Cathay Pacific 2010 Annual Report Download - page 39

Cathay Pacific Airways Limited Annual Report 2010
37
Continuing connected transactions
During the year ended 31st December 2010, the Group
had the following continuing connected transactions,
details of which are set out below:
(a) Pursuant to an agreement dated 17th October 2002
(the “DHL Services Agreement”) with DHL
International GmbH (formerly DHL International
Limited) (“DHL”), Air Hong Kong provides to DHL
services in respect of the sale of space on certain
cargo services operated by Air Hong Kong in the Asian
region for the carriage of DHL’s door to door air
express materials. Payment is made in cash by DHL
within 30 days from the date of receipt of Air Hong
Kong’s monthly invoices. The term of the DHL
Services Agreement is from 17th October 2002 to
31st December 2018.
DHL is a connected person of the Company because
its holding company Deutsche Post AG holds a 40%
attributable interest in the Company’s subsidiary Air
Hong Kong. The transactions under the DHL Services
Agreement were continuing connected transactions in
respect of which announcements dated 17th October
2002, 27th June 2005, 12th March 2007 and 9th
March 2011 were published and circulars dated 12th
July 2005 and 21st March 2007 were sent to
shareholders. Following amendments to the Listing
Rules effective 3rd June 2010, transactions under the
DHL Services Agreement constitute transactions with
persons connected at the level of subsidiaries of the
Company under Rule 14A.33(4) of the Listing Rules
with effect from 1st January 2011 and are therefore
exempt from the reporting, annual review,
announcement and independent shareholders’
approval requirements under the Listing Rules.
The fees payable by DHL to Air Hong Kong under the
DHL Services Agreement totalled HK$2,093 million for
the year ended 31st December 2010.
(b) Pursuant to an agreement (“JSSHK Services
Agreement”) dated 1st December 2004, as amended
and restated on 18th September 2008, with JSSHK,
JSSHK provides services to the Company and its
subsidiaries. The services comprise advice and
expertise of the directors and senior officers of the
Swire group including (but not limited to) assistance in
negotiating with regulatory and other governmental or
official bodies, 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
be agreed from time to time, and in procuring for the
Company and its subsidiary, jointly controlled and
associated companies the use of relevant trademarks
owned by the Swire group. No fee is payable in
consideration of such procuration obligation or
such use.
In return for these services, JSSHK receives annual
service fees calculated as 2.5% of the Company’s
consolidated profit before taxation and non-controlling
interests after certain adjustments. The fees for each
year are payable in cash in arrear 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 reimburses the Swire group at
cost for all the expenses incurred in the provision of
the services.
The current term of the JSSHK Services Agreement is
from 1st January 2011 to 31st December 2013 and 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.
Swire is the holding company of Swire Pacific which
owns approximately 42.97% 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 Listing Rules. The transactions
under the JSSHK Services Agreement are continuing
connected transactions in respect of which
announcements dated 1st December 2004, 1st
October 2007 and 1st October 2010 were published.
For the year ended 31st December 2010, JSSHK
waived its entitlement to fees under the JSSHK
Services Agreement in respect of that part of the
Company’s adjusted consolidated profit before
taxation and non-controlling interests which was
referable to the sale by the Company to Swire Pacific
of 24,948,728 shares in HAECO. After taking account
of that waiver, the fees payable by the Company to
JSSHK under the JSSHK Services Agreement totalled
HK$293 million and expenses of HK$139 million were
reimbursed at cost.
Directors’ Report