Cathay Pacific 2014 Annual Report Download - page 38

Cathay Pacific Airways Limited
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HAECO and HXITM are connected persons of the Company
by virtue of them being subsidiaries of Swire Pacific, one of the
Company’s substantial shareholders. The transactions under
the HAECO Framework Agreement are continuing connected
transactions in respect of which an announcement dated 13th
November 2013 was published, a circular dated 3rd December
2013 was sent to shareholders and an extraordinary general
meeting of the Company was held on 31st December 2013.
For the year ended 31st December 2014 and under the
HAECO Framework Agreement, the amounts payable by
the Group to the HAECO group totalled HK$3,167 million;
and the amounts payable by the HAECO group to the
Group totalled HK$13 million.
(c) The Company entered into a framework agreement dated
26th June 2008 (“Air China Framework Agreement”) with
Air China Limited (“Air China”) in respect of transactions
between the Group on the one hand and Air China and its
subsidiaries (“Air China group”) on the other hand arising
from joint venture arrangements for the operation of
passenger air transportation, code sharing arrangements,
interline arrangements, aircraft leasing, frequent flyer
programmes, the provision of airline catering, ground
support and engineering services and other services
agreed to be provided and other transactions agreed to be
undertaken under the Air China Framework Agreement.
The current term of the Air China Framework Agreement is
for three years ending on 31st December 2016 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.
Air China, by virtue of its 29.99% shareholding in Cathay
Pacific, is a substantial shareholder and therefore a
connected person of Cathay Pacific under the Listing Rules.
The transactions under the Air China Framework Agreement
are continuing connected transactions in respect of which
announcements dated 26th June 2008, 10th September
2010 and 26th September 2013 were published.
For the year ended 31st December 2014 and under the Air
China Framework Agreement, the amounts payable by the
Group to the Air China group totalled HK$430 million; and
the amounts payable by the Air China group to the Group
totalled HK$224 million.
The 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:
Directors’ Report
(a) in the ordinary and usual course of business of the Group;
(b) on normal commercial terms or better; and
(c) according to the agreements 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 were engaged to report on the
Group’s continuing connected transactions in accordance
with the Hong Kong Standard on Assurance Engagements
3000 “Assurance Engagements Other Than Audits or
Reviews of Historical Financial Information” and with
reference to Practice Note 740 “Auditor’s Letter on
Continuing Connected Transactions under the Hong Kong
Listing Rules” issued by the Hong Kong Institute of Certified
Public Accountants. The Auditors have issued their
unqualified letter containing their findings and conclusions
in respect of the continuing connected transactions
disclosed by the Group in accordance with Chapter 14A of
the Listing Rules, which states that:
(a) nothing has come to their attention that causes them to
believe that the disclosed continuing connected
transactions have not been approved by the Board of
the Company;
(b) nothing has come to their attention that causes them to
believe that the transactions were not, in all material
respects, in accordance with the pricing policies of the
Group if the transactions involve provision of goods or
services by the Group;
(c) nothing has come to their attention that causes them to
believe that the transactions were not entered into, in all
material respects, in accordance with the relevant
agreements governing such transactions; and
(d) nothing has come to their attention that causes them to
believe that the disclosed continuing connected
transactions have exceeded the relevant annual caps.
A copy of the Auditors’ letter has been provided by the
Company to the Stock Exchange.
Connected transaction
On 26th June 2014, Air China, Cathay Pacific China Cargo
Holdings Limited and Fine Star Enterprises Corporation
(“Fine Star”), being the existing shareholders of Air China
Cargo Co., Ltd. (“Air China Cargo”), entered into a capital
increase agreement with Air China Cargo, pursuant to which:
(a) Air China agreed to make a cash contribution of
RMB847,780,300 and an in-kind contribution of four
Boeing 757 aircraft together with aircraft components, an
auxiliary power unit and two back-up engines valued at