Cathay Pacific 2005 Annual Report Download - page 29

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Cathay Pacific Airways Limited Annual Report 2005
deductions will be imposed for underachievement.
Payment is made in cash by CPLP within 45 days
from the date of receipt of Teleservices’ invoice.
The term of the PCCW Services Agreement is
from 1st June 2005 to 31st May 2008.
Teleservices is an indirect wholly owned subsidiary
of PCCW Limited which indirectly holds 37%
equity interest in the Company’s subsidiary Abacus
Distribution Systems (Hong Kong) Limited.
Teleservices is therefore a connected person of
the Company under the Listing Rules. The
transactions under the PCCW Services Agreement
are continuing connected transactions in respect
of which an announcement dated 31st May 2005
was published.
The fees payable by CPLP to Teleservices under
the PCCW Services Agreement totalled HK$36
million for the year ended 31st December 2005.
Three independent non-executive Directors, who are
not interested in any connected transactions with the
Group, have reviewed and confirmed that the
continuing connected transactions as set out above
have been entered into by the Group:
(a) in the ordinary and usual course of business of
the Group;
(b) either on normal commercial terms or, if there are
not sufficient comparable transactions to judge
whether they are on normal commercial terms, on
terms no less favourable to the Group than terms
available to or from (as appropriate) independent
third parties; and
(c) in accordance with the relevant agreement
governing them on terms that are fair and
reasonable and in the interests of the shareholders
of the Company as a whole.
The Auditors of the Company have also reviewed
these transactions and confirmed to the Board that:
(a) they have been approved by the Board of
the Company;
(b) they are in accordance with the pricing policies of
the Group (if the transactions involve provision of
goods or services by the Group);
(c) they have been entered into in accordance with
the relevant agreements governing the
transactions; and
(d) they have not exceeded the relevant annual caps
disclosed in previous announcements.
In addition, the Company entered into service
agreements (“New Agreements”) with HAECO and
Taikoo (Xiamen) Aircraft Engineering Company Limited
(“TAECO”) on 10th November 2005 for provision of
services by HAECO and TAECO to the Company’s
aircraft fleet. The services comprise 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 and/or Xiamen.
Payment is made in cash by the Company to HAECO/
TAECO within 30 days upon receipt of the invoice.
The term of the New Agreements is from 1st January
2006 to 31st December 2007.
HAECO is a connected person of the Company by
virtue of it being an associate of the Company’s
substantial shareholder Swire Pacific Limited. TAECO
is a non-wholly owned subsidiary of HAECO and is
therefore also a connected person of the Company.
The transactions under the New Agreements are
continuing connected transactions in respect of which
an announcement dated 10th November 2005 was
published and a circular dated 22nd November 2005
was sent to shareholders.
Major customers and suppliers
6.1% of sales and 29.1% of purchases during the
year were attributable to the Group’s five largest
customers and suppliers respectively. 1.4% of sales
were made to the Group’s largest customer while
7.8% of purchases were made from the Group’s
largest supplier.
Directors’ Report