Yunkang Group Limited - Interim / Quarterly Report 2021

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Lenovo Group Limited `聯想集團有限公司`

(Incorporated in Hong Kong with limited liability) (Stock Code: 992)

FY2020/21 THIRD QUARTER RESULTS ANNOUNCEMENT

THIRD QUARTER RESULTS

The board of directors (the “Board”) of Lenovo Group Limited (the “Company”) announces the unaudited results of the Company and its subsidiaries (the “Group”) for the three and nine months ended December 31, 2020 together with comparative figures for the corresponding period of last year, as follows:

FINANCIAL HIGHLIGHTS

Group revenue and profit attributable to equity holders increased by 22 and 53 percent year-on-year, respectively, to all-time highs, thanks to operational excellence, product innovation, and quick time-to-market to capture new demand across business groups
Software and Services business, which carries the highest margin profile among all products, delivered record performance with its invoiced revenue growing 36 percent year-on-year, representing around 8.1 percent of the Group’s revenue
The PC and Smart Device business outperformed the market with sales and pre-tax profit growth of 27 and 35 percent to set new records; its unique hybrid manufacturing strategy provided greater efficiency, control, and flexibility to facilitate share gain
The Data Center Group achieved its highest quarterly revenue ever and further narrowed the pre-tax loss by US$14 million year-on-year to a pre-tax loss of US$33 million, partly driven by a higher services attach rate and upselling of premier services
The Mobile Business Group resumed profitability with 10 percent revenue growth; continued efforts to optimize the product portfolio has helped drive a mix shift towards higher-end models and expand average selling price
Net cash generated from operating activities was US$2.0 billion, up US$1.4 billion year-on-year

	3 months ended	9 months ended	3 months ended	9 months ended	Year-on-year change	Year-on-year change
	December 31,	December 31,	December 31,	December 31,	3 months	9 months
	2020	2020	2019	2019	ended	ended
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	December 31	December 31
	*US$ million*	*US$ million*	*US$ million*	*US$ million*
Revenue	17,245	45,112	14,103	40,137	22%	12%
Gross profit	2,786	7,080	2,265	6,496	23%	9%
Gross profit margin	16.2%	15.7%	16.1%	16.2%	0.1 pts	(0.5) pts
Operating expenses	(2,085)	(5,378)	(1,777)	(5,223)	17%	3%
Operating profit	701	1,702	488	1,273	44%	34%
Other non-operating
income/(expenses) - net	(110)	(308)	(98)	(333)	12%	(7)%
Profit before taxation	591	1,394	390	940	52%	48%
Profit for the period	431	1,028	305	741	41%	39%
Profit attributable to equity
holders of the Company	395	918	258	623	53%	47%
Earnings per share attributable to
equity holders of the Company
Basic	US3.31 cents	US7.70 cents	US2.16 cents	US5.22 cents	US1.15 cents	US2.48 cents
Diluted	US3.08 cents	US7.37 cents	US2.07 cents	US5.01 cents	US1.01 cents	US2.36 cents

BUSINESS REVIEW AND OUTLOOK

Highlights

During the three months ended December 31, 2020, Lenovo (the Group) delivered many new performance records, including all-time high revenue and profit. The Group achieved 22 percent and 53 percent year-onyear growth in revenue and profit attributable to equity holders, respectively. The strong performance has been fueled by Lenovo’s robust growth across business groups as well as structural changes in lifestyle and work habits since the onset of the COVID-19 pandemic. The PC and Smart Device (PCSD) and Data Center Group (DCG) achieved record revenue while Mobile Business Group (MBG) grew its top-line by double-digits.

The Group set new milestones in terms of service contract wins and pursuing service-led transformation. The Software and Services business, which carries the highest margin profile among all products, reported invoiced revenue and deferred revenue growth of 36 and 30 percent year-on-year, respectively. It represented around 8.1 percent of the Group’s revenue. Among the three key business segments, Managed Services including Device-as-a-Service (DaaS) enjoyed 73 percent growth thanks to strong progress in contract wins globally. Complex Solutions posted 49 percent growth from all verticals. Attached Services continued to grow steadily, up 26 percent during the quarter under review.

Net cash generated from operating activities was US$2.0 billion in 3QFY21 and increased US$1.4 billion yearon-year thanks to the Group’s strong revenue growth during the quarter. Given its strength in cash generation, the company’s net debt reduced by US$755 million year-on-year. On January 20, 2021, Lenovo’s board of directors approved the issuance of Chinese depositary receipts (“CDRs”), to be listed and traded on the Science and Technology Innovation Board of the Shanghai Stock Exchange. The Company plans to use the proceeds for research and development, strategic investments in related sectors, and replenishment of working capital.

Group Financial Performance

The Group’s revenue reached US$17.2 billion, up 22 percent year-on-year, during the period under review. Gross profit increased 23 percent and profit attributable to equity holders rose by 53 percent to US$395 million. The Group’s operating expense-to-revenue ratio was lowered by 0.5 percentage points to 12.1 percent. The change in the PCSD product mix, with growing contribution from consumer and Chromebook sales, continued to have an impact on the expense structure as both products require fewer operating costs. The Group recognized fair value gains from its strategic investments amounting to US$67 million during the quarter under review. The total segment pre-tax profit, excluding the impact of one-time items, grew by 41 percent year-onyear to US$902 million.

By business group, PCSD grew its revenues 27 percent year-on-year and its market share reached 25.3 percent in the global PC sector, representing an annual increase of 0.6 percentage points. It optimized share gain by leveraging operational excellence, product innovation and quick time-to-market to capture new demand. The Group’s hybrid manufacturing strategy provides greater efficiency, control, and flexibility to further expand market share leadership relative to the competition.

The MBG business aggressively expanded its product portfolio through multiple 5G model launches, resulting in 10 percent year-on-year growth in revenue. Revenue of DCG also reached an all-time high thanks to record sales in its Enterprise and SMB (ESMB) segment and robust momentum in its Cloud Service Provider (CSP) segment.

Geographic Performance

Lenovo is a global business operating in more than 180 markets. For the period under review, the Group reported consistent strength across all regional markets, with revenues up 25-30 percent year-on-year in America, Europe-Middle East-Africa (EMEA) and China. Even in Asia Pacific (excluding China), which was impacted by a slowdown in commercial sales, regional revenue still increased by 4 percent year-on-year.

In China, the Group’s revenue grew 30 percent year-on-year on the back of strong demand and market share gain in its PCSD and DCG’s ESMB businesses. In EMEA, the Group achieved strong performance in both PC and smartphone businesses, becoming the top PC vendor in the region for the first time. Its smartphone sales in Europe rose 82 percent year-on-year and contributed to the double-digit revenue growth of the MBG business relative to the same period last year. In North America, the Group delivered strong double-digit sales growth across the three business groups, driven by the improved smartphone portfolio, strength in consumer and education PC demand, and cloud infrastructure investment.

Performance by Product Business Group

Intelligent Devices Group (IDG)

The IDG Group, consisting of the PCSD and MBG businesses, outperformed the sector in the third fiscal quarter. The Group grew its revenue by 25 percent year-on-year at US$15.6 billion while its pre-tax profit increased 36 percent to reach US$935 million, both representing record highs. Market share gains in the strong PC sector and recovery of smartphone sales were key growth drivers for IDG’s profitability. The PCSD business sustained its top global position by leveraging operational excellence, product innovations and timeto-market capabilities, while taking advantage of “new normal” tailwinds. MBG posted annual revenue growth exceeding 10 percent, boosted by an expanded premium product portfolio and 5G launches.

Intelligent Devices Group - PC and Smart Device (PCSD) Business

During the period under review, the PCSD business achieved all-time high revenue and pre-tax profit. The worldwide PC market outperformed on the back of lifestyle changes including the one PC per person trend. Usage intensity of PC products also rose on accelerated market trends including work-from-home, e-learning, and e-commerce revolution. The Group was able to grow faster than its competitors across education and Small and Medium Business (SMB) segments.

PCSD revenue grew 27 percent year-on-year to US$14,011 million, contributing to 81 percent of the Group’s total revenue. Its pre-tax margin expanded 0.4 percentage points year-on-year to a record 6.6 percent. Its pretax profit increased 35 percent year-on-year to US$925 million for the period under review. The Group delivered stellar results in high-growth segments and high-margin services, driving a structural shift in the sales mix to provide a clear propellant for its long-term profitability.

The Software and Services business showcased strong growth during the period and its invoiced revenue increased 46 percent year-on-year. The Group’s e-commerce take-off benefited direct customer engagement and share gain in the consumer and SMB market segments. This has led to a record number of transactions through Lenovo’s on-line franchise and resulted in 39 percent year-on-year growth in e-commerce revenue. High-growth segment sales also performed well. Work-from-home demand remained a strong stimulus for thin-and-light notebook PC sales which grew 31 percent year-on-year. The Gaming PC segment has been a beneficiary of casual gaming demand. Its improved product portfolio led to revenue growth of 61 percent yearon-year. E-learning has prompted a 281 percent year-on-year increase in Chromebook shipments.

Intelligent Devices Group - Mobile Business Group (MBG)

MBG revenue increased by 10 percent from the same period last year to US$1,521 million. It has continued to expand its smartphone product portfolio and carrier ranging during the quarter. MBG’s product portfolio now carries attractive models across all price spectrums. It has been successful in driving a mix shift towards higher-end models and expanding average selling prices. The revenue contribution from 5G models improved 5 percentage points quarter-over-quarter to 13 percent. The average selling prices of MBG products increased 6 percent quarter-on-quarter and 19 percent year-on-year thanks to increased popularity of premium and flagship models. The MBG business accounted for 9 percent of the Group’s total revenue.

Despite challenges from the hike in logistics costs and industry-wide component shortages, MBG resumed profitability. Its pre-tax profit amounted to US$10 million for the period under review, up US$7 million yearon-year. The business will continue to drive profitable growth and win market share. MBG’s “5G for all” strategy, aiming to make 5G connectivity more accessible across all price segments, has been a success, as evidenced by its recent launches. The MBG business is planning more 5G launches across its franchise portfolio.

Data Center Group (DCG)

In the third fiscal quarter, DCG’s revenue increased by 2 percent year-on-year to a record US$1,634 million and contributed 9 percent of the Group’s total sales. The Group also narrowed its loss further by US$14 million year-on-year to a pre-tax loss of US$33 million. The DCG business continued to grow its services attach rate and upsell premier services. The strategic partnership with SAP to beef up TruScale solution, a scalable consumption-based services offering, is well positioned to benefit from an improved pipeline.

