Cathay Pacific 2004 Annual Report Download - page 27

COMMITMENTS AND CONTINGENCIES
The details of capital commitments and contingent
liabilities of the Group and the Company as at
31st December 2004 are set out in note 28 to
the accounts.
AGREEMENT FOR SERVICES
The Company had an agreement for services
(“Old Agreement”) with John Swire & Sons (H.K.)
Limited (“JSSHK”). Pursuant to the Old Agreement,
JSSHK provided advice and expertise of the directors
and senior officers of the John Swire & Sons
Limited (“Swire”) group, 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 have been agreed from time to time.
In return for these services, JSSHK received annual
service fees calculated as 2.5% of the Company’s
consolidated profit before taxation and minority
interests after certain adjustments. The fees for
each year were payable in cash in arrears 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 reimbursed
the Swire group for all the expenses incurred
in the provision of the services at cost.
The Old Agreement was terminated on 31st
December 2004 and replaced by a new agreement
(“New Agreement”) signed on 1st December 2004
also with JSSHK.
The New Agreement took effect from 1st January
2005 and will terminate on 31st December 2007.
However 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.
The terms of the New Agreement are substantially
the same as those of the Old Agreement.
The Directors estimate that the maximum aggregate
annual amount of the service fee and the costs
reimbursed to the Swire group under the New
Agreement (excluding those in respect of shared
administrative services) will not exceed HK$279
million in the period up to 31st December 2007.
Swire is the holding company of Swire Pacific
Limited which owns approximately 46% 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 Rules
Governing the Listing of Securities (the “Listing
Rules”) on The Stock Exchange of Hong Kong
Limited (the “Stock Exchange”). The transactions
under the New Agreement are continuing connected
transactions under the Listing Rules, in respect of
which an announcement dated 1st December 2004
was published by the Company.
As directors and employees of the Swire group,
Robert Atkinson, Philip Chen, Martin Cubbon,
James Hughes-Hallett, David Turnbull, Tony Tyler
and Raymond Yuen are interested in both the Old
Agreement and the New Agreement. Sir Adrian
Swire was interested as shareholder, director
and employee of the Swire group but has ceased
to be director and employee at the end of
December 2004.
Particulars of the fees paid and the expenses
reimbursed for the year ended 31st December
2004 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 2004.
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.
Cathay Pacific Airways Limited 2004 Annual Report 23