya
International Foundation, respectively. Guru-G and Agastya International Foundation are two non-profit educational
trusts that seek to transform education in semi-urban and rural schools. While the initiative in Pondicherry seeks to
empower the teacher, the Bangalore initiative, called Lab-On-a-Tab, aims to provide students with self-paced, high
quality, hands-on education to supplement the existing teaching and learning methods at government schools.
These initiatives will be implemented by using technology from Lenovo to convert physical experiments into
e-experiments for the students. In both cases, government schools will be provided with Lenovo A-1000 tablets.
Based on the results from these two pilot projects, the program will be expanded to reach more schools in
subsequent phases of implementation. The tablets are pre-loaded with applications to enable teachers to engage
students through interactive learning.
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CORPORATE SOCIAL RESPONSIBILITY REPORT
Lenovo has signed a contract with United Way in Europe to support the organization on important projects designed
to provide children and young adults with greater access to education. The agreement enables us to support
specific projects in France, Israel, Romania and the United Kingdom with cash donations and Lenovo products.
Through cooperation with an array of community organizations, our support will give disadvantaged youth access
to our technology with the aim of enabling them to enter school ready to learn as well as preparing them for future
careers.
United Way is in many ways a perfect partner for Lenovo. It is the world’s largest privately-supported non-profit
organization, established more than 125 years ago. Its focus is on creating opportunities and building stronger
communities around the world by improving education, financial stability and health. It recruits volunteers, donors
and organizations to create a large body of people able to make significant positive changes. Our intention is to
become United Way’s technology partner and support their development in Europe.
For nine years running, Lenovo has been the official technological partner for the Women’s Forum, an international
platform looking at major social and economic issues from women’s perspectives. In October 2014, the Women’s
Forum addressed fundamental questions under the theme ‘Leading for a More Equitable World.’ This year was the
10th edition of the Women’s Forum Global Meeting, which was held in Deauville, France with an audience of talented
leaders in business, media, politics, economics and academics.
Lenovo’s regional offices have established extensive relationships with their local communities and regional non-
governmental organizations. These regional offices support education, the environment and social causes unique to
their communities.
122 DIRECTORS’ REPORT
139 INDEPENDENT AUDITOR’S REPORT
140 CONSOLIDATED INCOME STATEMENT
141 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
142 CONSOLIDATED BALANCE SHEETS
144 CONSOLIDATED CASH FLOW STATEMENT
145 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
146 NOTES TO THE FINANCIAL STATEMENTS
211 FIVE-YEAR FINANCIAL SUMMARY
122 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
The directors of Lenovo Group Limited (the “Company”) submit their report together with the audited financial statements of the
Company and its subsidiaries (collectively, the “Group”) for the year ended March 31, 2015.
PRINCIPAL BUSINESS AND GEOGRAPHICAL ANALYSIS OF OPERATIONS
The principal activity of the Company is investment holding. The activities of its principal subsidiaries are set out in note 37 to the
financial statements.
Details of the analyses of the Group’s performance for the year by operating segment are set out in note 5 to the financial
statements.
RESULTS AND APPROPRIATIONS
The results of the Group for the year are set out in the consolidated income statement on page 140 of this annual report.
The state of affairs of the Group and of the Company as at March 31, 2015 is set out in the consolidated balance sheet on pages
142 to 143 of this annual report and the company balance sheet in note 30(a) to the financial statements respectively.
The consolidated cash flows of the Group for the year are set out in the statement on page 144 of this annual report.
An interim dividend of HK6.0 cents (2014: HK6.0 cents) per share, amounting to a total of approximately HK$666.5 million
(approximately US$86.0 million) (2014: approximately HK$623.6 million (approximately US$80.4 million)), was paid to shareholders
during the year.
The directors recommend the payment of a final dividend of HK20.5 cents per share for the year ended March 31, 2015 (2014:
HK18.0 cents). Subject to shareholders’ approval at the forthcoming annual general meeting (“AGM”), the proposed final dividend
will be payable on Tuesday, July 14, 2015 to the shareholders whose names appear on the register of members of the Company
on Wednesday, July 8, 2015.
For the purposes of determining shareholders’ eligibility to attend and vote at the AGM, and entitlement to the proposed final
dividend, the register of members of the Company will be closed. Details of such closures are set out below:
(i) For determining shareholders’ eligibility to attend and vote at AGM:
Latest time to lodge transfer documents for registration 4:30 p.m. on Tuesday, June 30, 2015
Closure of register of members Thursday, July 2, 2015
Record date Thursday, July 2, 2015
(ii) For determining shareholders’ entitlement to the proposed final dividend:
Latest time to lodge transfer documents for registration 4:30 p.m. on Tuesday, July 7, 2015
Closure of register of members Wednesday, July 8, 2015
Record date Wednesday, July 8, 2015
During the above closure periods, no transfer of shares will be registered. To be eligible to attend and vote at the AGM, and to
qualify for the proposed final dividend, all properly completed transfer documents accompanied by the relevant share certificates
must be lodged for registration with the Company’s share registrar, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183
Queen’s Road East, Hong Kong no later than the aforementioned latest times.
BUSINESS REVIEW
The business review of the Group for the year ended March 31, 2015 are provided in the Chairman and CEO Statement,
Management’s Discussion and Analysis and the Corporate Social Responsibility Report of this annual report.
FIVE-YEAR FINANCIAL SUMMARY
A summary of the results for the year and of the assets and liabilities of the Group as at March 31, 2015 and for the last four
financial years are set out on page 211 of this annual report.
DISTRIBUTABLE RESERVES
At March 31, 2015, the distributable reserves of the Company amounted to US$814,506,000 (2014: US$375,324,000).
123 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
BANK BORROWINGS
Particulars of bank borrowings as at March 31, 2015 are set out in note 27 to the financial statements.
DONATIONS
Charitable and other donations made by the Group during the year amounted to US$1,535,000 (2014: US$1,006,000).
SHARES ISSUED
During the year, the Company has issued shares as follows:–
(i) On October 1, 2014, 182,000,000 shares of the Company were issued to International Business Machines Corporation (“IBM”)
in satisfaction of the consideration in the sum of HK$2,103,920,000, representing part of the total consideration payable by
the Company to IBM in accordance with the terms and conditions under the Master Asset Purchase Agreement entered into
between the Company and IBM on January 23, 2014.
(ii) On October 30, 2014, 519,107,215 shares of the Company were issued to Google Inc. (“Google”) as consideration of
US$750,000,000, representing part of the total consideration payable by the Company to Google for the acquisition of all
the issued and outstanding equity interests of Motorola Mobility Holdings LLC pursuant to the acquisition agreement dated
January 29, 2014 (US Eastern time) entered into between the Company and Google.
(iii) As a result of the exercise of share options under the Company’s share option scheme, 1,172,000 shares (2014: 18,277,450
shares), fully paid, were issued for the total consideration of HK$2,982,740 (2014: HK$46,121,910).
Details of the shares issued by the Company during the year are set out in note 29 to the financial statements.
DEBENTURES ISSUED
The Company has issued the US$1,500,000,000 4.7% Notes due 2019 which was listed on The Stock Exchange of Hong Kong
Limited (the “Stock Exchange”) on May 9, 2014. The net proceed of US$1,488,979,933 from the Notes will be used to fund any
acquisition activities, working capital and other general corporate purposes of the Company. Subject to the terms thereof, the
Notes will constitute direct, general, unsecured and unsubordinated obligations of the Company and shall at all times rank pari
passu and without any preference among themselves.
Details of the debentures issued by the Company during the year are set out in note 27 to the financial statements.
EQUITY-LINKED AGREEMENTS
No equity-linked agreements were entered into during the year, save for the share options which were outstanding under the Share
Option Scheme and the Long-Term Incentive Program described in this report.
SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Particulars of the Company’s principal subsidiaries, associates and joint ventures as at March 31, 2015 are set out in notes 37 and
18 to the financial statements respectively.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of the business of the Company
were entered into or existed during the year.
MAJOR CUSTOMERS AND SUPPLIERS
During the year, the Group sold less than 15% of its goods and services to its five largest customers. The percentages of
purchases for the year attributable to the Group’s major suppliers are as follows:
The largest supplier 18%
Five largest suppliers combined 35%
None of the directors of the Company, their close associates or any shareholder (which to the knowledge of the directors owns
more than 5% of the number of issued shares of the Company) had an interest in the major suppliers noted above.
124 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
During the year ended March 31, 2015, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the
Company’s listed securities, except that the trustee of the long-term incentive program of the Company purchased 89,467,450
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 93 to 94 of this annual report.
DIRECTORS
The directors during the year and up to the date of this report are:
Chairman and Executive Director
Mr. Yang Yuanqing
Non-executive Directors
Mr. Zhu Linan
Mr. Zhao John Huan
Independent Non-executive Directors
Mr. Ting Lee Sen
Dr. Tian Suning
Mr. Nicholas C. Allen
Mr. Nobuyuki Idei
Mr. William O. Grabe
Mr. William Tudor Brown
Ms. Ma Xuezheng
Mr. Yang Chih-Yuan Jerry (appointed on November 6, 2014)
In accordance with article 107 of the Company’s articles of association, Mr. Yang Yuanqing, Mr. Zhao John Huan, Mr. Ting Lee Sen
and Mr. Nicholas C. Allen will retire by rotation at the AGM. Mr. Yang Chih-Yuan Jerry who was appointed as a director during the
year will retire pursuant to article 95 of the Company’s articles of association. Mr. Ting Lee Sen will not stand for re-election at the
AGM after having served as an independent non-executive director of the Company for 12 years, being the maximum term for an
independent non-executive director according to the corporate governance principle adopted by the Board of the Company. The
other four retiring directors will offer themselves for re-election/election at the AGM.
The Company has received from each of the independent non-executive directors an annual confirmation of his independence
pursuant to rule 3.13 of the Rules Governing the Listing of Securities on the 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.
The list of names of all directors who have served on the boards of the subsidiaries of the Company during the year and up to the
date of this report is available on the Company’s website (http://www.lenovo.com/ww/lenovo/subsidiaries.html).
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT
Honorary Chairman
Mr. Liu Chuanzhi, 71, has been appointed the Honorary Chairman and Senior Advisor of the Company since November 3,
2011. Mr. Liu is the founder of the Group and held the positions of executive director, non-executive director and chairman of the
Board at different times from 1993 until his resignation from the Board on November 3, 2011. As our Honorary Chairman, Mr. Liu
is not a director or an officer of the Company or of any subsidiary of the Company, and does not have any management role in
the Company or any of its subsidiaries. He graduated from the Xi’an Military Communications Engineering Institute (now Xidian
University) in China and has substantial experience in corporate management. Mr. Liu is the chairman of the board of Legend
Holdings Corporation, a company holding substantial interests in the issued shares of the Company.
125 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT (continued)
Biography of directors
Chairman and executive director
Mr. Yang Yuanqing, 50, is the Chairman of the Board, Chief Executive Officer and an executive director of the Company. He is
also a director and a shareholder of Sureinvest Holdings Limited which holds interests in the issued shares of the Company. Mr.
Yang assumed the duties of chief executive officer on February 5, 2009. Prior to that, he was the chairman of the Board from April
30, 2005. Before taking up the office as chairman, Mr. Yang was the chief executive officer and has been an executive director
since December 16, 1997.
Mr. Yang has more than 27 years of experience in the field of computers. Under his leadership, Lenovo has been China’s best-
selling PC brand since 1997 and is currently the world’s No. 1 PC vendor and the third-largest company in smartphone, tablet and
x86 server markets. Mr. Yang holds a Master’s degree from the Department of Computer Science at the University of Science and
Technology of China. Mr. Yang is also a guest professor at the University of Science and Technology of China; a member of the
New York Stock Exchange’s International Advisory Committee and a member of the International Advisory Council of Brookings
Institute.
Non-executive directors
Mr. Zhu Linan, 52, has been a non-executive director of the Company since April 30, 2005. Mr. Zhu graduated with a master’s
degree in electronic engineering from Shanghai Jiao Tong University and has more than 20 years of management experience.
He was previously a senior vice president of the Group. Mr. Zhu is currently a director and president and member of executive
committee of Legend Holdings Corporation, a company holding substantial interests in issued shares of the Company and he
also serve as director of its various members. He is a non-executive director of CAR Inc. (HKSE listed). He was previously a non-
executive director of Peak Sport Products Co., Limited (HKSE listed) and a director of Foshan Saturday Shoes Co., Ltd. (Shenzhen
Stock Exchange listed).
Mr. Zhao John Huan, 52, has been a non-executive director of the Company since November 3, 2011. Mr. Zhao holds a master’s
degree in Business Administration from the Kellogg School of Management at Northwestern University, dual master’s degrees in
electric engineering and physics from Northern Illinois University and a bachelor’s degree in physics from Nanjing University. He is
currently an executive director, executive vice president and member of executive committee of Legend Holdings Corporation, a
company having substantial interests in the issued shares of the Company and the president of Hony Capital Limited.
Besides, he currently holds the following directorship; an executive director of CSPC Pharmaceutical Group Limited and non-
executive director and the chairman of China Glass Holdings Limited (all HKSE listed) and the deputy chairman of Shanghai
Chengtou Holding Co., Ltd. (Shanghai Stock Exchange listed) and a director of Simcere Pharmaceutical Group (formerly listed on
NYSE).
Mr. Zhao was previously a director of Jiangsu Phoenix Publishing & Media Corporation Limited (Shanghai Stock Exchange listed),
an independent director of Fiat Industrial S.P.A. (MTA Italian Stock Exchange listed), the non-executive director of Wumart Stores,
Inc., New China Life Insurance Company Ltd. and Chinasoft International Limited (all HKSE listed).
Independent non-executive directors
Mr. Ting Lee Sen, 72, has been an independent non-executive director of the Company since February 27, 2003. Mr. Ting has
extensive knowledge and experience in the IT industry and was previously a corporate vice president of Hewlett-Packard Company,
where he worked for more than 30 years. He holds a bachelor of science degree in electrical engineering from the Oregon State
University and graduated from the Stanford Executive Program at Stanford University. Mr. Ting is currently the managing partner of
W.R. Hambrecht Venture I and II and an independent board member of NeoPhotonics Corporation (NYSE listed). He was a director
of Microelectronics Technology Inc. (Taiwan Stock Exchange listed) until June 14, 2013.
Dr. Tian Suning, 51, has been an independent non-executive director of the Company since August 2, 2007. He is the founder
and chairman of a Chinese focused private equity fund China Broadband Capital Partners, L.P.. He is currently an independent
non-executive director of MasterCard Incorporated (NYSE listed) and Taikang Life Insurance Company Ltd. In addition, he is a non-
executive director of China Jiuhao Health Industry Corporation Limited (HKSE listed). He held various senior positions in China
Netcom Group Corporation (Hong Kong) Ltd. (formerly listed on HKSE and NYSE) from 2000 to 2007 and was a vice chairman
of PCCW Ltd. (HKSE listed) between 2005 and 2007. From 1993 till 1999, he was co-founder and chief executive officer of
AsiaInfo-Linkage, Inc. (formerly listed on NASDAQ) of which he is now a board member. Dr. Tian holds a Ph.D. in natural resource
management from Texas Tech University and a M.S. degree in ecology from Chinese Academy of Sciences.
126 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT (continued)
Biography of directors (continued)
Independent non-executive directors (continued)
Mr. Nicholas C. Allen, 60, has been an independent non-executive director of the Company since November 6, 2009. Mr. Allen
received a bachelor of arts degree in economics/social studies from Manchester University, United Kingdom. He is a Fellow of the
Institute of Chartered Accountants in England and Wales and a member of the Hong Kong Institute of Certified Public Accountants.
Mr. Allen has extensive experience in accounting and auditing and was a partner of PricewaterhouseCoopers until his retirement in
June 2007. Mr. Allen is also an independent non-executive director of CLP Holdings Limited, Hysan Development Company Limited
(both HKSE listed) and VinaLand Limited (London Stock Exchange AIM listed) and Texon International Group Limited.
Mr. Nobuyuki Idei, 77, has been an independent non-executive director of the Company since September 28, 2011. Mr. Idei is
the founder and chief executive officer of Quantum Leaps Corporation, an executive advisory company. Until retiring in June 2005,
for more than a decade, Mr. Idei held a wide variety of leadership positions at Sony Corporation (Tokyo Stock Exchange, Osaka
Securities Exchange, NYSE and London Stock Exchange listed), including chairman and group chief executive officer. He was also
the chairman of Sony’s advisory board from June 2005 to June 2012.
Mr. Idei currently serves on the boards of directors of Baidu, Inc. (NASDAQ listed), FreeBit Co., Ltd. and Monex Group, Inc. (both
Tokyo Stock Exchange listed). Mr. Idei is also chairman of the National Conference on Fostering Beautiful Forests in Japan. Mr. Idei
holds a bachelor’s degree in political science and economics from Waseda University in Tokyo.
He has served on the boards of directors of Nestlé S.A., Electrolux, General Motors Company and Accenture plc and also served
in a number of other advisory positions including as counselor to the Bank of Japan, vice chairman of Nippon Keidanren (Japan
Business Federation) and chairman of the IT Strategy Council, an advisory committee to Japan’s Prime Minister.
Mr. William O. Grabe, 77, has been an independent non-executive director of the Company since February 8, 2012 and was
appointed as the lead independent director of the Company on May 23, 2013. Before that, he was a non-executive director of
the Company since May 17, 2005. Mr. Grabe is currently a director of the following listed companies: Gartner Inc. (NYSE listed),
Covisint Corporation (NASDAQ listed) and QTS Realty Trust, Inc. (NYSE listed). He was previously an independent director of
Compuware Corporation. Mr. Grabe is an advisory director of General Atlantic LLC. He formerly served as a managing director
of General Atlantic and has been associated with General Atlantic Group since 1992. Prior to that, he served as a corporate vice
president and officer of IBM.
Mr. William Tudor Brown, 56, has been an independent non-executive director of the Company since January 30, 2013. Mr.
Brown is a Chartered Engineer and holds an MA (Cantab) Degree in electrical sciences from Cambridge University. He is a Fellow
of the Institution of Engineering and Technology and a Fellow of the Royal Academy of Engineering. He was awarded as Member of
the Order of the British Empire (MBE) on June 15, 2013.
Mr. Brown was one of the founders of ARM Holdings plc (London Stock Exchange and NASDAQ listed). During the years with
ARM, he held a broad range of leadership positions including engineering director, chief technical officer, executive vice president
for global development, chief operating officer and president. He had responsibility for developing high-level relationships with
industry partners and governmental agencies and for regional development. He also served as a director of ARM from October
2001 to May 3, 2012. Before joining ARM, he was the principal engineer at Acorn Computers Ltd., working exclusively on the ARM
research & development programme since 1984.
Mr. Brown is currently an independent non-executive director of Tessera Technologies, Inc. (NASDAQ listed), Semiconductor
Manufacturing International Corporation (NYSE and HKSE listed) and P2i Limited. 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.
Ms. Ma Xuezheng, 62, was re-designated as an independent non-executive director of the Company on November 7, 2013. Prior
to that, she was a non-executive Vice Chairman of the Company since 2007. Before becoming a non-executive director, she was
an executive director and the chief financial officer of the Company at different times between 1997 and 2007 and held directorship
in various subsidiaries of the Company. She is currently chairman of Boyu Capital Advisory Company Limited and a non-executive
director of the Securities and Futures Commission following her resignation from the Main Board and GEM Listing Committees of
the HKSE on November 14, 2013. In addition, she is also a non-executive director of STELUX Holdings International Limited (HKSE
listed), Unilever N.V. (NYSE and Euronext Amsterdam listed) and Unilever PLC (NYSE and London Stock Exchange listed). She
was formerly a non-executive director of Wumart Stores, Inc. (HKSE listed) and an independent non-executive director of Standard
Chartered Bank (Hong Kong) Limited. Ms. Ma holds a bachelor of arts degree from Capital Normal University.
127 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT (continued)
Biography of directors (continued)
Independent non-executive directors (continued)
Mr. Yang Chih-Yuan Jerry, 46, has been an independent non-executive director of the Company since November 6, 2014. Prior
to that, he was the board observer of the Company since February 20, 2013. He holds a master’s degree and a bachelor’s degree
of science in electrical engineering from Stanford University and currently serves on the board of trustees of Stanford University.
Mr. Yang co-founded Yahoo! Inc. (NASDAQ listed) and served as its chief executive officer from June 2007 to January 2009. He
also served as a member of the board of directors of Yahoo! Inc. until January 17, 2012. During such appointment, Mr. Yang
focused on corporate strategy and technology vision. Mr. Yang was also instrumental in building strategic business partnerships,
international joint ventures and recruiting key talent.
Mr. Yang also served as a director of Yahoo! Japan Corporation (Tokyo Stock Exchange listed) from January 1996 to January 2012,
an independent director of Cisco Systems, Inc. (NASDAQ listed) from July 2000 to November 2012 and a director of Alibaba Group
Holding Limited from October 2005 to January 2012. Mr. Yang is currently an independent director of Workday Inc. and Alibaba
Group Holding Limited (all NYSE listed).
Biography of senior management
Mr. Gianfranco Lanci, 60, joined the Group in April, 2012 and is currently the Corporate President and Chief Operating Officer
of the Company. He is the leader of all of the Group’s five geographies, the PC and Enterprise Business Groups, with end-to-end
responsibility for the Group’s performance and business management system in these areas. Prior to that, Mr. Lanci was COO and
Executive Vice President of the Company and President of PC Group, EMEA and AP. Mr. Lanci has substantial experience across
the PC business, including leadership roles at Texas Instruments and Acer. He was appointed as president of Acer Inc. in 2005
and in 2008 became chief executive officer and president. Under his leadership, he led Acer to the number two position globally
and number one in EMEA while recording record profitability for three consecutive years. He holds a degree in engineering from the
Politecnico of Turin.
Mr. He Zhiqiang, 52, joined the Group in 1986 and is currently the Senior Vice President of the Company and President of
the Ecosystem and Cloud Services Business Group. This group is responsible for building Lenovo’s ecosystem and customer
relationship through cloud services, as well as exploring and driving growth in the broader personal and enterprise Internet
services. Prior to that, Mr. He was the chief technology officer and held various leadership positions in Lenovo, particularly in
overseeing Lenovo’s Research & Technology initiatives 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.
Dr. Peter D. Hortensius, 54, joined the Group in May, 2005 and is currently the Senior Vice President of the Company and the
Chief Technology Officer with responsibility for Lenovo’s technical strategy, R&D of systems and technology, and exploration of
emerging areas. He leads a worldwide team that focused on innovation for smartphones, tablets, PCs and servers and is widely
known for his extensive expertise in product and technology research & development.
Dr. Hortensius has held several key leadership positions in Lenovo including most recently President of the Think Business Group
where he managed the company’s commercial product portfolio and was responsible for increasing market share and profitability
in enterprise segments and in new growth areas like small-to-medium business. His focus areas included driving 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 president role, he served as president of the Product Group where he managed both the
company’s commercial and consumer PC product portfolio, and enterprise business.
Prior to that, Dr. Hortensius spent 17 years with IBM, including 10 years at IBM’s Watson Research Center and his last role at IBM
was as the vice president, Products and Offerings, for IBM’s PC Division. Dr. Hortensius earned his doctorate degree in electrical
engineering from the University of Manitoba in Canada.
Mr. Liu Jun, 46, joined the Group in 1993 and is currently the Executive Vice President of the Company and President of the
Mobile Business Group, responsible for driving Lenovo’s profitable growth in smartphone and tablet and developing Lenovo’s
smart TV business. Prior to that, Mr. Liu held a broad range of leadership positions in Lenovo, including senior vice president of
the Company, president of Lenovo Business Group, Products Group, Consumer Business Group, Global Supply Chain and Lenovo
China. Mr. Liu holds a bachelor’s degree in automation and an EMBA, both from Tsinghua University. Mr. Liu also completed
executive programs at Harvard and Stanford Universities.
128 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT (continued)
Biography of senior management (continued)
Ms. Qiao Jian, 47, joined the Group in 1990 and is currently the Senior Vice President of Human Resources, responsible for
Human Resources, Organizational Development, Global Talent, Compensation and Benefits as well as nurturing the Company’s
culture. Prior to assuming this position, Ms. Qiao held various senior positions in the Group including senior vice president of
Strategy and Planning and vice president of Human Resources in China – both before and after the acquisition of IBM’s PC
Division. Ms. Qiao has extensive experience in human resources, strategy, marketing and branding. She holds a bachelor’s degree
in management science from Fudan University and holds an EMBA from the China Europe International Business School.
Mr. Gerry P. Smith, 51, joined the Group in August, 2006 and is currently the Executive Vice President of the Company and
Chief Operating Officer of the PC and Enterprise Business Groups. In this capacity, Mr. Smith leads Lenovo’s PC and Enterprise
Business Groups, including the Global Operations organization that supports these businesses. Prior to that, Mr. Smith was senior
vice president of the Company and president of the Americas Group, senior vice president of Global Operations and senior vice
president of Global Supply Chain. Before joining the Group, Mr. Smith held a number of leadership roles at Dell, including vice
president and general manager of Notebook Development, Peripherals Development and the Display Line of Business. Mr. Smith
holds a bachelor’s degree in finance and marketing from Pacific Lutheran University.
Mr. Wong Wai Ming, 57, is currently the Executive Vice President of the Company and the Chief Financial Officer. He was
previously an investment banker for more than 15 years and also held senior management 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
Institute of Chartered Accountants in England and Wales and holds a bachelor’s degree in management sciences from the Victoria
University of Manchester in the United Kingdom.
DIRECTORS’ SERVICE CONTRACTS
On October 9, 2006, the Company entered into the service contract with Mr. Yang Yuanqing, the executive director and the
Chairman of the Board of the Company, for an unfixed term commencing from October 9, 2006. Upon termination of the service
contract, Mr. Yang may be entitled to compensation and other payments equivalent to more than one year’s emoluments
depending on a number of factors including the length of service, the amount of the unvested equity awards and the amount of the
annual bonus. The service contract was approved by the shareholders at an extraordinary general meeting of the Company held
on November 7, 2006 (at which Mr. Yang and his associates abstained from voting) pursuant to rule 13.68 of the Listing Rules. Mr.
