Annual Report of Lenovo

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Stock Code: 992

IDEAS EVERYWHERE
Lenovo Group Limited Annual Report 2007/08

TM

NEW WORLD. NEW THINKING.

TM

CONTENTS

ABOUT LENOVO
Lenovo (HKSE: 992) (ADR: LNVGY) develops, manufactures and markets high-quality, secure and easy-to-use technology products and services worldwide and is dedicated to building the world’s best-engineered personal computers. Formed by Lenovo Group’s acquisition of the former IBM Personal Computing Division, Lenovo’s heritage in both emerging and developed markets has resulted in a New World Company business model where ideas, operations and resources are borderless and mobile. With four operational hubs in Beijing, Raleigh, Singapore and Paris, Lenovo has major research centers in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina.

02 06 08 10 14 32 51 75 76 77 78 79 81 144
Inside Back Cover

Financial Highlights Chairman’s Statement CEO’s Report Lenovo Management Team Management’s Discussion & Analysis Corporate Governance Directors’ Report Independent Auditors’ Report Consolidated Income Statement Balance Sheets Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Financial Statements Five-Year Financial Summary Corporate Information

IN EVERY DIRECTION
On the subway. At the office. In the elevator. At the beach. In the park. In the car. On the bus. In the bedroom. In the boardroom. Where do you have your best ideas? Wherever it may be, Lenovo believes in the power of ideas and helps you create, nurture, preserve, share and realize them. Lenovo strives to make the best engineered PCs. Innovative, reliable, beautifully-designed machines that are enjoyed and relied upon in the commercial and, increasingly, consumer marketplaces. Lenovo, itself, is the culmination of novel ideas and daring vision that have contributed to the formation and unremitting growth of a “new world” company.

Financial HigHligHts

For the year ended March 31 Continuing Operations1 Sales Gross profit Gross profit margin (%) Operating expenses EBITDA2 Pre-tax income Pre-tax income margin (%) 2

008 US$ mn

2007 US$ mn

Year-on-year Change

16,35 ,450 15.0 1,91 11.7 798 513 3.1

13,978 1,887 13.5 1,722 12.3 375 155 1.1

17.0% 29.8% 1.5 pts 11.5% (0.6 pts) 113.0% 231.8% 2.0 pts

Expense-to-revenue ratio (%)

Group Results Profit attributable to shareholders EPS – basic (US cents) EPS – diluted (US cents) Interim dividend per share (HK cents) Proposed final dividend per share (HK cents) Proposed total dividend per share (HK cents) 484 5.51 5.06 3.0 1.8 15.8 161 1.87 1.84 2.4 2.8 5.2 200.5% 194.7% 175.0% 25.0% 357.1% 203.8%

Cash and Working Capital Bank deposits, cash and cash equivalents Total bank borrowings Net cash reserves Cash conversion cycle (days) ,191 561 1,630 (8) 1,064 118 946 (27) 106.0% 375.4% 72.4% (1)

Notes: 1 The disposal of mobile handset business was completed in March 2008. Continuing operations exclude mobile handset business. 2 Excluding restructuring charges



Lenovo Group Limited



Annual Report 2007/08

Sales Analysis by Geography – Continuing Operations1
for the year ended March 31 (US$ million)

Sales Analysis by Product – Continuing Operations1
for the year ended March 31 (US$ million)

08

37%

8%

%

13%

16,35

08

58%

41%

1%

16,35

07

36%

29%

22%

13%

13,978

07

55%

44%

1%

13,978

Greater China Americas

Europe, Middle East & Africa Asia Pacific (excluding Greater China)

Notebook computer Desktop computer

Others

EBITDA – Continuing Operations1, 2
for the year ended March 31 (US$ million)

Profit Attributable to Shareholders
for the year ended March 31 (US$ million)

08 07 06 05 04 155 152 375 343

798

08 07 06 05 04 22 144 135 161

484

Notes: 1 The disposal of mobile handset business was completed in March 2008. Continuing operations exclude mobile handset...
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