Cathay Pacific 2006 Annual Report Download - page 34

for the services, CPLP pays to Teleservices a
monthly charge based on cost plus a margin.
Teleservices is paid an additional margin upon the
achievement of certain performance criteria and
efficiency targets, and deductions are 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
a 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$64
million for the year ended 31st December 2006.
(e) Pursuant to the maintenance service agreements
dated 10th November 2005 with HAECO and
TAECO (“HAECO Services Agreements”), HAECO
and TAECO provide services 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 HAECO Services 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. TAECO
is a non-wholly owned subsidiary of HAECO
and is therefore also a connected person of the
Company. The transactions under the HAECO
Services 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.
The fees payable by the Company to HAECO/
TAECO under the HAECO Services Agreements
totalled HK$1,195 million for the year ended
31st December 2006.
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.
Cathay Pacific Airways Limited Annual Report 2006
32
Directors’ Report