Yang is currently the Chairman of the Board, the Chief Executive Officer and an executive director of the Company.
Save as disclosed above, none of the directors has a service contract with the Company which is not determinable within one year
without payment of compensation, other than statutory compensation.
DIRECTORS’ MATERIAL INTEREST IN TRANSACTIONS, ARRANGEMENTS OR
CONTRACTS
No transactions, arrangements or contracts that is significant in relation to the Group’s business to which the Company or its
subsidiaries, its holding company or any subsidiary of its holding company was a party and in which a director of the Company or
its connected entity had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the
year.
DIRECTORS’ INDEMNITIES AND INSURANCE
As permitted by the articles of association of the Company, a director or a former director of the Company may be indemnified
out of the Company’s assets against any liability incurred by the director to a person other than the Company or an associated
company of the Company that attaches to such director in his or her capacity as a director of the Company, to the extent
permitted by law. Such permitted indemnity provision has been in force since the adoption of the new articles of association of the
Company on July 2, 2014 and is currently in force at the time of approval of this report.
The Company has also taken out and maintained directors’ and officers’ liability insurance throughout the year, which provides
appropriate cover for certain legal actions brought against its directors and officers.
129 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
DIRECTORS’ INTERESTS
As at March 31, 2015, 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 Futures Ordinance (“SFO”)) as recorded in the register maintained by the Company under section 352 of the SFO or as
otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers (the “Model Code”) in the Listing Rules were as follows:
Interests in the shares and underlying shares of the Company
Capacity and number of shares/underlying shares held
Name of Director
Interests in shares/
underlying shares
Personal
interests
Family
interests
Corporate
interests
Aggregate
Long
position
Approximate
percentage of
interests
(Note 2)
Mr. Yang Yuanqing Ordinary shares 62,248,626 – 606,804,000
(Note 3)
669,052,626
Share awards 70,755,605 – – 70,755,605
739,808,231 6.66%
Mr. Zhu Linan Ordinary shares 2,599,999 – – 2,599,999
Share awards 779,732 – – 779,732
3,379,731 0.03%
Mr. Zhao John Huan Ordinary shares 155,434 – – 155,434
Share awards 1,187,884 – – 1,187,884
1,343,318 0.01%
Mr. Ting Lee Sen Ordinary shares 704,686 – – 704,686
Share awards 1,945,931 – – 1,945,931
2,650,617 0.02%
Dr. Tian Suning Ordinary shares 608,730 – – 608,730
Share awards 1,945,931 – – 1,945,931
2,554,661 0.02%
Mr. Nicholas C. Allen Ordinary shares 443,794 – – 443,794
Share awards 1,751,315 – – 1,751,315
2,195,109 0.02%
Mr. Nobuyuki Idei Ordinary shares 177,671 – – 177,671
Share awards 1,228,056 – – 1,228,056
1,405,727 0.01%
Mr. William O. Grabe Ordinary shares 2,116,844 – – 2,116,844
Share awards 1,989,900 – – 1,989,900
4,106,744 0.04%
Mr. William Tudor Brown Ordinary shares 92,730 – – 92,730
Share awards 831,372 – – 831,372
924,102 0.01%
Ms. Ma Xuezheng Ordinary shares 10,656,282 – 2,240,000 12,896,282
Share awards 1,100,198 – – 1,100,198
13,996,480 0.13%
Mr. Yang Chih-Yuan Jerry Ordinary shares 26,746 – – 26,746
Share awards 548,636 – – 548,636
575,382 0.01%
130 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
DIRECTORS’ INTERESTS (continued)
Interests in the shares and underlying shares of the Company (continued)
Notes:
1. Share awards represent underlying shares convertible into ordinary shares. Details of share awards are set out under the section “Long-Term
Incentive Program”.
2. The approximate percentage of interests is based on the shares/underlying shares comprising the interests held as a percentage of the total
number of shares in issue of the Company of the same class immediately after the relevant event and as recorded in the register maintained
under section 352 of the SFO.
3. The shares are held by Sureinvest Holdings Limited in which Mr. Yang Yuanqing holds more than one-third of the voting power at its general
meetings. Therefore, Mr. Yang is taken to have an interest in 606,804,000 shares under the SFO and such interest is also reported under the
below section headed “Substantial Shareholders’ and Other Persons’ Interests”.
Save as disclosed above, as at March 31, 2015, none of the directors or chief executive of the Company or their associates had
any interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within
the meaning of Part XV of the SFO) as recorded in the register maintained by the Company under section 352 of the SFO or as
otherwise notified 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 (the “New Option Scheme”) and termination of the share option scheme that was adopted
on January 18, 1994.
Pursuant to the terms of New Option Scheme, the New Option Scheme shall be valid and effective for a period of 10 years
commencing on the adoption date and expiring on the tenth anniversary of the adoption date. Accordingly, the New Option
Scheme had been expired on April 26, 2012, and no further options could thereafter be granted under the New Option Scheme.
However, all remaining provisions will remain in full force and effect to govern the exercise of all the options granted under the New
Option Scheme prior to its expiration.
As at March 31, 2015, no share options were outstanding under the New Option Scheme.
1. New Option Scheme
(a) Purpose
The New Option Scheme became effective on April 26, 2002. It serves as a way of providing incentives to and attracting
qualified participants for better performance of the Group by allowing them to participate in increases in the value of the
Company.
(b) Qualified participants
1. (i) any employee or officer, executive or non-executive director (or persons proposed to be appointed as such)
of the Group;
(ii) any consultant, professional or other adviser to the Group;
(iii) any director, executive and senior officer of any associated company of the Company; and
(iv) the trustee of any trust pre-approved by the directors of which the beneficiary (or in case of discretionary
trust, the discretionary objects) include any of the above-mentioned persons; and
2. (i) any customer, supplier, agent, partner, distributor, professional or other advisers of, or consultants or
contractors to, the Group; and
(ii) the trustee of any trust pre-approved by the directors of which the beneficiary (or in case of discretionary
trust, the discretionary objects) include any of the above-mentioned persons.
(c) Maximum number of shares
The total number of shares which may be issued upon exercise of all share options to be granted under the New Option
Scheme and any other share option scheme(s) of the Company must not in aggregate exceed 10% of shares in issue on
the date of approval of the New Option Scheme. The maximum number of shares of the Company which may be issued
upon exercise of all outstanding share options granted and yet to be exercised under the New Option Scheme and any
share option scheme(s) of the Company must not exceed 30% of shares in issue from time to time.
131 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES (continued)
Share Option Scheme (continued)
1. New Option Scheme (continued)
(d) Maximum entitlement of each qualified participant
The maximum number of shares issued and to be issued upon exercise of share options granted to each qualified
participant (including both exercised and outstanding options) in any 12-month period up to the date of grant shall not
exceed 1% of the shares of the Company in issue. Any further grant of share options in excess of this limit is subject to
shareholders’ approval in general meeting of the Company.
Share options to be granted to a director or chief executive of the Company or any of their respective associates are
subject to approval by the independent non-executive directors of the Company. In addition, any grant of share options
to an independent non-executive director of the Company or any of their respective associates, when aggregated with
all share options (whether exercised, cancelled or outstanding) already granted to any of them during the 12-month
period up to the date of grant, in excess of 0.1% of the ordinary shares of the Company in issue and with an aggregate
value in excess of HK$5,000,000, is subject to shareholders’ approval in general meeting of the Company.
(e) Timing for exercise of options
In respect of any particular option, the directors may in their absolute discretion determine the period within which an
option may be exercised provided that such period must expire no later than 10 years from the date upon which the
option is deemed to be accepted by the grantee. Option will then lapse to the extent not exercised during the option
period.
(f) Acceptance of offers
An option shall be deemed to have been granted and accepted when the duplicate offer letter comprising acceptance
of the option duly signed by the grantee shall have been received by the Company on or before the last day for
acceptance as set out in the offer letter.
(g) Basis for determination of exercise price
The exercise price must be no less than the highest of: (i) the closing price of the Company’s shares as stated in the
Stock Exchange’s daily quotation sheet on the date of grant of the share options; (ii) the average of the closing prices
of the Company’s 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 shares.
(h) Life of the scheme
The New Option Scheme shall be valid and effective for a period of 10 years from April 26, 2002, the date on which it is
deemed to take effect in accordance with its terms.
2. Valuation of share options
The share options granted are not recognized in the financial statements until they are exercised. The directors consider
that it is not appropriate to value the share options on the ground that certain crucial factors for such valuation are variables
which cannot be reasonably determined at this stage. Any valuation of the share options based on speculative assumptions
in respect of such variables would not be meaningful and the results thereof may be misleading to the shareholders. Thus, it
is more appropriate to disclose only the market price and exercise price.
Long-Term Incentive 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.
Details of the movements in the share options and the share awards for the year ended March 31, 2015 are set out under the
section headed “Long-Term Incentive Schemes” in the Compensation Committee Report and in the notes 29(b) and 29(a) to the
financial statements.
Save as disclosed in the sections headed “Directors’ Interests”, “Share Option Scheme” and “Long-Term Incentive Program” of
this report, and “Long-Term Incentive Program” of the Compensation Committee Report, at no time during the year ended March
31, 2015 was the Company or a specified undertaking of the Company a party to any arrangements to enable the directors of the
Company to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate.
132 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS
As at March 31, 2015, the following persons (other than the directors and chief executive of the Company as disclosed above) had
an interests or short positions in the shares and/or underlying shares of the Company as recorded in the register required to be
kept under section 336 of the SFO:
Capacity and number of
shares/underlying shares held
Name
Long position/
short position
Beneficial
owner
Corporate
interests
Aggregate
long and short
positions
Approximate
percentage of
interests
(Note 1)
Legend Holdings Corporation Long position 2,867,636,724 532,519,317
(Note 2)
3,400,156,041 30.60%
Short position – 89,900,000 89,900,000
(Note 3)
0.80%
Sureinvest Holdings Limited Long position 606,804,000 – 606,804,000
(Note 4)
5.46%
Notes:
1. The approximate percentage of interests is based on the shares/underlying shares comprising the interests held as a percentage of the total
number of shares in issue of the Company of the same class immediately after the relevant event and as recorded in the register maintained
under section 336 of the SFO.
2. Out of 532,519,317 shares, 477,819,317 shares are directly held by Right Lane Limited (“Right Lane”), a direct wholly-owned subsidiary of
Legend Holdings Corporation, and 54,700,000 shares are indirectly held by Right Lane through its wholly-owned subsidiary, Legion Elite
Limited.
3. These shares are held by Right Lane.
4. Mr. Yang Yuanqing holds more than one-third of the voting power at general meetings of Sureinvest Holdings Limited (“SHL”). Accordingly,
Mr. Yang is deemed to have interests in those 606,804,000 shares of the Company held by SHL under the SFO. This interest is also included
as corporate interests of Mr. Yang in the above section headed “Directors’ Interests”.
Save as disclosed above, as at March 31, 2015, no other persons (other than the directors and chief executive of the Company,
whose interests are set out in the above section headed “Directors’ Interests”) had any interests or short positions in the shares or
underlying shares of the Company as recorded in the register required to be kept by the Company under section 336 of the SFO.
RETIREMENT SCHEME ARRANGEMENTS
The Company contributes toward retirement 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 that is designed to attract and retain highly
skilled and talented employees.
Defined Benefit Pensions Plans
Chinese Mainland – Retirement Schemes
The Group participates in respective local municipal government retirement schemes in the mainland of China (“Chinese Mainland”)
whereby it is required to make an annual contribution of no more than 20% of three times the monthly average salaries as
set out by the local municipal government each year. The local municipal governments undertake to assume the retirement
benefit obligations of all retirees of the qualified employees in the Chinese Mainland. In July 2006, the Group has established
a supplemental retirement program for its employees in Chinese Mainland. This is a defined contribution plan, with voluntary
employee participation.
In addition to the above, the Group has defined benefit and/or defined contribution plans that cover substantially all regular
employees, and supplemental retirement plans that cover certain executives. Information on the principal pension plans sponsored
by the Group is summarized in this section.
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 Plan (“PPP”) with non-contributory defined benefit pension benefits
via the Lenovo Pension Plan. The plan is frozen to new entrants.
133 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
RETIREMENT SCHEME ARRANGEMENTS (continued)
Defined Benefit Pensions Plans (continued)
United States of America (“US”) – Lenovo Pension Plan (continued)
The Lenovo Pension Plan consists of a tax-qualified plan and a non-tax-qualified (non-qualified) plan. The qualified plan is funded
by Company contributions to an irrevocable trust fund, which is held for the sole benefit of participants and beneficiaries. The non-
qualified plan, which provides benefits in excess of US Internal Revenue Service limitations for tax-qualified plans, is unfunded.
Pension benefits are calculated using a five year average final pay formula that determines benefits based on a participant’s salary
and years of service, including prior service with IBM. The benefit is reduced by the amount of the IBM PPP benefit accrued to
May 1, 2005, which will be paid by IBM’s trust.
For the year ended March 31, 2015, an amount of US$6,729,364 was charged to the income statement with respect to the
qualified and non-qualified plans.
The principal results of the most recent actuarial valuation of the plan at March 31, 2015 were the following:
• The actuarial valuation was prepared by Fidelity. The actuaries involved are fully qualified under the requirements of US law.
• The actuarial method used was the Projected Unit Credit Cost method and the principal actuarial assumptions were:
– Discount rate: 2.75%
– Expected return on plan assets: 2.75%
– Future salary increases: 3.00%
• The qualified plan was 56% funded at the actuarial valuation date.
• There was a net liability of US$49,852,072 under the qualified plan for this reason at the actuarial valuation date.
Japan – Pension Plan
The Company operates a hybrid plan that consists of a defined contribution up to the annual tax-deductible limit plus a cash
balance plan with contributions of 7% of pay. The plan is funded 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, 2015, an amount of Yen 1,046,238,599 was charged to the income statement with respect to this
plan.
The principal results of the most recent actuarial valuation of the plan at March 31, 2015 were the following:
• The actuarial valuation was prepared by JP Actuary Consulting Co., Ltd. The actuaries involved are fully qualified under the
requirements of Japanese law.
• The actuarial method used was the Projected Unit Credit Cost method and the principal actuarial assumptions were:
– Discount rate: 1.00%
– Expected return on plan assets: 1.00%
– Future salary increases: Age-group based
• The plan was 64% funded at the actuarial valuation date.
• There was a net liability of Yen 8,779,310,134 under this plan at the actuarial valuation date.
Germany – Pension Plan
The Company operates a hybrid plan that provides a defined contribution for some participants and a final pay defined benefit for
other participants, depending on which former IBM plan they were in.
Employees hired by IBM before January 1, 1992 have a defined benefit based on a final pay formula. Employees hired from 1992
to 1999 have a combination of a defined benefit based on a final pay formula and a defined contribution plan with employee
required contributions of 7% of pay above the social security ceiling and a 100% company match. Employees hired in or after 2000
have a combination of a cash balance plan with an employer contribution of 2.95% of pay below the social security ceiling, and a
voluntary defined contribution plan where employees can contribute specific amounts through salary sacrifice.
The plan is partially funded by Company and employee contributions to an insured support fund with DBV-Winterthur up to the
maximum tax-deductible limits. In line with standard practice in Germany, the remainder is unfunded (book reserve).
134 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
RETIREMENT SCHEME ARRANGEMENTS (continued)
Defined Benefit Pensions Plans (continued)
Germany – Pension Plan (continued)
For the year ended March 31, 2015, an amount of EUROS 1,274,421 was charged to the income statement with respect to this
plan.
The principal results of the most actuarial valuation of the plan at March 31, 2015 were the following:
• The actuarial valuation was prepared by Kern, Mauch & Kollegen. The actuaries involved are fully qualified under German law.
• The actuarial method used was the Projected Unit Credit Cost method and the principal actuarial assumptions were:
– Discount rate: 1.00%
– Future salary increases: Age-group based
– Future pension increases: 2.00%
• The plan was 34% funded at the actuarial valuation date.
• There was a net liability of EUROS 71,404,837 under this plan at the actuarial valuation date.
Defined Contribution Plans
United States of America (“US”) – Lenovo Savings Plan
U.S. regular, full-time and part-time employees of Lenovo (United States) Inc. are eligible to participate in the Lenovo Savings Plan,
which is a tax-qualified defined contribution plan under section 401(k) of the Internal Revenue Code. The Company matches 50%
of the employee’s contribution up to the first 6% of the employee’s eligible compensation. In addition, for employees who have
also completed one year of service and who do not participate in the Lenovo Pension Plan, the Company provides a profit sharing
contribution of 5% of eligible compensation. Employee contributions are voluntary. All contributions, including the Company match,
are made in cash, in accordance with the participants’ investment elections.
The Company match is immediately vested. However the 5% Company profit sharing contribution is subject to three-year vesting.
Forfeitures of Company contributions arising from employees who leave before they are fully vested are used to reduce future
Lenovo contributions. For the period April 1, 2014 to March 31, 2015, the amount of forfeitures accumulated was US$295,442
while an amount of US$431,432 had been used to reduce Company contributions, leaving US$189,829 at March 31, 2015 to be
used to reduce Company contributions in the future.
US Motorola Mobility 401(k) Plan
U.S. regular, full-time and part-time employees of Motorola Mobility LLC are eligible to participate in the Motorola Mobility 401(k)
Plan, which is a tax-qualified defined contribution plan under section 401(k) of the Internal Revenue Code. Motorola Mobility LLC
matches 100% of the employee’s contribution up to the first 4% of the employee’s eligible compensation. Employee contributions
are voluntary. All contributions, including the match, are made in cash, in accordance with the participants’ investment elections.
The Motorola Mobility match is subject to a one-year vesting schedule. Forfeitures of matching contributions arising from
employees who leave before they are fully vested are used to pay eligible plan expenses.
US Lenovo Executive Deferred Compensation Plan
The Company also maintains an unfunded, non-qualified, defined contribution plan, the Lenovo Executive Deferred Compensation
Plan, which allows eligible executives to defer compensation, and to receive Company matching contributions, with respect to
amounts in excess of Internal Revenue Service limits for tax-qualified plans. Compensation deferred under the plan, as well as
Company matching contributions are recorded as liabilities.
Deferred compensation amounts may be directed by participants into an account that replicates the return that would be received
had the amounts been invested in similar Lenovo Savings Plan investment 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 eligible to participate in the Lenovo Stakeholders
Plan, which is a tax-qualified defined contribution “stakeholder” plan. For employees hired after April 30, 2005, the Company
contributes 6.7% of an employee’s eligible salary to the employee’s pension account each year until he/she is 35, and then
contributes 8.7% of salary after that age. The employer contributions are dependent on employee paying no less than 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.
135 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.
136 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
CONTINUING CONNECTED TRANSACTIONS (continued)
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)
Transitional Services Agreement
Date: May 30, 2011
Parties: The Company and NEC
Services provided/received: Services to be provided by NEC Group to JVCo Group and vice versa including business
infrastructure related services, development & production services, sales related services,
maintenance & support services, real estate services and information technology services.
Term: For a period of five years commencing from the Closing Date or until the mutual agreement of
the parties to early terminate the agreement, whichever the earlier.
Annual cap
(Note 1)
: Annual fees for services provided to JVCo Group by NEC Group (payable to NEC):
1/7/2011 – 31/3/2012: JPY23,793 million (US$287,895,300)
1/4/2012 – 31/3/2013: JPY32,351 million (US$391,447,100)
1/4/2013 – 31/3/2014: JPY32,791 million (US$396,771,100)
1/4/2014 – 31/3/2015: JPY33,220 million (US$401,962,000)
1/4/2015 – 31/3/2016: JPY33,660 million (US$407,286,000)
1/4/2016 – 1/7/2016: JPY8,415 million (US$101,821,500)
Annual fees for services provided to NEC Group by the JVCo Group (payable from NEC):
1/7/2011 – 31/3/2012: JPY7,070 million (US$85,547,000)
1/4/2012 – 31/3/2013: JPY9,504 million (US$114,998,400)
1/4/2013 – 31/3/2014: JPY9,592 million (US$116,063,200)
1/4/2014 – 31/3/2015: JPY9,691 million (US$117,261,100)
1/4/2015 – 31/3/2016: JPY9,790 million (US$118,459,000)
1/4/2016 – 1/7/2016: JPY2,448 million (US$29,620,800)
137 2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
CONTINUING CONNECTED TRANSACTIONS (continued)
NEC Fielding Agreement
Date: January 15, 2004
Parties: NEC Fielding Ltd., a subsidiary of NEC, and NECP (whose rights and obligations were
transferred to NECPC, a member of the JVCo Group, on and following the Closing Date)
Services provided/received: NEC Fielding Ltd. agreed to provide maintenance and other ancillary services for certain
equipments sold by the JVCo Group following the Closing Date.
Term: The initial term ended on March 31, 2004 and is automatically renewed for additional one-year
term unless either party gives prior termination notice.
Annual cap
(Note 1)
: 1/7/2011 – 31/3/2012: JPY2,665 million (US$32,246,500)
1/4/2012 – 31/3/2013: JPY3,553 million (US$42,991,300)
1/4/2013 – 31/3/2014: JPY3,553 million (US$42,991,300)
1/4/2014 – 31/3/2015: JPY3,553 million (US$42,991,300)
1/4/2015 – 31/3/2016: JPY3,553 million (US$42,991,300)
1/4/2016 – 1/7/2016: JPY888 million (US$10,744,800)
NESIC Agreement
Date: August 18, 2003
Parties: NEC Networks & System Integration 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)
Services provided/received: NESIC agreed to provide NECPC with operation and maintenance services for intranet and
other internal communication systems of NECPC following the Closing Date.
Term: The term ended on March 31, 2004 and is automatically renewed for additional one-year terms
unless either party gives prior termination notice.
Annual cap
(Note 1)
: 1/7/2011 – 31/3/2012: JPY58 million (US$701,800)
1/4/2012 – 31/3/2013: JPY77 million (US$931,700)
1/4/2013 – 31/3/2014: JPY77 million (US$931,700)
1/4/2014 – 31/3/2015: JPY77 million (US$931,700)
1/4/2015 – 31/3/2016: JPY77 million (US$931,700)
1/4/2016 – 1/7/2016: JPY19 million (US$229,900)
NEC Patent Licence Agreement
Date: The Closing Date
Parties: NEC and NECPC (a member of the JVCo Group on and following the Closing Date)
Services provided/received: 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’s personal computer business in Japan bearing the “NEC”.
Term: For a period of five years commencing from Closing Date expiring upon the earlier of (i) the
fifth anniversary of the Closing Date, and (ii) expiration of the last to expire of the patents
licensed under the NEC Patent License Agreement. The NEC Patent License Agreement will
automatically renew for a further period not terminating after the expiration of the last to expire
of the patents licensed under the NEC Patent License Agreement.
Annual cap
(Note 1)
: 1/7/2011 – 31/3/2012: JPY50 million (US$605,000)
1/4/2012 – 31/3/2013: JPY66 million (US$798,600)
Revised annual cap
(Note 2)
: 1/4/2013 – 31/3/2014: JPY79 million (US$774,200)
1/4/2014 – 31/3/2015: JPY79 million (US$774,200)
1/4/2015 – 31/3/2016: JPY79 million (US$774,200)
1/4/2016 – 1/7/2016: JPY20 million (US$196,000)
138 Lenovo Group Limited 2014/15 Annual Report
DIRECTORS’ REPORT
CONTINUING CONNECTED TRANSACTIONS (continued)
NEC Newco Brand Licence Agreement
Date: The Closing Date
Parties: NEC and NECPC (a member of the JVCo Group on and following the Closing Date)
Services provided/received: NEC agreed to grant NECPC a licence to use certain rights in connection with the letters and
the mark “NEC” at royalty payable to NEC by NECPC.
Revised Term: Commence on the Closing Date to June 30, 2018 and shall automatically extend for an
additional term of one year to a date no later than June 30, 2026 pursuant to the amendment
agreement dated October 7, 2014.
Annual cap
(Note 1)
: 1/7/2011 – 31/3/2012: JPY512 million (US$6,195,200)
1/4/2012 – 31/3/2013: JPY682 million (US$8,252,200)
1/4/2013 – 31/3/2014: JPY682 million (US$8,252,200)
1/4/2014 – 31/3/2015: JPY682 million (US$8,252,200)
1/4/2015 – 31/3/2016: JPY682 million (US$8,252,200)
1/4/2016 – 1/7/2016: JPY170 million (US$2,057,000)
In accordance with rule 14A.55 of the Listing Rules, the independent non-executive directors of the Company reviewed the
continuing connected transactions in the paragraph above and confirmed that the transactions were entered into:
(i) in the ordinary and usual course of business of the Group;
(ii) on normal commercial terms or better; and
(iii) according to the relevant agreement governing them on terms that are fair and reasonable and in the interests of the
shareholders of the Group as a whole.
Pursuant to rule 14A.56 of the Listing Rules, the Company’s auditor was engaged to report on the Group’s continuing connected
transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than
Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing
Connected Transactions under the Hong Kong Listing Rules” Issued by the Hong Kong Institute of Certified Public Accountants.
The auditor has issued an unqualified letter containing findings and conclusions in respect of the continuing connected transactions
disclosed by the Group in the paragraph above in accordance with rule 14A.56 of the Listing Rules. A copy of the auditor’s letter
has been provided by the Company to the Stock Exchange.
Note 1: The translation of Japanese yen into United States dollars is based on the exchange rate of JPY1.00 to US$0.0121 for information purposes
only.
Note 2: The translation of Japanese yen into United States dollars is based on the exchange rate of JPY1.00 to US$0.0098 for information purposes
only.
AUDITOR
The financial statements for the year have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves
for re-appointment.
PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the 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 total number of issued shares as required
under the Listing Rules.
On behalf of the Board
Yang Yuanqing
Chairman and Chief Executive Officer
May 21, 2015
139 2014/15 Annual Report Lenovo Group Limited
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the members 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 set out on
pages 140 to 210, which comprise the consolidated balance sheet as at March 31, 2015, and the consolidated income statement,
the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash
flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Directors’ Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view
in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants,
and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion
solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance and for no other purpose. We
do not assume responsibility towards or accept liability to any other person for the contents of this report.
We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified
Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and its
subsidiaries as at March 31, 2015, and of their financial performance and cash flows for the year then ended in accordance
with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the Hong Kong Companies
Ordinance.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, May 21, 2015
140 Lenovo Group Limited 2014/15 Annual Report
CONSOLIDATED INCOME STATEMENT
For the year ended March 31, 2015
Note
2015
US$’000
2014
US$’000