By segment, the CSP revenue grew 4 percent year-on-year during the quarter under review. The robust cloud demand and ongoing client diversification have led to double-digit sales growth across all regions except for China, where orders with better profitability are given higher regional priority. Therefore, revenue from its Enterprise and SMB (ESMB) segment increased by double-digits year-on-year, as the less profitable CSP orders were reduced. The ESMB business continued to drive success in four growth products: software defined infrastructure (SDI), storage, high-performance computing, and software and services. These product sales reached their highest level ever in the quarter under review, resulting in the highest revenue for ESMB segment in last three years. According to third-party research, Lenovo surpassed two competitors to become the second largest global supplier in entry storage. The DCG business group aims to scale up and enhance profitability to pursue long-term growth.

Outlook

Despite uncertainties since the outbreak of the COVID-19 pandemic, the Group has taken advantage of tailwind opportunities to drive earnings growth and furthered its business transformation. With regional economies including China on pace to expand and signs of a rebound in certain areas of enterprise spending, the Group will continue to capitalize on recovery-led opportunities. The business has also ratcheted up investments on service-led transformation which should bode well for long-term growth and profitability.

For its PCSD business, the Group will continue addressing opportunities emerging from structural changes in the sector. It will leverage its operational excellence and global franchise to meet strong segment demand, drive consistent premium-to-market growth, and maintain profitability leadership.

For its Mobile business, the Group will further push product innovation and accelerate 5G smartphone launches. It will also seek to enhance competitiveness in Latin America, North America, and Europe to grow at a premium to the sector and drive profitable growth.

In its DCG business, the Group aims to deliver premium-to-market growth and enhance profitability. In the ESMB segment, the Group will grow its high-margin services attach rate, upsell premier services and expand hybrid cloud solutions to drive a paradigm shift in computing with its edge-to-cloud solutions. For its CSP business, the Group’s recent design wins will attract new customers and expand its share with existing accounts. To achieve that the business will leverage its unique strengths in the global supply chain and worldwide reach and expand its product portfolio with advanced configuration and storage platforms. The business will also grow its in-house design and manufacturing capabilities to continue scale expansion.

Given a surge in market interest in its service capability since the outbreak of the pandemic, the Group has been building a strong pipeline of new orders for Attached Services, Managed Services which includes Device as a Service, and Complex Solutions.

Strategic Highlights

The Group continues to execute its strategy to be the leader and enabler of Intelligent Transformation. It has the vision of bringing smarter technology to all - through Smart Infrastructure, Smart Verticals, and Smart IoT. This “3S” strategy, in parallel with its customer-centric positioning, has led to structural growth in new businesses including Software and Services.

Smart Infrastructure provides the computing, storage, and networking power to support smart devices. The Group’s next-generation data center solutions in the hybrid cloud are based on the ThinkAgile platform, with strong growth coming from Smart City and data center project wins in China. The Group’s Smart Infrastructure revenue grew 5 percent year-on-year, representing a temporary deceleration as enterprise customers take time to reassess their business priorities and purchase decision amid COVID-19. The Group will continue to engage clients and expand the pipeline to resume its growth momentum.

Smart Verticals combine big data generated by smart devices and the computing power of smart infrastructure to provide more insights and improve processes for customers. The Group has expanded its footprint to win multiple projects across different industry verticals such as smart cities, smart education, and healthcare industries around the world. Its revenue grew by more than 54 percent year-on-year during the period under review.

The Group will continue to invest in Smart IoT , consisting of a network of many touchpoints for the connected world we live in. Specifically, the Group’s investments will accelerate in the area of edge computing, cloud, big data, and AI in vertical industries. This will strengthen the Group’s capability as a competitive end-to-end solution provider in the era of Intelligent Transformation. The Smart IoT business has delivered 44 percent year-on-year revenue growth. In particular, Attached and Managed Services has grown significantly thanks to its Device-as-a-Service project wins across worldwide markets.

New Organizational Structure for FY2021/22

Lenovo is also today announcing a new organizational structure designed to capitalize on the Group’s serviceled transformation growth opportunities. Effective April 1, 2021, Lenovo will bring together services and solutions teams and capabilities from across the company to form a dedicated organization - the new Solutions & Services Group (SSG) . SSG will further drive the company’s transformation by delivering incremental business across smart verticals, attached services, managed services and our “as a service” offerings including DaaS and Truscale™.

With this, Lenovo’s business will be structured into three main business groups aligned to the company’s 3S strategy of Smart IoT, Smart Infrastructure and Smart Verticals, namely IDG (Intelligent Devices Group) – focused on Smart IoT; ISG (Infrastructure Solutions Group , renamed from DCG, Data Center Group) – focused on Smart Infrastructure; and SSG – focused on Smart Verticals & Services. IDG will be led globally by Luca Rossi (currently SVP & President of PCSD in EMEA and Latin America). ISG will continue to be led globally by Kirk Skaugen . And the newly formed global Lenovo SSG will be led by Ken Wong (currently SVP & President of PCSD in Asia Pacific).

In addition, Lenovo’s sales organizations in markets around the world will split into a China GEO and an International Sales Organization , led respectively by Liu Jun (currently EVP & President of IDG in China) and Matt Zielinski (currently SVP & President of PCSD in North America), to drive greater synergies and efficiencies between business groups. All above five leaders will report directly to Yuanqing Yang and sit on the Lenovo Executive Committee (LEC).

Gianfranco Lanci , Lenovo’s Corporate President and COO has also announced his plans to retire from the company in September 2021. Until then, he will continue to serve in his role as President and Chief Operating Officer of Lenovo Group and be responsible for Lenovo’s global business operations across all of Business Groups and Sales.

FINANCIAL REVIEW

Results for the nine months ended December 31, 2020

	9 months	9 months
	ended	ended
	December 31, 2020 (unaudited) *US$ million*	December 31, 2019 (unaudited) US$ million	Year-on-year change
Revenue	45,112	40,137	12%
Gross profit	7,080	6,496	9%
Gross profit margin	15.7%	16.2%	(0.5) pts
Operating expenses	(5,378)	(5,223)	3%
Operating profit	1,702	1,273	34%
Other non-operating income/(expenses) – net	(308)	(333)	(7)%
Profit before taxation	1,394	940	48%
Profit for the period	1,028	741	39%
Profit attributable to equity holders of the Company	918	623	47%
Earnings per share attributable to equity holders of the Company Basic	US7.70 cents	US5.22 cents	US2.48 cents
Diluted	US7.37 cents	US5.01 cents	US2.36 cents

For the nine months ended December 31, 2020, the Group achieved total sales of approximately US$45,112 million. Profit attributable to equity holders for the period surged by US$295 million to approximately US$918 million when compared to the corresponding period of last year. In the same reporting period, gross profit margin eroded 0.5 percentage points to 15.7 percent, mainly due to higher costs in freight and transportation; while basic and diluted earnings per share were US7.70 cents and US7.37 cents respectively, representing an increase of US2.48 cents and US2.36 cents.

Analysis of operating expenses by function for the nine months ended December 31, 2020 and 2019 is as follows:

Selling and distribution expenses Administrative expenses Research and development expenses Other operating income/(expenses) – net	9 months ended December 31, 2020 *US$’000* (2,221,362) (2,163,584) (1,037,203) 43,772 (5,378,377)	9 months ended December 31, 2019 US$’000 (2,357,394) (1,804,407) (988,575) (72,681) (5,223,057)

Operating expenses for the period increased by 3 percent as compared with the corresponding period of last year. Employee benefit costs increased by US$407 million mainly due to increase in bonus, sales commission, wages and salaries and recognition of severance costs of US$75 million, and the Group recorded an impairment loss of intangible assets related to patent and technology of US$53 million (2019/20: nil). Amortization of intangible assets increased by US$47 million with more investments in patent and technology and internal use software. On the other hand, the Group recorded a gain on disposal of non-core property assets of US$79 million (2019/20: nil), and a fair value gain from strategic investments amounting to US$232 million (2019/20: US$49 million), including a dilution gain on interest in an associate of US$31 million (2019/20: nil) and a gain on deemed disposal of subsidiaries of US$3 million (2019/20: nil), reflecting the change in value of the Group’s portfolio. The overall increase was also partially offset by the reduction in advertising and promotional expenses of US$151 million.

Key expenses by nature comprise:

Depreciation of property, plant and equipment Depreciation of right-of-use assets - prepaid lease payments - leasehold land and buildings Amortization of intangible assets Impairment of intangible assets Employee benefit costs, including - long-term incentive awards - severance and related costs Rental expenses under operating leases Net foreign exchange loss Advertising and promotional expenses Legal and professional fees Information technology expenses Gain/(loss) on disposal of property, plant and equipment Fair value gain on financial assets at fair value through profit or loss Fair value loss on a financial liability at fair value through profit or loss Dilution gain on interest in an associate Gain on deemed disposal of subsidiaries Gain on disposal of subsidiaries Gain on disposal of interest in an associate Others	9 months ended December 31, 2020 *US$’000* (120,952) (61,073) *(1,988)* *(59,085)* (456,411) (52,606) (3,231,195) *(189,119)* *(75,006)* (5,139) (37,435) (568,882) (165,705) (103,718) 71,964 197,279 (7,373) 31,374 2,964 1,064 - (872,533) (5,378,377)	9 months ended December 31, 2019 US$’000 (116,340) (66,517) (1,952) (64,565) (409,862) - (2,823,892) (192,675) - (8,504) (70,310) (719,777) (149,125) (75,283) (1,348) 49,435 (13,000) - - 12,844 3,922 (835,300) (5,223,057)

Other non-operating income/(expenses) - net for the nine months ended December 31, 2020 and 2019 comprise:

Finance income Finance costs Share of losses of associates and joint ventures	9 months ended December 31, 2020 *US$’000* 24,573 (308,372) (23,849) (307,648)	9 months ended December 31, 2019 US$’000 37,843 (358,835) (11,107) (332,099)

Finance income mainly represents interest on bank deposits.

Finance costs for the period decreased by 14 percent as compared with the corresponding period of last year. The change is a combined effect of the decrease in interest on bank loans and overdrafts of US$34 million and factoring costs of US$53 million, partially offset by the increase in interest on notes of US$33 million. Share of losses of associates and joint ventures primarily represents operating losses arising from principal business activities of respective associates and joint ventures.

