Cathay Pacific 2011 Annual Report Download - page 40

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Continuing connected transactions
During the year ended 31st December 2011, the Group
had the following continuing connected transactions,
details of which are set out below:
(a) Pursuant to an agreement (“JSSHK Services
Agreement”) dated 1st December 2004, as amended
and restated on 18th September 2008, with JSSHK,
JSSHK provides services to the Company and its
subsidiaries. The services comprise advice and
expertise of the directors and senior officers of the
Swire group including (but not limited to) assistance in
negotiating with regulatory and other governmental or
official bodies, full or part time services of members
of the staff of the Swire group, other administrative
and similar services and such other services as may
be agreed from time to time, and in procuring for the
Company and its subsidiary, jointly controlled and
associated companies the use of relevant trademarks
owned by the Swire group. No fee is payable in
consideration of such procuration obligation or
such use.
In return for these services, JSSHK receives annual
service fees calculated as 2.5% of the Company’s
consolidated profit before taxation and non-controlling
interests after certain adjustments. The fees for each
year are payable in cash in arrear in two instalments,
an interim payment by the end of October and a final
payment by the end of April of the following year,
adjusted to take account of the interim payment.
The Company also reimburses the Swire group at
cost for all the expenses incurred in the provision
of the services.
The current term of the JSSHK Services Agreement is
from 1st January 2011 to 31st December 2013 and it
is renewable for successive periods of three years
thereafter unless either party to it gives to the other
notice of termination of not less than three months
expiring on any 31st December.
Swire is the holding company of Swire Pacific which
owns approximately 44.97% of the issued capital of
the Company and JSSHK, a wholly owned subsidiary
of Swire, is therefore a connected person of the
Company under the Listing Rules. The transactions
under the JSSHK Services Agreement are continuing
connected transactions in respect of which
announcements dated 1st December 2004, 1st
October 2007 and 1st October 2010 were published.
For the year ended 31st December 2011, the fees
payable by the Company to JSSHK under the JSSHK
Services Agreement totalled HK$136 million and
expenses of HK$146 million were reimbursed at cost.
(b) Pursuant to a framework agreement dated 21st May
2007 (“HAECO Framework Agreement”) with HAECO,
HAECO and its subsidiaries (“HAECO group”) provide
services to the Group’s aircraft fleets. The services
include line maintenance, base maintenance,
comprehensive stores and logistics support,
component and avionics overhaul, material supply,
engineering services and ancillary services at Hong
Kong International Airport, Xiamen or other airports.
Payment is made in cash by the Group to HAECO
group within 30 days upon receipt of the invoice. The
term of the HAECO Framework Agreement is for 10
years ending on 31st December 2016.
HAECO is a connected person of the Company by
virtue of it being a subsidiary of Swire Pacific, one of
the Company’s substantial shareholders. The
transactions under the HAECO Framework Agreement
are continuing connected transactions in respect of
which an announcement dated 21st May 2007 was
published and a circular dated 31st May 2007 was sent
to shareholders.
The fees payable by the Group to HAECO group under
the HAECO Framework Agreement totalled HK$2,287
million for the year ended 31st December 2011.
(c) The Company entered into a framework agreement
dated 26th June 2008 (“Air China Framework
Agreement”) with Air China Limited (“Air China”) in
respect of transactions between the Group on the one
hand and Air China and its subsidiaries (“Air China
Group”) on the other hand arising from joint venture
arrangements for the operation of passenger air
transportation, code sharing arrangements, interline
arrangements, aircraft leasing, frequent flyer
programmes, the provision of airline catering,
ground support and engineering services and other
services agreed to be provided and other transactions
agreed to be undertaken under the Air China
Framework Agreement.
Directors’ Report