Revenue 5 46,295,593 38,707,129
Cost of sales (39,613,780) (33,643,480)
Gross profit 6,681,813 5,063,649
Other income – net 6 1,490 22,427
Selling and distribution expenses (2,302,182) (1,900,005)
Administrative expenses (1,883,114) (1,402,979)
Research and development expenses (1,220,919) (732,454)
Other operating (expenses)/income – net (168,574) 1,417
Operating profit 7 1,108,514 1,052,055
Finance income 8(a) 30,902 33,893
Finance costs 8(b) (185,504) (80,974)
Share of profits of associates and joint ventures 18 17,055 9,221
Profit before taxation 970,967 1,014,195
Taxation 9 (134,364) (196,725)
Profit for the year 836,603 817,470
Profit attributable to:
Equity holders of the Company 828,715 817,228
Non-controlling interests 7,888 242
836,603 817,470
Earnings per share attributable to equity holders of the Company
Basic 12(a) US7.77 cents US7.88 cents
Diluted 12(b) US7.69 cents US7.78 cents
Dividends 13 379,646 321,875
141 2014/15 Annual Report Lenovo Group Limited
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended March 31, 2015
Note
2015
US$’000
2014
US$’000

Profit for the year 836,603 817,470
Other comprehensive (loss)/income:
Item that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations, net of taxes 9, 35 (68,973) 4,177
Items that have been reclassified or may be subsequently reclassified
to profit or loss
Fair value change on available-for-sale financial assets, net of taxes 21 7,326 (2,288)
Investment revaluation reserve reclassified to consolidated income
statement on disposal of an available-for-sale financial asset – (20,526)
Fair value change on cash flow hedges, net of taxes 9
– Forward foreign exchange contracts
Fair value gain/(loss), net of taxes 421,138 (49,106)
Reclassified to consolidated income statement (299,847) 10,818
Exchange reserve reclassified to consolidated income statement
on disposal of a subsidiary – 1,250
Currency translation differences (598,733) (69,781)
(539,089) (125,456)
Total comprehensive income for the year 297,514 692,014
Total comprehensive income attributable to:
Equity holders of the Company 289,626 691,772
Non-controlling interests 7,888 242
297,514 692,014
142 Lenovo Group Limited 2014/15 Annual Report
CONSOLIDATED BALANCE SHEET
At March 31, 2015
Note
2015
US$’000
2014
US$’000

Non-current assets
Property, plant and equipment 14 1,496,474 667,413
Prepaid lease payments 15 225,111 40,884
Construction-in-progress 16 311,888 351,934
Intangible assets 17 8,929,713 3,339,516
Interests in associates and joint ventures 18 45,719 20,753
Deferred income tax assets 20 530,047 389,330
Available-for-sale financial assets 21 73,400 35,157
Other non-current assets 41,191 111,558
11,653,543 4,956,545
Current assets
Inventories 22 2,995,389 2,701,015
Trade receivables 23(a) 5,177,840 3,171,354
Notes receivable 23(b) 334,738 447,325
Derivative financial assets 184,534 61,184
Deposits, prepayments and other receivables 23(c) 3,572,015 3,000,826
Income tax recoverable 136,857 65,715
Bank deposits 24 171,139 94,985
Cash and cash equivalents 24 2,855,223 3,858,144
15,427,735 13,400,548
Total assets 27,081,278 18,357,093
143 2014/15 Annual Report Lenovo Group Limited
CONSOLIDATED BALANCE SHEET
At March 31, 2015
Note
2015
US$’000
2014
US$’000

Share capital 29 2,689,882 1,650,101
Reserves 1,393,761 1,360,029
Equity attributable to owners of the Company 4,083,643 3,010,130
Non-controlling interests 235,378 227,490
Put option written on non-controlling interest 28(iii) (212,900) (212,900)
Total equity 4,106,121 3,024,720
Non-current liabilities
Borrowings 27 1,885,848 10,125
Warranty provision 26(b) 338,700 277,231
Deferred revenue 548,300 438,385
Retirement benefit obligations 35 399,782 156,515
Deferred income tax liabilities 20 200,730 142,881
Other non-current liabilities 28 2,440,435 844,914
5,813,795 1,870,051
Current liabilities
Trade payables 25(a) 4,662,411 4,751,345
Notes payable 25(b) 171,049 108,559
Derivative financial liabilities 80,897 58,462
Other payables and accruals 26(a) 9,066,487 6,658,254
Provisions 26(b) 1,203,547 852,154
Deferred revenue 640,161 410,330
Income tax payable 168,536 177,741
Borrowings 27 1,168,274 445,477
17,161,362 13,462,322
Total liabilities 22,975,157 15,332,373
Total equity and liabilities 27,081,278 18,357,093
Net current liabilities (1,733,627) (61,774)
Total assets less current liabilities 9,919,916 4,894,771
On behalf of the Board
Yang Yuanqing Ma Xuezheng
Chairman and Chief Executive Officer Director
144 Lenovo Group Limited 2014/15 Annual Report
CONSOLIDATED CASH FLOW STATEMENT
For the year ended March 31, 2015
Note
2015
US$’000
2014
US$’000