The Group adopts segments by business group as the reporting format. Segments by business group comprise IDG and DCG. Segment revenue and pre-tax income/(loss) for reportable segments are as follows:

IDG DCG Segment total Unallocated: Headquarters and corporate income/(expenses) - net Depreciation and amortization Impairment of intangible assets Finance income Finance costs Share of losses of associates and joint ventures Gain/(loss) on disposal of property, plant and equipment Fair value gain on financial assets at fair value through profit or loss Fair value loss on a financial liability at fair value through profit or loss Dilution gain on interest in an associate Gain on deemed disposal of subsidiaries Gain on disposal of interest in an associate Dividend income Consolidated profit before taxation	9 months ended December 31, 2020 Revenue from external customers Pre-tax income/ (loss) US$*’000* *US$’000* 40,387,424 2,255,903 4,724,784 (138,340) 45,112,208 2,117,563 (640,072) (158,385) (52,606) 13,954 (159,116) (23,849) 70,424 197,279 (7,373) 31,374 2,964 - 1,784 1,393,941	9 months ended December 31, 2020 Revenue from external customers Pre-tax income/ (loss) US$*’000* *US$’000* 40,387,424 2,255,903 4,724,784 (138,340) 45,112,208 2,117,563 (640,072) (158,385) (52,606) 13,954 (159,116) (23,849) 70,424 197,279 (7,373) 31,374 2,964 - 1,784 1,393,941	9 months ended December 31, 2019 Revenue from external customers Pre-tax income/ (loss) US$’000 US$’000 35,849,817 1,835,835 4,287,161 (149,716) 40,136,978 1,686,119 (503,272) (118,338) - 19,526 (176,453) (11,107) (726) 49,435 (13,000) - - 3,922 4,303 940,409	9 months ended December 31, 2019 Revenue from external customers Pre-tax income/ (loss) US$’000 US$’000 35,849,817 1,835,835 4,287,161 (149,716) 40,136,978 1,686,119 (503,272) (118,338) - 19,526 (176,453) (11,107) (726) 49,435 (13,000) - - 3,922 4,303 940,409
				1,686,119 (503,272) (118,338) - 19,526 (176,453) (11,107) (726) 49,435 (13,000) - - 3,922 4,303 940,409

Headquarters and corporate income/(expenses) - net for the period comprise various expenses, after appropriate allocation to business groups, of US$640 million (2019/20: US$503 million) such as employee benefit costs, legal and professional fees, and research and technology expenses. The increase is mainly due to employee benefit costs rising by US$174 million as a result of recognition of severance costs of US$75 million and an increase in bonus accrual. Also, fair value gain on bonus warrants decreased by US$15 million as compared with the corresponding period of last year. There was a one-time charge associated with the execution of previously announced resource actions at the corporate level of US$48 million last year.

Third Quarter 2020/21 compared to Third Quarter 2019/20

	3 months	3 months
	ended	ended
	December 31, 2020 (unaudited) *US$ million*	December 31, 2019 (unaudited) US$ million	Year-on-year change
Revenue	17,245	14,103	22%
Gross profit	2,786	2,265	23%
Gross profit margin	16.2%	16.1%	0.1 pts
Operating expenses	(2,085)	(1,777)	17%
Operating profit	701	488	44%
Other non-operating income/(expenses) – net	(110)	(98)	12%
Profit before taxation	591	390	52%
Profit for the period	431	305	41%
Profit attributable to equity holders of the Company	395	258	53%
Earnings per share attributable to equity holders of the Company Basic	US3.31 cents	US2.16 cents	US1.15 cents
Diluted	US3.08 cents	US2.07 cents	US1.01 cents

For the three months ended December 31, 2020, the Group achieved total sales of approximately US$17,245 million. Profit attributable to equity holders for the period increased by US$137 million to approximately US$395 million when compared to the corresponding period of last year. In the same reporting period, gross profit margin increased by 0.1 percentage points to 16.2 percent; while basic and diluted earnings per share were US3.31 cents and US3.08 cents respectively, representing an increase of US1.15 cents and US1.01 cents.

Further analyses of sales by segment are set out in Business Review and Outlook.

Analysis of operating expenses by function for the three months ended December 31, 2020 and 2019 is as follows:

	3 months	3 months
	ended	ended
	December 31,	December 31,
	2020	2019
	*US$’000*	US$’000
Selling and distribution expenses Administrative expenses Research and development expenses Other operating income/(expenses) – net	(863,021) (859,267) (398,102) 35,492	(816,261) (609,157) (341,232) (9,863)
	(2,084,898)	(1,776,513)

Operating expenses for the period increased by 17 percent as compared with the corresponding period of last year. Employee benefit costs increased by US$261 million mainly due to increase in bonus, sales commission, wages and salaries. On the other hand, the Group recorded a fair value gain from strategic investments amounting to US$67 million (2019/20: US$50 million) including a gain on deemed disposal of subsidiaries of US$3 million (2019/20: nil), reflecting the change in value of the Group’s portfolio. The increase in operating expenses also reflected an increase in advertising and promotional expenses of US$22 million.

Key expenses by nature comprise:

Depreciation of property, plant and equipment Depreciation of right-of-use assets - prepaid lease payments - leasehold land and buildings Amortization of intangible assets Employee benefit costs, including - long-term incentive awards Rental expenses under operating leases Net foreign exchange loss Advertising and promotional expenses Legal and professional fees Information technology expenses Gain/(loss) on disposal of property, plant and equipment Fair value gain on financial assets at fair value through profit or loss Fair value loss on a financial liability at fair value through profit or loss Gain on deemed disposal of subsidiaries Gain on disposal of interest in an associate Others	3 months ended December 31, 2020 *US$’000* (39,211) (21,996) *(686)* *(21,310)* (155,063) (1,204,121) *(61,367)* (2,048) (4,566) (270,052) (55,390) (48,706) 1,092 64,359 (5,600) 2,964 - (346,560) (2,084,898)	3 months ended December 31, 2019 US$’000 (37,786) (24,292) (646) (23,646) (150,290) (942,865) (68,978) (2,748) (21,859) (247,555) (62,510) (31,484) (642) 49,543 (10,000) - 3,922 (297,947) (1,776,513)

Other non-operating income/(expenses) - net for the three months ended December 31, 2020 and 2019 comprise:

Finance income Finance costs Share of losses of associates and joint ventures	3 months ended December 31, 2020 *US$’000* 7,240 (109,923) (7,046) (109,729)	3 months ended December 31, 2019 US$’000 13,369 (107,595) (3,659) (97,885)

Finance income mainly represents interest on bank deposits.

Finance costs for the period increased by 2 percent as compared with the corresponding period of last year. The change is a combined effect of the increase in interest on notes of US$21 million, partially offset by the decrease in interest on bank loans and overdrafts of US$11 million and factoring costs of US$9 million.

Share of losses of associates and joint ventures primarily represents operating losses arising from principal business activities of respective associates and joint ventures.

The Group adopts segments by business group as the reporting format. Segments by business group comprise IDG and DCG. Segment revenue and pre-tax income/(loss) for reportable segments are as follows:

	3 months ended	3 months ended	3 months ended	3 months ended
	December 31, 2020		December 31, 2019
	Revenue		Revenue
	from	Pre-tax	from	Pre-tax
	external	income/	external	income/
	customers	(loss)	customers	(loss)
	US$*’000*	*US$’000*	US$’000	US$’000
IDG	15,611,168	934,955	12,502,275	687,050
DCG	1,634,275	(32,710)	1,600,561	(46,546)
Segment total	17,245,443	902,245	14,102,836	640,504
Unallocated:
Headquarters and corporate income/(expenses) - net		(259,905)		(228,559)
Depreciation and amortization		(55,765)		(41,506)
Finance income		3,380		6,585
Finance costs		(57,985)		(28,369)
Share of losses of associates and joint ventures		(7,046)		(3,659)
Gain/(loss) on disposal of property, plant and
equipment		3,318		(146)
Fair value gain on financial assets at fair value
through profit or loss		64,359		49,543
Fair valuelosson a financial liability at fair value
through profit or loss		(5,600)		(10,000)
Gain on disposal of interest in an associate		-		3,922
Gain on deemed disposal of subsidiaries		2,964		-
Dividend income		1,513		1,913
Consolidated profit before taxation		591,478		390,228

Headquarters and corporate income/(expenses) - net for the period comprise various expenses, after appropriate allocation to business groups, of US$260 million (2019/20: US$229 million) such as employee benefit costs, legal and professional fees, and research and technology expenses. The increase is mainly due to employee benefit cost rising by US$86 million as a result of an increase in bonus accrual. Also, there was a one-time charge associated with the execution of previously announced resource actions at the corporate level of US$40 million last year.

Capital Expenditure

The Group incurred capital expenditure of US$564 million (2019/20: US$701 million) during the nine months ended December 31, 2020, mainly for the acquisition of property, plant and equipment, additions to construction-in-progress and intangible assets. The higher capital expenditure incurred in the corresponding period of last year was mainly attributable to more investments in patent and technology particularly on cloud technology and internal use software.

Liquidity and Financial Resources

At December 31, 2020, total assets of the Group amounted to US$38,645 million (March 31, 2020: US$32,128 million), which were financed by equity attributable to owners of the Company of US$3,887 million (March 31, 2020: US$3,197 million), other non-controlling interests (net of put option written on non-controlling interests) of US$24 million (March 31, 2020: negative balance of US$132 million), (March 31, 2020: perpetual securities of US$994 million) and total liabilities of US$34,734 million (March 31, 2020: US$28,069 million). At December 31, 2020, the current ratio of the Group was 0.90 (March 31, 2020: 0.81).

At December 31, 2020, bank deposits and cash and cash equivalents totalling US$4,091 million (March 31, 2020: US$3,617 million) analyzed by major currency are as follows:

	December 31, 2020	March 31, 2020
	%	%
US dollar	35.9	35.3
Renminbi	34.0	25.4
Japanese Yen	6.5	10.3
Euro	3.8	7.8
Great British Pound	0.3	4.2
Other currencies	19.5	17.0
Total	100.0	100.0

The Group adopts a conservative policy to invest the surplus cash generated from operations. At December 31, 2020, 92.0 (March 31, 2020: 85.6) percent of cash are bank deposits, and 8.0 (March 31, 2020: 14.4) percent 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 to meet inter-quarter funding requirements and the Group has entered into factoring arrangements in the ordinary course of business for liquidity.

