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China Communications Services Corporation Limited Annual Report 2015
REPORT OF THE DIRECTORS
CENTRALIZED SERVICES AGREEMENT
Pursuant to the Centralized Services Agreement, the centralized services to be provided by the Company to China Telecom
Group include:
(1) the corporate headquarters management function to manage assets of China Telecom’s certain retained specialized
telecommunications support businesses in the PRC other than the Group and any remaining assets, such as hotels,
manufacturing plants, schools and hospitals which are not in association with the specialized telecommunications support
businesses in the primary service areas of the Group; and
(2) the provincial headquarters management function to manage remaining assets of China Telecom in the primary service
areas of the Group.
Except as otherwise agreed by the parties, the aggregate administrative expenses incurred by the Company for the provision of
the centralized services referred to above (all expenses incurred in connection with the above-mentioned headquarters
management functions excluding remuneration for the Directors, share appreciation rights and provision of bad debts) will be
apportioned pro rata between the Company and China Telecom Group according to the proportional net asset value of each of
the relevant parties.
PROPERTY LEASING FRAMEWORK AGREEMENT
China Telecom Group have been leasing from the Company and its subsidiaries certain properties for use as business premises,
offices, equipment storage facilities and sites for network equipment. The Company and its subsidiaries also have been leasing
from China Telecom Group certain properties for use as business premises, offices and equipment storage facilities. These
arrangements fall within the Property Leasing Framework Agreement.
Pursuant to the Property Leasing Framework Agreement, the rental charges in respect of each property are determined at market
price. In determining the market price, the business and financial department of the relevant subsidiary of the Company shall
collect the relevant market information (including but not limited to the change in price for the same or similar type of services),
review and compare the costs and profits of transactions conducted in the most recent year of the same or similar type entered
into with China Telecom Group or independent third parties, and prepare fee quotes for review by the marketing department of
the relevant subsidiary of the Company, or the marketing department of the relevant subsidiary will further submit the fee quotes
to the management of such subsidiary for review depending on the actual situations (such as the amount and size of the
transaction). The marketing department or management of the relevant subsidiary of the Company shall primarily consider the
following factors: (1) cost of property depreciation; (2) rental charges of the same or similar type of property provided to China
Telecom Group and the Company by other service providers in the market; (3) rental charges of the same or similar type of
property provided to China Telecom Group and independent third parties by the Company previously, or rental charges of the
same or similar type of property provided to the Company by China Telecom Group and independent third parties previously.
Rental charges are payable monthly in arrears, except as otherwise agreed by the parties, and subject to review every three years
by both parties confirming after negotiations whether to adjust the rental charges and the amount of such adjustment.