Cash flows from operating activities
Net cash generated from operations 34 669,020 1,640,386
Interest paid (133,547) (71,199)
Tax paid (296,981) (137,129)
Net cash generated from operating activities 238,492 1,432,058
Cash flows from investing activities
Purchase of property, plant and equipment (258,599) (177,562)
Purchase of prepaid lease payments (69,903) –
Sale of property, plant and equipment 9,181 9,106
Acquisition of businesses, net of cash acquired (2,325,726) –
Interests acquired in associates and a joint venture (7,911) (8,769)
Payment for construction-in-progress (347,506) (388,238)
Payment for intangible assets (296,689) (109,544)
Purchase of available-for-sale financial assets (32,596) (8,550)
Net proceeds from disposal of an available-for-sale financial asset – 41,348
Decrease in bank deposits 16,645 24,070
Dividends received 305 547
Interest received 30,902 33,893
Net cash used in investing activities (3,281,897) (583,699)
Cash flows from financing activities
Exercise of share options 385 5,946
Repurchase of shares – (45,304)
Contribution to employee share trusts (129,365) (100,688)
Dividends paid (326,930) (266,692)
Proceeds from borrowings 1,803,420 119,292
Repayments of borrowings (693,880) (142,661)
Issue of long term notes 1,488,980 –
Net cash generated from/(used in) financing activities 2,142,610 (430,107)
(Decrease)/increase in cash and cash equivalents (900,795) 418,252
Effect of foreign exchange rate changes (102,126) (14,190)
Cash and cash equivalents at the beginning of the year 3,858,144 3,454,082
Cash and cash equivalents at the end of the year 24 2,855,223 3,858,144
145 2014/15 Annual Report Lenovo Group Limited
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended March 31, 2015
Attributable to equity holders of the Company
Share
capital
Share
premium
Investment
revaluation
reserve
Share
redemption
reserve
Employee
share
trusts
Share-
based
compensation
reserve
Hedging
reserve
Exchange
reserve
Other
reserve
Retained
earnings
Non-
controlling
interests
Put option
written on
non-
controlling
interest Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At April 1, 2013 33,465 1,654,806 16,080 1,188 (22,197) (3,149) 35,079 (166,850) 64,457 1,053,764 226,438 (212,900) 2,680,181
Profit for the year – – – – – – – – – 817,228 242 – 817,470
Other comprehensive
(loss)/income – – (22,814) – – – (38,288) (68,531) – 4,177 – – (125,456)
Total comprehensive (loss)/
income for the year – – (22,814) – – – (38,288) (68,531) – 821,405 242 – 692,014
Transfer to statutory reserve – – – – – – – – 2,379 (2,379) – – –
Exercise of share options 816 5,130 – – – – – – – – – – 5,946
Repurchase of shares (164) (45,304) – 164 – – – – – – – – (45,304)
Vesting of shares under
long-term incentive
program – – – – 73,882 (100,747) – – – – – – (26,865)
Share-based compensation – – – – – 80,274 – – – – – – 80,274
Contribution to employee
share trusts – – – – (100,688) – – – – – – – (100,688)
Dividends paid – – – – – – – – – (266,692) – – (266,692)
Change in ownership interest
in a subsidiary – – – – – – – – – – 810 – 810
Release of escrow shares
for settlement of
acquisition consideration – – – – – – – – 5,044 – – – 5,044
Transfer to share capital
(Note 29, 30) 1,615,984 (1,614,632) – (1,352) – – – – – – – – –
At March 31, 2014 1,650,101 – (6,734) – (49,003) (23,622) (3,209) (235,381) 71,880 1,606,098 227,490 (212,900) 3,024,720
At April 1, 2014 1,650,101 – (6,734) – (49,003) (23,622) (3,209) (235,381) 71,880 1,606,098 227,490 (212,900) 3,024,720
Profit for the year – – – – – – – – – 828,715 7,888 – 836,603
Other comprehensive
income/(loss) – – 7,326 – – – 121,291 (598,733) – (68,973) – – (539,089)
Total comprehensive income/
(loss) for the year – – 7,326 – – – 121,291 (598,733) – 759,742 7,888 – 297,514
Acquisition of businesses – – – – – 121,252 – – – – – – 121,252
Transfer to statutory reserve – – – – – – – – 3,832 (3,832) – – –
Issue of ordinary shares 1,039,396 – – – – – – – – – – – 1,039,396
Exercise of share options 385 – – – – – – – – – – – 385
Vesting of shares under
long-term incentive
program – – – – 166,927 (237,448) – – – – – – (70,521)
Deferred tax credit in relation
to long-term
incentive program – – – – – 9,693 – – – – – – 9,693
Share-based compensation – – – – – 139,977 – – – – – – 139,977
Contribution to employee
share trusts – – – – (129,365) – – – – – – – (129,365)
Dividends paid – – – – – – – – – (326,930) – – (326,930)
At March 31, 2015 2,689,882 – 592 – (11,441) 9,852 118,082 (834,114) 75,712 2,035,078 235,378 (212,900) 4,106,121
146 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
1 GENERAL INFORMATION AND BASIS OF PREPARATION
Lenovo Group Limited (the “Company”) and its subsidiaries (together, the “Group”) develop, manufacture and market reliable,
high-quality, secure and easy-to-use technology products and services. Its product lines include legendary Think-branded
commercial personal computers and Idea-branded consumer personal computers, as well as servers, workstations, and a
family of mobile internet devices, including tablets and smartphones.
The Company is a limited liability company incorporated in Hong 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 Standards (“HKFRS”). The
financial statements have been prepared under the historical cost convention except that certain financial assets and financial
liabilities are stated at fair values, as explained in the significant accounting policies set out below.
The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 4.
Changes in accounting policies and disclosures
The Group has adopted the following new interpretation and amendments to existing standards that are mandatory for the
year ended March 31, 2015 which the Group considers are appropriate and relevant to its operations:
– HK(IFRIC) – Int 21, Levies
– Amendments to HKAS 32, Financial instruments: Presentation – Offsetting financial assets and financial liabilities
– Amendments to HKAS 36, Impairment of assets: Recoverable amount disclosures for non-financial assets
– Amendments to HKAS 39, Financial instruments: Recognition and measurement – Novation of derivatives and
continuation of hedge accounting
– Amendments to HKFRS 10, HKFRS 12, HKAS 27 (2011), Investment entities
The adoption of these newly effective interpretation and amendments to existing standards does not result in substantial
changes to the Group’s accounting policies or financial results.
In addition, the requirements of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance (Cap.622)
came into operation during the financial year; and as a result, there are changes to presentation and disclosure of certain
information in the consolidated financial statements.
At the date of approval of these financial statements, the following new standards and amendments to existing standards,
which are considered appropriate and relevant to the Group’s operations, have been issued but are not effective for the year
ended March 31, 2015 and have not been early adopted:
Effective for annual
periods beginning
on or after
HKFRS 15, Revenue from contracts with customers January 1, 2017
HKFRS 9, Financial instruments January 1, 2018
Amendments to HKAS 1, Presentation of financial statements January 1, 2016
Amendments to HKAS 19 (2011), Employee benefits July 1, 2014
Amendments to HKAS 16, Property, plant and equipment January 1, 2016
Amendments to HKAS 27 (2011), Separate financial statements January 1, 2016
Amendments to HKAS 28 (2011), Investments in associates and joint ventures January 1, 2016
Amendments to HKAS 38, Intangible assets January 1, 2016
Amendments to HKFRS 10, Consolidated financial statements January 1, 2016
Amendments to HKFRS 11, Joint arrangements January 1, 2016
Amendments to HKFRS 12, Disclosure of interest in other entities January 1, 2016
The adoption of these new standards and amendments to existing standards is not expected to have material impact on the
Group’s financial statements.
147 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
(a) Subsidiaries
(i) Consolidation
The consolidated financial statements include the financial statements of the Company and all of its subsidiaries
made up to March 31.
Subsidiaries are all entities (including structured entities) over which the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity generally accompanying a shareholding of more than one half of the voting rights. The existence
and effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Group controls another entity. The Group also assesses existence of control where it does not have
more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto
control. De-facto control may arise from circumstances where it does not have more than 50% of the voting power
but is able to govern the financial and operating policies by virtue of de-facto control such as enhanced 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, balances, income and expenses on transactions are eliminated. Profits and losses
resulting from inter-company transactions that are recognized in assets are also eliminated.
Adjustments have been made to the financial statements of subsidiaries when necessary to align their accounting
policies to ensure consistency with the policies adopted by the Group.
For subsidiaries which adopted December 31 as their financial year end date for statutory reporting purposes,
their financial statements for the years ended March 31, 2014 and 2015 have been used for the preparation of the
Group’s consolidated financial statements.
(ii) Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values
at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-
acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized
amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquirer’s previously held equity interest in the acquiree
is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are
recognized in profit or loss.
Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability
is recognized in the consolidated income statement or as a change to other comprehensive income. Contingent
consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within
equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred, the amount of any
non-controlling interest in the acquiree and, in a business combination achieved in stages the acquisition-date fair
value of any previous equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed
(Note 2(g)(i)). If it is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized
directly in the consolidated income statement.
148 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Subsidiaries (continued)
(iii) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity
transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair
value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary
is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
The potential cash payments related to put options issued by the Group over the equity of a subsidiary are
accounted for as financial liabilities when such options may only be settled other than by exchange of a fixed
amount of cash or another financial asset for a fixed number of shares in the subsidiary. The amount that may
become payable under the option on exercise is initially recognized at fair value as a written put option liability with
a corresponding charge directly to equity.
A written put option liability is subsequently re-measured at fair value as a result of the change in the expected
performance at each balance sheet date, with any resulting gain or loss recognized in the consolidated income
statement. In the event that the option expires unexercised, the written put option liability is derecognized with a
corresponding adjustment to equity.
(iv) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the
date when control is lost, with the change in carrying amount recognized in the consolidated income statement.
The fair value is the initial carrying amount for the purposes of subsequent accounting for the retained interest
as an associate, joint venture or financial asset. In addition, any amounts previously recognized as other
comprehensive income/expense in respect 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.
(v) Separate financial statements
Investments in subsidiaries in the Company’s balance sheet are accounted for at cost less impairment. The results
of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments
if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or
if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the
consolidated financial statements of the investee’s net assets including goodwill.
(b) Associates and joint ventures
Associates are entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual
rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined
them to be joint ventures.
Interests in associates and joint ventures are accounted for using the equity method of accounting and are initially
recognized at cost. The Group’s interests in associates and joint ventures include goodwill identified on acquisition, net
of any accumulated impairment losses.
If the ownership interest in an associate or a joint venture is reduced but significant influence is retained, only a
proportionate share of the amounts previously recognized in other comprehensive income are reclassified to the
consolidated income statement where appropriate.
The Group’s share of its associates’ and joint ventures’ post-acquisition profits or losses is recognized in the
consolidated income statement, and its share of post-acquisition movements in other comprehensive income/expense
is recognized as other comprehensive income/expense with a corresponding adjustment to the carrying amount of the
investment. When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the
associate or the joint venture including any other unsecured receivables, the Group does not recognize further losses,
unless it has incurred legal or constructive obligations or made payments on behalf of the associate or the joint venture.
149 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Associates and joint ventures (continued)
The Group determines at each reporting date whether there is any objective evidence that the investment in the
associate and joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the
difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the
amount adjacent to share of profit/(loss) of associates and joint ventures in the consolidated income statement.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates or
joint ventures are recognized in the Group’s financial statements only to the extent of unrelated investor’s interests in
the associates or the joint ventures. Unrealized losses are eliminated unless the transaction provides evidence of an
impairment of the assets transferred.
Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with
the policies adopted by the Group.
For associates and joint ventures which adopted December 31 as their financial year end date for statutory reporting
purposes, their financial statements for the years ended March 31, 2014 and 2015 have been used for the preparation
of the Group’s consolidated financial statements.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Lenovo Executive Committee (the “LEC”) that makes
strategic decisions.
(d) Translation of foreign currencies
(i) Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary 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.
(ii) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in
equity as qualifying cash flow hedges and qualifying net investment hedges.
All foreign exchange gains and losses that relate to monetary assets and liabilities denominated in foreign currency
are presented in the income statement within “Other operating income/(expense) – net”.
Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale
are analyzed between translation differences resulting from changes in the amortized cost of the security and
other changes in the carrying amount of the security. Translation differences related to changes in the amortized
cost are recognized in the income statement, and other changes in the carrying amount are recognized as other
comprehensive income/expense and included in the investment revaluation reserve in equity.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through
profit or loss are recognized in the income statement as part of the fair value gain or loss. Translation differences
on non-monetary financial assets such as equities classified as available-for-sale are recognized as other
comprehensive income/expense and included in the investment revaluation reserve in equity.
(iii) The results and financial position of all the group entities that have a functional currency different from the Group’s
presentation currency are translated into the presentation currency as follows:
– assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
– income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the rates on the dates of the transactions); and
– all resulting exchange differences are recognized as other comprehensive income/expense.
150 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Translation of foreign currencies (continued)
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. Exchange differences arising are recognized as other
comprehensive income/expense and included in the exchange reserve in equity.
(iv) On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or
a disposal involving loss of control over a subsidiary, loss of joint control of a joint venture, or loss of significant
influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity
in respect of that operation attributable to the equity holders of the Company are reclassified to the consolidated
income statement.
In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a
foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling
interests and are not recognized in the consolidated income statement. For all other partial disposals (that is,
reductions in the Group’s ownership interest in an associate or a joint venture that do not result in the Group losing
influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to the
consolidated income statement.
(e) Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment
losses.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount 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 depreciated. Depreciation of buildings, buildings related equipment and leasehold improvements is
calculated using the straight-line method to allocate their costs to their estimated residual values over the unexpired
periods of the leases or their expected useful lives to the Group ranging from 10 to 50 years whichever is shorter.
Depreciation on other property, plant and equipment is calculated using the straight-line method to allocate their costs
to their estimated residual values over their estimated useful lives to the Group. The principal annual rates used for this
purpose are:
Plant and machinery
Tooling equipment 50%
Other machinery 14 – 20%
Furniture and fixtures 20 – 25%
Office equipment 20 – 33%
Motor vehicles 20%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An
asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 2(h)).
Gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the
carrying amount of the relevant asset, and is recognized within “Other operating income/(expense) – net” in the income
statement.
(f) Construction-in-progress
Construction-in-progress represents buildings, plant and machinery and internal use software under construction and
pending installation and is stated at historical cost, less any accumulated impairment losses. Historical cost comprises
all direct and indirect costs of acquisition or construction or installation of buildings, plant and machinery or internal use
software as well as interest expenses and exchange differences on the related funds borrowed during the construction,
installation and testing periods and prior to the date when the assets were available for use. No depreciation or
amortization is provided for on construction-in-progress. On completion, the carrying values of the buildings, plant and
machinery or internal use software are transferred from construction-in-progress to property, plant and equipment or
intangible assets.
151 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Intangible assets
(i) Goodwill
Goodwill represents the excess of the consideration of an acquisition transferred over the Group’s interests in the
fair value of the acquiree’s identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill
on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates and joint
ventures is included in interests in associates and joint ventures.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of
the cash-generating units (“CGU”), or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the
entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating
segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense
and is not subsequently reversed.
(ii) Trademarks and trade names
Separately acquired trademarks and trade names are shown at historical cost. Trademarks and trade names
acquired in a business combination are recognized at fair value at the acquisition date.
Trademarks and trade names that have an indefinite useful life are tested annually for impairment and carried at
cost less accumulated impairment losses.
Trademarks and trade names that have a definite useful life are carried at cost less accumulated amortization.
Amortization is calculated using the straight-line method to allocate the cost of trademarks and trade names over
their estimated useful lives of up to 8 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 and are carried at cost less accumulated amortization. Amortization is
calculated using the straight-line method over their estimated useful lives.
The estimated useful lives for customer relationships at the balance sheet date are not more than 15 years.
(iv) Internal use software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use
the specific software.
Development costs that are directly attributable to the design and testing of identifiable and unique software
controlled by the Group are recognized as intangible assets when the following criteria are met:
– it is technically feasible to complete the software so that it will be available for use;
– management intends to complete the software and use or sell it;
– there is an ability to use or sell the software;
– it can be demonstrated how the software will generate probable future economic benefits;
– adequate technical, financial and other resources to complete the development and to use or sell the
software are available; and
– the expenditure attributable to the software during its development can be reliably measured.
Development costs include the employee costs incurred as a result of developing software and an appropriate
portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognized as an expense as incurred.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Costs associated with maintaining computer software are recognized as an expense as incurred.
Acquired computer software licenses costs and computer software development costs are amortized using the
straight-line method over their estimated useful lives of not more than 5 years.
152 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Intangible assets (continued)
(v) Patents, technology and marketing rights
Expenditure on acquired patents, technology and marketing rights is capitalized at historical cost upon acquisition
and amortized using the straight-line method over their estimated useful lives of not more than 10 years.
(h) Impairment of non-financial assets
Assets that have an indefinite useful life or are not yet available for use are not subject to depreciation or amortization
and are tested annually for impairment. Assets that are subject to depreciation or amortization are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
(i) Financial assets
Classification
The Group classifies its financial assets into: (i) at fair value through 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.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading, and those designated at
fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for
the purpose of selling in the short term or if so designated by management. Derivatives are also categorized as
held for trading unless they are designated as hedges (Note 2(k)). Assets in this category are classified as current
assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for maturities greater than 12 months after the
balance sheet date which are classified as non-current assets. Loans and receivables comprise trade, notes and
other receivables, deposits, bank deposits and cash and cash equivalents in the balance sheet (Note 2 and
2(o)).
(iii) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified
in any of the other categories. They are included in non-current assets unless mature or management intends to
dispose of them within 12 months of the balance sheet date.
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 are initially
recognized at fair value plus transaction costs. Financial assets carried at fair value through profit or loss are initially
recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized
when the rights to receive cash flows from the investments have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair
value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at
amortized cost using the effective interest method.
Gains and losses arising from changes in the fair value of the “Financial assets at fair value through profit or loss”
category are presented in the income statement in the period in which they arise. Dividend income from financial assets
at fair value through profit or loss is recognized in the income statement as part of other income when the Group’s right
to receive payments is established.
153 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Financial assets (continued)
Recognition and measurement (continued)
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized as
other comprehensive income/expense.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments previously
recognized as other comprehensive income/expense are reclassified to the income statement as gains or losses from
securities.
Interest on available-for-sale securities calculated using the effective interest method is recognized in the income
statement as part of other income. 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 when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset
and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or
the counterparty
(j) Impairment of financial assets
(i) Assets carried at amortized cost
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment
losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred
after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is
reduced and the amount of the loss is recognized in the income statement. If a loan or held-to-maturity investment
has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an
instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized (such as improvement in the debtor’s credit
rating), the reversal of the previously recognized impairment loss is recognized in the income statement.
(ii) Assets classified as available-for-sale
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a
group of financial assets is impaired.
For debt securities, the Group uses the criteria referred to in (i) above. If, in a subsequent period, the fair value of
a debt instrument increases and the increase can be objectively related to an event occurring after the impairment
loss was recognized in the income statement, the impairment loss is reversed through the income statement.
For equity investments, a significant or prolonged decline in the fair value of the security below its cost is also
evidence that the assets are impaired. If any such evidence exists, the cumulative losses, measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognized in the income statement, is removed from equity and recognized in the income statement.
Impairment losses recognized in the income statement on equity instruments are not reversed through the income
statement.
154 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(k) Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-
measured at their fair values. The method of recognizing the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain
derivatives as either: (i) hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge)
or (ii) hedges of highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of
the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged
item is less than 12 months. Trading derivatives are classified as a current asset or liability.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in the
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk.
(ii) Cash flow hedge
The effective portion of changes 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.
Amounts accumulated in equity are reclassified to the income statement in the periods when the hedged item
affects profit or loss (for example, when the forecast sale or purchase that is hedged takes place). The gain or loss
relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the income
statement within “Finance costs”. The gain or loss relating to the ineffective portion is recognized in the income
statement within “Other operating income/(expense) – net”.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gains or losses on the hedging instrument that has been recognized as other comprehensive
income from the period when the hedge was effective shall remain separately in equity until the forecast
transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gains or losses on
the hedging instrument that has been recognized as other comprehensive income from the period when the hedge
was effective shall be reclassified from equity to the income statement immediately.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are recognized immediately in the income statement.
(l) Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt
instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of subsidiaries
or associates to secure loans, overdrafts and other banking facilities.
Financial guarantees are initially recognized in the financial statements at fair value on the date the guarantee was given.
The fair value of a financial guarantee at the time of signature is zero because all guarantees are agreed on arm’s length
terms, and the value of the premium agreed corresponds to the value of the guarantee obligation. No receivable for
the future premiums is recognized. Subsequent to initial recognition, the Group’s liabilities under such guarantees are
measured at the higher of the initial amount, less amortization of fees recognized in accordance with HKAS 18, and the
best estimate of the amount required to settle the guarantee. These estimates are determined based on experience of
similar transactions and history of past losses, supplemented by management’s judgment. The fee income earned is
recognized on a straight-line basis over the life of the guarantee. Any increase in the liability relating to guarantees is
reported in the consolidated income statement within “Other operating expense”.
155 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Financial guarantee contracts (continued)
Where guarantees in relation to loans or other payables of subsidiaries or associates are provided with no consideration,
the fair values are accounted for as contributions and recognized as part of the cost of the investment in the financial
statements of the Company.
(m) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined on a weighted average basis. The
cost of finished goods (except for trading products) and work-in-progress comprises direct materials, direct labor and
an attributable proportion of production overheads. For trading products, cost represents invoiced value on purchases,
less purchase returns and discounts. Net realizable value is determined on the basis of anticipated sales proceeds less
estimated selling expenses.
Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course
of business. Majority of other receivables are amounts due from subcontractors for part components sold in the ordinary
course of business. Trade and other receivables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method, less provision 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.
(o) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents mainly comprise cash on hand, 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.
(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 consideration paid,
including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the
Company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any
consideration received (net of any directly attributable incremental transaction costs and the related income tax effects)
is included in equity attributable to the Company’s equity holders.
(q) Borrowings and borrowing costs
Borrowings are recognized initially at fair value, net of transaction costs incurred. Transaction costs are incremental
costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including
fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities
exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortized cost; any difference
between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over
the period of the borrowings using the effective interest method.
Borrowings are 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.
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(r) Trade and other payables
Trade payables are obligations to pay for part components or services that have been acquired in the ordinary course of
business from suppliers. Majority of other payables are obligations to pay for finished goods that have been acquired in
the ordinary course of business from subcontractors. Trade and other payables are recognized initially at fair value and
subsequently measured at amortized cost using the effective interest method.
156 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(r) Trade and other payables (continued)
Trade and other payables are classified as current liabilities if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are presented as non-current liabilities.
(s) Provisions
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognized as interest expense.
(i) Warranty provision
The Group records warranty liabilities at the time of sale for the estimated costs that will be incurred under its basic
limited warranty. The specific warranty terms and conditions vary depending upon the product and the country in
which it was sold, but generally includes technical support, repair parts and labor associated with warranty repair
and service actions. The period ranges from one to three years. The Group reevaluates its estimates on a quarterly
basis to assess the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
(ii) Other provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognized when: the Group has
a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will
be required to settle the obligation; and the amount has been reliably estimated. Restructuring costs provision
comprises lease termination penalties and employee termination payments. Provisions are not recognized for future
operating losses.
(t) Current and deferred income tax
The tax expense for the period comprises current and deferred income tax.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
balance sheet date in the countries where the Company and its subsidiaries, joint ventures and associates operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not
recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the
related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and
associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by
the same tax authority on either the taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
157 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(u) Contingent liabilities
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by
the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It
can also be a present obligation arising from past events that is not recognized because it is not probable that outflow
of economic resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognized but is disclosed in the notes to the financial statements. When a change in the
probability of an outflow occurs so that the outflow is probable, it will then be recognized as a provision.
(v) Revenue
Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in
the normal course of the Group’s activities.
(i) Sale of goods and services
Revenue from sale of hardware, software and peripherals, services and mobile devices is recognized, net of value-
added tax, an allowance for estimated returns, rebates and discounts, when both ownership and risk of loss are
effectively transferred to customer, generally when there is a persuasive evidence that a sales arrangement exists,
the price is fixed or determinable, collectability is reasonably assured and delivery has occurred. Revenue from
extended warranty contracts is deferred and amortized as earned over the contract period, ranging from one to
four years. Revenue associated with undelivered elements is deferred 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 delivered and
revenue is recognized.
(ii) Interest income
Interest income is recognized using the effective interest method. When a receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the
original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest
income on impaired receivables is recognized using the original effective interest rate.
(iii) Dividend income
Dividend income is recognized when the right to receive payment is established.
(w) Non-base manufacturing costs
Non-base manufacturing costs are costs that are periodic in nature as opposed to product specific. They are typically
incurred after the physical completion of the product and include items such as outbound freight for in-country finished
goods shipments, warranty 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.
(x) Employee benefits
(i) Pension obligations
The Group operates various pension schemes. The schemes are generally funded through payments to insurance
companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both
defined benefit and defined contribution plans.
A defined benefit plan is a pension plan which defines an amount of pension benefit that 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 less the fair value of plan assets. Significant portion of the
defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will
be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries
where there is no deep market in such bonds, the market rates on government bonds are used.
158 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) Employee benefits (continued)
(i) Pension obligations (continued)
The current service cost of the defined benefit plan, recognised in the income statement in employee benefit
expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation
results from employee service in the current year, benefit changes, curtailments and settlements.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation
and the fair value of plan assets. This cost is included in employee benefit expense in the income statement.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognized as other comprehensive income/expense in the year in which they arise.
Past service costs are recognized immediately in the income statement.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate
entity. The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Group has no legal or constructive obligations to pay further contributions if the
fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current
and prior periods. The contributions are recognized as employee benefit expense when they are due and are
reduced by employer’s portion of voluntary contributions forfeited by those employees who leave the scheme prior
to vesting fully. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in
the future payments is available.
The Group’s contributions to local municipal government retirement schemes in connection with retirement benefit
schemes in the Mainland of China (“Chinese Mainland”) are expensed as incurred. The local municipal governments
in the Chinese Mainland assume the retirement benefit obligations of the qualified employees.
(ii) Post-employment medical benefits
The Group operates a number of post-employment medical benefit schemes, the largest being in the United
States. The entitlement to these benefits is usually conditional on the employee remaining in service up to
retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued
over the period of employment using an accounting methodology similar to that for defined benefit pension
plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognized as other comprehensive income/expense in the period in which they arise. The obligations of these
schemes in the United States are valued annually by independent qualified actuaries.
(iii) Long-term incentive program
The Group operates a long-term incentive program to recognize employees’ individual and collective contributions,
and includes two 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 the Long-term
Incentive Awards is recognized as employee benefit expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the Long-term Incentive Awards granted, including any market
performance conditions (for example, an entity’s share price); excluding the impact of any service and non-market
performance vesting conditions (for example, profitability and sales growth targets); and including the impact of
non-vesting conditions. Non-market performance and service conditions are included in assumptions about the
number of Long-term Incentive Awards that are expected to become exercisable/vested. The total expense is
recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied.
At each balance sheet date, the Group revises its estimates of the number of Long-term Incentive Awards that are
expected to become exercisable. It recognizes the impact of the revision of original estimates, if any, in the income
statement, with a corresponding adjustment to share-based compensation reserve under equity.
Employee share trusts are established for the purposes of awarding shares to eligible employees under the long-
term incentive program. The employee share trusts are administered by independent trustees and are funded by
the Group’s cash contributions and recorded as contributions to employee share trusts, an equity component. The
administrator of the employee share trusts buys the Company’s shares in the open market for award to employees
upon vesting.
Upon vesting, the corresponding amounts in the share-based compensation reserve will be transferred to share
capital for new allotment of shares to employees, or to the employee share trusts for shares awarded to employees
by the employee share trusts.
159 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) Employee benefits (continued)
(iv) Share options
In accordance with the transitional provision of HKFRS 2, share options granted after November 7, 2002 and
unvested on April 1, 2005 were expensed retrospectively in the income statement of the respective periods. At
April 1, 2005, the Group had no option granted after November 7, 2002 that had not yet vested on that day. The
proceeds received net of any directly attributable transaction costs are credited to share capital when the options
are exercised.
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will
be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized as “Other operating income – net” in the consolidated
income statement over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred
government grants and are credited to the consolidated income statement on a straight-line basis over the expected
lives of the related assets.
(z) Operating leases (as the lessee)
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are
accounted for as operating leases. Payments made under operating leases (net of any incentives received from the
lessor) are charged to the income statement on a straight-line basis over the lease term.
(aa) Related party transactions
A related party transaction is a transfer of resources, services or obligations between the Group and a related party of
the Group, regardless of whether a price is charged.
(i) A person, or a close member of that person’s family, is related to the Group if that person:
– has control or joint control over the Group;
– has significant influence over the Group; or
– is a member of the key management personnel of the Group or the Group’s parent.
(ii) An entity is related to the Group if any of the following conditions applies:
– The entity and the Group are members of the same group (which means that each parent, subsidiary and
fellow subsidiary is related to the others).
– One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of
a group of which the other entity is a member).
– Both entities are joint ventures of the same third party.
– One entity is a joint venture of a third entity and the other entity is an associate of the third party.
– The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity
related to the Group.
– The entity is controlled or jointly controlled by a person identified in (i) above.
– A person, or a close member of that person’s family, who has control or joint control over the Group, has
significant influence over the entity or is a member of the key management personnel of the entity (or of a
parent of the entity).
(ab) Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s and Company’s financial
statements in the period in which the dividends are approved by the Company’s shareholders in case of final dividend
and by the Company’s directors in case of interim dividend.
160 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks, such as market risk (including foreign currency risk and cash
flow interest rate risk), credit risk, and liquidity risk. The Group’s overall financial risk management program focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The
Group uses derivative financial instruments to hedge certain risk exposures. Financial risk management is carried out by the
centralized treasury department (“Group Treasury”).
(a) Financial risk factors
(i) Foreign currency risk
The Group operates internationally and is exposed to foreign currency risk arising from various currency exposures,
primarily with respect to United States dollar, Renminbi and Euro. Foreign currency risk arises from future
commercial transactions, recognized assets and liabilities and net investment in foreign operations denominated in
a currency that is not the group companies’ functional currency.
Management has set up a policy to require group companies to manage their foreign currency risk against their
functional currency. The Group’s forward foreign currency contracts are either used to hedge a percentage of
anticipated cash flows (mainly export sales and purchase of inventories) which are highly probable, or used as fair
value hedges for the identified assets and liabilities.
For segment reporting purposes, external hedge contracts on assets, liabilities or future transactions are
designated to each operating segment, as appropriate.
The following tables detail the Group’s exposure at the balance sheet date to currency risk arising from recognized
assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate,
except for the currency risk between United States dollar and Hong Kong dollar given the two currencies are under
the linked exchange rate system. For presentation purposes, the amounts of the exposure are shown in United
States dollar, 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.
2015 2014
United
States dollar Renminbi Euro
United
States dollar Renminbi Euro
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Trade and other receivables 262,319 14 167,002 237,972 868 134,557
Bank deposits and cash and
cash equivalents 112,198 38,411 10,286 94,725 942 23,513
Trade and other payables (1,224,378) (22,997) (14,541) (1,288,099) (2,739) (167,550)
Intercompany balances
before elimination (1,683,160) 388,212 (172,687) (1,784,195) 43,639 (305,352)
Gross exposure (2,533,021) 403,640 (9,940) (2,739,597) 42,710 (314,832)
Notional amounts of forward
exchange contracts used
as economic hedges 2,775,878 – 128,162 2,480,232 – 230,954
Net exposure 242,857 403,640 118,222 (259,365) 42,710 (83,878)
161 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT (continued)
(a) Financial risk factors (continued)
(ii) Cash flow interest rate risk
The Group’s interest rate risk mainly arises from short-term and long-term borrowings denominated in United
States dollar. It is the Group’s policy to mitigate interest rate risk through the use of appropriate interest rate
hedging instruments. Generally, the Group manages its cash flow interest rate risk by using floating-to-fixed interest
rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to
fixed rates. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals
(primarily quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by
reference to the agreed notional amounts.
The Group operates various customer financing programs. The Group is exposed to fluctuation of interest rates of
all the currencies covered by those programs.
(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 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 significant concentration of customer credit risk. The Group has a credit policy in place and
exposures to these credit risks are monitored on an ongoing basis.
No credit limits were exceeded by any customers during the reporting period, and management does not expect
any significant losses from non-performance by these counterparties.
(iv) Liquidity risk
Cash flow forecasting of the Group is performed by Group Treasury. It monitors rolling forecasts of the Group’s
liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient
headroom on its undrawn committed borrowing facilities (Note 27) at all times so that the Group does not breach
borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into
consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio
targets and, if applicable external regulatory or legal requirements, for example, currency restrictions.
Surplus cash held by the operating entities over and above balances required for working capital management
are transferred to Group Treasury. Group Treasury invests surplus cash in interest bearing current accounts, time
deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or
sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts, At the balance
sheet date, the Group held money market funds of US$744,233,000 (2014: US$719,704,000) (Note 24).
The tables below analyze the Group’s non-derivative financial liabilities and derivative financial liabilities into
relevant maturity groupings based on the remaining periods at the balance sheet date to the contractual maturity
dates. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for
an understanding of the timing of the cash flows. The amounts disclosed in the tables are the contractual
undiscounted cash outflows/(inflows).
162 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT (continued)
(a) Financial risk factors (continued)
(iv) Liquidity risk (continued)
Repayable
on demand
or 3 months
or less
Over
3 months
to 1 year
Over 1 to
3 years
Over 3 to
5 years
Over
5 years Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At March 31, 2015
Borrowings 1,055,770 121,384 – 1,900,000 – 3,077,154
Trade, notes and other payables
and accruals 10,084,163 3,899,707 – – – 13,983,870
Contingent considerations – 43,251 275,000 – – 318,251
Deferred considerations – – 1,502,172 – – 1,502,172
Guaranteed dividend to
non-controlling shareholders
of a subsidiary – 5,318 9,749 – – 15,067
Written put option liability – – 224,790 – – 224,790
Others – – 133,400 109,106 – 242,506
Derivatives settled in net:
Forward foreign exchange
contracts 1,297 – – – – 1,297
Derivatives settled in gross:
Forward foreign exchange
contracts
– outflow 6,117,803 1,006,623 – – – 7,124,426
– inflow (7,112,439) (1,024,005) – – – (8,136,444)
At March 31, 2014
Borrowings 47,282 398,195 10,125 – – 455,602
Trade, notes and other payables
and accruals 10,473,838 1,065,166 – – – 11,539,004
Contingent considerations – – 318,251 – – 318,251
Deferred consideration – – 2,172 – – 2,172
Guaranteed dividend to
non-controlling shareholders
of a subsidiary – 6,833 19,359 – – 26,192
Written put option liability – – 224,790 – – 224,790
Others – – 88,747 58,276 9,629 156,652
Derivatives settled in net:
Forward foreign exchange
contracts 19,941 – – – – 19,941
Derivatives settled in gross:
Forward foreign exchange
contracts
– outflow 5,245,168 226,392 – – – 5,471,560
– inflow (5,290,774) (229,500) – – – (5,520,274)
163 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT (continued)
(b) Market risks sensitivity analysis
HKFRS 7 “Financial instruments: Disclosures” requires the disclosure of a sensitivity analysis for market risks that show
the effects of a hypothetical change in the relevant market risk variable to which the Group is exposed to at the balance
sheet date on profit or loss and total equity.
The sensitivity analysis for each type of market risks does not reflect inter-dependencies between risk variables. The
sensitivity analysis assumes that a hypothetical change of the relevant risk variable had occurred at the balance sheet
date and had been applied to the relevant risk variable in existence on that date. The bases and assumptions adopted
in the preparation of the analyses will by definition, seldom equal to the related actual results.
The disclosure of the sensitivity analysis on market risks is solely for compliance with HKFRS 7 disclosure requirements
in respect of financial instruments, and are for illustration purposes only; and it should be noted that the hypothetical
amounts so generated do not represent a projection of likely future events and profits or losses of the Group.
(i) Foreign currency exchange rate sensitivity analysis
At March 31, 2015, if United States dollar had weakened/strengthened by one percent against the major
currencies with all other variables held constant, post-tax profit for the year would have been US$2.7 million
higher/lower (2014: US$2.2 million higher/lower), mainly as a result of foreign exchange gains/losses on translation
of unhedged portion of receivable and payable balances.
The analysis above is based on the assumption that United States dollar weakened or strengthened against all
other currencies in the same direction and magnitude, but it may not be necessarily true in reality.
(ii) Interest rate sensitivity analysis
At March 31, 2015, if interest rate on borrowings had been 25 basis points higher/lower with all other variables
held constant, post-tax profit for the year would have been US$1.5 million (2014: US$0.9 million) lower/higher.
At March 31, 2015, if interest rates on customer financing programs had been 25 basis points higher/lower with all
other variables held constant, post-tax profit for the year would have been US$2.8 million (2014: US$2.2 million)
lower/higher. This analysis is based on the assumption that the interest rates of all the currencies covered by the
customer financing programs go up and down at the same time and with the same magnitude; however, such
assumptions may not be necessarily true in reality.
(c) Capital risks management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in
order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of gearing ratio. This ratio is calculated
as total borrowings (including current and non-current borrowings) divided by total equity. The Group’s strategy remains
unchanged and the gearing ratios and net (debt)/cash position of the Group as at March 31, 2015 and 2014 are as
follows:
2015 2014
US$ million US$ million

Bank deposits and cash and cash equivalents 3,026 3,953
Less: total borrowings (3,054) (455)
Net (debt)/cash position (28) 3,498
Total equity 4,106 3,025
Gearing ratio 0.74 0.15
164 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT (continued)
(d) Fair value estimation
The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows:
– Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities
– Level 2 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices)
– Level 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet
date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the
current bid price. These instruments are included in Level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined by using valuation techniques. These valuation techniques maximize the use of observable market data
where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value
an instrument are observable, the instrument is included in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Specific valuation techniques used to value financial instruments include:
– The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves.
– The fair value of forward foreign exchange contracts is determined using 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.
The following table presents the assets and liabilities that are measured at fair value at March 31, 2015 and 2014.
2015 2014
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Assets
Available-for-sale financial assets
Listed equity investments 39,292 – – 39,292 10,455 – – 10,455
Unlisted equity investments – – 34,108 34,108 – – 24,702 24,702
Derivative financial assets – 184,534 – 184,534 – 61,184 – 61,184
39,292 184,534 34,108 257,934 10,455 61,184 24,702 96,341
Liabilities
Derivative financial liabilities – 80,897 – 80,897 – 58,462 – 58,462
Contingent considerations – – 312,083 312,083 – – 307,183 307,183
Written put option liability – – 219,317 219,317 – – 217,157 217,157
– 80,897 531,400 612,297 – 58,462 524,340 582,802
There were no significant transfers of financial assets between Level 1 and Level 2 fair value hierarchy classification
during the years ended March 31, 2015 and 2014.
165 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT (continued)
(d) Fair value estimation (continued)
The movements in the financial assets and liabilities included in Level 3 fair value hierarchy for the years ended March
31, 2015 and 2014 are as follows:
Available-for-sale financial assets
2015 2014
US$’000 US$’000