The Group has the following banking facilities:

				Utilized amount at
Type	Date of agreement	Principal amount	Term	December 31, 2020	March 31, 2020
		US$ million		*US$ million*	US$ million
Loan facility	May 26, 2015	300	5 years	N/A	300
Revolving loan
facility	March 28, 2018	1,500	5 years	445	1,500
Loan facility	May 12, 2020	300	5 years	160	N/A
Revolving loan
facility	May 14, 2020	200	5 years	-	N/A

Notes, convertible bonds and convertible preferred shares issued by the Group and outstanding as at December 31, 2020 are as follows:

				Interest rate /
		Principal		dividend per
	Issue date	amount	Term	annum	Due date	Use of proceeds
2022 Notes	March 16, 2017	US$337 million	5 years	3.875%	March 2022	For repayment	of the
						outstanding amount under the
						promissory notes issued to
						Google Inc. and general
						corporate purposes
2023 Notes	March 29, 2018	US$687 million	5 years	4.75%	March 2023	For repayment of	previous
						Notes and general	corporate
						purposes
Convertible bonds	January 24, 2019	US$675 million	5 years	3.375%	January 2024	For repayment of	previous
			(Note)			Notes and general	corporate
						purposes
Convertible	June 21, 2019	US$280 million	N/A	4%	N/A	For general corporate funding
preferred shares						and capital expenditure
2025 Notes	April 24, 2020	US$1 billion	5 years	5.875%	April 2025	For repayment of	previous
	and May 12, 2020					Notes and general	corporate
						purposes
2030 Notes	November 2, 2020	US$1 billion	10 years	3.421%	November 2030	For repurchase of	perpetual
						securities and previous Notes

Note: Please refer to Note 12(c) to the Financial Information for details.

The Group has also arranged other short-term credit facilities as follows:

	Total available	amount at	Drawn down amount at	Drawn down amount at
Credit facilities	December 31, 2020	March 31, 2020	December 31, 2020	March 31, 2020
	*US$ million*	US$ million	*US$ million*	US$ million
Trade lines	2,362	2,547	1,841	2,047
Short-term money market
facilities	1,020	1,034	45	334
Forward foreign exchange
contracts	12,163	9,278	12,095	9,222

Net debt position and gearing ratio of the Group as at December 31 and March 31, 2020 are as follows:

	December 31, 2020	March 31, 2020
	*US$ million*	US$ million
Bank deposits and cash and cash equivalents	4,091	3,617
Borrowings
- Short-term loans	639	2,125
- Long-term loan	2	3
- Notes	3,010	1,807
- Convertible bonds	620	607
- Convertible preferred shares	297	318
Net debt position	(477)	(1,243)
Total equity	3,911	4,059
Gearing ratio (Borrowings divided by total equity)	1.17	1.20

The Group is confident that the facilities on hand can meet the funding requirements of the Group’s operations and business development. The Group is in full compliance with all the banking covenants.

The Group adopts a consistent hedging policy for business transactions to reduce the risk of currency fluctuation arising from daily operations. At December 31, 2020, the Group had commitments in respect of outstanding forward foreign exchange contracts amounting to US$12,095 million (March 31, 2020: US$9,222 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.

FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

Note Revenue 2 Cost of sales Gross profit Selling and distribution expenses Administrative expenses Research and development expenses Other operating income/(expenses) - net Operating profit 3 Finance income 4(a) Finance costs 4(b) Share of losses of associates and joint ventures Profit before taxation Taxation 5 Profit for the period Profit attributable to: Equity holders of the Company Perpetual securities holders Other non-controlling interests Earnings per share attributable to equity holders of the Company Basic 6(a) Diluted 6(b) Dividend	3 months ended December 31, 2020 (unaudited) *US$’000* 17,245,443 (14,459,338) 2,786,105 (863,021) (859,267) (398,102) 35,492 701,207 7,240 (109,923) (7,046) 591,478 (160,043) 431,435 395,063 5,652 30,720 431,435 US3.31 cents US3.08 cents	9 months ended December 31, 2020 (unaudited) *US$’000* 45,112,208 (38,032,242) 7,079,966 (2,221,362) (2,163,584) (1,037,203) 43,772 1,701,589 24,573 (308,372) (23,849) 1,393,941 (366,145) 1,027,796 918,080 32,532 77,184 1,027,796 US7.70 cents US7.37 cents 102,298	3 months ended December 31, 2019 (unaudited) US$’000 14,102,836 (11,838,210) 2,264,626 (816,261) (609,157) (341,232) (9,863) 488,113 13,369 (107,595) (3,659) 390,228 (84,729) 305,499 258,117 13,440 33,942 305,499 US2.16 cents US2.07 cents	9 months ended December 31, 2019 (unaudited) US$’000 40,136,978 (33,641,413) 6,495,565 (2,357,394) (1,804,407) (988,575) (72,681) 1,272,508 37,843 (358,835) (11,107) 940,409 (199,329) 741,080 622,538 40,320 78,222 741,080 US5.22 cents US5.01 cents 96,640

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit for the period Other comprehensive income/(loss): Items that will not be reclassified to profit or loss Remeasurements of post-employment benefit obligations, net of taxes Fair value change on financial assets at fair value through other comprehensive income, net of taxes Items that have been reclassified or may be subsequently reclassified to profit or loss Fair value change on cash flow hedges from foreign exchange forward contracts, net of taxes - Fair value (loss)/gain, net of taxes - Reclassified to consolidated income statement Currency translation differences Other comprehensive income/(loss) for the period Total comprehensive income for the period Total comprehensive income attributable to: Equity holders of the Company Perpetual securities holders Other non-controlling interests	3 months ended December 31, 2020 (unaudited) *US$’000* 431,435 14,462 1,384 (180,525) 98,921 238,389 172,631 604,066 561,293 5,652 37,121 604,066	9 months ended December 31, 2020 (unaudited) *US$’000* 1,027,796 14,489 (5,722) (385,848) 241,540 367,588 232,047 1,259,843 1,137,797 32,532 89,514 1,259,843	3 months ended December 31, 2019 (unaudited) US$’000 305,499 (15,016) 1,474 (77,507) (11,741) 119,978 17,188 322,687 276,209 13,440 33,038 322,687	9 months ended December 31, 2019 (unaudited) US$’000 741,080 (14,636) (1,984) 20,104 (76,629) (120,541) (193,686) 547,394 426,044 40,320 81,030 547,394

CONSOLIDATED BALANCE SHEET

Note Non-current assets Property, plant and equipment Right-of-use assets Construction-in-progress Intangible assets Interests in associates and joint ventures Deferred income tax assets Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Other non-current assets Current assets Inventories 7 Trade receivables 8(a) Notes receivable Derivative financial assets Deposits, prepayments and other receivables 9 Income tax recoverable Bank deposits Cash and cash equivalents Total assets	December 31, 2020 (unaudited) *US$’000* 1,530,006 812,262 223,475 8,152,074 73,854 2,279,006 780,060 85,286 258,589 14,194,612 5,785,801 9,279,392 47,574 23,021 4,976,455 247,047 51,086 4,040,149 24,450,525 38,645,137	March 31, 2020 (audited) US$’000 1,398,440 812,235 304,241 7,984,582 60,307 2,059,582 494,807 56,136 224,396 13,394,726 4,946,914 6,263,012 11,529 138,813 3,559,239 196,464 66,480 3,550,990 18,733,441 32,128,167

CONSOLIDATED BALANCE SHEET (CONTINUED)

Note Share capital 13 Reserves Equity attributable to owners of the Company Perpetual securities 14 Other non-controlling interests Put option written on non-controlling interests 11(b) Total equity Non-current liabilities Borrowings 12 Warranty provision 10(b) Deferred revenue Retirement benefit obligations Deferred income tax liabilities Other non-current liabilities 11 Current liabilities Trade payables 8(b) Notes payable Derivative financial liabilities Other payables and accruals 10(a) Provisions 10(b) Deferred revenue Income tax payable Borrowings 12 Total liabilities Total equity and liabilities	December 31, 2020 (unaudited) *US$’000* 3,203,913 682,850 3,886,763 - 790,466 (766,238) 3,910,991 3,928,492 274,362 1,156,816 474,839 377,602 1,401,330 7,613,441 9,967,953 1,247,610 125,031 12,775,499 883,948 1,057,656 423,922 639,086 27,120,705 34,734,146 38,645,137	March 31, 2020 (audited) US$’000 3,185,923 11,619
		3,197,542 993,670 634,321 (766,238)
		4,059,295
		1,564,619 258,840 864,805 458,386 342,805 1,321,296
		4,810,751
		7,509,724 1,458,645 73,784 9,025,643 718,771 819,199 357,375 3,294,980
		23,258,121

		28,068,872

		32,128,167

CONSOLIDATED CASH FLOW STATEMENT

ONSOLIDATED CASH FLOW STATEMENT
Note Cash flows from operating activities Net cash generated from operations 15 Interest paid Tax paid Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Acquisition of subsidiaries, net of cash acquired Disposal of subsidiaries, net of cash disposed Interest acquired in associates and a joint venture Payment for construction-in-progress Payment for intangible assets Purchase of financial assets at fair value through profit or loss Purchase of financial assets at fair value through other comprehensive income Loan to a joint venture Net proceeds from sale of financial assets at fair value through profit or loss Net proceeds from sale of a financial asset at fair value through other comprehensive income Payment of contingent consideration Decrease in bank deposits Dividends received Interest received Net cash used in investing activities Cash flows from financing activities Issue of warrant shares Capital contribution from other non-controlling interests Contribution to employee share trusts Issue of convertible preferred shares Issue of notes Issuing costs of notes Repayment of notes Principal elements of lease payments Dividends paid Dividends paid to other non-controlling interests Distribution to perpetual securities holders Dividends paid to convertible preferred shares holders Repurchase of convertible preferred shares Proceeds from borrowings Repayments of borrowings Repurchase of perpetual securities Net cash used in financing activities Increase in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	9 months ended December 31, 2020 (unaudited) *US$’000* 3,757,936 (230,493) (476,047) 3,051,396 (191,476) 36,883 (5,049) (6,977) (3,582) (269,693) (103,057) (160,522) (29,556) - 111,753 493 (117,390) 15,394 1,897 24,573 (696,309)	9 months ended December 31, 2019 (unaudited) US$’000 2,432,768 (353,870) (300,611) 1,778,287 (178,068) 12,291 - (18,155) (1,616) (305,674) (217,070) (47,107) - (72,603) 56,843 2,803 - 5,131 6,206 37,843 (719,176) - 61,696 (86,684) 300,000 - - (786,244) (98,590) (431,148) (4,620) (26,880) - - 3,046,800 (2,143,800) - (169,470)
	17,990 70,195 (162,669) - 2,003,500 (14,383) (791,555) (93,533) (434,397) (5,156) (34,772) (11,600) (16,575) 2,813,016 (4,298,242) (1,045,320) (2,003,501)
	351,586 137,573 3,550,990 4,040,149
		889,641 (31,576) 2,662,854 3,520,919

