Page 373 - CRC_One Report 2021_EN

Business Overview and Performance Corporate Governance Financial Statements Enclosure

3) Management fee
Persons or Companies Transaction value (Baht : Million) Audit
Necessity and rationale of
which may have Committee’s
conflict of interest Transaction 2019 2020 2021 transactions Opinion

3.1 Management fee expenses
HCDS Group: Management 436.71 300.00 309.29 The Group receive consulting services Transactions are
− Harng Central fee expenses for operations management from normal c ourse
Department Store HCDS due to the following reasons: of business
Limited (1) HCDS have efficient and specialist transactions which
− CGE Investment professionals including experienced are favorable to
Limited top-level managements from various the Group. Service
top companies and HCDS also have rate is calculated
highly experienced teams from various from proportion of
industries, (2) HCDS have served other expected actual
business units that are in different cost. Therefore,
industries. Thus, HCDS can apply transactions are
experiences and knowledge from each reasonable and
business to the Group, and (3) The beneficial to the
Group can reduce operating cost and Group.
achieve economies of scale.
On 1 January 2019, the Group and
HCDS entered into management
services agreements to set scopes of
services such as consulting on business
strategies, merger & acquisition and
giving advices for business opportunities.
In the past, HCDS provided a service
that was Creating Shared Value (CSV)
activity to the Group. However, in July
2019, HCDS transferred employees who
worked in this project to the Company
and did not charge this service expense
to the Group anymore.
In addition, service rate is re-determined
to be a fixed rate. Annual service charge
would be adjusted with the same growth
rate of income, EBIT, and inflation rate
which shall not be more than 10% per
year but not lower than 0% per year. If
there would be any changes of service
fee calculation method and important
conditions in the agreement, it shall
be approved by the Audit Committee
before being applied. This service rate
is comparable to an expected cost of
the Group, and it is not included cost
plus. As a result, the group shall have
lower operating cost than proceeding
the operation by itself.

Annual Report 2021 (Form 56-1 One-Report) 373