At the beginning of the year 24,702 16,162
Exchange adjustment (459) (10)
Additions 9,865 8,550
At the end of the year 34,108 24,702
Contingent considerations and written put option liability
2015 2014
US$’000 US$’000

At the beginning of the year 524,340 517,385
Exchange adjustment (8) (235)
Recognized in consolidated income statement 7,068 7,190
At the end of the year 531,400 524,340
Total losses for the year included in profit or loss under “finance costs” 7,060 6,955
Changes in unrealized losses for the year included in profit or loss 7,060 6,955
No sensitivity analysis for unlisted equity investments is presented as a reasonably possible change in key assumptions
used in the sensitivity analysis would not result in any significant potential financial impact. Sensitivity analysis in respect
of contingent considerations and written put option liability is disclosed in Note 28.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements often requires the use of judgment to select specific accounting methods and
policies from several acceptable alternatives. Estimates and judgments used in preparing the financial statements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the related actual results. The following are the more
significant assumptions and estimates, as well as the accounting policies and methods used in the preparation of the financial
statements:
(a) Impairment of non-financial assets
The Group tests at least annually whether goodwill and other assets that have indefinite useful lives have suffered any
impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset exceeds its recoverable amount. The recoverable amounts of an asset or a cash-
generating unit have been determined based on value-in-use calculations. These calculations require the use of
estimates.
The value-in-use calculations primarily use cash flow projections based on financial budgets, in general covered five
years, were approved by management and estimated terminal values at the end of the five-year period. There are a
number of assumptions and estimates involved for the preparation of cash flow projections for the period covered by
the approved budget and the estimated 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.
166 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
(a) Impairment of non-financial assets (continued)
Management prepared the financial budgets reflecting actual and prior year performance and market development
expectations. Judgment is required to determine key assumptions adopted in the cash flow projections and changes to
key assumptions can significantly affect these cash flow projections and therefore the results of the impairment reviews.
(b) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining
the worldwide provision for income taxes. There are certain transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of business. The tax liabilities recognized are based on
management’s assessment of the likely outcome.
The Group recognizes liabilities for anticipated tax audit issues based on estimates 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.
Deferred income tax assets are mainly recognized for temporary differences such as warranty provision, accrued
sales rebates, bonus accruals, and other accrued expenses, and unused tax losses carried forward to the extent it is
probable that future taxable profits will be available against which deductible temporary differences and the unused
tax losses can be utilized, based on all available evidence. Recognition primarily involves judgment regarding the
future financial performance of the particular legal entity or tax group in which the deferred income tax asset has been
recognized. A variety of other factors are also evaluated in considering whether there is convincing evidence that it is
probable that some portion or all of the deferred income tax assets will ultimately be realized, such as the existence of
taxable temporary differences, group relief, tax planning strategies and the periods in which estimated tax losses can
be utilized. The carrying amount of deferred income tax assets and related financial models and budgets are reviewed
at each balance sheet date and to the extent that there is insufficient convincing evidence that sufficient taxable profits
will be available within the utilization periods to allow utilization of the carry forward tax losses, the asset balance will be
reduced and the difference charged to the income statement.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the income tax provisions and deferred income tax assets and liabilities in the period in which such
determination is made.
(c) Warranty provision
Warranty provision is based on the estimated cost of product warranties when revenue is recognized. Factors that affect
the Group’s warranty liability include the number of sold units currently under warranty, historical and anticipated rates
of warranty claims on those units, and cost per claim to satisfy our warranty obligation. The estimation basis is reviewed
on an on-going basis and revised where appropriate. Certain of these costs are reimbursable from the suppliers in
accordance with the terms of relevant arrangements with the suppliers. These amounts are recognized as a separate
asset, to the extent of the amount of the provision made, when it is virtually certain that reimbursement will be received
if the Group settles the obligation.
(d) Revenue recognition
Application of various accounting principles related to the measurement and recognition of revenue requires the Group
to make judgments and estimates. Specifically, complex arrangements with non-standard terms and conditions may
require significant contract interpretation to determine the appropriate accounting, including whether the deliverables
specified in a multiple element arrangement should be treated as separate units of accounting. Other significant
judgments include determining whether the Group or a reseller is acting as the principal in a transaction and whether
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 with reference to historical data. Revenue recognition is also impacted by the Group’s ability to estimate volume
discounts, price protection and rebates, marketing development funds. The Group considers various factors, including a
review of specific transactions, historical experience, market and economic conditions and channel inventory level when
calculating these provisions and allowances.
167 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
(d) Revenue recognition (continued)
Revenue from sales of goods is recognized when both ownership and risk of loss are effectively transferred to customer.
Risk of loss associated with goods-in-transit is generally retained by the Group. The Group books revenue upon delivery
of products, and defers the amounts of revenue based on the estimated days-in-transit at the end of each month. The
days-in-transit is estimated based on the Group’s 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.
(e) Retirement benefits
Pension and other post-retirement 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 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 assets is based on market expectations for returns over the life of the related
assets and obligations. The salary growth assumptions reflect the Group’s long-term actual experience and future and
near-term outlook. Actual results that differ from the assumptions are generally recognized in the year they occur.
(f) Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make
assumptions that are mainly based on market conditions existing at each balance sheet date. The Group has used
discounted cash flow analyses for various available-for-sale financial assets that are not traded in active markets.
(g) Fair value of contingent considerations and written put option liabilities
Certain of the Group’s business combination activities involved post-acquisition performance-based contingent
considerations. The Group recognizes contingent considerations and the corresponding written put option liabilities
at their fair values which are determined in accordance with the terms under those relevant agreements and with
reference to the estimated post-acquisition performance of the acquired subsidiaries/businesses. Judgment is required
to determine key assumptions (such as growth rate, margins and discount rate) adopted in the estimation of post-
acquisition performance of the acquired subsidiaries/businesses. Changes to key assumptions can significantly affect
the amounts of future liabilities. Contingent considerations shall be re-measured at their fair value resulting from events
or factors emerge after the acquisition date, with any resulting gain or loss recognized in the consolidated income
statement.
(h) Fair value of identifiable assets and liabilities acquired through business combinations
The Group applies the acquisition method to account for business combinations, which requires the Group to record
assets acquired and liabilities assumed at their fair values on the date of acquisition. Significant judgment is used to
estimate the fair values of the assets and liabilities acquired, including estimating future cash flows from the acquired
business, determining appropriate discount rates, asset lives and other assumptions.
5 SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by the LEC, the chief operating
decision-maker, that are used to make strategic decisions.
The LEC considers business from a geographical perspective. The Group has four geographical segments, China, Asia Pacific
(“AP”), Europe-Middle East-Africa (“EMEA”) and Americas (“AG”), which are also the Group’s reportable operating segments.
The LEC assesses the performance of the operating segments based on a measure of adjusted pre-tax income/(loss).
This measurement basis excludes the effects of non-recurring expenditure such as restructuring costs from the operating
segments. The measurement basis also excludes the effects of unrealized gains/(losses) on financial instruments. Certain
interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury
function, which manages the cash position of the Group.
Supplementary information on segment assets and liabilities presented below is primarily based on the geographical location
of the entities or operations which carry the assets and liabilities, except for entities performing centralized functions for the
Group the assets and liabilities of which are not allocated to any segment.
168 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
5 SEGMENT INFORMATION (continued)
(a) Segment revenue and adjusted pre-tax income for reportable segments
2015 2014
Revenue
from
external
customers
Adjusted
pre-tax
income
Revenue
from
external
customers
Adjusted
pre-tax
income
US$’000 US$’000 US$’000 US$’000

China 14,700,270 794,795 14,725,659 788,130
AP 6,549,339 302,183 6,162,919 109,350
EMEA 12,803,357 410,858 9,580,700 187,482
AG 12,242,627 7,999 8,237,851 68,627
Segment total 46,295,593 1,515,835 38,707,129 1,153,589
Unallocated:
Headquarters and corporate expenses (449,142) (156,502)
Restructuring costs – (26)
Finance income 14,825 19,240
Finance costs (129,096) (33,754)
Net gain on disposal of
available-for-sale financial assets 1,185 21,880
Dividend income from an
available-for-sale financial asset 305 547
Share of profits of associates and
joint ventures 17,055 9,221
Consolidated profit before taxation 970,967 1,014,195
(b) Segment assets for reportable segments
2015 2014
US$’000 US$’000

China 6,157,774 5,157,241
AP 2,179,482 1,993,624
EMEA 2,808,546 2,341,114
AG 5,059,385 2,559,869
Segment assets for reportable segments 16,205,187 12,051,848
Unallocated:
Deferred income tax assets 530,047 389,330
Derivative financial assets 184,534 61,184
Available-for-sale financial assets 73,400 35,157
Interests in associates and joint ventures 45,719 20,753
Unallocated bank deposits and cash and cash equivalents 1,259,658 2,521,366
Unallocated inventories 1,131,779 757,648
Unallocated deposits, prepayments and other receivables 1,508,524 2,214,124
Income tax recoverable 136,857 65,715
Intangible assets pending allocation 5,706,000 –
Other unallocated assets 299,573 239,968
Total assets per consolidated balance sheet 27,081,278 18,357,093
169 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
5 SEGMENT INFORMATION (continued)
(c) Segment liabilities for reportable segments
2015 2014
US$’000 US$’000

China 4,250,546 3,965,295
AP 1,697,066 1,671,669
EMEA 1,589,515 1,407,530
AG 5,005,649 1,636,349
Segment liabilities for reportable segments 12,542,776 8,680,843
Unallocated:
Income tax payable 168,536 177,741
Deferred income tax liabilities 200,730 142,881
Derivative financial liabilities 80,897 58,462
Unallocated borrowings 2,924,352 300,000
Unallocated trade payables 2,631,917 2,862,851
Unallocated other payables and accruals 2,499,007 2,687,703
Unallocated provisions 11,655 16,522
Unallocated other non-current liabilities 1,806,831 308,889
Other unallocated liabilities 108,456 96,481
Total liabilities per consolidated balance sheet 22,975,157 15,332,373
(d) Analysis of revenue by significant category
Revenue from external customers are mainly derived from the sale of personal technology products and services.
Breakdown of revenue by business group is as follows:
2015 2014
US$’000 US$’000

PC Business Group 33,346,120 31,632,868
Mobile Business Group 9,142,211 5,353,635
Enterprise Business Group 2,627,408 505,307
Others 1,179,854 1,215,319
46,295,593 38,707,129
(e) Other segment information
Depreciation and
amortization Finance income Finance costs
Additions to non-
current assets (Note)
2015 2014 2015 2014 2015 2014 2015 2014
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

China 148,274 79,970 4,197 3,966 2,255 788 249,117 99,190
AP 86,248 55,481 3,254 1,251 9,457 6,318 35,840 14,822
EMEA 118,273 50,234 463 697 24,788 10,206 17,098 7,978
AG 155,948 69,448 8,163 8,739 19,908 29,908 61,681 52,071
Total 508,743 255,133 16,077 14,653 56,408 47,220 363,736 174,061
Note: Other than financial instruments and deferred income tax assets; and excluding construction-in-progress pending allocation to
segments.
The total of non-current assets other than financial instruments, deferred income tax assets and post-employment benefit
assets (there are no rights arising under insurance contracts) located in China and other countries is approximately
US$2,639,744,000 (2014: US$2,305,752,000) and US$8,410,352,000 (2014: US$2,226,306,000) respectively.
170 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
6 OTHER INCOME – NET
2015 2014
US$’000 US$’000

Net gain on disposal of available-for-sale financial assets 1,185 21,880
Dividend income from an available-for-sale financial asset 305 547
1,490 22,427
7 OPERATING PROFIT
Operating profit is stated after charging/(crediting) the following:
2015 2014
US$’000 US$’000

Depreciation of property, plant and equipment and
amortization of prepaid lease payments 208,363 109,689
Amortization of intangible assets 300,380 145,444
Employee benefit costs (Note 10) 3,524,219 2,745,853
Cost of inventories sold 37,067,180 31,763,864
Inventory write-down 125,284 57,031
Auditor’s remuneration 9,002 4,543
Rental expenses under operating leases 113,264 99,024
Government grant (Note 28(iv)) (154,571) (143,755)
Net foreign exchange loss 189,550 79,242
Net (gain)/loss on foreign exchange forward contracts
for cash flow hedge reclassified from equity (299,847) 10,818
Ineffectiveness on cash flow hedges (9,279) (4,265)
8 FINANCE INCOME AND COSTS
(a) Finance income
2015 2014
US$’000 US$’000

Interest on bank deposits 28,793 26,852
Interest on money market funds 2,092 2,126
Others 17 4,915
30,902 33,893
(b) Finance costs
2015 2014
US$’000 US$’000

Interest on bank loans and overdrafts 28,658 39,811
Interest on long term notes 64,925 –
Interest on promissory note 16,599 –
Factoring costs 54,075 23,866
Commitment fee 10,787 5,878
Interest on contingent considerations and put option liability 7,068 7,190
Others 3,392 4,229
185,504 80,974
171 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
9 TAXATION
The amount of taxation in the consolidated income statement represents:
2015 2014
US$’000 US$’000

Current tax
– Hong Kong profits tax 26,041 13,024
– Taxation outside Hong Kong 193,810 201,175
Deferred tax (Note 20) (85,487) (17,474)
134,364 196,725
Hong Kong profits tax has been provided at the rate of 16.5% (2014: 16.5%) on the estimated assessable profit for the year.
Taxation outside Hong Kong represents income and irrecoverable withholding taxes of subsidiaries operating in the Chinese
Mainland and overseas, calculated at rates applicable in the respective jurisdictions.
The Group has been granted certain tax concessions by tax authorities in the Chinese Mainland and overseas whereby the
subsidiaries operating in the respective jurisdictions are entitled to tax concessions.
The differences between the Group’s expected tax charge, calculated at the domestic rates applicable to the countries
concerned, and the Group’s tax charge for the year are as follows:
2015 2014
US$’000 US$’000

Profit before taxation 970,967 1,014,195
Tax calculated at domestic rates applicable in countries concerned 228,660 231,160
Income not subject to taxation (393,290) (427,986)
Expenses not deductible for taxation purposes 205,207 192,706
Utilization of previously unrecognized tax losses (31,669) (3,841)
Effect on opening deferred income tax assets due to change in tax rates 10,269 359
Deferred income tax assets not recognized 78,976 151,136
Under-provision in prior years 36,211 53,191
134,364 196,725
The weighted average applicable tax rate for the year was 23.5% (2014: 22.8%).The increase is caused by changes in tax
concessions and profitability of the Group’s subsidiaries in respective countries they are operating.
The tax (credit)/charge relating to components of other comprehensive income is as follows:
2015 2014
Before
tax
Tax
(credit)/
charge
After
tax
Before
tax
Tax
charge
After
tax
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Fair value change on available-for-sale
financial assets 7,326 – 7,326 (2,288) – (2,288)
Investment revaluation reserve
reclassified to consolidated income
statement on disposal of an
available-for-sale financial asset – – – (20,526) – (20,526)
Fair value change on cash flow hedges 125,856 (4,565) 121,291 (41,389) 3,101 (38,288)
Remeasurements of post employment
benefit obligations (70,087) 1,114 (68,973) 3,988 189 4,177
Exchange reserve reclassified to
consolidated income statement
on disposal of a subsidiary – – – 1,250 – 1,250
Currency translation differences (598,733) – (598,733) (69,781) – (69,781)
Other comprehensive (loss)/income (535,638) (3,451) (539,089) (128,746) 3,290 (125,456)
Current tax – –
Deferred tax (Note 20) (3,451) 3,290
(3,451) 3,290
172 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
10 EMPLOYEE BENEFIT COSTS
2015 2014
US$’000 US$’000

Wages and salaries 2,627,764 1,868,018
Social security costs 206,436 152,371
Long-term incentive awards granted (Note 29(a)) 99,062 80,274
Pension costs
– Defined contribution plans 158,236 129,813
– Defined benefit plans (Note 35) 22,630 21,799
Others 410,091 493,578
3,524,219 2,745,853
The Group contributes to respective local municipal government retirement schemes which are available to all qualified
employees in the Chinese Mainland. Contributions to these schemes are calculated with reference to the monthly average
salaries as set out by the local municipal government.
The Group participates in various defined contribution schemes, either voluntary or mandatory, for all qualified employees.
The assets of those defined contribution schemes are held separately from those of the Group in independently administered
funds.
The Group also contributes to certain defined benefit pension schemes, details of which are set out in Note 35.
11 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS
(a) Directors’ and senior management’s emoluments
Directors’ emoluments comprise payments 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, 2015 and 2014 is set out below:
2015
Name of Director Fees Salaries
Discretionary
bonuses
(note i)
Long-term
incentive
awards
(note ii)
Retirement
payments
and
employer’s
contribution
to pension
schemes
Housing
allowance
Other
benefits-
in-kind Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Executive director
Mr. Yang Yuanqing (CEO) – 1,338 5,740 11,921 134 286 22 19,441
Non-executive directors
Mr. Zhu Linan 88 – – 193 – – – 281
Mr. Zhao John Huan 88 – – 190 – – – 278
Independent non-executive directors
Mr. William O. Grabe 123 – – 193 – – – 316
Mr. Ting Lee Sen 88 – – 193 – – – 281
Dr. Tian Suning 88 – – 193 – – – 281
Mr. Nicholas C. Allen 115 – – 193 – – – 308
Ms. Ma Xuezheng 108 – – 193 – – – 301
Mr. Nobuyuki Idei 88 – – 191 – – – 279
Mr. William Tudor Brown 88 – – 163 – – – 251
Mr. Yang Chih-Yuan Jerry 72 – – 108 – – – 180
946 1,338 5,740 13,731 134 286 22 22,197
173 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
11 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS (continued)
(a) Directors’ and senior management’s emoluments (continued)
2014
Name of Director Fees Salaries
Discretionary
bonuses
(note i)
Long-term
incentive
awards
(note ii)
Retirement
payments
and
employer’s
contribution
to pension
schemes
Housing
allowance
Other
benefits-
in-kind Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Executive director
Mr. Yang Yuanqing (CEO) – 1,283 7,159 12,647 128 281 17 21,515
Non-executive directors
Mr. Zhu Linan 88 – – 109 – – – 197
Dr. Wu Yibing 26 – – 290 – – – 316
Mr. Zhao John Huan 88 – – 148 – – – 236
Independent non-executive directors
Mr. William O. Grabe 123 – – 278 – – – 401
Mr. Ting Lee Sen 88 – – 180 – – – 268
Dr. Tian Suning 88 – – 170 – – – 258
Mr. Nicholas C. Allen 115 – – 180 – – – 295
Ms. Ma Xuezheng 98 – – 170 – – – 268
Mr. Nobuyuki Idei 88 – – 161 – – – 249
Mr. William Tudor Brown 88 – – 88 – – – 176
890 1,283 7,159 14,421 128 281 17 24,179
Notes:
(i) Discretionary bonuses paid for the two years ended March 31, 2015 and 2014 represent the amounts in connection with the
performance bonuses for the two years ended March 31, 2014 and 2013 respectively.
(ii) Details of the long-term incentive program of the Company are set out in Note 29(a). The fair value of the employee services
received in exchange for the grant of the long-term incentive awards is recognized as an expense. The total amount to be
amortized over the vesting period is determined by reference to the fair value of the long-term incentive awards at the date of
grant. The amounts disclosed above represent the amortized amounts for the two years ended March 31, 2015 and 2014.
(iii) Mr. William O. Grabe has elected to defer his receipt of the cash of director’s fee into fully vested share units under the long-term
incentive program (Note 29(a)) for the two years ended March 31, 2015 and 2014.
(iv) During the year ended March 31, 2015 and 2014, a pension payment of US$1.5 million was made to Mr. Liu Chuanzhi, a retired
director.
(v) Dr. Wu Yibing retired as a director on July 16, 2013.
(vi) Mr. Yang Chih-Yuan Jerry was appointed as an independent non-executive director on November 6, 2014.
174 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
11 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS (continued)
(b) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for the year include one (2014: one) director
whose emoluments are reflected in the analysis presented above. The emoluments of the remaining four (2014: four)
individuals during the year are as follows:
2015 2014
US$’000 US$’000

Basic salaries, allowances, and other benefits-in-kind 4,093 3,873
Discretionary bonuses 10,865 14,199
Retirement payments and employer’s contribution to pension schemes 625 285
Long-term incentive awards 10,630 9,262
Others 575 260
26,788 27,879
The emoluments fell within the following bands:
Number of individuals
2015 2014

Emolument bands
US$5,287,557 – US$5,352,038 1 –
US$5,481,004 – US$5,545,485 1 1
US$5,609,969 – US$5,674,450 – 1
US$5,674,451 – US$5,738,933 1 –
US$6,319,275 – US$6,383,757 – 1
US$10,188,219 – US$10,252,701 1 –
US$10,381,667 – US$10,446,148 – 1
12 EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable 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.
2015 2014

Weighted average number of ordinary shares in issue 10,714,763,044 10,408,747,622
Adjustment for shares held by employee share trusts (44,369,898) (38,861,785)
Weighted average number of ordinary shares in issue
for calculation of basic earnings per share 10,670,393,146 10,369,885,837
US$’000 US$’000

Profit attributable to equity holders of the Company 828,715 817,228
175 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
12 EARNINGS PER SHARE (continued)
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding
due to the effect of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary
shares, namely share options and long-term incentive awards.
2015 2014

Weighted average number of ordinary shares in issue
for calculation of basic earnings per share 10,670,393,146 10,369,885,837
Adjustments for share options and long-term incentive awards 101,511,837 131,031,863
Weighted average number of ordinary shares in issue
for calculation of diluted earnings per share 10,771,904,983 10,500,917,700
US$’000 US$’000

Profit attributable to equity holders of the Company
used to determine diluted earnings per share 828,715 817,228
Adjustments for the dilutive potential ordinary shares are as follows:
– For the share options, a calculation is performed to determine the number of shares that could have been acquired
at fair value (determined as the average periodic market share price of the Company’s shares) based on the
monetary value of the subscription rights attached to outstanding share options. The number of shares calculated
as above is compared with the number of shares that would have been issued assuming the exercise in full of the
share options.
– For the long-term incentive awards, a calculation is performed to determine whether the 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
2015 2014
US$’000 US$’000

