Annual Report 2016
85
Report of the Directors
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 two 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$3.4 million
(equivalent to approximately HK$26.4 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 (“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$4,157.5 million (2015: HK$4,654.6 million). During the year, tax indemnity amounted to
approximately HK$218.9 million (2015: HK$359.2 million) was effected. By a deed of termination dated 23 August 2016
entered into between the Company and NWCL, the Deed of Tax Indemnity was terminated with effect from 4 August 2016.
(3)
Penta Hotels Germany GmbH (“PHGG”), an indirect wholly owned subsidiary of NWCL during the period from 19 December
2013 to 28 December 2015, 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 2016 amounted to approximately HK$10.5 million. PHGG ceased to
be a subsidiary of NWCL on 29 December 2015 following the completion of the disposal of New World Hotel Management
(BVI) Limited, the holding company of PHGG, by NWCL.
(4)
On 22 March 2012, New World Department Store China Limited (“NWDS”) and Chow Tai Fook Jewellery Group Limited (“CTFJ”)
entered into a master concessionaire counter agreement (the “Master Concessionaire Counter Agreement”) commencing
from 24 April 2012 up to and including 30 June 2014, pursuant to which members of the NWDS Group (i.e. NWDS and its
subsidiaries) and the CTFJ Group (i.e. CTFJ and its subsidiaries) may from time to time enter into definitive concessionaire
agreements in relation to any transactions arising from the concessionaire arrangements or rental agreements in respect of
retailing counters for the sale of jewellery products and watches by the CTFJ Group at properties in the PRC owned by, or
leased to the NWDS Group or at which the NWDS Group operates its business.
The Master Concessionaire Counter Agreement will be automatically renewed for a successive period of three years after
the initial term or subsequent renewal term subject to compliance with relevant requirements of the Listing Rules.
On 11 April 2014, in anticipation of the expiry of the Master Concessionaire Counter Agreement on 30 June 2014, NWDS and
CTFJ proposed to renew the Master Concessionaire Counter Agreement for a further term of three years, subject to
compliance with relevant requirements of the Listing Rules. The directors of NWDS believe that including CTFJ as one of the
concessionaire counters in the department stores owned by the NWDS Group from time to time enhances NWDS’ brand and
product mix and raises the image and profile of such stores. As NWDS is a subsidiary of the Company, the Directors of the
Company believe that the Group will also benefit as a result of the renewal of the Master Concessionaire Counter
Agreement. The Master Concessionaire Counter Agreement was automatically renewed from 1 July 2014 for three years
ending 30 June 2017.
As CTFJ is a fellow subsidiary of CTF which is a substantial shareholder of the Company, CTFJ is therefore a connected
person of the Company under the Listing Rules. Accordingly, the entering into of the Master Concessionaire Counter
Agreement and all the transactions contemplated thereunder constitute continuing connected transactions for the Company
under the Listing Rules.
For the year ended 30 June 2016, the aggregate amount of the transactions under the Master Concessionaire Counter
Agreement amounted to approximately RMB63.2 million (equivalent to approximately HK$73.9 million), which is within the
annual cap of RMB265.0 million (equivalent to approximately HK$310.1 million).