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

At April 1, 2020 Profit for the period Other comprehensive (loss)/income Total comprehensive (loss)/income for the period Transfer to statutory reserve Transfer of investment revaluation reserve upon disposal of financial assets at fair value through other comprehensive income to retained earnings Repurchase of perpetual securities Issue of warrant shares Vesting of shares under long-term incentive program Deferred tax in relation to long-term incentive program Acquisition of subsidiaries Disposal and deemed disposal of subsidiaries Settlement of bonus through long-term incentive program Share-based compensation Contribution to employee share trusts Dividends paid Dividend paid to other non-controlling interests Capital contribution from other non-controlling interests Change of ownership of subsidiaries without loss of control Distribution to perpetual securities holders At December 31, 2020 At April 1, 2019 Profit for the period Other comprehen siv e (loss)/inco me Total comprehen siv e (loss)/inco me for the period Transfer to statutory reserve Transfer of investment revaluation reserve upon disposal of financial assets at fair value through other compreh ensiv e income to retained earnings Vesting of shares under long-term incentive program Deferred tax in relation to long-term incentive program Disposal of subsidiaries Share-based compensation Contribution to employee share trusts Dividends paid Dividends paid to other non-controllin g interests Capital contribution from other non-controllin g interests Change of ownership of subsidiaries without loss of control Distribution to perpetual securities holders At December 31, 2019		Attributable to equity holders of the Company Share capital Investment revaluation reserve Employee share trusts Share-based compensation reserve Hedging reserve Exchange reserve Other reserve Retained earnings Perpetual securities Other non- controlling interests Put option written on non- controlling interests Total *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *(unaudited)* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* *US$’000* 3,185,923 (48,716) (101,467) 287,574 58,489 (1,799,017) 176,642 1,438,114 993,670 634,321 (766,238) 4,059,295 – – – – – – – 918,080 32,532 77,184 – 1,027,796 – (5,722) – – (144,308) 355,258 – 14,489 – 12,330 – 232,047
		– (5,722) – – (144,308) 355,258 – 932,569 32,532 89,514 – 1,259,843 – – – – – – 8,890 (8,890) – – – – – 1,728 – – – – – (1,728) – – – – – – – – – – (53,890) – (991,430) – – (1,045,320) 17,990 – – – – – – – – – – 17,990 – – 187,628 (247,158) – – – – – – – (59,530) – – – 21,265 – – – – – – – 21,265 – – – – – – – – – 2,113 – 2,113 – – – – – 437 (1,819) – – 261 – (1,121) – – – 34,444 – – – – – – – 34,444 – – – 189,119 – – – – – – – 189,119 – – (162,669) – – – – – – – – (162,669) – – – – – – – (434,397) – – – (434,397) – – – – – – – – – (5,156) – (5,156) – – – – – – – – – 69,887 – 69,887 – – – – – – 474 – – (474) – – – – – – – – – – (34,772) – – (34,772)
		3,203,913 (52,710) (76,508) 285,244 (85,819) (1,443,322) 130,297 1,925,668 – 790,466 (766,238) 3,910,991
		3,185,923 (36,095) (140,209) 311,540 23,240 (1,371,932) 163,241 1,260,745 993,670 473,178 (766,238) 4,097,063 – – – – – – – 622,538 40,320 78,222 – 741,080 – (1,984) – – (56,525) (123,349) – (14,636) – 2,808 – (193,686)
		– (1,984) – – (56,525) (123,349) – 607,902 40,320 81,030 – 547,394 – – – – – – 11,995 (11,995) – – – – – (1,696) – – – – – 1,696 – – – – – – 181,424 (242,631) – – – – – – – (61,207) – – – (7,048) – – – – – – – (7,048) – – – – – – (267) – – – – (267) – – – 192,675 – – – – – – – 192,675 – – (86,684) – – – – – – – – (86,684) – – – – – – – (431,148) – – – (431,148) – – – – – – – – – (4,620) – (4,620) – – – – – – – – – 76,019 – 76,019 – – – – – – 1,673 – – (1,673) – – – – – – – – – – (26,880) – – (26,880)
		3,185,923 (39,775) (45,469) 254,536 (33,285) (1,495,281) 176,642 1,427,200 1,007,110 623,934 (766,238) 4,295,297

Notes

1 General information and basis of preparation

The financial information relating to the year ended March 31, 2020 included in the FY2020/21 third quarter results announcement as comparative information does not constitute the Company’s statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance is as follows:

The Company has delivered the consolidated financial statements for the year ended March 31, 2020 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance.

The Company’s auditor has reported on those consolidated financial statements of the Group. The auditor’s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance.

Basis of preparation

The financial information presented above and notes thereto are extracted from the Group’s consolidated financial statements and presented in accordance with Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The Board is responsible for the preparation of the Group’s consolidated financial statements. The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards. The consolidated financial statements have been prepared under the historical cost convention except that certain financial assets and financial liabilities are stated at fair values.

The accounting policies adopted are consistent with those of the previous financial year. The Group has reclassified right-of-use assets related to leasehold land and buildings, which was previously classified as “property, plant and equipment”, and “prepaid lease payments” to “right-of-use assets” in the consolidated balance sheet.

The below amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards.

Amendments to HKFRS 3, Definition of a business
Amendments to HKAS 1 and HKAS 8, Definition of material
Amendments to HKFRS 9, HKAS 39 and HKFRS 7, Interest rate benchmark reform

New amendments to existing standards not yet effective

The following new 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 ending March 31, 2021 and have not been early adopted:

	Effective for annual periods
	beginning on or after
Amendments to HKFRS 16, COVID-19-Related rent
concessions	June 1, 2020
Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and
HKFRS 16, Interest Rate Benchmark Reform – Phase 2	January 1, 2021
Amendments to HKAS 37, Onerous contracts – Cost of
fulfilling a contract	January 1, 2022
Annual improvements to HKFRS Standards 2018-2020 Cycle	January 1, 2022
Amendments to HKAS 16, Property, plant and equipment:
Proceeds before Intended Use	January 1, 2022
Amendments to HKFRS 3, Reference to the conceptual
framework	January 1, 2022
Amendments to HKAS 1, Classification of liabilities as current
or non-current	January 1, 2023
Amendments to HKFRS 10 and HKAS 28, Consolidated
financial statements and investments in associates	Date to be determined

The Group is in the process of assessing what the impact of these developments is expected to be in the period of initial application. So far it has concluded that their adoption is unlikely to have a significant impact on the consolidated financial statements of the Group.

2 Segment information

Management has determined the operating segments based on the reports reviewed by the Lenovo Executive Committee (“LEC”), the chief operating decision-maker, that are used to make strategic decisions. Segments by business group comprise IDG and DCG.

The LEC assesses the performance of the operating segments based on a measure of pre-tax income/(loss). This measurement basis excludes the effects of non-recurring expenses such as restructuring costs from the operating segments. The measurement basis also excludes the effects of certain income and expenses such as fair value change of financial instruments and disposal gain/(loss) of fixed assets that are from activities driven by headquarters and centralized functions. Certain finance income and costs are not allocated to segments when these types of activities are 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 business group 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.

(a) Segment revenue and pre-tax income/(loss) for reportable segments

			9 months	ended		9 months ended	9 months ended	9 months ended
		December 31, 2020				December 31, 2019
		Revenue				Revenue
			from	Pre-tax			from	Pre-tax
		external		income/		external		income/
		customers		(loss)		customers		(loss)
		US$*’000*		*US$’000*		US$’000		US$’000
	IDG	40,387,424		2,255,903		35,849,817		1,835,835
	DCG	4,724,784		(138,340)		4,287,161		(149,716)
	Segment total	45,112,208		2,117,563		40,136,978		1,686,119
	Unallocated:
	Headquarters and corporate income
	/(expenses) - net			(640,072)				(503,272)
	Depreciation and amortization			(158,385)				(118,338)
	Impairment of intangible assets			(52,606)				-
	Finance income			13,954				19,526
	Finance costs			(159,116)				(176,453)
	Share of losses of associates and joint ventures			(23,849)				(11,107)
	Gain/(loss) on disposal of property, plant and
	equipment			70,424				(726)
	Fair value gain on financial assets at fair value
	through profit or loss			197,279				49,435
	Fair value loss on a financial liability at fair
	value through profit or loss			(7,373)				(13,000)
	Dilution gain on interest in an associate			31,374				-
	Gain on deemed disposal of subsidiaries			2,964				-
	Gain on disposal of interest in an associate			-				3,922
	Dividend income			1,784				4,303
	Consolidated profit before taxation			1,393,941				940,409
(b)	Segment assets for reportable segments
				December 31, 2020			March 31, 2020
						*US$’000*		US$’000
	IDG			25,062,258				20,045,317
	DCG				4,788,714			4,656,685
	Segment assets for reportable segments			29,850,972				24,702,002
	Unallocated:
	Deferred income tax assets				2,279,006			2,059,582
	Financial assets at fair value through profit or loss					780,060		494,807
	Financial assets at fair value through other
	comprehensive income					85,286		56,136
	Derivative financial assets					23,021		138,813
	Interests in associates and joint ventures					73,854		60,307
	Bank deposits and cash and cash equivalents				4,091,235			3,617,470
	Unallocated deposits, prepayments and other
	receivables					687,617		379,429
	Income tax recoverable					247,047		196,464
	Other unallocated assets					527,039		423,157
	Total assets per consolidated balance sheet			38,645,137				32,128,167

(c) Segment liabilities for reportable segments

IDG DCG Segment liabilities for reportable segments Unallocated: Deferred income tax liabilities Derivative financial liabilities Borrowings Unallocated other payables and accruals Unallocated other non-current liabilities Income tax payable Total liabilities per consolidated balance sheet	December 31, 2020 *US$’000* 26,462,927 1,861,861 28,324,788 377,602 125,031 4,567,578 887,707 27,518 423,922 34,734,146	March 31, 2020 US$’000 20,271,781 1,666,557
		21,938,338 342,805 73,784 4,859,599 470,200 26,771 357,375
		28,068,872

(d) Analysis of revenue by geography

China AP EMEA AG	9 months ended December 31, 2020 *US$’000* 10,873,643 8,849,205 11,512,931 13,876,429 45,112,208	9 months ended December 31, 2019 US$’000 8,854,350 8,965,759 9,478,596 12,838,273
		40,136,978

(e) Analysis of revenue by timing of revenue recognition

Point in time Over time	9 months ended December 31, 2020 *US$’000* 43,929,146 1,183,062 45,112,208	9 months ended December 31, 2019 US$’000 39,177,055 959,923
		40,136,978

(f) Other segment information

	IDG		DCG		Total
	2020	2019	2020	2019	2020	2019
	*US$’000*	US$’000	*US$’000*	US$’000	*US$’000*	US$’000
For the nine months ended December 31
Depreciation and amortization	422,306	408,696	184,746	176,234	607,052	584,930
Finance income	9,734	15,863	885	2,454	10,619	18,317
Finance costs	114,280	168,469	34,976	13,913	149,256	182,382
Additions to non-current assets (Note)	496,279	612,731	133,540	208,929	629,819	821,660

Note: Excluding other non-current assets and including non-current assets acquired through acquisition of subsidiaries.