Interim dividend of HK6.0 cents (2014: HK6.0 cents)
per ordinary share, paid on December 1, 2014 85,978 80,426
Proposed final dividend – HK20.5 cents
(2014: HK18.0 cents) per ordinary share 293,668 241,449
379,646 321,875
176 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
14 PROPERTY, PLANT AND EQUIPMENT
Freehold
land and
buildings
Leasehold
improvements
Plant and
machinery
Furniture
and
fixtures
Office
equipment
Motor
vehicles Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At April 1, 2013
Cost 308,006 136,080 283,548 41,243 286,520 5,760 1,061,157
Accumulated depreciation and
impairment losses 51,910 78,652 222,101 27,221 198,713 2,783 581,380
Net book amount 256,096 57,428 61,447 14,022 87,807 2,977 479,777
Year ended March 31, 2014
Opening net book amount 256,096 57,428 61,447 14,022 87,807 2,977 479,777
Exchange adjustment (5,005) (2,091) (5,013) (538) (1,571) (55) (14,273)
Reclassification (2,106) 2,354 14 82 (344) – –
Additions 10,655 18,579 98,465 3,766 44,903 1,194 177,562
Transfer from
construction-in-progress 76,185 10,711 40,344 5,232 7,930 – 140,402
Disposals (3,866) (705) (1,111) (426) (2,456) (186) (8,750)
Depreciation (9,962) (24,543) (30,657) (5,041) (37,651) (1,016) (108,870)
Acquisition of subsidiaries – – 1,565 – – – 1,565
Closing net book amount 321,997 61,733 165,054 17,097 98,618 2,914 667,413
At March 31, 2014
Cost 382,444 162,102 401,012 48,337 307,252 5,910 1,307,057
Accumulated depreciation and
impairment losses 60,447 100,369 235,958 31,240 208,634 2,996 639,644
Net book amount 321,997 61,733 165,054 17,097 98,618 2,914 667,413
Year ended March 31, 2015
Opening net book amount 321,997 61,733 165,054 17,097 98,618 2,914 667,413
Exchange adjustment (30,185) (4,691) (14,711) (774) (4,979) (653) (55,993)
Reclassification (2) 37 (233) (95) 293 – –
Additions 21,272 43,495 111,362 7,606 73,231 1,633 258,599
Transfer from
construction-in-progress 71,668 163,265 8,020 8,227 721 – 251,901
Disposals (3,877) (523) (799) (822) (2,993) (329) (9,343)
Depreciation (14,877) (41,784) (68,367) (7,603) (72,968) (1,365) (206,964)
Acquisition of businesses 91,653 191,759 82,358 6,202 216,854 2,035 590,861
Closing net book amount 457,649 413,291 282,684 29,838 308,777 4,235 1,496,474
At March 31, 2015
Cost 529,592 542,699 563,106 64,860 563,012 7,609 2,270,878
Accumulated depreciation and
impairment losses 71,943 129,408 280,422 35,022 254,235 3,374 774,404
Net book amount 457,649 413,291 282,684 29,838 308,777 4,235 1,496,474
177 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
15 PREPAID LEASE PAYMENTS
2015
US$’000
2014
US$’000

At the beginning of the year 40,884 36,522
Exchange adjustment (18) (17)
Additions 69,903 –
Transfer from construction-in-progress 115,741 5,198
Amortization (1,399) (819)
At the end of the year 225,111 40,884
16 CONSTRUCTION-IN-PROGRESS
Buildings under
construction
Internal
use software Others Total
2015 2014 2015 2014 2015 2014 2015 2014
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At the beginning of the year 337,386 155,474 11,753 20,177 2,795 8,400 351,934 184,051
Exchange adjustment (1,348) (1,665) (96) (132) – (269) (1,444) (2,066)
Reclassification – 3,499 – (4,215) – 716 – –
Additions 120,980 286,493 35,967 64,515 190,559 37,230 347,506 388,238
Acquisition of businesses – – – – 12,930 – 12,930 –
Transfer to property,
plant and equipment (73,304) (101,217) – – (178,597) (39,185) (251,901) (140,402)
Transfer to intangible assets – – (31,052) (67,373) (144) (4,097) (31,196) (71,470)
Transfer to prepaid lease
payments (115,741) (5,198) – – – – (115,741) (5,198)
Disposals (114) – (14) (1,219) (72) – (200) (1,219)
At the end of the year 267,859 337,386 16,558 11,753 27,471 2,795 311,888 351,934
During the year, the Group has capitalised borrowing costs amounting to US$4.5 million (2014: nil) on qualifying assets.
Borrowing costs were capitalized at the weighted average rate of its general borrowings of 3.28%.
178 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
17 INTANGIBLE ASSETS
(a)
Goodwill
(Note (b))
Trademarks
and trade
names
(Note (b))
Internal
use
software
Customer
relation-
ships
Patent and
technology
(Note (c)) Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At April 1, 2013
Cost 2,403,980 591,447 724,817 173,268 137,906 4,031,418
Accumulated amortization and
impairment losses – 130,590 429,984 35,728 108,698 705,000
Net book amount 2,403,980 460,857 294,833 137,540 29,208 3,326,418
Year ended March 31, 2014
Opening net book amount 2,403,980 460,857 294,833 137,540 29,208 3,326,418
Exchange adjustment (47,685) 4,086 (641) 908 (632) (43,964)
Reclassification – – (59,680) – 59,680 –
Additions – 111 61,001 395 48,037 109,544
Transfer from
construction-in-progress – – 54,337 4,092 13,041 71,470
Disposals – – (12,111) – (562) (12,673)
Amortization – (2,011) (110,883) (11,937) (20,613) (145,444)
Acquisition of subsidiaries 33,527 (1,514) – 2,152 – 34,165
Closing net book amount 2,389,822 461,529 226,856 133,150 128,159 3,339,516
At March 31, 2014
Cost 2,389,822 594,084 715,182 181,468 302,686 4,183,242
Accumulated amortization and
impairment losses – 132,555 488,326 48,318 174,527 843,726
Net book amount 2,389,822 461,529 226,856 133,150 128,159 3,339,516
Year ended March 31, 2015
Opening net book amount 2,389,822 461,529 226,856 133,150 128,159 3,339,516
Exchange adjustment (188,879) (17,990) – (48,283) (472) (255,624)
Reclassification – – 173 – (173) –
Additions – – 36,936 – 259,753 296,689
Transfer from
construction-in-progress – – 31,052 – 144 31,196
Disposals – – (1,999) – (657) (2,656)
Amortization – (19,964) (90,046) (65,847) (124,523) (300,380)
Acquisition of businesses 2,723,254 860,000 – 1,289,999 947,719 5,820,972
Closing net book amount 4,924,197 1,283,575 202,972 1,309,019 1,209,950 8,929,713
At March 31, 2015
Cost 4,924,197 1,435,461 767,962 1,416,282 1,505,808 10,049,710
Accumulated amortization and
impairment losses – 151,886 564,990 107,263 295,858 1,119,997
Net book amount 4,924,197 1,283,575 202,972 1,309,019 1,209,950 8,929,713
Amortization of US$12,503,000 (2014: US$18,281,000), US$8,562,000 (2014: US$8,263,000), US$221,967,000 (2014:
US$91,312,000) and US$57,348,000 (2014: US$27,588,000) are included in the ‘cost of sales’, ‘selling and distribution
expenses’, ‘administrative expenses’ and ‘research and development expenses’ in the consolidated income statement
respectively.
179 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
17 INTANGIBLE ASSETS (continued)
(b) Impairment tests for goodwill and intangible assets with indefinite useful lives
The carrying amounts of goodwill and trademarks and trade names with indefinite useful lives are presented below:
China AP EMEA AG
Amounts
pending
allocation Total
US$ million US$ million US$ million US$ million US$ million US$ million

At March 31, 2015
Goodwill 1,128 521 216 336 2,723 4,924
Trademarks and trade names 209 59 102 67 830 1,267
China AP EMEA AG Total
US$ million US$ million US$ million US$ million US$ million
At March 31, 2014
Goodwill 1,123 597 287 383 2,390
Trademarks and trade names 209 59 118 67 453
Goodwill pending allocation represents the amount attributable to the acquisition of Motorola Mobility Group (“Motorola”)
and X86 server hardware and related maintenance services business of IBM (“System X”), details of which are set out
in Note 36. The goodwill is primarily attributable to the significant synergies expected to arise in connection with the
development of mobile devices and X86 server businesses, respectively. Management is in the process of determining
the allocation of goodwill and other intangible assets to the appropriate cash generating units of the Group.
The Group completed its annual impairment test for goodwill allocated to the Group’s various CGUs by comparing their
recoverable amounts to their carrying amounts as at the reporting date. The recoverable amount of a CGU is determined
based on value in use. These assessments use pre-tax cash flow projections based on financial budgets approved by
management covering a five-year period with a terminal value 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.
Future cash flows are discounted at the rate of 9% (2014: 11%) across all CGUs. The estimated compound annual
growth rates used for value-in-use calculations under the five-year financial budgets period are as follows:
2015 2014

China 2% 2%
EMEA -2% -2%
AP -2% -1%
AG -2% 0%
Management determined budgeted gross margins based on past performance and its expectations for the market
development. The weighted average growth rates used are consistent with the forecasts included in industry reports.
The discount rates are pre-tax and reflect specific risks relating to the relevant segments.
The directors are of the view that there was no evidence of impairment of goodwill and trademarks and trade names as
at March 31, 2015 arising from the review (2014: nil).
The Group has performed a sensitivity analysis on key assumptions used for the annual impairment test for goodwill.
Except for AG in 2015 and 2014, a reasonably possible change in key assumptions used in the impairment test for
goodwill would not cause any CGU’s carrying amount to exceed its respective recoverable amount. As at March 31,
2015, the recoverable amount for AG calculated based on value in use exceeded carrying value by US$1,101 million
(2014: US$774 million). Had AG’s forecasted operating margin been 1.50 (2014: 1.30) percentage point lower than
management’s estimates, the AG’s remaining headroom would be removed.
(c) At March 31, 2015, included in the patent and technology is a construction-in-progress balance of US$24,452,000
(2014: US$58,880,000).
180 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
18 INTERESTS IN ASSOCIATES AND JOINT VENTURES
2015 2014
US$’000 US$’000

Share of net assets
– Associates 9,277 5,401
– Joint ventures 36,442 15,352
45,719 20,753
The following is a list of the principal associates and joint ventures as at March 31, 2015:
Place of Interest held indirectly
Company name establishment 2015 2014 Principal activities

Associates
[¶±¦|;¯|÷¸¸|.
(IGRS Engineering Lab Limited) (Note ii)
Chinese Mainland 23.1% 23.1% Distribution and development
of IT technology
¸¯[¶¯¦±¦|;¸|.
(Beijing Shanlian Yunshi Information
Technology Limited) (Note ii)
Chinese Mainland 23.7% 23.7% Distribution and development
of IT technology
Joint ventures
[7¶@¡¯],¸|)L.
(Chengdu Lenovo Rongjin
Investment Limited) (Note ii)
Chinese Mainland 49% 49% Property development
¸·¦¯((¦|¸|.
(Shanghai Shiyun Network
Technology Limited) (Note ii)
Chinese Mainland 48.1% 49% Distribution and development
of IT technology and software
Lenovo NNL HK Limited Hong Kong 51% – Provision of IT services and
distribution of IT products
As at March 31, 2014, the Group had a capital commitment of US$4,021,000 to Shanghai Shiyun Network Technology
Limited.
Notes:
(i) The associates and joint ventures operate principally in their respective places of establishment.
(ii) The English name of the company is a direct translation or transliteration of its Chinese registered name.
The following sets out the aggregate amount of the Group’s share of associates and joint ventures:
2015 2014
US$’000 US$’000

Share of losses of associates (2,148) (679)
Share of profits of joint ventures 19,203 9,900
17,055 9,221
181 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS BY CATEGORY
Loans and
receivables
Assets at
fair value
through
income
statement
Derivatives
used for
hedging
Available-
for-sale
financial
assets Total
US$’000 US$’000 US$’000 US$’000 US$’000
Assets
At March 31, 2015
Available-for-sale financial assets – – – 73,400 73,400
Derivative financial assets – 60,459 124,075 – 184,534
Trade receivables 5,177,840 – – – 5,177,840
Notes receivable 334,738 – – – 334,738
Deposits and other receivables 2,325,836 – – – 2,325,836
Bank deposits 171,139 – – – 171,139
Cash and cash equivalents 2,855,223 – – – 2,855,223
10,864,776 60,459 124,075 73,400 11,122,710
At March 31, 2014
Available-for-sale financial assets – – – 35,157 35,157
Derivative financial assets – 49,460 11,724 – 61,184
Trade receivables 3,171,354 – – – 3,171,354
Notes receivable 447,325 – – – 447,325
Deposits and other receivables 1,939,314 – – – 1,939,314
Bank deposits 94,985 – – – 94,985
Cash and cash equivalents 3,858,144 – – – 3,858,144
9,511,122 49,460 11,724 35,157 9,607,463
182 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS BY CATEGORY (continued)
Liabilities
at fair value
through
income
statement
Derivatives
used for
hedging
Other
financial
liabilities at
amortized
cost Total
US$’000 US$’000 US$’000 US$’000
Liabilities
At March 31, 2015
Trade payables – – 4,662,411 4,662,411
Notes payable – – 171,049 171,049
Derivative financial liabilities 74,904 5,993 – 80,897
Other payables and accruals – – 9,066,487 9,066,487
Other non-current liabilities – – 242,506 242,506
Borrowings – – 3,054,122 3,054,122
Deferred considerations and guaranteed dividend
under other non-current liabilities – – 1,404,546 1,404,546
Contingent considerations and written put option liability 531,400 – – 531,400
606,304 5,993 18,601,121 19,213,418
At March 31, 2014
Trade payables – – 4,751,345 4,751,345
Notes payable – – 108,559 108,559
Derivative financial liabilities 43,530 14,932 – 58,462
Other payables and accruals – – 6,658,254 6,658,254
Borrowings – – 455,602 455,602
Deferred consideration and guaranteed dividend
under other non-current liabilities – – 21,073 21,073
Contingent considerations and written put option liability 524,340 – – 524,340
567,870 14,932 11,994,833 12,577,635
20 DEFERRED INCOME TAX ASSETS AND LIABILITIES
Deferred income tax is calculated in full on temporary differences under the liability method using the rates applicable in the
respective jurisdictions.
Deferred income tax assets and liabilities are netted off when the taxes relate to the same tax authority and where offsetting is
legally enforceable. The following amounts, determined after appropriate offsetting, are shown separately on the consolidated
balance sheet:
2015 2014
US$’000 US$’000

Deferred income tax assets:
Recoverable within 12 months 327,817 324,837
Recoverable after 12 months 202,230 64,493
530,047 389,330
Deferred income tax liabilities:
Recoverable after 12 months (200,730) (142,881)
Net deferred income tax assets 329,317 246,449
183 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
20 DEFERRED INCOME TAX ASSETS AND LIABILITIES (continued)
The movements in the net deferred income tax assets are as follows:
2015 2014
US$’000 US$’000

At the beginning of the year 246,449 235,397
Reclassification and exchange adjustment (4,814) (9,496)
Credited to consolidated income statement (Note 9) 85,487 17,474
(Charged)/credited to other comprehensive income (Note 9) (3,451) 3,290
Acquisition of businesses/subsidiaries (4,047) (216)
Credited to share-based compensation reserve 9,693 –
At the end of the year 329,317 246,449
(a) The movements in deferred income tax assets (prior to offsetting of balances within the same tax jurisdiction), analyzed
by major components, during the year are as follows:
Provisions
and accruals Tax losses
Tax
depreciation
allowance
Deferred
revenue
Share-based
payment Others Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At April 1, 2013 245,892 30,686 6,086 65,574 – 5,588 353,826
Reclassification and
exchange adjustments (4,750) (3,185) 57 1,094 – (416) (7,200)
Credited/(charged) to consolidated
income statement 18,479 23,081 (3,936) 7,682 – 355 45,661
Credited to other
comprehensive income – – – – – 291 291
At March 31, 2014 and April 1, 2014 259,621 50,582 2,207 74,350 – 5,818 392,578
Reclassification and
exchange adjustments (18,604) (747) (1,017) (5,408) – (505) (26,281)
(Charged)/credited to consolidated
income statement (33,101) 64,699 5,059 27,703 16,646 (320) 80,686
Credited to other
comprehensive income – – – – – 1,012 1,012
Acquisition of businesses 15,876 3,101 1,294 8,626 43,380 9,767 82,044
Credited to share-based
compensation reserve – – – – 9,693 – 9,693
At March 31, 2015 223,792 117,635 7,543 105,271 69,719 15,772 539,732
Deferred income tax assets are recognized for deductible temporary differences and tax losses carried forward to the
extent that realization of the related tax benefit through the future taxable profits is probable.
184 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
20 DEFERRED INCOME TAX ASSETS AND LIABILITIES (continued)
(a) (continued)
At March 31, 2015, the Group did not recognize deferred income tax assets in respect of deductible temporary
differences of approximately US$2,373,130,000 (2014: US$2,188,939,000) and tax losses of approximately
US$1,726,640,000 (2014: US$1,687,310,000) that can be carried forward against future taxable income, of which, tax
losses of US$1,311,799,000 (2014: US$1,181,408,000) can be carried forward indefinitely. The remaining balances of
tax losses will expire as follows:
2015 2014
US$’000 US$’000

Expiring in
– 2015 – 20,832
– 2016 – 1,900
– 2017 26,874 33,309
– 2018 202,272 10,704
– 2019 71,536 294,209
– 2020 36,261 9,786
– 2021 9,816 8,548
– 2022 48,977 125,812
– 2023 13,556 802
– 2024 5,549 –
414,841 505,902
185 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
20 DEFERRED INCOME TAX ASSETS AND LIABILITIES (continued)
(b) The movements in deferred income tax liabilities (prior to offsetting of balances within the same tax jurisdiction),
analyzed by major components, during the year are as follows:
Intangible
valuation
Undistributed
earnings
Property
valuation
Accelerated
tax
depreciation Others Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At April 1, 2013 72,093 36,586 4,273 748 4,729 118,429
Reclassification and exchange
adjustments 1,463 485 333 (18) 33 2,296
(Credited)/charged to consolidated
income statement (5,845) 10,427 (12) 23,864 (247) 28,187
Credited to other
comprehensive income – – – – (2,999) (2,999)
Acquisition of subsidiaries 216 – – – – 216
At March 31, 2014 and
April 1, 2014 67,927 47,498 4,594 24,594 1,516 146,129
Reclassification and exchange
adjustments (17,912) 774 (821) (3,285) (223) (21,467)
(Credited)/charged to consolidated
income statement (6,358) 3,498 (631) (2,124) 814 (4,801)
Charged to other
comprehensive income – – – – 4,463 4,463
Acquisition of businesses 85,973 – – 118 – 86,091
At March 31, 2015 129,630 51,770 3,142 19,303 6,570 210,415
21 AVAILABLE-FOR-SALE FINANCIAL ASSETS
2015 2014
US$’000 US$’000

At the beginning of the year 35,157 69,962
Exchange adjustment (1,442) (1,073)
Fair value change recognized in other comprehensive income 7,326 (2,288)
Additions 32,596 8,550
Disposals (237) (39,994)
At the end of the year 73,400 35,157
Equity securities, at fair value
Listed in Hong Kong 20,692 722
Listed outside Hong Kong 18,600 9,733
Unlisted 34,108 24,702
73,400 35,157
186 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
22 INVENTORIES
2015 2014
US$’000 US$’000

Raw materials and work-in-progress 1,387,082 1,222,589
Finished goods 1,212,009 1,263,341
Service parts 396,298 215,085
2,995,389 2,701,015
23 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:
2015 2014
US$’000 US$’000

0 – 30 days 3,669,635 2,206,799
31 – 60 days 881,449 601,499
61 – 90 days 320,591 181,916
Over 90 days 426,267 220,754
5,297,942 3,210,968
Less: provision for impairment (120,102) (39,614)
Trade receivables – net 5,177,840 3,171,354
Trade receivables that are not past due are fully performing and not considered impaired.
At March 31, 2015, trade receivables, net of impairment, of US$841,001,000 (2014: US$371,549,000) were past due.
The ageing of these receivables, based on due date, is as follows:
2015 2014
US$’000 US$’000

Within 30 days 465,918 186,913
31 – 60 days 192,276 82,652
61 – 90 days 68,599 45,306
Over 90 days 114,208 56,678
841,001 371,549
Movements in the provision for impairment of trade receivables are as follows:
2015 2014
US$’000 US$’000

At beginning of the year 39,614 36,920
Exchange adjustment 777 342
Provisions made 37,359 22,000
Uncollectible receivables written off (7,475) (244)
Unused amounts reversed (18,668) (20,675)
Acquisition of businesses/subsidiaries 68,495 1,271
At the end of the year 120,102 39,614
(b) Notes receivable of the Group are bank accepted notes mainly with maturity dates of within six months.
187 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
23 RECEIVABLES (continued)
(c) Details of deposits, prepayments and other receivables are as follows:
2015 2014
US$’000 US$’000

Deposits 3,481 1,635
Other receivables (i) 2,322,355 1,937,679
Prepayments (ii) 1,246,179 1,061,512
3,572,015 3,000,826
Notes:
(i) Majority of other receivables of the Group are amounts due from subcontractors for part components sold in the ordinary course of
business.
(ii) The Group defers the cost of shipped products awaiting revenue recognition until the goods are delivered and revenue is
recognized. In-transit product shipments to customers of US$581 million as at March 31, 2015 (2014: US$413 million) are included
in prepayments.
(d) The carrying amounts of trade, notes, deposits and other receivables approximate their fair values. The maximum
exposure to credit risk at the balance sheet date is the fair value of each class of receivable mentioned above. The
Group’s receivables in the amount of US$54 million (2014: US$14 million) are held as collateral for short-term loans
obtained.
24 BANK DEPOSITS AND CASH AND CASH EQUIVALENTS
2015 2014
US$’000 US$’000

Bank deposits
– matured between three to twelve months 100,828 94,165
– restricted bank balances 70,311 820
171,139 94,985
Cash and cash equivalents
– cash at bank and in hand 2,110,990 3,138,440
– money market funds 744,233 719,704
2,855,223 3,858,144

3,026,362 3,953,129
Maximum exposure to credit risk 3,026,362 3,953,129
Effective annual interest rates 0%-11.60% 0%-12.36%
25 PAYABLES
(a) Aging analysis of trade payables of the Group at the balance sheet date, based on invoice date, is as follows:
2015 2014
US$’000 US$’000

0 – 30 days 3,764,369 2,761,170
31 – 60 days 358,296 1,217,547
61 – 90 days 218,299 586,145
Over 90 days 321,447 186,483
4,662,411 4,751,345
(b) Notes payable of the Group are mainly repayable within three months.
(c) The carrying amounts of trade payables and notes payable approximate their fair value.
188 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
26 PROVISIONS, OTHER PAYABLES AND ACCRUALS
(a) Details of other payables and accruals are as follows:
2015 2014
US$’000 US$’000

Accruals 2,120,381 1,359,002
Allowance for billing adjustments (i) 2,169,767 1,785,022
Other payables (ii) 4,776,339 3,514,230
9,066,487 6,658,254
Notes:
(i) Allowance for billing adjustments relates primarily to allowances for future volume discounts, price protection, rebates, and
customer sales returns.
(ii) Majority of other payables are obligations to pay for finished goods that have been acquired in the ordinary course of business from
subcontractors.
(iii) The carrying amounts of other payables and accruals approximate their fair values.
(b) The components of provisions of the Group are as follows:
Warranty
Environmental
restoration Total
US$’000 US$’000 US$’000
Year ended March 31, 2015
At the beginning of the year 1,127,260 19,684 1,146,944
Exchange adjustment (69,142) (2,919) (72,061)
Provisions made 1,153,855 10,378 1,164,233
Amounts utilized (1,049,291) (6,919) (1,056,210)
Unused amounts reversed (19,391) (3,749) (23,140)
Acquisition of businesses 396,563 – 396,563
1,539,854 16,475 1,556,329
Long-term portion classified as
non-current liabilities (338,700) (14,082) (352,782)
At the end of the year 1,201,154 2,393 1,203,547
Year ended March 31, 2014
At the beginning of the year 1,054,181 56,042 1,110,223
Exchange adjustment 3,997 (2,837) 1,160
Provisions made 898,264 8,610 906,874
Amounts utilized (812,936) (5,179) (818,115)
Unused amounts reversed (16,246) (36,952) (53,198)
1,127,260 19,684 1,146,944
Long-term portion classified as
non-current liabilities (277,231) (17,559) (294,790)
At the end of the year 850,029 2,125 852,154
The Group records its warranty liability at the time of sales based on estimated costs. Warranty claims are reasonably
predictable based on historical failure rate information. The warranty accrual is reviewed quarterly to verify it properly
reflects the outstanding obligation over the warranty period. Certain of these costs are reimbursable from the suppliers
in accordance with the terms of relevant arrangements with them.
The Group records its environmental restoration provision at the time of sales based on estimated costs of
environmentally-sound disposal of waste electrical and electronic equipment upon return from end-customers and with
reference to the historical or projected future return rate. The environmental restoration provision is reviewed at least
annually to assess its adequacy to meet the Group’s obligation.
189 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
27 BORROWINGS
2015 2014
US$’000 US$’000

