Cathay Pacific 2009 Annual Report Download - page 38

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Directors’ Report
Commitments and contingencies
The details of capital commitments and contingent
liabilities of the Group and the Company as at 31st
December 2009 are set out in note 30 to the accounts.
Agreement for services
The Company has an agreement for services with
John Swire & Sons (H.K.) Limited (“JSSHK”), the
particulars of which are set out in the section on
continuing connected transactions.
As directors and/or employees of the John Swire &
Sons Limited (“Swire”) group, Christopher Pratt,
Philip Chen, James E. Hughes-Hallett, James W.J.
Hughes-Hallett, Peter Kilgour, John Slosar, Tony Tyler
and Robert Woods are interested in the JSSHK
Services Agreement (as defined below). Robert
Atkinson and Martin Cubbon were interested as
directors and/or employees of the Swire group until
their resignation with effect from 12th March 2009 and
14th May 2009 respectively.
Particulars of the fees paid and the expenses
reimbursed for the year ended 31st December
2009 are set out below and also given in note 29 to
the accounts.
Significant contracts
Contracts between the Group and HAECO and its
subsidiary TAECO for the maintenance and overhaul
of aircraft and related equipment accounted for
approximately 3% of the Group’s operating expenses
in 2009. Like the Company, HAECO is an associate of
Swire Pacific; all contracts have been concluded on
normal commercial terms in the ordinary course of the
business of both parties.
Connected transactions
(a) The Company entered into a sale and purchase
agreement with Swire Pacific on 16th September
2009 for Swire Pacific to purchase and the Company
to sell 20,700,958 ordinary shares of HK$1 each in
HAECO (representing 12.45% shareholding in
HAECO) for a consideration of approximately
HK$1,901 million (equivalent to HK$91.83 per
HAECO share) (the “HAECO Share Transaction”).
The HAECO Share Transaction enabled the
Company to realise cash from its investment in
the 20,700,958 HAECO shares while at the same
time maintaining, through its continued holding of
a 15% shareholding interest in HAECO, a strategic
investment in HAECO. The proceeds from the
HAECO Share Transaction were applied towards the
Company’s general working capital requirements.
As Swire Pacific is a substantial shareholder and
therefore a connected person of the Company, the
HAECO Share Transaction constituted a connected
transaction for the Company under the Listing
Rules, in respect of which an announcement
dated 16th September 2009 was published and
a circular dated 23rd September 2009 was sent
to shareholders.
Following completion of the HAECO Share
Transaction on 22nd October 2009, the
Company’s shareholding interest in HAECO
decreased from 27.45% to 15.00% and Swire
Pacific’s shareholding interest in HAECO increased
from 33.52% to 45.96%.
(b) The Company and its wholly owned subsidiaries
Cathay Pacific China Cargo Holdings Limited
(“Cathay Pacific China Cargo Holdings”) and
Dragonair entered into a framework agreement
with Air China Limited (“Air China”) and its wholly
owned subsidiaries Air China Cargo Co., Ltd.
(“Air China Cargo”) and Fine Star Enterprises
Corporation (“Fine Star”) on 25th February 2010,
which provided for the entry of relevant ancillary
agreements for the following transactions (the
“Joint Venture Transaction”) to take place:
(i) Cathay Pacific China Cargo Holdings will
subscribe for a 25% equity interest in Air China
Cargo for a consideration of RMB851,621,140
(comprising RMB808,823,530 as contribution to
the registered capital and RMB42,797,610 as
premium contribution) and Fine Star will make a
further capital contribution of RMB238,453,919
(comprising RMB226,470,588 as contribution to
the registered capital and RMB11,983,331 as
premium contribution) in cash to Air China
Cargo. Following the completion of such equity
36