Cathay Pacific 2003 Annual Report Download - page 27

Cathay Pacific Airways Limited Annual Report 2003 25
Directors’ Report
SHARE CAPITAL
During the year under review, the Group did not purchase or redeem any shares in the Company. At 31st
December 2003, 3,343,515,048 shares were in issue (31st December 2002: 3,336,007,848 shares).
The Company adopted a share option scheme on 10th March 1999. During the year, 7,507,200 shares were issued
under the scheme. Details of the scheme can be found in note 20 to the accounts.
COMMITMENTS AND CONTINGENCIES
The details of capital commitments and contingent liabilities of the Group and the Company as at 31st December
2003 are set out in note 28 to the accounts.
AGREEMENT FOR SERVICES
There is an agreement for services in respect of which John Swire & Sons (H.K.) Limited, a wholly owned
subsidiary of John Swire & Sons Limited, provides services to the Company and under which costs are reimbursed
and fees payable. The agreement can be terminated by either party giving not less than 12 months’ notice of
termination expiring on 31st December 2005 or any subsequent 31st December. As Directors and/or employees of
the John Swire & Sons Limited group, Robert Atkinson, Philip Chen, Martin Cubbon, James Hughes-Hallett, David
Turnbull, Tony Tyler and Raymond Yuen are interested in this agreement. Sir Adrian Swire is also interested in this
agreement as shareholder, director and employee of John Swire & Sons Limited.
Particulars of the fees paid and the expenses reimbursed for the year ended 31st December 2003 are given in note
26 to the accounts.
SIGNIFICANT CONTRACTS
Contracts between the Company and Hong Kong Aircraft Engineering Company Limited (“HAECO”) for the
maintenance and overhaul of aircraft and related equipment accounted for approximately 3% of the airline’s
operating costs in 2003. Like the Company, HAECO is an associated company of Swire Pacific Limited; all
contracts have been concluded on normal commercial terms in the ordinary course of the business of both parties.
CONNECTED TRANSACTIONS
The Company has entered into the following transactions with DHL International Limited (“DHL”), which is a
connected person of the Company for the purpose of the Listing Rules (Main Board) (the “Listing Rules”) of
The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) by virtue of its 40% interest in the Company’s
subsidiary AHK Air Hong Kong Limited (“AHK”).
AHK is owned 60% by the Company and 40% by DHL via their respectively wholly owned subsidiaries Maplebeck
Limited and DHL Worldwide Express BV. For funding the advance payment of AHK’s aircraft acquisition, interest-
free and unsecured loan facilities totalling US$150 million were granted to AHK on 6th February 2003, comprising
US$90 million from the Company and US$60 million from DHL Investments Limited, a wholly owned subsidiary of
DHL, on the same terms and in a 60%/40% proportion. The loan facilities are available until 30th June 2004 and
will remain in force until full repayment. The amounts due to the Company and DHL as at 31st December 2003
were HK$494 million and HK$329 million respectively.
During the year, pursuant to an agreement dated 17th October 2002 (the “Services Agreement”) with DHL, AHK
has provided to DHL services in respect of the sale of space on certain cargo services operated by AHK in the
Asian region for the carriage of DHL’s door to door air express materials. Pursuant to another agreement of the
same date (the “Agency Agreement”) with AHK and DHL, the Company has acted as AHK’s worldwide exclusive
sales agent for general cargo sales and for arranging and marketing AHK’s commercial activities for the space not
taken up by DHL. These transactions (the “Transactions”) are continuing connected transactions.