Current liabilities
Short-term loans (i) 1,168,274 145,477
Term loans (ii) – 300,000
1,168,274 445,477
Non-current liabilities
Term loans (ii) 395,043 10,125
Long term notes (iii) 1,490,805 –
1,885,848 10,125
3,054,122 455,602
Notes:
(i) Short-term loans primarily comprised a US$1,200 million 5-year loan facility (comprising US$800 million short term) entered into in
December 2013 and has been utilized to the extent of US$700 million as at March 31, 2015; and a US$500 million revolving loan facility
entered into on February 2, 2011 which has been utilized to the extent of US$300 million as at March 31, 2015. The majority of the
short-term bank loans are denominated in United States dollar.
(ii) Term loans comprised a US$1,200 million 5-year loan facility (comprising US$800 million short term) entered into in December 2013, and
has been drawn down to the extent of US$400 million as at March 31, 2015.
(iii) On May 8, 2014, the Group completed the issuance of 5-Year US$1.5 billion notes bearing annual interest at 4.7% due in May 2019. The
proceeds would be used for general corporate purposes including working capital, and to fund any acquisition.
The exposure of all the borrowings of the Group to interest rate changes and the contractual repricing dates at the end of the
reporting period are as follows:
2015 2014
US$’000 US$’000

Within 1 year 1,168,274 445,477
Over 1 to 3 years – 10,125
Over 3 to 5 years 1,885,848 –
3,054,122 455,602
The carrying amounts of borrowings approximate their fair value as the impact of discounting is not significant.
Total bank facilities of the Group are as follows:
Total facilities Utilized amounts
2015 2014 2015 2014
US$’000 US$’000 US$’000 US$’000

Revolving loans 1,300,000 1,300,000 1,000,000 –
Term loans 400,000 711,045 400,000 310,125
Short-term loans 339,111 324,643 177,154 145,477
Foreign exchange contracts 10,530,679 7,076,019 9,821,769 6,513,326
Other trade finance facilities 1,353,244 489,054 315,562 213,745
13,923,034 9,900,761 11,714,485 7,182,673
190 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
27 BORROWINGS (continued)
Except for short-term loans of US$54 million with collateral at the same amount recorded as trade receivables, all the
borrowings are unsecured and the effective annual interest rates at March 31, 2015 are as follows:
United States dollar Other currencies
2015 2014 2015 2014

Term loans 1.73% 2.24% N/A 8%
Short-term loans 0%-3% 0%-5.0% 0%-15.17% 0%-12.87%
28 OTHER NON-CURRENT LIABILITIES
2015 2014
US$’000 US$’000

Contingent considerations (i) 270,196 307,183
Deferred considerations (i) 1,394,941 2,151
Guaranteed dividend to non-controlling
shareholders of a subsidiary (ii) 9,605 18,922
Environmental restoration (Note 26(b)) 14,082 17,559
Written put option liability (iii) 219,317 217,157
Government incentives and grants received in advance (iv) 118,371 143,778
Deferred rent liabilities 127,954 –
Others 285,969 138,164
2,440,435 844,914
Notes:
(i) Pursuant to the completion of business combinations, the Group is required to pay in cash to the then respective shareholders/sellers
contingent considerations with reference to certain performance indicators as written in the respective agreements with those then
shareholders/sellers; and deferred consideration. Accordingly, non-current liabilities in respect of the present values of contingent and
deferred considerations have been recognized. The contingent considerations are subsequently re-measured at their fair values as a
result of change in the expected performance at each balance sheet date, with any resulting gain or loss recognized in the consolidated
income statement. Deferred consideration is subsequently measured at amortized cost.
As at March 31, 2015, the potential undiscounted amounts of future payments in respect of the contingent and deferred considerations
that the Group could be required to make to the then respective shareholders/sellers under the arrangements are as follows:
Joint venture with NEC Corporation Nil – US$325 million
Joint venture with EMC Corporation US$39 – US$59 million
Stoneware Nil – US$48 million
CCE Nil – BRL400 million
Google Inc. US$1,500 million
With reference to the performance indicators, if their actual performances had been 10% higher/lower than their respective expected
performances, contingent considerations would have been increased/decreased by approximately US$4 million and US$30 million
respectively with the corresponding loss/gain recognized in consolidated income statement.
(ii) Following the acquisition of Medion on July 29, 2011, Lenovo Germany Holding GmbH (“Lenovo Germany”), an indirect wholly-owned
subsidiary of the Company and the immediate holding company of Medion entered into a domination and profit and loss transfer
agreement (the “Domination Agreement”) with Medion on October 25, 2011. Pursuant to the Domination Agreement, Lenovo Germany
has guaranteed to the non-controlling shareholders of Medion an annual guaranteed pre-tax dividend amounting to EUR0.82 per share
for each fiscal year. The Domination Agreement became effective on January 3, 2012 and is terminable by either Lenovo Germany or
Medion after March 31, 2017. Accordingly, a non-current liability in respect of future guaranteed dividend has been recognized. The
corresponding amount stated at its discounted value on the date of acquisition of Medion was charged to retained earnings in equity.
191 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
28 OTHER NON-CURRENT LIABILITIES (continued)
Notes: (continued)
(iii) Pursuant to the joint venture agreement entered into between the Company and Compal Electronics, Inc. (“Compal”) to establish a joint
venture company (“JV Co”) to manufacture notebook computer products and related parts, the Company and Compal are respectively
granted call and put options which entitle the Company to purchase from Compal and Compal to sell to the Company the 49% Compal’s
interests in the JV Co. The call and put options will be exercisable at any time after October 1, 2019 and October 1, 2017 respectively.
The exercise price for the call and put options will be determined in accordance with the joint venture agreement, and up to a maximum
of US$750 million.
The financial liability that may become payable under the put option is initially recognized at fair value within other non-current liabilities
with a corresponding charge directly to equity, as a put option written on non-controlling interest.
The put option liability shall be re-measured at its fair value resulting from the change in the expected performance of the JV Co at each
balance sheet date, with any resulting gain or loss recognized in the consolidated income statement. If the actual performance of JV Co
had been 10% higher/lower than its expected performances, the written put option liability would have been increased/decreased by
approximately US$4 million with the corresponding loss/gain recognized in consolidated income statement.
In the event that the put option lapses unexercised, the liability will be derecognized with a corresponding adjustment to equity.
(iv) Government incentives and grants received in advance by certain group companies included in other non-current liabilities are mainly
related to research and development projects and construction of property, plant and equipment. These group companies are obliged to
fulfill certain conditions under the terms of the government incentives and grants. The government incentive and grants are credited to
the income statement upon fulfillment of those conditions.
29 SHARE CAPITAL
2015 2014
Number of
shares US$’000
Number of
shares US$’000

Issued and fully paid:
Voting ordinary shares:
At the beginning of the year 10,406,375,509 1,650,101 10,439,152,059 33,465
Issue of ordinary shares 701,107,215 1,039,396 – –
Exercise of share options 1,172,000 385 18,277,450 816
Repurchase of shares – – (51,054,000) (164)
Transfer from share premium and share
redemption reserve (Note 30) – – – 1,615,984
At the end of the year 11,108,654,724 2,689,882 10,406,375,509 1,650,101
An entirely new Companies Ordinance (Cap.622) (“new CO”) that came into effect on March 3, 2014. The new CO abolishes
authorized share capital, par value, share premium, and share redemption reserve, in respect of the share capital of Hong
Kong companies. As a result, the amounts of share premium and share redemption reserve of the Company were transferred
to the share capital.
192 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
29 SHARE CAPITAL (continued)
(a) Long-term incentive program
A performance-related long-term incentive program was approved on May 26, 2005 for the purpose of rewarding and
motivating directors, executives and top-performing employees of the Company and its subsidiaries (the “Participants”).
The long-term incentive program is designed to enable the Company to attract and retain the best available personnel,
and encourage and motivate Participants 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, at its discretion, using any of the two types of
equity-based compensation: (i) share appreciation rights and (ii) restricted share units, which are described below:
(i) Share Appreciation Rights (“SARs”)
An SAR entitles the holder to receive the appreciation in value of the Company’s share price above a
predetermined level.
(ii) Restricted Share Units (“RSUs”)
An RSU equals to the value of one ordinary share of the Company. Once vested, an RSU is converted to an
ordinary share.
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 are
as follows:
Number of units
SARs RSUs
Outstanding at April 1, 2013 164,412,435 170,406,536
Granted during the year 7,057,800 55,119,546
Vested during the year (59,706,679) (71,231,773)
Lapsed/cancelled during the year (8,535,288) (16,790,916)
Outstanding at March 31, 2014 103,228,268 137,503,393
Outstanding at April 1, 2014 103,228,268 137,503,393
Shares awarded upon acquisition of businesses – 146,594,218
Granted during the year 84,979,487 90,514,143
Vested during the year (47,499,634) (134,431,685)
Lapsed/cancelled during the year (6,600,459) (17,684,353)
Outstanding at March 31, 2015 134,107,662 222,495,716
Average fair value per unit (HK$)
– At March 31, 2014 2.15 7.34
– At March 31, 2015 2.39 9.73
The fair values of the SARs awarded under the long-term incentive program were calculated by applying a Black-
Scholes pricing model. For the year ended March 31, 2015, 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 of 34.48 percent (2014: 36.62
percent), expected dividends during the vesting periods of 2.23 percent (2014: 2.71 percent), contractual life of 4.75
years (2014: 4.75 years), and a risk-free interest rate of 0.64 percent (2014: 0.67 percent).
The remaining vesting periods of the awards under the long-term incentive program as at March 31, 2015 ranged from
0.08 to 3.92 years (2014: 0.08 to 3.92 years).
193 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
29 SHARE CAPITAL (continued)
(b) Share options
Under the Company’s employee share option scheme adopted on January 18, 1994 (“Old Option Scheme”), the
Company granted options to employees (including directors) of the Company or its subsidiaries to subscribe for ordinary
shares in the Company, subject to a maximum of 10 percent of the issued share capital of the Company from time to
time. Options granted are exercisable at any time during a period of ten years from the date upon which the option is
accepted. The subscription price of the option shares is the higher of the nominal value of the ordinary shares and an
amount which is 80 percent of the average of the closing prices of the listed ordinary shares on the five trading days
immediately preceding the date on which the offer is made. The Old Option Scheme was terminated on April 26, 2002.
On March 25, 2002, an ordinary resolution approving the adoption of a new share option scheme (“New Option
Scheme”) was passed by shareholders at an extraordinary general meeting of the Company.
Under the New Option Scheme, the Company may grant options to qualified participants as defined in the New Option
Scheme to subscribe for ordinary shares in the Company, subject to a maximum of 10 percent of the issued share
capital of the Company as at the date of adoption of the New Option Scheme. Options granted are exercisable at any
time during a period of ten years from the date upon which the option is accepted. The subscription 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 Option Scheme expired on April 26, 2012, and no further options could thereafter be granted under the New
Option Scheme. However, all remaining provisions will remain in full force and effect to govern the exercise of all the
options granted under the New Option Scheme prior to its expiration.
2015 2014
Number of
outstanding
share options
Number of
outstanding
share options

At the beginning of the year 31,487,601 63,939,051
Exercised during the year (ii) (1,172,000) (18,277,450)
Lapsed during the year (iii) (30,315,601) (14,174,000)
At the end of the year (iv) – 31,487,601
(i) No share options were granted or cancelled by the Company during the years ended March 31, 2014 and 2015.
(ii) Details of share options exercised during the year ended March 31, 2015 are as follows:
Exercise date
Exercise
price
Market value
per ordinary
share at
exercise date
Number
of share
options
exercised
Gross
proceeds
received
(MM.DD.YYYY) HK$ HK$ HK$

04.01.2014 to 04.25.2014 2.545 8.80-9.48 1,172,000 2,982,740
1,172,000 2,982,740
US$385,000
194 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
29 SHARE CAPITAL (continued)
(b) Share options (continued)
(ii) (continued)
Details of share options exercised during the year ended March 31, 2014 are as follows:
Exercise date
Exercise
price
Market value
per ordinary
share at
exercise date
Number
of share
options
exercised
Gross
proceeds
received
(MM.DD.YYYY) HK$ HK$ HK$
04.03.2013 to 04.25.2013 2.245 6.45-7.63 1,314,000 2,949,930
04.03.2013 to 04.25.2013 2.545 6.60-7.63 164,000 417,380
05.15.2013 to 05.31.2013 2.545 6.71-7.99 260,000 661,700
06.03.2013 to 06.17.2013 2.545 7.40-8.08 472,000 1,201,240
07.12.2013 to 07.31.2013 2.545 7.06-7.27 72,000 183,240
08.01.2013 to 08.30.2013 2.545 7.12-7.88 446,000 1,135,070
09.03.2013 to 09.27.2013 2.545 7.55-8.26 3,158,000 8,037,110
10.08.2013 to 10.31.2013 2.545 8.07-8.33 2,612,000 6,647,540
11.01.2013 to 11.29.2013 2.545 8.36-9.46 4,892,000 12,450,140
12.02.2013 to 12.31.2013 2.545 9.13-9.49 526,000 1,338,670
01.02.2014 to 01.30.2014 2.545 8.99-10.96 1,805,450 4,594,870
02.10.2014 to 02.28.2014 2.545 7.72-8.62 222,000 564,990
03.03.2014 to 03.31.2014 2.545 8.14-8.59 2,334,000 5,940,030
18,277,450 46,121,910
US$5,946,000
(iii) Details of share options lapsed during the years ended March 31, 2015 and 2014 are as follows:
2015 2014
Exercise period
Exercise
price
Number of
share options
lapsed
Number of
share options
lapsed
(MM.DD.YYYY) HK$

New Option Scheme
04.26.2003 to 04.25.2013 2.245 – 14,174,000
04.27.2004 to 04.26.2014 2.545 30,315,601 –
30,315,601 14,174,000
(iv) Details of share options at the balance sheet date are as follows:
2015 2014
Exercise period
Exercise
price
Number of
outstanding
share options
Number of
outstanding
share options
(MM.DD.YYYY) HK$

New Option Scheme
04.27.2004 to 04.26.2014 2.545 – 31,487,601
– 31,487,601
195 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
30 BALANCE SHEET AND MOVEMENT OF RESERVES OF THE COMPANY
(a) Balance sheet of the Company
At March 31
2015
US$’000
2014
US$’000

Non-current assets
Property, plant and equipment 3,049 2,478
Construction-in-progress 296 174
Intangible assets 141,325 39,269
Interest in an associate 1,887 –
Investments in subsidiaries 8,100,648 2,888,712
Available-for-sale financial assets 31,801 8,500
Other non-current assets – 11,690
8,279,006 2,950,823
Current assets
Deposits, prepayments and other receivables 54,252 4,999
Amounts due from subsidiaries 3,183,046 227,859
Cash and cash equivalents 15,440 5,414
3,252,738 238,272
Total assets 11,531,744 3,189,095
Share capital 2,689,882 1,650,101
Reserves (Note 30(b)) 830,504 370,520
Total equity 3,520,386 2,020,621
Non-current liabilities
Borrowings 1,885,848 –
Deferred revenue 4,806 –
Other non-current liabilities 1,662,691 306,236
3,553,345 306,236
Current liabilities
Derivative financial liabilities 131 –
Other payables and accruals 90,671 36,685
Borrowings 991,121 300,000
Deferred revenue 35,393 –
Amounts due to subsidiaries 3,340,697 525,553
4,458,013 862,238
Total liabilities 8,011,358 1,168,474
Total equity and liabilities 11,531,744 3,189,095
Net current liabilities (1,205,275) (623,966)
Total assets less current liabilities 7,073,731 2,326,857
196 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
30 BALANCE SHEET AND MOVEMENT OF RESERVES OF THE COMPANY (continued)
(b) Movement of reserves of the Company
The changes in the reserves of the Company during the years ended March 31, 2015 and 2014 are as follows:
Share
premium
Investment
revaluation
reserve
Share
redemption
reserve
Share-based
compensation
reserve
Exchange
reserve Other reserve
Retained
earnings Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At April 1, 2014 – – – (23,622) 10,204 8,614 375,324 370,520
Profit for the year – – – – – – 766,855 766,855
Other comprehensive loss – (2,979) – – – – – (2,979)
Total comprehensive (loss)/income
for the year – (2,979) – – – – 766,855 763,876
Acquisition of businesses – – – 121,252 – – – 121,252
Vesting of shares under long-term
incentive program – – – (237,448) – – – (237,448)
Share-based compensation – – – 139,977 – – – 139,977
Dividends paid – – – – – – (327,673) (327,673)
At March 31, 2015 – (2,979) – 159 10,204 8,614 814,506 830,504
At April 1, 2013 1,654,806 – 1,188 (3,149) 10,204 3,570 290,204 1,956,823
Profit for the year – – – – – – 353,129 353,129
Exercise of share options 5,130 – – – – – – 5,130
Repurchase of shares (45,304) – 164 – – – – (45,140)
Vesting of shares under long-term
incentive program – – – (100,747) – – – (100,747)
Share-based compensation – – – 80,274 – – – 80,274
Release of escrow shares
for settlement of acquisition
consideration – – – – – 5,044 – 5,044
Dividends paid – – – – – – (268,009) (268,009)
Transfer to share capital (Note 29) (1,614,632) – (1,352) – – – – (1,615,984)
At March 31, 2014 – – – (23,622) 10,204 8,614 375,324 370,520
197 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
31 SIGNIFICANT RELATED PARTY TRANSACTIONS
(a) The Group had the following significant related party transactions in the normal course of business during the year:
2015 2014
US$’000 US$’000

[¶±¦|;¯|÷¸¸|.
(IGRS Engineering Lab Limited) (an associate)
– Purchase of goods – 2,508
¸·¦¯((¦|¸|.
(Shanghai Shiyun Network Technology Limited) (a joint venture)
– Purchase of goods 4,522 –
Note: The English name of each company is a direct translation of its Chinese registered name.
(b) Key management compensation
Details on key management compensation are set out in Note 11.
32 COMMITMENTS
(a) Capital commitments
Apart from disclosed elsewhere in these financial statements, on March 31, 2015, the Group had the following other
capital commitments:
2015 2014
US$’000 US$’000

Contracted but not provided for:
– Property, plant and equipment 261,663 153,621
– Patent and technology – 122,500
– IT consulting services 6,738 830
268,401 276,951
Authorized but not contracted for:
– Property, plant and equipment 1,027,710 890,701
– IT consulting services 251 –
– Prepaid lease payments – 65,692
1,027,961 956,393
(b) Commitments under operating leases
The future aggregate minimum lease payments in respect of land and buildings under non-cancelable operating leases
of the Group are as follows:
2015 2014
US$’000 US$’000

Not later than one year 107,222 63,798
Later than one year but not later than five years 428,706 162,487
Later than five years 311,278 61,784
847,206 288,069
198 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
33 CONTINGENT LIABILITIES
The Group, in the ordinary course of its business, is involved in various claims, suits, investigations, and legal proceedings
that arise from time to time. Although the Group does not expect that the outcome in any of these legal proceedings,
individually or collectively, will have a material adverse effect on its financial position or results of operations, litigation is
inherently unpredictable. Therefore, the Group could incur judgments or enter into settlements of claims that could adversely
affect its operating results or cash flows in a particular period.
34 RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH GENERATED
FROM OPERATIONS
2015 2014
US$’000 US$’000

Profit before taxation 970,967 1,014,195
Share of profits of associates and joint ventures (17,055) (9,221)
Finance income (30,902) (33,893)
Finance costs 185,504 80,974
Depreciation of property, plant and equipment and
amortization of prepaid lease payments 208,363 109,689
Amortization of intangible assets and share-based compensation 399,442 225,718
Loss/(gain) on disposal of property, plant and equipment 162 (356)
Net gain on disposal of available-for-sale financial assets (1,185) (21,880)
Loss on disposal of construction-in-progress 200 1,219
Loss on disposal of intangible assets 2,656 12,673
Dividend income (305) (547)
Fair value change on financial instruments 20,376 (10,572)
Release of escrow shares for settlement of acquisition consideration – (6,913)
Decrease/(increase) in inventories 120,263 (739,964)
(Increase)/decrease in trade receivables, notes receivable,
deposits, prepayments and other receivables (526,439) 1,474
(Decrease)/increase in trade payables, notes payable,
provisions, other payables and accruals (491,457) 1,011,546
Effect of foreign exchange rate changes (171,570) 6,244
Net cash generated from operations 669,020 1,640,386
199 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
35 RETIREMENT BENEFIT OBLIGATIONS
2015 2014
US$’000 US$’000

Pension obligation included in non-current liabilities
Pension benefits 377,228 142,482
Post-employment medical benefits 22,554 14,033
399,782 156,515
Expensed in income statement
Pension benefits (Note 10) 22,630 21,799
Post-employment medical benefits (885) 492
21,745 22,291
Remeasurements for:
Defined pension benefits 70,267 (3,060)
Post-employment medical benefits (180) (928)
In Germany, the Group operates a sectionalised plan that has both defined contribution and defined benefit features, including
benefits based on a final pay formula. This plan is closed to new entrants. Following the acquisition of System X and Motorola
Mobility in 2014, the Group assumed approximately US$239,419,000 of defined benefit obligations in Germany. The defined
benefit plan for Motorola’s employees in Germany contains less than 20 active employees but a large number of retirees and
former employees with benefits which have vested, but where payment will be deferred until they retire. As a result of these
acquisitions and decreases in Euro interest rates, the Group’s largest pension liabilities are now in Germany.
The Group continues to maintain significant pension liabilities in Japan, where a cash balance benefit is provided for
substantially all employees.
In the United States, the defined benefit plan is closed to new entrants, and now covers only 2% of employees. There is also
a supplemental defined benefit plan that covers certain executives.
The Group also operates final salary defined benefit plans in a number of countries as a result of past acquisitions.
The Group’s major plans are valued by qualified actuaries annually using the projected unit credit method.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited
to other comprehensive income in the period in which they arise.
(a) Pension benefits
The amounts recognized in the consolidated balance sheet are determined as follows:
2015 2014
US$’000 US$’000

Present value of funded obligations 574,901 389,172
Fair value of plan assets (284,229) (266,875)
Deficit of funded plans 290,672 122,297
Present value of unfunded obligations 86,556 20,185
Liability in the balance sheet 377,228 142,482
Representing:
Pension benefits obligation 377,228 142,482
Pension plan assets – –
377,228 142,482
200 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
35 RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Pension benefits (continued)
The principal actuarial assumptions used are as follows:
2015 2014

Discount rate 1%-2.75% 1.75%-3.75%
Future salary increases 0%-3% 0%-3%
Future pension increases 0%-1.75% 0%-1.75%
Life expectancy for male aged 60 24 23
Life expectancy for female aged 60 27 29
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Impact on defined benefit obligation
2015
Change in
assumption
Increase in
assumption
Decrease in
assumption

Discount rate 0.5% Decrease by 8.1% Increase by 9.1%
Salary growth rate 0.5% Increase by 0.8% Decrease by 0.7%
Pension growth rate 0.5% Increase by 3.0% Decrease by 2.3%
Increase by 1 year
in assumption
Decrease by 1 year
in assumption
Life expectancy Increase by 2.4% Decrease by 2.1%
Impact on defined benefit obligation
2014
Change in
assumption
Increase in
assumption
Decrease in
assumption
Discount rate 0.5% Decrease by 6.6% Increase by 7.4%
Salary growth rate 0.5% Increase by 0.5% Decrease by 0.5%
Pension growth rate 0.5% Increase by 1.2% Decrease by 1.6%
Increase by 1 year
in assumption
Decrease by 1 year
in assumption
Life expectancy Increase by 1.7% Decrease by 1.6%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the
sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the
defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied as when calculating the pension liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the
previous year.
(b) Post-employment medical benefits
The Group operates a number of post-employment medical benefit schemes, principally in the US. The method of
accounting, assumptions and the frequency of valuations are similar to those used for defined benefit pension schemes.
The US plan (Lenovo Future Health Account and Retiree Life Insurance Program) is currently funded by a trust that
qualifies for tax exemption under US tax law, out of which benefits to eligible retirees and dependents will be made.
Changes in future medical cost trend rates has no effect on the liabilities for post-employment medical benefits.
201 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
35 RETIREMENT BENEFIT OBLIGATIONS (continued)
(b) Post-employment medical benefits (continued)
The amounts recognized in the consolidated balance sheet are determined as follows:
2015 2014
US$’000 US$’000