(g) Included in segment assets for reportable segments are goodwill and trademarks and trade names with indefinite useful lives with an aggregate amount of US$6,233 million (March 31, 2020: US$5,983 million). The carrying amounts of goodwill and trademarks and trade names with indefinite useful lives are presented below:

At December 31, 2020

					Mature	Emerging
	China	AP	EMEA	AG	Market	Market	Total
*US$ million*		*US$ million*	*US$ million*	*US$ million*	*US$ million*	*US$ million*	*US$ million*
Goodwill
- PCSD	1,089	726	245	302	-	-	2,362
- MBG	-	-	-	-	678	804	1,482
- DCG	499	166	104	345	-	-	1,114
Trademarks and trade names
- PCSD	209	59	110	67	-	-	445
- MBG	-	-	-	-	197	263	460
- DCG	162	54	31	123	-	-	370

At March 31, 2020

					Mature	Emerging
	China	AP	EMEA	AG	Market	Market	Total
US$ million		US$ million	US$ million	US$ million	US$ million	US$ million	US$ million
Goodwill
- PCSD	1,002	686	215	297	-	-	2,200
- MBG	-	-	-	-	666	799	1,465
- DCG	471	159	77	343	-	-	1,050
Trademarks and trade names
- PCSD	209	59	103	67	-	-	438
- MBG	-	-	-	-	197	263	460
- DCG	162	54	31	123	-	-	370

The directors are of the view that there was no impairment of goodwill and trademarks and trade names based on impairment tests performed as at December 31, 2020 (March 31, 2020: Nil).

3 Operating profit

Operating profit is stated after charging/(crediting) the following:

	3 months ended	9 months ended	3 months ended	9 months ended
	December 31,	December 31,	December 31,	December 31,
	2020	2020	2019	2019
	*US$’000*	*US$’000*	US$’000	US$’000
Depreciation of property, plant and
equipment	73,938	221,555	69,309	205,845
Depreciation of right-of-use assets	25,771	71,734	26,757	77,167
- prepaid lease payments	*717*	*2,076*	674	2,039
- leasehold land and buildings	*25,054*	*69,658*	26,083	75,128
Amortization of intangible assets	160,299	472,148	155,183	420,256
Impairment of intangible assets	-	52,606	-	-
Employee benefit costs, including	1,406,168	3,778,337	1,108,987	3,271,969
- long-term incentive awards	*61,367*	*189,119*	68,978	192,675
- severance and other related costs	-	*75,006*	-	-
Rental expenses under operating leases	3,467	10,145	3,396	11,435
(Gain)/loss on disposal of property,
plant and equipment	(1,092)	(71,964)	642	1,348
Loss on disposal of intangible assets	1,091	1,541	50	1,066
Fair value gain on financial assets at fair
value through profit or loss	(64,359)	(197,279)	(49,543)	(49,435)
Fair value loss on a financial liability at
fair value through profit or loss	5,600	7,373	10,000	13,000
Dilution gain on interest in an associate	-	(31,374)	-	-
Gain on deemed disposal of subsidiaries	(2,964)	(2,964)	-	-
Gain on disposal of subsidiaries	-	(1,064)	-	(12,844)
Gain on disposal of interest in an
associate	-	-	(3,922)	(3,922)

4 Finance income and costs

(a) Finance income

3 months ended December 31, 2020 *US$’000* Interest on bank deposits 7,240 Interest on money market funds - 7,240	9 months ended December 31, 2020 *US$’000* 22,797 1,776 24,573	3 months ended December 31, 2019 9 months ended December 31, 2019 US$’000 US$’000 11,694 31,463 1,675 6,380 13,36937,843	3 months ended December 31, 2019 9 months ended December 31, 2019 US$’000 US$’000 11,694 31,463 1,675 6,380 13,36937,843
			37,843

(b) Finance costs

Interest on bank loans and overdrafts Interest on convertible bonds Interest on notes Interest on lease liabilities Factoring costs Interest on contingent considerations and written put option liabilities Others	3 months ended December 31, 2020 9 months ended December 31, 2020 *US$’000* *US$’000* 9,704 34,216 10,017 29,931 42,797 101,590 4,087 13,138 34,828 105,653 6,830 19,653 1,660 4,191 109,923 308,372	3 months ended December 31, 2019 US$’000 20,321 9,898 21,785 4,534 44,202 6,636 219 107,595	9 months ended December 31, 2019 US$’000 67,933 29,618 68,993 12,496 158,353 19,900 1,542
			358,835

5 Taxation

The amount of taxation in the consolidated income statement represents:

Current tax Hong Kong S.A.R. of China profits tax Taxation outside Hong Kong S.A.R. of China Deferred tax Credit for the period	3 months ended December 31, 2020 *US$’000* 38,702 177,519 (56,178) 160,043	9 months ended December 31, 2020 *US$’000* 66,404 430,469 (130,728) 366,145	3 months ended December 31, 2019 US$’000 26,351 128,973 (70,595) 84,729	9 months ended December 31, 2019 US$’000 57,335 333,332 (191,338) 199,329

Hong Kong S.A.R. of China profits tax has been provided for at the rate of 16.5% (2019/20: 16.5%) on the estimated assessable profit for the period. Taxation outside Hong Kong S.A.R. of China represents income and irrecoverable withholding taxes of subsidiaries operating in the Chinese Mainland and overseas, calculated at rates applicable in the respective jurisdictions.

6 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 period after adjusting shares held by employee share trusts for the purposes of awarding shares to eligible employees under the long term incentive program.

Weighted average number of ordinary shares in issue Adjustment for shares held by employee share trusts Weighted average number of ordinary shares in issue for calculation of basic earnings per share Profit attributable to equity holders of the Company used to determine basic earnings per share	3 months ended December 31, 2020 12,027,956,071 (84,672,136) 11,943,283,935 *US$’000* 395,063	9 months ended December 31, 2020 12,019,195,723 (100,104,164) 11,919,091,559 *US$’000* 918,080	3 months ended December 31, 2019 12,014,791,614 (57,160,242) 11,957,631,372 US$’000 258,117	9 months ended December 31, 2019 12,014,791,614 (90,663,388) 11,924,128,226 US$’000 622,538

(b) Diluted

The calculation of the diluted earnings per share is based on the profit attributable to equity holders of the Company, adjusted to reflect the impact from any dilutive potential ordinary shares issued by the Group, as appropriate. The weighted average number of ordinary shares used in the calculation is the weighted average number of ordinary shares in issue during the period, as used in the basic earnings per share calculation, and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares.

The Group has five (2019/20: five) categories of potential ordinary shares, namely longterm incentive awards, bonus warrants, put option written on non-controlling interests, convertible bonds and convertible preferred shares. Long-term incentive awards and convertible bonds were dilutive for the respective three months and nine months ended December 31, 2020 and 2019. Bonus warrants were anti-dilutive for the three months and nine months ended December 31, 2020 and dilutive for the three months and nine months ended December 31, 2019. On November 16, 2020, 26,914,000 units of bonus warrants were exercised, the remaining units were expired during the period. Put option written on non-controlling interests and convertible preferred shares were anti-dilutive for the respective three months and nine months ended December 31, 2020 and 2019.

Weighted average number of ordinary shares in issue for calculation of basic earnings per share Adjustment for long-term incentive awards Adjustment for bonus warrants Adjustment for convertible bonds Weighted average number of ordinary shares in issue for calculation of diluted earnings per share Profit attributable to equity holders of the Company used to determine basic earnings per share Adjustment for interest on convertible bonds, net of tax Profit attributable to equity holders of the Company used to determine diluted earnings per share	3 months ended December 31, 2020 11,943,283,935 397,375,752 - 742,452,665 13,083,112,352 *US$’000* 395,063 8,364 403,427	9 months ended December 31, 2020 11,919,091,559 141,358,495 - 742,452,665 12,802,902,719 *US$’000* 918,080 24,992 943,072	3 months ended December 31, 2019 11,957,631,372 193,424,497 3,886,240 694,709,646	9 months ended December 31, 2019 11,924,128,226 283,411,890 10,646,786 694,709,646 12,912,896,548
			12,849,651,755
			US$’000 258,117 8,265 266,382	US$’000 622,538 24,731
				647,269

7 Inventories

	December 31, 2020	March 31, 2020
	*US$’000*	US$’000
Raw materials and work-in-progress	3,594,237	3,571,141
Finished goods	1,855,165	1,020,718
Service parts	336,399	355,055
	5,785,801	4,946,914

8 Ageing analysis

(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:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days Less: loss allowance Trade receivables – net	December 31, 2020 March 31, 2020 *US$’000* US$’000 6,644,603 4,768,436 1,790,732 878,135 409,495 192,075 507,308 519,822 9,352,138 6,358,468 (72,746) (95,456) 9,279,392 6,263,012	December 31, 2020 March 31, 2020 *US$’000* US$’000 6,644,603 4,768,436 1,790,732 878,135 409,495 192,075 507,308 519,822 9,352,138 6,358,468 (72,746) (95,456) 9,279,392 6,263,012
		6,358,468 (95,456)
		6,263,012

(b) Ageing analysis of trade payables of the Group at the balance sheet date, based on invoice date, is as follows:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	December 31, 2020 March 31, 2020 *US$’000* US$’000 6,428,306 4,793,837 2,184,749 1,699,192 945,848 596,027 409,050 420,668 9,967,953 7,509,724	December 31, 2020 March 31, 2020 *US$’000* US$’000 6,428,306 4,793,837 2,184,749 1,699,192 945,848 596,027 409,050 420,668 9,967,953 7,509,724
		7,509,724

9 Deposits, prepayments and other receivables

Details of deposits, prepayments and other receivables are as follows:

Deposits Other receivables Prepayments	December 31, 2020 March 31, 2020 *US$’000* US$’000 14,159 14,502 3,963,083 2,379,850 999,213 1,164,887 4,976,455 3,559,239

Other receivables mainly comprise amounts due from subcontractors for components sold in the ordinary course of business.

