Annual Report 2015
REPORT OF THE DIRECTORS
75
CONNECTED TRANSACTIONS
(1) The Company and Chow Tai Fook Enterprises Limited (“CTF”), severally in the proportions of 64.0% and 36.0%,
have on 29 August 1995 issued an indemnity (the “Indemnity”) to Renaissance Hotel Group N.V. (“RHG”), a
former subsidiary of New World Hotels (Holdings) Limited (“NWHH”), which is now an independent third party, in
respect of any obligations of RHG or its subsidiaries may have in respect of certain lease payment obligations under
originally 25 leases or guarantees of leases (now three leases remaining) held by Hotel Property Investments (B.V.I.)
Ltd. (“HPI”) and its subsidiaries.
On 25 July 1997, NWHH sold its entire interests in HPI to CTF Holdings Ltd.(“CTFH”), a company then controlled
by Dr. Cheng Kar-Shun, Henry and Mr. Doo Wai-Hoi, William (“Mr. Doo”), and currently wholly owned by CTF.
Under the sale, the Indemnity will continue. Arrangements have therefore been entered into whereby CTF will
counter-indemnify the Company fully against any liability arising under the Indemnity in respect of the said lease
obligations and guarantees of leases. It is presently estimated that the maximum liability of the Company under the
Indemnity will be approximately US$5.4 million (equivalent to approximately HK$42.0 million) per annum. Up to the
date of this report, no payment has ever been made by the Company or CTF under the Indemnity.
(2) In July 1999, a deed of tax indemnity was entered into between the Company and New World China Land Limited
(“NWCL”) whereby the Company undertakes to indemnify NWCL in respect of, inter alia, certain Mainland China
income tax (“IT”) and land appreciation tax (“LAT”) in Mainland China payable in consequence of the disposal of
certain properties held by NWCL as at 31 March 1999 and in respect of which the aggregate amount of LAT and IT is
estimated at approximately HK$4,654.6 million (2014: HK$5,518.1 million). During the year, tax indemnity amounted
to approximately HK$359.2 million (2014: HK$1,075.3 million) was effected.
(3) Penta Hotels Germany GmbH (“PHGG”), which became an indirect wholly owned subsidiary of NWCL on
19 December 2013, entered into 24 hotel management agreements and 24 licence and royalty agreements
(collectively, the “Hotel Agreements”) with certain subsidiaries of CTF (the “Hotel Owners”) between February
2007 and March 2013 in relation to the management of the hotels owned by the Hotel Owners by PHGG and
the grant of sublicences by PHGG to the Hotel Owners to use the “penta” brand name in connection with the
goods and services offered in the hotels. The Hotel Agreements between PHGG and the Hotel Owners constitute
continuing connected transaction for the Company under the Listing Rules by virtue of the controlling interests of
CTF in the Hotel Owners. Details of the Hotel Agreements were set out in the announcement of the Company
dated 19 December 2013. The aggregate transaction values under the Hotel Agreements for the year ended 30
June 2015 amounted to approximately HK$18.3 million.