Present value of funded obligations 26,545 18,287
Fair value of plan assets (5,333) (5,545)
21,212 12,742
Present value of unfunded obligations 1,342 1,291
Liability in the balance sheet 22,554 14,033
(c) Additional information on post-employment benefits (pension and medical)
Plan assets of the Group comprise:
2015 2014
Quoted Unquoted Total Quoted Unquoted Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Pension plan
Equity instruments
Information technology 556 – 556 860 – 860
Energy 284 – 284 298 – 298
Manufacturing 530 – 530 1,216 – 1,216
Others 7,518 9 7,527 11,239 – 11,239
8,888 9 8,897 13,613 – 13,613
Debt instruments
Government 27,209 37 27,246 26,775 42,898 69,673
Corporate bonds
(investment grade) 45,446 2 45,448 39,673 7,105 46,778
Corporate bonds
(Non-investment grade) 12 2 14 – 472 472
72,667 41 72,708 66,448 50,475 116,923
Others
Property – 3,770 3,770 – 18,877 18,877
Qualifying insurance policies – 56,132 56,132 845 41,555 42,400
Cash and cash equivalents 14,800 – 14,800 8,135 – 8,135
Investment funds 89 126,401 126,490 437 – 437
Structured bonds – – – – 48,503 48,503
Others 675 757 1,432 158 17,829 17,987
15,564 187,060 202,624 9,575 126,764 136,339
97,119 187,110 284,229 89,636 177,239 266,875
Medical plan
Cash and cash equivalents 5,333 – 5,333 5,545 – 5,545
The long term strategic asset allocations of the plans are set and reviewed from time to time by the plans’ trustees
taking into account the membership and liability profile, the liquidity requirements of the plans.
The weighted average duration of the defined benefit obligation is 14.5 years.
202 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
35 RETIREMENT BENEFIT OBLIGATIONS (continued)
(c) Additional information on post-employment benefits (pension and medical) (continued)
Expected maturity analysis of undiscounted pension and post-employments medical benefits:
At March 31, 2015
Less than
a year
Between
1-2 years
Between
2-5 years
Over
5 years Total
US$’000 US$’000 US$’000 US$’000 US$’000

Pension benefits 13,286 13,709 47,909 799,171 874,075
Post-employment medical benefits 4,512 4,878 2,800 29,341 41,531
Total 17,798 18,587 50,709 828,512 915,606
Pension and medical plan assets do not include any of the Company’s ordinary shares or US real estate occupied by
the Group (2014: nil).
Reconciliation of fair value of plan assets of the Group:
Pension Medical
2015 2014 2015 2014
US$’000 US$’000 US$’000 US$’000

Opening fair value 266,875 275,422 5,545 5,878
Exchange adjustment (33,710) (12,285) (1) (1)
Interest income 6,150 5,965 146 160
Remeasurements:
Return on plan assets
excluding interest income – 1,015 – –
Experience gain/(loss) 29,210 (281) (140) (146)
Contributions by the employer 13,906 19,698 30 27
Contributions by plan participants 408 415 – –
Benefits paid (15,677) (23,074) (247) (373)
Acquisition of businesses 17,067 – – –
Closing fair value 284,229 266,875 5,333 5,545
Actual return on plan assets 35,360 6,699 6 14
Contributions of US$5,607,984 are estimated to be made for the year ending March 31, 2016.
203 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
35 RETIREMENT BENEFIT OBLIGATIONS (continued)
(c) Additional information on post-employment benefits (pension and medical) (continued)
Reconciliation of movements in present value of defined benefit obligations of the Group:
Pension Medical
2015 2014 2015 2014
US$’000 US$’000 US$’000 US$’000

Opening defined benefit obligation 409,357 424,641 19,578 20,542
Exchange adjustment (50,501) (16,002) (178) (169)
Current service cost 14,272 15,850 455 495
Past service cost (1,542) (695) – (34)
Interest cost 10,845 9,689 676 685
Remeasurements:
Loss from change in
demographic assumptions 6,617 509 (104) 69
Loss/(gain) from changes in
financial assumptions 90,530 (4,614) 310 (678)
Experience loss/(gain) 2,330 1,779 (526) (465)
Contributions by plan participants 408 415 – –
Benefits paid (16,393) (25,135) (258) (373)
Curtailments 5,205 2,920 (1,859) (494)
Acquisition of businesses 190,329 – 9,793 –
Closing defined benefit obligation 661,457 409,357 27,887 19,578
During the year, benefits of US$716,000 were paid directly by the Group (2014: US$2,061,000).
Summary of pensions and post-retirement medical benefits of the Group:
2015 2014 2013 2012 2011
US$’000 US$’000 US$’000 US$’000 US$’000

Present value of defined
benefit obligations 689,344 428,935 445,183 435,760 255,673
Fair value of plan assets 289,562 272,420 281,300 230,942 180,803
Deficit 399,782 156,515 163,883 204,818 74,870
Actuarial (gains)/losses
arising on plan assets (29,070) (588) (7,840) 1,786 3,642
Actuarial losses/(gains)
arising on plan liabilities 99,157 (3,400) 25,014 35,751 3,548
70,087 (3,988) 17,174 37,537 7,190
204 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
35 RETIREMENT BENEFIT OBLIGATIONS (continued)
(c) Additional information on post-employment benefits (pension and medical) (continued)
The amounts recognized in the consolidated income statement are as follows:
Pension Medical
2015 2014 2015 2014
US$’000 US$’000 US$’000 US$’000

Current service cost 14,272 15,850 455 495
Past service cost (1,542) (695) – (34)
Interest cost 10,845 9,689 676 685
Interest income (6,150) (5,965) (146) (160)
Curtailment losses 5,205 2,920 (1,870) (494)
Total expense recognized in the
consolidated income statement 22,630 21,799 (885) 492
36 BUSINESS COMBINATIONS
During the year, the Group completed two business combination activities aiming at expanding the Group’s existing scale of
operations and to enlarge the Group’s market share.
On October 1, 2014, the Group acquired certain assets and assumed certain liabilities in connection with System X. The
acquisition provides the Group with end-to-end capabilities to serve enterprise customers and explore new growth segments
in the enterprise hardware market. It also offers a comprehensive and competitive portfolio of server products including
towers, racks, blades and converged systems, as well as associated maintenance services.
On October 30, 2014, the Group acquired 100% of the issued and outstanding equity interests in Motorola. Motorola
is principally engaged in the business of developing, manufacturing, distributing and selling mobile devices, particularly
smartphones based on the Android operating system, and their related products. The acquisition provides the Group with
immediate access to key assets, technology and personnel to accelerate the Group’s entry into mature geographies for
smartphones, including those based on the popular Android operating system under its strong relationships with retailers and
carriers.
The estimated total consideration for the business combination activities completed during the year is approximately US$5,232
million, including cash, the Company’s shares as consideration shares, deferred consideration and share-based compensation
obligation assumed by the Company.
Set forth below is the preliminary calculation of goodwill:
Motorola System X Total
US$’000 US$’000 US$’000
Purchase consideration:
– Cash paid less cash to be refunded (a) 836,306 1,859,188 2,695,494
– Fair value of consideration shares (b) 768,482 270,914 1,039,396
– Present value of deferred consideration (c) 1,376,230 – 1,376,230
– Share-based compensation obligation assumed 114,922 6,330 121,252
Total purchase consideration 3,095,940 2,136,432 5,232,372
Less: Fair value of net assets acquired (1,436,665) (1,072,453) (2,509,118)
Goodwill (Note 17(a)) 1,659,275 1,063,979 2,723,254
205 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
36 BUSINESS COMBINATIONS (continued)
(a) At completion date on acquisition of System X, cash payment comprising cash consideration of US$2,070,000,000
net of a downward adjustment of US$210,811,622 calculated based on transferred balances of certain working capital
items, was paid to IBM.
At completion date on acquisition of Motorola, US$660,000,000, representing the cash consideration, and a
compensation of US$176,306,000, which primarily relates to the estimated amount of excess net cash and working
capital remaining in Motorola transferrable to the Company, was paid to Google Inc.(“Google”), the seller, in cash.
(b) The fair values of 182,000,000 and 519,107,215 ordinary shares of the Company issued as part of the purchase
consideration for the business combinations of System X and Motorola were based on the published share price on
October 1 and October 30, 2014, respectively.
(c) The deferred consideration represents the promissory note of US$1,500,000,000 issued to Google payable in cash on
the third anniversary of the completion date. The present value of deferred consideration is included in other non-current
liabilities in the balance sheet.
The major components of assets and liabilities arising from the business combination activities are as follows:
Motorola System X Total
US$’000 US$’000 US$’000
Cash and cash equivalents 404,157 17,801 421,958
Property, plant and equipment 477,432 113,429 590,861
Deferred tax assets less liabilities 47,358 (51,405) (4,047)
Intangible assets 1,587,718 1,510,000 3,097,718
Other non-current assets 24,720 – 24,720
Net working capital except cash and cash equivalents (832,692) (146,646) (979,338)
Non-current liabilities (272,028) (370,726) (642,754)
Fair value of net assets acquired 1,436,665 1,072,453 2,509,118
Intangible assets arising from the business combination activities mainly represent customer relationships, trademarks and
brand licenses. The Group has engaged external valuers to perform fair value assessments on these intangible assets in
accordance with HKAS 38 “Intangible Assets” and HKFRS 3 (Revised) “Business Combination”.
At March 31, 2015, the Group has not finalized the fair value assessments for net assets acquired (including intangible assets)
from the business combination activities. The relevant fair values of net assets stated above are on a provisional basis.
Acquisition-related costs of US$26,813,000 have been charged to administrative expenses in the consolidated income
statement for the year ended March 31, 2015.
The aggregate revenue included in the consolidated income statement since October 1, 2014 and October 30, 2014
contributed by System X and Motorola was approximately US$5,603,000,000. System X and Motorola incurred an aggregate
loss of approximately US$63,000,000 over the same period.
No separate set of financial information was prepared for System X before the acquisition. The historical financial information
of Motorola was prepared under the accounting policies of Google, and it is impractical for the Group to prepare a set of
financial information in conformity with the Group’s accounting policies. Accordingly, disclosure of the revenue and profit/loss
before taxation of both newly acquired businesses for the full year from April 1, 2014 has not been made.
206 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
37 PRINCIPAL SUBSIDIARIES
The following includes the principal subsidiaries directly or indirectly held by the Company and, in the opinion of the directors,
are significant to the results of the year or form a substantial portion of the net assets of the Group. The directors consider
that giving details of other subsidiaries would result in particulars of excessive length.
Company name
Place of
incorporation/
establishment
Issued and fully
paid up capital
Percentage of
issued capital held Principal activities
2015 2014

Held directly:
¶[¸¯)¸|.
(Lenovo (Beijing) Limited)
1
(wholly foreign-owned enterprise)
Chinese Mainland HK$175,481,300 100% 100% Manufacturing and distribution
of IT products and provision
of IT services
¶[¸·)¸|.
(Lenovo (Shanghai) Co., Ltd.)
1
(wholly foreign-owned enterprise)
Chinese Mainland HK$10,000,000 100% 100% Distribution of IT products and
provision of IT services
Held indirectly:
Digiboard Eletrônica da Amazônia Ltda. Brazil BRL174,669,670 100% 100% Manufacturing and distribution
of IT products
Digibrás Indústria do Brasil S.A. Brazil BRL957,207,677.92 100% 100% Manufacturing and distribution
of IT products
Dual Mix Comércio de Eletrônica Ltda. Brazil BRL106,719 100% 100% Manufacturing and distribution
of IT products
¶|÷])¸¸¦|¸|.
(LCFC (Hefei) Electronics Technology
Co., Ltd.)
1
(wholly foreign-owned enterprise)
Chinese Mainland US$265,000,000 51% 51% Manufacturing and distribution
of IT products
Lenovo (Asia Pacific) Limited Hong Kong HK$2,574,207,653.94 100% 100% Investment holding and
distribution of IT products
¸¯¶[]"¸|.
(Beijing Lenovo Software Limited)
1
(wholly foreign-owned enterprise)
Chinese Mainland HK$5,000,000 100% 100% Provision of IT services and
distribution of IT products
Lenovo (Australia & New Zealand)
Pty Limited
Australia AUD43,857,597 100% 100% Distribution of IT products
Lenovo (Belgium) BVBA Belgium EUR1,317,700,834.94 100% 100% Investment holding and
distribution of IT products
Lenovo (Canada) Inc. Canada CAD10,000,000 100% 100% Distribution of IT products
207 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
Company name
Place of
incorporation/
establishment
Issued and fully
paid up capital
Percentage of
issued capital held Principal activities
2015 2014

¶[[7)¸|.
(Lenovo (Chengdu) Limited)
1
(Chinese-foreign equity joint venture)
Chinese Mainland RMB12,000,000 100% 100% Provision of IT services and
distribution of IT products
Lenovo Computer Limited Hong Kong HK$2 100% 100% Procurement agency and
distribution of IT products
Lenovo (Danmark) ApS Denmark DKK126,000 100% 100% Distribution of IT products
Lenovo (Deutschland) GmbH Germany EUR25,100 100% 100% Distribution of IT products
Lenovo Enterprise Solutions
(Singapore) Pte. Ltd.
Singapore SGD1 100% – Manufacturing of computers
and peripheral equipment
Lenovo Enterprise Solutions Ltd. Japan JPY50,000,000 100% – Distribution of IT products
Lenovo (France) SAS France EUR1,837,000 100% 100% Distribution of IT products
Lenovo HK Services Limited Hong Kong HK$1 100% 100% Provision of business planning,
management, global
supply chain, finance, and
administration support
services
Lenovo (Hong Kong) Limited Hong Kong HK$74,256,023 100% 100% Distribution of IT products
±¦¶[¸¸¯¸¸|.
(Lenovo (Huiyang) Electronic Industrial
Co., Ltd.)
1
(wholly foreign-owned enterprise)
Chinese Mainland HK$31,955,500 100% 100% Manufacturing of IT products
Lenovo (India) Private Limited India INR5,296,421,514 100% 100% Manufacturing and distribution
of IT products
¶[±¦¸,´¯)¸|.
(Lenovo Information Products
(Shenzhen) Co. Ltd.)
1
(wholly foreign-owned enterprise)
Chinese Mainland US$80,000,000 100% 100% Manufacturing and distribution
of IT products
37 PRINCIPAL SUBSIDIARIES (continued)
208 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
Company name
Place of
incorporation/
establishment
Issued and fully
paid up capital
Percentage of
issued capital held Principal activities
2015 2014

Lenovo (Israel) Ltd. Israel ILS1,000 100% 100% Distribution of IT products
Lenovo (Italy) S.r.l Italy EUR100,000 100% 100% Distribution of IT products
Lenovo (Japan) Ltd. Japan JPY100,000,000 51% 51% Distribution of IT products
Lenovo Korea LLC Korea KRW3,580,940,000 100% 100% Distribution of IT products
Lenovo Mexico, S. de R.L. de C.V. Mexico MXN226,308,454 100% 100% Distribution of IT products
¶[¦]¿±¦|¸|.
(Lenovo Mobile Communication
Technology Ltd.)
1
(Chinese-foreign equity joint venture)
Chinese Mainland RMB187,500,000 100% 100% Manufacturing and distribution
of IT products and provision
of IT services
¶[¦]¿±]"F¸)¸|.
(Lenovo Mobile Communication
Software (Wuhan) Limited)
1
(wholly foreign-owned enterprise)
Chinese Mainland RMB10,000,000 100% 100% R&D of mobile software
¶[¦]¿±F¸)¸|.
(Lenovo Mobile Communication
(Wuhan) Limited)
1
(wholly foreign-owned enterprise)
Chinese Mainland RMB60,000,000 100% 100% Manufacturing of mobile
products
Lenovo PC HK Limited Hong Kong HK$2 ordinary and
HK$1,000,000
non-voting deferred
100% 100% Procurement agency and
distribution of IT products
Lenovo PC International Limited Hong Kong HK$4,758,857,784 100% 100% Intellectual properties
Lenovo (Schweiz) GmbH Switzerland CHF2,000,000 100% 100% Distribution of IT products
Lenovo (Singapore) Pte. Ltd. Singapore SGD1,971,231,035.94 100% 100% Distribution of IT products
Lenovo (South Africa) (Pty) Limited South Africa RAND1,000 100% 100% Distribution of IT products
Lenovo (Spain), SRL Spain EUR108,182 100% 100% Distribution of IT products
37 PRINCIPAL SUBSIDIARIES (continued)
209 2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
Company name
Place of
incorporation/
establishment
Issued and fully
paid up capital
Percentage of
issued capital held Principal activities
2015 2014

Lenovo (Sweden) AB Sweden SEK200,000 100% 100% Distribution of IT products
¶[¬(º[´¯)¸|.
(Lenovo Systems Technology
Company Limited)
1
(wholly foreign-owned enterprise)
Chinese Mainland USD41,100,000 100% – Manufacturing and Distribution
of IT products
Lenovo Technology (United Kingdom) Limited United Kingdom GBP8,629,508 100% 100% Distribution of IT products
Lenovo Technology B.V. Netherlands EUR20,000 100% 100% Distribution of IT products
Lenovo Technology Sdn. Bhd. Malaysia MYR1,000,000 100% 100% Distribution of IT products
Lenovo Tecnologia (Brasil) Ltda Brazil BRL2,837,051,501 100% 100% Manufacturing and Distribution
of IT products
Lenovo (Thailand) Limited Thailand THB243,000,000 100% 100% Distribution of IT products as
well as mobile phone, smart
phone and tablet, server and
storage
Lenovo (United States) Inc. United States US$1 100% 100% Distribution of IT products
Lenovo (Venezuela), SA Venezuela VEB3,846,897 100% 100% Distribution of IT products
LenovoEMC, Limited Hong Kong HK$366,012,965.72
ordinary
51% 51% Distribution of IT products
¶[F¸)¸|.
(Lenovo (Wuhan) Limited)
1
(Chinese-foreign equity joint venture)
Chinese Mainland RMB10,000,000 100% 100% Provision of IT services and
distribution of IT products
¶[¯/)¸|.
(Lenovo (Xian) Limited)
1
(Chinese-foreign equity joint venture)
Chinese Mainland RMB10,000,000 100% 100% Provision of IT services and
distribution of IT products
LLC “Lenovo (East Europe/Asia)” Russia RUB1,910,000 100% 100% Distribution and marketing of
IT products
37 PRINCIPAL SUBSIDIARIES (continued)
210 Lenovo Group Limited 2014/15 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
Company name
Place of
incorporation/
establishment
Issued and fully
paid up capital
Percentage of
issued capital held Principal activities
2015 2014

Medion AG Germany EUR48,418,400 79.82% 79.82% Retail and service business
for consumer electronic
products
Motorola Mobility Comércio de Productos
Eletronicos Ltda
Brazil BRL739,238,401 100% – Developer, owner, licensor and
seller of communications
hardware and software
Motorola Mobility International Sales Bermuda USD1 100% – Used for Non-US countries for
Distribution of Products
Motorola Mobility LLC United States – 100% – Developer, owner, licensor and
seller of communications
hardware and software
NEC Personal Computers, Ltd. Japan JPY500,000,000 51% 51% Manufacturing and distribution
of IT products
´¯¶[·,j¦¸|.
(Shenzhen Lenovo Overseas
Holdings Limited)
1
(Chinese-foreign equity joint venture)
Chinese Mainland USD298,000,000 100% – Investment management
Stoneware, Inc. United States US$861,341.25 100% 100% Development and distribution
of IT products
¦¸[,±¦|;|¦¸¯)¸|.
(Sunny Information Technology
Service, Inc.)
1
(Chinese-foreign equity joint venture)
Chinese Mainland RMB20,000,000 100% 100% Provision of repair services
for computer hardware and
software systems
Notes:
(i) All the above subsidiaries operate principally in their respective places of incorporation or establishment.
(ii) All the Chinese Mainland subsidiaries, CCE and Motorola’s subsidiaries are limited liability companies. They have adopted December
31 as their financial year end date for statutory reporting purposes. For the preparation of the consolidated financial statements,
financial statements of these Chinese Mainland subsidiaries and of CCE for the years ended March 31, 2014 and 2015, and Motorola’s
subsidiaries for the period ended March 31, 2015 have been used.
(iii) The company whose English name ends with a “1” is a direct transliteration of its Chinese registered name.
(iv) Medion AG is a publicly traded German stock corporation listed on the Frankfurt am Main stock exchange.
38 APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board of directors on May 21, 2015.
37 PRINCIPAL SUBSIDIARIES (continued)
211 2014/15 Annual Report Lenovo Group Limited
FIVE-YEAR FINANCIAL SUMMARY
CONDENSED CONSOLIDATED INCOME STATEMENT
2015 2014 2013 2012 2011
US$’000 US$’000 US$’000 US$’000 US$’000

Revenue 46,295,593 38,707,129 33,873,401 29,574,438 21,594,371
Profit before taxation 970,967 1,014,195 801,299 582,443 357,751
Taxation (134,364) (196,725) (169,707) (107,027) (84,515)
Profit for the year 836,603 817,470 631,592 475,416 273,236
Profit/(loss) attributable to:
Equity holders of the Company 828,715 817,228 635,148 472,992 273,234
Non-controlling interests 7,888 242 (3,556) 2,424 2
836,603 817,470 631,592 475,416 273,236
Earnings per share attributable to
equity holders of the Company
Basic (US cents) 7.77 7.88 6.16 4.67 2.84
Diluted (US cents) 7.69 7.78 6.07 4.57 2.73
CONDENSED CONSOLIDATED BALANCE SHEET
2015 2014 2013 2012 2011
US$’000 US$’000 US$’000 US$’000 US$’000

Non-current assets 11,653,543 4,956,545 4,492,260 4,040,348 2,769,476
Current assets 15,427,735 13,400,548 12,389,737 11,820,400 7,936,463
Total assets 27,081,278 18,357,093 16,881,997 15,860,748 10,705,939
Non-current liabilities 5,813,795 1,870,051 2,110,342 1,603,102 838,386
Current liabilities 17,161,362 13,462,322 12,091,474 11,809,677 8,032,653
Total liabilities 22,975,157 15,332,373 14,201,816 13,412,779 8,871,039
Net assets 4,106,121 3,024,720 2,680,181 2,447,969 1,834,900
212 Lenovo Group Limited 2014/15 Annual Report
CORPORATE INFORMATION
HONORARY CHAIRMAN
Mr. Liu Chuanzhi
BOARD OF DIRECTORS
Chairman and executive director
Mr. Yang Yuanqing
Non-executive directors
Mr. Zhu Linan
Mr. Zhao John Huan
Independent non-executive directors
Mr. Ting Lee Sen
Dr. Tian Suning
Mr. Nicholas C. Allen
Mr. Nobuyuki Idei
Mr. William O. Grabe
Mr. William Tudor Brown
Ms. Ma Xuezheng
Mr. Yang Chih-Yuan Jerry
CHIEF FINANCIAL OFFICER
Mr. Wong Wai Ming
COMPANY SECRETARY
Mr. Mok Chung Fu, Eric
REGISTERED OFFICE
23rd Floor, Lincoln House, Taikoo Place,
979 King’s Road, Quarry Bay, Hong Kong
PRINCIPAL BANKERS
Bank of China
BNP Paribas
Citibank, N.A.
Industrial and Commercial Bank of China
Standard Chartered Bank (Hong Kong) Limited
INDEPENDENT AUDITOR
PricewaterhouseCoopers
Certified Public Accountants
22nd Floor, Prince’s Building,
Central, Hong Kong
SHARE REGISTRAR
Tricor Abacus Limited
Level 22, Hopewell Centre
183 Queen’s Road East, Hong Kong
AMERICAN DEPOSITARY RECEIPTS
(Depositary and Registrar)
Citibank, N.A.
14th Floor, 388 Greenwich Street,
New York, NY 10013, USA
STOCK CODES
Hong Kong Stock Exchange: 992
American Depositary Receipts: LNVGY
WEBSITE
www.lenovo.com
www.lenovo.com
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