10 Provisions, other payables and accruals

(a) Details of other payables and accruals are as follows:

	December 31, 2020	March 31, 2020
	*US$’000*	US$’000
Accruals	3,109,548	2,340,811
Allowance for billing adjustments (i)	2,443,100	1,618,374
Contingent consideration (Note 11(a))	-	117,387
Other payables (ii)	7,122,478	4,857,095
Lease liabilities	100,373	91,976
	12,775,499	9,025,643

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 are as follows:

Warranty *US$’000* 976,278 (32,815) 824,687 (793,311)	Environmental restoration Restructuring Total *US$’000* *US$’000* *US$’000* 33,297 15,486 1,025,061 626 (91) (32,280) 20,126 - 844,813 (18,445) (15,395) (827,151) 35,604 - 1,010,443 (32,832) - (291,672) 2,772 - 718,771 35,604 - 1,010,443 1,692 - 57,399 12,731 - 750,868 (15,488) - (629,585) 34,539 - 1,189,125 (30,815) - (305,177) 3,724 - 883,948	Environmental restoration Restructuring Total *US$’000* *US$’000* *US$’000* 33,297 15,486 1,025,061 626 (91) (32,280) 20,126 - 844,813 (18,445) (15,395) (827,151) 35,604 - 1,010,443 (32,832) - (291,672) 2,772 - 718,771 35,604 - 1,010,443 1,692 - 57,399 12,731 - 750,868 (15,488) - (629,585) 34,539 - 1,189,125 (30,815) - (305,177) 3,724 - 883,948
974,839 (258,840)	35,604 - (32,832) -
715,999	2,772	-
	35,604 - 1,692 - 12,731 - (15,488) -
1,154,586 (274,362)	34,539 - (30,815) -
880,224	3,724	-

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.

Restructuring costs provision mainly comprises lease termination obligations and employee termination payments, arising from a series of restructuring actions to reduce costs and enhance operational efficiency. The Group records its restructuring costs provision when it has a present legal or constructive obligation as a result of restructuring actions.

11 Other non-current liabilities

Details of other non-current liabilities are as follows:

December 31, 2020 *US$’000* Deferred consideration (a) 25,072 Written put option liabilities (b) 874,861 Lease liabilities 317,983 Environmental restoration (Note 10(b)) 30,815 Government incentives and grants received in advance (c) 64,322 Others 88,277 1,401,330	March 31, 2020 US$’000 25,072 802,273 346,806 32,832 51,938 62,375
	1,321,296

(a) Pursuant to the completion of business combinations, the Group is required to pay in cash to the respective sellers contingent consideration with reference to certain performance indicators as written in the respective agreements with the sellers; and deferred consideration. Accordingly, current and non-current liabilities in respect of the fair value of contingent consideration and present value of deferred consideration have been recognized. The contingent consideration is subsequently re-measured at its 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 carried at amortized cost.

The contingent consideration to Fujitsu Limited (“Fujitsu”) was paid in May 2020 (Note 10(a)). As at December 31, 2020, the potential undiscounted amount of future payment in respect of the deferred consideration that the Group could be required to make to the respective seller under such arrangement is as follows:

Joint venture with NEC Corporation US$25 million

(b) (i) Pursuant to the joint venture agreement entered into between the Company and Fujitsu, the Company and Fujitsu are respectively granted call and put options which entitle the Company to purchase from Fujitsu and Development Bank of Japan (“DBJ”), or Fujitsu and DBJ to sell to the Company, the 49% interest in Fujitsu Client Computing Limited and its subsidiary, Shimane Fujitsu Limited (together “FCCL”). Both options will be exercisable following the fifth anniversary of the date of completion. The exercise price for the call and put options will be determined based on the fair value of the 49% interest as of the day of exercising the option. FCCL will pay to its shareholders by way of dividends in their respective shareholding proportion in a range of FCCL’s profits available for distribution under applicable law in respect of each financial year during the term of the joint venture agreement, after making transfers to reserves and provisions.

(ii) During the year ended March 31, 2019, Hefei Zhi Ju Sheng Bao Equity Investment Co., Ltd (“ZJSB”) acquired the 49% interest in a joint venture company (“JV Co”) from Compal Electronics, Inc. The Company and ZJSB respectively own 51% and 49% of the interest in the JV Co. Pursuant to the option agreement entered into between a wholly owned subsidiary of the Group and Hefei Yuan Jia Start-up Investment LLP (“Yuan Jia”), which holds 99.31% interest in ZJSB, the Group and Yuan Jia are respectively granted call and put options which entitle the Group to purchase from Yuan Jia, or Yuan Jia to sell to the Group, the 99.31% interest in ZJSB. The call and put options will be exercisable at any time after August 31, 2022 and August 31, 2021 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 RMB2,300 million (approximately US$352 million).

The financial liability that may become payable under the put option and dividend requirement is initially recognized at present value of redemption amount within other noncurrent 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 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 put option lapses unexercised, the liability will be derecognized with a corresponding adjustment to equity.

(c) 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 incentives and grants are credited to the consolidated income statement upon fulfillment of those conditions and on a straight line basis over the expected life of the related assets respectively.

12 Borrowings

December 31, 2020 *US$’000* Current liabilities Short-term loans (a) 639,086 Notes (b) - Convertible bonds (c) - 639,086 Non-current liabilities Long-term loan (a) 2,324 Notes (b) 3,009,607 Convertible preferred shares (d) 297,024 Convertible bonds (c) 619,537 3,928,492 4,567,578	March 31, 2020 US$’000 2,124,562 563,249 607,169
	3,294,980 3,079 1,243,714 317,826 -
	1,564,619 4,859,599

(a) Majority of the short-term and long-term loans are denominated in United States dollars. As at December 31, 2020, the Group has total revolving and short-term loan facilities of US$3,020 million (March 31, 2020: US$2,834 million) which has been utilized to the extent of US$650 million (March 31, 2020: US$2,134 million).

Issue date	Principal amount	Term	Interest rate per annum	Due date	December 31, 2020 *US$’000*	March 31, 2020 US$’000
June 10, 2015	RMB4 billion	5 years	4.95%	June 2020	-	563,249
March 16, 2017 US$337 million /
	US$500 million	5 years	3.875%	March 2022	336,555	498,225
March 29, 2018 US$687 million /
	US$750 million	5 years	4.75%	March 2023	683,638	745,489
April 24, 2020
and May 12, 2020	US$1 billion	5 years	5.875%	April 2025	999,150	-
November 2, 2020	US$1 billion	10 years	3.421%	November 2030	990,264	-
					3,009,607	1,806,963

On November 3, 2020, approximately US$163 million in principal amount of the 2022 Notes and approximately US$63 million in principal amount of the 2023 Notes were purchased by the Company. Approximately US$337 million in principal amount of the 2022 Notes and approximately US$687 million in principal amount of the 2023 Notes remain outstanding.

(c) On January 24, 2019, the Company completed the issuance of 5-Year US$675 million convertible bonds bearing annual interest at 3.375% due in January 2024 (“the Bonds”) to third party professional investors (“the bondholders”). The proceeds were used to repay previous notes and for general corporate purposes. The bondholders have the right, at any time on or after 41 days after the date of issue up to the 10th day prior to the maturity date, to convert part or all of the outstanding principal amount of the Bonds into ordinary shares of the Company at a conversion price of HK$7.99 per share, subject to adjustments. The conversion price was adjusted to HK$7.13 per share effective on November 28, 2020. Assuming full conversion of the Bonds at the adjusted conversion price of HK$7.13 per share, the Bonds will be convertible into 742,452,665 shares. The Group expects that it will be able to meet its redemption obligations based on the financial position of the Group.

The initial fair value of the liability portion of the bond was determined using a market interest rate for an equivalent non-convertible bond at the issue date. The liability is subsequently recognized on an amortized cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option and recognized in shareholders’ equity, net of income tax, and not subsequently remeasured.

The outstanding principal amount of the Bonds is repayable by the Company upon the maturity of the Bonds on January 24, 2024, if not previously redeemed, converted or purchased and cancelled. On January 24, 2021, the bondholders will have the right, at the bondholders’ option, to require the Company to redeem part or all of the Bonds on January 24, 2021 at their principal amount. To exercise such right, the bondholders must complete, sign and deposit a duly completed and signed notice of redemption not earlier than 60 days and not later than 30 days prior to January 24, 2021. The outstanding principal amount of the Bonds has been reclassified to non-current liabilities as a result of the lapse of the redemption option.

(d) On June 21, 2019, the Group completed the issuance of 2,054,791 convertible preferred shares through its wholly owned subsidiary, Lenovo Enterprise Technology Company Limited (“LETCL”).

The convertible preferred shares are convertible to 20% of the enlarged issued ordinary share capital of LETCL on an as-converted and fully-diluted basis. The holders of the convertible preferred shares will be entitled cash dividends of 4% per annum payable semi-annually on the original subscription price until December 31, 2023. Upon the occurrence of certain specified conditions, the holders of convertible preferred shares will have the right to require LETCL to redeem or the Company to purchase all of their convertible preferred shares at the predetermined consideration. Accordingly, the convertible preferred shares are classified as a financial liability.

The aggregated subscription price of convertible preferred shares is approximately US$300 million. The net proceeds from the issuance were used by LETCL and its subsidiaries towards general corporate funding and capital expenditure of LETCL and its subsidiaries.

The Group expects that it will be able to meet its redemption obligations based on the financial position of the Group.

The exposure of all the borrowings of the Group to interest rate changes and the contractual repricing dates as at December 31, 2020 and March 31, 2020 are as follows:

December 31, 2020 *US$’000* Within 1 year 639,086 Over 1 to 3 years 1,319,541 Over 3 to 5 years 1,618,687 Over 5 years 990,264 4,567,578	March 31, 2020 US$’000 3,294,980 1,564,619 - -
	4,859,599

13 Share capital

Issued and fully paid: Voting ordinary shares: At the beginning of the period/year Issue of warrant shares At the end of the period/year	December 31, 2020 *Number of* *Shares* *US$’000* 12,014,791,614 3,185,923 26,914,000 17,990 12,041,705,614 3,203,913	March 31, 2020 Number of shares US$’000 12,014,791,614 3,185,923 - - 12,014,791,614 3,185,923

On November 16, 2020, the Company completed the issuance of 26,914,000 warrant shares at exercise price of HK$5.1445 each.

14 Perpetual securities

In March 2017, the Group issued a total of US$850 million perpetual securities through its wholly owned subsidiary, Lenovo Perpetual Securities Limited (“the issuer”). The net proceeds amounted to approximately US$842 million. The securities are perpetual, non-callable in the first 5 years and entitle the holders to receive distributions at a distribution rate of 5.375% per annum in the first 5 years, floating thereafter and with a fixed step up margin, payable semi-annually in arrears, cumulative and compounding. As the perpetual securities do not contain any contractual obligation to pay cash or other financial assets pursuant to the terms and conditions of the issue; in accordance with HKAS 32, they are classified as equity and for accounting purpose regarded as part of noncontrolling interests.

In April 2017, the Group issued an additional US$150 million perpetual securities under the same terms, which are fungible with and form a single series with the aforementioned US$850 million perpetual securities.

On November 3, 2020, approximately US$819 million in principal amount of the perpetual securities were purchased and cancelled by the issuer pursuant to a tender offer made by the issuer on October 22, 2020, and the remaining approximately US$181 million in principal amount of the perpetual securities were redeemed and cancelled on December 10, 2020.

15 Reconciliation of profit before taxation to net cash generated from operations

	9 months ended	9 months ended
	December 31, 2020	December 31, 2019
	*US$'000*	US$'000
Profit before taxation	1,393,941	940,409
Share of losses of associates and joint ventures	23,849	11,107
Finance income	(24,573)	(37,843)
Finance costs	308,372	358,835
Depreciation of property, plant and equipment	221,555	205,845
Depreciation of right-of-use assets
- prepaid lease payments	2,076	2,039
- leasehold land and buildings	69,658	75,128
Amortization of intangible assets	472,148	420,256
Impairment of intangible assets	52,606	-
Share-based compensation	189,119	192,675
(Gain)/loss on disposal of property, plant and equipment	(71,964)	1,348
Loss on disposal of intangible assets	1,541	1,066
Dilution gain on interest in an associate	(31,374)	-
Gain on deemed disposal of subsidiaries	(2,964)	-
Gain on disposal of subsidiaries	(1,064)	(12,844)
Gain on disposal of interest in an associate	-	(3,922)
Fair value change on bonus warrants	(1,138)	(15,869)
Fair value change on financial instruments	23,869	16,252
Fair value change on financial assets at fair value through profit or
loss	(197,279)	(49,435)
Fair value change on a financial liability at fair value through profit or
loss	7,373	13,000
Dividend income	(1,897)	(6,206)
Increase in inventories	(886,592)	(577,613)
Increase in trade receivables, notes receivable, deposits, prepayments
and other receivables	(4,486,404)	(3,142,649)
Increase in trade payables, notes payable, provisions,
other payables and accruals	6,975,941	3,967,285
Effect of foreign exchange rate changes	(278,863)	73,904
	────────	`─────────────`
Net cash generated from operations	3,757,936	2,432,768

Reconciliation of financing liabilities

This section sets out an analysis of financing liabilities and the movements in financing liabilities for the period/year presented.

Financing liabilities December 31, 2020 *US$’000* Short-term loans – current 639,086 Long-term loan – non-current 2,324 Notes – current - Notes – non-current 3,009,607 Convertible bonds – current - Convertible bonds – non-current 619,537 Convertible preferred shares – non-current 297,024 Lease liabilities – current 100,373 Lease liabilities – non-current 317,983 4,985,934 Short-term loans – variable interest rates 630,543 Short-term loan – fixed interest rates 8,543 Long-term loan – fixed interest rates 2,324 Notes – fixed interest rates 3,009,607 Convertible bonds – fixed interest rates 619,537 Convertible preferred shares – fair value 297,024 Lease liabilities – fixed interest rates 418,356 4,985,934	March 31, 2020 US$’000 2,124,562 3,079 563,249 1,243,714 607,169 - 317,826 91,976 346,806
	5,298,381
	2,123,571 991 3,079 1,806,963 607,169 317,826 438,782 5,298,381

Financing liabilities
December 31, 2020
US$’000
Short-term loans – current
639,086
Long-term loan – non-current
2,324
Notes – current
-
Notes – non-current
3,009,607
Convertible bonds – current
-
Convertible bonds – non-current
619,537
Convertible preferred shares – non-current
297,024
Lease liabilities – current
100,373
Lease liabilities – non-current
317,983
4,985,934
Short-term loans – variable interest rates
630,543
Short-term loan – fixed interest rates
8,543
Long-term loan – fixed interest rates
2,324
Notes – fixed interest rates
3,009,607
Convertible bonds – fixed interest rates
619,537
Convertible preferred shares – fair value
297,024
Lease liabilities – fixed interest rates
418,356
4,985,934

March 31, 2020
US$’000
2,124,562
3,079
563,249
1,243,714
607,169
-
317,826
91,976
346,806

5,298,381

2,123,571
991
3,079
1,806,963
607,169
317,826
438,782
5,298,381

Financing liabilities as at April 1, 2019 Change in accounting policy Proceeds from borrowings Repayments of borrowings Repayments of notes Transfer Issue of convertible preferred shares Principal elements of lease payments Dividends paid Foreign exchange adjustments Other non-cash movements Financing liabilities as at March 31, 2020 Financing liabilities as at April 1, 2020 Proceeds from borrowings Repayments of borrowings Repayment of notes Repurchase of convertible preferred shares Transfer Issue of notes Issuing costs of notes Principal elements of lease payments Acquisition of a subsidiary Dividends paid Foreign exchange adjustments Other non-cash movements Financing liabilities as at December 31, 2020	Short-term loans current *US$'000* 1,166,907 - 4,089,791 (3,135,800) - - - - - - 3,664 2,124,562 2,124,562 2,813,016 (4,298,242) - - 755 - - - 1,770 - 544 (3,319) 639,086	Long- term loan non- current *US$'000* - - 3,079 - - - - - - - - 3,079 3,079 - - - - (755) - - - - - - - 2,324	Notes current *US$'000* 786,136 - - - (786,244) 581,389 - - - (18,770) 738 563,249 563,249 - - (565,643) - - - - - - - 2,058 336 -	Notes non- current Convertible bonds current Convertible bonds non- current Convertible preferred shares non- current *US$'000* *US$'000* *US$'000* *US$'000* 1,836,264 - 590,506 - - - - - - - - - - - - - - - - - (581,389) 602,983 (602,983) - - - - 300,000 - - - - - - - (6,000) (13,548) - - - 2,387 4,186 12,477 23,826 1,243,714 607,169 - 317,826 1,243,714 607,169 - 317,826 - - - - - - - - (225,912) - - - - - - (16,575) - (619,537) 619,537 - 2,003,500 - - - (14,383) - - - - - - - - - - - - - - (11,600) - - - - 2,688 12,368 - 7,373 3,009,607 - 619,537 297,024	Lease liabilities current *US$'000* - 77,903 - - - 91,422 - (130,993) - (370) 54,014 91,976	Lease liabilities non- current *US$'000* - 331,441 - - - (91,422) - - - (863) 107,650 346,806 346,806 - - - - (83,394) - - - - - 13,594 40,977 317,983	Total *US$'000* 4,379,813 409,344 4,092,870 (3,135,800) (786,244) - 300,000 (130,993) (6,000) (33,551) 208,942 5,298,381 5,298,381 2,813,016 (4,298,242) (791,555) (16,575) - 2,003,500 (14,383) (93,533) 1,770 (11,600) 24,153 71,002 4,985,934
					91,976 - - - - 83,394 - - (93,533) - - 7,957 10,579 100,373

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the nine months ended December 31, 2020, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities, except that the respective trustee of the long-term incentive program and the employee share purchase plan of the Company purchased a total of 247,810,599 shares from the market for award to employees upon vesting. Details of these program and plan are set out in the 2020/21 interim report of the Company.

REVIEW BY AUDIT COMMITTEE

The Audit Committee of the Company has been established since 1999 with the responsibility to assist the Board in providing an independent review of the financial statements, risk management and internal control systems. It acts in accordance with its terms of reference which clearly deal with its membership, authority, duties and frequency of meetings. Currently, the Audit Committee is chaired by an independent non-executive director, Mr. Nicholas C. Allen, and comprises four members including Mr. Nicholas C. Allen and the other three independent non-executive directors, Mr. William Tudor Brown, Mr. Gordon Robert Halyburton Orr and Mr. Woo Chin Wan Raymond.

The Audit Committee of the Company has reviewed the unaudited financial results of the Group for the nine months ended December 31, 2020. It meets regularly with the management, the external auditor and the internal audit personnel to discuss the accounting principles and practices adopted by the Group and internal control and financial reporting matters.

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

None of the directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not during the nine months ended December 31, 2020, in compliance with the code provisions of the Corporate Governance Code and Corporate Governance Report (the “CG Code”) as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, with the exception that the roles of the chairman of the Board (the “Chairman”) and the chief executive officer of the Company (the “CEO”) have not been segregated as required by code provision A.2.1 of the CG Code.

The Board has 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 Yuanqing (“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 as the lead independent director (the “Lead Independent Director”) with broad authority and responsibility. Among other responsibilities, the Lead Independent Director serves as Chair of the Nomination and Governance Committee meeting and/or Board meeting whenever the Committee and/or Board is considering (i) the combined roles of Chairman and CEO; and (ii) assessment of the performance of Chairman and/or CEO. The Lead Independent Director also calls and chairs 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 provide an effective balance on power and authorizations between the Board and the management of the Company.

By Order of the Board Yang Yuanqing Chairman and Chief Executive Officer

February 3, 2021

As at the date of this announcement, the executive director is Mr. Yang Yuanqing; the non-executive directors are Mr. Zhu Linan and Mr. Zhao John Huan; and the independent non-executive directors are Mr. Nicholas C. Allen, Mr. William O. Grabe, Mr. William Tudor Brown, Mr. Yang Chih-Yuan Jerry, Mr. Gordon Robert Halyburton Orr, Mr. Woo Chin Wan Raymond and Ms. Yang Lan.

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Yunkang Group Limited — Interim / Quarterly Report 2021

50524_rns_2021-02-03_ec0e9e69-c9d4-412a-bf8c-3e00b5391949.pdf

Lenovo Group Limited 聯想集團有限公司

FY2020/21 THIRD QUARTER RESULTS ANNOUNCEMENT

THIRD QUARTER RESULTS

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

BUSINESS REVIEW AND OUTLOOK

Highlights

Group Financial Performance

Geographic Performance

Performance by Product Business Group

Intelligent Devices Group (IDG)

Intelligent Devices Group - PC and Smart Device (PCSD) Business

Intelligent Devices Group - Mobile Business Group (MBG)

Data Center Group (DCG)

Outlook

Strategic Highlights

New Organizational Structure for FY2021/22

FINANCIAL REVIEW

Results for the nine months ended December 31, 2020

Third Quarter 2020/21 compared to Third Quarter 2019/20

Capital Expenditure

Liquidity and Financial Resources

Contingent Liabilities

FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET (CONTINUED)

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

1 General information and basis of preparation

Basis of preparation

New amendments to existing standards not yet effective

2 Segment information

(a) Segment revenue and pre-tax income/(loss) for reportable segments

(c) Segment liabilities for reportable segments

(d) Analysis of revenue by geography

(f) Other segment information

4 Finance income and costs

5 Taxation

6 Earnings per share

(a) Basic

(b) Diluted

7 Inventories

8 Ageing analysis

9 Deposits, prepayments and other receivables

10 Provisions, other payables and accruals

11 Other non-current liabilities

12 Borrowings

13 Share capital

14 Perpetual securities

15 Reconciliation of profit before taxation to net cash generated from operations

Reconciliation of financing liabilities

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

REVIEW BY AUDIT COMMITTEE

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

February 3, 2021

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